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Content-Type: text/plain; charset=ANSI_X3.4-1968 Content-Transfer-Encoding: 7bit X-From: Jeff Dasovich X-To: Jennifer Rudolph X-cc: X-bcc: X-Folder: \Jeff_Dasovich_June2001\Notes Folders\Sent X-Origin: DASOVICH-J X-FileName: jdasovic.nsf Sorry about that. I don't think that I'm in on the 1 pm conference call. Best, Jeff ----- Forwarded by Jeff Dasovich/NA/Enron on 12/20/2000 01:30 PM ----- Jeff Dasovich Sent by: Jeff Dasovich 12/19/2000 12:09 PM To: skean@enron.com, Richard Shapiro/NA/Enron@Enron, James D Steffes/NA/Enron@Enron, Wanda Curry/HOU/EES@EES, Dennis Benevides/HOU/EES@EES, Roger Yang/SFO/EES@EES, Gordon Savage/HOU/EES@EES, Harry Kingerski/NA/Enron@Enron, Michael A Smith/HOU/EES@EES cc: Subject: San Francisco Chronicle, Tues 12/19: "Utilities Want Rates To Increase About 20% Utilities, State Wrangling Over Rate Hikes for Power" FYI. This article tracks well with the information we've thus far received and that I passed along on the call this morning. ----- Forwarded by Jeff Dasovich/NA/Enron on 12/19/2000 12:06 PM ----- Joseph Alamo 12/19/2000 11:51 AM To: Miyung Buster/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT cc: Susan J Mara/NA/Enron, Sandra McCubbin/NA/Enron, Jeff Dasovich/NA/Enron, Mona L Petrochko/NA/Enron, Roger Yang/SFO/EES@EES, Paul Kaufman/PDX/ECT@ECT, Lysa Akin/PDX/ECT@ECT Subject: San Francisco Chronicle, Tues 12/19: "Utilities Want Rates To Increase About 20% Utilities, State Wrangling Over Rate Hikes for Power" Utilities Want Rates To Increase About 20% Utilities, State Wrangling Over Rate Hikes for Power David Lazarus, Chronicle Staff Writer Tuesday,?December 19, 2000 ,2000 San Francisco Chronicle Top-secret talks between state officials and PG&E became bogged down yesterday over how much customers' bills should be raised to rescue the utility from financial ruin, sources said. State officials are pushing for Pacific Gas and Electric Co. and Southern California Edison to accept a 10 percent rate increase, while the utilities are asking for a rate increase almost double that amount, the sources said. An accord, first reported in The Chronicle on Saturday, still could be announced any time this week, the sources said, noting that Gov. Gray Davis was maintaining pressure for the two sides to come to terms as quickly as possible. However, the sources said, both sides are digging in their heels as the talks intensify. The impasse makes it unlikely that the California Public Utilities Commission will lift a rate freeze affecting the two utilities at its meeting on Thursday, even though the matter already has been placed on the commission's agenda. "Everyone is still trying to nail down different pieces of this mess," one source said. The negotiations began last week and continued through the weekend. However, sources familiar with the talks said PG&E and Edison were reluctant to compromise over how much they should be able to raise customers' bills and, in turn, how much of a combined $8 billion in outstanding debt the two utilities would have to swallow. Representatives of the utilities, the PUC and the governor's office declined to discuss the matter on the record yesterday. But sources said there was an increasing sense of urgency on the governor's part to extricate PG&E and Edison from their current financial woes and focus instead on California's chronic power shortages. State officials called a Stage 1 energy emergency yesterday afternoon as electricity reserves once again slipped to dangerously low levels. Large-scale industrial users were urged to reduce consumption. The governor is said to be eager to show some progress in tackling California's energy crisis, especially in light of measures announced by federal regulators on Friday that critics say do not go far enough. The Federal Energy Regulatory Commission announced several steps intended to reduce volatility in wholesale power prices, but stopped short of a long- sought cap on wholesale rates. Davis said the commission "abdicated its responsibility to the people in the West," while Sen. Dianne Feinstein characterized federal authorities as fiddling while Rome burns. Federal authorities will meet today in Sacramento with representatives of utilities and power companies, along with state politicians, to discuss ways to relieve California's energy shortage. Meanwhile, PG&E and Edison have warned of possible bankruptcy if they are unable to pass along to customers billions of dollars in extra costs accrued since wholesale power prices spiked over the summer. Because of the existing rate freeze, the two utilities so far have had to absorb all such costs as losses. Under terms of the deal now on the table, PG&E would absorb about half the roughly $5 billion in expenses it has incurred, while Edison would absorb a nearly equal percentage of its $3 billion in debt, sources said. The utilities, however, are fighting hard to pass on even more of the debt to customers in the form of higher rates, they said. PG&E held a special briefing for legislative aides in Sacramento yesterday at which utility officials made their case for a speedy bailout. "They said they need to solve this, and they need to solve it now," said one participant in the meeting. But the officials were less forthcoming about how much the utility would compromise to find a workable solution. "There wasn't a lot of wiggle room," the participant said. A source close to the PUC said state regulators would be ready to take up the matter of the rate freeze whenever a deal was reached with the utilities on how much customers' bills would go up. The source said the PUC probably would accept the utilities' argument that conditions for ending the rate freeze had been met months ago. The commissioners would then pass an emergency measure allowing rates to increase immediately. PUC President Loretta Lynch, who sources said was actively involved in the weekend negotiations, probably would introduce the emergency measure when a deal is reached. Swift approval by the five-member commission almost certainly would follow. "If some kind of accord is reached, we will be morally obligated to go forward," one source said. Still, consumer activists blasted the pending deal yesterday, calling instead for all parties to hold their negotiations in the public arena. "This is a gross violation of basic concepts of due process and fair play," said Nettie Hoge, executive director of The Utility Reform Network in San Francisco. "Utility rates in this state are supposed to be determined via a public process, not through back room deals between politicians and the utilities." Added John Gamboa, executive director of San Francisco's Greenlining Institute: "Back room deals are what led to our utility-backed deregulation scheme in the first place." E-mail David Lazarus at dlazarus@sfchronicle.com.
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