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Sac Bee, Fri, 6/22: Employees: Power supply held down Sac Bee, Fri, 6/22: Consumers cut down their own power in protest Sac Bee, Fri, 6/22: Davis consultants had contract with Edison: The disclos= ures turn up the heat on the governor for hiring=20 ex-Clinton aides SD Union, Fri, 6/22: State deal may ease blackout threat Canada to supply energy as summer demand rises=20 SD Union, Fri, 6/22: Ex-worker: Duke manipulated market LA Times, Fri, 6/22: Estimates of power profits disputed LA Times, Fri, 6/22: Edison plans bond offer at 13% rate LA Times, Fri, 6/22: Energy company abandons plans for Baldwin Hills plant= =20 SF Chron, Fri, 6/22: Western states could feel pinch from California pricin= g=20 SF Chron, Fri, 6/22: Feds spurn Duke Energy in its bid to avoid refunds SF Chron, Fri, 6/22: News Analysis: Davis winning Washington PR battle=20 Price cap victory may rob Democrats of campaign issue SF Chron, Fri, 6/22: Suit filed over report on power lines, health=20 Deal on transmission grid could raise liability SF Chron, Fri, 6/22: Texas power firm's shares failing (Enron spotlighted) Power baron Enron finds fortunes fading Mercury News, Fri, 6/22: Power firm accused of price-fixing Mercury News, Fri, 6/22: Enron chief: Gov. Davis not to blame for energy cr= isis (Jeff Skilling comments, Ken Lay and Enron mentioned) OC Register, Fri, 6/22: Three say company purposely cut power Ex-Duke workers say repairs were curbed in order to manipulate market OC Register, Fri, 6/22: FERC judge tackles task of generating a deal=20 OC Register, Fri, 6/22: Davis seeks $9 billion refund=20 OC Register, Fri, 6/22: Energy notebook: Blackouts are still a hot prospect= , officials warn OC Register, Fri, 6/22: In rolling blackouts, 'together' is all relative Employees: Power supply held down By Kevin Yamamura and Emily Bazar Bee Cap= itol Bureau (Published June 22, 2001) Three former San Diego Gas & Electri= c Co. employees who worked at a Duke Energy plant said Thursday that the ge= nerator destroyed working parts, withheld power supply or otherwise took ac= tions that they believe drove up the price of electricity. State officials= said the whistle-blowers' comments at a state Senate hearing today could p= rovide the most damaging illustration yet that power generators held down p= roduction to inflate prices on the spot market. Gov. Gray Davis has long al= leged that power companies have overcharged the state and utilities. Jimmy= Olkjer, a former assistant control room operator at Duke's South Bay plant= in San Diego, said in a phone interview that during the state's power shor= tages, Duke cut supply. Although Duke, a Charlotte, N.C.-based company, own= ed the plant, and it contracted with SDG&E to operate the unit, he said. "= Rather than creating more power, they were creating less," Olkjer said. "I = think there was manipulation of the market." The California Public Utiliti= es Commission and several state legislative committees continue to investig= ate price manipulation allegations, and Attorney General Bill Lockyer has s= aid he will take witnesses to a grand jury next month. The generators have= denied they manipulated the market. "We stand behind our maintenance prac= tices and have done a good job keeping the power flowing," Duke spokesman T= om Williams told the CBS television network. But former mechanic Glenn Joh= nson said he saw generation units taken "down for economics." Ed Edwards, = also a mechanic, said he was ordered to destroy 23 pallets of working parts= . "We were asked, myself and other employees, to disperse of perfectly goo= d parts that were used to make repairs of systems and components," Edwards = said. State Sen. Joe Dunn, D-Santa Ana, chairman of the market-manipulatio= n committee, said his staff has been looking for employees or others with i= ntimate knowledge of power plant operation to come forward, and he promised= that others will testify at future hearings. "It's the first time that we= 've had evidence from directly within power plants in California that the r= amping up and ramping down of power generation was a response to price and = not to demand," Dunn said. He said he would reach no conclusions until Duk= e and other generators testify next month, but he added that the former emp= loyees' testimony raises suspicions "at first blush." The Bee's Kevin Yam= amura can be reached at (916) 326-5542 or kyamamura@sacbee.com . =09 Consumers cut their own power in protest By Silvina Mart?nez Bee S= taff Writer (Published June 22, 2001) When the temperature hit 100 degree= s at 7 p.m. Thursday, Larry Lynch turned off the air conditioner, unplugged= the refrigerator, pulled out the TV cords and shut down all other applianc= es in the house. Lynch, a 61-year-old newsletter publisher in Sacramento, = responded to the "Roll Your Own Blackout" Thursday and joined thousands thr= oughout the state to protest energy policies and promote conservation by st= opping the use of energy from 7-10 p.m. But the data coming off the grid a= t the California Independent System Operator didn't show the effort. Durin= g the first hour of the voluntary shut-off, the demand for energy by PG&E c= ustomers in Northern California was almost the same as at the same time Wed= nesday, ISO officials said. Protesters didn't expect significant changes o= n the grid. "I feel it will at least send a message that we don't have to = depend on it (energy)," said Jackie Bell, 37, a consultant at the Capitol j= oining the conservation drive from her apartment on Fulton Avenue. "It's j= ust a symbolic act," said Peter Lopez of Sacramento, who decided to use the= evening to meditate. "Maybe I'll just go outside, stare at the stars and t= ry to spot a few constellations in the night." It was the longest day of t= he year, and one of the hottest. But those determined to advocate conservat= ion didn't mind the sacrifice. "People are getting focused on the fact tha= t we have power at our end," said Joan Blades, a spokeswoman for MoveOn, a = grass-roots organization in the Bay Area and one of hundreds of online grou= ps passing along the call for the voluntary blackout. An electrical engine= er in Oakland started the "Roll Your Own Blackout" idea when he posted a no= te in a political chat room in April. Then an artist in Los Angeles forward= ed the e-mail to a number of friends and from there it quickly spanned the = globe. By Thursday afternoon, more than 12,000 people had signed up at the= MoveOn Web site to join the protest, Blades said. Many threw blackout par= ties. In San Francisco, the nonprofit group Global Exchange gathered hundre= ds around a big bonfire at Ocean Beach. At his home in east Sacramento, Ly= nch did fine without electricity for three hours. He ate tuna salad for din= ner, watered the lawn and when it got dark, he opened the windows and let s= ome air in. "We should show that people are willing to shut the power off = if the prices go too high," he said. ISO has not declared a power emergenc= y since May 31. "We have seen a consistent conservation on a day-to-day ba= sis, and it's making the difference between blackouts and no blackouts," IS= O spokeswoman Stephanie McCorkle said. McCorkle encouraged initiatives lik= e "Roll Your Own Blackout." "People are conserving," she said. "And we can= only support this whole effort." The Bee's Silvina Mart?nez can be reach= ed at (916) 321-1159 or smartinez@sacbee.com . =09 Davis consultants had contract with Edison: The disclosures turn up the hea= t on the governor for hiring the ex-Clinton aides. By Emily Bazar Bee Capit= ol Bureau (Published June 22, 2001) Two consultants hired to advise Gov. G= ray Davis on energy policy officially disclosed their contract with Souther= n California Edison on Thursday, but Davis aides insisted it is not a confl= ict because "Edison and the Governor's Office have the same goal." Communi= cations consultants Chris Lehane and Mark Fabiani have drawn intense critic= ism since they were hired last month to shape the Democratic governor's pub= lic response to the state energy crisis. The former Clinton administration= communication aides -- nicknamed the "Masters of Disaster" for their spin = on the Whitewater, travel office and 1996 fund-raising controversies at the= Clinton White House -- have come under fire for receiving a six-month, $30= ,000-a-month contract, more than the governor or anyone on his staff makes.= Secretary of State Bill Jones, a Republican who is running for governor n= ext year, has called for an investigation into potential conflicts. State C= ontroller Kathleen Connell, a Democrat, has said she will not issue paychec= ks to the pair pending her own investigation. The criticism mounted after = the duo's economic interest disclosure forms were released late Thursday, s= howing that each has received at least $10,000 under contract from Edison i= n the past year. But Davis spokeswoman Hilary McLean defended their credib= ility, saying there's no conflict of interest because Lehane and Fabiani bo= th disclosed that they had worked for Edison before they signed their contr= acts with the state. Besides, she added, Edison and the governor are worki= ng toward the same goal: Both want the Legislature to adopt a memorandum of= understanding, a proposed agreement, that would prevent Edison from going = bankrupt by financing a state purchase of the utility's transmission lines.= "It's not a conflict because there's been full disclosure," McLean said. = "Edison and the Governor's Office have the same goal, passing the MOU. We'r= e working together at this point with Edison." But open-government groups = and Republican lawmakers bristled at the notion that disclosure negates any= potential conflict. Derek Cressman of the California Public Interest Rese= arch Group pointed to a section of state law that prohibits public official= s from influencing decisions if it would have "a material financial effect"= on a business entity that provided them $500 or more within the last year.= "You have two individuals on the government payroll who had previously be= en on the Edison payroll and it's not clear to whom their loyalties are," h= e said. "Just because they've revealed it doesn't mean there's not a confli= ct there, and that they're not serving two masters." On Thursday, Jones sa= id he is awaiting the results of the Fair Political Practices Commission in= vestigation and agrees with Connell's decision this week to withhold paymen= t from the consultants. "This further calls into question the ethics of ho= w these individuals were hired and contracts were let," Jones said. Senate= Republican leader Jim Brulte believes there's no question that Lehane and = Fabiani are violating conflict-of-interest laws and suggested that the two = should be paid out of Davis' campaign funds, which had reached $26 million = by Jan. 1. Brulte, of Rancho Cucamonga, added that he would not vote for a= state budget as long as Lehane and Fabiani remain on the state payroll. "= The state of California does not need to be paying political wordsmiths $30= ,000 a month," he said. "I just wish (Davis) were as frugal with the taxpay= ers' money as he is with his campaign money." The Bee's Emily Bazar can b= e reached at (916) 326-5540 or ebazar@sacbee.com . =09 State deal may ease blackout threat =09 =09 Canada to supply energy as summer demand rises By Ed Mendel UNION-TRIBUNE = STAFF WRITER June 22, 2001 SACRAMENTO -- California may be able to avoid = some of the blackouts predicted for this summer, thanks to a little-known p= ower-swapping agreement with a Canadian utility. The arrangement is expect= ed to give California electricity in July and August from the hydroelectric= generators of BC Hydro in British Columbia, despite a serious drought in t= he Northwest. California has sold surplus power in recent months to the go= vernment-owned utility, which is expected to return power to the state as h= eat drives up the demand for electricity. State deal may ease blac= kout threat Continuing coverage: California's Power Crisis Despit= e the energy crunch, the state often finds itself with surplus power that c= an be sold or swapped. For instance, advance power purchases that provide e= nergy at a better price may deliver more power than needed at any given tim= e, particularly during off-peak hours. BC Hydro's reservoirs and hydroelec= tric generators are a little like an electricity storage battery. By import= ing California power, BC Hydro has been able to conserve water that can be = released this summer to produce power for California. As a result of the a= greement and other factors, state power buyers say they are in a stronger p= osition going into the hot summer months than they had expected. So far thi= s week, the state has managed to get through a heat wave without so much as= a Stage 1 power alert. "We are in much better shape at this point than I = imagined we would have been as little as a month ago," said Ray Hart, head = of the power purchasing unit in the state Department of Water Resources. T= he North American Electric Reliability Council, which last month predicted = 260 hours of rolling blackouts for California this summer, has noticed a ch= ange in recent weeks. "We don't seem to have the crisis we were all expect= ing," said Ellen Vancko, a council spokeswoman. "But whether that is a shor= t-term or a long-term event we don't think anyone knows yet." Much of the = credit for avoiding blackouts is given to unexpectedly high conservation by= Californians and an increased supply of power. Many generators that had be= en shut down for maintenance or lack of payment are now back on line. But = the hydroelectric power agreement had gone unnoticed until now. Hart menti= oned it during a Senate Energy Committee hearing this week. But he declined= to reveal the amount of power banked with BC Hydro, saying it could hurt t= he state's competitive position in the market. "If I start talking specifi= cs," said Hart, "then I have to give out what I am doing every single day, = and I have no market position." In the past, California routinely sent pow= er to a number of utilities in the Pacific Northwest during the winter when= residents there needed heat. Northwest utilities returned power to Califor= nia in the summer when air conditioning drove up demand. Little was expect= ed from the reciprocal arrangement this year because California was short o= f power last winter as electricity prices soared, and drought has sharply l= owered reservoirs in the Northwest. But the agreement with BC Hydro will pr= ovide at least some power this summer. The state was forced to begin buyin= g power in January after its two largest utilities, Southern California Edi= son and Pacific Gas and Electric, were unable to borrow because of a $13 bi= llion debt. The rates that the utilities could charge their customers were = frozen under a failed deregulation plan as the cost of power on the wholesa= le market skyrocketed. Hart said it took time to convince BC Hydro, which = has demanded cash for some electricity, that it could safely do business wi= th California despite big debts owed to generators for power they supplied = to the utilities. "We have only been able to do it for the last couple of = months," said Hart. "It took a long time to get them to do it because of cr= edit issues." A spokesman for BC Hydro said the utility engages in power s= waps but does not release the name of the other parties or the terms of the= agreements. "Our first priority is taking care of our own," said Warren C= ousins of BC Hydro. "We are still looking for opportunities to help out oth= er entities when we can." Hart said the state has another arrangement with= the federal Bonneville Power Authority, but again refused to provide detai= ls. He said the state has sold surplus power to several buyers, including t= he Los Angeles Department of Water and Power. Information about state powe= r purchases had been closely guarded until recently. Gov. Gray Davis, press= ured by lawsuits and a court ruling, released edited versions last week of = 38 long-term power contracts worth $43 billion. The Davis administration s= aid it agreed to release contract information because power prices have dro= pped, easing competitive pressures. =09 Ex-worker: Duke manipulated market =09 =09 By Bill Ainsworth UNION-TRIBUNE STAFF WRITER June 22, 2001 SACRAMENTO --= A former operator at Duke Energy's Chula Vista plant said he was told freq= uently by company officials during the past year to alter the plant's outpu= t in a way that may have boosted electricity prices. The operator, Jimmy O= lkjer, said he was even ordered to cut power generation during energy emerg= encies, when the state faced rolling blackouts because of a scarce supply o= f electricity. He said he believes reducing the electricity generation hel= ped the company charge higher prices. "It looks like that's what they were = doing," Olkjer said in an interview. He and another former plant employee = said that during the past year the company regularly operated its least-eff= icient turbine, possibly to justify higher prices. The allegations, which = they plan to repeat today at a state Senate hearing investigating power gen= erators, provide the first insider evidence that Duke Energy may have manip= ulated output at its South Bay plant to drive up prices. Duke, based in No= rth Carolina, leases the South Bay plant from the San Diego Unified Port Di= strict. A March report by the Independent System Operator, which manages C= alifornia's electricity grid, alleged that by withholding power Duke and fo= ur other owners of generating plants have contributed to billions of dollar= s in overcharges to California consumers. Tom Williams, spokesman for Duke= Energy North America, said that varying the output of the generating units= at the Chula Vista plant had nothing to do with trying to achieve higher p= rices. He said the changes in output helped balance the state's grid by "d= ancing in the market" -- providing flexibility for grid managers by allowin= g the plant to add or reduce power quickly. Williams added that the aging = South Bay plant produced as many megawatts last year as it did in 1994. Ol= kjer served as a plant operator for 18 years, mostly when the plant was own= ed by San Diego Gas & Electric Co. After Duke took over the plant, workers = were guaranteed their jobs for two years. In April, when that period ended,= Duke laid off Olkjer and other workers. Now he is retired. During the two= years Duke has managed the plant, Olkjer said, operators frequently got ca= lls from officials with Duke Energy Trading and Marketing in Salt Lake City= telling them to adjust their production schedule. Some employees at the p= lant monitored the hourly price of electricity posted by the Independent Sy= stem Operator and recognized a correlation, he said. "We noticed that a lo= t of times when the price was down (our) megawatts would go down," he said.= "If the price was up, often the megawatts would go up." Olkjer said he wa= s never told why he was being ordered to turn the plant's output up and dow= n. When he asked, he said, company officials told him it was none of his bu= siness. Still, he was puzzled, particularly when he was told to throttle d= own the plant during electricity emergency alerts -- as he says he did Jan.= 16 when the state declared a Stage 3 alert, with the possibility of rollin= g blackouts. "It doesn't make sense to cycle up and down when there's a St= age 3 alert," he said. Duke spokesman Williams said the company may turn d= own units at the orders of the ISO during a Stage 3 alert because the grid = manager can find cheaper power somewhere else. Lisa Szot, spokeswoman at t= he ISO, said she couldn't determine whether the ISO had ordered Duke to pow= er down its Chula Vista plant Jan. 16. Olkjer said the frequent adjustment= s of power production, which sometimes occurred every half-hour, wear out t= he plant's equipment. "It's harder on the machinery," he said. "It's like = driving down the street putting your (foot) on the gas and then slamming on= the brake." Before deregulation, Olkjer said, the four units at Chula Vis= ta, which have the capacity to produce 706 megawatts, had been operated ste= adily during much of their history. S. David Freeman, formerly general man= ager of Los Angeles' Department of Water and Power and now chief energy adv= iser to Gov. Gray Davis, said rapid cycling had become more common under de= regulation and is hard on equipment. "We had almost 15,000 megawatts of ge= nerating capacity down for repair last winter," said Freeman, referring to = what industry experts agreed was an extraordinary level of plant outages ov= er several months. SDG&E, which built the Chula Vista plant in the 1960s, = sold it to the Port District for $110 million. In 1998 the port leased the = plant to Duke Energy for 101/2 years in what critics are now calling a swee= theart deal. The company pays minimal rent, but has made large profits. In= the first quarter of this year, Duke, which owns three other plants in Cal= ifornia, said profits rose 208 percent to $428 million from energy sales an= d trading. Duke may hold the record for charging the highest price for ele= ctricity. It asked $3,880 per megawatt-hour this year. By comparison, befor= e the energy crisis began, electricity sold for around $35 per megawatt-hou= r, an amount which powers about 750 homes. Federal regulators have ordered= the company to refund $20 million to the state for charging excessive pric= es unless the company can justify them. In May, the company offered to pay= the state to settle any price gouging investigations, but Gov. Gray Davis = declined. Olkjer and Ed Edwards Jr., who worked at the plant for 20 years = before being laid off in April, said they couldn't understand why Duke ran = the inefficient, high-cost turbine unit during the past year while other ge= nerators sat idle. They said they believed it may have been an attempt to = fetch a higher price for electricity because the company got extra fees whe= n it ran. Williams, the Duke spokesman, said the opposite was true. He sai= d Duke ran the small turbine more frequently because it was less expensive.= It ran on jet fuel, which was cheaper than the natural gas powering the ot= her units. Edwards said the smaller unit was run so hard that it was destr= oyed. "It ran so frequently and so hard, it needed extensive repairs," he = said. Edwards told CBS News last night that plant outages at Chula Vista w= ere prolonged because one supervisor ordered him to dump spare parts. The = former power plant employees said they felt compelled to come forward becau= se they saw the impact the power crisis was having on their community. "It= kind of irritated me because you know there's people on a fixed income tha= t can't afford a big utility bill," said Olkjer. Staff writer Craig D. Ros= e contributed to this story. =09 Estimates of Power Profits Disputed Electricity: A study of overcharges by= suppliers may be flawed, state officials say. Davis quoted the figures to = Congress. By DOUG SMITH, ROBERT J. LOPEZ and RICH CONNELL, Times Staff Wr= iters Gov. Gray Davis' contention that California has been nicked fo= r billions of dollars in inflated electricity costs is based on a study tha= t state officials concede may have significant flaws, according to intervie= ws and confidential government documents. Those costs--estimated by th= e state to be as high as $9 billion--were central to Davis' testimony this = week before a U.S. Senate committee, where he again denounced power wholesa= lers and urged federal regulators to "give us back the money that was wrong= ly taken from us." The governor's impassioned demand, however, was bas= ed on shaky calculations. The formulas are being reworked, said Charles Rob= inson, vice president of California's grid operator, which prepared the stu= dy. Robinson said he "had no idea" how much the amount allegedly overc= harged by the generators might change. For now, he said, the agency stands = by the numbers. But internal documents from the California Independent= System Operator warn that some of the financial assumptions used to quanti= fy the alleged excess profits could be well off the mark. What's more,= the documents caution against relying on the agency's study as a basis for= allegations of overcharging--as Davis did during his testimony Wednesday. = That warning was particularly important because the documents provide for t= he first time a detailed accounting of how much each energy supplier prospe= red from the state's power troubles between last summer and February. = The largest amounts were charged by four out-of-state power companies, acco= rding to the confidential Cal-ISO report. Okalhoma-based Williams Cos. led = the group with $860 million, followed by Duke Energy with $805 million, Sou= thern Company Energy Marketing (now Mirant) with $754 million and Reliant E= nergy Services with $750 million. When told of the alleged profiteerin= g attributed to them, executives of the companies insisted the numbers were= grossly overstated because of Cal-ISO's poor methodology. Duke spokes= man Tom Williams said his company's entire energy earnings for North Americ= a were less than the amount it was accused of reaping unfairly in Californi= a. "It doesn't add up. It doesn't come close to adding up," Williams s= aid. "What [Cal-ISO] has done is highly irresponsible math." Paula Hal= l-Collins, a Williams Cos. spokeswoman, said the firm would need to study t= he ISO report further. But generally, she said, such reports fail to fully = account for electricity production costs. "We maintain that we have no= t overcharged, and that we have operated legally." Reliant spokesman R= ichard Wheatley also questioned the figures, saying, "There's a lot of misi= nformation out of there." A Mirant spokesman said: "We haven 't overch= arged. We haven't manipulated. We haven't withheld." Even some firms = alleged to have overcharged to a much lesser degree were outraged. Joe= Ronan, vice president for government and regulatory relations at Calpine, = said the $236 million attributed to his company "doesn't bear any relation = to reality." "Anybody can throw out any number," he said. "It's like M= cCarthyism. . . . Where is the evidence?" A spokeswoman for Davis conc= eded that his refund figure was an estimate but defended it as reasonable. = "It's no surprise that the people that are gouging us want to dispute = an estimate of how much they're gouging us," senior advisor Nancy McFadden = said. Despite the cautions expressed in the Cal-ISO documents, officia= ls Thursday insisted they were not troubled that the governor referred to t= he agency's figures as potential overcharges. "The way it should be c= haracterized is the amount paid above a competitive benchmark," said Robins= on, who is also Cal-ISO's general counsel. The first version of the no= w-disputed Cal-ISO study was made public in March. It estimated that power = sellers earned $6.3 billion in excess profits between May 2000 and last Feb= ruary. The report, later revised upward to $6.7 billion, became a crucial e= lement of the Davis Administration's campaign against alleged electricity p= rice gougers. This week, just before Davis' appearance in Congress, th= e study was updated again, adding another $2.2 billions in alleged excess p= rofits through May. The orginal study, which did not include actual pr= icing data, was mostly intended to prod federal regulators into seeking inf= ormation from generators that the state had been denied, Robinson said. = Thus far, the Federal Energy Regulatory Commission has ordered refunds of= only $125 million. Next week FERC is convening an unusual settlement confe= rence aimed at addressing the outstanding claims by the state, as well as t= hose of sellers who claim they are owed hundreds of millions of dollars by = California utilities. One encouraging signal for state officials came = this week when FERC reiterated an earlier order that Duke Energy pay millio= ns in refunds. The order stemmed from the company's sale of electricity at = $3,880 a megawatt hour--for thousands of hours. FERC's order said Duke= 's pricing had resulted in $11 million in billings. A fair price for that p= ower would have been $273 per megawatt hour, the agency said. Tom Will= iams, a Duke spokesman, said the firm is willing to accept the lower price.= He said he company has yet to collect a dime. --- Times staff write= rs Elizabeth Shogren and Dan Morain contributed to this story.=09 Edison Plans Bond Offer at 13% Rate Debt: Yield is about double what a cre= dit-worthy company would pay, analysts say. But will investors bite? By J= ERRY HIRSCH, Times Staff Writer Edison International is offering inv= estors what analysts are calling an unprecedented 13% interest rate for $1.= 2 billion in notes to refinance debt. Even so, it's far from certain that t= he Rosemead-based power company will find enough buyers to complete the dea= l. A failure by Edison to refinance $618 million in bank debt that com= es due June 30 and an additional $250 million in notes due in July could pu= t the company precariously close to bankruptcy and cast a shadow on Califor= nia's plan to sell $12.5 billion in bonds to pay for power purchases, said = Dan Scotto, a bond analyst at PNB Paribas in New York. "Even though it= would at first appear to be a company setback, it would really be a major = setback for the state," said Scotto, who added that Edison's credit trouble= s could translate into higher prices for California's proposed bond offerin= g. Edison, however, said Thursday that the deal is moving forward. = "We believe our deal is going well, and we are comfortable with it," said= Jo Ann Goddard, vice president for investor relations. She declined to dis= cuss other details of the offering. Goldman Sachs Group, Edison's inve= stment bank, expects to formally price the offering Monday. Edison official= s would not comment on the proposed price of the note offering, but Wall St= reet sources said the power company was shopping the issue at the 13% rate.= Edison floated the plan earlier this month as a way to tap the borrow= ing power of a profitable subsidiary to trim debt that comes due this year = and to insulate itself from a possible bankruptcy of its ailing utility uni= t. The utility, Southern California Edison, has lost billions of dollars on= electricity sales over the last year. The high interest rate on Ediso= n's proposed sale of seven-year notes is about double what a credit-worthy = company would pay for a similar bond or note issue and would add a premium = amounting to tens of millions of dollars in annual interest costs to the co= mpany's already strapped financial condition, analysts said. It's a full tw= o percentage points higher than the average rate for other junk, or specula= tive, bonds. And corporate bonds with similar ratings are going out at 9% t= o 10%. Edison originally started marketing the issue at 12%, a full tw= o percentage points higher than what analysts initially expected, but then = raised the rate to 13% in recent days because it was finding few takers on = Wall Street. "The word is that they couldn't get people interested and= that they might not be able to get it done," said Kurt Stabel, a money man= ager at Street Asset Management in Newport Beach. The higher rate, how= ever, might be pulling investors out of the woodwork and has increased the = chance that Edison will pull off the deal, Scotto said. "This never pr= omised to be a day at the beach," Scotto said. "I think it is really a ques= tion of find the right price, the price at which people feel comfortable wi= th the risk." Both Stabel and Scotto said that Edison's note offering = is unusually complicated and requires far more explaining or "selling" than= typical corporate offerings. Mission Energy Holding Co., a company cr= eated by Edison for the sole purpose of issuing these bonds, will offer the= notes. The assets of Edison Mission Energy, a subsidiary that owns a netwo= rk of power plants across the United States and in Asia, Australia and New = Zealand, will secure the debt. Mission Energy Holding plans to issue t= he proceeds to Edison in the form of dividends, giving the parent company f= unds to pay off a substantial portion of its debt. The notes will have= a credit rating of BB-minus and come due in 2008, according to bond rating= agency Standard & Poor's. That's slightly higher than the near-default CC = rating now carried by Edison. If the offering failed, Edison would fac= e a series of difficult choices that range from depleting its cash cushion = to going back to its bankers and begging for continued forbearance. I= ts SCE subsidiary already has defaulted on $931 million in bonds and notes.= That triggered a default in bank lines of credit at Edison International a= nd SCE, which has since operated under extensions from its lenders. Ed= ison has about $3 billion in cash, including $2 billion held by SCE, accord= ing to regulatory documents. "This could all still unravel, but I have= been impressed with [Edison's] effort to inch along so far," said Ellen La= pson, an analyst at Fitch Inc., a corporate credit rating service. "Who wou= ld have thought that they could have lasted so many months after their firs= t default in January and still not be in bankruptcy?" Positive develop= ments for Edison, including a deal to hold small generators at bay with par= tial payments from SCE and progress at crafting a rescue plan in both the s= tate Legislature and the Public Utilities Commission have sparked a small r= ally in the company's stock. Edison shares have risen 8% this month. = They gained 21 cents Thursday to close at $11.90 on the New York Stock Exch= ange.=09 Energy Company Abandons Plans for Baldwin Hills Plant Power: Homeowners an= d environmentalists rejoice at decision. The site is proposed as a 1,200-ac= re state park. By JOE MOZINGO, Times Staff Writer In a victory for= environmentalists and nearby homeowners, an energy company announced Thurs= day that it was abandoning its plan to build a power plant on the site of a= proposed state park in the Baldwin Hills. La Jolla Energy Developmen= t Inc., in a letter to the state Energy Commission, said it was withdrawing= its application for fast-track approval of the 53-megawatt plant and "will= not pursue the Baldwin facility in the future." "We listened to the c= ommunity," La Jolla President Steve Wilburn said in an interview Thursday. = "We need to find another place for this equipment." The project was to= be a joint venture between La Jolla and Stocker Resources, an oil company = that leases the land where the trailer-sized natural-gas plant would sit. = Stocker officials said they will decide in the next few days whether th= ey will pursue the project. "At this point it's just La Jolla pulling out,"= Stocker spokesman Steve Rusch said. But most observers said it would = be difficult to move forward on the fast-track schedule the state has imple= mented to relieve the energy crisis. The state commission was schedule= d to decide whether to approve the project today in Sacramento, but the hea= ring has been canceled. The news sparked elation among environmentalis= ts and nearby homeowners who had fought the proposal on grounds that it wou= ld pollute neighborhoods and threaten an ambitious plan to piece together 1= ,200 acres of public open space in the hills. "We're getting ready to = have the biggest party," said Tony Nicholas, president of the hills' United= Homeowners Assn. "This shows how a community can come together for a commo= n goal and mobilize the people in a matter of days." About 76% of the = residents in the hills are African American and many saw the issue as a mat= ter of environmental justice. In addition, Stocker and La Jolla were = seeking approval for the plant within 21 days of filing their application, = under the governor's emergency power orders. By following this fast-tracked= procedure, they would have been able to avoid the normal, time-consuming e= nvironmental review process. That angered opponents even further, and = nearly 1,000 people showed up at a public hearing Monday to fight the proje= ct. But what officials said turned the tide against the project--at a = time when the energy commission is approving such plants as fast as possibl= e--was testimony from a South Coast Air Quality Management official who sai= d his agency would not be able to approve the plant quickly. Executive= Director Barry Wallerstein said his agency would have to conduct hearings = that would take up to 60 days, pushing construction well beyond a Sept. 30 = deadline set by the governor for fast-track projects. He also said it was u= nlikely Stocker could get needed exemptions from federal clean air laws. = In a letter to the Energy Commission this week, Wallerstein wrote: "It a= ppears that the Baldwin Energy Facility could not begin operation until som= e time in the first part of 2002 at the earliest." By Wednesday night, the = energy commissioner who presided over the public hearings issued a statemen= t recommending that the rest of the commission deny the application for a p= lant, citing Wallerstein's concerns. Conservationists embraced the out= come as a sign that the movement to create a park was gaining steam. The Ba= ldwin Hills Conservancy was created last year with the idea of creating gre= en space for the densely populated neighborhoods of south Los Angeles. With= support from the governor and local politicians, the state recently bought= a 68-acre parcel in the area for an unprecedented $41 million. "This = is a great day for the Baldwin Hills and all the people who have worked so = hard to bring this world-class vision to reality," said Esther Feldman, pre= sident of Community Conservancy International and the main organizer to bui= ld the park. Also applauding La Jolla's decision were state Sen. Kevin= Murray (D-Culver City) and Assemblyman Herb Wesson (D-Culver City), who ha= d come out strongly against the project. They and others questioned whether= the small amount of power provided by the facility--coming online after th= e dog days of summer--would do much to relieve the energy crisis. "I'm= ecstatic" Wesson said. "At this point the environment has won." The p= lant would have sat on what is a working oil field about 650 feet from the = Kenneth Hahn State Recreation Area. And according to park proponents, it wo= uld lie in the middle of the grander state conservancy, on what would be a = half-mile bridge of land arching over La Cienega Boulevard. Rusch, the= spokesman for Stocker, said much of the information circulating about the = trailer-sized plant is false. The plan did not call for "a stack with = billowing smoke," he said. "If the issue is air quality, we've cleaned air = quality up." In the last decade, Rusch said, the company's existing 400 oil= pumps on the property have reduced nitrogen oxide emissions from 374 tons = to 3 tons a year. The power plant--with two 70-foot stacks--would ultimatel= y add about 18 tons a year. He said the company was trying to cut its = energy bills by providing its own power to pump oil, while also contributin= g an extra 39 megawatts to the state grid during the energy crisis. Re= sidents say there are more desolate places for the state to relieve the ene= rgy problem. Said Mary Ann Green, president of the Blair Hills Homeowners A= ssn.: "We just hope that Stocker would be responsive to the outcry from the= community."=09 Western states could feel pinch from California pricing=20 KAREN GAUDETTE, Associated Press Writer Friday, June 22, 2001=20 ?2001 Associated Press=20 URL: http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2001/06= /22/national0545EDT0489.DTL&type=3Dnews =20 (06-22) 02:45 PDT SAN FRANCISCO (AP) --=20 When power supplies stretch thin across the West this summer, who will deci= de whether Silicon Valley computers, Washington apple orchards or Las Vegas= casinos get first dibs on what's left?=20 It's a key question raised by the decision of federal energy regulators thi= s week to cap electricity prices throughout the West, using a formula based= on California's power costs.=20 Economists, energy industry executives and officials in all 11 states are b= eginning to analyze the fit of this new piece in the energy puzzle.=20 Though most call the order a good step that could prevent price gouging, ot= hers worry the pricing system could lead to electricity shortages for Calif= ornia's neighbors, or prompt utilities to stock up on power contracts to fe= nd off shortages. That could diminish any leverage power buyers might have = as they compete for the remaining megawatts available each day.=20 Tying the highest possible power price to California could cause a problem = come winter, when power demand drops in the Golden State, said Gary Ackerma= n, director of the Western Power Trading Forum, which represents most selle= rs of energy.=20 States where consumers need electricity to heat furnaces through the winter= would be unable to outbid each other above the price cap, which is usually= determined by a formula based on the highest bid for last-minute power dur= ing the most recent energy supply emergency in California.=20 That may leave power wholesalers, and not a free market, to decide who gets= the energy.=20 "Certainly, California has a tremendous pull on our prices and has for prob= ably the last year," said Claudia Rapkoch, spokeswoman for Montana Power Co= ., which supplies natural gas and electricity to two-thirds of the Big Sky = state. "What it means for this winter, we're just going to have to wait and= see."=20 California utilities had much more control over power supplies before dereg= ulation in 1996 obligated them to sell off their power plants to encourage = competition. This brought lower prices for a time, but gave control over po= wer supplies to wholesalers that aren't obligated by state law to serve the= serve the best interests of local customers.=20 Rather than appointing one power grid manager to decide how to divide power= in the West, Ackerman predicts utilities in non-deregulated states will si= mply sell their power within their borders. That would hurt California, whi= ch this week imported about 10 percent of its electricity and its remaining= supply from local plants owned by out-of-state power companies.=20 Price cap or not, utilities in the region will watch out for each other as = best they can, because they might need the favor returned, said Charles Rei= nhold, executive consultant for Electric Resources Strategies in Ariz.=20 Saddled with rising bills that threatened to exhaust the state's budget, Ca= lifornia recently began to sign long-term contracts with generators. Gov. G= ray Davis credits the change for helping to drastically reduce prices on th= e spot market, which earlier this month fell below $50 per megawatt hour fo= r the first time in a year.=20 The long-term contracts, though, weren't cheap. California will pay an aver= age of $70 per megawatt hour during the next decade under 38 different cont= racts signed so far.=20 On the Net:=20 Western Power Trading Forum: www.wptf.org =20 RTO West: www.rtowest.org =20 ?2001 Associated Press =20 Feds spurn Duke Energy in its bid to avoid refunds=20 Christian Berthelsen, Chronicle Staff Writer=20 Friday, June 22, 2001=20 ?2001 San Francisco Chronicle =20 URL: http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/20= 01/06/22/MN95159.DTL&type=3Dnews =20 Federal regulators have rejected attempts by Duke Energy Inc. to avoid refu= nding millions of dollars to California for charging exorbitant electricity= prices in January and February.=20 The Federal Energy Regulatory Commission first ordered the refunds on March= 9, and Duke responded by filing a challenge. But the commission on Monday = rejected the company's appeal and reiterated its earlier order, claiming Du= ke had abused its power in the California energy market when it sold power = for $3, 880 per megawatt hour.=20 "We will not tolerate abuse of market power or anticompetitive bidding or b= ehavior," the commission said.=20 Duke acknowledged this month that it had charged $3,880 per megawatt for ab= out 5,500 megawatt hours sold to the state's major utilities in January and= February, netting it more than $19 million in receivables.=20 The commission did not specify how much money Duke should refund, but it di= rected the company to readjust its January billings for those hours to a pr= ice of $273. From a FERC document, it appears that about 2,835 hours occurr= ed in January, which would result in a total refund for that month of $10.2= million.=20 Duke is one of the companies that have been identified by both the Californ= ia Independent System Operator, the manager of the state's electricity grid= , and the FERC as having exercised market power and overcharged Californian= s for electricity.=20 Meanwhile, employees at the South Bay power plant in San Diego run by Duke = are expected to testify in a state Senate committee hearing today that the = company ramped production up and down. That allegedly was aimed at lowering= power production during shortages and attempting to drive up electricity p= rices on the spot market.=20 The workers were employed by San Diego Gas & Electric Co. but were working = under contract to Duke.=20 E-mail Christian Berthelsen at cberthelsen@sfchronicle.com .=20 ?2001 San Francisco Chronicle Page A - 4 NEWS ANALYSIS=20 Davis winning Washington PR battle=20 Price cap victory may rob Democrats of campaign issue=20 Marc Sandalow, Washington Bureau Chief=20 Friday, June 22, 2001=20 ?2001 San Francisco Chronicle =20 URL: http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/20= 01/06/22/MN167044.DTL&type=3Dnews =20 Washington -- There was a reason Gov. Gray Davis donned a dark blue jacket = and endured beastly humid 90-degree heat this week in an area behind the Ca= pitol known as the "House swamp."=20 The nation was watching. And after months of political free fall, his messa= ge seemed to be taking hold.=20 "California has been bilked out of $9 billion while the Federal Energy Regu= latory Commission was asleep at the switch," Davis declared, repeating test= imony he had delivered hours earlier in the air-conditioned confines of a S= enate hearing room.=20 Wiping a bead of sweat from his brow as 10 television cameras and two dozen= reporters recorded the scene, the California governor apparently couldn't = resist taking another shot: "For nearly a year I've been pounding on this c= ommission to enforce the law."=20 The state's energy crisis, with its volatile spot markets, out-of-state gen= erators and dearth of alternative energy providers, is a dizzyingly complex= policy puzzle. The politics are much simpler.=20 Democrats present themselves as consumer crusaders, defending helpless util= ity customers from greedy energy conglomerates and misguided regulators. Re= publicans portray themselves as stewards of the free market and long-term s= olutions, rejecting price caps and refunds as heavy-handed overreactions wi= th Soviet-style results.=20 The Democratic populism seems to be winning the battle. Though the debate i= s far from settled, the consumer-oriented approach to California's energy w= oes has raised their hopes of winning back the House of Representatives in = 2002 and the White House in 2004.=20 "Republicans are scared out of their minds about this," said one gleeful De= mocrat on Capitol Hill, who suggested that the White House's lackadaisical = response to California's problems would rile consumers from coast to coast.= =20 "This could rival Pete Wilson's alienation of Latinos," said the Democrat, = referring to the former Republican governor's strident stand against illega= l immigrants, which many blame for the party's weak standing in California.= =20 A sign of the GOP's concern surfaced this week with television ads, finance= d by anonymous sources but produced by Republican Party strategists, that b= lame the Democratic governor for California's energy problems.=20 Democrats, who long have worried that the crisis could cost Davis a second = term, now take credit for having pressured the White House and federal regu= lators to take a more active role.=20 The Federal Energy Regulatory Commission, which had previously resisted suc= h efforts, took steps toward controlling wholesale electricity prices Monda= y. Later in the week, two commissioners appointed by President Bush testifi= ed that they might be open to further price restrictions and support huge r= efunds to California. And just yesterday, Vice President Dick Cheney, who h= as been among California's most vocal critics, told Senate Democrats behind= closed doors that he could support refunds to California if federal regula= tors agreed, according to those in the meeting.=20 "There is no doubt in my mind that action (taken by federal regulators) was= the direct result of pressure for price relief led primarily by the Califo= rnia delegation," Davis said.=20 The pressure did not come only from Democrats. Republican lawmakers, some o= f whom fear the crisis could cost them seats in 2002, wrote FERC last week,= requesting commissioners to "take further actions" to help the state.=20 The Democrats' public relations success follows an effort by the party to r= aise the profile of its consumer crusade. Hardly a day has passed in the pa= st several weeks without a group of Democrats holding a news conference to = attack the White House, the Republican controlled House or FERC for inactio= n.=20 But it may have just as much to do with a White House that has been far mor= e focused on long-term energy production than the immediate concerns of Cal= ifornians. Even as it engaged in a legitimate policy dispute over how to so= lve the power mess, the Bush administration appeared indifferent to the pli= ght of residents experiencing skyrocketing energy bills and rolling blackou= ts.=20 Bush tried to correct that impression with a trip to the state last month. = But the damage appears to have extended beyond California.=20 A CBS News/New York Times poll released this week of 1,050 adults from acro= ss the country showed that only one in three voters approved of the job Bus= h was doing on energy. More than half the respondents said that protecting = the environment was a higher priority than producing energy, yet barely one= in 10 said that Bush shared that priority.=20 Some Republicans say that Bush was in a no-win position, contending that an= ything he did would have been attacked by California's opportunistic govern= or.=20 "Politics is (Davis') main objective, and I don't see the Bush administrati= on being that way," said Rep. George Radanovich, R-Fresno.=20 The question for some analysts is whether Democrats might have been too suc= cessful. By pressuring the federal government to take a more active role, D= emocrats may lose their ability to point the finger at a convenient scapego= at.=20 "Davis has always needed rate caps much less than he needed a scapegoat. No= w that FERC has given him what he wants, or close enough to it, it's a lot = harder for him to lay blame back on Washington when the blackouts kick in,"= said Dan Schnur, a GOP analyst based in San Francisco.=20 E-mail Marc Sandalow at msandalow@sfchronicle.com .=20 ?2001 San Francisco Chronicle Page A - 4=20 Suit filed over report on power lines, health=20 Deal on transmission grid could raise liability=20 Matthew Yi, Chronicle Staff Writer=20 Friday, June 22, 2001=20 ?2001 San Francisco Chronicle =20 URL: http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/20= 01/06/22/MN114037.DTL&type=3Dnews =20 As state legislators consider Gov. Gray Davis' deal to buy part of the powe= r grid in California, a public records advocacy group filed a lawsuit yeste= rday demanding that the state release a report on potential health hazards = of living near high-voltage transmission lines.=20 The document could be vital to how legislators vote on the $2.76 billion de= al to buy Southern California Edison's power lines, said Terry Francke, gen= eral counsel for the California First Amendment Coalition, which filed the = lawsuit in Alameda County Superior Court. The power line deal was brokered = by the governor to help the cash-strapped utility.=20 Legislators must approve the power grid purchase by Aug. 15 or the utility = can back out. Davis also has a $1 billion agreement to purchase San Diego G= as and Electric's power grid, which also would require the Legislature's ap= proval.=20 Pacific Gas and Electric has not agreed to sell its transmission lines.=20 The power lines report was completed in April by California Electric and Ma= gnetic Fields Program, an agency set up by the state Department of Health S= ervices to study the issue, Francke said. Both state agencies and their dir= ectors are named in the lawsuit.=20 Efforts to keep the report secret are suspect, Francke said.=20 "If it's known there's some danger . . . do you want the state owning that = liability?" he asked.=20 The study began in 1993 after the state Public Utilities Commission committ= ed $7.2 million for research and education on the subject, Francke said.=20 The state document deals with scientific findings on how magnetic and elect= ric fields from transmission lines affect humans and possible policies base= d on those findings, he said.=20 The report was scheduled to be released to the public on May 7, but "at the= last minute, the Public Utilities Commission apparently instructed the sta= ff of the EMF Program to keep the reports secret," the lawsuit said.=20 State health services spokeswoman Lea Brooks said that the report was only = a draft and that her department was following orders from the PUC.=20 "The PUC wanted to see the draft before (it is released)," she said. "We pr= epared (the report) for them. We are following their request."=20 Brooks refused comment on the lawsuit, saying her office hadn't seen it. PU= C officials were not available for comment.=20 Studies on the effects of magnetic fields have resulted in no clear consens= us on their effects, Francke said. That's what makes the state study import= ant for legislators to consider before voting on the governor's deal to buy= transmission lines, he said.=20 Opponents of the power grid deals say the report may add to objections to D= avis' agreements with the utilities. Some legislators would rather the stat= e help build more power generators in California.=20 "They are extra nails in the coffin," said James Fisfis, spokesman for stat= e Assembly minority leader Dave Cox, R-Fair Oaks. "We have fundamental issu= es with the transmission lines, but when you start stacking these items up,= =20 you have an undigestible deal."=20 Davis' spokesman Roger Salazar said he believed the governor hadn't seen th= e health hazard report.=20 "Obviously, if something pops up and is an issue, you'll take a look at it,= but I don't think we're at that point yet," he said.=20 An Alameda County Superior Court judge will hear the lawsuit on July 23, Fr= ancke said.=20 E-mail Matthew Yi at myi@sfchronicle.com .=20 ?2001 San Francisco Chronicle Page A - 4=20 Texas power firm's shares falling=20 Power baron Enron finds fortunes fading=20 Christian Berthelsen, Chronicle Staff Writer=20 Friday, June 22, 2001=20 ?2001 San Francisco Chronicle =20 URL: http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/20= 01/06/22/BU178338.DTL&type=3Dnews =20 =20 There's trouble in Texas.=20 Enron Corp., the Houston power firm that's profited mightily during Califor= nia's energy crisis, is suffering a surprising lack of popularity on Wall S= treet.=20 While all eyes have been on Enron's enormous profits here and its enormous = pull in Washington, D.C., the reputed titan of the newly incarnated, free- = wheeling power industry has lost half its market capitalization -- more tha= n $30 billion -- since its peak in August.=20 Forgive Californians for savoring a bit of schadenfreude over the Houston b= oys' reversal of fortunes. But what gives? Isn't this the company that was = fattening up on the backs of the state's beleaguered utilities, residents a= nd state budget? Isn't this the company with such close ties to the Bush ad= ministration that Kenneth Lay, Enron's chairman, was reported to have inter= viewed a candidate for a job on the commission that regulates his company?= =20 Yup. That Enron.=20 On Monday, Enron shares hit a 52-week low of $43.07, after the Federal Ener= gy Regulatory Commission decided to apply the same price controls to power = marketers such as Enron that had applied to power-generating companies for = months. That's a far cry from August, when the company's shares peaked at $= 90.=20 "There's a whole kaleidoscope of issues that Enron is being challenged with= in the marketplace right now, none of which on the surface is a major deal= ," said Donato J. Eassey, an analyst with Merrill Lynch Global Securities i= n Houston. "But when you combine them all . . . I think what's happening he= re is you have a crescendo with this FERC announcement. You have people say= ing, 'OK, the growth rate is now in question.' "=20 That growth rate was an eye-popping 88.82 percent in revenues for the Unite= d States on a two-year average, and nearly 98 percent in the rest of the wo= rld. Enron officials did not respond to a request for interviews, but as th= e stock continued to drop Tuesday morning, chief executive Jeff Skilling is= sued a statement to the markets in which he reiterated "strong confidence" = in its earnings guidance. The stock rebounded slightly throughout the week,= closing at $44.05 yesterday.=20 In a speech at the Commonwealth Club last night, Skilling blamed regulatory= interference with the "free market" for investor flight from his company.= =20 "Our stock prices have gotten hammered," he said. "They're half what they w= ere a year ago."=20 Tumbling stock prices weren't the only bad news for Skilling last night. A = protester pelted the executive with a berry pie just before he began speaki= ng. As Skilling used paper towels to wipe the pie from his face, a woman wa= s arrested on battery and malicious mischief charges.=20 Enron isn't the only company with stock prices that soared in tandem with C= alifornia's power crisis and are now suddenly headed south. Shares of Relia= nt Energy Inc., AES Inc. and Williams Companies Inc., which generate and se= ll electricity in California, and El Paso Energy Corp., which sells natural= gas here, are all trading near 52-week lows.=20 The main culprit appears to be the suddenly serious talk in Washington abou= t power price controls, re-regulation and now, the possibility of big refun= ds being ordered for California. Even Calpine Corp. of San Jose, which has = developed a reputation as an industry good guy because it has not played th= e spot market and has not been accused of manipulative tactics, dropped nea= rly 7 percent yesterday, to $37.10. But none of the companies has been hit = as hard as Enron.=20 Such a drastic drop in market capitalization poses serious problems for any= company. It leaves it less money to invest in its own growth, and because = executive compensation is so closely tied to stock price, a sharp decline m= akes it more difficult to retain talented leaders.=20 While Enron's power wholesaling division seems to be doing fine, the firm h= as been buffeted by disappointments in other lines of business and other re= gions in recent months. In the financial press, the continuing knock on Enr= on is that its business lines are so new and complex, and the company is so= secretive about its operations, that analysts and fund managers don't feel= confident in their understanding of what it does.=20 A look at the firm's recent troubles exemplifies its diversity.=20 For instance, Enron has engaged in repeated battles with the state governme= nt of Maharashtra in India over a 2,184-megawatt power plant there. The Dah= bol Power Co., which is 65 percent controlled by Enron, stopped constructio= n on a second phase of the project on Sunday, claiming it is owed $48 milli= on by the Maharashtra State Electricity Board. The state has accused Enron = of charging too much and not generating enough, and stopped buying power fr= om the plant last month.=20 Closer to home, Enron has struggled with its investments in fiber-optic ban= dwidth. The company buys and sells unused, high-speed bandwidth space, trea= ting it like a commodity as it does electricity, coal or natural gas. But t= he fiber-optic sector has imploded in recent weeks as it has become clear t= hat for all the long-distance cable laid in the ground, there have not been= enough "last mile" connections set up for users to actually take advantage= of it. Earlier this year, Enron scuttled plans for a joint venture with Bl= ockbuster to offer what it called "video on demand," in which customers at = home would be able to select a video of their choice for a fee and have it = transmitted via fiber-optic cables.=20 Then there was the FERC ruling. For months, the agency had resisted aggress= ive price controls in the West, preferring to let the market run its course= . But as control of the U.S. Senate was handed to Democrats this month and = President Bush appointed a tough Texan regulator named Patrick Wood III to = the commission, the agency changed its tune. It expanded price controls to = all hours of the day, spread the controls throughout the Western region and= brought previously excluded power marketers under the tent.=20 So under current calculations, that means Enron could sell power for no mor= e than $108 per megawatt in a shortage and about $90 during normal hours --= far short of the hundreds of dollars that companies were regularly chargin= g during the past year.=20 In part, the company's gyrating stock price reflects the volatile nature of= the businesses Enron has decided to pursue. And the hard-charging company = has a reputation for going aggressively into entirely new markets. But some= times that approach gets it in trouble, as was the case last year, when Enr= on had to take a $400 million charge for its failed investment in Azurix, a= global water company that set out to make a commodity out of water supply = the same way it had done for electricity service, as governments privatized= their water systems. The opportunities never materialized.=20 Add it all together and Enron has a tough time supporting a price-earnings = ratio of nearly 39, considerably above the liberal standard of health, whic= h is 25. The company had less than $1 billion in profits on more than $100 = billion in revenues last year. Still, a survey by Thomson Financial/First C= all found that analysts expect Enron to deliver earnings of 42 cents per sh= are in the second quarter (up from 34 cents last year), and $1.79 per share= on the year. Most maintain a strong "buy" rating on the stock.=20 But investors with big positions in Enron have taken a hit. Hardest-put of = them will be the Janus funds, which, as Enron's largest mutual fund investo= r, held nearly $3.33 billion of its stock as of the end of April.=20 In a semiannual report to investors, John Schreiber, a p
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