Please see the following articles:

Sac Bee, Thurs, 6/21: Davis insists on energy refunds

Sac Bee, Thurs, 6/21: Energy Digest: State moves to tax plants

SD Union, Wed, 6/20: Davis demands nearly $9 billion for electricity
overcharges

SD Union, Wed, 6/20: Davis spars with GOP senators over electricity rates

SD Union, Thurs, 6/21: Poway not proceeding on power plant proposal

SD Union, Thurs, 6/21: Campaign helps seniors bear summer
Program to use stickers identifying 'cool zones'

SD Union, Thurs, 6/21: Business leaders unite to back new SDG&E line
Coalition to lobby for transmission plan

SD Union, Thurs, 6/21: Governor adamant on refund at hearing
Davis, on Capitol Hill visit, deflects blame for shortages

SD Union, Wed, 6/20: Little-known transmission company has billion-dollar
backers

LA Times, Thurs, 6/21: Davis asks for energy refund help

LA Times, Thurs, 6/21: House approves utility aid for needy

LA Times, Thurs, 6/21: Summer starts, power doesn't stop

LA Times, Thurs, 6/21: Board votes to let state tax power plants

SF Chron, Wed, 6/20: Davis' spinmeisters draw heat from watchdogs
State controller refuses to pay energy advisers

SF Chron, Thurs, 6/21: Board wants to take back control of setting plants'
property taxes

SF Chron, Thurs, 6/21: Tough talk on power prices

SF Chron, Thurs, 6/21: Nonprofits helped with utility bills
Grants pay for ways to conserve energy

Mercury News, Thurs, 6/21: Federal caps chill prices, analysts say
Market steadies state leaders pushing for stricter controls

OC Register, Wed, 6/20: Price controls could take years to assess
Factors such as weather, conservation and long-term contracts all contribute
to prices, experts say

OC Register, Wed, 6/20: Cast members in the power play

OC Register, Wed, 6/20: Lawmaker criticizes FERC's settlement talks

OC Register, Wed, 6/20: Energy notebook: Anti-tax advocate sues to block cash
for Davis consultants

OC Register, Wed, 6/20: Fair and cloudy
The energy crunch is casting a financial shadow over the state's midways this
summer.  Organizers are making emergency preparations to weather blackouts

OC Register, Wed, 6/20: US stocks open lower
More profit warning slam market
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Davis insists on energy refunds
By David Whitney
Bee Washington Bureau
(Published June 21, 2001)
WASHINGTON -- Gov. Gray Davis demanded Wednesday that power generators refund
California nearly $9 billion in electricity charges.
"It is unconscionable for the generators to profit from their egregious
overcharges," Davis told the Senate Governmental Affairs Committee.
Davis' testimony highlighted a change in political tactics in the state's
power crisis after a Monday order by the Federal Energy Regulatory Commission
expanding wholesale price relief for California and 10 other Western states.
And the governor got some support from two FERC members who said Wednesday
that they are prepared to order California's energy suppliers to make heavy
refunds because of overcharging.
But the two commissioners -- Pat Wood III and William Massey -- agreed with
their FERC colleagues that California officials and energy companies should
be given a chance to settle the multibillion-dollar refund dispute in the
next three weeks before the commission acts, the Washington Post reported.
During his testimony, Davis gave tepid praise to FERC, which he said "finally
took a positive step" in imposing the limits. But he continued to press the
independent agency to recover what he said were overcharges.
"The FERC has been on a sit-down strike ... because we haven't received a
dime," Davis said.
The commission's action on price controls has been well-received, diminishing
appeals among West Coast Democratic governors and lawmakers and a handful of
Republicans for congressionally mandated caps.
But the commission's order didn't quiet demands that generators be required
to pay back overcharges, and Davis led the charge Wednesday to exploit that
issue.
Davis said the California Independent System Operator, the Folsom-based
agency that manages the state's power grid, found the state was billed $8.9
billion more than the competitive market would have warranted for power
deliveries for the 13 months ending June 1.
Davis insisted that FERC move promptly to "order the energy companies to give
back the money," and that Congress should help pressure the agency to do so.
"I do believe that FERC should get a clear signal on refunds from this
committee," Davis told the Democrat-controlled panel during a hearing into
whether FERC has responded properly to the crisis.
The energy commission has ordered reviews of about $124 million in potential
overcharges in the past several months. But that amount is dwarfed by the
$8.9 billion that Davis is now seeking in refunds.
While the commission is continuing to review possible overcharges, it has yet
to order a single dollar in refunds. The power generators deny they have
overcharged California, saying market conditions and the utilities' shaky
credit ratings warranted high prices.
Wood and Massey, who talked to the Post after their testimony Wednesday
before the committee, said they are ready to require generators and marketers
to refund revenue that exceeded the price ceilings imposed by FERC on Monday.
"We should have given (the California parties) guidance on refunds," Massey
told the Post. "A good place to start was to take (Monday's) order and apply
it starting October 2000 and see what you get" in refunds.
Depending on the time period and whether private generators and municipal
utilities would be required to pay, the refunds could exceed $1 billion, some
energy attorneys calculated Wednesday.
In its Monday order, the commission said it wanted all the parties to sit
down with an administrative law judge to see if they could work out a refunds
settlement. The settlement conference begins Monday.
Commission Chairman Curt Hebert told the Senate panel at Wednesday's hearing
that if no deal is reached after three weeks, the commission would seek
advice from the judge on how it might order a resolution.
"The commission stands ready to act expeditiously," Hebert pledged.
While Davis took the offensive at Wednesday's hearing, Republicans didn't
give him a free ride. The Republican National Committee passed out hand fans
touted as "Gray Davis' solution for summer blackouts."
The fans were paid for by a small Sacramento Republican consulting firm, MB
Associates.
The questioning by the committee's chairman, Sen. Joe Lieberman of
Connecticut, and other Democrats was friendly. But Republicans tried to paint
Davis as the culprit in a crisis he could have solved a year ago.
"How did you let things get totally out of hand?" asked Sen. Fred Thompson of
Tennessee, the committee's senior Republican.
Davis said his administration began the push to build new generating plants
to meet the impending power shortage four months after he took office in
1999.
"I make no apologies for the aggressive actions we've taken," the governor
said.
Republican lawmakers warned that demanding refunds could actually add to
California's power woes if energy investors become spooked about sanctions
and take their business elsewhere -- resulting in a decreased electricity
supply.
Under pointed questioning from Thompson, Davis shot back.
"The people I represent are mad. They want us to fight back," Davis said.
"... Obviously, we want the state to be an attractive place for investment.
But we don't want companies walking all over our citizens."
Separately, the top Republican on the Senate's Energy and Natural Resources
Committee said it was unrealistic -- and perhaps unfair -- for Davis to
expect FERC to immediately order refunds.
"They're going to have to go back to court and prove these charges that,
indeed, there was manipulation in the marketing of power. And that's going to
be very difficult to do," said Sen. Frank Murkowski, R-Alaska.
Even if a refund deal is reached, it's uncertain how much of an effect it
might have. Of the $8.9 billion identified by the ISO, roughly two-thirds of
that was incurred by California utilities that still owe generators billions
of dollars for past power deliveries.
Hebert also noted that ratepayers in other Western states would have to be
included in refund considerations.
Meanwhile, Sens. Dianne Feinstein, D-Calif., and Gordon Smith, R-Ore., said
Wednesday that because of FERC's action, they were pulling back their bill,
at least for now, to require that wholesale prices in the West be set at the
cost of production, plant by plant, plus a margin of profit.
However, House Democrats said that while they were happy the commission had
taken action, they still want a vote on a tougher price-cap proposal offered
by Democratic Reps. Jay Inslee of Washington and Nancy Pelosi of San
Francisco.

The Bee's David Whitney can be reached at (202) 383-0004 or
dwhitney@mcclatchydc.com.
The New York Times contributed to this report.

Energy Digest: State moves to tax plants

(Published June 21, 2001)
In a move aimed at squeezing more tax revenue from large in-state power
generators, the state Board of Equalization on Wednesday edged closer to
stripping local governments of their authority to tax power plants.
State Controller Kathleen Connell, a member of the board, proposed that the
state take over the assessments.
The amount local governments may assess power plants is limited by
Proposition 13, but the state is able to place higher values on the
properties.
Supporters of the move say the state could collect $70 million to $100
million more than local governments.
But the board's staff, while acknowledging that the state could extract more
from power plants than local governments during the current energy crisis,
said it is unclear what would happen to the price of power and value of power
plants in the future.
Local governments, worried that the new assessment system could shortchange
their revenues, opposed the move. But the board, which voted unanimously to
give the plan tentative approval, said the Legislature intends to distribute
the power plant money as though it were taxed locally.
Plants producing fewer than 50 megawatts and co-generation facilities would
be exempted from the rule change. The bill closely resembles AB 81 by
Assemblywoman Carole Migden, D-San Francisco, which has been approved by the
Assembly and awaits Senate action.
--Bee Capitol Bureau

Davis demands nearly $9 billion for electricity overcharges

By H. Josef Hebert
ASSOCIATED PRESS
June 20, 2001
WASHINGTON ) California Gov. Gray Davis demanded that power generators refund
nearly $9 billion in electricity overcharges and complained that federal
regulators have "looked the other way while energy companies bilked our
state."
Davis told a Senate hearing Wednesday that the decision by the Federal Energy
Regulatory Commission to curtail price spikes in California and 10 other
Western states was a step forward. "But its actions do nothing about the
overcharges" over the past year, he said.
The governor, a Democrat, has been criticized by Republicans, who charge he
has allowed the California power crisis to get out of hand.

Customers might have to pay debt, advocate says
Continuing coverage: California's Power Crisis
?

Davis defended his actions, saying the state has stepped up approval for new
power plants and strengthened conservation programs. He also said the state
has little control over price gouging by out-of-state power generators.
"The governor once said he could solve California's problems in 15 minutes.
... But it appears that California has continued to try and hide the true
cost of power by having the state pay for it instead of the utilities,"
putting California taxpayers in jeopardy, said Sen. Frank Murkowski,
R-Alaska.
Murkowski said many of the alleged overcharges are by public power entities
not under FERC jurisdiction
Sen. Joe Lieberman, D-Conn., chairman of the Governmental Affairs Committee,
said the FERC, which regulates wholesale electricity sales, has been slow to
respond and "surprisingly reluctant" to assure that electricity prices are
just and reasonable, as required by the 1934 Federal Power Act.
The agency's response to the Western power problem "raises serious questions
about whether (FERC) has or will oversee the newly deregulated energy
markets" not only in the West but across the rest of the country.
The federal agency, whose commissioners were to testify later in the day,
imposed limited, market-based price caps on Monday in California and 10 other
Western states from Washington to Arizona. The agency also ordered the
parties to attend a conference next week to try to work out agreements on
overcharges and other issues.
Months ago, the FERC singled out $124 million in alleged overcharges by power
generators. The power companies have since challenged the agency's findings
and the matter remains in dispute.
"To date not a single penny in refunds has been returned to California,"
complained Davis. He said that between May 2000 and the beginning of this
month power generators are believed to have overcharged California $8.9
billion.
"They must be required to give us back our money," said Davis. "It is
unconscionable that FERC looked the other way while energy companies bilked
our state for up to $9 billion."
The state spent $7 billion for electricity in 1999 and $27 billion in 2000
and is projected to pay nearly $50 billion this year, said Davis. "Power
generators have been able to exert extreme power over our energy market," he
said.
Davis rejected Republican criticism that the state is not addressing the
problem. He said newly approved power plants will provide 20,000 additional
megawatts of electricity by 2003, including 4,000 megawatts by the end of
this summer. "Everything that can be done to bring reliable, affordable
energy to California is being done ... except wholesale price relief," he
said.
"This administration has minimized this crisis (for) more months," said Sen.
Patty Murray, D-Wash., alluding to President Bush's repeated refusal to urge
the FERC to mitigate electricity prices. Bush has strongly opposed price
controls, although he indicated support for FERC's limited price mitigation
effort this week.
Murray said the government should issue a disaster declaration so that
businesses can get low-income loans, and require that FERC press its
investigation into price gouging and demand refunds not only in California
but in the Pacific Northwest, where electricity prices have also skyrocketed.
Republicans continued their opposition to more stringent price caps based on
the cost of generation at individual power plants.
"Having a federal agency try to determine what is a just and reasonable price
is laughable," said Sen. Fred Thompson of Tennessee, the committee's ranking
Republican. Hard price caps "don't work when supply is the problem. ... They
make a bad situation worse," he said.
After FERC issued its limited price control order this week, Senate Democrats
on Tuesday said they would drop legislation to require more stringent
cost-based price caps on Western electricity sales.
Democrats in the House, however, said they would continue to pursue a bill
requiring the FERC to take more aggressive action.

Davis spars with GOP senators over electricity rates

By Finlay Lewis and Joe Cantlupe
COPLEY NEWS SERVICE
June 20, 2001
WASHINGTON ) California Gov. Gray Davis sparred with Senate Republicans
Wednesday as he blamed federal regulators for averting their gaze from an
alleged $9 billion scheme to bilk the state's electricity consumers.
Testifying in front of the Senate's Government Affairs Committee, Davis
demanded that the Federal Energy Regulatory Commission (FERC) order power
companies to refund the overcharges. But the governor also found himself
obliged to ward off GOP claims that Davis' own policies triggered the state's
energy crisis.
The partisan give-and-take reflected the mounting political stakes involved
in California's plight. With both parties preparing for next year's
congressional elections, the subtext of Davis' testimony appeared to involve
a recognition that the state's energy problems could affect the outcome of
several California races.
"How did you let things get so totally out of hand?" asked Sen. Fred Thompson
of Tennessee, the committee's ranking Republican, as he greeted Davis who
made a long-awaited appearance here after weeks of transcontinental sniping
over assigning responsibility for the state's energy woes.
Thompson's question could have been lifted from the script of a $1.5 million
GOP advertising campaign launched earlier this week in California that
attempts to put the governor on the spot for the energy crisis.
Davis' rebuttal involved a long recitation of his moves to bring more power
on line in the state and to encourage greater conservation.
"We've been working on this for a very long time, and to suggest otherwise
would be inaccurate," he told Thompson.
Saying that he is determined to hold "FERC's feet to the fire" on the refund
issue, Davis complained to the committee, "It is unconscionable that the
commission looked the other way while energy companies bilked our state for
up to $9 billion."
Recent public opinion polls show that Davis has lost substantial ground with
California voters since the electricity crisis hit, but Wednesday's round of
activities here found him on the offensive.
"Obviously, this is the equivalent of a political nuclear weapon for him,"
observed Norm Ornstein, a congressional affairs expert at the American
Enterprise Institute.
Several hours after Davis completed his testimony, the five FERC
commissioners appeared before the committee, but they largely ignored the
governor's accusations.
On Monday, FERC issued an order restricting energy prices in California and
much of the West for the next 15 months and setting up a procedure for
reviewing refund claims.
"The commission is not ducking these issues," said FERC Chairman Curtis L.
Hebert.
However, there remains a substantial gap between Davis' calculation of
electricity overcharges in California and the $124.5 million in refunds
assessed so far by FERC.
The struggle over refunds will enter a new phase on Monday when the review
procedure outlined by FERC will begin before FERC's chief administrative law
judge, Curtis L. Wagner Jr. Pairing off against the power companies will be
senior officials of the Independent System Operator, which runs the state's
power grid.
Davis told reporters that it was the ISO that produced the $9 billion
estimate of California's electricity overcharge.
"To date, not a single penny has been returned to Californians," Davis told
the committee. "It is unconscionable that the generators be allowed to keep
these egregious overcharges."
California Attorney General Bill Lockyer is reviewing possible price gouging,
and Davis said later he would anticipate "some strong action coming out of
his office before the end of the summer."
Davis expects to meet on Monday in Sacramento with Bush's two new FERC GOP
appointees, Pat Wood III and Nora Brownell, about "natural gas discrepancies"
in California.
"California was paying two to three times more in natural gas, and the
president agreed with me this is something that could be fixed," Davis told a
press conference after meeting with the California congressional delegation.
Reps. Duncan Hunter, R-El Cajon, and Darrell Issa, R-Vista, were among the
Republicans who met with Davis.
"It was a good meeting with the governor," Hunter said, adding that FERC "has
taken steps to lock down prices, and the results speak for themselves. I
think we are all working together, and it's a good sense of common ground."
That was not the mood in the committee hearing, however.
Sparring with Davis, Thompson argued that there had been ample advance
warnings of the crisis, including a 1998 report foreseeing an imminent energy
shortage and the fact that the state was undergoing a rapid period of
economic growth spurred by the energy-intensive high-tech industry.
"Did you see those developments?" Thompson asked. "Did they cause you
concern?"
Davis sought to shift the focus back to his predecessor, Gov. Pete Wilson,
and the State Legislature that designed an energy deregulation plan now
widely recognized as having been seriously flawed.
However, he said those problems did not become apparent until last year.
Thompson also criticized Davis' recent rhetoric castigating the power
companies for price gouging and suggested that the tactic could backfire by
dissuading the energy sector from making needed investments in the state's
power infrastructure.
"The people I represent are mad," replied Davis. "They want us to fight back
and that's what I'm doing."
He said he is determined that the state cease serving as "a cash cow to a lot
of energy companies."

Poway not proceeding on power plant proposal

Council worried about financial burden
By Brian E. Clark
UNION-TRIBUNE STAFF WRITER
June 21, 2001
POWAY -- Citing financial risks, the City Council has pulled the plug on a
proposed $40 million power plant in the South Poway Business Park.
Though there was no formal vote, Mayor Mickey Cafagna told City Manager Jim
Bowersox -- who was lukewarm at best to the proposed plant -- that his staff
should not spend any more time or money on the project.
So-called "peaker" plants are small, less-efficient plants that can produce
up to 50 megawatts of electricity. Usually they run only several hours a day,
when demand is greatest.
At the council meeting Tuesday night, Cafagna said he saw little reason to
invest in the plant, especially since there are no guarantees that Poway
could claim any of the power it produced.
Instead, he said the city should monitor a plan put forth by Rep. Duncan
Hunter, R-El Cajon, that would coordinate the use of diesel generators owned
by large businesses to help avoid the blackouts that are expected to plague
the state this summer.
If the council had chosen to proceed with the peaker-plant proposal -- an
idea it first explored in March -- it would have had to pay San Diego Gas &
Electric Co. up to $30,000 to go through the application process. An
additional $70,000 would have been authorized for a consultant.
Those two figures made City Council members blanch.
"I'm not willing to commit any of the public's money on this," said
Councilwoman Betty Rexford. "I think it would be better for the city to be
handing out energy-efficient light bulbs to save energy."

Campaign helps seniors bear summer

Program to use stickers identifying 'cool zones'
By Anne Krueger
UNION-TRIBUNE STAFF WRITER
June 21, 2001
During a heat wave or rolling blackout this summer, look to the polar bear
for relief.
The bear is on a decal that will be placed at the entrances of about 60
buildings around San Diego County that have been designated as "cool zones."
The program kicks off today, the first day of summer.
The cool zones were the idea of Supervisor Dianne Jacob. She was looking for
a way to offer relief to seniors and the disabled who are particularly
vulnerable to heat exhaustion and dehydration.
Jacob said she was concerned that many seniors might not use their air
conditioners this summer because of high electric bills. Or they would have
to suffer through a power outage during a rolling blackout.
She said she wants to avoid a disaster like the one in Chicago in 1995. More
than 500 residents, most of them elderly, died when the power went out during
a heat wave.
The buildings identified as cool zones include senior centers, libraries,
enclosed shopping malls, and even courthouses. Some of the cool zones, such
as senior centers or libraries, may have planned programs, but other
buildings will simply provide a place to get out of the heat.
"If people want to read on their own or knit or chat, at least there will be
places for them to cool off," said Denise Nelesen, spokeswoman for the county
Office of Aging and Independence Services, which is coordinating the program.
Many of the buildings designated as cool zones are popular spots already. At
Parkway Plaza in El Cajon, 79-year-old William Richards of North Park sat on
a bench sipping a soda. He said that although he lives closer to Fashion
Valley, an outdoor mall in Mission Valley, he prefers Parkway Plaza, in part,
because it's enclosed.
"It's more comfortable," Richards said. "It's just a nice place to walk
around."
The Lemon Grove Senior Center is getting a polar bear sticker, too. Even
without the air-conditioning turned on. Officials there are prudently waiting
for the heat to hit before flipping the switch.
A group of women played mah-jongg there Tuesday as a breeze came through the
open door. "We'll be glad to share our space, if it's cool," said Eve Butler.
Jacob said providing transportation to cool zones is still a problem that
hasn't been worked out. She said money may be available through the state
Public Utilities Commission.
Nelesen said the county also is helping shut-in seniors through its Project
Care program, in which the seniors receive a regular phone call to check on
their welfare. Mail carriers and utility workers are being trained to look
for signs that a senior may require assistance, Nelesen said.

Business leaders unite to back new SDG&E line

Coalition to lobby for transmission plan
By Jeff McDonald
UNION-TRIBUNE STAFF WRITER
June 21, 2001
A group of San Diego business leaders have formed a coalition to promote a
major improvement to the San Diego Gas & Electric transmission grid.
The utility is seeking approval for a 500,000-volt transmission line that
would run from southwest Riverside County to north San Diego County. SDG&E
hopes to have the so-called Valley Rainbow Interconnect in place by 2004.
San Diego business executives plan to lobby state energy regulators to
approve the 30-mile set of looming poles and high-voltage wires in order to
boost capacity along the SDG&E transmission network.
"The Valley Rainbow Interconnect will ensure a reliable delivery of power for
San Diegans for years to come," said Jessie Knight Jr. of the San Diego
Regional Chamber of Commerce.
The collection of business leaders includes chamber officials as well as
executives of the San Diego-Imperial Counties Labor Council and the San Diego
Economic Development Corp.
Calling themselves the San Diego County Valley Rainbow Alliance, members plan
to testify at California Public Utilities Commission meetings on behalf of
the project.
Three community hearings have been scheduled by the CPUC to solicit input on
the proposal from residents of San Diego and Riverside counties. They were
scheduled in Pauma Valley and the Riverside County communities of Winchester
and Temecula.
No organized opposition to the network has surfaced in San Diego County.
But a group of Temecula Valley area residents have spent months fighting the
project. Among other things, they worry about the effect that the
long-planned series of 190-foot poles might have on their property values.
The CPUC held a hearing last night at the Pauma Valley Community Center.
Another hearing on the application will be held at 6:30 tonight at the
Temecula Community Recreation Center.
For more information, check the CPUC Web site at www.cpuc.ca.gov.

Governor adamant on refund at hearing

Davis, on Capitol Hill visit, deflects blame for shortages
Finlay Lewis and Joe Cantlupe
COPLEY NEWS SERVICE
June 21, 2001
WASHINGTON -- Gov. Gray Davis sparred with Senate Republicans yesterday as he
blamed federal regulators for ignoring what he said was a $9 billion scheme
by power companies to bilk Californians.
Testifying before the Senate's Government Affairs Committee, Davis demanded
that the Federal Energy Regulatory Commission order power companies to refund
the overcharges.
But the governor was forced to respond to Republican claims that his policies
turned a solveable problem into a full-blown energy crisis.
The partisan give-and-take reflected the mounting political stakes involved
in California's plight. The subtext of Davis' testimony involved a
recognition that the state's energy problems could affect the outcome of
several California House races next year, as well as the governor's own
re-election.
"How did you let things get so totally out of hand?" Sen. Fred Thompson of
Tennessee, the committee's ranking Republican, asked Davis.
Thompson's question could have been lifted from the script of a $1.5 million
GOP advertising campaign launched earlier this week in California that
attempts to put the governor on the spot for the energy crisis. The campaign
follows weeks of criticism by Davis of federal regulators and of President
Bush for failing to address the energy problem.
Davis' rebuttal involved a long recitation of his moves to bring more power
on line in the state and to encourage greater conservation.
"We've been working on this for a very long time, and to suggest otherwise
would be inaccurate," he told Thompson.
The Democratic governor said he is determined to hold "FERC's feet to the
fire" on the refund issue.
"It is unconscionable that the commission looked the other way while energy
companies bilked our state for up to $9 billion," he said.
Davis' grievances received more attention here than they might have just
weeks ago, before Democrats took control of the Senate and its committees
after Sen. Jim Jeffords of Vermont bolted the Republican Party to become an
independent. A sympathetic committee chairman, Democratic Sen. Joe Lieberman
of Connecticut, made Davis the star witness of yesterday's hearing.
Recent public opinion polls show that Davis has lost substantial ground with
California voters since the electricity crisis hit, but Republicans have
acknowledged that Davis and Democrats in recent weeks have gained the upper
hand over the Bush administration in the energy debate.
Despite some GOP criticism yesterday, Davis was clearly on the offensive.
"Obviously, this is the equivalent of a political nuclear weapon for him,"
observed Norm Ornstein, a congressional affairs expert at the American
Enterprise Institute.
Several hours after Davis completed his testimony, the five FERC
commissioners appeared before the committee, but they largely ignored the
governor's accusations.
On Monday, FERC issued an order to control energy prices in California and
much of the West for the next 15 months and to set up a procedure for
reviewing refund claims.
"The commission is not ducking these issues," said FERC Chairman Curtis
Hebert.
However, there remains a substantial gap between Davis' calculation of
electricity overcharges in California and the $124.5 million in refunds
assessed so far by FERC, which have been contested by power generators.
The struggle over refunds enters a new phase Monday when the review procedure
outlined by FERC will begin before the commission's chief administrative law
judge, Curtis Wagner Jr. Facing off against the power companies will be
senior officials of the Independent System Operator, which runs the
California power grid.
Davis told reporters that it was the ISO that produced the $9 billion
estimate of California's electricity overcharge.
"To date, not a single penny has been returned to Californians," Davis told
the committee. "It is unconscionable that the generators be allowed to keep
these egregious overcharges."
Sen. Barbara Boxer, D-Calif., yesterday introduced legislation to provide for
refunds.
The power companies, although acknowledging huge profits, have denied
allegations of price gouging or market manipulation.
"There has been no evidence to suggest that suppliers bilked anyone," Mark
Stultz, a vice president of the Electric Power Supply Association, told the
Associated Press.
California Attorney General Bill Lockyer is reviewing possible price gouging,
and Davis said after the hearing he anticipated "some strong action" from
Lockyer in the next few months.
Davis said he plans to meet on Monday in Sacramento with Bush's two new FERC
appointees, Pat Wood III and Nora Brownell, about "natural gas discrepancies"
in California. Davis said California has been paying up to three times more
for natural gas than elsewhere in the country.
"The president agreed with me this is something that could be fixed," Davis
told a reporters after meeting with the California congressional delegation.
Reps. Duncan Hunter of El Cajon and Darrell Issa of Vista were among the
Republicans who met with Davis.
"It was a good meeting with the governor," Hunter said, adding that FERC "has
taken steps to lock down prices, and the results speak for themselves. I
think we are all working together, and it's a good sense of common ground."
That was not the mood in the committee hearing, however.
Sparring with Davis, Thompson argued that there had been ample advance
warnings of the crisis. He noted a 1998 report forecasting an imminent energy
shortage and the fact that the state was undergoing a rapid period of
economic growth spurred by the energy-intensive high-tech industry.
"Did you see those developments?" Thompson asked. "Did they cause you
concern?"
Davis sought to shift the focus back to his predecessor, Republican Gov. Pete
Wilson, and the state Legislature, which approved an energy deregulation plan
now widely recognized as seriously flawed.
However, he said those problems did not become apparent until last year.
Thompson also criticized Davis' recent rhetoric castigating the power
companies for price-gouging and suggested that the tactic could backfire by
dissuading the energy sector from making needed investments in the state's
power infrastructure.
"The people I represent are mad," replied Davis. "They want us to fight back
and that's what I'm doing."
He said he is determined that the state cease serving as "a cash cow to a lot
of energy companies."
?

Little-known transmission company has billion-dollar backers

By Jennifer Coleman
ASSOCIATED PRESS
June 20, 2001
SACRAMENTO ) Through an alliance with a little-known start-up company,
General Electric Co. is trying to enter California's transmission lines
business.
Although Trans-Elect, a two-year-old company based in Washington, has no
experience in the transmission business, it has the financial support of GE's
$66 billion financial arm, GE Capital. Trans-Elect's latest offer comes as
Gov. Gray Davis seeks legislative approval for his plan to buy the
transmission lines of both San Diego Gas & Electric and Southern California
Edison.
Any involvement by GE in the state's transmission grid could be a conflict of
interest, said a key lawmaker involved in the efforts to end California's
yearlong power crisis.
"You've got someone with generation and transmission systems, how do they
keep them separate and do they?" said Assemblyman Fred Keeley, D-Boulder
Creek. "That's a concern for me. Would they have the ability to restrict
competitors' access to transmissions?"
Trans-Elect first made overtures to buy the transmission lines in February,
offering more than $5 billion for those owned by SDG&E, Edison and Pacific
Gas and Electric.
Although Davis has reached a deal with Edison to buy their lines for $2.76
billion and a $1 billion pact with SDG&E, Trans-Elect has said it will offer
Edison $1.8 billion and SDG&E $700 million.
Bob Mitchell, Trans-Elect's vice president, said the company made its offer
believing that the Legislature won't approve the deals to buy the two
utilities' lines.
GE joined forces with Trans-Elect March 14, when GE Capital Services
Structured Finances Group Inc. announced it had bought a minority stake in
the company. Neither company would reveal the size of the investment.
But a GE statement said its investment enables "GE Capital Global Energy to
co-invest with Trans-Elect as it acquires transmission assets throughout the
U.S."
Now, however, both GE and Trans-Elect are trying to downplay their
relationship.
Ken Koprowski, a GE spokesman, said the company made "a small financial
investment and we're not involved in the management of the company." He added
that the company invests in many other energy projects, including power
plants.
"There's no connection with what we're doing in California and GE," Mitchell
said.
What Koprowski and Mitchell call a low-profile arrangement has generated
lobbying activity. Several lawmakers said they had met with Mitchell about
Trans-Elect's offer.
GE Capital hired lobbyist Phillip Schott a week after investing in
Trans-Elect. Schott referred calls to GE's lobbyist, Kahl/Pownall Advocates,
one of California's biggest political lobbying firms. Fred Pownall,
Kahl/Pownall's head, referred all questions on the bill to GE Capital
headquarters.
In California, many hurdles remain for Trans-Elect. First, the Legislature
would have to kill the deals with SDG&E and Edison. Then the companies would
have to turn to Trans-Elect to buy their lines.
So far, utility leaders are skeptical. Edison CEO John Bryson rejected the
Trans-Elect offer Tuesday, calling it a "phony" bid by an unknown company.
"We don't know this company. I suppose nobody does," Bryson said at a town
hall meeting in Los Angeles. The reason the transmission lines are in the
deal "is that we consider it our responsibility to try to stay serving our
customers as a healthy utility."
Other than the governor's offer, the transmission system isn't for sale,
Bryson said.
Trans-Elect remains interested in investing in California, but has postponed
sending a letter offering $1.8 billion for Edison's lines, Mitchell said.
"I think it's potentially an attractive deal, when we can create the right
climate for it," Mitchell said. "From the perspective of the people of
California, it's one less financial obligation they have to take on."
The Memorandum of Understanding between Edison and the governor needs
legislative approval by August, and many lawmakers have balked at the plan.
Keeley said he isn't convinced that selling the assets to a private company
is the best long-term solution for the state.
"I'm not prepared at this stage to believe that we should sell something as
significant as the transmission system to an entity that is not regulated by
the state and where our ability to have anything to say about the
transmission system is in the Federal Energy Regulatory Commission's venue,"
he said.
Should the Davis plan fail, Mitchell says his offer would remain.
"It appears to me and many other people that the Legislature is not going to
allow the people of California to pay an excessively high price," he said.
The $1.8 billion offer is "a very strong price."
Mitchell said he doesn't blame the utilities for rejecting his initial
offers, since the governor has promised more. But he stressed that the
company has a future in the industry, and plans to go public eventually.
Formed in 1998, Trans-Elect is trying to be the country's first national
transmission company. As utilities deregulate, they are allowed to sell
assets, including the transmission lines.
The American Transmission Company, a private transmission company based in
Wisconsin, has a similar mission as Trans-Elect, but not the level of
financial backing, said ATC spokeswoman Maripat Blankenheim.
"They're out there out with a really big check book," she said.

Davis Asks for Energy Refund Help
Power: Governor urges U.S. Senate action to get "back the money that was
wrongly taken from us."

By RICHARD SIMON, Times Staff Writer

?????WASHINGTON--California Gov. Gray Davis, seeking to shift the focus of
the energy debate, urged Congress on Wednesday to turn up the political heat
on federal regulators to help California recover $9 billion in estimated
overcharges by power generators.
?????Davis told a Senate panel that the order issued Monday by the Federal
Energy Regulatory Commission to limit Western electricity prices was "a step
in the right direction." But more aggressive action is needed, he said, to
"give us back the money that was wrongly taken from us."

Gov. Gray Davis wipes his brow outside the Capitol after discussing his
remarks to the Senate Governmental Affairs Committee.
AFP

?????Davis' remarks to the Senate Governmental Affairs Committee suggest that
the political warfare between Sacramento and Washington did not end with
FERC's decision to police wholesale electricity prices more aggressively.
?????By demanding federal intervention to recover money already paid to power
generators, Davis continued to insist that the Bush administration and
federal regulators must share responsibility for solving the state's energy
problems.
?????"Yes, they have provided some relief," Davis said of FERC's price
mitigation mandate. "But that's only half the job. The other half of the job
is give us back the money that was wrongly taken from us."
?????On his first trip to Capitol Hill since Democrats took control of the
Senate, Davis appeared before a Governmental Affairs Committee that displayed
more sympathy toward his administration than it did when Republicans ruled it.
?????One committee member, fellow Democrat Robert Torricelli of New Jersey,
bluntly warned FERC: "We are watching how the people of California are
treated, and we are watching very, very closely."
?????Davis noted that federal regulators have already determined that
wholesale power rates charged to California were "unjust and unreasonable."
Even so, he said, "not a single penny in refunds has been returned to
California."

?????Governor Calls Rates 'Egregious'
?????"It's unconscionable if generators are allowed to keep these egregious
overcharges," Davis said, imploring the committee to "hold FERC's feet to the
fire."
?????California's electricity grid operator has calculated that the state
paid about $9 billion more than a competitive market would warrant for
electricity from May 2000 to May 2001. So far, FERC has only identified about
$124 million in possible overcharges, which were confined to January and
February.
?????To some extent, FERC has already agreed to play a bigger role in seeking
refunds, although not necessarily the full $9 billion that Davis is seeking.
?????Next week, representatives of the state, electric utilities and power
generating companies are scheduled to begin talks in Washington on possible
refunds.

California Gov. Gray Davis testifies before a Senate committee. He implored
its members to "hold FERC's feet to the fire." AFP

?????The settlement conference, which begins Monday, is scheduled to run for
15 consecutive days, including weekends, which is unusual for a regulatory
proceeding.
?????Presiding over the conference will be Chief Administrative Law Judge
Curtis L. Wagner Jr., who admonished participants Wednesday to make sure that
they send representatives who have authority to approve any agreements
reached during the negotiations. Wagner can extend the conference if
necessary.
?????The purpose of the conference is to settle past accounts and structure
"new arrangements for California's energy future," Wagner said in a
scheduling order. To reach those goals, the parties must agree on how much of
the electricity load will be shifted away from the volatile spot market for
immediate delivery into stable, long-term contracts, refunds and
"credit-worthiness matters," the order said.
?????Edison General Counsel Stephen E. Pickett said the utility is pleased
that regulators set up the meeting with power generators to discuss refunds
to the utilities dating back to Oct. 2.
?????"Certainly, it is a positive step toward resolving many of these
issues," Pickett said in a conference call Tuesday with creditors.
?????San Diego Gas & Electric expressed similar muted optimism.
?????"SDG&E has been a supporter of customer refunds, and we're encouraged
that the FERC is working toward a settlement," SDG&E spokesman Art Larson
said.
?????But Reliant Energy spokeswoman Pat Hammond expressed skepticism about
the $9-billion overcharge figure cited by Davis. "That number sounds like the
price of all the power they've bought in the last year in California, and we
obviously don't feel that is owed" by Reliant and other power producers.
?????Donato Eassey, a Houston-based energy analyst for Merrill Lynch, said he
expects the FERC-mediated conference to produce a compromise in which all
parties--generators, utilities and consumers--get "a haircut." But that
outcome, he suggested, might beat the alternatives.
?????"You've got to put this problem behind you," he said, "because if you
don't, you'll have a problem of biblical proportions."

?????FERC Members Also Before Senate Panel
?????Adding to the pressure for refunds, Sen. Barbara Boxer (D-Calif.)
introduced a bill Wednesday that would require FERC to order rebates if
federal regulators determine that prices charged were "unjust and
unreasonable."
?????The five members of FERC's governing board also appeared Wednesday
before the Senate panel but were scheduled later in the day to avoid a public
confrontation with Davis.
?????The governor met privately Wednesday with two new board members,
including Patrick H. Wood III, a Bush ally from Texas who, according to
Davis, has indicated a "more aggressive approach to refunds might be in
order."
?????Still, there was no shortage of partisanship at the committee hearing.
?????Republican aides passed out hand-held fans bearing the inscription:
"Gray Davis' solution for summer blackouts." Davis handed out a slick
177-page book detailing steps his administration has taken to ease the power
crunch. The Bush administration issued a Department of Energy study asserting
that California would face twice as many rolling blackouts if hard price caps
were imposed on wholesale electricity.
?????Davis did not escape a scolding from Republican senators for his
criticism of the Bush administration's refusal to impose firm price controls.
?????Sen. Fred Thompson (R-Tenn.) pointedly asked Davis "how he let things
get totally out of hand" and excoriated the governor for assigning blame for
the state's problems to the Bush administration, federal regulators, former
Gov. Pete Wilson and various "corporate pirates." He also faulted Davis for
not acting sooner to pass on higher wholesale costs to consumers.
?????"If I passed on a 700% increase to the citizens of California, there
would be an outrage the likes of which you have never seen," Davis responded.
?????Republican senators also challenged Davis on how he hopes to stimulate
more power plant construction in California if state officials continue to
attack generating companies. They noted that the state attorney general even
suggested that the chairman of one power company deserved to be locked in a
cell with an amorous inmate named Spike.
?????"This is a rough business," Davis responded. "The people I represent are
mad."
?????He also told his Republican critics: "If you were in my shoes and facing
the extraordinary price increases, you would feel as I do. Our first
obligation is to fight back."
?????Davis urged the committee to keep pressure on FERC to rein in natural
gas prices, which until recently have been as much as eight times higher than
the national average.
?????FERC Chairman Curtis L. Hebert Jr. assured the committee that his agency
is aggressively pursuing remedies to California's energy price spikes and
supply shortages. "We have been engaged," he said, citing more than 60 orders
issued by the agency to address the power crisis.
?????Commissioner William L. Massey, a Democrat who has urged stronger
federal intervention in the electricity markets, said he regrets the
commission did not act sooner.
?????"Businesses have closed down, putting thousands out of work and hurting
the Western economy, and all because of a broken electricity market," he
said. "By acting 10 months ago, we could have prevented much of the economic
carnage."
?????Despite the tensions, Davis elicited some sympathy from even his
Republican critics.
?????"I wouldn't wish your problems on my worst enemy," Thompson told Davis.
---
?????Times staff writers Nancy Rivera Brooks in Los Angeles and Thomas S.
Mulligan in New York contributed to this story.

House Approves Utility Aid for Needy
Congress: Bill would add $300 million to program that helps families pay
their bills. Strict price caps are blocked.

By JANET HOOK, Times Staff Writer

?????WASHINGTON--In its first direct legislative response to the nation's
burgeoning energy crisis, the House on Wednesday approved legislation that
would provide an additional $300 million to help low-income families pay
their power bills.
?????The bill amounts to a midyear increase of 21% for the $1.4-billion
energy assistance program--twice as much as President Bush had proposed
adding to help the poor cope with increases in utility bills.
?????Before final action on the bill, House Republican leaders blocked
Democratic efforts to force votes on a broader response to the energy crisis
in the West: strict energy price caps that reach beyond the restraints
imposed Monday by federal regulators.
?????Republicans argued that price caps would not solve California's energy
problem, while Democrats accused the GOP of being cavalier about the crisis
faced by consumers.
?????"This says to the people of the West, 'Your emergency doesn't count to
us,' " said Rep. Nancy Pelosi (D-San Francisco).
?????But such assertions were countered by House Majority Whip Tom DeLay
(R-Texas), who said: "Members should reject the siren song of price caps and
remember this: Government price controls will mean more blackouts."
?????The issue erupted during debate on a $6.5-billion midyear appropriation
bill to cover unanticipated costs and emergency expenditures, including $5.5
billion for the Defense Department and $116 million to help the Internal
Revenue Service pay the cost of sending out rebate checks authorized by the
recently enacted tax cut law.
?????The measure passed, 341 to 87.
?????In an earlier vote, Bush barely escaped an embarrassing slap when
Democrats moved to cut the proposed IRS increase by $29 million--the cost of
a letter the agency is sending to tell taxpayer of their impending tax rebate.
?????Democrats complained that the letter, which prominently mentions Bush,
reads like a piece of campaign literature. Republicans said it was needed to
save people from calling the IRS about their checks. The amendment failed,
216 to 212.
?????The bill now goes to the Senate, where Democrats are considering an even
bigger increase in energy aid for the poor.
?????Overall, the House bill would provide the $6.5 billion requested by
Bush. But it would change some spending priorities. For instance, Bush's
Office of Management and Budget objects strongly to provisions that would
rescind $389 million in money appropriated for the Federal Emergency
Management Agency--just as the disaster relief agency is facing big outlays
to cope with damage caused by Tropical Storm Allison.
?????That provision to rescind the money came under attack from Democrats and
Republicans, posing the debate's most serious challenge to the bill. But an
effort to send the bill back to the Appropriations Committee and restore the
money was defeated on a party line vote of 218 to 209.
?????The energy aid for the poor is provided through the Low-Income Home
Energy Assistance Program, which helps the poor and elderly pay heating and
air-conditioning bills. In California, a family of four must earn less than
$33,125 to be eligible, and the average benefit is $326 a year.
?????Although Republicans and Democrats have been divided over broad
questions of energy policy, there has been a bipartisan consensus on more
help for needy consumers. So, despite pressure to hold down the cost of the
supplemental spending bill, House Republicans doubled Bush's request for $150
billion in additional energy aid. GOP leaders blocked, on procedural
technicalities, Democratic amendments to increase the funding even more.
?????Republican leaders also fought efforts by Democrats to turn debate on
the spending bill into Congress' first broad-gauged discussion on the
nation's energy crisis. Democrats wanted to offer major energy amendments,
including one to impose strict cost-based price caps on wholesale electricity
in California--stricter price restraints than the policy announced Monday by
the Federal Energy Regulatory Commission.
?????Proponents of the stricter caps, echoing complaints by California Gov.
Gray Davis and others, said FERC's order did not go far enough to guarantee
relief for consumers against blackouts, shortages and price gouging.
?????Republicans argued that price caps would be counterproductive and that
California's problems will be solved only by increasing the energy supply.
?????Democrats lost a 222-205 procedural vote that blocked their amendments
from coming to a vote.It was an important victory for Republican leaders who
had feared mounting support for price caps even within their own party.
However, momentum flagged this week after the FERC decision.
?????The House bill also includes:
?????* $45 million for a Defense Department plan to make military bases in
California self-sufficient and get them off the state's power grid during
shortages.
?????* $1.5 million for planning and environmental studies for a proposed
upgrade in an electrical transmission line in Central California known as
Path 15.

Summer Starts, Power Doesn't Stop
Energy: Consumers show they can take the heat, with their conservation
helping to limit demand. But experts remain wary.

By MITCHELL LANDSBERG, Times Staff Writer

?????As unwelcome as the killer bees, as hyped as "Pearl Harbor," the big,
bad summer of 2001 officially arrived today and--did someone forget to turn
out the lights?
?????After months of dread, the Blackout Summer began on a curiously bright
note. Despite several days of summer-like weather, there was barely a whisper
about blackouts. The state that couldn't plug in a night light in January
without tripping electrical shortage alarms managed to enter the summer with
electricity to spare.
?????For the moment, power supplies look healthy. Wholesale electricity
prices are a sliver of what they were just a month ago. Demand for power is
down, apparently the result of a successful conservation campaign. And
California officials appear to have won their months-long battle with the
Federal Energy Regulatory Commission, which imposed price and supply controls
on the Western electricity market beginning at midnight last night.
?????All in all, an auspicious beginning for what many have warned would be a
dreadful summer. So why aren't California energy officials blowing up
balloons for the big end-of-crisis party?
?????"We are not out of the woods," said Richard Sklar, the state's energy
supply czar. "We are not out of the woods on price, and we are not out of the
woods on availability."
?????His view is echoed by most of those who closely watch the state's
electrical market. So far, California's supply-demand balance is coming
closer to best-case predictions than to the worst. But it is a delicate
balance.
?????On Wednesday, with temperatures hovering around summer norms, operators
of the statewide power grid managed to maintain--if just barely--the 7% of
operating reserves they strive for. When reserves dip below that, the state
begins ascending the ladder of staged emergency declarations that eventually
lead to blackouts.
?????Total electricity use in the state peaked about 4 p.m. at 39,156
megawatts--a high for the year, but well below the state's all-time record of
45,884 megawatts, which was set on July 12, 1999.
?????State officials credit conservation with shaving off about 4,000
megawatts, an amount that easily means the difference between blackouts or no
blackouts on most days.
?????"There is no doubt in my mind that conservation . . . has led directly
to the situation that we're in now," said Mike Sloss, who tracks conservation
for the California Energy Commission.
?????Richard Roher, who crunches conservation numbers for the commission,
said consumers appear to be continuing to cut their electricity use by about
11%.
?????There also has been good news on the supply side of the equation. After
months in which power plant breakdowns and shutdowns were costing the state
as much as 15,000 megawatts of electricity at a time, most plants are now
online and outages were down to 4,300 megawatts Wednesday.
?????Most small, alternative energy suppliers finally reached agreement this
week in their epic contract battle with Southern California Edison, putting
that vital segment of the state's energy production back in business. And in
the next two weeks, the state's first two new major power plants in a decade
are scheduled to open, adding more than 1,000 megawatts to the power
stream--enough to serve about 750,000 typical homes.
?????State officials are also hoping that the FERC ruling, which limits
prices in the 11-state Western region and requires generators to sell
available power to California, will ease the situation further.
?????"Everyone is very interested to see how tomorrow unfolds, price-wise and
supply-wise," Stephanie McCorkle, a spokeswoman for California's grid
operator, said Wednesday.
?????For all the positive signs, no one is predicting that the state will
weather the summer without blackouts. No one knows how many power plants will
break down. Nor does anyone know the extent to which Californians' best
intentions to conserve will melt away in a sustained heat wave.
?????While the past few days have been hot, they haven't been searing. It was
81 in downtown Los Angeles on Wednesday, 94 in Riverside, 102 in Sacramento,
109 in Palm Springs--toasty, but far from the hottest weather any of those
places can expect this summer.
?????Nor was it unusually hot in surrounding states, whose ability to sell
power to California depends in part on their own energy needs. Electricity
use generally rises with the thermometer, because air conditioners use more
power than most other appliances.
?????"If it gets hot in California, and it's also hot in the Northwest . . .
and it's hot in Phoenix, we could run into some significant problems," said
Jan Smutney-Jones, executive director of the Independent Energy Producers
Assn., a trade group for power plant owners in California.
?????The state has benefited recently from imports of electricity from the
Northwest, where snow runoff is cascading through electrical turbines. But
those imports are expected to dry up later in the summer as stream flowswhich
have been kept high to assist salmon runs--are scaled back to levels that
reflect the region's winter drought.
?????So the summer of 2001 could still be interesting. And it may begin with
a blackout after all. For weeks now, an e-mail campaign has spread through
the Internet, calling on people to voluntarily cut off most or all of their
power between 7 p.m. and 10 p.m. tonight.
?????The protest, called the "Roll Your Own Blackout," is the idea of a
Southern California artist who worked in tandem with a software engineer from
Berkeley. Their intention is to protest the energy policies recently
announced by President Bush and Vice President Dick Cheney.
?????"When you hear Mr. Cheney, who drafted the energy plan, deriding
conservation as merely a personal virtue, it is as though he believes virtue
has no place in government policy, and that would be a very dangerous thing,"
said Dave Aragon, the software engineer.
?????The California crisis gave birth to their campaign, but Aragon said he
is hoping that the protest goes beyond the state's borders.
?????"Worldwide would be fine," he said.

Board Votes to Let State Tax Power Plants
Proposal: Levies on property currently are made by counties. The revenue
would increase, say proponents of change.

By NANCY VOGEL, Times Staff Writer

?????SACRAMENTO--State tax collectors endorsed a proposal Wednesday that
could force power plant owners to pay tens of millions of dollars more in
taxes next year.
?????The five-member Board of Equalization voted unanimously to assert
jurisdiction over the property taxes paid by companies with power plants that
produce more than 50 megawatts. Under the board's proposal--which faces
public hearings before it takes effect--the state would seize from counties
the authority to tax these plants.
?????State control could potentially enrich government coffers, because the
state would tax the plants based on their fair market value, while counties
tax power plant owners based on the original value of the plants plus a 2%
annual inflation rate.
?????Consumer advocates argue that the value of private power plants has
skyrocketed in the past year, as the price of wholesale electricity soared in
the malfunctioning market created under California's 1998 deregulation plan.
?????Under deregulation, utilities sold 22 power plants to private companies,
many of them based out of state, for a total of $3.2 billion.
?????"They are making exorbitant profits," said Lenny Goldberg, executive
director of the California Tax Reform Assn., a nonprofit group largely funded
by unions. He called the power plants "vastly underassessed."
?????Board of Equalization Chairwoman and state Controller Kathleen Connell
said the move is necessary not only because it might bring in more tax
revenue, but because California itself could soon build power plants or own
power lines under plans pushed by Gov. Gray Davis.
?????"We may not be getting the best value through the current system," said
Connell, "especially if the state proceeds with plans to own plants in
California.
?????"It makes sense to act now to bring all generating facilities under the
same assessment system," she said.
?????For many decades, the Board of Equalization levied property taxes on
power plants because they were owned by utilities and regulated by the state.
But in 1999, after the launch of deregulation, the tax board voted to allow
counties to assess property taxes on power plants under a formula set by
Proposition 13, the 1978 ballot measure that limits property taxes for
homeowners and businesses.
?????The board's vote Wednesday launches a process of public hearings that
could lead to a reversal of that 1999 decision.
?????Officials from several cities that are home to power plants urged the
Board of Equalization to take no action. Under the current system, cities
with power plants get a greater share of property tax revenue, which is
generally split among local governments and schools.
?????Long Beach got about $55,000 a year in property tax revenue when the
state was assessing taxes, said city Controller Barbara Hennessy, but now
gets nearly $1 million a year.
?????Shari L. Freidenrich, treasurer for Huntington Beach, said a reversal of
the board's tax method could cost the city--home to a major power plant--$1.5
million a year in property taxes.
?????A bill pending in the Legislature by Assemblywoman Carole Migden (D-San
Francisco) would protect those cities by guaranteeing that they get the same
proportion of property tax revenue even if the state reasserts control over
power plant assessments.
?????Goldberg, of the California Tax Reform Assn., argued that allowing the
state to tax plant owners based on market value would bring in more revenue
for the entire state.
?????As an example, he estimated that a big power plant on Monterey Bay owned
by Charlotte, N.C.-based Duke Energy North America would have paid Monterey
County at least an additional $10 million in property taxes last year under
the proposed method of assessment. The plant, valued by the county at $362
million, is probably worth about $2 billion given market conditions, Goldberg
said.
?????The power industry argues that when California lifted state regulation
of power plants in 1998, those plants became businesses no different from a
department store or bakery in terms of property tax status.
?????"We would expect to be treated like any other business in California has
been treated since Prop. 13 went into place," said Duke spokesman Tom
Williams.

Davis' spinmeisters draw heat from watchdogs
State controller refuses to pay energy advisers
Robert Salladay, Chronicle Sacramento Bureau
Wednesday, June 20, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/06/20/M
N230757.DTL&type=news
Gov. Gray Davis' decision to hire the "Masters of Disaster" -- two former
Clinton-Gore spin doctors -- has led to a lawsuit by an anti-tax group and a
refusal by the state controller to pay the two political strategists.
Since the energy crisis began, Davis has hired several nationally known
experts to advise him. But the recent contract for Chris Lehane and Mark
Fabiani has opened a political wound, in part because the two men are
considered fiercely partisan and politically ruthless.
State Controller Kathleen Connell, a Democrat who continually fights with
Davis, said yesterday that she will refuse to pay Lehane and Fabiani with
state funds. Their contract is worth $180,000 for six months.
Connell said it's hard for her to imagine that Lehane and Fabiani are working
on state policy, as required by law, and not politics.
"From my viewpoint, you're asking Californians to survive with fewer lights
on and you're asking them to assume the burden of $43 billion in long-term
debt for power," Connell said. "It's just another slap in the face to ask
them to pay for people to explain the situation away."
The National Tax-Limitation Committee, a Sacramento group that mostly
monitors legislation, filed a lawsuit last week alleging that Fabiani and
Lehane are violating the Political Reform Act because they also have done
work for Southern California Edison as consultants.
It's considered a conflict of interest for public officials to work on issues
that affect companies that pay them more than $250, either through paychecks
or stock. Davis is actively negotiating with Edison on a bailout plan to keep
the utility from bankruptcy.
ADDING INSULT TO INJURY
Lewis Uhler, with the Tax-Limitation Committee, said, "We are kind of adding
insult to injury to then have the governor who feels the pressure of this
crisis to spend this kind of dough for damage control."
Secretary of State Bill Jones last week asked the Fair Political Practices
Commission to investigate Lehane and Fabiani and their relationship with
Edison. Jones said "the unseemly conflicts of interest by (Davis') advisers
during the energy crisis are increasing the people's cynicism."
A spokeswoman for the FPPC said the agency was reviewing Jones' complaint.
Both Lehane and Fabiani have promised to file their required financial
disclosure reports this week.
Now private citizens and communications consultants, Lehane and Fabiani
worked inside the Clinton White House and for Vice President Al Gore during
his failed 2000 campaign. They earned the nickname "Masters of Disaster" for
consistently handling public relations matters during Clinton's various
scandals.
Davis spokesman Hilary McLean said Lehane and Fabiani were hired to explain
"what the state is doing to help solve the crisis on a short- and long-term
basis." She said financial experts are consulting with the governor on the
Edison deal.
"They worked in the White House and worked on policy issues," McLean said,
"and, believe me, what they are working on right now is the public policy
aspect of the California energy crisis."
Davis is not the first elected official to hire former political strategists
with public money. President Bush put his political strategist, Karl Rove, in
a senior White House position. Rove recently revealed that he held stock in
an energy trading company that stands to benefit from Bush's energy policy.
'CLEARLY A CONFLICT'
But state Senate Minority Leader Jim Brulte said the contract for Lehane and
Fabiani is "clearly a conflict of interest in regards to Edison" and far
different from the other consultants Davis has hired. Brulte promised he
would not vote for a 2001-02 state budget that includes the Lehane and
Fabiani contract.
"The governor has hired millions of dollars worth of consultants who are
experts on bonds and experts on energy. In each of these cases, we have given
him the benefit of the doubt," Brulte said. "There is no doubt here. The
appropriate people to pay for this is the Gray Davis campaign committee."
The increased political pressure on Davis comes as several Republicans are
entering the race for governor. At one time, Davis was considered all but
invincible in 2002, but the energy crisis has badly damaged his standing
among voters, according to recent polls.
The governor is also using his own political pressure, orchestrated by chief
adviser Garry South, Fabiani and Lehane, among others, to boost his image and
change federal policy. Since Davis has no control over the federal
government, his only weapon is to heat the political climate and try to force
movement from the White House and federal regulators.
E-mail Robert Salladay at rsalladay@sfchronicle.com.
,2001 San Francisco Chronicle ? Page?A - 11

Board wants to take back control of setting plants' property taxes
Bernadette Tansey, Chronicle Staff Writer
Thursday, June 21, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/06/21/M
N210838.DTL&type=news
In a move that consumer advocates hope will raise taxes for energy companies,
the state Board of Equalization yesterday proposed taking back authority to
set property taxes for large private power plants.
The board voted 5 to 0 to take steps to reverse a decision it made in 1999 to
give county assessors the job of evaluating the taxable value of power plants
sold as part of deregulation.
Counties are barred from increasing assessments more than 2 percent a year
under Proposition 13. The state tax board is free to set higher assessments.
A coalition of tax reform and environmental groups lauded the change proposed
by State Controller Kathleen Connell, saying assessment rules that apply to
the counties allow energy firms making huge profits to save millions in
property taxes. The power companies vowed to challenge the board's plan.
Board member Johan Klehs said the board is not bound by its 1999 decision
because the power industry did not live up to its claim that deregulation
would bring California lower rates for electricity. Klehs said the thinking
then was that county assessment would yield a value that was more fair
because competition would reduce profits for generators.
'If you didn't keep your end of the bargain, I don't see why we should keep
ours," Klehs said.
But whether power suppliers would pay more under board authority is open to
question. No matter who does the evaluation, the record profits reaped by
energy firms over the past year and a half cannot be considered when their
next assessment is made January 1. By then, rates for electricity will likely
be lower as more supplies come on line, state contracts kick in, and federal
price caps continue.
Connell herself said she did not advocate the change to maximize tax
revenues, but to ensure the most consistent and most accurate method of
setting property tax values for the estimated 41 power plants that will be
online in California within a few years.
'This discussion is not about raising taxes or denying the protection of
Proposition 13," said Connell. She said she proposed the change because the
state is gearing up to buy its own power plants and transmission lines, and
should therefore take a stronger role in setting tax policy for generators.
Connell challenged estimates of potential multimillion dollar increases in
tax revenues advanced by Lenny Goldberg, executive director of the California
Tax Reform Association.
Goldberg said Monterey County should have received at least $20 million more
in taxes on the Moss Landing plant acquired by Duke Energy, which he claimed
had made as much as $450 million in profits over the past year. Goldberg said
the other 20 or so plants divested by the utilities were similarly
undervalued.
"They are making exorbitant profits," Goldberg said. 'They are vastly
underassessed."
But cities that are now benefiting from local assessment of power plants
within their borders say the change could have a drastic impact on their
finances. Under the board's 1999 decisions, cities where plants are located
draw a heftier share of the taxes than they did when the plants belonged to
the state-assessed utilities.
Those cities may keep their enhanced share of the revenues under a bill
sponsored by Assemblywoman Carole Migden that would also shift authority for
power plant assessment to the state board. The bill, AB81, passed the
assembly and is headed for hearings in the state Senate.
But city officials said they were still uneasy over the transfer of
assessment power to the board, saying it could lead to unpredictable,
fluctuating revenues and possible concessions to big industry.
Long Beach City Controller Barbara Hennessy cited a past settlement agreement
with the utilities that she said dropped evaluations for the power plants
they formerly owned.
'My concern is that something like that would happen in the future," Hennessy
said.
Since Los Angeles County took over evaluating a Long Beach power plant, city
revenues have gone up from $55,000 to $960,000, Hennessy said.
E-mail Bernadette Tansey at btansey@sfchronicle.com.
,2001 San Francisco Chronicle ? Page?A - 9

Tough talk on power prices
Carolyn Lochhead, Chronicle Washington Bureau
Thursday, June 21, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/06/21/M
N58851.DTL&type=news
Washington -- President Bush's top federal energy regulator told a Senate
panel yesterday that he would consider denying power generators the right to
charge market prices for electricity.
If carried out, the suggestion by Patrick Wood, one of Bush's two new
appointees to the Federal Energy Regulatory Commission, would mark a stunning
about-face for an agency that until Wood's arrival had resisted heavy
intervention in California's electricity market.
Such a move would hand a huge victory to Gov. Gray Davis, who earlier in the
day told the Government Affairs Committee that FERC should order power
generators to pay California
$9 billion in refunds for alleged overcharges.
Davis arrived in Washington for what had initially been billed as star
testimony urging FERC to impose price caps. After federal regulators approved
a form of price controls on Monday, Davis swiftly pivoted to demand that FERC
order generators to pay refunds.
"It is unconscionable that FERC looked the other way while energy companies
bilked our state out of $9 billion," Davis told panel chairman Joe Lieberman,
who had offered Davis the forum before his investigatory committee as soon as
Democrats took control of the Senate a few weeks ago.
Lieberman promised Davis that he would pressure regulators to order the
refunds. And Sen. Barbara Boxer, a California Democrat, introduced the
Electricity Gouging Relief Act of 2001 that would force FERC to do so.
But it now appears that FERC may be much more amenable to Davis' complaints
than it was little more than two weeks ago, before Wood was sworn in.
In his first action at the agency, Wood, the former head of the Texas Public
Utilities Commission, was a chief catalyst behind a 5-to-0 vote by FERC
Monday to impose a sweeping price ceiling on electricity throughout 11
Western states.
Wood also said that while refunds might be useful to chasten electricity
sellers, Congress might consider giving FERC the power to impose punitive
triple damages for generator overcharges and impose other administrative
penalties in addition to refunds.
'TREBLE DAMAGES'
"Ordering refunds is one issue," Wood said. "But an administrative penalty is
perhaps a useful tool in our tool chest, and I think perhaps even treble
damages much as exist in antitrust laws. . . . If we're going to be a
vigilant market cop, we need to make sure our bark matches our bite."
Wood said a return to the traditional cost-of-service regulation that existed
before California partially deregulated electricity in 1996 remains on the
table. That would restrict companies from charging whatever the market could
bear.
Temporarily revoking a company's authority to sell at market rates -- a right
granted by FERC -- could be an effective way to deter price manipulation,
he said.
Wood's comments may offer some insight on how FERC intends to rule on
sweeping allegations of market manipulation by California's power grid
managers.
The state has demanded that federal regulators revoke the rights of six
generators' to sell electricity at market rates. The California Independent
System Operator said the companies' prices should be set by determining their
generating costs, plus a reasonable return.
Bush's other new appointee, Nora Mead Brownell, a former Pennsylvania utility
regulator, also suggested a much more forceful federal role.
"You don't just open the market, declare victory and walk away," Brownell
said. Competition in a newly deregulated market, she added, "doesn't just
happen overnight."
Davis spokesman Steve Maviglio said Davis has had "extensive conversations"
with Wood that lead him to believe Wood would be amenable to refunds. Davis
"thinks there's a real meeting of minds there," Maviglio said.
Davis met privately with Wood and Brownell yesterday, and Wood is scheduled
to meet with Davis again in Sacramento on Monday.
When Wood's name was first floated as a Bush appointee, it was widely assumed
he would follow in the footsteps of fiercely free-market FERC chairman Curt
Hebert, a Republican appointee of President Clinton whom Bush elevated to
head the agency.
But in his first few public comments since taking office, Wood has
consistently charted a much more regulatory course. Bush is considered likely
to tap Wood as FERC chairman, perhaps this fall.
Echoing a long-standing Davis complaint that FERC has been "asleep at the
wheel," Wood and Brownell said that once properly deregulated electricity
markets are in place, federal regulators should actively monitor and enforce
market rules.
SETTLEMENT TALKS
As part of its Monday price-control action, FERC also ordered settlement
talks between the state of California and its electricity suppliers that will
start in Washington on Monday at FERC headquarters and last for 15 days. FERC
judge Curtis Wagner will preside.
The refund total Davis gave senators is nearly 70 times more than the $133
million in overcharges that FERC has alleged so far.
Maviglio said any refunds of alleged overcharges that occurred after the
state began buying power January 17 would go to the state. Refunds of
overcharges before that date would to go the state's utilities, one of which,
Pacific Gas and Electric Co., is in bankruptcy.
Wood warned that the price controls imposed by FERC this week will not
prevent blackouts this summer because electricity remains in short supply.
"We didn't promise that it would be a panacea," Wood said. "I think quite
frankly we want to make sure that we mitigate not only the price but mitigate
the expectations that things are going to be rosy this summer on the West
Coast. They are not. There will be blackouts, but I think what we wanted to
take a step on was to make sure that those blackouts -- the insult of those
wouldn't be accompanied by the injury of a very high and unjust bill for the
power."
GOP SCOLDS DAVIS
While Davis was greeted warmly by Democrats on the committee, Republicans
took him to task for mismanaging the state's electricity crisis and trying to
lay the blame on Bush.
"For Gov. Davis, (the cause of the state's crisis) is simply that a bunch of
Texas cowboys got in the corral and decided to take advantage of California,
" said ranking panel Republican Fred Thompson of Tennessee. "All of the
policies that were clearly part of the problem were locked into place and
kept there until they created a disaster."
"How was it that you seemed to let this get totally out of hand?" he asked
Davis.
But Davis stuck to his insistence on refunds. "Give us back the money that
was wrongly taken from us," he said.
E-mail Carolyn Lochhead at clochhead@sfchronicle.com
,2001 San Francisco Chronicle ? Page?A - 1

Nonprofits helped with utility bills
Grants pay for ways to conserve energy
Bill Workman, Chronicle Staff Writer
Thursday, June 21, 2001
,2001 San Francisco Chronicle
URL:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/06/21/M
NS187867.DTL&type=news
Nonprofit agencies that serve Santa Clara County's needy are about to get
relief from skyrocketing energy costs that could keep them from doing their
jobs.
A unique grant program to help them cut their utility bills was announced
yesterday, along with the findings of a foundation survey of 54 nonprofits
that reported gas and electric costs have gone up an average 46 percent at a
time when the slowing economy has increased demand for their services.
To help the nonprofits keep energy bills down so they can meet rising need,
Community Foundation Silicon Valley has begun handing out $5,000 grants to
local agencies to buy energy-efficient equipment and conduct energy audits to
determine other ways to reduce expenses.
The privately funded energy grant program was said to be the first of its
kind in Northern California since the onset of the current energy crisis.
"For more agencies, something as simple as purchasing a new refrigerator or
installing ceiling fans can lead to hundreds of dollars in savings," said
Peter Hero, president of Community Foundation Silicon Valley. ''Our goal is
to help keep energy costs down so that our local nonprofits can avoid cutting
services to the community."
The survey released yesterday showed that most agencies have already
initiated such energy-saving measures as turning off lights, cutting down air
conditioning and turning off computers and appliances, but are still forced
to dip into reserves to pay utility bills.
The agencies, said Hero, "face stiff challenges in taking conservation to the
next step. A performing arts group, for example, can't just simply turn off
the spotlight in the middle of a show."
The announcement of the grants, part of a $100,000 "energy crisis response
fund" created with donations from several private foundations, was made in
San Jose at St. Elizabeth's Day Care Center, whose gas and electricity bills
have tripled in some months, according to Executive Director Robert Freiri.
The church-run day care center, which serves more than 200 children, was one
of three agencies that received the first of the foundation's energy- saving
grants yesterday. It will use the money to pay for an extensive energy audit
of the 35-year-old facility.
Other grant recipients were San Juan Bautista Child Development Center in
east San Jose, which plans to buy an energy-saving commercial stove for its
central kitchen, and Concern for the Poor, which runs the San Jose Family
Shelter. A shelter official said the money will be used to purchase energy-
efficient refrigerators and other energy-saving appliances.
Meanwhile, Hero said his foundation was seeking matching funds from other
donors and that he expects the energy grant program to "double or triple" in
size within the next few weeks.
A surprising finding in the survey, he said, was that while the stock market
plunge may have contributed to an average 11 percent drop in donations to the
charitable groups during the first quarter of this year, philanthropic giving
in Silicon Valley was still 10 percent higher this year than in 1999, when
the economy was booming.
"I may be an optimist, but it seems philanthropy is so much more on the radar
screen of Silicon Valley, even among the dot-comers" whose stocks and jobs
have taken a beating, said Hero.
Hero was joined at the news conference by Greg Larson, president and CEO of
United Way Silicon Valley, who told how his own agency is being rescued from
mounting energy bills by an anonymous Silicon Valley contractor.
The contractor, he said, has donated $70,000 as part of $100,000 in planned
upgrading of heating and air conditioning systems as well as electrical
retrofitting of United Way's Silicon Valley Nonprofit Center in San Jose. The
center provides office and meeting space for more than 50 nonprofits.
Without such energy-efficient improvements, said Larson, United Way would
have to cut about $75,000 a year from its critical services budget to meet
the recent 40 percent increase in utility bills.
E-mail Bill Workman at wworkman@sfchronicle.com.
,2001 San Francisco Chronicle ? Page?A - 15

Federal caps chill prices, analysts say
Market steadies state leaders pushing for stricter controls

Davis demands refunds from energy companies
BY JOHN WOOLFOLK
Mercury News
The gold rush in California's electricity market -- when generators could
name any price for their power -- may be over.
New federal limits taking effect today have chilled Western power markets,
keeping prices cool even as a heat wave drives up demand in California.
It's still too early to say how effective those regional rules will be, and
California leaders are urging tougher controls. But market analysts no longer
expect a return to the huge markups seen earlier this year.
``I think the party has gotten a lot quieter,'' said Severin Borenstein,
director of the University of California Energy Institute.
The federal controls for the first time limit market prices throughout the
West under a complex formula based on the operating costs of the plant that
is the most expensive to run. The prices will change based on which plants
are selling power during shortages. That limit is currently $92 per
megawatt-hour, although companies can add 10 percent for California sales to
reflect credit uncertainty.
That's a far cry from daily prices that averaged $200 to $400 and at times
neared $4,000 per megawatt-hour earlier this year.
Prices have been falling since late May as power plants returned to operation
from scheduled maintenance, cool weather dampened demand and hydro-electric
imports exceeded expectations. The state's long-term power contracts also
contributed to the decline.
But as rising temperatures threatened blackouts this week, daily prices for
Northern California held at a modest $94 per megawatt-hour, according to
Bloomberg News Service, less than a third of the cost during similar
shortages in May.
Power contract prices for electricity delivered later this summer and next
year reflect lower profit expectations.
``They know there's going to be a ceiling on prices and that's bearish
news,'' said Mike Wilczek, senior reporter for Platts Power Markets, a
division of McGraw-Hill. ``They've sold the market down. They're not sure
what the cap will be at any given time. But they do know it won't be able to
spike to the extremes it did before.''
Energy industry officials have been studying the Federal Energy Regulatory
Commission's Monday order and say it's too soon to declare the profit party
over.
``Prices can always go higher and always go lower,'' said Gary Ackerman,
executive director of the Western Power Trading Forum. ``If there's something
to be worried about, it's the unknown. Once it's known, our fears will calm
down and we'll be able to start working with it.''
Expectations were much higher just two months ago. Predictions of routine
rolling blackouts prompted energy traders to bid up summer electricity prices
to $700 per megawatt-hour. Although the summer has just begun, the state's
power picture now looks less ominous.
Experts agree energy companies will still make a tidy sum in California, and
industry officials say generators aren't shelving plans for new plants.
``These sorts of caps are not going to put any kind of squeeze on them,''
Borenstein said. ``They just aren't going to see quite as large profits as
they have been.''
An analyst who works closely with power marketers said they no longer expect
easy money.
``They're having a hell of a time now justifying the prices they charged
earlier this year,'' said the analyst, who asked not to be identified. ``What
they are saying is it's going to be more difficult to make more money in the
market.''
Past federal regulatory orders in December and April have been followed by
higher prices, leading many California officials to press for even stricter
moves, such as refunding past profits.
But this week's order suggests the agency, which includes two new appointees
of President Bush, is more serious about keeping the market in check.
The order includes a demand that Duke Energy, which owns four California
power plants, refund -- with interest -- profits from charging the state
$3,880 per megawatt-hour earlier this year. The company said it never
collected its $11 million bill, which included an 80-percent markup for the
state's uncertain credit. But in an order more strongly worded than any to
date, federal regulators made clear they disapproved of the company's claim.
``We will not tolerate abuse of market power or anti-competitive bidding
behavior,'' regulators wrote in the order. ``Duke Energy's bidding at
multiples of its marginal costs in an attempt to recover past-due amounts can
in no way be found to be just and reasonable.''
State leaders, who have accused federal regulators of falling down on the
job, are encouraged.
``I believe the energy companies realize their day is up,'' Gov. Gray Davis
said at a Washington, D.C., press conference. ``They have bilked Americans
out of billions of dollars, and now they have to play by the rules.''
Staff writer Jim Puzzanghera contributed to this report.

Price controls could take years to assess
Factors such as weather, conservation and long-term contracts all contribute
to prices, experts say.
June 20, 2001
By DENA BUNIS
The Orange County Register
WASHINGTON Federal regulators could turn out to be heroes or goats, depending
on whether Monday's price-control ruling helps California turn the corner on
its electricity crisis.
And it could be years before anyone can legitimately make that call.
Meanwhile, spin abounds, and Californians who ultimately pay the energy bills
will have to sit tight and hope.
Several factors combine to make it difficult, experts say, to predict how
much good the soft price cap ordered by the Federal Energy Regulatory
Commission will do.
"I can think of an awful lot of different reasons" that would affect energy
prices, said Robert Michaels, a professor of economics at California State
University, Fullerton, and a consultant to power producers.
The weather, lower natural-gas prices, new power coming online, conservation
and long-term contracts all contribute to lower prices. And those things
figure into the price the state - and if they get back into the market,
utilities - will pay for electricity.
Experts pored over the order when it was released, saying the fine print is
crucial to how the market will be affected.
"It's a positive development, but it's just half the battle," said Gov. Gray
Davis' spokesman, Steve Maviglio. "The other half is getting the refunds back
to California," he added, referring to allegations of generator overcharges.
"The fight is not over."
Davis will testify this morning before the Senate Committee on Government
Affairs, along with the FERC commissioners.
Not everyone was happy with FERC's turnaround.
Julie Simon, vice president of policy at the Electric Power Supply
Association, the national trade association for power, said the order is
"incredibly intrusive. It worries me that this could have a detrimental
impact on California getting the investment that it needs and the type of
market structure, so people can get the benefits of competition."
Whatever happens with prices, nothing in the order will do anything to ease
the chances of blackouts, says a former California Public Utilities
Commission chairman.
"Blackouts are in the short term and have nothing to do with the price of
electricity," said Mitch Wilk, a utility consultant who ran the PUC from 1986
to 1991.
Despite the uncertainties, there was enough confidence that the FERC action
would at least stabilize a chaotic market that even Sen. Dianne Feinstein, a
fierce critic of the agency, thanked the commissioners who appeared before
the Senate energy committee Tuesday. And she and Sen. Gordon Smith, R-Ore.,
pulled back their bill that would have established cost-based price caps in
the West.
"Let's watch and wait and see how this order works," Feinstein said.
As the pressure mounted politically for price controls, two things happened:
Republicans - including President George W. Bush - began talking about caps
that weren't really caps. And energy analysis and economists usually opposed
to such regulation began to soften.
"I would fear price caps which don't have any market connection," said Steven
Fetter, a utility bond rater with Fitch Inc. in New York. Fetter testified
before the Senate energy panel Tuesday. This plan, he said, "maintains a
connection to the supply-and-demand patterns. That is definitely a positive."
Fetter said the order, once implemented in all 11 states in the West, "should
ramp down some of the volatility."
"I came all ready for a brawl over price caps,'' he said. "And instead got a
love fest regarding regulations."
FERC Chairman Curt Hebert, whose turnaround on this issue has been attributed
to political pressure and the presence of two new GOP commissioners committed
to helping California, continued to insist Tuesday that the price controls
are not caps. He said May and June's low prices are proof that the more
limited price controls put on in April are working.
"The approach has been working, and I believe it will work better," Hebert
told the senators. "Spot prices in California and the rest of the West are
lower than at any time in the last year."
Lower prices eventually filter down to consumers. Stable prices mean large
rate increases can probably be avoided.
But long-term, Wilk said, "electricity rates are going to go up, no matter
what happens. The days of cheap electricity and no power plants are long
over."
And regardless of whether caps serve to keep prices at least in check, the
order has changed the playing field, Wilk said.
"It's a new ballgame," he said.
The order, he added, sends a signal to generators that "to the extent they
were trying to play around, either legally or illegally (with prices),
thinking they have sympathetic ears in Washington, that those days are over."
Register staff writers Kate Berry and John Howard contributed to this report.

RELATED STORY
 Energy notebook
 Cast members in the power play
 Lawmaker criticizes FERC's settlement talks
FERC actions in the electricity crisis
The Federal Energy Regulatory Commission has come under scrutiny for its
handling of California's energy crisis. What it has done so far:
July 26 -- Orders staff to investigate California's soaring electricity
prices.
Aug. 23 -- Launches formal investigation into the state's electricity market.
Sept. 12 -- Holds hearing in San Diego.
Dec. 15 - Orders flexible rate-cap plan.
March 9 - Proposes that power companies refund $69 million in overcharges
during power alerts.
March 16 - Proposes an additional $55 million in refunds.
April 10 - Holds hearing in Boise, Idaho.
April 26 -- Orders limited price caps during electricity alerts only.
June 18 - Orders around-the-clock price controls throughout the West as part
of a comprehensive plan for Western electricity markets.

Cast members in the power play
June 20, 2001
The Orange County Register
The job of regulating energy markets in the state and the nation has usually
been left to faceless bureaucrats, as far as the public is concerned.
California's energy crisis, however, has changed all that. Politicians now
talk energy and have played major roles in bringing federal regulators --
themselves unknown until the crisis hit -- to the decision they made Monday.
Here are some of the players in California's energy drama:
Gov. Gray Davis -- He's been Mr. One Note for firm price caps. Now that
federal regulators have put on soft price caps that even Democrats in
Washington are embracing, Davis will have trouble laying more blame at the
federal government's feet.

Sen. Dianne Feinstein -- She's been Mrs. Price Cap. She wrote to the
president, held news conferences and introduced a bill on cost-based pricing
that was going nowhere until the Democrats took control of the Senate. She
pounded away at the Federal Energy Regulatory Commission. Her job done, she
agreed Tuesday to hold back on her bill to see if the new controls work.

President George W. Bush -- He is Mr. Anti-Price Cap. But as he was pounded
by Davis and Feinstein and even some Republicans, he found a way out of the
dilemma. Bush said this week that the plan FERC was contemplating wasn't
really a price cap and that it was OK.

Rep. Billy Tauzin -- He is Mr. No Price Cap Legislation. The powerful
chairman of the House Energy and Commerce Committee killed an emergency bill
to help California get through the summer rather than risk a floor debate on
those caps. But in the end, the Louisiana congressman and a dozen other
Republicans - some from California - wrote to FERC, urging it to issue some
price relief.

Curt Hebert - He's Mr. Free Market. Hebert, chairman of FERC, for months
resisted anything that even hinted at price caps. The Republican from
Mississippi still insists the new controls are not caps. But Californians
don't care. A cap by any other name ...

Richard Massey - He's Mr. Caps Do Work. Massey, a Democratic commissioner
from Arkansas, has argued for price caps for eight months. He put pressure on
his fellow commissioners, and his arguing paid off this week.

Pat Wood and Nora Mead Brownell -- They are Mr. And Ms. New Kids on the
Block. These new GOP Bush appointees made it known they were flexible and
open to caps. The new blood contributed to the compromise price-control
order.

RELATED STORY
 Price controls could take years to assess
 Energy notebook
 Lawmaker criticizes FERC's settlement talks

Lawmaker criticizes FERC's settlement talks
June 20, 2001
By KATE BERRY and JOHN HOWARD
The Orange County Register
A leading state Democratic lawmaker criticized the Federal Energy Regulatory
Commission's effort to hold settlement negotiations, saying that regulators
failed in January to resolve issues between the state and power suppliers.
Sen. Debra Bowen, D-Marina del Rey, who is chairman of the state Senate's
energy committee, said the federal agency chose to "punt," rather than make
crucial financial decisions about California's restructured energy market.
"They have to put the parties together, because there really isn't a
mechanism at FERC for dealing with it," Bowen said.
The settlement conference was established as part of FERC's order Monday to
expand price controls in California and other states.
The talks, set to begin before June 25 and last no longer than 15 days, will
bring together hundreds of parties.
"This is far from a typical case," said Julie Simon, vice president of policy
for the Electric Power Supply Association, a national trade group of power
suppliers. "All of the refund issues, the offset issues, all of the financial
issues still outstanding are supposed to be settled."
Those issues include massive debts owed to power suppliers by the state's
utilities, primarily Southern California Edison and Pacific Gas & Electric.
Those debts, in turn, could be offset against claims that power suppliers
overcharged the state up to $6.8 billion and should pay refunds.
Curtis Wagner, FERC's chief administrative law judge, is expected to assist
the parties in a settlement. He will make a recommendation to the commission
within seven days after the negotiations, if the parties do not reach a
settlement.
Bowen said it would be difficult for the parties to determine how the
financial issues will be resolved, particularly refunds.
"It's hard to unravel how the money comes back from those types of
transactions," she said. "How do you go back and unravel $15 billion worth of
spending?"

Energy notebook
Anti-tax advocate sues to block cash for Davis consultants.
June 20, 2001
By the Associated Press
SACRAMENTO An anti-tax advocate has filed a lawsuit against the state,
attempting to block payments to two consultants hired to help Gov. Gray Davis
deal with California's energy crisis.
Lewis Uhler filed the suit Monday in Sacramento Superior Court, saying that
Controller Kathleen Connell shouldn't pay the two consultants $30,000 every
month. Connell responded Monday by saying she is "going to freeze the
payment" once she receives an invoice from communication consultants Chris
Lehane and Mark Fabiani. Both men have been shaping Davis' public awareness
campaign about the energy crisis.
"I'm certainly in agreement with the intention of the lawsuit," Connell said.
"It provides a legal incentive to not pay, and a protection mechanism when I
don't pay."
Lehane countered, "If these parties were truly concerned about the taxpayers
and the people of California, they'd be spending their time suing
out-of-state power generators for their months of gouging."
In addition to seeking a court order blocking the payment, the suit also asks
that the consultants be barred from participating in decisions related to the
energy crisis. Both men advise Southern California Edison and their work may
cause a conflict of interest, the suit alleges.
Assembly panel OKs bill to jail power price gougers
SACRAMENTO Price caps, threats to seize power plants and excess profits, and
a bill that could jail price gougers could hurt California's efforts to lure
more energy producers, according to power generators and business officials.
They testified against an Assembly bill that would make it a felony to create
a fuel shortage to drive up energy prices, with penalties including
imprisoning company officials for up to three years and seizing up to 10
percent of the company's assets.
Whistleblowers who turn in a company would be eligible for up to 10 percent
of the fine collected from the company.
"It feels to me we're entering the final chapter of an Orwellian novel," said
California Manufacturers and Technology Association President Jack M.
Stewart. "If we're sending signals of price caps and windfall profits, and
now criminal penalties, I don't think we're going to have the (energy) we
need."
Supporters said the bill outlaws price manipulation, not normal business
practices.
"Responsible energy producers have nothing to worry about," said the sponsor,
Lt. Gov. Cruz Bustamante.
Committee Vice Chairman Jay La Suer, R-La Mesa, worried that the bill may
create a "bounty hunter" mentality among whistleblowers and a "witch hunt"
atmosphere for prosecutors.
The committee sent the bill to the Assembly Appropriations Committee, with La
Suer opposed, on a 5-1 vote.
In other news:
Gov. Gray Davis issued an executive order that lets the state's water
department borrow up to $5 billion to help cover its power purchases.
Edison International chief John E. Bryson said a federal ruling this week
limiting wholesale energy prices in 10 Western states isn't enough to pull
its utility, Southern California Edison, any further from the brink of
bankruptcy. Bryson said he senses a warming among state lawmakers to a
proposed bailout deal between his company and the state that would supply
billions of dollars to Edison in trade for years of cheap power and possibly
the utility's power lines. State legislative hearings on the deal began
today. The deadline for the legislature to act is Aug. 15.
California, New York and Connecticut, along with environmental and consumer
groups, filed suit to stop the Bush administration's decision to weaken
efficiency standards for air conditioners.
Three community groups sued Mirant California and the Bay Area Air Quality
Management District in federal court. They accuse the air quality managers of
violating the federal clean air act by allowing Mirant to exceed the time it
can run its Potrero power plant without pollution controls. Mirant spokesman
Patrick Dorinson would not comment on the suit, but says the company has
complied with an earlier executive order from Gov. Gray Davis to supply as
much power as possible to California's grid. The city and county of San
Francisco plan to file a similar suit.
No power alerts were called Tuesday as reserves stayed above 7 percent.

RELATED STORY
 Price controls could take years to assess
 Cast members in the power play
 Lawmaker criticizes FERC's settlement talks

Fair and cloudy
The energy crunch is casting a financial shadow over the state's midways this
summer. Organizers are making emergency preparations to weather blackouts.
June 20, 2001
By BARBARA KINGSLEY
The Orange County Register
DEL MAR Del Mar Fair officials like to try things that are edgy and radical -
like the Adrenaline Drop, a 100-foot plunge into a net.
But they have turned achingly conservative for this blackout summer. Even
though fair officials could throw a switch to jump on another power grid
should the lights go out due to rolling blackouts, they aren't taking any
chances.
The midway on the 300-acre site is crowded with 13 electric generators housed
in white 40-foot trailers. Fair officials are spending $2,000 a day on the
generators over the course of the three-week fair, which ends July 4.
It's a safety issue, said spokesman Steve Fiebing. But a PR issue also. Fairs
are electricity hogs.
"We don't want people to drive by our fair and say, 'We're having rolling
blackouts and they're taking our power.'"
Summer is high season for the fair industry, which attracted almost 14
million fair-goers in California last year, producing $100 million in
revenue.
But this summer also means headaches and high power bills. Should the
blackouts turn out to be more hype than hardship, most fair operators feel
they have to be prepared anyway. And preparation costs money.
At the Orange County Fair, which has traditionally used generators to power
rides, they're leasing one additional generator this year, and spending
$6,500 on glow sticks - little glowing wands folks can wave should lights go
dim. (The Orange County Fair runs July 13 to 29.) At the California State
Fair in Sacramento, they're cutting back on hours and hot water to the hot
tubs.
And everybody is paying higher bills. The Del Mar fairgrounds paid
$137,152.95 for electricity from March 12 to April 10. It paid $51,845.39 for
electricity during the same period last year.
Extra costs and blackout fears are giving the industry jitters. Fair
operators work all year for an enterprise that makes virtually all its money
in the summer months.
"It's a huge topic," said Stephen Chambers, executive director of the Western
Fairs Association, a Sacramento-based organization that represents 150 fairs
in the United States and Canada. "It's like in agriculture, you have 20
minutes to get the tomatoes out of the ground. You have a very narrow window.
It's the same with us."
The worries are particularly keen for small operators. The Amador County Fair
in Plymouth and the Mother Lode Fair in Sonora would be gravely wounded by a
Friday blackout that could spook fair-goers the following Saturday, too.
"We would assume a blackout ... in midafternoon would affect the animals,''
said Ralph Clark, CEO of the Amador Fair, which is held 45 minutes east of
Sacramento. "If we had 100-degree weather, they would die, especially fur and
feathers with the rabbits and chickens. The pigs wouldn't be too far behind.
They don't have a sweat gland. You have to keep them cool. In that respect,
it would be pretty dramatic."
The 63-year-old Amador Fair, which runs July 26-29, is spending $6,000 on
backup generators and lighting - a big bite out of a $250,000 total budget.
"If the lights go out, people will leave, and that will hurt us," said Clark.
Even the bigger kids are feeling the pinch. The Los Angeles County Fair in
Pomona is raising admission fees on weekends from $10 to $12 for adults and
$5 to $6 for kids to cover energy costs.
In Sacramento, the California State Fair is opening two hours later on
weekdays to shed electricity "load." It's also installing hundreds of solar
panels on a parking lot to generate half a megawatt of electricity, or 1/16th
of the fair's needs during peak times.
By the fall, another panel will go on the roofs of 26 stable buildings on the
racetrack backstretch.
The entire midway of the fair, which draws 1 million people over 18 days,
will run on generators instead of electricity.
"If we were to have a blackout, we wouldn't want to have someone stuck on a
ride for an hour," said assistant GM Brian May.
The very idea of generator-powered midways is a throwback to the old days,
when carnivals brought their own source of power to remote locales, said
Chambers, of the Western Fairs Association. In recent years, they started
plugging into the local power companies because the power was cheaper and
more reliable. But nowadays, generators are quiet, while electricity from
power companies is no longer cheap, and this summer, not always reliable.
At Del Mar, thousands streamed through the gates on opening day Friday. They
were eating funnel cakes and screaming through the Kamikaze, the Inverter and
the Storm. They were petting animals, licking ice cream cones and walking the
brilliantly illuminated midway. And fair officials were crossing their
fingers.

U.S. stocks open lower. more profit warnings slam market
June 21, 2001 ????
NEW YORK(Reuters) via NewsEdge Corporation -
Stocks slipped at the opening Thursday after profit warnings rolled in from
electronics maker Sanmina Corp. , among others.
The Nasdaq composite index dropped 6.35 points, or 0.31 percent, to 2,024.89,
while the blue-chip Dow Jones industrial average lost 26.71 points, or 0.25
percent, at 10,620.62. The Standard & Poor's 500 Index slipped 1.52 points,
or 0.12 percent, to 1,221.62.
Sanmina dropped $1.74 to $18.34 after saying its earnings and revenues will
be below earlier estimates due to sluggish demand as high inventories
continue to hurt the technology industry.
Another top tech firm, Transmeta Corp. , which designs power-saving chips for
notebook computers, slashed its sales projection, citing a slowdown in
shipments to Japan, its major market. Transmeta slumped $6.22, or 49 percent,
to $6.36.
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