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----- Forwarded by Steven J Kean/NA/Enron on 02/28/2001 02:12 PM -----
Miyung Buster@ENRON_DEVELOPMENT 02/26/2001 03:56 PM To: Ann M Schmidt/Corp/Enron@ENRON, Bryan Seyfried/LON/ECT@ECT, dcasse@whwg.com, dg27@pacbell.net, Elizabeth Linnell/NA/Enron@Enron, filuntz@aol.com, James D Steffes/NA/Enron@Enron, Janet Butler/ET&S/Enron@ENRON, Jeannie Mandelker/HOU/ECT@ECT, Jeff Dasovich/NA/Enron@Enron, Joe Hartsoe/Corp/Enron@ENRON, John Neslage/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, John Sherriff/LON/ECT@ECT, Joseph Alamo/NA/Enron@Enron, Karen Denne/Corp/Enron@ENRON, Lysa Akin/PDX/ECT@ECT, Margaret Carson/Corp/Enron@ENRON, Mark Palmer/Corp/Enron@ENRON, Mark Schroeder/LON/ECT@ECT, Markus Fiala/LON/ECT@ECT, Mary Hain/HOU/ECT@ECT, Michael R Brown/LON/ECT@ECT, Mike Dahlke/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Mona L Petrochko/NA/Enron@Enron, Nicholas O'Day/AP/Enron@Enron, Paul Kaufman/PDX/ECT@ECT, Peggy Mahoney/HOU/EES@EES, Peter Styles/LON/ECT@ECT, Richard Shapiro/NA/Enron@Enron, Rob Bradley/Corp/Enron@ENRON, Roger Yang/SFO/EES@EES, Sandra McCubbin/NA/Enron@Enron, Shelley Corman/ET&S/Enron@ENRON, Stella Chan/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Steven J Kean/NA/Enron@Enron, Susan J Mara/NA/Enron@Enron, Mike Roan/ENRON@enronXgate, Alex Parsons/EU/Enron@Enron, Andrew Morrison/LON/ECT@ECT, lipsen@cisco.com, Janel Guerrero/Corp/Enron@Enron, Shirley A Hudler/HOU/ECT@ECT cc: Subject: Energy Issues Please see the following articles: POWER POINTS:Calif Gov Fiddles As Summer Likely To Burn By Mark Golden 02/23/2001 Dow Jones Energy Service Most of West in the Same Power Jam as California LA Times, 2/26/01 Plant Construction Stalled Over State's Effort to Revise Contracts LA Times, 2/26/01 Electricity Crisis Dims Firms' Opinion of State LA Times, 2/24/01 NEWS ANALYSIS Once Accused of Inactivity, Davis Now Takes Lead Role LA Times, 02/24/01 California has appetite for electricity, but is no power glutton SF Chron, 2/26/01 U.S. West spot power lower as plants return to service Reuters, 02/26/01 Calif Pwr Plan May Face Stumbling Blocks In Legislature Dow Jones Energy Service, 2/26/01 ------------------------------------------------------------------------------ ------------------------------------------------------------------------------ -------------------------------------------------------------------------- POWER POINTS:Calif Gov Fiddles As Summer Likely To Burn By Mark Golden ? 02/23/2001 Dow Jones Energy Service (Copyright © 2001, Dow Jones & Company, Inc.) ? ? A Dow Jones Newswires Column NEW YORK -(Dow Jones)- Once there was a bride whose pianist became ill the night before a beachfront wedding. As she frantically tried to find a new pianist, the radio blared an alert: A 40-foot tidal wave was headed straight for the beach. ? "I just will not let this pianist ruin my wedding," muttered the bride as she turned the radio off. California Gov. Gray Davis and the state Legislature have no better sense of priorities than the bride did. They've been obsessing over the financial solvency of the state's utilities for three months, instead of making progress on the bigger problem: the huge shortage of electricity expected to hit the state this summer. California's multibillion dollar purchase of the utilities' transmission lines won't add one megawatt to the supply of electricity. How big is the imbalance between supply and expected summer demand? The California Energy Commission forecast two weeks ago that the 60,000-megawatt system might just squeak by with 87 MW to spare in a bad heat wave. But nobody takes that forecast seriously. The CEC's numbers are way off base. California's electricity demand could exceed supply by 5%, or 2,000 MW, on days with typical summer weather. That 2,000 MW shortfall will be made up by turning out the lights in 2 million homes, or a mix of homes, businesses and industry. A bad heat wave would get shortages several times that size. As the blackouts roll through parts of the state every weekday that temperatures are at or above normal, every business and home will take its turn at getting by without electricity for an hour or so. What factory can operate under such conditions? Will the state's elderly survive the heat exposure? The CEC put the capacity of generators in the state at about 54,000, but it used original capacity figures. Most of California's big power plants are more than 30 years old. They can't produce as much power as they once did, so subtract about 7,000 MW from their rated capacity. About 15,000 MW of the state's capacity is now controlled by merchant energy companies Calpine (CPN), Duke Energy (DUK), Dynegy (DYN), Mirant (MIR), Reliant Energy (REI) and Williams Cos. (WMB). They say they already have sold much of the power they will generate this summer to out-of-state western utilities. But the CEC ignored that. Hydroelectric generation in the western states is expected to be just 60% of normal this spring and summer. Western utilities have been buying up supplies since last fall. California's PG&E (PCG) and Edison International (EIX) couldn't do that, of course, because they're nearly bankrupt. Nobody knows exactly how much power has already been sold out of state. A trader at one California merchant power company estimated 5,000 MW. In a recent auction of transmission line use, capacity to move electricity out of California sold for up to 15 times the price of transmission capacity to move power into the state. The CEC ignored the sales of California power to out-of-state generators in its rosy summer outlook and ignored the forecast for below-normal hydropower, which depends on winter snowfall. The snowfall season is three-fourths over now, making a hydropower shortage pretty much a done deal. Yet the CEC used normal northwest hydropower production in its forecast. Take off another 2,000 MW. The commission expects 3,000 MW of generators to be off line for unplanned repairs when the heat wave hits. That's California's historic average. But outages usually increase dramatically during a heat wave. Take off another 2,000 MW. The commission expects all 1,000 MW of Davis' recently announced peaking generators to be on line for the summer. "No way," says the industry. Instead of the CEC's estimate of 61,000 MW, then, California can expect available supply of only 44,000 MW. The state needs 51,000 MW to meet demand and maintain recommended reserves in the kind of heat wave it gets, on average, every two summers. People in the industry have been telling the governor for nine months that there's no way to raise supply to meet demand this year or next. Siting and building power plants takes too long. Demand has to be reduced to the level of supply. The current course is to reduce demand through blackouts. Pricing offers a better way. If the state raised electricity rates immediately - a step no longer opposed even by California consumer group The Utility Reform Network - California would stop burning through the natural gas and water reserves needed to keep generators running this summer. Davis insists on solving the crisis without a rate increase big enough to damp demand. Several western U.S. utilities outside California have already imposed such rate hikes. Davis is focused on buying power, even though California can't subsidize consumption of artificially cheap power much longer. The Department of Water Resources is signing 10-year power supply contracts at hefty prices that fully reflect today's supply-demand imbalance. Instead, he should be addressing the imbalance, which must be dealt with sooner (by prices) or later (by blackouts). Raise California rates significantly now. Cut demand, and the wholesale price for electricity comes crashing down. Then sign long-term contracts at the lower rates. Davis is committing California's citizens and businesses to 10 years of overpriced electricity. After that, he says, he will try to reduce demand. His streak of bad decisions in this crisis continues unbroken. -By Mark Golden, Dow Jones Newswires ------------------------------------------------------------------------------ ------------------------------------------------------------------------------ -------------------------------------------------------------------------- Monday, February 26, 2001 Most of West in the Same Power Jam as California Utilities: Other states ran their grids at fever pitches as populations swelled and few new energy sources were developed. Now, also facing blackouts, they want to tilt balance of power away from the Golden State and toward themselves. By PETER G. GOSSELIN, Times Staff Writer ?????WINTERSBURG, Ariz.--For more than a century, California ran a simple account with the rest of the West: It demanded and the West supplied, most especially water and power. ?????But as the Western states have ballooned in the last decade--in no small part because of an outbound trek of Californians--this simple, supply-demand relationship has broken down. ?????Fundamentally, the rest of the West has outgrown its electrical system just as California has its own. And it has done so in very much the same way--by adding too many people without enough new power or conservation. ?????Indeed, statistics show that much of the rest of the West would have been on the verge of trouble even without California's help and may yet face the sort of rolling blackouts that have wreaked so much havoc in the Golden State. ?????The booming Southwest has run its power grid at such a fever pitch that its planning reserves--the extra power that utilities build in to handle emergencies--have shrunk to levels that many regulators and industry experts consider dangerous. ?????Almost none of the West save Montana has increased its power production at anything like the pace of its population growth during the last decade. Despite the long economic boom of the 1990s, which smiled especially on the West, several, such as Arizona, have failed to complete a single new power plant. ?????"We don't know how bad it's going to be yet," said Utah's Republican governor, Mike Leavitt. "We won't know that until May, June, July and August, when everyone in the Southwest turns on their swamp coolers." ?????In trying to dodge the blackout bullet, many Western leaders are seeking to force a great change on the region: to renegotiate their states' basic deal with California. They want to end an old relationship--that between center and hinterland, colonizer and colonized--and establish a new one that could curtail California's long regional dominance. ?????In the strange chemistry of the moment--when a once-Republican state government has turned Democratic and a once-Democratic national government has turned Republican, when the battle is to a large extent over privately owned electricity rather than publicly controlled water--they could actually meet with some success. ?????"California spent the 20th century decolonizing itself from Wall Street and the East," said Kevin Starr, the state librarian and author of a multivolume history of California. "Now, all of a sudden, there's a dramatic possibility of it being recolonized, at least in part, by the rest of the West." ?????Captive Plants Feed Power to California ?????Ground zero for these changes lies 50 miles west of Phoenix in the dry scrublands of Wintersburg. This is home to the Palo Verde nuclear facility, now the nation's single biggest power producer. It will soon be home as well to between three and six new gas-fired power plants that, combined, will produce even more electricity than their giant neighbor. ?????Palo Verde represents a great deal about the old, fraying world of regulated utilities and about the supply-demand relationships that California once maintained with the rest of the West. ?????More than one-quarter of the plant is owned by Los Angeles' municipal utility, the Department of Water and Power, several other California cities and Southern California Edison. ?????A row of steel latticework towers runs off toward California, carrying a transmission line from plant to consumer. California has big stakes in a half-dozen similarly captive plants in an arc of states from Nevada to New Mexico. ?????From California's point of view, the beauty of these projects has been that they provided near-certain power without the muss of meeting state pollution standards or the political hassle of building closer to home. ?????And at least until the mid-1990s, California regulators virtually guaranteed that their owners covered their costs and made profits, even if plants' power wasn't immediately needed. ?????"The first principle of the old system was that you had to be able to meet demand, no matter what," said Paul L. Joskow, a veteran utility economist at the Massachusetts Institute of Technology. ?????"If you had too much power, if it cost you a little too much, that was less important than being sure you could meet demand." And, he added, "you had regulators watching to make sure you did." ?????The gas-fired plants that are about to pop up in Wintersburg are also representative, but of the new, deregulated world of power production. Although they will crowd in around Palo Verde and tap into the same California transmission line, they are being built on an entirely different business premise: selling power to the highest bidder. ?????In fact, the reason this empty patch of desert has become such an electricity hot spot lately is not Palo Verde itself, but its huge transmission lines. In addition to the California line, four others fan out from the plant: two back to Phoenix, one east to New Mexico, and one north to Utah and from there to the Northwest. ?????All were built to hard-wire the nuclear project to its owners. But they are now seen as the means by which a new breed of producer can get top dollar by sending power wherever prices are highest. ?????"It used to be generating capacity was built by people who looked at the market to see if they could meet demand," said Jack Davis, president of Pinnacle West Capital Corp., which owns Arizona's major utility and is putting up two of the Wintersburg plants. ?????"Now," he said approvingly, "it's being built by people who look at the market to see if you can make a lot of money." ?????Plans Go Awry in Many States ?????Money, not the watchful eye of government, was what was supposed to assure that electricity deregulation worked. The opportunity to make it would cause investors to flock to the electricity business, ensuring that plenty of new power plants got built. ?????If too many went up, it would be investors, not ratepayers, who suffered. If too few, then high prices would attract still more investors, more plants and, ultimately, more power. ?????But to date, almost nothing about deregulation has gone as planned--and not just in California, but in the West in general. ?????Take Arizona. The state has a hands-off attitude toward business, including its utilities. It has almost none of the environmental restrictions blamed for keeping California from putting up the new plants it needs. ?????Its population grew by 40% from 1990 to 2000, according to the Census Bureau. And its demand for electricity expanded at nearly twice that rate, according to industry figures. ?????"Arizona should have been a power producer's heaven," said A. Michael Schaal, a senior analyst with Energy Ventures Analysis Inc., a prominent Washington-area consulting firm. ?????But Arizona's power production rose a mere 4% during the 1990s, mostly as a result of improving existing plants. Until 18 months ago, no one had applied to build a major power plant since Palo Verde in the late 1980s. ?????"I guess I go on the assumption that the utilities plan with some sort of 10-, 20-, 30-year time horizon," Arizona's Republican Gov. Jane Dee Hull said in a recent interview. "I think what we all worry about is: Are they planning?" ?????Or Nevada. Its utilities apparently did plan and increased electricity-making capacity between 1990 and 2000 by a substantial 44%. But that wasn't enough to keep up with the state's population, which increased 66%. On Thursday, Nevada Gov. Kenny Guinn, a Republican and former energy company executive, indefinitely halted deregulation in his state. ?????Or traditionally energy-rich Washington state. One of its major utilities, Seattle City Light, recently learned that all of its previously planned supply increase for the next four years will be consumed, and then some, by just three new customers: computer server farms being built to handle the growing Internet traffic in and out of the high-tech capital. ?????But it's unlikely to be able to get extra power soon because regional supplies are balanced on a "razor's edge," according to Northwest Power Pool President Jerry Rust. "We have no cushion." ?????Indeed, the electricity supplies of the entire West are balanced on a razor's edge, with a variety of forecasters predicting serious shortages this summer. ?????Schaal, the Washington-area consultant, for example, said the region will come up 6% short. "Westerners can expect 150 to 275 hours of rolling blackouts, most of them in California," he said. ?????One of the most striking aspects of the current situation is that, in contrast to what most people think, supplies have not grown short just recently. ?????They have been perilously tight for the last several years--before the start of California's troubles of this summer and fall, and before the near-record dry winter that has left the Northwest dangerously short of water for its hydroelectric dams. ?????The implication is that California did not cause other states to run short of power so much as trigger events that exposed their danger. It did that, according to key observers, with one monumentally inept maneuver. ?????When California required its major utilities to buy power in the volatile spot market and simultaneously prohibited them from passing along higher costs to consumers, it set off a furious price spiral. ?????That effectively stripped the entire region of its energy security blanket, the assurance that it could buy extra power relatively inexpensively if local supplies proved inadequate. ?????The result has been a string of crises across the West. ?????In southern Arizona, for example, the San Carlos Irrigation Project, a tiny public utility that tried to jump into the deregulation vanguard by dropping long-term contracts in hopes of more power at lower prices in the spot market, has announced that its bills are going up 300%. Most of the project's 13,300 poor customers say they can't pay. ?????In Phoenix, utility executives who had confidently said the state was rich with new power projects about to come on line have decided to pull two 50-year-old steam plants out of mothballs and rent a pair of portable generators to reduce purchases from the expensive spot market. ?????In Idaho, the big power company is appealing to potato farmers to skip planting and sell the electricity they would use running irrigation pumps back to the firm. Company executives figure the buyback will be cheaper than purchasing power on the open market--and the potato farmers are likely to do pretty well themselves. ?????Deep Hostility in Rest of the West ?????The subtle difference between California's triggering recent events and actually causing the region's crisis is largely lost in the current atmosphere of apprehension and upheaval. Although leaders of the rest of the West are scrupulously evenhanded in commenting to outsiders about their big neighbor, they are less guarded at home. ?????The normally mild-mannered Leavitt, for example, was recently quoted as warning a Salt Lake City audience that "California, if given the chance, would put a shunt into our veins and bleed us pretty quickly." (In an interview, he denied having made the remark.) ?????Such comments reflect an old and easily rekindled view among Westerners that their states are, in the words of historian Bernard DeVoto, "plundered provinces"--terrain that first Easterners and then Californians have regularly raided for minerals, water and, most recently, power. ?????But this time, some Western leaders think they can change all this. "A lot of people see an opportunity to rewrite the fundamental relationship with California to their advantage," said Stanford historian Richard White. ?????The attempts at rewriting are taking shape across the West. ?????In the Northwest, Oregon, Washington, Idaho and Montana are redoubling their efforts to take over the Bonneville Power Administration, the huge, federally controlled generating system on the Columbia and Snake rivers that is one of California's chief sources of summer electricity. ?????"The crisis has highlighted the danger that power generated in the region can be exported without the region's consent," Oregon Gov. John Kitzhaber said in an interview. ?????In Arizona, state officials have gone from having no proposals for new power plants to being buried by them. Regulators recently approved the construction of 10 plants, including several around Palo Verde, and are considering another eight. ?????Although they are requiring the plants to temporarily serve Arizona's needs first, the facilities will soon be able to sell their power for whatever prices they can command, an arrangement that could leave California just one among many bidders. ?????(Federal officials are unlikely to get in the way: Gov. Hull is close to President Bush, who in turn has shown little interest in helping Democratic California.) ?????Perhaps the most aggressive efforts at change are occurring in Utah, where Leavitt is trying something that could become California's worst nightmare--recalling power that Utah produces for the state. ?????Los Angeles' DWP and several other California utilities own three-quarters of the huge, coal-fired Intermountain Power Project in west-central Utah, and have been drawing on it without incident for 15 years. ?????But Utah officials recently unearthed a long-forgotten provision in their agreement with the plant's owners that gives them the right, with proper notice, to recall power for local use. ?????The state has already notified Los Angeles that it is taking back 50 megawatts of electricity capacity this summer and another 170 next summer, and it may be able to take back still more, according to plant general manager Reed Searle. ?????Although the amounts are trivial--the Los Angeles utility either owns or has firm contracts for more than 7,000 megawatts of capacity--Leavitt said Utah will demand similar recall provisions in agreements for any new plants in the state, including a 500- to 750-megawatt facility that Los Angeles is negotiating to build. ?????"California has chosen not to create its own power generation and has depended on us to do that," the Utah governor said. "That's fine and we're willing to do that. ?????"But," he added, "there comes a point at which, if demand grows too large, we've got to hold some of this capacity back for ourselves, and for our children and grandchildren." ?????If Utah and the rest of the West have reached that point, California could be in for a much bigger and more enduring shock than the one from which it now suffers. --- ?????Times researcher Lynn Marshall in Seattle contributed to this report. ------------------------------------------------------------------------------ ------------------------------------------------------------------------------ -------------------------------------------------------------------------- Monday, February 26, 2001 Plant Construction Stalled Over State's Effort to Revise Contracts Power: Small "peaker" generators could help California get through the summer without blackouts. By NANCY VOGEL, Times Staff Writer ?????SACRAMENTO--The construction of a fleet of small power plants--capable of supplying 1 million homes--is being stalled because of a dispute between state officials and the plant builders. ?????Two weeks ago, Gov. Gray Davis toured a power plant under construction among the orchards of Sutter County. He ordered state Energy Commission regulators to roll out the red carpet for anybody willing to quickly build small, sometimes temporary, generators called "peakers" to help the state get through next summer without blackouts. ?????Yet plans for 29 such plants, which have been in the works since last fall, have been slowed by the state, according to the companies hired to build the plants. The problem, they say, is that the California Department of Water Resources, which was pushed into the electricity business on an emergency basis last month, is trying to amend 4-month-old contracts for construction of peaker plants. ?????State officials say the original contracts gave too much to the plant builders, and they want to save the taxpayers money by revising the terms. ?????"We're not delaying any construction," said Davis spokesman Phil Trounstine. "We're providing financial assurances for the generators and protections for California consumers." ?????"There's no reason," he added, "that these guys can't rework these contracts and get these plants up and running on time." ?????But peaker plant operators say the contract revisions probably will slow down construction. ?????Last week, Harold Dittmer found out that the department wants to stretch to 10 years the terms of what had been a three-year contract with his company, Sacramento-based Wellhead Power. ?????He said he is scrambling to alter land and equipment leases and isn't certain he will get his four power plants installed in the Central Valley by the target dates of May and July. ?????"Having to renegotiate the agreements adds uncertainty, and uncertainty adds time," Dittmer said. ?????Some of the other eight companies with contracts to build peakers say they've also been asked to alter their contracts. ?????"The projects will not be done in June, as originally contemplated," said Dale Fredericks, chief executive officer of DG Power Inc. in the San Francisco suburb of Walnut Creek. His company intends to build seven small plants around the state with the combined capacity to supply more than 340,000 homes. ?????These gas-fired plants, some so small they fit on the back of a big-rig truck, are designed to run a few hours at times of heightened demand. Most are slated for construction on existing industrial sites, such as utility substations. ?????Officials of the Department of Water Resources did not return calls for comment. Steve Maviglio, a spokesman for Davis, said department officials are confident that the plants will all be finished this summer. He said the agency--thrust into the power-buying business as a result of the near-bankruptcy of the state's two biggest utilities--wants to amend the original contracts to save money. ?????"We're simply trying to get the best prices for taxpayers," Maviglio said. ?????But in slowing down the plant construction, the department's action undermines the governor's campaign to quickly expand the state's power production. Two weeks ago, Davis ordered the Energy Commission to offer licensing of such plants in 21 days or less. On Wednesday, the commission published a list of 32 sites around the state that could, by its estimation, quickly and easily accommodate a peaker plant. ?????Among these sites, targeted for proximity to transmission lines and natural gas supplies, are an airport in Kern County, the port of Long Beach and a cardboard recycling plant in Ontario. ?????"Our target is 1,000 megawatts," said Energy Commission spokeswoman Claudia Chandler. ?????Fredericks, the power plant builder, said the state's best shot of getting that much peaking power built by this summer is through existing contracts like his. So many plants are under construction around the country that there is often a long wait for delivery of the turbines, compressors and other crucial components of a power plant, he said. ?????"We've been working on this six months, so we have equipment lined up," said Fredericks, who searched worldwide for the parts he needed. "But somebody coming in right now probably can't find the equipment." ?????His company and eight others signed contracts last fall with the California Independent System Operator. That nonprofit agency, based east of Sacramento in Folsom, was established under the state's 1996 deregulation plan to balance the flow of electricity on the transmission grid reaching 75% of California. ?????Typically, Cal-ISO wouldn't be in the business of soliciting construction of power plants. But a scarcity of supply complicates Cal-ISO's job. Managers looking ahead to the summer of 2001 predicted last year that the state would be short of electricity by one-fifth of what it needs on those hottest afternoons when demand for power spikes upward. ?????Warning of "a very substantial risk" of rotating blackouts in the summer of 2001, Cal-ISO officials signed contracts last October and November for 29 small power plants to be built by June. The plants would be capable of providing 1,279 megawatts of peak-time electricity--enough to supply more than 1 million homes--at a cost of $214 million a year for three years. ?????That would amount to about $6 per California household per year, Cal-ISO staff figured. ?????"These costs," wrote Cal-ISO management in a memo to its policy-making board of governors, "should be weighed against the financial, social and human costs" associated with blackouts. ?????"We saw the summer of 2001 coming like a freight train," said Brian Theaker, manager of reliability contracts at Cal-ISO. "And we gulped and swallowed and said, 'We've got to do this because nobody else is.' " ?????Those contracts were signed despite the misgivings of two appointees of the governor. ?????In an Oct. 26 letter, Public Utilities Commission Chairwoman Loretta Lynch and Michael Kahn, head of the Electricity Oversight Board, complained that the contracts for peaker plants seemed too expensive. ?????They urged Cal-ISO to refrain from signing the contracts until the PUC could check whether Edison and PG&E were willing to build the plants more cheaply. ?????But the utilities came forward with no such plans, and the Cal-ISO board approved the contracts. ?????Under those contracts, the plants would be required to produce electricity for 500 hours at most this summer, when called upon to do so by Cal-ISO. ?????But work on the plants tapered off in January, when the deteriorating financial condition of Edison and PG&E threw the future of Cal-ISO into jeopardy. ?????Cal-ISO doesn't actually buy electricity. It bills utilities for the power it needs to balance the grid. So as Edison and PG&E spiraled toward bankruptcy in December, Cal-ISO lost its credit-worthy status, and companies--and their lenders--feared doing business with the agency. ?????To calm those fears and to get construction underway, the Department of Water Resources has offered to replace Cal-ISO in the contracts. But that has not yet happened, as department officials seek to change the contracts. The state has hired a Massachusetts firm, Navigant, to renegotiate the deals. ?????"If DWR would just assume the contracts as they are, we'd all be in high gear," Dittmer said. ------------------------------------------------------------------------------ ------------------------------------------------------------------------------ -------------------------------------------------------------------------- Saturday, February 24, 2001 Electricity Crisis Dims Firms' Opinion of State Polling: Four out of 10 small companies are less happy about California's business climate, and 20% are looking at a move. By NANCY RIVERA BROOKS, Times Staff Writer ?????Four out of 10 small companies say California's electricity crisis has dimmed their view of the state as a place to do business, and nearly two in 10 are exploring a move to another state, according to a survey released Friday by the National Federation of Independent Business. ?????The survey, one of the first to attempt to ?????gauge the toll on business from the energy meltdown, follows other polls issued this week that illuminate vastly different views of deregulation and the retail competition that it is intended to spark. ?????Most California consumers said they still favor electricity competition, in a survey conducted by J.D. Power & Associates. More than half of the 750 people interviewed said they did not understand deregulation, but 64% said the state should continue to support competition in the electricity industry. ?????But another survey, by the Booz-Allen & Hamilton consulting firm, found that most commercial and industrial companies were "wholly unprepared" to take advantage of retail electricity competition around the nation and that few switched to new electricity providers. While most of those that switched saved money on their electricity bills, 10% paid the same or even more for power. ?????If nothing else, the three surveys underscore that problems in the electricity industry are confusing, expensive, frustrating and disruptive for all involved. ?????"This is a major issue, the No. 1 issue, for small business," said Martyn Hopper, state director for the National Federation of Independent Business, an advocacy group for small companies. ?????Although California businesses have raised serious concerns about both energy costs and supply, the state's economy so far has shown only limited damage. ?????Just more than 20% of respondents said they had been hit by blackouts since the beginning of the year, the telephone survey of 523 small businesses conducted for NFIB by Mason-Dixon Polling & Research of Maryland found. ?????But there clearly was some confusion among those answering the survey about whether these were the rotating blackouts that hit Northern and Central California on Jan. 17 and 18, or whether these were voluntary power outages under utility programs that ask businesses to cut electricity usage when supplies are extremely tight. For example, 9.4% of respondents in the Los Angeles area said they had experienced a blackout when no forced outages occurred south of Bakersfield. ?????For whatever reason the lights went out, more than half of the businesses were forced to severely curtail or terminate business operations for the entire blackout. ?????About one-third said they lost sales, nearly 21% said materials were damaged or destroyed, and nearly 40% had to absorb wage costs for work not done. ?????Businesses were almost evenly split on whether the blackouts would lower earnings, and nearly eight out of 10 were not planning any layoffs as a result. ?????But the electricity mess has damaged the companies' views of California as a secure business home. Slightly more than 43% said the power problem had changed their views about California as a place to do business, and nearly 71% said it had shaken their confidence in the state's political and business leadership. ?????But a whopping 69% said they have no intention of moving their companies to another state. ?????"Our members don't have the option of moving to Texas or Colorado" in search of cheaper or more reliable power, Hopper said. "A lot of them are family owned and minority owned . . . and they want to do business in California." ------------------------------------------------------------------------------ ------------------------------------------------------------------------------ -------------------------------------------------------------------------- NEWS ANALYSIS Once Accused of Inactivity, Davis Now Takes Lead Role The governor has shifted into campaign mode in the power crisis, trying to convince voters, critics and investors that he can steer the state toward recovery. By DAN MORAIN and RONE TEMPEST, Times Staff Writers ?????Just a month ago, Gov. Gray Davis was under fire for failing to move quickly and forcefully to quell California's energy crisis. ?????But in recent weeks the governor has moved into campaign mode--touring power plants with TV cameras in tow and issuing a steady stream of proclamations that declare victories in the power battle. ?????His mission is to convince voters in California, analysts on Wall Street, and politicos across the country that he is up to solving what he insists on calling the energy "challenge." ?????Davis is doing what any politician on the hustings would do: Head out to a power plant under construction as he did recently, put on a hard hat and tell gathered reporters that he is working to make sure the state will have enough power to meet its needs. ?????"Because it is so complicated and hydra-headed," said Garry South, Davis' chief political consultant, "we really felt he had to move out and simplify and objectify what he is doing." Otherwise, people simply wouldn't see that he had a plan to solve the problem. ?????"This isn't rocket science," South added. "The communication tools and techniques that any elected official has" don't differ that much "from what is available in a campaign." ?????Davis arrived Friday night in Washington, D.C., on the first leg of a five-day East Coast trip that will take him to Wall Street. In recent weeks, he has compiled a story to tell of actions he has taken that suggest he is on top of the situation. ?????Critics counter that his plans are half measures. On Friday, for example, he did not announce a final deal to rescue the state's three private utilities from their multibillion dollar debt. Rather, he proclaimed that he had the framework of an accord with one of the utilities, Southern California Edison. ?????However, the goal is to show progress, even if it's incremental. ?????"The public just wants it solved," said Democratic political consultant Darry Sragow, who doesn't work for Davis. "He is working to show that he is working to solve the problem. If there is a view that no one is solving his problem, all hell will break loose." ?????The actions are a far cry from the situation in January, when utility executives, power generators and lawmakers were loudly blaming Davis for failing to recognize the power crisis and for not taking steps soon enough to get California on course for recovery. ?????Davis confidantes say there was no single event that led to the governor's decision to position himself as the man who would lead California out of the crisis. But the governor pays close attention to politics--conferring at least weekly with his team of political advisors and regularly scrutinizing public opinion polls. ?????After convening two focus groups on the topic last month, the governor and his political advisors, led by South, concluded that Davis needed to take a higher profile. The prospect of the state's two major utilities going broke also spurred the governor into action. ?????"It became important to let Wall Street, creditors, generators and the public understand that we were making progress." said Davis' communication director Phil Trounstine. "That's a big piece of why you've seen the governor personally carrying the message." ?????Davis still has critics, including many in his party. But few can say that he is still suffering from inaction. He is pushing for a state takeover--at a cost of more than $7 billion--of private utilities' electrical transmission systems, and spending money at a clip of $1 billion a month to buy electricity. ?????Flush with a multibillion budget surplus, the Davis administration has spent more than $2 billion to buy electricity so far. It is offering an extra $400 million for conservation measures, and pledges to spend millions more to speed construction of new power plants. ?????Aides say practical reasons prevented Davis from taking a more public role sooner. He was spending most of his time gaining an understanding of the problem, and looking for solutions. ?????Davis was freed up only after he assembled his energy team, led by former Edison executive Michael Peevey, San Francisco lawyer Michael Kahn, and Department of Water and Power chief S. David Freeman. The trio gave Davis the expertise to negotiate with utility executives and power generators. ?????Once they were in place, Davis had time to make public appearances, like the one in Yuba City earlier this month, themed around generation and power plant construction--the stuff of photo opportunities. ?????"It was a collective view that because this problem was so complicated and abstract, he had to move out," South said. ?????And of course, Davis' political future is widely seen to ride on the outcome. ?????Lawmakers give Davis credit for deflecting blame for the crisis from his office, even if it means they pay the price. But now that Davis has taken the lead role, he faces risks if the plan fails. ?????"I'm convinced, if it blows up, he is going to get the worst of it," said one senior Democrat. ?????Added Sragow: "We're not talking about anything that is particularly subtle or sophisticated. The governor is chief executive, the point person. If the person who is the obvious choice doesn't lead, there will be unrest, and someone will try to fill the vacuum." ?????Davis' efforts are beginning to result in some praise. A utility executive who a month ago was highly critical said after Davis announced the makings of a rescue plan for Edison that the governor "forged a difficult and creative and complex agreement.' ?????"I think you have to give him points for that," the executive said. ?????This story was reported by Dan Morain in Los Angeles and Rone Tempest in Sacramento. ------------------------------------------------------------------------------ ------------------------------------------------------------------------------ -------------------------------------------------------------------------- California has appetite for electricity, but is no power glutton ANDREW BRIDGES, Associated Press Writer ? Monday,?February 26, 2001 Breaking News Sections (02-26) 12:39 PST LOS ANGELES (AP) -- California's power crisis has led neighboring states to accuse the Golden State of hogging electricity. But the numbers tell a different story. California does use a vast amount of electricity. But it consumes less on a per-capita basis than all other states except Rhode Island. The mild climate and less heavy industry than other states are part of the reason. Experts say credit also must go to stringent conservation measures. ``It's true we're big, and it's true we didn't build a lot of power plants. ... But we're not energy hogs at all,'' said Arthur Rosenfeld, who sits on the five-member California Energy Commission. ``We're almost as good as Western Europe, and Western Europe is about twice as energy-efficient as the United States.'' Among the 50 states, only Texas consumes more energy -- measured by its total use of electricity, natural gas and oil -- than California, the nation's most populous state. However, California ranks 47th in per-capita energy use -- well below No. 4 Texas, No. 20 Washington and No. 27 Oregon, according to the Energy Information Administration, which is part of the U.S. Energy Department. When looking specifically at per-capita electricity consumption, California ranks 49th, at 24.2 million BTUs, the agency said. Californians' per-capita electricity use is only 60 percent of the national average. For air conditioning alone, a typical California household uses one-third the amount of electricity consumed by a household in Texas or Florida, according to the U.S. Energy Department's 1997 Residential Energy Consumption Survey. California has ``a different climate, so even if you do have warm summers, they're not humid, so you don't have the big, huge air conditioning load you see in Florida or Texas,'' said Robert Latta, the survey's manager at the Energy Information Administration. California also uses electricity, as well as natural gas, oil and coal, more wisely than most states thanks to aggressive conservation efforts started during the oil shocks of the early 1970s, federal and state data indicate. Key to those efforts are stringent standards for new homes and commercial buildings that dictate such things as the types of windows and lighting and the amount of insulation. ``If it is not the leading state, they are at least tied for it'' in efficiency standards, said Ed Wisniewski, deputy director of the Boston-based Consortium for Energy Efficiency. ``Historically, they have been very progressive, and many of the programs we advocate nationally were started in California.'' California's per-capita use also is lower because many energy-intensive industries are located elsewhere. Aluminum smelting and paper manufacturing, for example, are clustered in the Pacific Northwest. The industries that are located in California, however, are generally more efficient in their use of electricity than industries elsewhere, according to 1998 figures from the California Energy Commission, which shapes state energy policy. Companies use just 0.2 kilowatt-hours of electricity to produce every dollar's worth of goods and services in California, while businesses in neighboring states use twice as much, according to commission figures. ``The concept that California is a big, wasteful state really isn't true,'' said Latta, of the Energy Information Administration. There is still room for improvement in California, particularly when it comes to conservation. California ranks just 17th among all states in spending by utilities on energy-efficiency programs as part of their revenue. In 1998, California utilities reduced spending on energy-efficiency programs, though the current crisis has prompted the major utilities to reverse that, according to the American Council for an Energy-Efficient Economy. Gov. Gray Davis recently released a $404 million conservation program designed to control growth in the state's demand for electricity. Maintaining energy efficiency and keeping demand in check as the population grows will be among the toughest challenges in the years ahead. Energy use per capita is up 10 percent over the past two decades. Californians used about 7,000 kilowatt hours per year in 1980, compared with about 7,700 kilowatt hours last year, according to scientists at Lawrence Berkeley National Laboratory. And many people are moving to inland areas where they find cheaper housing but also face more severe summer temperatures that require greater use of air conditioning. ? ? Printer-friendly version ? Email this article to a friend Feedback ? ,2001 Associated Press ? ------------------------------------------------------------------------------ ------------------------------------------------------------------------------ -------------------------------------------------------------------------- USA: U.S. West spot power lower as plants return to service. ? 02/26/2001 Reuters English News Service (C) Reuters Limited 2001. LOS ANGELES, Feb 26 (Reuters) - Spot electricity prices in the U.S. West for Tuesday delivery were lower, weakened by the return to service of some key power plants and comparatively light loads across the region. Dealers noted the list of plants returning to service included the 750 megawatt Unit 1 at the Navajo coal-fired plant in Arizona, the 750 MW Unit 1 at the Ormond Beach gas-fired plant in southern California and the 739 MW Unit 6 at the Moss Landing gas-fired plant in northern California . Their return was offset by the start of a planned outage at the 750 MW Unit 3 at the Navajo plant and expectations that the 739 MW Unit 7 at the Moss Landing gas-fired plant would be brought down shortly for a planned upgrade. There was also talk that the 508 MW Boardman coal-fired plant in Oregon had tripped off line over the weekend although market sources said they believed the unit was back up on Monday morning. Loads were reduced by generally mild daytime temperatures across the region although cold nights boosted offpeak demand. The California Independent System Operator (ISO) forecast loads on the 75 percent of the state grid it oversees would peak Tuesday at 29,285 MW, down from an expected peak on Monday of 29,814 MW. Natural gas prices were steady to slightly higher with a range of $12.00-14.00 per million British thermal units compared with an average on Friday of $12.25. Gas fuels about a third of California 's power plants. Weather Services Corp. forecast Northwest temperatures would be mostly 2-4 degrees F below normal through Tuesday, near normal Wednesday and near normal to 10 degrees above on Thursday and Friday. Southwest temperatures were seen averaging 3-12 degrees below on Tuesday, 2-8 degrees below on Wednesday, near normal to 4 degrees above on Thursday and near normal to 8 degrees above on Friday. For city-by-city regional weather forecasts, double click on the following: Northwest (Northern WSCC) Southwest (Southern WSCC) Throughout the West, planned and unplanned outages or reductions were underway at the following units (tentative restart dates): - 1,270 MW Palo Verde 3, nuclear, Ariz. (March 3) - 750 MW Navajo 3, coal, Ariz. (March 24) - 175 MW South Bay 3, gas, Calif. (March) - 430 MW Hunter 1, coal, Utah (April) - 1,080 MW San Onofre 3, nuclear, Calif. (mid-May to mid-Jun) - 750 MW Ormond Beach 1, gas, Calif. (unknown) - 750 MW Ormond Beach 2, gas, Calif. (unknown) - 335 MW El Segundo 3, gas, Calif. (unknown) - 215 MW Mandalay 1, gas, Calif. (unknown) - 215 MW Mandalay 2, gas, Calif. (unknown) - 175 MW El Segundo 2, gas, Calif. (unknown) - 175 MW Alamitos 1, gas, Calif. (unknown) - 175 MW Redondo Beach 5, gas, Calif. (unknown) - 165 MW Pine Flat, hydro, Calif. (unknown) - 163 MW Pittsburg 2, gas, Calif. (unknown) - 163 MW Pittsburg 3, gas, Calif. (unknown) - 163 MW Pittsburg 4, gas, Calif. (unknown) - 147 MW, Alamitos 7, gas, Calif. (unknown) - 147 MW, Huntington Beach 5, Calif. (unknown) FUTURE PLANT OUTAGES --- - 750 MW Moss Landing 7, gas, Calif. (Feb, unknown) - 1,158 MW Columbia GS, nuclear, Wash. (April, unknown) PRICES --- 02/26/01 02/23/01 Mid-Columbia peak 200.00-205.00 240.00-250.00 off-peak 175.00-180.00 225.00-230.00 bal Feb --- --- Mar --- --- COB peak 200.00-210.00 N 245.00-250.00 N off-peak 180.00-185.00 N 230.00-235.00 N bal Feb --- --- Mar --- --- Palo Verde peak 177.00-182.00 195.00-200.00 off-peak 92.00-100.00 130.00-147.00 bal Feb --- --- Mar --- --- Four Corners peak 178.00-182.00 190.00-200.00 off-peak 95.00-99.00 130.00-135.00 bal Feb --- --- Mar --- --- NP-15 peak 190.00-205.00 212.00-215.00 off-peak 160.00-170.00 N 180.00-185.00 N SP-15 peak 180.00-185.00 190.00-195.00 off-peak 115.00-120.00 130.00-135.00. ------------------------------------------------------------------------------ ------------------------------------------------------------------------------ -------------------------------------------------------------------------- Calif Pwr Plan May Face Stumbling Blocks In Legislature By Jason Leopold ? 02/26/2001 Dow Jones Energy Service (Copyright © 2001, Dow Jones & Company, Inc.) OF DOW JONES NEWSWIRES LOS ANGELES -(Dow Jones)- Key lawmakers in the California Assembly and Senate on Monday were only willing to offer partial support for a plan by Gov. Gray Davis to buy the power lines owned by the state's three investor-owned utilities. Their hesitance calls into question the chances of quick passage for the measure, which is the centerpiece of the governor's plan to keep the state's two largest utilities from sliding into bankruptcy. "There are way too many unanswered questions about it, both fundamental and logistical questions," said the chief of staff to one key Democratic lawmaker. On Friday, Gov. Davis announced at a news conference that he reached an "agreement in principle" with Edison International (EIX) unit Southern California Edison to purchase the utility's transmission lines for $2.76 billion, roughly 2.3 times their book value. Davis said he hopes to finalize the deal by Friday, when he also hopes to announce similar deals for Sempra Energy (SRE) unit San Diego Gas & Electric and PG&E Corp. (PCG) unit Pacific Gas & Electric . Davis aides said the state is willing to pay about $7.5 billion for the 26,000 miles of transmission lines owned by the three utilities. The buyout is aimed to restore the utilities to solvency and help them restructure nearly $13 billion in undercollected power costs the companies have amassed during 2000. But lawmakers said the measure won't sail through the Legislature. State Sen. Debra Bowen, D-Redondo Beach, who chairs the Senate Energy Committee, said she isn't willing to sign off on the transmission plan until the state secures concessions from generators and other creditors. She also questioned the price the governor has offered for the power lines. "There are a number of advantages to having the state own and control the transmission lines, but it's not something we should do at any price," Bowen said, adding that the deal should also have value to ratepayers. For the past several weeks, key lawmakers Bowen, Assembly Speaker Robert Hertzberg, Assemblyman Fred Keely, Senate leader John Burton and Assembly Republican Minority leader Bill Campbell, the Democratic and Republican lawmakers who have stood with Davis during previous news conferences, have been missing. Advisers said the lawmakers have decided not to endorse Davis' plan until more information has been released. Sen. Burton, who introduced legislation three weeks ago to have the state purchase the utilities' transmission lines, also wouldn't declare his support for the governor's plan. "As the governor noted, this is an agreement in principle, and the Legislature awaits further details," said Burton press secretary Dave Sebeck. Other Democrats refused to comment on the transmission plan, while Republicans have been the most vocal opponents. "I don't see how we can pay for the transmission lines without a rate increase," Campbell said. "If you refinance your house from a $100,000 mortgage to a $230,000 mortgage, you're going to have to pay more. That's a simple fact. Consumer groups have blasted the governor's proposal, likening it to a bailout of the utilities. Michael Shames, executive director of the Utilities Consumer Action Network, said the price the state is offering to pay for Southern California Edison's power lines "is the outer limits of what can be financially justified as a purchase price for the transmission." Harvey Rosenfield of the Foundation for Taxpayer and Consumer Rights, said he will try and overturn the measure with an initiative on the 2002 ballot. But Davis isn't worried by his critics, whether they be Democrat or Republican. "Responsible Democrats and Republicans will vote for this," said Steve Maviglio, press secretary to Davis. -By Jason Leopold, Dow Jones Newswires; 323-658-3874; jason.leopold@dowjones.com
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