From: jeff.dasovich@enron.com
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Date: 2001-05-31 10:31:00+00:00
Subject: Municipal utilities warned

Municipal utilities warned 
Governor says he'll seize excess electricity if prices don't come down 
David Lazarus, Chronicle Staff Writer
Thursday, May 31, 2001 
,2001 San Francisco Chronicle 
URL: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2001/05/31/MN154796.DTL 
Sacramento -- Gov. Gray Davis threatened last night to seize excess power 
generated by California's municipal utility districts, which he said have 
charged even higher electricity prices than out-of-state generators. 
Davis said in an interview with The Chronicle that some municipal utility 
districts have charged the state as much as 10 percent more than the average 
wholesale cost demanded by private power companies. 
The governor's tough talk came as California suffered through a Stage 2 power 
alert and faced the prospect of a long, hot summer of rolling blackouts and 
skyrocketing electricity prices. So far this year, the state has paid more 
than $8.2 billion to buy power for its cash-strapped utilities. 
In a variation on his threat to seize power plants from out-of-state 
generators if they continue gouging California ratepayers, the governor said 
he would use his executive powers to claim excess juice from the locally 
owned utilities if they do not lower their prices. 
He said he is ready to go to court if they offer resistance. 
"We're going to get that power one way or another," Davis said. 
Municipal utilities are city-owned power companies. In Northern California, 
there are municipal utilities in Alameda, Palo Alto, Redding, Sacramento and 
Santa Clara. Los Angeles has the largest municipal utility in the state. 
30 DAYS TILL CONTRACT DETAILS 
For the first time, the governor also gave a time frame for releasing details 
of more than 40 long-term electricity contracts California is signing with 
generators since the financial meltdown of the state's two biggest utilities. 
He said that after about six more contracts get nailed down, he expects full 
details to be made available within 30 days. 
Although the contracts involve nearly $40 billion in public funds, Davis and 
other state officials have adamantly refused to divulge their contents, 
insisting that secrecy is needed to remain competitive during negotiations. 
The Chronicle and other media outlets have filed suit for access to the 
contracts, arguing that the public has a right to know how its money is being 
spent. 
RUDE AWAKENING
While going toe-to-toe with the out-of-state generators, the last thing Davis 
needed was for municipal utilities -- the home team, as it were -- to emulate 
the Texas big boys and dig deep into California's pockets. 
Yet the governor's negotiators have been struggling for weeks to convince 
municipals that they are obliged to provide power at cost -- which Davis 
insisted they are required to do by law. 
He met last week with the heads of a dozen municipal utilities and told them 
explicitly that he would not tolerate gouging from within the state as 
California faces a summer of potential blackouts. 
The governor said after the meeting that the municipals had agreed "to make 
most of their excess power available this summer . . . at prices 
significantly lower than those being charged on the spot market." 
Apparently, however, little progress has been made since that declaration. 
Davis told The Chronicle last night that he is still "trying very hard to 
promote this notion that we're all in this together." 
While unwilling to specify which municipal utilities have been most 
aggressive in their pricing, and refusing to place a dollar amount on how 
much the utilities charged, Davis said he is prepared to seize up to 800 
megawatts of output if the they do not change their ways. 
Eight hundred megawatts is enough power to light about 800,000 homes. 
Representatives of the various municipal utilities could not be reached for 
comment, nor could a spokesperson for the California Municipal Utilities 
Association in Sacramento. 
"I told them that they will either (reduce their prices) voluntarily or 
involuntarily," the governor said. 
UNCERTAIN FUTURE
It remains to be seen, however, whether the municipal utilities will play 
ball. To date, they have shown a firm inclination to go their own way. 
In March, Lodi's municipal utility district and a Northern California 
municipal utility cooperative that includes Palo Alto, Santa Clara and 
Alameda told Pacific Gas and Electric Co. that they will not participate in 
rolling blackouts during power shortages. 
"I won't arbitrarily screw my customers . . . so 5,000 PG&E customers can 
turn on their lights somewhere else," said Alan Vallow, director of the 
utility serving Lodi's 58,000 residents. 
E-mail David Lazarus at dlazarus@sfchronicle.com. 
,2001 San Francisco Chronicle ? Page?A - 1