|
|
Enron Mail |
Firsst article attached refers to the 1946 Nebraska case I mentioned to you=
=20 in DC ----- Forwarded by Steven J Kean/NA/Enron on 03/02/2001 10:36 AM ----- =09Miyung Buster@ENRON_DEVELOPMENT =0903/02/2001 10:04 AM =09=09=20 =09=09 To: Ann M Schmidt/Corp/Enron@ENRON, Bryan Seyfried/LON/ECT@ECT,=20 dcasse@whwg.com, dg27@pacbell.net, Elizabeth Linnell/NA/Enron@Enron,=20 filuntz@aol.com, James D Steffes/NA/Enron@Enron, Janet=20 Butler/ET&S/Enron@ENRON, Jeannie Mandelker/HOU/ECT@ECT, Jeff=20 Dasovich/NA/Enron@Enron, Joe Hartsoe/Corp/Enron@ENRON, John=20 Neslage/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, John Sherriff/LON/ECT@ECT,=20 Joseph Alamo/NA/Enron@Enron, Karen Denne/Corp/Enron@ENRON, Lysa=20 Akin/PDX/ECT@ECT, Margaret Carson/Corp/Enron@ENRON, Mark=20 Palmer/Corp/Enron@ENRON, Mark Schroeder/LON/ECT@ECT, Markus=20 Fiala/LON/ECT@ECT, Mary Hain/HOU/ECT@ECT, Michael R Brown/LON/ECT@ECT, Mike= =20 Dahlke/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Mona L Petrochko/NA/Enron@Enron= ,=20 Nicholas O'Day/AP/Enron@Enron, Paul Kaufman/PDX/ECT@ECT, Peggy=20 Mahoney/HOU/EES@EES, Peter Styles/LON/ECT@ECT, Richard=20 Shapiro/NA/Enron@Enron, Rob Bradley/Corp/Enron@ENRON, Roger Yang/SFO/EES@EE= S,=20 Sandra McCubbin/NA/Enron@Enron, Shelley Corman/ET&S/Enron@ENRON, Stella=20 Chan/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Steven J Kean/NA/Enron@Enron, Sus= an=20 J Mara/NA/Enron@Enron, Mike Roan/ENRON@enronXgate, Alex=20 Parsons/EU/Enron@Enron, Andrew Morrison/LON/ECT@ECT, lipsen@cisco.com, Jane= l=20 Guerrero/Corp/Enron@Enron, Shirley A Hudler/HOU/ECT@ECT =09=09 cc:=20 =09=09 Subject: Energy Issues Please see the following articles: Oakland Trib 2/28: "Energy buyout foes say dump grid plan" San Diego Union 2/28: "Energy chief 'open' to plan on transmission line=20 buyout" SF Chron, 2/28: "Energy Experts Belie Davis' Rosy Prediction Summer expected to be crunch time" Riverside Press 3/1: "PUC to mull baseline level for electricity" Orange Co. Register 3/1: "Electricity notebook" Contra Costa Times 3/1: "PUC chief defends actions in crisis" LA Times 3/2: "Cal-ISO Says Suppliers Overcharged" Sac Bee 3/2: Power profits targeted: Generators urged to forgive some of=20 utilities' debts (Steve Kean quoted) Energy Insight 3/2: "California Energy Island Won't Work" SF Chron 3/2: Ex-Regulator Urges Temporary Federal Price Caps on Power SF Chron 3/2: PG&E to Pay Creditors Only 15% / Smaller suppliers outraged= =20 over plan ---------------------------------------------------------------------------= --- ---------------------------------------------------------------------------= --- ------------------ Energy buyout foes say dump grid plan Davis critics point to federal veto disclosure=20 By Steve Geissinger SACRAMENTO BUREAU=20 SACRAMENTO -- Foes of Gov. Gray Davis' plan to buy power lines said Tuesday= =20 the 11th-hour disclosure of federal veto power over the stalled deal shows= =20 the effort should be abandoned altogether.=20 But Davis, who spent the day lobbying federal officials in Washington, D.C.= ,=20 said he's confident the Bush administration will support his plan to purcha= se=20 California's high-voltage transmission grid as part of a deal to rescue=20 teetering utilities.=20 Critics of the plan to ease the energy crisis, however, aren't so sure that= =20 Bush's Republican administration, which favors market-driven strategies ove= r=20 government intervention, will support the Democratic governor's proposal.= =20 Moreover, Republican legislators here said, the last-minute revelation that= =20 the plan would need the approval of federal regulators is further evidence= =20 that it is misdirected, overly complex and will take too long to implement.= =20 "It means much more time will be required and time is something that=20 especially a lot of the creditors of the utilities do not have," said=20 Assembly Republican leader Bill Campbell of Villa Park.=20 "I think this means we have to look at an alternative deal," Campbell said.= =20 Dan Nelson, a spokesman for Senate Republican leader James Brulte of Rancho= =20 Cucamonga, said Republicans generally oppose state purchase of power lines= =20 from utility companies as part of a plan to rescue them from financial=20 difficulty.=20 They instead support acquisition of some other asset from the utilities, su= ch=20 as stock warrants, in exchange for state assistance with their financial=20 woes.=20 Foes say the grid purchase would saddle the state with an antiquated networ= k=20 that could prove costly to maintain while supporters contend it could lead = to=20 quick improvements in a bottlenecked system overdue for repairs.=20 Word that Davis' plan to buy transmission lines would need federal approval= =20 surprised some legislators, their aides said. Open government advocates hav= e=20 harshly criticized the administration for secrecy surrounding much of the= =20 governor's energy crisis relief efforts.=20 Federal Energy Regulatory Commission Chairman Curtis Hebert disclosed=20 recently in Washington that his board has authority over the deal, which he= =20 called "nationalization" that is "against the best interests of the America= n=20 public."=20 Following that disclosure, Democratic legislative leaders backing Davis' pl= an=20 said they hope to maneuver around the need for commission approval.=20 California can perhaps circumvent the potential hitch by relying in part on= a=20 1946 case involving the state of Nebraska that did not require federal=20 approval, according to Senate President Pro Tem John Burton, D-San Francisc= o.=20 Nevertheless, Davis, in Washington for a national governors meeting, said h= e=20 presented a nine-page proposal to U.S. Energy Secretary Spencer Abraham and= =20 expects a response by the end of the week.=20 "He wants this problem solved and he's been very supportive," Davis said.= =20 "He's recommended approval on every request I've made and I believe he will= =20 support our proposal."=20 Abraham's office did not return calls seeking comment.=20 The Federal Energy Regulatory Commission that will likely weigh the fate of= =20 the plan, however, is independent of Abraham's office. Even so, Abraham is= =20 part of an energy policy team appointed by Bush, and Davis views Abraham's= =20 support of the proposal as a potential key to a federal nod.=20 Davis' history with the commission won't help his efforts. He and the=20 commission have been at odds for months over the governor's campaign to=20 impose tough wholesale price caps in the West.=20 The latest complications in the plan to rescue utilities came amid a=20 continuing deadlock in secret negotiations between the state and the Pacifi= c,=20 Gas and Electric Co., which is reluctant to sell its high-voltage=20 transmission lines.=20 Davis announced Friday that California's other major investor-owned utility= ,=20 Southern California Edison, had agreed on the basic framework of a deal tha= t=20 includes the sale of its transmission grid to the state for $2.8 billion.= =20 The utilities, trapped between high wholesale costs and lower=20 government-frozen retail rates, have been pushed to the brink of bankruptcy= =20 as they amassed nearly $13 billion in debt.=20 When the utilities could no longer buy enough power, the state began=20 brokering billions of dollars in emergency and long-term power deals to=20 thwart rolling blackouts.=20 Then Davis and legislators began developing strategies to ease the energy= =20 crisis, including increased conservation, construction of new generation=20 plants and ways to prevent utility bankruptcies.=20 Under Davis' plan to rescue utilities, the state would help fiscally restor= e=20 the companies with bonds in exchange for acquisition of their 26,000 miles = of=20 transmission grids. The state would upgrade the aging grid and then lease t= he=20 lines back to the utilities to operate. ---------------------------------------------------------------------------= --- -------------------------------------------- Energy chief 'open' to plan on transmission line buy out By Toby Eckert=20 COPLEY NEWS SERVICE=20 February 28, 2001=20 WASHINGTON -- Energy Secretary Spencer Abraham is "open" to California's pl= an=20 to take over utility transmission lines in the state, but stopped short of= =20 endorsing the proposal, saying he needed to study it further, Gov. Gray Dav= is=20 said yesterday.=20 "From the tone of his remarks, I think his comments will be positive, and I= =20 hope by the end of the week he will be able to endorse the proposal or at= =20 least endorse a modified proposal that is satisfactory to us," Davis said= =20 after meeting with Abraham privately at the Department of Energy.=20 A spokesman for Abraham said he "couldn't characterize (Abraham's) reaction= =20 one way or the other." But he said Abraham was "open to taking a look at th= e=20 material the governor provided" and would follow up with Davis.=20 In his effort to drum up federal support for the buyout plan, Davis also=20 invoked a name that resonates throughout the halls of power in Washington:= =20 Alan Greenspan.=20 Davis said the Federal Reserve Board chairman "in a general way thinks it= =20 makes sense to acquire transmission lines to make the capacity improvements= =20 that have not been done over the past 15 years."=20 Greenspan and Davis informally talked about the power crisis this week, aid= es=20 to Davis said. Greenspan's comments could not be confirmed independently.= =20 Davis was in Washington for the four-day winter meeting of the National=20 Governors Association. But he also used the occasion to try to convince the= =20 new Bush administration -- and the media -- that his plans to solve=20 California's power woes are sound.=20 The governor spent about an hour briefing Abraham on the tentative agreemen= t=20 the state struck last week to acquire Southern California Edison's=20 transmission system for $2.76 billion. The state is trying to negotiate=20 similar deals with San Diego Gas and Electric and Pacific Gas and Electric = as=20 a condition for helping the utilities pay off about $13 billion in debt the= y=20 have accumulated because of soaring wholesale power costs.=20 The Federal Energy Regulatory Commission probably will have to sign off on= =20 any purchase plans, and FERC Chairman Curtis Hebert has made comments=20 indicating he is skeptical of the idea. But Davis believes he can overcome= =20 possible opposition at FERC if Abraham backs the plans.=20 Davis also said he and Abraham had "some creative talks about how we might = be=20 able to find more megawatts for this summer" and assigned staff members to= =20 work on that "on a daily basis." He did not elaborate on the ideas, saying= =20 there may be some details forthcoming "in about two to three weeks."=20 The governor will continue his East Coast sales pitch for the transmission= =20 line purchase -- and other elements of his plan to solve the power crisis -= -=20 in a meeting with Wall Street analysts and bond-raters today.=20 Davis and legislators also have pursued long-term power contracts with ener= gy=20 suppliers to wean the state from the open market, which became wildly=20 expensive last year.=20 Mirant Corp., which operates power plants in Northern California, said=20 yesterday that it has agreed to shift contracts from the defunct California= =20 Power Exchange to the Department of Water Resources, which is the state's= =20 electricity buyer.=20 The contracts amount to about 1,000 megawatts of power over the next 10=20 months. Last week, Mirant agreed to sell 750 megawatts to the state next=20 month. On a typical winter day, the maximum demand on the grid managed by t= he=20 state Independent System Operator, about 75 percent of the total state=20 network, is about 30,000 megawatts.=20 Davis' visit to Washington came against the backdrop of a muted federal=20 response to California's power crisis. The Bush administration, which favor= s=20 open power markets, has said it is largely up to state officials to solve t= he=20 problem, rejecting calls by Davis for more aggressive action like caps on= =20 wholesale power costs.=20 But the Democratic governor praised the Republican president publicly on=20 several occasions. He cited the administration's temporary extension of=20 federal orders that kept electricity and gas flowing to the state during=20 emergency shortages and its agreement to speed up federal review of new pow= er=20 plants.=20 "Secretary Abraham and the Bush administration in general have been=20 wonderfully responsive to my requests. I cannot thank them enough," Davis= =20 said yesterday.=20 Other California Democrats have been less charitable toward President Bush.= =20 "I think the president is going in the wrong direction on this issue," said= =20 Rep. Bob Filner, D-San Diego, a staunch advocate of wholesale price control= s.=20 "A hands-off approach by the federal government, as the president has=20 suggested, is not going to solve this problem." ---------------------------------------------------------------------------= --- -------------------------------------------- Energy Experts Belie Davis' Rosy Prediction Summer expected to be crunch time=20 Greg Lucas, Sacramento Bureau Chief Wednesday,?February 28, 2001=20 ,2001 San Francisco Chronicle=20 Sacramento -- Gov. Gray Davis' optimistic assessment that California may be= =20 on the "back side" of its energy crisis flies in the face of what many ener= gy=20 companies and other experts predict.=20 California's real test will come this summer when electricity usage sharply= =20 increases, and unless everything breaks the way Davis hopes, predictions ar= e=20 that large chunks of the state will be in the dark.=20 "We're not on the back side of this crisis. This problem is far, far bigger= =20 than the governor is suggesting," said Gary Ackerman, executive director fo= r=20 the Western Power Trading Forum in Menlo Park.=20 "To characterize the problem that way shows a recklessness that feeds on th= e=20 popular notion we don't have an energy crisis. We do. We have a very seriou= s=20 one that's going to hit us as temperatures and loads go up," Ackerman said.= =20 The Democratic governor's comments were made Monday in Washington, D.C.,=20 during an East Coast visit aimed at getting Washington and Wall Street=20 support for his energy plan.=20 He admitted more hard work is needed, but said the state is on the "back si= de=20 of the crisis" because lawmakers have passed bills needed to help lower=20 electricity prices.=20 "Does that mean we're home free?" Davis asked yesterday. "No."=20 But he again repeated that the state is on the back side of the crisis.=20 That is contrary to predictions by the Independent System Operator, which= =20 oversees the state's power market.=20 On any given day in June, the ISO estimates, the state will fall 6,815=20 megawatts short of demand. That would put nearly 7 million homes in the dar= k,=20 if it happens.=20 In July, the expected shortage is 4,685 megawatts. In August, it's 5,297=20 megawatts. That's if California has a normal summer. If it's hotter than=20 normal, the shortage grows.=20 The ISO's estimates tend to be conservative and do not include Davis'=20 conservation goal.=20 But even if a 10 percent reduction were achieved in June that would save=20 roughly 5,000 megawatts, the state would still be short 1,800 megawatts.=20 And there are other variables.=20 Depending on the snowpack and reservoir levels, hydroelectric plants may no= t=20 be able to run at full bore, which would also worsen the situation.=20 "That is something the governor cannot spin his way out of," said Sen. Tom= =20 McClintock, R-Northridge.=20 Davis said a combination of new power plants and energy conservation will= =20 help the state get through this summer.=20 The clock is running. The ISO predicts shortages of 3,030 megawatts in May = -=20 - just two months away.=20 "The real electricity crisis is going to be this summer, and I don't think= =20 we've made enough progress there," said Severin Borenstein, director of the= =20 University of California Energy Institute.=20 California won't be able to build its way out of the energy crisis by quick= ly=20 approving and building new power plants, Borenstein said.=20 The ISO's demand estimates already factor in the new power plants set to co= me=20 online this summer.=20 "Unless we have a very mild summer and have lots of rainfall between then a= nd=20 now," Borenstein said, "we are going to face some serious shortages."=20 Like Davis, Borenstein says California needs to do more to conserve energy.= =20 Unlike Davis, he favors raising prices on big power consumers to give them = an=20 incentive to cut back.=20 But the Democratic governor may be sending Californians a mixed message.=20 By telling them the worst is over, he could undercut his plan by making=20 people believe more conservation is unnecessary.=20 Excluding what lies ahead, there are also plenty of energy issues left=20 unresolved right now.=20 Although Davis has reached a tentative deal with Southern California Edison= =20 on purchasing its share of the state's transmission system for $2.7 billion= =20 -- no such deal exists with either Pacific Gas & Electric or San Diego Gas = &=20 Electric.=20 Some alternative energy producers, like co-generation plants, are shutting= =20 down because the cash-poor utilities haven't paid them for several months. = No=20 cash means no fuel to run the turbines that make the juice.=20 Generators like Duke Energy and Reliant Energy aren't convinced the crisis= =20 has passed.=20 For starters, both companies are owed in excess of $700 million for=20 electricity bought by PG&E and Edison but never paid for.=20 "There are a lot of issues still out there such as how much power your stat= e=20 will require this summer, whether there is enough generation on the ground = or=20 available commercially to handle the load if there is a significant spike i= n=20 demand," said Richard Wheatley, a Reliant spokesman.=20 Harvey Rosenfield, head of the Foundation for Taxpayer and Consumer Rights,= =20 has a slightly different take on whether the worst is over.=20 "We've said all along it's a crisis inspired by the greed of the utilities= =20 and the energy companies," Rosenfield said.=20 "Now that taxpayers are paying $1 billion every three weeks to buy=20 electricity and the ratepayers are going to pay between $13 billion and $20= =20 billion, the companies are happy and the crisis is over. What more could th= ey=20 want?" ---------------------------------------------------------------------------= --- -------------------------------------------- PUC to mull baseline level for electricity It's been a decade since amounts were set. They vary by region, season and= =20 whether a home is heated with gas or electricity. By Robert T. Garrett The Press-Enterprise SACRAMENTO Inland-area residents who want a higher "baseline quantity" of lower-priced= =20 electricity each month will get a chance to plead their case in the next fe= w=20 weeks.=20 The state Public Utilities Commission will examine by early April whether t= he=20 monthly usage limits that trigger higher rates for residential customers ar= e=20 set too low, PUC President Loretta Lynch said Wednesday.=20 Baseline amounts are set by the PUC and vary by geographic region, season a= nd=20 whether a home is heated with gas or electricity.=20 "It's been over a decade since the baselines were set," Lynch told the=20 Sacramento Press Club. ". . . I think it's about time for us to look at wha= t=20 these baselines are in the 21st century."=20 Lynch, an appointee of Gov. Davis, declined to say whether the commission= =20 will make permanent a 9-percent rate hike imposed in early January on=20 residential customers of Southern California Edison, which serves much of t= he=20 Inland Empire.=20 With Edison and Pacific Gas Electric collapsing financially, the PUC impose= d=20 the rate hike -- and increases of up to 17 percent for Edison's large=20 business customers -- for 90 days.=20 The "temporary surcharge" will be lifted in early April unless the PUC vote= s=20 to keep it in effect.=20 Davis has said he hopes his plan to rescue the state's ailing utilities and= =20 avoid rolling blackouts can be carried out without further rate hikes.=20 Davis was in New York City on Wednesday, where the plan drew a tepid respon= se=20 from Wall Street.=20 Meanwhile, the unexpected shutdown of four Western power plants for repairs= ,=20 combined with scheduled maintenance at several in-state plants, forced=20 California grid officials to declare a Stage 2 alert.=20 Wall Street analysts who met privately with Davis in New York called his=20 moves a good step toward solving the energy crisis, but said more must be= =20 done.=20 "He talked about a lot of short-term measures to alleviate problems for thi= s=20 summer, but he hasn't communicated a long-term fix," said Lawrence J.=20 Makovich, senior director of Cambridge Energy Research Associates.=20 Lynch said Wednesday that she and others on the PUC should have recognized= =20 sooner that utility deregulation wasn't working.=20 As part of its review of the January rate hikes, the PUC will invite public= =20 comments on baselines, Lynch said.=20 She said she plans to examine the baselines for each climate zone. In=20 Edison's service area, for instance, there are six.=20 Lynch also said the PUC would look at whether baselines are fair and=20 effective, and whether similar incentives to conserve energy should be buil= t=20 into the rates of businesses.=20 If the commission adopts "incentives for businesses," she said, it has to= =20 make sure it doesn't set the baseline quantities too low for industrial=20 sectors such as agriculture and biotechnology. State Sen. Jim Battin, R-La= =20 Quinta, said Lynch's proposed review of the fairness of baselines in the=20 different climate zones "could be encouraging."=20 But he said he thinks businesses will oppose having baselines applied to=20 them.=20 Battin has waged a battle against baselines, which he calls "social=20 engineering" and which were mandated by a state law passed in the 1980s.=20 In the Inland area, the baseline system works like this:=20 In Temecula and Corona an "all-electric" home -- meaning one that is heated= =20 by electricity -- this summer will pay 12 cents a kilowatt for the first 30= 4=20 kilowatts used each month; for each additional kilowatt consumed, Edison wi= ll=20 charge 14 cents.=20 In Moreno Valley, Hemet, Rialto and most of Redlands, owners of=20 "all-electric" homes will pay Edison the lower rate for 514 kilowatts per= =20 month this summer.=20 In the Coachella Valley, in both summer and winter, Edison charges the=20 higher, 14-cent rate only for monthly consumption above 1,299 kilowatts.=20 Those with gas heating in their homes get different baseline allowances tha= n=20 do those with electric heating.=20 ---------------------------------------------------------------------------= --- -------------------------------------------- Electricity notebook=20 State, Calpine sign $8.3 billion in pacts.=20 March 1, 2001=20 Calpine Corp., a San Jose-based power plant owner, signed two contracts=20 valued at up to $8.3 billion to sell electricity to the California Departme= nt=20 of Water Resources for 10 to 20 years.=20 The contracts with the DWR, which buys electricity for the state's=20 two-biggest utilities, will provide 1,500 megawatts, or enough to light 1.5= =20 million homes, the company said.=20 Calpine signed one $5.2 billion, 10-year contract to sell 1,000 megawatts= =20 from new power plants. Deliveries are expected to begin July 1, with 200=20 megawatts. The full amount of power won't be available until July 2002.=20 A $3.1 billion contract calls for Calpine to provide power for 20 years.=20 Deliveries are expected to begin in August with 90 megawatts and to increas= e=20 to 495 megawatts in August 2002.=20 The contract also allows the state to buy up to 2,000 hours during peak=20 periods from 11 new generating units, once they are built.=20 In February, Calpine signed a 10-year contract valued at $4.6 billion with= =20 the DWR to supply 1,000 megawatts. A megawatt is enough to light 1,000 home= s.=20 Separately, Duke Energy Corp. said it is in discussions with the DWR on=20 long-term power supply contracts.=20 The Gas Co. agrees=20 to buy gas for PG&E=20 The Gas Co. said Wednesday that it reached an agreement with Pacific Gas &= =20 Electric Co. to buy natural gas for the troubled utility for the next month= .=20 PG&E, which is near bankruptcy, has said it is running out of gas supplies= =20 and is unable to buy more because creditors are hesitant to sell to it.=20 PG&E had asked the state Public Utilities Commission to force The Gas Co.,= =20 which serves all of Orange County, to step in and buy gas for PG&E on an=20 emergency basis.=20 The Gas Co. said the agreement with PG&E includes a guarantee that The Gas= =20 Co. will be paid out of the money received from PG&E customer bills. Unpaid= =20 balances cannot exceed $16.5 million, said Gas Co. spokeswoman Denise King. ---------------------------------------------------------------------------= --- -------------------------------------------- PUC chief defends actions in crisis Loretta Lynch blames the energy crunch on the failure of deregulation;=20 credit-rating firm says state will continue to feel its effects=20 By Andrew LaMar and Mike Taugher TIMES STAFF WRITERS=20 SACRAMENTO -- Loretta Lynch, who has faced close scrutiny as president of t= he=20 state Public Utilities Commission, defended her handling of the electricity= =20 crisis Wednesday and said she wishes the agency had recognized sooner that= =20 deregulation was not working.=20 Appearing before reporters at a luncheon, the 38-year-old attorney offered = a=20 harsh assessment of deregulation and said California has not faced the same= =20 degree of uncertainty since the 1920s.=20 "From my perspective, the system that we created was built on a theory and = a=20 hope and a promise, and that promise is unrealized and the theory was fault= y=20 and so therefore the hope remains unfulfilled," Lynch said. "I'm from=20 Independence, Mo.; you have got to show me how we're going to get to the=20 nirvana of the plan for deregulation."=20 Lynch said the PUC is working feverishly on three things:=20 To advise the Legislature on scores of energy bills.=20 To legally defend its decision to keep rates frozen on two utility companie= s.=20 To prepare to decide whether to extend or increase a 9 percent electricity= =20 rate hike approved in January.=20 Meanwhile, the Wall Street credit-rating firm Standard & Poor's issued a=20 report on the dangers of the energy crisis that said California will feel i= ts=20 effects "throughout 2001 and beyond."=20 Damage has been contained to the state's utilities, which are nearly broke,= =20 and the state treasury, which S&P said is insulated from credit problems=20 because of its ample reserves and ability to borrow.=20 But S&P analysts said the combination of the energy crisis and a nationwide= =20 economic slowdown could restrict the state's ability to deal with budgetary= =20 issues that could come up if the economy continues to slow. Also, it could= =20 strap the budgets of cities, counties and other local governments if the=20 state decides to cut payments to them.=20 "In addition to the overall economic slowing that is clearly evident=20 nationally, the utility crisis has hit California at a time when the=20 technology sector, the growth of which has played a significant role in the= =20 state's economy over the past several years, is undergoing a significant=20 retraction," S&P warned.=20 As for Lynch, she challenged several popular assumptions as myths. First, s= he=20 said, deregulation failed on its own, not because politicians cut it short.= =20 Second, she said, the PUC did not stop utilities from arranging long-term= =20 contracts to buy electricity, as they have claimed.=20 And, the defense of the PUC's rate freeze in court is not a losing=20 proposition, she said.=20 "It is true that the utilities came to the commission and to me personally = in=20 October and said 'End the rate freeze. We are hurting.'" Lynch said. "When = we=20 looked at the request, it really did put us between a rock and a hard place= ,=20 and that's a rock and a hard place we remain in today.'"=20 But Lynch said if the PUC had lifted the rate freeze, "we would have, by=20 administrative fiat, plunged the rest of California into the price volatili= ty=20 that San Diego experienced this summer."=20 As it is, the commission is studying the market value of the assets Souther= n=20 California Edison and PG&E were supposed to sell under the terms of=20 deregulation. Once the commission sets the market value, it can determine= =20 whether the utilities are eligible to raise rates.=20 In other developments Wednesday:=20 Power generator Calpine Corp. announced two long-term electricity contracts= =20 that will require energy-starved California to pay up to $8.3 billion to ke= ep=20 the lights on in as many as 1.5 million homes.=20 With the latest agreements, San Jose-based Calpine has three separate=20 long-term electricity contracts with the state Department of Water Resource= s,=20 which is shopping for deals that will spread the soaring cost of power over= =20 several years=20 Environmentalists urged Gov. Gray Davis to upgrade his proposal to obtain= =20 development rights for scenic acreage owned by the state's beleaguered=20 utilities, saying the state should obtain the properties outright.=20 As part of a utility bailout package, the governor has recommended Edison a= nd=20 PG&E turn over development rights to more than 88,000 acres, including scen= ic=20 parcels in the Sierra, and 26,000 miles of high voltage transmission lines,= =20 among other considerations.=20 A Republican assemblyman attacked Davis for comments he made in Washington,= =20 D.C., on Tuesday. The governor said the deals he is negotiating with utilit= y=20 companies to buy their transmission lines would complete the legislative=20 fixes needed and "it means we are basically on the downside of the problem.= "=20 But Assemblyman Tony Strickland, R-Thousand Oaks, questioned whether there= =20 would be enough power this summer or if federal regulators would approve th= e=20 state purchase of transmission lines.=20 "It's irresponsible to call this crisis nearly over," Strickland said. "The= re=20 are still way too many unknowns." ---------------------------------------------------------------------------= --- -------------- Cal-ISO Says Suppliers Overcharged=20 Power: State report calls for a refund of $562 million above 'reasonable'= =20 prices. Generators deny gouging.=20 By NANCY VOGEL and JENIFER WARREN, Times Staff Writers ?????SACRAMENTO--Wholesale electricity suppliers overcharged California's= =20 utilities more than $500 million during December and January, an amount tha= t=20 the federal government should demand be refunded, according to a=20 no-holds-barred state report released Thursday. ?????The report by the California Independent System Operator, which overse= es=20 the flow of electricity in the state, said power suppliers charged $11=20 billion during those two months alone--more than they did for all of 1999. ?????Studying various market dynamics, the agency concluded that there was = a=20 "prima facie case" that the unnamed generators and marketers had charged $5= 62=20 million above "just and reasonable" prices, warranting further investigatio= n=20 and federal hearings into the appropriateness of refunds. ?????The state report is the most accusatory of a number of studies=20 undertaken to determine why wholesale electricity prices have soared in=20 California since last summer, throwing the state's biggest utilities into= =20 financial crisis and dashing hopes for lower consumer rates under=20 deregulation. ?????The study also provides new ammunition to members of California's=20 congressional delegation, who have unsuccessfully been pressing the Federal= =20 Energy Regulatory Commission to impose price ceilings on wholesale=20 electricity costs. ?????Generators defended their operating practices and rejected the=20 allegation that they had raked in unfairly large profits in December and=20 January. ?????"We have played by the rules, acted ethically and legally in all our= =20 operations," said Richard Wheatley, a spokesman for Houston-based Reliant= =20 Energy, which owns power plants capable of supplying more than 3 million=20 homes. "We have nothing to hide." ?????Gary Ackerman, executive direcor of the Western Power Trading Forum,= =20 said the Cal-ISO report does not account for less tangible factors that ten= d=20 to drive up prices, such as political and financial uncertainties. ?????"Those are the things my people take into account when deciding whethe= r=20 to sell into California," said Ackerman. He noted that, in the second week = of=20 December, a period analyzed in the Cal-ISO report, electricity prices were= =20 higher in the Pacific Northwest than in California. ?????The report, he said, "provides some reasonable questions which will be= =20 responded to by my members, under FERC authority." ?????Cal-ISO officials stressed Thursday that they are not accusing any=20 seller of inflating prices but are simply asking for federal action to=20 restrain costs. ?????"We have not seen prices come down to what we feel are justifiable=20 levels," said Anjali Sheffrin, director of market analysis for Cal-ISO. ?????Although federal energy commission officials on Thursday refused to=20 comment on the study, many experts predicted that refunds would not be=20 forthcoming. ?????Since July, when Gov. Gray Davis first asked the federal commission to= =20 give San Diego Gas & Electric customers refunds for electricity costs that= =20 doubled and in some cases tripled, the agency has refused to order power=20 sellers to give back some of their profits to California utilities and=20 consumers. ?????The commission, charged by Congress with assuring "just and reasonable= "=20 wholesale electricity rates, has also resisted imposing firm price caps on= =20 California's electricity market. In November, the commission called that=20 market "dysfunctional" and vulnerable to manipulation by power sellers, but= =20 the agency has so far failed to document or punish specific cases of such= =20 anti-competitive behavior. ?????"The real question is what is FERC going to do with all of this?" said= =20 Gary Stern, chief of market analysis for Southern California Edison, once o= ne=20 of the two biggest buyers of electricity in California. "Based on past=20 history, we think they're probably going to say they don't see wrongdoing= =20 that provides a reason for refund." ?????Determining rebates could prove a logistical nightmare for federal=20 regulators and Cal-ISO, Stern said, but the data exist to show how much it= =20 cost power plant owners to generate electricity and what price they charged= . ?????Given that Edison and PG&E have defaulted on payments of hundreds of= =20 millions to power sellers, Stern said, a rebate order wouldn't lead to=20 reimbursement for individual utility customers. Instead, it could help the= =20 utilities eliminate some of their debt to generators and marketers. ?????Edison and PG&E have been pushed nearly to bankruptcy by high wholesal= e=20 costs, which they could not pass on to their customers because of a=20 state-imposed rate freeze.=20 ?????Last week, Davis announced that Edison had agreed in principle to stat= e=20 financial help in exchange for its transmission lines. Negotiations with PG= &E=20 continue. ?????The Folsom-based Cal-ISO drew its conclusions after reviewing=20 electricity purchases made between Dec. 8, 2000, and Jan. 31, 2001. ?????To calculate the cost of producing electricity in those months, Cal-IS= O=20 analysts assumed power plant owners were buying natural gas from the spot= =20 market, where prices soared this winter, and were running old, inefficient= =20 plants. They also assumed relatively high prices for air emission credits i= n=20 Southern California and added a 10% buffer to the operating costs. ?????Cal-ISO officials then compared these costs with the prices sellers we= re=20 paid. Their report did not name the individual sellers, which range from th= e=20 province of British Columbia to the publicly owned Los Angeles Department o= f=20 Water and Power to private companies. ?????Several lawmakers praised the report as long overdue. ?????"It's about time," said state Sen. Debra Bowen (D-Marina del Rey),=20 chairwoman of the Senate Energy Committee. She said that the desire among= =20 some legislators to seize power plants and take other drastic actions stems= =20 from the sense that "there's no one willing to enforce the provisions of th= e=20 federal power act regarding just and reasonable rates. ?????"The utilities are doing a great job looking out for their shareholder= s,=20 but who is looking out for ratepayers?" she asked. ?????Consumer advocacy groups applauded Cal-ISO's action and said the=20 agency's evidence of overcharges underscored the need for hard price caps o= r=20 a tax on generator profits. ?????"It's certainly not news to us that the generators are charging=20 excessive wholesale prices," said Mindy Spatt, spokeswoman for the Utility= =20 Reform Network of San Francisco. "If there had been a real price cap, this= =20 investigation would not be necessary."=20 ?????California's congressional delegation has pushed hard in recent months= =20 for legislation that would impose temporary price controls on wholesale pow= er=20 supplies in the West. On Wednesday, a bipartisan team met with Curtis Heber= t,=20 chairman of the Federal Energy Regulatory Commission, and came away=20 discouraged by Hebert's opposition to price caps. ?????The federal commission has imposed a so-called "soft cap" of $150 per= =20 megawatt-hour in California's electricity market. When sellers ask a higher= =20 price they must explain why it is necessary.=20 ?????Within 60 days, the commission can launch a review of those bids that= =20 could lead to refunds. So far, the federal panel has ordered none. On=20 Thursday, Cal-ISO asked the commission to extend the two-month deadline in= =20 its examination of the purchases made during December and January. * * * ?????Times staff writer Nancy Rivera Brooks in Los Angeles contributed to= =20 this story. ---------------------------------------------------------------------------= --- -------------------------------------------- Power profits targeted: Generators urged to forgive some of utilities' debt= s By Stuart Leavenworth and Dale Kasler Bee Staff Writers (Published March 2, 2001)=20 They are cocky and defiant, and unabashedly rich. Over the past year, the= =20 companies that generate and trade much of California's electricity have mad= e=20 multimillion-dollar profits off the state's power crunch.=20 Yet pressure is mounting for these power producers to return some of their= =20 profits, or at least forgive some debts they are owed by the state's troubl= ed=20 utilities:=20 A spokesman for Gov. Gray Davis said Thursday that at least two energy=20 companies have volunteered to forgive some debt, a development that could= =20 give Davis leverage over other suppliers.=20 Also Thursday, the state's Independent System Operator declared that some= =20 power merchants may have overcharged the state and utilities by as much as= =20 $562 million in December and January. ISO officials asked federal regulator= s=20 to confirm their findings and seek refunds from the generators.=20 Several key lawmakers say any deal to rescue Pacific Gas and Electric Co. a= nd=20 Southern California Edison must include debt forgiveness by generators and= =20 other creditors.=20 "They have to get a haircut like anyone else," said state Sen. Debra Bowen,= =20 the powerful chair of the Senate Energy Committee. "I'm not saying they hav= e=20 to walk around like Jesse Ventura, but they can't continue to walk around= =20 like Don King, either."=20 So far, most generators adamantly refuse to discuss debt forgiveness, sayin= g=20 their electricity prices are reasonable.=20 Steven Kean, executive vice president of Enron Corp., said he didn't see "a= ny=20 reason" to forgive any debts. A spokeswoman for Mirant Corp. said company= =20 officials expect full payment.=20 Richard Wheatley, a spokesman for Reliant Energy Inc., said lawmakers urgin= g=20 debt relief are engaged in wishful thinking.=20 "The more they discuss it, the more they hope it might turn into reality,"= =20 said Wheatley, whose company is owed $300 million. "From our perspective,= =20 it's not open to negotiation."=20 But Bowen and others say generators, bondholders and other utility creditor= s=20 have some good reasons to budge.=20 If Edison and PG&E go bankrupt, Bowen says, the generators might have to wa= it=20 years to get even partial payment. That's because they are unsecured=20 creditors -- meaning they don't hold any collateral to secure payment of=20 their debts.=20 "It is not very hard to figure out from a dollars and cents standpoint," sa= id=20 Bowen, D-Marina Del Rey, who has been talking to some of the generators abo= ut=20 debt forgiveness. "If you are owed 100 bucks, would you rather get $90=20 several months from now, or would you rather take your chances with=20 bankruptcy attorneys and get $50 three years from now?"=20 Steve Maviglio, a spokesman for Davis, said the governor "has received a=20 couple of unsolicited offers" from generators willing to forgive debts as= =20 part of a deal. Maviglio declined to name the companies, but said, "It is a= ll=20 part of the ongoing negotiations."=20 The game of cat and mouse comes as Davis and lawmakers try to gain leverage= =20 over five companies -- AES Corp., Duke Energy Corp., Dynegy Inc., Mirant an= d=20 Reliant -- that bought power plants from the California-based utilities in= =20 the early days of the state's foray into deregulation.=20 Because of that divesture, much of California's power is controlled by=20 out-of-state generators and their trading subsidiaries, or by independent= =20 brokers such as Enron, the country's biggest electricity marketer.=20 In recent months, at least five class-action lawsuits have accused these=20 companies of manipulating and inflating electricity prices, either by=20 intentionally shutting down plants or by buying natural gas cheaply and usi= ng=20 it to generate electricity sold at a several-hundred-percent markup.=20 On Thursday, the nonprofit corporation that manages most of the state's=20 electric grid revealed data that could support claims of price gouging.=20 In a filing with federal regulators, the Independent System Operator said t= he=20 wholesalers overcharged the ISO by $562 million for spot-market purchases i= n=20 December and January.=20 The ISO's findings are based on federal price caps that say any bids above = a=20 certain level be justified in writing. The ISO calculated the suppliers'=20 costs, threw in a 10 percent profit margin -- and concluded that the=20 generators had sold scads of power at unreasonable prices.=20 The state's grid managers want the Federal Energy Regulatory Commission to= =20 seek refunds from the generators if regulators confirm that overcharging to= ok=20 place. But some doubt the FERC will act, given its past reluctance to set= =20 price controls or interfere in California's energy markets.=20 "I don't think they have a whole lot of chance with FERC," said Severin=20 Borenstein, director of the University of California Energy Institute.=20 Federal officials, he said, "are likely to bend over backward to excuse the= =20 prices."=20 Wholesalers also doubted the ISO report would lead anywhere, saying it left= =20 out significant, legitimate costs of selling electricity to California.=20 Suppliers had the right to charge a "credit premium" as the risks of=20 nonpayment began rising, said Gary Ackerman of the Western Power Trading=20 Forum. Not only did the ISO become an uncreditworthy buyer -- because it go= t=20 its money from Edison and PG&E -- but the whole political climate in=20 California added to the wholesalers' risks, Ackerman said.=20 Whether or not the ISO filing prompts action from federal regulators, it=20 could help lawmakers pressure the generators.=20 State Sen. Joe Dunn, D-Santa Ana, said he wants to sort out how much of the= =20 debts piled up by PG&E and Edison since last summer were the result of=20 electricity prices that could be deemed "unjust and unreasonable" under=20 federal and state laws.=20 "Since every regulatory body has concluded those costs were unjust and=20 unreasonable, a portion, if not a very significant part of that past debt= =20 ought to be forgiven," Dunn said.=20 Some analysts say state leaders can't push the generators too far, since th= ey=20 depend on energy companies to build new power plants -- a supply boost that= =20 theoretically would lower energy prices.=20 Dunn acknowledges that is a concern, but says the Legislature also can't=20 afford to ignore charges that generators have gouged utilities and=20 ratepayers.=20 "That is the game of chicken we are in now," Dunn said. "And up to this=20 point, it is only the state that has blinked."=20 The issue of debt forgiveness could become moot if Davis can't strike a dea= l=20 with PG&E and San Diego Gas & Electric to buy their transmission systems.= =20 Last week, Davis announced a tentative agreement to acquire Edison's power= =20 lines for $2.7 billion and is reportedly close to coming to terms with SDG&= E.=20 But PG&E has so far rejected the governor's overtures, and on Thursday it= =20 added to a litany of financial woes. The San Francisco-based company=20 defaulted on another $1.21 billion worth of payments to electricity=20 suppliers. It did, however, make partial payments totaling $228 million to= =20 the ISO, which bought power from the wholesalers on the utility's behalf, a= nd=20 to a group of cogenerators and alternative energy providers.=20 If talks with the state break down, one of PG&E's alternatives would be=20 bankruptcy court, where a judge would determine how its assets would be=20 divided among creditors. An alternative scenario has one or all of the=20 generators going to court to force PG&E into bankruptcy, but Bowen, for one= ,=20 is doubtful that will happen anytime soon.=20 "If they (the generators) thought they would come out better in a bankruptc= y,=20 we would be there already," said Bowen, whose committee would have to appro= ve=20 any rescue plan for the utilities.=20 "So that means they have to give. Everyone has to give."=20 Emily Bazar of The Bee Capitol Bureau contributed to this report.=20 Thursday's developments A Davis spokesman says the governor has received "unsolicited offers" from= =20 some generators willing to forgive debts but declines to name them.=20 In a filing with federal regulators, the Independent System Operator says= =20 some wholesalers overcharged the ISO by $562 million for spot-market=20 purchases in December and January.=20 Pacific Gas and Electric Co. pays 16 percent of a $1.44 billion bill to=20 wholesale power suppliers, defaulting on $1.21 billion of the debt but payi= ng=20 $228 million.=20 State declares Stage 2 alert but downgrades it to a "warning" at mid-mornin= g.=20 Calpine Corp. becomes the latest wholesaler to sign long-term supply=20 contracts with the Department of Water Resources, agreeing to two deals=20 totaling $8.3 billion -- a 10-year contract for $5.2 billion and a 20-year= =20 contract for $3.1 billion. Last month, Calpine signed a deal worth $4.6=20 billion.=20 ---------------------------------------------------------------------------= --- -------------------------------------------- Friday, March 2, 2001=20 By Rick Stouffer=20 rstouffer@ftenergy.com=20 "=01(No state is an island, entire of itself; every state is a piece of the= =20 continent, a part of the main=01(" -John Donne California Gov. Gray Davis has seemingly hit on a plan that he thinks will= =20 solve his state's energy problems:=20 Acquire some 32,000 miles of transmission lines for between $8 billion and= =20 $10 billion to keep the bankruptcy wolf away from the state's three=20 investor-owned utilities. Create a public power authority to buy, build and operate power plants,=20 financed with up to $5 billion in state bonds. Not raise customer rates to pay for at least $10 billion in bonds used to p= ay=20 for power.=20 Sounds great, doesn't it? Something for everyone=01*no more pain=01*sounds= =20 suspiciously like California's original deregulation plan=01*itself a misno= mer;=20 California wasn't deregulated, it was restructured.=20 Energy 'island' won't work But Davis's efforts to, in effect, create the electrical island of Californ= ia=20 will not work, many say. The governor's control of transmission doesn't sol= ve=20 the immediate demand-supply conundrum.=20 And creation of the fancy-sounding California Consumer Power and Conservati= on=20 Financing Authority to buy, build and operate power plants could drive=20 private developers out of the Golden State=01*who wants to compete against = the=20 ultimate government-subsidized entity?=20 "Davis is, in effect, nationalizing the power industry in California," said= =20 Jonathan Gottlieb, a partner in Washington, D.C., law firm Baker & McKenzie= 's=20 North American Utility and Energy Products Group. "Command and control=20 economies have been collapsing around the world=01*except in California."= =20 The problems with the California power industry are numerous and beaten to= =20 death by the media. It appears everything went wrong that could go wrong=01= *all=20 at once=01*Murphy's Law in the absurd.=20 Just as numerous as the problems, are the number of entities which can be= =20 fingered as having a hand in the debacle.=20 All that said, Gov. Davis feels he has the magic bullet which will make=20 everything right: take over much of the system, force those=20 out-of-state-based generators to act "responsibly," bail out the incumbent= =20 utilities and not raise customer rates.=20 But has anyone looked longer term than the next few months concerning the= =20 consequences of Davis' moves? Anyone stop to think what happens if and when= =20 the state does take control?=20 Who runs the state-owned system?=20 "With the transmission-lines buy, you have a mechanism which gives the=20 utilities cash to pay off the debt incurred in buying wholesale power," sai= d=20 Craig Pirrong, a commodity markets expert and professor in the Olin School = of=20 Business at Washington University in St. Louis.=20 "But now there are operational questions," Pirrong continued. "Is the state= =20 the most efficient entity to operate and maintain the wires system?"=20 Good question. "You have to find someone to run the system once you take it= =20 over," said William Hogan, a professor in Harvard University's John F.=20 Kennedy School of Government. "So you either contract or hire utility=20 employees."=20 There is precedent, obviously, for government-owned and operated utilities.= =20 In the United States, more than 2,000 municipals operate today, while=20 internationally a number of state-run utilities are in operation, for examp= le=20 Electricit, de France. But government ownership of utilities appears to be = on=20 the way out across the world, the experts say.=20 "Look what's happening worldwide," said Adrian Moore, executive director of= =20 the Los Angeles-based free market think tank Reason Public Policy Institute= .=20 "Over the last seven or eight years, billions of dollars worth of utility= =20 privatizations have taken place. Germany and Italy, for example, are sellin= g=20 off huge tranches of their national utilities."=20 Municipal utilities tout their lower costs per customer, but those figures= =20 are deceptive, some industry watchers believe.=20 "There are a lot of tax advantages and hidden subsidies in municipal=20 utilities that mask the real cost," said economist Murray Weidenbaum, schol= ar=20 in residence at the Jones Graduate School of Management at Rice University = in=20 Houston, Texas, and the former first chairman of President Reagan's Council= =20 of Economic Advisers. "If you move to a state-run utility, you can almost= =20 guarantee costs will go up over time," Moore said.=20 Politics taking precedence With state control of California's transmission lines, many experts see=20 politics taking precedence over economics=01*or need=01*when decisions are = made=20 concerning where to build new lines.=20 "You can see gamesmanship and lobbying taking precedence, moving away from= =20 economic drivers toward political drivers," Washington University's Pirrong= =20 said.=20 On the generation side, many of the same problems associated with assuming= =20 command of the wires could occur.=20 Generators including Mirant Corp. and Duke Energy already publicly expresse= d=20 concerns with the wires acquisition; specifically, will they be shut out of= =20 access to get their power to market?=20 "I can see politically that they've got to get something out of this to sel= l=20 the plan to consumers, but we need to make sure we aren't discriminated=20 against," Mirant President Marce Fuller said during the recent Cambridge=20 Energy Research Associates energy conference in Houston.=20 Discrimination against incumbents could occur, but what about bias against= =20 potential generators? With the establishment of the Consumer Power and=20 Conservation Financing Board, what private company would want to bid agains= t=20 the sixth largest economy in the world?=20 "With the government involved, companies would be reluctant to build new=20 plants without a government contract, because the government is subsidizing= =20 construction," said Harvard's Hogan.=20 "Where's the state's comparative advantage in building new plants?"=20 Washington University's Pirrong asked.=20 FERC must weigh-in There is another major player in California's ascension to wires=20 owner-operator: the Federal Energy Regulatory Commission (FERC). The Federa= l=20 Power Act puts FERC right in the middle of the California takeover, said=20 Baker & McKenzie's Gottlieb.=20 "FERC Chairman Curtis Hebert has used the word 'nationalization' publicly t= o=20 describe what California is proposing, and has said he has definite concern= s=20 about the proposal," Gottlieb said. "I don't think FERC can say no to the= =20 California takeover, but they could weigh it down with conditions."=20 One of those conditions may be a trade-off: FERC will approve California's= =20 takeover of transmission wires, in exchange for the state giving control of= =20 the lines to multi-state regional transmission organizations.=20 A 'quick' fix could take months No one, including Davis, sees this plan happening quickly. In a presentatio= n=20 Wednesday to analysts in New York, the governor admitted it would take up t= o=20 four more weeks to reach agreement with PG&E Corp./Pacific Gas & Electric C= o.=20 for its wires. He also admitted he cannot win enough Republicans to pass th= e=20 bill with the two-thirds majority needed for immediate implementation. Bill= s=20 in California passed with a simple majority must wait 90 days before going= =20 into effect.=20 Thus, the entire process may not be over for at least another six weeks, an= d=20 even then the Davis plan could face a ballot initiative. But for the sake o= f=20 argument, assume Gov. Davis gets his way and takes control of the=20 investor-owned utilities' wires and begins building and buying plants. Wher= e=20 does such a massive undertaking leave the Golden State in three to five=20 years?=20 "All things add up to a pretty grim situation," said the Reason Public Poli= cy=20 Institute's Moore. "Five years from now just because the state is purchasin= g=20 power, we will have prices higher than the U.S. average. That will be=20 exacerbated by the state owning the wires and building the plants."=20 "I'm very dubious; the government-run utility in the long-run will be very= =20 expensive," Harvard's Hogan concurred.=20 Baker & McKenzie's Gottlieb sees the California screen test as providing th= e=20 impetus for a huge infrastructure build-out nationwide. One recent survey= =20 found that some $20 billion in plant financings within the United States ar= e=20 projected for just the first three months of 2001=01*compared to $24 billio= n for=20 all of 1999.=20 A textbook case According to economist Weidenbaum, the California energy debacle answers th= e=20 question "does the government deregulate as badly as it regulates," with a= =20 huge exclamation point.=20 "California is a textbook dramatization of the shortcomings of government= =20 involvement with business," Weidenbaum said. "You now have Chapter Two in= =20 that book; we already have Chapter One."=20 The English poet Donne said: "And therefore never send to know for whom the= =20 bell tolls; it tolls for thee."=20 In California, that "bell" is clanging.=20 ---------------------------------------------------------------------------= --- -------------------------------------- Ex-Regulator Urges Temporary Federal Price Caps on Power Carolyn Lochhead, Chronicle Washington Bureau=20 ? Friday,?March 2, 2001=20 Washington -- Federal energy regulators should intervene more forcefully in= =20 California's energy crisis, a former Reagan-appointed regulator said=20 yesterday,=20 while other experts feared the financial effects could balloon into another= =20 savings-and-loan bailout disaster.=20 Independent regulatory experts speaking at a high-profile panel on the ener= gy=20 crunch also said Gov. Gray Davis may be whistling in the dark in his=20 assurances that the power crisis will be largely resolved by summer.=20 "I think there is a fairly compelling argument that something needs to be= =20 done," said Elizabeth Moler, appointed to the Federal Energy Regulatory=20 Commission by President Ronald Reagan and named chairwoman by President Bil= l=20 Clinton.=20 Moler, speaking to the Brookings Institution and the American Enterprise=20 Institute Joint Center for Regulatory Studies, said some form of temporary= =20 federal intervention on wholesale prices is needed, so long as it does not= =20 discourage investment in new generation capacity.=20 Davis and Sen. Dianne Feinstein, D-Calif., have urged federal regulators to= =20 impose temporary price controls to give the state breathing room.=20 The chairman of the Federal Energy Regulatory Commission, Curt Hebert, is= =20 strongly opposed to price caps, saying they would discourage investment and= =20 delay resolution of the crisis. California needs to lift the electricity ra= te=20 freeze on consumers to encourage conservation and restore the finances of t= he=20 bankrupt investor-owned utilities, Hebert has argued.=20 But Moler faulted federal regulators and the California Public Utilities=20 Commission, both of which oversaw the state's deregulation plan, for allowi= ng=20 the problem to fester.=20 "The signs were there in June that something needed to happen," Moler said,= =20 noting that electricity deregulation is complex and always needs adjustment= s.=20 "I'd like to think I would have been reading the market monitoring reports,= "=20 Moler said. "I'd like to think I would have been on the airplane to San=20 Francisco every other week, and on the other weeks, the CPUC would have bee= n=20 on a plane to Washington."=20 Moler also faulted state PUC members for blaming the crisis on their=20 predecessors. "I'm pretty amazed the CPUC is still blaming Dan Fessler," th= e=20 former chairman, Moler said. "He's been gone for three years."=20 Moler noted that the state's plan to take over the utilities' transmission= =20 lines needs federal regulatory approval, which Hebert indicated he opposes,= =20 comparing the move to "nationalization."=20 Davis' assertions this week to Washington policymakers and Wall Street=20 analysts that he has the crisis under control were also viewed dubiously.= =20 Noting that peak California power demand will rise to 45,000 megawatts in t= he=20 summer from 30,000 in the winter, Robert Litan, director of the Joint Cente= r=20 for Regulatory Studies, said, "You do your own math. If you think the probl= em=20 is bad now, you ain't seen nothing yet."=20 Litan said the state's partial electricity deregulation was a giant gamble= =20 that freed wholesale prices would stay below fixed retail prices, but the b= et=20 went bad and now state taxpayers are paying the cost.=20 "I used to study S&Ls, and what California is doing sounds a lot like what= =20 the federal government did for 10 years, which was pray and hope that the= =20 problem goes away," he said.=20 California is paying roughly $1.5 billion a month for electricity while sta= te=20 officials try to craft a long-term solution.=20 Paul Joskow, director of the Center for Energy and Environmental Policy=20 Research at the Massachusetts Institute of Technology, said state and feder= al=20 policymakers must devise a long-term blueprint that encourages investment i= n=20 new generation and offers price stability to consumers.=20 "I haven't seen any long-term plan yet for where they are going in=20 California," Joskow said. ". . . I think the governor owes that to the=20 citizens of California, because now we're going from week to week, and you= =20 know as well as I do what it's going to be six months from now."=20 E-mail Carolyn Lochhead at clochhead@sfchronicle.com.=20 ?=20 ? Printer-friendly version=20 ? Email this article to a friend=20 02/16/2001 - California governor proposes state power line purchase .=20 02/09/2001 - Removal of Rate Caps Urged.=20 02/08/2001 - Developments in California's power crisis .=20 02/04/2001 - Davis Neglected Key Strategy In Power Crisis.=20 <<more related articles...=20 ---------------------------------------------------------------------------= --- ------------------------------------------ NEWS=20 PG&E to Pay Creditors Only 15% / Smaller suppliers outraged over plan David Lazarus 03/02/2001=20 The San Francisco Chronicle=20 FINAL=20 Page A1=20 (Copyright 2001)=20 Pacific Gas and Electric Co. said yesterday it would pay only about 15 cent= s=20 on the dollar for its outstanding power bills, sparking outrage among small= er=20 creditors, who accused the utility of driving them out of business.=20 In a filing to securities regulators, PG&E revealed it would pay just $228= =20 million of about $1.4billion due for recent electricity purchases.=20 "How would you feel if your boss gave you just 15 percent of your paycheck= =20 and said he'll get back to you for the rest?" asked Bob Judd, director of t= he=20 California Biomass Energy Alliance, representing operators of 28 wood-fired= =20 plants statewide.=20 PG&E's filing marks a turning point in California 's energy crisis. It is n= ow=20 possible that not only will the state's largest utility go under, but it=20 could take a number of power generators with it.=20 PG&E, now in talks with the governor on a possible financial bailout, is=20 telling creditors to be thankful for whatever they get. If the utility=20 declares bankruptcy, all parties know, many creditors may receive nothing.= =20 Still, time is running out for Ridgewood Power, a New Jersey company with 1= 4=20 plants in California . It already has had to shut down three facilities in= =20 PG&E's service area because it can no longer afford to keep them running.= =20 'NOWHERE NEAR'=20 "The amount of money
|