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Urgency-tone-topic-on-enron_labeled_emails_with_subjects-llama2-7b_finetuning

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Confidential Stuff

Here it is

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CONFIDENTIAL AND LEGALLY PRIVILEGED

CONFIDENTIAL AND LEGALLY PRIVILEGED Vicki Many thanks for your assistance yesterday. Clinton Energy Management Services Inc. because it holds a current power marketing certificate is an entity which we would like to move to being a direct subsidiary of Enron Corp. to take effect today. This is considered to be an essential part of restructuring to meet our current and future needs. While the day to day control will remain where it is and all the efforts assign contracts and other work should progress as planned since the value to Enron Corp. is the power marketing certificate nothing should be done to jeopardize this. In addition we will be changing the charter and will need copies of the existing charter to effect those changes required. Please call me if you need to discuss this further. Kind regards Marcus

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Re: DRAFT - PRC Follow Up Memo

Looks fine to me. Maureen - please keep on file From: Billy Lemmons/ENRON@enronXgate on 06/13/2001 07:08 AM To: Stanley Horton/ENRON@enronXgate Steven J Kean/NA/Enron@Enron cc: Ted C Bland/ENRON@enronXgate Teresa Bosien/ENRON@enronXgate Subject: DRAFT - PRC Follow Up Memo Stan and Steve Below is a short email that I suggest we send as a follow up to each PRC meeting. Please adjust as you feel appropriate and I'll ask Terry Bosien to provide your assistant with a list of attendees after each meeting for distribution. I'm traveling today but will be back in the office Thursday. If you'd like to discuss my asst Maxine (x33499) knows how to reach me or you can contact Ted or Terry. Regards Billy ___________________ Thank you for participating in the [EES] Analyst & Associate PRC meeting [last Friday]. The Western Hemisphere final PRC meeting for Analysts & Associates is set for July 18. The purpose of this meeting will be to review the collective ranking distributions and to discuss the performance of individuals in categories 1 and 5. A subset of those who participated in [Friday's] meeting will be selected to participate on July 18. After the July 18 meeting you will receive the ok to provide feedback to those you represented. If you are not the direct supervisor of those you represented it is critically important that you work with the supervisor to insure consistent and clear feedback and ownership of the ranking results. If you have any questions please feel free to contact Terry Bosien (x35230). Thank you again for your contributions to this important process.

business document

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Comp Committee Meeting - April 30th

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FCEL

fyi - there has been some concern that this deal was being put together without Connecticut authorities knowing the full extent of our interest in FCEL.

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Re: Pension Reform Bill

I think it's a good idea but we will need a different summary ... either limit the summary to a couple of key points or provide an explanation in layman's terms of the practical effect of each of the changes. Cindy Olson 04/26/2001 01:46 PM To: Steven J Kean/NA/Enron@Enron cc: Subject: Pension Reform Bill Steve what do you think????? -----------------

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Peer Group Mapping

I saw your e-mail response. Did it go to Oxley too? -----------------

business document

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RE: Eeegads...

hey when are you scheduled to go in for your attitude labotomy? Paul Kaufman/ENRON@enronXgate 05/10/2001 01:51 PM To: Jeff Dasovich/NA/Enron@Enron Susan M Landwehr/NA/Enron@Enron cc: Subject: RE: Eeegads... I'll be there as will Sandi McCubbin. Are you interested in going? I thought not.

business document

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Confidential Information and Securities Trading

I need to get the form to show compliance but I cannot get it online--I cannot remember all my passwords. Can you get this form for me? Thx.

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RE: VACATION

Kevin Enjoy your vacation. Vince

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Energy Issues

Firsst article attached refers to the 1946 Nebraska case I mentioned to you= =20 in DC

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Confidential Folder to safely pass information to Arthur Andersen

Please read and follow below: Thanks -----------------

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Report on POWER Conference

I attended the U.C. Berkeley POWER (Program on Workable Energy Regulation) Conference on March 16. Here is a brief report on the relevant parts. Notably the Lieff Cabreser duo of Bill Bernstein and Barry Himmelstein were there listening carefully. The program consisted of the presentation of 8 economic studies followed by comments from two discussants followed by audience questions/comments. The following is a list of the papers and the discussants who presented with slides taken from the website of the U.C. Energy Institute You can click on this to see the slides in PDF format. The papers in green are not particularly relevant for our purposes and I won't say more about them beyond the note in brackets. The presenter's name is in bold. Bidding Asymmetries in Multi-Unit Auctions: Implications of Bid Function Equilibria in the British Spot Market for Electricity by Greg Crawford Duke University Joe Crespo NERA and Helen Tauchen University of North Carolina Pricing and Firm Conduct in California's Deregulated Electricity Market by Steve Puller UC Berkeley Discussion by Anjali Sheffrin California Independent System Operator Identification and Estimation of Cost Functions Using Observed Bid Data: An Application to Electricity Markets by Frank Wolak Stanford University [A paper about economic tools to study power markets.] Forward Contracts and the Curse of Market Power by Jeffrey Lien University of Maryland The Impact of Retail Rate Deregulation on Electricity Consumption in San Diego by James Bushnell and Erin Mansur UC Berkeley [This looks at whether consumption declined with price increases. Not much.] Consumption and Home Energy Costs: How Prevalent is the 'Heat or Eat' Decision? by Julie Berry Cullen University of Michigan Leora Friedberg University of Virginia and Catherin Wolfram UC Berkeley [A macro study on how consumers change overall spending patterns when they have to shell out more $$ for power.] A Quantitative Analysis of Pricing Behavior in California's Wholesale Electricity Market During Summer 2000 by Paul Joskow MIT and Edward Kahn Analysis Group Electricity Restructuring and the Cost of Pollution Reduction by Dallas Burtraw Karen Palmer Ranjit Bharvirkar and Anthony Paul Resources for the Future Before I discuss the specific papers and presenters one big picture point needs to be made. There was an unchallenged consensus at this conference that the generators have exercised market power to the tune of billions of dollars. The focus was on how and how much not whether. The good news is that I heard no evidence supporting any collusion theory the thought was that generators are making independent output and pricing decisions knowing they could influence the market price given the auction rules and the completely inelastic demand. On the other hand I would have to say that the economic work on the tacit collusion hypothesis in incomplete at best. The bad news is that the scale of potential overcharges is pretty staggering -- >$5 billion. The plaintiffs will be able to put together quite a damage study. Crespo Bidding Asymmetries in UK: This is a marginally relevant paper examining whether bidders in the UK electricity auction markets behaved in a leader-follower mode i.e. asymmetrically. Crespo's model shows that in a uniform price-setting auction with clearing price rules a price setter will emerge and take all prices above marginal cost. Thus above marginal cost pricing does not require coordination. Crespo (from NERA) appeared knowledgeable but is not an inspiring speaker. His paper also got roughed up a bit in the audience questioning segment. Puller Pricing and Firm Conduct in California's Deregulated Electricity Market: This is a very relevant paper as it tries to determine whether market power (presumably) exercised in California was static or dynamic meaning the product of individual firm decisionmaking (static) or tacit collusion (dynamic). The period studied was 4/98 to 12/99. Puller found evidence of static market power consistent with so-called Cournot pricing. This theory posits that in an oligopoly firms will take their rivals' observed price/output decisions as a given and decide how to maximize profitability given that behavior. He then tried to determine whether any dynamic games were occurring meaning a game where firms recognize their interdependence and try to follow a supergame trigger strategy in which firms try to induce favorable responses from rivals. It's quite complicated how he goes about this but fundamentally he tries to correlate observed output decisions with how a firm at that time might have expected a change in its behavior to affect its future share of the market. With this methodology Puller finds what he called weak evidence of forward-looking dynamic pricing for a brief time in 1998 but not otherwise. My impression was that the evidence for 1998 was very weak and the logic used to arrive at this conclusion was also weak. Puller then went at this a second time with a theory that attempts to determine what a firm's supply function would look like if it was exercising static and dynamic market power and then comparing this to an estimate of that firm's actual supply function. I found this even more speculative than the first theory. Nonetheless the results are basically the same: evidence of static but not dynamic market power. Puller took a lot of heat for the methodology of this paper during the questioning segment. He's not a dynamic speaker and does not appear to me to be a strong expert candidate. Anjali Sheffrin's commentary was very important. She is the Director of Market Analysis for CAISO. After general comments on Crespo and Puller she launched in to a discussion of whether their models explained the California experience. This turned out to be a preview of the CAISO FERC filing of last week in which they allege $5.5 billion in market power-related overcharges from May 200 to Feb. 2001. That filing and Sheffrin's report follow. They are essential reading. Sheffrin maintains that it was the absence of imports during this period that left the market power of the California generators unchecked. This permitted the in-state generators to engage in either economic or physical withholding of power. (Economic withholding is bidding a higher-than-needed supply curve physical withholding is cutting output at the plant.) Her study was intended to (1) Identify individual firms engaging in market power activity and (2) Analyze how each firms' actions set market clearing prices. She utilized full bidding data in CA ISO real time market for each hour between May and Nov 2000 defined and categorized bidding patterns and identified economic or physical withholding and then calculated bid-cost mark-up and a monopoly rent. She found what she claimed was strong evidence of both types of withholding but that economic withholding is the dominant bidding pattern used by the five large California generators. While Sheffrin's study does not name names it claims that most of the five in-state suppliers and many of the [16] large importers displayed bidding patterns which were consistent with the exercise of market power. Bernstein and Himmelstein were positively gleeful during this presentation. On the question of collusion Sheffrin's study is not terribly illuminating. She maintains that the dominant bidding pattern is consistent with two characteristics of a supply function equilibrium model of oligopolist pricing. I take that to mean Cournot which is a static non-collusive model. However when you read her study you'll see the picture is not entirely clear. Lien The Curse of Market Power: This is only marginally relevant for us as its thesis is that forward-looking supply contracts are better for both producers and society. Everyone seemed to agree -- and were confused why we needed a paper to prove it. Lien (U. Md.) is young and not expert material. Joskow and Kahn: (paper) (Kahn's slides). I'm sure many of you have already read this everyone should. Prepared for SoCal Edison it contends that 4 in-state generators (Reliant Dynegy AES/Williams and Southern/Mirant) exercised market power by withholding capacity during the summer or 2000. J&K use publicly available data on loads market prices and generation to (a) quantify combined effects of market fundamentals on market prices (b) calculate price gap (difference between actual prices and competitive market benchmarks) (c) account for quantify effects of ISO's ancillary services requirements and forced outages and then (d) calculate the output gap for high priced hours meaning the difference between observed and maximum profitable levels of generation. They conclude that prices were far in excess of the competitive benchmark and that the 4 in-state generators could have produced more power at competitive prices but chose not to. Hence market power was exercised. Kahn the Analysis Group economist who presented is a very colorful and rather undisciplined advocate of his position. He threw around allegations of conspiracy rather casually but mostly to be funny. I couldn't tell whether he believed his study proved that I don't think it even speaks to it. But Bernstein and Himmelstein applauded him when he finished grinning ear to ear. Severin Borenstein UC Berkeley and the conference director was supposed to comment on J&K but hardly did. He said that the generators would have been stupid not to exercise market power given the supply/demand conditions and the market rules and argued that permitting long term contracts and requiring real-time residential pricing were the solutions to all of this. Borenstein was the best expert material I saw at this conference and the fact he took a pass on the details of the J&K paper is puzzling to me. It made me wonder whether he already has a horse in this race or perhaps is trying to stay above it all. Hope this is useful. Regards Dan Daniel M. Wall Latham & Watkins 505 Montgomery Street Suite 1900 San Francisco CA 94111-2562 Direct: (415) 395-8240 Main: (415) 391-0600 Fax: (415) 395-8095 dan.wall@lw.com This email may contain material that is confidential privileged and/or attorney work product for the sole use of the intended recipient. Any review reliance or distribution by others or forwarding without express permission is strictly prohibited. If you are not the intended recipient please contact the sender and delete all copies. - 2001032214541122276.pdf.pdf - 2001032214585222924.pdf.pdf

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Department Meeting

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Fwd: IS TRADING AN INSIDERS GAME?

Enclosed is an article in this morning's San Diego Union written by one of their reporters that I know. As indicated it focuses on Enron. Of particular interest are the comments by Senator Dunn which are at odds with his statements to the Sacramento lobbyists that he has no idea what Enron does. The information contained in this e-mail message and any accompanying documents is subject to the attorney-client privilege and/or the attorney work product rule and is confidential business information intended only for the use of the individual or entity named above. If the reader of this message is not the intended recipient or representative of the recipient you are hereby notified that any dissemination of this communication is strictly prohibited. If you have received this communication in error please notify the Systems Administrator at admin@pkns.com and immediately delete this message from your system. Content-Transfer-Encoding: quoted-printable Date: Wed 06 Jun 2001 08:53:28 -0700 From: Cindy Frederick <cfred@pkns.com> To: Michael Kirby <mlk@pkns.com> Subject: IS TRADING AN INSIDER'S GAME? Mime-Version: 1.0 Content-Type: text/plain charset=us-ascii Content-Disposition: inline IS TRADING AN INSIDER'S GAME? Buying selling of electricity is a growth business but some say deck is stacked against consumers By Craig D. Rose STAFF WRITER June 6 2001 While Californians decry deregulation's failure to deliver a competitive market electricity wholesalers have quietly developed a vast and rapidly growing business of buying and selling power among themselves. The deals take place on high-tech trading floors in Houston and elsewhere around the country as well as on Internet-based trading systems. Some experts say this electricity trading is a key mechanism for raising consumer power prices yet it's largely unregulated. Electricity trading is like buying stock -- when you have ability to change the stock price said Frank Wolak a Stanford University economics professor and member of the state grid operator's market surveillance group. Energy companies say the buying and selling of contracts to deliver power provides risk management allowing plant owners to presell their electricity lock in prices and avoid fluctuations. The rough and tumble of the free market they add is the most efficient means of allocating a resource like electricity. But industry critics say trading is far from a competitive market paradigm. In their view it's a means of communication -- a way for energy insiders to collude and raise prices under the guise of competition. To be sure the trading arms of major energy companies have emerged as stars in an industry where profit surges of 300 percent or 400 percent are not uncommon. The transactions shrouded in secrecy can leave ownership of a critical commodity in unknown hands. Consider the case of power generated by AES Corp.'s California plants. In 1998 AES made a bold move. Immediately after purchasing power plants that gave it control of 10 percent of the state's electric generating capacity the company sold the output from its plants for the next 20 years to Williams Cos. Williams did not sit on this treasure trove of electrons. The Tulsa Okla. company soon sold 80 percent of what it bought. It is difficult to say who owns that power now. Some might be owned by Sempra Trading a sister company of SDG&E. Or some could be owned by Enron Corp. the nation's biggest electricity trader. A spokeswoman for Williams conceded that Williams itself may have repurchased some of the electricity it sold earlier. But trading companies closely guard their positions. This much can be said with certainty: Electricity that AES sold for less than 5 cents per kilowatt-hour to Williams changed hands perhaps 10 times in the wholesale market and emerged at times in recent months with a price tag for consumers that was 300 percent higher. Williams' trading profits increased by 523 percent in the first quarter this year. Advance sales All this buying and selling creates curious confluences. In their attempt to deflect criticism over high prices generating companies such as Duke Energy -- operator of the South Bay Power Plant in Chula and others in the state -- frequently note that they sell most of their electricity far in advance. But they acknowledge less often that their trading units may also be buying power which could boost the company's electricity inventory. Duke was the fourth biggest electricity trader last year and cited its trading activity as a prime contributor to its wholesale business profits which soared 324 percent in the first quarter to $348 million. It is a company's power traders who frequently direct plant operators to increase or decrease the generation of power in response to market conditions. Energy companies have little option but to turn to trading for profits. One of the better kept secrets of electrical deregulation and its promise of competition is that there is remarkably little competition in the production side of the business. For one thing electricity is a commodity power from one company is indistinguishable from that generated by others. More important nearly all modern plants generate power from turbines built by a handful of manufacturers. The result? Modern plants owned by different companies produce power at nearly identical cost. The cost of power produced by modern plants is all within a mil (one-thousandth of a dollar) said Michael Peevey an adviser to Gov. Gray Davis and former president of Southern California Edison. So the extraction of profit in the electricity business relies much more on trading. Traders' profits rise when prices are volatile -- plunging or even better rising sharply. Little regulation But despite the obvious temptation to manipulate the market the burgeoning electricity trading business has remained largely unregulated. The Federal Energy Regulatory Commission does require quarterly filings from energy traders but these often provide incomplete information or at least little that has been of concern to FERC. In fact although the trading of electricity grew more than a hundredfold from 1996 to 2000 FERC has taken no major enforcement action against a trader. After the onset of the California crisis last year FERC has acted once. That was against Williams which agreed to pay $8 million without admitting guilt to resolve an allegation that it withheld supply to pump up prices. FERC's record of enforcement in the area of power trading stands in contrast to a long list of enforcement actions within other markets taken by the Securities Exchange Commission and the Commodity Futures Trading Commission. FERC has recently added staff to its market oversight operations. But William Massey a FERC commissioner says the agency's effort is still inadequate. Electricity can be flipped stripped and chopped up Massey said. It's an extraordinarily complicated market. The sophisticated marketers and traders have simply moved past us. We're kind of horse and buggy in our approach and they're out there in rocket ships flying around ... The problem is that sophisticated traders don't necessarily produce reasonable prices. They produce profits. Before deregulation electricity trading was a low-key affair. Regulated utilities dealt power back and forth on a reciprocal basis to fill electricity shortfalls in their control areas. There was little trading for profit until the mid-1990s after federal legislation and FERC rulings opened the market. Major traders include large energy companies sister companies of California's major utilities and Wall Street firms. Market volatility In many ways the trading of power is similar to that of other commodities. But there are important differences. Because it cannot be stored and its use is so fundamental the price of electricity is the most volatile of all. When supplies are tight a single supplier can rapidly raise prices to budget-busting levels as evidenced by Duke Energy's recent admission that it charged California nearly $4000 for a megawatt-hour of power a quantity that probably sold hours earlier for one-tenth of that sum or less. Wolak the Stanford economist and state Sen. Joseph Dunn D-Garden Grove who is investigating the state power market say trading allows companies to collude under the guise of competition. Instead of wringing out lowest costs the wholesale trading market serves to raise prices they say. As I trade to you and you trade to me we communicate to each other what price we would like to get said Wolak. It's not collusive. It's just communicating price. Mark Palmer a spokesman for Enron the nation's biggest power trader said California's problem is not the result of trading. It's a result of shortages Palmer said. Underscoring its emphasis on trading Enron's new headquarters tower in downtown Houston rises from a six-story block of new trading floors including expanded space for electricity trading. Enron also pioneered trading in cyberspace and its Enron Online site claims to be the most active computer-based trading market. The Houston company argues that consumers won't fully benefit from power trading and deregulation until they have greater choice in choosing their power supplier. And the company says FERC has not done enough to open access to transmission lines which would allow traders to move power around the country. To that end Enron has lobbied hard for President Bush's plan for a national electricity grid. Palmer says the notion that the price of electricity rises each time it is traded is mistaken. The market is always looking for the real price of a commodity Palmer said. Dunn the California state senator says his investigation found a different function for trading. At a time when supply barely meets or falls short of demand he noted companies with electricity to sell have to worry only about how high to set their price. The trader is a pawn in the generator's game to drive up prices said Dunn. Trading develops a level of trust. You my alleged competitor will bid in the same patterns and I will respond not in a competitive pattern but in a complimentary pattern. The state senator said his investigation found evidence that on several days energy companies appeared to test their ability to drive prices up without being undercut by competitors. This ability to drive up prices without competitive consequence is a key test of market power the technical term for manipulation or price fixing. But Dunn also conceded that antitrust violations can be hard to prove in court. He suggested that even if the trading behavior falls short of antitrust violations it remains anti-competitive and devastating for the California economy. To Harry Trebing a utility industry expert and professor emeritus at Michigan State University wholesale electricity trading is reminiscent of what took place in the 1920s and early '30s. Back then utility companies created complex networks of holding companies that traded stock among themselves driving up prices in the process. Undoing that scheme was a focus of President Franklin Roosevelt's administration. Congress ended up barring national power companies and tightening regulation of utilities in an effort to counteract their tendency to create markets that work only for insiders. The broad goals of trading are the same Trebing said. The goal is to maximize profits through raising prices.

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Governor Davis Power Grab

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RE: Application for Financial Engineer

Shriram We have suspended hiring for the next few months till we shall sort our physical space problem (we have no space left in our old building). Please feel free to contact me again in September. Vince Kaminski

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<<Concur Expense Document>> - April American Express

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RE: Risk 2001 Australia

Philip Frank's E-mail: wolak@zia.stanford.edu Vince

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Confidential

fyi -----------------

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HP -- confidential internal document

Matt: As GSS Business Development transitions the HP relationship for broadband to your team there are several issues I wanted to clarify in terms of how the relationship has been developed and who the contacts have been to date. Additionally I outlined the discussion points/action items from this morning's meeting you held with Jennifer Medcalf and myself. Per your request the HP presentation complete with a listing of HP's business partners was e-mailed to you this morning. HP contacts to date: Bill Lovejoy Western Gulf Area Sales Manager Houston TX #(713)-439-5587 (Gerry Cashiola's boss) Gerry Cashiola sales representative Houston TX #(713)-439-5555 (To date HP person coordinating the relationship--seeking a short term play) Greg Pyle Solution Control Manager Southeast Region Austin TX (#(512)-257-5735 (Pyle has been playing the business developer role but continues to defer leadership of the process to Gerry Cashiola) Daniel Morgridge Manager of Internet - E-Services long term alliances Austin TX #(512)-257-5736 (Interested in E-services/wireless longer term alliances) Bill Dwyer Chief Architect e-Services Solutions Cupertino CA #(408)-447-5240 (To date clearly the most knowledgeable person on HP's business propositions strong technical financial background to craft value propositions. Gerry Cashiola and Greg Pyle deferred to his judgement in the 11/16th meeting) Matt On November 10th GSS Business Development took HP through a tour of Enron's trading floor the gas control center and the peaking power plant unit center on the trading floor. This tour was one meeting amongst several held in October and November to provide HP a full overview of Enron's products and services and introduce them to appropriate contacts at Enron (EBS GSS buy side -- Peter Goebel). On November 16th GSS Business Development Patrick Tucker and Dale Clark outlined 3 possible EBS/HP focus areas -- connectivity storage and wireless. Three EBS action items were defined in that meeting: 1) HP was to provide an HP contact on connectivity (to date Gerry Cashiola has stalled on providing this). Sarah-Joy will continue to pursue this information and get a sense from Gerry Cashiola of what he means by short term opportunity. What is HP's time horizon for short term? 2) EBS and GSS/BD was to facilitate a conference call on Storage with Ravi to explore size and potential scope of opportunity (completed 12/8) 3) GSS/BD was to facilitate a conference call with Peter Goebel GSS IT Sourcing Portfolio Leader (set for 12/14) In conversations with you Jennifer Medcalf and myself this morning several decisions on forward-looking strategy with HP/EBS were confirmed: Gerry Cashiola has been unable to take control of the process. More importantly despite numerous visits to Enron in which he has had overviews of Enron's products and services met with Peter Goebel and his team on the GSS buy side and participated in an Experience Enron tour Gerry has been unable to define an HP business proposition. The coordination between Cashiola (short term initiative) Morgridge (long term 12-24 months) has remained unorganized. These initiatives need to be developed separately. Clearly the conversations with HP need to be elevated to a more senior level so EBS can work with HP decision makers who can move the relationship forward at a strategic level. As the relationship is developed at this strategic level shorter term opportunities will crop up along the way. But Gerry's short term plans will not be the focus of the EBS/HP relationship rather a by-product. To facilitate this process of elevating the relationship Jennifer Medcalf and I are following up with Bill Lovejoy and Greg Pyle. Lovejoy's boss is Dan Sytsma VP of HP's America's Central Region. In the conference call Thursday 12/14 with Peter Goebel and HP regarding wireless initiatives Peter will support the GSS/BD push for the HP/EBS initiative by reiterating the following two points: a) Enron is already an HP customer the onus is on HP to move forward on the process of building a strategic relationship (IBM and Lexmark are only some of the HP competitors who could push them out of the running) b) HP's ability to bring the right people to the table will influence HP's business relationship process with Enron Patrick Tucker and Dale Clark could build their relationship with Bill Dwyer Chief Architect e-Services Solutions (met at the meeting 11/16) in the near term. Perhaps plan a visit to Cupertino California to see Dwyer in person. We look forward to continuing close collaboration with your team on this and other opportunities. Sarah-Joy Hunter Enron Corporation Global Strategic Sourcing - Business Development #(713)-345-6541

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RE: Schoenemann Resume

Presly Greetings from London. I picked up your resume from here and forwarded it to our corporate recruiter. Vince

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EBS/Blockbuster Local Media

Strong work Laura! -----------------

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<<Concur Expense Document>> - May2001ExpenseReport

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One more for Mark Metts

Am I taking care of you or what?? -----------------

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Deadline Today -- Draft Enron Comments on NERC Bill

Attached are suggested comments on the draft NERC bill for which we were asked to provide comments by today. You will see that the response is a firm but polite -- no thanks. While I doubt NERC assumes that silence means support by their deadline today I would like to get something to them by COB if at all possible. (I will be on vacation tomorrow in any event). With apologies for the short turn around please call or e-mail your comments or OK this afternoon. John

energy infrastructure

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Energy Issues

Please see the following articles: AP Wires Thurs 3/22: Report: Power wholesalers overcharged California $5.= 5=20 billion Dow Jones Newswires Thurs 3/22: Reliant To Appeal Fed Judge Ruling To Sel= l=20 Pwr To Calif Sac Bee Thurs 3/22: Federal judge orders major power wholesaler to sell t= o=20 California San Jose Mercury News Thurs 3/22: State falling short on pacts that provi= de=20 low-cost energy Contra Costa Times Thurs 3/22: Crisis saps state surplus Sac Bee. Fri 3/23: Bill to pay small energy firms stalls Sac Bee Fri. 3/23: House panel ends energy hearings -- will it step in? Sac Bee Fri 3/23: Dan Walters: Crisis deepens: politicos panic San Diego Union Fri. 3/23: Report says power wholesalers overcharged=20 state $6 billion San Diego Union Fri 3/23: Disappearing state surplus sparks alarm San Diego Union Fri. 3/23: Outages darken economic outlook in state so= me=20 say San Diego Union Fri. 3/23: Out-of-state generators question power=20 regulators' authority San Diego Union Fri. 3/23: Allegheny Energy makes big California=20 connection LA Times Fri 3/23: Judge Frees Small Firm From Edison Contract SF Chron Fri 3/23: Lodi Defies Order for Blackouts=20 Utility tells PG&E to 'pay the bills' SF Chron Fri 3/23: Coming Down to the Wire=20 State legislators battle over alternative energy bills SF Chron Fri 3/23: Grid Operators Push to Prevent Overcharging=20 They say regulators must be aggressive to stop billing abuses=20 Mercury News Fri. 3/23: State's bill for energy could double this year Mercury News Fri. 3/23: Plan for alternate power plants stalls --- --- Report: Power wholesalers overcharged California $5.5 billion=20 DON THOMPSON Associated Press Writer Thursday March 22 2001=20 2001 Associated Press=20 (03-22) 11:41 PST SACRAMENTO Calif. (AP) -- Electricity wholesalers have= =20 overcharged California more than $5 billion since May by manipulating the= =20 energy market according to a report prepared for power grid managers.=20 The Independent System Operator will file the findings with federal=20 regulators and ask for a refund ISO spokesman Patrick Dorinson said.=20 The state auditor also said Thursday that the state's 1996 deregulation law= =20 encouraged both buyers and sellers of electricity to ``manipulate wholesale= =20 prices to their advantage'' by underestimating supply and demand.=20 The auditor's report lays out what it calls ``a complex combination'' of=20 deficiencies and misjudgments it says led to the state's power problems.=20 According to the ISO report five in-state power suppliers and 16 importers= =20 frequently offered electricity at prices higher than it cost them to produc= e=20 -- effectively withholding supplies -- or didn't bid at all when they were= =20 able to generate power.=20 ISO Director of Market Analysis Anjali Sheffrin presented the findings at a= =20 conference in Berkeley last week.=20 The companies have denied overcharging California and have said they expect= =20 the Federal Energy Regulatory Commission will determine their prices were= =20 justified.=20 The commission has recently stepped up scrutiny of power companies' behavio= r=20 during California's power crisis asking suppliers to justify $124 million = in=20 sales during the first two months of the year or refund the money. Critics= =20 claim thousands of additional questionable sales are not being challenged.= =20 California has been spending about $45 million a day -- $4.2 billion since= =20 January -- to purchase power for Pacific Gas and Electric Co. and Southern= =20 California Edison. Both utilities the state's largest have been cut off b= y=20 electricity wholesalers because their credit is almost worthless.=20 Edison and PG&E say they are nearly $14 billion in debt due to soaring=20 wholesale power costs. The state's deregulation law blocks them from=20 recovering the costs from customers.=20 State Controller Kathleen Connell said Wednesday that the state's=20 power-buying is gutting its budget surplus.=20 Since the state started making emergency power buys the surplus has fallen= =20 from $8.5 billion to about $3.2 billion she said.=20 Connell ordered an audit of the power buys saying Gov. Gray Davis is=20 withholding key financial information from her office and the Legislature.= =20 She said she would refuse to transfer $5.6 billion into a ``rainy day fund'= '=20 she said was set up to impress Wall Street as the state prepares to issue $= 10=20 billion in revenue bonds to cover its power buys.=20 Transferring the money would leave the state general fund $2.4 billion in= =20 debt Connell said.=20 Sandy Harrison spokesman for the state Department of Finance and Keely=20 Bosler of the Legislative Analyst's Office said such transfers are routin= e=20 and required by law.=20 ``The law says she has to do it. The law does not give her the power to=20 demand that kind of audit information'' Harrison said.=20 Davis spokesman Steve Maviglio said the administration has released the=20 financial information it can without jeopardizing negotiations for long-ter= m=20 power contracts with wholesalers.=20 Also Wednesday a federal judge ordered a major wholesaler Reliant Energy= =20 Services to continue selling power to California despite its fear that it= =20 will not be paid.=20 The ISO buys power from companies like Reliant on behalf of utilities in=20 attempts to fend off rolling blackouts like those that hit the state this= =20 week and during two days in January.=20 --- Reliant To Appeal Fed Judge Ruling To Sell Pwr To Calif 03/22/2001 Dow Jones Energy Service (Copyright (c) 2001 Dow Jones & Company Inc.) LOS ANGELES -(Dow Jones)- Reliant Energy Inc. (REI) said Thursday it will= =20 immediately file with the 9th Circuit Court of Appeals in San Francisco in= =20 response to a federal judge's ruling late Wednesday that the company contin= ue=20 selling power to California regardless of whether it is paid.=20 U.S. District Court Judge Frank Damrell granted California's Independent=20 System Operator which makes last minute power purchases in the spot market= =20 a preliminary injunction against Reliant saying Californians were at risk = of=20 irreparable harm if Reliant stopped selling power to the state. The ISO manager of the state's electricity grid said the judge's ruling= =20 will allow the agency to keep the lights on in California.=20 Reliant which is owed more than $300 million from the state's cash-strappe= d=20 utilities supplies California with about 3000 megawatts of electricity fr= om=20 power plants it owns in the state.=20 Reliant spokesman Richard Wheatley said the state Department of Water=20 Resources the agency that buys California's bulk power needs on behalf of= =20 PG&E Corp. (PCG) unit Pacific Gas & Electric Edison International (EIX) un= it=20 Southern California Edison and Sempra Energy (SRE) unit San Diego Gas &=20 Electric should back the ISO's last minute power purchases.=20 In a filing with the Securities and Commission Reliant said it is owed $10= 8=20 million by the DWR for last minute power purchases the ISO made during the= =20 six weeks prior to the agreement Reliant made with the DWR.=20 Damrell dismissed Reliant's claim saying he does not have the authority to= =20 force the DWR to pay for that power.=20 We're going to immediately appeal Judge Damrell's order Wheatley said.= =20 Clearly the judge understands the implications of his order. We are requir= ed=20 to do business with creditworthy entities. Unfortuantely the judge did not= =20 force the ISO to post a surety bond which would allowed us to do business= =20 with the ISO.=20 Gov. Gray Davis has said the state is not responsible for the last minute= =20 power purchases the ISO makes despite a law passed authorizing the DWR to= =20 buy power on behalf of the utilities.=20 Wheatley added that the company will also seek relief on the issue at the= =20 Federal Energy Regulatory Commission. Damrell's ruling remains in effect=20 until the Federal Energy Regulatory Commission rules on the matter.=20 Separately Wheatley said a short-term power supply contract that Reliant= =20 signed with the DWR expired Monday and the DWR has not renewed the contract= .=20 A spokesman for the DWR would not comment on the issue.=20 -By Jason Leopold Dow Jones Newswires 323-658-3874=20 jason.leopold@dowjones.com --- --- ----------------------- Federal judge orders major power wholesaler to sell to California Updated: March 21 2001 - 8:23 p.m.=20 A federal judge issued a preliminary injunction Wednesday ordering a major= =20 electricity wholesaler to continue selling to California despite its fear= =20 that it will not get paid.=20 U.S. District Judge Frank C. Damrell Jr. said Californians were at risk of= =20 irreparable harm if Reliant Energy Services stopped selling power to the=20 Independent System Operator which oversees the state's power grid. The ISO= =20 buys last-minute power on behalf of utilities to fill gaps in supply to try= =20 to fend off blackouts.=20 Damrell dismissed Reliant's attempt to force the state Department of Water= =20 Resources to back the ISO's purchases for the state's two biggest utilities= .=20 The state has been spending about $50 million a day on power for Pacific Ga= s=20 and Electric Co. and Southern California Edison both denied credit by=20 suppliers after amassing billions of dollars in debts. The judge said he had no authority to force the DWR to pay for that power.= =20 Gov. Gray Davis has said the state isn't responsible for purchasing the=20 costly last-minute power ISO buys for Edison and PG&E despite a law=20 authorizing state power purchases on the utilities' behalf.=20 ISO attorney Charles Robinson said the ruling gives ISO operators a tool t= o=20 assist them in keeping the lights on in California.=20 Had the decision gone the other way one could expect other generators to= =20 simply ignore emergency orders Robinson said.=20 Damrell's preliminary injunction will remain in effect until the Federal=20 Energy Regulatory Commission rules on the matter.=20 Damrell denied the ISO's request for preliminary injunctions against three= =20 other wholesalers Dynegy AES and Williams who agreed to continue selling= =20 to the ISO pending the FERC ruling.=20 Spokesmen for Reliant Dynegy AES and Williams were out of the office=20 Wednesday night and didn't immediately return calls from The Associated Pre= ss=20 seeking comment on the ruling.=20 The ISO went to court in February after a federal emergency order requiring= =20 the power sales expired. The judge then issued a temporary restraining orde= r=20 requiring the sales but dropped it after the suppliers agreed to continue= =20 sales to California pending his Wednesday ruling.=20 The ISO said it would lose about 3600 megawatts if the suppliers pulled ou= t=20 enough power for about 2.7 million households. One megawatt is enough for= =20 roughly 750 homes.=20 Grid officials said Reliant's share alone is about 3000 megawatts. Reliant= =20 said the amount at issue actually is less than a fourth of that because mo= st=20 of the power is committed under long-term contracts.=20 Reliant which provides about 9 percent of the state's power worries it=20 won't get paid due to the financial troubles of PG&E and Edison.=20 PG&E and Edison say that together they have lost about $13 billion since Ju= ne=20 due to soaring wholesale electricity costs that California's 1996=20 deregulation law bars them from passing onto customers.=20 At the same time the state has faced a tight electricity supply due in pa= rt=20 to California power plant shutdowns for maintenance and to a tight=20 hydroelectric supply in the Pacific Northwest.=20 Managers of the state power grid imposed rolling blackouts across the state= =20 Monday and Tuesday as supply fell short of demand. Wednesday cooling=20 temperatures and the completion of repairs at several power plants allowed= =20 the state to avoid blackouts. State Controller Kathleen Connell said Wednesday that the energy crunch als= o=20 imperils California's financial health. Connell said the state's power-buying on behalf of Edison and PG&E is is=20 gutting its budget surplus. Since the state started making emergency power= =20 buys in January the surplus has fallen from $8.5 billion to about $3.2=20 billion she said.=20 Connell ordered an audit of the state's power-buying saying Davis is=20 withholding key financial information from her office and the Legislature.= =20 She is refusing a request by Davis and the Legislature to transfer $5.6=20 billion into a rainy day fund she said was set up to impress Wall Street = as=20 the state prepares to issue $10 billion in revenue bonds to cover its=20 power-buying.=20 Transferring the money would leave the state general fund $2.4 billion in= =20 debt Connell said.=20 Sandy Harrison spokesman for the state Department of Finance and Keely=20 Bosler of the Legislative Analyst's Office said such transfers are routine= =20 and required by law.=20 They put the state's budget surplus at $5.6 billion.=20 The law says she has to do it. The law does not give her the power to dema= nd=20 that kind of audit information Harrison said.=20 He said the state's budget isn't in danger because it will be repaid with t= he=20 $10 billion in long-term debt.=20 Wells Fargo & Co. chief economist Sung Won Sohn said he sees little progres= s=20 in efforts to fix the state's power problems and end state electricity=20 purchases.=20 If we're going to pour money into a bottomless pit I would worry about th= e=20 state's finances he said. At some point we're going to run out of money.= The controller's criticism of fellow Democrat Davis won support from Assemb= ly=20 Republicans and Secretary of State Bill Jones a Republican considering=20 challenging Davis next year.=20 Jones said he wants to announce his own plan to solve the state's energy=20 woes but can't unless Davis releases more financial details.=20 Davis spokesman Steve Maviglio dismissed the criticism. Political grandstanding doesn't generate one more kilowatt of energy for= =20 California in this time of emergency he said.=20 Maviglio said the administration has released the financial information it= =20 can without jeopardizing negotiations for long-term power contracts with=20 wholesalers.=20 Also Wednesday a report by Davis' chief power negotiator appears to show= =20 that as much as 75 percent of the state's power purchases will have to be o= n=20 the expensive short-term market this summer said Sen. Debra Bowen D-Marin= a=20 del Rey chairwoman of the Senate Energy Committee.=20 The prices may be phenomenol she said particularly given predicted=20 hydroelectric shortages due to drought in the Pacific Northwest.=20 The report by David Freeman who is negotiating the state's long-term power= =20 contracts shows California has finalized 19 contracts and has 25 agreement= s=20 in principle. Freeman said DWR is continuing to negotiate other contracts. Bowen said FERC should impose short-term price caps or let generators to=20 charge enough to make a reasonable profit or we could be subject to enormo= us=20 price-gouging this summer.=20 -- Associated Press --- State falling short on pacts that provide low-cost energy=20 Published Thursday March 22 2001 in the San Jose Mercury News=20 BY CHRIS O'BRIEN AND JOHN WOOLFOLK=20 Mercury News=20 The state has signed low-cost contracts for just a third of the energy it= =20 needs this year raising the prospect that California could be forced to bu= y=20 much of its electricity this summer on the expensive spot market.=20 A spokesman for Gov. Gray Davis conceded Wednesday that the state will be i= n=20 trouble without more contracts but insisted California will meet its needs= =20 through conservation and additional long-term deals for cheap electricity.= =20 The state according to a report released Wednesday has fallen far short o= f=20 the governor's goal of filling almost all its electricity needs through suc= h=20 deals. In fact the state has lined up contracts for about half the amount= =20 Davis had projected earlier this month.=20 If the state has to rely heavily on the volatile spot market where the pri= ce=20 of electricity this summer could reach five times the state's contract pric= e=20 pressure could mount to raise the cap on the electricity rates consumers pa= y.=20 But Steven Maviglio the governor's spokesman said ``The governor has sai= d=20 he's committed to work this in the existing rate structure so that's the= =20 plan.''=20 In the report sent to state lawmakers the state Department of Water=20 Resources indicated that it had secured just more than 20 million=20 megawatt-hours for this year leaving it far short of the 60 million=20 megawatt-hours needed.=20 ``This is just a progress report'' Maviglio said. ``They did all this in= =20 three weeks which is pretty amazing when you think about it and we have a= =20 lot more to do.''=20 The state got into the power buying business in January supplying it to th= e=20 state's nearly bankrupt utilities.=20 The state negotiated long-term contracts with generators to supply that pow= er=20 at a reduced rate. Based on the report the state will pay an average of $6= 8=20 per megawatt-hour over the next 10 years -- significantly less than in=20 December when prices spiked higher than $300 per megawatt-hour but not as l= ow=20 as the $55 Davis hoped to reach.=20 Most of this power however won't be delivered until 2004. From 2004 to=20 2006 the Department of Water Resources estimates it has enough power unde= r=20 contract. Until then the amount falls short.=20 In 2001 it appears the state has about one-third of the power it needs. Th= e=20 gap closes to about half in 2002 and two-thirds in 2003.=20 At a news conference in Los Angeles two weeks ago Davis said the state wou= ld=20 have to buy only 30 to 45 percent of the power it needs this summer on the= =20 open market.=20 At the time critics said with only two-thirds of the power under contract= a=20 rate increase was almost inevitable. Even Davis' chief negotiator S. David= =20 Freeman offered a bleak assessment for the summer saying that all availab= le=20 electricity has already been sold.=20 ``We'll be subject to extremely high prices'' said Frank Wolak a Stanford= =20 professor who sits on a market committee for the Independent System Operato= r=20 the agency that runs the state power grid.=20 Wolak said there are two main hopes for avoiding a price increase this=20 summer: Federal officials could cap the wholesale price a step they've=20 resisted or Californians can conserve an unprecedented amount of power. --- --- ----------------------- Crisis saps state surplus POWER CRISIS=20 Controller moves to block a transfer of funds saying the $8.5 billion=20 surplus has been cut more than half since January=20 By Mike Taugher TIMES STAFF WRITER=20 The energy crisis has bled California's once-touted budget surplus by more= =20 than half since taxpayers began buying electricity two months ago leading = a=20 top state finance official Wednesday to order an audit of the power purchas= es=20 and block Gov. Gray Davis' plan to transfer funds into a reserve account.= =20 A booming economy last year produced a budget surplus that totaled $8.5=20 billion in January. But that figure now stands at about $3.2 billion=20 according to Controller Kathleen Connell.=20 We started this year with a generous budget surplus Connell said in a=20 statement announcing her decision to block what Davis administration=20 officials described as a routine transfer of surplus money. The energy=20 crisis has taken much of that away and this transfer on top of the=20 electricity purchases would put the fund at risk.=20 Meanwhile the Davis administration released a report by David Freeman the= =20 governor's chief negotiator on power purchases on the progress of executin= g=20 long-term agreements meant to stabilize the power buys.=20 According to the report only about 40 percent of the electricity needed fr= om=20 the open market this year has been lined up. That means the state could be= =20 forced to continue buying a substantial amount of power on the highly=20 expensive spot market and further drain its coffers.=20 And a key regulatory panel is scheduled next week to issue a ruling that=20 would determine how quickly state funds will be replenished when it decides= =20 what portion of electric bill payments should be allocated to the state=20 treasury a decision that could include a rate increase to fully repay=20 taxpayers without further crippling the state's two largest electric=20 utilities.=20 The Public Utilities Commission also will consider whether it will force th= e=20 utilities to pay alternative energy producers whose shutdowns this week=20 contributed to blackouts.=20 Connell's action underscores a growing nervousness over the sheer volume of= =20 money that is being poured into energy buys despite the fact that state=20 officials plan to replenish the treasury with up to $10 billion in loans th= at=20 will be repaid by electricity consumers.=20 The state has committed to spending $4.2 billion to date to keep lights on= =20 since taxpayers were forced in mid-January to take over electricity buys fr= om=20 the financially crippled utilities Pacific Gas & Electric Co. and Southern= =20 California Edison. Tax money is going out at a clip of about $50 million a= =20 day.=20 High prices already have brought PG&E and Edison to the brink of bankruptcy= =20 and now the state's surplus is at risk according to Connell.=20 In addition to requesting an audit and announcing her intention to delay th= e=20 transfer to the reserve account Connell said she wanted the administration= =20 to send her office more information about the electricity purchases.=20 Davis' representatives questioned Connell's authority in trying to block th= e=20 funds transfer which they called a routine accounting procedure and accus= ed=20 her of making political hay.=20 It is not helpful to the taxpayers or ratepayers or the people who just wa= nt=20 to keep the lights on it isn't helpful to have the situation muddied like= =20 this said Sandy Harrison a Finance Department spokesperson. We're sorry= =20 it came up in this manner.=20 Connell and the administration have butted heads in recent weeks. The=20 controller wants to post details of the state's electricity purchases on he= r=20 Web site a plan that have been delayed under pressure from Davis because o= f=20 the governor's concerns that releasing those details will allow power=20 generators and traders to sell at higher prices.=20 Harrison said administration officials believe Connell lacks the authority= =20 either to block the funds transfer to a reserve account or to audit the sta= te=20 water resources department.=20 Two days of widespread blackouts this week show how vulnerable the power gr= id=20 is to financial glitches. Although several factors combined to produce the= =20 blackouts state power officials say the outages could have been avoided if= =20 the utilities were paying their bills to alternative energy producers.=20 Many of those producers including clean-burning natural gas power plants= =20 wind solar and geothermal energy developers shut down enough production t= o=20 spell the difference between grid reliability and blackouts Monday and=20 Tuesday.=20 Davis called the utilities' failure to pay bills to those producers known = as=20 qualifying facilities immoral. The QFs were either unable to buy gas fro= m=20 their suppliers or were frustrated with the utilities' failure to pay them.= =20 The utilities hoarded billions of dollars since November without paying an= y=20 money out said Davis spokesman Steve Maviglio. They've got the money --= =20 we're pulling the trigger to make them pay it.=20 The utilities however say they are doing all they can to conserve enough= =20 cash to continue operating. Together they owe the QFs about $1.5 billion.= =20 Next week the PUC is scheduled to consider whether to force the utilities = to=20 heed Davis' demand to pay the QFs and it might also decide how much of=20 ratepayers' bill payments will be used to refund taxpayers for power buys.= =20 PG&E says that under a formula proposed by the administration the water=20 resources department would receive about 40 percent of the money collected= =20 from ratepayers for power purchases.=20 The rest of that money about $240 million would have to be divided among= =20 QFs existing power contracts operating PG&E's nuclear and hydroelectric= =20 plants and what hour-by-hour purchases the utility still must make on the= =20 spot market according to PG&E spokesman John Nelson.=20 There isn't enough to do that he said.=20 That is making it increasingly likely that electric bills will be hiked=20 according to a growing chorus of officials and experts.=20 Unless rates are raised Nelson said the only entity that can absorb a lac= k=20 of payment or a partial payment is the state treasury. Cutting off any othe= rs=20 will lead to electricity becoming unavailable and more blackouts he said.= =20 If they do it under existing rates -- given that the existing pool of mone= y=20 is not enough -- who doesn't get paid or who gets a partial payment? Nelso= n=20 said. What's the only entity left with wiggle room? The state.=20 Rate hikes are also a sticking point in negotiations to bail out the=20 utilities through purchase of their transmission lines and other assets=20 Maviglio said.=20 They want rate increases of significant magnitude and we're not going=20 there he said.=20 WE CAN TRIM STORY HERE IF NECESSARY BUT KEEP TAGLINES AT BOTTOM=20 About one-third the electricity needed by the customers of California's thr= ee=20 major utility companies is produced by the companies themselves one-third= =20 comes from alternative producers who use environmentally friendly technique= s=20 and one-third is bought on the open market.=20 The state stepped in to buy the one-third needed from the open market after= =20 the utility companies ran out of cash and credit in January to make the=20 purchases themselves.=20 But that electricity has proven to be enormously expensive and Davis has= =20 planned to lower those prices by committing to long-term purchases.=20 Freeman's report on the progress of those long-term purchases dated March = 15=20 but released this week said the state has finalized 19 contracts with seve= n=20 suppliers and reached 25 additional agreements.=20 Mike Taugher covers the environment and energy. Reach him at 925-943-8324 o= r=20 mtaugher@cctimes.com.=20 Staff writer Andrew LaMar contributed to this story. --- --- ----------------------- Bill to pay small energy firms stalls By Kevin Yamamura Dale Kasler and Jim Sanders Bee Staff Writers (Published March 23 2001)=20 A quickly melded proposal that would assure payments for alternative energy= =20 suppliers whose money woes contributed to power blackouts this week stalled= =20 Thursday in a divided Legislature.=20 The state Senate passed the bill AB 8x but with Republicans balking it w= as=20 rejected in the Assembly along party lines. Assembly leaders said they may= =20 try again today.=20 For most of Thursday lawmakers scrutinized legislation they had overhauled= =20 the night before to include Gov. Gray Davis' plan to force utilities to pay= =20 solar wind and small gas-fired suppliers. Such providers called qualifie= d=20 facilities or QFs provide more than 20 percent of California's=20 electricity and their shutdowns were partly to blame for rolling blackouts= =20 Monday and Tuesday.=20 Under the Democratic governor's plan the state Public Utilities Commission= =20 would determine prices at which alternative generators may sell power but= =20 legislation is needed to authorize the PUC action.=20 Lawmakers faced time pressures Thursday. They wanted to pass the bill quick= ly=20 so the PUC could act next week and legislators could embark Monday on an=20 annual three-day lobbying trip in Washington D.C.=20 Assembly Speaker Robert Hertzberg D-Sherman Oaks said the Republicans'=20 rejection of AB 8x could jeopardize more than $4 billion the state has spen= t=20 or allocated for electricity during the energy crisis.=20 Hertzberg said producers of alternative energy which are owed more than $1= =20 billion have threatened to drag debt-ridden utilities into involuntary=20 bankruptcy if the Legislature failed to pass the measure.=20 They said it and I believe it Hertzberg said. If such bankruptcies occu= r=20 he added the state with its multibillion-dollar debt would become just=20 another creditor in a pile of creditors.=20 But Assembly Republican leader Bill Campbell of Villa Park said the=20 finger-pointing is unfair. Passage of AB 8x would not necessarily prevent= =20 bankruptcies he said.=20 One alternative energy provider won a crucial court ruling Thursday that=20 staved off at least for a while threats by some creditors to haul one or= =20 both big utilities into bankruptcy court for nonpayment of bills.=20 CalEnergy Co. Inc. won the right to sell its geothermal power which was=20 contracted to Southern California Edison on the open market. CalEnergy sai= d=20 it is owed $45 million by Edison.=20 If the Imperial County judge hadn't ruled in CalEnergy's favor the company= =20 and seven other QFs were fully prepared to file an involuntary bankruptcy= =20 petition against Edison this morning said David Sokol chief executive of= =20 CalEnergy's parent MidAmerican Energy Holdings Co. of Des Moines Iowa.=20 That is currently off the table.=20 An involuntary bankruptcy proceeding would take California's energy crisis= =20 into uncharted territory although a bankruptcy judge would have the leeway= =20 to reject the filing.=20 Freed from its contract with Edison CalEnergy will move to sell its=20 electricity to people who will pay for it Sokol said.=20 Besides calming the bankruptcy movement temporarily the ruling also could= =20 prompt other alternative energy providers -- hundreds of which have shut do= wn=20 because of nonpayment by Edison and Pacific Gas and Electric Co. -- to foll= ow=20 CalEnergy's example and find other buyers for their electricity said Gary= =20 Ackerman of the Western Power Trading Forum an association of generators.= =20 Assembly Republicans said they felt the Senate's decision to package three= =20 important energy issues into a single bill was an attempt to ramrod=20 legislation through both houses.=20 We have to stand and say no Campbell said during floor debate.=20 Besides determining alternative generator payments the bill would change a= n=20 earlier law by capping the value of bonds the state may sell for power=20 purchases at $10 billion. It also would extend to large businesses an=20 existing rate cap in the San Diego Gas and Electric Co. service area.=20 And it would earmark a portion of rates paid by utility customers to fund t= he=20 state's ongoing power purchases. Within a week the state will have spent= =20 $4.2 billion on power since January.=20 Without the bill some legislators fear Pacific Gas and Electric and=20 Southern California Edison would be reimbursed before the state.=20 They have got (some) gall to go to the PUC and say they're going to go to= =20 court to keep our money -- to keep our money to pay off their creditors= =20 said Senate President Pro Tem John Burton D-San Francisco.=20 Most of the bill's controversy however centered on how the PUC would trea= t=20 gas-fired alternative generators.=20 The commission issued a revised draft decision Wednesday that would impose= =20 prices for qualifying facilities at $79 a megawatt-hour for five-year=20 contracts or $69 a megawatt-hour for 10 years.=20 But those producers that use natural gas -- representing about two-thirds o= f=20 the alternative energy providers in California -- spent Thursday arguing th= at=20 Davis' plan to rescue them would all but guarantee that they would go out o= f=20 business instead.=20 The plan -- ordering Edison and PG&E to pay them a fixed price for their=20 power -- would set rates well below the cost of natural gas they said.=20 Democratic lawmakers tried to assure such producers that the PUC would set= =20 prices that make business sense even obtaining a letter to that effect fro= m=20 Loretta Lynch who heads the commission.=20 Davis has vowed to fine Edison and PG&E if they don't pay alternative=20 producers for future deliveries. But Sokol said his company isn't convinced= =20 that Edison will pay.=20 Calling Edison a confrontive in-your-face nasty organization Sokol sai= d=20 the utility was sitting on $2 billion and not paying its bills. Edison i= n=20 a Securities and Exchange Commission filing Thursday said its debts outwei= gh=20 its cash reserves by $722 million.=20 The Senate sent the Assembly two other bills that deal specifically with=20 supply and demand. The first SB 5x would spend about $1 billion on energy= =20 conservation and low-income assistance programs. The other SB 28x would= =20 streamline siting procedures for power plant construction.=20 In separate energy-related matters Thursday the Assembly approved:=20 AB 21x which would allow businesses industries or other electrical=20 customers to negotiate private contracts with energy providers.=20 Nine energy bills designed to generate or save 665 megawatts of electricity= =20 -- including 345 megawatts this summer. One megawatt is enough electricity = to=20 light about 1000 homes.=20 The state put power emergencies behind it after dropping out of a Stage 1= =20 alert late Wednesday. The California Independent System Operator which=20 manages the state's power transmission grid was predicting no further aler= ts=20 this week. It expected cooling temperatures and a regular dropoff in=20 electricity use on Fridays to lessen demand at the same time that more pow= er=20 plants were returning to service.=20 Bee staff writer Carrie Peyton contributed to this report.=20 --- House panel ends energy hearings -- will it step in? By David Whitney Bee Washington Bureau (Published March 23 2001)=20 WASHINGTON -- A key House panel wrapped up a series of hearings on the=20 California electricity crisis Thursday and now will decide whether to come = to=20 the state's aid with legislation.=20 But the panel's Texas chairman made clear that West Coast price controls=20 won't be on the table.=20 Caps will not be in anything I am submitting said Rep. Joe Barton=20 chairman of the House Energy and Commerce Committee's energy and air qualit= y=20 subcommittee.=20 Some form of federal controls to hold down escalating wholesale prices this= =20 summer because of power shortages has been the most frequent appeal of=20 witnesses who testified before the panel during roughly 30 hours of hearing= s=20 over five days.=20 Such controls have been sought by the governors of California Oregon and= =20 Washington. As power shortages are forecast for other regions states like= =20 New York also have appealed for temporary price controls to halt gouging.= =20 But the Federal Energy Regulatory Commission which is responsible for=20 enforcing reasonable wholesale rates under the Federal Power Act has refus= ed=20 to impose them and the Bush administration is bolstering that decision by= =20 opposing any legislation that would compel such action.=20 Barton in a brief hallway interview declined to say what other legislativ= e=20 remedies he might propose to address the worsening California situation.=20 He said he expects to submit a list of ideas to the White House today and= =20 after receiving comment on it sit down with other committee Republicans an= d=20 Democrats next week to see if any legislation is in order.=20 If we are going to do anything to help California or the West this summer= =20 we have to make it law within the next month or six weeks Barton said.=20 Even the panel's senior Democrat Virginia Rep. Rick Boucher was urging a= =20 careful and deliberate approach to the California crisis which he said w= as=20 largely of the state's own making.=20 There are steps Congress might take to provide some help to the West such = as=20 more money for conservation and relaxed federal regulation of air quality= =20 standards. That would permit older more polluting generators to operate=20 through a long hot summer when electricity demand could exceed supply by= =20 about 3000 megawatts roughly the amount needed to power 3 million homes.= =20 But Alan Lloyd chairman of the California Air Resources Board said power= =20 production already is being maximized without sacrificing air quality.=20 Simply put no essential electricity generation has been curtailed due to= =20 air emission limitations he said. California's programs to protect publi= c=20 health are not major factors in the electricity shortages experienced to=20 date.=20 The concern is that as shortages turn into more rolling blackouts wholesal= e=20 prices will jump even higher and steadily bleed the economies of California= =20 and the West Coast.=20 William L. Massey the lone member of the energy regulatory commission who= =20 supports price controls said at a Tuesday hearing that without them the We= st=20 Coast faces economic catastrophe this summer.=20 It was evident from the comments of some Republicans that they think their= =20 party could capitalize politically from a difficult summer.=20 If they had a bad summer it could show up in the polls said Rep. Charli= e=20 Norwood R-Ga. And sometimes that's not a bad idea.=20 One of the most dramatic exchanges during the weeklong hearings came Thursd= ay=20 with S. David Freeman the former general manager of the Sacramento Municip= al=20 Utility District who now heads the Los Angeles Department of Water and Powe= r.=20 He recently was named Gov. Gray Davis' chief negotiator with power generato= rs=20 for long-term contracts to stabilize future deliveries.=20 Don't feel sorry for California Freeman said. We're going to come out o= f=20 this stronger than ever.=20 But Freeman said it will be a year or two before all the fixes are in place= =20 and in the meantime the region desperately needs Congress' help to force th= e=20 FERC into controlling wholesale prices which witnesses said are likely to= =20 rise from $7 billion last year to as much as $70 billion or more this year.= =20 We recognize that the current administration and various legislators have= =20 their own opinion as to the California situation Freeman said. But my=20 personal plea is that if the federal government is not going to help us th= e=20 least it should do is refrain from legislation that attempts to tell us wha= t=20 to do.=20 Barton perked up at that idea.=20 Leave California alone huh? Barton said. That might be a good motto.= =20 --- --------------------- Dan Walters: Crisis deepens: politicos panic (Published March 23 2001)=20 That choking sound you hear is California's political class shifting into= =20 near-panic mode as it realizes that the energy crisis is on the verge of=20 becoming a full-scale meltdown with utilities forced into bankruptcy and= =20 consumers hammered by severe and prolonged power blackouts and soaring=20 electricity bills.=20 The Legislature which had been content to allow Gov. Gray Davis to handle= =20 the crisis on his own suddenly came to life Thursday jolted by this week'= s=20 unexpected rolling blackouts and threats by creditors to force the utilitie= s=20 into bankruptcy court. Lawmakers quickly fashioned a basketful of legislati= on=20 aimed -- or so they hope -- at increasing power supplies promoting=20 conservation and relieving the financial pressure on utilities and=20 electricity generators. But it may be too little too late -- and Davis and= =20 other politicians are already pointing fingers of blame aware that a=20 political price will be paid if the apocalypse strikes.=20 While Davis chants his mantra that he inherited a fatally flawed utility=20 deregulation scheme from predecessor Pete Wilson Republicans are blaming= =20 Davis for moving too slowly after the crisis first surfaced last summer an= d=20 even some of Davis' fellow Democrats are distancing themselves from the=20 governor.=20 Deregulation was a product of a Republican governor a Republican author a= nd=20 a Republican PUC (Public Utilities Commission) that was unduly impatient= =20 Davis said at one point this week as the Capitol buzzed with private=20 negotiations and public posturing.=20 A day later however state Controller Kathleen Connell a Democrat issued= a=20 warning that Davis' power purchases running at $50 million a day had=20 already drawn down state budget reserves by nearly two-thirds and she=20 refused to authorize additional transfers. It was a direct shot by Connell = at=20 Davis an old rival and came just a day after the governor had endorsed a= =20 Connell foe Antonio Villaraigosa in the duel for mayor of Los Angeles.=20 Other Democrats didn't join Connell's direct challenge to Davis but there= =20 is nevertheless a growing concern among Democratic legislators that the= =20 power purchases are costing many billions of dollars more than the governor= =20 had projected and could place the state budget in jeopardy. They're nervous= =20 because Davis has refused to reveal even to legislators exactly how much= =20 power the state is buying each day and how much it is paying.=20 From the few details that have been disclosed it's clear that the state is= =20 spending about $1.5 billion a month which would wipe out the state's=20 reserves by midsummer. It's also becoming increasingly clear that Davis=20 probably can't make good on his promise to avoid major consumer rate=20 increases unless the state is willing to plunge deeply and semi-permanentl= y=20 into debt to underwrite wholesale costs or unless federal authorities orde= r=20 huge refunds from power suppliers.=20 Rates in areas served by private utilities have risen only slightly while t= he=20 costs first to utilities and later to the state soared. Data from the=20 administration and utilities when collated indicate that the state is in= =20 line to collect just 20 cents for every dollar it's spending on power=20 purchases and the gap will increase as summer heat drives up demand.=20 Privately some economists say that private utility rates will have to rise= =20 33 percent to 50 percent to cover costs of current power supplies plus=20 utilities' past debts to generators and the state's purchase of the=20 utilities' transmission system if that deal is made final.=20 It's ultimately going to break down and the ratepayer is going to pay for= =20 it one way or the other Republican Sen. Jim Battin said during one of=20 Thursday's many committee hearings on utility legislation. No one disagreed= =20 with him.=20 DAN WALTERS' column appears daily except Saturday. Mail: P.O. Box 15779= =20 Sacramento CA 95852 phone (916) 321-1195 fax: (781) 846-8350 E-mail: dwalters@sacbee.com Recent columns: --- Report says power wholesalers overcharged state $6 billion=20 By Don Thompson ASSOCIATED PRESS=20 March 22 2001=20 SACRAMENTO =01) Electricity wholesalers have overcharged California more th= an=20 $6.2 billion by manipulating the energy market according to a report by an= =20 economist working for power grid managers.=20 The Independent System Operator planned to file the findings with federal= =20 regulators Thursday and ask for a refund said ISO spokesman Patrick=20 Dorinson.=20 In a related development the state auditor said Thursday that the state's= =20 1996 deregulation law encouraged both buyers and sellers of electricity to= =20 manipulate wholesale prices to their advantage by underestimating both=20 supply and demand.=20 Disappearing state surplus sparks alarm=20 Outages darken economic outlook in state some say=20 Out-of-state generators question power regulators' authority=20 Allegheny Energy makes big California connection=20 Enron stock slides despite earnings reassurance=20 California's electricity crisis at-a-glance=20 ?=20 The auditor's report lays out what it calls a complex combination of=20 deficiencies and misjudgments it says led to the state's power problems.=20 The ISO's filing came a day after the state controller complained that a=20 relentless energy crisis is jeopardizing California's financial future.=20 Since May the companies manipulated the market by bidding at excessive=20 prices effectively withholding supplies or by not bidding at all when they= =20 had generation capability available according to the ISO study.=20 ISO Director of Market Analysis Anjali Sheffrin presented the findings at a= n=20 energy conference at the University of California Berkeley last week.=20 The companies have denied overcharging California and have said they expect= =20 the Federal Energy Regulatory Commission will determine their prices were= =20 justified.=20 In a burst of activity after weeks of delay both houses of the Legislature= =20 approved bills Thursday designed to ease the energy crisis.=20 The state Senate approved measures to encourage energy conservation and spe= ed=20 up power plant construction.=20 Topping that the Assembly sent the Senate 14 energy-related bills includi= ng=20 $455 million in loans and grants to encourage energy efficiency and=20 conservation and alternative energy projects by this summer.=20 One of the Assembly bills would require new energy plants approved by the= =20 state to sell their power within California before they offer it to other= =20 states.=20 The (California) Energy Commission says for every day we delay this bill= =20 there are 20 megawatts that could be saved that we're not saving said sta= te=20 Sen. Byron Sher D-Stanford as senators voted 28-10 to send his conservati= on=20 measure to the Assembly.=20 Senators also approved another Sher bill speeding up the siting of power=20 plants. It went to the Assembly on a 37-1 vote.=20 Meanwhile a federal judge issued a preliminary injunction Wednesday orderi= ng=20 one of the companies named in the ISO filing Reliant Energy Services to= =20 continue selling to California despite its fear that it will not be paid.= =20 U.S. District Judge Frank C. Damrell Jr. said Californians were at risk of= =20 irreparable harm if Reliant stopped selling power to the ISO which buys at= =20 the last minute on behalf of utilities to bolster supplies and try to fend= =20 off blackouts.=20 Such blackouts struck the state twice this week shutting off power to=20 hundreds of thousands of people from San Diego to Oregon snarling traffic= =20 and shutting down businesses.=20 The state remained free of any power alerts Thursday morning as power=20 reserves stayed above 7 percent.=20 Damrell dismissed Reliant's attempt to force the state Department of Water= =20 Resources to back the ISO's purchases for the state's two biggest utilities= =20 Southern California Edison and Pacific Gas and Electric Co.=20 The judge said he had no authority to force the DWR to pay for that power.= =20 The utilities have been denied credit after amassing billions of dollars in= =20 debt paying high prices for power that the state's energy deregulation law= =20 prevents them from passing on to consumers.=20 Gov. Gray Davis has said the state isn't responsible for purchasing the=20 costly last-minute power the ISO buys for Edison and PG&E despite a law=20 authorizing state power purchases on the utilities' behalf.=20 ISO attorney Charles Robinson said the ruling gives ISO operators a tool t= o=20 assist them in keeping the lights on in California.=20 Had the decision gone the other way one could expect other generators to= =20 simply ignore emergency orders Robinson said.=20 Damrell's preliminary injunction will remain in effect until the Federal=20 Energy Regulatory Commission rules on the matter.=20 In another development Wednesday state Controller Kathleen Connell=20 complained that the energy crunch is imperiling California's financial=20 health.=20 Connell said the state's power buying on behalf of Edison and PG&E is gutti= ng=20 its budget surplus. Since the state started making emergency power buys in= =20 January the surplus has fallen from $8.5 billion to about $3.2 billion sh= e=20 said.=20 Connell ordered an audit of the state's power buying saying Davis is=20 withholding key financial information from her office and the Legislature.= =20 She is also refusing a request by Davis and the Legislature to transfer $5.= 6=20 billion into a rainy day fund she said was set up to impress Wall Street = as=20 the state prepares to issue $10 billion in revenue bonds to cover its power= =20 buying.=20 Transferring the money would leave the state general fund $2.4 billion in= =20 debt Connell said.=20 Sandy Harrison spokesman for the state Department of Finance and Keely=20 Bosler of the Legislative Analyst's Office said such transfers are routine= =20 and required by law.=20 They put the state's budget surplus at $5.6 billion.=20 Davis spokesman Steve Maviglio dismissed the criticism.=20 Political grandstanding doesn't generate one more kilowatt of energy for= =20 California in this time of emergency he said.=20 Connell is a candidate for mayor of Los Angeles in next month's election.= =20 The ISO study meanwhile covered five major in-state power suppliers =01)= =20 Reliant Dynegy Williams/AES Duke Energy and Mirant as well as 16 power= =20 importers. All deliver power to customers of Edison PG&E and San Diego Gas= &=20 Electric Co. the state's three largest investor-owned utilities.=20 All overcharged but some excessively and some by moderate amounts said= =20 ISO's Sheffrin.=20 According to the report the overcharging took place beginning last May wh= en=20 the energy crisis began and continued through last month.=20 During that time according to the report energy suppliers commonly offere= d=20 their electricity at twice the amount it cost them to produce.=20 FERC member William L. Massey said he wasn't shocked to hear the amount=20 overcharged added up to more than $5 billion.=20 Prices over the past 10 months in California have greatly exceeded the=20 federal standards of just and reasonable prices and I think they have=20 exceeded the standards by possibly billions of dollars he said.=20 Chuck Griffin spokesman for Atlanta-based Mirant said the company would=20 justify their charges to FERC officials.=20 I think we're missing sometimes just how basic the problem is in Californi= a.=20 Supply and demand are out of whack and some basic rules of economics kick i= n=20 when that happens he said.=20 --- ------------- Disappearing state surplus sparks alarm=20 Controller puts hold on transfer of $5.6 billion to reserve funds By Karen Kucher and Ed Mendel=20 UNION-TRIBUNE STAFF WRITERS=20 March 22 2001=20 The state's general fund surplus has dropped to $3.2 billion from $8.5=20 billion since January largely because California's power purchases are=20 devouring the money state controller Kathleen Connell said yesterday.=20 Connell said she wants to see more documentation about state power spending= =20 before approving the transfer of $5.6 billion from the general fund to a=20 special reserve fund requested by Gov. Gray Davis.=20 Connell said the state would have to borrow $2.4 billion to cover the=20 transfer.=20 Report says power wholesalers overcharged California $5.5 billion=20 Outages darken economic outlook in state some say=20 Out-of-state generators question power regulators' authority=20 Allegheny Energy makes big California connection=20 Enron stock slides despite earnings reassurance=20 California's electricity crisis at-a-glance=20 ?=20 We started this year with a generous budget surplus. The energy crisis has= =20 taken much of that away and this transfer on top of the electricity=20 purchases would put the (general) fund at risk Connell said in a statemen= t.=20 Her action came on a day when state power supplies improved. After two days= =20 of forced outages this week no rolling blackouts were ordered yesterday.= =20 Several power plants came back on line and imports from the Pacific Northwe= st=20 provided enough electricity to meet demand yesterday said Stephanie=20 McCorkle a spokeswoman with the California Independent System Operator=20 which manages most of the state's power grid.=20 Gradually more (electricity) generation comes on every day McCorkle said= .=20 By Monday we should see somewhere around 2200 megawatts back in service= =20 that was not on this Monday. That's if no other generation falls off.=20 Meanwhile Connell's move took some by surprise.=20 A spokesman for the state Department of Finance said Connell is denying a= =20 routine transfer that is required by law. It was just a routine accounting= =20 measure that we didn't anticipate becoming controversial Sandy Harrison= =20 said.=20 Connell announced the denial of the transfer a day after Davis endorsed one= =20 of her opponents former Assembly Speaker Antonio Villaraigosa in the race= =20 for Los Angeles mayor.=20 Connell who monitors California's cash flow said she was deeply concerne= d=20 about putting the state's general fund in a deficit situation in light of t= he=20 energy crisis.=20 About two months ago the state began spending about $50 million a day to b= uy=20 power after Pacific Gas and Electric and Southern California Edison nearly= =20 went bankrupt. It is also purchasing power for customers of San Diego Gas a= nd=20 Electric.=20 The Davis administration said earlier this week it soon will begin spending= =20 an additional $500 million on power purchases bringing the total to $4.2= =20 billion.=20 As that staggering sum continues to grow the state won a court battle with= =20 an electricity supplier yesterday. A federal judge in Sacramento sided with= =20 the state and ordered the wholesaler to continue selling to California=20 despite its fear that it will not get paid.=20 Judge Frank C. Damrell Jr. said Californians were at risk of irreparable ha= rm=20 if Reliant Energy Services stopped selling power to the Independent System= =20 Operator. The ISO acquires last-minute power on behalf of utilities to fill= =20 gaps in supply to try to fend off blackouts.=20 Damrell dismissed Reliant's attempt to force the state Department of Water= =20 Resources to back the ISO's purchases for the state's two biggest utilities= .=20 The judge said he had no authority to force the DWR to pay for the power.= =20 Davis has said the state isn't responsible for purchasing the costly=20 last-minute power the ISO buys for Edison and PG&E despite a law authorizi= ng=20 state power purchases on the utilities' behalf.=20 Meanwhile those who manage the power grid say the forecast for power=20 supplies this week looks good although conditions can change quickly.=20 ISO managers continue to stress the importance of conservation. Utility=20 customers across the state conserved about 900 megawatts of power Tuesday= =20 which kept blackouts from being ordered that night.=20 As the power crisis worsened this week ISO managers wished aloud that they= =20 still could rely on business customers to shut down in exchange for lower= =20 energy rates.=20 Such interruptible customers saved as much as 2100 megawatts last spring= =20 a figure that dropped to about 1700 last summer and 1400 at the end of th= e=20 year. But in January the state Public Utilities Commission told utilities= =20 they could no longer impose fines on business customers who refuse to shut= =20 down when asked.=20 ISO managers realize the program was harming businesses with frequent=20 interruptions of service -- but they still miss having that option McCorkl= e=20 said.=20 It would have made an enormous difference but at the same time we=20 understand the impact it was having on businesses McCorkle said. --- -------------- Outages darken economic outlook in state some say=20 By Dean Calbreath? UNION-TRIBUNE STAFF WRITER=20 March 22 2001=20 Until this week the San Diego Regional Chamber of Commerce was predicting= =20 that the county was well-insulated from the growing threat of economic=20 recession.=20 But that was before the lights went out in the chamber's downtown=20 headquarters Monday.=20 Working by window light in his darkened office chamber economist Kelly=20 Cunningham rapidly erased his previous projections for 3.5 percent growth f= or=20 San Diego County. Cunningham now feels the local economy could fall into a= =20 recession thanks to its shaky supply of energy.=20 Report says power wholesalers overcharged California $5.5 billion=20 Disappearing state surplus sparks alarm=20 Out-of-state generators question power regulators' authority=20 Allegheny Energy makes big California connection=20 Enron stock slides despite earnings reassurance=20 California's electricity crisis at-a-glance=20 ?=20 Blackouts are very disruptive to the economy Cunningham said. A busines= s=20 can absorb rising energy prices by cutting costs or raising its own prices.= =20 But an energy shutoff is much less predictable. It cuts into productivity.= =20 Those sentiments are being echoed throughout California as business leader= s=20 and economists worry that rolling blackouts will darken the state's=20 previously glowing economy.=20 At the University of California Los Angeles for instance leading financia= l=20 theorists will meet April 4 to discuss the question Can California grow in= =20 the dark? Although the topic was chosen before the recent string of power= =20 outages the blackouts have given the issue new urgency.=20 These blackouts are not just a single episode said UCLA economist Tom=20 Lieser. They are a bridge to what will happen this summer. If we don't fal= l=20 into a recession in the second half of the year we will fall pretty close.= =20 Tapan Munroe an economist formerly with Pacific Gas and Electric this wee= k=20 crossed out his projection for 2 percent statewide growth. After blackouts= =20 rolled toward his consulting offices in the Bay Area city of Moraga Munroe= =20 decided the state will be lucky if it manages zero growth.=20 I'm a pretty optimistic guy by nature but this has been sobering Munroe= =20 said. On Tuesday one restaurant alone in San Francisco lost $20000.=20 Multiply that by all of the businesses that lost power in the state and=20 you've got a serious problem.=20 Two days of blackouts in San Diego County have hurt businesses large and=20 small. Among the industries under threat is the local biotechnology sector= =20 which requires a steady supply of electricity to power areas of laboratorie= s=20 that must remain temperature-controlled and sterile.=20 Continued blackouts could have a huge impact not only in dollars but=20 multiple millions of dollars said Tom Oster vice president of operations= =20 for BioCom the leading trade organization for the more than 200 biotechs i= n=20 San Diego County.=20 Idun Pharmaceuticals a biotech near La Jolla Village Drive that has 67=20 employees had its power cut for about 40 minutes Tuesday. Though the compa= ny=20 has a back-up generator some segments of its laboratories and lab equipmen= t=20 were not supported by it. Chemists also had to turn off some sensitive lab= =20 equipment to avoid the possibility of a damaging power surge once the=20 blackout was over.=20 We're not in a position as a small company to back up the whole facility= =20 said Steven Mento Idun's chief executive. We haven't done a survey yet to= =20 determine whether we had losses either in experiments or equipment damaged= =20 -- but we're hoping because the blackout was so short that damage will be= =20 minimal.=20 Mento said rolling blackouts coupled with continuing high energy costs=20 could cripple many small biotechs -- and even take a bite out of bigger mo= re=20 established companies.=20 We generate new compounds in controlled environments on a daily basis and= =20 when power goes off you can lose samples because of contamination and other= =20 issues Mento said. We are fortunate that our losses would be in having t= o=20 repeat an experiment -- but this could be really critical for companies wit= h=20 drug manufacturing and issues of quality control.=20 The wireless firms along Sorrento Valley have not been immune from blackout= s.=20 The lights went out at Qualcomm early this week although executives declin= ed=20 to comment about the impact.=20 No blackouts hit the big shipbuilding operations on the waterfront this wee= k.=20 But the National Steel and Shipbuilding Co. -- one of San Diego's largest= =20 employers -- already experienced a voluntary loss of power this year its= =20 first since World War II. Since the shipyard does not have its own power=20 supply NASSCO executives fear the effect of unplanned outages.=20 Our average payroll totals half a million dollars a day said NASSCO=20 spokesman Jim Scott. When you have a day's work disrupted that can be=20 pretty serious. We're currently in discussions about the possibility of=20 buying from independent power suppliers or setting up a power plant of our= =20 own.=20 Small businesses which constitute the bulk of employment in San Diego=20 County were hurt by disruptions as well -- costing them vital revenue at a= =20 time when their power bills have skyrocketed.=20 At Fantastic Sam's a hair salon in Chula Vista Angelica Alcala estimated= =20 that business dropped 60 percent when the blackouts hit Tuesday. Among othe= r=20 things Alcala had to alter her planned haircuts because she was relying on= =20 scissors instead of electric clippers.=20 At the Family Fun Center in El Cajon the management gave vouchers or refun= ds=20 to the 15 or so video-game players who were in the midst of killing aliens = or=20 fighting ninja warriors as the power went down.=20 Papa John's Pizza estimates that it may have lost several thousand dollars = in=20 business after six stores were blacked out Monday and four others lost powe= r=20 Tuesday. Brian Mills who runs 23 Papa John's stores in the county said hi= s=20 main concern was shutting down the computers so they would not be damaged b= y=20 a power surge when the electricity was restored.=20 Paul Ecke III a member of the West Coast advisory panel for the Federal=20 Reserve said the potential impact of the energy crisis is worse than any= =20 downturn in the stock market.=20 Ecke who runs the Paul Ecke Ranch flower operation in Encinitas said the= =20 crisis could be particularly harmful for the state's agricultural sector= =20 since farmers need electricity to pump water and natural gas to heat=20 greenhouses.=20 What I'm really worried about is the energy thing is going to cast a shado= w=20 on California he said. If you're a business person thinking about moving= =20 to California right now you're probably not going to do it because you're= =20 not sure you're going to have your lights on this summer.=20 Besides the disruption to businesses the energy crisis is also hurting the= =20 pocketbooks of hourly workers who have been sent home during the crisis.=20 Under state law employers are free to send hourly workers home without pay= =20 during such emergencies although salaried workers must still be paid.=20 Susan Kemp an attorney with the California Chamber of Commerce said there= =20 are ways of minimizing the impact on hourly workers.=20 You have to look at what time it is when the blackout occurs and how long= =20 you think it's going to last Kemp said. If it's around a meal time you= =20 might send the workers out for a longer meal period if you think it's going= =20 to be an hour or hour and a half delay.=20 But the potential for losing wages doesn't sit well with the hourly workers= .=20 When you get sent home early and lose your wages you have even less money= =20 to pay your inflated energy bills said an hourly worker who was sent home= =20 during Monday's blackout.=20 --- ---------- Out-of-state generators question power regulators' authority=20 By Karen Gaudette ASSOCIATED PRESS=20 March 22 2001=20 SAN FRANCISCO =01) At least three major out-of-state electricity generators= are=20 challenging the authority of the California Public Utilities Commission to= =20 investigate whether they deliberately reduced power supplies to drive up=20 prices.=20 The PUC has asked for power plant maintenance records as it tries to=20 determine whether Duke Energy Dynegy Inc. Mirant Corp. and other=20 wholesalers have manipulated the energy market at California's expense.=20 At issue is who ultimately controls oversight of in-state plants that provi= de=20 most of California's electricity. The plants once owned by the state's=20 largest utilities were sold off as part of the state's 1996 attempt at=20 deregulation.=20 Report says power wholesalers overcharged California $5.5 billion=20 Disappearing state surplus sparks alarm=20 Outages darken economic outlook in state some say=20 Allegheny Energy makes big California connection=20 Enron stock slides despite earnings reassurance=20 California's electricity crisis at-a-glance=20 ?=20 PUC President Loretta Lynch said the public deserves to know whether=20 generators have unnecessarily taken plants off-line to create artificial=20 shortages forcing the utilities and now state bureaucrats to buy much high= er=20 priced power on the spot energy market.=20 What I do know is we have historically high levels of outages across the= =20 board Lynch told The Associated Press. Dynegy and Duke have been fightin= g=20 the PUC in the PUC's quest to obtain documents about these outages.=20 The PUC has the authority to regulate facilities within its borders she=20 added. It doesn't matter where the headquarters of the company is.=20 Duke based in North Carolina says it does matter =01) and that since it a= nd=20 other wholesalers aren't headquartered in California the PUC can't require= =20 it to turn over the maintenance records.=20 We have not given them proprietary information because they do not regulat= e=20 us said Duke's spokesman Tom Williams.=20 Dynegy did not return calls for comment Wednesday.=20 The PUC also faces a new challenge in the legislature. A bill sponsored by= =20 Assemblywoman Carole Migden D-San Francisco which would have granted the= =20 PUC greater inspection authority over out-of-state generators was amended= =20 this month to grant the authority to Independent System Operator instead.= =20 The ISO has managed the delivery of energy through most of the state's powe= r=20 grid but historically has done little regulating and has had no policing=20 authority.=20 This board created during the state's 1996 attempt at deregulation was=20 redesigned in January. Now it has a five-member board appointed by Davis= =20 replacing a 26-member ISO board composed of utility executives marketers= =20 power plant owners and others.=20 The latest version of Migden's bill requires wholesalers to report monthly = to=20 the ISO about any plants that are off-line or working at reduced capacity= =20 and gives the ISO power to audit these reports.=20 But because the ISO board historically has made key decisions behind closed= =20 doors and is exempt from certain open-government regulations government=20 watchdogs are outraged by the switch.=20 The PUC's been no friend of ratepayers but at least under the constitutio= n=20 and state law they're required to conduct their process in the open and the= =20 public can intervene said Harvey Rosenfield of the Foundation for Taxpaye= r=20 and Consumer Rights.=20 Davis ordered last month that the ISO take the lead among state agencies to= =20 ensure adequate energy supplies. Alan LoFaso an aide to Migden said the= =20 amendment follows Davis' lead.=20 Both LoFaso and the governor's spokesman Steve Maviglio downplayed the=20 change. I don't know if we have a preference as to which state agency get= s=20 the authority to continue the probe Maviglio said.=20 The challenge by Duke Energy Houston-based Dynegy Inc. and Mirant Corp. of= =20 Atlanta came in filings March 12 asking for a rehearing of the PUC's Februa= ry=20 resolution reasserting its legal authority to examine the books accounts= =20 memoranda contracts and records of generators selling energy to utilities= =20 already subject to PUC regulation.=20 Those utilities include Pacific Gas and Electric Co. and Southern Californi= a=20 Edison Co. which have been nearly bankrupted buying power from wholesalers= =20 as well as the financially troubled San Diego Gas and Electric -- Allegheny Energy makes big California connection=20 ASSOCIATED PRESS=20 March 22 2001=20 HAGERSTOWN Md. =01) Allegheny Energy Inc. said Thursday it has agreed to s= ell=20 $4.5 billion worth of power to California's electricity-purchasing agency= =20 over the next 10 years.=20 The company said the contract call for Allegheny to provide up to 1000=20 megawatts that the Hagerstown-based company has secured from western=20 generating plants through its new energy trading division Allegheny Energy= =20 Global Markets =01) formerly Merrill Lynch Global Energy Markets.=20 This is a win-win for both the state of California and Allegheny Energy. I= t=20 provides a long-term source of fixed-price energy and should help to=20 stabilize prices in California said Michael P. Morrell president of the= =20 Allegheny Energy Supply division.=20 --- ----------- Judge Frees Small Firm From Edison Contract=20 By KEN ELLINGWOOD and DAN MORAIN Times Staff Writers=20 ?????EL CENTRO--California's balance of electrical power shifted slightly= =20 Thursday when an Imperial County judge temporarily freed a small geothermal= =20 energy producer from its contract with Southern California Edison allowing= =20 it to sell power on the open market. ?????The ruling by Superior Court Judge Donal B. Donnelly could lead to a= =20 mass exodus by hundreds of small energy producers that have been selling=20 power to the state's financially troubled utilities for months without=20 getting paid. ?????At the same time it may have staved off plans by a group of the small= =20 generators to send Edison into involuntary bankruptcy as early as today. ?????In Sacramento energy legislation pushed by Gov. Gray Davis passed in= =20 the state Senate but foundered in the Assembly. The measure was intended to= =20 ensure that the state gets repaid for the electricity that it has been buyi= ng=20 on behalf of Edison and Pacific Gas & Electric which say they lack the cas= h=20 and credit to purchase power. The bill also was supposed to guarantee that= =20 the small alternative energy producers--which together provide nearly a=20 third of the state's power--get paid. But Assembly Republicans opposed it= =20 saying it hadn't been given sufficient scrutiny. ?????The impact of the small producers was made clear in Imperial County= =20 where Edison's failure to pay CalEnergy the county's biggest property=20 taxpayer had outsize implications. CalEnergy had put county officials on= =20 notice that it was about to miss a $3.8-million property tax payment. The= =20 uncertainty had prompted the tiny Calipatria Unified School District to=20 postpone a bond issue for badly needed school repairs. ?????Among CalEnergy Chairman David Sokol's first acts after the judge's=20 ruling Thursday was to promise Imperial County Supervisor Wally J. Leimgrub= er=20 that the company would pay its property taxes on time. ?????That is great news Leimgruber said. ?????Within hours of its court victory CalEnergy had stopped transmitting= =20 geothermal power to Edison and begun selling it to El Paso Energy a=20 marketing company that purchased the energy at prevailing rates and resold = it=20 on the spot market. ?????Some of the more than 700 other small energy producers in the state sa= id=20 they were considering similar action against Edison and Pacific Gas &=20 Electric. ?????We absolutely need the right to sell to third parties said Dean=20 Vanech president of Delta Power a New Jersey company that owns five small= =20 gas-fired plants in California and is owed tens of millions of dollars by= =20 Edison. ?????Sokol praised the Imperial County judge and said his company simply=20 wanted the authority to sell its power to a credit-worthy company that in= =20 fact pays for the power. ?????An Edison spokesman said the company was disappointed with the ruling= =20 but sympathized with CalEnergy and other small producers because=20 California's power crisis has placed [them] in financial distress just as= =20 it has placed utilities in financial distress. ?????Edison expressed concern that the ruling would prompt CalEnergy and=20 other small producers to sell their power out of state. Sokol said CalEnerg= y=20 had specifically told El Paso Energy that it hoped its power would remain i= n=20 California but if someone wants to pay a higher price out of state we=20 can't stop them. ?????Sokol said that Edison still owes CalEnergy $140 million and that the= =20 company--along with seven other small producers--had been prepared to file = a=20 petition in federal bankruptcy court in Los Angeles today forcing the utili= ty=20 into involuntary bankruptcy. He said his company no longer intends to do so= =20 and he believed--but wasn't certain--that the other companies would shelve= =20 their plans. ?????Edison filed papers Thursday with the federal Securities and Exchange= =20 Commission showing that it owed $840 million to various small electricity= =20 producers many of which rely on renewable energy sources such as geotherma= l=20 steam solar energy or wind. ?????The alternative energy producers--and utilities--strenuously objected = to=20 the legislation considered in Sacramento on Thursday. The bill spelling ou= t=20 how the utilities are to pay the state and the small producers passed the= =20 Senate on a 27-9 vote the exact two-thirds margin required. But it stalled= =20 in the Assembly on a 46-23 party-line vote well short of two-thirds. ?????When I was a citizen back in Lancaster I heard these stories about= =20 pieces of legislation that were cooked up late at night that . . . were cu= t=20 and pasted together and were rammed through by the Legislature Assemblyma= n=20 George Runner (R-Lancaster) said. That's exactly what we have before us. ?????The alternative electricity generators including oil companies warne= d=20 that they would lose money under the Davis proposal while representatives = of=20 Edison and PG&E which have amassed billions in debt in the worsening energ= y=20 crisis said the legislation would push them deeper into the hole. ?????There isn't enough money Edison attorney Ann Cohn testified at a=20 Senate hearing on the bill Thursday. It is a very simple question: Dollars= =20 going out cannot be greater than dollars coming in. ?????The bill AB 8X combined several proposals. First it sought to clari= fy=20 earlier legislation by spelling out that Edison and PG&E must pay the state= =20 all money collected from consumers for electricity that the state has been= =20 buying. ?????Additionally the bill would turn over to the California Public=20 Utilities Commission the thorny issue of how much to pay alternative energy= =20 producers for their electricity. ?????Wind solar and geothermal producers might agree to the prices offered= =20 by the administration. But most of the alternative energy producers=20 including Chevron and British Petroleum use natural gas to generate=20 electricity through cogeneration a process of creating steam for both=20 electric generation and heat. With natural gas prices high they contend= =20 they would lose money at the prices Davis is offering. ---=20 ?????Ellingwood reported from El Centro Morain from Sacramento. Times staf= f=20 writers Mitchell Landsberg in Los Angeles and Jenifer Warren Nancy Vogel a= nd=20 Carl Ingram in Sacramento contributed to this story. --- ------------------- Lodi Defies Order for Blackouts=20 Utility tells PG&E to 'pay the bills'=20 Alan Gathright Chronicle Staff Writer Friday March 23 2001=20 2001 San Francisco Chronicle=20 URL:=20 /23/M N171303.DTL=20 Let history show that the rebellion against rolling blackouts started when= =20 the Central Valley town of Lodi defied PG&E and refused to unplug its=20 customers this week.=20 Like several cities that own their own utilities Lodi saw the energy crunc= h=20 looming last fall and spent millions for long-term power contracts in an=20 attempt to avoid blackouts.=20 Now Lodi and a Northern California municipal utility cooperative that=20 includes Palo Alto Santa Clara and Alameda are telling Pacific Gas and=20 Electric Co. that it's unfair to force their customers to endure blackouts= =20 triggered by the near-bankrupt utility's failure to pay its debts.=20 The problem is not paying bills so pay the bills said Alan Vallow=20 director of the utility serving Lodi's 58000 residents. I won't arbitrari= ly=20 screw my customers . . . so 5000 PG&E customers can turn on their lights= =20 somewhere else.=20 When PG&E relayed an order from state power regulators Monday and Tuesday f= or=20 Lodi to black out some of its customers a strategy intended to keep the=20 West's power grid from collapsing Lodi said no.=20 So far other cities in the Northern California Power Agency say they will= =20 continue to participate in rotating outages.=20 But in a letter last Friday to PG&E members of the agency and four other= =20 utility districts including Sacramento's warned they didn't believe long-= =20 standing agreements that allow them to use PG&E transmission lines to conne= ct=20 to the grid obliged them to endure rolling blackouts because of PG&E's=20 failure to pay its power obligations.=20 They say the agreements require them to reduce power demand only in respons= e=20 to natural disasters or malfunctions damaging power lines or plants.=20 The agencies asked for a meeting with PG&E President Gordon Smith before=20 anticipated summer blackouts hit to develop a more rational program for= =20 allocation of risks associated with (power demand) load shedding before you= =20 call on us to participate in load shedding again.=20 REFUSING TO SHARE BURDEN PG&E officials accused Lodi of selfishly refusing to share the burden of th= e=20 statewide energy crisis.=20 It is regrettable that after reaping the benefits of the (power grid)=20 interconnection contract for many years Lodi is suddenly unwilling to bear= =20 their share of the burden of the statewide energy crisis said PG&E=20 spokesman Ron Low. When cities like Lodi do not follow the (state=20 Independent System Operator's) order to curtail power it hurts all of=20 California and jeopardizes the entire power grid.=20 Low also disagreed with accusations that this week's blackouts were trigger= ed=20 by PG&E's failure to pay its bills noting that the ISO stated that 12000= =20 megawatts of power were offline because of plant maintenance.=20 But ISO spokeswoman Lisa Szot confirmed assertions by the municipal utiliti= es=20 that power generators had kept an additional 3000 megawatts offline becaus= e=20 they feared PG&E couldn't pay.=20 Lodi's Vallow said he was legally obliged to serve city customers. Lodi=20 residents are facing rate increases of as much as 15 percent under a power= =20 contract that the city secured in hopes of avoiding blackouts. The contract= =20 required Lodi to pay a $10 million premium above its typical $23 million=20 annual energy bill.=20 'THAT'S NOT FAIR'=20 I've been hearing (PG&E say) 'Gee that's not fair. Where's the equity if= =20 everybody is doing rolling blackouts and you're not?' Vallow said. Well= I=20 put my customers at financial risk to the tune of $10 million. And if they'= re=20 not going to get to use that power they paid for then by God give us that= =20 money back.=20 Vallow said he was willing to sell PG&E some of Lodi's power surplus knowi= ng=20 Lodi might not be paid.=20 But I'm not willing to turn off 5000 customers so 5000 customers=20 somewhere else can turn their lights on Vallow said. The objective here= =20 people is to keep as many lights on as possible.=20 Other city-owned utilities while annoyed with the rolling blackouts aren'= t=20 going as far as Lodi.=20 WEATHERING BLACKOUTS I certainly understand the frustrations of utilities like Lodi and actuall= y=20 share those frustrations in many cases said John Roukema assistant=20 director of Santa Clara's utility.=20 But he stressed that his agency had been able to weather blackouts without= =20 hurting residents or small business because 17 major industrial power user= s=20 had agreed to curtail demand during energy alerts.=20 The prudent thing to do at this time is to continue to do our share and=20 participate in rolling blackouts because a single problem could cause a=20 catastrophic failure in the statewide system Roukema said.=20 In Alameda residents endured blackouts this week despite the fact that cit= y=20 has secured reliable power supplies said Matt McCabe spokesman for Alamed= a=20 Power & Telecom.=20 It was in the best of interests of Alamedans to maintain the stability and= =20 integrity of the grid he said. Now if it becomes evident that the syste= m=20 is being jeopardized for financial reasons then we should not have to=20 subject Alamedans to rolling blackouts.=20 In Palo Alto which also had blackouts this week utility officials told th= e=20 City Council they were expecting a 30 to 40 percent rate hike this spring t= o=20 pay new contracts guaranteeing a stable power supply said Councilman Bern= =20 Beecham. The city hopes to avoid giving customers the double whammy of rate= =20 boosts and more blackouts with a program that gets industrial users to cut= =20 demand voluntarily during alerts.=20 When there's not enough generating capacity in the state to protect the=20 integrity of the grid that is in fact everybody's problem Beecham said= =20 but that doesn't mean Palo Alto is willing to endure blackouts to prop up= =20 PG&E's ailing finances.=20 We need to have some very frank discussions with PG&E about mutual=20 obligations Beecham said.=20 Energy Tips=20 With Californians facing electricity and natural gas shortages PG&E has=20 several tips to help conserve both:=20 -- Set the furnace thermostat at 68 degrees or lower health permitting.=20 -- Wash only full loads in a dishwasher. If operating instructions allow= =20 turn dishwasher off before the drying cycle and let dishes dry naturally.= =20 -- Use low-wattage or fluorescent lights.=20 -- Fix defective plumbing and dripping faucets which waste water and=20 increase the gas or electric bill for heating the water.=20 -- Plug gaps around pipes ducts fans and vents that go through walls=20 ceilings and floors.=20 -- Keep furnaces clean and clean or replace the filter regularly.=20 -- Turn heaters down when using a fireplace and close the damper when not= =20 using the fireplace.=20 -- On sunny days open drapes on windows facing south and let the sun shine= =20 in. At night close the drapes to retain indoor heat.=20 Source: www.pge.com=20 E-mail Alan Gathright at 2001 San Francisco Chronicle ? Page?A - 1=20 --- Coming Down to the Wire=20 State legislators battle over alternative energy bills=20 Greg Lucas Robert Salladay Chronicle Sacramento Bureau Friday March 23 2001=20 2001 San Francisco Chronicle=20 URL:=20 /23/M N113351.DTL=20 Sacramento -- After several weeks of slow to no progress in attacking the= =20 state's energy mess the Legislature erupted yesterday into a frenzy of=20 energy activity.=20 The sudden action on a series of energy bills -- including one to let=20 businesses buy power directly from generators -- stemmed initially from the= =20 fear of bad publicity lawmakers might receive for a planned three-day junke= t=20 next week to Washington D.C.=20 When a key bill bogged down in the Assembly late yesterday Speaker Bob=20 Hertzberg D-Sherman Oaks announced the trip was canceled.=20 Another reason for the flurry of action was recognition that time is runnin= g=20 out.=20 Several alternative energy producers -- like wind farms and biomass plants = -=20 - said they were one day away from forcing the state's two biggest utilitie= s=20 into bankruptcy because they were owed more than $1 billion.=20 The Legislature's action and a court ruling that could free alternative=20 producers from unpaid contracts.=20 This is triage members of the Senate said Sen. Jim Costa D-Fresno. Th= is=20 is crisis activity we're engaged in.=20 The Senate approved a bill aimed at helping state regulators get cash to so= me=20 alternative energy producers. Most of them have been paid little or nothing= =20 since November by the utilities they sell electricity to.=20 Senators passed a bill to help the Public Utilities Commission order=20 utilities to pay solar wind and other alternative energy producers who sig= n=20 lower-priced contracts with the utilities.=20 The bill failed in the Assembly because of GOP opposition fanned in part b= y=20 price concerns by the oil industry a major co-generation producer. The=20 Assembly is set to meet again today to try again pass the bill which the P= UC=20 needs to issue its final order.=20 The PUC's proposed order offers the first hint of financial relief for=20 hundreds of alternative energy producers known as ''qualified facilities = in=20 the energy industry who have been paid just pennies on the dollar by cash-= =20 strapped Pacific Gas & Electric and Southern California Edison.=20 Lack of payments has caused many alternative generators to shutter their=20 operations.=20 The PUC's proposal which will be considered at the commission's meeting=20 Tuesday offers generators a choice of agreeing to a five-year contract at= =20 $79 per megawatt or a 10-year deal at $69 per megawatt Davis said. The goi= ng=20 rate now is about $150 a megawatt hour.=20 The order does not address money already owed to the more than 600=20 alternative energy producers.=20 Under the order utilities would have to pay any generator who signed the n= ew=20 contracts within two weeks.=20 But PG&E said it might not be able to afford do that.=20 Operators of co-generation facilities say the contracts contemplated by the= =20 PUC don't cover their cost of producing energy because the sale price no=20 longer would be pegged to the the price of natural gas.=20 In a significant court decision affecting generators one geothermal energy= =20 supplier in Imperial County won a lawsuit yesterday against Edison allowing= =20 the company to escape a contract requiring it to sell electricity to the=20 utility.=20 A superior court judge said CalEnergy operator of the geothermal plant=20 could suspend deliveries to Edison and sell the 268 megawatt hours it=20 generated on the open market.=20 CalEnergy is owed $75 million by the utility.=20 The court victory may ease mounting pressure from some qualified facilities= =20 including CalEnergy to drive one or both of the utilities into involuntary= =20 bankruptcy.=20 The Assembly and Senate meanwhile rushed through a series of bills aimed = at=20 increasing energy conservation and rushing the building of new power plant= s.=20 Most significant for bigger residential and commercial utility customers is= a=20 measure passed by the Assembly to allow energy customers to buy power=20 directly from generators.=20 That right was eliminated in January when the state began buying power for= =20 the cash-strapped utilities.=20 The bill approved unanimously yesterday would impose a yet to be determined= =20 exit fee on customers who leave the power grid to help cover the state's=20 financial exposure.=20 Tell Us What You Think=20 Can you save 20 percent on your energy use? Gov. Gray Davis' administration= =20 is offering rebates for Californians who save on power starting in June an= d=20 if you've got a strategy for conserving The Chronicle wants to hear it.=20 We'll be writing about the hardest-working energy savers in a future story.= =20 To get involved write to the Energy Desk San Francisco Chronicle 901=20 Mission St. San Francisco CA 94103 or e-mail energysaver@sfchronicle.com= .=20 E-mail the reporters at glucas@sfchronicle.com and bsalladay@sfchronicle.co= m.=20 2001 San Francisco Chronicle ? Page?A - 14=20 --- State's bill for energy could double this year=20 Posted at 9:34 p.m. PST Thursday March 22 2001=20 BY=20 STEVE=20 JOHNSON=20 AND=20 JOHN=20 Warning that California is imperiled by the prices it is paying for=20 electricity a report Thursday said the state's annual power tab could wind= =20 up being 10 times what it was two years ago.=20 At the current rate of spending the report estimated that the total=20 electricity bill in California this year could hit $70 billion which is mo= re=20 than twice what it was last year and about 10 times what was paid in 1999 a= nd=20 1998.=20 ``The California electricity market has gone from being `dysfunctional' to= =20 precipitating a crisis'' according to the report from the Independent Syst= em=20 Operator.=20 It added that the price being charged ``threatens any semblance of just and= =20 reasonable consumer rates the financial viability of California's=20 investor-owned utilities the financial stability of California of its=20 neighboring states and of the nation.''=20 While power suppliers denied any wrongdoing the report said the state=20 appears to have been hit with ``excess'' charges totaling $6.87 billion sin= ce=20 May based on an assessment of the typical operating costs of power plant= =20 owners. Out of that total $6.2 billion appeared to be excessive charges=20 during times when power was not in particularly short supply the agency=20 said.=20 The cost of power has become a growing concern now that the state has stepp= ed=20 in to buy it on behalf of Pacific Gas & Electric Co. and Southern Californi= a=20 Edison which claim to be so strapped for cash that they are on the verge o= f=20 bankruptcy.=20 In making public the report which was sent to the Federal Energy Regulator= y=20 Commission officials at the Independent System Operator were careful not t= o=20 accuse any power companies of price gouging. While the prices appeared to b= e=20 unreasonable they said the state needs to learn more about the specific= =20 operating costs of power plant operators before they could determine whethe= r=20 California was cheated.=20 The officials said they were considering asking the federal agency which= =20 oversees power wholesalers to order the suppliers to make refunds. In the= =20 past two weeks the federal agency has warned a number of suppliers that th= ey=20 may have to refund $135 million in apparent overcharges during January and= =20 February.=20 But many experts question whether the federal agency is serious about=20 demanding such refunds so California officials also are reviewing the=20 possibility of suing the suppliers or seeking criminal charges against some= =20 of them. ``We're working very closely with a number of agencies to review t= he=20 information we currently have to determine what remedies may be available'= '=20 said Charles Robinson the Independent System Operator's general counsel.= =20 The report's suspicions were partly bolstered by another study made public= =20 Thursday by the state auditor. It said California's market structure=20 encouraged bidding gamesmanship by both utilities and power sellers ``in an= =20 effort to manipulate wholesale prices to their advantage.'' But it stopped= =20 short of accusing power generators of profiting illegally.=20 ``There's clearly some evidence of market abuse'' said state Auditor Elain= e=20 Howle. Even so she added ``that's not to say it's anything illegal. We=20 hired consultants they looked at some of the bidding and they weren't=20 comfortable going that far.''=20 Although no power companies were named in either report officials with=20 several suppliers insisted they have done nothing wrong.=20 ``We've conducted our business legally and ethically'' said Richard=20 Wheatley spokesman for Reliant Energy which runs five major California=20 power plants. ``The ISO report appears to be nothing more than just another= =20 attempt to put blame at someone else's doorstep when there's been very=20 little action out of Sacramento to resolve the problems in the California= =20 marketplace.''=20 Duke Energy spokesman Jeremy Dreier said the company which runs plants in= =20 Moss Landing and Morro Bay sold most of its power last year and this year = in=20 relatively low-cost long-term contracts and was among the first to offer= =20 such deals to the state. He added that Duke increased production from its= =20 aging plants to meet surging demand.=20 ``The fact that we were among the first to bring long-term contracts to the= =20 table speaks volumes about how we're trying to serve this market'' Dreier= =20 said.=20 John Sousa of Dynegy Inc. which co-owns three major California plants add= ed=20 that ``given the market conditions the rates we charged were just and=20 reasonable.''=20 --- Plan for alternate power plants stalls=20 Posted at 10:03 p.m. PST Thursday March 22 2001=20 BY DION NISSENBAUM AND JENNIFER BJORHUS=20 Mercury News=20 SACRAMENTO -- The state's prospects for plugging a critical electricity gap= =20 dimmed Thursday when the state Assembly rejected a rescue plan for=20 alternative power companies and a state judge ruled that one such firm coul= d=20 stop selling energy in California.=20 Both actions threaten the plan Gov. Gray Davis announced just Tuesday to ke= ep=20 these companies running and stave off more blackouts. With the state's=20 troubled utilities failing to pay for their electricity many alternative= =20 energy plants have been shutting down.=20 The dual blows came on a day when tempers flared in the Capitol as lawmaker= s=20 jarred by back-to-back blackouts launched bipartisan attacks on Pacific Gas= &=20 Electric Co. and Southern California Edison which aren't paying wind sola= r=20 biomass geothermal and small gas-fired plants for their electricity.=20 After Republicans shot down the measure meant to keep alternative energy=20 companies in business Assembly Speaker Robert Hertzberg D-Van Nuys warne= d=20 that the restless companies might act on their threat to force the utilitie= s=20 into bankruptcy.=20 ``They said it and I understood them to mean it'' he said.=20 The failure overshadowed a burst of action in Sacramento where lawmakers=20 approved a host of other measures. The Senate approved two key bills: one= =20 that would spend more than $1 billion to encourage Californians to conserve= =20 energy and one that would make it easier to build power plants. The Assembl= y=20 approved 14 incremental bills.=20 Six votes short=20 But the Assembly fell six votes short of passing a hastily prepared bill=20 meant to help prop up the nearly 700 alternative energy companies many of= =20 which are now idle.=20 Those closings sapped California of energy this week and helped cause two= =20 days of rolling blackouts -- the first since January.=20 In response Davis and lawmakers cobbled together a plan to set new lower= =20 rates for alternative power and to fine the utilities if they refuse to pay= =20 these companies which supply up to a third of the state's power.=20 But Republicans refused to back the measure and said it contained too many= =20 complex parts that needed more time to analyze.=20 ``Everyone in this room knows that this piece of legislation has not had a= =20 good look'' said Assemblyman George Runner R-Lancaster.=20 Assemblyman Fred Keeley D-Santa Cruz castigated the Republicans and=20 implored them to accept an imperfect solution.=20 ``Ladies and gentlemen: Welcome to the NFL'' he said. ``Welcome to the wor= ld=20 where large complex issues don't have a simple solution.''=20 Approval is needed before state regulators at the Public Utilities Commissi= on=20 can vote on the fine points of the plan. That was supposed to happen Tuesda= y.=20 Much of the criticism focused on concerns raised by power plants that use= =20 natural gas to produce energy. Administrators from those plants said the=20 Davis price caps would make it impossible for them to break even.=20 The derailment came hours after the measure narrowly won approval in the=20 state Senate.=20 Hertzberg plans to search for a compromise today and canceled plans for the= =20 Assembly's annual trip to Washington.=20 Thursday's actions were highlighted by angry attacks on the utilities by=20 frustrated lawmakers.=20 ``I hope they do go bankrupt'' shouted Senate President pro tem John Burto= n=20 D-San Francisco during a debate on the energy crisis. ``Let them go belly= =20 up. I don't care any more.''=20 Legal decision adds twist=20 The legislative failure was compounded by a legal decision in Southern=20 California that further complicated the picture.=20 A Superior Court judge in Imperial County cleared the way for CalEnergy=20 Operating Corp. to break its contract with Edison and sell its 268 megawatt= s=20 of power on the open market. The judge concluded that Edison had breached i= ts=20 contract by failing to pay CalEnergy since November.=20 That ruling could pave the way for hundreds of others to follow suit and=20 drain off power California needs to prevent blackouts.=20 ``It's not good'' said V. John White director of the Center for Energy=20 Efficiency and Renewable Technologies. ``This is potentially going to chang= e=20 the dynamics of the situation and probably not for the better.''=20 Jan Smutny-Jones executive director of the Independent Energy Producers=20 Association said it was unclear whether other companies would sue.=20 ``I think this is a very significant development'' he said. ``We're sort o= f=20 at a period where the industry's reaching the end of the rope.''=20 The ruling did have one silver lining: CalEnergy Chairman David Sokol said= =20 his company and seven others had planned to force Edison into bankruptcy if= =20 they lost in court.=20 But he also warned ``You stick a sharp stick in enough people's eyes and= =20 they get pretty tired of it.''=20 The situation with generators supplying PG&E isn't as dire since the compan= y=20 has been making partial payments.=20 Kent Burton senior vice president for Covanta Energy Corp. in New Jersey= =20 said ``They've tried to be responsive.''=20 Mercury News Staff Writer Mark Gladstone contributed to this report. Contac= t=20 Dion Nissenbaum at dnissenbaum@sjmercury.com or (916) 441-4603 or Jennifer= =20 Bjorhus at jbjorhus@sjmercury.com or (408) 920-5660.

other

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Re: Confidential - Notes from Portland Visit

David I will have this re-reviewed by Oregon counsel but it was scrubbed about 18-24 months ago as being enforceable. Thanks. Michelle

legal affairs

formal

RE: EPSA/EEI on Reliability

Charles -- Thanks for the reply. Your thoughts on the EEI draft in terms of details would be helpful. As I read it we still have the problems with the EEI draft that we had with the NERC draft on which it is based -- deference regional rules variances regional reliability entities regional advisory boards limits on FERC authority etc. etc. It would also be helpful to have input on whether the plans for EISB could go forward if legislation like the EEI bill were enacted into law. It would seem not since the SRO would focus only on reliability as defined by how the bill defines what matters are subjects for an organization standard.

other

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Re: All-Employee Meeting Report

We have got to do better at this. IR did a webcast of the annual meeting that from all reports had a minimum of glitches. Can we use the same technology? Courtney Votaw 03/13/2001 09:10 AM To: Steven J Kean/NA/Enron@Enron Mark Palmer/Corp/Enron@ENRON Karen Denne/Corp/Enron@ENRON cc: Mary Clark/Corp/Enron@ENRON Erin Rice/Corp/Enron@Enron Subject: All-Employee Meeting Report I have attached a success report of the streaming communications vehicles we used for the All Employee meeting on Feb. 21 2001. The report includes information about the following: Video Teleconference Audio and Video quality Viewing employees IP-TV Statistics Successes of the locations streamed Video Requests Quantity by location and group To improve access and increase the employee's viewing experience at future meetings we are working with the IP-TV technical team to find solutions to the problems that occurred in February. From the employee feedback we received we will plan to send slides in advance to the video teleconference locations. Please let me know if you have any questions regarding this report. Thanks Courtney

information technology

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Government Affairs off-site presentations June 2000

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other

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Governor Ridge might call Ken Lay today

FYI. These are the items I left Ken a voicemail about. -----------------

government & politics

casual

Re: ken lay tour

I have advised against Ken or Jeff attending the generators meeting: Ken is still willing to make time avail on the 3d to meet with the gov. From: Susan M Landwehr on 04/29/2001 05:04 PM To: Richard Shapiro/NA/Enron@Enron Janel Guerrero/Corp/Enron@Enron Jeff Dasovich/NA/Enron@Enron Maureen McVicker/NA/Enron@Enron Steven J Kean/NA/Enron@Enron Paul Kaufman/PDX/ECT@ECT cc: Subject: Re: ken lay tour All--here's some thoughts on the RGA related events. We currently have Ken scheduled to participate in an energy roundtable discussion on the afternoon of the 2nd with at least four governors attending that session--Kempthorne Hull Geringer and Ridge. (Engler and Rowland are also attending the overall event but they will be in a healthcare breakout session). Kaufman and I thought that it would be particularly helpful for Arizona Gov Hull and Idaho Gov Kempthorne to hear Ken's remarks and have a chance to talk with him. I have also been working with Rosalee to schedule an early evening (6:00-7:00pm) meeting that night with Exelon co CEO John Rowe. John Rowe will be in California for some investor meetings and well as attending some sections of the RGA events. I have told my counterpart at Rowe's office that we would confirm Ken's availability on Monday morning. If you do decide that Ken should attend the Davis meeting in Sacremento that day instead we will just reconfigure a bit. Paul and I will cover the RGA events and I will cancel the John Rowe get together. I would also want to talk about having Mr. Lay reach out to Hull and Kempthorne via phone sometime in the near future. Same with Rowe. Rosalee Fleming 04/27/2001 07:12 PM To: Janel Guerrero/Corp/Enron@Enron cc: Maureen McVicker/NA/Enron@Enron Jeff Dasovich/NA/Enron@Enron Richard Shapiro/NA/Enron@Enron Paul Kaufman/PDX/ECT@ECT Steven J Kean/NA/Enron@Enron Sherri Sera/Corp/Enron@ENRON Susan M Landwehr/NA/Enron@Enron Subject: Re: ken lay tour I received a return call from Lelanie in Governor Davis' office this evening. She said the Governor wanted to invite Ken Lay and Jeff Skilling to a meeting the Governor is having at 2:00 p.m. in Sacramento on May 2 with a lot of CEOs. I still pressed for a one on one meeting on May 3 in Sacramento but she told me the Governor wanted to have the one meeting all at once and his schedule was very tight on Thursday May 3. I transferred her to Sherri and called Ken. Ken wanted me to try to get more specific information which she shared that it is with generators - Sempra Williams CalPine Duke Dynegy and Reliant. She also said since the Governor has worked with Ken she thought he might prefer that he attend. Ken said to let you all know and be thinking whether we even want to do it. He said one thought might be that he'd do that meeting and maybe Jeff could do the one in L.A. on May 2. Talk to you Monday. Rosie Janel Guerrero 04/27/2001 02:39 PM To: Rosalee Fleming/Corp/Enron@ENRON Maureen McVicker/NA/Enron@Enron Jeff Dasovich/NA/Enron@Enron cc: Richard Shapiro/NA/Enron@Enron Paul Kaufman/PDX/ECT@ECT Subject: ken lay tour Just so we're all on the same page......Dasovich will arrive in Houston on Monday (mid-day) and will travel with Dr. Lay beginning on Wednesday (to Austin) and then on to LAX Sacramento etc. Steve said there really isn't time to have a pre-briefing so any questions that Ken has will have to be addressed enroute to CA. Rosalee....we're giving Steve the briefing book today so he can review over the weekend and we'll have a final copy to Ken before he departs next week.

project management

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<<Concur Expense Document>> - May - Env Strat

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finance

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Calif briefing

other

casual

Thank you

thanks for your help in preparing for the Texas hearing. I think Texas legislators are viewing the California experience in the proper context and I think I was at least marginally articulate on the emissions issues as well. thanks again.

other

celebratory

Re: Press Clipping - Germany (Enron Mention)

The quotes are accurate but I did not say California does not have a supply problem. Mark Schroeder@ECT 03/19/2001 06:04 AM To: Steven J Kean/NA/Enron@Enron cc: Jackie Gentle/LON/ECT@ECT Alex Parsons/EU/Enron@Enron Subject: Press Clipping - Germany (Enron Mention) Steve - FYI and presumably they misquoted you on the problem (at least in California) not being a function of indaequate capacity (it is one of the root causes we have been pointing to over here among others). mcs -----------------

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formal

Fwd: FW:

Return-path: <VKaminski@aol.com> From: VKaminski@aol.com Full-name: VKaminski Message-ID: Date: Tue 13 Nov 2001 21:03:34 EST Subject: Fwd: FW: To: VKaminski@aol.com MIME-Version: 1.0 Content-Type: multipart/mixed X-Mailer: AOL 6.0 for Windows US sub 10539 Return-path: <VKaminski@aol.com> From: VKaminski@aol.com Full-name: VKaminski Message-ID: Date: Sun 11 Nov 2001 02:56:49 EST Subject: Fwd: FW: To: VKaminski@aol.com MIME-Version: 1.0 Content-Type: multipart/mixed X-Mailer: AOL 6.0 for Windows US sub 10539 Content-Transfer-Encoding: quoted-printable Return-Path: <Vince.J.Kaminski@enron.com> Received: from rly-xf05.mx.aol.com (rly-xf05.mail.aol.com [172.20.105.229]) by air-xf01.mail.aol.com (v81.9) with ESMTP id MAILINXF110-1019180521 Fri 19 Oct 2001 18:05:21 -0400 Received: from postmaster.enron.com (outbound5.enron.com [192.152.140.9]) by rly-xf05.mx.aol.com (v80.21) with ESMTP id MAILRELAYINXF57-1019180459 Fri 19 Oct 2001 18:04:59 -0400 Received: from corp.enron.com [192.168.110.110]) by postmaster.enron.com with ESMTP id f9JM4w304754 for <vkaminski@aol.com> Fri 19 Oct 2001 17:04:58 -0500 (CDT) Received: from nahou-mscnx04p.corp.enron.com (unverified) by corp.enron.com (Content Technologies SMTPRS 4.2.1) with SMTP id for <vkaminski@aol.com> Fri 19 Oct 2001 17:04:58 -0500 Received: from NAHOU-MSMBX03V.corp.enron.com ([192.168.110.40]) by nahou-mscnx04p.corp.enron.com with Microsoft SMTPSVC(5.0.2195.2966) Fri 19 Oct 2001 17:04:58 -0500 X-MimeOLE: Produced By Microsoft Exchange V6.0.4712.0 content-class: urn:content-classes:message MIME-Version: 1.0 Content-Type: text/plain charset=iso-8859-1 Subject: FW: Date: Fri 19 Oct 2001 16:34:52 -0500 Message-ID: X-MS-Has-Attach: X-MS-TNEF-Correlator: Thread-Topic: Thread-Index: From: Kaminski Vince J <Vince.J.Kaminski@ENRON.com> To: Lin Martin <Martin.Lin@ENRON.com> Cc: <vkaminski@aol.com> X-OriginalArrivalTime: 19 Oct 2001 22:04:58.0864 (UTC) FILETIME=[17D6F700:01C158EA] X-Mailer: Unknown (No Version) Martin Lance What do you think? Vince >

business document

casual

Re: Confidential - Mike Miller

Elspeth do we want to do a new agreement or simply assume the obligations in the old one? If the former I'd do a new agreement. If the latter I believe I simply can do an assignment agreement once I receive a copy of the current agreement. It also depends on the language in the old one and whether we believe it protects ENA. So we'd have to look at it. Sharon do you have the file on this person? If so let me know and I will have someone come and pick it up. Thanks. Michelle Elspeth Inglis@ENRON on 04/14/2000 04:56:09 PM To: Michelle Cash/HOU/ECT@ECT cc: Subject: Confidential - Mike Miller Michelle when rolling over an employment contract from another Enron entity is it re-issued with same details but under ENA's name? thanks Elspeth -----------------

employment

formal

RE: Thu evening

Thanks. Confirmed. Vince

personal & social

casual

examples of auction processes that worked

Jeff Skilling proposed a solution to Gov Davis to solve the supply and pricing problems in the California market. In summary the proposal would have a neutral party conduct an auction wherein the utilities would seek bids for 5-10 year packages of power from suppliers. The gov asked if anyone had successfully conducted such an auction in the industry already. I need your help to identify and describe any such examples (European or North American) by mid day Monday. Jeff and I will have a follow up call with the governor on Monday. Thanks

other

formal

Privileged and Confidential -- website

FYI the attached article and story is disturbing and surprising about Southern Company. It also raises an issue that we could face if we are not careful. The article discusses internal diversity studies which the plaintiffs are using as evidence to support their claims. The company claims that the studies were done by people who did not know how to conduct the appropriate analyses under the relevant legal standards. I have this concern here as well when we have people running analyses that do not factor in the legal standards and instead try to interpret data themselves. I would like to talk about how to manage that. Let me know who you think should be included in such a meeting and I'll set something up. Thanks. Michelle

legal affairs

formal

I talked to Hettie today. It's unlikely that we are going to find time for Jeff and the Governor to talk (because of the Governor's schedule). We'll try to set something up later. In the meantime the Governor should just sign the bill. Of course Hettie had already communicated this the Gov's office acknowledged that the message was recieved but did not make a specific commitment.

government & politics

casual

http://www.vaionline.it/

http://www.vaionline.it/

other

neutral

Re:

The conversation was very positive (Glynn did not know anything about it at first but looked into it and called Ken back Friday evening). Glynn said they were including the amount owed in their negotiations over the price for the transmission assets and said they intended to pay all of their debts including this one as soon as they get paid. He said that this weekk would be focussed on finalizing a deal for SCE given the threat of bankruptcy the discussions would then turn to PG&E. Jeff Dasovich Sent by: Jeff Dasovich 03/14/2001 07:03 PM To: skean@enron.com cc: Subject: Steve: Jim mentioned that Ken Lay was trying to talk to Glynn today about getting the PX credit issue resolved. Any progress made? Best Jeff

other

formal

Some funnies

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other

casual

Confidential Attorney Client Privilege - Attorney Work Product

I have drafted the attached letter denying the Cal ISO's request to send it (and the EOB) EPMI and EES' cost information for transactions over the FERC's cost cap. Since I believe we are on very firm ground my initial inclination was to send no response to the ISO's letter so there would be nothing to quote in the press. However I drafted this letter at Alan's suggestion for purposes of discussion. We should decide whether to send a letter before distributing this draft more widely in-house to discuss how to parse the message.

legal affairs

formal

Re: DRAFT Slides for Sempra Meeting

I think the presentation looks good. In the meeting itself I think you should go heavy on the argument that it makes no sense for Sempra shareholders to be in a commodity market as a regulated entity -- the heads they win tails you lose argument. Jeff Dasovich Sent by: Jeff Dasovich 10/13/2000 06:11 PM To: skean@enron.com Richard Shapiro/NA/Enron@Enron James D Steffes/NA/Enron@Enron Sandra McCubbin/SFO/EES@EES Mona L Petrochko/SFO/EES@EES Susan J Mara/SFO/EES@EES Paul Kaufman/PDX/ECT@ECT cc: Subject: DRAFT Slides for Sempra Meeting Attached for your review is a rough cut at slides we're preparing for the meeting with Sempra next Thursday. Thoughts and comments are appreciated. Please disregard korny title.

other

formal

Re: Wyden Bankruptcy Amendment

The amendment was defeated Jeff Dasovich Sent by: Jeff Dasovich 03/14/2001 11:11 AM To: James D Steffes/NA/Enron@Enron Chip Schneider/Enron@EnronXGate Linda Robertson/NA/Enron@ENRON Richard Shapiro/NA/Enron@Enron skean@enron.com cc: Subject: Wyden Bankruptcy Amendment

finance

formal

Re: Tax Valuations for YR2000

Congratulations! Gary Fitch@ENRON on 07/27/2000 12:02:47 PM To: Bill Donovan/EPSC/HOU/ECT@ECT cc: Steven J Kean/HOU/EES@EES Subject: Tax Valuations for YR2000 Bill we hit a home run this morning with HCAD. They have agreed to take my reduced valuation on the Enron fleet. A reduction of $16079000 in taxable value. This results in savings of $482375. That's not all our allocation based on records for operations outside of the state of Texas resulted in additional savings of $1559638. Total savings to our 2000 budget will be $2042013.

finance

excited

Legislative Status Report Week Ending 4/20

Date: 4/20/01 To: Jan Smutny-Jones Steven Kelly Katie Kaplan Cc: IEP Board of Directors From: Julee Malinowski-Ball Edson + Modisette RE: Legislative Status Report Week Ending 4/20 RECENT EVENTS: -- IEP with the help of Chris Ellison has been at the negotiating table mos= t of the week dealing with the most recent amendments to SB 28x. SB 28x (Sher/Battin) makes various changes to the siting process including many IEP-sponsored proposals. As you will recall two new provisions were added to the bill at the last minute before going to the Assembly Floor dealing with both retrofit schedules and environmental dispatch of generating facilities. Per the direction from IEP member companies IEP has decided not to negotiate on the environmental dispatch issue. If the provision remained in the bill IEP would continue to push the Republicans to hold their opposed position. We were however given the authority to negotiate on the retrofit issue as long as we were only talking about facilities that already have retrofit requirements. I will be faxing out the agreed upon language which in essence says the ARB shall set a schedule for the completion of any mandated retrofits. It does not expand the authority of the air districts and ARB to mandate retrofits under existing law. The schedule would require completion of the retrofits by July 1 2004 or such later date as the ISO determines is necessary to maintain reliability. With these amendments including some clean-up language SB 28x will be voted-on on the Assembly floor on Monday and go to the Senate for concurrence on Tuesday. The final version will include the following IEP-sponsored proposals: ? Conforming the timing of offsets for power plants to Clean Air Act requirements ? Substituting CEQA-style hearings for the trial-like proceedings of the CE= C ? Streamlining the permit process for the modernization of existing power plant sites ? Giving consideration to the positive environmental impacts of a proposed project. ? Improving the timeliness and coordination of state and local agency review. ? Extending the current deadlines for the expedited review process established in AB 970. Since SB 28x is only a first step in making changes to the siting process IEP member should now be thinking about what is next. IEP proposals still on the table include: ? Permitting local agencies to make zoning changes or other decisions for power plants contingent upon CEC CEQA Compliance ? Giving deference to other state and regional agencies ? Easing the threshold for override of local land use requirements. ? Making the ISO responsible for determining interconnection requirements -- Bad news on the =01&California First=018 issue quickly followed the good= news. The CEC staff analysis which said the State can't require builders of new power plants to sell electricity here even as a trade-off for expedited permitting was countered by another staff analysis that says the state can= . Both documents cannot be obtained due to attorney-client privilege. This issue is coming to a head next week with a decision pending by the CEC to include a California First clause on the approval of an expedited AES power plant project. AB 60x (Hertzberg) which ties to the siting process the requirement that a developer enter into a contract to sell power to specified California entities is still poised to be heard in the Senate Energy committee. IEP members company lobbyist should continue to lobby against this measure regardless of the CEC=01s decision on AES although our arguments are definitely strengthened if the addition of the clause at the CEC is denied. -- IEP has finalized negotiations with Senator Burton=01s office on amendm= ents attempting to solve our problem with the eminent domain provision in SB 6x (Burton) which is the State Power Authority measure. Attached is a copy o= f the bill in PDF form. The agreed upon language which clarifies that the Authority=01s purpose is to supplement existing generation activities can= be found on pages 6-7 (Section 3310) 13 (Section 3341.1) and 16-17 (Section3352). Considering the inflammatory remarks made by Senator Burton in the press lately regarding seizing generation assets this was most likely the best we could get. -- The first of Senator Dunn=01s hearings with the Senate Select Committee= to Investigate Price Manipulation of the Wholesale Market occurred this week. This week and next week=01s topics will be to go over previous investigati= ons into market power. The committee heard or will be hearing testimony from: Frank Wolak Chairman Market Surveillance Committee CAISO Eric Hildebrandt Manager Market Monitoring CAISO and Elaine Howle State Auditor. -- The Assembly Electricity Oversight Subcommittee met this week and focused on the issue of natural gas collusion. Testifying before the committee were representatives from Dynegy and El Paso commenting on the rise of natural gas prices and whether illegal market manipulation and collusion occurred. The subcommittee plans on putting together a package o= f bills related to natural gas issues which would be the culmination of the committee=01s hearings over the last two months. This package will be up = for consideration first by the whole special Assembly Energy committee. -- Governor Davis came out this week supporting the construction of the Calpine Metcalf Energy Center the 600-megawatt power plant proposed for th= e San Jose region. The Governor urged the CEC to approve the plant siting so that construction can begin. -- Two long-term contracting bills are scheduled for hearings next week. IEP counsel is currently reviewing AB 57 (Wright) and SB 997 (Morrow) and will comment on their provisions as soon as possible. -- Attached is the most recent legislative tracking reports both the special session and regular session. Please let me know if you need copies of any of these bills. UPCOMING EVENTS: MONDAY April 23rd Assembly Utilities and Commerce Committee AB 57 (Wright) =01) long-term contracting reasonableness review TUESDAY April 24th Senate Energy Committee SB 997 (Morrow) =01) long-term contracting reasonableness review WEDNESDAY April 25th Assembly Appropriations Committee AB 62x (Cohn) =01) California First AB 63x (Florez) =01) Sale of Kern Power Plant THURSDAY April 26th Select Committee to Investigate Price Manipulation of the Wholesale Market Informational hearing on the overview of investigations studies and reports regarding the energy crisis. MONDAY April 30th Senate Appropriations Committee SB 1x (Soto) =01) excess profits tax Assembly Revenue and Taxation Committee AB 128x (Corbett) =01) excess profits tax ON THE ASSEMBLY FLOOR SB 6x (Burton) =01) State Power Authority SB 28x (Sher/Battin) =01) siting --end-- Julee Malinowski-Ball Senior Associate Edson + Modisette 916-552-7070 FAX-552-7075 jmball@ns.net - 2001 Tracking Report.doc - 2001 Tracking Report.special session.doc -

legal affairs

formal

Re: Canary Wharf - Update for Executive Committee

Maybe we should knock down the walls of those cavernous offices on the top= =20 floor. Mark Frevert@ENRON 07/24/2000 06:17 AM To: Steven J Kean/HOU/EES@EES Cindy Olson/Corp/Enron@ENRON Mark=20 Palmer/Corp/Enron@ENRON Mark Koenig/Corp/Enron@ENRON cc: =20 Subject: Canary Wharf - Update for Executive Committee Just a quick update on our real estate escapades. Regards . Mark -----------------

other

casual

RE: Confidential Concern

Sharon I suggest that we ask Valeria Hope to investigate the fact situation here and report back to us jointly. What do you think? Michelle

other

formal

Re: NEW DRAFT OF ENRON STATEMENT

As discussed. -----------------

other

formal

Andre LeGAllo

Any problem? please advise Don. -----------------

other

casual

<<Concur Expense Document>> - March 2001

finance

neutral

Confidential Information and Securities Trading

I couldn't open link. I s this something new for me to sign or have I already complied? -----------------

other

casual

Revised list of PRC Reps

Make sure this is consistent with the lists we put in the memo. thanks

human resources

formal

EPSA/EEI on Reliability

This follows up on Rick's inquiry late last week on the talks between EPSA and EEI on reliability. Yesterday I spoke with Mark Bennett and Donn Salvosa of the EPSA staff. Mark did the talking. The upshot is that EPSA and EEI are meeting to see if they can't agree on reliability legislation. EEI is working off of the NERC draft and has sent a version to EPSA dated 9/14 (see attached) that was the basis for last Thursday's meeting. EPSA is now doing some drafting of its own. I need to read the 9/14 draft but the fact that they are working off of the old NERC language is of considerable concern. EPSA staff emphasizes the value of having EEI off the NERC reservation (which is good in terms of showing that there is NERC consensus) but I think EPSA staff may be too flexible in how they are approaching it. I reminded them of our position and concerns and of Jim's prepared statement on EPSA's behalf filed for the Sept. 11 Barton hearing. EPSA staff claims that other EPSA members are OK with them embarking on this project. It is not clear if this effort will succeed. EPSA staff said EEI's board insists on having engineers do reliability which is objectionable to EPSA. EPSA staff seems to think that some type of reliablity SRO is inevitable and that it is wise to get the best one they can. I will check with some other EPSA members.

other

formal

Urgent!!! FLSA legislation is on the fast track

Joe - could you or someone in the office get in touch with Michelle? Thanks

other

urgent

i2 Bandwidth Management Agreement Press Release

fyi

other

neutral

Risk Matrix

FYI. I had started an informal discussion group to work on political/regulatory risk.. I included Jane Jim Bouillian and Scott Gahn. Jane sent me the atached as an example of how her group approaches issues in the acquisition context. -----------------

other

neutral

Re: Next Draft of Letter to Dunn

I think this is an excellent letter. I agree with Sue's comments and have included her changes on Page 3. All changes have been marked in this version.

other

formal

Regulatory Policy Committee

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legal affairs

formal

Draft of California Contact List

Steve ? This is a draft of the contact list I promised you.? There are still some typos in it.? I will clean them up and get send you a draft in the morning that is ready for circulation. ? This list is made?up of?people that I know?and trust.? By an large I have excluded sitting pubic officials.? In cases where a given organization has several useful contacts with similar knowledge I have listed just one person for now. ? Give me a call at your convenience and we can discuss this in great detail. ? Kevin 213-926-2626 - Kevin Scott - Key Contacts - Draft.doc

other

casual

Confidential Inquiry

Steve I hope this email finds you well. ?Don't know if you remember me exactly however I worked at Enron for 4 years working closely with the Associate/Analyst Program under Charlene Jackson. ?I had to spread my wings a bit and flew to Reliant Energy to further enhance my career. As a former Enron employee I know Enron-candidate material! ?I would like to submit confidentially of course a resume on AJ McCormac. ?AJ is currently the Executive Director for Workforce Planning (HR) here at Reliant. ?She is very interested in opportunities at Enron and has the right stuff to compliment your strategic direction and objectives for Human Resources. ?I am confident that after just a few minutes with AJ you will quickly recognize her superior expertise. Realizing how expensive executive search firms can be advice from a Enron fan is free. Thank you for your time and consideration. ?If you would like to contact her directly here at Reliant her number 713-207-7162. Ginger Gamble 713-207-8824 (See attached file: AJ Confidential Resume 9-21-00.doc) (See attached file: AJ Confidential Resume 9-21-00.doc) - AJ Confidential Resume 9-21-00.doc

human resources

friendly

Re: CONFIDENTIAL - Residential in CA

Before any decision is made I think we really need to weigh in with EES on the ramifications (both PR and legislative) of turning back 16000 residential customers. I strongly believe that the public hit we will take will be far greater than our actual out-of-pocket losses. We will be crucified by the public media consumer groups legislators governor attorney general etc. and this action will reaffirm our reputation of packing up and leaving when it's not in our interest. The impact of this action would be exacerbated since it is on the heels of UC/CSU. I would also argue that this hurts our national dereg efforts. If we're advocating that competition and choice benefits consumers and then we turn around and pull out of a market and abandon customers when we're not profiting we'll kill any chances we have of ever serving retail customers in California -- or in any other state. We look foolish advocating for direct access when we're not willing to serve our existing -- let alone future customers What about a preemptive strike that engages these 16000 customers to weigh in on direct access -- i.e. a letter that says Enron may be forced to cancel its contract -- call/write/send the enclosed postcard to your legislator and tell them you want to keep your right to choose your energy service provider. Our credibility is on the line. Before we take this action we need to be cognizant of all the long-range strategic implications and we need to seriously weigh the negative impact this will have on our corporate reputation on our legislative abilities and on our commercial success going forward. kd James D Steffes 04/12/2001 09:05 PM To: Jeff Dasovich/NA/Enron@Enron Paul Kaufman/PDX/ECT@ECT Sandra McCubbin/NA/Enron@Enron Richard Shapiro/NA/Enron@Enron Janel Guerrero/Corp/Enron@Enron Mark Palmer/Corp/Enron@ENRON Karen Denne/Corp/Enron@ENRON Susan J Mara/NA/Enron Peggy Mahoney/HOU/EES@EES Harry Kingerski/NA/Enron@Enron cc: Dan Leff/HOU/EES@EES Subject: CONFIDENTIAL - Residential in CA In the meeting today no decision was made about what to do with Enron's 16000 residential customers. Each of the contracts gives a basic 30 day out right to Enron. That being said I think that we have a short window to push for DA before any public action impacts us in Sacramento. I realize that the ultimate action (which I think is inevitable) makes it harder for our advocacy on DA but real $ are flowing out of the company. EES will give us notice when a decision is reached. Thanks Jim

other

urgent

GREAT NEWS ****FERC Order on Morgan Stanley Complaint Against ISO

See below. this is one of the issues that concerned us more than price caps because it could limit our ability to move power to other markets in the west. In addition if you get questions from the analysts on reregulation or price caps it is worth pointing out that the high prices prevailing in many markets help our retail sales pitch to end use customers and create opportunities for our wholesale price risk management services . . . even a $250 price cap is 5-10 times what large customers are accustomed to paying. -----------------

other

confident

Draft - Background and Q&A for CA residential customers

Please send any comments directly to Peggy. -----------------

utilities

formal

Re: Trade Mission

Terry was acting with full coordination from Jose. The problem was this: Daly insisted someone speak on behalf of the group to the press (and designated Terry to be the one) Terry did not have the updated information that we were about to meet with the government officials and deliver a slightly different message (i.e. that we needed to know if the government planned to really open Petrobras or not -- the implication being that we would work within either decision but we needed to know one way or the other) Terry was simply not in possession of this information and no one had given it to him (probably because they had no reason to assume that Terry would be thrust in front of the press) moreover it's hard to see how Terry could have taken such a position publicly anyway. By my eyes Terry did the best he could and we had an unavoidable communications bust. I know the Southern cone team is moving to make it right but I see absolutely no reason to come don on anyone about this. Richard Shapiro 02/17/2000 09:47 PM To: Steven J Kean/HOU/EES@EES cc: Subject: Re: Trade Mission What was the outcome? Steven J Kean 02/17/2000 08:13 AM To: Richard Shapiro/HOU/EES cc: Subject: Re: Trade Mission FYI. I will call Terry and get in touch with Jim/Diomedes -----------------

business document

formal

<<Concur Expense Document>> - JB 003

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finance

formal

IEP News 4/20

AP Online April 20 2001 Friday 7:57 AM Eastern Time Financial pages ????238 words Power Co. Executives Lose Bonuses LOS ANGELES Contra Costa Times April 20 2001 Friday STATE AND REGIONAL NEWS K560 ????460 words Energy officials accused of manipulating natural gas market ????defend actions By Andrew La Mar Los Angeles Times April 20 2001 Friday Home Edition Page 3 715 words ???? CALIFORNIA AND THE WEST ??A U-TURN ON CAR TAX REBATES ??LEGISLATION: ????STARTING JULY 1 FEE REDUCTION WILL BE FIGURED DIRECTLY INTO VEHICLE ????REGISTRATION BILLS NOT REFUNDED BY MAIL. CARL INGRAM TIMES STAFF WRITER ????SACRAMENTO Los Angeles Times April 20 2001 Friday Home Edition Page 3 453 words ???? CALIFORNIA AND THE WEST ??LOCKYER ASKS JUDGE TO ORDER FIRMS TO RELEASE ????RECORDS ROBERT J. LOPEZ and RICH CONNELL TIMES STAFF WRITERS Los Angeles Times April 20 2001 Friday Home Edition Page 3 1426 ????words CALIFORNIA AND THE WEST ??LEGISLATORS UNITE OVER ENERGY PRICE ISSUE ????POWER: BIPARTISAN CONGRESSIONAL DELEGATION CALLED TOGETHER BY DAVIS SAYS U. ????S. MUST STEP IN TO PROTECT STATE FROM MANIPULATION BY SUPPLIERS. MITCHELL ????LANDSBERG and MIGUEL BUSTILLO TIMES STAFF WRITERS The Orange County Register April 20 2001 Friday STATE AND REGIONAL NEWS ???? K497 846 words Federal energy commission considers price fix for state ????energy market By Dena Bunis San Jose Mercury News April 20 2001 Friday STATE AND REGIONAL NEWS ????K512 696 words In response to power woes rating agencies have California ????on credit watch By Jennifer Bjorhus San Jose Mercury News April 20 2001 Friday STATE AND REGIONAL NEWS ????K520 1069 words Issues still remain on what power consumers will ????eventually pay By John Woolfolk and Michael Bazeley The San Francisco Chronicle APRIL 20 2001 FRIDAY FINAL EDITION NEWS ????Pg. A4 765 words Edison pushes lawmakers to accept deal David Lazarus The Associated Press State & Local Wire April 20 2001 Friday BC cycle ????7:04 AM Eastern Time State and Regional 438 words Most Edison executives ????going without bonuses By GARY GENTILE AP Business Writer LOS ANGELES The Associated Press State & Local Wire April 19 2001 Thursday BC cycle ???? State and Regional 901 words Top political aide discusses Bush's low-key ????style By RON FOURNIER AP White House Correspondent WASHINGTON The Associated Press State & Local Wire April 19 2001 Thursday BC cycle ???? State and Regional 727 words Utility commission staff says parent ????company profiting from energy sales BOISE Idaho The Associated Press State & Local Wire April 19 2001 Thursday BC cycle ???? State and Regional 820 words Legislators probe possible power natural ????gas collusion By DON THOMPSON Associated Press Writer SACRAMENTO Copyright 2001 Associated Press AP Online April 20 2001 Friday 7:57 AM Eastern Time SECTION: Financial pages LENGTH: 238 words HEADLINE: ?Power Co. Executives Lose Bonuses DATELINE: LOS ANGELES BODY: ???Senior executives at Southern California Edison and its parent company went without hundreds of thousands of dollars in bonuses in 2000 because of California's power crisis. ??Edison International's chairman and chief executive John Bryson was paid $950000 in 2000 compared with salary and bonus totaling $2.16 million in 1999. ??Stephen Frank the chairman and chief executive at Southern California Edison was paid $617000 in 2000 compared with salary and bonus totaling $1.3 million in 1999 according to the company's proxy statement filed with the Securities and Exchange Commission. ??The company also said Thursday it would not award merit increases to executives in 2001 because of the continuing crisis. ??In a similar statement released Tuesday Pacific Gas and Electric Corp. revealed it also withheld bonuses for its top two executives although they did receive raises. ??Edison and PG&E say they have lost nearly $14 billion since June to high wholesale prices that the state's electricity deregulation law bars them from passing on to consumers. PG&E saying it hasn't received the help it needs from regulators or state lawmakers filed for federal bankruptcy protection April 6. ??Edison is continuing to work with state officials and its ??reditors. ?????(PROFILE ?????(CO:Southern California Edison Co. TS:SCE) ?????(CO:Pacific Gas and Electric TS:PCG IG:ELC) ?????) LOAD-DATE: April 20 2001 of 78 DOCUMENTS ??????????????Copyright 2001 Knight Ridder/Tribune News Service ???????????????????????Knight Ridder/Tribune News Service Costa Times 20 2001 Friday SECTION: STATE AND REGIONAL NEWS KR-ACC-NO: ?K560 LENGTH: 460 words HEADLINE: Energy officials accused of manipulating natural gas market defend actions BYLINE: By Andres LaMar BODY: ??SACRAMENTO _ Energy officials who are accused of manipulating California's market for natural gas defended their actions on Thursday and attributed the state's skyrocketing gas prices to increased demand the weather and other factors. ??The explanation however drew skepticism from lawmakers in the wake of expert testimony alleging that one Texas firm El Paso Natural Gas Co. had engineered a classic case of monopoly power by controlling the pipeline that delivers gas to the state. ??At the outset of the Thursday's hearing Assemblyman Darrell Steinberg D-Sacramento noted the huge run-up in the cost of natural gas which went from $6.6 billion for the entire year of 1999 to $12.3 billion for sales in 2000 and to $7.9 billion for the first three months of this year. ??Steinberg zeroed in on the difference between California and other parts of the country. From March 2000 to February 2001 natural gas prices have risen 489 percent compared to a 266 percent increase in New Mexico and a 247 percent jump in Chicago. ??Steinberg asked Ralph Eads the president of an El Paso Natural Gas Co. subsidiary for an explanation. ??The 275 percent difference you say is attributable completely to constraints on the pipeline and demand? Steinberg asked. ??Yes Eads replied. Eads said the state's energy crisis which led power plants to run harder and longer dramatically increased demand for natural gas over the summer and a winter with temperatures about 15 percent cooler than the year before exacerbated the problem. ??In another twist to California's deregulation nightmare El Paso officials said they gained greater control of the pipeline after the Pacific Gas & Electric Co. relinquished the capacity four years ago. At that time PG&E's movement of the gas and the prices it could charge were regulated by the Public Utilities Commission. ??In other developments at the Capitol on Thursday lawmakers called on the federal government to re- regulate natural gas sales at the California border and U.S. Sen. Joe Lieberman D-Conn. said federal regulators should impose price caps on California's wholesale electricity market. ??The Assembly held considerable debate on the resolution asking for re-regulation with Democrats accusing President George W. Bush of doing nothing to come to the aid of California and Republicans defending the administration. ??I'm learning an interesting lesson that all the problems of the world started after Jan. 21 and the inauguration of the new president said Assemblyman Bill Leonard R-San Bernardino. ??KRT CALIFORNIA is a premium service of Knight Ridder/Tribune ??(c) 2001 Contra Costa Times (Walnut Creek Calif.). ??Visit the Contra Costa Times on the Web at http://www.cctimes.com/ JOURNAL-CODE: CC LOAD-DATE: April 20 2001 of 78 DOCUMENTS 2001 / Los Angeles Times Angeles Times ?????????????????????April 20 2001 Friday Home Edition SECTION: Part A Part 1 Page 3 Metro Desk LENGTH: 715 words HEADLINE: CALIFORNIA AND THE WEST A U-TURN ON CAR TAX REBATES LEGISLATION: STARTING JULY 1 FEE REDUCTION WILL BE FIGURED DIRECTLY INTO VEHICLE REGISTRATION BILLS NOT REFUNDED BY MAIL. BYLINE: CARL INGRAM TIMES STAFF WRITER DATELINE: SACRAMENTO BODY: ??Gov. Gray Davis and the Legislature spun a U-turn Thursday and scrapped a costly program that requires motorists to first pay their car tax and then get a rebate in the mail. ??Starting July 1 the state Department of Motor Vehicles will send owners of approximately 26 million vehicles registration renewal bills already reduced by the amount of the vehicle license fee rebates. ??On a unanimous roll call the Senate voted final approval and sent to Davis an urgency bill SB 52 that repealed the rebate program which the governor had previously fought for and defended. ??In addition to abolishing the rebates the legislation reduces by 67.5% the amount motorists must pay for the upcoming year the level that lawmakers and former Gov. Pete Wilson envisioned in 1998 when they began cutting the fee. It had been about 2% of a vehicle's market value. ??Davis immediately signed the repeal bill saying only that the new law will expedite relief to taxpayers and greatly reduce administrative costs. ??The governor's muted observation contrasted with his effusive support of the rebates last year when he said Californians don't appreciate the fact that they're getting a rebate unless they see it in their hands. ??At the time Davis and the Legislature had the choice of simply cutting the car tax which voters might not notice or sending checks in the mail which Davis felt would have a greater impact. ??The rebates which began Jan. 1 were scheduled to continue through 2002 when Davis intends to run for reelection. In 2003 the license fee was to have fallen permanently with no more rebates. ??The whole rebate scheme was good only through the next gubernatorial election cycle said Sen. Tom McClintock (R-Thousand Oaks) who supported reductions in the license fee but opposed the rebates. ??Until July 1 the DMV will continue to bill motorists for the full amount of their license fee which includes a 35% reduction from last year. ??Then we return to you an additional 32.5% rebate making a total reduction of 67.5% said DMV spokesman Bill Branch. Starting with license renewals on July 1 the DMV bills will include the full tax cut. ??A Senate analysis of the repeal bill noted that the current awkward system . . . effectively requires taxpayers to overpay their vehicle license fee and then await a rebate check from the state--a system that is at best difficult to explain. ??But as the California economy tightened the state's budget surplus shrank and taxpayers shelled out approximately $ 50 million a day to buy electricity the costs of the rebate program threatened to become a political embarrassment to Davis. ??Projected administrative and postage costs of the rebate program alone were estimated at $ 22 million this year and another $ 22 million or so next year. ??Last year state Sen. Joe Dunn (D-Santa Ana) and McClintock sought to eliminate the rebates and give drivers their full tax cuts when they register their vehicles. Under pressure from Davis the bill failed. ??It was killed behind the scenes at the insistence of the governor McClintock said Thursday. He didn't want it on his desk. ??This year Dunn launched a similar bill but his name was struck from it as the lead author in the Assembly and the name of Sen. Wes Chesbro (D-Arcata) was substituted. ??In a speech Thursday Sen. Ross Johnson (R-Irvine) suggested that Davis' performance on the issue in an earlier time and a more just society would have resulted in his public flogging by representatives of taxpayers. ??The repeal bill was passed 78 to 0 by the Assembly on Monday and sent to Davis by the Senate on a 34-0 vote Thursday. ??If the rebates were to be abolished the bill had to pass this week in order to take effect July 1 said Branch the DMV spokesman. This is because motorists must be advised 60 days in advance that their registration renewals are due. ??We have to reprogram all the computers. We have to print new bills and mail them by May 1 for the July 1 expiration he said. It will be a little tight but we will still make it. ??Branch said that since the Jan. 1 start of rebates checks totaling $ 454 million have been sent to 7.4 million vehicle owners at an extra administrative cost of $ 9.4 million. LOAD-DATE: April 20 2001 of 78 DOCUMENTS 2001 / Los Angeles Times Angeles Times ?????????????????????April 20 2001 Friday Home Edition SECTION: Part A Part 1 Page 3 Metro Desk LENGTH: 453 words HEADLINE: CALIFORNIA AND THE WEST LOCKYER ASKS JUDGE TO ORDER FIRMS TO RELEASE RECORDS BYLINE: ROBERT J. LOPEZ and RICH CONNELL TIMES STAFF WRITERS BODY: ??California Atty. Gen. Bill Lockyer ratcheting up his investigation of possible civil and criminal violations by the state's power suppliers is asking a San Francisco judge to order two firms to hand over confidential records. ??In a motion filed Thursday in Superior Court Lockyer said Reliant Energy and Mirant Corp. have failed to comply with subpoenas for documents that were to be produced by March 19. ??Amid soaring electricity costs and rolling blackouts the attorney general launched an investigation of possible manipulation of wholesale electricity prices that have skyrocketed to record levels and have financially crippled the state's major utilities. ??Dozens of other public and private power suppliers are complying with the subpoenas. ??But in an interview Lockyer accused Reliant and Mirant of stonewalling investigators so they can keep enjoying these exorbitant profits and prices for as long as possible. ??Ultimately the companies will have to honor the subpoenas he said. I'm going to pit bull them he said. This is one we win. ??Both companies say they have done nothing wrong and played by the rules of California's flawed electricity deregulation plan. ??A spokesman for Houston-based Reliant said Thursday the firm is seeking court action of its own to ensure that sensitive business information will not be shared with other public agencies or its competitors. ??Last week Reliant asked a Los Angeles Superior Court judge to clarify the attorney general's obligation to keep proprietary information confidential. ??We're glad to cooperate with his investigation to the extent we can said Reliant spokesman Richard Wheatley. But we have not received sufficient assurances that Lockyer would keep the data confidential. ??Lockyer called Reliant's court filing frivolous and propagandistic and insisted that adequate safeguards are in place. He reserves the right under state law to share information with other government agencies aiding in his investigation but has said he will keep sensitive business information from being made public. ??Atlanta-based Mirant demanded and received similar guarantees of confidentiality Lockyer said. Mirant did not return phones calls Thursday. ??Lockyer did not discuss details of the probe or the kinds of information he's seeking. But based on the investigation so far he said it's beginning to get interesting. ??Other records indicate that the attorney general has sought 91 categories of information about the power merchants' activities. They include the operation of power plants trading information that may have been shared by private power suppliers and bidding strategies in the California market. LOAD-DATE: April 20 2001 of 78 DOCUMENTS 2001 / Los Angeles Times Angeles Times ?????????????????????April 20 2001 Friday Home Edition SECTION: Part A Part 1 Page 3 Metro Desk LENGTH: 1426 words HEADLINE: CALIFORNIA AND THE WEST LEGISLATORS UNITE OVER ENERGY PRICE ISSUE ?POWER: BIPARTISAN CONGRESSIONAL DELEGATION CALLED TOGETHER BY DAVIS SAYS U. S. MUST STEP IN TO PROTECT STATE FROM MANIPULATION BY SUPPLIERS. BYLINE: MITCHELL LANDSBERG and MIGUEL BUSTILLO TIMES STAFF WRITERS BODY: ??This may be the surest sign yet of the depth of California's energy crisis: A bipartisan cross-section of the state's congressional delegation brought together Thursday by Gov. Gray Davis not only agreed about the severity of the problem but also about the need for swift federal intervention. ??This meeting did not have the word 'Democrat' or 'Republican' used once Rep. Darrell E. Issa (R-Vista) said of the unusual spirit of cooperation at the meeting near Los Angeles International airport. ??Members of both parties said the Federal Energy Regulatory Commission must slash wholesale electricity prices so California utilities can once again afford to buy power. Since January the state government has been buying electricity on their behalf as skyrocketing wholesale prices put Pacific Gas & Electric Co. and Southern California Edison billions of dollars into debt and many power suppliers refused to sell to them PG&E has since filed for Chapter 11 bankruptcy protection. ??Although the Bush administration has said repeatedly that it is strongly opposed to price caps and FERC has refused to grant them California Republicans at the energy meeting said they are optimistic that the administration will agree to some other form of price regulation. They brushed aside the notion that such regulations might conflict with their ideological belief in a free market. ??This is not a free-enterprise situation Rep. Duncan Hunter (R-Alpine) said after the meeting. In fact it's just the opposite. ??Specifically citing the huge disparity between natural gas prices charged to California and those charged in other Western states he said California clearly has been the victim of unreasonably high energy costs. Under federal law the FERC must regulate the prices of companies if it finds they are exerting market power to drive prices to unreasonable levels. ??Executives from two Texas energy companies meeting with legislators in Sacramento denied Thursday that they had caused natural gas prices in California to artificially skyrocket by hoarding access to a critical pipeline into the state. ??After the extraordinary meeting in Los Los Angeles Rep. Brad Sherman (D-Sherman Oaks) said the biggest disagreement between California Democrats and Republicans appeared to be their relative faith--or lack thereof--in the ability of President Bush and his administration to help California. There has been much speculation that Bush who lost California in November has no political motive to help the state. ??We Democrats said Sherman hope very much that our skepticism is proven wrong. ??Davis--who sat flanked by Democratic U.S. Sen. Dianne Feinstein and the governor's newly appointed chief energy advisor S. David Freeman--said he used the meeting mainly to discuss the importance of conservation by Californians this summer and to ask the congressional delegation to pitch in. Five Republicans and more than a dozen Democrats attended the gathering. ??Feinstein said Thursday that she has asked for a third time to meet with Bush to discuss the energy situation. Meeting with Times reporters and editors Wednesday she described a recent meeting with Vice President Dick Cheney in which she said he ignored her appeal for federal assistance. ??Feinstein has been among those critical of natural gas companies saying they appear to have constricted access to a California-bound pipeline to run up prices. ??The Brattle Group a respected consulting firm alleged Wednesday before an Assembly committee that Dynegy Inc. and El Paso Natural Gas Co. had manipulated the market by charging so much for the rights to their pipeline capacity that they had in effect withheld access to it. ??That action the experts said directly forced companies trying to deliver gas to California to look for alternatives clogging other pipelines and causing a surge in prices. ??The explanation El Paso executives said was simple: Demand for gas soared in California because generators that use gas to make electricity increased production last year in response to the energy crisis. ??We're not withholding capacity--no one is said El Paso Merchant Energy President Ralph Eads. With these prices you want to sell every molecule. ??In other developments Thursday: ??* The agreement between Davis and Edison International to return its ailing utility arm to financial health is in deep trouble and could be rejected by legislators the Standard & Poor's credit rating agency said in a note to clients citing legislative and other sources. A rejection of the deal would be a humiliating setback for the governor S&P said. ??The agreement calls for among other things the sale of Edison's transmission grid to the state for $ 2.76 billion and the sale of $ 2 billion in bonds--both designed to pay off the utility's huge electricity debt. Edison agreed to several constraints including the sale of electricity to the state at prices tied to the cost of producing power. ??Since they returned Monday from a two-week recess state legislators have been sharply critical of the Edison agreement and have indicated a desire to tinker with aspects of the deal. Some lawmakers have said publicly that a bankruptcy protection filing by Edison like that of PG&E might not be such a dire outcome. ??But a senior Edison executive said it is way too early to give up on passage of the proposal which legislators have not yet seen in official form. ??There is an education process to do here the executive said of the highly detailed 38-page document. The legislators should be asking questions. That is appropriate. ??* The Public Utilities Commission voted to investigate whether alternative energy providers violated contractual agreements by withholding supplies from PG&E and Edison which owe them hundreds of millions of dollars. ??The action Commissioner Carl W. Wood said was prompted in part by lawsuits some providers have filed seeking release from their contracts with the cash-starved utilities. The producers of solar wind and geothermal energy account for more than 25% of California's electricity supply. ??The question is whether we will be able to rely on them in the long hot days of summer Wood said. ??Jack Raudy of the Renewable Energy Creditors Committee said the PUC needs to address the $ 700 million the producers are owed. All we have gotten is rhetoric from the governor the PUC and the utilities he said. ??* An $ 850-million plan to entice Californians to conserve precious megawatts appears to be running into roadblocks compounding predictions by state officials of tighter than expected energy supplies in May and June. ??Davis signed the conservation spending package last week earmarking $ 242 million of the new funds for the Public Utilities Commission to distribute to the state's investor-owned utilities to support existing conservation programs. ??But Barbara Hale director of the PUC's Division of Strategic Planning said Thursday that since Pacific Gas & Electric Co. filed for bankruptcy protection April 6 the utility has stopped releasing conservation funds. ??Hale testifying before a state Senate committee said PG&E's decision--coupled with the threat that Southern California Edison could follow a similar route to U.S. Bankruptcy Court--has complicated her agency's efforts. ??PG&E spokeswoman Staci Homrig said her company plans to petition the Bankruptcy Court to have the conservation funds designated as a trust and separated from assets tied up in the bankruptcy proceedings. She said if the court denies the request PG&E would ask to be permitted to pay the expenses anyway. The process she added could take about a month--too long in the view of some legislators given increasingly gloomy energy forecasts for late spring and early summer. ??Deputy Director Bob Therkelsen of the California Energy Commission said his agency had been counting on a number of small power producers to bolster their output during that period. But he said some producers did not purchase the necessary equipment because PG&E and Edison have failed to pay them in full for earlier electricity deliveries. ??It's not a huge amount he said of the anticipated production shortfall but every little bit helps. ??* ??Landsberg reported from Los Angeles Bustillo from Sacramento. Times staff writers Nancy Rivera Brooks in Los Angeles Carl Ingram and Julie Tamaki in Sacramento and Tim Reiterman in San Francisco contributed to this story. LOAD-DATE: April 20 2001 of 78 DOCUMENTS ??????????????Copyright 2001 Knight Ridder/Tribune News Service ???????????????????????Knight Ridder/Tribune News Service ??????????????????????????The Orange County Register 20 2001 Friday SECTION: STATE AND REGIONAL NEWS KR-ACC-NO: ?K497 LENGTH: 846 words HEADLINE: Federal energy commission considers price fix for state energy market BYLINE: By Dena Bunis BODY: ??WASHINGTON _ Californians who see federal re-regulation of the state's crisis-bound energy market as an answer to the impending summer emergency better look for some other solution. ??Even the short-term price fix that the Federal Energy Regulatory Commission may consider at its Wednesday meeting might be too little too late. ??Lobbyists lawmakers and other FERC-watchers say they have seen a slight shift in recent weeks among commission staff and at least one member. There is some willingness they say to consider some price controls even though the Bush administration is adamantly opposed to such measures. ??Many are looking to see if President Bush's choices for the two vacancies on FERC will provide a margin for change. ??But the commission's basic philosophy that open unregulated markets are best is not likely to change soon members say. ??I've been championing a revamping of FERC's antiquated standards for determining market-based rates Commissioner Richard Massey said Thursday. But with no success. My agency is not on the verge of turning on a dime on this market-based pricing. ??The standards are a joke Massey added because the commission never turns down requests for such pricing authority. More than 600 power sellers have been given that authority he said. ??For a power company to be allowed to charge whatever the market will bear it must show FERC for example that it doesn't have the power to manipulate the market and drive prices up. ??Any seller that can't pass our screen needs to fire their consultants and lawyers Massey said. ??While the overall philosophy remains consistent FERC staff has proposed to the commission that a Stage 3 electricity emergency in California should trigger cost-based rates a form of price controls. Such triggers would be in place for one year under the staff proposal. ??The commission may decide Wednesday whether to accept that proposal. It has to make some decision by May 1 on how the market will be monitored from now on. ??The theory behind controlling prices in Stage 3 says a FERC staff report is that during such an emergency generators have the greatest opportunity to manipulate the market and drive prices up. ??But generators have that power during Stage 2 and Stage 1 emergencies says Les Starck Southern California Edison Co.'s manager of federal regulatory affairs. Price caps during Stage 3 might avert the rolling blackouts associated with that level of crisis but they wouldn't do anything to stop generators from jacking up prices the rest of the time he said. ??It is not clear how long it would take for such price controls to take effect should the commission go along with the staff recommendation. ??We're close because summer is approaching Commissioner Linda Breathitt said Thursday. Breathitt who had firmly opposed any form of price controls said in an interview last month that given the worsening crisis in California she was open to considering some short-term measures. ??It's important to me that we address the summer Breathitt said but said she wasn't able to predict what the commission would do Wednesday. ??Even if an order is approved Massey said there could be delays while the power sellers file their costs with regulators and disputes over those filings are handled. ??Sen. Dianne Feinstein said Thursday such a move by the commission would be better than having no controls at all. There's no question that we're going to be in a Stage 3 emergency. ??Feinstein D-Calif. and other Western lawmakers have been urging FERC to step in sooner and with price controls that extend beyond just the emergency period. ??Waiting for Stage 3 to intervene is putting the whole grid at risk said Roger Hamilton a member of Oregon's Public Utility Commission. We have a real stability problem when you cut it that close. ??Feinstein says the future could well rest with the new commissioners particularly Patrick Wood the head of the Texas PUC who many believe will replace Curt Heber as FERC chairman if he is confirmed by the Senate. ??Even if Massey and Breathitt agree on broader price controls as chairman Heber could block consideration of such a move. It's unclear what stance Wood would take as chairman. ??The thing that deeply concerns me about Pat Wood is that he's from Texas Feinstein said. What's reassuring is that it appears from my personal discussion with him is that he appears to be pragmatic. ??But once again timing could be a problem. ??Bush has said he intends to nominate Wood and Nora Brownell a member of the Pennsylvania PUC but has not formally sent their nominations to the Senate. ??The Federal Energy Regulatory Commission is of vital importance right now and to let the time go on without filling the spots makes no sense Feinstein said. Please please please President Bush process your nominees. ??KRT CALIFORNIA is a premium service of Knight Ridder/Tribune ??(c) 2001 The Orange County Register (Santa Ana Calif.). ??Visit the Register on the World Wide Web at http://www.ocregister.com/ JOURNAL-CODE: OC LOAD-DATE: April 20 2001 of 78 DOCUMENTS ??????????????Copyright 2001 Knight Ridder/Tribune News Service ???????????????????????Knight Ridder/Tribune News Service Jose Mercury News 20 2001 Friday SECTION: STATE AND REGIONAL NEWS KR-ACC-NO: ?K512 LENGTH: 696 words HEADLINE: In response to power woes rating agencies have California on credit watch BYLINE: By Jennifer Bjorhus BODY: ??SAN JOSE Calif. _ All three of the nation's influential judges of credit risk now have California on credit watch saying they are deeply concerned about the economic impact of the state's power crisis. ??The Fitch credit rating agency made it unanimous Wednesday when it warned that the thickening electricity quagmire as well as lower than expected tax revenues in February and March could spell broader risk for the state's budget. ??The announcement is a signal that Fitch too may downgrade its ratings on California's nearly $30 billion in public debt a move which could cost taxpayers millions. ??The announcement comes as state lawmakers mull a bailout plan for Southern California Edison Pacific Gas & Electric Co. sits in bankruptcy and state officials bleed through the state's general fund as they purchase expensive electricity for consumers. Earlier this week Gov. Gray Davis announced that the average daily bill for electricity purchases has risen from $45.8 million a day in the last week of March to $73 million a day. ??Moody's Investors Service and Standard & Poor's have already issued their own credit warnings although none of the three agencies has actually downgraded the state's very good double-A credit rating. ??Bond ratings are important yardsticks that bankers and investors use to price municipal and corporate bonds. A downgrade would force California to offer bondbuyers higher interest rates going forward costing taxpayers. ??The state was last at a lower A rating back in 1994. ??Moody's changed California's Aa2 general obligation bond rating outlook from stable to negative on April 6 the day Pacific Gas & Electric Co. filed for bankruptcy. Standard & Poor's has had the state's AA rating outlook at negative since January when the state began buying electricity for the utilities. ??The deciding factor for Fitch said Fitch vice chairman Claire Cohen was the disagreement over how the money from the new electricity rate hike will be spent. ??The California Public Utilities Commission ruled in late March that money generated by higher electricity bills should go first to pay the state Department of Water Resources which has been buying electricity for the utilities. Pacific Gas & Electric Co. has argued that if the state is paid first there won't be any money left for it. ??The utility is formally challenging the PUC decision and the move threatens to hold up the estimated $12 billion to $14 billion of bonds the Department of Water Resources plans to issue to buy more electricity. ??With that being appealed you don't have a clean authorization Cohen said. It signals to me that it could delay the financing process. ??A second concern is that the state isn't collecting as much in taxes as expected Cohen said. Tax collections for both February and March were below forecast. The amount of personal income tax the state collected in those months fell short by $455 million or 14% less than expected. ??Cohen said she made her decision before hearing that the state's power costs now exceed $70 million a day. Cohen and David Hitchcock the California analyst for Standard & Poors agreed those rising costs are a definite concern. ??It doesn't take much of a change in economic growth to make some of these projected fund balances disappear and so we're very worried about what the current economic activity is particularly in Northern California with some of the problems with the high tech area Hitchcock told analysts and investors last week in a conference call. ??State treasurer Phillip Angelides was traveling Thursday and couldn't be reached for comment. Other economy-watchers expressed concern. ??Sandy Harrison assistant director of the state Dept. of Finance said the move reinforced the importance of solving the current power problems soon. ??It's important to note that the rating hasn't been lowered yet and does remain very strong he said. ??KRT CALIFORNIA is a premium service of Knight Ridder/Tribune ??(c) 2001 San Jose Mercury News (San Jose Calif.). ??Visit Mercury Center the World Wide Web site of the Mercury News at http://www.sjmercury.com/ JOURNAL-CODE: SJ LOAD-DATE: April 20 2001 of 78 DOCUMENTS ??????????????Copyright 2001 Knight Ridder/Tribune News Service ???????????????????????Knight Ridder/Tribune News Service Jose Mercury News 20 2001 Friday SECTION: STATE AND REGIONAL NEWS KR-ACC-NO: ?K520 LENGTH: 1069 words HEADLINE: Issues still remain on what power consumers will eventually pay BYLINE: By John Woolfolk and Michael Bazeley BODY: ??SAN JOSE Calif. _ State regulators last month announced an electric rate increase that would average a whopping three cents per kilowatt hour hit bills beginning in May and punish power pigs while sparing energy misers. ??Now much of that is up in the air. ??Higher rates are surely coming _ but not before June. Exactly which consumers and businesses will pay how much is uncertain as regulators rush to forge a rate structure from a tangle of more than 20 proposals. ??Their task has been complicated immeasurably by Gov. Gray Davis' decision to weigh in with a competing rate plan and Pacific Gas & Electric's move into bankruptcy court. ??Little details are moving billions of dollars around said Nettie Hoge of consumer advocate group TURN. ??All the proposals assume a tiered structure that forces the heaviest users of energy to pay the most. But key details yet to be decided mean consumers could see their average rates go up anywhere from 7 percent to 30 percent or more. ??Among them: ??_How much of an overall increase? The Public Utilities Commission approved a 3-cent per kilowatt hour increase last month which would boost utility revenue $4.8 million. Gov. Gray Davis' hike _ left vague in Davis' April 5 television address _ averages 2.8 cents for PG&E customers but only 2.3 cents for customers of Southern California Edison. ??_What regions of the state will pay? The commission agreed to raise rates only for Pacific Gas & Electric and Southern California Edison but Davis would include the additional 1.2 million San Diego Gas & Electric customers. ??_Should heavier users of electricity subsidize those who are exempt from the new rate increase? If so those users will find themselves paying much more than any of the average increase figures being tossed about. ??_How will utilities bill customers retroactively for the increase? At the time of the PUC vote on March 27 commissioner said their increase would take effect immediately. ??Various plans are being presented this week to an administrative law judge working for the commission. The judge is expected to recommend a rate structure to the PUC on May 4. Public hearings would follow May 7-11 and the commission would vote on a plan May 14 condensing to a few weeks a process that normally lasts nearly a year. ??Each of the major proposals before the commission assumes that residential customers using less than 130 percent of their baseline would be exempt from higher rates. That's mandated under a new law that allows the state to buy power. Customers already pay higher rates for exceeding their baseline which is the average basic level of use for each region of the state. ??Each major proposal also sets new tiers with progressively higher rates for medium use at 130 to 200 percent of baseline and heavy use over 200 percent of that level. ??But that's where the similarities end. ??The first distinction among the leading plans comes in the form of an assumption: How many residential customers will avoid any increase because they don't exceed 130 percent of their baseline? Davis says more than half commissioners say a little under half and PG&E says less than a third. ??The second difference among the plans is a real difference: What happens to everyone else? ??Under the plan by utilities commission President Loretta Lynch medium PG&E users would see average bills rise 9 percent and heavy users would see bills increase 36 percent. ??Davis' plan says medium PG&E users would see average bills rise 11 percent while heavy users would pay 37 percent more. But the average total bill increase for PG&E residential customers including those who are exempt would be 20 percent under his plan and 24 percent under Lynch's according to a statement on the governor's web site. ??Business customers would see proportionately greater increases averaging 30 percent under Lynch's proposal and 26 percent under Davis'. ??The most consumer-friendly of the various proposals comes from consumer-rights group TURN. They suggest an overall average residential increase of just 7.5 percent. ??TURN's plan assumes utilities cannot charge other customers more to make up for the energy misers shielded from rate increases under state law. ??PG&E disagrees with that interpretation. The utility wants other residential users to make up for any lost revenue from exempted customers through higher rates. Under the utility's plan residential customers would see an average rate hike of nearly 30 percent. ??The proposal these folks are pushing rips the heart out of that law said Matthew Freedman staff attorney for TURN. ??Another issue affecting consumers is how the utilities can bill for electricity used in April and May before the final plan is approved. ??Utility officials have objected to making the rate structure retroactive. Instead to recoup the revenue they are proposing a flat surcharge that everyone would pay regardless of how much they use. ??Edison proposes a higher surcharge added to bills for a shorter period of time _ in this case June through August. PG&E officials are suggesting a smaller surcharge that would be spread out over 12 months. ??It'll probably be something closer to the PG&E proposal Paul Clanon the commission's director of energy issues. ??All the rate increase proposals stem from a commonly understood problem: California's current frozen rates don't generate enough money to cover the wholesale price of power. The PUC raised rates 10 percent _ or 1 cent per kilowatt hour _ in January in an attempt to help but that turned out to be far from enough. ??In March the Commission approved an additional 3-cent increase. But Davis followed quickly with an alternative proposal. The next day PG&E filed for bankruptcy raising the specter that a federal judge could order even higher rates. ??Although the PUC has sole authority to raise rates under state law Davis' proposal has complicated an already complex process. The governor appointed three of the five members of the commission and his appointees seem inclined to show him deference. But Davis has been slow in filing the details of his plan which has made it hard for the PUC to proceed. ??KRT CALIFORNIA is a premium service of Knight Ridder/Tribune ??(c) 2001 San Jose Mercury News (San Jose Calif.). ??Visit Mercury Center the World Wide Web site of the Mercury News at http://www.sjmercury.com/ JOURNAL-CODE: SJ LOAD-DATE: April 20 2001 of 78 DOCUMENTS ?????????????????Copyright 2001 The Chronicle Publishing Co. ?????????????????????????The San Francisco Chronicle ????????????????????APRIL 20 2001 FRIDAY FINAL EDITION SECTION: NEWS Pg. A4 LENGTH: 765 words HEADLINE: Edison pushes lawmakers to accept deal SOURCE: Chronicle Staff Writer BYLINE: David Lazarus BODY: Although lawmakers are skeptical of the state's multibillion-dollar deal to acquire the power lines of Southern California Edison the head of the utility's parent company warned yesterday that failure to approve the accord could lead to a long and costly bankruptcy. ???But John Bryson chief executive of Edison International told The Chronicle that he thought legislators would want to do the right thing by approving the multibillion-dollar agreement and preventing Edison from following Pacific Gas and Electric Co. into bankruptcy court. ???Bankruptcy for California's two largest utilities could have severe consequences for consumers. Financial analysts said a worsening of the state's energy mess would increase the possibility of higher electricity rates. ???Nevertheless lawmakers are unlikely to accept the Edison deal -- at least not in its present form. ???We are going to go through this thing extensively said state Senate President Pro Tem John Burton D-San Francisco. There are a lot of concerns about the valuation. ???Still he said legislative backing for the accord remains possible as long as Edison is open to amending some of the terms. ???The Edison people are smart enough to know that the Legislature is going to have its say Burton said. ???Indeed sources familiar with the matter said Edison expected a certain amount of tinkering with the deal and would not resist efforts to reach common ground with lawmakers. ???The Assembly members do not view bankruptcy as a favorable alternative said Assemblyman Herb Wesson D-Los Angeles. There will be a big effort to try and work something out. ???Edison's Bryson seems eager at this point to present himself and his company as reasonable business partners who are willing to negotiate in good faith. ???This contrasts sharply with the state's relations with PG&E which turned acrimonious after PG&E blindsided the governor with its bankruptcy filing. Each side blamed the other for the collapse of earlier negotiations. ???We made the decision at an early stage that this was a massive problem for the state and that the best course was to find a practical solution that would allow us to get on with operating our power system Bryson said. ???Bankruptcy he said is absolutely a last resort. It's a long and costly process. ???It is also the last thing Wall Street wants to see. On Wednesday rating agency Fitch Inc. joined Standard & Poor's and Moody's Investor Service in warning that California's credit rating could be lowered because of the state's energy mess. ???The state may be forced to issue junk bonds said Carol Coale an energy-industry analyst at Prudential Securities in New York. This could lead to a surcharge on electricity bills to guarantee the bonds. ???Bryson not surprisingly defended Edison's agreement with the governor as a prudent alternative to bankruptcy. ???This is a very good deal for the state he said. It is not a bailout. Edison gives up a lot to make all this possible. ???Southern California Edison will sell its power lines to the state for $2.8 billion. It also will provide low-cost power to California for 10 years and drop a federal lawsuit seeking full recovery of nearly $5 billion in past debt. ???Critics say the state is paying far too much for Edison's transmission system -- more than two times book value -- and that the power lines are of little use unless PG&E's grid also can be acquired. ???It's a multibillion-dollar ratepayer bailout of Edison said Doug Heller a spokesman for the Foundation for Taxpayer and Consumer Rights in Santa Monica. Edison gets off scot-free. ???Under the most likely scenario lawmakers will seek to reduce the amount paid for Edison's power lines and to increase the role of the California Public Utilities Commission in regulating the utility. ???They also will try to come up with a workable contingency plan for the state if PG&E remains adamant in its refusal to sell off its part of the power grid. ???The deal on the table is still salvageable said Michael Shames executive director of the Utility Consumers' Action Network in San Diego. But Edison needs to understand that what it got from the governor is only a framework not set in stone. ???For his part Bryson signaled that plenty of room existed for give and take on the issue. ???We're just at the initial stage he said. We always have accepted the notion that Edison is a California regulated utility and is subject to the laws of the Public Utilities Commission.E-mail David Lazarus at dlazarus@sfchronicle.com. GRAPHIC: PHOTO Gov. Gray Davis (left) and John Bryson chairman of Edison International announced a transmission line deal on April 9. Bryson said Edison may go into bankruptcy if the deal isn't approved. LOAD-DATE: April 20 2001 of 78 DOCUMENTS ???????????????????The Associated Press State & Local Wire The materials in the AP file were compiled by The Associated Press. ?These materials may not be republished without the express written consent of The Associated Press. ???????????????????????April 20 2001 Friday BC cycle AM Eastern Time SECTION: State and Regional LENGTH: 438 words HEADLINE: Most Edison executives going without bonuses BYLINE: By GARY GENTILE AP Business Writer DATELINE: LOS ANGELES BODY: ??Senior executives at Edison International and its subsidiary Southern California Edison went without hundreds of thousands of dollars in bonuses in 2000 because of California's power crisis. ??Edison International's chairman and chief executive John Bryson was paid $ 950000 in 2000 compared with salary and bonus totaling $2.16 million in 1999. ??Stephen Frank the chairman and chief executive at Southern California Edison was paid $617000 in 2000 compared with salary and bonus totaling $1.3 million in 1999 according to the company's proxy statement filed with the Securities and Exchange Commission. ??The company also said Thursday it would not award merit increases to executives in 2001 because of the continuing crisis. ??In a similar proxy statement released Tuesday Pacific Gas and Electric Corp. revealed it also withheld bonuses for its top two executives although they did receive raises. ??Edison and PG&E say they've lost nearly $14 billion since June to high wholesale prices that the state's electricity deregulation law bars them from passing on to consumers. PG&E saying it hasn't received the help it needs from regulators or state lawmakers filed for federal bankruptcy protection April 6. ??Edison is continuing to work with state officials and its creditors. ??The utility said its board of directors decided to withhold bonuses to all but two key executives because the financial effects of the energy crisis have overshadowed all other aspects of company and individual performance. ??The two executives who did get bonuses earned them for their roles in preserving the viability of the companies during the crisis and for retention purposes Edison said. ??Ted Craver senior vice president chief financial officer and treasurer at Edison International was paid $375000 in 2000 and received a $100000 bonus. His total compensation in 1999 was $652100. ??Harold Ray executive vice president at Southern California Edison received a salary of $390000 in 2000 and a bonus of $50000. His cash compensation in 1999 was $818400. ??PG&E paid Chairman Robert D. Glynn Jr. $945086 in salary and benefits during 2000 a 58 percent decrease from $2.26 million in the prior year according to the company's proxy statement. ??Glynn 57 received a 12.5 percent increase in his base salary but didn't get a bonus. ??Gordon R. Smith who runs Pacific Gas and Electric received a 14.5 percent raise in his base salary to $630000 but didn't receive a bonus. In 1999 Smith's compensation package totaled $1.1 million. LOAD-DATE: April 20 2001 of 78 DOCUMENTS ???????????????????The Associated Press State & Local Wire The materials in the AP file were compiled by The Associated Press. ?These materials may not be republished without the express written consent of The Associated Press. ??????????????????????April 19 2001 Thursday BC cycle SECTION: State and Regional LENGTH: 901 words HEADLINE: Top political aide discusses Bush's low-key style BYLINE: By RON FOURNIER AP White House Correspondent DATELINE: WASHINGTON BODY: ??When 24 members of a Navy spy plane crew returned to the United States after 11-days in Chinese custody President Bush was noticeably absent from their homecoming ceremonies. ??He also kept a low profile as the Senate shrank his tax-cut plan by $400 billion and had little to say about riots in Cincinnati this month. ??Such is the silent style of the new president says Bush's top political strategist Karl Rove. ??Every administration is marked in contrast to its predecessor. The previous administration felt compelled to dominate the evening news every day and the president said 'I'm focused on getting the job done' Rove said Wednesday in an Associated Press interview. ??Running a low-key presidency sets Bush apart from former President Clinton but the style has its critics. ??Some lawmakers including members of his own party said Bush could have saved more of his $1.6 trillion tax-cut plan if he had personally lobbied more lawmakers. ??Bush issued a statement expressing sympathy with police and protesters in Cincinnati but ran the risk of looking detached. ??And Rove acknowledged that there was some discussion in the White House about Bush attending the U.S. crew's homecoming to reap the public relations reward for freeing the crew. ??But the president vetoed the idea according to Rove who quoted Bush as saying I want it to be about them and I don't want to go through the discombobulation that it would require of them and their families for me to show up. ??It is not hard to imagine Clinton commanding center stage during city riots a budget battle or an international crisis but Rove said We intended to have a smaller profile than the previous administration. ??Bush's attitude is that he's not going to be measured by whether or not he gets on the evening news but on whether or not he gets progress Rove said during the 45-minute interview. ??He sat at a polished wood conference table in his West Wing office his hands folded over a memo he had discretely turned upside down. Newspapers and a Starbucks coffee mug littered his desktop. Framed photos and artwork were propped against a chair still awaiting hanging on his 89th day in the White House. ??A painting of a Texas landscape decorated one wall allowing Bush's political strategist of eight years to go on vacation whenever I'm on the phone. ??Rove is on the telephone a lot these days crafting strategies to pass the White House legislative agenda maintain GOP control of Congress in 2002 and position the president for a re-election bid in 2004. ??Bush narrowly won the White House without California's 54 electoral votes and Rove said the president could win re-election without the state but it's always nicer to carry the Golden State. ??He said the state's electricity shortage will not hurt Bush's chances in 2004 adding that the administration has done virtually everything Gov. Gray Davis has requested. ??He suggested that the state caused its own problems by not building enough power plants and failing to follow the lead of other states such as Bush's Texas to establish sound energy policies before a crisis struck. ??This has got a very human dimension to it Rove said. It's one thing to talk about power supplies. It's another thing when you talk about how it affects their jobs how it's affecting their livelihoods how it's affecting the safety of their communities and the health of their families. This is a tough issue and it ought to be a wake up call for the entire country. ??A White House task force headed by Vice President Dick Cheney is working on recommendations to address both short-term problems of soaring electricity and natural gas prices and longer-term energy supply problems focusing on producing more domestic oil and gas and building more electric power plants. ??Rove said the administration will soon unveil new conservation measures aimed at helping California ease its shortages. ??He said Bush and his political team are bringing House Republicans from politically competitive states to the White House where they discuss their districts' needs and often gain local media attention. ??Bush also plans to attend fund-raisers for House and Senate campaign committees helping the party gear up for 2002 midterm elections in which control of Congress is at stake. ??Rove also said: ??-Bush will not seek broad authority to negotiate trade treaties anytime soon allowing time to make the legislation more attractive to Democrats. You can only put so much into that pipe and we've stuffed it he said of Bush's crowded legislative agenda. The fast track authority is key to Bush's plans for a free trade zone stretching from Canada to Chile. That proposal is the focus of the three-day Summit of the Americas beginning Friday in Quebec City. ??-Americans will support Bush's environmental policies despite criticism of his decision to overturn some initiatives of the final days of the Clinton administration. Rove stopped short of accusing Clinton of setting Bush up for political troubles. I'm not certain I see a conspiracy there. I do think it's interesting that Clinton waited until the last moment to act. ??-Bush has not wavered since the campaign in his view that states should be able to opt out of minimum wage increases passed by Congress. We are not all one single labor market Rove said. GRAPHIC: AP Photo WX109 LOAD-DATE: April 20 2001 of 78 DOCUMENTS ???????????????????The Associated Press State & Local Wire The materials in the AP file were compiled by The Associated Press. ?These materials may not be republished without the express written consent of The Associated Press. ??????????????????????April 19 2001 Thursday BC cycle SECTION: State and Regional LENGTH: 727 words HEADLINE: Utility commission staff says parent company profiting from energy sales DATELINE: BOISE Idaho BODY: ??IDACORP made $66 million in profits in the past year by buying electricity on the spot market and reselling it for a higher price to its subsidiary Idaho Power Co. the staff for state utility regulators contends. ??The Idaho Public Utilities Commission staff said such profits should not come at the expense of Idaho Power ratepayers facing staggering electrical bills. ??In a report to commissioners posted on the agency's Internet site Wednesday the staff recommended Idaho Power's proposed increases for residential and commercial customers be cut by about half. ??Idaho Power seeks rate increases over the coming year totaling $227.4 million. The regulatory staff recommends a $108.7 million increase. For residential customers a requested 34-percent hike would be reduced to 16 percent. ??This is not a final decision said Jeff Beaman a spokesman for IDACORP and Idaho Power. In many cases the commissioners disagree with the staff. ??The report noted there was nothing illegal about the transactions between Idaho Power and its sister company Idaho Energy Systems. To change that the staff urged commissioners to create a mechanism that forces Idaho Power to buy electricity at the same price Idaho Energy Systems pays for it. ??The report said Idaho Energy Systems an unregulated subsidiary of IDACORP repeatedly purchased electricity on the wholesale market and then sold it to Idaho Power for a profit. ??Idaho Power officials contend the recommended policy change could financially cripple the company. It already spent $161 million buying power on the open market and cannot recover the money unless the coming year's rate is increased. ??The failure to recoup these funds could lead to liquidity problems Beaman said and that will hurt not only the company but our customers as well. ??But IDACORP paid all of its salaried staff - including Idaho Power employees - a 15-percent bonus at the end of the last fiscal year because the company had achieved record profits of $139.9 million 53 percent over the year before. ??Beaman said incentive payments have no impact on the rate request. ??Charging the higher rate between the two subsidiaries was the result of a commission order tying the price that Idaho Energy charges for wholesale electricity to the Mid-Columbia Index. The index has been pegged at unrealistic levels since the energy crisis erupted in California and fluctuates constantly. ??We are confident that the transactions were performed within the letter and spirit of the law and have not been at the expense of ratepayers Beaman said. ??Commission spokesman Gene Fadness said commissioners cannot comment on a case before them but their ultimate decision can be appealed to the Idaho Supreme Court. ??The Public Utilities Commission staff also recommended: ??- Deferring $66.1 million of Idaho Power's rate request without interest until answers are available about the company's electricity deals. ??- Deferring another $45.8 million of the request until next year when the commissioners would allow Idaho Power to collect 5-percent interest. That part of the hike was earmarked for wholesale power purchases this year - purchases that the staff believes will be much more expensive next year. ??- Cutting another $10.3 million from the increase request contending it was an error by Idaho Power's Risk Management Committee that the company planned on passing on to ratepayers. ??- Implementing a low-interest loan program to encourage energy conservation by Idaho Power customers. ??- A two-year phase-in of any rate increase ultimately approved that is substantially over 20 percent. ??- Changing residential rates to a three-tiered system to encourage savings. ??Homeowners would pay 5.52 cents per kilowatt-hour for the first 800 kwh used 6.12 cents per kwh for use between 800 kwh and 2000 kwh and 7.48 cents per kwh for use over 2000 kwh. The current residential rate of 5.2 cents per kwh. ??The staff report also took Idaho Power to task saying it was warned of the possibility of spiraling prices and power shortages as far back as 1995. ??But the company contends it did not want to build generating plants during the past decade because with electricity deregulation looming nobody knew what independent power facilities were being considered. LOAD-DATE: April 20 2001 of 78 DOCUMENTS ???????????????????The Associated Press State & Local Wire The materials in the AP file were compiled by The Associated Press. ?These materials may not be republished without the express written consent of The Associated Press. ??????????????????????April 19 2001 Thursday BC cycle SECTION: State and Regional LENGTH: 820 words HEADLINE: Legislators probe possible power natural gas collusion BYLINE: By DON THOMPSON Associated Press Writer DATELINE: SACRAMENTO BODY: ??Southern California Edison was charged about $750 million more this year for natural gas because of unchecked free-market forces an industry consultant testified. ??Paul Carpenter told the Assembly Electricity Oversight Subcommittee on Wednesday the price spikes came after the El Paso Natural Gas Co. contracted first with Dynegy and later with its own marketing affiliate El Paso Merchant Energy to control the pipeline capacity. ??Officials with El Paso and other natural gas suppliers are expected to testify Thursday that they did not illegally manipulate the market. ??The California Public Utilities Commission estimated a year ago that overcharges by the companies that control natural gas flow drove up prices by $ 100 million a year to California gas and electricity customers. ??But PUC attorney Harvey Morris said that was before last summer's price spikes which he blamed on natural gas suppliers using a monopoly to game the system. ??It's way worse than we could possibly have imagined Morris said after testifying before the subcommittee. It's obviously way higher than $100 million. ??Natural gas rates at the California border generally tracked national prices until November when they spiked as high as 11 times higher than the price of natural gas elsewhere in the nation Carpenter said. ??I have never seen gas prices like this anywhere in the world said Carpenter who has been studying the energy market for 20 years for Cambridge Mass.-based consultant The Brattle Group. The Brattle Group was hired by Edison to study the natural gas market. ??The committee is one of two legislative committees exploring whether illegal market manipulation in the electricity and natural gas markets has driven up California's energy costs. ??This is a market that is plagued by the exercise of market power Frank Wolak chairman of the California Independent System Operator's Market Surveillance Committee told the Senate Select Committee to Investigate Price Manipulation of the Wholesale Energy Market. The ISO runs the state's power grid. ??However there is no law against me saying 'I'm not going to sell to you' Wolak said. Market manipulation only becomes illegal when there is collusion Wolak said and such evidence is hard to find. ??Electricity generators and natural gas suppliers say a severe supply and demand imbalance - not market manipulation - has led to higher prices. ??Everybody's busy doing investigations. They're not interested in solving the problem said Independent Energy Producers Executive Director Jan Smutny-Jones. ??Investigations are wasting everybody's time Smutny-Jones said adding that previous probes and lawsuits have uncovered no wrongdoing. He said the state's power problems came because state regulators denied utilities the chance to sign long-term energy contracts when they had the chance. ??People have been playing by the rules Smutny-Jones said. ??But the Senate committee's first witnesses are ISO officials who authored studies that claim the state paid more than $6 billion too much for power last year. ??Committee chair Joseph Dunn D-Garden Grove also has slated state Auditor Elaine Howell who last month blamed buyers and sellers for skyrocketing electricity costs. Dunn also has scheduled future testimony from state federal academic and private investigators studying the power market. ??He invited five major generators to attend the committee's second hearing next week. All five - Reliant Dynegy Williams Energy Duke Energy and Mirant - say they are eager to cooperate and clear their names Dunn said. ??Dunn asked the five for a total of 86 specific documents. If the companies feel they cannot provide documents because of legal or confidentiality concerns Dunn said he will subpoena them. ??Smutny-Jones said investigators appear to be growing desperate to blame the state's natural gas and electricity price hikes on illegal market manipulation instead of natural market forces. ??He cited Attorney General Bill Lockyer's announcement last week that any informant who helped prove wrongdoing would be entitled to a percentage of the state's recovery he estimated could range from $50 million to hundreds of millions of dollars. ??If the state's offering a $50 million reward they haven't found anything Smutny-Jones said. I don't think you're going to find the fact that anybody did anything criminal here. ??Assemblywoman Jenny Oropeza D-Long Beach said she believes otherwise after Wednesday's testimony: I think it is very clear there was some price manipulation going on. ??But Assemblyman John Campbell R-Irvine isn't sure there was anything illegal. ??There clearly are market forces at work that's evident Campbell said. Whether you make the jump to market manipulation ... I haven't seen conclusive evidence that leads me to make that jump. LOAD-DATE: April 20 2001

other

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RE: Market Stack

Eric I shall be glad to talk to you about it. The first three days of the next week would work for me. Vince

other

polite

Demand buy-down proposal

The e-copy. -----------------

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RE:

Liz It's in Stanford. We can stay at the Stanford Inn Hotel Tuesday night and leave early in the morning for Santa Fe on Wednesday. I am still waiting for Prediction to confirm their meeting on Wednesday. Vince

personal & social

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Presentation to faculty and students at Berkeley

FYI. I am sending Vince some materials we have used

human resources

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Confidential - May 2001 HR At A Glance

Attached is the May 2001 At A Glance report. A couple of additions this month which include a section on Capital Expenditures with Pay Backs and some analysis of the recent new hire survey that we set up. Please call if you have any questions. DCL

human resources

formal

Re: Next policy committee meeting

We may be able to handle this specific issue outside the policy committee but I think it would be a good idea to set the next one anyway. I'm sure we'll have something we'll need to talk about. From: Sherri Sera/ENRON@enronXgate on 06/12/2001 01:17 PM To: Steven J Kean/NA/Enron@Enron cc: Subject: Next policy committee meeting Steve given yesterday's conversation toward the end of the executive committee - i.e. countries ENE will do business in - do you think we should try to set up another policy committee meeting? Jeff's schedule is pretty ugly for the rest of this month and early July but could probably do something mid-July. I'm not sure what Ken Lay's schedule looks like though. Please advise. Thanks SRS

government & politics

formal

New Congressional Report on California

Ray Alvarez brought to my attention today a news item indicating that the Congressional Budget Office released a report earlier this week entitled Causes and Lessons of the California Electricity Crisis. The 30+ page report is available on the home page of the CBO's web site at www.cbo.gov. I have quickly read through the summary and it is largely favorable. For example the summary says: Much of the blame for California's electricity crisis attaches to the state's restructuring plan -- but not to its objective electricity deregulation. (...) But deregulation itself did not fail rather it was never achieved. The restructuring plan did not remove sufficient barriers on both the supply and demand sides of the market to allow competition to work -- in part because it was not designed to. Even without restructuring California's electric utilities would have faced a difficult challenge in meeting the demand for power and holding down prices in 2000. Consequently wholesale electricity prices were higher than they probably would have been in either a traditionally regulated market or a more fully deregulated market. Long-term solutions to California's electricity problems will most likely require three changes: removing barriers to the addition of generating capacity eliminating bottlenecks in the electricity transmission system and removing regulatory restrictions on the sale of power throughout the broad western market. On the negative side the report summary does state that some generators may also have withheld supplies at certain times to boost prices even more and the plan's auction system for the spot market appears to have created strong incentives for suppliers to bid strategically in a way that raised wholesale prices.

other

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Legislative Update -- Two Track In The Senate and House Update

We face two parallel tracks in the Senate in the coming weeks between now and the start of the congressional recess for one week on June 29th. In the Senate Energy and Natural Resources Committee we will be facing efforts by pro-price caps forces who will use the committee bully pulpit to pressure FERC into more action. This effort is led by incoming chairman Bingaman with support from Majority Leader Daschle. They are saying they will consider acting on the Feinstein-Smith price cap legislation unless FERC takes unspecified additional action by the end of this month. The new track in the Senate will be in the Governmental Affairs Committee chaired by Sen. Lieberman (D-CT). While this committee does not have the legislative jurisdiction over energy that the Energy Committee does in terms of moving legislation the Governmental Affairs Committee has broad oversight and investigatory jurisdiction over all federal agencies including FERC. New chairman Lieberman held his first press conference as chairman today and said addressing high energy prices would be a priority. In that vein the committee is expected to hold a hearing on June 13 featuring some of the economists who wrote a letter in favor of price caps last month. We are checking with the Republican staff to make sure that the anti-price cap economists (the majority of the discipline of course) will also testify. We also brief committee members and staff with our arguments against price caps and the latest publicly available market data. On June 20 the committee will hold a hearing on whether FERC has properly exercised its duties under the Federal Power Act to make sure that wholesale power rates are just and reasonable. We are going to meet with the committee majority staff but we presently expect this hearing to have political witnesses (i.e. elected officials possibly including Gov. Davis). We must keep in mind that Sen. Feinstein had earlier written to Chairman Lieberman asking for a hearing on the California energy situation including relationships between FERC and those it regulates (citing the NY Times article involving Enron and Chairman Hebert). There is at present no indicationi that either hearing will address this matter. We are as you might imagine paying close attention to this situation. Over in the House Energy and Commerce Chairman Tauzin has said he will write to FERC asking them to extend the April 26 price mitigation order to the entire west and to extend it to 24/7. He also asks FERC to see if it can implement negawatts demand reduction administratively. We are in the process of obtaining a copy of the letter which has not yet been made public. Also in the House we expect congressional committees to begin marking up portions of the President's energy legislation and related topics as the month unfolds.

other

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Re: Chorety Crisis

Thanks for the update. Congratulations on your progress. Keith Miceli@ENRON 07/24/2000 04:18 PM To: Steven J Kean@EES Mark Palmer/Corp/Enron@ENRON Karen.Denne@enron.com cc: Karen.Denne@enron.com Subject: Re: Chorety Crisis Steve and Mark: I arrived in the US on Saturday with a good feeling about what appears to be a successful resolution of the Chorety crisis. Under Steve Hopper's leadership the Chorety spill became a non-issue by Friday. During the crisis I collaborated with my counterpart from Shell/London Michael Megarry in developing a Key Messages and Internal Q&As document (attached). At the daily meeting/conference call there was an Operations Report from the site an analysis of the day's newspaper articles (which I handled) and discussions on how to respond to media that were reporting or airing inaccurate information that was damaging Transredes' image. I also developed a Stakeholders Action Plan (attached) for the Incident Commander to use in organizing and monitoring team member actions taken in response to stakeholder concerns. The Plan was updated daily by the Transredes PR Office and given to team members prior to every meeting/conference call. The Stakeholder Report is intended to complement the Operations Report. I also want to acknowledge the support of Karen and Dennis during the early stages of the crisis. It was extremely helpful. Regards Keith

other

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WSJ: PG&Es Huge losses...

Eliz -- I need your group to put together a search which captures the comments of PG&E and Edison officials in trade press anlyst reports and speeches which would be inconsistent with the idea that they can now recover their shortfall. In other words when they were trying to get AB 1890 passed when they were fighting Proposition 9 when they floated their rate reduction bonds and when they talked to analysts and rating agencies I'm sure they assumed that they would live under the rate freeze and take the risk of stranded cost recovery whithin the statutory deadline.

energy infrastructure

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Strengthening Enron as it grows

Jeff I have prepared the attached chart for you. It captures the ideas we discussed last week. Please call when you have a chance. I look forward to talking with you. Kevin 213-926-2626 - STRENGTHENING ENRON AS IT GROWS.doc

other

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CONFIDENTIAL Personnel issue

Michelle/Lizsette I was wondering if circumstances with Jonathan Lane (the contract Help desk person whom I mentioned to you a week or so ago) have been resolved? When we last spoke I mentioned that he went to Valeria Hope's group. I am not sure of the outcome of that visit but I will tell you that his negative attitude and general dissatisfaction on the team is becoming disruptive to the other help desk members. He is away from his desk often (having meetings which may be interviews for other positions) he has shared with the other team members his perceptions of management and his issues with us. If and when I can do so I would like to terminate him. I won't until I hear from you all and we are documenting discussions as you requested. I hope this can end soon though because this is causing real problems here. Gina

human resources

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RE: Governors Generator Phone calls

You should also check my folder California - working group -----------------

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ABX1 70 Further Nail in Generators Coffin -- Absurdity in CA

test

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TW Gas Sales: PRIVILEGED AND CONFIDENTIAL ATTORNEY CLIENT PRIVILEGE

In anticipation of potential litigation involving TW's operational activities please prepare an analysis for me of the reasons for TW's sale of excess natural gas at the California border. I am aware of several of these sales and have been informed that excess pressure at the border is the basic reason for them. I'd like a more specific explanation that includes the following information: 1. What are the specific pressures and volume considerations that could make it operationally necessary to sell gas at the California border? 2. What is the process that is followed to make such a determination? 3. Which individuals or groups are involved in determining whether an operational sale is necessary? 4. In what way have system operations changed since last year and how do those changes contribute to the increased frequency of such sales compared to previous years? 5. What alternatives to operational sales are considered before the decision to make a sale is reached? Thanks for your attention to this request. Please give me a call to discuss and please designate your response as Privileged and Confidential Attorney Client Privileged.

energy trading

formal

Re: Advisory council meeting

fyi -----------------

meetings & events

casual

Re: Philippe

Yes Phillippe left to join a firm in New York -- I don't know who. Christopher Culberson <cmculbe@us.ibm.com> on 06/26/2001 02:42:53 PM To: skean@enron.com cc: Subject: Philippe Steven I hear Philippe is leaving for Putnam any truth to this? I've been unable to contact him directly. Thanks in advance. Best Regards Chris M. Culberson cmculbe@us.ibm.com (281) 556-8104

human resources

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Fw: Tagging issue at NERC Security Subcommittee tomorrow

energy infrastructure

neutral

I got a voicemail fro Ken. He would be happy to meet with Freeman. He is willing to work on other times but suggested the following After 3:00 on May 2nd (right after Ken's speech to the RGA) or late the day before or in the morning of the second (to do this though he would have to cancel his speech to the Texas Governor's business council but he is willing to do this if necessary) His least preferred alternative in this general time frame would be early morning on the third. Jeff -- could you coordinate with Rosie to get the time and place nailed down?

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Multi-talented Recruit

other

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Red Herring Article

Hap -- could you provide a response and get it to Meredith. I'd like to correct this.

other

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potential media calls

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media & press

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FTC Staff Report on Electricity Restructuring

Yesterday the Federal Trade Commission issued a staff report on electricity restructuring issues. It is an update of the July 2000 report done at the request of House Energy Chairman Tauzin and Subcommittee Chairman Barton. They requested the report be updated. A summary of the report and the full 80+ page text is on the FTC web site at www.ftc.gov on the upper left side of the home page. I read the summary and will read the balance. So far so good. It basically says that even states that have opened up to retail competition are in transition with a hybrid of regulation and competition thus the expected benefits of competition have not yet emerged. However the report states that nothing to date indicates that competition once the transition period is over will not produce additional benefits for consumers. The report's major conclusion is that competitive wholesale markets are important to achieving effective competition in retail markets. The summary includes something that sounds promising on RTO policy saying And as wholesale and retail markets become regional governing policies and jurisdictional approaches also must move in that direction for wholesale and retail competition to be successful.

utilities

informative

Re: Comments on Judge Wagners Proposed Recommendation

My comments are attached. I think the pleading is well written but as you'll see from my comments I believe we should be incorporating more of the arguments from the previous pleading. Ray Alvarez 07/09/2001 07:14 PM To: James D Steffes/NA/Enron@Enron cc: Jeffrey T Hodge/Enron@EnronXGate Robert C Williams/Enron@EnronXGate Steven J Kean/NA/Enron@Enron Richard Shapiro/NA/Enron@Enron Linda Robertson/NA/Enron@ENRON Alan Comnes/Enron@EnronXGate Jeff Dasovich/NA/Enron@Enron Susan J Mara/NA/Enron@ENRON Robert Frank/NA/Enron@Enron Sarah Novosel/Corp/Enron@ENRON dwatkiss@bracepatt.com Subject: Comments on Judge Wagner's Proposed Recommendation As you may be aware the Chief Judge informed the parties to the settlement proceeding this afternoon that he intends to recommend to the Commission that it employ the June 19 rate methodology for the refund period from October 2 forward. Attached are draft comments that Sarah Novosel and I propose to submit to the Judge and his legal staff tomorrow. While we would like to convince the Judge that the June 19 methodology is not appropriate we also provide a fallback approach. Please review the comments (they are only 4 pages) and send your comments to us. We plan to submit the comments tomorrow. Thanks Ray and Sarah

legal affairs

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Energy Issues

Please see the following articles: Sac Bee Fri 7/6: Two more say Duke withheld power: The company says it was responding to the state grid operator Sac Bee Fri 7/6: Lockyer seeks SEC investigation of PG&E's financial transfers LA Times Fri 7/6: California State Seeks SEC Probe of PG&E Transfers LA Times Fri 7/6: THE NATION Little Progress on Energy Rebate Judge Hints SF Chron Fri 7/6: Davis energy team denied pay State controller says work for Edison is a conflict of interest SF Chron Fri 7/6: Ex-staff speaks out against Duke Two more charge prices manipulated SF Chron Fri 7/6: Vallejo to produce its own energy Conservation generators expected to make city self-sufficient Mercury News Fri 7/6: SEC asked to see if PG&E Corp. violated law with subsidiary Mercury News Fri 7/6: Judge may speed up electricity refund talks Mercury News Fri 7/6: Davis keeps state addicted to fossil fuels (Commentary) Chicago Trib Fri 7/6: Economics fuels power solution in California Price relief gains political support Wash. Post Fri 7/6: California Changes Stance on Refunds Two Sides Far Apart In Energy Talks WSJ Fri 7/6: U.S. Hearing Officer May Impose Pact To End California Power-Overcharge Case Two more say Duke withheld power: The company says it was responding to the state grid operator. By Kevin Yamamura Bee Capitol Bureau (Published July 6 2001) Two more former workers from a Duke Energy power plant came forward Thursday to bolster recent claims by colleagues that the power generator withheld production to drive up prices. But Duke attributed witness accounts of fluctuating generation to instructions from the state's transmission-grid operator. Richard J. Connors an auxiliary operator and E. Robert Edwards an electrician said generation units at Duke's Chula Vista plant sat idle during emergency periods for no apparent reason. Three of their former co-workers -- two mechanics and a control room operator -- told lawmakers two weeks ago that Duke had disposed of new parts and varied its production. While that testimony drew significant attention it was countered Monday by a report released by the state's Independent System Operator that showed the ISO had in fact ordered Duke's up-and-down output Jan. 16-18. On Thursday the Charlotte N.C.-based company leaned on the ISO report in its defense. The ISO could have dispatched those units at will said Duke spokesman Tom Williams referring to unused equipment. But Lt. Gov. Cruz Bustamante who has filed a lawsuit against generators contended that the ISO had based its orders on Duke's dubious bidding history. These ISO orders came only after Duke had continuously manipulated the market with price-gouging schemes forcing the ISO to regulate production Bustamante said. Connors and Edwards each worked more than 20 years at the South Bay plant in Chula Vista. For most of that time the plant was owned by San Diego Gas & Electric. Two years ago Duke purchased South Bay and retained Connors and Edwards under state-mandated agreements that ended in April. Edwards said that during power blackouts in January he saw a 225-megawatt unit off-line. Other units he said were operating far below capacity. Our No. 1 priority in life was to make money Edwards said. Williams rebutted the claims as observations from those who did not have the complete picture. It's dead on dead true that there are times when that plant is not running at full capacity and there is a Stage 3 Williams said. There may be blackouts in San Francisco. But the reason why it's not running is because the power can't move up Path 15 (a north-south bottleneck). Bustamante however maintained that Duke has continued to manipulate the market calling Connors and Edwards the tip of the iceberg in the price-gouging investigation. State Sen. Joe Dunn D-Santa Ana chairman of the Senate committee investigating price manipulation said Connors and Edwards may testify before lawmakers after further evaluation. Dunn added that his committee has talked to potential whistleblowers from other power generators who said they have seen production decreases and suspicious activities. It is undetermined whether they will testify he said. The Bee's Kevin Yamamura can be reached at (916) 326-5542 or kyamamura@sacbee.com. Lockyer seeks SEC investigation of PG&E's financial transfers By Ed Fletcher Bee Capitol Bureau (Published July 6 2001) State Attorney General Bill Lockyer on Thursday asked the federal Securities and Exchange Commission to scrutinize financial transfers made to PG&E Corp. from its subsidiary that has filed for bankruptcy protection. SEC scrutiny is essential to protect the public interest ratepayers and the people of the state of California Lockyer said in a prepared statement. Charges that PG&E Corp. hastened the bankruptcy filing of Pacific Gas and Electric Co. have been made before responded Greg Pruett a vice president of PG&E Corp. That is an issue that has been investigated multiple times by the Public Utilities Commission earlier this year by an Assembly oversight committee and in each of these audits there has been no conclusion that the transfers were inappropriate or that they were injurious to PG&E Co. Pruett said. In its filing with the SEC the attorney general's office said that without meaningful review by the SEC it cannot be determined what impact the transfer of assets ... may have on the financial condition of the bankrupt utility. An SEC spokesman said the commission has yet to examine the petition. Among other concerns raised by Lockyer's office is the transfer of more than $4 billion from 1997 to 1999 to PG&E Corp. from PG&E Co. The majority of the $4 billion came from the sales of PG&E power plants as was required by deregulation. The bulk of the money went to pay debt that was incurred to actually build those plants Pruett said. The rest of the transfers were to pay stockholder dividends he said. PG&E filed for Chapter 11 bankruptcy protection in April after having run up $6.6 billion in debt. The Bee's Ed Fletcher can be reached at (916) 326-5548 or efletcher@sacbee.com. Business Financial Desk California State Seeks SEC Probe of PG&E Transfers NANCY RIVERA BROOKS ? 07/06/2001 Los Angeles Times Home Edition Page C-2 Copyright 2001 / The Times Mirror Company California Atty. Gen. Bill Lockyer on Thursday asked the Securities and Exchange Commission to investigate PG&E Corp. for potential abuses of its responsibilities as a utility holding company. At issue is a series of transactions over the last several years in which PG&E Corp. transferred funds from its utility Pacific Gas & Electric Co. which now is operating under Bankruptcy Court protection. The money--more than $4 billion since 1997--flowed to the parent company and to unregulated sister companies of the utilities. The transfers have been scrutinized by the California Public Utilities Commission and the state Legislature with no finding of wrongdoing said PG&E Corp. spokesman Greg S. Pruett. The SEC currently exempts PG&E from almost all requirements of the Public Utility Holding Company Act because the San Francisco utility operates primarily within California . That law regulates transactions between holding companies and their utility subsidiaries. Lockyer wants the SEC to withdraw PG&E's exemption citing $13 billion in PG&E assets outside of California . All the primary evils addressed by PUHCA are relevant to PG&E Corp. Lockyer's petition to the SEC stated. In Bankruptcy Court on Thursday PG&E said it is close to reaching an agreement with Calpine Corp. to pay more than $267 million it owes the San Jose-based power generator and to preserve contracts for 453 megawatts of relatively cheap electricity . In all PG&E buys about 2600 megawatts of electricity from nearly 25 alternative generators which are seeking repayment and release from their contracts through Bankruptcy Court. National Desk THE NATION Little Progress on Energy Rebate Judge Hints RICARDO ALONSO-ZALDIVAR ? 07/06/2001 Los Angeles Times Home Edition Page A-30 Copyright 2001 / The Times Mirror Company WASHINGTON -- The federal mediator seeking a settlement for billions of dollars in alleged electricity overcharges in California signaled Thursday that the talks are in trouble and analysts said hope for a deal seems to be fading. Curtis L. Wagner Jr. chief judge of the Federal Energy Regulatory Commission said he may issue a report on the closed-door talks as early as today if he sees no progress. The judge will perhaps issue a preliminary assessment of the talks said Tamara Young-Allen a spokeswoman for FERC. He will do this only if he feels the talks aren't moving along as he sees fit. Originally a preliminary report from the judge was not part of the plan. Wagner had previously said all sides would labor in private through the weekend to try to get a deal by Monday's midnight deadline. If that failed the judge said he would take seven days to craft a proposed settlement for FERC's governing board. Kit Konolige a power industry analyst with Morgan Stanley in New York said Wagner's announcement on Thursday amounted to a judicial distress signal. The judge wouldn't say something like this if the parties were close to a settlement said Konolige. I suppose he may be trying to jump-start things but I think most people believed the sides were so far apart going into the talks that it seemed like a long way to go to reach a settlement. Although Wagner has imposed a gag order on participants several people with knowledge of the negotiations said Thursday that major power generators and California officials have not budged from dug-in positions since the talks began last week. They also said the judge is extremely frustrated with the state and with several large power suppliers. California is demanding $9 billion in refunds. According to sources the generators have offered less than $1 billion. And some major power sellers are insisting they do not owe anything. Many experts say California has little hope of obtaining the $9 billion since only $5.4 billion of that is attributable to sellers under FERC's jurisdiction. On the other hand it seems clear from statements by FERC commissioners that the board is prepared to extract significant refunds from generators. Wagner is said to be probing for a compromise figure between $1 billion and $9 billion. It could take the form of a mix of cash payments and discounts on long-term contracts for power. FERC's governing board ordered Wagner to hold the talks to see if a compromise could be struck on three big issues: refunds guarantees that generators will be paid and ways to shift more of the state's power purchases to long-term contracts. The board also made clear that it would impose its own settlement if the state and power sellers were unable to come to an agreement. Wagner said Thursday that if he issues a preliminary report today he will give all the parties a chance to respond publicly on Monday. Such a report might embarrass some of the key players since Wagner is known for his plain-spoken conclusions. The judge would then prepare a settlement recommendation for the FERC board by July 16. However he also said he is willing to work through the weekend to reach a settlement if it appears within striking distance. The talks are in a large hearing room on the second floor of the FERC building near Washington's Union Station. Access is strictly controlled and special badges have been issued to the more than 140 lawyers participating. Some people with knowledge of the negotiations said Wagner's threat to issue a report may be a bid to see if one of the parties will make a move. It was like a shot across the bow said one source. * RELATED STORIES Energy savers: College students help businesses cut waste. B1 SEC probe: The state urges a review of PG&E fund transfers. C2 'No' vote: Reliant Energy workers reject union representation. C2 Davis energy team denied pay State controller says work for Edison is a conflict of interest Robert Salladay Chronicle Sacramento Bureau Friday July 6 2001 2001 San Francisco Chronicle URL: N198197.DTL Sacramento -- State Controller Kathleen Connell is refusing to pay two former Clinton- Gore campaign operatives hired by Gov. Gray Davis even though one of the consultants dropped his Southern California Edison contract amid conflict-of- interest allegations. Mark Fabiani and Chris Lehane were collectively known as the Masters of Disaster for their work in the Clinton White House during various federal investigations. They also worked for Vice President Al Gore during the 2000 presidential campaign. Because of their work for Davis Connell says the contract Fabiani and Lehane signed with Edison is a conflict of interest under state ethics rules. Davis is negotiating with Edison on a bailout for the utility. Late last week at the bottom of a press release Davis announced that Fabiani was no longer a communications consultant because his work had been successfully implemented. Lehane on the other hand has dropped his contract with Edison and signed a new agreement with Davis. Lehane's new contract includes reimbursement for travel and meal expenses which he didn't have before and requires him to work a maximum of 66 hours a month at $150 an hour. His total payments are capped at $76000 for work from June 26 to Nov. 20 2001. In his release Davis said Lehane would be paid the same amount as former communications director Phil Trounstine about $9900 a month. But Connell like Davis a Democrat said Trounstine undoubtedly worked more than 66 hours in a month for his $9990. We don't intend to be paying it Connell said of the contract for both men. They represented Southern California Edison. You have to have a singular relationship with the state of California and not show a conflict. Previously the Davis administration said there was no conflict because Edison and Davis wanted the same things out of their negotiations. Earlier this week Davis spokesman Steve Maviglio said attorneys had different opinions over whether the two consultants had violated ethics rules. Davis spokeswoman Hilary McLean said the governor had signed an executive order allowing him to enter into consulting contracts with anyone he believed could help him solve the state's energy crisis. She said Lehane had been working full-time on public policy even though his contract caps his salary. The National Tax-Limitation Committee a Sacramento group that mostly monitors legislation sued last month alleging that Fabiani and Lehane were violating the state Political Reform Act because of the Edison contract. In a recently filed disclosure statement Fabiani also listed more than $10 000 worth of consulting work for Cisco Systems another company that frequently brings issues before state authorities including Davis. The state Fair Political Practices Commission also is looking into a complaint filed by GOP Secretary of State Bill Jones that Fabiani and Lehane violated state ethics rules. E-mail Robert Salladay at rsalladay@sfchronicle.com. 2001 San Francisco Chronicle ? Page?A - 3 Ex-staff speaks out against Duke Two more charge prices manipulated Robert Salladay Chronicle Sacramento Bureau Friday July 6 2001 2001 San Francisco Chronicle URL: N122949.DTL Sacramento -- Two more former employees at Duke Energy's Chula Vista power plant came forward yesterday with allegations that the company manipulated the energy market to drive up prices although they offered no hard proof and little new information. Their accusations bring to five the number of Duke plant workers who say they observed suspicious behavior including the disappearance of parts needed for repairs the idling of generators for no apparent reason and continual stopping and starting that critics of Duke suspect was designed to withhold power and artificially increase prices. E. Robert Edwards a 50-year-old electrician related one conversation with a Duke foreman sometime in January that prompted suspicion. I asked the foreman why Unit 4 wasn't running Edwards said yesterday at a press conference. We had a 225-megawatt generator sitting there and he just shrugged his shoulders and said 'I really can't tell you. I'm not privy to that information.' State lawmakers have been focusing on whether Duke manipulated prices during three days in January when the company at one point offered a single megawatt of power for a record-shattering $3880. Duke says it was following orders from the Independent System Operator which runs the state's power grid when it repeatedly turned its generators on and off during those three days. An ISO memo recently released by Duke confirms the company's contention it was under orders. But January logs from the ISO and the generators don't offer an explanation for every allegation of price manipulation since Duke has refused to release a detailed list of the prices it offered and paid during that period. The two workers who came forward yesterday Edwards and 46-year-old Richard J. Connors both worked more than 20 years in the business. They left the South Bay Plant in Chula Vista in April two years after Duke purchased it from San Diego Gas & Electric as part of deregulation. SOME SHIFTS UNPOPULAR It is true units were taken offline mostly on the weekends for whatever reason said Connors a former auxiliary operator. It got to the point as an operator that you were dreading working swing shifts on Sunday or graveyard Monday morning because you knew you were going to be running around putting units back online. Edwards said he had seen a company warehouse eventually emptied of parts that are used to repair broken generators although he didn't know where the parts went. Forcing a longer wait for repair parts was designed to dry up the power supply and push prices higher lawmakers and other investigators suspect. Edwards however admitted the warehouse was being cleaned out even when SDG&E ran the plant. Duke contends the workers weren't familiar with Duke's inventory system and couldn't possibly know why parts were being moved. Duke and other energy companies are facing scrutiny by two legislative committees a 19-member Sacramento County grand jury state Attorney General Bill Lockyer the California Public Utilities Commission and federal regulators. BUSTAMANTE ALSO SUING Lt. Gov. Cruz Bustamante who introduced Edwards and Connors yesterday also is suing a variety of generators in state court for alleged price manipulation and bad business practices. He said Edwards and Connors reiterated what we've know all along -- Duke has been gouging California consumers through its use and abuse of the South Bay Plant. Duke offers a variety of defenses for its actions during the three days in January and throughout the energy crisis. Tom Williams a spokesman for Duke said Edwards and Connors had offered nothing new yesterday. Beyond the ISO's 37 separate orders to stop and start generators during the three days in January Williams said state air regulations required the company to shut the plant at certain times because it was running out of emissions credits that limit the amount of air pollution it can put out. Duke which controls about 5 percent of the state energy market also contends the state's power transmission lines can't always handle an increase in load. Yes it's true there are times when that plant is not running at full capacity and there is a Stage Three (alert) and there may be blackouts in San Francisco Williams said. The reason why it's not running is the power cannot move up Path 15 the transmission line bottleneck near Los Banos. E-mail Robert Salladay at rsalladay@sfchronicle.com. 2001 San Francisco Chronicle ? Page?A - 3 Vallejo to produce its own energy Conservation generators expected to make city self-sufficient Jason B. Johnson Chronicle Staff Writer Friday July 6 2001 2001 San Francisco Chronicle URL: N138966.DTL Vallejo leaders looking to escape mounting gas and electric bills are planning to build enough new power generators that the city government will be self-sufficient when it comes to energy. City officials said they believe that Vallejo is the first city in the nation to take such an approach. This is going to be a showplace said Scott Sossen the chief executive officer of Edge Capital Group a funding agency based in Orange County. Edge will be supervising the work along with O'Hara Energy Corp. of Nevada. The plan comes at a time when the city expects to see its energy costs double next year if it continues buying its power from PG&E. It couldn't be more timely said Mayor Tony Intintoli. Vallejo leaders are in the process of contracting with private business to build new wind solar and microturbine generators. Construction of a one- megawatt solar generator could start within 30 to 60 days. Conservation is also part of the plan and energy-efficiency improvements are already under way at Vallejo City Hall and the fire and police stations. City officials hope to add enough sources of power generation to make all city offices -- which consume about 10 megawatts a year -- self-sufficient by the end of the year. The Vallejo City Council gave tentative approval to the project late last month and will continue its discussions on the plan next week. Vallejo taxpayers won't have to pay any money in advance because Edge will finance the project's first $50 million in capital costs. In return a portion of the city's projected financial savings will be shared with the Edge and O'Hara. This is a fairly sizable project said Kevin Chambers the chief executive officer at O'Hara. Energy-efficient capital is difficult to find because it is such a new field. O'Hara is installing high-tech energy management systems at all city-owned property to reduce energy consumption. Final sites for the construction of new wind solar and microturbine generators have not been chosen. In recent years the energy bill for Vallejo city government has averaged between $2 million and $3 million per year. That includes the police and fire departments City Hall and water-pumping stations. Vallejo is part of a group of 50 local governments in Northern California that pooled their resources to buy electricity and natural gas keeping prices down. But the group's current contract expires Dec. 30. As a result the city expects its energy bill to double next year from 9.2 cents per kilowatt hour to 20 cents per kilowatt hour. It's been very positive what we've been doing and it hasn't cost us anything said City Manager David Martinez. We're going to be very optimistic that this is going to be a good thing for the city. City officials hope to eventually extend the plan to Vallejo's 4500 businesses and 37000 households. E-mail Jason B. Johnson at jbjohnson@sfchronicle.com. 2001 San Francisco Chronicle ? Page?A - 23 SEC asked to see if PG&E Corp. violated law with subsidiary Published Friday July 6 2001 in the San Jose Mercury News BY JENNIFER BJORHUS Mercury News California Attorney General Bill Lockyer asked the federal Securities and Exchange Commission on Thursday to step in to investigate whether PG&E Corp. violated federal law in taking billions of dollars from its bankrupt subsidiary. ``SEC scrutiny is essential to protect the public interest ratepayers and the people of the state of California'' Lockyer said in a statement. More than $4 billion flowed from the Pacific Gas & Electric utility to parent PG&E Corp. from 1997 to 1999 according to Lockyer's petition representing nearly 70 percent of the cash that flowed to the parent company during that period. PG&E Corp. spent $2.7 billion to buy back its stock $1.5 billion to pay dividends to shareholders and invested $800 million in its other subsidiaries according to the petition filed Thursday in Washington. Those figures are similar to figures from a state-ordered independent audit of PG&E Corp.'s finances released in late January. By moving assets from the utility to other businesses the company potentially harmed the utility and violated the federal Public Utility Holding Company Act in several ways according to the petition. The SEC is the nation's top cop for publicly held companies. But the commission has not reviewed PG&E Corp.'s asset movements saying the company is exempt from scrutiny under the Public Utility Holding Company Act because it's mainly a California operation and such intrastate operations are exempt. The attorney general's office argues that PG&E Corp. with more than $13 billion of its assets outside the state can no longer claim it is primarily an intrastate company. The SEC should step in it argues. The petition surprised PG&E Corp. officials who said they had no idea the attorney general's office had an issue with the company's exemption from the federal law said company spokesman Greg Pruett. Pruett said PG&E Corp.'s actions were appropriate because the federal utility law only applies if a company has one or more of the following activities in several states: electric transmission and distribution gas distribution or utility-owned generation. ``We have none of those things except in California'' Pruett said adding that the National Energy Group a PG&E Corp. affiliate ``has natural gas transmission but no distribution.'' ``The power plants that NEG owns or operates are not part of a utility and thus aren't regulated by PUCHA and it has an energy-trading arm that is also not regulated by PUCHA'' he said. The petition further asks the SEC to order PG&E Corp. to cooperate fully with the California Public Utilities Commission. The state commission is investigating whether PG&E Corp.'s corporate structure and its relationship with its bankrupt utility violate state utility regulations. The petition states it expects a response from the SEC within 60 days. But SEC spokesman John Heine said there's no statutory deadline for a response. He said he had not seen the petition and could not comment. Contact Jennifer Bjorhus at jbjorhus@sjmercury.com or (408) 920-5660. Judge may speed up electricity refund talks Published Friday July 6 2001 in the San Jose Mercury News BY RICARDO ALONSO-ZALDIVAR Los Angeles Times WASHINGTON -- A federal mediator seeking a settlement for billions of dollars in alleged electricity overcharges in California signaled Thursday that the talks are in trouble. Curtis L. Wagner Jr. chief judge of the Federal Energy Regulatory Commission said he may issue a report on the closed-door talks as early as today if progress is not made. ``The judge will perhaps issue a preliminary assessment of the talks'' said Tamara Young-Allen a FERC spokeswoman. ``He will do this only if he feels the talks aren't moving along as he sees fit.'' Wagner had previously said all sides would labor in private through the weekend to try to get a deal by the deadline of Monday at midnight. If that failed the judge said he would take seven days to craft a proposed settlement for FERC's governing board. California is demanding $9 billion in refunds. According to sources the generators have offered less than $1 billion. Wagner is said to be probing for a compromise figure that could take the form of a mix of cash payments and discounts on long-term contracts for power. Davis keeps state addicted to fossil fuels Published Friday July 6 2001 in the San Jose Mercury News BY JOE COSTELLO BEFORE this year's energy ``crisis'' Gray Davis wanted to be known as the education governor. However Davis and his advisers' energy teachings have revealed alarming failures setting back state energy policy not one or two years but one or two decades. While George W. Bush proposed an energy policy tied to fossil fuels disproportionate building of centralized generation plants too little energy efficiency lowering environmental standards and increased global warming emissions Davis enacted it. First Davis has tied the state for the next decade or longer to contracts with facilities that are exclusively fossil fuel generation. Second he has encouraged an unprecedented surge in the building of new centralized fossil fuel plants. Finally he has pushed the lowering of environmental standards to increase production from the dirtiest fossil fuel facilities. The state's new energy purchasing department has spent zero on renewable generation. David Freeman the governor's energy czar giving lip service to alternatives has negotiated close to $50 billion in long-term contracts with fossil fuel generators. By comparison the governor has authorized investment of only $13 million in expanding solar generation. Photovoltaic cells produce electricity directly from the sun's energy offering a clean efficient solution to the state's future peak energy demand. While the governor talks a lot about energy efficiency the state's funding of demand programs is about 1 percent of the funding for supply. Most egregious the vast majority of state energy efficiency money is funneled back to the utilities. While environmentalists deride the Bush administration proposals in California organizations such as the Natural Resources Defense Council actively support Davis' fossil fuel energy policy. The Davis energy policy has stuck California with the same old electric system for at least the next decade. Money has literally been burned instead of invested in innovation and creation of a cleaner and more efficient system. The best hedge against price spikes is a diversity of fuel sources unfortunately California's electric system is now tied to an even greater degree to fossil fuels. After binding the state economy to the past the Davis end game is logical. Davis and his energy advisers want to spend tens of billions of dollars for the utilities' restoration -- the very companies that for so long stifled industry innovation and remain most responsible for California's energy fiasco. There is still an opportunity to make the best out of a bad situation. Instead of bailing out the utilities they should be dismantled and sold off. A combination of a dozen or so local government and publicly owned companies should be created with a goal of innovating the industry. An auction could be held that would sell customer blocks and with it the state's long-term contracts. Choice should be reinstated with the lifting of the suspension on direct access to alternative suppliers. Instead of moving the state to the next level of energy development the education governor's remedial energy teachings will force California to repeat its energy lessons. Joe Costello is an energy and communications consultant based in Larkspur. Business Economics fuels power solution in California Price relief gains political support Robert Gibbons BridgeNews ? 07/06/2001 Chicago Tribune North Sports Final N Page 3 (Copyright 2001 by the Chicago Tribune) Political pressure coming from the U.S. Congress and politicians from Western states seems to have influenced the approach to the power crisis despite opposition to price caps in the Bush administration. The Federal Energy Regulatory Commission in June expanded price mitigation measures on wholesale electricity sales in California during periods when blackouts are possible. The measures encourage generators to sell power into the state to prevent emergency alerts from being declared which trigger price caps. The move came with support growing in Congress especially among representatives of Western states on both sides of the aisle for legislation that would have capped wholesale prices in the region. The macroeconomic force may have been the difference between the $7 billion cost of power for California in 1999 and its rise to approximately $27 billion in 2000. The cost is estimated to reach between $50 billion and $70 billion in 2001. With that kind of money at stake suddenly the concern becomes less a question of who is responsible for the problem but rather how it can be solved quickly to prevent harsh political consequences. California Atty. Gen. Bill Lockyer has conducted an investigation into the actions of power generators and offered multimillion dollar rewards to whistleblowers to provide evidence of price manipulation by independent power generators. The state is seeking refunds of $8.9 billion the amount it estimates independent power generators overcharged California 's troubled utilities. The U.S. General Accounting Office has released a report criticizing the FERC for not finding evidence of power generators using plant outages to drive up prices in California . FERC's [February] study was not thorough enough to support its overall conclusion that audited companies were not physically withholding electricity supply to influence prices the GAO found. Of the major independent power generators and marketers like Reliant Energy Dynegy Duke Energy and Enron only Williams and its CEO Keith Bailey came out in April in favor of some sort of short- term price relief for California . The political dynamic out there is much more Draconian than what we're proposing Bailey told analysts in April defending Williams' position supporting some limited short-term price mitigation. What he was worried about was California Gov. Gray Davis using eminent domain powers to take over power plants and the state setting up a public power authority to build state-owned plants. Financial California Changes Stance on Refunds Two Sides Far Apart In Energy Talks Peter Behr ? 07/06/2001 The Washington Post FINAL Page E01 Copyright 2001 The Washington Post Co. All Rights Reserved California officials have abruptly shifted tactics in their attempt to recover billions of dollars in alleged overcharges for electricity saying they may reduce their demands for huge refunds if generators renegotiate $43 billion in long-term electricity contracts that the state signed this year. Gov. Gray Davis (D) said part of the $8.9 billion in refunds the state is seeking could be offset by reductions in energy prices in the long-term contracts whose costs have become a growing political embarrassment for Davis. We've made suggestions we've offered various ways in which people could get us $8.9 billion Davis told the San Jose Mercury News in a report yesterday. You can renegotiate our existing contracts and save us money. However you want to do it it's just got to net out close to $8.9 billion. The new offer was introduced this week into the closed negotiations over a California settlement being conducted in Washington by Federal Energy Regulatory Commission Judge Curtis L. Wagner Jr. according to sources close to the negotiations. Yesterday Wagner said he may issue his own preliminary finding today on the amount of overcharges if California officials and the generators cannot reach a compromise. What I'm trying to do is get people in a settlement mood Wagner told reporters. In the event we're unable to do that [Friday] at some point I may offer a preliminary assessment. The settlement conference is set to conclude on Monday. Wagner FERC's chief administrative judge has been trying to push both sides toward a compromise that would resolve the huge energy pricing controversy. Mountainous energy prices have bankrupted California 's largest utility drained billions of dollars out of the state treasury and put Davis at sword's point with generators that help keep the state's lights on. Last Friday Wagner rebuked Davis's chief representative Michael Kahn chairman of California Independent Grid Operator -- the state's power grid manager -- indicating that the state's demand for nearly $9 billion in refunds from power generators and marketers was too high sources said. Wagner's settlement conference which has involved more than 100 lawyers for all sides is closed to the public and media. Wagner complained last month that Kahn was following a political agenda and his lack of independence in the negotiations was such a joke that the parties might as well wear clown suits according to a Dow Jones report confirmed by sources close to the talks. But he has also criticized the generators and power marketers led by Reliant Energy Inc. Williams Energy Services Duke Energy and Southern Co. for failing to make serious settlement offers these sources said. The suppliers have offered to refund $600 million provided the state is able to call off various California lawsuits demanding far larger refunds sources said. Wagner's leverage is his ability to propose his own refund figure to FERC's commissioners. FERC has tentatively called for $124 million in refunds but now is taking a harder line on preventing a new escalation of California 's electricity prices this summer and is likely to be receptive to a higher refund figure some energy analysts believe. Davis's tactical change offering to make the long-term contracts part of an overall settlement comes amid growing criticism of what the state will have to pay for energy under those deals. California 's energy calamity stemmed in large part from its failed deregulation plan which relied heavily on short-term power purchases at volatile spot market prices. When energy costs shot upward last summer so did the state's electricity bills. In response Davis's aide S. David Freeman and his staff began negotiating long-term power contacts with suppliers. The $43 billion in deals signed so far would require the state to pay about $70 per hour for a megawatt of power for a large part of the electricity it will need over the next 10 years. That's well under the average of $250 per megawatt-hour that the state was paying at the beginning of this year but above current power prices -- and considerably higher than what electricity may cost in the next decade energy analysts say. A new agreement to lower those contract prices could relieve political pressure on Davis and focus settlement negotiations away from the state's controversial demand for the $8.9 billion refund. Davis will argue that reducing future power charges that his administration negotiated should count as a refund because the deals were reached under commercial duress according to sources close to Wagner's negotiations. Industry supporters say Davis's refund figure is impossible to justify. There's no benchmark for what a fair and reasonable price should be said Michael Zenger California director of Cambridge Energy Research Associates. The state's advocates counter that if FERC enforced a just and reasonable standard for power prices based on operating costs and a generous profit the overcharges by all sellers could easily reach the $9 billion figure. It's not rocket science but it does require the regulators to regulate said Frank Wolak a Stanford University economist who heads an oversight committee for the California grid. Those polar-opposite views have left both sides in Wagner's conference room billions of dollars apart as the talks approached their final weekend sources said. http://www.washingtonpost.com Contact: http://www.washingtonpost.com Politics & Policy U.S. Hearing Officer May Impose Pact To End California Power-Overcharge Case By Richard B. Schmitt ? 07/06/2001 The Wall Street Journal Page A10 (Copyright (c) 2001 Dow Jones & Company Inc.) WASHINGTON -- With settlement talks apparently stalled a federal hearing officer said he may propose his own solution to settle billions in alleged electricity overcharges tied to the California power crisis. Curtis L. Wagner Jr. said he was still optimistic California officials and several power companies could come to terms on $8.9 billion in disputed electricity charges the state has incurred over the past year. Absent more-meaningful progress he said he would offer his own preliminary assessment and recommendation as soon as today. In that event Mr. Wagner also said he would convene a hearing Monday where the two sides would be given the chance to comment on his plans. Mr. Wagner has previously indicated he feels California is due some refunds but far less than the total the state claims. California is also indebted to the power companies for billions in previous deliveries those debts could at least partially offset any refunds. Mr. Wagner has also said long-term contracts that would insulate the state from the sort of price shocks it has experienced over the past year could be part of any resolution. An administrative-law judge with the Federal Energy Regulatory Commission Mr. Wagner was named by the panel two weeks ago to broker a peace of the overcharge dispute. Commission officials have given the parties until Monday to reach an agreement behind closed doors. After that absent a settlement the commission has ordered Mr. Wagner to report back with his findings and recommendations within a week. At that point the commission has said it will impose a settlement of its own liking. The overcharge issue has been a flash point in the California debacle with the state's governor Gray Davis calling the energy companies pirates and marauders. The industry considers itself a scapegoat for a bungled state deregulation effort.

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Re: Hendricks

I think we should let people in the legislature know about this and see if one or more of them can get their hands on it. From: Richard B Sanders@ECT on 05/06/2001 10:40 AM To: James D Steffes/NA/Enron@Enron Steven J Kean/NA/Enron@Enron Richard Shapiro/NA/Enron@Enron Jeff Dasovich/NA/Enron@Enron Sandra McCubbin/NA/Enron@Enron cc: Subject: Hendricks Any thoughts?

legal affairs

confidential

Energy Issues

Firsst article attached refers to the 1946 Nebraska case I mentioned to you= =20 in DC

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casual