Please see the following articles:

Sac Bee, Tues, 5/29:  Lodi just says no to powers that be:
Four times since March, the city kept the lights on as other towns went dark

Sac Bee, Tues, 5/29: Dan Walters: Debt dilemmas plague energy executives,
ordinary workers alike

SD Union (AP), Tues, 5/29: Governor's rescue plan garners no support,
a newspaper reports

SD Union, Tues, 5/29:  In power crisis, is there ray of light at end of murky
tunnel?

SD Union, Mon, 5/28:  Bush, Davis on collision course

SD Union, Sun, 5/27:  Republicans fiddle while Californians burn

SD Union (AP), Sun, 5/27:  Energy executive seeks state GOP support  (Enron
mentioned)

SD Union (AP), Sat, 5/26:  State demands FERC close loopholes

SD Union, Sat, 5/26: Changes in Senate could offer state relief        (Enron
mentioned)

SD Union, Sat, 5/26: Natural gas CEO denies deal was improper

LA Times, Tues, 5/29:  Kern County Basks in Role as State's Blackout-Buster

LA Times, Mon, 5/28:  Plan to Rescue Edison Stalls

LA Times, Mon, 5/28:  Bush Could Boost Green Power With Buying Power

LA Times, Sun, 5/27:  Suddenly, Dirty Old Coal Is the Fossil Fuel of the
Future

LA Times, Sun, 5/27:  Power Firm Chief Lists Solutions for Crisis

LA Times, Sat, 5/26:  State Renews Demand for Power Price Relief

LA Times, Sat, 5/26:  El Paso CEO Admits Approving Subsidiaries' Natural Gas
Deal

LA Times, Sat, 5/26:  Police Support 48-Hour Alerts for Blackouts

LA Times, Sat, 5/26:  Outdoor Lights Still Burning

LA Times, Sat, 5/26:  Businesses Hopeful on Blackout Warnings

LA Times, Tues, 5/29:  Power Crisis Has Mileage for Bush
(Commentary)

SF Chron (AP), Tues, 5/29:  Bush announcing low-income aid, but no price caps

SF Chron, Tues, 5/29:  Bush facing Davis' heat over energy
In first visit to state as president, he'll hear governor's plea for help

SF Chron, Tues, 5/29:   Bush's first visit not so welcome

SF Chron (AP), Tues, 5/29:  Californians revert to clotheslines, fans as they
gear up for blackouts

SF Chron, Tues, 5/29:  Crisis no sweat to some offices
Many offices keep cool in crisis
Air conditioners blast in state's energy centers

SF Chron (AP), Tues, 5/29:  Stakes are high for Davis meeting with Bush

SF Chron, Tues, 5/29:   State gives president tepid ratings
Power crisis blamed for 42% approval

SF Chron (AP), Mon, 5/28:   Calif. pawn businesses boom as energy bills rise

SF Chron (AP), Mon, 5/28:  Californians brace for a summer of blackouts

SF Chron, Mon, 5/28:  New Nevada-California energy plan surfaces at last
minute

Mercury News, Tues, 5/29:  Bush feeling weight of state's energy crisis

Mercury News, Tues, 5/29:  New energy moves by W.House before Bush-Davis meet

OC Register, Tues, 5/29:  California should try true deregulation
(Commentary)

Energy Insight, Tues, 5/29:  Look for more wellhead-power plant deals
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Lodi just says no to powers that be: Four times since March, the city kept
the lights on as other towns went dark.
By Stuart Leavenworth
Bee Staff Writer
(Published May 29, 2001)

LODI -- In this old farm town, where ferment is largely confined to wine
bottles, leaders are staging a Boston Tea Party against California's energy
crisis.
Lodi, population 57,000, is refusing to participate in the rolling blackouts
that have swept across California. Four times since March, Lodi's electric
utility has snubbed the state's power managers and kept its lights on while
others went dark.
The rock band Creedence Clearwater Revival once derided Lodi as a
conservative backwater, but now, this town is leading an unlikely revolt that
is being picked up by others statewide.
"Lodi has something of an independent streak," said Steve Mann, a former city
councilman in Lodi and one of many residents who support the city's utility.
"It doesn't make sense that we should participate in blackouts when we have
done everything we can to make sure we can avoid that."
So far, Lodi has the only utility in the state to openly defy an on-the-spot
call for blackouts. They did so twice in March, then twice again this month.
This week, however, Riverside's utility said it, too, would not participate
in forced outages, and leaders of some other "munis" may follow suit.
Worried about a political snowball, Gov. Gray Davis met with leaders of the
munis last week, but refused to exempt them from further blackouts. If that
happened, the state's power managers would be unable to spread blackouts to
25 percent of the state's households, putting the brunt on other parts of the
state.
"I'm sympathetic," said David Freeman, the governor's top energy adviser and
a former leader of municipal utilities in Sacramento and Los Angeles. But
Freeman, speaking with uncharacteristic guardedness, said it may not be
practical "to separate out utilities that are an integral part of the grid."
The self-proclaimed "wine grape capital of the world," Lodi would seem an
unlikely hotbed for dissent. Creedence Clearwater once bemoaned being "stuck
in Lodi." Instead of being offended by the song, many residents are glad
their town isn't inhabited by a bunch of long-haired rabble-rousers.
Even so, Lodi likes to defy convention when it comes to protecting its own.
Two years ago, the city started waging battle against big insurance companies
that didn't want to pay to clean up toxic substances from local businesses
that had trickled into water supplies.
In recent years, Lodi has spent millions sprucing up its once-dilapidated
downtown, which soon will be crowned by a new 12-screen cineplex.
But the town's biggest source of pride is its taxpayer-owned utility, which
started in the 1890s when two brothers, Ed and Fred Carey, launched a water
and electric utility. In 1910, they sold it to the city of Lodi for $35,000.
Now, the utility provides $4 million to the town's coffers every year, with a
$30 million annual budget.
Like many other municipal utilities in Northern California, Lodi has more
power lined up than it needs, but is dependent on Pacific Gas and Electric
Co. to deliver that power to its doorstep.
As a result, "Lodi's relationship with PG&E has been tenuous throughout its
history," said Mann. One point of contention is the interconnection agreement
among PG&E, Lodi and the town's fellow members in the Northern California
Power Agency.
PG&E officials say the agreement requires Lodi to shed power during any power
shortfall. But Lodi contends the pact obligates the utility to impose
blackouts only during "physical emergencies," such as a wind storm that
knocks out transformers.
"We don't see any compelling reason why Lodi should have to participate in
rolling blackouts," said Alan Vallow, director of the city's utility. "You
want me to turn customers off when we have the capacity to keep them on? That
doesn't work for me."
During a statewide call for blackouts, PG&E conceivably could just switch off
power for Lodi if the city's utility didn't heed the call voluntarily. But
Vallow doubts PG&E would take such a step. "That would be pretty extreme," he
said.
An engineer who used to work for Los Angeles' utility, Vallow has become
"something of a folk hero" because of his stance, said Mann. Vallow is
especially popular with Lodi's canneries, which need reliable power in the
summer to pack fruit before it rots in the field. And most Lodites "are 100
percent behind Mr. Vallow," said Marie Saunders, a longtime local resident.
On the other hand, Lodi's City Council hasn't officially endorsed Vallow's
decision, giving it an out should PG&E or state officials seek revenge.
"If we weren't supportive, we would let Alan know," said Alan Nakanishi, the
mayor of Lodi. "On the other hand, if we do get retribution, we may say to
Al, 'Hey, what is all this about?' "
So far, PG&E hasn't threatened any action against Lodi, but experts say the
town is venturing into murky legal territory.
"It is a legal question that hasn't been resolved," said John Fistolera,
legislative director of the Northern California Power Agency, a group of
municipal utilities that includes Lodi.
The Sacramento Municipal Utility District, which is not part of NCPA, also
has taken a cautious approach. Earlier this year, at least one SMUD board
member recommended the utility follow Lodi's example. But the idea was
dropped amid fears that SMUD, being a bigger utility, could face a legal
fight that PG&E wouldn't mount against little Lodi.
"I really admire what Lodi has done," said Linda Davis, a SMUD board member.
"But I don't want to end up in court, and I fear SMUD would end up in court."
Instead of an open rebellion, SMUD has joined the Southern California town of
Vernon and 13 other cities in appealing to the Federal Energy Regulatory
Commission. They want FERC to exempt them from blackouts ordered by the
state's grid manager, the Independent System Operator.
ISO officials argue that "load shedding" from the municipal utilities is
vital for maintaining balance on the grid during shortfalls. But SMUD and the
other municipalities say they shouldn't be penalized for lining up power
reserves that have eluded the state's big utilities, especially with the
state facing dozens of blackouts this summer.
"Like Vernon, SMUD has grave concerns over the prospect of sharply escalating
the number and duration of blackout occurrences directed by the ISO on a
grid-wise basis over the upcoming summer months," SMUD wrote to FERC.
Last week, the Riverside City Council voted to stop participating in
blackouts ordered by the ISO. Like Lodi, Riverside says its conservation
programs should be taken into account in ISO's attempts to deal with power
shortages.
Vallow says Lodi has done everything it can to help the state. In January,
the city complied with blackout orders, then purchased long-term contracts
that gave it a 40 percent surplus in power reserves.
To pay for those reserves, the utility increased customer rates by as much as
15 percent.
Since then, the city has sold excess power back to the state to help with
shortages. But Vallow also has told the state that Lodi will not participate
in further blackouts.
Vallow calls it the "SET" program, which stands for "System, Electric supply
and Team."
"We've done everything the state should have done to avoid the crisis we are
in now," said Vallow. "We are SET."

The Bee's Stuart Leavenworth can be reached at (916) 321-1185 or
sleavenworth@sacbee.com.

Dan Walters: Debt dilemmas plague energy executives, ordinary workers alike

(Published May 29, 2001)
The Bible, in one of its many warnings to the faithful about incurring debt,
makes this pithy observation: "The rich rule over the poor and the borrower
is servant to the lender."
Credit may have become the essential underpinning of a modern industrial
society, from the billions of dollars in operational financing arranged by
governments and corporations to the credit card transactions of everyday
consumers, but our uneasiness about debt continues.
California's two major utilities ran up more than $13 billion in debt to buy
power at prices far higher than consumers were paying, until lenders cut off
their credit. And the state government then stepped in and has incurred an
additional $7.7 billion in debt -- with plans to nearly double its borrowing
to over $13 billion -- to keep the lights burning. One utility has sought
bankruptcy protection and another is on the verge; the state's heavy power
purchase debts have undermined its credit rating and its ability to finance
other spending.
While the governor and state legislators ponder these multibillion-dollar
questions of debt, they also must decide what to do, if anything, about the
relatively tiny debts that poor Californians are incurring. The practices of
so-called "payday lenders" and those making home-secured loans to the elderly
and working poor are generating sharp conflicts in the Capitol.
The "payday loan" business has mushroomed since being expressly authorized by
1996 state legislation. Storefront businesses offering short-term loans at
high interest rates have exploded from almost none to more than 3,000 in the
state, often replacing pawnbrokers as lenders of last resort.
Critics see the trade as legalized usury, in which cash-poor borrowers not
only are tapped for very high interest rates -- as much as 900 percent per
year -- and are forced, in effect, to roll over the loans week after week.
Sen. Don Perata, D-Alameda, is carrying a measure that would tighten up
payday loan practices, the latest in a long string of proposals that have
died at the hands of fellow Democrats in legislative committees, thanks to
the efforts of lenders and their lobbyists. Assemblyman Dario Frommer, D-Los
Angeles, meanwhile, is carrying a measure that lenders back as a compromise,
although it's been denounced by consumerists as a smoke screen.
A similar battle is being waged over what critics describe as "predatory
lending" by home loan subsidiaries of major banks. Consumer activists argue
that the lenders are enticing low-income and/or elderly borrowers into
pledging their homes for "subprime" loans -- even many who could qualify for
more conventional, lower-cost mortgages. The borrowers, say critics, are
paying higher interest rates and higher fees, are being saddled with unneeded
mortgage life insurance and often are at risk of losing their homes to
foreclosures.
Sen. Joseph Dunn, D-Santa Ana, is carrying a consumer group-backed bill,
pending in the Senate Banking Committee, but bankers have mounted a stiff
opposition campaign and the fate of the bill is in doubt. Dunn and his
supporters need five of the six Democrats on the committee to vote for the
bill, and the heaviest lobbying attention is being focused on two uncommitted
Democrats from conservative Central Valley districts -- Mike Machado of
Linden and Jim Costa of Fresno. Last week, consumer activists staged a
symbolic march on the Capitol to press their cause.
The questions that surround both issues are similar: Should the state protect
borrowers from agreeing to loans that carry high interest rates and other
charges, as long as they are aware of the risks and costs they are incurring?
Are those rates and fees justified by the higher costs, including higher
default rates, that lenders experience in making loans to those of marginal
creditworthiness?
They are not dissimilar to the questions that are being raised about the huge
debts that the utilities and the state -- institutions presumably operated by
sophisticated executives -- have assumed. The blue-collar worker who takes
out a high-cost payday loan to keep his own lights burning is not that much
different from the governor.

The Bee's Dan Walters can be reached at (916) 321-1195 or dwalters@sacbee.com
.

Governor's rescue plan garners no support, a newspaper reports

ASSOCIATED PRESS
May 28, 2001
LOS ANGELES ) Leaders of both houses are against Gov. Gray Davis' plan to
rescue Southern California Edison from bankruptcy, the Los Angeles Times
reported Monday.
Not only has the more than $3 billion plan failed to garner support but
efforts by lawmakers to come up with an alternative are also falling by the
wayside.
The stakes are high, because restoring Edison to financial health and
requiring Edison to temporarily sell power at lower prices are vital to
Davis' plan to get the state out of the business of buying electricity.

Nevertheless, leaders in the Legislature say the governor's approach has few
backers.
"I don't think the governor's (plan) has support in either party in either
house," Assembly Speaker Bob Hertzberg, D-Sherman Oaks, told the Times. "The
issue is whether we can come up with something else, and I think we can."
Senate leader John Burton, D-San Francisco, has been critical of the deal
Davis and Edison put together from the outset. He said it is certainly dead
in the Legislature, but that a more far-reaching proposal may still emerge.
"Hopefully, we will find a long-term solution" to the state's energy crisis,
Burton said. The Edison deal alone "is not going to solve anything. It is not
going to reduce rates, and it is not going to prevent blackouts," he said.
In both the Assembly and Senate, most Democrats and Republicans are convinced
there is no way for them to save Edison without appearing to sanction a huge
bailout. Therefore, they want to get something of value in return from Edison
) high-voltage transmission lines, hydroelectric power plants or guarantees
that the utility will boost energy supplies ) but are sharply split on what
is best.
Democrats, who hold majorities in both houses, cannot agree on how to save
the utility ) or whether it is even proper for the government to do so. Some
believe that the state would be better off letting Edison file bankruptcy
like Pacific Gas & Electric.
Meanwhile, their efforts to forge a bipartisan solution with Republicans have
are not going well.
Despite the setbacks, Davis and many lawmakers still say some form of the
Edison rescue plan will clear the Senate and Assembly this summer. But since
Davis announced he had reached a deal with Edison executives to save the
utility in April, nothing has been accomplished in the Legislature to
implement it.
The rescue deal Davis reached with Edison calls for the state to pay the
utility $2.76 billion for its power transmission lines. It would allow the
state to issue bonds to finance the purchase, and declares that Edison is to
use the money to reduce its estimated $3.5 billion debt.
The deal also would set aside a portion of ratepayers' monthly utility bills
to pay off Edison's "undercollections," huge debts the utility incurred last
year and early this year because it was not allowed by the state to pass on
to consumers the full cost of wholesale power.
In return, Edison would agree to sell the electricity it generates from its
power plants at cost for the next decade, lowering the state's overall
power-buying expenses.
Lawmakers from both parties have called the deal overly generous and
questioned the benefit to the public.

In power crisis, is there ray of light at end of murky tunnel?

By Ed Mendel
May 28, 2001
SACRAMENTO -- Is California, at long last, about to catch a break in the
electricity crisis, or will the cost of power this summer short-circuit the
state budget, forcing painful cuts?
Among the doom and gloom of blackout preparations last week, there were a few
faint flickers of hope.
Some prices for summer power have dropped. State power buyers smoothly
handled high loads during two hot days. A big generator, Mirant, unexpectedly
agreed to provide 500 megawatts through the summer at a reasonable price.
Davis administration officials are sticking with their forecast, derided by
some as a "hope and expectation," that the average price the state will pay
for non-contracted power will drop this summer.
"It's very doable," said Ray Hart, head of the power purchasing unit in the
state Department of Water Resources.
The forecast by Davis consultants expects the average of $346 per megawatt
hour paid by the state for non-contracted power in April through June to drop
to $195 in July through September.
But skeptics fear that as heat drives up the demand for power, the state will
get a double whammy -- soaring spot-market prices because of a regional power
shortage, and a series of disruptive and dangerous blackouts.
The state, in what Vice President Dick Cheney calls a "harebrained scheme,"
began buying power for utility customers in January after a failed
deregulation plan forced the utilities deep into debt.
The Davis administration notified the Legislature last Wednesday that in 10
days the state general fund will begin spending another $500 million
increment for power, bringing the total since January to $7.7 billion.
Now it's nervous time at the Capitol until the general fund is repaid by a
bond issue of up to $13.4 billion, which is expected to be issued in late
August and September and paid off by ratepayers over 15 years.
What if there is a snag? Or spending on power soars? State Controller
Kathleen Connell is predicting that the state will have to borrow more money
than planned, perhaps an additional $4 billion.
As for the flicker of hope, a reporter for a publication that tracks power
said prices at the Palo Verde hub, which serves Southern California, have
dropped significantly since April for deliveries in July through September.
"My personal opinion is, they probably won't get back up to where they were
during the highs," said Mike Wilczek of Platts Power Market Week.
Another journalist who tracks power prices, Arthur O'Donnell, editor of
California Energy Markets, sees no trend other than volatility.
"It depends largely on what the weather is," O'Donnell said. "The expectation
is that August is going to be the ugly month, and that is being reflected in
the future prices."
O'Donnell said he was encouraged that the state Department of Water
Resources, which lined up some power purchases in advance, handled
heat-driven high loads last Monday and Tuesday without declaring an
emergency.
"What it tells me is, DWR is learning its job," O'Donnell said.
The state is counting on an ad campaign and "sticker shock" from rate
increases to reduce power use this summer. And the amount of cheaper power
obtained through contracts, now less than half the total, is expected to
increase to about two-thirds in June through August.
"I think this month is a harder month to get through than those months," said
DWR's Hart.
Ed Mendel is Capitol bureau chief for the Union-Tribune.

Bush, Davis on collision course

President, Cheney firm: No price caps
By Toby Eckert
COPLEY NEWS SERVICE
May 27, 2001
WASHINGTON -- When President Bush and Gov. Gray Davis meet this week to
discuss California's power crisis, it will be a close-up clash of ideologies
that until now have been playing out long distance.
To Californians struggling with rolling blackouts and skyrocketing power
bills, Bush's allegiance to free-market principles and his rejection of
electricity price controls can seem baffling -- if not payback for the
state's vote against him in the presidential election.
Yet a look at the record shows that Bush and his energy czar, Vice President
Dick Cheney, share an unshakable faith in open power markets shaped by
conservative politics and their long association with an industry that has
benefited greatly from deregulation.

It is a view fortified by energy company executives who enjoy easy access to
top administration officials and counsel against measures like price
controls. One company in particular, power marketer Enron Corp., appears to
wield great influence with the White House on energy policy.
Davis argues that because the deregulation plan adopted by the state in 1996
turned out to be deeply flawed, a truly free market doesn't exist. Power
marketers and generators now have enough leverage to charge, on average, more
than $330 per megawatt-hour of electricity, 10 times what they were getting
just a year ago.
Temporary Western price controls -- based on the cost of producing the power
and a hefty, built-in profit margin for the power sellers -- would provide a
respite until the problems are fixed, Davis contends. A recent Field Poll
shows that an overwhelming majority of Californians, Republican and Democrat,
share that view.
"It would be a grave mistake for the Bush administration to allow rigid
ideology to stand in the way of doing what's best for our country," a
frustrated Davis said recently. "Deregulation is not a religion."
The White House flatly denies it is looking at the issue with ideological
blinders on, or through an energy industry prism. Bush and other
administration officials argue that price controls have a proven history of
backfiring -- drying up energy supplies at the same time they encourage more
consumption.
"The president and this administration do not support price caps because they
don't work," said White House spokeswoman Claire Buchan.
The folly of price controls is an article of faith in the oil industry, which
was long subjected to them. Both Bush and Cheney prospered in that industry.
Bush founded an oil company in his native West Texas in 1977, shortly after
graduating from business school. Arbusto Energy didn't find much oil, but
Bush profited greatly in the boom-and-bust industry through mergers with
bigger industry players.
Before Bush plucked him out of the private sector, Cheney headed Halliburton
Co., a leading oil-field services firm based in Dallas.
"I think there's no doubt that their views have been shaped by their
backgrounds in the industry and their broader ideological views about
markets," said political analyst Stuart Rothenberg.
Cheney in particular has expressed a visceral aversion to price controls. His
experience helping to craft broad wage and price limits in the Nixon
administration left an indelible mark.
"The night the control regulations went to the Federal Register to be
published, they were 14 pages long. I know, because I typed them," Cheney
said recently. "When we got through a couple years later, we had a roomful of
regulations."
The price controls aggravated the oil shortage that plunged the nation into
an energy crisis in the 1970s, Cheney argues.
"You could control domestic oil prices, but you couldn't control the price of
imports that were set by the international market. .?.?. A lot of companies
shut down, quit producing domestically," he said.
The new breed of power generators and marketers spawned by the nationwide
move toward electricity deregulation are also, by and large, fierce opponents
of price controls. Houston-based Enron in particular has positioned itself as
a major player in the world of freewheeling power sales, including in
California.
Enron and its executives have been among Bush's biggest supporters throughout
his political career and enjoy an unusually close relationship with the
president. Company Chairman Kenneth Lay was one of the "Pioneers" who raised
at least $100,000 for Bush during the presidential campaign.
Enron's political action committee and its executives poured $113,800 into
Bush's coffers and put a corporate jet at his disposal, according to the
Center for Responsive Politics, which tracks political spending.
Two top Bush administration officials -- economic adviser Lawrence Lindsey
and U.S. Trade Representative Robert Zoellick -- once served on an Enron
advisory board.
As Cheney was crafting the administration's recently unveiled energy policy,
Lay was one of the handful of people who got to meet with him. Lay presented
a three-page, eight-point list of priorities for open power markets,
including an admonition that the administration "should reject any attempt to
re-regulate wholesale power markets" with price caps or other controls.
Davis, by contrast, was invited to simply submit a one-page memo to the
energy task force, his spokesman said.
Lay also reportedly advised the Bush administration on appointments to the
Federal Energy Regulatory Commission. The commission has the power to impose
price controls, but has so far balked at Davis' proposal.
Enron's clout with the administration has stoked the suspicions of critics.
"It's Lay that drives the policy," said Craig McDonald, director of Texans
for Public Justice, which tracks political spending in that state.
Enron spokesman Mark Palmer dismissed such talk as "outrageous."
"The Cheney task force met with dozens of trade groups, industry
representatives, politicians, regulators," Palmer said.
But in recent weeks, even the normally cautious Davis has highlighted the
Texas ties of the energy companies that have profited from California's
travails, saying at one point that the Bush administration was allowing the
companies "to get away with murder."
The White House says such allegations are just overheated rhetoric.
"That's goofy. It doesn't even merit a response," Cheney said when asked
about Davis' comments. "The president and I are making decisions and policy
based on what we think makes sense for the country."

Republicans fiddle while Californians burn

By Bill Ainsworth
UNION-TRIBUNE STAFF WRITER
May 27, 2001
CALIFORNIA'S POWER CRISIS

SACRAMENTO -- Once upon a time, California Republicans faced a Democratic
governor with ratings in the stratosphere, a Legislature dominated by his
party and no popular issues to help improve their lowly status.
Then the energy crisis hit. As power prices jumped, blackouts hit and the
governor hesitated, the formerly unbeatable candidate and his party suddenly
seemed vulnerable.
Yet California Republicans are having trouble taking advantage of this
seemingly golden political opportunity. As Davis struggles to extricate
himself from the energy quagmire, GOP leaders are also flailing about, mired
in contradiction, indecision and debate.
Although most Californians blame the power generators for the crisis, the
Republicans' reflexive support of big business makes them unwilling to
criticize the out-of-state "entrepreneurs." Meanwhile, the party's lack of a
strong leader or well-known gubernatorial candidate means that it doesn't
have a loud voice in the Capitol.
Republican consultant Dan Schnur, whose former boss, Gov. Pete Wilson, thrust
deregulation upon the state, said Republican leaders made a mistake by not
offering an alternative plan once the crisis hit.
"Keeping their heads down did nothing but leave the playing field open to
Gray Davis," he said.
Republicans have recently sketched out some proposals, but these appear
contradictory and politically dangerous.
The party opposes Davis' creation of a state power authority, with some
blasting it as "socialism."
"America is built on a capitalist system -- not on socialization," said
Assembly Republican Leader Dave Cox, R-Fair Oaks. "Socialism has failed
throughout the rest of the world."
Yet Assembly Republicans want to make it easier for San Diego County to
create a publicly owned municipal utility district.
Cox said local power isn't socialism because its board members are elected.
The board of the state authority is composed of appointed and elected
officials.
Assemblyman Mark Wyland, R-Escondido, who is pushing a San Diego utility
district, said he believes the difference is local control.
"People want to control their own energy destiny," he said. "They don't have
any control over a statewide bureaucracy."
Davis chastised Republicans for putting ideology above pragmatism.
"They're very quick to say we need more supply, but when you have a measure
that would lead to more supply, they quickly retreat to their ideological
point of view and refuse to be problem solvers," he said.
Republicans also opposed the Democrats' plan to replenish the state treasury
for the money it has spent on buying power by floating a $13.4 billion bond
that would be repaid by ratepayers. They claimed that the bond was so large
it was fiscally irresponsible.
Yet the Assembly Republicans' alternative plan would have led to massive
budget cuts. They wanted the state to give away about $5 billion it had to
spend to buy electricity on the spot market -- and that money would have been
a subsidy largely to business and large users of electricity.
Democrats passed the bond plan anyway, but the Republicans' opposition
delayed the sale until August. Davis charged the delay cost the state an
extra $50 million to $150 million in bond charges.
Republicans have also been hurt by their unwillingness to crack down on the
mostly out-of-state generating companies and natural gas companies.
According to last week's nonpartisan Field Poll, the vast majority of
Californians believe that these companies are to blame for piling up enormous
profits at California's expense.
Davis and the Democratic leaders have proposed a windfall profits tax on
generators.
By contrast, Cox opposes the tax, worrying that it will hurt the business
climate. Davis calls the power producers "price gougers," while Cox refers to
them as "entrepreneurs trying to maximize profits."
A recent Assembly investigation into California's high natural gas prices
highlighted the GOP's reluctance to criticize energy companies.
Assembly Democrats issued a report accusing a Texas natural gas company, El
Paso Corp., of making a sweetheart deal with an affiliate that allowed it to
manipulate the natural gas market. That deal, the report charged, contributed
to soaring prices for California consumers and astronomical profits for the
company.
The key Republican committee member, Assemblyman John Campbell, R-Irvine,
issued a dissenting report, attributing El Paso's profits to supply and
demand.
Assemblyman Juan Vargas, D-San Diego, said Republicans are backing the wrong
side.
"They're siding with Texas oil interests and Texas gas interests and that's
going to get them in trouble," he said.
Republicans may also suffer from association with President Bush, who is
visiting California this week. The Republican president's close ties to the
oil industry and refusal to back wholesale electricity price caps have made
him unpopular with California voters, said Bruce Cain, a UC Berkeley
political scientist whose view is backed by state polls.
Bill Jones, the only announced Republican candidate for governor, commended
Bush's energy plan -- even without price caps.
Jones, secretary of state, released his plan so quietly some wondered whether
he was trying to avoid publicity. Jones criticized Davis for "socializing the
delivery" of power and called on the state to help its utilities by loaning
them money.
Despite their missteps, though, the Republicans still have time to develop a
coherent alternative. The energy crisis isn't going away.
"Most voters understand that the Democratic plan hasn't worked," said Schnur,
"but at some point they'll want to see an alternative. The Republicans are
starting to do that."
Republicans can claim credit for urging Davis to act more quickly. Last
summer when the price spikes hit San Diego and threatened to spread, they
asked the governor to call a special session. He ignored their pleas.
And Republicans voted against the January measure that got the state into the
power buying business, a move that Democrats said was required to keep the
lights on, but now threatens the state's fiscal health.
Still, if the generators remain unpopular, the GOP could suffer.
"The Republicans have an inability to distinguish between market manipulation
and a well-functioning market," said Cain. "The perception that the party is
tied to the big energy companies isn't helpful."

ANALYSIS

Energy executive seeks state GOP support

Politicians, celebs at secret meeting
ASSOCIATED PRESS
May 27, 2001
SAN FRANCISCO -- In a move to garner support from prominent California
Republicans, a Texas energy executive attended a secret meeting to push for
the preservation of the state's deregulated power market, a newspaper
reported yesterday.
Houston-based Enron Corp. Chairman Kenneth Lay met with well-known
Republicans, including movie star Arnold Schwarzenegger, Los Angeles Mayor
Richard Riordan and Michael Milken, who pleaded guilty to fraud charges in
1990 as head of the Drexel Burnham Lambert investment banking firm, the San
Francisco Chronicle reported. The 90-minute private meeting took place May 11
at a Beverly Hills hotel.
Schwarzenegger and Riordan have both been courted as Republican candidates
for California governor.
Enron distributed a four-page plan at the meeting calling for ratepayers to
cover the billions in debt racked up by the state's public utilities and
contending that state and federal investigations of price gouging are
hindering the situation, the Chronicle reported after obtaining a copy of the
paper.
"Southern California Edison is very close to bankruptcy, and no one around
the table wanted that to happen," Enron spokeswoman Karen Denne said
yesterday. "There was considerable frustration that a solution is not being
advanced at the legislative level."
But Gov. Gray Davis' spokesman Steve Maviglio called the paper a "generator's
wish list," saying it goes against the governor's policy on the energy
crisis.
"The governor is not calling off the dogs," Maviglio said yesterday. "To
suggest that ratepayers should shoulder the entire burden of deregulation is
totally the opposite of what the governor is calling for."
Lay and Davis have disagreed about how California's power crisis should be
handled, and Lay says his company is being used as a scapegoat.
The meeting was hosted by Kevin Sharer of biotech giant Amgen. About a dozen
people attended, including chief executives Ray Irani of Occidental Petroleum
and Bruce Karatz of home builder Kaufman & Broad, Denne said.
Lay, who is a friend of President Bush and one of his largest campaign
contributors, has built the world's largest energy-trading company by buying
electricity from generators and selling it to consumers. During the first
quarter of this year, Enron's revenue increased 281 percent to $50.1 billion.

State demands FERC close loopholes

By Jennifer Coleman
ASSOCIATED PRESS
May 26, 2001
SACRAMENTO -- California made new demands for tough federal electricity price
caps yesterday and singled out two generators that it said should roll back
rates immediately.
The filings by several state agencies were in response to a Federal Energy
Regulatory Commission order last month that offered limited price controls in
exchange for concessions on control of the state's power grid.
"FERC's pricing plan is laced with loopholes," Gov. Gray Davis said. "It's
worse than too little, too late. It's simply a fig leaf that does nothing to
address the impact of the energy crisis on California and our nation."
The state's multiple filings also said that two generators, Williams and AES,
have profited excessively by exercising market power.
The Electricity Oversight Board, the Public Utilities Commission and the
Independent System Operator asked FERC to require the generators to use
cost-based rates, which limit company profits to a percentage above the costs
to produce power.
In order to escape charging cost-based rates, generators must prove to FERC
that they don't have market power -- the ability to charge whatever price
they want without consequence.
The ISO, keeper of the state's power grid, said the two companies have
exhibited that they have market power and the ability to charge market-based
rates should be revoked.
Aaron Thomas, spokesman for the Arlington, Va.-based AES, said the company
has applied to have its ability to charge market-based rates renewed, and
expects FERC to approve that request.
"The governor, for six months now, has been calling for a form of cost-based
rates from FERC, so I don't think anything has changed," said Thomas.
Earlier this month, Tulsa-based Williams agreed to pay $8 million to settle
charges with FERC that the company was purposely withholding electricity from
California's power market. The company admitted no wrongdoing, and officials
said a full hearing would have cleared the company.
ISO attorney Charles Robinson said the agency is also considering similar
requests for revocation of the market-power authority of three other
generators -- Duke Energy, Reliant and Mirant.
Sen. Joe Dunn, D-Garden Grove, chairman of the Senate subcommittee
investigating the electricity wholesale market, said FERC has never adopted a
definition of market power, leaving open the question of how they can
determine if the generators don't have it.
"That calls into question whether FERC must revoke market-based rate
authority retroactively," Dunn said. "That may require a reimbursement of the
difference between what would have been cost-based rates and what they've
been charging."
The FERC order in April establishes some price controls when the state's
power reserves drop below 7.5 percent. That is scheduled to take effect
Tuesday, unless the FERC orders otherwise over the holiday weekend, Robinson
said.
The state Assembly, in documents to be filed Tuesday, said those price
controls should cover all hours -- not just during power emergencies. The
Assembly's filing calls that order "arbitrary and capricious," and says the
order does nothing to curtail unreasonable prices unless reserves drop.
Earlier ISO studies have estimated that California was overcharged more than
$6 billion in the last year. FERC has ordered refunds for a fraction of that
-- $125 million -- saying it can only examine prices for power sold during
Stage 3 emergencies, when reserves drop to below 1.5 percent.
The Assembly's filing also will object to FERC's requirement that the state
join a regional transmission organization in order to get price controls.
Robinson, the ISO attorney, said the ISO would make a decision next week
whether to file a plan to join an RTO.
The state agencies also objected to a FERC plan to put a surcharge on energy
rates to pay money owed to generators.

Changes in Senate could offer state relief

By Finlay Lewis and Toby Eckert
COPLEY NEWS SERVICE
May 26, 2001
WASHINGTON -- After weeks of impasse, a plan to bring emergency relief to
California's suffering electricity customers suddenly seems likely in the
Senate because a sympathetic friend unexpectedly finds himself in a position
to help.
This dramatic reversal of fortune will occur when Sen. Jeff Bingaman, D-N.M.,
becomes chairman of the Senate Energy and Natural Resources Committee because
of Vermont Sen. James Jeffords' defection from the GOP.
Bingaman is expected to take control of the committee next week when Jeffords
officially becomes a political independent and throws control of the chamber
to the Democratic Party. Bingaman will replace Sen. Frank Murkowski,
R-Alaska, a strong ally of the energy industry.
Unlike Murkowski, Bingaman supports a bill championed by Sens. Dianne
Feinstein, D-Calif., and Gordon Smith, R-Ore., to impose temporary restraints
on wholesale power sales in the West. The bill is likely to command a
majority if it comes to a vote in the committee.
The price caps still face fierce resistance in the House and at the other end
of Pennsylvania Avenue, where President Bush, armed with a veto pen, and Vice
President Dick Cheney steadfastly resist movement toward any form of price
controls.
But because of a committee chairman's agenda-setting power, Bingaman's
ascension would dramatically shift the prospects of the Feinstein bill and
other energy issues in the Senate.
Bush's proposal to open the Arctic National Wildlife Refuge to oil
exploration already faced difficulty, but now opponents will have easier
means to block it. And other environmentally contentious energy proposals
could face tough scrutiny from Jeffords, who is expected to become chairman
of the Senate's Environment and Public Works Committee.
Still, the president will have the power to enact the bulk of his energy
program because fewer than two dozen of his 105 proposals need congressional
action.
But the shift in the Senate allows Democrats to advance their own plan. At
the top of the list are temporary price controls.
"It's a priority for Sen. Bingaman," said Jude McCartin, a spokeswoman for
the senator. "He would like to act quickly to meet the challenges."
"Bingaman is from a Western state, unlike Murkowski," said Ashley Brown,
executive director of an electricity-policy think tank at Harvard University.
"His geographic outlook is going to be different. He is also going to be
sensitive to Democratic senators from California. It's going to mean more to
him than it meant to Murkowski."
McCartin and aides to Feinstein were guardedly optimistic about the measure's
prospects should the bill reach the Senate floor, where its bipartisan
parentage will likely guarantee bipartisan backing.
That does not mean Feinstein's bill is home-free.
Bush and Cheney's opposition to price caps is rooted firmly in their belief
that they would discourage investment in the energy industry, thereby
resulting in even shorter power supplies and more California blackouts.
In the House, a companion bill to the Feinstein-Smith measure is snarled in
complex and inconclusive negotiations in the House Energy and Commerce
Committee, and the House Republican leadership would be poised to bury any
measure that might make it to the floor in defiance of Bush's wishes.
But other factors may be bolstering prospects for action to ease the
California crisis.
McCartin pointed to the Senate's unanimous vote yesterday afternoon
confirming two Bush nominees to posts on the Federal Energy Regulatory
Commission as signaling a possibly more activist bureaucratic policy in
dealing with the state's problems.
The two new members of the nation's major regulatory authority over the power
industry are Pat Wood III, the head of the Texas Utility Commission, and Nora
Brownell, a Pennsylvania utility regulator.
Bush reportedly plans to replace FERC Chairman Curtis Hebert with Wood.
While observers say it is unlikely that Wood and Brownell would defy the
White House, they note that the appointees have indicated they might take a
more expansive view than most current FERC commissioners to bring relief to
California.
Once the Democrats take formal control of the Senate, probably about June 5,
there could be other actions affecting California's power problems.
Feinstein yesterday urged the likely chairman of the Senate Governmental
Affairs Committee, Sen. Joseph Lieberman, D-Conn., to investigate whether
energy companies are improperly influencing the FERC.
She cited a report in yesterday's New York Times that Kenneth Lay, the head
of Enron Corp., a Houston-based power marketing company, had offered to back
Hebert in his effort to remain at the commission's helm if Hebert supported
Enron's positions on electricity deregulation.
Enron outpaced all other energy companies last year in contributing to GOP
campaigns, while Lay has personally been one of Bush's most generous
financial backers.
"Since FERC has refused to fulfill its legally mandated function under the
Federal Power Act to restore 'just and reasonable' electricity rates, we need
to ask whether undue influence by the companies that FERC regulates has
resulted in its failure to act," Feinstein wrote in a letter to Lieberman.
Senate passage of the Feinstein-Smith bill would send the measure to the
House, where some Republican House members from California face close
re-election races next year.
A Field Poll recently showed that 75 percent of state residents view the
electricity situation as "very serious" and that 59 percent say it was caused
by energy companies seeking to increase profits.
Democratic strategists, citing those findings, say some California lawmakers
visiting their districts over the Memorial Day recess may come under pressure
to take strong action to restrain energy prices.

Natural gas CEO denies deal was improper

By Joe Cantlupe
COPLEY NEWS SERVICE
May 26, 2001
WASHINGTON -- The head of a Texas energy company that is accused of
wrongfully driving up California's natural gas prices told a federal
administrative law judge yesterday that he approved a deal between two
subsidiaries, but denied that it was an improper, sweetheart arrangement.
William Wise, the chief executive officer of El Paso Corp., said the
Houston-based company has "stringent" rules that separate the operations of
its pipeline subsidiary, El Paso Natural Gas, from its gas marketing
division, El Paso Merchant Energy.
"Functionally, that is the way they perform," said Wise of the corporate
subsidiaries. "They can be very autonomous from each other and the parent
company."
Wise defended the corporation's practices in testimony before Curtis L.
Wagner, Federal Energy Regulatory Commission administrative law judge.
Wagner is examining allegations by California officials that El Paso and its
divisions entered into improper business practices before the deal was
struck. California officials charge that El Paso bolstered profits by
withholding natural gas capacity, costing the state about $3.7 billion. El
Paso officials deny the allegations.
FERC's governing body has dismissed allegations of an improper relationship
between the subsidiaries, but Wagner said he is still examining the issue
before making recommendations to FERC.
Wise was hastily summoned to testify yesterday, a day after Wagner sharply
criticized the credibility of another top El Paso Corp. executive about
Wise's involvement in discussions about the Merchant bid.
In his testimony, Wise said he gave the OK, on Valentine's Day 2000, to allow
Merchant Energy officials to bid on the natural gas capacity within the El
Paso Natural Gas Co. pipeline. Wise said he was unaware of details about the
bid.
The El Paso Merchant Energy subsidiary eventually won the $38.5 million bid
on the pipeline, which supplies about one-sixth of the natural gas that
California imports from throughout the Southwest. The company earned more
than $180 million in profits.
If El Paso is found to have manipulated the power market, it could face
hundreds of millions of dollars in penalties.

Kern County Basks in Role as State's Blackout-Buster
Electricity: Six new plants will bolster its status as energy center.

By MITCHELL LANDSBERG, Times Staff Writer

?????McKITTRICK, Calif.--You could think of this as California's own little
slice of west Texas.
?????Here in the scruffy brown hills of western Kern County, oil rigs grow
more easily than trees, pickups are more common than cars, and chicken fried
steak is the most popular dish at Mike and Annie's McKittrick Hotel.

Tom Romesberg, general manager of La Paloma plant being built in Kern County,
stands next to the unit's cooling tower.
AL SEIB / Los Angeles Times

?????The hotel--which no longer offers lodging, just food and drink, and
plenty of it--is bustling these days with the roustabout energy of a Lone
Star construction camp. Just down the road, a mammoth electrical power plant
is rising out of the sagebrush, its generators housed in four boxy buildings
the size of airplane hangars.
?????It is one of six new major gas-fired power plants expected to be built
in Kern County over the next several years, an electrical construction boom
unmatched anywhere in California. Kern, which already has a large surplus of
electricity, is cementing its place as California's energy capital, assuming
far more than its share of the burden in recharging the state's drained power
supplies.
?????Over the next several years, the county will add nearly 5,000 megawatts
of power to the statewide grid. That is more than California now imports, on
average, from out-of-state suppliers. It's enough to supply about five
counties the size of Kern, which fills the dusty southern rim of the San
Joaquin Valley and has a population of 662,000.
?????In some parts of the state, a proposal to build a new power plant is a
call to throw up the barricades. In recent months, intense community
opposition has forced developers to pull back proposals to build major plants
in South Gate and San Jose, although Gov. Gray Davis has tried to revive
plans for the San Jose plant.
?????You don't hear a lot of not-in-my-backyard talk in Kern County.
?????"There should be power plants in everybody's backyard," said Paul Gipe,
chairman of the Kern chapter of the Sierra Club, which did not oppose any of
the new plants. "If people are concerned about having too many power plants,
they should think twice when they flip on the light switch."
?????New, natural gas-fired power plants, Gipe reasoned, are relatively clean
and will not add significantly to the county's serious air pollution
problems. Ideally, he said, they will allow the state to close some older,
dirtier plants that cause considerably more environmental damage.
?????If environmentalists don't oppose the plants, it's not too much of a
leap to guess that some people might be positively thrilled about them.
?????Just try, for instance, asking somebody in Taft, an oil center south of
McKittrick. "It's more money coming into Kern County--that's the way I look
at it," said Pamela Dunlap, who runs a downtown thrift shop.

?????An Economy Rooted in the Oil Industry
?????She stood in the twilight outside her shop, on a street that embodies
many of the most attractive attributes of small town Americana--with one
small difference. Where some towns might have statues of their founders or
war heroes in prominent public places, Taft has erected small oil rigs and
other pieces of drilling machinery, a reminder of its economic roots.
?????That Kern County has stepped up as California's blackout-buster is,
perhaps, not surprising.
?????To begin with, there's geography. Kern stands astride California's major
north-south electrical transmission lines at precisely the spot at which they
divide between the service areas of Pacific Gas & Electric, which serves
Northern California, and Southern California Edison. That spot can be
pinpointed as the Midway substation, a vast jungle of humming wires,
transformers and circuit breakers that lies a short distance west of
Interstate 5 in the town of Buttonwillow.
?????Already, massive new circuit-breakers--they look like Frankenstein
helmets sprouting 5-foot-long sparkplugs--are being erected at Midway to
handle the power from two major plants that will be revving up in the coming
months: PG&E National Energy's La Paloma plant, the one near McKittrick; and
Edison Mission Energy's Sunrise plant, just south of Taft.
?????The county is served by two major natural gas pipelines, which will be
tapped to run the plants. In fact, Kern contains the state's largest known
reservoirs of natural gas.
?????Another of Kern's geographic advantages?
?????"You look around, and you'll see there aren't a lot of people living
around here," observed Stephen Whaley, who is overseeing construction of the
Sunrise plant. In the surrounding hills, an orchard of oil rigs bobbed in the
morning haze. Dirt roads cut crudely across the landscape, bisecting a
crisscross of steam pipes, fuel lines and electrical wires.
?????"This area is all about oil," Whaley said. Casting a glance at the
modular 560-megawatt plant rising behind him, he added with a wry smile, "You
know, I guess you could look at this from the road, and you could make the
argument that it improves the looks."
?????The Sunrise plant, a relatively simple single-cycle plant, is expected
to fire up 320 megawatts of its total output by Aug. 1, a scant nine months
after construction began. The other plants--more complex and efficient
dual-cycle operations--will be opening over the next several years, assuming
all receive final approval.
?????The lack of major opposition to the plants is, of course, another reason
developers see Kern County as a good place to build. The county has long had
a more intimate relationship with energy--oil, gas, electricity--than most
places. To people here, the link between a natural gas well and a lightbulb,
or an oil derrick and a gas pedal, is neither theoretical nor especially
threatening. They're comfortable with energy.
?????Kern produces more crude oil than any other county in the United States
outside Alaska. Property taxes from oil companies have helped build handsome
new schools in Bakersfield, the county seat and largest city. The companies'
big payrolls have helped populate elegant subdivisions with names that sound
vaguely Houstonian: Seven Oaks, River Oaks, Landmark Estates.
?????Which brings us to the Texas connection.
?????It's hard to overlook it, in a county that runs on oil and cotton and
boasts a country music scene to rival Austin's. Conversations in the finer
Bakersfield restaurants are filled with references to trips to Texas, of
colleagues in Midland and Odessa. A Bakersfield radio station was running a
contest recently: The winners would be flown to a bull riding championship in
Houston.
?????Until December 1999, American Airlines offered direct jet service
between Bakersfield and Dallas. It stopped after Occidental Petroleum moved
its headquarters from Bakersfield to Houston.
?????This is a county where President Bush received more support in the
November election than he did in Texas, his home state. But then, Bush
already had a Bakersfield connection: He lived there briefly as a child when
his father, former President George Bush, worked in the Kern oil fields.
?????"You look at the topography around Bakersfield, and the county's morals
and ethics--that predominantly conservative attitude that we have around
here--and you look at the oil, and you could be in Midland," said John Allen,
the general manager of Occidental of Elk Hills, which is developing a power
plant in tandem with Sempra Energy of San Diego.
?????A lot of people in Kern County will tell you they don't mind being an
energy farm for the state. It's a living, after all.
?????"It's good to be working at home," said Joe Ryan, a Bakersfield pipe
welder who has spent years on the road seeking the heavy construction work
that seemed to have vanished in his hometown. Now he's working at the La
Paloma plant, a 1,048-megawatt behemoth that will come online in phases
beginning in December.
?????About 800 people are at work on the plant, and several hundred more will
be employed in the coming months. And after that plant is done, there will be
others to build.
?????"This is a good job here, I tell you what," said Ryan, 47, who has been
banking his overtime on six 10-hour days a week--sometimes more.

?????County Sees Itself as 'Part of the Solution'
?????But there are some signs of simmering resentment, especially among
county leadership. After all, if every other county produced just half the
electricity that Kern generates, California wouldn't have an energy crisis.
And people in Kern County are getting hit with the same spring-loaded
electricity bills, the same rolling blackouts as everybody else.
?????"I think the people of California are either going to be part of the
solution or part of the problem," said Assemblyman Roy Ashburn
(R-Bakersfield). "And in Kern County, we have a long history of being part of
the solution, especially when it comes to energy issues."
?????Elsewhere in the state, Ashburn sees "a lot of arrogance--people who
enjoy the benefits of a very high quality of life, enjoy the benefits of
electric power for jobs and for their personal life, but with an exclusivity
that it's someone else's problem to create that for them. We don't have that
attitude in Kern County."

Copyright 2001 Los Angeles Times

Plan to Rescue Edison Stalls
Power: Few lawmakers back Davis in the deal he reached with the utility.
Alternatives are being crafted, but legislators are wary of being blamed for
new failures. Some see benefits in bankruptcy.

By MIGUEL BUSTILLO and CARL INGRAM, Times Staff Writers

?????SACRAMENTO--Despite months of negotiations, Gov. Gray Davis' plan to
save Southern California Edison, one of California's biggest utilities, is
effectively dead in the state Legislature, leaders of both houses now agree.
?????Not only has Davis failed to garner support for his more than $3-billion
plan to keep the utility out of bankruptcy--in part by having the state
purchase its transmission lines--but follow-up efforts by leading lawmakers
to fashion an alternative are also falling flat. As a result, any alternative
proposal to rescue Edison will probably have to be approved on a party-line
vote by Democrats.
?????The reasons are complex, according to legislators working to close the
Edison deal, but ultimately come down to simple politics, and are emblematic
of what has been a plodding, partisan response in the state Capitol to the
energy crisis.
?????The stakes are high, because restoring Edison to financial health and
requiring the utility to temporarily sell power at lower prices are linchpins
of Davis' plan to get the state out of the business of buying electricity.
?????Nevertheless, leaders in the Legislature say Davis' approach has few
backers.
?????"I don't think the governor's [plan] has support in either party in
either house," said Assembly Speaker Bob Hertzberg (D-Sherman Oaks). "The
issue is whether we can come up with something else, and I think we can."
?????Senate leader John Burton (D-San Francisco), who has been critical of
the deal Davis and Edison put together from the outset, said it is certainly
dead in the Legislature, but that a more far-reaching proposal may still
emerge.
?????"Hopefully, we will find a long-term solution" to the state's energy
mess, Burton said. The Edison deal alone "is not going to solve anything. It
is not going to reduce rates, and it is not going to prevent blackouts."
?????Since January, California has authorized more than $7 billion in
taxpayer money to buy power for private utilities in order to avoid mass
blackouts. It is a perilous fiscal situation that has drained the state
budget and led to downgrades of the state's credit rating on Wall Street.
?????Lawmakers are wary of making an even greater blunder than they did in
1996, when they unanimously approved what is now widely considered to be a
botched scheme to deregulate electricity in California. In both the Assembly
and Senate, most Democrats and Republicans are convinced there is no way for
them to save Edison without appearing to sanction a huge bailout similar to
the federal government's rescue of Chrysler in 1980--one with less financial
reward for the state.
?????As a result, they all want to get something of value in return from
Edison--high-voltage transmission lines, hydroelectric power plants or
guarantees that the utility will boost energy supplies--but are sharply split
on what is best.
?????A core element of all Edison rescue programs being considered is a
proposal to use a chunk of customers' monthly electric bills to repay the
utility's huge debt, a solution many election-conscious legislators find as
appetizing as a suicide pill.

?????Consumer Activists Threaten Initiative
?????The deal only requires a majority vote, but without two-thirds approval
it would be wide open to an initiative challenge--a prospect that frightens
politicians. Consumer activists have already threatened to strike back with a
referendum next year, when Davis and lawmakers will be seeking reelection.
?????Democrats, who hold majorities in both houses, cannot agree on how to
save Edison--or whether it is even proper for government to do so. Some have
grown convinced that California would be better off letting Edison follow
Pacific Gas & Electric Co. into U.S. Bankruptcy Court. Indeed, after PG&E
filed for protection from creditors in Bankruptcy Court last month, and
massive blackouts failed to materialize, legislative momentum to save Edison
from a similar fate all but vanished.
?????"The urgency of doing anything on behalf of Edison is gone," said Sen.
Don Perata (D-Alameda).
?????Meanwhile, Democratic efforts to forge a bipartisan solution with
Republicans have unraveled, and GOP lawmakers are now advancing their own
plan. Legislative leaders realized early on that liberals and conservatives
were unlikely to ever agree on details of a deal, so some Democrats and
Republicans attempted to form a centrist coalition. But the parties have
become increasingly distrustful of each other as the climate in Sacramento
over who is to blame for California's power problems grows ever more partisan.
?????Sensing they were being frozen out of negotiations, Assembly Republicans
rolled out a rival proposal last week that was focused on increasing power
supplies in exchange for the rescue. Assembly Republican leader Dave Cox
(R-Fair Oaks) said he had hoped to pursue a bipartisan solution, but,
"Regrettably, it appears that [the Legislature] is not moving in that
direction now."
?????The Republicans' decision surprised and angered members of the "Plan B
Group," a loose-knit cadre of Democratic lawmakers that has been working with
Republicans to hash out an alternative to Davis' proposal. Members of the
group say they are close to unveiling a complex counterproposal that could
garner greater support, but now fear that they may have to seek approval on a
party-line basis.
?????Despite the setbacks, Davis and many lawmakers still say some form of
the Edison rescue plan will clear the Senate and Assembly this summer. But
since Davis announced he had reached a deal with Edison executives to save
the utility in April, nothing has been accomplished in the Legislature to
implement it.
?????The long delay is adding to the problem. Every day that passes increases
the likelihood that one of Edison's numerous creditors will drag the
debt-strapped utility into an involuntary bankruptcy.
?????The lack of progress also increases the chances that Edison, like PG&E,
will lose patience with politicians in Sacramento and take itself into
bankruptcy court.
?????Edison has ramped up its public relations efforts in recent weeks and
has launched an aggressive multimedia campaign to pressure legislators into
approving the deal, replete with firefighter testimonials on television and
direct mail pitches to stockholders asking them to write their state
representatives.
?????The rescue deal Davis reached with Edison calls for the state to pay the
utility $2.76 billion for its network of high-voltage transmission lines. It
would allow the state to issue bonds to finance the purchase, and declares
that Edison is to use the money to pare down its debt, estimated at $3.5
billion.
?????Most important, the deal would set aside a portion of ratepayers'
monthly utility bills to pay off Edison's "undercollections," huge debts the
utility incurred last year and early this year because it was not allowed by
the state to pass on to consumers the full cost of wholesale power.
?????In return, Edison would agree to sell the electricity it generates from
its power plants at cost for the next decade, lowering the state's overall
power-buying expenses.
?????From the minute it was announced, however, lawmakers from both parties
have called Davis' deal overly generous and questioned the benefit to the
public.
?????Republicans, who have opposed the takeover from the outset, are
supporting an alternative they call "Plan R." Like Davis' proposal, the
Assembly GOP plan allows Edison to recover debts by siphoning a portion of
electric rates, but requires in to bolster power supplies in return.
?????"This whole electricity crisis is a supply-demand imbalance," said
Assemblyman Keith Richman (R-Northridge), one of the architects of the
Republican plan. "We need to get to a point where there is a supply surplus."
?????In addition, the GOP plan calls for the electricity generators owed
billions by Edison to "take a haircut," Capitol parlance for forgiving some
of what they are owed. Davis and Burton have also called for the generators
to accept a 30% reduction in outstanding payments, and the idea is part of
the alternative Edison deal being pieced together by the Democrats' Plan B
Group.
?????Assemblyman John Dutra (D-Fremont), one of the group's leaders, said its
members have been meeting with consumer groups, Edison representatives and
others, and believe they are close to satisfying the groups at odds over the
rescue plan. But because of lingering differences with Republicans, Dutra
said they may have to try passing partisan legislation.
?????"This is not a situation where we should be playing a political game,"
he said. "We have to find a solution, because the alternative for the state
is social and economic chaos."
?????Assemblyman Bill Leonard (R-San Bernardino) said he was disappointed
that what started out in January as a bipartisan effort to resolve energy
issues had collapsed into a nasty partisan standoff. Leonard said he feared
that the bipartisan spirit would not return.
?????"The reservoirs of goodwill are not full right now," Leonard said.
"We're in a goodwill drought."

Copyright 2001 Los Angeles Times

WASHINGTON OUTLOOK
Bush Could Boost Green Power With Buying Power

By RONALD BROWNSTEIN, Times Staff Writer

?????Today, the south wall of the Energy Department's fortress-like
Washington headquarters is a fitting symbol for an agency that itself has
never quite established an identity: a 32,100-square-foot blank slab of
concrete.
?????Shortly before leaving office, however, the Clinton administration
awarded a Chicago architectural firm a contract to explore converting the
wall into something quite different: a vast solar array that would provide
much of the building's heat and power.
?????The firm--Solomon Cordwell Buenz & Associates--has produced a
spectacular design of a graceful, canopy-like Sun Wall that utilizes both
photovoltaic panels and hydronic systems, a liquid-filled vacuum tube that
warms with the sun's rays and can heat the building in winter. Now the firm
is working to estimate the cost of constructing its creation. "We think it
would certainly draw attention to this whole new type of energy," says Martin
Wolf, one of the designers. "Which would be quite timely given where we are
as a nation."
?????The Sun Wall stands as a riveting symbol of Washington's potential to
advance the development of renewable energy through a tool that's received
almost no attention in the energy debate: the purchasing power of the federal
government itself. Through all its departments and agencies, the federal
government spends about $8 billion a year on energy--probably more than any
other single consumer in the world. That buying power gives the government
enormous leverage to speed the growth of renewable energy sources such as
solar, wind, geothermal and biomass.
?????Today, all of these renewable sources (leaving aside hydropower) provide
only 2% to 3% of the nation's electricity, mostly because they are too
expensive to compete with conventional sources. Renewables are in the same
Catch-22 as many new technologies: Because they are too expensive, they
cannot attract the sales that their makers need to both generate economies of
scale and invest in more advanced manufacturing techniques.
?????Government can break the logjam by providing a market that allows
renewable manufacturers to advance up the learning curve and lower the price
of their technologies to a level that makes them commercially competitive.
?????Washington has done precisely this before, most important with a product
that has literally transformed modern life: the microchip at the heart of the
computer revolution. The first microchips were much too expensive to attract
commercial customers, but in the early 1960s, both NASA (using the chips for
the Apollo space program) and the Defense Department (embedding the chips in
nuclear weapons) provided a guaranteed market--buying the chips without
regard to cost.
?????As author T.R. Reid recounted in "The Chip," his history of the
microchip: "The government's willingness to buy chips in quantity at premium
prices provided the money the semiconductor firms needed to hone their skills
in designing and producing [the] circuits. . . . As experience taught ways to
solve the most common production problems, the cost of making a chip began to
fall."
?????Three years after the government first started buying, the cost fell far
enough that the microchip attracted its first commercial customers. Its been
a breakneck race to the future ever since.
?????An alliance of centrist House Democrats has sensibly proposed that
Washington do the same for renewables. Earlier this month, the House New
Democrat Coalition introduced legislation that would commit the federal
government to purchasing a fixed percentage of its power from renewable
sources; the bill also would provide grants and loans to encourage state
governments and nonprofit organizations to also buy green. "Today, you can't
generate the revenue to make these technologies more commercially viable,"
says Rep. Adam Smith (D-Wash.), one of the bill's principal authors. "The way
to get around that is to use the market power of the federal government to
help create a market."
?????With little attention, former President Clinton already committed the
federal government to that course. In 1999, he signed an executive order
mandating that Washington expand its use of renewable energy; later, his
administration set a goal of obtaining 2.5% of its electricity from renewable
sources by 2005, almost eight times more than today. Smith believes that goal
is already too low, largely because renewables are becoming more competitive
as conventional sources grow more expensive.
?????Even so, this initiative is already spurring new thinking. As part of
the overall plan, the Clinton administration committed to installing 20,000
solar systems on government facilities by 2010; by the time he left office,
2,000 were already in place.
?????"It's out in the national parks, where instead of having to string power
lines to remote buildings, they are putting up solar systems," says Dan
Reicher, the assistant secretary for energy efficiency and renewable energy
under Clinton. "There are several thousand units of naval housing in Hawaii
that are now using solar. They are being used at the Coast Guard Station in
Boston, a post office in Nantucket."
?????Another dramatic project is underway in Nevada. Shortly before Clinton
left office, his administration signed an agreement with a private consortium
to lease part of an old nuclear test site in the desert northwest of Las
Vegas as a giant wind power facility that would be the nation's second
largest. Eventually the site is expected to provide power for California and
Nevada and the Energy Department itself from 500 wind turbines.
?????President Bush hasn't tipped his hand entirely on leveraging government
buying power to boost renewables. Disturbingly, the national energy plan that
Bush released earlier this month says not a word about the use of government
procurement. But Jill Schroeder, an Energy Department spokeswoman, says the
administration has indicated no intention to revoke the Clinton executive
order--and the green power purchasing goal it includes.
?????As for the Sun Wall, Energy Department officials sound dubious--but they
are reserving judgment until Wolf's firm completes its cost estimates. The
cost could indeed be intimidating; even the Clinton team hadn't committed
itself to construction. But such a strategic purchase can pay dividends for
decades--a fact evident in the debt that everyone who uses a computer still
owes to the critical investments NASA and the Defense Department made in
another technology 40 years ago.
---
?????Ronald Brownstein's column appears every Monday.
Copyright 2001 Los Angeles Times

Suddenly, Dirty Old Coal Is the Fossil Fuel of the Future
Energy: The power crisis--and Bush's plan to deal with it--has lifted the
mining lobby and the industry it promotes.

By GERALDINE BAUM, Times Staff Writer

?????WASHINGTON--The National Mining Assn. represents a fuel that many
Americans think went out with Charles Dickens.
?????Just last week, a California congressman's aide asked an association
lobbyist wide-eyed: "Do we still use coal in this country?"
?????The answer is yes--and lots of it. More than half of America's
electricity is coal-fired, but polls show that most Americans don't know it.
?????Considered the voice of coal in Washington, the mining association has
been denigrated by critics as a venal hired gun for an industry that doesn't
give a whit about acid rain, global warming, black lung disease or slag heaps
that scar the land. The industry was under siege in the final years of the
Clinton administration, when Washington launched an aggressive effort to make
owners of coal-fired power plants undertake expensive pollution control
improvements.
?????"It was like waking up every morning with a six-chamber gun pointed at
your head, and each chamber contained a lethal bullet," said Thomas Altmeyer,
the association's top lobbyist.
?????Suddenly, it's a new day for coal in America. That much became clear to
Altmeyer the other day as he found himself at the White House, where Vice
President Dick Cheney personally briefed about 40 industry types on the Bush
administration's new energy plan.
?????"It was really nice to hear it from him," says Altmeyer.
?????A lot has changed in the short time since George W. Bush beat Al Gore in
West Virginia (and lots of other places), and California's power crisis
transformed dirty old coal into a fossil fuel of the future.
?????Now, when the mining association faxes position papers to the U.S.
Environmental Protection Agency, they are read. Now, when its lobbyists call
over to the U.S. Interior Department with suggestions for job candidates,
they talk with old friends occupying key positions. Now, those at the top
don't need to be told that coal supplies more than half of America's
electricity: Bush comes from Texas, which uses more coal-fired power than any
other state in the union; Cheney hails from Wyoming, the largest
coal-producing state.
?????When the Bush-Cheney team took over, mining association employees were
invited to serve on transition teams. The White House had not had a new
occupant but two months before Bush reversed himself on carbon dioxide
emissions, deciding to forgo new rules on a gas that scientists say
contributes to global warming. Coal-fired power plants are a key source of
the gas.
?????Yet, like poor relatives who have finally been invited over for
Christmas dinner, the coal people are not quite comfortable with their
newfound popularity in Washington. When asked how it feels to go from class
pariah to homecoming king, the best that Altmeyer and his boss, mining
association President Jack Gerard, can come up with is that they're, well . .
. pleased.
?????But their friends know better: The chief of staff to a Southern
Republican senator said he saw the usually low-key, all-business Altmeyer at
an inaugural party in January. "He was downright elated," said the aide,
chuckling.
?????A coal-friendly Democratic senator slapped Altmeyer on the back at a
fund-raiser recently and said, "Tom, I can't believe it, but we really have
an opportunity to do something. All the liberal senators are running scared
about this California energy crisis. Now they'll listen to us." The next day,
Altmeyer shipped him a list of suggestions to share with his liberal
colleagues.
?????"We're not going to waste this opportunity to educate people, no way,"
says Altmeyer.
?????The association's president, Gerard, 42, a native of Idaho and a former
consultant to the mining industry, is not ready to celebrate. He is new at
his job: He took over the NMA shortly before Bush took over the White House,
but he has been around mining long enough to remember other times when the
industry was left for dead but rebounded with an energy crisis.
?????And so, he says, he is merely "cautiously optimistic."
?????"You might sense some excitement in the industry," he allows, "that we
have a White House that recognizes the facts." He then rattles off a bunch:
The U.S. has enough reserves in the ground to burn coal at its current rate
for 250 years; since implementation of the 1970 Clean Air Act, coal use for
electricity has tripled while emissions have dropped 30%.
?????"We play an important role in society and the White House knows it,"
Gerard says. "Does that make us gleeful? Not necessarily."
?????Perhaps it's because coal is still a hard sell to many people.
?????Gerard is the speaker at a conference of 400 scientists interested in
"carbon sequestration," a theoretical solution to coal's contribution to
global warming. But he spends about half of his time attacking
environmentalists and saying things like, "California represents a failed
experiment in energy policy."
?????When a professor takes issue with his combative "tone," Gerard smiles
pleasantly. He is not fazed. On the cab ride back to his office, he explains,
"Look, the professor is looking for a technical paper. That's not what we do.
I'm trying to talk about what is at stake and the future."
?????In recent years, the NMA has tried to refashion its industry's dark
legacy and image. It spent less time calling scientific evidence against coal
"bunk" and more time on the bandwagon to clean up three of the four main
pollutants caused by its use. And now coal-related businesses are trying to
act like winners. Besides backing Bush's $2-billion plan for more "clean
coal" technology, they're spending $10 million of their own money on a
campaign to buff up their image.
?????More than image-building, however, the real work of the mining
association these days is in the massive Capitol building and House and
Senate offices. There is where the administration's energy plan will be
fashioned into action; there is where the president's budget will buy the
coal industry time to develop new anti-pollution technology; there is where
they can get government to ease up.
?????Altmeyer is a tall, strapping fellow. But, although he was born in West
Virginia, he wasn't born to its coal. His father was an undertaker.
?????After earning degrees in law and business, Altmeyer went to work for the
late Democratic Sen. Jennings Randolph of West Virginia, and he got to know
"lots of coal miners who were proud of what they're doing," he says.
?????In the mid-1980s, he went with a trade association that evolved into the
NMA. He has spent most of his career shepherding companies through
anti-pollution legislation.
?????He can't quite abide the way coal is treated like a "black hat" in the
media--even now. "You don't see banner headlines, 'U.S. has record coal
production in the year 2000, and we did it in a way much more environmentally
responsible.' "
?????Instead, he says, media reports emphasize renegade coal companies that
break laws and exaggerated claims about climate change.
?????But coal has never been appealing to California, which uses very little
coal-fired power because it's so dirty. California Resources Secretary Mary
Nichols does not buy the coal lobby's Rodney Dangerfield act.
?????"They don't get no respect?" mocks Nichols, who ran the EPA's air and
radiation department for President Clinton. "But they have over the years.
We've spent billions trying to clean up coal. Nobody is suggesting we stop.
But how much attention should it get as a fuel of the future? Not much,
because under any scenario, the cost of cleaning up carbon emissions and the
way it's mined is too high."
?????Altmeyer is no fan of Nichols, either. It may be a new day, but the old
battles remain fresh.
?????"It was like living in a banana republic with a dictator who made
arbitrary decisions," he says of the Clinton years. He won't even speculate
what the industry would be facing if Gore had been elected president. "I
would have rather had Woody Allen in the White House."

Copyright 2001 Los Angeles Times

Power Firm Chief Lists Solutions for Crisis

By KURT STREETER, Times Staff Writer

????? A Texas business executive whose company has profited enormously from
California's energy crisis says California needs more deregulation, not less.
?????Kenneth Lay, the head of Houston-based Enron Corp., handed out a
four-page plan detailing his solution to California's energy crisis at a
meeting with Los Angeles Mayor Richard Riordan and other state business and
political leaders at a Beverly Hills hotel May 17.
?????The report details several ways to solve California's energy crisis.
?????"Get deregulation right in California," it reads. "California never
deregulated. . . . There is more regulation than ever."
?????Among the document's other points are calls for consumers to pay the
billions of dollars in debt the state's public utilities have incurred, and
an assertion that federal investigations into price gouging by private firms
such as Enron are contributing to the problems.
?????Lay also suggests increasing conservation efforts, partly through
pricing that would cost consumers more for using electricity during peak
times.
?????Reached for comment, Steve Maviglio, a spokesman for Gov. Gray Davis,
called the paper a "generator's wish list," saying it goes against the
governor's policy on the energy crisis.
?????"The governor is not calling off the dogs," Maviglio said Saturday. "To
suggest that ratepayers should shoulder the entire burden of deregulation is
totally the opposite of what the governor is calling for."
?????Lay, one of President Bush's biggest campaign contributors and a key
advisor on the Bush energy plan, has built a powerful energy company by
buying electricity from generators and then selling it. Enron reported
first-quarter revenue of $50.1 billion, nearly a 281% increase over the same
quarter last year.
?????Lay met with Riordan and luminaries including actor Arnold
Schwarzenegger and financier Michael Milken--plus about a dozen others--at
the Peninsula Hotel.
?????Enron spokesman Mark Palmer said: "Our position is simple." California
needs to "increase the supply of energy and decrease the demand."
---
?????Associated Press contributed to this story.

Copyright 2001 Los Angeles Times

State Renews Demand for Power Price Relief
Energy: Officials ask FERC to reconsider ruling. Cheney reiterates opposition
to caps.

By NANCY VOGEL and DAN MORAIN, Times Staff Writers

?????SACRAMENTO--California officials launched a full-scale formal effort
Friday to persuade the federal government to act more forcefully to push down
wholesale electricity prices, saying that existing plans have "utterly
failed."
?????At the same time, Vice President Dick Cheney strongly reiterated the
Bush administration's opposition to any price caps. Price controls are "a
mistake," he told a Washington audience. "It's not a solution; it's adding to
the problem," he said. "There isn't anything that can be done short term to
produce more kilowatts this summer."
?????State officials have repeatedly demanded price controls, only to be
rebuffed, and Cheney's remarks illustrate the depth of the administration's
opposition to the idea.
?????But the politics of the energy crisis have changed since the last time
the Federal Energy Regulatory Commission rejected broad price caps. The
Senate is about to move from Republican to Democratic control, giving
opponents of the administration's energy policies a much more potent
platform; the Senate has confirmed two new members to the five-member FERC;
and the existing members of the commission have shown doubts about whether
deregulation of energy prices is working.
?????Gov. Gray Davis described the state's actions--detailed in a set of
filings delivered Friday to FERC--as a "full frontal attack" on what he terms
the commission's industry-friendly policies.
?????"This agency has failed its duties miserably," he said. "It's time for
FERC to wake [up] and take action on a crisis that threatens our nation's
economy."
?????With the governor's backing, the California Public Utilities Commission,
California Independent System Operator and Electricity Oversight Board said
FERC's actions to date have failed "to extinguish the fire that is rapidly
consuming California's economy." They petitioned the commission to reconsider
its April 25 order to limit prices during power shortages in California.
?????A second petition asks the federal government to revoke the rights of
Oklahoma-based Williams Cos. and Virginia-based AES Corp. to sell electricity
at whatever price the market will bear.
?????The companies' right to do so was granted by FERC three years ago, when
California opened its $28-billion electricity industry to competition, but
that right has come up for renewal. State officials said they will similarly
challenge other power sellers, arguing that it is illegal for FERC to allow
the companies to sell at whatever price the market will bear when the market
is obviously broken.
?????The state's filings and the evidence about wholesale prices they contain
are sure to be fodder for Davis' scheduled meeting Tuesday with President
Bush in Los Angeles.
?????California's petitions also come the day that Bush won Senate
confirmation of his two appointees to FERC. With the current members split 2
to 1 on last month's FERC order, the new commissioners--Pat Wood III of Texas
and Nora Mead Brownell of Pennsylvania--would cast the deciding votes on
California's request for a rehearing. In their confirmation hearings, both
Wood and Brownell expressed support for more aggressive federal efforts to
protect California consumers.
?????Since last June, after prices began to soar in California's partly
deregulated electricity market, Davis has beseeched the federal agency to
take swift action, including imposing price caps. The agency is charged by
federal law with ensuring that prices for wholesale electricity are just and
reasonable.
?????But its commissioners have declined to cap prices across the West's
interconnected electrical transmission system. Instead, they have attempted
to stabilize wholesale power costs through its April 25 order that would
limit how much power sellers can earn whenever California's reserves have
slipped to 7% or less, which triggers what is known as a Stage 1 emergency.
?????But some economists have concluded that California's market is so flawed
that sellers are able to boost prices even when electricity demand is not
particularly high, such as at night or on weekends.
?????State officials have also faulted the federal plan for exempting
marketers--companies that trade electricity but do not generate it--from the
limited price caps. Such a loophole, they say, would allow power producers to
escape the caps by making arrangements with marketers--a process called
"megawatt laundering."
?????"FERC's pricing plan is laced with loopholes," Davis said in a written
statement. "It's simply a fig leaf that does nothing to address the impact of
the energy crisis on California and our nation."
?????The state's filings homed in on wholesale electricity prices charged in
April, when electricity usage was down compared with that of a year earlier.
Prices averaged $370 per megawatt-hour last month, significantly higher than
those of January and February. (That's enough to supply 750 typical homes for
an hour.)
?????Officials with the California Independent System Operator, which manages
three-quarters of the state's electricity transmission grid, said they
measured greater manipulation of prices by power sellers in April than in any
month since June 2000.
?????In 1999, the first full year of deregulation in California, wholesale
electricity prices averaged $31 per megawatt-hour. By February of this year,
the average price had risen more than 700%, to $258 per megawatt-hour,
according to the state's filings.
?????Such prices have contributed to extraordinary profits for some
companies, including Williams, the state noted in its filings.
?????Williams reported first-quarter profit of $484 million in 2001, compared
with $77.8 million for the same period last year.
?????"Frankly," the state charges, "it does not and should not require
detailed analysis by economists to recognize that the phenomenal transfer of
wealth is the product of supplier exploitation of the current market
situation."
?????Williams, which markets electricity produced by AES, was ordered April
30 by FERC to refund $8 million in connection with allegations that power
plants in Huntington Beach and Long Beach were improperly shut down to create
scarcity that would boost prices.
?????The state filing asks FERC to set the prices Williams and AES can charge
based on what it costs to produce the power.
?????Representatives of Williams could not be reached for comment late
Friday, but AES spokesman Aaron Thomas said that stripping companies of the
right to sell at whatever price the market bears would result in tremendous
upheaval in California's power market.
?????In Washington, at a U.S. Chamber of Commerce energy conference, Cheney
suggested that California officials were largely to blame for the state's
energy problems.
?????"They didn't address it soon enough," he said, referring to the power
shortages. "They knew a year ago they had problems; they postponed taking
action because all of the action was potentially unpleasant--[it] would have
involved price increases, and so forth.
?????"The net result is, though, having postponed action and delayed, we're
now in a situation where the prices [consumers pay] have to go up anyway;
where, in effect, you're going to have blackouts this summer because even as
we had this flawed regulatory scheme, we've had demand grow in California
with the economy, but no increase in power because nobody built a new plant
out there for 10 years.
?????"Long term, the answer is build more power plants, and that's exactly
what they're doing," Cheney added. "But they're not going to have enough new
capacity online this summer to be able to avoid blackouts."
?????Soaring market prices since May 2000 have financially crippled Pacific
Gas & Electric and Southern California Edison, the state's two biggest
electricity utilities, which were forbidden by the state's deregulation plan
to pass on their higher costs to customers.
?????By mid-January, the utilities were so close to bankruptcy that power
sellers refused to deal with them for fear of not getting paid. The state
stepped in to buy electricity on their behalf and has so far committed $7
billion from the general fund for such spending.
?????Even if it can't persuade FERC to reconsider its plan, the state could,
in effect, kill it outright.
?????Implementation of the plan is contingent upon the state submitting by
June 1 a plan for joining a so-called regional transmission organization.
FERC has made it a top priority to make the country's electricity system work
more efficiently and smoothly by linking operations through such regional
organizations.
?????State officials said Friday they will decide next week whether to submit
such a plan to FERC.

Copyright 2001 Los Angeles Times

El Paso CEO Admits Approving Subsidiaries' Natural Gas Deal

By RICARDO ALONSO-ZALDIVAR, Times Staff Writer

?????WASHINGTON--The chief executive of a Texas energy company testified
Friday that he approved a controversial deal between two subsidiaries that
critics allege contributed to Southern California's soaring natural gas
prices.
?????However, El Paso Corp. Chief Executive William A. Wise said he did not
decree that El Paso Merchant Energy Group, which sells natural gas, enter
into the $38.5-million deal with El Paso Natural Gas Co., which owns a major
pipeline system. He also said he was unfamiliar with the details of
Merchant's bid for about one-third of the pipeline system's capacity.
?????"What I don't do is micromanage," Wise said under questioning by Judge
Curtis L. Wagner Jr. in a trial-like hearing before the Federal Energy
Regulatory Commission. "I agreed we should go forward and bid on this
capacity . . . but I didn't direct them to bid or not to bid for it."
?????Describing his role in a meeting at which the plan was presented to him,
Wise said, "I had no part in preparing for the meeting--I just showed up."
?????Wagner will now have to determine if Wise's role violated FERC rules on
arm's-length relationships within the same corporate family, essentially
circumventing federal policies to prevent pipeline companies from exercising
monopolistic power.
?????The California Public Utilities Commission has alleged that El Paso
Merchant took advantage of the contract to withhold space on the pipeline,
creating an artificial shortage that led to a price spike that raised
California's total energy costs by an estimated $3.7 billion.
?????El Paso counters that high prices are due to increased demand from power
plants that burn natural gas, unusual weather and other factors--not market
manipulation. They dismiss the $3.7-billion estimate.
?????Separately Friday, the Senate unanimously confirmed President Bush's
nominations of Patrick Wood III and Nora Brownell to fill two empty seats on
FERC's five-member governing board. Wood, who heads the Texas Public Utility
Commission, is widely expected to be named the next FERC chairman. The new
board members are expected to bring a more activist style to the agency,
which functions like a national utility commission.
?????Also Friday, FERC issued a late-afternoon order clarifying technical
details of its plan to keep California electricity prices in check during
power emergencies this summer. The order addresses such issues as how to
compute a price for natural gas.
?????The El Paso case represents the closest yet to a trial of allegations
that energy companies are manipulating the California market. Wagner, who is
FERC's chief judge, will render an initial decision to the agency's governing
board, which has the power to order the return of ill-gotten profits.
?????Attorneys for the plaintiffs said Wise's testimony was important because
it suggests an effort by a single corporate entity to use its subsidiaries in
an end-run around FERC's system of checks and balances against monopoly power.
?????"It shows it was a coordinated strategy at the highest levels of El Paso
Corp.," said Frank Lindh, a lawyer representing Pacific Gas & Electric, which
is one of the plaintiffs.
?????During his cross-examination, Lindh sought to emphasize that, as a
former executive of the pipeline company, Wise was intimately familiar with
the workings of the industry and with federal curbs on monopoly power.

Copyright 2001 Los Angeles Times

Police Support 48-Hour Alerts for Blackouts
Crisis: Law enforcement officials downplay crime fears, saying notice of
power outages will make their jobs easier.

By MITCHELL LANDSBERG, Times Staff Writer

?????Earlier this year, when widespread blackouts first began to roll their
way across California, electric utility officials explained why they couldn't
give the public more than a few minutes' warning before pulling the plug.
?????Advance notice, they explained, would give the upper hand to criminals,
who could plan their day around out-of-service burglar alarms.
?????That was then.
?????This is now: On Friday, law enforcement officials throughout Southern
California hailed a decision by Gov. Gray Davis to create an early-warning
system that would give the public increasingly specific alerts during the 48
hours leading up to a blackout.
?????"It's a huge improvement," Los Angeles County Sheriff Lee Baca said at a
news conference, where he was joined by senior officials of the California
Highway Patrol and the Los Angeles Police Department, among other agencies.
The governor announced his plan Thursday.
?????The governor's plan was also endorsed by 35 police chiefs from
throughout Los Angeles County. The chiefs held their annual meeting Friday in
Palm Springs.
?????Since the blackouts began, "one of the No. 1 issues has been the lack of
notification," said Pasadena Police Chief Bernard Melekian, who is president
of the county police chiefs association.
?????What gives? What has changed since January, when officials from Southern
California Edison insisted that they couldn't give more than five or 10
minutes' warning?
?????Richard Rosenblum, a senior vice president for Edison, said the utility
had canvassed law enforcement officials earlier this year. "The general view
at that time--and it certainly was not unanimous--was that for public safety
reasons, it would be better not to release that information."
?????Since then, he said, "there's been a good deal more thinking . . . and
that view has changed."
?????Melekian (whose city is served by its own utility, not Edison) said he'd
heard that explanation before.
?????"I remember, when they were saying that, I had trouble finding anybody
who had been canvassed," he said. "I certainly wasn't. Somebody may have
been."
?????Were police worried about looting and burglaries in a blackout?
?????"We never were worried about that," Melekian said. With blackouts
lasting only about an hour in any one place and always occurring during
daylight, "we haven't seen any crime issues emerge and we don't anticipate
any."
?????Baca said he did have concerns, but they were erased Monday, when Davis
led a delegation of California officials to Chicago, where they met with
Mayor Richard Daley and top public safety officials to compare notes on the
threat of crime during blackouts. Chicago has a plan in place for dealing
with electricity outages by determining in advance which intersections and
other public places should receive the most attention.
?????The Chicago officials told the Californians that public safety isn't
jeopardized as long as law enforcement officials send forces to critically
affected areas, Baca said.
?????"All of us were extremely relieved that . . . our fears about crime
increasing by advance notice are just totally unfounded," the sheriff said.
?????Baca said his department would be developing a plan for deploying
deputies when blackouts strike. Other agencies said they were doing the same.
?????"We may contact businesses such as banks and jewelry stores, or any type
of businesses that the criminal type may target," said Lt. Clyde Stuart of
the Huntington Beach Police Department.
?????Ventura County Sheriff Bob Brooks said he had been dreading this
summer's looming blackouts, but the 48-hour warning will make his job easier.
During the past few rounds of rolling outages, Brooks said he was notified
just a few minutes before the power was yanked.
?????"There really wasn't time to do anything except shut our computers
down," he said.
?????Earlier this month, he met with several other sheriffs throughout the
state to talk about how to cope with the power outages. "That was our No. 1
priority--being able to have adequate time to mobilize," he said. "It was a
good move on the part of the governor."
---
?????Times staff writers Anna Gorman in Ventura and Thuy-Doan Le in Orange
County contributed to this story.

Copyright 2001 Los Angeles Times

Outdoor Lights Still Burning
Energy: Despite threat of fines, few retailers are following order to cut
usage in off hours.

By SARAH HALE, Times Staff Writer

?????It was almost midnight on auto row in Glendale recently, and although
the car lots had been closed for nearly three hours, the lights still burned
brightly at Glendale Dodge, Guy Schmidt Cadillac and other dealerships along
Brand Boulevard.
?????California regulators ordered retailers March 15 to cut their outdoor
lighting in half during off hours, but so far it appears there is widespread
disregard or ignorance of the plan, retailers acknowledge. Many auto dealers,
grocery stores and restaurants still keep the lights burning after hours.
?????Although the state order threatens retailers with fines of as much as
$1,000 for disregarding the measure, no citations have been issued, according
to state officials tracking the program. Police say they are paying little
attention to the issue.
?????Despite that, Sheryl Tankersley of the Governor's Office of Emergency
Services said she believes the program is working--even though she concedes
there are no energy-use figures or other statistics to prove it. She also
acknowledged that the state is at the mercy of local police to enforce the
measure, who say they are more interested in fighting violent crime than
conservation scofflaws.
?????"It is our belief that the program is working," Tankersley said. "We
assume businesses are complying. However, without law enforcement assistance,
the order is difficult to moderate."
?????The energy conservation order by Gov. Gray Davis applies to all
California businesses, regardless of location or whether they are served by
municipal utilities with power to spare.
?????In interviews, many business owners, including one of the Glendale car
dealers whose lights were on after closing time, said they are complying with
the law.
?????"Someone must have forgot [to turn off the lights]," said Myron
Grombacher, general manager of Glendale Dodge. "Or maybe the cleaning crew
turned on the lights."
?????Some retailers say they've killed lights to save on energy bills, not
for fear of being fined. Others say they were unaware of the rule or haven't
complied due to security concerns. The order applies only to "unnecessary"
lighting, exempting lighting needed to protect workers, the public or
property.
?????"We understand the importance of turning off the lights, but we can't
afford to black out the lot," said Bill Jaros, with Guy Schmidt Cadillac.
"Theft is a problem and that's just as costly."
?????Glendale isn't alone--bright lights can be seen after midnight at car
dealerships throughout the area, including lots in Van Nuys and Thousand
Oaks. After-hours lights also were spotted this week at a Smart & Final in
Venice, a lamp store in Studio City and a Goodyear Tires store in Westwood,
where the manager said the lights stay on till 3 a.m.
?????"We are obligated to the corporate office to keep our lights on," said
the tire store manager, who would not give his name. "We do what they tell
us. I didn't even know a fine could be issued."
?????In San Francisco's Union Square, retailers and restaurants also keep
their windows lit long after closing time, according to area merchants.
?????"If stores are cutting back, I haven't noticed. The heart of Union
Square looks the same. Everything is bright, everything is on," said Brandon
Koehl, manager of the Williams-Sonoma housewares store near Union Square.
?????The light-reduction order, signed by Davis on Feb. 1, called on "all
California retail establishments" to "substantially reduce maximum outdoor
lighting capability during nonbusiness hours." In a directive one week later,
the governor's office defined substantial as a 50% reduction in electrical
power consumed--allowing retailers to meet the rule by either turning off
lights or cutting the wattage.
?????Law enforcement honchos, including Los Angeles County Sheriff Lee Baca,
promised to enforce the measure at a Feb. 1 news conference with Davis. Since
then, police have expressed confusion about the 50% rule and whether cities
such as Glendale and Los Angeles that have been spared from blackouts must
comply.
?????Los Angeles County Sheriff's Deputy David Cervantes said his agency is
focused on street crime, not store lights.
?????"We aren't issuing citations," Cervantes said, although he said that
deputies have issued a few warnings to businesses that appeared to be in
violation.
?????Glendale Police spokesman Sgt. Rick Young said the late-night bright
lights at the Brand Boulevard car dealerships aren't his problem. "We don't
believe this is a police matter," Young said. "What do police officers know
about monitoring energy use?"
?????(This week, after calls to Glendale city officials and car dealers, more
lights appeared to be off along Brand Boulevard after hours.)
?????Norman Williams of the state Technology, Trade and Commerce Agency,
which was asked by Davis to help implement the order, said he was
disappointed to learn that police departments have been reluctant to devote
resources to the issue.
?????"We need them to help us," Williams said.
?????Richard Giss, a retail analyst with Deloitte & Touche in Los Angeles,
said many store managers may be unaware of the rules or are unable to easily
curtail power usage.
?????"Most retailers aren't scofflaws," Giss said. "Some may face issues that
aren't apparent on the surface. . . . There isn't always a switch that turns
off all the lights. It's not that easy."
?????Bob Israel, co-owner of Hungry Al's Bar-B-Que in West Covina, said the
$1,000 fine didn't scare him into trimming his energy use. His monthly $500
to $600 utility bills were a bigger threat. Israel raised his food prices and
began to limit employee hours, but the high energy costs still were too much.
?????He said he can't afford to turn on the restaurant's air conditioning
this summer, when he expects his bill to approach $1,000. And the illuminated
sign in front of Hungry Al's now goes off at 11 p.m. instead of staying on
all night. "We've always left our outdoor lights on. We want people to see
us. It just wasn't feasible anymore. The governor has nothing to do with it."
?????The bottom line also influenced Edwards Cinemas' energy conservation
efforts, which have been implemented at the company's 55 California locations
since last summer. Illuminated theater displays and marquees go off when the
last show begins, rather than when it ends, saving the company about two
hours of energy use. Kevin Frabotta, vice president of theater operations,
said the company has focused on long-term methods as well, including
electrical rewiring and using of more cost-efficient bulbs.
?????"It's an expensive transition," he said. "But we'll save money in the
long haul."
?????Other local businesses have used the governor's order as a marketing
tool, pushing the sale of energy-efficient products such as motion detectors,
ceiling fans, weather stripping and improved windows. Home Depot, which
unveiled a hefty conservation plan in January, said it is important for
customers to see conservation products in action.
?????After rolling blackouts started sweeping the state, sales and interest
in these items increased, said Chuck Sifuentes, company spokesman. Home Depot
added a special section to its catalog devoted to energy-related tips and
merchandise.
?????"It's important to lead by example," Sifuentes said. "If we cut back,
the customers will cut back. They'll want to buy our products."

Copyright 2001 Los Angeles Times

Businesses Hopeful on Blackout Warnings
Power: But some leaders worry that early outage notification won't be
accurate.

By MARLA DICKERSON, Times Staff Writer

?????Frustrated at being left in the dark about rolling blackouts, California
business leaders expressed optimism Friday that a proposed early warning
system will help minimize the economic damage of power outages on the state's
industries.
?????Gov. Gray Davis ordered state officials Thursday to begin warning
residents and businesses of likely power outages up to two days in advance
when power supplies appear scarce. Given the fluid nature of the state's
electricity grid, which can see its supplies swing from abundant to
inadequate in a matter of minutes, some of those predictions could prove
about as useful as a weather report six months in advance.
?????But business advocates say any information is better than no information
when it comes to avoiding outages.
?????"Businesspeople are accustomed to assessing risk," said Jack Stewart,
president of the California Manufacturers and Technology Assn. "We need to
give them the best available information, as far ahead as possible, and let
them make their own decisions."
?????Under Davis' order, blackouts will be issued under a three-tiered system
beginning with a forecast 48 hours in advance of a projected electricity
shortfall.
?????General geographic areas to be blacked out will be identified in
warnings issued 24 hours before likely outages. Precise locations will be
announced an hour before the power is cut.
?????Details are still being worked out, but the idea is to use data such as
weather patterns and scheduled power plant shutdowns to make the longer-range
projections. Information about communities and specific block numbers to be
interrupted will be provided closer to the projected outages, as real-time
usage and supply information becomes available to the grid operator.
?????Plans call for notifying electricity customers through a variety of
means, including the news media, the California Independent System Operator
(Cal-ISO), utility Web sites and a proactive system being developed by
Cal-ISO to phone, page, fax or e-mail individual power users. Agency
officials say they plan to implement the governor's order by June 15.
?????Business interests have been beating the drum for early warning since
the first rolling blackouts walloped companies last summer. Though residents
might find it inconvenient to have their dishwashers turned off, a sudden
outage can wreak havoc on a company if an assembly line freezes or a computer
system crashes.
?????The stakes are enormous. A Silicon Valley business group estimated that
a single blackout last June resulted in losses of $100 million for that
region's companies because of forfeited sales, squandered productivity,
wasted wages and ruined products.
?????A study released this month by a California business consortium
estimated that a projected 30-plus days of summer blackouts could cost state
businesses $21.8 billion, reduce household income by $4.5 billion and result
in 135,000 lost jobs.
?????Julie Puentes, a spokeswoman for the Orange County Business Council,
said the governor's plan is consistent with what businesses have been
demanding. "If they can do this, companies will be able to use the backup
generation that they've paid hundreds of thousands of dollars for," she said.
"They will be able to prevent chaos for their workers, and they'll be able to
maintain their business operations, which benefits the California economy."
?????The president of Aluminum Precision Products in Santa Ana, which has
four manufacturing plants in Orange County, was equally enthusiastic.
?????"You have no idea what help [the warnings] would be," Philip S. Keeler
said. "In our particular case, because of the heavy equipment, this could be
the difference between life and death, and I'm very serious. It will help
tremendously."
?????Others are skeptical.
?????James Swartwout, chief executive of Torrance-based Summa Industries,
said he's not counting on the system to protect his molded plastics
manufacturing company.
?????"How can they say with certainty that a blackout will occur?" Swartwout
asked. "It's my understanding that they have no real way of knowing until the
very last minute. Eventually, we'll get two or three warnings a week. I can't
promise we won't start to ignore them."
?????Indeed, while early warning sounds good in theory, implementing it is
another story. The utilities long resisted such a system because they often
get only a few minutes' notice from Cal-ISO, which in turn often isn't able
to project a shortfall with absolute certainty until it is almost upon them.
?????One of the big concerns with early warning is that it simply won't be
accurate. Cal-ISO board member Mike Florio, a consumer advocate, said he
worries about crying wolf.
?????"After the third or fourth or 10th time," Florio said, "people start to
say, 'They're always calling these things, and nothing ever happens.' "
?????But board member Carl Guardino, who also is head of the Silicon Valley
Manufacturing Group, sees that as a strength rather than a weakness of the
program.
?????He said early warning will prompt businesses to redouble their
conservation efforts, which could help stave off many of the projected
blackouts.
?????"That's not crying wolf; that's popping the champagne," Guardino said.
"Preventing blackouts from happening in the first place is precisely what we
want."
---
?????Times staff writers Sarah Hale, Leslie Earnest and Nancy Vogel
contributed to this report.

Copyright 2001 Los Angeles Times

Power Crisis Has Mileage for Bush
By ROBERT SCHEER

?????The Bush administration is pulling a fast one on energy, and we will all
pay dearly for decades to come. By panicking the public with oil industry
propaganda of an energy shortage, the Bushies are building support for the
most reckless energy policy since the days before the environmentalist
movement, when blackened skies and lungs represented the vision of progress.
?????To make things worse, to head off objections to their plans to plunder
virgin lands and obliterate conservation measures, they have thrown in as a
palliative the old oxymoron of "clean" nuclear power.
?????Of course there is nothing clean about nuclear waste, which can never be
rendered safe.
?????The public may temporarily accept new nuclear power plants, as long as
one is not built anywhere near their neighborhood and the radioactive
byproduct is shipped to another part of the country.
?????But trust me, while these things may be better designed today, the
insurance companies are no dummies for still refusing to insure nuclear power
plants. It is wildly irresponsible for the Bush administration to now insist
that U.S. taxpayers underwrite these inherently dangerous ventures.
?????Does anyone even remember Three Mile Island? Or, more disastrously,
Chernobyl? I was the first foreign print journalist admitted to the Chernobyl
plant after the explosion. Even a year after the fact, and with the benefit
of the best of Western scientific advice, it was still a scene of chaos.
Nuclear power is like that--unpredictable, unstable and ultimately as
dangerous as it gets.
?????The entire Chernobyl operation is now buried in a concrete-covered
grave, but the huge area under the radioactive plume emitted from the plant
is a permanent cancer breeding ground, as is the sediment in the area's main
rivers and throughout much of its farm land. I traveled from Moscow to
Chernobyl by train in the company of top U.S. and Soviet experts, but even
they seemed to feel lost and frightened as they donned white coats and Geiger
counters to tour Chernobyl. Nuclear power is just too risky a gamble to push
because of a phony energy crisis.
?????The desperation in the White House is palpable, but it is not over an
"energy crisis," which Bush's buddies and campaign contributors manipulated
in the Western electricity market.
?????No, the fear of the Bush people, even before Jim Jeffords' defection,
was that their political power would be short-lived and that they had best
move as fast as possible on their pet projects, beginning with increasing the
profits of GOP energy company contributors.
?????Why else the panic? There is no sudden energy crisis. Known world
reserves of fossil fuel are greater than ever, alternative energy sources are
booming, and conservation measures work. If the Federal Energy Regulatory
Commission would do its legally required duty of capping wholesale prices to
prevent gouging, there would not be an electricity crisis in California or
elsewhere.
?????The FERC has not done its job. Clearly, as the New York Times reported
last week, energy wholesalers are in cahoots with the Bush administration to
use the FERC as their personal marketing tool to drive up their already
obscene profits.
?????Finally, there is simply no reason to rape America in pursuit of
something called "energy self-sufficiency." If the vast reservoirs of natural
energy resources--resources that are sitting under land controlled by regimes
around the world that we've propped up at enormous military cost for half a
century--are not available to be sold to us at a fair price, why continue to
prop up these regimes? What did President Bush's Dad, with his buddies Dick
Cheney and Colin Powell, achieve in preserving Saudi Arabia and Kuwait if
those degenerate monarchs they saved in the Gulf War will not now trade
fairly in the one commodity of value that they hold?
?????We must make our quid pro quo clear: We will pay for a huge military to
keep these sheikdoms and other energy-rich regimes in power only if they
guarantee fair oil and natural gas prices for our retail consumers.
?????Make that deal and the energy "crisis" is history.
- - -

Robert Scheer Writes a Syndicated Column

Bush announcing low-income aid, but no price caps
SCOTT LINDLAW, Associated Press Writer
Tuesday, May 29, 2001
,2001 Associated Press
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/05/29/nation
al0755EDT0488.DTL
(05-29) 04:55 PDT LOS ANGELES (AP) --
President Bush traveled across the country to deliver news Gov. Gray Davis
doesn't want to hear: He won't force down soaring electricity prices that
have cost California nearly $8 billion since January.
The Republican president and the embattled Democratic governor arranged a
20-meeting Tuesday to talk about California's energy crisis, but there was no
indication they would break their stalemate.
Bush opposes price limits on wholesale electricity that utilities buy,
arguing they do nothing to address supply-and-demand issues at the heart of
the crisis.
Davis contends federal energy regulators are ignoring their mandate to ensure
"just and fair" electricity prices.
With no sign of a break in the deadlock, each side maneuvered for maximum
advantage from Bush's first full day in California as president.
Davis, in an interview Tuesday on ABC's "Good Morning America," defended his
record on licensing more power plants.
"We've licensed 15 plants. Ten are under construction, four will be online
this summer, four next summer, and by the end of 2003 we will have built our
way out of this problem. But between now and then, we are getting gouged
unbelievably," Davis said.
The Bush administration timed positive energy announcements to coincide with
the president's visit.
At the Marine Corps base at Camp Pendleton, Bush was announcing the expansion
of a program that provides federal money to help low-income residents pay for
power.
Bush was proposing $150 million, in addition to $300 million already budgeted
for a component of the Low Income Home Energy Assistance Program, to provide
special help to cash-strapped residents of California and certain Midwest
areas such as Chicago, a senior administration aide said.
Bush was also reminding state residents of his order that military facilities
in the state cut peak-hour usage by 10 percent.
To alleviate an electricity bottleneck on a crucial south-north transmission
path, the Department of Energy announced that the Western Area Power
Authority will try to raise money from a variety of private and public
entities to finance a crucial additional lines.
"The Bush administration is taking a leadership role in addressing a
long-neglected problem in California's electricity transmission system," said
Energy Secretary Spencer Abraham. "California's electricity problems
developed over a period of years and cannot be solved overnight. However, we
can move now on actions that will help avert the same types of problems from
recurring year after year."
Davis had a letter for Bush from top economists who maintain price caps are
justified and necessary.
Aides to the governor expressed amazement that Bush would travel all the way
to California with no major announcement in hand, and predicted Davis would
respond with "polite rage."
Mindful of the national stage he commanded, Davis planned a news conference
to air his grievances. And he convened a panel of families he said have been
victimized by the energy crisis in the same hotel where Bush was staying.
Davis wants Bush to pressure the Federal Energy Regulatory Commission to
impose stiff price caps.
Tuesday, limited caps ordered last month by FERC go into effect in
California, but only when electricity reserves fall below 7.5 percent in the
state -- a step Davis called inadequate.
Protesters planned demonstrations in Los Angeles and at Camp Pendleton, in
San Diego County.
Bush also arranged a speech on energy and trade to the Los Angeles World
Affairs Council and planned to president over a closed-door energy
round-table discussion.
,2001 Associated Press ?

Bush facing Davis' heat over energy
In first visit to state as president, he'll hear governor's plea for help
Carla Marinucci, Lynda Gledhill, Chronicle Political Writers
Tuesday, May 29, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/05/29/M
N205743.DTL
President Bush wasn't on California soil for more than five minutes yesterday
when he was drawn into his first debate on the state's power crunch.
Rep. Brad Sherman, a Democrat from Thousand Oaks who met Air Force One on the
tarmac at Los Angeles International Airport along with a group of high school
students, wasted no time button-holing the president for what appeared to be
an animated conversation.
"I brought up . . . the idea that after his meeting with our governor, I
hoped he would be in favor of wholesale regulation (of energy prices),"
Sherman said later. "He disagreed with me."
Sherman -- who two weeks ago suggested that the headline to the president's
national energy policy should be "Bush to California: Drop Dead" -- didn't
seem optimistic yesterday about Bush's 48-hour visit to the state. "I think
that the president's policies show either a lack of understanding of what's
really going on in California, or a lack of concern," he said.
That vignette underscored some of the challenges facing Bush, who arrived in
California as protesters geared up and Democratic Gov. Gray Davis prepared to
press him for federal action on the state's power troubles.
Besides Sherman, Bush was greeted by a crowd of cheering Republicans,
including Secretary of State Bill Jones and Los Angeles Mayor Richard
Riordan, the former a declared GOP candidate for governor in 2002, the latter
a rumored one.
But today, Bush will sit down with the present governor, who lately has been
blistering in his criticism of the president.
"The last time I looked, California was still part of the United States of
America," Davis told reporters this weekend. "We have contributed
disproportionately to the economic growth of this country. There's no reason
why a president should not respond to a legitimate request from the chief
executive of the largest state in the union."
In his first visit to California since just before the election, Bush plans
to emphasize the energy crisis -- but will focus on it through the lens of
his own energy plan.
ENERGY SECRETARY ACTS
Just hours before the president landed, Energy Secretary Spencer Abraham
ordered a speedup in planning to relieve a notoriously overloaded electricity
transmission line in California.
Abraham's holiday action was timed to provide a bit of positive news for Bush
to announce in California. He ordered the Western Area Power Administration,
a 15-state marketing arm of the Energy Department, to complete planning and
seek outside financing to reduce the transmission bottleneck on California's
Path 15, which connects the northern and southern parts of the state.
This morning, Bush will visit the Marine Corps base at Camp Pendleton, near
San Diego, to underscore his conservation order for a 10 percent cut in
energy usage in federal buildings and military facilities.
In Los Angeles, he will deliver a wide-ranging talk before the World Affairs
Council and lead a discussion among business leaders about technological
advances in energy conservation.
Then, he will head to Fresno and Sequoia National Park to press his
initiative to improve national parks. Along the way, protesters have vowed to
provide a vocal commentary on Bush's energy and environmental policies.
But the real drama of the trip will no doubt be the sit-down between Bush and
Davis today. The governor pushed for a lengthy, open meeting with Bush that
would include testimony from officials and consumers affected by the energy
crisis. Bush's camp announced Friday the meeting would be 20 to 30 minutes --
in private.
Davis plans to outline steps the state has taken to alleviate the energy
crisis, and what it wants the federal government to do -- including
implementing price caps on the wholesale cost of energy, cost-based pricing,
and the possibility of ordering refunds.
DAVIS THREATENING SUIT
The governor has said he will consider suing the Federal Energy Regulatory
Commission -- the agency charged with overseeing energy prices -- if it does
not impose temporary price caps.
And the state Legislature has already filed a suit, saying the commission has
failed to stop what it has determined are "unjust and unreasonable prices."
With California's energy woes worsening and a summer of rolling blackouts
predicted, the Bush-Davis session holds potentially deep political pitfalls
for both leaders, both of whom are suffering in state polls as a result of
their handling of the energy crisis.
Bush needs to demonstrate his concern for California, a state that gave a
12-point margin of victory to Al Gore in the presidential election.
But even as Bush adviser Karen Hughes told state reporters this week that the
president had arrived to show he cares, Vice President Dick Cheney again
chastised state officials for delaying their response to the energy crisis
"because all of the action was potentially unpleasant."
And Cheney signaled that the administration would resist long-term price
caps, saying, "We think that's a mistake."
Such talk drew fire from Davis' senior political adviser, Garry South, who
charged that Cheney's words demonstrated insensitivity to California's
troubles and only underscored the perception of an "all-oil, all-the-time
ticket."
Davis, whose campaign for re-election next year will depend on his handling
of the crisis, has stepped up his criticism of Bush and profit-hungry energy
firms, particularly those from Texas, in recent weeks.
And yesterday, signaling no letup, Davis' supporters made an unusual holiday
conference call to again press his case for federal action. They argued that
without immediate intervention from the Bush administration, the economy of
California -- and potentially the entire nation -- was at risk.
'THIS ENORMOUS SHOCK'
"We have this enormous shock in prices that needs to be addressed and not
ignored," said Joseph Fichero, head of Sabre Partners and a consultant to
Davis.
Alan Blinder, a Princeton economist and former vice chairman of the Federal
Reserve, warned that energy woes in California alone would "take almost a
half a percent of the gross domestic product off of the national economy."
Blinder and others argue that short-term relief -- for about 6 to 12 months
-- is necessary while new power plants are being built.
"Most times and most places, I agree price caps are not the long-run
solution, but they can be part of a short-term solution," Blinder said.
"There really is a case for temporary price caps to shield consumers and the
California and national economy from the full force of the energy shock."
Limited new price caps approved by the Federal Energy Regulatory Commission
on the sale of wholesale electricity begin today in California. But the
temporary caps, which go into effect when the electricity reserves dip below
7. 5 percent, have been lambasted by Davis as ineffective and inadequate.
Political analysts say Bush's resistence on the issue could cost him in
California -- and elsewhere.
"(California) is probably an area where he is criticized more than any other
region in the country," said Mark DiCamillo, director of the statewide Field
Poll. "Californians are looking to Bush for some relief -- and to the extent
they don't get it, Bush may be in some jeopardy here."
Chronicle news services contributed to this report. / E-mail the writers at
cmarinucci@sfchronicle.com and lgledhill@sfchronicle.com.
,2001 San Francisco Chronicle ? Page?A - 1

Bush's first visit not so welcome
Medea Benjamin
Tuesday, May 29, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/05/29/E
D10936.DTL
THIS WEEK, President Bush is making his first visit to California at a time
when consumers have been socked with hefty electric rate increases, and $70
million is being drained from our state budget each day as we buy wholesale
energy at outrageous prices.
If Bush were serious about helping Californians, he would immediately tell
the Federal Energy Regulatory Commission, FERC, to do its job. FERC's legal
mandate is to ensure that wholesale electricity prices are "just and
reasonable." But current wholesale prices are not just and reasonable, and
they are completely divorced from costs.
FERC has been ideologically fixated on the free market while ignoring the
reality that companies controlling California's energy supply are
manipulating the market to make obscenely high profits at our expense.
During the past several months, the news media have unveiled how generators
are turning power plants on and off as often as several times an hour; taking
plants off line for "unscheduled maintenance," and simply refusing to sell
California power. Investigators have determined that these energy companies
have deliberately gouged consumers to the tune of billions of dollars.
State Senate figures show that profits of these energy companies rose more
500 percent between 1999 and 2000.
If President Bush wanted FERC to control wholesale prices through a system of
cost-plus pricing, it would happen overnight.
When it comes to long-term solutions, Bush's energy policy dangerously
promotes a continued reliance on polluting fossil fuels and a resurgence of
unsafe nuclear energy. Bush pays lip service to smart, sustainable solutions
such as solar, wind and other sources of renewable energy, and to energy
savings derived from conservation and improved efficiency.
Technologies proven to be dirty, dangerous and expensive will get the lion's
share of taxpayer subsidies, while the 2002 federal budget slashes funding
for solar research by more than 50 percent, with major cuts in funding for
geothermal, hydrogen and biomass technology, and fuel cell research.
If the Bush administration were to make sustainable energy sources a
priority, technologies such as wind, solar and some types of biomass could
solve our long-term energy needs. While such a policy is anathema to oil,
coal and utility industry leaders, it is central to any forward-looking
energy strategy.
The sensible responses to the energy crisis are clear: Control prices now and
rely on renewable energy and conservation in the future.
It is up to us to let the president know he can't kowtow to the energy
industry interests. Hopefully, he'll respond to the angry Californians he
will hear this week.
Medea Benjamin is founding director of Global Exchange, a San Francisco
corporate accountability organization.
,2001 San Francisco Chronicle ? Page?A - 19

Californians revert to clotheslines, fans as they gear up for blackouts
MARGIE MASON, Associated Press Writer
Tuesday, May 29, 2001
,2001 Associated Press
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/05/29/nation
al0338EDT0451.DTL
(05-29) 00:38 PDT OAKLAND, Calif. (AP) --
Paul Goettlich's condo in the Oakland hills features vaulted ceilings and
skylights, a sweeping view of San Francisco's bay and state-of-the-art
appliances.
But with the power crisis in full tilt, his dryer sits unused while he hangs
clothes, sheets and towels on a wooden rack in the garage.
"Maybe somebody doesn't want to see somebody else's underwear or bras hanging
out," Goettlich says. "But, hey, that's life."
As the state gears up for rolling blackouts and hefty energy bills this
summer, many Californians are changing their habits. The result: surging
sales of everything from low-energy light bulbs to fans to evaporative
coolers that blow misty air.
The Orchard Supply Hardware store a few miles down the road from Goettlich's
condo is having a hard time keeping clotheslines and retractable drying racks
in stock.
At The Home Depot store in Colma, about 10 miles south of San Francisco,
energy-efficient compact fluorescent light bulbs are hot sellers, along with
a $40 device called a Power Planner that's said to cut energy use by
appliances like refrigerators.
At the Wal-Mart in the Southern California suburb of Brea, customers are
buying blackout supplies along with fans and low-energy light bulbs.
Flashlights, camping lanterns and oil lamps are popular, according to manager
Rebecca Smith.
"We've quadrupled our fan sales this year, and it's not even summer," Smith
said. "It doesn't seem to matter what kind. People are buying all of them."
The rolling blackouts are proving a retail bonanza for some out-of-state
companies, like St. Louis-based Emerson, which is selling twice as many
ceiling fans in California than in any other state.
"They're energy efficient and use less electricity than a 100-watt bulb,"
explains Emerson spokesman Walt Sharp. "They can make a room feel about seven
degrees cooler without air conditioning by circulating the air. They can save
up to 40 percent when used with air conditioning."
Industrial-sized floor fans -- used in manufacturing areas and large
warehouses -- also are a hot commodity in California, he said.
At Walnut-based Lights of America, sales of energy-efficient compact
fluorescent bulbs have increased 700 percent since last year. And with state
rebates and incentives for consumers to switch to the new bulbs, sales are
expected to continue soaring, said Brian Halliwell, vice president of
marketing sales.
Most bulbs average from $6 to $10, with 50-watt compact fluorescent bulbs
providing the same amount of light as 300-watt halogens, Halliwell said.
Shopping the light bulb display at The Home Depot in Colma, Linda Shintaku
said she's exploring all her options for conserving energy this summer.
"We lowered the thermostat, and we're trying not to turn lights on in rooms
we're not in," Shintaku said. "I try to wash clothes at night during low-peak
hours."
Energy experts note that homeowners can make the biggest dent in their power
bills by switching to more efficient models of major appliances.
But despite the advice and an array of rebate programs, Home Depot manager
Benefield says consumers aren't yet flocking to replace energy-sucking
appliances like refrigerators and dishwashers. People who are in the market
for big appliances ask about the government's Energy Star ratings, which
bring rebates of up to $75, he noted.
The new vogue for conservation has some ecology-conscious Californians
shaking their heads. Berkeley resident Leona Benten has been hanging her
clothes outside to dry long before the power crisis came along and she's
hoping the energy crisis will push others to change their habits and their
attitudes.
"It takes like two minutes," Benten said. "I think that people have succumbed
to incredible amounts of advertisements, and if it's mechanized, it's
better."

Crisis no sweat to some offices
Many offices keep cool in crisis
Air conditioners blast in state's energy centers
Steve Rubenstein, Chronicle Staff Writer
Tuesday, May 29, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/05/29/M
N208422.DTL

Some very cool places to be during the dog days of spring and summer turn out
to be the places with their fingers on California's air conditioning switch.
If only the entire state could cram itself into the cavernous control room in
Folsom of the Independent Systems Operator, where the air is a comfortable 69
degrees and receptionists wear sweaters at high noon -- when it's upwards of
90 degrees outside.
Or the Pacific Gas and Electric Co. lobby in downtown San Francisco, where
the air is an even chillier 65 degrees, which admittedly isn't much of a
bounty, considering it's usually that cool outside anyway.
Other cool places to be are the state Capitol, where legislators who
promulgate energy edicts hang out, and the headquarters of the state Public
Utilities Commission, where bureaucrats who promulgate energy edicts hang
out.
Armed with a high-tech digital thermometer, The Chronicle made the rounds of
the energy crisis poohbahs, to make sure they are practicing what they are
preaching.
Some were, some weren't. Those that weren't blamed it all on that most
familiar of modern scapegoats, the computer.
Computers must be kept cool -- in the 60s for big mainframes and a bit more
for the smaller units most folks use, though some can go into the 80s without
hiccuping. So generally, people who work alongside the computers get to keep
cool, by association, although it's the computer that counts.
The ISO headquarters, located in an industrial park 20 miles east of
Sacramento, is a delightfully cool and comfortable place when the outside
temperature soars into the 90s and 100s.
The reception area, the only room accessible to the outraged public, is a
fairly stiff 76 degrees -- only two degrees cooler than the 78 degrees
recommended by President Bush and the federal energy crisis czars and
czarinas.
But take a step past the lobby security doors and the temperature plummets.
In the main hallway, the temperature is 73 degrees. And in the control room,
where two dozen engineers and technicians sit at consoles and monitor the
flow of California electricity on a giant diagram of state power lines so
they can order blackouts for everyone else -- the temperature is 69 degrees.
NO SWEATING AT ISO
Some managers do not take off their sports coats and jackets.
"We want these people to be comfortable," explained Tony Capasso, facilities
manager for the ISO complex. "We don't want these people sweating bullets in
the middle of a crisis."
Inside the state Capitol, where legislators and the governor preach
compliance with federal guidelines calling for 78-degree thermostats, the
temperature dips into the high 60s. The coolest spots are the press briefing
room and the treasurer's old office.
GOVERNOR'S OFFICE
The governor's suite is in the mid-70s, apparently because folks are often
coming by with thermometers and it wouldn't do not to set an example. Press
secretary Steve Maviglio said Governor Gray Davis is a practice-what-he-
preaches kind of guy who keeps corridors dark, shades drawn, air conditioners
idle. His personal secretary works in short sleeves, with a cheap plastic fan
humming nearby.
"It's so dark in the hall that we're always bumping into things," said one
aide.
Even so, the temperature in the governor's suite of offices is three degrees
cooler than the 78 degrees recommended by President Bush -- not the first
time the two men have failed to agree.
THE LEGISLATURE
The Assembly chamber is 71 degrees while the Senate chamber -- with 40 fewer
legislators spewing forth -- is 73 degrees. But the Senate chamber has a
southern exposure, one Capitol guide explained.
"Hot air from the people sitting inside has nothing to do with it," he said.
In San Francisco, the temperature inside cavernous City Hall dips in spots to
the mid-60s. College student Jasmine Westbrook, who dropped by with her art
class on a project to sketch the interior of the building, was doing her
sketching while wearing a windbreaker to keep warm.
"I want to stay comfortable," she said. "It think it's supposed to be hotter
in here, isn't it?"
The mayor's office, at 73 degrees, was eight degrees warmer than another
office down the hall, even without the mayor sitting in it.
63 AT THE PUC
At the headquarters of the state Public Utilities Commission, which is
supposed to be keeping an eye on the self-declared bankruptcy of the utility
that mails out the bills, the lobby temperature is 63 degrees.
Chief engineer David Omosheyin, eyeing The Chronicle's thermometer nervously,
insisted the 63-degree reading was caused by the lobby's proximity to the
front door, where the outside temperature at the moment was in the low 60s.
He invited the thermometer to visit the upper floors, where the temperature
was 70.
As for San Francisco's federal buildings: Bush would probably not frown.
His orders appeared to be followed during The Chronicle's visits, so much so
that it was actually hotter inside than out. Though that wouldn't be hard,
considering it was in the low 60s outside. And the places measured happened
to be courtrooms and tax offices, where the body heat from anxiety alone
could probably melt the paint some days.
San Franciscans, Omosheyin said, are losing their perspective when it comes
to things like electricity, energy alerts and rolling blackouts. In his
native country of Nigeria, he said, the electricity runs sporadically, if at
all.
"There the power can go off for a week," he said. "The world goes on. Here,
people take a lot of things for granted, and electricity is one of them."
As for the offices of the places that report on such matters, they fared
about the same.
The Walnut Creek bureau of The Chronicle, where the sun sizzles into the 90s
with regularity in the summer, is kept at 67 degrees because of all the
computers. The main newsroom of The Chronicle is kept at 71 degrees, because
of all the computers. But the reception room was 71 degrees, too, and there
aren't any computers there, not a one.

E-mail Steve Rubenstein at srubenstein@sfchronicle.com.
Some offices keeping their cool
Place                                  Inside     Outside
                                    temperature  temperature
Control Room, California Independent
Systems Operator (Folsom)                  69       90
Governor's office, Capitol (Sacramento)    75       94
Press briefing room, Capitol (Sacramento)  68       94
Caltrans headquarters (Sacramento)         70       94
Chronicle bureau newsroom (Walnut Creek)   67       90
Mayor's Office, San Francisco City Hall    73       63
Calif. Public Utilities Commission lobby
(San Francisco)                            63       63
State Building (San Francisco)             69       63
Courtroom, 19th floor, Federal Building
(San Francisco)                            70       63
Lobby, Pacific Gas and Electric
headquarters (San Francisco)               65       65
IRS office, Federal Building
(San Francisco)                            69       63
Main newsroom,
San Francisco Chronicle (San Francisco)    71       64

,2001 San Francisco Chronicle ? Page?A - 1

Stakes are high for Davis meeting with Bush
GARY GENTILE, AP Business Writer
Tuesday, May 29, 2001
,2001 Associated Press
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/05/29/state0
731EDT0136.DTL
(05-29) 04:31 PDT LOS ANGELES (AP) --
With California facing a summer of outages, Gov. Gray Davis was to meet
President Bush to press for a federal cap on energy prices.
But Davis wasn't expected to win any concessions during the 20-minute Tuesday
meeting where he's expected to point to Texas energy makers.
Davis has appeared on national news programs attacking Bush for opposing
price controls on wholesale electricity, and suggesting the president has
ignored price-gouging by Texas-based electricity generators.
"The president did not create this problem, but he is uniquely situated to
solve it," Davis said Monday. "What I'm going to ask him to do, with all
respect, is to enforce federal law. The money that leaves this state goes
directly to energy companies in Texas and the Southwest."
If Bush refuses to administer price controls as expected, Davis can use that
as ammunition in his sparring with the administration.
Bush has blamed California officials for the state's power woes and said
price controls won't solve shortages. Instead, they said, Bush plans to
stress his efforts to conserve energy in federal buildings and will bring one
or two new initiatives to the table.
One of them commits the federal government to helping organize a consortium
to build more power lines for the state.
Energy Secretary Spencer Abraham directed the Western Area Power
Administration, a federal agency, to take the first steps to clear the way
for building more transmission capacity between southern and northern
California. That would help relieve a transmission bottleneck in the central
part of the state.
While this will not help this summer, Abraham said in a statement the line
improvements, when completed, "will help avert the same types of problems
from recurring year after year."
The stakes of the meeting are high for both politicians.
Davis, who has been mentioned as a Democratic challenger to Bush in 2004,
wants federal help to solve an energy crunch that threatens rolling outages
this summer and has cost state taxpayers nearly $8 million since January --
the price of buying power for two cash-starved private utilities. And his
plan to rescue one of those companies reportedly is faltering.
Leaders of both the state Senate and Assembly oppose a $3 billion-plus plan
to bail out Southern California Edison by buying its power lines, the Los
Angeles Times reported Monday.
Bush, meanwhile, needs to mend fences in vote-heavy California. The
Republican president lost badly here in November, and polls show most
Californians dislike his handling of their energy crisis.
Bush's Tuesday agenda was heavy on energy issues. At the Marine Corps base at
Camp Pendleton, near San Diego, Bush was to highlight his order that federal
agencies and installations cut back energy use. Then it was on to Los Angeles
to discuss his energy plan in a speech to the Los Angeles World Affairs
Council.
Bush was confronted by the issue virtually as he stepped off the plane Monday
in Los Angeles. Rep. Brad Sherman, D-Los Angeles, escorted the Academic
Decathlon national championship team from El Camino Real High School in
Woodland Hills to meet Bush. He told the president California needs
regulation of electric generators.
"The president seems to believe just by instinct that rate regulation reduces
supply and also by instinct that all those in the energy industry are fair
people who are not trying to game the system," Sherman said. "Anyone who
studies the facts in California knows that power is being withheld in order
to drive up the price."
,2001 Associated Press ?

State gives president tepid ratings
Power crisis blamed for 42% approval
Carla Marinucci, Chronicle Political Writer
Tuesday, May 29, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/05/29/M
N56632.DTL

As President Bush arrives in California for his first trip in seven months,
many state residents give the former Texas governor lackluster approval
ratings - underscoring how even the nation's leader may be feeling the
effects of the worsening energy crunch, a new Field Poll shows.
The poll of 1,015 Californians, taken from May 11 to May 20, shows that 42
percent approve of Bush's job performance to date, with 40 percent
disapproving, a nearly even split. Eighteen percent of those surveyed offer
no views of Bush's performance, the poll showed.
A Field Poll last week showed that on energy issues specifically, more than
half of Californians viewed the president's job performance as "poor" or
"very poor," compared with 38 percent who gave Democratic Gov. Gray Davis the
same rating.
"This should be a time when Bush is enjoying his honeymoon period," said Mark
DiCamillo, director of the Field Poll, who pronounced the president's ratings
"very mixed."
"If you compare Bush's 42 percent approval ratings in California, it's about
12 points behind the national (ratings)," said DiCamillo. "He's not doing as
well as he should here, and one of the reasons is the energy crisis."
In the Field Poll's first measure for Bush since his election, "what stands
out is the absence of any real honeymoon."
". . . It's highly partisan," DiCamillo said.
CHENEY LOOKS RATHER POSITIVE
Vice President Dick Cheney fares better, with 47 percent of Californians
viewing him in a positive light and 25 percent disapproving.
Much of the difference in the ratings comes because voters are not as likely
to hold the second-in-command responsible for their energy woes, DiCamillo
said.
"Whenever there's a problem with the federal government, you're going to
focus your anger and attention at the guy at the top of the heap," he said.
"Bush will be held responsible for his administration."
DAVIS' SHARP DECLINE
The Field Poll reported last week that as the energy crisis has ramped up,
the governor's overall approval ratings have fallen statewide. Today, 49
percent disapprove of his job performance and 42 percent approve -- a sharp
decline from the favorable approval ratings he held in January.
But the new poll shows that the public's views of the Legislature has dropped
dramatically in recent months as concerns about the energy crisis have
multiplied. Just 39 percent of Californians have a positive view of the
Legislature's job performance today, while 42 percent have a negative view.
That's a stark contrast to January, when residents approved of the job the
Legislature was doing by more than a 2-to-1 ratio, 52 percent to 25 percent.
While state and local political leaders appear to bear the brunt of the
public's negative feelings regarding the recent energy crisis, Californians
continue to give strong approval ratings to their two U.S. senators and to
members of Congress, the poll showed.
Californians hold favorable views of Sen. Dianne Feinstein, who was re-
elected in November. By 54 percent to 27 percent, they like the job she is
doing, the latest poll showed.
"She has always had good job ratings" among voters, said DiCamillo, "and this
is just an affirmation of that."
Sen. Barbara Boxer also continues to get high ratings, with 49 percent
approving of her performance and 28 percent disapproving. And Californians
gave a generally favorable rating to their congressional representatives,
with 53 percent approving and 35 percent disapproving.
PARTY LINE SPLITS
Among the other findings of the new Field Poll:
-- Views about Bush's job performance are split along party lines, with
Democrats, by a more than 3-to-1 ratio, holding a negative view of him, and
Republicans, by a 6-to-1 ratio, seeing him in a positive light. Independent
voters gave him positive ratings, 39 percent approving of his job
performance, 31 percent disapproving and 30 percent holding no view.
-- Cheney had equally partisan approval ratings, although he received much
stronger ratings from his own party and independents. Forty percent of
Democrats disapproved of him, compared with 30 percent who approved. But
Republicans approved of him by a 10-to-1 ratio. Independents, by a 2-to-1
ratio, liked what he has done in office.
-- Congressional Democrats get particularly strong ratings from state voters.
Fifty-three percent of Californians approve of their job performance, while
just 33 percent disapprove. Republicans in Congress get a less favorable 41
percent approval, 46 percent disapproval rating, the poll showed.
The Field Poll carries a margin of error of plus or minus 3.2 percentage
points.

E-mail Carla Marinucci at cmarinucci@sfchronicle.com.
Field Poll / Job approval ratings

 -- Job approval of George W. Bush as president

                     Approve  Disapprove  No opinion
Statewide              42%       40%         18%
Democrats              18%       63%         19%
Republicans            76%       12%         12%
Others/non-partisans   39%       31%         30%
.
 -- Trend of job approval of Dianne Feinstein as senator
                     Approve  Disapprove  No opinion
Men                    49%       35%         16%
Women                  60%       19%         21%
Democrats              73%       12%         15%
Republicans            33%       50%         17%
Others/Non-partisans   44%       21%         35%
.
 -- Trend of job approval of Barbara Boxer as senator
                     Approve  Disapprove  No opinion
Men                    45%       36%         19%
Women                  53%       20%         27%
Democrats              67%       12%         21%
Republicans            29%       53%         18%
Others/Non-partisans   37%       19%         44%

   The poll was conducted May 11-20, 2001. Results are from a telephone
survey
of 1,015 California adults, including 504 self-described Democrats, 390 self-
described Republicans and 121 others. The margin of error is 3.2 percentage
points.
   Source: Field Institute
   Chronicle Graphic

,2001 San Francisco Chronicle ? Page?A - 1

Calif. pawn businesses boom as energy bills rise

Monday, May 28, 2001
,2001 Associated Press
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/05/28/nation
al1807EDT0593.DTL
(05-28) 15:07 PDT SAN FRANCISCO (AP) --
Rising energy bills have some Californians pawning their valuables to pay for
power.
When an employee at an Oakland pawnshop asked N'Kechia Jackson last week how
much she wanted for a gold necklace, Jackson had a specific amount in mind.
"I need $113.86," she said. "That's how much my PG&E bill is."
Jackson, who got $125 for the chain, said her monthly energy bill from
Pacific Gas and Electric Co. is like a credit card balance that never
shrinks.
Bay Area pawnshop owners say similar scenes are becoming common as laid off
dot-com workers and single mothers hock items like jewelry and laptop
computers to pay rising power bills.
"That's the number one reason people have been coming in to pawn right now,"
said Bill Rager, assistant manager of Best Collateral Pawnbrokers in Oakland.
"Basically, it's high-dollar items -- chains, watches, bracelets, engagement
rings, wedding rings."
Pawnshops do not require credit checks, and they offer fast cash. They also
allow people up to four months to repay a loan before their items are sold.
Interest rates range from 5 percent to 20 percent.
"The sad thing about it is that I'd say 60 percent will lose their property
because they can't afford to get it out," Rager said.
Another woman entered Rager's shop minutes after Jackson pawned her jewelry.
The woman, who gave her name only as Sophia, used her children's Nintendo
game set as collateral for a $65 loan.
The woman said she had scrambled since February to pay a $700 PG&E bill, and
now had no money to cover her $100 phone bill.
"When they come home and see their Nintendo gone, they'll be upset," she
said. "But my kids are understanding."
,2001 Associated Press ?

Californians brace for a summer of blackouts
GARY GENTILE, Associated Press Writer
Monday, May 28, 2001
,2001 Associated Press
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/05/28/nation
al0501EDT0456.DTL
(05-28) 02:01 PDT LOS ANGELES (AP) --
While most people celebrate Memorial Day, Jan and Ralph Vazquez will
celebrate their own independence day -- energy independence.
Worried about a summer of rolling blackouts and fed up with rising utility
bills, the couple installed a $33,000 solar system in their four-bedroom home
in San Rafael a few weeks ago. It can store enough energy in batteries to
power their refrigerator and other appliances for up to six hours if there is
a blackout.
"I think there is a little bit of fear and concern about to what extent would
we be subject to blackouts and how much energy is going to cost us," Jan
Vazquez said. "The simple solution is to be independent, or as much so as
possible."
The Vazquezes are among millions of Californians facing an uncertain summer,
wondering how they will cope with what is expected to be several months of
rolling blackouts.
The prospect of daily power outages as the temperature rises and air
conditioning use peaks has left many people apprehensive, from parents of
newborns who need warm bottles to people who require electric-powered medical
devices in their homes to office workers worried about getting stuck in an
elevator.
California already has endured six days of rolling blackouts this year, each
lasting about an hour and hitting different parts of the state. Estimates
vary about what lies ahead.
One industry-sponsored watchdog group, the North American Electric
Reliability Council, predicted California would face an average of 20 hours a
week of rolling blackouts.
Responding to complaints following the earlier outages, state power officials
this month plan to begin issuing weather advisory-style warnings 24 hours
before an expected blackout.
Chicago, faced with a deteriorated electrical system after years of neglect
and severe weather, adopted a blackout plan in 1999 that is being studied as
a model by California officials.
Today, for example, Chicago police officers carry portable stop signs to
darkened intersections moments after a blackout hits.
"There's no just excuse for trapping people in elevators," said Bill Abolt,
Chicago's commissioner of environment. "There's no excuse for shutting off
power to an intersection with no notification to police and fire in advance."
Across the country, reduced hydroelectric production due to the Pacific
Northwest drought, an aging transmission system, rising costs for the natural
gas that fires many power plants and increasing demand for electricity is
expected to produce shortages and higher prices in the Northwest, New England
and other regions.
The stakes are high in California. It has the world's sixth largest economy
and is home to bellwether high tech companies such as Intel and Cisco
Systems.
For some retailers, the impact is minimal. Clerks can switch from an
electric-powered cash register to battery-powered calculators. Some companies
can fire portable generators to power their phone system with minimal
disruption.
The California Manufacturing and Technology Association recently estimated a
summer of blackouts could cost the state $21 billion and 136,000 jobs as
manufacturers curtail production and retail stores suffer a slowdown.
The Bay Area Economic Forum has estimated that rolling blackouts could cost
as much as $15 billion and 15,000 jobs.
A summer of rolling blackouts also will test the emotional mettle of
Californians, who normally rally when faced with such natural disasters as
earthquakes and wildfires.
"It's going to be an interesting natural experiment," said Mihaly
Csikszentmihalyi, Davidson professor of management at Claremont Graduate
University.
"When there is a natural calamity, people often respond really positively.
This is different in the sense it is not a natural calamity and you can blame
politicians and gougers for it. It could turn into resentment against those
in power and those who should be supplying the power."
California's plight already has become comic fodder.
From David Letterman to radio talk shows, the state has been the butt of
power-related jokes. On a recent episode of the game show "The Weakest Link,"
which is taped in Los Angeles, the acerbic host asked which player was having
a "rolling mental blackout."
Jan Vazquez, however, suggests that California has the chance to go from
punch line to role model.
"California has the opportunity to be a leader again," Vazquez said, urging
more state investment in alternative energy rather than sinking billions more
into buying power at inflated prices.
"If there were more homeowners like us and more businesses that were
generating their own electrical power, I think we would avoid blackouts
completely -- maybe not by this summer, but by next summer," she said.
,2001 Associated Press ?

New Nevada-California energy plan surfaces at last minute
BRENDAN RILEY, Associated Press Writer
Monday, May 28, 2001
,2001 Associated Press
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/05/28/state2
242EDT0228.DTL
(05-28) 19:42 PDT CARSON CITY, Nev. (AP) --
An 11th-hour proposal to help ease Nevada's budget problems and provide more
electrical power to neighboring California was outlined Monday by a key state
lawmaker.
Assembly Ways and Means Chairman Morse Arberry, D-Las Vegas, said his plan,
to be introduced Tuesday, would allow power plants to be built along the
Nevada-California border, on land that would be owned by this state.
"It could produce millions of dollars for the state," said Arberry, adding
that he has asked researchers to determine the exact dollar benefit to Nevada
to help get the proposal passed in the final week of the 2001 session.
Under the proposal, the state would negotiate with the federal Bureau of Land
Management to acquire BLM land on the border of the two states, especially in
the southern Nevada desert region.
The state then could accept bids from companies that wanted to build
power-generating plants, and take the bid that would be the best deal for the
state, he said.
The benefit to the power plant builders would be a site as close to a prime
market -- energy-starved California -- but located in industry-friendly
Nevada, which already has moved to speed up paperwork involved in power plant
approvals.
Arberry said he wasn't approached by energy company lobbyists to introduce
the idea. Instead, he said, "I was just talking to an old guy at the
barbershop, and he suggested it. I don't know if he even realized what he was
saying."
As part of a broad effort to ensure Nevada has enough energy, Gov. Kenny
Guinn already has worked with local government officials, especially in
southern Nevada, to speed up power plant permit processes.
Legislative efforts include SB362, which lets various local and state
agencies act simultaneously on permits for power plants, transmission lines
and other related facilities.
Various power companies have come up with plans for Nevada plants that would
supply more than 10,000 megawatts of energy by 2004.
Those proposals are among plans that would add more than 76,000 megawatts of
power in the Northwest, Southwest, Rocky Mountain and California-Mexico
regions, according to the California Energy Commission.
,2001 Associated Press ?

New energy moves by W.House before Bush-Davis meet
Posted at 6:39 a.m. PDT Tuesday, May 29, 2001
BY RANDALL MIKKELSEN
WASHINGTON (Reuters) - On the eve of a showdown meeting on California's power
crisis between California Gov. Gray Davis and President Bush, the Bush
administration Monday moved to help ease the crisis.
Energy Secretary Spencer Abraham unveiled plans to boost extra transmission
capacity in California, which he said would be a ``big step'' in easing
rolling power blackouts.
Abraham ordered the Western Area Power Administration -- an Energy Department
arm responsible for marketing electricity from federal water projects in 15
Western states -- to wrap up planning for building extra transmission
capacity.
The move came as Bush headed to California for his first presidential visit,
and a critical meeting on Tuesday in Los Angeles with the Democratic
governor.
Davis will ask Bush to impose wholesale electricity price controls and order
refunds for overcharged consumers, aides said, but the White House on Monday
reiterated Bush's position that such steps would be counterproductive.
Davis spokesman Steven Maviglio said the steps announced by Abraham were not
new and were not the kind of help California needed to meet its immediate
crisis. ``That's been kicked around for a while,'' he said.
Davis said last week he was prepared to ``go to court'' if Bush failed to
act. ``The law says we're entitled to relief and it hasn't been coming,''
Davis said.
White House spokeswoman Claire Buchan said that while Bush had ``worked very
hard'' to help California, through measures such as ordering the Defense
Department to reduce its energy use by 10 percent in California and easing
rules for using backup power generators, price controls ``make the problem
worse.''
TRANSMISSION BOTTLENECK
At issue in Abraham's order is so-called Path 15, an 84-mile stretch of power
lines with insufficient capacity to carry the necessary load between southern
California and the northern part of the state, especially during peak hours.
Abraham told WAPA to determine whether outsiders were interested in financing
and co-owning a new transmission line. ''The level of interest will be a
factor in the decision to build the line later this year,'' the Energy
Department said in a statement.
The statement did not make clear whether the federal government would go
ahead with the project in the absence of outside financing, nor did it give
cost details.
It said WAPA, which manages nearly 17,000 miles of transmission lines, would
prepare the necessary environmental and feasibility studies and review
easement and land acquisition issues.
LEADERSHIP ROLE
``The Bush administration is taking a leadership role in addressing a
long-neglected problem in California's electricity transmission system,''
Abraham said. ``California's electricity problems developed over a period of
years and cannot be solved overnight. However, we can move now on actions
that will help avert the same types of problems from recurring year after
year.
``Removing the so-called Path 15 bottleneck is a big step in the right
direction,'' he said.
The Energy Department said a new line could transmit across the state an
additional 1,500 megawatts of electricity, enough to power 1.5 million homes.
Planning for additional transmission in the Path 15 area was started in the
mid-1980s.
California's energy crisis is rooted in a flawed 1996 deregulation plan that
allowed wholesale power prices to soar while capping retail rates.
The result has brought rolling blackouts, spotty power supplies and put
intense pressure on Davis to come up with ways to solve a worsening energy
crunch that has also drained billions of dollars from state coffers.
It has also energized potential opposition to Davis's expected 2002
reelection bid. Bush has encouraged Los Angeles Mayor Richard Riordan to
challenge Davis.

Tuesday, May 29, 2001

California should try true deregulation
Moving toward a government monopoly is the wrong prescription

EDWARD R. MULLER
Mr. Muller is the former president and CEO of Edison Mission Energy, a
power-producing firm owned by Edison International and headquartered in
Irvine. This was co-authored by S. Linn Williams, former senior vice
president of Edison Mission Energy.

Capitalism won the Cold War because of better economics: Consumers make
better decisions than politicians, central planners or monopolists. That
lesson seems to have been learned better by those who lost the war than by
those who won it.
The failure to absorb the lesson is nowhere clearer than in the efforts to
deregulate utilities. Deregulation, we are being told, has failed. The lights
are going out in California, and now politicians, governments, consumer
groups and the utilities themselves are rushing to hang out signs that read
"Capitalism doesn't work here."
Principles matter, so let's start with some: The objective of government is
to provide a framework for a better life for its people, and monopolies are a
bad framework. They are inefficient, and when they include the government,
whether as owner or comprehensive regulator, they are both inefficient and
dogmatic because politics enters the equation. We pay for that inefficiency
through higher taxes or higher prices.
We must, of course, keep the lights on to maintain our standard of living.
Does that mean that we just have to put up with the inefficiencies of
government-supported monopolies as a necessary evil to assure that important
services are available? We do not. The problem has not been too little
regulation, but too much. California is an excellent example.
What has gone wrong? The finger pointing has been great sport, but the core
of the problem is just the law of supply and demand. California flat ran
short of power. Many have wanted to build new power plants in California, but
the regulatory hurdles have been insurmountable. In recent times, the
utilities themselves said that California didn't need more power plants and
fought to stop the construction of new plants by others. The marketplace
didn't fail; regulation failed.
And California's vaunted "deregulation" was in reality just a botched
substitution of one form of regulation for another. When you deregulate a
monopoly marketplace, you want all buyers and sellers to be subject to market
forces. What California called "deregulation" didn't come close. First, the
state and the utilities agreed on fixed retail prices for five years.
As a result, consumers used electricity without knowing what it really cost
to produce. Second, the state and the utilities agreed that the utilities
would buy wholesale power through a system subject to market forces. As a
result, the cost of power bought by the utilities fluctuated even though the
price they could charge was fixed.
The utilities thought the retail prices were fixed high enough to more than
cover what they expected power to cost them. For two years they were correct
and bought power for much less than the fixed prices they charged their
customers, but last year the cost of power soared way above the fixed prices.
This wasn't deregulation, just another form of regulation. There were no
principles, just political expediency.
It didn't take long for economic reality to assert itself and the jury-rigged
structure came tumbling down. Blackouts, high prices and insolvent utilities
are not a failure of the marketplace; the marketplace never got a chance. Now
we are at a fork in the road. Should we go back to the regulation of the past
or forward to full deregulation?
It's not fair to say that deregulation has failed. After all, we haven't
tried it yet. We should return to first principles: Deregulate properly by
making all aspects of the system subject to market forces. True deregulation
would include:
* Reducing the regulatory burdens on building new power plants.
* Eliminating fixed prices.
* Making sure that there are enough players in the market to make it
competitive.
* Having shareholders, not customers, be responsible for the financial
effects of business decisions.
Prices will vary with supply and demand and may rise at the outset until
supply is added, but over time a deregulated market will give customers the
lowest prices. The talk of a retreat to the regulation of the past is in part
a result of our failure to articulate why capitalism won the Cold War and
competition makes the world a better place.
The tendencies of politicians to intervene, and of businessmen to ask
government to exempt their particular business from the marketplace, or some
of its effects, remain strong. Ironically, prosperous times reinforce those
tendencies by masking their effects on the rest of us. Whether in good times
or in bad, the public interest is a David to the Goliath of politicians,
bureaucrats and businessmen who see governmental protection as safer for
themselves than the hurly burly of competition.
Capitalism, like democracy, is imperfect, but both are far preferable to the
alternatives. Our laws and regulations should provide the structure for a
marketplace where consumers vote many times a day, not a discredited and
dictatorial system in which only politicians and monopolists get to vote.

By Rick Stouffer
rstouffer@ftenergy.com
Power generators and traders are finally realizing that the phrase "build it
and they will come" wasn't written with power plants and natural gas fuel in
mind.

You can build all the new capacity you want*but if you don't have the natural
gas to fuel the turbines, all you have is a brand-new, very expensive white
elephant.

With roughly 90% of the 155,000 MW to 200,000 MW of announced capacity to
come on-line within the next few years firing with natural gas, executives
are beginning to add two and two together and really getting four.

Back to the future with a twist
Translation: The really smart power producers/traders are now locking in
proven natural gas reserves*insuring that when supply gets tight, they can
reach into the ground and pull out more fuel*their fuel.

For some players, it's back to the future, a return to the days when the same
company owned the fuel, the generation, and the transmission*but with a 21st
century twist. Today, the various factions are unregulated.

"What goes around comes around in this business," said Edward Tirello Jr.,
managing director and senior power strategist-investment banking at Deutsche
Banc Alex. Brown. "The utilities used to own the various fuel sources, coal,
natural gas, and now they are getting back into it."

"Oil and natural gas firms are rebundling, reintegrating, but in an
unregulated sense," said John Olson, an energy analyst in Houston with
Sanders Morris Harris.

Can't burn paper in a turbine
With volatility as much a part of deregulation as mergers and acquisitions,
no power producer wants to be caught with its assets unproductive, i.e. with
a shiny, new combined-cycle plant and no gas to fuel it.

"You can't put paper in a pipeline; you can't burn paper in a turbine," said
Donato Eassey, head of natural gas analysis for Merrill Lynch in Houston,
Texas.

"There are developing some real physical concerns for getting natural gas,
and we will see some reneging on deals*even with contracts."

Olson has done the mathematics concerning the spike in demand related to new
plants*and the numbers don't work.

"To feed all the plants expected to come on-line in the next few years would
take an additional 13 billion cubic feet per day (Bcfd), and we are producing
52 Bcfd," according to Olson. "Gas production has only been growing at a rate
of 0.4 Bcfd over the last 10 years*and well productivity has been down the
last two years. We've simply been replacing our natural declines."

Control what's there
To put it in the vernacular: If enough gas isn't going to be there, you
better control what you can. Thus, Calpine Corp. in February announced a deal
to acquire for $1.2 billion in stock and assumed debt the Calgary, Alberta,
Canada-based exploration and production (E&P) firm Encal Energy Ltd.

No power producer wants to be caught with a shiny, new combined-cycle plant
and no gas to fuel it.

The deal gave Calpine a solid foothold in satisfying part of its seemingly
insatiable need for natural gas fuel, as it marches toward 70,000 MW of
capacity within the next three years. With Encal, San Jose, Calif.-based
Calpine's proven and probable reserves jumped to 1.7 trillion cubic feet
(Tcf), with a daily production capacity of 390 million cubic feet equivalent
(MMcfe).

Earlier this month, Williams Cos. pushed oil behemoth Royal Dutch/Shell Group
out of the way and snared independent E&P player Barrett Resources Corp. for
$1.5 billion in cash, stock and assumed debt.

Williams' offer was music to Barrett shareholders' ears: At $73 per share,
the price was some 60% above Barrett's stock price the day before Shell's
unsolicited bid became a hostile offer in March.

Two weeks ago, another independent E&P player took the money and ran. San
Francisco-based HS Resources agreed to $66 a share*a 24% premium*$1.7 billion
in cash, stock and assumed debt from Kerr-McGee Corp. Not bad for a stock
trading around $20 a year ago*and around $5 a share in early 1999.

As was the case with Calpine's swallowing of Encal, Williams and Kerr-McGee
were thinking one thing when they bid the roof off: natural gas reserves.
Williams' proven reserves, including Barrett, more than doubled to 3.3
trillion cubic feet equivalent (Tcfe), while average daily production jumped
to 555 MMcfe.

Kerr-McGee gains via the HS Resources deal 1.3 Tcfe, about a 77% increase,
while daily production will climb 45%.

"Williams looked at Barrett using wellhead-to-power plant economics,"
according to Stuart Wagner, a principal in the Denver office of investment
banking firm Petrie Parkman. "It was looking at long-lived, low-risk
reserves."

More deals a no-brainer
Generators today cannot take the chance natural gas will not be available
when that 500-MW or 1,000-MW plant is set to be primed.

"If you are building the plants and you don't have the gas, you are down the
tubes," Merrill Lynch's Eassey said. "If you are down a day in this market,
you're sunk. And buying gas in the ground is cheaper than buying it on the
market."

"The firms already have a market for their power, now they are locking in
margins," said Phillip Pace, an energy analyst in Houston with Credit Suisse
First Boston. "It depends on how short you want to be. One hundred percent
short*you don't want to be."

Thus, there will be more plays made for sister firms to Barrett and HS
Resources, industry watchers believe. The acquisition of independent E&P
players is heating up.

"Will we see more deals? That's a no-brainer," said Merrill's Eassey. "You
think Equitable (Pittsburgh, Pa.-based Equitable Resources Inc., the largest
holder of gas in the Appalachian region) is trading around $80 a share on its
fundamental valuation? That's not fundamentals*that's takeout."

National Fuel is another takeout target, said Eassey. Another analyst, who
requested anonymity, believes Mitchell Energy & Development Corp., Louis
Dreyfus Natural Gas and Burlington Resources are choice targets. Petrie
Parkman's Wagner sees Mitchell and Western Gas Resources Inc. as takeout
material.

Olson calls Mitchell his "dream" acquisition. The 55-year-old firm, founded
by 81-year-old wildcatter George Mitchell, may be the choicest plum still to
be picked. Mitchell put his firm on the block last year but has yet to hear
numbers he likes.

"Gas production at Mitchell is up 25% this year, and is projected at 20%
through 2003," Olson said. "It's finding very rich gas in the Barnett
Formation in North Texas, but even if you're finding it at 70 cents per Mcf
(thousand cubic feet), if you can sell it for $4 to $5 per Mcf, that works."

Proven gas reserves are in the 1.5 Tcf range, with daily production of
roughly 340 MMcfd. Mitchell's stock price has more than doubled in the last
year, closing May 23 at $56.55.

A crowded field of acquirers
With potential acquisitions awaiting, which companies are the promising
acquirers? Merrill's Eassey likes Reliant Energy, Aquila, possibly Mirant,
even Calpine and Williams, which he believes remain natural gas-short if they
stay on their capacity growth plans. Sanders Morris' Olson believes Duke
Energy clearly is looking for more natural gas, even with its access to
product via Duke Energy Field Services.

Credit Suisse's Pace said the field of potential acquirers could be crowded*
including every firm yet to be successful in acquiring reserves. That
includes Royal Dutch/Shell.

"Phillips already has stated it wants to be the largest coal-bed methane
player in the U.S.," Petrie Parkman's Wagner said. "Duke, Dynegy, Entergy and
AES will also have to step up."

"The pressure is there definitely to act," Pace said. "I would be very
surprised if nothing else happened this summer."