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Sac Bee, Wed, 4/4: "Davis' solutions may be in trouble: New plants built in California don't have to sell electricity here, state lawyers conclude" Sac Bee, Wed, 4/4: "Davis' solutions may be in trouble: Skepticism is now= =20 growing=20 among Democrats over a plan to purchase transmission lines" Sac Bee, Wed, 4/4: "PUC to probe money transfers " Sac Bee, Wed, 4/4: "Dan Walters: Politicians seek shelter as energy=20 Armageddon looms" San Diego Union, Tues, 4/3: "Rate jump lurks for customers of SDG&E " San Diego Union, Tues, 4/3: "PUC expected to approve new incentives to cut= =20 power usage" San Diego Union, Tues, 4/3: "Davis warns of spring problems, urges=20 conservation incentives" LA Times, Wed, 4/4: "Energy Firms' Mixed Message Is Focus of Inquiry" LA Times, Wed, 4/4: "Probe of Utility Money Transfers Ordered" SF Chron, Wed, 4/4: "Worst Power Shortage Likely In May and June, Davis=20 Warns " SF Chron, Wed, 4/4: "Vocal Citizens Berate PUC=20 Police remove several protesters" SF Chron, Wed, 4/4: "PUC faces angry backlash to electricity rate increase= s=20 " SF Chron, Wed, 4/4: "California regulators face angry backlash to=20 electricity rate increases" SF Chron, Wed, 4/4: "Developments in California's power crisis" Mercury News, Wed, 4/4: "Power gap greatest in May, June" Mercury News, Wed, 4/4: "Already a power giant, state may build plants" Orange County, Wed, 4/4: "Manager of AES' Huntington Beach plant becomes a= =20 controversial figure amid plans to expand capacity" Orange County, Wed, 4/4: "PUC gives 'interruptibles' a way out" Orange County, Wed, 4/4: "Davis to give TV address on energy crisis Thursd= ay" Individual.com, Wed, 4/4: "Power Supplier Files Lawsuit Against Pacific Ga= s=20 and=20 Electric Company; Dynamis, Inc. Seeks to Suspend Power Purchase Agreement= =20 in Order to Provide Power to Grid" Energy Insight, Wed, 4/4: "Resurrection of Residential Energy-Efficiency Programs" ---------------------------------------------------------------------------= --- ----------------------------------------- Davis' solutions may be in trouble: New plants built in California don't ha= ve=20 to sell electricity here, state lawyers conclude By Carrie Peyton Bee Staff Writer (Published April 4, 2001)=20 California can't require builders of new power plants to sell electricity= =20 here, even as a trade-off for super-fast environmental review, lawyers at t= he=20 state Energy Commission have concluded.=20 Their position, reached despite Gov. Gray Davis' vow that new megawatts "wi= ll=20 stay in California," emerged as part of a fast-track approval for expanding= a=20 south state power plant.=20 It comes as the agency that oversees plant licensing is whittling away at t= he=20 presumption that emergency "peaking" plants installed this summer will be= =20 temporary. Some of the peaking plants - to be used only at times of highest= =20 energy demand - are now proposed to stay in place 30 to 40 years.=20 Both issues have bubbled up quietly during California Energy Commission=20 reviews, sometimes addressed only indirectly in staff reports.=20 "This is a major public policy issue for all of California. If we're buildi= ng=20 these plants on an expedited basis and we're not getting any electricity ou= t=20 of it, why are we doing it?" asked William Workman, Huntington Beach=20 assistant city administrator.=20 The answer, according to the Governor's Office and the Energy Commission, i= s=20 twofold. First, the plants are needed no matter what, because the entire We= st=20 is power poor. And second, it looks like a California sales clause would=20 violate federal interstate commerce law.=20 "We're not supposed to take protectionist action against our fellow states,= "=20 said Bill Chamberlain, chief counsel to the Energy Commission. He said=20 numerous Supreme Court decisions have held that a state can't use its=20 regulatory powers - such as permitting processes - to give its residents an= =20 economic advantage.=20 Although there is no guarantee, the Governor's Office, power plant builders= =20 and the state Environmental Protection Agency say most of the plants being= =20 rushed to life will probably end up selling to the state Department of Wate= r=20 Resources.=20 "The people who are building these power plants know very well that we expe= ct=20 it to be used in California, and we're confident that it will be," Davis=20 spokesman Roger Salazar said.=20 Cal-EPA Secretary Winston Hickox said the "preponderance" of new peaking=20 plants will devote their electricity to California.=20 "We will do everything that we can to encourage that the energy produced as= a=20 result of our bending over backward to be accommodating is sold to=20 California. We're not there yet, but I believe we'll get there," Hickox sai= d.=20 He also said the three-week reviews of peaking plants have cut no corners i= n=20 terms of fundamental environmental standards.=20 Two of those plants scheduled for Energy Commission votes today were praise= d=20 by environmentalists as having relatively low emissions of smog-forming=20 compounds, but they still were concerned by the 21-day review.=20 "If you're having a quick review, a plant shouldn't be allowed to continue= =20 for more than the summer," said Gail Ruderman Feuer of the Natural Resource= s=20 Defense Counsel.=20 The first peaking plant approved by the commission, the United Golden Gate= =20 Project in San Mateo County, was given permission to run for three years.= =20 But the next two, in San Diego and Palm Springs, are being recommended for= =20 indefinite approval, and their builder, InterGen North America, said it=20 intends to keep them running for 30 to 40 years.=20 "There's no way affected communities can know what's going on with the=20 processes that are so short," said Sandra Spelliscy, general counsel of the= =20 Planning and Conservation League. "I don't want to say negative things abou= t=20 that particular peaker (but) =01( I think we're going to wake up in six to = 12=20 months and realize we did a lot of stuff that we regret."=20 In Huntington Beach, city officials say they are largely pleased with the= =20 fast-track process that protected most of their major concerns over a=20 proposal by AES to quickly revive two mothballed steam turbines at its=20 seaside plant.=20 But a slower review process would have offered even more, Workman said. It= =20 would have delayed the plant for results of studies on sea life injured or= =20 killed by cooling water intakes and potential increases in ocean pollution.= =20 He worries that his city's residents gave up those protections without any= =20 certainty that California will benefit from the extra 450 megawatts AES wil= l=20 be able to crank out.=20 Huntington Beach sought a California buyer clause in the AES permit, which = is=20 scheduled for an Energy Commission vote next week, but it was rejected in a= =20 cryptic report that only notes the commission staff has taken no stand on t= he=20 issue.=20 AES would have opposed such a provision, because it believes the Energy=20 Commission has no authority to tell it where to sell, said Aaron Thomas, a= =20 manager at AES Pacific.=20 "In our case, there is no need to have a shotgun to our head," he said. AES= =20 is negotiating to sell all 450 megawatts to the state.=20 Meanwhile, the governor acknowledged what an Energy Commission report=20 outlined last week - that his goal of 5,000 more megawatts online by July= =20 will not be met.=20 "We have a real challenge in the early part of the summer," Davis said=20 Tuesday. "We do have more than 4,000 megawatts coming online by late summer= .=20 Usually, the challenge is in August and September. This year, the challenge= =20 may well be in May and June."=20 The Bee's Carrie Peyton can be reached at (916) 321-1086, cpeyton@sacbee.co= m.=20 Emily Bazar of The Bee Capitol Bureau contributed to this report.=20 ---------------------------------------------------------------------------= --- --------------------------------------------- Davis' solutions may be in trouble: Skepticism is now growing among Democra= ts=20 over a plan to purchase transmission lines By Emily Bazar Bee Capitol Bureau (Published April 4, 2001)=20 A deal that Gov. Gray Davis had touted as a potential solution to the state= 's=20 energy crisis is faltering, as talks with the utilities have yet to produce= =20 concrete results and lawmakers grow increasingly skeptical.=20 For weeks, the administration has claimed progress in its negotiations with= =20 Pacific Gas and Electric Co. and Southern California Edison to purchase abo= ut=20 32,000 miles of the transmission grid in exchange for helping the utilities= =20 pay off billions of dollars in debt.=20 Though talks are moving forward with Edison, little headway has been made= =20 with PG&E.=20 Now, a new contingent of naysayers is emerging from within the Capitol -=20 Democratic legislators who would be asked to approve the deal.=20 Convinced that a takeover of the transmission grid presents too many=20 obstacles, some top lawmakers are suggesting utility bankruptcy or other=20 alternatives might be better for the state.=20 "The governor feels very strongly that bankruptcy should be avoided at all= =20 costs," said state Sen. Jackie Speier, D-Hillsborough, immediately after sh= e=20 and other state Senate Democrats met with Davis on Tuesday.=20 "But there's growing sentiment in the caucus that bankruptcy is not the wor= st=20 thing in the world. =01( We'd have more control, in many respects, over our= =20 destiny."=20 It has been seven weeks since Davis first publicly indicated that he favore= d=20 a takeover of the power transmission grid.=20 Shortly thereafter, on Feb. 23, he announced an "agreement in principle" wi= th=20 Edison, laying out a conceptual deal to buy the utility's transmission line= s=20 for $2.76 billion.=20 On the same day, Davis acknowledged he needed to buy PG&E's share of the=20 transmission grid, as well as San Diego Gas & Electric Co.'s, to make his= =20 rescue package viable.=20 But Davis still has not reached an "agreement in principle" with the two=20 remaining utilities and continues to negotiate with Edison over details.=20 Administration officials presented PG&E representatives with a proposed=20 agreement Tuesday, the first time in three weeks the two sides had met.=20 Republican legislators have long opposed buying transmission lines, and=20 Democrats increasingly are questioning the deal.=20 Democratic support began to dwindle two weeks ago, when the state was hit b= y=20 two days of unexpected rolling power blackouts. The blackouts were caused i= n=20 part by the unanticipated shutdown of some alternative energy providers,=20 which had not been paid by utilities for months.=20 Many legislators expected the Democratic governor to work out a deal with t= he=20 small generators before the blackouts hit, and they blame him for letting t= he=20 situation get out of hand.=20 Now, many are taking critical looks at the governor's bid to purchase the= =20 transmission lines and believe the plan contains too many pitfalls.=20 For example, a state purchase of transmission lines would need federal=20 approval because they are part of an interstate system.=20 By some estimates, that approval process could take as long as two years. T= he=20 state would not be able to sell bonds to finance the purchase of the=20 transmission lines until the deal is blessed by the federal government.=20 Then there's the cost. Senate President Pro Tem John Burton, D-San Francisc= o,=20 long an advocate of the deal, said the administration - which has reportedl= y=20 offered as much as $7 billion for the utilities' shares of the grid - would= =20 be paying "too much."=20 "This is not supposed to be a bailout," he said. "This is supposed to be a= =20 purchase based on fair market value."=20 As a result of these and other sticking points, some legislators believe th= e=20 utilities can't be saved through state intervention.=20 "I think we're going to end up in a bankruptcy at this point," said Sen.=20 Debra Bowen, D-Marina Del Rey. "I just don't see any of it coming together.= "=20 Bowen said she wants the state to be prepared if utilities opt for, or are= =20 forced into, bankruptcy.=20 Should the utilities enter bankruptcy proceedings, there is a 20-day interi= m=20 period during which the state, or any other creditor, can attempt to persua= de=20 the court to forbid bankruptcy.=20 Bowen said some work has been done to prepare for that, but it "needs to be= =20 updated."=20 In addition, senior legislative staff members met with the governor's=20 negotiators a week ago, urging them to prepare contingency plans in case of= =20 bankruptcy.=20 PG&E spokesman John Nelson declined comment on a report that the utility's= =20 board recently voted narrowly against entering Chapter 11 on a voluntary=20 basis.=20 The utility still believes that bankruptcy is not a solution, he said, "but= =20 that conclusion is re-evaluated on a daily basis in light of actions by the= =20 (Public Utilities Commission) and the state."=20 Nelson said bankruptcy represents a substantial risk because the proceeding= =20 "would turn over the utilities to a federal bankruptcy judge whose powers a= re=20 not well defined."=20 Speier said she and other Democrats believe the governor should consider=20 seizing hydroelectric or other power plants or levying a "windfall profits= =20 tax" against generators selling electricity at exorbitant prices.=20 Despite growing pessimism among legislators, Davis continues to insist that= =20 the transmission deal will prevail.=20 "I believe we will purchase the transmission lines, and that will allow us = to=20 make needed improvements," he said Saturday about the status of negotiation= s.=20 On Tuesday, Davis asked television stations for time to address state=20 residents on Thursday evening about "California's energy emergency." The=20 governor had previously promised to announce his position on state utility= =20 rate increases.=20 Davis also indicated he has made plans should the federal government reject= a=20 future deal.=20 If that happens, he said, the state will attempt to acquire the utilities'= =20 hydroelectric plants.=20 "Plan B would be to take hydro assets in lieu of the transmission lines,"= =20 Davis said. "They are not worth as much in book value, but they generate=20 revenue every year, which the transmission lines don't do, so they are very= =20 valuable."=20 The Bee's Emily Bazar can be reached at (916) 326-5540 or ebazar@sacbee.com= .=20 ---------------------------------------------------------------------------= --- ---------------------------------------------------- PUC to probe money transfers=20 By Dale Kasler Bee Staff Writer (Published April 4, 2001)=20 SAN FRANCISCO - With protesters being ejected for storming the stage, state= =20 regulators Tuesday launched an investigation into how California's two=20 near-bankrupt utilities shipped billions of dollars in profits to their=20 parent corporations.=20 The Public Utilities Commission voted 4-0 to determine whether the parent= =20 companies should have to send any money back to the utilities, which have= =20 been nearly bankrupted by soaring wholesale power costs.=20 The PUC also took steps to approve a formula for how much the utilities mus= t=20 reimburse the state for its power purchases.=20 Utility executives said the formula could significantly worsen their=20 financial plight and vowed to fight the plan. Commissioners called the=20 utilities' warnings premature but said they had to act to protect the state= =20 treasury.=20 The formula also sets a $13.4 billion ceiling on the bonds the state can se= ll=20 in order to finance the power purchases by the Department of Water Resource= s.=20 While the formula is a crucial if arcane element of the state's plan to fix= =20 the energy crisis, the PUC was upstaged by several dozen activists seething= =20 over the 30 percent rate increase the commission granted last week to Pacif= ic=20 Gas and Electric Co. and Southern California Edison.=20 For 90 minutes, speaking one by one, the protesters from the Green Party an= d=20 other groups scolded the commissioners and urged the seizure of generating= =20 plants. They led supporters in chanting, "Public power now!"=20 A Davis woman, Lellingby Boyce, led the crowd in chanting, "PG&E, stop=20 pimping off me." Several speakers challenged the commissioners to attend a= =20 meeting they've organized on rate hikes. Only PUC Commissioner Geoffrey Bro= wn=20 committed to attending.=20 Then protesters went beyond talking. Mary Bull declared, "This meeting's a= =20 sham," and walked briskly toward the dais where commissioners sat. About a= =20 half-dozen other protesters followed but were halted by California Highway= =20 Patrol officers.=20 Officers escorted about dozen people from the building, including a man who= =20 was dragged out. There were no arrests.=20 Brown called the disruption "the height of undemocratic behavior" but said= =20 he'd still attend the activists' meeting.=20 Then the commissioners voted to initiate the probe into the relationship=20 between the utilities and their holding companies. Audits have shown that= =20 Edison shipped $4.8 billion in profits to its parent, Edison International,= =20 over five years, while PG&E sent $4.6 billion to parent PG&E Corp.=20 Edison called the probe "unnecessary and redundant," while PG&E said earlie= r=20 investigations "found nothing improper or illegal in the (parent) company's= =20 relationship with the utility."=20 The two utilities said they'll be hurt by the PUC's calculation of the=20 California Procurement Adjustment - a measure of how much utility revenue i= s=20 available to send to the water department. The department has been buying= =20 power on behalf of PG&E and Edison since mid-January.=20 Both utilities said there isn't nearly as much money available as the PUC= =20 believes, and the calculation could cost them billions.=20 "Rates aren't high enough now for both (the department) and Edison," said J= im=20 Scilacci, the utility's chief financial officer.=20 Commissioners, who will determine in about two weeks just how much utility= =20 money to send to the water department, are walking a fine line.=20 The two utilities are nearly bankrupt. Between them, they expect to take $6= .8=20 billion in post-tax charges to earnings April 17, according to Securities a= nd=20 Exchange Commission filings.=20 But with the state water department having spent more than $4 billion on=20 power purchases, the PUC wants to send as much money as possible to the=20 state.=20 "A lot of our focus at this point is in preserving the state Treasury,"=20 Commissioner Carl Wood said later.=20 With an eye toward summer, the PUC also approved new conservation incentive= s=20 for customers of the three big investor-owned utilities.=20 The Bee's Dale Kasler can be reached at (916) 321-1066 or dkasler@sacbee.co= m.=20 Bee Staff Writer Carrie Peyton contributed to this report.=20 ---------------------------------------------------------------------------= --- ------------------------------------------------ Dan Walters: Politicians seek shelter as energy Armageddon looms=20 (Published April 4, 2001)=20 There's been a subtle but unmistakable shift in the political atmosphere th= at=20 envelops California's energy crisis.=20 Politicians have concluded that the crisis is largely beyond their control= =20 and the die is more or less cast. Whatever fate decrees - massive summer=20 blackouts, soaring utility bills or even the bankruptcy of the state's=20 utilities - will happen, and politicians from Gov. Gray Davis downward are= =20 scrambling to insulate themselves from voters' anger and single out rivals= =20 for blame.=20 No one is saying that publicly, of course, but the fatalistic mood is very= =20 apparent in the Capitol, whose denizens have dropped their preoccupation wi= th=20 energy and moved to other matters. Legislative committees are working on th= e=20 hundreds of bills that had been stalled for three months while the special= =20 committees that had been holding almost daily sessions on the energy crisis= =20 have gone into semihibernation.=20 Last weekend's Democratic state convention in Anaheim was dominated by fear= s=20 that when the crisis hits home, the party's dominance of the Capitol will= =20 backfire. "Just remember Jimmy Carter," state Controller Kathleen Connell= =20 warned fellow Democrats, adding that they will have "no excuses" for=20 perceived failure to deal with the crisis forthrightly. "We will be=20 accountable on Election Day 2002," she said.=20 Next year's elections are very much on Davis' mind, since he'll be seeking = a=20 second term and polls indicate that his approval ratings have declined=20 sharply in recent weeks. He devoted much of the weekend to defending his=20 actions, saying, "I believe we've moved at warp speed to address this=20 problem," and trying to pin blame on Republicans.=20 Republicans, meanwhile, sense that the crisis gives them an avenue of escap= e=20 from the dungeon of irrelevancy to which they had been exiled by heavy loss= es=20 in the last three elections. The only remaining statewide GOP officeholder,= =20 Secretary of State Bill Jones, is running for governor by accusing Davis of= =20 mismanagement, and Republican Assembly members dumped their leader, Bill=20 Campbell, on grounds that he had been insufficiently aggressive vis-a-vis= =20 Davis.=20 The political positioning reflects the reality that the crisis shows every= =20 sign of worsening. Although Davis' office is distributing a brochure entitl= ed=20 "Meeting the Energy Challenge" to defend the governor's actions, it's=20 apparent that none of the steps the governor has taken is bearing much frui= t.=20 The state is spending at least $50 million a day on emergency power=20 purchases, but what was supposed to be a short-term program has evolved int= o=20 a monthslong drain on the state's rapidly shrinking budget reserves. The=20 long-term supply contracts that were supposed to replace daily spot purchas= es=20 have bogged down, and without firm contracts and a revenue stream to pay fo= r=20 them, Wall Street is reluctant to market the bonds the state wants to float= .=20 Many authorities now believe Davis' decision to step into the power purchas= e=20 market in January was a strategic error because it gave power suppliers a= =20 deep new pocket to tap just as the utilities themselves ran out of credit.= =20 Davis, meanwhile, is refusing to embrace a rate increase approved by the=20 state Public Utilities Commission, which sends a mixed message to Wall=20 Street, and efforts to resolve problems with unpaid bills from power=20 generators and have the state acquire the utilities' intercity transmission= =20 grid have stalled, perhaps permanently.=20 The crisis may careen totally out of control as summer arrives, raising the= =20 specter of elderly and/or ill Californians dying from having their air=20 conditioners or medical equipment shut down. And the utilities are closer t= o=20 bankruptcy now than at any other point in the nearly yearlong crisis.=20 Plan A isn't working, and there is no Plan B - except for bankruptcy. With= =20 Armageddon looming, politicians have retreated into the bunker, hoping to= =20 protect themselves from what could be a firestorm of anger.=20 The Bee's Dan Walters can be reached at (916) 321-1195 or dwalters@sacbee.c= om . ---------------------------------------------------------------------------= --- ------------------------ =20 Rate jump lurks for customers of SDG&E=20 By Ed Mendel=20 UNION-TRIBUNE STAFF WRITER=20 April 3, 2001=20 SACRAMENTO -- Last year, San Diego was on the front line of the electricity= =20 crisis, but this year it's more like a rearguard action -- a lower priority= =20 treated with less urgency.=20 State regulators last week imposed the biggest rate increase in California= =20 history on the customers of the two biggest utilities, Pacific Gas and=20 Electric and Southern California Edison.=20 But for better or worse, as the Public Utilities Commission plans to meet= =20 today in San Francisco, it's unknown when the commission will impose a rate= =20 increase on San Diego Gas and Electric customers or how big that increase= =20 will be.=20 PUC expected to approve new incentives to cut power usage=20 ?=20 The Legislature enacted urgency legislation in September that capped SDG&E= =20 rates after bills doubled and tripled for some customers, when the utility= =20 became the first to be deregulated.=20 A bill that would extend the SDG&E cap to an estimated 4,500 businesses and= =20 some residences, which stalled when Democrats tried to use it as leverage t= o=20 get Republican votes on other issues, passed an Assembly committee yesterda= y.=20 "They are the only customers in the state who are paying the day-to-day rat= es=20 and cost of electricity," said Sen. Dede Alpert, D-Coronado, the author of= =20 the bill.=20 Gov. Gray Davis proposed a "20/20" conservation plan last month, a 20 perce= nt=20 cut in utility bills for a 20 percent cut in energy use when compared with= =20 the same summer month last year.=20 But some say the plan is unfair to SDG&E customers, who cut energy use last= =20 summer because of soaring bills. Assemblyman Juan Vargas, D-San Diego, want= s=20 the comparison for SDG&E customers to be with the same month in 1999.=20 "We are looking into it," said Roger Salazar, a Davis spokesman. "It's a=20 concern."=20 The rate increase proposed by SDG&E -- 2.3 cents per kilowatt hour -- is=20 significantly lower than the 3-cent increase imposed by the PUC on the=20 customers of PG&E and Edison last week.=20 An SDG&E spokesman said the PUC has asked the utility to participate in=20 discussions of a rate increase, effective June 1, that is expected to=20 encourage conservation by imposing the highest rates on the biggest users.= =20 "As for specifics pertaining to us, I don't know," said Art Larson of SDG&E= .=20 Commissioner Carl Wood said the PUC is looking at a number of issues,=20 including the fact that SDG&E rates were capped by legislation, unlike the= =20 rates of the other two investor-owned utilities.=20 "We are looking at whether we have the authority to change rates, and if we= =20 do, by how much -- and things like that," Wood said.=20 PUC President Loretta Lynch said yesterday that she plans to hold hearings= =20 throughout the state as the regulatory agency designs the specifics of the= =20 new rate increase.=20 "I think it's really key and critical that we have input not just from folk= s=20 who can hire lawyers to be at the PUC in San Francisco, but from all=20 Californians and all businesses," Lynch said.=20 Businesses may get some of the biggest rate increases. Legislation exempts= =20 residences that use up to 130 percent of the "baseline," a minimum amount o= f=20 electricity that varies with climate zones.=20 Lynch said a question has arisen about whether the PG&E and Edison rate=20 increase was effective immediately. Bills will not increase until May or=20 later, and the plan was to add the amount owed since March 27 to ratepayer= =20 bills in monthly installments.=20 "We have asked for additional briefing on that," said Lynch, offering littl= e=20 explanation.=20 The governor, who called the rate increase premature, may make a proposal o= f=20 his own in two weeks. He has asked for information on various factors,=20 including state spending to buy power for utility customers.=20 The state has spent about $4 billion, which will be repaid by a bond that= =20 will be paid off by ratepayers. The PUC is taking a series of steps that wi= ll=20 give the state money from the monthly bills paid by utility customers.=20 Lynch said yesterday that the state will receive $3 billion to $3.5 billion= a=20 year, enough for a bond of $12 billion to $14 billion -- by far a record fo= r=20 the biggest municipal bond issue in the nation.=20 State Treasurer Phil Angelides had hoped to obtain a bridge loan of $5=20 billion by the end of last month, easing the drain on the state general fun= d.=20 But a spokeswoman said "obstacles" have developed that Angelides plans to= =20 discuss tomorrow at a news conference.=20 The PUC also is scheduled to consider a revised program today that will=20 encourage businesses to agree to have their power "interrupted" this summer= ,=20 in exchange for lower bills and protection from blackouts. Some guidelines= =20 for blackouts also may be set.=20 "Facing rolling blackouts on an almost routine basis is a completely new=20 phenomenon," Wood said. "It's not something that I think we have experience= =20 in in any developed country, until very recent times."=20 Lynch also will propose an investigation into whether the parent firms of= =20 utilities should help pay off the debt of utilities, a move urged by consum= er=20 groups.=20 ---------------------------------------------------------------------------= --- -- PUC expected to approve new incentives to cut power usage=20 ASSOCIATED PRESS=20 April 3, 2001=20 SAN FRANCISCO =01) With summer and the threat of hours of rolling blackouts= =20 drawing ever closer, California power regulators are expected Tuesday to=20 expand programs they hope will coerce businesses to cut electricity use in= =20 trade for cheaper rates.=20 Under the Public Utilities Commission plan outlined Monday by Commissioner= =20 Carl Wood, businesses can contribute to California's desperate cause by=20 volunteering to turn off their power for up to 120 hours during a three-mon= th=20 period in exchange for a 15 percent discount on their electricity bills.=20 The power interruptions will be limited to a maximum of 6 hours per day and= =20 24 hours per week. The caps are designed to avoid a repeat of what happened= =20 in January when the businesses in a previous voluntary program were require= d=20 to suffer 120 hours of blackouts in a span of just a few weeks.=20 The frequency of the outages caught some businesses off guard and almost=20 caused a gasoline shortage by shutting off the power to key pipelines for= =20 extended periods.=20 As the PUC work to stave off future troubles, managers of the state's power= =20 grid continued a Stage 2 power alert early Tuesday morning. The Independent= =20 System Operator called for energy conservation Monday after gusty winds=20 yanked down Southern California power lines, keeping 3,000 megawatts of=20 imported electricity from reaching California.=20 The ISO calls a Stage 2 alert when electricity reserves drop below 5 percen= t.=20 and Stage 3 when reserves drop below 1.5 percent.=20 It could take up to 10 days to repair all the state's downed lines, said=20 spokespeople for the ISO and the Los Angeles Department of Water and Power.= =20 The downed lines crowded an already strained transmission bottleneck that= =20 transfers electricity up the state, ISO spokesman Patrick Dorinson said=20 Tuesday morning.=20 Additionally, power plants that would have produced 12,900 megawatts were= =20 down for repairs. Another 3,000 megawatts from alternative energy providers= =20 who are owed more than $1 billion by two near-broke utilities were also=20 unavailable to grid operators.=20 One megawatt is roughly enough power for 750 homes.=20 In Sacramento, an Assembly energy committee approved six power-related bill= s,=20 including two that aim to increase electricity generation with incentives f= or=20 building power plants.=20 One bill would give cities and counties that approve large power plants=20 additional state aid equal to 25 percent of the property tax the plant brin= gs=20 in.=20 The estimated $62.5 million in state incentives is designed to encourage=20 local governments to allow power plant construction within their boundaries= ,=20 said the author, Assemblywoman Rebecca Cohn, D-Sarasota.=20 Another bill would give $53.25 million in incentives primarily to small pow= er=20 plants that can be built quickly to serve specific commercial customers. Bo= th=20 bills now go to the Assembly Appropriations Committee for consideration.=20 There were no developments announced Monday in Gov. Gray Davis' efforts to= =20 reach deals to buy 26,000 miles of transmission lines owned by the state's= =20 three financially troubled investor-owned utilities.=20 PUC President Loretta Lynch said Monday she planned to end months of delay= =20 and officially open an investigation into the conduct of the parent compani= es=20 of the nearly bankrupt utilities Pacific Gas and Electric Co. and Southern= =20 California Edison Co.=20 The inquiry will focus on allegations that the parent companies have hoarde= d=20 cash and assets that should have been used to ease the utilities' financial= =20 crisis.=20 The commission is expected to approve a key accounting benchmark that will= =20 authorize the state to issue anywhere from $12 billion to $14 billion to bu= y=20 electricity. The maximum amount, based on a formula created by state=20 lawmakers, is higher than the $10 billion envisioned just a few months ago.= =20 Lynch said she hoped the new energy-curtailment program will help cut energ= y=20 demand. The old program curtailed demand by as much as 3,200 megawatt hours= .=20 Companies that already contributed 120 hours of voluntary power outages thi= s=20 year could sign up and receive additional discounts.=20 Businesses also can make money by agreeing to sell part of their usual ener= gy=20 load for $350 per megawatt hour during crisis periods. Regulators might be= =20 willing to pay businesses even more for the extra energy, depending how muc= h=20 money power wholesalers demand on the spot market this summer.=20 The California economy already has been hit with the double whammy of risin= g=20 electricity bills and an energy shortage that has triggered rolling blackou= ts=20 in January and March.=20 Now, regulators find themselves paying businesses to curtail their operatio= ns=20 so the damage doesn't become even worse this summer.=20 Regulators aren't sure how much the new incentive program will cost the=20 state, but they believe California stands to lose even more if businesses= =20 aren't paid to reduce their energy usage.=20 Blackouts are "threatening to almost become an everyday experience," Wood= =20 said Monday as he made his case for the new business incentive plan.=20 Depending on how much the state can conserve, California is expected to=20 suffer anywhere from 20 hours to 200 hours of rolling blackouts this summer= ,=20 based on the estimates of industry experts.=20 Because the state won't substantially increase its energy supply by this=20 summer, cutting electricity demand represents the state's best chance of=20 minimizing the expected blackouts.=20 In another move expected to lower energy usage, the PUC last week approved = a=20 rate increase of as high as 42 percent for customers of Edison and 46 perce= nt=20 for customers of PG&E.=20 Lynch said regulators are still collecting information to create a tiered= =20 rate structure that will impose the largest increases on the biggest=20 electricity users.=20 The higher rates might not show up in customer bills until May or June, but= =20 Lynch said she wants the higher prices to be retroactive to March 27.=20 With the latest incentives offered by the state, it's conceivable that some= =20 businesses might find it more profitable to simply close their plants for= =20 days at a time and sell their energy to the state, Wood said.=20 But Wood believes it's more likely that companies will remain open and make= a=20 little extra money by slightly reducing their power usage.=20 ---------------------------------------------------------------------------= --- ----- Davis warns of spring problems, urges conservation incentives=20 By Steve Lawrence ASSOCIATED PRESS=20 April 3, 2001=20 SACRAMENTO =01) Gov. Gray Davis urged lawmakers Tuesday to quickly approve = $1.12=20 billion in energy conservation incentives to ease a warm-weather power crun= ch=20 he said could hit as early as next month.=20 The Assembly Appropriations Committee approved one conservation bill after= =20 changing it, over the author's objections, to limit how much agricultural= =20 customers could have power shut off during rolling blackouts.=20 The chairwoman of the Senate Appropriations Committee put off a vote on=20 another conservation measure at least until Wednesday, saying senators need= ed=20 more time to study the legislation.=20 Davis met for about two hours with Senate Democrats and urged them to pass= =20 the conservation bills this week so the programs start working as soon as= =20 possible. The two bills have been moving slowly through the Legislature for= =20 the last month.=20 The governor's office announced later in the day that Davis had requested= =20 time from television stations for a five-minute statement Thursday evening = on=20 the energy situation.=20 The governor said the state could face its biggest power shortage in May or= =20 June because new power plants capable of producing 4,000 megawatts of=20 electricity won't be coming online until late in the summer.=20 "Usually, the challenge is in August and September," he said in a dimly lit= =20 hallway outside the Senate lounge. "This year it may well come in May or=20 June."=20 He said he hoped to avoid more rolling blackouts, but he added, "We are=20 hoping for the best and planning for the worst."=20 One of the bills, by Assemblywoman Christine Kehoe, D-San Diego, would=20 allocate $408 million for energy efficiency and conservation programs,=20 including $50 million for rebates for consumers who buy new, more=20 energy-efficient refrigerators.=20 The bill also would includes:=20 =01) $60 million to distribute subcompact fluorescent lights and other=20 energy-saving devices through community organizations.=20 =01) $50 million for grants or loans to low-income residents or small busin= esses=20 to make buildings more energy efficient.=20 =01) $50 million for large businesses that install electricity meters that= =20 charge the customer more for power during peak demand periods.=20 The Senate Appropriations Committee discussed the bill for more than an hou= r=20 Tuesday but put off a vote at least until Wednesday.=20 The other measure, by Sen. Byron Sher, D-Stanford, was sent to the Assembly= =20 floor Tuesday by the Assembly Appropriations Committee.=20 It would allot $710 million for conservation and efficiency efforts,=20 including $240 million to help low-income Californians weatherize their hom= es=20 and pay their natural gas and electricity bills.=20 It also includes $50 million for incentives for agri-businesses to buy=20 energy-efficient equipment and $50 million to install energy-saving=20 technology in state buildings.=20 Sher objected to an amendment added by the committee to allow officials to= =20 cut off power to agricultural customers no more than four hours a day and 2= 0=20 hours a month during power emergencies.=20 Sher said the amendment had no place in a conservation bill.=20 The committee's chairwoman, Assemblywoman Carole Migden, D-San Francisco,= =20 said the amendment was pushed by Assembly leaders and refused to change it.= =20 The meeting with Senate Democrats was the second that Davis has talked behi= nd=20 closed doors with lawmakers to discuss the state's energy crisis. He met wi= th=20 Assembly Democrats last week and plans to sit down with Assembly Republican= s=20 on Wednesday.=20 In a speech Saturday to the state Democratic Party convention, Davis said= =20 Republicans caused the state's power problems by pushing for utility=20 deregulation. He also complained they had not offered a "constructive,=20 comprehensive solution to the problem."=20 Asked what he would tell GOP lawmakers Wednesday, the Democratic governor= =20 said he would "explain the challenge and just tell them they can be part of= =20 the solution or part of the problem."=20 Although there were some raised voices during Tuesday's meeting, Sen. Tom= =20 Torlakson, D-Martinez, said the session with Davis was "very positive" and= =20 that he was "much more confident" about how the state is dealing with its= =20 power problems.=20 "We got some good information we had not had before," he said.=20 But Sen. Jackie Speier, D-Daly City, said Davis and his aides didn't know i= f=20 the state's two biggest utilities had followed a Public Utilities Commissio= n=20 order to set aside money to repay the state for its power purchases.=20 She said if the utilities go bankrupt "that money could be sucked up" by=20 other creditors.=20 ---------------------------------------------------------------------------= --- ------- Energy Firms' Mixed Message Is Focus of Inquiry=20 Deregulation: Senate panel will investigate whether suppliers were being=20 misleading when they promised lower rates for consumers while they were als= o=20 predicting bigger profits for investors.=20 By ROBERT J. LOPEZ and RICH CONNELL, Times Staff Writers=20 ?????In the summer of 1999, a top official with a major player in=20 California's power market testified during a congressional committee hearin= g=20 in support of speeding up deregulation. Unleashing market forces, said the= =20 Dynegy Inc. executive, would ensure "maximum customer savings" and "low-cos= t=20 power."=20 ?????That same month, the Houston-based firm made a far different pitch to= =20 Wall Street: Deregulation and major swings in electricity prices would boos= t=20 revenue and stock value. "We know how to take advantage of volatility spike= s=20 across the gas and power market," Chief Executive Officer Charles Watson=20 declared in a publication targeting large investors. "The energy=20 marketplace," he predicted, "will simply get more volatile."=20 ?????Dynegy was not alone, a review of federal filings, company documents a= nd=20 public records shows. In the years since California's pioneering deregulati= on=20 plan was approved, other major out-of-state energy suppliers were sending= =20 similar, seemingly contradictory signals to the public and stock buyers. ?????Now, those divergent messages--electricity prices will fall but=20 corporate revenue and profits will climb--will be a key focus of a special= =20 state Senate committee charged with investigating the alleged manipulation = in=20 the power market. ?????"How you can tell your investors you're about to make a whole ton of= =20 money in the very short term, and tell the consumers of California you're= =20 about to get lower rates?" said Sen. Joe Dunn (D-Santa Ana), a former=20 consumer attorney who is heading the legislative probe.=20 ?????Investigations by the state attorney general and federal regulators ar= e=20 continuing, but remain largely secret. ?????The Senate panel could offer the most open and wide-ranging examinatio= n=20 yet of alleged misconduct among power sellers. The bipartisan panel expects= =20 to begin requesting documents from power producers as early as today and=20 begin hearings in a few weeks. Committee members stress that they are hopin= g=20 the power companies will cooperate but are ready to issue subpoenas if=20 necessary. ?????Suppliers Deny Misleading Public ?????The legislative probe comes as many state officials are moving=20 aggressively to expose alleged market manipulation and overcharges totaling= =20 billions of dollars by the power suppliers. ?????"Somewhere along the line, there may be a skunk in the woodpile. And i= f=20 there is, we need to find out about it," said K. Maurice Johannessen=20 (R-Redding), the committee's ranking Republican. ?????Another panel member, Sen. Debra Bowen (D-Marina del Rey), noted that= =20 all companies try to maximize profits. "But [we want] to understand how the= =20 market was manipulated and how sellers took advantage of the market." ?????The power traders strongly deny acting improperly or sending misleadin= g=20 signals to the public. ?????"Hogwash," said Tom Williams, spokesman for North Carolina-based Duke= =20 Energy. Spokesmen for Dynegy said there was nothing inconsistent in the=20 statements of their executives. ?????The companies maintain that California's problems stem from soaring=20 electricity demand, lagging power plant construction and a faulty=20 deregulation plan adopted by the Legislature in 1996. "You have a flawed=20 structure there," said Dynegy spokesman John Sousa. ?????Sousa and executives of other power suppliers say their comments to th= e=20 general public and to Wall Street are not contradictory because unfettered= =20 competition--not the California model--would have created opportunities to= =20 both make money and cut rates. ?????Still, regulators, lawmakers and ratepayer groups note that only half= =20 the promises made by the power dealers have been realized so far--their=20 earnings and stock prices have risen at record rates as electricity prices= =20 have soared. ?????"The big lie was, while they were telling ratepayers to 'Trust us, we'= re=20 going to lower your rates,' they were planning the entire time to raise the= =20 rates," said San Diego attorney Michael Aguirre, a former federal prosecuto= r=20 who specialized in fraud cases. Aguirre is representing state ratepayers in= a=20 class-action lawsuit against the power companies. ?????Just last month, California's independent grid operator reported that= =20 many power sellers "used well-planned strategies to ensure maximum possible= =20 prices." Potential overcharges could total nearly $6.3 billion.=20 ?????The Senate panel wants to track information that Dynegy and other=20 generators were providing to the investment community in the 1990s as a=20 possible way of determining whether they entered the California market with= =20 plans to run up electricity costs. Among many other things, the committee= =20 plans to seek internal projections of how the firms expected wholesale pric= es=20 and profits to rise under deregulation.=20 ?????Members also want to know how the suppliers expected to recoup billion= s=20 in outlays for California power plants being unloaded by regulated utilitie= s.=20 Some of the purchases were far above book value, stunning analysts. ?????"What did they know that the rest of us didn't at the time they were= =20 purchasing those generations facilities?" asked Dunn. "They knew something.= " ?????One thing the power wholesalers say they did know was that tight power= =20 supplies in California would probably boost prices, at least for a time. ?????"They were going anywhere where they thought energy [use] would spike= =20 upward," recalled market analyst Joan Goodman, who was familiar with compan= y=20 pitches. "California was one of those places because it didn't have=20 sufficient [power] plants." ?????Duke Energy projected that prices would rise after 2000, although the= =20 company says it did not foresee the huge increases that occurred, according= =20 to spokesman Williams. ?????However, when the company sealed one of the first packages of power=20 plant purchases in the state in 1997, Chief Executive Officer Richard Prior= y=20 said in a press release it would "deliver greater value" to California=20 customers. ?????The publicity spin was similar when Edison's sprawling beachfront powe= r=20 plant in El Segundo changed hands the following year. "Consumers in=20 California will begin to benefit from more competitively priced electricity= =20 and more vibrant economy," announced Craig Mataczynski, vice president of= =20 Minneapolis-based NRG Corp., a partner in the purchase with Dynegy. ?????Big Growth Was Predicted ?????Utilities reaping profits from plant sales also trumpeted the consumer= =20 windfall theme. Electricity rates would drop 20% by 2001, Pacific Gas &=20 Electric's top executive, Robert Glynn, said in early 1998. "There is no=20 product bought on a daily basis that has such a predictable downward price= =20 trajectory into the future." ?????But to its Wall Street audience, the power suppliers emphasized climbi= ng=20 revenues. ?????Atlanta-based Southern Co., now Mirant, told investors in 1999 that it= s=20 plan to buy plants and market power had brought the company to the "doorste= p=20 of significant growth opportunities." ?????"We believe our strategies will result in the best shareholder return= =20 available," Bill Dahlberg, then-chief executive officer, said shortly after= =20 buying three California plants. ?????Mirant spokeswoman Jamie Stephenson said assurances given the public a= nd=20 assumptions directed to Wall Street were "just a different way of deliverin= g=20 the same message." The firm was saying it would be "reliable to shareholder= s=20 and reliable to consumers." ?????Now, with rolling blackouts and record electricity bill increases,=20 federal and state authorities are alleging that large energy suppliers play= ed=20 the power market too hard. ?????Last month, the Federal Energy Regulatory Commission said it found=20 evidence of $124 million in "unjust and unreasonable" charges during the=20 severest periods of electricity shortage. The commission, often criticized= =20 for being too lenient on private power companies, ordered the firms to refu= nd=20 the money or further justify the charges. ?????Some firms are contesting the findings, saying the prices they charged= =20 were justified.=20 ?????Investigators and regulators have faced a vexing challenge trying to= =20 unravel the complex financial workings of the large power traders. The=20 companies closely guard information, and some recently refused to comply wi= th=20 subpoenas from the state Public Utilities Commission, which is also probing= =20 the power market. ?????Whether the Senate investigating committee will have the resources and= =20 tenacity to get much further remains to be seen. But Democrats and=20 Republicans alike insist they are serious about untangling how the power=20 market went haywire. ?????"I haven't seen that much smoke where there hasn't been a fire," Dunn= =20 said.=20 ---------------------------------------------------------------------------= --- ------------------------------------- Probe of Utility Money Transfers Ordered=20 Finance: PUC wants to know whether payments to holding companies were prope= r,=20 and whether parent firms gave all the help they could to subsidiaries.=20 Companies deny any impropriety.=20 By TIM REITERMAN and NANCY RIVERA BROOKS, Times Staff Writers=20 ?????SAN FRANCISCO--After dozens of protesters assailed them for a recent= =20 electricity rate hike, state regulators Tuesday ordered an investigation in= to=20 the transfer of billions of dollars from utilities to parent companies and= =20 whether the parents failed to help them during the energy crisis. ?????"This order is absolutely necessary to establish the credibility for a= ny=20 rate hike," said California Public Utilities Commission member Geoffrey=20 Brown. "We should be assured no assets were transferred imprudently to the= =20 parent companies and no assets in the parent were available" to help=20 financially troubled utilities. ?????The commission adopted the order on a 4-0 vote during an uproarious=20 meeting that started with 1 hours of public testimony and was disrupted=20 repeatedly by a few dozen protesters who chanted "public power now" and urg= ed=20 state takeover of the utilities. ?????The PUC probe targets Pacific Gas & Electric Co., Southern California= =20 Edison Co., San Diego Gas & Electric Co. and their respective holding=20 companies. ?????Spokesmen for the parent companies--PG&E Corp., Edison International a= nd=20 Sempra Energy--denied any impropriety and said previous PUC audits have fou= nd=20 no wrongdoing. ?????"The commission, which is probably faced with one of the greatest=20 challenges since the state was formed in 1850, is wasting its time reviewin= g=20 old ground," said PG&E Corp. spokesman Greg Pruett. ?????Commissioners expressed concern that the utilities transferred billion= s=20 of dollars to their holding companies while experiencing financial=20 difficulties. They said the parents evidently did not help out the utilitie= s,=20 which sought rate increases to cover their excess costs. ?????"We will examine whether this apparent failure violates [PUC=20 regulations] that the holding company give 'first priority' to the capital= =20 needs of its utility subsidiary," the order said. ?????The PUC said the parent companies disbursed much of the money as=20 dividends, stock repurchases and other payments. ?????Sempra spokesman Art Larson dismissed any suggestion that the parent= =20 neglected SDG&E, noting that it invested $324 million in the utility last= =20 year. "It's the most in the past seven years," he said. "That speaks for=20 itself." ?????PG&E Corp.'s Pruett said millions of dollars in dividends and loan=20 repayments to shareholders would have been made whether there was a holding= =20 company or not. "It's a specious argument [by the PUC]," he said. "It's a= =20 smoke screen." ?????Since early February, the commission had repeatedly delayed ordering t= he=20 investigation, in part to avoid jeopardizing the state's recent negotiation= s=20 for the purchase of the power grid and other assets of Southern California= =20 Edison and Pacific Gas & Electric Co., which say they are billions of dolla= rs=20 in debt and in danger of bankruptcy. ?????Edison International Chief Financial Officer Ted Craver declined Tuesd= ay=20 to say whether Edison is close to signing an agreement, noting, "Discussion= s=20 are at a critical point right now." ?????Under the proposed deal, the state would purchase Edison's massive=20 high-voltage transmission system for $2.76 billion and receive other assets= .=20 The utility could use the cash to restructure debt. ?????"It is not a done deal; it is very close to final," said Joseph Ficher= a,=20 a consultant representing Gov. Gray Davis in negotiations with Edison. ?????However, a top utility executive, speaking on the condition of=20 anonymity, said, "There are serious disagreements on major issues." ?????The state's talks with PG&E, which had been dormant for weeks, resumed= =20 Tuesday as that utility's negotiators met with the governor's staff,=20 according to a company official.=20 ?????If a deal for transmission lines can be struck, it is subject to=20 approval by federal regulators. ?????Davis said Tuesday that if federal officials reject any deal, his "Pla= n=20 B" is to seek state ownership of private utilities' hydroelectric plants. ?????"We are then entitled to have assets of comparable value," Davis told= =20 reporters. "We have told utilities by that we mean their hydro assets,=20 because those are moneymakers." ?????PG&E, which operates more hydroelectric plants than Edison, has=20 repeatedly made it clear that it does not intend to give up those operation= s. ?????Davis said he is buying five minutes of television time at 6:05 p.m.= =20 Thursday to discuss California's energy situation. ?????The PUC, in other action to ease the energy crisis, on Tuesday adopted= a=20 measure that allows the Department of Water Resources to sell $12 billion t= o=20 $14 billion in bonds to help pay for the state's power purchases for=20 cash-starved utilities and their customers. ?????That is a significant increase over the maximum $10 billion approved b= y=20 the Legislature. ?????The PUC next must devise a formula to divide customer electricity=20 revenue among the utilities, power providers and the Department of Water=20 Resources. ?????Edison executives said they fear that the PUC is underestimating=20 electricity costs--in particular those of the alternative, natural gas fire= d=20 generators that the commission recently ordered the utilities to resume=20 paying. Even with last week's rate increase of about 40%, Craver said=20 customer revenue could fall short, which may add to the utility's debt. ?????"At best, the utility is standing still: Its cash position has not=20 improved," said Craver. "At worst, it's going backward." ?????A controversial PUC program that pays companies to use less electricit= y=20 got an overhaul to make it more attractive to business and more useful in= =20 helping to avoid blackouts. ?????Companies that no longer wish to participate in the so-called=20 interruptible power program will be allowed to leave without penalty, but= =20 must repay any discounts received since Nov. 1. ?????Julie Puentes, executive vice president of the Orange County Business= =20 Council, said the group is pleased that businesses will no longer be=20 penalized for past failures to interrupt power. But she said the decision= =20 does nothing to help companies that did comply and lost business as a resul= t. ?????"They were good corporate soldiers," Puentes said. ?????Companies receive discounted rates in exchange for agreeing to reduce= =20 power use when supplies are tight, but in the last year companies have been= =20 asked to cut power dozens of times or face big fines. ?????The new program limits power interruptions to no more than six hours a= =20 day, four days a week and 40 hours a month. Other programs will allow=20 customers--even groups of residential customers--to be paid for reducing=20 power use, and expand a Southern California Edison operation that=20 automatically turns off some air-conditioners. ?????The commission heard more than three dozen speakers Tuesday during its= =20 public comment period, and several protesters were ejected for disruptions. ?????Protesters challenged the commission to attend a community meeting at = a=20 San Francisco school on April 18. Commissioner Brown agreed, saying, "I hop= e=20 you treat me as courteously as we tried to treat you." ---=20 ?????Times staff writers Dan Morain and Carl Ingram in Sacramento contribut= ed=20 to this story. ---------------------------------------------------------------------------= --- --------------------------------------- Worst Power Shortage Likely In May and June, Davis Warns=20 Lynda Gledhill, Chronicle Sacramento Bureau Wednesday, April 4, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/04= /04/M N107852.DTL=20 Sacramento -- Gov. Gray Davis acknowledged yesterday that the state would= =20 fall short of its goals for increased power generation this summer and warn= ed=20 that the toughest phase of the energy crisis might be just weeks away.=20 Davis said May and June would be the most critical time for rolling blackou= ts=20 because several planned new power plants would not be on line. He said only= =20 4,000 megawatts of new power would be flowing by summer's end, a sharp drop= =20 from the 5,000 megawatts he had promised in February to have on line by the= =20 start of summer.=20 "I hope we don't have major disruptions," the Democratic governor said. "Bu= t=20 we're hoping for the best and preparing for the worst."=20 Davis' frank admission came after a meeting with Senate Democrats to discus= s=20 the energy crisis. Many lawmakers have expressed frustration with the lack = of=20 information coming from Davis and his aides as the energy crisis drags on.= =20 The governor plans to discuss the crisis during a five-minute statewide=20 television address at 6:05 p.m. tomorrow.=20 Despite the gloomy forecast, Davis said he thought California would be=20 generating more power than it needs in three years, but "we have to get=20 through the next two (years)."=20 Yesterday everyone agreed that only conservation and luck would prevent=20 summer blackouts.=20 "Everyone's concerned," said Sen. Debra Bowen, D-Marina del Rey, chairwoman= =20 of the Senate's energy committee. "It's not possible for me to be more=20 concerned. We're hearing from businesses about the economic impact of the= =20 interruptions of power supply. They are more concerned with the reliability= =20 than the price."=20 The Public Utilities Commission approved last week a tiered electric rate= =20 increase averaging 40 percent in the hope that higher prices would encourag= e=20 conservation.=20 Lawmakers might take even more drastic action. Some senators said there is= =20 growing support for using the state's power of condemnation to seize privat= e=20 power plants.=20 Under the state's 1996 deregulation plan, the major utilities were required= =20 to sell many of their power plants to private firms. State Sen Jackie Speie= r,=20 D-Hillsborough, said senators now believe the state should take over those= =20 generating plants.=20 CALL FOR BOLD ACTION State Sen. Don Perata, D-Oakland, said he and several other lawmakers have= =20 told the governor he must take bold action so people can be confident in=20 their leadership.=20 "I told him he needs to sell energy the same way he sold education," Perata= =20 said, adding that he supports taking over the power plants.=20 "If in fact we're being taking advantage of by a school-yard bully, we need= =20 to put a roll of pennies in our fist and cold-cock the guy," Perata said.= =20 Speier said the governor did not dismiss the condemnation idea outright.=20 Other lawmakers believe that there is also support for a windfall-profits t= ax=20 on private generators that have made huge profits during the power crisis.= =20 Money raised by the profits tax could be returned to consumers or to the=20 state for its power purchases, which have topped $3.7 billion so far this= =20 year.=20 Meanwhile, Davis aides resumed talks with Pacific Gas and Electric Co.=20 yesterday to purchase the utility's power transmission system.=20 The administration wants to buy the transmission lines to help restore=20 financial solvency to the state's investor-owned utilities, including Pacif= ic=20 Gas and Electric Co. The utilities would then be able to use the money to p= ay=20 off their $14 billion debt.=20 Southern California Edison already has tentatively agreed to sell the state= =20 its transmission lines for almost $3 billion.=20 Negotiations for PG&E's transmission lines have bogged down. Davis said he= =20 also is considering a backup plan to acquire PG&E's hydroelectric plants=20 should PG&E or Uncle Sam scuttle the transmission system deal.=20 PLANS THREATENED "Part of the negotiations is that if the transmission lines purchase is not= =20 approved by the federal government, we would still get an asset like the=20 hydro plants," Davis said.=20 As the crisis wears on, Davis has become a leading proponent of energy=20 conservation. Davis has promised a 20 percent rebate on power bills to all= =20 Californians who reduce their electricity consumption by one-fifth beginnin= g=20 June 1.=20 Davis continued his push yesterday, encouraging lawmakers at yesterday's=20 meeting to pass several conservation bills this week. But two key=20 conservation bills faced difficult hearings yesterday.=20 An Assembly bill that would spend $400 million on various conservation=20 efforts stalled in the Senate Appropriations Committee because the Davis=20 administration had not agreed to it.=20 The second bill, by Sen. Byron Sher, D-Palo Alto, which would allocate $700= =20 million for conservation measures, has been languishing for weeks. It passe= d=20 the Assembly Appropriations Committee yesterday over the objections of the= =20 author, after negotiations between Democrats and Republicans the night=20 before.=20 E-mail Lynda Gledhill at lgledhill@sfchronicle.com.=20 ,2001 San Francisco Chronicle ? 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