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Please see the following articles:
Energy Insight, Fri, 4/6: "PG&E files for Chapter 11" Sac Bee, Mon, 4/9: "Energy supply setback: Big generator can't be forced t= o=20 sell emergency power to the state,=20 a U.S. court rules" Sac Bee, Mon, 4/9: "Dan Walters: Hertzberg's oversight is looking more lik= e=20 a whitewash" San Diego Union, Sun, 4/8: "PG&E awards bonuses hours before filing Chapte= r=20 11" San Diego Union, Sat, 4/7: "PG&E looks to court for debt relief; Davis=20 promises to expedite deal with Edison" San Diego Union, Sat, 4/7: "Utility argues for Otay power plant " San Diego Union, Sat, 4/7: "United at the start, lawmakers now split on how= =20 to clean mess " San Diego Union, Sat, 4/7: "GOP activists feel state is being snubbed by= =20 Bush" LA Times, Mon, 4/9: "With Power Price Surges, California's a Follower" LA Times, Mon, 4/9: "Judge in PG&E Bankruptcy Case Seen as a Problem Solve= r"=20 LA Times, Mon, 4/9: "Bankruptcy Filing Threatens Tax Bases" LA Times, Mon, 4/9: "Others Learning from California's Energy Mistakes"=20 LA Times, Mon, 4/9: "Generators Scrambled to End Pacts With Utilities "=20 LA Times, Sun, 4/8: "PG&E Gave Bonuses Prior to Bankruptcy" LA Times, Sun, 4/8: "Shifting Action to Neutral Arena May Be Bankruptcy=20 Filing's Upside" LA Times, Mon, 4/9: "Shock's Silver Lining" (Commentary) LA Times, Mon, 4/9: "Use Eminent Domain as a Power Tool " (Commentary) SF Chron, Mon, 4/9: "Governor, Utility In War Of Words=20 Davis furious as PG&E defends bankruptcy filing " SF Chron, Mon, 4/9: "Power Grab -- Some Democrats Favor Seizing Plants" SF Chron, Mon, 4/9: "Davis Could Still Show Courage " (Editorial) SF Chron, Mon, 4/9: "Governor, bankrupt utility blame each other for power= =20 woes " SF Chron, Mon, 4/9: "Negotiations continue between state and SoCal Edison " SF Chron, Mon, 4/9: "SAN FRANCISCO=20 PUC General Manager To Leave S.F. Post " Mercury News, Mon, 4/9: "Gov. Davis, bankrupt utility blame each other for= =20 power woes" Mercury News, Mon, 4/9: "Cheap, abundant coal eyed with new interest" Mercury News, Mon, 4/9: "Leaders threaten to seize power contracts, plants= " Mercury News, Mon, 4/9: "Blackouts this summer?" (Commentary) Individual.com, Mon, 4/9: "Pacific Gas Files for Chapter 11" Individual.com, Mon, 4/9: "Davis endorses rate hikes, defends handling of= =20 energy crisis" Individual.com, Mon, 4/9: "Sempra Energy And SDG&E Reaffirm Strong Financi= al=20 Position in Response to PG&E Bankruptcy" ---------------------------------------------------------------------------= --- -------------------------------------------------------------------- =09Friday, April 6, 2001=20 By Rick Stouffer=20 rstouffer@ftenergy.com=20 Pacific Gas & Electric Co., saddled with $9 billion in wholesale power cost= s=20 it could not collect and with costs increasing by $300 million per month,= =20 filed Friday for protection from creditors under Chapter 11 of the U.S.=20 Bankruptcy Code. Under Chapter 11, the utility unit of PG&E Corp. will be given time to=20 reorganize its precarious financial situation, including the restructuring = of=20 its massive debt. The filing in no way impacts PG&E or its other=20 subsidiaries, including National Energy Group.=20 "We believe filing for Chapter 11 bankruptcy protection is the best=20 alternative to protect the legal rights of Pacific Gas & Electric and to=20 allow us to continue serving our (13 million) customers," said Pacific Gas = &=20 Electric Chairman Robert D. Glynn Jr., during a Friday teleconference.=20 Four primary reasons for filing In a teleconference on Friday April 6, Glynn listed four primary reasons fo= r=20 filing for Chapter 11, including:=20 Failure by California to assume the full procurement responsibility for the= =20 utility's "net open position," which the company said was provided for. Thi= s=20 resulted in Pacific Gas & Electric continuing to be exposed to purchase cos= ts=20 totaling an estimated $300 million-plus per month.=20 "We don't actually know how much we owe the DWR (California Department of= =20 Water Resources) or the ISO (California Independent System Operator), becau= se=20 they've never told us," Glynn said.=20 Actions taken by the California Public Utilities Commission (CPUC) on March= =20 27 and April 3, which Pacific Gas & Electric said created new payment=20 obligations and undermined its ability to return to financial viability.=20 Those actions included mandating Pacific Gas & Electric pay the full amount= =20 of the bills presented by qualifying facilities, and that the utility "pay= =20 out more in cash to DWR than we collect in rates," according to Glynn.=20 Lack of any progress in negotiations between the company and the state=20 concerning the $9 billion in excess wholesale power costs spent since last= =20 June.=20 "Talks were going nowhere; we would reach agreements that were then not=20 followed up on," Glynn said. "We've heard a lot of words come out of=20 Sacramento, but the challenge was to follow up with action."=20 The adoption by the CPUC of what Pacific Gas & Electric called an illegal a= nd=20 retroactive accounting change that would appear to eliminate the company's= =20 uncollected wholesale costs.=20 The CPUC ruled that the utilities offset their wholesale power costs agains= t=20 the transition costs collected from ratepayers.=20 The order also requires the utilities to offset their operating costs with= =20 the money they make from selling power from their own generating units duri= ng=20 the rate freeze. The companies believe that if the order isn't changed, the= y=20 could not recover past purchased power expenses.=20 PG&E PROFILE SPREADSHEET Many not surprised Analysts for the most part were not surprised that Pacific Gas & Electric= =20 took Friday's action, many saying they had expected a filing weeks ago.=20 "I always believed this was the smartest way to deal with this debacle," sa= id=20 Bill LeBlanc, vice president of retail consulting for Boulder, Colorado=20 research and consulting firm E Source=01*the retail-energy wing of FT Energ= y. "I=20 expect Southern California Edison to follow suit; I had actually expected= =20 these utilities to file Chapter 11 about eight weeks ago."=20 LeBlanc said he expected a Chapter 11 filing, because California will not= =20 bail out the utilities, and they have no way to recover costs in an=20 expeditious manner in what they believe is economically fair to their=20 corporation and customers.=20 Governor's acquiescence didn't help Even a short press conference Thursday by California Gov. Gray Davis, in=20 which he finally admitted a rate hike was needed, and his proposal to provi= de=20 as much as $8 billion in bonds to pay the utilities' past power costs, coul= d=20 not deter Pacific Gas & Electric's filing.=20 The governor's words had little effect on Glynn. "Did we hear the governor'= s=20 speech last night? We heard a lot of words, but we have not seen the=20 actions," Glynn told his teleconference audience.=20 "Almost every day since this crisis began, we have looked at staying out of= =20 bankruptcy, vs. entering bankruptcy," Glynn said. "We expect the court to= =20 provide the venue needed to reach a solution which the state and regulators= =20 have been unable to achieve."=20 "This (bankruptcy filing) really wasn't unexpected; this company has been= =20 making noise like this for weeks," said Dresdner Kleinwort Wasserstein ener= gy=20 analyst Linda Byus. "The governor probably expected that he made a big nois= e=20 last night with his announcement, but these guys said no, not really."=20 "It's a very unfortunate situation, extremely complicated," according to=20 Jeffrey Holzschuh, managing director and head of Morgan Stanley Dean Witter= 's=20 Global Energy Group. "There are just so many people involved in this that I= =20 don't think you can come to conclusion quickly or easily."=20 Judge holds the power What bankruptcy offers is a utility "czar," a court judge with virtually=20 unlimited power, legal scholars said. The judge will hold the situation in= =20 his or her hands=01*and the governor, shareholders and consumers be darned.= =20 "Bottom line is the judge has total control," according to Robert Nachtmann= ,=20 professor of finance and executive associate dean of the Katz Graduate Scho= ol=20 of Business at the University of Pittsburgh.=20 Preservation of the utility's assets is first and foremost in the judge's= =20 eyes=01*doing what needs to be done to keep the company operational.=20 Who loses?=20 Who loses? In particular, the power producers that have been vilified by=20 Glynn and his counterpart at SoCal Ed will lose=01*as well as Gov. Davis.= =20 However, in reality, just about everyone in the state of California will=20 suffer.=20 Stocks of power wholesalers, including Duke Energy, Dynegy Corp., Williams= =20 Cos. Inc. and Reliant Energy Inc. immediately swooned once word spread=20 concerning Pacific Gas & Electric's filing.=20 "Creditors, including the state, wholesalers, equipment vendors, etc. will= =20 take something of a financial hit=01*probably get back something like 50 ce= nts=20 to 75 cents on the dollar for what they are owed," according to John Egan, = E=20 Source's director, strategic & marketing issues.=20 Shareholders will be the big losers; typically they will be wiped out, Egan= =20 said.=20 Glynn said he did not know how long the process would take, but expect it t= o=20 be long and extremely costly. The University of Pittsburgh's Nachtmann said= =20 the average time frame for bankruptcy for a publicly traded entity is about= =20 30 months.=20 Huge monetary cost As for cost, the 1992 to 1996 bankruptcy of El Paso Electric Co. cost an=20 estimated $100 million=01*and that was for a company many times smaller tha= n the=20 behemoth Pacific Gas & Electric.=20 One thing is for sure: The problems and trials in the California energy=20 market will only continue.=20 "This will continue daily, weekly, hourly for the foreseeable future," Morg= an=20 Stanley's Holzschuh said.=20 ---------------------------------------------------------------------------= --- ---------------------------------------------------------------------------= --- ------------------------------ Energy supply setback: Big generator can't be forced to sell emergency powe= r=20 to the state, a U.S. court rules. By Denny Walsh and Carrie Peyton BEE STAFF WRITERS (Published April 6, 2001)=20 In a development that does not bode well for California's energy supply, a= =20 federal appellate court Thursday halted enforcement of a lower court order= =20 that a big electricity generator must sell emergency power to the state=20 without guarantee of payment.=20 State energy officials said the ruling wouldn't have any immediate effect b= ut=20 could precipitate a power emergency if the generator decided to take a plan= t=20 off-line for maintenance.=20 On March 21, citing "rolling blackouts (that have) darkened the California= =20 landscape," U.S. District Judge Frank C. Damrell Jr. imposed an injunction= =20 against Reliant Energy Services Inc., one of the nation's major generators.= =20 Houston-based Reliant controls approximately 3,800 megawatts, or about 20= =20 percent, of the gas-fired generation capacity in the state, and Damrell fou= nd=20 that loss of that production "poses an imminent threat."=20 But Thursday, a three-judge panel of the 9th U.S. Circuit Court of Appeals= =20 granted an emergency stay of the injunction, saying Reliant has shown "a hi= gh=20 likelihood of success on the merits" of its appeal.=20 While not spelling it out, the panel apparently bases its finding on the=20 question of the courts' jurisdiction over the energy market. The panel=20 directed that a hearing on the appeal be scheduled for the second week in= =20 July.=20 The decision leaves California's electric grid more fragile, at least=20 temporarily, according to the state Independent System Operator, which=20 maintains and controls power transmissions.=20 It gives the agency no immediate recourse if Reliant chooses to shut down a= ny=20 of its plants for maintenance, said ISO Vice President Jim Detmers.=20 "It's not going to change anything overnight, and it's not going to change= =20 anything over the weekend," said Detmers. "But if Reliant decided on a=20 unilateral action to take their units off for maintenance ... we definitely= =20 could have a system emergency."=20 Reliant officials, when told of the ruling, took a conciliatory tone but=20 declined to specify their next move.=20 "Reliant ... has pledged to keep the lights on in California," said company= =20 lobbyist Marty Wilson, and "is still of a mind to want to cooperate."=20 Without further comment, the appeals court judges cited a 1980 U.S. Distric= t=20 Court decision. In that case, 14 cities sued Florida Power and Light Co.,= =20 alleging that it was violating a number of laws in its sales of power and= =20 production of electricity.=20 The judge found, however, that the Federal Power Act reserves oversight of= =20 interstate utilities exclusively to the Federal Energy Regulatory Commissio= n.=20 He ruled that only the commission may bring an action involving energy sale= s=20 into federal court -- unless it is a request to review a commission order,= =20 and that goes directly to an appellate court.=20 The lawsuit before Damrell was brought by the ISO to force Reliant and two= =20 other generators to respond to ISO's emergency orders for power, even thoug= h=20 the agency is buying on behalf of two retailers that are broke and hopeless= ly=20 in debt.=20 Because Pacific Gas and Electric Co. and Southern California Edison can't p= ay=20 their bills -- about $14 billion -- some wholesalers want to cut off sales = to=20 the utilities.=20 The other three defendants in the ISO's suit -- Dynegy Power Corp. of Houst= on=20 and Tulsa-based AES Corp. and its marketer, Williams Energy Marketing &=20 Trading Co. -- have entered into written agreements with ISO to continue=20 supplying emergency power until the FERC decides whether they are required = to=20 sell to companies that are not creditworthy.=20 But Charles Robinson, ISO general counsel, points out that the generators c= an=20 rescind those agreements with 48 hours' notice.=20 "My hope is this is a temporary setback," said Robinson. He added, however,= =20 that the practical effect is "at least for now, we don't have a tool to=20 compel them to do what we believe they're obligated to do" -- respond to=20 emergency demands for power.=20 Reliant has insisted since the suit was filed Feb. 6 that Damrell has no=20 jurisdiction over the rate schedules that govern dealings between generator= s=20 and the ISO, and that the Federal Power Act mandates that the FERC must=20 settle any disputes about terms of those tariffs.=20 In issuing the injunction, Damrell acknowledged that the FERC has special= =20 expertise concerning agreements between generators and ISO.=20 "Absent the extreme exigencies of the California power crisis, the court=20 agrees that a stay pending further action by the FERC would be proper," he= =20 said. "But those are not the facts here. Electricity is in critically short= =20 supply. The health and safety of the people of California are potentially a= t=20 risk."=20 Immediately upon receiving the 9th Circuit's order Thursday, attorneys for= =20 the ISO asked Damrell to set an accelerated schedule for its motion to amen= d=20 the suit. The agency apparently has crafted a new complaint stressing its= =20 view that the matter is an ordinary contract dispute over which the judge h= as=20 jurisdiction.=20 Damrell scheduled a hearing on the motion for Thursday.=20 In a further development that could complicate the state's dire need for=20 energy, an alternative supplier won a court fight Thursday to bypass the bi= g=20 utilities and sell its power on the open market.=20 Timber giant Sierra Pacific Industries, which operates four biomass plants= =20 that produce power for PG&E, obtained a temporary restraining order in=20 Sacramento Superior Court that says Sierra Pacific is not required to sell= =20 its power to PG&E.=20 The ruling means PG&E and Southern Edison could lose power as alternative= =20 energy generators, fed up with months of nonpayment, sue to be able to sell= =20 their comparatively cheap product elsewhere, including outside the state.= =20 The Bee's Denny Walsh can be reached at (916) 321-1189 or dwalsh@sacbee.com= .=20 Bee staff writer Dale Kasler contributed to this report.=20 ---------------------------------------------------------------------------= --- ---------------------------------------------------------------------------= --- ---------------------------- Dan Walters: Hertzberg's oversight is looking more like a whitewash (Published April 9, 2001)=20 When Bob Hertzberg was elevated into the Assembly speakership a year ago, h= e=20 pledged to make a priority of what's called "oversight" -- the much-neglect= ed=20 legislative duty to examine how administrative agencies operate programs.= =20 "We pass all these bills," Hertzberg said in a speech shortly after being= =20 elected speaker. "What do they mean? What did they do? We intend to do a=20 great deal of oversight."=20 Seemingly, Hertzberg made good on his pledge when the Assembly conducted an= =20 exemplary, bipartisan investigation of state Insurance Commissioner Chuck= =20 Quackenbush's questionable regulation of insurers. The Assembly investigati= on=20 was the key factor in Quackenbush's decision to abandon his once-promising= =20 political career.=20 Flaying Republican Quackenbush for his shortcomings was relatively easy for= =20 Democrat Hertzberg. Would he, many wondered, be equally eager to examine=20 wrongdoing, or simple incompetence, by Democratic officeholders, especially= =20 Gov. Gray Davis?=20 The answer, apparently, is no. While there are many potential targets for= =20 deeply probing legislative examinations, Hertzberg and his much-vaunted sta= ff=20 of investigators have not given them the same attention as Quackenbush=20 received.=20 Early this year, the Hertzberg hit team went to work on the energy crisis,= =20 and Assemblyman Darrell Steinberg, D-Sacramento, was appointed to chair a= =20 special committee that was to delve into how the crisis came to pass. But= =20 after fiddling around with the matter for several weeks and failing to=20 pinpoint some easy villains, the investigation sputtered.=20 The moratorium on oversight occurred just as the committee was moving into = an=20 area that could have been embarrassing to Davis and state Public Utilities= =20 Commission President Loretta Lynch -- what they did or did not do last summ= er=20 when the crisis first became apparent. It's an area of inquiry whose=20 importance was magnified by Friday's bankruptcy filing by Pacific Gas and= =20 Electric Co. Republicans complained about the investigation's shutdown, but= =20 to no avail.=20 The hollowness of Hertzberg's oversight pledge was demonstrated again the= =20 other day when a subcommittee of the Assembly Governmental Organization=20 Committee staged what it described as an "informational hearing" on what ar= e=20 arguably the state's two most dysfunctional agencies, the Department of=20 Veterans Affairs and the California National Guard.=20 The former is a mess from top to bottom and has been for years. Its two maj= or=20 functions, providing home loans to veterans and operating two residential= =20 facilities for aged and/or ill veterans, have been plagued by mismanagement= =20 and downright neglect. It's been a notorious dumping ground for political= =20 hacks through several gubernatorial administrations. Agency secretaries hav= e=20 come and gone in clouds of personal scandal.=20 Revelations about the National Guard are more recent but equally disturbing= .=20 Its readiness for either active military duty or responding to state=20 disasters has declined, and its non-military programs supposedly serving=20 delinquent youths are marginally effective at best and riddled with financi= al=20 irregularities. Under Adj. Gen. Paul Monroe, the Guard has become top-heavy= =20 with cronies while Monroe has feuded openly with his second-in-command, Eze= ll=20 Ware. At one point this year, Monroe unilaterally dumped Ware from the slot= =20 to which he had been appointed by Davis, but within four days Ware was=20 restored to his deputy's position.=20 The subcommittee's chairman, first-term Assemblyman Ed Chavez, D-La Puente,= =20 conducted what can only be described as a sham hearing, allowing bureaucrat= s=20 for both agencies to emit a blizzard of self-serving statements and data wi= th=20 little or no questioning, and then praising them for their appearances.=20 Monroe, he said, "showcased the National Guard as we had hoped."=20 If the aborted energy investigation and the Chavez hearing were what=20 Hertzberg had in mind as "oversight," a better word might be "whitewash."= =20 The Bee's Dan Walters can be reached at (916) 321-1195 or dwalters@sacbee.c= om .=20 ---------------------------------------------------------------------------= --- ---------------------------------------------------------------------------= --- -------------------------------- PG&E awards bonuses hours before filing Chapter 11=20 ASSOCIATED PRESS=20 April 8, 2001=20 SAN FRANCISCO =01) As a reward for "staying the course" the parent company = of=20 Pacific Gas and Electric Co. awarded about 6,000 bonuses and raises to=20 midlevel managers and other employees hours before the utility filed for=20 bankruptcy, a newspaper reported.=20 PG&E Corp. Chairman Robert Glynn issued an internal memo late Thursday that= =20 incentive payments denied in January would be awarded to eligible employees= =20 at the subsidiary utility.=20 The payments were made in time for many of the bonuses to be deposited into= =20 workers' bank accounts before the utility filed for Chapter 11 Friday=20 morning, the San Francisco Chronicle reported Saturday after obtaining a co= py=20 of the memo.=20 Gov. Gray Davis issued a brief statement Saturday in response saying "PG&E'= s=20 management is suffering from two afflictions: denial and greed."=20 Glynn applauded the employees' "efforts, teamwork and dedication during the= =20 past year, and particularly throughout the ongoing energy crisis," he wrote= .=20 "Thank you for staying the course."=20 The bonuses and raises were earned as part of the company's incentive=20 program. In January, the amount owed to employees who met their department= =20 objectives was estimated at $83 million, Pacific Gas & Electric Co. spokesm= an=20 Ron Low said Saturday.=20 The amount paid out was less than the earlier estimate because top-level=20 company executives were exempt from payment. Low did not have a dollar figu= re=20 for the amount paid out but said it was based only on department objectives= =20 met by employees.=20 Low said the money came from a combination of a $1.1 billion tax refund,=20 paying power generators only what the company receives in rates and cash=20 conservation within the company such as halting the installation of=20 underground distribution lines.=20 The raises and bonuses were given to secretarial staff, midlevel managers a= nd=20 other support staff. No money was distributed to rank-and-file union member= s=20 who already received a wage increase earlier this year as part of their=20 contract, Low said.=20 The performance-based bonuses can equal up to four weeks of an employee's= =20 regular salary, said company spokesman John Nelson.=20 Annual raises average 3 percent of an employee's salary and are meant to=20 balance cost-of-living expenses, he said.=20 Los Angeles lawyer David Huard of Manatt, Phelps & Phillips said the practi= ce=20 of compensating employees prior to filing Chapter 11 is not uncommon. In=20 addition, the U.S. bankruptcy court in San Francisco granted approval for= =20 Pacific Gas & Electric Co. to make outstanding compensation payments to=20 employees and to maintain related bank accounts.=20 "It's not unusual for corporations anticipating bankruptcy to sweeten the p= ot=20 and encourage management to stay," Huard said.=20 But Assembly Republican Leader Dave Cox, R-Fair Oaks, said it's disgraceful= =20 to the state's ratepayers.=20 "On the surface it's outrageous," he said. "Declaring bankruptcy and at the= =20 same time providing increases and bonuses for employees would just be in yo= ur=20 face to the consumers of the state of California."=20 ---------------------------------------------------------------------------= --- ------------------------------------------------------------------------ PG&E looks to court for debt relief; Davis promises to expedite deal with= =20 Edison=20 By Ed Mendel=20 UNION-TRIBUNE STAFF WRITER=20 April 7, 2001=20 SACRAMENTO -- California's electricity crisis entered a new phase of open= =20 combat yesterday when the state's largest utility, Pacific Gas and Electric= ,=20 suddenly declared bankruptcy, blaming Gov. Gray Davis for delaying=20 negotiations.=20 Davis said San Francisco-based PG&E has "dishonored itself" and that he vow= s=20 to complete an agreement with Southern California Edison soon to show that= =20 negotiation, not bankruptcy, is the best way out of the crisis.=20 PG&E said routine service will continue and that no employees will be laid= =20 off. The bankruptcy filing halts attempts to collect debts from the utility= =20 as a judge begins a process that some think could be lengthy, with an=20 uncertain outcome.=20 Utility argues for Otay power plant=20 United at the start, lawmakers now split on how to clean mess=20 GOP activists feel state is being snubbed by Bush=20 Continuing coverage: California's Power Crisis=20 ?=20 The utility filed for protection under Chapter 11 of the federal bankruptcy= =20 law, which means it plans to reorganize and pay off its debt over time. The= =20 bankruptcy judge, Dennis Montali of San Francisco, may seek a change in a b= ig=20 rate increase approved by the Public Utilities Commission last week for PG&= E=20 customers.=20 Creditors form committees under the bankruptcy process to represent their= =20 interests. Angry consumer groups said they will form a committee of their o= wn=20 and attempt to become part of the process.=20 The consumer groups accused PG&E of maneuvering to protect its parent firm,= =20 PG&E Corp., while forcing ratepayers to pay off an $8.9 billion debt, run u= p=20 while rates were frozen under deregulation and wholesale power costs soared= .=20 "The holding company vacuumed all of the assets out of the utility and is= =20 perfectly willing to let it go bankrupt," said Nettie Hoge of The Utility= =20 Reform Network in San Francisco.=20 Senate Energy Committee Chairwoman Debra Bowen, D-Marina del Rey, a lawyer= =20 who worked on the Chrysler bankruptcy, predicted one benefit of the=20 bankruptcy will be that generators accused of gouging California will not g= et=20 full payment.=20 "There is no way generators expecting to get paid 100 cents on the dollar= =20 come out of a bankruptcy with 100 cents on the dollar," Bowen said.=20 The surprise PG&E announcement came the morning after the governor used a= =20 statewide televised address to reassure the public that he had a plan for= =20 ending the crisis, which included paying off the utilities' huge debt.=20 But PG&E, which has resisted state purchase of its transmission system in= =20 exchange for payment of its debt, said it concluded that the court offers t= he=20 best way out while the utility continues routine service to customers.=20 "The regulatory and political processes have not provided a solution, and n= ow=20 we are turning to the court," said Robert Glynn Jr., chairman of PG&E Corp.= =20 Glynn said Davis aides did not meet with PG&E for more than three weeks whi= le=20 they tried to wrap up the Edison deal and that they then did little in a=20 meeting this week.=20 "We have heard a lot of words from the Sacramento sources that simply have= =20 not come to fruition," Glynn said.=20 The governor, who used the televised address to drop his opposition to a bi= g=20 rate increase and propose one of his own, was not happy to learn that he ha= s=20 lost his battle to keep the utilities out of bankruptcy.=20 "I believe PG&E has dishonored itself," Davis said as he signed a bill in= =20 downtown San Diego yesterday. "It has created undue alarm among 34 million= =20 citizens of this state."=20 Davis acknowledged that the PG&E bankruptcy may force him to alter his resc= ue=20 plan based on the principle that the utilities must give the state somethin= g=20 in exchange for aid in paying off their debts.=20 To make the deal work, he said, he needs the transmission systems of all=20 three utilities: PG&E, Edison, and San Diego Gas and Electric.=20 The judge and the creditor committees presumably would have to approve the= =20 sale of the PG&E transmission system. If that is not possible, Davis said, = he=20 will negotiate for "comparable assets," such as the hydroelectric facilitie= s=20 owned by the utilities.=20 The governor's plan would give the utilities part of the revenue from the= =20 monthly bills paid by their customers -- a "dedicated rate component" -- th= at=20 could be used to finance an $8 billion bond to pay off their debts.=20 In San Diego, the governor signed a bill that extends the SDG&E rate cap to= =20 businesses, retroactive to Feb. 7. He appeared earlier at an Escondido=20 elementary school, where he praised student conservation efforts.=20 Davis told reporters that PG&E chairman Glynn told him a week ago that the= =20 PG&E board was one vote short of filing for bankruptcy and that seeking a= =20 solution in the court was "a very real option."=20 The governor said PG&E chose to further its own interests, not the best=20 interest of Californians. In contrast, he said, PG&E's creditors have acted= =20 responsibly and shown faith in negotiations by not pushing the utility into= =20 bankruptcy.=20 "I am pleased that Southern California Edison and San Diego Gas and Electri= c=20 are allowing us to negotiate a settlement as opposed to forcing this matter= =20 into bankruptcy," he said.=20 Davis said he planned to attend a previously scheduled meeting yesterday=20 afternoon with John Bryson, Edison's top executive, to work on the final=20 issues in the purchase of its transmission system.=20 "We are down to a few remaining issues that we hope to work out within the= =20 next very few days," Davis said.=20 Southern California's parent, Edison International, yesterday emphasized th= e=20 importance of completing the sale of the transmission system quickly to=20 prevent creditors from taking the utility into bankruptcy.=20 Lynn LoPucki, a UCLA law professor who specializes in corporate bankruptcie= s,=20 predicted that Edison will follow PG&E into bankruptcy. He said the two=20 utilities have comparable business plans and have made similar decisions so= =20 far.=20 "They have pretty much marched together on this," LoPucki said.=20 PG&E and Edison say they ran up a combined debt of $13 billion when their= =20 rates were frozen under deregulation last year and wholesale power costs=20 soared.=20 After generators refused to extend the utilities more credit, the state was= =20 forced to begin buying power for utility customers in mid-January. The stat= e=20 has spent more than $4 billion so far, most of it on the expensive spot=20 market.=20 The state has signed more than $40 billion worth of long-term contracts to= =20 provide cheaper power during the next 10 years. The state general fund will= =20 be repaid by a bond of $12 billion or more, paid off by ratepayers over a= =20 dozen years.=20 Glynn said PG&E decided to declare bankruptcy because the PUC, while raisin= g=20 the utility's rates last week, gave the additional money to the state for i= ts=20 power purchases and imposed new costs on PG&E by requiring the utility to p= ay=20 small nonutility generators.=20 In addition, said Glynn, the PUC adopted an "illegal and retroactive=20 accounting change" advocated by consumer groups that would have counted=20 transfers to the parent firm to offset the estimate of the utility's debt.= =20 But another important factor was that the state has not been paying for=20 expensive last-minute power acquisitions made by the Independent System=20 Operator to keep the grid at minimum levels.=20 Glynn said the state has been improperly assigning the cost of this expensi= ve=20 emergency power to PG&E, increasing the utility's debt at an estimated rate= =20 of $300 million a month.=20 Ironically, federal regulators ruled yesterday that generators cannot be=20 forced to sell emergency power to the California grid if the utilities can'= t=20 pay for it. Now the state may have to begin paying for the emergency power.= =20 PG&E contends that if the PUC had approved its request for a rate increase= =20 last fall, the utility would have raised rates less than the PUC and Davis= =20 have proposed, obtained cheap long-term power contracts, and thus the state= =20 would not have had to begin buying power.=20 Under bankruptcy, PG&E said it will be able to pay all new bills, continue= =20 normal service to its customers, and provide health care and other benefits= =20 to its employees and retirees. But payments on bonds and loans may be=20 suspended, the utility said.=20 Glynn said he expected bankruptcy to aid shareholders by halting PG&E's=20 mounting debt. But the surprising move caused the stock of all three=20 California utilities to drop yesterday, and trading in PG&E stock was halte= d=20 briefly.=20 Some small nonutility generators that operate under the federal "qualifying= =20 facilities" program have formed a creditors committee, the first step towar= d=20 taking Edison into bankruptcy.=20 A spokesman for the creditors committee, Jack Raudy, said yesterday that=20 PG&E's bankruptcy "underscores the state's critical need for a real solutio= n=20 without further delay."=20 The generators who formed the creditors committee get power from "renewable= "=20 sources such as wind, solar, geothermal and biomass. Nonutility=20 "co-generators" use natural-gas turbines and sell the waste heat to=20 businesses.=20 "None of the members that I represent are interested in putting Edison into= =20 involuntary bankruptcy," said Ann MacLeod of the California Cogeneration=20 Council. Staff writers Bruce V. Bigelow, Karen Kucher and Eleanor Yang contributed t= o=20 this report.=20 ---------------------------------------------------------------------------= --- ------------------------------------------------------------------------ Utility argues for Otay power plant=20 Rivals claim it would add to area pollution By Jeff McDonald=20 UNION-TRIBUNE STAFF WRITER=20 April 7, 2001=20 While attorneys for the state's largest utility were filing for bankruptcy= =20 protection in San Francisco yesterday, executives from its sister company= =20 were in San Diego lobbying state energy officials to push ahead with a huge= =20 investment.=20 At a committee hearing in the County Administration Building yesterday, PG&= E=20 National Energy Group urged a California Energy Commission committee to=20 approve plans for a 510-megawatt power plant on Otay Mesa. Operators of two= =20 power plants in the county opposed the request, saying it could result in= =20 dirtier skies.=20 "We're focused on getting this plant on-line as soon as possible," project= =20 manager Sharon Segner told the panel. "Any (commission) delay, whether it's= a=20 week or a month, presents greater risk of this plant not coming online in= =20 2003 .?.?. The schedule is already tight."=20 The bankruptcy filing by Pacific Gas and Electric has no effect on the Otay= =20 Mesa project, Segner said. "It may be confusing to the public, but at the e= nd=20 of the day, we are separate companies," she said after the hearing.=20 The Otay Mesa application, which has been in the works for more than three= =20 years, is expected to be considered by the full commission April 18. The=20 plant would provide enough power for roughly 380,000 homes and businesses.= =20 The siting committee has indicated its support for the project, but the=20 hearing yesterday was intended to give opponents and members of the public = an=20 opportunity to testify for and against the plant.=20 Attorneys for the owners of the Encina and South Bay power plants urged the= =20 committee to reject the Otay Mesa project, saying the area's natural-gas=20 pipelines could not accommodate enough fuel to supply another plant.=20 What's more, lawyers for Duke Energy and Cabrillo Power said, the Otay Mesa= =20 plant could only run on natural gas. The two existing plants can run on=20 natural gas or fuel oil, which causes more pollution. If there are natural= =20 gas shortages, the lawyers said their clients would have to burn the dirtie= r=20 fuel.=20 "We would be criticized for that publicly," said Jane Luckhardt, an attorne= y=20 for Duke Energy, which operates the South Bay plant in Chula Vista. "We wil= l=20 be forced to purchase very expensive (smog) emission credits."=20 A consultant for Cabrillo Power, which co-owns the Encina plant in Carlsbad= ,=20 also told the committee that the Otay Mesa facility would hurt his clients.= =20 Robert Weatherwax of Sierra Energy and Risk Assessment told the panel that= =20 allowing the Otay Mesa plant would create as much as 800 tons of smog,=20 although he did not specify over how long a period the extra smog would be= =20 created.=20 The new power plant "will force Encina and South Bay to burn more oil,"=20 Weatherwax warned.=20 The PG&E National Energy Group said it will get much of its fuel from a=20 natural gas pipeline scheduled to be built between Blythe and Tijuana. Gas= =20 from that line would power both the Otay Mesa plant and another in Rosarito= ,=20 Mexico, company officials said.=20 "There's no nexus between our proceeding and their issues," Segner said of= =20 the complaints from Duke Energy and Cabrillo Power attorneys.=20 The Otay Mesa power plant application won praise from several business grou= ps=20 as well as Supervisor Bill Horn, who urged the committee to approve the=20 project as soon as possible.=20 Horn said he received numerous complaints from area biotechnology firms aft= er=20 rolling blackouts hit San Diego County for the first time last month. Three= =20 companies in particular reported losing years of research, he said.=20 The Otay Mesa project "will play a key role in solving the energy problem= =20 that's plaguing San Diego County," Horn told the committee. While the plant= =20 would brighten the West's electricity supply picture, there is no requireme= nt=20 that the power generated at the Otay Mesa plant be used in San Diego County= .=20 The project was opposed by some environmentalists, who chastised the=20 California Energy Commission for relying too heavily on fossil fuels for th= e=20 state's power needs.=20 William Claycomb of the Save Our Bay nonprofit group said commissioners=20 should focus more attention on lowering the price of photovoltaic systems,= =20 which use solar power to provide energy to homes and businesses.=20 "We're going to spend a lot of time and money building power plants up to o= ur=20 ears that won't be needed" in the coming years, Claycomb said. "The sun is= =20 the ultimate source of energy."=20 Ownership of the Otay Mesa plant will be transferred to Calpine Corp. of Sa= n=20 Jose once final approval is granted by the state Energy Commission. ---------------------------------------------------------------------------= --- ---------------------------------------------------------------------------= --- ------- United at the start, lawmakers now split on how to clean mess=20 By Toby Eckert? COPLEY NEWS SERVICE=20 April 7, 2001=20 WASHINGTON -- Back in 1997, as California's experiment with electricity=20 deregulation was about to get under way, the state's entire House delegatio= n=20 signed a letter assuring congressional leaders that the plan would "provide= =20 tremendous benefits to the citizens of our state."=20 Now that the experiment is acknowledged as an abject failure, the delegatio= n=20 has yet to present a united front on what, if anything, the federal=20 government should do to help out.=20 Most notably, there seems to be no consensus on the wisdom of slapping=20 federal price controls on the stratospheric cost of wholesale power in the= =20 West. While nearly all California Democrats have publicly embraced the=20 proposal, including U.S. Sens. Dianne Feinstein and Barbara Boxer, only a= =20 handful of Republicans have joined them.=20 "In terms of price caps, there are deep divisions," an aide to one top=20 California Republican said.=20 Many GOP members worry that price controls "would leave (power companies)= =20 disinterested in selling to the California market," aggravating the=20 electricity shortage, the aide said.=20 The feeling is not unanimous among Republicans, however. Republican Reps.= =20 Duncan Hunter of El Cajon and Randy "Duke" Cunningham of Escondido -- whose= =20 San Diego-area constituents were hit with huge power bills last summer --= =20 have advocated wholesale price limits.=20 And some Democrats suspect there are more California Republicans who are=20 willing to support price controls but are wary of publicly challenging the= =20 Bush administration, which adamantly opposes the limits.=20 "I think there are Republicans who are very supportive. And we hope that th= ey=20 will join us," said Rep. Susan Davis, D-San Diego.=20 California consumer advocates, who favor price controls, are critical of th= e=20 congressional response.=20 "They all organized themselves when it came time to pushing for the utility= =20 companies (who favored deregulation). But they're not organized at all when= =20 it comes to (price) caps. They're AWOL," said Harvey Rosenfield, president = of=20 the Santa Monica-based Foundation for Taxpayer and Consumer Rights.=20 But Tim Ransdell, executive director of the nonpartisan California Institut= e=20 for Federal Policy Research, said the divisions in the congressional=20 delegation reflect the complexity of the power crisis.=20 "If there was a silver bullet for this, if there was a single obvious remed= y,=20 I think Californians would flock to it," Ransdell said. "Price caps may be= =20 the right way to go or they may not be. There are strong arguments in varyi= ng=20 directions. They've got to do something. Nobody knows what the right=20 something is."=20 Congressional delegations from other states affected by the power crisis,= =20 such as Washington and Oregon, are similarly divided.=20 Despite the rift over price controls, the GOP aide maintained that Californ= ia=20 Republicans and Democrats "have worked together in a number of ways to ensu= re=20 that the (Bush) administration is paying attention to the problem and doing= =20 what it can."=20 Members of both parties sent strong signals to the administration that the= =20 Federal Energy Regulatory Commission was not doing enough to address the=20 power crisis, the aide said. That message played a role in President Bush's= =20 reported desire to replace FERC Chairman Curtis Hebert and the commission's= =20 subsequent flurry of threats to order power providers to pay refunds for=20 overcharging California utilities, the aide speculated.=20 Other observers say Bush merely wants to install his "own man" as head of= =20 FERC -- former Texas utility regulator Pat Wood -- and that the agency's=20 actions amount to tokenism.=20 Some Democrats believe that the pressure for federal electricity price=20 controls will grow as consumers throughout California start seeing a recent= =20 retail rate hike show up in their bills. Widespread blackouts this summer= =20 could add more momentum.=20 "I think we're going to be witnessing initiatives, referenda, recall effort= s,=20 a consumer revolution in California unless we find a way to put a tournique= t=20 on this problem," said Rep. Jane Harman, D-Venice.=20 ---------------------------------------------------------------------------= --- ---------------------------------------------------------------------------= --- - GOP activists feel state is being snubbed by Bush=20 They fault administration's handling of energy crisis By George E. Condon Jr.=20 COPLEY NEWS SERVICE=20 April 7, 2001=20 WASHINGTON -- California Republican activists are starting to grow restive = at=20 what many see as President Bush's inattention to the nation's largest state= =20 in the opening months of his administration.=20 Despite frequent assurances from the White House that the president has=20 California concerns on his agenda, many Republicans believe that he has=20 already missed an opportunity to rebound from his shellacking in the state = in=20 November's election.=20 "It is a slow, day-by-day erosion of California confidence in the=20 administration's understanding of the needs and desires of Californians.=20 There are people here who are getting pretty nervous," said a senior=20 Republican, who has been heavily involved in Republican administrations in= =20 Sacramento and Washington.=20 "It's just slowly backing up in the California consciousness that these guy= s=20 look like they're completely out of touch with mainstream California=20 concerns," said the Republican, a longtime Bush supporter who would speak= =20 only on the condition that he not be named out of fear of being branded=20 "disloyal" by the White House.=20 Other Republicans are equally cautious about going public with their=20 concerns. But they don't like what they have seen so far:=20 ?By the end of next week, Bush will have visited 25 states, including 11 of= =20 the most populous 13, but not California.=20 ?There is no Californian among the president's senior domestic advisers. Th= e=20 highest-ranking Californians on the president's domestic staff are Ruben=20 Barrales, director of the office of intergovernmental affairs, and Lezlee= =20 Westine, director of public liaison.=20 ?His early environmental and abortion actions have been at odds with majori= ty=20 California views.=20 ?The administration's early positions on the energy crisis have come across= =20 to many Californians as aloof and uninvolved.=20 Gerry Parsky, the Rancho Santa Fe investment banker who ran the Texan's=20 California campaign last year, is the president's prime adviser in the stat= e.=20 He disagrees with the criticism now bubbling up and urges skeptics to take = a=20 second look.=20 "My message is that from the moment that this president began his campaign= =20 for the presidency, he made it clear that California was important to him a= nd=20 that he was committed to helping change the face of the Republican Party in= =20 California and to reach out to people that felt left out," said Parsky.=20 "That began with the campaign, it carried throughout the campaign. And sinc= e=20 he's been president, he's demonstrated repeatedly, with appointments he has= =20 made and with his continual contact with the state, that he hasn't changed= =20 his position at all," added Parsky.=20 Three Californians serve in Bush's Cabinet: Ann Veneman, Norman Mineta and= =20 Anthony Principi are, respectively, secretaries of agriculture,=20 transportation and veterans affairs.=20 At the White House, spokesman Ken Lisaius objected to tallies of presidenti= al=20 trips that have excluded California.=20 "It's a little unfair to say that, because somebody is not there, that they= =20 don't care or they're ignoring the state," he said, calling administration= =20 officials "very engaged" in the state's issues.=20 But other Republicans say there are few visible signs of that engagement.= =20 More troubling than the president's travel itinerary, they say, has been th= e=20 administration's handling of the state's energy crisis. With staunch=20 opposition to price caps and the appointment of a Dick Cheney-led task forc= e,=20 the administration has emphasized that the problem was caused by a bad=20 California law and it is up to Californians to extricate themselves from th= e=20 mess.=20 Over and over, Democrats -- gleefully -- and Republicans -- ruefully -- say= =20 the impression left has been a paraphrase of the famous 1970s New York=20 tabloid headline: "Bush to California: Drop Dead!"=20 "Substantively, the administration has been saying all the right things,"= =20 said veteran state Republican operative Dan Schnur. "But stylistically, the= =20 message that Californians hear is that George Bush doesn't care."=20 Energy, he said, "is the only issue in California right now and the=20 administration's distance represents a missed opportunity to make up lost= =20 ground."=20 Garry Sragow, a Democratic consultant in the state, said his daily tracking= =20 polls since Bush's inauguration show his popularity remaining flat in=20 California, evincing none of the honeymoon bounce evident nationally. But h= e=20 said there has been a steady, daily increase in the number of Californians= =20 who say the president should "do more" about the energy crisis. That number= =20 now stands, he said, at two-thirds of Californians.=20 "He is not feeling our pain the way Bill Clinton did," said Sherry Bebitch= =20 Jeffe, a political scientist at the University of Southern California. "The= re=20 is a disconnect between George Bush and California."=20 Democratic pollster Mark Mellman said the message is clear:=20 "He doesn't care enough about the state to even show up. And on the issue= =20 most critically important to the state, he refuses to do anything. There=20 couldn't be a bigger kiss-off."=20 There have been no recent public polls. Surveys of California voters taken= =20 for the administration show Bush's popularity lagging below his national=20 numbers.=20 "He's got no place to go but up," said Sragow. "He started off with his=20 hard-core base in California. He's not going to lose them. The question is,= =20 will he begin to attract swing voters? And he has made no effort to do that= =20 yet."=20 It is with these voters that the environmental decisions have been damaging= ,=20 said several analysts, who also noted the sharp contrast between the curren= t=20 approach to the state and that adopted by Clinton.=20 "We got accused of throwing too much to California and ignoring the rest of= =20 the country. He's getting accused of the opposite," said John Emerson, the= =20 California lawyer who was a senior adviser to Clinton.=20 Unless it is changed, he warned, Bush's hands-off approach to the state=20 "almost fore-ordains a blowout" loss in 2004.=20 ---------------------------------------------------------------------------= --- ----------------------------------------------------------------------- With Power Price Surges, California's a Follower=20 Energy: Much of the nation is already being zapped by double-digit increase= s.=20 Several states have higher rates. Deregulation, anti-pollution laws and=20 distance from fuel sources are to blame.=20 By ERIC SLATER, Times Staff Writer=20 ?????CHICAGO--For all its energy notoriety and outrage over surging=20 electricity rates, California has plenty of company. Much of the nation fac= es=20 double-digit price hikes, and several states--especially in the=20 East--continue to pay more for electricity than California. ?????Not even Gov. Gray Davis' reluctant proposal last week to kick rates u= p=20 as much as 34.5% for the heaviest residential users would guarantee=20 California the dubious honor of having the priciest electricity in the Unit= ed=20 States. ?????Overshadowed by the rhetoric, lawsuits and rolling blackouts is the fa= ct=20 that Californians have been paying less for electricity than residents in= =20 Rhode Island, New Hampshire, Vermont, New York, Alaska and, by a longshot,= =20 Hawaii. California, in fact, is barely in the top 10 when it comes to=20 electrical prices. ?????One of the reasons that Californians have been paying less is because= =20 they conserve more, with the average resident draining 40% less from the gr= id=20 than the average American. ?????Another reason, however, is that California's rates have been frozen b= y=20 law, even as the lids have been coming off the prices in other states that= =20 are deregulating their utilities. ?????"I don't know about you guys," said state Sen. Sheila Kuehl (D-Santa= =20 Monica) at a hearing last week in Sacramento, "but my constituents don't=20 think they suffered over the past several years because their rates didn't = go=20 up 45% and 50% the way they did in New York and Pennsylvania and other part= s=20 of this country." ?????These dramatic price spikes are driven by a strange, worst-case=20 confluence of electrical-world forces. ?????A drought in the Northwest means that there's not enough water to turn= =20 the turbines in the great hydroelectric dams; massive price increases for= =20 natural gas come even as the country is moving toward more natural=20 gas-powered electrical generators; and the deregulation of utilities--left= =20 largely up to individual states--has proved more complicated than almost=20 anyone dreamed. ?????"We look at it as a perfect storm," Rep. Jay Inslee (D-Wash.) said of= =20 the improbably bad stew of circumstances. ?????In Boston, residential users face a possible 23% hike, industrial=20 customers 69%. In Cheyenne, Wyo., some residential customers are insulating= =20 themselves against possible hikes of 57%, with some commercial customers=20 looking at an 88% jump. In Idaho, they're talking hikes of between 34% and= =20 63% for some customers. In Nevada, rate hikes scheduled at more than 1% a= =20 month, starting in September and continuing until September 2003, will rais= e=20 residential rates about 75%. ?????All this after two decades of steadily declining electricity rates in= =20 the U.S.--with almost all of the price drops preceding the deregulation tha= t=20 was supposed to bring down prices. ?????Price of Power Fell Steadily for Years ?????In the early 1980s, one kilowatt hour of power cost residential=20 customers about a dime. Over the next two decades, Americans began to emplo= y=20 more energy-efficient appliances, computers, even lightbulbs, and utilities= =20 produced their power more and more efficiently. ?????At the same time, utilities took advantage of low interest rates to he= lp=20 retire massive debt incurred during the high-cost, post-Chernobyl building = of=20 nuclear reactors, and they were thus able to pass on further savings to=20 customers. ?????By last year, buying a kilowatt hour set the average American back jus= t=20 7.5 cents. ?????The trend has suddenly stopped. ?????In a forecast released Friday, the Energy Information Administration= =20 predicts that a kilowatt hour will cost about 8 cents on average nationally= =20 by the end of this year and rise another half-cent in 2002. ?????"For the first time in a long time, the prices are going up," said=20 administration forecaster Neil Gamson. ?????A one-cent increase in the price per kilowatt hour would boost the=20 monthly bill of a typical California residential customer by about $10, to= =20 $117. For big industrial users, the extra monthly cost could be in the=20 thousands. ?????Substantial regional differences have always existed, with the Northea= st=20 the longtime home of the highest prices in the continental U.S. Some=20 Northeastern customers pay twice as much, or more, than consumers 3,000 mil= es=20 due west. ?????One reason is that, although environmental laws in the Northeast are= =20 typically less stringent than those in California and the Northwest, growin= g=20 concerns and tougher anti-pollution legislation have forced utilities to=20 shift away from the higher-polluting coal-powered generators and toward=20 cleaner-burning natural gas. The environmentally conscious move has left=20 them, like several other areas, vulnerable to the recent price spikes of=20 natural gas. ?????The Northeast is also farther from most major sources of fuel, includi= ng=20 natural gas, oil and coal. ?????Several states in the Northeast, including Connecticut, Maine, New=20 Hampshire, New York and Massachusetts, are actively deregulating. Like=20 California, only with less drama, they are finding the birth of a free mark= et=20 painful and expensive. ?????Under Massachusetts' deregulation statute, the standard retail rate fo= r=20 a kilowatt hour was fixed at an average of just over 9 cents through 2005.= =20 However, the rise in natural gas prices has left utilities pleading with=20 regulators to allow them to raise prices, lest they face California's probl= em=20 of selling their power at a loss--precisely the circumstance that led the= =20 Pacific Gas & Electric Co. of San Francisco to declare bankruptcy Friday. ?????Kilowatt Hour's Average Cost Rising ?????Earlier this month, the Massachusetts Electric Co. got the go-ahead to= =20 charge 270,000 residential customers an additional 23%. Statewide, analysts= =20 say, the average price of a kilowatt hour is probably edging up from its=20 already high October figure, the last available, of 11.2 cents. ?????In New York, the average cost of a kilowatt hour statewide was 14.1=20 cents in October. However, even under a deregulation plan that won't fully= =20 free the utilities from price controls until 2002, some New York City=20 residents have seen their rates rise by nearly 20%, to 13.9 cents a kilowat= t=20 hour, in recent months. ?????Still, Cornell University economist Tim Mount said he would be surpris= ed=20 and "very disappointed if we mess things up in the East as badly as they=20 messed it up in California. I think the regulators thought that it would be= =20 easy to run a market, and they didn't allow for very much malfeasance" on t= he=20 part of newly untethered utilities or private power generators. ?????The South, with its coal reserves, has long hovered in the relatively= =20 cheap range of 6 to 8 cents per kilowatt hour and, along with the Midwest, = is=20 likely to be among the most stable areas in the near future. ?????Several states in the South and Midwest are also among the last to=20 consider deregulation--for the very reason that their power is already=20 cheap--and so may benefit the most from studying the daily jolt of news out= =20 of California. ?????The Midwest has, as with so many things, been a picture of moderation= =20 when it comes to electrical rates. A kilowatt hour goes for 7 to 8 cents or= ,=20 in the case of Illinois, a bit over 9 cents. (Chicago, the country's=20 third-largest city and the location of several infamous--although=20 localized--blackouts in 1999, tends to raise the state's average=20 considerably.) ?????Having continued to build power plants when states in the West and Eas= t=20 had all but halted construction, and with Illinois home to 11=20 price-stabilizing nuclear reactors, the Midwest is expected to hold the lin= e,=20 at least in the near future. ?????The Northwest, long the land of cheap, clean hydroelectric power, is= =20 already beginning to see its 5- and 6-cent electric rates climb. ?????Many of the utilities in the Northwest receive huge portions of their= =20 juice from the Bonneville Power Administration, which oversees 29 dams in t= he=20 Columbia and Snake River basins and provides 45% of the region's electricit= y. ?????However, the severity of the region's drought--and the accompanying=20 electricity shortage--was illustrated last week when the BPA announced that= =20 it would stop spilling precious water over its dams to help the spring salm= on=20 run. ?????Announcing the news to residents who for decades have fought to restor= e=20 salmon runs decimated by the dams was perhaps made a bit easier for acting= =20 BPA administrator Steve Wright because he had previously made another=20 announcement. The BPA, Wright said, would likely be raising its own wholesa= le=20 rates from 95% to 200% come October. ?????Some of the rate hikes around the country are surcharges, meant to fil= l=20 utility coffers left empty by the leap in natural gas prices, for example.= =20 Many others, however, are viewed as permanent. In the West, especially, the= re=20 is simply no reason to believe that costs will drop any time soon. ?????The bankruptcy move Friday by PG&E only solidified that widely held=20 opinion. Among its other worries, Bonneville has been holding a $100-millio= n=20 IOU from California utilities--half of it owed by PG&E--and hoping that mon= ey=20 would help to mitigate its rate hikes to other customers. ?????When PG&E became the biggest utility in U.S. history to seek bankruptc= y=20 protection, BPA became just another creditor likely to lose money. ---=20 ?????Times staff writer Julie Tamaki in Sacramento contributed to this stor= y. ---------------------------------------------------------------------------= --- ------------------- Judge in PG&E Bankruptcy Case Seen as a Problem Solver=20 Courts: Dennis Montali will face unprecedented legal complexities.=20 By MAURA DOLAN, Times Legal Affairs Writer=20 * Bankruptcy Judge Dennis Montali is called a "reasonable man." AP ?????SAN FRANCISCO--U.S. Bankruptcy Judge Dennis Montali, who will oversee= =20 Pacific Gas & Electric Co.'s bankruptcy reorganization, is a highly respect= ed=20 scholar and effective mediator known for persuading reluctant parties to=20 reach agreement. ?????In a recent case, Montali achieved in only three days a settlement=20 between a debtor and creditors in the bankruptcy of an international=20 engineering firm. The case had been in bruising litigation for two years wh= en=20 another judge asked Montali to mediate it. ?????As a lawyer, Montali helped divert a statewide agricultural crisis 10= =20 years ago by persuading warring factions to accept a deal in the bankruptcy= =20 of an agricultural cooperative, according to a lawyer in the case. ?????"He is very good at not embarrassing people but getting them to=20 understand they are wrong," said lawyer Larry Engel, who has known and work= ed=20 with Montali for two decades. ?????Montali, 60, the son of a winemaker, grew up in San Francisco and now= =20 lives in Berkeley. He is considered among the top tier of bankruptcy expert= s=20 in the United States.=20 ?????He will be calling the shots in one of the largest bankruptcy=20 reorganizations in U.S. history. The case raises unprecedented legal=20 questions and is expected to make new law. Some of the legal disputes may= =20 wind up before the U.S. Supreme Court, attorneys said. ?????Lawyers who know the easygoing, witty judge say he is probably relishi= ng=20 this legal challenge the way a golfer looks forward to playing a new and mo= re=20 difficult course. The court action begins today, when Montali is expected t= o=20 decide whether PG&E can spend cash that others have laid claims to.=20 ?????Right from the beginning, Montali will be in the limelight, and lawyer= s=20 will be eagerly searching for any clues to his leanings. Montali declined t= o=20 be interviewed, but those who know him say he is fair, smart, hard-working= =20 and thoughtful. He does not browbeat, but quietly negotiates to bring peopl= e=20 around, lawyers said. ?????The judge is highly engaged in his cases. He is well prepared,=20 intellectually curious and knows the hard questions to ask, lawyers said. H= e=20 also is a relatively quick decision-maker, frequently ruling from the bench= . ?????"Reality tends to come out" in his courtroom becaus
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