From: miyung.buster@enron.com
To: california.group@enron.com
Date: 2001-04-06 09:45:00+00:00
Subject: Energy Issues

Please see the following articles:

Sac Bee, Fri, 4/6:  "Energy supply setback: Big generator can't be forced
 to sell emergency power to the state, a U.S. court rules"

Sac Bee, Fri, 4/6:  "In TV address, Davis embraces rate increase"

Sac Bee, Fri, 4/6:  Governor's speech transcript

Sac Bee, Fri, 4/6:  "Dan Walters: Davis finally acknowledges 'crisis,' backs 
a rate increase"

San Diego Union, Thurs, 4/5:  "Davis endorses rate hikes, defends handling of 
energy crisis"

San Diego Union, Thurs,4/5: "San Diego utility overspent $98 million, 
consumer group says "

LA Times, Fri, 4/6:  "Davis Acknowledges Need for Rate Hike"

LA Times, Fri, 4/6:  "Putting the Heat on 2-Fridge Households"

SF Chron, Fri, 4/6:  "Davis Proposes Tiered Plan To Boost Rates 
Governor wants slightly lower increases than PUC adopted "

SF Chron, Fri, 4/6:  "Legislature Pounds Out Conservation Package 
Davis expected to sign $1.1 billion measures"

SF Chron, Fri, 4/6:  "At least 3.6 million families face possible power 
cutoffs"

Mercury News, Fri, 4/6:  "Davis reveals plan, including rate hikes"

Mercury News, Thurs, 4/5:  "Davis gives up fight against rate hikes"

Mercury News, Thurs, 4/5:  "Western states share shortage of electricity"

Mercury News, Fri, 4/6:  "Getting real on rates"                 (Editorial)

Orange County, Fri, 4/6:  "Davis: Rate hikes a must"

Orange County, Fri, 4/6:  "Davis' power-crisis plan brings questions from 
Wall Street"

Orange County, Fri, 4/6:  "Davis pulls energy switch"

Individual.com, Fri, 4/6:  "[B] PG&E defaults on Los Alamos Energy power 
payment"

Energy Insight, Fri, 4/6:  "Energy-related firms fare well on Fortune 500 
list"          (Enron mentioned)
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Energy supply setback: Big generator can't be forced to sell emergency power 
to the state, a U.S. court rules.
By Denny Walsh and Carrie Peyton
BEE STAFF WRITERS
(Published April 6, 2001) 
In a development that does not bode well for California's energy supply, a 
federal appellate court Thursday halted enforcement of a lower court order 
that a big electricity generator must sell emergency power to the state 
without guarantee of payment. 
State energy officials said the ruling wouldn't have any immediate effect but 
could precipitate a power emergency if the generator decided to take a plant 
off-line for maintenance. 
On March 21, citing "rolling blackouts (that have) darkened the California 
landscape," U.S. District Judge Frank C. Damrell Jr. imposed an injunction 
against Reliant Energy Services Inc., one of the nation's major generators. 
Houston-based Reliant controls approximately 3,800 megawatts, or about 20 
percent, of the gas-fired generation capacity in the state, and Damrell found 
that loss of that production "poses an imminent threat." 
But Thursday, a three-judge panel of the 9th U.S. Circuit Court of Appeals 
granted an emergency stay of the injunction, saying Reliant has shown "a high 
likelihood of success on the merits" of its appeal. 
While not spelling it out, the panel apparently bases its finding on the 
question of the courts' jurisdiction over the energy market. The panel 
directed that a hearing on the appeal be scheduled for the second week in 
July. 
The decision leaves California's electric grid more fragile, at least 
temporarily, according to the state Independent System Operator, which 
maintains and controls power transmissions. 
It gives the agency no immediate recourse if Reliant chooses to shut down any 
of its plants for maintenance, said ISO Vice President Jim Detmers. 
"It's not going to change anything overnight, and it's not going to change 
anything over the weekend," said Detmers. "But if Reliant decided on a 
unilateral action to take their units off for maintenance ... we definitely 
could have a system emergency." 
Reliant officials, when told of the ruling, took a conciliatory tone but 
declined to specify their next move. 
"Reliant ... has pledged to keep the lights on in California," said company 
lobbyist Marty Wilson, and "is still of a mind to want to cooperate." 
Without further comment, the appeals court judges cited a 1980 U.S. District 
Court decision. In that case, 14 cities sued Florida Power and Light Co., 
alleging that it was violating a number of laws in its sales of power and 
production of electricity. 
The judge found, however, that the Federal Power Act reserves oversight of 
interstate utilities exclusively to the Federal Energy Regulatory Commission. 
He ruled that only the commission may bring an action involving energy sales 
into federal court -- unless it is a request to review a commission order, 
and that goes directly to an appellate court. 
The lawsuit before Damrell was brought by the ISO to force Reliant and two 
other generators to respond to ISO's emergency orders for power, even though 
the agency is buying on behalf of two retailers that are broke and hopelessly 
in debt. 
Because Pacific Gas and Electric Co. and Southern California Edison can't pay 
their bills -- about $14 billion -- some wholesalers want to cut off sales to 
the utilities. 
The other three defendants in the ISO's suit -- Dynegy Power Corp. of Houston 
and Tulsa-based AES Corp. and its marketer, Williams Energy Marketing & 
Trading Co. -- have entered into written agreements with ISO to continue 
supplying emergency power until the FERC decides whether they are required to 
sell to companies that are not creditworthy. 
But Charles Robinson, ISO general counsel, points out that the generators can 
rescind those agreements with 48 hours' notice. 
"My hope is this is a temporary setback," said Robinson. He added, however, 
that the practical effect is "at least for now, we don't have a tool to 
compel them to do what we believe they're obligated to do" -- respond to 
emergency demands for power. 
Reliant has insisted since the suit was filed Feb. 6 that Damrell has no 
jurisdiction over the rate schedules that govern dealings between generators 
and the ISO, and that the Federal Power Act mandates that the FERC must 
settle any disputes about terms of those tariffs. 
In issuing the injunction, Damrell acknowledged that the FERC has special 
expertise concerning agreements between generators and ISO. 
"Absent the extreme exigencies of the California power crisis, the court 
agrees that a stay pending further action by the FERC would be proper," he 
said. "But those are not the facts here. Electricity is in critically short 
supply. The health and safety of the people of California are potentially at 
risk." 
Immediately upon receiving the 9th Circuit's order Thursday, attorneys for 
the ISO asked Damrell to set an accelerated schedule for its motion to amend 
the suit. The agency apparently has crafted a new complaint stressing its 
view that the matter is an ordinary contract dispute over which the judge has 
jurisdiction. 
Damrell scheduled a hearing on the motion for Thursday. 
In a further development that could complicate the state's dire need for 
energy, an alternative supplier won a court fight Thursday to bypass the big 
utilities and sell its power on the open market. 
Timber giant Sierra Pacific Industries, which operates four biomass plants 
that produce power for PG&E, obtained a temporary restraining order in 
Sacramento Superior Court that says Sierra Pacific is not required to sell 
its power to PG&E. 
The ruling means PG&E and Southern Edison could lose power as alternative 
energy generators, fed up with months of nonpayment, sue to be able to sell 
their comparatively cheap product elsewhere, including outside the state. 

The Bee's Denny Walsh can be reached at (916) 321-1189 or dwalsh@sacbee.com. 
Bee staff writer Dale Kasler contributed to this report. 
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In TV address, Davis embraces rate increase
By Dan Smith
BEE DEPUTY CAPITOL BUREAU CHIEF
(Published April 6, 2001) 
Seeking to ease Californians' energy fears, Gov. Gray Davis on Thursday 
proposed a tiered electricity rate increase that would hit the heaviest power 
users the hardest. 
The Democratic governor, whose popularity has been plummeting, told a 
statewide television audience in a five-minute speech from his Capitol 
office: "It's become increasingly clear ... that some rate increases now are 
necessary to keep our lights on and our economy strong." 
The address came as California enters its fifth month of acute power woes 
that have resulted in periodic electricity blackouts. 
In embracing a rate increase as part of the solution to California's energy 
nightmare, Davis joined a long list of financial and energy experts -- 
including members of his own staff -- who for months have said a rate 
increase is imperative. 
The state Public Utilities Commission last week approved a $4.8 billion a 
year, average 30 percent rate increase for customers of cash-strapped Pacific 
Gas and Electric Co., Southern California Edison and San Diego Gas & 
Electric. 
But Davis said his plan, which he will ask the PUC to approve instead, is 
better. Administration officials said the governor's plan goes easier on 
commercial users and conservation-minded residential users, but preserves the 
largest rate increases for heavy residential users. Sacramento Municipal 
Utility District customers would be unaffected by Davis' proposal. 
The 55 percent of PG&E residential customers who use less than 130 percent of 
the "baseline" amount of power, for instance, would see no increase. Medium 
users -- those using between 130 percent and 200 percent of the baseline 
amount -- would see an average bill of $70 rise to $77. But heavy users would 
see their bills go from $138 a month to $189. 
"Here's the point," Davis said. "The more you use, the more you pay. The more 
you conserve, the more you save. Conservation is our best short-term weapon 
against blackouts and price gouging." 
The rate increase would come on top of an average 9 percent residential rate 
increase imposed in January. Davis advisers said the proposed increase would 
eliminate the need for an additional 10 percent increase scheduled to take 
effect next year. 
Davis said his plan would raise enough money to "restore the utilities to 
financial stability" if the companies agree to sell their transmission lines 
to the state, drop their lawsuits against the state and promise to sell cheap 
power for 10 years. The administration has been negotiating to buy the power 
transmission lines for weeks, and has made little progress with PG&E. 
Even though the governor's rate proposal would raise about 15 percent less 
revenue than the PUC plan, administration officials insisted it would provide 
the utility companies enough money to cover future power purchases and reduce 
their debts over time. They said they discovered that the state can buy power 
more cheaply than the PUC thought it could and presumed greater savings 
through conservation. 
Davis' plan relies heavily on floating billions of dollars in bonds, 
essentially stretching the impact of a rate hike over as many as 15 years. 
Not only would the state borrow about $12 billion to pay for its purchases, 
but the utilities would borrow about $8 billion. They'd repay the $8 billion 
through a slice of the money generated by the rate increase. The utilities 
also would get a cash infusion of something less than $7 billion from the 
sale of the transmission grid. 
Harvey Rosenfield of the Foundation for Taxpayer and Consumer Rights said 
Davis' numbers, while apparently offering a "bailout" of utilities' debts 
designed to please Wall Street, simply don't add up. 
"He's cooking the books to lower the apparent price to the public, and then 
they're going to figure out a way to ram this down our throats after the 2002 
election," he said. 
Analysts called the plan long overdue and questioned whether it would work. 
"It's definitely a plan from the Wall Street cookbook, but can he get it 
done? Can he get it done in a believable time frame?" said bond analyst Shawn 
Burke of Barclays Capital in New York. 
Davis' speech disappointed nearly all other parties. 
"Unfortunately, the steps the governor announced tonight still do not appear 
to offer a comprehensive solution to resolve California's energy crisis," 
PG&E said in a prepared statement. 
Davis continued to blame power generators for "ripping us off" and federal 
regulators for failing to stop them, and spent much of his speech detailing 
the steps that he and state lawmakers have taken to confront the crisis thus 
far. 
"Those around (the Capitol) have heard the speech," said Senate President Pro 
Tem John Burton, D-San Francisco. "He was talking to 34 million Californians 
who hadn't." 
Some gubernatorial advisers had been pushing for the speech for weeks, 
arguing that Davis needed to explain his actions -- and his intentions -- as 
the onset of warm weather enhances the prospect of power blackouts. 
Davis has come under increasing criticism, including from some members of his 
own party, for failing to stem the crisis. Detractors say Davis has been 
indecisive -- even inattentive -- in his handling of the crisis, while his 
proposals falter in the Legislature and at negotiating tables with 
near-bankrupt utilities. 
Consumer groups, meanwhile, say Davis' failure to more forcefully take on 
power generators has allowed the crisis to fester, and they blame him for the 
rate increases. As the 2002 re-election campaign looms, some private polls 
now say support for the once-popular Davis is eroding. 
Davis didn't make believers out of Republicans. Assembly GOP leader Dave Cox 
said the speech was more talk than substance. "Frankly, he didn't offer any 
new solutions to the problems," said Cox, of Fair Oaks. "What we heard 
tonight was the governor saying, 'Oops, I guess we're going to have to raise 
rates,' while all along he'd been saying a rate increase wasn't necessary. 
And, frankly, it wasn't necessary if we'd gotten started back in September." 
Also on Thursday, the Legislature sent Davis a $1.1 billion conservation and 
low-income assistance package aimed at reducing California's risk of rolling 
blackouts this summer. 
By passing two bills -- SB 5x by state Sen. Byron Sher, D-Palo Alto, and AB 
29x by Assemblywoman Christine Kehoe, D-San Diego -- lawmakers met their 
stated goal of sending conservation measures to Davis before heading off on a 
weeklong spring recess. 

The Bee's Dan Smith can be reached at (916) 321-5249 or smith@sacbee.com. 
Bee Staff Writers Amy Chance, John Hill, Kevin Yamamura, Dale Kasler and Jim 
Sanders contributed to this report. 
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Governor's speech transcript


(Published April 6, 2001) 
Here is the text of Gov. Gray Davis' remarks on energy: 
Good evening. I'm speaking to you tonight from Sacramento on the most 
difficult issue facing California: our energy crisis. 
Simply stated, we have two problems: Supply is too low and costs are too 
high. Both result from the flawed deregulation scheme created back in 1996. 
But no matter how we got into this mess, you hired me to solve problems. And 
that's what I'm doing. 
The only long-term solution is to build more power plants. We must also cut 
back on consumption and stabilize the utilities. But prices won't fall and 
supply won't be truly reliable until we generate more power than we consume. 
Yet in the 12 years before I took office, not a single major power plant was 
built in California. Not one. Since I became governor, we've licensed 12 
major power plants. Ten more are in the pipeline. And we're doing this 
without weakening our commitment to clean air and clean water. 
Deregulation required the utilities to sell off many of their power plants to 
independent generating companies. The generators are free to charge whatever 
they want because they're governed only by federal regulators who refuse to 
control wholesale energy prices. 
This past winter, the prices charged by the generators shot through the roof, 
driving the utilities to the brink of bankruptcy. 
In January, with the feds still refusing to do their job, California stepped 
in to purchase the power the utilities could no longer afford to buy. We 
didn't take over to save the utilities. We took over to keep the power on and 
the economy strong. That's not all: 
We also negotiated long-term contracts for electricity at vastly lower 
prices. 
I used my emergency powers to seize control of low-cost power contracts the 
utilities were about to forfeit to the generators. 
We began negotiations to buy the utilities' transmission system. 
We cut red tape and offered cash incentives to speed up construction of power 
plants. 
We're launching an $800 million conservation program. 
We're moving to establish a public power authority to build more power. If 
the private sector fails to build all the plants California needs, we'll 
build them ourselves. 
And because I share your concern that the generators are ripping us off, 
we're using every legal remedy to root out and punish illegal conduct. 
We can't fix 12 years of inaction overnight. But we're making real progress. 
Now, as you know, I have fought tooth and nail against raising rates. It's 
become increasingly clear, however, that with rising natural gas prices, the 
feds' failure to control costs, and the state's lack of supply, that some 
increases now are necessary to keep our lights on and our economy strong. 
But I remain committed to protecting average Californians from massive rate 
hikes. So I'm urging the Public Utilities Commission to adopt a plan that 
will protect average consumers, reward those who conserve and motivate the 
biggest users to cut back. 
Under my proposal, more than half of you won't pay a penny more. For the 
rest, the average increase will be 26 and a half percent. But many in that 
group will pay only about a 10 percent rate increase. The heaviest users will 
see their rates rise 34 and a half percent on average. That includes business 
paying their share. This is in addition to the 9 percent surcharge we've all 
been paying since last winter. 
But all Californians can reduce their bills through conservation. 
Here's the point: The more you use, the more you pay. The more you conserve, 
the more you save. Conservation is our best short-term weapon against 
blackouts and price-gouging. By flexing your power, you'll help secure our 
energy future. 
Unlike the PUC, my plan includes funds to restore the utilities to financial 
stability -- if they agree to three main conditions: 
They must provide low-cost regulated power to the state for 10 years. Agree 
to sell us their transmission system. And dismiss their lawsuits which seek 
to double your electricity rates. 
My proposal raises rates fairly, assures us of long-term power, stabilizes 
the utilities and promotes conservation. 
Our emphasis on conservation is critical. In order to make it through the 
summer, we must cut demand by at least 10 percent. 
Already we've launched programs to cut back commercial lighting, and reduce 
consumption in office buildings, supplies and government facilities. 
My friends, we do have a power shortage but we are far from powerless. We are 
34 million strong and if each of us does our part, we can minimize 
disruptions and get through the summer. We are Californians. We've withstood 
earthquakes, floods, fires, and droughts. 
Yes, this mess is man-made, but with your help and God's blessing, we'll get 
through this as well. 
Thank you and good night. 
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Dan Walters: Davis finally acknowledges 'crisis,' backs a rate increase


(Published April 6, 2001) 
Gov. Gray Davis -- under fire from the media and other politicians for his 
passive, incremental handling of the state's deepening energy crisis -- 
unveiled Thursday what he said was a comprehensive scheme to resolve it, 
including a hefty increase in power rates paid by most consumers. 
It was a full-court press by Davis and his administration, including a brief 
statewide television address and a turnout of aides to sell the scheme to the 
media. Davis -- for the first time -- even used the term "crisis" to describe 
the situation after weeks of insisting it was merely a "challenge." 
Clearly, a major motivating factor in the governor's new activism is that his 
own re-election in 2002 is now in peril if the energy crisis persists and he 
continues to deal with it reactively. Editorial writers have been describing 
Davis' reactive approach as cowardly, and private polls have been indicating 
that since an unexpected power blackout hit last month, Davis' approval 
ratings have been plummeting, from well over 60 percent to perhaps half that 
level. And certainly Davis' own nonstop polling has told him the same thing. 
While much of Thursday evening's five-minute address was a truncated version 
of what Davis has been saying publicly for the past few weeks, most recently 
at the state Democratic convention in Anaheim last weekend, the one new 
element was an endorsement of rate increases after months of insisting that 
the problems could be resolved "within the existing rate structure." Davis 
proposed a rate boost similar in structure, but apparently slightly less, 
than the one tentatively endorsed by the state Public Utilities Commission 
last week. Davis had insisted that the PUC, although controlled by his 
appointees, had acted on its own, but the widespread skepticism about that 
posture merely added to his image problems. 
Like the PUC plan, the Davis rate scheme would concentrate the rate increases 
on heavy residential power users and businesses. "I'm urging the (PUC) to 
adopt a plan that will protect average consumers, reward those who conserve 
and motivate the biggest users to cut back," Davis said, adding that the plan 
will "restore the utilities to financial stability" if they agree to sell 
their intercity power transmission system to the state, provide low-cost 
power to the state for 10 years and drop federal lawsuits seeking 
compensation for their immense debts. 
It's unclear, however, whether the average 26.5 percent boost in rates to 
customers of the three major privately owned utilities -- about 70 percent of 
Californians -- will do all that the Democratic governor insists it will. He 
and his aides say it will cover the $5 billion or so that the state's general 
fund already has spent on emergency power purchases since January, finance 
future purchases and still provide enough "headroom" to pay off the 
utilities' $13 billion in debts, part of which would be covered by the 
transmission grid buyout. But the utilities and their creditors were already 
complaining that the PUC's somewhat larger rate boost was too small to cover 
all the various costs and debts. 
Davis aides refused to release specific numbers on how each cost factor would 
be covered by the proposed rate boost. The governor's hike would come on top 
of a 9 percent surcharge on power bills imposed in January and now being made 
permanent. 
Even if it pencils out and is implemented by the PUC, however, the Davis plan 
would leave Californians with some of the nation's highest utility rates and 
invite a backlash from consumer activists who have been threatening to 
sponsor a 2002 ballot measure if there's a "bailout" of utilities. The plan 
would also have to win the approval of Wall Street bankers, who would 
underwrite and market the billions of dollars in bonds that Davis wants to 
float to pay for past debts and future power costs. 
Will it be implemented? Will it work? Will it arrest Davis' slide in the 
polls? No one can say for certain -- and that includes the governor himself. 

The Bee's Dan Walters can be reached at (916) 321-1195 or dwalters@sacbee.com
. 
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Davis endorses rate hikes, defends handling of energy crisis 



By Jennifer Coleman
ASSOCIATED PRESS 
April 5, 2001 
SACRAMENTO ) Gov. Gray Davis told Californians in a live address Thursday 
night that he now thinks rate increases are needed to resolve the state's 
power crisis. 
Davis, reacting to record rate hikes of up to 46 percent approved by state 
regulators last week for Pacific Gas and Electric Co. and Southern California 
Edison power customers, said he wants to make those who use the most 
electricity bear the bulk of the price hikes. 
"The more you conserve, the more you save," Davis said. "Conservation is our 
best short-term weapon against blackouts and price-gouging." 








San Diego utility overspent $98 million, consumer group says 
Text of Gov. Gray Davis' energy speech 
? 



Speaking from his Capitol office in a televised five-minute speech, Davis 
lashed out at federal power regulators for failing to help California and 
defended his handling of the state's energy problems. 
The Democrat told viewers California's short power supply and high wholesale 
costs are the result of a "flawed deregulation scheme" signed into law in 
1996 by then-Republican Gov. Pete Wilson. 
"But no matter how we got into this mess, you hired me to solve problems and 
that's what I'm doing," he said. 
Davis said he has fought utility rate increases "tooth and nail" but now 
thinks they are needed to help finance the state's power purchases on behalf 
of Edison, PG&E and a third strapped utility, San Diego Gas & Electric. 
The power buys have cost taxpayers $4.7 billion since January, money that 
will eventually be recouped from ratepayers. 
Davis said the utilities were pushed to the brink of bankruptcy by soaring 
wholesale power costs and federal regulators' refusal to cap wholesale 
prices. 
"In January, with the feds still refusing to do their job, California stepped 
in to purchase the power the utilities could no longer afford to buy," Davis 
said. "We didn't take over to save the utilities. We took over to keep the 
power on and the economy strong." 
Davis, who repeatedly has said the state can resolve the power problems 
without rate hikes, told viewers he now thinks rate increases are necessary 
to finance the power purchases. 
His new stance comes after the state Public Utilities Commission last week 
approved rate increases of up to 46 percent for customers of Edison and PG&E. 
The commission has not yet decided how to spread the rate increases among the 
utilities' customers. 
Davis said he will propose a tiered rate plan that would mean a 26.5 percent 
rate increase for the average customer. Under the governor's plan, the 
heaviest power users would see an average 34.5 percent rate increase. 
According to the Davis administration, the governor's plan would let Edison, 
PG&E and the state's third investor-owned utility, San Diego Gas & Electric, 
to make a total of $8 billion in debt payments over a decade. 
Davis' plan would shift the burden of the PUC rate increase to heavier 
residential, commercial and industrial power users while largely sparing 
agricultural users, who would only see increases of 5 to 15 percent. 
"We are going to take the governor's proposal under advisement and give it a 
lot of weight, I suspect," PUC Commissioner Carl Wood said, adding that the 
commission will seek input from consumer groups and businesses before making 
a final decision. 
The three utilities say they have lost more than $14 billion since June due 
to soaring wholesale power costs. More than $13 billion of that comes from 
Edison and PG&E, who have been barred under the state's deregulation law from 
recovering the rising costs from their customers. 
Davis ) facing mounting pressure from Republicans and fellow Democrats to 
resolve California's energy crisis ) delivered the speech from behind a desk, 
with his hands clasped in front of him. 
He assured residents that the state would survive the crisis. 
"We are Californians. We've withstood earthquakes, floods, fires and 
droughts," Davis said. "Yes, this is man-made, but with your help and God's 
blessing, we'll get through this as well." 
He said he would stand by his plan to help restore the utilities to financial 
health by negotiating state acquisition of their transmission lines and 
requiring them to sell low-cost power to the state for a decade and drop 
their lawsuits seeking to double their electric rates. 
Davis urged Californians to help cut power use 10 percent to fend off rolling 
blackouts this summer, when residents will crank their air conditioners and 
demand will rise sharply. 
The Legislature on Thursday afternoon sent Davis proposals that would spend 
$1.1 billion on conservation programs for consumers and businesses. Davis 
plans to sign the measures. 
He listed actions he has taken to try to solve the power crisis, including 
negotiating long-term contracts to purchase power and buy the utilities' 
transmission lines. 
Davis also said he has cut red tape and provided incentives to speed power 
plant construction after a decade with none built. 
"We can't fix 12 years of inaction overnight. But we're making real 
progress," he said. 
The speech, the first such message Davis has delivered besides his annual 
State of the State address, comes as the GOP and even fellow Democrats 
criticize the governor's handling of the crisis. 
Consumer groups, angered by the rate increases, are promising a revolt at the 
polls in 2002, planning to roll back the rate hikes through an initiative 
that would share the ballot with Davis, who is up for re-election then. 
Consumer advocate Harvey Rosenfield said Davis is failing to protect utility 
customers. He compared power suppliers to blackmailers charging an 
"extortionary price for electricity." 
"Nothing the governor has said tonight will do anything to stop the 
profiteers," said Rosenfield of the Foundation for Consumer and Taxpayer 
Rights in Santa Monica. 
Power supplier Duke Energy said it has done nothing wrong and doesn't deserve 
criticism for the wholesale prices. 
"We are running our power plants at historically high levels to keep 
consumers' lights on," Duke said in a written statement. 

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San Diego utility overspent $98 million, consumer group says 



ASSOCIATED PRESS 
April 5, 2001 
SAN FRANCISCO ) San Diego Gas and Electric Co. could have saved its customers 
$98 million by buying electricity using contracts rather than over-relying on 
purchases from the expensive daily market, a state consumer agency says. 
The state Office of Ratepayer Advocates, the consumer arm of the Public 
Utilities Commission, filed testimony Thursday recommending the PUC not allow 
the San Diego utility to pass along the amount to its customers. 
A call to Sempra Energy Corp., the parent company of SDG&E, was not 
immediately returned Thursday night. 
In August, the state Legislature capped electricity rates at 6.5 cents per 
kilowatt hour for the customers of SDG&E after customers saw their bills 
skyrocket when the utility began passing along the market price of power. 
Since the price cap, SDG&E has undercollected around $400 million from its 
customers, said Steve Linsey, an ORA supervisor. 
"Had SDG&E acted reasonably and prudently, SDG&E rates still would have 
increased, but not by nearly as much," read a statement from the ORA. 
"We're not saying that they could have seen the level or extent that the 
overpricing occurred," Linsey said. "But just based on the history and 
volatility of the market and supply and demand fundamentals that would have 
led them to hedge their portfolio rather than being totally exposed to the 
spot market." 

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Davis Acknowledges Need for Rate Hike 

Electricity: In a statewide TV broadcast, he says the average would be 26.5%. 
For the first time, he calls situation a "crisis." 

By DAN MORAIN, Times Staff Writer 

?????SACRAMENTO--After spending months voicing opposition to rate hikes, Gov. 
Gray Davis acknowledged to a statewide television audience Thursday night the 
need for an electricity rate increase that would average 26.5%.
?????For the first time calling it an "energy crisis," Davis enumerated steps 
he has taken, then said he has fought "tooth and nail against raising rates." 
But citing a need for increases, the Democratic governor called for a tiered 
system in which people who use the most electricity pay the most--as much as 
37% more if they use more than twice their minimum allotment.
?????"Here's the point: The more you use, the more you pay," Davis said. "The 
more you conserve, the more you save. Conservation is our best short-term 
weapon against blackouts and price gouging."
?????Davis said his proposed rate plan is sufficient to help reduce the 
$13-billion debt of Southern California Edison and Pacific Gas & Electric. 
Although the bulk of the rate increase would be used to help California 
finance bonds for long-term power purchases, about 10% to 15% would be 
earmarked for the utilities--so long as they agree to sell their transmission 
lines to the state, according to the administration.
?????The decision to offer the utilities at least some rate hike monies 
brought a sharp response from lawmakers. Consumer advocates also are sure to 
be unhappy.
?????"We are not in this business to bail out these guys," said Senate 
President Pro Tem John Burton (D-San Francisco).
?????Added Harry Snyder of Consumers Union: "Absolute giveaway . . . He is 
going to pay them off completely for all their mistakes."
?????The governor took the unusual step of reserving air time on statewide 
television at a time when he is slipping in polls and surveys show that the 
public is increasingly concerned about the energy crisis. Gov. Pete Wilson 
took a similar step during the recession in 1992 when he moved to raise taxes 
and cut government spending.
?????The speech took on greater urgency as the California Independent System 
Operator, the entity that oversees power distribution, warned Thursday that 
the state will face 34 days of rotating blackouts if consumers and businesses 
use the same amount of electricity this summer that they did last year. The 
blackouts could be extensive enough to darken 5 million homes at once.
?????The governor's speech came hours after the Legislature approved a record 
$1.1 billion in energy conservation measures designed to provide consumers 
with incentives to reduce electricity use. 
?????In his speech, Davis renewed his call to Californians to curtail 
electricity use by at least 10%, even as a new report was issued warning that 
the state faces repeated summer blackouts because of a major gap in the 
supply of power during the coming months.
?????"We are 34 million strong, and if each of us does our part, we can 
minimize disruptions and get through the summer," Davis said.
?????The governor did not speak in detail on any issue, including the rate 
hike. The talk lasted a mere five minutes, delivered in fewer than 800 words.
?????Under Davis' proposal, Southern California Edison residential customers 
would face an average increase of 2.21 cents per kilowatt hour. San Diego Gas 
& Electric customers would have a 2.57-cent hike, while Pacific Gas & 
Electric would have a 2.44-cent boost. Business rates would rise slightly 
more.
?????Davis blamed the rate hikes on rising natural gas prices, a lack of 
adequate generation and the federal government's refusal to cap wholesale 
power prices.
?????Rates for customers of the state's two largest utilities rose 9% in 
January. That boost remains in effect. Legislation approved earlier this year 
bars further rate increases for those who use up to 30% more than their 
so-called baseline allocation.
?????According to administration estimates, 53% of consumers would experience 
no rate hike beyond the 9% boost approved in January. A fourth of all 
households would face increases averaging 34.5%.
?????Under the proposal, which requires Public Utilities Commission approval, 
people who use up to 200% of their baseline allocation would see rates on 
that portion of their electricity use go up by 9%, plus the 9% already 
imposed for a total of 18%.
?????Electricity users who consume more than twice their baseline allocation 
would pay between 33% and 37% more for kilowatts used beyond 200% of their 
baseline allocation.
?????Davis' proposed rate increase is somewhat lower than that proposed by 
the PUC, in part because he had more information, including the price that 
the state is paying for electricity, his aides said.
?????"My proposal raises rates fairly, assures us of long-term power, 
stabilizes the utilities and promotes conservation," Davis said.
?????Although there has been wide news coverage of the crisis, the governor's 
aides said Davis felt a need to talk directly to Californians to sum up the 
steps that he has taken to solve the problem.
?????Perhaps adding to the urgency, utility customers could start seeing 
increases in their bills as early as next month. Further raising the stakes 
for the speech, Davis warned this week that supplies will be so short that 
there could be blackouts by the end of the month, and continue into May and 
June.
?????"The public is more aware of what is going on on this issue than any 
other issue I have seen, ever," said Democratic political consultant Gale 
Kaufman. "People have gotten three or four bills that they're unhappy with 
and they may have been in a blackout or two. There is a concern for the 
future.
?????"By not talking to the public for a long time," Kaufman said, "and 
focusing it on one speech in one day, people will dissect this five minutes, 
much more than if he would have had a regular dialogue."
?????In what some political consultants see as a reflection of Davis' 
declining political strength, a recent Times poll showed that in Davis' 
hometown of Los Angeles, only 14% are more likely to vote for a candidate 
endorsed by Davis, while 21% would be less likely.
?????Several recent private polls show that a majority of Californians would 
not vote to reelect Davis if he were on the ballot today, though Davis does 
not face voters in a general election for 19 months, giving him plenty of 
time to recover.
?????"People need to be reassured that there is a strong sense of direction," 
said Bill Carrick, a Democratic consultant. "I don't think people are looking 
for a magic wand. But they need a sense that there is sense of direction."
?????Other political consultants said Davis used television to get his 
message out because newspaper accounts have raised questions about his 
handling of the situation. Also, voters who get the bulk of their information 
from television news generally have less knowledge about the nuances of the 
crisis.
?????"He is not doing well with the print story," said Republican consultant 
Wayne C. Johnson, "so he has decided to change venues."
?????Johnson, like many consultants, also said the governor's declining poll 
numbers likely influenced his decision to make the television appearance, 
carried on most stations across the state during 6 p.m. news shows.
?????"Gray Davis doesn't do anything that the polls don't dictate," Johnson 
said. "He is doing this because the polls show his support is in free-fall."
?????Until Thursday, Davis had not characterized the situation as a "crisis," 
instead calling it a "challenge." That euphemism raised the hackles of many 
legislators.
?????"It's pretty clear: The public is angry and scared," said state Sen. Don 
Perata (D-Alameda). "They want a sense that someone is in control, and that 
there is some certitude of where we're going. We're lacking both."
?????The Legislature, meanwhile, approved two measures touted as ways to cut 
the state's power needs this summer, when hot temperatures traditionally 
cause demand to surge--a situation that this year could result in blackouts.
?????The bills had been bogged down in squabbling between the Assembly and 
Senate. The delay raises questions about whether the conservation incentives 
will be in place long enough to have an immediate effect.
?????The bills, a $709-million measure by state Sen. Byron Sher (D-Stanford) 
and a $409-million measure by Assemblywoman Christine Kehoe (D-San Diego), 
contain a dizzying range of financial "carrots" designed to help people cut 
power use.
?????There is $50 million to help low- and moderate-income consumers replace 
energy-wasting appliances such as old refrigerators with new, more 
energy-efficient equipment, $60 million to help consumers replace older 
lighting systems, $7 million to teach school children about energy 
efficiency, and $50 million for electricity meters for businesses.
?????The Senate bill won final passage on a 31-6 vote; the Assembly bill 
cleared the Legislature on a 55-15 vote. However, not everyone supported the 
concept of government subsidies to reduce power use.
?????Meanwhile, utility watchers issued gloomy reports early Thursday, 
helping to drag down the stocks of Edison International and PG&E Corp., 
parent corporations of the beleaguered utilities. Edison closed at $12.64 per 
share, down 34 cents or 2.6%, while PG&E fell to $11.38 per share, down 27 
cents or 2.3%, on the New York Stock Exchange.
?????Standard & Poor's said it is unlikely that Southern California Edison 
and Pacific Gas & Electric will regain a sound credit rating soon. The Wall 
Street debt-rating firm lowered the utilities' credit rating to high-risk 
junk-bond status in January when they began defaulting on debt.
?????Standard & Poor's cited a lack of action by Davis and state legislators, 
and said rate increases approved by the PUC will not be sufficient to pay all 
electricity costs. Banks and other creditors will run out of patience before 
long unless a settlement is reached to help the utilities pay past debts, 
Standard & Poor's said.
?????The firm predicted that "the coming weeks are likely to be critical if 
the utilities are to be made financially sound companies once again and avoid 
bankruptcy proceedings."

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-------------------------------------------------------------------

Putting the Heat on 2-Fridge Households 

Electricity: Utilities intensify bid to cut the numbers of spare iceboxes and 
freezers, which experts say use enough energy to power 200,000 homes. 

By MARTHA L. WILLMAN, Times Staff Writer 

?????Parked next to the two cars in Gordon Gould's Valencia garage is a 
side-by-side white Whirlpool refrigerator, stocked with all the TV dinners, 
Dreyer's ice cream and cold Pepsi he can't squeeze into the duplicate fridge 
in his kitchen.
?????To conservationists, Gould's extra refrigerator--and 1 million more like 
it in garages throughout the state--is a symbol of how our energy-guzzling 
lifestyle is straining the state's power supply. To Gould, it's something he 
can't bear to live without.
?????"I need it for drinks and frozen foods," said Gould, 78, who has lived 
alone since his wife died last fall. "We've always had two refrigerators. I 
absolutely need it."
?????You wouldn't think of this dilemma as a key part of California's 
electricity crisis. Yet the state Public Utilities Commission is prepared to 
spend nearly $10 million this year to persuade people to turn in their garage 
iceboxes.
?????The California Energy Commission estimates that spare refrigerators and 
freezers throughout the state suck up enough juice to collectively power 
200,000 homes. After air-conditioning units, refrigerators are considered the 
largest consumers of electricity in the typical household.
?????Many owners of spare refrigerators view them as a necessity. Whether 
that is true or not, people will tenaciously cling to the appliances because 
they offer "a little extra security" at a time in which many still do not 
believe that an energy crisis is real, said Dallas Willard, a USC philosophy 
professor.
?????"It represents the idea of something in reserve, and there is not very 
much that people have in reserve in this culture," Willard said. "We go for 
elaborate security systems such as SUVs with giant tires that look like they 
could run over small buildings, or huge ugly dogs that serve no purpose but 
to scare people. It's a sense of a fragility of the system put together with 
not being sure there is a problem there."
?????Then, too, homeowners can expect scant financial rewards, at least 
immediately, for giving up their garage refrigerators. In Southern California 
Edison's territory, owners are paid just $35, or offered $50 worth of compact 
fluorescent light bulbs, in exchange for working refrigerators. As the 
program expands to Northern California and San Diego County, the bounty will 
rise to $75. Die-hard adherents of spare refrigerators, such as Gould, scoff 
at such offers.
?????"It's important to me," he said, adding that he wouldn't consider even a 
$75 rebate. "There's not enough room in my other one."
?????He's got plenty of company. A few blocks away, Robin Ray keeps a similar 
grip on the 1980s-vintage Kenmore standing tall in his garage.
?????"I utilize that refrigerator way too much to get rid of it," said Ray, 
38, who lives with his wife and their 5-year-old son. "We use it to store all 
the extra meat, fish and chicken we buy every time we run to Costco."
?????Mary Potts has both a gleaming black 23.5-cubic-foot, side-by-side 
refrigerator and a 20-cubic-foot upright freezer in her garage nearby.
?????"I know it's a luxury--we try to watch our power usage--but you need it 
to keep drinks, soda pops and food for parties," said Potts, an insurance 
executive.
?????State officials believe that with energy costs rising, residents will be 
more willing to decommission their spare refrigerators. And they point out 
that a recycling program in Edison's territory has been a huge success, 
resulting in 254,000 refrigerators being turned in over the last seven years.
?????Still, with more than 9 million new refrigerators sold in the U.S. each 
year, according to Appliance Magazine, the secondhand fridge market 
flourishes in classified ads and thrift stores. No one knows exactly how many 
refrigerators are permanently disabled or sent out of the country, but energy 
experts say the number of total units is not dwindling, despite recycling 
efforts nationwide.
?????With a median life span of 19 years, refrigerators and freezers "often 
take on a second, third and fourth lifetime," said Wayne Morris of the Assn. 
of Home Appliance Manufacturers, an international trade organization. 
?????Paul Janzen, who recently moved to Telluride, Colo., is advertising "an 
old junker refrigerator for $25" among the furnishings he is trying to shed 
at his Orange County apartment. He bought the full-size, used refrigerator 
for $45 from a Salvation Army thrift store 10 years ago. "It probably uses a 
whole lot of energy, but it still works wonderfully," Janzen said.
?????Indeed, experts say old refrigerators use up to four times the energy of 
the newest models.
?????"Most people simply don't think about the refrigerator as a major energy 
user. It's not like a hair dryer that you have to turn on," said David 
Goldstein of the Natural Resources Defense Council, an environmental advocacy 
group that has pushed for more efficient appliances.
?????Energy experts estimate that 10% to 14% of California households harbor 
an extra refrigerator or freezer. Appliance repair workers informally guess 
that the number in Southern California is higher, based on their firsthand 
experience in servicing refrigerators in affluent suburban neighborhoods.
?????"Most people have a spare refrigerator, as a convenience," said Terry 
McVicker, owner of Certified Service in Anaheim. But he said calls to fix 
spares in the last six months have dropped as more people have complained 
about energy costs.
?????Others, however, are so attached to the convenience that they are 
willing to fix or replace their garage iceboxes.
?????"A lot of times, people get used to them," said Scott Kassner, general 
manager of Angel Appliances in North Hills. "So if one dies, they are just as 
likely to find a used one to put in its place."
?????Within the next few weeks, the three major private utilities in 
California will intensify a campaign to capture spare appliances with 
advertising, bill inserts, roving exhibits and other promotions.
?????"This year we are trying our best to get as many of these refrigerators 
and freezers offline prior to the summer season," said Jeannette Duvall-Ward, 
refrigerator recycling program manager for Edison, which is also coordinating 
the effort by Pacific Gas & Electric and San Diego Gas & Electric.
?????To qualify for rebates, refrigerators must be 10 to 25 cubic feet and in 
working condition. Edison customers have a choice of a $35 rebate or a 
five-pack of compact fluorescent lightbulbs worth $50. Because the programs 
are new, consumers in the Bay Area and San Diego will receive $75 rebates. In 
exchange, customers can expect annual energy savings of $150 or more.
?????Among those taking advantage of the rebates is Ruth Beatty of Covina, 
who has turned in three appliances in the last year, collecting $35 rebates 
on each. He said the first was a refrigerator only 5 years old that required 
repeated repairs. The second, recycled from a neighbor's garage, "would talk 
to me, like a dog moaning" and caused his monthly electric bills to double. 
The latest was a 15-year-old freezer he turned in as a cost-cutting move.
?????"When the electric bill becomes more than the rent, you start 
investigating," he said.

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Davis Proposes Tiered Plan To Boost Rates 
Governor wants slightly lower increases than PUC adopted 
Lynda Gledhill, Greg Lucas, Chronicle Sacramento Bureau
Friday, April 6, 2001 
,2001 San Francisco Chronicle 
URL: 
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/04/06/M
N141706.DTL 
After months of denying that rate increases were needed to pull California 
out of its energy crisis, Gov. Gray Davis yesterday proposed an average 37 
percent increase for residential users served by PG&E. 
The governor's electricity rate increases are slightly lower than the ones 
adopted by the PUC last week. He said about half of the state's residential 
customers would see no increase at all. 
Davis has blamed the energy crisis on his GOP predecessor, out-of-state 
energy generators and federal regulators. 
But in a rare statewide television address last night, he acknowledged that 
pointing the finger would not solve California's flawed deregulation plan 
that plunged utilities into debt as wholesale energy prices rose and retail 
rates remained frozen. 
"It's become increasingly clear . . . that with rising natural gas prices, 
the (Federal Energy Regulatory Commission's) failure to control costs and the 
state's lack of supply, that some rate increases are necessary to keep our 
lights on and our economy strong," Davis said. 
By embracing a rate increase lower than the PUC's, Davis tried to portray 
himself politically as a leader, but he also put himself in jeopardy should 
his plan fail. 
Last week, the PUC approved a rate increase that would average 40 percent. 
That includes making permanent a temporary 10 percent average increase 
adopted by the commission in January. 
Davis also would make that average 10 percent increase permanent. 
The PUC's rate would lift the customer's price per kilowatt by about 3 cents. 
Under Davis' plan, the rate for PG&E customers would be 2.44 cents. 
Consumer advocates blasted Davis' plan as a bailout for investor-owned 
utilities. 
"Gov. Davis blamed everyone but himself tonight," said Harvey Rosenfeld, 
president of the Foundation for Taxpayer and Consumer Rights. 
Rosenfeld said Davis must have the courage to stand up to out-of-state power 
generators and, if they don't reduce their profits to fair levels, impose 
taxes on their windfall gains. If that doesn't work, he said, the state 
should move to seize power plants. 
Even though Davis' plan would generate less revenue than the PUC's increase, 
he says he can do more with less. 
The governor's plan would eliminate a 10 percent rate increase scheduled to 
kick in next March. The PUC's would not. 
Davis said his slightly lower rate not only would provide enough money to pay 
off a bond California is set to issue for power purchases but also would pay 
off a portion of PG&E and Southern California Edison's $14 billion debt. 
The remainder of the debt would be erased by the state's purchase of the PG&E 
and Edison's transmission lines, an idea Davis again endorsed last night. 
The PUC's rate increase did not address the utilities' debt. 
The state will have to issue a bond of somewhere between $12.4 billion and 
$14 billion to cover power purchases, said John Stevens, Davis' top energy 
adviser. The state has spent about $4 billion so far. 
All of this can be in a smaller rate increase because the governor's office 
has different numbers, Stevens said. The numbers will be provided to the 
board, 
but have not been made available yet. 
PUC Commissioner Carl Wood said the board would review Davis' plan. 
"There isn't a big gulf," he said. "These are more recent numbers. But the 
PUC has the ultimate responsibility to make rates." 
While the PUC rate increase has already been adopted, the tiered structure 
has not. 
Reaction to the speech was not overwhelmingly supportive. 
A statement by PG&E said it supported the governor's efforts to increase 
conservation but said the speech did not go far enough. 
"However, the state's power crisis has been ongoing for nearly a year now, 
with little relief in sight," the statement said. "Unfortunately, the steps 
the governor announced tonight still do not appear to offer a comprehensive 
solution to resolve California's energy crisis." 
Republicans were not any more supportive. 
Davis' only announced 2002 Republican challenger said Davis had failed to 
take responsibility for his "mismanagement" that had made the crisis worse. 
"Gov. Gray Davis looked us right in the eye and said nothing," said Secretary 
of State Bill Jones. "The first responsibility of leadership is to tell the 
truth. Gray Davis needs to level with the people of California -- not 
continue to tell them bits and pieces that he thinks they want to hear." The 
admission that rate increases are necessary is a politically dicey move for 
Davis, but one widely seen as necessary. 
The Democratic governor had come under increasing pressure to take decisive 
action after the PUC's action last week. 
But Davis political adviser Garry South said Davis needed to take the time to 
make sure the numbers were right. 
"I think people understand when a public official comes forward and looks 
them in the eye and says here is what we need to do to solve it," he said. 
"The governor clearly has the authority to ask the PUC to do something." 
Davis said he opposed the increase at the time, and denied having any 
knowledge of the plan, despite having appointed a majority of the board. 
In his speech, Davis "urged" the PUC to consider the plan. 
Davis had maintained since last fall that he wanted to work to solve the 
energy crisis without a rate increase. 
"If I wanted to raise rates, I could have solved this in 20 minutes," Davis 
said in February. 
Even with the rate increase there are still many pieces of the energy puzzle 
that must be solved. 
The rate increase will cover only the utilities' back debt if there is an 
agreement to sell the transmission systems. So far, those negotiations have 
progressed very slowly. 
Davis urged conservation as the main way to get through the summer. 
"The more you use, the more you pay," Davis said. 
He lauded two conservation bills passed by the legislature yesterday that 
provide about $1.1 billion for various programs, such as refrigerator trade- 
ins. 
Also yesterday, Reliant Energy, one of the out-of-state generators providing 
California with power, won a court ruling yesterday that means it no longer 
has to make forced sales of electricity to the state. 
The Ninth Circuit Court of Appeals lifted an injunction from a lower court 
that forced the energy provider to sell to California, no matter whether it 
was paid or not. 

E-mail Lynda Gledhill and Greg Lucas at lgledhill@sfchronicle.com and 
glucas@sfchronicle.com. 
A look at Gov. Davis' proposed rate increase, by the numbers. Proposed 
rates do not include the average 10 percent temporary increase adopted in 
January that Davis wants to make permanent).
   --  Increase for the 55 percent of residential customers who use less 
electricity than 130 percent of their predetermined baseline:
   0%
   Average increase for people who use between 130 and 200 percent of 
baseline 
amounts:
   10%
   Average increase for users who surpass 200 percent of baseline:
   34.5%
   Average increase for "flat rate" industrial and commercial users
   29%
   Average increase for "time of use" industrial and commercial users
   30%
   (Proposed rates do not include the average 10 percent temporary increase 
adopted in January that Davis wants to make permanent.)


,2001 San Francisco Chronicle ? Page?A - 1 
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Legislature Pounds Out Conservation Package 
Davis expected to sign $1.1 billion measures 
Greg Lucas, Sacramento Bureau Chief
Friday, April 6, 2001 
,2001 San Francisco Chronicle 
URL: 
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/04/06/M
N97060.DTL 
Sacramento -- After a long day of haggling, both houses of the Legislature 
yesterday approved a $1.1 billion package of energy conservation measures 
designed to cut California electricity use as quickly as possible. 
Much of the money goes to existing state programs offering loans, grants and 
cash to business, agricultural, residential and low-income ratepayers. Gov. 
Gray Davis is expected to sign the bills. 
Programs include rebates on new refrigerators and air conditioners, as well 
as grants to place reflective surfaces on roofs and replace traffic lights 
with energy-efficient bulbs and weatherize homes. 
"These are well-known programs," said state Sen. Byron Sher, D-Palo Alto, 
author of one of the bills in the package. "They have been very effective." 
Lawmakers were divided over which consumers should get the most assistance, 
and fights flared between urban and rural lawmakers over the size of 
assistance to agricultural interests. 
The final compromise gives the bulk of the money to the Public Utilities 
Commission and the California Energy Commission, which administer a host of 
conservation programs. 
One-fifth of the $1.1 billion is devoted to programs helping the state's 
poorest consumers. 
Of the $240 million in low-income aid, $100 million will go to subsidize up 
to 25 percent of gas or electric bills in low-income households. 
A poor household is defined as one that is below 150 percent of the federal 
poverty level -- roughly a family of four earning $25,000. 
The program, known as California Alternate Rates for Energy, is administered 
by the utilities and paid for by $180 million in surcharges on other 
consumers' bills. The $100 million will go to expand the program. 
An additional $120 million is pegged for a program that helps households 
below 60 percent of the state median income -- $33,000 for a family of four. 
The program offers subsidies and grants for home-energy efficiencies like 
insulation, weather-stripping and low-flow shower heads. 
Among the other programs receiving more money: 
-- $50 million to beef up new air conditioner and refrigerator rebate 
programs run by local utilities. 
-- $50 million in 3 percent loans to replace inefficient display 
refrigerators like the ones that hold drinks in mini-marts, liquor stores or 
convenience stores. 
-- $60 million to municipal utilities like those in Sacramento, Alameda and 
Palo Alto to expand their conservation efforts. 
-- $10 million for cities and counties to replace stoplights with energy 
efficient light-emitting diodes or LEDs. 
-- $35 million in grants to businesses that recoat the roofs of their low- 
story buildings with reflective surfaces. 
-- $35 million to create "demand responsive" buildings that use an Internet 
connection that can automatically adjust thermostats or lights when power 
alerts are called. 
-- $50 million for a grab bag program for other innovative energy savings. 
-- $10 million to retrofit existing gas agriculture pumps with alternative 
fuels. 
Information on these programs will be posted on www.flexyourpower.com, which 
also has links to the Public Utilities Commission and local utilities. 
E-mail Greg Lucas at glucas@sfchronicle.com. 
,2001 San Francisco Chronicle ? Page?A - 13 
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At least 3.6 million families face possible power cutoffs 

Friday, April 6, 2001 
,2001 Associated Press 
URL: 
http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/04/06/nation
al0450EDT0471.DTL 
(04-06) 01:50 PDT WASHINGTON (AP) -- At least 3.6 million households are at 
risk of having their power cut off because they cannot afford soaring energy 
costs, according to a study. 
The survey was released Thursday by the National Energy Assistance Directors' 
Association, which represents officials who distribute federal energy aid to 
poor families. 
The study says 3.6 million families in 18 states and Washington, D.C., have 
fallen behind in payments to power utilities. Officials from the other 32 
states did not provide data for the survey. 
Mark Wolfe, director of the association, says it comes as no surprise that 
poor families are having trouble keeping up with power costs. 
Energy prices have been climbing in recent months as a result of increasing 
demand, reduced oil production overseas and skyrocketing wholesale costs in 
the West. The high wholesale prices have been blamed in part on deregulation 
in California's power market. 
------< ?On the Net: ?National Energy Assistance Directors' Association: www.neada.org/ ?,2001 Associated Press ? ?------------------------------------------------------------------------------?---------------------------------------------------------------????Davis reveals plan, including rate hikes ?Posted at 10:07 p.m. PDT Thursday, April 5, 2001 ?BY DION NISSENBAUM ?AND HALLYE JORDAN ??Mercury News Sacramento Bureau ???SACRAMENTO -- In a rare statewide television address, Gov. Gray Davis on ?Thursday abandoned his struggle to keep electricity rates from skyrocketing ?and proposed an increase of about 26.5 percent for almost half of the state's ?residents. ?Though he had vowed repeatedly to protect Californians from footing the bill ?for the state's failed deregulation plan, Davis offered an approach that ?appears similar to the rate structure adopted last week by utilities ?regulators to prevent the crisis from deepening. ?Last week, Davis had insisted that he didn't know that the Public Utilities ?Commission intended to raise rates and called the decision ``premature.'' ?Davis did not indicate in his speech what led him to reach his decision, but ?a top adviser said Davis acted when he became confident the numbers required ?it. ?``I have fought tooth and nail against raising rates,'' said Davis, who ?appeared somber and slightly nervous during the five-minute speech carried ?live by more than 75 stations and C-SPAN. ``It has become increasingly clear, ?however, that with rising natural gas prices, the feds' failure to control ?costs and the state's lack of supply that some rate increases are needed to ?keep our lights on and our economy humming.'' ?Under his plan, the Democratic governor said, more than half of the state's ?residential customers would not see higher energy bills. But residential ?customers who use more than 130 percent of their baseline usage would see ?increases. Customers using the most electricity would face a jump of 34.5 ?percent, on average. ?Rates for businesses would increase about 30 percent. ?Northern half hit hardest ?The governor's plan also calls for Northern Californians to shoulder the ?biggest rate increases. Customers of Pacific Gas & Electric Co., the utility ?in the worst financial condition, would see their electric bills rise an ?average of 28 percent if they use more than 130 percent of their baseline ?usage. ?Although Davis stressed that ``more than half of you won't pay a penny ?more,'' figures from the utilities commission and PG&E suggest far more ?customers may be subject to the governor's rate increase. ?PG&E spokesman Ron Low said that only 31 percent of the utility's residential ?customers used no more than 130 percent of their baseline last year. ?The governor offered scant details about the proposal, but the plan appears ?similar to the one adopted by the Public Utilities Commission. ``It doesn't ?look like there is a big gulf between the overall numbers,'' said ?Commissioner Carl Wood. ?The PUC plan -- the largest rate increase in state history -- envisions ?electric bills for homes and apartments going up by as much as 36 percent for ?those who use the most energy. ?Both proposals come on top of a 9 percent residential rate increase approved ?in January by the PUC that was intended to be temporary, but is now expected ?to become permanent. ?Davis contrasted his plan with the PUC plan, saying he plans to earmark a ?portion of the revenue to help the utilities pay off some of their more than ?$12 billion debt they ran up purchasing power last year. ?To receive that deal, Davis said, the utilities would need to agree to ?provide cheap power from their own plants for a decade, agree to sell the ?state their transmission lines and drop their lawsuits that could lead to ?higher rates. ?The speech marked a dramatic turning point for Davis, who entered the energy ?crisis with a pledge to derail any plans to raise rates for average ?Californians. For months, Davis expressed his ``hope and expectation'' that ?the crisis could be resolved without forcing Californians to pay dramatically ?more for electricity. ?Davis and the Democrat-controlled Legislature are still struggling to find a ?way out of the energy crisis that has brought two rounds of rolling ?blackouts, forced PG&E and Southern California Edison to the brink of ?financial collapse and threatened to push California into an economic ?tailspin. ?But as the complex pieces of the state's rescue plan failed to come together ?and the price tag continued to rise, Davis and lawmakers were left with few ?options. ?While Davis steadfastly stood by his ``hope and expectation'' that he could ?avoid rate increases, most other state leaders had already come to the ?conclusion that there was no way out of the crisis without them. ?But the governor recently softened his stance and said he would support ?higher energy bills if he saw no other options. ?Some consumer activists attacked the governor Thursday and vowed to fight the ?rate increase at the ballot box. ?``The governor's plan is: Turn out the lights, get your wallets out and wait ?in the dark until the utility bill comes,'' said Harvey Rosenfield, head of ?the Foundation for Taxpayer and Consumer Rights. ?Some Californians who watched the speech also expressed disappointment that ?Davis had given up on his fight against rate increases. ?``He said he didn't want to raise prices but he did anyway,'' said Craig ?Vomvardieri, 46, of San Jose. ``Twenty-six percent still sounds like a big ?chunk of change to me. But I guess he's trying to deal with it the best he ?can.'' ?Felix Hill, 81 of San Jose, said Davis did not offer real solutions: ``He's ?just trying to save his political hide.'' ?GOP reaction ?Republicans criticized the governor for waiting so long to act on a crisis ?that they charged could have been addressed with less painful remedies last ?year before the problems became so severe. ?State Sen. Tom McClintock, R-Thousand Oaks, said Davis was leading the state ?down the path of ``heavy taxes, oppressive regulations, new bureaucracies, ?endless mandates to conserve even more, and ultimately sky-high prices and ?rolling blackouts.'' ?The address marked the first time since his January State of the State ?message that Davis has taken his case directly to the public. And it was the ?first time since 1992 -- when GOP Gov. Pete Wilson talked about the recession ?-- that a governor has delivered such a speech to Californians. ?Davis less popular now ?The crisis has created a political challenge for the Democratic governor, who ?until recently has enjoyed strong support in the polls. His popularity has ?taken a hit in recent weeks in the wake of growing criticism from prominent ?members of his own party, the PUC's massive rate increase and a surprise ?series of blackouts. ?After months of work, state leaders have little to show for their efforts to ?bring the crisis under control. The state continues to spend about $50 ?million a day to buy electricity, a job it took on in January when PG&E and ?Edison lost their ability to buy power themselves because of mounting debts. ?Since then, Davis and his advisers have been trying to piece together a ?bailout plan for the two companies. The plan, which calls for the state to ?buy 26,000 miles of transmission lines from the two troubled utilities and ?San Diego Gas & Electric, has languished. ?Davis has expressed hopes of completing the deals soon, but talks with PG&E ?have been put to the side while the governor tries to reach an agreement with ?Edison. ?Another key piece of the rescue plan -- a summertime conservation -- has also ?been stalled by special interest wrangling. ?More than $1.1 billion in conservation programs were hung up this week by ?efforts by the agriculture community to win special protections from ?blackouts. ?After two chaotic days, sorting through pages of last-minute changes proposed ?by lobbyists and rounding up votes including a threat to intercept one ?senator at the airport and bring him back to vote, lawmakers narrowly ?approved the bills. ?The funds -- $710 million in SB 5X by Sen. Byron Sher, D-Redwood City, and ?$408 million in AB29X by Assemblywoman Christine Kehoe, D-San Diego -- will ?pay for a range of programs, from grants for weatherizing homes to rebates ?for new energy-efficient appliances. ?In his address, Davis touted conservation as the best way to ward off higher ?energy bills. ?``The more you use, the more you pay,'' Davis said. ``The more you conserve, ?the more you save.'' ??Mercury News Staff Writers Mark Gladstone, John Woolfolk and Dana Hull ?contributed to this report. ??------------------------------------------------------------------------------?------------------------------------------------------------------------------?--------------?????Davis gives up fight against rate hikes ?Posted at 11:00 p.m. PDT Thursday, April 5, 2001 ?BY DION NISSENBAUM AND HALLYE JORDAN ??Mercury News Sacramento Bureau ???SACRAMENTO -- In a rare statewide television address, Gov. Gray Davis on ?Thursday abandoned his struggle to keep electricity rates from skyrocketing ?and proposed an increase of about 26.5 percent for almost half of the state's ?residents. ?Though he had vowed repeatedly to protect Californians from footing the bill ?for the state's failed deregulation plan, Davis offered an approach that ?appears similar to the rate structure adopted last week by utilities ?regulators to prevent the crisis from deepening. ?Last week, Davis had insisted that he didn't know that the Public Utilities ?Commission intended to raise rates and called the decision ``premature.'' ?Davis did not indicate in his speech what led him to reach his decision, but ?a top adviser said Davis acted when he became confident the numbers required ?it. ?``I have fought tooth and nail against raising rates,'' said Davis, who ?appeared somber and slightly nervous during the five-minute speech carried ?live by more than 75 stations and C-SPAN. ``It has become increasingly clear, ?however, that with rising natural gas prices, the feds' failure to control ?costs and the state's lack of supply that some rate increases are needed to ?keep our lights on and our economy humming.'' ?Under his plan, the Democratic governor said, more than half of the state's ?residential customers would not see higher energy bills. But residential ?customers who use more than 130 percent of their baseline usage would see ?increases. Customers using the most electricity would face a jump of 34.5 ?percent, on average. ?Rates for businesses would increase about 30 percent. ?Northern half hit hardest ?The governor's plan also calls for Northern Californians to shoulder the ?biggest rate increases. Customers of Pacific Gas & Electric Co., the utility ?in the worst financial condition, would see their electric bills rise an ?average of 28 percent if they use more than 130 percent of their baseline ?usage. ?Although Davis stressed that ``more than half of you won't pay a penny ?more,'' figures from the utilities commission and PG&E suggest far more ?customers may be subject to the governor's rate increase. ?PG&E spokesman Ron Low said that only 31 percent of the utility's residential ?customers used no more than 130 percent of their baseline last year. ?The governor offered scant details about the proposal, but the plan appears ?similar to the one adopted by the Public Utilities Commission. ``It doesn't ?look like there is a big gulf between the overall numbers,'' said ?Commissioner Carl Wood. ?The PUC plan -- the largest rate increase in state history -- envisions ?electric bills for homes and apartments going up by as much as 36 percent for ?those who use the most energy. ?Both proposals come on top of a 9 percent residential rate increase approved ?in January by the PUC that was intended to be temporary, but is now expected ?to become permanent. ?Davis contrasted his plan with the PUC plan, saying he plans to earmark a ?portion of the revenue to help the utilities pay off some of their more than ?$12 billion debt they ran up purchasing power last year. ?To receive that deal, Davis said, the utilities would need to agree to ?provide cheap power from their own plants for a decade, agree to sell the ?state their transmission lines and drop their lawsuits that could lead to ?higher rates. ?The speech marked a dramatic turning point for Davis, who entered the energy ?crisis with a pledge to derail any plans to raise rates for average ?Californians. For months, Davis expressed his ``hope and expectation'' that ?the crisis could be resolved without forcing Californians to pay dramatically ?more for electricity. ?Davis and the Democrat-controlled Legislature are still struggling to find a ?way out of the energy crisis that has brought two rounds of rolling ?blackouts, forced PG&E and Southern California Edison to the brink of ?financial collapse and threatened to push California into an economic ?tailspin. ?But as the complex pieces of the state's rescue plan failed to come together ?and the price tag continued to rise, Davis and lawmakers were left with few ?options. ?While Davis steadfastly stood by his ``hope and expectation'' that he could ?avoid rate increases, most other state leaders had already come to the ?conclusion that there was no way out of the crisis without them. ?But the governor recently softened his stance and said he would support ?higher energy bills if he saw no other options. ?Some consumer activists attacked the governor Thursday and vowed to fight the ?rate increase at the ballot box. ?``The governor's plan is: Turn out the lights, get your wallets out and wait ?in the dark until the utility bill comes,'' said Harvey Rosenfield, head of ?the Foundation for Taxpayer and Consumer Rights. ?Some Californians who watched the speech also expressed disappointment that ?Davis had given up on his fight against rate increases. ?``He said he didn't want to raise prices but he did anyway,'' said Craig ?Vomvardieri, 46, of San Jose. ``Twenty-six percent still sounds like a big ?chunk of change to me. But I guess he's trying to deal with it the best he ?can.'' ?Felix Hill, 81 of San Jose, said Davis did not offer real solutions: ``He's ?just trying to save his political hide.'' ?GOP reaction ?Republicans criticized the governor for waiting so long to act on a crisis ?that they charged could have been addressed with less painful remedies last ?year before the problems became so severe. ?State Sen. Tom McClintock, R-Thousand Oaks, said Davis was leading the state ?down the path of ``heavy taxes, oppressive regulations, new bureaucracies, ?endless mandates to conserve even more, and ultimately sky-high prices and ?rolling blackouts.'' ?The address marked the first time since his January State of the State ?message that Davis has taken his case directly to the public. And it was the ?first time since 1992 -- when GOP Gov. Pete Wilson talked about the recession ?-- that a governor has delivered such a speech to Californians. ?Davis less popular now ?The crisis has created a political challenge for the Democratic governor, who ?until recently has enjoyed strong support in the polls. His popularity has ?taken a hit in recent weeks in the wake of growing criticism from prominent ?members of his own party, the PUC's massive rate increase and a surprise ?series of blackouts. ?After months of work, state leaders have little to show for their efforts to ?bring the crisis under control. The state continues to spend about $50 ?million a day to buy electricity, a job it took on in January when PG&E and ?Edison lost their ability to buy power themselves because of mounting debts. ?Since then, Davis and his advisers have been trying to piece together a ?bailout plan for the two companies. The plan, which calls for the state to ?buy 26,000 miles of transmission lines from the two troubled utilities and ?San Diego Gas & Electric, has languished. ?Davis has expressed hopes of completing the deals soon, but talks with PG&E ?have been put to the side while the governor tries to reach an agreement with ?Edison. ?Another key piece of the rescue plan -- a summertime conservation -- has also ?been stalled by special interest wrangling. ?More than $1.1 billion in conservation programs were hung up this week by ?efforts by the agriculture community to win special protections from ?blackouts. ?After two chaotic days, sorting through pages of last-minute changes proposed ?by lobbyists and rounding up votes including a threat to intercept one ?senator at the airport and bring him back to vote, lawmakers narrowly ?approved the bills. ?The funds -- $710 million in SB 5X by Sen. Byron Sher, D-Redwood City, and ?$408 million in AB29X by Assemblywoman Christine Kehoe, D-San Diego -- will ?pay for a range of programs, from grants for weatherizing homes to rebates ?for new energy-efficient appliances. ?In his address, Davis touted conservation as the best way to ward off higher ?energy bills. ?``The more you use, the more you pay,'' Davis said. ``The more you conserve, ?the more you save.'' ??Mercury News Staff Writers Mark Gladstone, John Woolfolk and Dana Hull ?contributed to this report. ???------------------------------------------------------------------------------?------------------------------------------------------------------------------?----------------------??????Western states share shortage of electricity ?Posted at 11:00 p.m. PDT Thursday, April 5, 2001 ?BY STEVE JOHNSON ??Mercury News ???All across the West, an unsettling realization is sinking in: The threat of ?blackouts and electric rate increases is no longer confined to California. ?In the past few months, consumers in at least eight other Western states have ?been slapped with higher electricity bills, largely because of the same ?out-of-control wholesale market that is wreaking havoc here. Wholesale prices ?in the Pacific Northwest are even higher than in California, raising fears ?that California may be forced into a bidding war to get the power it ?desperately needs. ?So far, officials in most Western states expect to get through the summer ?without blackouts. Even so, electricity supplies are worrisomely thin. ?``I don't recall a time when it has been as tight as this,'' said Robert ?Dintelman, assistant executive director of the Western Systems Coordinating ?Council, which plans to release a report today assessing power supplies ?throughout the region. ?The problem is expected to receive intense scrutiny Tuesday when officials ?from California and 10 other Western states meet with the Federal Energy ?Regulatory Commission in Boise, Idaho, to discuss the spreading energy crisis ?and what can be done about it. ?Julie Leonard, who manages Westy's Garden Lanes, a 40-lane bowling alley in ?Boise, is among those who hope the solution can be found quickly. Idaho Power ?is seeking to boost electric bills by 24 percent for residents and 20 percent ?for most businesses. If approved, she said, it would tack $500 onto the ?bowling alley's $2,500 monthly power bill. ?``Everybody is upset about it,'' Leonard said. ``They don't like it, but what ?are they going to do about it. Everybody is trying to conserve whatever ?energy they can.'' ?Like Gov. Gray Davis and some other Western governors, Leonard favors having ?the federal government impose regionwide caps on the wholesale price of ?power, which lately has been up to 10 times higher than it was a year ago and ?up to 10 times what many Eastern states now pay. ?But given the commission's past resistance to caps and the increasing ?difficulty providing power to the West's fast-growing population, averting ?problems this summer could prove difficult -- especially if unusually hot ?weather sends electricity use soaring. ?``The entire Western grid could be very short, and when that happens the ?price goes through the roof and .?.?. we get a scramble for power,'' said ?Severin Borenstein, who directs the University of California Energy ?Institute. ?The biggest victim in such a scramble could be California, because it imports ?about 20 percent of the power it needs, more than any other Western state. ?That has become a particular concern recently because of what has happened to ?prices in Oregon and Washington state, where a drought has severely crimped ?their hydroelectric power. ?In April last year, wholesale power at peak times was selling for about $36 a ?megawatt-hour in California, vs. $31 at a Washington trading hub and $35 at ?another hub in Oregon, according to a survey by Energy NewsData. On ?Wednesday, the top price in California was $300 per megawatt-hour, vs. $345 ?in Oregon and $350 in Washington. ?If that price difference persists into summer, some energy specialists fear, ?electricity suppliers may be more willing to sell to Washington or Oregon ?than here during emergencies, which could result in a nasty interstate ?rivalry. ?``The last thing that any of us needs is some sort of civil war between the ?states because everyone will lose,'' said Tom Williams, a spokesman for Duke ?Energy of Charlotte, N.C. Unfortunately, he added, ``I don't think imports ?are going to show up in California this summer. And if they do, they're going ?to be very, very expensive.'' ?Some experts aren't troubled by the price difference, characterizing it as a ?temporary and insignificant development. They also think too much is being ?made of rising prices and power constraints throughout the West. ?``Everybody has a knot in their stomach'' because supplies are tighter than ?in recent years, said Thomas Feiler of the Rocky Mountain Institute, an ?energy policy think tank in Colorado. But he called most of the concerns ?``overstated,'' because ``the market fundamentals just don't support that ?kind of Chicken Little thinking.'' ?While experts consider the threat of blackouts to be most acute in California ?-- followed by Washington and Oregon -- other states are in relatively good ?shape because they were more diligent about building power plants. ?Arizona is a good example. Although ``summer is going to be a test,'' ?according to Heather Murphy, a spokeswoman for the Arizona Corporation ?Commission, which oversees utilities, ``there is an air of confidence with ?caution.'' ?Still, at least one small Arizona community that does not generate its own ?power and must buy it on the volatile spot market recently asked for a rate ?increase. And across the West, other communities are facing similar troubles. ?Aside from Arizona and California, rate increases recently have been approved ?or proposed in portions of Colorado, Idaho, Nevada, Oregon, Utah, Washington ?and Wyoming. California's rates are still higher in many cases. Even so, the ?change in some of these other communities is not insignificant. A temporary ?50 percent rate increase approved in Tacoma, Wash., in December raised the ?average monthly electric bill for a home with electric heat from $85.30 to ?$123.70. And the bill could go up more in October. ?That isn't sitting well in a lot of places. And despite data that shows ?Californians are better about conserving energy than consumers elsewhere, ?many other Westerners hold this state responsible for the regionwide ?wholesale market meltdown that led to their rate increases. ?``Basically, California is the 1,000-pound gorilla in the Western power ?grid,'' said Richard Comerford, a spokesman for Colorado's largest municipal ?utility in Colorado Springs, which is asking for a 25 percent rate increase ?from its 175,000 customers. ``The problems California is facing, with too ?much demand and not enough supply, is driving the price in the entire Western ?region. So to compete, we have to pay the same high price.'' ??Contact Steve Johnson at sjohnson@sjmercury.com or (408) 920-5043. ???------------------------------------------------------------------------------?------------------------------------------------------------------------------?-------------------??????Getting real on rates ?Published Friday, April 6, 2001, in the San Jose Mercury News ?THE best part of Gov. Gray Davis's Thursday night television address on the ?energy crisis was the direct endorsement of a rate increase. ?Granted, the Public Utilities Commission cleared the path 10 days ago by ?raising rates. In response, Davis had waffled. All winter he had pretended he ?could restore stability to the system while protecting the current rates. ?Now that he has seen the light on the necessity of higher rates both to ?procure energy and to prompt conservation, Davis delivered the news in ?person. ?Davis had not addressed Californians on the electricity shortage since ?January. He was in danger of leaving the impression that the crisis was not ?critical and that he was not engaged. ?Davis's rate plan seems roughly similar to that of the PUC. Both are ?structured to protect thrifty consumers and designed to pressure the heavy ?users into cutting back. Davis called for all Californians to cut demand 10 ?percent. ?The question is whether rate protection for more than 50 percent of ?consumers, which Davis promised, will lessen their incentive to conserve. ?But while the words in the speech were on point, the tone lacked zest. Davis ?is no Franklin Roosevelt. Too bad, because in the call to conservation, some ?rhetoric to quicken the civic virtue in the citizenry would have helped the ?cause. ?Unless the summer is unexpectedly cool, conservation will be critical to ?avoiding blackouts. While some additional supply will be coming online, it is ?not possible to build fast enough. ?A part of that conservation has to come from average Californians inspired to ?make sacrifices, such as as sitting in a hot house for a couple hours in the ?afternoon instead of turning on the air conditioning. ?Wisely, Davis didn't review the promises he made in his January state of the ?state speech, the last time he addressed Californians on energy. ?Then, he had bashed the independent power generators and promised to ``regain ?control over the power that's generated in California and commit it to the ?public good.'' ?Not a lot of progress has been made on that score. The state has been ?purchasing power both for day-to-day needs and for the future. Davis has not ?reported specifically on what it is paying and how much power is lined up. ?His plan to restore the financial health of Pacific Gas & Electric and ?Southern California Edison continues to hinge on state purchase of the ?transmission system. Those negotiations have been crawling along. ?The governor faces a delicate task of convincing Californians of the gravity ?of the electricity shortage for the coming summer without creating a panic. ?They would like to feel he's got the situation in hand. Thursday's speech ?proved at least that he's got it in mind.??------------------------------------------------------------------------------?------------------------------------------------------------------------------?------------------------?????Davis: Rate hikes a must ?April 6, 2001 ?The Orange County Register ?Gov. Gray Davis for the first time Thursday endorsed electricity rate ?increases, saying the strapped utilities need help to return to solvency. ?Addressing Californians in a televised speech, he lashed out at federal ?regulators for refusing to limit wholesale electricity prices. ?Until Thursday, Davis repeatedly said the state could resolve the power ?crisis without rate hikes. ?He announced his change of mind about two weeks after the Public Utilities ?Commission came out with a similar rate plan, using similar reasoning. ?The PUC must approve any change in rates. ?Some consumer groups are promising a revolt at the polls in 2002, hoping to ?roll back the rate hikes through a ballot initiative.???------------------------------------------------------------------------------?------------------------------------------------------------------------------?----------------------------------?????Davis' power-crisis plan brings questions from Wall Street ?April 6, 2001 ?By KATE BERRY?The Orange County Register ?Wall Street analysts and investment bankers grilled Gov. Gray Davis' ?financial advisers Thursday on a plan that would use a portion of an ?electricity rate increase to pay off some of the power-buying debts of ?Southern California Edison and Pacific Gas & Electric. ?Joe Fichera, Davis' top financial adviser, said the new plan would raise $3.5 ?billion a year from ratepayers. About 5 percent would pay off about $8 ?billion of the $14 billion debt accumulated by the state's two largest ?utilities. ?"The governor said tonight he wants the utilities to be stabilized,'' said ?Fichera, who spoke to Wall Street analysts in a conference call. "He supports ?a rate increase. Part of the rate increase goes to their back debt. He's ?showing a commitment to avoid bankruptcy.'' ?Both utilities have delayed reporting their results for last year's fourth ?quarter because they are considering taking write-offs for wholesale ?electricity debts. The utilities have incurred the debts since May because ?they could not pass on their full costs to consumers protected by a rate ?freeze. ?Under Davis' plan, the utilities could issue their own bonds to pay off their ?debts, using the dedicated cash stream from ratepayers to service the bonds, ?Fichera said. ?In return, both utilities would have to agree to drop lawsuits against the ?state, sell their transmission lines and supply power to the state for 10 ?years at cost-based prices, which include a profit for the companies. ?Fichera said negotiations with the utilities are continuing and that he was ?exploring alternatives if the utilities did not sign up for the plan. ?Stephen Frank, chairman and chief executive of Edison, responded with a terse ?statement: "We will look to what actions follow the governor's words ?tonight.'' ?Pacific Gas & Electric stated: "The steps the governor announced tonight ?still do not appear to offer a comprehensive solution to resolve California's ?energy crisis.'' ?The Davis plan also includes the sale of $12.4 billion to $14 billion in ?bonds to cover power purchases made by the state Department of Water ?Resources. The bonds are to be repaid by ratepayers through their electricity ?bills over 12 to 15 years. ?But it was unclear to bankers and analysts whether the rate increases ?proposed by Davis would cover the skyrocketing costs of electricity, ?particularly this summer. ?Davis' advisers declined to disclose how much DWR is paying for electricity. ?Davis' rate plan assumes a 10 percent across-the-board reduction in energy ?use this summer. Without conservation, analysts said, the calculations could ?be off, triggering more rate increases.???------------------------------------------------------------------------------?------------------------------------------------------------------------------?--?????Davis pulls energy switch ?His proposal for a rate hike, weighted toward heavy electricity users, ?represents a shift from previous position. ?April 6, 2001 ?By JOHN HOWARD?The Orange County Register ?SACRAMENTO - Gov. Gray Davis said Thursday that Californians' electricity ?rates must be raised to ease the state's energy crisis, and that some of the ?money should help bail out the strapped utilities, which have rung up $14 ?billion in debt. ?Embracing rate increases for the first time, Davis said in a rare, ?five-minute, statewide television address that he "fought tooth and nail ?against raising rates," but that "some rate increases are needed to keep our ?lights on and our economy strong." ?The Democratic governor also said that the proposed rate hike - a flexible ?scheme in which the heaviest users would pay the most - would pay down the ?huge debt that utilities have rung up buying wholesale electricity. ?But to take advantage of that money - Davis didn't say how much - the ?utilities would have to agree to three things: sell thousands of miles of ?transmission lines to the state, provide at least a decade's worth of ?low-cost power to the state, and drop all court actions seeking new rate ?increases. The proposal, which Davis urged the state Public Utilities ?Commission to adopt, would apply to Southern California Edison, Pacific Gas & ?Electric Co. and San Diego Gas & Electric Co. ?Senate leader critical of 'bailout' ?That provision to help the utilities drew a sharp response from Senate Leader ?John Burton, D-San Francisco, a top consumer advocate. ?"We are not in the business of bailing those guys out, and that's what he's ?doing. So you raise my rates $2, then you say you're going to give 50 cents ?to the utilities to pay off back debt. What that means to me is you could ?have covered the cost of electricity with just $1.50," Burton said. ?Doug Heller of the Santa Monica-based Foundation for Taxpayer and Consumer ?Rights, was equally critical. ?"Gov. Davis, if you're going to pick our pockets, tell us how much you're ?really going to take because you can't pay off the energy cartel and bail out ?the utilities with the rate increase that (you) talked about tonight," Heller ?said. ?In Orange County, at least one resident who watched Davis' speech questioned ?the state's handling of the crisis. ?"Everybody who's been watching this understands that if you have a decreasing ?supply and an increasing demand, prices will go up. But the question is, why ?wasn't anyone managing this thing a long time ago?" said Henry Eilbirt, ?president of the Community Association of Leisure World-Laguna Woods, which ?represents about 3,500 residents. "What the governor said is all very nice, ?but it doesn't solve the problem. In fact, it seems like the governor is ?stepping away from a solution." ?PUC, Davis plans are similar ?Two weeks ago, the PUC adopted a plan - in some respects similar to Davis' - ?to raise rates through a tiered scheme in which the lightest users of ?electricity pay the least and the heaviest users the most. It would raise ?customers' bills up to 36 percent. ?Under the Davis plan, roughly half of all electricity customers would not ?face increases because their electricity consumption is already low or ?moderate. But heavier users, nearly a fourth of all customers, would face a 9 ?percent increase, and those who consume the most face a 48 percent increase, ?or from $129 to $171 on the average bill of a heavy Edison customer. ?"It sends the signal, the more you use the more you pay," said V. John White, ?executive director of the Center for Energy Efficiency and Renewable ?Technologies. ?But Dave Cox, R-Fair Oaks, the Assembly's GOP leader and a former utility ?executive, said the governor provided little hard information to the public ?about how the electricity crisis will be resolved. ?"One day he said there wasn't going to be a rate increase, and now he's ?saying it look like we are going to have to. It kind of strains the ?credibility, doesn't it?" Cox said the speech was designed to make people ?feel as good as possible in the crisis. ?"It was warm and fuzzy. It was a great political speech, but it didn't ?provide any specificity on how to solve the problem,'' Cox said. ?Staff writers Hanh Kim Quach, Kimberly Kindy and Andrew Horan contributed to ?this report.???------------------------------------------------------------------------------?------------------------------------------------------------------------------?-???[B] PG&E defaults on Los Alamos Energy power payment ??????San Francisco, April 5 (BridgeNews) - Los Alamos Energy, a division of Out ?Takes Inc., said Thursday that it was not paid for past deliveries of ?electricity delivered to Pacific Gas & Electric (PG&E). The company joins a ?slew of other power providers that have not been paid by PG&E because of the ?utilities financial difficulties. The power producer (qualifying facility, or ?QF) terminated its contract with PG&E March 16 because of lack of payment. ?The termination was not contested by PG&E. ??*                   *             *???The company is in the process of exploring alternative buyers or markets for ?electricity sales. ?"While Los Alamos Energy has demanded payment in full for electricity ?delivered to PG&E, there can be no assurance that PG&E will, or can make such ?payment in accordance with the demand," the company said in a statement. ?Los Alamos did not return calls for comment on how much PG&E owes and what ?action it is planning to pursue against PG&E. Some QFs are contemplating ?involuntary bankruptcy action if PG&E does not create a settlement with ?California Gov. Gray Davis on how to pay its around $4 billion debt. ?"In view of PG&E continuing its existence absent reorganization, envisaged to ?be detrimental to the interests of LAE as an unsecured creditor, there can be ?no assurance of LAE collecting payments due from PG&E," the Dallas-based ?company concluded. End ???------------------------------------------------------------------------------?----------------------------------------------------------------???Friday, April 6, 2001??????By Rick Stouffer ?rstouffer@ftenergy.com ??While technology stocks in 2000 got whacked*taking much of the stock market's ?oomph with it*guess what? America's energy woes meant no "whoas" when it came ?to reigning in revenues at the nation's energy-related companies.??Fortune 500 list numbers released this week show that energy-connected firms ?did quite well in 2000, with 48 utility, pipeline, independent power ?producer, convergent-type firms making the annual prestigious revenues list. ??Energy is top category?According to Fortune Magazine's research, in terms of revenue growth, the top ?business category was what it calls energy, including such giants as Duke ?Energy, Reliant Energy, UtiliCorp United and Avista Corp. Combined this group ?experienced an 83.7% increase in revenues from 1999. ??Second in revenue growth from a percentage increase was the pipeline ?category, including such firms as Enron Corp., Dynegy Inc., El Paso Energy ?Corp. and Williams. Combined this group saw 2000 revenues jump 71.8%.???Even gas and electric utilities grew in double-digit bites during 2000, up a ?strong 34.3% to capture seventh place among industry types. ??On the profit side, over a one-year period, pipeline companies came in third, ?up 73.2%; energy firms took 10th place, up 23.4%; and gas and electric ?companies captured 28th place, up 5.4%. Fastest profit growth year-over-year ?was recorded in the mining, crude oil production category, up an amazing ?473.7%.??Not only did many of the energy-related listees make the Top 500 mark*they ?pummeled it. ??Higher energy prices certainly led to very large, black revenue and profit ?lines in company financials. In numerous cases, revenues, and to a lesser ?extent profits, experienced double-, even triple-digit increases from the ?year before. ??However, some industry followers said the glowing revenue figures had a lot ?to do with good times in trading natural gas and electricity*and, indeed ?profits as a percentage of revenues struggled to get out of the single ?digits. ??Enron leads the pack?Leading the energy pack, excluding the major oil companies, which are ?acknowledged to be in another galaxy in terms of revenues and profits, was ?Enron Corp., listed in an industry grouping with the pipeline firms. ?Obviously, Fortune Magazine was looking at the Houston, Texas-based giant's ?roots when grouping it with the pipes; but then, perhaps because it has ?become so divergent in its paths, pipes was the only category that made any ?sense. ??Regardless, Enron's 2000 revenues more than doubled its nearest ?energy-related challenger's figure, with revenues totaling $100.8 billion*up ?151% from 1999, according to Fortune. ??On the overall Fortune 500 list (the magazine actually tracks the top 1,000 ?firms), Enron was the only energy-related (again excluding Big Oil) company ?to make the Top 10, settling in at No. 7. ??Duke has the profits?Manning the No. 2 energy-related spot in a category Fortune calls "energy," ?was Duke Energy Corp., with 2000 revenues totaling $49.3 billion*up 127% from ?a year earlier. On the larger 500 list, Duke ranked No. 17. ??Duke may not have had Enron's revenues, but the Charlotte, N.C.-based titan ?led all comers in profits, pegged at a very patriotic $1,776 billion, ?bettering by 18% its 1999 numbers. ??Dynegy (listed as a pipeline company) edged Reliant Energy (in the energy ?category) in terms of 2000 revenues, $29.4 billion to $29.3 billion. Close ?behind was another energy firm, UtiliCorp United, with 2000 revenues just ?under $29 billion. ??The above trio on the Fortune 500 list, ranked by revenues, took the 54th, ?55th and 60th spots, respectively, on the highly regarded honor roll. ?Reliant's revenues jumped 92% year-to-year, Dynegy's rose 91% and UtiliCorp's ?revenues climbed a strong 56% year-over-year. ??Southern largest in its class?The largest firm in Fortune's gas and electric utility class was Atlanta, ?Ga.-based Southern Co., ranked fifth in terms of revenues with $23.4 billion, ?but No. 2 in profits, at more than $1.3 billion. Southern's revenues in 2000 ?ballooned 102%, while profits inched up by 3%. Southern captured the 76th ?position on the actual Fortune 500 list. ??It's interesting to note that no matter how things change, they have a way of ?staying relatively the same. In 1999, the top five (actually four) energy ?firms in Fortune's list were MidAmerican Energy Holdings, UGI Corp., USEC ?Inc. and NorthWestern Corp. ??For 2000, MidAmerican is not listed as it was taken private by a trio of ?players headed by billionaire investor Warren Buffett; UGI fell to 10th ?place; USEC to 14th; and Northwestern Corp. to fifth. ??In the pipeline category in 1999, Enron was No. 1, followed by Dynegy, ?Williams, El Paso and KN Energy. For 2000, Enron is tops, followed by Dynegy, ?El Paso, Williams and TransMontaigne Inc. ??In the utility category, in 1999, the top five included PG&E Corp., Duke, ?Texas Utilities, UtiliCorp and Entergy. In 2000, Southern, PG&E, TXU, ?American Electric Power and Edison International filled the top spots. ??Ironically, two of those top five firms for 2000 could be in Chapter 11 ?bankruptcy protection before the next Fortune 500 list comes out. ??Are the figures as rosy as they appear? PricewaterhouseCoopers' Gerald Keenan ?cautions that the mind-boggling leaps in year-over-year revenue totals were ?recorded while margins themselves shrank from where they were just a few ?years ago. ??"In large part, a number of folks made trading much more of their portfolio," ?said Keenan, PwC's energy strategy partner in Chicago. "Some of the ?astronomical prices in the West also contributed. It's a situation where the ?revenues reported were much higher, but there was a significant drop in net ?income as a percentage of sales." ??Indeed, in the Fortune 500 list's column titled "profits as a percentage of ?revenues," only two of the top five listmakers in the energy, pipelines and ?gas and electric utilities categories topped the 5% mark. Southern and Edison ?International recorded profits as a percentage of revenues figure of 6%.??Keenan suggests that as companies continue to move, within the context of ?deregulation, toward merchant trading, revenues will continue on the present ?path, while margins will remain low. ??Exxon Mobil blows away competition?And which firm took top honors in the Fortune 500 list? For the first time ?since 1984, General Motors Corp. fell from the top spot*blown out, actually*?by two firms, No 2, Wal-Mart Stores Inc. and No. 1, oil giant Exxon Mobil. ??GM owned the top spot from the inception of the Fortune list in 1954 until ?1975, when skyrocketing oil prices allowed then-Exxon Corp. to become No. 1. ??Last year, Exxon Mobil's revenues totaled $210.4 billion, $17.1 billion more ?than Wal-Mart, and $25.8 billion more than GM. ?