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Enron Mentions - 04/15/01

The New Power / 'THEY GET IT' / Enron displays political savvy in access to decision-makers Houston Chronicle, 04/15/01 THE NEW POWER / Enron / Making of the Market-maker / Pipeline operator evolved into player that keeps raising bar Houston Chronicle, 04/15/01 THE NEW POWER / Enron / Making of the Market-maker / With ups and downs, Enron Broadband is a work in progress Houston Chronicle, 04/15/01 THE NEW POWER / Enron / Making of the Market-maker / The project Houston Chronicle, 04/15/01 SIGN OF THE TIMES / Glowing logo once hovered over the city that oil built Houston Chronicle, 04/15/01 THE NEW POWER / Returns on investments too slow in developing nations Houston Chronicle, 04/15/01 THE NEW POWER / Working environment now driven more by new ideas than old doctrine Houston Chronicle, 04/15/01 THE NEW POWER / Firm in a hurry to get into new downtown tower Houston Chronicle, 04/15/01 THE NEW POWER / Current lineup Houston Chronicle, 04/15/01 THE NEW POWER / Enron's chronology Houston Chronicle, 04/15/01 GRASS-ROOTS BUSINESS Oil-Patch Epicenter, Embracing the Web The New York Times, 04/15/01 Sierra Pacific Suspends Quarterly Payout Because of Energy Crisis in Western States Dow Jones Business News, 04/15/01 India: Report cautions Maharashtra on PPAs The Hindu, 04/15/01 Graft vs graft: Political scene in state hits nadir The Times of India, 04/15/01 In an energy crisis, lean toward the green The News & Observer Raleigh, NC, 04/15/01 A The New Power / 'THEY GET IT' / Enron displays political savvy in access to decision-makers DAVID IVANOVICH, Houston Chronicle Washington Bureau Staff 04/15/2001 Houston Chronicle 4 STAR 1 (Copyright 2001) WASHINGTON - When then-candidate George W. Bush needed a plane to shuttle his staff around on the campaign trail, corporations scrambled to offer up their private jets. The Bush camp was eager to fly the friendly skies of Enron Corp. When former Secretary of State James A. Baker III was out of a job at the end of the first Bush administration, Houston-based Enron had some consulting work waiting. And when then-President Clinton, ex-President Ford and golfing legend Jack Nicklaus needed a fourth, Enron Chairman Ken Lay was available to play a round of 18 holes. Here, in a town where access to the political elite is everything, Enron is master of the game. Other companies contribute to political campaigns, hire former insiders and hobnob with politicos, but few do so on a par with Enron. "They get it," noted Andrew Wheat, research director for Texans for Public Justice, an Austin-based watchdog group and frequent Enron critic. "They understand how it works and . . . how things get done, both here and abroad. "I can't think of another company in Texas that compares." In part, Enron's political smarts are an outgrowth of the company's business strategy, to be first in an emerging market even as the rules of the game are being formulated. The company's shrewdness also is a reflection of Lay's own personality, his experience in government and his affinity for politics. And now, thanks to his longtime association with - and munificent contributions to - President Bush, Lay is the envy of corporate America. Access to decision-makers in both parties, however, does not always translate into favorable decisions. Enron's recent lobbying efforts have yielded rather mixed results. Consider: The new Bush administration has taken a largely hands-off approach to the electricity crisis in California, heeding the advice of power wholesaler and marketer Enron. But Enron's broader objective, national deregulation of the power industry, remains stalled on Capitol Hill. Enron officials support the Republicans' vision of a smaller federal government. But the Bush White House has proposed whacking the budgets of two federal agencies Enron has relied upon repeatedly, the Export-Import Bank of the United States and the Overseas Private Investment Corp. Bush, much to Lay's surprise, pledged to try to force power plants to curb their carbon-dioxide emissions, the main greenhouse gas implicated in global warming. That policy could have created a vast growth market for Enron, whose business benefits from construction of more natural-gas-fired plants that emit less carbon dioxide. But last month, Bush flip-flopped on that promise. According to all conventional wisdom inside the capital Beltway, Enron should not be suffering political setbacks now. Lay, a former Naval officer and one-time energy policy-maker during the Nixon administration, is one of Bush's longest and staunchest supporters. An ally of the elder George Bush, Lay worked closely with George W. Bush during the Republican National Convention in Houston in 1992, when Lay co-chaired the host committee. They met up again during the site-selection process for the senior Bush's presidential library. As the younger Bush became a force first in Texas and then in national politics, Lay and other Enron officials emerged as perhaps the biggest contributors of his political career. By July 1999, with Bush's run for the presidency just getting under way, Enron officials had already contributed more than $550,000 to him, according to the Center for Public Integrity. Bush and Lay never became fishing buddies or bird-hunting pals. But then-Gov. Bush did appoint Lay to head his governor's business council. And he dubbed Lay with a series of nicknames, including "Kenny Boy." Lay didn't forget Bush during the presidential race. He was one of the 214 Bush "Pioneers," supporters who raised at least $100,000 for the candidate, and also ponied up cash for Bush's Florida recount battle. For the inaugural festivities, Lay, Enron Chief Executive Jeff Skilling and the corporation itself each contributed the maximum $100,000. But Lay says he didn't contribute so heavily to Bush in the hopes of getting something out of him. Instead, he believed in him as a candidate. "He's smart," Lay said. "He's got good values. He's got family values. . . . He's a man of character and integrity, just like his father." Bush also shares Lay's vision of deregulated, competitive markets. "My basic philosophy is very much in tune with his basic philosophy," Lay said. After the election, Lay was frequently mentioned as a possible candidate for both energy and Treasury secretary. He has also been advising the Bush team on energy policy. Lay's political star, however, didn't rise just with Bush's relocation from Austin to Washington. Despite his strong GOP credentials, Lay was a frequent visitor at the Clinton White House, helping to host the Brazilian president, advising the Democratic administration on trade policy and brainstorming on global warming. Lay was on good terms with all three Treasury secretaries under Clinton - Lloyd Bentsen, Robert Rubin and Larry Summers - as well as White House Chief of Staff Thomas "Mack" McLarty and former Energy Secretary Bill Richardson. To handle the day-to-day political work, Enron doesn't hesitate to hire some of the heaviest hitters on the political scene. The company's list of political consultants has included: Bill Paxon, a former conservative leader in the House; Ralph Reed, one- time head of the Christian Coalition; former Sen. J. Bennett Johnston, D-La., and Elizabeth "Betsy" Moler, former chairwoman of the Federal Energy Regulatory Commission and one-time deputy energy secretary. The company's board of directors includes Wendy Gramm, former head of the Commodity Futures Trading Commission and wife of Senate Banking Committee Chairman Phil Gramm, R-Texas, and John Wakeham, Britain's former energy minister. Back in the early 1990s, within weeks of the end of the first Bush administration, Enron hired Baker and former Commerce Secretary Robert Mosbacher. The move sparked controversy when Baker, who as secretary of state had helped forge the international coalition that expelled Iraqi troops from Kuwait, was visiting a liberated Kuwait lobbying on Enron's behalf. Government watchdogs have long decried the "revolving door" between top government jobs and the corporate world. Wheat of Texans for Public Justice said Enron keeps that door "spinning." More recently, Enron angered right-wing partisans on Capitol Hill when it hired Linda Robertson, a former assistant Treasury secretary in the Clinton administration and a Democrat, to run the company's Washington office. Lay is not apologetic. "We don't discriminate based upon color or creed or race or religion or sex," Lay said. "We also don't discriminate based upon political preference." Unlike many other companies, which are shy of government involvement, Enron does not hesitate to use the resources of the federal government to boost exports and win contracts overseas. Commerce secretaries, for example, routinely take U.S. businesses on international road shows, hoping to use Uncle Sam's political influence to win business for American firms. During the Clinton years, Enron executives accompanied commerce secretaries on at least seven such trips, government records show. The Overseas Private Investment Corp. provides political risk insurance and project financing to U.S. companies doing business overseas. Enron has been one of the agency's biggest customers. And since the end of the Cold War, U.S. diplomats have become much more involved in advocating for American firms. While other companies have been slow to seek out the State Department's help, "Enron was in step with that change," noted McLarty, a former natural-gas-company executive and an expert on Latin American trade. Closer to home, deregulation of the electric-power industry tops the company's domestic political agenda. To date, electricity deregulation has progressed piecemeal, state by state. Bills in Congress to deregulate the industry nationwide have gone nowhere. Enron officials were able to enlist the support of the Clinton administration, but the legislation failed to move on Capitol Hill, largely because of personalities and turf issues. "It didn't come to fruition, not because of Enron but because of a lack of leadership on the issue, particularly in the House," said Moler, the former Energy Regulatory Commission chairwoman. "Enron was very effective, even though they didn't get the ball across the finish line, in terms of advocating a pro-competition agenda." Now, there's a new Congress and a new occupant of the Oval Office, a pro-competition advocate who oversaw the deregulation of the Texas power market. But Enron's hopes of a national deregulation bill dimmed as the lights flickered out in California. While energy experts can think of numerous reasons why California's energy crisis was largely of its own making, the rolling blackouts there have caused other states to slow their deregulation efforts for fear of similar troubles. Even politically savvy Enron may have a tough time pulling out a victory from those ashes. Photo: 1. Jim Crownover, left, and his wife, Molly, welcome former President Bush and Enron Chairman Ken Lay at their home in February 2000. The United Way of the Texas Gulf Coast honored the Alexis de Tocqueville Society during a reception for major donors at the Crownovers' residence (p. 19); Mugs: 2. Lloyd Bentsen (p. 19); 3. J. Bennett Johnston (p. 19); 4. Bill Paxon (p. 19); 5. Ralph Reed (p. 19) Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. BUSINESS THE NEW POWER / Enron / Making of the Market-maker / Pipeline operator evolved into player that keeps raising bar MICHAEL DAVIS Staff 04/15/2001 Houston Chronicle 2 STAR 1 (Copyright 2001) AT ENRON CORP., it came to be known as the "Come to Jesus" meeting. This gathering in late 1988 had nothing to do with religion, but everything to do with a leap of faith. Top management, about 70 in all, met to find out where their company was headed. They were told to expect a big change. At the meeting led by Rich Kinder, who would soon become Enron's president, they were briefed on the company's new strategy. Like the unredeemed at a revival meeting, the leaders of the then-stodgy natural gas pipeline company were told they had to change their ways. Rather than stick to only the safe and highly regulated gas pipeline business, Enron officials were about to stake their company's future on the unregulated part of the business and look for opportunities worldwide. "The decision was made that we needed to move quickly," said Ken Lay, Enron chairman. "And if we were going to be a leader, we were going to have to go after it. If not, other people would." The gravity of the moment was not lost on those present. These veterans of the regulated pipeline business were now working for a company that was heading into uncharted territory. Many in the room would be gone from the company within months, replaced by younger executives who were more open to change. "They may talk about it casually now, but at the time they were sweating bullets," said Robert Bruner, executive director of the Batten Institute at the University of Virginia, who teaches a case study on Enron's evolution to executives. The company has made its mark by being in the vanguard of change. Since that fateful meeting in the late 1980s, it has shown over and over again that it has a knack for knowing when to exit a declining market and move on to the next one. Now the the pipeline business has moved into the background at Enron. Enron now profits mainly by making it easier to buy and sell things that otherwise would be difficult to market - a process the company calls "making markets." "They have shown they can trade almost anything and have a compelling need to dominate any market they go into," said John Olson, an energy analyst with Sanders Morris Harris in Houston. "They do it with a sort of Gulf War military doctrine of using overwhelming force, technology and people, going in with a blitzkrieg to get the best of the market and move on." That statement could serve as a summation of Enron's business strategy during its period of explosive growth that made it the first Houston-based company to post annual revenues of $100 billion a year. Most of the time the approach has paid off, with only a few major missteps. Enron has been in the forefront of sea changes numerous times, and not just in the energy industry. When Houston Natural Gas was bought by InterNorth, creating Enron, it formed the first nationwide interstate natural gas pipeline system. The company created the first futures market for natural gas with its Gas Bank - allowing users to buy and sell gas for future delivery - years ahead of the first futures contract to trade on the New York Mercantile Exchange. It also developed many of the methods of hedging natural gas costs that are used today to reduce the risk of price swings. Enron's pipeline was the first system to offer its interstate pipeline to transport anyone's gas for a fee. Now, all interstate pipelines are run in that fashion. The company's $2 billion power plant project in India is the largest single outside investment ever made in that country. The company moved quickly to become a player when California lawmakers voted to open that state to electricity supplier competition, and soon changed its plans to limits its risks there. In 1996, Enron became the first natural gas pipeline company to buy an electric utility, Portland General Electric in Portland, Ore. Enron OnLine, the company's Internet trading site at enrononline.com, has, in only a year or so of operation, become the largest e-commerce site in the world. Now, Enron makes 80 percent of its profits from businesses that did not exist in 1988, the huge wholesale markets that have developed for natural gas and electricity-marketing, broadband, fiber-optic and energy services. "It seems like they do everything," said David Nemtzow, president of the Alliance to Save Energy, a nonprofit energy conservation group. "$100 billion (in annual revenues) is nothing to sneeze at. Exxon Mobil was founded by John Rockefeller, Enron's only been around for 15 years." Enron still trails Exxon in size, since the biggest company in the oil business had $233 billion in revenues last year, and it is not be as well known as John D. Rockefeller. But its influence is becoming almost as pervasive as his once was. The company was one of the largest contributors to the campaign of President Bush and Lay is considered one of the president's closest private-sector advisers on energy policy. He is personal friends with both the president and his father. The company has equally strong ties to Democrats, including access to former President Clinton. But at the same time, Enron's role in deregulation in the United States and globalization have made it a target for protesters who blame private energy companies for the deregulation fiasco in California and U.S. multinationals for a wide array of troubles overseas. And the company which has been leader in this business, is regularly racing against a pack of competitors, including Houston- based El Paso Corp. Reliant and and Dynegy. Kinder, who declined to be interviewed for this story, left when it became apparent he wouldn't become CEO and started his own energy company Kinder Morgan. "You really can't copyright or patent this sort of stuff," said Jeffrey Skilling, Enron's chief executive officer."This is like an arms race where the arms are brains. You need smart people that are constantly thinking up the next things the customer needs. "What a change from the gas business 25 years ago, when the whole name of the game was good regulatory lawyers," Skilling said. Now, its future depends on a continuing willingness to take chances on new things, and when things aren't working, to spend what it takes to change them. "Maybe that's a lesson we all learned: There is usually no second best; it's winner take all and you better get in there and you better fight your best battle because it's pretty hard to play catch-up," Skilling said. ... Surviving the culture clash The executives who were called to the Come to Jesus meeting already had survived three years of tumult. Even Ken Lay, who was behind that message, had his doubts about the whole enterprise in the beginning. He was there because of a contract he had signed that he likened to having his hands glued to the steering wheel. The merger of Omaha, Neb.-based InterNorth and Houston-based Houston Natural Gas created a company that was mired in debt and had to battle corporate raiders. The employees from the companies that formed Enron clashed as well. "That first year after the merger was kind of interesting," Lay said, in a characteristic understatement. He described the corporate culture battle in those early years as "bloody." Bill Brendler, an organizational psychologist who was brought in to help combine the companies' cultures, recalls going to Omaha after the merger and not hearing anyone refer to the new company as Enron. All of the InterNorth people were still calling the company by its former name. "It was kind of gut wrenching to them, like they had been sold out," said Brendler, who operates a consulting company based in Austin. The merger had left the new company with a mountain of debt. It was one of the first big junk bond mergers engineered by Michael Milken. The company's financial woes got even worse around Christmas 1985, when the Peruvian government nationalized all of the company's oil and gas properties in that country, depriving Enron of its main sources of cash flow. Then, in January 1986, oil prices collapsed from $30 per barrel to $10. To add to the company's problems, it came under fire from raider Irwin Jacobs, who led a group that held about 15 percent of Enron's stock. In a bid to fend off Jacobs' group, Enron considered going private. They turned to one of the most high-profile takeover partnerships of the time, Kohlberg Kravis Roberts & Co., to look into financing a deal to buy all its publicly traded shares. That deal came, "very, very close," Lay said. Eventually, the company ended the takeover threat by buying back Jacobs's shares. All this was going on as the company's top management was in a state of flux. Lay was named chief executive officer in November 1985 and elected chairman in a February board meeting that he still recalls vividly today. Lay had recommended that Bill Strauss, former InterNorth chairman and chief executive officer, come on as chairman. "I thought it would sort of pull the teams together," Lay said. "He could give me air cover in Omaha." In retrospect, Lay said, his recommendation probably heightened the battle between the rival groups of employees. Strauss, too, soon realized that there was room at the top for only one. Before the company's February 1986 board meeting in Winter Park, Fla., Strauss had persuaded Lay to tear up his contract with a golden parachute, which would have paid him handsomely if he left the company, in return for incentives in stock options. "He wanted to make sure I was committed to the company and I was because I had no choice," Lay said. "They sort of glued my hands to the steering wheel." Strauss called the board meeting to order and resigned on the spot, stunning Lay and everyone else in the room. He recommended the board elect Lay chairman and CEO. He then said, "I'll see you around," walked out of the room, drove to the airport and caught a flight back to Omaha. After about 30 seconds of silence, one of the former InterNorth directors nominated Lay to be chairman, another seconded it and they voted on it. "There I was," Lay said, laughing. "Just totally prepared for it." ... Learning from near-disaster Enron took the leap into the volatile world of deregulated energy markets in spite of a trading fiasco that could have pushed the company to the brink of bankruptcy. In 1987, Enron was rocked by the disclosure that rogue traders at its Enron Oil Co. had left the company holding the bag for about $1 billion in trading liabilities. Before disclosing it to the market, the company worked the trading loss down to about $142 million. The experience was one Lay and others at the company would not forget. But rather than losing faith in making markets, this was a lesson that shaped the way the company is run. "We learned a lot, certainly in a bad way," Lay said. "We put in place probably the best risk management and control system, not just in our business, but in any industry." The company has become a leader in developing risk management strategies, offering hedges on everything from weather derivatives to advertising space. Many of these techniques were developed during the late 1980s with the guidance of a former consultant at McKinsey & Co., Jeffrey Skilling. It was Skilling, among others, who came up with the idea for Enron to create The Gas Bank, a unique concept of packaging natural gas supplies so they could be bought on a long-term basis for fixed prices to suit an individual customer's needs. "It was the first forward pricing structure for natural gas," Skilling said. The idea was to gather gas supplies on one end of the pipeline, customers on the other, and then put together deals to serve both sides' needs. It worked like this. From the overall production of a well or field, the company would sell parts of the production to different customers - an industrial customer might buy a portion of the production for a year, while a local gas distribution company might buy a share of the production for two or three years, and a power producer might buy a 10-year supply. At the time, power producers were desperate to get long-term, fixed-price supplies of natural gas. "It was very successful for us and it made it clear that there was a whole new way of thinking about this business," Skilling said. "We were creating a forward market in 1988," he said, describing that year as "a magical time." The company began developing package deals for its customers. One of the first major customers was Peoples Gas Co., the utility company that serves Chicago, which traditionally had relied on a huge supply organization. "They were buying capacity on pipelines and in storage fields, buying gas from producers with a massive organization," Skilling said. "We went to them and said, give us all of that stuff, we'll manage it for you. Then all you have to do is call us in the morning and tell us how much gas you need and we will have it ready." From The Gas Bank, Enron eventually set up Enron Gas Marketing, and they started bidding, mainly on spot transactions. It was the genesis of Enron's massive wholesale trading operations today. It was also around this time that the company began to move into energy financing. After the bust of 1986, banks had pulled out of the energy lending business and Enron believed it could make money by filling that void. What had begun as a gas marketing unit also was now engaged in venture finance. Enron Gas Marketing became Enron Capital and Trade Resources, with Skilling at the helm. He later would become head of Enron North America, over all of the company's domestic operations. When Enron's natural gas wholesale business began, there were about 70 employees. Now, including power sales, there are 5,000. "We always kidded that Enron Capital and Trade Resources sounded kind of complicated, but no matter what we named it, within six months, everyone else in the industry had one just like it," Lay said. ... Portrait of Ugly American Enron's foray into unregulated overseas markets has been largely successful, but when it has gone bad, it has gone very bad. The company has built some of the largest power projects and pipeline systems in international markets over the past 10 years or so, but in the process it often has been portrayed as the Ugly American corporation by critics who accuse it of spreading around payoffs and showing little regard for human rights or the environment. Enron has responded that those allegations are unfounded, but has made changes in its international business that have moved it away from those confrontations. It began testing its plan to build an international business in 1988, when it established an operation to build gas-fired electric generating plants in the United Kingdom as that country's electricity markets were privatized. "We were beginning to get a little momentum from the standpoint of stepping outside of our regulated business in North America and even stepping outside of North America a little bit," Lay said. "But we still had to demonstrate that we could do it without great risk. That was a fairly important part of those early days." As Enron branched out into international markets, the executive who took the international reins was a woman who stood out in the largely male domain of the energy business. Her name was Rebecca Mark. Mark, who declined to be interviewed for this story, became one of the stars at Enron after she successfully saw through to completion the company's controversial Dabhol power plant project in India. Enron bought a 65 percent share in the Dabhol Power Co. back in the early 1990s. Enron believed it could replicate the success it had had in England with its massive Teesside power plant in the United Kingdom. The political landscape in India, however, proved to be far more daunting. The $2.9 billion project became a political nightmare for Enron. After a change in the ruling party, the project was halted amid accusations that Enron had a sweetheart deal with the previous regime to build the plant. That standoff led to construction delays at the huge project that were costing Enron a small fortune. Mark got the job of leading the effort to renegotiate the deal to get the plant construction back on schedule. In an interview she gave in early 1997, Mark said "People thought we were pushy and aggressive. But think of the massive bureaucracy we had to move. How do you move a bureaucracy that has done things one way its entire collective life? You have to be pushy and aggressive." Adding to the project's bureaucratic difficulties were mass protests from nearby villagers. Enron was accused of human rights abuses because of the tactics used by local police the company hired as security. Human Rights Watch and Amnesty International accused Enron's security guards of beating villagers who protested the project. Enron said the accusations about human rights abuses in a report released in early 1999 were false. In the wake of those allegations, Enron hired a human rights director to handle concerns at its global operations. Eventually, Mark renegotiated the deal and phase one of the plant was completed and went into operation. This victory gained her international attention and led to her being named vice chairwoman at Enron. But she gained attention largely because of the business she had chosen for her career. She was a single mother who had risen to the top in the energy business. Enron liked to portray her as evidence that it was a new kind of energy company in which everyone had a chance to prosper. As a rising star, Mark was tapped to head up the company's effort to get into the international water utility business. It would prove to be her undoing as Enron shifted from owning lots of physical assets, which was the side of the business where Mark had made her name, and into its so-called asset-lite strategy. The problems she dealt with in India have not been resolved; they have resurfaced in another form. The company is not getting paid for power because it's said to be too expensive. Enron officials maintain that they are sticking behind the project, even going so far as to warn Indian politicians that taking on Enron will be "like playing chicken with a brick wall." But analysts question how long they can last. "Clearly India has been a political hot potato," for Enron, said Carl Kirst, an analyst with Merrill Lynch Global Securities in Houston."They've continued to put one foot in front of another against almost gale-force winds. Sometimes it's not worth the uphill battle." The company is reportedly looking to sell its stake in the Dabhol project to either Reliance, one of India's largest industrial concerns, or China Light and Power Co. There is some doubt as to whether the project would command full value given all of the political problems at the plant. An Indian observer is more blunt on the subject. "India is not a place where their fortunes lie," says analyst Subhash Agarwal, editor of India Focus, a political risk magazine. ... The power of electricity Once Enron had become a dominant player in the unregulated natural gas business, the company set its sites on a new market: electricity. It was in many ways much more of a gamble than the company's move into unregulated natural gas markets. The electricity business was even more entrenched in regulation than gas had been. And it was being deregulated in a piecemeal fashion, state by state, instead of through a federal regulatory process like the one that covered gas. Yet when describing it, Lay makes it sound simple. "We just took the model that Jeff and his team developed in the early 1990s for wholesale North American natural gas and began to move it out to other markets." Lay said. In 1997, the company made its first major move on domestic electricity markets when it bought Portland General Corp., the parent company of Portland General Electric, the utility serving Portland, Ore. The purchase gave the company a beachhead into the soon-to-be- opening California market and a marketing arm on the West Coast. Three years after buying Portland General, though, the nation's electricity markets had changed to the point where Enron decided to sell the electric company. The company realized it no longer needed an electric utility to be a major player. It was another of many lessons for Enron that making markets, not owning physical assets, was where its future lay. In many ways, Enron's experience in California has been a textbook example of how they quickly move out of a market when an investment is not living up to expectations. In California, the company avoided getting involved in that state's energy crisis because it chose not to buy power plants there, but rather stick to offering services and selling power on the wholesale markets. "Because it does not own generation in the region, Enron is not forced into power trades with the utilities the way the California wholesale generators have been," said Jeff Dietert, analyst with Simmons & Company International in Houston. The company realized soon after the California market opened in March 1998 that the legal framework was flawed and was a recipe for disaster. "When we entered California, we were still trying to change the rules so competition could take hold; we were not successful," Lay said. "At the end of the day, it was set up in a way that the more you sold, the more you lost." But the recent filing of Chapter 11 bankruptcy by Pacific Gas & Electric Co., has drawn Enron into the crisis in a big way. The company disclosed last week that it is owed $570 million by the bankrupt utility. Enron has been named to the creditors committee for the case. Rather than restrict their power business to individual states or regions, the company last year decided the time had come for a national effort to enter opening power and gas markets. Enron formed a nationwide power and natural gas retail marketing company catering to residential and small-business customers named The New Power Co. The company is a joint venture of Enron, IBM and AOL Time Warner. The concept of the joint venture is for Enron to provide natural gas and electricity as a commodity, IBM to provide technical support and service, and AOL to provide an Internet platform to market the service nationwide. But less than a year after the company was formed, its concept is already outdated. It has become apparent that the role that AOL was expected to play in marketing the service is not needed; most of the sales so far have happened over the telephone as a result of direct- mail solicitations. "AOL is a problem," said Gene Lockhart, chief executive of The New Power Co. "We are not a dot-com. About 70 percent of our sales come through traditional channels." The intended role of AOL in the joint venture "just hasn't worked," Lockhart said. Now, the deal with AOL is being renegotiated as The New Power Co. establishes relationships with other Internet companies. Since its inception last year, The New Power Co. has grown rapidly and now has about 650,000 customers in 15 states. The company expects to finish the year with 1.2 million customers split about equally between natural gas and electricity, said Bill Jacobs, the chief financial officer for the company. The New Power Co. recently announced that it had signed up over 5,000 residential electricity customers in Texas as part of the state's pilot program to test deregulation. "I think Texas is a market we will be able to enter from day one," Lay said. "Both with The New Power Co. for residential and Enron Energy Services for large customers." ... Broadening its horizons again When Enron bought Portland General, it picked up a new line of business - a telecommunications unit with only 25 employees that moved data over fiber-optic lines. From that tiny start, Enron is creating what it expects will someday grow into a venture that could rival its natural gas and electricity businesses. While electricity looked like a natural next step for Enron after natural gas, the business of trading space on broadband lines appeared on its face to be a different sort of animal. But after a second look, the company's traders noticed that the broadband business looked a lot like natural gas markets in the mid-1980s. In both cases, owners of lines were paid to deliver something. But buying and selling this valuable service was difficult because there were no standardized terms and conditions for contracts and no opportunity to buy or sell on a short notice. For businesses to ensure they had all the broadband capacity they needed during peak periods, they often had to pay for the capacity to send far more data than they needed. "We found even in the case of Enron, when we looked at our connections between Houston and London, the average load factor was only about 15 percent," Lay said. "It's close to 100 percent during peak days, peak hours, etc. But there were an awful lot of nonpeak periods when it was very low. We couldn't do anything with that extra capacity." All of these elements combined to make a very inefficient business - which to Enron meant there were customers out there willing to pay someone to manage their broadband requirements. The broadband business reported a $60 million operating loss for 2000, and the company has warned analysts that it will continue losing money for the next two years or so as it builds its nationwide fiber-optic network. The company's broadband business suffered a setback recently when its deal to provide on-demand video with Blockbuster Video fell through. The cancellation of the 20-year deal means Enron's broadband business will have to go after smaller contracts, which could mean a longer time to expand the business. Losing the Blockbuster deal, and a staff reduction that reduced the broadband team by more than 20 percent, has not dampened company officials' enthusiasm, though they admit the growth may take longer than expected. "This is going to be a core business for us," Lay said. "With this business, we will show that companies define themselves not by industry, but by skill base." ... Azurix turns into wash Undoubtedly, the biggest blunder Enron has made as it has grown away from being strictly an energy company was its misguided foray into the water business. It cost the company billions, confirmed the wisdom of the strategy to shift away from hard assets, and cost Rebecca Mark her job. Enron bought Britain's Wessex Water in 1998 for $2.8 billion to use as a platform to launch a worldwide water business. The plan was to take over formerly public water and wastewater facilities as they privatized as well as manage such facilities. Enron thought it could once again turn a mature regulated business into a growth machine. The move ran counter to the way the rest of the company was going. Enron was going to a strategy built around making markets, rather than ownership of big assets. This allowed it to grow faster using less capital. Enron turned to investors for capital to fuel its water venture, which was led by Mark and named Azurix. It went public in June 1999, selling about one-third of its shares to investors at $19 per share. But Azurix soon ran into fierce competition. Giant multinational rivals such as Vivendi and Suez Lyonnaise des Eaux outbid Azurix time and again for projects, forcing Azurix to pay more for some deals than they were worth. The real blow, however, came when regulators in England clamped down on water rates, depriving the company of its main source of cash flow. Azurix's shares plummeted 40 percent in December 1999 when the company said it would not make fourth-quarter expectations and was laying off much of its staff. Enron decided last summer that it was time to stop the bleeding. Mark resigned from Azurix and from her seat on Enron's board, severing ties to the company she had helped create. A few months later, Enron announced a plan to take the company private. "I am not sure if the strategy was flawed or if it was never given a chance," Lay said. "Some of the operating assumptions didn't prove out, but this was never meant to be a long-term business for us. We thought we could transfer some of our skills into it." Skilling, who was the champion of the company's market-driven business strategy, is a bit more blunt about the experience. "You win some, you lose some, " he said. "If you don't have some mistakes, it means you're not trying. I wish it wasn't as big a mistake as it was, but you can't win them all. ... Making and creating markets The mantra at Enron nowadays is, "We make markets." The company is positioning itself to be a private-sector, online version of the New York Mercantile Exchange, offering traders an Internet platform to buy and sell a vast range of commodities as well as less tangible items such as emissions credits and weather hedges. Stock market observers are having an increasingly hard time figuring out how to value Enron's shares, which sometimes trade in tandem with technology stocks rather than energy stocks because of the growing broadband business. The University of Virginia's Bruner said the question he is most often asked when he teaches his Enron case study is whether the company can keep finding new businesses to enter to sustain its strong growth. His answer is yes. "I think their model can revitalize a wide variety of areas; I think Enron is going to be around for a long time," Bruner said. EnronOnline, the company's Internet trading platform is only about 18 months old but did some $330 billion in transactions last year, easily making it the largest e-commerce site in the world. The company has taken its risk-management skills and approach to buying and selling natural gas and electricity and moved it into the old-line businesses of steel and paper. "We make markets, but they have to have certain characteristics for us to be interested in those markets," Skilling said. The commodities Enron is interested in tend to have very complex, dedicated delivery systems, such as gas pipelines or fiber-optic data communications networks. It has to be a commodity with relatively long time frames involved. Examples would be when a producer drills a well or someone builds a power plant. Those are big capital investments with long-lived assets that are associated with the commodity. "They have morphed from saying they want to be the leading gas company to being the leading energy company to where there is now no industry definition that describes them," Bruner said. Skilling does not believe Enron will be that much different of a company five years from now, other than it likely will have expanded the roster of commodities it trades. But Lay still is expecting big changes. "It will be a totally different company just like it is today versus five years ago," he said. "As we sit here with what is on our plate today, we can see some very significant growth with several years to come. I am sure if we look back five years from now there will be at least one or two businesses with enormous potential in our portfolio that we have not even thought of yet." Photo: 1. From top left: Enron Chairman Ken Lay; President and CEO Jeffrey Skilling; former Azurix Chairwoman Rebecca Mark; an Enron worker in Dabhol, India (color); Graph: 2. Revenues and profits (b/ w, p. 6, BAR GRAPH); Drawing: 3. Enron Center South: A look inside the new tower (b/w, p. 8) Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. BUSINESS THE NEW POWER / Enron / Making of the Market-maker / With ups and downs, Enron Broadband is a work in progress TOM FOWLER Staff 04/15/2001 Houston Chronicle 2 STAR 1 (Copyright 2001) IN LATE 1999, when Enron announced it would pioneer trading of a "new new" commodity - Internet bandwidth - analysts and investors were only a little skeptical. Nevermind that buying and selling time on the vast, unruly tangle of the Internet on a big scale was unheard of. Enron's reputation for making a profit trading almost everything from pulp to plastics made this venture look like a sure thing. When entertainment giant Blockbuster Video signed a deal with Enron last summer to provide video-on-demand service to consumers, creating content to fill that giant data pipeline, investors bid up the stock to show their confidence in its broadband vision. But when the Blockbuster deal was canceled on March 9, Enron stock fell back to earth. Things got worse when Wall Street got reports that Enron Broadband Services was reducing its staff by more then 20 percent - which have since been confirmed by the company. That news took a bit of the high-tech shine off the company at a time when Enron also was getting some bad news from its international operations and the market was losing its taste for high flying stocks. Suddenly, Enron's broadband business, which helped fuel the stock's rise last year, had become a drag. The potential for broadband services and trading isn't being disputed, but Andre Meade, head of U.S. utilities research for Commerzbank Securities, said many analysts were too quick to accept Enron's estimates on the value of the business when it was first announced. "The market priced in an excessive valuation on the broadband business, overreacting on something that was still relatively unknown," Meade said. "Now it's overreacted somewhat to the Blockbuster news. I think it's dropped lower than it should." The trading side of the business appears to be exceeding expectations, but Enron Broadband is still expected to remain in the red for the next couple of years as it builds business. "I think we realize it's still a work in progress," Meade said. Enron Broadband first used its network for broadband hosting, letting a few large customers, such as TV networks or financial services companies, buy data line access on an as-needed basis for such things as Web broadcasts or shipping large amounts of data across the country, said Ken Rice, chief executive officer of Enron Broadband Services. In the past, if a company wanted to do a Web broadcast between two cities, for example, it had two choices: just do the broadcast and hope regular Internet traffic wouldn't slow it down or interfere with the quality, or reserve time on a data line months in advance and pay for several months worth of service, instead of just the time needed. "It seemed to be a business about the same size as natural gas, but growing by 15 to 20 percent per year," Rice said. "By 1998, we decided that telecom could be the company's core business." Enron's bold predictions were embraced by investors and analysts who had learned to give the company a lot of credit for its ability to successfully execute its business plan. That faith helped keep Enron's stock buoyant in the past year even as other companies with broadband businesses, such as Williams Cos. and Global Crossing, saw their operations lose more than half their value. Enron built its own fiber-optic network, which now runs about 18,000 miles. It used that to connect many other large networks around the world. To facilitate those connections, the company has created more than 25 "pooling points" where Enron's network interconnects with others, much like the Henry Hub in Louisiana connects many natural gas pipelines. It's at these pooling points where Enron can flip the switches on increasingly short notice to turn on a section of the network dedicated to a customer's needs. That lets Enron buy and sell just what the customer wants. Enron also created software that allows customers to reserve and schedule bandwidth and pick the quality of service. The company has seen trading grow quickly, jumping from 236 broadband trades in the fourth quarter of 2000 to more than 500 trades in the first quarter of 2001. Enron also is moving closer to having the one tool that could really let trading take off - standardized contracts. That can be a hard sell. "Just as with the electricity and natural gas industries, a lot of the market says it can't start trading until trading standards are set, but that's bogus," Rice said. "We've come up with a couple of standard contracts ourselves and believe the industry will adopt standards over time." Meanwhile, the deal with Blockbuster to provide online delivery of movies was supposed to be the cornerstone of a business in which Enron would deliver a wide variety of content to homes and businesses. The companies had tests of the new service running in four cities, which appeared to be a success, but in early March the 20-year deal came to an abrupt end. Blockbuster was the first to announce the breakup, but Enron issued its own release a few hours later, saying Blockbuster was unable to secure the quality or quantity of movies from the studios needed to make the service a success. "Blockbuster had some relationships with the studios complete, but the studios ultimately weren't too excited about giving them control of the digital rights to films," Rice said. Enron Broadband now is working directly with the studios and other content producers to secure movie deals and expects to announce some of those relationships soon. The company also announced a new content deal to offer hundreds of video game titles online by June. For investors and analysts, however, the misstep with Blockbuster took the shine off Enron's apple. "They really sold the Blockbuster deal as an anchor tenant for broadband and as proof of their idea's success," said Jeff Dietert, vice president of research at Simmons & Company International. "So when it fell through, the one major item we could point to as a sign of a successful execution was gone." While Enron Broadband works toward earning its keep, Rice predicts broadband will become a bigger and bigger part of Enron's overall business. The group has started to trade online data storage - effectively offering companies an alternative to buying more storage hardware - and is even beginning to trade broadcast advertising time. "I think eventually it will be on par with natural gas retail and wholesale," Rice said. "A lot of the guys in that division will say `no way,' but there's no doubt to anyone it will be big." Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. BUSINESS THE NEW POWER / Enron / Making of the Market-maker / The project Staff 04/15/2001 Houston Chronicle 2 STAR 1 (Copyright 2001) Enron Corp. has gone from just another pipeline company to the largest - and possibly the most powerful company - in Houston. This company's insatiable appetite for change has led it to create a dizzying range of new businesses and has spawned a surge of growth in its hometown. This package of stories offers a look at this innovative and powerful worldwide business empire. ... I N S I D E CULTURE: Enron has become a spawning ground for fast-growing businesses because it pushes bright newcomers to quickly show what they can do. But not everyone fits into this pressured business environment: Page 6D. HEADQUARTERS: Enron is in a hurry to get into its new downtown headquarters building. The company will begin moving people into the lower floors this summer, a year before the tower is complete: Page 7D. EMPIRE: Enron is changing its worldwide focus to Western Europe and Japan as it reduces its attention on developing countries, which provide a slower rate of return on investments: Page: 8D. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. A SIGN OF THE TIMES / Glowing logo once hovered over the city that oil built ALLAN TURNE Staff 04/15/2001 Houston Chronicle 4 STAR 33 (Copyright 2001) For years, it hung over downtown Houston like some wacky corporate moon. Giant blue letters - Gulf - in an orange neon disc announced to land and air travelers that they were approaching the nation's oil capital. It was called "The Lollipop." At 58 feet tall, it was the world's largest rotating sign. And while the Gulf Oil Co. reveled in the giant corporate logo atop its neo-Gothic office tower, critics called it an 83-ton monument to tastelessness. Today, as Houston reassesses its downtown architectural heritage and recasts itself as a city it hasn't been in 50 years, the hotly debated landmark of the 1960s and early '70s is largely forgotten. Still, with nostalgia an undercurrent in the central city's reawakening - Enron Field, loft apartments, refurbished office buildings and even a popular new diner all feature a "retro" feel - there are those who fondly recall when the downtown skyline was bathed in an orange glow. "When I first came to Houston for the first time," recalled Gordon Campbell, a former Gulf budget analyst, "I flew from Tulsa on the company plane. That sign was one of the first things I saw. It really gave me a thrill." "I was very passionate about it. . . . It was an icon," added one-time Gulf chemicals division executive Charles Rhoads, who first visited the city as a young Gulf employee in the mid-1960s. "It was the definition of the skyline back then." Undoubtedly the sign that had been atop what is now the Chase Bank building was an eye-catcher. With 4,700 square feet of display area illuminated by 7,350 feet of neon tubing, the sign rotated at a steady 1 1/2 revolutions a minute. "Airline pilots used it as a beacon," boasted Sherman H. Hink, chairman and chief executive officer of Neon Electric Corp., the company that built the sign. "It was advertising. As far as I'm concerned, bigger is better. The object of any sign is to sell." Built at a cost of $250,000, the sign took six months to erect. When it was completed in the summer of 1966, it commanded immediate attention. Signs of the Times magazine, a trade journal, featured the sign on the cover of its September issue. Gulf Oil Co. issued postcards of it, noting on the back that the "landmark will guide travelers and residents to the heart of Houston." "It was a fantastic sign," Hink said. "People loved this sign." Or at least some people loved the sign. "I don't want to be disrespectful," said Bill Roher, former president of Gulf's chemicals division, "but I was somewhat aghast. I hadn't seen anything that garish in any of of the cities I had been in. It wasn't the only sign. Tenneco, all the other oil companies had signs emblazoned on their buildings. But nothing like Gulf. We outdid them. "It was very emblematic of the times. There were very aggressive advertising people who felt that was one way to sell gasoline." Former Houston Chronicle fine-arts editor Ann Holmes said the sign made the the old bank building look like an oversized gas pump, to the amusement of some. "It became a joke and not a very funny one," she said. Artie Lee Hinds, then and now a member of the Houston Municipal Art Commission, recalled that members of the advisory body abhorred the sign. "They didn't like it," she said. "It wasn't that the sign wasn't good-looking. The art commission didn't want any signs on any buildings, and this one was revolving around." Members of the commission quietly urged Gulf management to remove the sign as a public service. Today, such a sign, which finally came down in 1975, never would pass muster with a city ordinance that regulates sign height and size. Critics never warmed to the Gulf sign as they did - begrudgingly, perhaps - to the giant red neon Pegasus that revolved above the old Magnolia Oil Co. headquarters in Dallas. "The Pegasus is interesting," said Rice University architectural historian Stephen Fox. "I don't think the Gulf sign was offensive in any way. But it never claimed people's affection as a civic symbol the way the Magnolia emblem did in Dallas. It basically was a transposition and magnification of a Gulf filling-station sign. There was nothing special, nothing especially Houston about it." While the details of why the gargantuan sign was erected in the first place probably are lost to history - many of those involved in the project are dead - Fox suggested Gulf simply may have been trying to regain its lost prominence on the Houston skyline. When the sign was erected, Gulf, which traced its history to the 1901 discovery of oil at Spindletop, occupied a striking old bank building at Main and Rusk streets. Built in 1929 and standing 450 feet in height, it long had been the tallest building west of the Mississippi River. In 1963, though, Gulf's tower was eclipsed by the 600-foot-tall headquarters of the Humble Oil and Refining Co. (now Exxon Mobil) at 800 Bell Ave. The orange disc brought the Gulf Building's height to more than 500 feet - still short of Humble's height but topping its rival in garishness and illumination. By the time Z.D. Bonner became president of Gulf Oil - United States in the early 1970s, criticism of the sign had reached a crescendo. "It certainly was not an asset," Bonner said. "We had very few people - aside from those in the Gulf marketing department - who really liked it. And there were mechanical problems with it. It had suffered wind damage." When the massive porcelain panels were dismantled - a process Hink said took about a month - workers were surprised to find they were pockmarked with bullet holes. "We got a letter of commendation from some civic association for taking it down," Bonner recalled. The sign was replaced with a helicopter pad, which remains atop the building. Gulf Oil Co. lost its corporate identity in a mid-1980s merger with the San Francisco-based Chevron Cos. About the time the Houston sign was dismantled, Dallas' neon flying horse - erected in 1934 for an oil convention - was donated to the city. It was welded in place to keep it from toppling. In 1997, its neon lights went dark, victims of the elements and neglect. Admirers of the sign raised $600,000 from individual and corporate donors - including Magnolia's descendant, Exxon Mobil - to replace the 15-ton sign with a replica. The new sign was illuminated at the stroke of midnight on New Year's Day 2000. No such resurrection was in the cards for the Gulf sign. Its porcelain panels were taken to Hink's workshop on the city's northwest side. Hink kept the small "R" from the sign's trademark emblem for himself and donated the rest to an employee who wanted to use the panels to build a barn. The barn was built, but the worker since has died, and Hink no longer remembers where the farm was located. Photos: 1. Sign maker Sherman H. Hink poses with a miniature Gulf service station sign, model for the 83-ton neon sign that for nearly a decade rotated atop the company's downtown office tower. At right is the giant sign's trademark emblem - the only part of the controversial landmark that was preserved; 2. Known as "The Lollipop," Gulf Oil Co.'s rotating orange, white and blue logo towered above most other downtown buildings in the 1960s and early '70s. It was removed in 1975. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. BUSINESS THE NEW POWER / Returns on investments too slow in developing nations JENALIA MORENO, MICHAEL DAVIS, JANAKI BAHADUR KREMMER Staff 04/15/2001 Houston Chronicle 2 STAR 8 (Copyright 2001) JUST A FEW years ago, Enron Corp. focused its international operations in developing markets such as Maputo, Mozambique, and Bombay, India. Today, top executives for the Houston-based giant are more likely to fill their passports with stamps from London, Tokyo or Sydney. As in many other public energy companies, a keen interest in building pipelines and power plants in Third World nations while earning a slow rate of return has been replaced with a drive to deliver more money, faster to shareholders, analysts said. That's led to a for-sale sign on many of its international operations. Enron and analysts believe the company's international fortune lies in creating markets for gas, electricity and almost anything else that they can profitably trade. Outsiders say building big power plants has been a profitable line of business for them, but it ties up too much money. "We're perfectly happy to make our way along by buying and selling from other people who have power plants," said John Sherriff, president and chief operating officer of Enron Europe. More than a year ago, Japan opened up 30 percent of its electricity market to competition. The island nation charges some of the highest power rates in the world, and Enron is eager to get into that market. Enron Chairman Ken Lay said he is hopeful, despite a relatively slow start, because he senses a change in attitude on the part of Japanese business leaders. Enron already has set up a joint venture to market the power of some privately owned power plants, and Enron's broadband network will be tied into Tokyo by the end of the year. Hong Kong, Singapore and India will follow. "There is a much greater sense of urgency to make changes and get their economy competitive with the U.S. economy and other economies around the world," Lay said. Europe also is opening up its energy market. Enron's annual report last year predicted: "In just a few years, the competitive European wholesale power market will rival the size of the power sector in the United States. Enron expects to assume the leading position in Europe as it has done in North America." In 1989, Enron chose Europe for its first international foray. "We didn't really tiptoe into the market," said Sherriff. "We really came into it in a big way." Today, Enron employs 4,000 people in Europe. Worldwide it operates in more than 30 nations. "Our business model works best when we're pretty sure we're going to get paid, where there's a rule of law, where there's a lack of bribery," said Sherriff, explaining why the company does not operate in most Eastern European countries. Such ventures in developing countries could reap significantly higher returns than power plants in India, where the company has faced everything from accusations of human rights violations to bureaucratic red tape. But analysts and critics alike question whether the move to the safer haven of developed nations is because of a series of troubles with big energy projects in developing markets. While outsiders have long followed Enron's battles over its power electric plant in the Indian city of Dabhol, its problems with the Asian nation go beyond that. Plans for trading in bandwidth by building a broadband telecom network with 971,000 miles of fiber-optic cable connecting four Indian cities also have been put on hold. "Due to the lengthy delay and continued disagreement on critical commercial and legal issues, Enron has determined that its involvement (in the fiber-optic venture) is no longer financially viable," said John Ambler, an Enron spokesman. "Since we tend to focus on the more open and developed markets, it is too early to determine whether the market will open in an acceptable time frame in India," he added. While analyst Subhash Agarwal, editor of India Focus, a political risk magazine, sees Enron concentrating elsewhere, he says opportunities still exist in India. "They are clearly shifting away from asset-owning to trading in the energy business, but a lot still needs to be done in India before they can freely do that here," Agarwal said. The problems they have faced in the electricity business help explain why they are wary about such commitments. Analysts said selling less-profitable assets is all part of Enron's strategy of frequently changing its businesses, which has been a cornerstone of its success. "You're never going to win on every single investment, but Enron is usually smart enough to know when to get out," said Rebecca Followill, an analyst in Houston for Howard, Weil. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. BUSINESS THE NEW POWER / Working environment now driven more by new ideas than old doctrine MICHAEL DAVIS Staff 04/15/2001 Houston Chronicle 2 STAR 6 (Copyright 2001) FOR CLAUDE TELLIS, working at Enron Corp. has meant being able to develop an idea, pitch it to his bosses and see it through to success. Within a year of joining the company, Tellis was one of a group of employees who put together Enron Investment Partners, a venture- capital fund that specializes in bankrolling minority- and women- owned businesses. It started with $40 million to invest, and that's expected to grow to some $300 million. Tellis was given the chance even though his idea had nothing to do with Enron 's main businesses. He just had to prove that the concept was viable and then be willing to work to make it happen. Tellis explains it all by saying: "Enron is a meritocracy." An open attitude toward new ideas is often cited as one of the key components to the success of Enron as the company continually reinvents itself. The associates program, in which Tellis operates, is one of the best examples of this attitude. Recent MBAs are rotated through various Enron businesses for two years, allowing them to decide where they might best fit in at the huge company. The person largely responsible for the program as it is today is Jeffrey Skilling, recently named chief executive officer. Although Enron has had programs for incoming MBAs for most of its history, it was after the arrival of Skilling in 1990 that the associates program really took off. "We created a whole new culture," Skilling says. "We knocked down a lot of walls, literally." Skilling and others running Enron often single out employees such as Tellis as being the future of the company as it chases an ever- growing number of markets. Skilling has likened the recruiting to an arms race. "We realized early on that the name of the game was technology and brains," Skilling said. All of which sounds like a logical approach. But Tellis learned from hard experience that the culture in other companies is not always so accommodating to new hires. After getting his undergraduate degree from Duke University, he was eager to get into deal-making and went to work for one of the nation's biggest business consulting firms. "They told me to think outside the box, but the only box I was in was a Power Point box," Tellis said, referring to the popular software used for presentations. Rather than being put on deal teams, he was relegated to putting together slide presentations for higher- ups. He returned to college and earned his master's of business administration from The Wharton School at the University of Pennsylvania. Soon after, he was hired by Enron and joined the associates program. The expansion of the associates program in the early 1990s was accompanied by a change in the layout of Enron's offices to reflect a more open corporate culture. Skilling wanted to express a sense of equal opportunity by advocating an environment where everyone operated in an open office space. Skilling also began to offer an axiom to new employees wanting to propose new ideas: The quality of an idea is usually proportionate to its distance from the 50th floor. The 50th floor is where Enron's top executives, including Skilling, have their offices. The concept of an open office in the energy industry was revolutionary in the early 1990s, said Bob Bruner, a professor at the University of Virginia who has done a case study on Enron's evolution. Companies that operate in regulated businesses tend to be very bureaucratic, and Enron was no exception in its early days, he said. "Enron had to become a new animal. This meant that it had to shed layers of organization," Bruner said. "They shed lots of little things like offices that went with titles and created the open- office concept." Not all of the cultural changes at Enron have been met with a warm reception from employees. A new evaluation system being used at the company is considered by some to be divisive rather than supportive. This so-called "horizontal" evaluation process has angered some employees who think it pits employees against each other. Under the system, employees are required to spend about two weeks out of the year ranking their fellow employees in five categories. The process has been referred to as "rank and yank," and can be brutal, employees say - a corporate version of the television show Survivor in which workers can gang up on others they may not like for whatever reason. The new evaluation program is a good example of how Enron can be a tough place to cut it for those not determined to work harder than the rest. It also is regarded as an employer that can often overwhelm its workers' personal lives. Ten- to 12-hour days are not that unusual at the company, former Enron employees say. Tellis normally puts in about a 10-hour day and frequently works weekends, but when a deal is about to close, Enron's downtown office becomes his second home. No matter how warm and fuzzy the Enron culture is presented to the public, the company clearly does not suffer fools gladly. When asked what sort of day he typically puts in at Enron, Tellis cast a nervous eye to the public relations person sitting next to him and asked, "Do I have to answer that?" Mug: Claude Tellis Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. BUSINESS THE NEW POWER / Firm in a hurry to get into new downtown tower RALPH BIVINS Staff 04/15/2001 Houston Chronicle 2 STAR 7 (Copyright 2001) ENRON CORP. is in a hurry. That is evident to anyone watching workers scurrying about to erect additional steel beams to the skeleton of the Enron Center South tower emerging on the downtown skyline. It will become even more evident this summer when Enron will begin moving 1,000 employees into the building before construction is complete. While work continues above and below, Enron employees will be doing their jobs on the tower's third, fourth and fifth floors. The 40-story tower going up across the street from the 50-story Enron Center North won't be complete until the summer of 2002. Finishing the elaborate 40-story office tower can't happen soon enough for William R. Donovan, the Enron vice president managing the construction project. Employees of the company, whose explosive growth made it the biggest in town in terms of revenues, are tightly packed into the current Enron building and have spilled over into other towers on the southwestern edge of downtown. "We need the space. We have just about soaked up about every square foot of short-term leased space within walking distance," Donovan said. When the tower is finished, the imprint of the corporate culture will be stamped into the new Enron Center South. At the heart of the 1.2 million-square-foot building will be massive trading floors that house the company's key business. These open spaces on the lower levels will be home to traders buying and selling everything from electricity to wood pulp, from natural gas to broadband communications capacity. The importance of those traders, and the company's open culture, also will shape the design of the offices of Enron Chairman Ken Lay and Chief Executive Officer Jeff Skilling. Their offices will be on the seventh floor overlooking the trading floors. Two curved grand stairways will connect their offices to where the action is. "I think it says a lot about how Ken Lay and Jeff Skilling view the corporation," meaning they don't want to be sequestered away, said architect Gregg Jones of Cesar Pelli & Associates, the New Haven, Conn., firm that designed the new tower. The company, which profits from the world's insatiable appetite for energy, is going to occupy a new headquarters that will reflect Enron's emphasis on energy efficiency, Jones said. The south, west and east sides of the building will be adorned with metal sunshades and fins that deflect the sun and lower energy costs. "You will be shading an entire skyscraper," Jones said. The building will be wrapped in bluish-gray glass that matches the Enron tower across the street. From aircraft flying above, the main tower of Enron Center South will appear to have the same shape as the Enron Center North building - sort of an oval shape with flattened sides. The ovalish shape will be a decorative theme that is repeated in Enron Center South in many ways. Tiny ovals will be etched into the glass of the windows in the building; small oval holes will be punched into the sunshades and replicated in the elevator doorjambs. A curved sky bridge will connect the two buildings and the 15- level parking garage that is under construction at the corner of Bell and Smith. From above, the sky bridge will look like a ring around Saturn. The designers were hoping the circular tube would create something more than than "just another gerbil tube" between towers, Jones said. With the new building, Enron is creating an urban corporate campus. It will have a wide array of services for its employees, from child care to medical care to on-site food services. The ground floor will have restaurants, retail space and a 240-seat auditorium. The company that is rushing to get into the new building already has long-term plans for another building. Donovan said Enron owns a full block downtown bounded by Bell, Leeland, Louisiana and Milam where the third tower could be built, if needed. Enron hired the Cesar Pelli firm to help make its statement on the Houston skyline. The firm, led by Pelli, the former dean of the architecture school at Yale University, designed the one of the tallest office projects in the world, the Petronas Towers in Kuala Lumpur, Malaysia. In Houston he designed a number of prominent buildings, including the St. Luke's Medical Towers in the Texas Medical Center, whose twin spires look like hypodermic needles to many Houstonians. He also designed the Four Oaks Place office towers and Four Leaf condominium towers near the Galleria. In a few months, when the exterior skin of Enron Center South is applied, it will give the tower a notable place in the downtown skyline. "It's going to be very elaborate. It's not going be that minimalistic 1980s architecture," Donovan said. "It's going to be a much, much more ornate facade than I think downtown has seen in 50 years." Photo: A view from Smith Street of the new 40-story Enron Center South tower. Although construction will continue on some floors until summer 2002, the company plans to move 1,000 employees into the building this year Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. BUSINESS THE NEW POWER / Current lineup Staff 04/15/2001 Houston Chronicle 2 STAR 7 (Copyright 2001) ENERGY TRANSPORTATION AND UPSTREAM SERVICES: This group was the starting point for Enron. It runs its natural gas pipelines, storage facilities, compression services and gas processing and treatment facilities. ONLINE MARKETPLACE SERVICES: This unit is built around Internet marketing and trading sites where a vast range of commodities are bought and sold. It also includes services such as ePowerOnline, where users of Enron broadband services can monitor their accounts, and Enron Direct, where European customers can strike long-term wholesale contracts for natural gas and power. ENERGY AND COMMODITIES SERVICES: This operation buys and sells such commodities as power, natural gas, pulp and paper, coal, emissions credits, plastics and petrochemicals, steel, crude oil and wind power. BROADBAND SERVICES: This venture buys and sells capacity on broadband networks so companies can buy time to ensure high-quality transmissions of data across the country. This operation also includes a media services business in which companies can hedge the costs of buying advertising space and streaming media applications through which TV-quality video can be delivered to large audiences live or on demand. CAPITAL AND RISK-MANAGEMENT SERVICES: This group offers a wide range of financial instruments such as hedges and swaps that allow companies to manage the volatility of price swings for a commodity that they buy regularly. It also includes a corporate finance arm. COMMERCIAL AND INDUSTRIAL OUTSOURCING: Commercial and industrial outsourcing includes Enron energy services, which supplies and manages energy usage for large businesses. It also provides software for energy management as well as on-site personnel to manage facilities for customers. PROJECT DEVELOPMENT AND MANAGEMENT: This business develops, finances, builds and manages such things power plants, pipelines, water, wind power, and oil and gas exploration and production. These projects normally are done with partners. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. BUSINESS THE NEW POWER / Enron's chronology Staff 04/15/2001 Houston Chronicle 2 STAR 6 (Copyright 2001) 1985 - Houston Natural Gas merges with Omaha, Neb., -based InterNorth to create the company that would eventually be named Enron Corp. The deal integrated several pipeline systems to create the first nationwide natural gas pipeline system. 1986 - Ken Lay, who had been chief executive officer of Houston Natural Gas, is named chairman and chief executive officer. The company chooses the name Enron after rejecting Interon. 1987 - Enron discovers that oil traders in New York have overextended the company's accounts by almost $1 billion. The company ultimately worked this loss down to $142 million. This leads to Enron developing a myriad of services to help reduce the risk of price swings for everything from gas to advertising space. 1988 - Enron opens its first overseas offices in England to take advantage of the country's privatization of its power industry. The company's major strategy shift - to pursue unregulated markets in addition to its regulated pipeline business - is revealed to executives in a gathering that became known as the "Come to Jesus" meeting. 1989 - Jeffrey Skilling joins the company and Enron launches its Gas Bank, a program under which buyers of natural gas can lock in long-term supplies at fixed prices. The company also begins to offer financing for oil and gas producers. 1992 - Enron acquires Transportadora de Gas del Sur. It was Enron's first pipeline presence in South America and the start of a push to expand on the continent. 1993 - Enron's Teesside power plant in England begins operation, one of the first big successes for the company's international strategy. 1994 - Enron makes its first electricity trade, beginning what will turn out to be one of the company biggest profit centers in the next few years. 1995 - Enron Europe establishes a trading center in London, marking the company's entry into European wholesale markets. Europe is now considered one of the company's prime growth markets. 1996 - Construction begins on the first phase of the Dabhol power plant in India. The $2 billion project would be plagued with political problems throughout its construction and those problems continue today. 1997 - To expand its electricity business, Enron buys Portland General Electric Corp., the utility serving the Portland, Ore., area. Enron Energy Services is formed to provide energy management services to commercial and industrial customers. 1998 - Enron acquires Wessex Water in the United Kingdom, which forms the basis for its water subsidiary Azurix. 1999 - Enron forms its broadband services unit. The first phase of the Dabhol project begins operations. One-third of Azurix is sold to the public in an initial public offering. After an early rise, shares fall sharply as the year goes on and the problems facing the company become apparent. Enron Online, the company's commodity trading Internet site, is formed. It quickly becomes the largest e-business site in the world. Enron Energy Services turns its first profit in the fourth quarter. 2000 - Rebecca Mark resigns from her position as Azurix chairwoman and the company announces a plan to take the troubled water subsidiary private. Annual revenues reach $100 billion, more than doubling from the year before, reflecting the growing importance of trading. Enron Field is opened in downtown Houston. In addition to buying the naming rights, Enron Chairman Ken Lay helped raise financial support for the construction project. 2001 - Skilling is named chief executive officer. Lay remains chairman of the board. Photos: 1. Jeffrey Skilling; 2. Enron's power plant in Dabhol, India, under construction in 1998; 3. Rebecca Mark in 1998 (p. 7); 4. Fans file into Enron Field, a symbol of the company's prominence (p. 7) Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Money and Business/Financial Desk; Section 3 GRASS-ROOTS BUSINESS Oil-Patch Epicenter, Embracing the Web By JOEL KOTKIN 04/15/2001 The New York Times Page 6, Column 1 c. 2001 New York Times Company HOUSTON -- AS the daughter of an oil-field supplier in Lake Charles, La., two and a half hours from this booming energy capital, Claire S. Farley says she always knew she would end up in the business herself. Often the only woman in her geology classes in college, Ms. Farley did eventually become one of the few top executives in the energy industry who are women. She held several high-level positions at Texaco, including president of North American oil and gas production. Today, Ms. Farley, 42, finds herself and the company where she is chief executive, Trade-Ranger, in another pioneering role. Trade-Ranger, which provides Internet-based business-to-business services to energy companies and suppliers, is part of a growing information sector that is rapidly transforming both the energy industry and this historically blue-collar city. Energy companies have tended to be insular, Ms. Farley said, conducting most of their basic research and development internally. But to take advantage of new information technologies, she said, they increasingly look to new businesses like hers. Trade-Ranger, whose clients include 15 major energy companies, helps manage transactions between those companies and key suppliers over an Internet-based global network. It is a potentially huge business, she said, adding that global energy companies spend more than $500 billion a year procuring most anything from pipes to computer services. ''Fundamentally, the people in this business are looking for information and economies of scale,'' she said, pointing to a need to buy large quantities of goods and services at the best available prices. ''Ten years ago, they would have done this themselves, but now they are looking for people who can give them solutions.'' In a broader sense, Houston-based companies like Trade-Ranger and the PetroCosm Corporation, a rival whose founders include Chevron, are part of a rising tide of technology businesses connected to the energy industry. As technology companies, especially Internet businesses, are collapsing in places like San Francisco and New York, energy-related technology concerns have not been as troubled by the collapse of the Nasdaq or weakening investor confidence. Trade-Ranger, founded last summer, has more than $90 million in venture capital from energy companies like Royal Dutch/Shell and BP Amoco. That money lets the company invest heavily in new technology. But it is not just Internet companies that are thriving here. Other technology companies -- in fields as different as geology and market analysis -- are also growing rapidly. That is a major departure from previous energy expansions, like the boom of the 1970's, when growth came largely from manufacturing oil-field equipment or dispatching riggers around the world. Barton Smith, an economics professor at the University of Houston, said that much of what Houston needs today, and is selling to the world, is technological and managerial expertise. RECENT employment numbers reflect the trend. Over the last three years, the fastest rate of job growth in Houston has been concentrated in business services, as well as engineering, accounting, research and management services. In contrast, the traditional energy sector, which includes oil companies and businesses directly engaged in mining, gained only 10,000 jobs last year, well below historical highs. ''Houston's energy economy is increasingly high tech,'' Mr. Smith said. ''It's white collar, not blue collar.'' Other evidence of a white-collar expansion can be seen in the office market. New office towers, including headquarters for energy businesses like Enron and Reliant Resources, have been rising downtown. Vacancy rates in the central core, as high as 30 percent in the late 1980's, have dropped into the single digits. Once a ghost town after hours, downtown is starting to become a more popular destination, and increasingly a residential hub, for young professionals. The surge in technology-related employment is also spreading across the vast greater Houston area, which is larger than all of New Jersey. Much of the most recent growth has been beyond the city limits, a periphery that is home to nearly 2.7 million of the region's estimated 4.6 million residents. ''The growth is becoming inevitable,'' said David Wolff, president of the Wolff Companies, a developer in the energy corridor along the city's western suburbs. ''The billings are increasing at all the energy companies -- that's billions in new spending coming on line.'' THE new wealth has created a large middle class of accountants, lawyers and other professionals, many of them directly or indirectly serving the energy industry. More fashionable boutiques and high-end restaurants are opening throughout the area, joining places like the Galleria -- west of downtown -- the shopping and office center where Trade-Ranger is based. ''Houston,'' Ms. Farley said, ''is becoming chic.'' The shift away from a blue-collar base extends even into the industry's historic core -- the wildcatters. Once identified with roughnecks and seat-of-the-pants entrepreneurs, the exploration industry now relies more on sophisticated sensing and computer-modeling technology than on elbow grease. Companies like Davis Petroleum, which explores largely in the Gulf of Mexico, depend increasingly on such technologies to uncover oil and natural-gas supplies. The family-owned business, which has grown to 50 employees from 20 in the last five years, now includes 10 highly paid scientists. ''There's a tremendous amount of data generated in this business and a huge paper trail,'' said Gregg James Davis, the company's president. ''To be efficient, you have to get down to the digits so you can make better guesses as to where to drill.'' Deregulation of energy prices has also increased demand for sophisticated trading information, said Jay P. Lukens, 46, president of the Lukens Energy Group, which provides information and trend analysis on energy prices, as well as advice for mergers and acquisitions for major utilities and generators. Founded in 1999, Lukens has grown to 20 employees, from 6, virtually all of them with graduate degrees. The company uses the latest computer-modeling technology for utilities and energy concerns, including the Williams Companies, Alberta Energy and BP Amoco. Lukens's billings are rising to an estimated $6 million this year from $2 million two years ago. Mr. Lukens says, however, that his company remains an energy business at heart. ''We have the software,'' he said, ''but what we are selling in reality is knowledge of the market itself.'' Such expertise, Ms. Farley said, will give Houston a competitive edge. Even if oil prices drop, major energy companies merge and most new drilling continues to take place thousands of miles from the Texas coast, she predicts that the city's new technology-oriented energy sector will continue to expand. ''Houston now sells its expertise,'' said Ms. Farley, whose major investors are from outside of Texas. ''Why not London or Los Angeles? Why, it's the oil business -- it has to be in Houston. Everyone you know who's important in this business passes through here. It's where the information is.'' Photos: Lukens Energy supplies software to companies like Aquila Energy, a natural-gas wholesaler. Bryon Jobe, above, is lead operator in an Aquila control room near Katy, Tex. Part of the distribution system is outside. (Photographs by Phillippe Diederich for The New York Times) Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Sierra Pacific Suspends Quarterly Payout Because of Energy Crisis in Western States By Rhonda L. Rundle 04/15/2001 Dow Jones Business News (Copyright (c) 2001, Dow Jones & Company, Inc.) Staff Reporter Of The Wall Street Journal Sierra Pacific Resources, which owns two Nevada utilities, said it suspended its quarterly dividend, citing high power costs and other fallout from the energy crisis afflicting the Western part of the U.S. The utility holding company said it still hopes to complete a $2 billion agreement to purchase Enron Corp.'s Portland General Electric unit. The transaction, which will also include the assumption of $1 billion in debt, has been delayed partly because of a new California law that has blocked Sierra Pacific (SRP) from raising funds through planned sales of certain power-generating assets. Sierra Pacific has paid a quarterly dividend of 25 cents in recent quarters. Suspension of the payout will save "less than $20 million -- but every dollar counts at times like this," said Mark Ruelle, senior vice president and chief financial officer. The dividend policy will be reviewed again at the next board meeting, set for May 21, the company said. Sierra Pacific, based in Las Vegas, said it is continuing several cost-control programs that were recently undertaken to reduce expenses. The cutbacks are mainly in the area of administrative expenses and include elimination this year of incentive pay for executive staff. Sierra Pacific, like utility owners in other Western states, has been hit by rising energy costs. Sierra Pacific has said it incurred an unanticipated expense of $889 million in 2000 to purchase fuel and electricity on the open market. That produced a full-year 2000 loss of $39.8 million, or 51 cents a share. Copyright (c) 2001 Dow Jones & Company, Inc. All Rights Reserved. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. India: Report cautions Maharashtra on PPAs Mahesh Vijapurkar 04/15/2001 The Hindu Copyright (C) 2001 Kasturi & Sons Ltd (KSL); Source: World Reporter (TM) - Asia Intelligence Wire MUMBAI, APRIL 14. A caution that any effort to continue with the proposed power purchase agreements (PPAs) with Reliance and Mittals for major projects in Maharashtra "will only result in a problem similar to that of the Dabhol Power Company (DPC) re- emerging in future" has been sounded by the Madhav Godbole Committee. The committee - major findings of which have been publicised - expressed fears on "allowing these independent power producers to proceed, as currently structured". The two projects, one in Patalganga and another in Chandrapur, also have substantial import content. These projects, the committee said, have to be "re- examined in accordance with a Least Cost Plan and in any case, till such time the demand level in the State permits full absorption of power" from these independent power producers. It may be recalled that all arithmetic, including demand projections by the MSEB, have gone awry in the Enron-sponsored DPC. Neither of the two projects is contractually structured to meet the needs of intermediate and peaking load in the MSEB or Maharashtra itself. The MSEB needs to justify projections in more detail "before proceeding with these projects", the committee said. The MSEB's power procurement policy till the Maharashtra Electricity Regulatory Commission stepped in was not according to a least-cost plan. In fact, the MERC's least-cost option unsettled the purchase option from the DPC, forcing it to limit the maximum offtake to around 50 per cent of the contractual obligation. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Graft vs graft: Political scene in state hits nadir Ambarish Mishra 04/15/2001 The Times of India Copyright (C) 2001 The Times of India; Source: World Reporter (TM) MUMBAI: The opposition Shiv Sena-BJP combine, according to the Vidhan Bhavan grapevine, is ready with a videotape showcasing the escapades of a prominent minister in the ruling Democratic Front (DF) government. ``With videotapes here, there and everywhere, we will have to build a preview theatre,'' remarked a senior official of the state legislature. `Make hay with an allegation a day' seems to be the mantra in the corridors of power. With DF ministers and the opposition Shiv Sena-BJP bigwigs choking on allegations and running away at the mouth, Maharashtra's political sensex seems to have hit an all-time low. Charges and counter-charges, traded with the glee of a Dahyabhai from Dalal Street, have been taking up a considerable portion of the budget session's proceedings at a time when the state's financial health is precarious, to say the least, with more than 20,000 villages reeling under acute water scarcity. Also, the state administration is weighed down by a host of problems, including the prolonged strike of resident doctors, a worsening law and order situation and l'affaire Enron, not to speak of the bickerings within the eight-party ruling combine. ``It is unfortunate that the assembly has been converted into an akhada. The trading of charges has, apart from vitiating the political atmosphere, lowered the prestige of the state legislature,'' said a former speaker of the legislative assembly. During the first two weeks of the budget session, which began on March 13, the Sena-BJP combine went bang bang bang targeting minister of state for public health Eknath Gaikwad, deputy chief minister Chhagan Bhujbal and chief minister Vilasrao Deshmukh. The Sena-BJP leaders flaunted affidavits filed by several youths in support of their claim that Mr Gaikwad's personal assistant had demanded money, right in the presence of the minister, as a quid pro quo for offering government jobs. Closing in on the chief minister, prominent BJP leader Nitin Gadkari, while speaking in the legislative council, accused him of having indulged in ``corruption'' while finalising the purchase of a spinning mill in Latur, the CM's hometown. The Vilasrao Deshmukh ministry retaliated against Mr Gadkari, who belongs to Nagpur, with a threat to supercede the Nagpur municipal corporation on charges of, what else, bhrashtachaar (graft). Moreover, the ruling DF alliance accused leader of the opposition Narayan Rane of having drained the state exchequer of a staggering Rs 124 crore by gifting away a government plot to Esselworld in 1996 when Mr Rane held the revenue portfolio in the Manohar Joshi cabinet. As if this was not enough, the treasury benches okayed the suspension of BJP MLAs. Although the suspension orders against five of the nine legislators have since been revoked, the coup de grace has embittered the Sena-BJP combine. ``The state government is plainly vindictive,'' declared BJP leader Gopinath Munde. ``The opposition should learn to behave,'' retorted a DF minister. More fireworks took place in the assembly last week, belying hopes that the house would take up issues of public importance for discussion and decision. A judgment by the division bench of the Bombay high court last Monday held Mr Rane guilty of condoning irregularities in a land de-reservation case. The verdict brought cheer in the DF camp. However, an unrepentant Mr Rane hit back with an allegation that Mr Bhujbal, who holds the home portfolio, and his close relatives had demanded a tidy sum from a senior IPS official in connection with his transfer. The plot thickened with the allegation by senior BJP leader Gopinath Munde that Mr Bhujbal had set free two COFEPOSA detenues for a hefty Rs 2 crore. And on to a new allegation on Monday, when the state legislature resumes business after a brief recess. ``Not a single charge is backed with foolproof evidence. Tehelka.com seems to have fired the imagination of Maharashtra's politicians,'' said the Vidhan Bhavan official, referring to the audiotapes which Mr Rane flaunted in the house while making out a case against Mr Bhujbal. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Editorial/Opinion In an energy crisis, lean toward the green Molly Ivins Fort Worth Star-Telegram 04/15/2001 The News & Observer Raleigh, NC Final A27 (Copyright 2001) BOULDER, Colo. -- At the annual World Affairs Conference at the University of Colorado, the assorted experts from around the globe may sometimes be wrong, but they are rarely in doubt. This lends a happy, "But the emperor isn't wearing any clothes," simplicity to much of the discussion. Shibboleths are ignored, obligatory bows to those who are only partially informed are skipped entirely, and folks get right down to the lick-log. Thus, Harvey Wasserman, a longtime leader of the anti-nuclear movement, cutting to the chase: "Anyone who advocates nuclear power as a solution to our energy problems should be shut up in a padded cell." Wasserman can, of course, discuss the details of nuclear plant design, risk, insurance, regulation, waste disposal, etc., ad nauseam. It's just that he'd rather not waste his time on the obvious. One session I attended here not expecting to learn much new (but it's always nice to have your prejudices confirmed) was titled "Our Fake Energy Crisis: What Really Happened in California." The aforementioned Wasserman waded in with a will, describing the dastardly tale of ruthless utility companies determined to unload the "stranded costs" of their monumental folly in building nuclear plants - $20 billion worth in California's case - on the ratepayers. Given that utility lobbyists literally wrote the California deregulation bill, it's quite a reach to blame it on anyone else. This is a familiar tale to those who have read beyond the basic coverage of the California situation. Wasserman tells the story well, with a fine contempt for the greed and stupidity behind it all and for the politicians now seeking cover. But he presents a media mystery that has me stumped - one of those cases of the media overlooking the obvious so completely that one is bereft of a handy explanation. Some parts of California are not suffering from power problems of any kind. In Los Angeles and Sacramento, the lights are still on and the rates have not doubled or tripled. As it happens, the people of Los Angeles and Sacramento own their own power plants. This glaringly obvious fact has for some reason escaped media attention, except in California. The history of how utility ownership and regulation came about is crucial to this story. Wasserman quoted a 19th century mayor of Cleveland, Tom Johnson, who said, "If we don't control the electric utilities, they will control us." As is often the case with business and government regulation, it was the utilities themselves that asked for regulation, knowing full well that they could easily dominate state public utility commissions. "Regulation" evolved so that utilities were permitted to make 15 percent on invested capital - a tidy sum. This lasted until the early 1990s, when wholesale prices fell, tempting the utilities into deregulation. They dumped the stranded nuke costs on the ratepayers and made a promise in exchange - no rate increases - which they promptly broke when wholesale prices went up. Ask the people of San Diego. The performance of the suppliers in this case - Enron, Reliant, etc. - is already the subject of public inquiry. But the California utility companies were meanwhile shipping the recovered nuke costs to their parent companies. ("We're still checking the DNA on those parents," said Wasserman.) And then, in a truly sublime move, the major California utility gave its executives huge bonuses just before it went into bankruptcy. Wasserman's suggested solution is that Californians should simply get themselves out of the grid by setting up municipally owned power companies. In rural areas, this can be done by counties or electric co-ops. He believes that what held the old system together for so long was not government regulation, which was always blatantly subject to manipulation by the utilities (as anyone who has ever covered a PUC can tell you), but rather the tension between the for- profits and the municipals. In the current issue of Business Week, the cover story is on Exxon Mobil's plan to take advantage of the "energy crisis." This would normally be funny, given that Exxon is in the oil business and (as most people outside the Oval Office are aware), the oil business has nothing to do with electricity. However, Exxon's acquisition of Mobil, which is rich in natural gas, unleashes a corporate behemoth of unprecedented size. Exxon also has a corporate culture that would give nightmares to "Chainsaw Al" Dunlap of business fame. Here are some interesting facts from the Rocky Mountain Institute: The cheapest source of new electricity is efficiency; the next cheapest is burning soft coal, which is a gross polluter; and the next cheapest after that is wind power - 2.5 cents per kilowatt- hour. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved.

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VentureWire, Wednesday, November 29, 2000

=09?=09 ?=09'VentureWire' =09Wednesday, November 29, 2000=09? ?=09CONTENTS | COMPANIES | INVESTORS=09? ?=09 =09 =09 =09top stories =09 =09* Weston Presidio Closes $1.3 Billion Fund =09* Report: Crosspoint Forgoes $1 Billion New Fund =09* Crosslink Capital Makes Add-ons but No New Investments in Q3 =09* Broadband Access Firm Allegro Gets $24 Million First Round =09 =09 =09 =09The elite of the burgeoning optical communications industry =09will be in one place, under one roof Feb 11-14: =09Optix2001 in Pasadena, CA. =09 =09This unusual event combines leaders in academia and business =09exchanging the latest on trends, recent developments, and =09the future of optical technology. If you are a player in the =09field, this is a special opportunity to learn from the =09world's experts. =09 =09The brightest corporate stars such as Don Smith, President =09of Nortel are joined by renowned academics such as =09Kerry J. Vahala, Professor of Applied Physics at Cal Tech, =09to provide a breadth of knowledge and insider perspective =09unique to the industry. =09 =09Participation at this event is subject to approval and is =09limited to senior executives involved in the optical =09communications industry. For your registration pack link=20 to:http://www.optix2001.com/ =09 =09 =09 =09new money =09 =09* Central European Telecom Firm Secures $50 Million=20 =09* Health Industry Software Firm Gets $500,000 in Open Series A =09* Internet Health Firm Verus Raises $1.2 Million First Round=20 =09* Scheduling App Firm ServiceU.com Gets $3.15 Million Series A =09* Wireless Net Marketing Firm Mobliss Gets Seed Funds =09* ASP United Messaging Closes Third Round with $70 Million =09* ID Management Firm Courion Gets $13.2 Million in Round Two =09* Performance Management Firm Wily Has $10 Million Round Two =09* Supply Chain Apps Firm Percite Gets $7.5 Million Series B =09* Web Identity Services Firm dotTV Has $28 Million in Series B =09* E-Manufacturing Software Firm Camstar Secures $22 Million =09* Passport Health Communications Raises $4.9 Series B =09* Web Security Firm Counterpane Lands $24 Million Third Round =09* Animated Virtual Guide Firm Kiwilogic Closes Third Round =09* Business Service Provider Virtual Growth Gets $21.5 Million =09* Mineral and Metal Marketplace Gets Funding from Votorantim =09* Motorola Takes Stake in Corporate Media Portal V-SPAN=20 =09* Softbank Invests in Diamond.com, Online Jewelry Source=20 =09* TL Ventures Funds European Webgroup with $4.4 Million =09* WineryExchange.com Raises $15 Million Series B =09* Business Service Firm DigitalWork Has $14 Million Round Four =09* Web Education Marketplace Embark Gets $5 Million in Debt =09* Wholesale Gift Distributor USgift Raises $8.5 Million=20 =09* CRM Service Firm Gets Funds, Changes Name to Cerida =09 =09 =09new products =09 =09* Komag, Storm Ventures and Summit in Joint Venture =09* Recruitment Firm MorganWorks.com Changes Focus and Name =09 =09 =09new deals =09 =09* Andersen Consulting Takes Stake in Deal with Yantra =09 =09 =09m&a =09 =09* QuantumShift to Buy ICE for $5 Million in Stock=20 =09* Eco Associates Buys Bankrupt Golf Site ChipShot.com =20 =09* Broadband Firm Mindport Acquires Infrastructure Firm Noochee =09* Radiology Software Firm Avreo Acquires Image Medical =09* TeamStaff Merges with Online Business Center Brightlane.com =09* Youth Sports Network Athelete.com Acquires HockeyWeb.com =09* zZounds Sold to Pinebrook Holdings, to Close Two Stores=20 =09 =09 =09new directors =09 =09* Ten Square Names Microsoft WebTV CFO to Board =09* Handheld Device Firm Extenex Taps Ex-Coherent Exec for Board =09* Web-Based ASP Worldo Names Ex-Fina CEO as Board Chairman=20 =09 =09 =09new people =09 =09* Wireless App Firm iConverse Names Ex-Interactive Exec as CEO =09* Telco Services Firm The GTX Names Chairman and CEO =09* App Firm SiteStuff Promotes COO to President =09* Wireless Firm Travelers Telecom Appoints New CEO =09 =09 =09vc fund news =09 =09* Three Arch Partners Raises $200 Million For New Fund =09* Hudson Ventures Closes Second Fund with $130 Million =09* Merck Forms New Investment Arm with $100 Million Purse =09* Info Appliance Software Firm Liberate Raises $50 Million =09* Business Accelerator STARTech Closes Fund with $32 Million =09* Pakistani Incubator KASB TechVentures Launches =09 =09 =09vc personnel =09 =09* Former Verizon Exec Named Managing Director of Carlyle Group =09* Metropolitan Venture Names Directors of European Branch =09 =09 =09vw corrections =09 =09* Edmunds.com =09 =09 =09TOP STORIES... NEW MONEY... NEW PRODUCTS... NEW DEALS... M&A... NEW=20 DIRECTORS... NEW PEOPLE... VC FUND NEWS... VC PERSONNEL... VW CORRECTIONS =09 =09 =09 =09 =09 =09 =09The world won't beat a path to your door just because you've =09built a dot.com. You have to have the right connections. =09Through the HP Garage Program, HP can get your name in front =09of the people who can speed your time-to-market and really =09help you succeed. (Marketing people. Web integration people. =09Hosting people. VC's.) You name it. And networking is only =09part of what the HP Garage Program has to offer. HP can help =09you finance it, build it, run it, and market it. So do what =09you do best. Invent. We'll help with the rest.http://www.garage.hp.com/ =09 =09 =09 =09top stories =09? =09Weston Presidio Closes $1.3 Billion Fund =09?=09?=09SAN FRANCISCO (VENTUREWIRE) -- Weston Presidio Capital Managemen= t said it ?closed Weston Presidio Capital IV, a venture capital fund with c= ommitments of ?$1.3 billion. This fund brings Weston Presidio's total capit= al under ?management to over $2.2 billion. The company said it seeks to bac= k ?exceptional management teams in any sector and has approximately a quart= er of ?its investments in mid to late stage technology firms. The fund's in= vestors ?include Golman Sachs, The Common Fund, and Chase Bank among others= . ?=09http://www.westonpresidio.com?=09?=09Report: Crosspoint Forgoes $1 Bi= llion New Fund?=09 =09 =09NEW YORK (VENTUREWIRE) -- Crosspoint Venture Partners has commitments fo= r a=20 new $1 billion fund but has decided not to raise the capital, according to = a=20 report in the Wall Street Journal. The reason for the delay is the difficul= t=20 environment for investing in new companies and generating high returns.=20 Crosspoint will raise the fund as soon as the environment improves, accordi= ng=20 to the report. Crosspoint raised an $850 million fund earlier this year.=20 =09http://www.cpvp.com =09 =09Crosslink Capital Makes Add-ons but No New Investments in Q3 =09?=09?=09SAN FRANCISCO (VENTUREWIRE) -- Crosslink Capital said that it ma= de no new ?investments in the third quarter of 2000. The firm said this was= the first ?time this happened since the fourth quarter of 1996. Crosslink = did commit ?additional capital to existing portfolio companies in the third= quarter. The ?firm invested in Brightmail, a provider of anti-spam softwar= e; NonStop ?Solutions, which develops chain automation software; Protocare,= a healthcare ?services company; and techies.com, which provides Web-based = IT recruiting ?services. The firm said it is evaluating potential investmen= ts in software, ?Internet infrastructure, and communications integrated cir= cuits companies. ?Crosslink Capital has more $800 million under management.= ?=09http://www.crosslinkcapital.com?=09?=09Broadband Access Firm Allegro = Gets $24 Million First Round?=09 =09 =09SAN JOSE, Calif. (VENTUREWIRE) -- Allegro Networks, which is developing = a=20 wholesale broadband access platform, said it has secured $24 million in its= =20 first round of funding from Bessemer Venture Partners, Columbia Capital, an= d=20 Infinity Capital. The company said it will use the funds to develop its=20 technology. Allegro Networks said it named P.J. Singh as its chief technica= l=20 officer and acting CEO. Mr. Singh co-founded Packet Engines.=20 =09http://www.allegronetworks.com =09 =09new money =09? =09Central European Telecom Firm Secures $50 Million=20 =09?=09?=09DUBLIN (VENTUREWIRE) -- eTel Group, a Dublin-based telecommunica= tions service ?provider that focuses on serving the Czech Republic, Hungary= , Poland, and ?Slovakia, said it raised $50 million from new investors. Dre= sdner Kleinwort ?Benson Private Equity led the round, which included Argus = Capital Partners, ?Greenhill Capital Partners, and Intel Capital. The compa= ny will use the ?funding for construction of fiber optic metropolitan area = networks in ?Budapest, Prague, and Warsaw. ?=09http://www.etel-group.com?= =09?=09Health Industry Software Firm Gets $500,000 in Open Series A?=09 =09 =09HOUSTON (VENTUREWIRE) -- Dynamic Health Strategies (DHS), a provider of= =20 software for healthcare audit preparation and report production, said it=20 raised $500,000 in an ongoing $3 million Series A round of funding. The=20 financing came from individuals. The company said it expects to raise the= =20 remaining $2.5 million within the next 3 or 4 weeks. The company will use t= he=20 funding to develop its software product. The company also plans to use=20 funding for sales, marketing, and general operating expenses.=20 =09http://www.dhsgroup.com =09 =09Internet Health Firm Verus Raises $1.2 Million First Round=20 =09?=09?=09BELLEVUE, Wash. (VENTUREWIRE) -- Verus, which develops Web appli= cations and ?Web sites for hospitals, said it raised $1.2 million in its fi= rst round of ?financing from Pacific Northwest Partners, Summit Law Group, = and Phase II ?this past August. The company said it will use the funds to g= row the ?business. ?=09http://www.verus-tech.com?=09?=09Scheduling App F= irm ServiceU.com Gets $3.15 Million Series A?=09 =09 =09MEMPHIS, T.N. (VENTUREWIRE) -- ServiceU.com, which makes a Web-based=20 scheduling application, said it has closed its Series A round of financing= =20 with a $3.15 million investment from Delta Venture Partners I and undisclos= ed=20 individual investors. The company said it will use the funds to increase=20 marketing. =20 =09http://www.serviceu.com =09 =09Wireless Net Marketing Firm Mobliss Gets Seed Funds =09?=09?=09SEATTLE, Wash. (VENTUREWIRE) -- Mobliss, a wireless Internet mar= keting ?technology company, said it has secured $200,000 in seed funding, p= lus a ?commitment for an additional $1 million, from venture capital firm I= nukshuk ?Limited Partnership, which is also based here. The company, which = previously ?received funding from individual investors, said it will use th= e funding to ?develop its technology and enhance marketing efforts. The Mo= bliss' ?technology permits marketers to reach users of wireless devices and= voice ?portals through branded promotional campaigns. ?=09http://www.mobli= ss.com?=09?=09ASP United Messaging Closes Third Round with $70 Million?=09 =09 =09WEST CHESTER, Pa. (VENTUREWIRE) -- United Messaging, an enterprise messa= ging=20 service provider, said it closed a $70 million third round of financing led= =20 by Broadview Capital Partners. New investors First Union Capital Partners,= =20 Comcast Interactive Capital, and Brinson Partners, and previous investors= =20 Internet Capital Group, Oak Investment Partners, Infinity Capital, and=20 Labrador Ventures participated in the round as well. United Messaging is a= =20 global application service provider that offers hosted messaging and=20 professional services. The company said it will use the funding to expand= =20 service platforms in the U.S. and abroad, to support the launch and promoti= on=20 of its existing and upcoming messaging technologies and services, and to op= en=20 new sales offices in Europe and Asia. Broadview and First Union will each= =20 receive a seat on United Messaging's board of directors. =20 =09http://www.unitedmessaging.com =09 =09ID Management Firm Courion Gets $13.2 Million in Round Two =09?=09?=09FRAMINGHAM, Mass. (VENTUREWIRE) -- Courion, which develops self-= service ?identity management software, said it secured $13.2 million in it= s second ?round of funding led by QuestMark Partners. Other investors inclu= de Riggs ?Capital and previous investors JMI Equity and Massachusetts Techn= ology ?Development. The company will use the funds to add new products, and= to ?expand into Internet commerce and international markets. ?=09http://ww= w.courion.com?=09?=09Performance Management Firm Wily Has $10 Million Round= Two?=09 =09 =09BURLINGAME, Calif. (VENTUREWIRE) -- Wily Technology, a provider of=20 performance management software for Java Web applications, said it raised $= 10=20 million in its second round of funding. Previous investors Greylock=20 Management and BEA Systems participated along with new investor Accel=20 Partners. The company will use the funds to expand its Web application=20 management product portfolio, and for sales and marketing.=20 =09http://www.wilytech.com =09 =09Supply Chain Apps Firm Percite Gets $7.5 Million Series B =09?=09?=09FORT LEE, N.J. (VENTUREWIRE) -- Percite Information Technologies= , which ?produces a supply chain management application for the global trad= e and ?freight industry, said it has raised $7.5 million in a Series B roun= d led by ?BRM Group. Other investors in the round included GreenSpring Vent= ures and ?previous backers Neuron and Gerard Klauer Mattison & Co. The comp= any said it ?will use the funds to expand operations in the U. S. and the F= ar East. ?=09http://www.percite.com?=09?=09Web Identity Services Firm = dotTV Has $28 Million in Series B?=09 =09 =09LOS ANGELES (VENTUREWIRE) -- dotTV, which provides Web identity services= =20 including Web addresses ending in .tv, said it has raised approximately $28= =20 million in its Series B round of funding. VeriSign, through its investment= =20 arm, NSI Capital Management, led this round,which also included=20 UnitedGlobalCom, Munder Capital Management, Mark Asset Management and Compa= ss=20 Asset Management. The company said it will use the funds to expand its=20 international sales and marketing efforts. =20 =09http://www.tv =09 =09E-Manufacturing Software Firm Camstar Secures $22 Million =09?=09?=09CAMPBELL, Calif. (VENTUREWIRE) -- Camstar Systems, a provider of= electronic ?manufacturing software technology for Fortune 100 companies, s= aid it has ?secured $22 million in a venture capital round led by HarbourVe= st Partners. ?The round also included Glenmount International and Dominion = Ventures. The ?company said it will use the funds to expand into the supply= chain network ?market. ?=09http://www.camstar.com?=09?=09Passport Health= Communications Raises $4.9 Series B?=09 =09 =09FRANKLIN, Tenn. (VENTUREWIRE) -- Passport Health Communications, a provi= der=20 of Web-based administrative and financial process services for the health= =20 care industry, said it raised $4.9 million as part of its Series B round of= =20 funding. Previous investors Greenfield Investments, CB Health=20 Ventures,Coleman, Swenson, Hoffman & Booth, Anvers L.P., SSM Ventures,=20 Dauphin Capital Partners, and Evergreen Investments participated in the=20 round. Passport said it will use the capital to further expand its sales=20 force in targeted markets and to develop additional payer connectivity and= =20 content. The company has raised approximately $17.5 million to date. =20 =09http://www.passporthealth.com =09 =09Web Security Firm Counterpane Lands $24 Million Third Round =09?=09?=09SAN JOSE, Calif. (VENTUREWIRE) -- Counterpane Internet Security,= which ?provides monitoring as well as penetration prevention and detection= for ?computer networks, said it raised $24 million in its third round of f= unding. ?The funds came from new investors Amerindo Investment Advisors, Cl= earLight ?Partners, Dell, and a Deutsche Bank venture capital fund, as well= as previous ?investors Accel Partners, Bessemer Venture Partners, The Gold= man Sachs Group, ?and Morgan Stanley Dean Witter Private Equity. The compan= y will use the funds ?to expand its business development, sales operations,= research and ?development, and to expand into the Western Europe and Asia = Pacific markets.?=09http://www.counterpane.com?=09?=09Animated Virtual Guid= e Firm Kiwilogic Closes Third Round?=09 =09 =09Hamburg, Germany (VENTUREWIRE) -- Kiwilogic, a company that creates anim= ated=20 virtual guides, said it closed its third round of funding with an undisclos= ed=20 amount from 3i. The company did say the round was larger than the company's= =20 second $5.2 million round, which was led by Earlybird Venture Capital in=20 September. Kiwilogic has developed Lingubot, an animated virtual sales=20 assistant that can be installed on Web sites. A representative from 3i will= =20 join Kiwilogic's board of directors.=20 =09http://www.kiwilogic.com =09 =09Business Service Provider Virtual Growth Gets $21.5 Million =09?=09?=09NEW YORK (VENTUREWIRE) -- Virtual Growth, which offers Internet-= based ?accounting and business services to small and medium-sized businesse= s, said ?it closed a $21.5 million Series C round of financing. ETF Group, = a global ?venture capital group, led the round. Other participants include = previous ?investors Citigroup Investments, a subsidiary of Citigroup; Besse= mer Venture ?Partners; StarVest Partners; Chelsea Capital Partners; and str= ategic partner, ?Administaff. The company said it will use the funds for fu= rther product ?development, to expand its new regional headquarters in Colu= mbia, South ?Carolina, and for marketing. ?=09http://www.virtualgrowth.com?= =09?=09Mineral and Metal Marketplace Gets Funding from Votorantim?=09 =09 =09LOS ANGELES (VENTUREWIRE) -- Quadrem, an online marketplace for mining,= =20 minerals, and metals, said that Votorantim Venture Capital, the venture arm= =20 of industrial giant Votorantim Group of Brazil, has become a founding=20 shareholder of Quadrem. Other founding shareholders of include Alcan=20 Aluminium Limited, Alcoa, Anglo American, Barrick Gold, BHP, Corporacion=20 Nacional del Cobre de Chile (CODELCO), Companhia Vale do Rio Doce (CVRD), D= e=20 Beers Consolidated Mines, Imerys, Inco Limited, Newmont Mining, Noranda.=20 Normandy Mining, Pechiney, Phelps Dodge , Rio Tinto, WMC Limited, and Morga= n=20 Stanley Dean Witter. =20 =09http://www.quadrem.com =09 =09Motorola Takes Stake in Corporate Media Portal V-SPAN=20 =09?=09?=09King of Prussia, Pa. (VENTUREWIRE) -- V-SPAN, a portal which pro= vides ?corporations and other institutions with Web-based multimedia collab= oration ?services over broadband networks, said it entered into a strategic= ?relationship with Motorola, which includes an investment by Motorola in i= ts ?Series B preferred stock. V-SPAN and Motorola's Broadband Communicatio= ns ?Sector will enter into two strategic initiatives. The companies will fo= cus on ?video communications services using digital set-top terminals, as w= ell as on ?broadband VPN solutions for mobile professionals and remote work= ers. ?Motorola's investment brings total raised in Series B funding to $38 = million. ?Previous investors in the round include Goldman Sachs & Co., Comc= ast ?Interactive Capital, and Enron Broadband. VSPAN is also backed by MF P= rivate ?Capital, J & W Seligman, Boston Millennia Partners, Harron Capital,= B-ETC, ?and Edison Ventures! . ?=09http://www.vspan.com?=09?=09Softbank In= vests in Diamond.com, Online Jewelry Source ?=09 =09 =09FT. LAUDERDALE, Fla. (VENTUREWIRE) -- Diamond.com, an online retailer of= =20 certified diamonds, jewelry, and watches, said it has closed a new round of= =20 financing with Softbank Capital Partners. The actual amount of funds raised= =20 was not disclosed. The Steinmetz Group also participated in the round, alon= g=20 with STI Ventures, Data Investments, and the Lipton Group. The company said= =20 it will use the funds to solidify its market position in the U.S. and abroa= d.=20 Odimo, majority owned by Softbank Capital Partners and The Steinmetz Diamon= d=20 Group, purchased Diamond.com in May. In March, Softbank committed $125=20 million to fund joint ventures aimed at establishing Odimo.com operations= =20 worldwide. =20 =09http://www.diamond.com =09 =09TL Ventures Funds European Webgroup with $4.4 Million =09?=09?=09WAYNE, Pa. (VENTUREWIRE) -- TL Ventures said it funded European = Webgroup ?(EWG) of Zug, Switzerland, with an investment of $4.4 million. TL= Ventures ?said it was making the investment to strengthen its ties to Euro= pe and ?provide a network for its portfolio companies. EWG focuses on early= stage ?investment in European and U.S companies in the business-to-busines= s, ?business-to-consumer, enterprise applications and tools, enabling techn= ology, ?and IT infrastructure sectors. EWG's portfolio companies include i-= drive.com, ?Offroad Capital, Pefa.com, and SubmitOrder.com ?=09http://www.= europeanwebgroup.com?=09http://www.tlventures.com?=09?=09WineryExchange.com= Raises $15 Million Series B?=09 =09 =09NOVATO, Calif. (VENTUREWIRE) -- WineryExchange.com, an online marketpla= ce=20 for the wine industry, said it received $15 million in its Series B round o= f=20 funding from new investors Charter Venture Capital and Cahill, Warnock & Co= .=20 Previous investors Venrock Associates and 3i Technology Partners also=20 participated in the round. The funds will be used for international=20 expansion, product roll-out, and customer service. The company has raised $= 24=20 million to date. WineryExchange is also backed by vTraction, the Internet= =20 initiative of Netherlands-based Rabobank; Draper Richards, and individual= =20 investor Fred Warren, founder of Brentwood Associates. =20 =09http://www.wineryexchange.com =09 =09Business Service Firm DigitalWork Has $14 Million Round Four =09?=09?=09CHICAGO (VENTUREWIRE) -- DigitalWork.com, which provides Web-bas= ed business ?services to small businesses, said it received $14.3 million i= n its fourth ?round of funding. Wells Fargo & Co. and VerticalNet participa= ted in this ?round, along with previous investors Draper Fisher Jurvetson, = TL Ventures, ?Information Technology Ventures, and PurchasePro.com. The com= pany will use ?the funds for working capital. ?=09http://www.digitalwork.co= m?=09?=09Web Education Marketplace Embark Gets $5 Million in Debt?=09 =09 =09SAN FRANCISCO (VENTUREWIRE) -- Embark, which provides services related = to=20 higher education aimed at helping individuals manage transactions such as= =20 recruitment or admissions processes, said it received $5 million in debt=20 financing from Morgan Stanley Dean Witter Venture Partners, Norwest Venture= =20 Partners, and Doll Capital Management. The company will use the funds for= =20 general operating expenses. =09http://www.embark.com =09 =09Wholesale Gift Distributor USgift Raises $8.5 Million=20 =09?=09?=09ATLANTA (VENTUREWIRE) -- USgift, which provides services for the= wholesale ?exchange of gift, garden and home products, said it raised $8.5= million in a ?funding round led by Internet Capital Group. USgift said it = will receive $4 ?million immediately, and the remaining $4.5 million on Feb= ruary 1, 2000. The ?company said it will use the funds to continue with its= strategy of ?partnering with sales agencies. This additional investment br= ings the total ?amount of venture capital raised by the company to $40 mill= ion. USgift has ?secured funds from Gilbert Global Equity Partners, Ingram = Industries and ?other undisclosed investors. ?=09http://www.usgift.com?= =09?=09CRM Service Firm Gets Funds, Changes Name to Cerida?=09 =09 =09PITTSFIELD, Mass. (VENTUREWIRE) -- TeleSales, which provides customer= =20 relationship management services, said it changed its name to Cerida and=20 closed a round of funding, the amount of which was not disclosed. Investors= =20 were the Berkshires Capital Investors, Fleet Development Ventures, Marathon= =20 Investment Partners, North Atlantic Capital, and Boston Community Venture= =20 Fund. The company will use the funds to expand its customer interaction=20 centers, and for hiring and marketing. =20 =09http://www.cerida.com =09 =09new products =09? =09Komag, Storm Ventures and Summit in Joint Venture =09?=09?=09SAN JOSE, Calif. (VENTUREWIRE) -- Publicly traded Komag, which p= roduces media ?for disk drives, said it formed a new company with Storm Ven= tures Fund II and ?Summit Partners, with investments totaling $24 million. = Storm Ventures and ?Summit Partners co-led the financing. The new company, = Chahaya, will provide ?manufacturing services focused on the optical compon= ents and subsystems ?sectors. Komag said it provided 50% of the new company= 's initial ?capitalization. Storm Ventures co-founder Sanjay Subhedar, Summ= it Partners ?managing partner Walker G. Kortschak, Komag chairman Chris Eyr= e and CEO T.H. ?Tan will sit on Chahaya's board of directors. ?=09http://w= ww.komag.com?=09http://www.stormventures.com?=09http://www.summitpartners.c= om?=09?=09Recruitment Firm MorganWorks.com Changes Focus and Name?=09 =09 =09CHICAGO (VENTUREWIRE) -- MorganWorks.com, a Web-based employment recruit= ing=20 company that outsources its software to other Web sites, said it is changin= g=20 its name to Morgan International. Company president and COO Lloyd R. Singer= =20 said the company will step back from new technology development and focus o= n=20 its primary business of staffing services. The company laid off employees i= n=20 August, but said the layoffs were minor and mostly by attrition. The=20 company's president and CEO Rick Salvadore and chairman Bernie Layton left= =20 the company in early October. William A. Lederer of Minotaur Partners is no= w=20 serving as chairman of the company. The company said it will put a splash= =20 page in place of its Web site by this Friday. Morgan International is backe= d=20 by Minotaur Partners.=20 =09http://www.morganworks.com =09 =09new deals =09? =09Andersen Consulting Takes Stake in Deal with Yantra =09?=09?=09NEW YORK (VENTUREWIRE) -- Andersen Consulting announced a strate= gic alliance ?with Yantra, a provider of management technology for the manu= facturing and ?retail industries. Yantra will provide its PureEcommerce sof= tware, which ?manages, tracks and executes customer transactions across a c= ompany supply ?chain, to Andersen Consulting Supply Chain Solution centers = and Business ?Launch centers. AC Ventures, the venture capital arm of Ander= sen Consulting, ?has taken an undisclosed equity stake in Yantra. Yantra is= backed by Morgan ?Stanley Dean Witter, Broadvision, VerticalNet, Amerindo,= Eastman Chemical, ?Charles River Ventures, Hambrecht & Quist, One Liberty = Ventures, RHO ?Management, Draper International, and Boston Millennia Partn= ers.?=09http://www.ac.com?=09http://www.yantra.com?=09?=09m&a?=09??=09Quant= umShift to Buy ICE for $5 Million in Stock ?=09 =09 =09SAN FRANCISCO (VENTUREWIRE) -- QuantumShift, a provider of telecommunica= tions=20 management services, said it has agreed to acquire ICE Communications, a=20 business-to- business application service provider for wireless=20 telecommunications, in a transaction valued at $5 million in stock. Matt=20 Fuller, chief executive officer of ICE Communications, will be the company'= s=20 vice president of product marketing. QuantumShift plans to integrate ICE's= =20 technology into its communications offerings. QuantumShift recently receive= d=20 $68 million in Series C funding from Bowman Capital Partners, Thomas Weisel= =20 Partners, Morgan Stanley Dean Witter, Mayfield Fund, Texas Pacific Group,= =20 Presidio Ventures, Wilson Sonsini, and Comdisco. =09http://www.icewireless.com =09http://www.quantumshift.com =09 =09Eco Associates Buys Bankrupt Golf Site ChipShot.com =20 =09?=09?=09AUSTIN, Texas (VENTUREWIRE) -- Interfase Capital-affiliate Eco A= ssociates, ?which invests in struggling e-commerce companies, said it acqui= red all the ?assets of Chipshot.com, a Sunnyvale, Calif.-based online retai= ler of golf ?merchandise. Terms of the deal were undisclosed. The company f= iled for ?Chapter 11 bankruptcy protection on Sept. 28, 2000. Eco Associate= s plans to ?restructure the company and will feature Chipshot.com on Mall.c= om, an ?Interfase affiliate. Chipshot was originally backed by Comdisco Ven= tures, ?Damac Investors, Glynn Ventures, the New Economy Fund, Oracle Ventu= re Fund, ?Sequoia Capital, and Sumitomo.?=09http://www.chipshot.com?=09?=09= Broadband Firm Mindport Acquires Infrastructure Firm Noochee?=09 =09 =09SAN DIEGO, Calif. (VENTUREWIRE) -- Mindport, a broadband content delive= ry=20 applications subsidiary of MIH, an interactive media and technology firm,= =20 said it has taken a 70% stake in Noochee, a Colorodo Springs-based Internet= =20 infrastructure and software firm. The Noochee location will become Mindport= 's=20 Colorado office. In February of this year, Cisco took a 10% stake in Nooche= e=20 for less than $10 million. Other backers in Noochee include Crimson Capital= ,=20 Vantage Point Venture Partners, and Dixon Doll, co-founder of Noochee and= =20 head of Doll Capital. =20 =09http://www.mindport.com =09 =09Radiology Software Firm Avreo Acquires Image Medical =09?=09?=09CHICAGO (VENTUREWIRE) -- Avreo, an Internet software developer f= or the ?radiology industry, said it acquired Image Medical, a provider of i= mage ?management systems for radiology. Terms of the deal were undisclosed.= Sam ?Willcoxon, chief executive officer of Image Medical, will remain with= the ?company as president and chief operating officer. Avreo will market a= nd ?integrate Image Medical's PracticeBuilder product, an Internet-based im= age ?viewing technology, into its own product offerings. Avreo is funded by= ?individual investors.?=09http://www.avreo.com?=09http://www.imagemedical.= com?=09?=09TeamStaff Merges with Online Business Center Brightlane.com?=09 =09 =09SOMERSET, N.J. (VENTUREWIRE) -- TeamStaff, a national professional emplo= yer=20 organization, said it has merged with Brightlane.com, a privately-held onli= ne=20 business center, to form a new business process outsourcing services=20 organization. The merged company will provide small and middle market=20 business with a full service co-employment relationship or the opportunity = to=20 select specific products such as banking, payroll, benefits and other=20 services. T.Stephen Johnson, the chairman of Brightlane, will become chairm= an=20 of the board of the combined entity. Brightlane was funded in part by First= =20 Union e-Ventures. The company also received funding from Nationwide=20 Financial. =20 =09http://www.brightlane.com =09http://www.teamstaff.com =09 =09Youth Sports Network Athelete.com Acquires HockeyWeb.com =09?=09?=09NEW YORK (VENTUREWIRE) -- Athlete.com, a multimedia youth sports= network, ?said it is acquiring HockeyWeb.com, a Web-based management tool = for hockey ?teams and leagues. The financial terms of the acquisition were = not disclosed. ?Athelete.com said it will integrate HockeyWeb into its newl= y launched site, ?www.athlete.com, by the end of the year. Athlete.com has = received funding ?from Millenium Three Capital Partners and ING Barings. ?= =09http://www.athlete.com?=09http://www.hockeyweb.com?=09?=09zZounds Sold t= o Pinebrook Holdings, to Close Two Stores ?=09 =09 =09CHICAGO (VENTUREWIRE) -- zZounds.com, a retail subsidiary of the=20 music-focused Web site HarmonyCentral.com, said it is being sold to Pinebro= ok=20 Holdings. Terms of the deal were undisclosed. zZounds will continue to=20 operate its Web site, which sells musical instruments and recording gear, b= ut=20 will close two Chicago area retail stores. HarmonyCentral decided to sell t= he=20 site when it decided to forego retailer revenues in favor of a=20 retailer-neutral strategy. Ray Worthy Campbell, zZound founder and former= =20 CEO, will remain with Harmony Central as CEO and chairman. zZound is backed= =20 by Vulcan Ventures, Zilkha Venture Partners, and several individual investo= rs. =09http://www.zzounds.com =09 =09new directors =09? =09Ten Square Names Microsoft WebTV CFO to Board =09?=09?=09SAN JOSE, Calif. (VENTUREWIRE) -- Ten Square, an interactive poi= nt-of-sale ?broadcasting and publishing company, said it appointed Albert A= . (Rocky) ?Pimentel to its board of directors. Mr. Pimentel currently serve= s as CFO and ?senior vice president at Microsoft WebTV Networks, which prov= ides enhanced TV ?services using Internet and digital technologies. Mr. Pim= entel has served on ?the board of several companies including Livingston En= terprises, SoftCom ?Microsystems, CrossWorlds Software, ConXion, and NetCel= l. Ten Square's ?investors include Marconi, BP Amoco, Chevron, BEA Systems,= Blackboard ?Ventures, Bay Partners, and APV Technology Partners. ?=09htt= p://www.tensquare.com?=09?=09Handheld Device Firm Extenex Taps Ex-Coherent = Exec for Board?=09 =09 =09SOQUEL, Calif. (VENTUREWIRE) -- Extenex, a handheld device firm, said it= has=20 appointed Hank Gauthier to its board. Mr. Gauthier is chairman and a former= =20 executive of Coherent, a laser technology firm. Extenex raised a $2.1 milli= on=20 Series A round in August led by Vanguard Atlantic. =20 =09http://www.extenex.com =09 =09Web-Based ASP Worldo Names Ex-Fina CEO as Board Chairman=20 =09?=09?=09NEW YORK (VENTUREWIRE) -- Worldo, a Web-based application servic= e provider, ?said it has appointed Ron Haddock, the former president and ch= ief executive ?officer of Fina Petroleum, as chairman of its board of direc= tors. Prior to ?Fina, Mr. Haddock was vice president and director of Exxon.= Worldo is backed ?by Continuation Investments N.V. Group, Easton Hunt Capi= tal Partners of New ?York, and the New York Community Investment Company. = ?=09http://www.worldo.com?=09?=09new people?=09??=09Wireless App Firm iCo= nverse Names Ex-Interactive Exec as CEO?=09 =09 =09WALTHAM, Mass. (VENTUREWIRE) -- iConverse, a wireless applications firm,= said=20 it has appointed Ron Matros, a former executive at Web publishing company= =20 FutureTense, as president and CEO, replacing cofounder Andy Fox, who is now= =20 chairman of the board. iConverse is funded by Advanced Technology Ventures= =20 and Prism Venture Partners. =20 =09http://www.iconverse.com =09 =09Telco Services Firm The GTX Names Chairman and CEO =09?=09?=09WASHINGTON (VENTUREWIRE) -- The GTX, a service provider for ?tel= ecommunications carriers, said it appointed Charles Menatti as chairman, ?= president, and CEO, replacing Phil Anderson as CEO, who will now serve as a= ?consultant and remain on the board of directors. Previously Mr. Menatti ?= served as president of The GTX's European operations. Prior to joining the = ?company, he served as president of European development for CompleTel. The= ?company is backed by Washington Investment Partners and Lucent. ?=09http:= //www.thegtx.com?=09?=09App Firm SiteStuff Promotes COO to President?=09 =09 =09AUSTIN, Texas (VENTUREWIRE) -- SiteStuff, which develops applications fo= r=20 maintenance and other services related to the commercial real estate=20 industry, said it has appointed COO Eugene W. Long as president. SiteStuff= =20 said Mr. Long will use his international experience as global director of= =20 supply chain operations at Ernst & Young, president of global logistics at= =20 Burlington Air Express, and director of worldwide logistics at Dell to assi= st=20 in SiteStuff's international expansion. The company raised $40 million in i= ts=20 Series B round of funding this past August, with $30 million from commercia= l=20 real estate firms CB Richard Ellis, Jones Lang LaSalle, and Tramell Crow an= d=20 the rest from previous investors. =20 =09http://www.sitestuff.com =09 =09Wireless Firm Travelers Telecom Appoints New CEO =09?=09?=09LOS ANGELES (VENTUREWIRE) -- Travelers Telecom, a wireless commu= nications ?technology and applications firm, said it has appointed Robert L= . Corey, ?former CEO of Novatel Wireless, as the company's first CEO. Trave= lers Telecom ?said it is backed by several undisclosed venture firms. ?= =09http://www.travtel.com?=09?=09vc fund news?=09??=09Three Arch Partners R= aises $200 Million For New Fund?=09 =09 =09MENLO PARK, Calif. (VENTUREWIRE) -- Three Arch Partners said it has comp= leted=20 the first closing of its new fund, Three Arch Capital, raising $200 million= .=20 The company expects to raise a total of $290 million and will target=20 developmental stage companies in the biotechnology, healthcare information= =20 technology and services, and medical devices sectors. The average investmen= t=20 size will be $10-$15 million. The partners in the fund are Tom Fogarty, Wil= f=20 Jaeger, Mark Wan, Barclay Nicholson, Richard Lin, Bill Harrington, Jeff Bir= d,=20 and Mark Wan. =20 =09http://www.threearchpartners.com =09 =09Hudson Ventures Closes Second Fund with $130 Million =09?=09?=09NEW YORK (VENTUREWIRE) -- Hudson Ventures said it closed its sec= ond venture ?capital fund, Hudson Venture Partners II, with $130 million. T= he fund will ?focus on technology firms in New York. The firm's first fund = was a $42 ?million fund that focused on Series A investments between $500,0= 00 and $2 ?million. This second fund will branch out to more Series B round= investments ?with investments between $2 million and $5 million. The new f= und, which was ?raised mostly from individuals, including $20 million from = the firm's own ?partners, has invested in three start-ups so far. The new p= ortfolio companies ?in the current fund are Centor Software, an XML-based s= ervice provider for ?financial transactions; E-Tran Solutions, a software p= rovider for web ?application deployment; and ZapSpot, a person-to-person AS= P. ?=09http://www.hudsonventures.com?=09?=09Merck Forms New Investment Arm = with $100 Million Purse?=09 =09 =09WHITEHOUSE STATION, N.J. (VENTUREWIRE) -- Merck announced it has formed = a new=20 subsidiary, Merck Capital Ventures, that will invest up to $100 million in= =20 private Internet companies and businesses focused in areas related to the= =20 commercialization, distribution and delivery of pharmaceuticals and related= =20 health care services. Per G. H. Lofberg stepped down as the chairman of=20 Merck-Medco, to head the new venture as president. Merck Capital Ventures,= =20 which will be based in Montvale, N.J., said it will immediately begin=20 searching for investment opportunities. The company added the fund will not= =20 be used to invest in research-based pharmaceutical, vaccine, or biotechnolo= gy=20 companies. =20 =09http://www.merck.com =09 =09Info Appliance Software Firm Liberate Raises $50 Million =09?=09?=09SAN CARLOS, Calif. (VENTUREWIRE) -- Liberate Technologies, which= provides a ?software platform for delivering Internet-enhanced content and= applications ?to information appliances, said it has launched Liberate Cor= porate Venture ?Fund, a $50 million fund. The fund will focus on the intera= ctive television ?industry. The fund will make its first investment of $7 m= illion in Two Way ?TV, a company providing interactive gaming and enhanced = television ?applications. Liberate has also invested in iTV companies, ICE = Interactive, ?Diva Systems and Everypath. ?=09http://www.liberate.com?= =09?=09Business Accelerator STARTech Closes Fund with $32 Million?=09 =09 =09RICHARDSON, Texas (VENTUREWIRE) -- STARTech, a high-tech business=20 accelerator, said it closed its Seed Fund II at nearly $32 million. STARTec= h=20 said it anticipates that Seed Fund II will support about 50 to 60 future=20 startups with $100,000 to $900,000 each. All Seed Fund I investors invested= =20 in Seed Fund II, including Austin Ventures, Capital Southwest Corp., and=20 CenterPoint Ventures. New investors include Access Venture Partners, Arkoma= =20 Venture Partners, and Chisholm Private Capital Partners. STARTech program= =20 companies that have received Seed Fund II investments include E-Tron, an=20 engineering services provider for in-structure wireless telecommunications;= =20 PowerUp Networks, a services provider that automates the process of deployi= ng=20 networks; and TeleCentric, an Internet business services provider for the= =20 telecom industry.=20 =09http://www.startech.org =09 =09Pakistani Incubator KASB TechVentures Launches =09?=09?=09LAHORE, Pakistan (VENTUREWIRE) -- Khadim Ali Shah Bukhari & Co.,= a ?Pakistan-based investment firm, said it launched KASB TechVentures, an = ?incubator for Internet businesses. The new incubator will focus on ?Pakist= an-based businesses and invest between $100,000 and $1 million in its ?port= folio companies. The incubator will fund companies in the infrastructure, ?= networking, software, hardware, Internet, telecom, and financial services ?= sectors.?=09http://www.kasbtv.com?=09?=09vc personnel?=09??=09Former Verizo= n Exec Named Managing Director of Carlyle Group?=09 =09 =09WASHINGTON (VENTUREWIRE) -- The Carlyle Group, a private equity firm, sa= id it=20 appointed James A. Attwood as managing director and head of its global=20 telecommunications and media investment team. Mr. Attwood was formerly vice= =20 president of strategy, development, and planning at Verizon Communications.= =20 Mr. Attwood will be based out of the company's New York office. Carlyle=20 focuses on telecommunication and media companies and currently manages more= =20 than $12 billion in private equity funds. =09http://www.thecarlylegroup.com =09 =09Metropolitan Venture Names Directors of European Branch =09?=09?=09LONDON (VENTUREWIRE) -- Metropolitan Venture Partners (MetVP), a= n early stage ?technology venture capital fund, said it opened its European= business with ?the appointment of Adrian Blumfield as chief executive offi= cer and Nick Wood ?as managing director. Mr. Blumfield previously served as= head of strategic ?planning for the Man Group. Nick Wood joins MetVP from = The NewMedia Group in ?London, a European early stage technology and Inter= net investment company. ?MetVP is backed by the Man Group, a London listed = international financial ?services company, and by Lawrence D. Hite, founder= and managing director of ?Mint Investment Management Company. MetVP has st= akes in ten technology ?businesses in the US covering the software, Interne= t services and e-commerce ?sectors. MetVP is actively seeking investments = in the US and Europe in early ?stage technology businesses. ?=09http://www.= metv! p.com?=09?=09vw corrections?=09??=09Edmunds.com?=09 =09 =09NEW YORK (VENTUREWIRE) -- An item in yesterday's VentureWire incorrectly= =20 identified Peter Steinlauf as the founder of Edmunds.com. He was not the=20 founder, but has led the company since he purchased it in 1986. The item al= so=20 misstated the titles of Bob Thomas. He was formerly CEO of North American= =20 operations and has been promoted to COO of the overall company. =20 =09 =09company index =09?=09?=09Allegro Networks, Andersen Consulting, Athlete.com, Avreo, Brigh= tLane.com, ?Camstar Systems, Cerida, chipshot.com, Counterpane Internet Sec= urity, Courion?, Crosslink Capital, Crosspoint Venture Partners, Diamond.co= m, ?DigitalWork.com, dotTV, Dynamic Health Strategies, Embark.com, eTel Gro= up, ?European Webgroup, Extenex, HockeyWeb.com, Hudson Ventures, ICE ?Commu= nications, iConverse, Imagemedica! l.com, KASB TechVentures, Kiwilogic, ?Ko= mag, Liberate Technologies, Merck, Metropolitan Venture Partners, Mindport,= ?Mobliss, MorganWorks.com, Passport Health Communications, Percite Informa= tion ?Technologies, Quadrem, QuantumShift, ServiceU.com, SiteStuff.com, Sta= rtech, ?Storm Ventures, Summit Partners, TeamStaff, Ten Square, The Carlyle= Group, ?The Global TeleExchange, Three Arch Partners, TL Ventures, Travele= rs Telecom, ?United Messaging,! USgift.com, V-SPAN, Verus, Virtual Growth, = Weston Presidio ?Capital, Wily Technology, WineryExchange, Worldo, Yantra, = zZounds.com?=09?=09?=09?=09CONNECTED COFFEE??=09?=09It's no longer a pipe d= ream. Lavazza and eDevice have?=09unveiled the world's first Internet-enabl= ed espresso maker.?=09Further, Web tablets, Internet radios, and other conn= ected?=09appliances are popping up everywhere. But business models?=09and r= evenue streams have proven elusive. The consumer?=09devices panel at Techno= logy Outlook 2000, will explore?=09some of the difficulties of this emergi= ng market with:?=09?=09* Safi Qureshy, Chairman, AudioRamp?=09* Daniel H. R= imer, Partner, The Barksdale Group?=09* Kent Savage, President & CEO, Netpl= iance?=09* Michael Slater, President, PhotoTablet?=09?=09Technology Outlook= 2000: The Future of Pervasive Computing?=09December 4 and 5, San Francisco= http://technologicpartners.com/tp/conf/to2000/?=09?=09?=09investor index?= =09 =09 =093i Group, 3i Group, Accel Partners, Accel Partners, Alcan Aluminium Limi= ted,=20 Alcoa, Amerindo Investment Advisors, Anglo American Security Fund, Argus=20 Capital, BEA Systems, Bessemer Venture Partners, Brinson Partners, Broadvie= w=20 Capital Partners, Cahill, Warnock & Company, Charter Growth Capital,=20 Clearlight Partners, Comcast Interactive Capital Group, Dell Computer,=20 Deutsche Bank, Draper Fisher Jurvetson, Dresdner Kleinwort Benson, First=20 Union Capital P! artners, Goldman Sachs Group, Greenhill Capital Partners,= =20 Greylock Management, Infinity Capital, Information Technology Ventures, Int= el=20 Capital, Internet Capital Group, Inukshuk Limited Partnership, Labrador=20 Ventures, Morgan Stanley Dean Witter Private Equity, Oak Investment Partner= s,=20 PurchasePro.com, TL Ventures, TL Ventures, Venrock Associates, VerticalNet,= =20 Votorantim Venture Capital, Wells Fargo =09 =09 =09 =09 =09 =09Encourage your friends and colleagues to subscribe to VentureWire at=20 http://venturewire.net/register.asp =09 =09Send news items to [email protected] =09 =09Send questions, complaints, or service queries to venturewire@venturewir= e.com =09 =09To change your e-mail address visit our account administration page at= =20 http://venturewire.net =09 =09To unsubscribe send e-mail to [email protected] =09 =09This newsletter was mailed to you at: [email protected] =09 =09 =09This copy of VentureWire may be distributed freely, provided that the=20 distribution is without charge, that the issue is distributed complete and= =20 unaltered, and that all copies retain the Technologic copyright notice. Th= is=20 copy of VentureWire and the information within it, however, may not be=20 reproduced, saved, or otherwise copied into a database without the prior=20 written consent of Technologic Partners. =09 =09 =09VentureWire is a service mark of Technologic Partners =09, 2000 Technologic Partners =09=09?

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VentureWire, Tuesday, May 22, 2001

=09=09?=09 ?=09VentureWire =09Tuesday, May 22, 2001=09=09? ?=09CONTENTS | COMPANIES | INVESTORS | ADVERTISE | TELL A FRIEND=09VentureW= ire Index =09=09'VentureWire =09=09today: 737.6 ? +3.36%=09? ? =09=09 =09=09 =09=09top stories =09=09 =09=09 =01=07 Kodiak Venture Partners Closes Fund II with $290M =09=09 =01=07 Mercury Pays $147M for Freshwater Software =09=09 =01=07 Manufacturing Services Firm Celetron Lands $48M Round One=20 =09=09=01=07 TVM Has First Close on New Life Science Fund =09=09 =09=09UPCOMING EVENTS=20 =09=09 Enterprise Outlook 2001 =09=0990 private enterprise companies already comfirmed to present their bu= siness=20 plans. Register for Enterprise Outlook to learn more!=20 =09=09 =09=09TODAY'S FEATURES=20 =09=09Lucent's Investment Pace Slows =09=09By Matthew Sheahan =09=09Lucent Venture Partners, the venture capital unit of Lucent Technolog= ies, is=20 now investing from its third fund, though at a slower pace than in years=20 past, according to managing partner Ashton B. Peery. more>> =09=09 =09=09 =09=09Entrepreneurs and VC-backed company CEOs: =09=09* Where can you obtain FREE detailed information on the =09=09latest quarter'sventure funding by region, industry, =09=09round and stage of development? =09=09* Where are there FREE tools and templates for writing a =09=09business plan and securing venture funding? =09=09* And if you're a young tech company CEO, where can you =09=09hear other CEOs discuss the issues of the day? =09=09VISIT PricewaterhouseCooper's Entrepreneur Resource Center =09=09for this and more -->http://www.pwcmoneytree.com =09=09 =09=09 =09=09 =09=09iCelerate Gets Series B Funds, Looks For New Deals =09=09By Taran Provost =09=09iCelerate, an application, integration and managed services firm, clo= sed a=20 new round of funding, and is on the lookout for acquisitions, sources at th= e=20 company told VentureWire. more>> =09=09 =09=09Instant Messaging Company Odigo Looking For Partnerships =09=09By Lizbeth Scordo =09=09Fresh off a new strategic partnership, instant messaging firm Odigo i= s=20 continuing to seek more, and predicts profitability next year, Avner Ronen,= =20 co-founder and vice president of strategic development, told VentureWire.= =20 more>> =09=09 =09=09 =09=09 =09=09 =09=09new money =09=09 =09=09 =01=07 CGtime Gets $7 Million Series A =09=09 =01=07 e-Merchandising Tech Firm MotionPoint Raises $400,000 Seed=20 =09=09=01=07 Lawson Software Raises $40M in First Round=20 =09=09=01=07 NetContinuum Raises $26M Second Round=20 =09=09=01=07 Virtual Mobile Operator Firm Spinbox Sets Up with $2.4M Seed =09=09 =01=07 Wireless Tech Firm Danger Closes Series A with $11M =09=09 =01=07 Air Charter Firm FlightTime Gets $25 Million Series B =09=09 =01=07 Bluetooth Tech Firm Inventel Systemes Gets $5.3M First Round =09=09 =01=07 Cambridge Broadband Raises $15 Million in Round Two =09=09 =01=07 Database Management Firm Lazy Software Caps $8.6M Round One= =20 =09=09=01=07 Net Consultancy Proteus Gets Series A from Lycos Ventures =09=09 =01=07 NuVasive Raises $29.3 Million Series D =09=09 =01=07 Celvibe Raises $2M More in Second Round =09=09 =01=07 Financial Services Firm MiFund Raises $25 Million Series B =09=09 =01=07 Mobile Applications Provider ViAir Gets $15M Round Two =09=09 =01=07 Reinhardt Gets $5.3M from JBWere in Round Two =09=09 =01=07 Supply Chain Firm SeeCommerce Raises $27 Million Series E =09=09 =01=07 Zinio Systems Closes $5M Series B Led by NEA =09=09 =01=07 E-Mail Management Service Akio Solutions Raises $3 Million =09=09 =01=07 Antrim Design Systems Caps $11 Million in Series D =09=09 =01=07 NewMarkets Raises $7.5M in Series F Funds =09=09 =09=09 =09=09bad news =09=09 =09=09 =01=07 AgWeb Discloses Staff Cuts =09=09 =01=07 Online Construction Marketplace Ironmax Cuts 30% of Staff =09=09 =01=07 Rx.com No Longer Filling Prescriptions =09=09 =09=09 =09=09new products =09=09 =09=09 =01=07 AuctioNet.com Changes Name to Realm Connect =09=09 =01=07 Voice and Data Services Firm Nextira Federal Launches =09=09 =09=09 =09=09m&a =09=09 =09=09 =01=07 Net Bookmarking Tech Firm Blink.com Buys BookmarksPlus =09=09 =01=07 Everstream Acquires The MusicBooth in $10M Stock Deal =09=09 =01=07 Primus Gets Search Engine AnswerLogic in $3M Stock Swap=20 =09=09=01=07 MindArrow Systems Buys Control Commerce in Stock Deal =09=09 =09=09 =09=09new directors =09=09 =09=09 =01=07 iVita Names Landmark Graphics President and CEO to Board =09=09 =01=07 Armando Geday Joins Chameleon Board of Directors =09=09 =09=09 =09=09new people =09=09 =09=09 =01=07 Colorado MicroDisplay Changes Name, Juggles Execs =09=09 =01=07 Icarian Hires Ed Koepfler as New President and CEO =09=09 =01=07 Travel Site Viator Promotes COO Jan Knox to President =09=09 =01=07 IKANO Appoints New President and Chief Operating Officer =09=09 =01=07 MRM Fulfillment Appoints New President & CEO =09=09 =01=07 DigitalMoJo Announces Thomas Joseph As New Chairman & CEO =09=09 =01=07 Digi-Block Taps Ex Pres of Ziff-Davis Education as CEO =09=09 =09=09 =09=09vc fund news =09=09 =09=09 =01=07 University of Pittsburgh, Redleaf Form Tech Funding Program =09=09 =09=09 =09=09vc personnel =09=09 =09=09 =01=07 Baroness Sarah Hogg Set to Become 3i Chair in January =09=09 =01=07 Dekkers Davidson Joins Charles River as Exec in Residence =09=09 =01=07 Growth Capital Names New Executive Vice President =09=09 =09=09 =09=09vw corrections =09=09 =09=09 =01=07 Broadview =09=09 =01=07 Porivo Technologies =09=09 =09=09 TOP STORIES... NEW MONEY... BAD NEWS... NEW PRODUCTS... M&A... NEW= =20 DIRECTORS... NEW PEOPLE... VC FUND NEWS... VC PERSONNEL... VW CORRECTIONS =09=09 =09=09 =09=09top =09=09 =09=09 =09=09Time is money and time can be saved through =09=09effortless, streamlined Web-based enterprise =09=09services. =09=09 =09=09As IBM preps to launch Web-based software =09=09allowing for smoother enterprise-application- =09=09integration, it will face competition from the =09=09likes of Hewlett-Packard, Microsoft, Oracle and Sun. =09=09Which will attract the greatest number of =09=09developers and customers in the Web-services =09=09arena? =09=09 =09=09Hear what Steven Mills, Senior VP & Group =09=09Executive of IBM Software, has to say about =09=09IBM's latest at Enterprise Outlook, June 26 & 27. =09=09 =09=09Register today:http://www.enterpriseoutlook.com/register.asp =09=09 =09=09 =09=09 =09=09 top stories=20 =09=09? =09=09Kodiak Venture Partners Closes Fund II with $290M =09=09 mail? top =09=09 =09=09 CONCORD, Mass. (VENTUREWIRE) -- Kodiak Venture Partners, a seed and= =20 early-stage venture capital firm, said it closed its second fund, Kodiak=20 Venture Partners II (KVP II) with $290 million. The fund, initially targete= d=20 at $250 million, will make seed and early stage investments typically rangi= ng=20 between $500,000 and $5 million. KVP will continue to focus on=20 communications, semiconductor, and software sectors in eastern North Americ= a.=20 Partner Mike O'Neill said most of KVP II's investments so far have been in= =20 the Ottawa and Boston areas. While the company will continue to concentrate= =20 on those areas, it will expand into a few other cities, including Washingto= n.=20 KVP II has already invested in several companies including TeraConnect, an= =20 optical communications company; IceFyre Semiconductor, a developer of=20 high-speed wireless connectivity chips; Sentito, a provider of network and= =20 telecommunications equipment; and Chaoticom, a developer of data compressio= n=20 and encryption technology. Kodiak said all of the! institutional and=20 corporate limited partners from its first fund contributed to the new fund= =20 along with several new institutions and individuals from the technology=20 industry. Co-founder Dave Furneaux serves as managing general partner of KV= P.=20 Limited partners include Cisco, PMC-Sierra, Goldman Sachs, BancBoston=20 Capital, and CIBC. =09=09http://www.kodiakvp.com =09=09 =09=09 =09=09Mercury Pays $147M for Freshwater Software =09=09 mail? top =09=09 =09=09 SUNNYVALE, Calif. (VENTUREWIRE) -- Mercury Interactive, a publicly = traded=20 provider of enterprise testing and performance management software, said it= =20 acquired Freshwater Software, which develops Web management tools and=20 services, for $147 million in cash for Freshwater's outstanding capital=20 stock. Mercury also assumed Freshwater's stock option plan. Mercury said=20 Freshwater will become a wholly owned subsidiary but will retain its name,= =20 its Boulder, Colo.-based office, and its 64-person staff. Four of the five= =20 founders of Freshwater will remain with the company. Donna Auguste, the fif= th=20 founder and the president and CEO of Freshwater, will leave the company aft= er=20 a transition period to pursue philanthropic interests. In 1996 Freshwater= =20 raised $1.25 million from Mayfield Fund and Mohr, Davidow Ventures. Mercury= =20 received financial advice from PricewaterhouseCoopers and legal counsel fro= m=20 Davis, Polk & Wardwell. =20 =09=09http://www.freshwater.com =09=09http://www.mercuryinteractive.com =09=09 =09=09 =09=09Manufacturing Services Firm Celetron Lands $48M Round One=20 =09=09mail? top =09=09 =09=09 SIMI VALLEY, Calif. (VENTUREWIRE) -- Celetron International, an=20 international provider of electronic and optical manufacturing services,=20 announced closing a $48 million first round led by New Enterprise Associate= s=20 (NEA) that also included Golden Gate Capital, Baring Asia Private Equity Fu= nd=20 II, Alta Partners, and an undisclosed strategic corporate investor. Celetro= n,=20 founded in 1981 and formerly family owned, said the board was still being= =20 formed. However, Celetron said it expects the board to be comprised of thre= e=20 or four of its own executives as well as representatives from NEA, Golden= =20 Gate, Baring Asia, and the strategic corporate investor. Celetron said the= =20 financing would be used for accelerated development of its optical=20 manufacturing division, capital equipment, and as working capital. The=20 company said it had no plans for additional funding. Celetron said it earne= d=20 $200 million in revenues in 2000 and projects to earn close to $500 million= =20 in 2001. Celetron currently employs 7,000 people worldwide and al! so has= =20 offices in India in Bombay, Delhi, and Madras and in Sri Lanka. =20 =09=09http://www.celetron.com =09=09 =09=09 =09=09TVM Has First Close on New Life Science Fund =09=09 mail? top =09=09 =09=09 MUNICH, Germany (VENTUREWIRE) -- Techno Venture Management (TVM), a= =20 German-U.S. venture capital firm, announced first close of TVM V Life Scien= ce=20 Ventures at EUR 70 million ($61 million) as part of its fifth generation of= =20 venture funds. Existing European investors and new investors in U.S. and As= ia=20 participated in the first close. TVM expects to target $219 million for the= =20 Life Science Ventures fund, though the firm expects the fund will exceed th= at=20 target, said partner and COO for U.S. operations John DiBello. Final close= =20 for Life Science Ventures fund is expected in September. Previous limited= =20 partners will contribute more than half the fund, while new investors will= =20 include European pension funds and insurance companies, American pension=20 funds and endowments, and Asian government-related authorities and banks. T= VM=20 expects to invest approximately $8.7 million in each company, for a total o= f=20 25 new portfolio companies over two years. Life Science Ventures will=20 primarily make seed investments in early-sta! ge companies in functional=20 genomics, drug discovery and development, medical devices, small molecule= =20 therapeutics, and peptide chemistry. Managing partner Helmut Schuehsler wil= l=20 have overall responsibility for the TVM V Life Science Ventures. Mr.=20 Schuehsler also oversaw life science investments in TVM IV. The firm is als= o=20 raising TVM V Information Technology, a $219 million fund. First close for= =20 that fund is expected in the third quarter of 2001, and final close in the= =20 first quarter of 2002. Mr. DiBello expects the fund to exceed its $219=20 million target. Like Life Science Ventures, Information Technology will=20 invest approximately $8.7 million in about 25 companies over two years. The= =20 fund will focus on Internet infrastructure, telecommunications, and=20 enterprise software. Limited partners will include European, U.S., and Asia= n=20 banks, pension funds, and insurance companies. Friedrich Bornikoel, managin= g=20 partner for IT investments at TVM, will oversee the new fund, as he overs! = aw=20 Fund IV's IT investments. Terms of the two TVM V funds are "standard" and t= he=20 same as with previous funds, said Mr. DiBello, who disclosed a 20% carry bu= t=20 did not comment on management fees. The firm expects to fundraise again tw= o=20 years after final close of TVM V. The TVM V funds will invest primarily in= =20 German and American companies, in addition to companies in Switzerland,=20 Austria, Israel, and the U.K. UBS Warburg is helping TVM raise the fund. La= w=20 firm Testa Hurwitz is handling the fundraising in the U.S., while S.J. Berw= in=20 provides those services in Germany. The firm currently employs between 20 a= nd=20 25 investment professionals, and expects to add between three and four new= =20 partners within two years. In 2001 TVM promoted John Chapman and Hans G.=20 Schreck to partner positions. TVM currently has $526 million under=20 management, with investments split evenly between life sciences and=20 information technology. =20 =09=09http://www.tvmvc.com =09=09 =09=09 =09=09 new money=20 =09=09? =09=09CGtime Gets $7 Million Series A =09=09 mail? top =09=09 =09=09 SAN FRANCISCO (VENTUREWIRE) -- CGtime, a developer of software engin= es to=20 help brand marketers create incentive marketing programs on the Web, said i= t=20 raised $7 million in its Series A round of funding led by New Enterprise=20 Associates. Odyssey LP, individual investors, and the company's senior=20 management also participated. CGtime said it will use the funding to=20 accelerate development of its software. The company plans to launch its sui= te=20 of marketing and sales applications later this year, and to market it to=20 Fortune 500 companies and advertising agencies. Board members will include= =20 Marke Perry, general partner of New Enterprise Associates; A. Michael Spenc= e,=20 former dean of the Graduate School of Business at Stanford University and= =20 former dean of the faculty of arts and sciences at Harvard; and Robert V.= =20 Gunderson, senior partner of Gunderson Dettmer.=20 =09=09http://www.cgtime.com =09=09 =09=09 =09=09e-Merchandising Tech Firm MotionPoint Raises $400,000 Seed=20 =09=09mail? top =09=09 =09=09 BOCA RATON, Fla. (VENTUREWIRE) -- MotionPoint, which develops online= =20 merchandising services and technology for retailers, said it secured $400,0= 00=20 in seed funding from individual investors, including Charles Vitton of BMO= =20 Nesbitt Burns. The company said it is currently beta-testing its products a= nd=20 plans on commercially launching with two retailers in the fourth quarter of= =20 this year. MotionPoint also said it would triple its six-member staff befor= e=20 the end of the year and that it plans on being profitable by the end of 200= 2.=20 Outside investors hold 10% of the company. MotionPoint said it had a=20 pre-money valuation of $5 million and would consider raising a $3 million= =20 round at the end of the year. Will Fleming, Stewart Padveen, Adam Rubenstei= n,=20 and Enrique Travieso founded MotionPoint in September 2000. =20 =09=09http://www.motionpoint.com =09=09 =09=09 =09=09Lawson Software Raises $40M in First Round=20 =09=09mail? top =09=09 =09=09 ST. PAUL, Minn. (VENTUREWIRE) -- Lawson Software, a provider of inte= grated=20 e-business software applications, said it closed a $40 million first round= =20 led by TA Associates, which invested $30 million, with St. Paul Venture=20 Capital investing the remaining $10 million. David S.B. Lang, a principal a= t=20 TA Associates, joins Lawson's board of directors. Lawson said the financing= =20 would be used as growth capital and to fuel expansion. Founded in 1975,=20 Lawson had 1999 and 2000 year revenues of $268 million and $313 million,=20 respectively. =20 =09=09http://www.lawson.com =09=09 =09=09 =09=09NetContinuum Raises $26M Second Round=20 =09=09mail? top =09=09 =09=09 SANTA CLARA, Calif. (VENTUREWIRE) -- NetContinuum, which provides In= ternet=20 data center infrastructure, announced it has raised $26 million in its seco= nd=20 round of funding led by new investor NIF Ventures, a division of Daiwa=20 Securities Group. Menlo Ventures, which led NetContinuum's first round of= =20 funding, also participated in the round, along with new investors Adams=20 Street Partners, Invus Group, and Siemens Venture Capital. Jim Timmins, a= =20 general partner at NIF, will join NetContinuum's board of directors. Kamal= =20 Anand, vice president of marketing and business development, said=20 NetContinuum will use the funding to develop and launch its product. The = =20 funding is expected to last for 18 months, at which point NetContinuum woul= d=20 seek another round of funding. Mr. Anand said the company plans to reach=20 profitability sometime in 2003. He said NetContinuum's valuation is up more= =20 than three to four times from the previous round. The company has 90=20 employees and plans to add 40 or 50 more by the end of the y! ear.=20 =09=09http://www.netcontinuum.com =09=09 =09=09 =09=09Virtual Mobile Operator Firm Spinbox Sets Up with $2.4M Seed =09=09 mail? top =09=09 =09=09 STOCKHOLM, SE (VENTUREWIRE) -- Spinbox, a newly formed company devel= oping=20 technology for virtual mobile operators, said it raised EUR 2.7 million ($2= .4=20 million) in seed funding led by Brainheart Capital and Christer Hagglund,= =20 founder of Proffice. Petter Bogren of Brainheart and Christer Hagglund both= =20 have board seats. Spinbox intends to provide hosted mobile phone services t= o=20 enable large companies to operate their own mobile services. The company sa= id=20 the financing would be used for product development and increasing its staf= f=20 from six to between 15 and 20. Spinbox plans on making its services=20 commercially available by July. CEO Christer Palmgren, Mr. Hagglund, and=20 Brainheart Capital founded the company in April 2001. =20 =09=09http://www.spinbox.se =09=09 =09=09 =09=09Wireless Tech Firm Danger Closes Series A with $11M =09=09 mail? top =09=09 =09=09 PALO ALTO, Calif. (VENTUREWIRE) -- Danger, which develops and produc= es=20 wireless online digital hardware, software, and services, said it raised $1= 1=20 million in its Series A round of funding led by Softbank Venture Capital.= =20 Undiclosed investors also participated in the round. Greg Galanos of Softba= nk=20 Venture Capital will join Danger's board of directors. A company spokespers= on=20 said Danger, which launched earlier this month, will roll out its first=20 product later this year. =20 =09=09http://www.danger.com =09=09 =09=09 =09=09Air Charter Firm FlightTime Gets $25 Million Series B =09=09 mail? top =09=09 =09=09 WALTHAM, Mass. (VENTUREWIRE) -- FlightTime, a provider of technology= that=20 manages pricing, scheduling, and inventory of charter aircrafts, said it=20 raised $25 million in a Series B round led by Amerland Holdings, with=20 participation of prior investors Axxon Capital, BancBoston Ventures,=20 Covestco-Seteura, and Southeast Interactive Technology Funds. The company= =20 said it plans to dedicate the new funds to sales and marketing expansion as= =20 well as to develop its technology infrastructure. As a result of this=20 financing, Christopher Austen, a partner of Southeast Interactive Technolog= y=20 Funds, and Zacharias Karelas, a representative of Amerland, have joined the= =20 seven-member FlightTime board of directors that also includes John Doggett = of=20 Bancboston Ventures. The company raised $10 million in Series A financing i= n=20 February 2000. =09=09http://www.flighttime.com =09=09 =09=09 =09=09Bluetooth Tech Firm Inventel Systemes Gets $5.3M First Round =09=09 mail? top =09=09 =09=09 PARIS (VENTUREWIRE) -- Inventel Systemes, a radiocommunications fir= m=20 developing Bluetooth and DECT technology, said it closed its first round at= =20 FRF40 million ($5.3 million) led by new investor Banexi Ventures with=20 participation from Innovacom, which is also a new investor. Both Banexi and= =20 Innovacom are taking board seats, but the representatives have not been=20 determined. Inventel said it plans to have a seven-member board with two=20 investor representatives, three company executives, and two outside=20 directors. The company said the financing would be used for further=20 technology development, marketing, and sales. Inventel also said it would= =20 consider a new round with U.S. investors later this year if the company met= =20 certain benchmarks. Inventel, founded in 1990, was profitable prior to this= =20 round of funding and had year 2000 revenues of $4 million and said it plans= =20 to make the same amount in 2001. Banexi and Innovacom own less than 30% of= =20 Inventel. =20 =09=09http://www.inventel.com =09=09 =09=09 =09=09Cambridge Broadband Raises $15 Million in Round Two =09=09 mail? top =09=09 =09=09 CAMBRIDGE, U.K. (VENTUREWIRE) -- Cambridge Broadband, a developer of= =20 broadband wireless technology, said it raised $15 million in second round= =20 funding led by Gilde IT Fund, with participation from Amadeus Capital=20 Partners, Kiwi II, and TVM. The new money will be dedicated to product=20 development and deployment. As a result of this financing, Anton Arts of=20 Gilde IT has been granted the sixth seat on the company's board of director= s,=20 which also includes Peter Wynn of Amadeus Capital Partners and David Cleeve= ly=20 of Analysys Group. In May 2000 the company raised $6 million in a first rou= nd=20 led by Amadeus Capital Partners. Cambridge Broadband plans to raise an=20 additional $5 million before closing this round within the next two months.= =20 =09=09http://www.cambridgebroadband.com =09=09 =09=09 =09=09Database Management Firm Lazy Software Caps $8.6M Round One=20 =09=09mail? top =09=09 =09=09 LONDON (VENTUREWIRE) -- Lazy Software, which develops a Web-enabled = database=20 management system, said it received an additional GBP 2.5 million ($3.6=20 million) to close its first round at $8.6 million. The new investors are= =20 Commerzbank, which invested $2.9 million, and Metropolitan Venture Partners= ,=20 which invested $720,000. In December Lazy Software received $5 million in= =20 first round funding from Advent Venture Partners. James Powell-Tuck of=20 Commerzbank will join the board of directors. The company said the financin= g=20 would be used for sales, research and development, and further U.S. market= =20 expansion. =20 =09=09http://www.lazysoft.com =09=09 =09=09 =09=09Net Consultancy Proteus Gets Series A from Lycos Ventures =09=09 mail? top =09=09 =09=09 WASHINGTON (VENTUREWIRE) -- Proteus, an Internet consultancy that de= velops=20 Internet, wireless, and interactive television applications, said it has=20 closed Series A at an undisclosed amount with financing from Lycos Ventures= .=20 Brett Moraski of Lycos Ventures joins the board, bringing the total number = of=20 directors to five. Proteus, which has been profitable since 1996, will devo= te=20 funds to developing interactive television and mobile products.=20 =09=09http://www.proteus.com =09=09 =09=09 =09=09NuVasive Raises $29.3 Million Series D =09=09 mail? top =09=09 =09=09 SAN DIEGO (VENTUREWIRE) -- NuVasive, a medical company that designs,= =20 manufactures, and markets spine surgery systems, announced it has closed=20 $29.3 million in Series D equity financing. New investor William Blair=20 Capital Partners VII led the round, with participation from other new=20 investors A.M. Pappas & Associates, RS Coinvestment Fund, Societe Financier= e=20 d'Innovation, and Sofinov. All existing investors -- Domain Associates,=20 Enterprise Partners, and Kleiner Perkins Caufield & Byers -- also joined in= =20 this round. Post-money, NuVasive had a valuation of $75 million in this fla= t=20 round. Robertson Stephens managed the round. William Blair and Sofinov each= =20 gain a seat on the board, which now has eight directors. Funds will be used= =20 for product development, product launch, sales, marketing, and staff=20 expansion. The company employs 63 and expects to add another 10, mostly in= =20 sales, by the end of the year. NuVasive has raised a total of $50 million i= n=20 financing. The company expects to become cash flow pos! itive by mid-2003,= =20 and may raise a small fifth round. NuVasive recently established an office = in=20 New Jersey and in Munich, and will focus on forming co-development,=20 co-marketing partnerships that may involve equity investments. =20 =09=09http://www.nuvasive.com =09=09 =09=09 =09=09Celvibe Raises $2M More in Second Round =09=09 mail? top =09=09 =09=09 NATANYA, Israel (VENTUREWIRE) -- Celvibe, which has developed a tech= nology=20 that enables wireless carriers to deliver live, multi-channel television=20 broadcasts to wireless users in real time based on the MPEG-4 standard, sai= d=20 it has secured an additional $2 million from China Development Industrial= =20 Bank of Taiwan and an undisclosed Asian investor. The latest investment are= =20 additional installments to the company's second round of $12 million that i= s=20 being led by the Challenge Fund. The Challenge Fund, which has invested $8= =20 million in Celvibe, was joined by Poalim Capital Market Technologies, Ophir= =20 Technologies, Eurofund Israel 2000, and tecc-IS in the round. The company= =20 said it will use the funds for research and development, expansion of its= =20 marketing and sales, and to establish strategic partnerships with=20 communications firms in the U.S., Europe, and the Far East.=20 =09=09http://www.celvibe.com =09=09 =09=09 =09=09Financial Services Firm MiFund Raises $25 Million Series B =09=09 mail? top =09=09 =09=09 SAN FRANCISCO (VENTUREWIRE) -- MiFund, a provider of financial servi= ces for=20 the distribution and client management of third party mutual funds, said it= =20 closed on $25 million in its Series B round. The round was led by State=20 Street and included Series A investors Walden Interational Investment Group= ,=20 Partech International, and Crystal Internet Investment Fund. Gary Enos,=20 executive vice president of State Street, will take a seat on the MiFund=20 board of directors as a result of the investment. The company has operation= s=20 in Dublin and Paris as well as in San Francisco, the site of the firm's=20 corporate headquarters.=20 =09=09http://www.mifund.com =09=09 =09=09 =09=09Mobile Applications Provider ViAir Gets $15M Round Two =09=09 mail? top =09=09 =09=09 SEATTLE (VENTUREWIRE) -- ViAir, a provider of mobile applications ma= nagement=20 and delivery platforms, said it raised over $15 million in its second round= =20 of financing led by Spectrum Equity Investors with participation from 3i,= =20 Mercury Interactive, and return investor The Barksdale Group. The company= =20 plans to spend the new funds for expansion into the European and Asian=20 markets, as well as on product development. As a result of this financing,= =20 the company has appointed Victor E. Parker, a general partner at Spectrum, = to=20 its six-member board of directors, which also includes Peter Currie, the=20 founder and partner of The Barksdale Group. In addition, the company=20 announced that it has granted a board seat to Bill Owens, co-CEO and vice= =20 chairman of Teledesic. In May 2000, the company raised $8 million in first= =20 round led by The Barksdale Group, with unnamed individuals participating.= =20 =09=09http://www.viair.com =09=09 =09=09 =09=09Reinhardt Gets $5.3M from JBWere in Round Two =09=09 mail? top =09=09 =09=09 SYDNEY, AU (VENTUREWIRE) -- Reinhardt International, which operates = Reino=20 International, a designer and builder of digital parking meters, announced = it=20 has raised AUD 5 million ($2.6 million) from sole investor JB Were Private= =20 Equity Fund. JB Were retains an option to invest an additional $2.6 million= =20 in the next 12 months. Existing investor Saltbush Capital did not participa= te=20 in this round. Bernard Stanton, executive director of JBWere Private Equity= =20 Fund, joins the board of directors as the sixth member. Funds will be used = to=20 expand product distribution as the company targets the U.S., Europe, and=20 Asia. Prior to this round Reinhardt had raised $1.3 million. =09=09http://www.reino.com.au =09=09 =09=09 =09=09Supply Chain Firm SeeCommerce Raises $27 Million Series E =09=09 mail? top =09=09 =09=09 PALO ALTO, Calif. (VENTUREWIRE) -- SeeCommerce, a provider of supply= -chain=20 performance management and improvement applications, announced it has close= d=20 its Series E round at $27.4 million. New investor Amerindo Investment=20 Advisors led the round, which included previous investors Insight Capital= =20 Partners, Integral Capital Partners, Voyager Capital, Munder Capital=20 Management Altamira Financial Services, SunAmerica Ventures, Task Holdings,= =20 Telsoft Ventures and Sierra Ventures. Siebel Systems, NetMarket Partners, a= nd=20 Charter Growth Capital also participated in the round as new investors. Jim= =20 Dorst, SeeCommerce's chief financial officer, said the company's valuation= =20 increased by 50% from the previous round, and is now over $150 million. Mr.= =20 Dorst said the funding is expected to last until the second quarter of 2002= ,=20 when SeeCommerce turns cash-flow positive. The bulk of this financing was= =20 raised in February, but the company kept the round open for strategic=20 financing, Mr. Dorst explained. He said the fundi! ng is earmarked for=20 general operations and to further expand business around the world. The=20 company, which has raised $66 million in funding to date, also plans to=20 develop new business applications. Mr. Dorst said that if market conditions= =20 are favorable, SeeCommerce will seek an IPO during the second half of next= =20 year. SeeCommerce currently employs about 125 people, but plans to steadily= =20 increase its workforce to about 175 by year's end, Mr. Dorst said. =20 =09=09http://www.seecommerce.com =09=09 =09=09 =09=09Zinio Systems Closes $5M Series B Led by NEA =09=09 mail? top =09=09 =09=09 SAN FRANCISCO (VENTUREWIRE) -- Zinio Systems, which develops a conte= nt=20 delivery system that enables magazines to be distributed over the Internet= =20 and read in their print-layout forms, announced it has closed more than $5= =20 million in Series B financing. New investor New Enterprise Associates led t= he=20 round, with participation from additional new investors Odyssey Capital and= =20 IDEO Ventures. Stewart Alsop, general partner at NEA, joins the board, as= =20 does outside director Mike Edelhart; there are four directors in total. In= =20 February 2001 the company raised $2 million from undisclosed strategic=20 investors and individuals. =09=09http://www.zinio.com =09=09 =09=09 =09=09E-Mail Management Service Akio Solutions Raises $3 Million =09=09 mail? top =09=09 =09=09 PARIS (VENTUREWIRE) -- Akio Solutions, a provider of corporate e-mai= l=20 management, said it raised FRF 23 million ($3 million) in its latest round = of=20 funding. The round was funded by previous investors 3i Technology, Banexi= =20 Ventures, and Innovacom. In January, 2000, Akio Solutions raised FRF 26=20 million ($3.4 million) from the same group of investors. The company has=20 operations in England, France, and Germany. The firm's customers include a= =20 subsidiary of French large-scale distribution firm, Carrefours Jardin, and= =20 Sofinco, a subsidiary of Credit Agricole Bank Group.=20 =09=09http://www.akio-solutions.com =09=09 =09=09 =09=09Antrim Design Systems Caps $11 Million in Series D =09=09 mail? top =09=09 =09=09 SCOTTS VALLEY, Calif. (VENTUREWIRE) -- Antrim Design Systems, which = provides=20 electronic data automation software for semiconductor chips, said it has=20 closed $11 million in a round of Series D financing. New investor iVisionar= y=20 Fund lead the round, with participation from other new investors Mitsubishi= =20 and Matsushita, and all existing investors -- Brentwood Venture Capital,=20 Goldman Sachs, and the Intel 64 Fund. A representative from the round will = be=20 appointed to the sixth seat on the board of directors. Post-money valuation= =20 increased from that of the previous round. Funds will be used primarily for= =20 research and development. The company expects to become cash flow positive = by=20 the third or fourth quarter this year. To date Antrim has raised $72 millio= n. =09=09http://www.antrim.com =09=09 =09=09 =09=09NewMarkets Raises $7.5M in Series F Funds =09=09 mail? top =09=09 =09=09 SAN MATEO, Calif. (VENTUREWIRE) -- NewMarkets International, which d= evelops=20 technology for international e-payments through its foreign currency exchan= ge=20 Web site FXWeb, said it has received commitments of approximately $7.5=20 million in its Series F round of funding from Quantam Venture Partners and= =20 individual investors. NewMarkets said it plans on closing the Series F roun= d=20 by the end of June with $15 million to $25 million. NewMarkets said it is= =20 currently in discussions with six to 12 international and U.S. investors to= =20 participate in the round. The company said the funding would be used as=20 operating and security capital. Prior to the Series F round, NewMarkets=20 raised $28.8 million from Accel Partners, Bay Partners, Charter Growth=20 Capital, Draper Fisher Jurvetson, Jafco, Menlo Ventures, Softbank, Softbank= =20 Technology Ventures, and Technology Crossover Ventures. =20 =09=09http://www.sonnet-financial.com =09=09 =09=09 =09=09 bad news=20 =09=09? =09=09AgWeb Discloses Staff Cuts =09=09 mail? top =09=09 =09=09 KING OF PRUSSIA, Pa. (VENTUREWIRE) -- AgWeb.com, a business-to-busi= ness=20 commerce and content site serving the agricultural market, told VentureWire= =20 that it cut 20 employees, or 36% of its staff due to a lack of commercial= =20 revenue from its satellite information service, which is being eliminated.= =20 The cuts, which took place in March, occurred in AgWeb.com's Des Moines, Io= wa=20 office and were concentrated in customer service, IT, and administrative=20 positions related to the satellite division. All the laid off employees=20 received severance. Eight employees in the editorial department remain in t= he=20 Iowa office, and 27 people are employed in AgWeb.com's King of Prussia=20 headquarters. The company said it was currently hiring people for its=20 nationwide sales force. AgWeb.com also said it plans on being profitable in= =20 the fourth quarter of this year. In addition, AgWeb.com said discussions a= re=20 underway to acquire other venture-backed firms in its niche and expects to= =20 complete one such acquisition by the end of the yea! r. AgWeb.com said it h= as=20 no plans to seek additional funding. In January 2000 AgWeb.com launched wit= h=20 $100 million from Farm Journal, Madison Dearborn Partners, and Safeguard=20 Scientifics. =20 =09=09http://www.agweb.com =09=09 =09=09 =09=09Online Construction Marketplace Ironmax Cuts 30% of Staff =09=09 mail? top =09=09 =09=09 LOUISVILLE, Ky. (VENTUREWIRE) -- Ironmax, an online marketplace for = the=20 construction equipment industry, said it laid off approximately 30% of its= =20 staff. A company spokesperson, who would not disclose the current staff=20 number, said the cuts mainly affected those in the sales and marketing=20 departments. The company's strategic partners, Primedia (which holds an=20 equity stake in the company) and McGraw Hill now serve as Ironmax=20 distribution channels. "But it was also to execute an alignment with what's= =20 going on in the marketplace and the economy and to trim to the current sale= s=20 level and funding environment," said the spokesperson. "It's important to d= o=20 what's right at the right time. It's the best thing for proactive=20 management." Ironmax raised $10 million in its Series A round of funding i= n=20 April 2000 from CMGI@Ventures, Chrysalis Ventures, Iceberg Ventures, and=20 Prosperitas Investment Partners. The spokesperson would not comment on=20 whether or not the company would seek another round of fu! nding. =20 =09=09http://www.ironmax.com =09=09 =09=09 =09=09Rx.com No Longer Filling Prescriptions =09=09 mail? top =09=09 =09=09 AUSTIN, Texas (VENTUREWIRE) -- Rx.com, which provides pharmacy items= and=20 health information online, has ceased day-to-day operations and is no longe= r=20 filling prescriptions. An operator for the company's customer service=20 department confirmed Rx.com had laid off employees from several departments= ,=20 but did not know the precise amount. The operator said that the company's= =20 annoucement came with no explanation of how long the cessation would last o= r=20 if the company would inevitably close down. Rx.com's Web site now directs a= ll=20 activity to its help line. The company's executives could not be reached fo= r=20 comment. In May 2000, Alliance UniChem, a publicly traded European retail= =20 pharmacy company, invested an undisclosed amount of money in the company. I= n=20 July 1999, CBS entered an agreement with Rx.com for $37.5 million worth of= =20 advertising and promotion deals over a four-year period. CBS received 700,0= 00=20 common shares of the company, or an 20% stake, as a result of the deal. =09=09http://www.rx.com =09=09 =09=09 =09=09 new products=20 =09=09? =09=09AuctioNet.com Changes Name to Realm Connect =09=09 mail? top =09=09 =09=09 REDWOOD CITY, Calif. (VENTUREWIRE) -- AuctioNet.com, which operates = a=20 private label auction network, said it changed its name to Realm Connect to= =20 reflect its growth from auction aggregator to a network of online=20 marketplaces. Nuri Otus is the company's president and CEO. Realm Connect i= s=20 backed by Ambex Venture Group, AP Venture Partners I, B3 Ventures, Clayton,= =20 Dubilier & Rice, Empire Ventures, Garage.com, Global Virtual Accelerator,= =20 Oracle Corp., and ZDNet. The board of directors is comprised of Michela=20 O'Connor Abrams, an executive at Imagine Media; Bruce M. Lange, senior vice= =20 president, treasuer and head of worldwide real estate of Oracle; Chong-Moon= =20 Lee, chairman and CEO of AmBex Venture Group; Samuel S. Lee, managing partn= er=20 of Bluehawk Venture Partners; and R. Nuri Otus, CEO of AuctioNet. =20 =09=09http://www.realmconnect.com =09=09 =09=09 =09=09Voice and Data Services Firm Nextira Federal Launches =09=09 mail? top =09=09 =09=09 FAIRFAX, Va. (VENTUREWIRE) -- Nextira Federal, a company formed from= the=20 consolidation of the federal business components of Milgo Solutions, a=20 provider of voice and data services; TimePlex Federal Systems, which provid= es=20 networking services to the federal government; and the federal services=20 division of Nextira, (formerly Williams Communications Solutions) said that= =20 it has offically launched operations. The new company will provide converge= d=20 voice and data services to the civilian and defense agencies of the federal= =20 government. Stephen L. Snyder, who was the president and CEO of Timeplex= =20 Federal Systems, has been named Nextira Federal's president. Nextira Federa= l=20 is backed by Platinum Equity Holdings, a privately held company that acquir= es=20 and operates international technology organizations and service companies.= =20 =09=09http://www.nextirafederal.com =09=09 =09=09 =09=09 m&a=20 =09=09? =09=09Net Bookmarking Tech Firm Blink.com Buys BookmarksPlus =09=09 mail? top =09=09 =09=09 NEW YORK (VENTUREWIRE) -- Blink.com, which provides free online book= mark=20 technology, announced it has acquired its rival BookmarksPlus.com, for an= =20 undisclosed amount. A spokeswoman for Blink.com said the company will not= =20 retain any of BookmarksPlus.com's employees. The BookmarksPlus Web site is= =20 now linked to Blink.com. Last year, Blink acquired CoolSync and BookmarkBox= ,=20 two of its rivals in the online bookmarking market. Earlier this month, the= =20 company appointed former Doubleclick vice president and general manager, El= i=20 Chaflin, as its new CEO. Blink's backers include Inabata, Jafco, Palisade= =20 Capital Management, Sandler Capital Management, Sumitomo, and Tudor=20 Investment. =20 =09=09http://www.blink.com =09=09 =09=09 =09=09Everstream Acquires The MusicBooth in $10M Stock Deal =09=09 mail? top =09=09 =09=09 CLEVELAND (VENTUREWIRE) -- everstream, which provides software for a= udio and=20 video advertising, said it has acquired AdAcoustics and its parent company= =20 The MusicBooth, an online advertising services and technology company, in a= n=20 all-stock transaction worth $10 million. The combined entity has a valuatio= n=20 of $40 million. The deal was valued based on funds raised for The MusicBoot= h.=20 Law firm Benesch and Fiedlander advised everstream, while Mintz and Levitz= =20 advised The MusicBooth. Deloitte and Touche served as accountants. Two of= =20 nine employees from The MusicBooth will join everstream. AdAcoustics=20 president Robert Wolfe will join the board of directors and serve as=20 executive vice president and general counsel, while AdAcoustics board membe= r=20 Burt Manning will join everstream's board. The combined company will mainta= in=20 offices in Cleveland and in New York. everstream has raised $8.54 million= =20 from Knight Ridder Venture, Gannet, Pulitzer, and CapStar Partners. The=20 MusicBooth has raised more than $2 milli! on from CRM Ventures and=20 Excite@Home. =09=09http://www.everstream.com =09=09http://www.musicbooth.com =09=09 =09=09 =09=09Primus Gets Search Engine AnswerLogic in $3M Stock Swap=20 =09=09mail? top =09=09 =09=09 SEATTLE (VENTUREWIRE) -- Primus, a publicly traded provider of knowl= edge=20 enabling software for customer relationship management (CRM) applications,= =20 said it acquired AnswerLogic, which develops answer engine CRM software=20 utilizing natural language processes, for 750,000 shares of common stock in= =20 Primus worth approximately $3 million. Primus said that when the deal is=20 finalized, AnswerLogic would become a wholly owned subsidiary and would=20 continue to employ its staff and operate out of its Washington office.=20 AnswerLogic's CEO Lou Pugliese will continue with the company through the= =20 transition period. AnswerLogic's founders Jamie Hamilton and Paul Jacobs wi= ll=20 have executive positions with Primus. AnswerLogic had received $12 million = in=20 funding from CMGI@Ventures, which had invested $9 million, Novak Biddle=20 Venture Partners, which had invested $2.6 million, and individual investors= .=20 Primus received legal counsel from the Seattle law firm Preston, Gates &=20 Ellis. =20 =09=09http://www.answerlogic.com =09=09http://www.primus.com =09=09 =09=09 =09=09MindArrow Systems Buys Control Commerce in Stock Deal =09=09 mail? top =09=09 =09=09 ALISO VIEJO, Calif. (VENTUREWIRE) -- MindArrow Systems, a publicly-t= raded=20 company that provides direct digital marketing software and services, said = it=20 has agreed to acquire New York-based Control Commerce, a provider of the=20 "Virtual Kiosk" e-commerce system. Details of the all-stock deal were not= =20 disclosed; the acquisition will close within a few weeks. The deal was valu= ed=20 based on Control Commerce's discounted cash flow, patents, and sales. Contr= ol=20 Commerce had ceased marketing in October in an effort to focus on finding a= =20 buyer. At the time of the acquisition, the company had $1.4 million in cash= .=20 Three employees from Control Commerce, including co-founder Eric Wolffe, wi= ll=20 join MindArrow; Mr. Wolffe will serve as vice president of business=20 development. MindArrow will not retain Control Commerce's New York or San= =20 Diego offices. Law firm O'Melveney and Myers advised MindArrow in the=20 acquisition. Drinker, Biddle, and Shanley advised Control Commerce, and=20 Business Development helped the acquired com! pany find a buyer. Control=20 Commerce had raised $5.5 million from ColumbusNewport, Guthy-Renker, Hudson= =20 Venture Partners, MacAndrews and Forbes, Millennium Hanson, Waterview=20 Partners, and William E. Simon and Sons. =09=09http://www.controlcommerce.com =09=09 =09=09 =09=09 new directors=20 =09=09? =09=09iVita Names Landmark Graphics President and CEO to Board =09=09 mail? top =09=09 =09=09 HOUSTON (VENTUREWIRE) -- iVita, which provides applications for perf= ormance=20 management of fixed-asset portfolios, said John Gibson, current president a= nd=20 CEO of Landmark Graphics, has become the sixth member of its board of=20 directors. Other board members include Vic Mahadevan, chairman and CEO;=20 Andrew W. Kahn, managing director and partner of Access Technology Partners= ;=20 Robert W. Stearns, managing director of Sternhill Partners; Ken DeAngelis,= =20 general partner of Austin Ventures; and Somesh Singh, president and COO of= =20 iVita. Investors in iVita are Austin Ventures, Information Access Technolog= y,=20 Morgan Stanley Dean Witter Private Equity, and Sternhill Partners. The=20 company is advised by the Houston office of law firm Baker Botts. =20 =09=09http://www.ivita.com =09=09 =09=09 =09=09Armando Geday Joins Chameleon Board of Directors =09=09 mail? top =09=09 =09=09 SAN JOSE, Calif. (VENTUREWIRE) -- Chameleon Systems, a fabless semic= onductor=20 company, said Armando Geday has become the sixth member of the board of=20 directors. Mr. Geday is the current board member, president, and CEO of=20 GlobeSpan. Chameleon designs, markets, and sells programmable=20 system-on-a-chip applications for the communications electronics markets. M= r.=20 Geday joins Charles Cump, Chameleon's chairman and vice president of sales;= =20 Charles Fox, president and CEO; Sam Lee, general partner of Infinity Capita= l;=20 Russ Irwin, general partner at Convergence Partners; and Gary Little, gener= al=20 partner of Morgenthaler Ventures. Chameleon is backed by 3i Group, Argo=20 Global Capital, Athena Technology Ventures, Bayview 2000, Convergence=20 Partners, Crossroads Ventures, Dain Rauscher Wessels, GTG Ventures,=20 Information Technology Ventures, Macnica, Merrill Lynch Kecalp, Morgan=20 Stanley Dean Witter Venture Partners, Morgenthaler Ventures, Synopsys, U.S.= =20 Bancorp Piper Jaffray Ventures, and WK Technology Fund. =09=09http://www.chameleonsystems.com =09=09 =09=09 =09=09 new people=20 =09=09? =09=09Colorado MicroDisplay Changes Name, Juggles Execs =09=09 mail? top =09=09 =09=09 BOULDER, Colo. (VENTUREWIRE) -- Colorado MicroDisplay, which develop= s=20 high-resolution, full-color microdisplay applications, said it has changed= =20 its name to Zight. The company said that the name change reflects its growt= h=20 and not a business model shift. Zight also shifted several members of its= =20 management team. Co-founder and former CEO Mark Willner will become chairma= n=20 of the board and chief strategy officer. He replaces co-founder Bob Epstein= ,=20 who will retain his seat on the board. The company's former president and C= OO=20 Kennedy Roberts replaces Mr. Willner in the CEO position and will remain=20 president. The company said the COO position will remain open. New board=20 members were also announced. Sherel Horsley, former key business and=20 marketing executive of the DLP Product Group at Texas Instruments, and Stua= rt=20 Chapman, director at 3i -- who has been an observer of the board for the la= st=20 nine months -- become the eighth and ninth board members. The company's=20 backers are GE Capital, Texas Instruments,! Intel, InFocus, Granite Venture= s,=20 Mustang Ventures Fund, Vulcan Ventures, 3i, Telesystems-Argo Global Capital= ,=20 Sequel Venture Partners, and Polaroid. The company was founded in July 1996= =20 by Mr. Epstein, Mr. Willner, and Douglas McKnight and closed its fourth rou= nd=20 of funding in November 2000 at $34.3 million. =20 =09=09http://www.zight.com =09=09 =09=09 =09=09Icarian Hires Ed Koepfler as New President and CEO =09=09 mail? top =09=09 =09=09 SUNNYVALE, Calif. (VENTUREWIRE) -- Icarian, which provides innovativ= e hosted=20 workforce management applications, said it appointed Ed Koepfler as its new= =20 president and CEO. He replaces Doug Merritt, who founded the company in 199= 7=20 and has become vice president of sales. Its investors include Fidelity=20 Ventures, Granite Ventures, Information Access Technology, J.P. Morgan H&Q,= =20 Kleiner Perkins Caufield & Byers, Partech International, Patricof & Co.=20 Ventures, Presidio Venture Partners, Sands Brothers & Co., TMP Worldwide, V= an=20 Wagoner Capital Management, and Wheatley Partners.=20 =09=09 =09=09 =09=09Travel Site Viator Promotes COO Jan Knox to President =09=09 mail? top =09=09 =09=09 SAN FRANCISCO (VENTUREWIRE) -- Viator, a provider of travel destinat= ion=20 content, technology, and distribution services, announced the promotion of= =20 Jan Knox to the company's first president. Ms. Knox has been with the compa= ny=20 for two years and most recently served as the company's chief operating=20 officer in Sydney, Australia and will relocate to San Francisco. Viator is= =20 backed by Australia Technology Group, Technology Venture Partners,=20 Travelocity, Worldspan, and individual investors.=20 =09=09http://www.viator.com =09=09 =09=09 =09=09IKANO Appoints New President and Chief Operating Officer =09=09 mail? top =09=09 =09=09 SALT LAKE CITY (VENTUREWIRE) -- IKANO Communications, a provider of = Internet=20 networking infrastructure and branded services, said it has appointed Garth= =20 Howard as president and chief operating officer. Mr. Howard, who most=20 recently served as president of custom solutions for Convergys' customer=20 management group, replaces founder Henry Smith as president. Mr. Smith will= =20 continue on as the company's CEO. As president and COO, Mr. Howard will=20 manage the strategic direction and operations of IKANO's sales, marketing,= =20 finance, customer relationship management, creative, and call center office= s.=20 In January 2000, the company secured $11.5 million from Insight Capital=20 Partners and Chicago Venture Partners. =09=09http://www.ikano.com =09=09 =09=09 =09=09MRM Fulfillment Appoints New President & CEO =09=09 mail? top =09=09 =09=09 RESEARCH TRIANGLE PARK, N.C. (VENTUREWIRE) -- MRM Fulfillment, a pro= vider of=20 order management and fulfillment services to marketing organizations,=20 announced the appointment of Antony Francis as president and CEO. Mr.=20 Francis, who most recently served as vice president of global operations fo= r=20 publicly traded online marketplace SciQuest.com, replaces founder Ed=20 Hathaway. Mr. Hathaway will continue with the company as chairman and vice= =20 president, business development and operations. Currently backed by=20 individuals, MRM Fulfillment is actively seeking between $3 million and $5= =20 million in Series A financing, to close by the third quarter of this year.= =20 =09=09http://www.mrmfulfillment.com =09=09 =09=09 =09=09DigitalMoJo Announces Thomas Joseph As New Chairman & CEO =09=09 mail? top =09=09 =09=09 ATLANTA (VENTUREWIRE) -- DigitalMoJo, a provider of risk management = and=20 information security services, said that it appointed Thomas Joseph as chie= f=20 executive officer and chairman of the board. Mr. Joseph replaces Robert=20 McMillon, who will continue with the company as chief strategist and board= =20 member. Prior to joining DigitalMojo, Mr. Joseph served as vice president a= nd=20 general manager of North American operations for publicly traded network=20 infrastructure consulting firm Predictive Systems. DigitalMoJo's five-membe= r=20 board of direction includes Teddy Kaplan and Gavin Ray of Meyer Duffy=20 Ventures. To date, DigitalMoJo has raised $4 million in one round from Meye= r=20 Duffy Ventures, Predictive Systems, Formational Ventures, and unnamed=20 individuals. The company is currently seeking an undisclosed amount of seco= nd=20 round funding, to close in June.=20 =09=09http://www.digitalmojo.com =09=09 =09=09 =09=09Digi-Block Taps Ex Pres of Ziff-Davis Education as CEO =09=09 mail? top =09=09 =09=09 WATERTOWN, Mass. (VENTUREWIRE) -- Digi-Block, which develops mathema= tics=20 blocks for elementary schools, announced Bill Rosenthal will join as CEO on= =20 June 1, replacing Patricia Reinhardt, who is leaving the company for person= al=20 reasons. He was introduced to the company by executive search firm Christia= n=20 & Timbers. Mr. Rosenthal also takes Mr. Reinhardt's seat on the board, whic= h=20 totals seven directors. Prior to Digi-Block, Mr. Rosenthal served as=20 president of The Kaplan colleges, a division of Kaplan, and as president of= =20 Ziff-Davis Education. The company is backed by KKR and Grace Capital. =20 =09=09http://www.digi-block.com =09=09 =09=09 =09=09 vc fund news=20 =09=09? =09=09University of Pittsburgh, Redleaf Form Tech Funding Program =09=09 mail? top =09=09 =09=09 PITTSBURGH (VENTUREWIRE) -- The University of Pittsburgh and Redleaf= Group,=20 a technology operating company that provides services and capital for very= =20 early stage technology companies, announced plans to create Oak Leaf=20 Networks, a new program that will provide capital, services, and=20 infrastructure to start-ups in southwestern Pennsylvania and northern West= =20 Virginia. RedLeaf Group said the new program will seek to commercialize new= =20 ideas at the university, as well as fund emerging technologies in the Great= er=20 Delaware region. Oak Leaf said it is particularly interested in information= =20 technologies, Internet-related technologies, and biotechnology applications= =20 such as bio-informatics and drug discovery software. Redleaf will manage th= e=20 program and provide capital through its early-stage venture fund, while the= =20 University of Pittsburgh will facilitate the formation of new ventures base= d=20 on University technology. Oak Leaf Networks will be located in the Oakland= =20 neighborhood of Pittsburgh, near the Pitt camp! us. Mark Coticchia, a senio= r=20 director at RedLeaf who handles the technology transfer program, said Oak= =20 Leaf expects to complete two new deals by the end of July. RedLeaf has also= =20 partnered with the University of Pennsylvania to form another accelerator= =20 program, known as PennNetworks. About two weeks ago, RedLeaf announced it i= s=20 financing the launch of a network optimization company called 61C Networks,= =20 which was founded by a graduate student at Carnigie Mellon. Mike Nelson, a= =20 managing director at RedLeaf, is also responsible for the execution of this= =20 program, along with Chris Capelli, who heads the University of Pittsburgh's= =20 technology development and research program. =20 =09=09http://www.redleaf.com =09=09 =09=09 =09=09 vc personnel=20 =09=09? =09=09Baroness Sarah Hogg Set to Become 3i Chair in January =09=09 mail? top =09=09 =09=09 LONDON (VENTUREWIRE) -- 3i announced the retirement of George Russel= l as=20 non-executive chairman of its board of directors, effective December 31,=20 2001. Upon Mr. Russell's retirement Baroness Sarah Hogg will become the new= =20 non-executive chairman of the board of directors, which now has 12 director= s.=20 Ms. Hogg is currently chairman of 3i's audit and compliance committee and h= as=20 been a non-executive director at 3i since 1997. She is also a chairman of= =20 Frontier Economics and Foreign & Colonial Smaller Companies, a director of= =20 GKN, Martin Currie Portfolio Investment Trust, P&O Princess Cruises, a=20 Governor of the BBC, and a member of the House of Lords select committee on= =20 economic affairs.=20 =09=09http://www.3i.com =09=09 =09=09 =09=09Dekkers Davidson Joins Charles River as Exec in Residence =09=09 mail? top =09=09 =09=09 WALTHAM, Mass. (VENTUREWIRE) -- Charles River Ventures (CRV), which = closed=20 its Charles River Partnership XI fund in January at $1.2 billion, said it= =20 hired Dekkers Davidson as its executive in residence. Mr. Davidson will wor= k=20 with entrepreneurs on how to effectively run start-up companies. Prior to= =20 joining CRV, he was the president of the Ontario division of Rogers Cantel,= =20 Canada's largest wireless company. CRV's portfolio includes Brix Networks,= =20 Storigen Systems, Guardent, TalkingNets, InteQ, and Upromise.=20 =09=09http://www.crv.com =09=09 =09=09 =09=09Growth Capital Names New Executive Vice President =09=09 mail? top =09=09 =09=09 LANCASTER, Pa. (VENTUREWIRE) -- Growth Capital, a private venture ca= pital=20 firm, announced it has appointed Richard A. Bidgood to head its venture=20 capital group as an executive vice president. Mr. Bidgood will be responsib= le=20 for Growth Capital's venture capital fund, as well as for its business=20 management and consulting activities. He will report to Jeremy Freakins,=20 Growth Capital's chairman and CEO. Before joining Growth Capital, Mr. Bidgo= od=20 was vice president and senior portfolio manager at First Union National Ban= k,=20 where he worked since 1983.=20 =09=09http://www.growthcapitalusa.com =09=09 =09=09 =09=09 vw corrections=20 =09=09? =09=09Broadview =09=09 mail? top =09=09 =09=09 NEW YORK (VENTUREWIRE) -- An item in Friday's VentureWire incorrectl= y cited=20 Broadview Associates as an investor in Red Herring. Broadview Capital=20 Partners backs Red Herring.=20 =09=09 =09=09 =09=09Porivo Technologies =09=09 mail? top =09=09 =09=09 NEW YORK (VENTUREWIRE) -- An item in Friday's VentureWire about the= =20 appointment of Gordon Kass as president and CEO of Porivo Technologies=20 contained an editing error that made his background unclear. He formerly=20 served as executive vice president and chief technology officer at NBC=20 Internet. The story also misspelled the name of the company's co-founder an= d=20 vice president of strategic development Will Holmes. =09=09 =09=09 =09=09company index =09=09top =09=09 =09=09no companies yet indexed for this issue =09=09 =09=09 =09=09 =09=09Free Trial! Hoover's Online Business Subscription =09=09Sign up now for a free one-week Business Subscription to =09=09Hoover's Online and boost your business intelligence. With =09=09coverage of more than 12 million private and public =09=09companies worldwide, Hoover's Online is the ultimate =09=09resource for in-depth business information, including =09=09company and industry profiles, IPO pricings and filings, =09=09news, financial data, officers, competitors and more! =09=09Sign up today for your free=20 trial.http://www.hoovers.com/hoov/freetrial/vwire.html =09=09 =09=09 =09=09 =09=09investor index =09=09top =09=09 =09=09no investors yet indexed for this issue =09=09 =09=09 =09=09your account =09=09 =09=09click on the following links to: =09=09=01=07 Switch to the plain-text version =09=09=01=07 Change your e-mail address =09=09=01=07 Cancel your subscription =09=09=01=07 Thoughts, suggestions, commentary =09=09=01=07 This newsletter was mailed to you at: [email protected] =09=09 =09=09contact =09=09 =09=09Send news items to [email protected] =09=09Send questions, complaints, or service queries to venturewire@venture= wire.com =09=09Send advertising inquiries to [email protected] =09=09 =09=09 =09=09legal =09=09 =09=09This copy of VentureWire and the information within it may not be rep= roduced,=20 saved, or otherwise copied into a database without the prior written consen= t=20 of Technologic Partners. =09=09 =09=09VentureWire is a service mark of Technologic Partners =09=09,2001 Technologic Partners =09=09=09?

dasovich-j/all_documents/12846.

dasovich-j

['[email protected]']

FW: ______________

Does someone at the Chamber want to see this? -----Original Message----- From: Dan Douglass [mailto:[email protected]] Sent: Thursday, September 27, 2001 1:16 AM To: ARM; Gary Ackerman; Vicki Sandler; Anderson, Robert; Max Bulk; John Yurkanin; Steve Huhman; Mike Day; Paul Fenn Subject: ______________ Attached for your review and comment is a revised draft of the application for rehearing to be filed on Friday the 28th. There are two primary changes. The California Chamber of Commerce has been added to the application and an argument has been added that the Decision contradicts the most recent legislative intent expressed in ABX2 9 that direct access continue, at least for aggregation and community choice purposes. Any and all comments will be very much appreciated. Also, I would appreciate it if Sue Mara would forward the document to her contact at the Chamber so that they can also review the draft. Thanks! Dan Law Offices of Daniel W. Douglass 5959 Topanga Canyon Blvd. Suite 244 Woodland Hills, CA 91367 Tel: (818) 596-2201 Fax: (818) 346-6502 [email protected] <mailto:[email protected]>

dasovich-j/deleted_items/1590.

dasovich-j

['[email protected]']

WPTF Friday Crazy About U Burrito

THE FRIDAY BURRITO=20 Ben Zycher from the RAND Corporation used the following line in his talk at= =20 the WPTF General Meeting in Phoenix a few weeks ago. The story takes place = in=20 the good ol' days of the Soviet Union when Brezhnev was Premier.? Brezhnev= =20 and the rest of the Politburo one fine May Day were watching the tanks and= =20 missiles pass by the Kremlin Wall, when Leonid noticed in the middle of the= =20 parade a truck carrying a group of civilians.? He turned to Dmitri Ustinov,= =20 the Defense Minister, and asked, "Who are they?"? Ustinov replied, "Those a= re=20 our economists.? You just wouldn't believe their destructive potential."=20 This is appropriate for our time and our situation.? The economists descend= ed=20 upon us when the California market was designed, but we know not from where= .?=20 Aliens?? Since weaving conspiracy theories is a popular past time in=20 Sacramento ("We just know they are gouging us, them bullies"), I believe th= at=20 one must do the same by following the money.? I'm not talking about the=20 campaign contributions in Gray Davis' pocket. The most money has gone from= =20 power sales in California to the Canadian Province of British Columbia.? It= =20 was a plot the Canadians hatched. I mean, look at Governor Davis.? He looks= =20 kind of BC-ish.? Skinny and lanky, wimpy hair, and a hesitation in his=20 speech. He talks their language: a mix of misspelled French ("meet me at th= e=20 centre"), English, and Eh(?).? One night in 1996, the BC government secretl= y=20 sent us some economists by the truckload to destroy California.? The=20 utilities probably paid for the bus tickets.? I happen to know that Frank= =20 Wolak, Chair of the ISO Market Surveillance Committee once lectured at a=20 University in Vancouver, B.C..? What more evidence do you need?? The BC=20 Government sent us cheap hydro power, sold at inflated market prices so tha= t=20 they could do what the citizens of California wanted to do with their budge= t=20 largess =01( build roads, schools, and hospitals. They didn't think we coul= d=20 figure out their plot, but we did.? Now is the time for California to=20 counter-attack.? We'll send them some of our politicians, a bipartisan grou= p=20 including a few who can add, and some of our select energy thugs from the= =20 CPUC and the Blind Oversight Board.=20 Speaking of times and situations, there was a time when discussing the ISO,= =20 words such as "communist" and "Nazi" were only uttered, by my pal, Carl=20 Imparato,.? We would shake our heads, and chuckle at Carl's extremism.? We= =20 aren't laughing now.? The descriptors seem to arise again and again in poli= te=20 conversation by a wider circle of people.? I watch with utter amusement=20 (because the alternative is retching breakfast) at the demagoguery of the I= SO=20 Governing Board, the Market Despair Team, the Governor's office, and some= =20 members of the California Legislature. Like an audience watching a tragedy= =20 from hell, we scream aloud, "These people are crazy!"? And indeed, they are= .?=20 Mr. President is not helping us at all by continuing to wrangle over who ge= ts=20 the musical Chair at FERC =01( Bubba Curt or Bubba Patrick.? Listen to us, = Mr.=20 President.? Let Bubba Curt keep the reigns for a year or two, and let Bubba= =20 Patrick take a seat at the table.? We need someone with a shockproof BS=20 detector.? Someone who can honestly field a motion to dismiss the Californi= a=20 ISO.? The time is long overdue to shoot this horse in the head.=20 Not all is evil.? This week in Houston, the resource capital of California,= I=20 visited the trading floor folks at Dynegy, before attending the WTPF Board= =20 meeting.? The coolest thing I saw, besides all the neat gadgets on each=20 trader's desk, was the coffee machine.? Brother Jolly Hayden showed me how = to=20 use it.? You pick the type of coffee you want.? The contents of the coffee= =20 are in a shot-glass sized plastic tub with a foil top.? I picked Venezuelan= =20 #6 Decaffeinated Waxy Crude.? The tub is placed inside the brewing machine,= =20 and the start button is pushed.? Presto, coffee drips from the spout into a= =20 waiting cup.? I asked Jolly, "How did the hot water get mixed into the grou= nd=20 beans?"? He removed the tub from the machine and showed me a pin prick hole= =20 made in the foil top, and another that was made at the bottom.? Is that nea= t,=20 or what?=20 I would like to buy a brewing machine just like the Dynegy coffee machine,= =20 but a little larger.? I would set up a booth in Sacramento, on the corner o= f=20 11th and "L", and bark out to passing members of the Legislature, "Free spa= ce=20 shuttle. Come and see life on other planets."? They would jump at the chanc= e=20 to visit other planets.? I would seat them in the machine, push the start= =20 button, and voila.? Dripping out would be the essence of democracy.? Don't= =20 worry about the holes needed at the top and the bottom.? They are already= =20 there, and quite enlarged.=20 Back to my day at Dynegy.? Trade floors might seem similar across companies= ,=20 but the small differences speak to the management style embraced by the cre= w=20 and its leaders.? Each electric trading desk, for various parts of the=20 country, is set up a little bit differently.? For example, some desks have = a=20 person doing asset-backed trading, but some don't.? When I arrived at 6 a.m= .,=20 Houston time, the Eastern desk was busy in its trade day.? The Western folk= s=20 hadn't arrived, yet.? Later, I sat with Randy LeForce of the Western desk.?= =20 "Captain LeForce, to you", he told me.? He could talk big because Dave=20 Francis, who sits next to Randy, and hangs witty quotes from the ceiling=20 above his head ("Even a blind pig could make money in this market"), was on= =20 vacation.? As the pace of the trading gathered steam, Randy kept an eye on= =20 all the different people working the Western trading desk.? The Captain=20 worked it like a maestro.=20 During my visit, some Dynegy folks came up to me, introduced themselves, an= d=20 said how much they enjoyed the Friday Burrito.? I'll tell you what.? There= =20 are few things in life that give me as much satisfaction.? Complete strange= rs=20 who tell you that something you do makes them feel good, well, it doesn't g= et=20 any better than that.? Garrison Keillor, the well-known author of Lake=20 Woebegone Days, and NPR radio entertainer once said a writer should have an= =20 audience.? Not everyone in the world should be in the audience, but an=20 audience nonetheless of some people.? I now know what he means.? And the=20 people I met on the trading floor felt like they knew me, and shared with m= e=20 their thoughts and opinions on a lot of things.?? Often they asked me, "Are= =20 those California people really that crazy?"=20 Since last week, you might have noticed the pace at the FERC has picked up,= =20 somewhat.? Last Friday the FERC issued an Order on possible refunds for=20 alleged overcharges by parties selling to the ISO last January.? That was= =20 news worthy.? Then, on Wednesday, the FERC issued an Order to remove barrie= rs=20 to additional electric generation in the West.? The Order admits that it=20 won't change the dire situation in the West, but these are steps in the rig= ht=20 direction.? The FERC also issued on Wednesday a show-cause order to AES and= =20 Williams regarding the maintenance of RMR units that were called by the ISO= =20 in April and May of 2000.? That is a serious case that we must watch=20 closely.? Also this week, the California Senate kicked off its own=20 investigation (this will be the tenth such investigation of the California= =20 markets to uncover alleged price manipulation).? The Senate Committee will= =20 have subpoena rights, and if I understand it correctly, they plan to subpoe= na=20 individuals.? Sounds like a Kangaroo Court and a Three-Ring Circus, to me.= =20 Thursday, Secretary Abraham stated in a congressional hearing that the West= =20 would certainly experience power outages this summer. Finally, an LA Times= =20 reporter asked me if I had heard that a small QF company had filed for=20 seizure of SCE property to satisfy an outstanding debt.? That would be step= =20 one of the bankruptcy cha-cha.? All in all, a typical week among crazy=20 people.=20 Let's see what else we can talk about.=20 Things in the People's Republic of California=20 ?@@@ PUC Updates Utility Liabilities=20 ?@@@ Be a Source for Energy Price Update=20 ?@@@ BPA Misquoted in the WSJ=20 Things FERC=20 ?@@@ Market Monitoring Proposal=20 Letters=20 Jobs and People=20 Odds & Ends (_!_)=20 =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=20 Things in the People's Republic of California=20 ?@@@ PUC Updates Utility Liabilities=20 My favorite regulator, the California PUC, issued an Order in the Utilities= '=20 Rate Stabilization case to re-open the record on utility audits.? Although= =20 the text of the order is unremarkable, the data tables bring up to date, as= =20 of March 8, the outstanding liabilities of PG&E and SCE.=20 The PG&E commercial paper obligation due as of March 8 increased by $354=20 million since January 31, for a total default amount of $790 million.? QF= =20 purchases increased by $280 million for the same five-week period, now=20 totaling $651 million.? The ISO payments increased $934 million, now totali= ng=20 $1.5 billion, and the direct access charge backs for negative PX credits=20 increased $214 million, now totaling $433 million.? PG&E's total default=20 amount is now $3.3 billion excluding amounts yet to be collected from PG&E= =20 customers for DWR purchases.=20 The SCE balance is as follows: The commercial paper obligation that is due = as=20 of March 8 increased by $260 million since January 31, for a total default= =20 amount of $401 million. SCE defaulted on a significant amount of long-term= =20 debt principal and interest, roughly $249 million.? QF purchase defaults=20 increased by $354 million for the same five-week period, now totaling $835= =20 million.? The ISO obligations decreased $1.1 million, and the direct access= =20 charge backs for negative PX credits increased $21 million, now totaling $2= 5=20 million.? SCE's total default amount is now $1.7 billion excluding amounts= =20 yet to be collected from SCE customers for DWR purchases.=20 There is little question that the QFs are taking it on the chin, big time.?= =20 In the last five weeks, between January 31 and March 8, the defaulted=20 payments to the QF owners from both utilities has increased $630 million.?= =20 The total QF default for both utilities as of March 8 stands at $1.5=20 billion.? Does anyone wonder why 1500 MW of QF capacity has shut down in=20 California?? Without these payments being made very soon, I would expect th= e=20 amount of shut down QF capacity to easily double, or more.? Why would these= =20 projects produce without the promise of being paid?=20 Things in the People's Republic of California=20 ?@@@ Be a Source for Energy Price Update=20 Art O'Donnell, editor and associate publisher of the well-known and widely= =20 read California Energy Market (CEM), is looking for traders willing to=20 participate in his survey in exchange for receiving an advanced copy.? The= =20 Survey is a regular feature in CEM. The information collected by Art is=20 matched against the responses of the other people he interviews and some=20 posted sources (Pricewaterhouse Coopers; BPA=01,s daily offerings, for=20 instance).? It is written up in narrative form. The report goes out twice= =20 weekly, once on Wednesday afternoon/evening via e-mail as a courtesy to the= =20 respondents (because the week is pretty much done by then), and a rewrite o= n=20 Friday that is e-mailed around 10 am, posted on the newsdata.com Web site,= =20 and published in the newsletter for general consumption. The Friday report= =20 also features a brief story about natural gas markets in the West=20 The WPTF Board of Directors has allowed me to publicize this offering, and = to=20 explain that if your company is interested in participating, the informatio= n=20 you provide to Art would be protected as confidential.? In Art's words, "Th= e=20 price survey is =01( unlike some attempts at creating a tradable index numb= er=20 (e.g. McGraw-Hill=01,s Power Markets Week index or the Dow Jones indices), = is=20 more of a narrative about the state of the market d a pulse reading as=20 opposed to a blood pressure number or an EKG. As such, I do not ask traders= =20 and schedulers for precise dollar figures or volumes associated with specif= ic=20 trades, but rather questions like, 'What=01,s Mid-Columbia going for today?= What=20 about off-peak? How has that changed since this morning? Oh yeah, why is=20 that? Anything else I should know?'"=20 The WPTF Board asked Art to explain how the information he collects would b= e=20 protected since so many marketers and generators are under State data=20 subpoenas.? Art replied, "The Constitution of the State of California=20 provides for a blanket immunity against government intrusions for news=20 gathering from confidential sources and unpublished information, something= =20 which we believe in strongly at Energy NewsData Corporation and which we ar= e=20 willing to go to jail to protect. So if, for instance, the Attorney General= =20 tried to subpoena me or anyone from my staff about power price information,= =20 we would 1) refuse to divulge anything other than the already published=20 accounts, 2) send back a copy of the Constitution, 3) contact the attorneys= =20 for the Society of Professional Journalists, and 4) start preparing a benef= it=20 party to raise legal fees. "=20 If you would like to participate in Art's survey, please e-mail him at=20 [email protected].=20 Things in the People's Republic of California=20 ?@@@ BPA Misquoted in the WSJ=20 In last week's Burrito, I referred to a Wall Street Journal article that=20 portrayed a BPA trader as admonishing the DWR for accepting bids over marke= t=20 prices.? I was surprised when I received the following e-mail from BPA's=20 David Mills.? His message to me copied a letter he sent to DWR's Ray Hart,= =20 explaining what he meant as opposed to what he was quoted as saying.=20 Dear Ray:=20 ?=20 As per our telephone discussion, I just wanted to reiterate a few things=20 re:the Wall Street Journal article and the quotes attributed to me.? At no= =20 time during the interview with Ms Smith did I state that I thought that=20 CDWR's offers were out of line with the prevailing market price in Californ= ia=20 or that your traders should check that price before entering the market.? T= he=20 reporter was quite interested in the price difference between California an= d=20 the MidC price here in the Northwest and when I asked I told her that=20 currently that price delta was roughly $50-$100 MWhr, with MidC being lower= =20 than the CA prices.? I did not indicate to the reporter that I thought that= =20 CDWR was paying more than the California market price and was simply trying= =20 to make a comparison of price relativity between California and the=20 Northwest.? Lastly, BPA has, on occasion, charged extra-regional entities= =20 less than the prevailing market price but has only done so to remain=20 consistent with our own pricing strategies.=20 ?=20 ?I apologize for any misconceptions or miscommunications that may have=20 resulted from this and look forward to a continuing working relationship=20 between CDWR and BPA.=20 ?=20 Things FERC=20 ?@@@ Market Monitoring Proposal=20 FERC Staff issued a report with "Recommendations on Prospective Market=20 Monitoring and Mitigation for the California Wholesale Electric Power=20 Market."? WPTF members are taking this proposal very seriously, and we inte= nd=20 to provide comments on March 22.? If you are interested in a copy of the=20 report, go to http://www3.ferc.fed.us/bulkpower/bulkpower.htm.=20 General members are able to participate along with the Board members and=20 other general members working on our response.? We have retained the servic= es=20 of Dr. Ben Zycher of the RAND Corporation to help us draft the policy=20 issues.? He will be working with our counsel, Dan Douglass of Arter & Hadde= n=20 to craft our reply.=20 In short, our submission will point out the flaws in FERC's proposed=20 methodology, and demonstrate the shortcomings of narrowly limiting the=20 definition of producer marginal cost to operating variable cost.? Further,= =20 excluding measures of credit worthiness are an important missing variable i= n=20 the FERC analysis.? Next week, I will include a short summary of our respon= se=20 in the Burrito.=20 Letters=20 I received a note from one of our legal beagles that drop me a line every n= ow=20 and then.? I don't have the facts of the case to which this person refers,= =20 but I hope the sender provides us with an update if a judgement should occu= r.=20 "Universal Studios wants FERC to find that Universal owes no penalty to SCE= =20 for not interrupting its interruptible load (under a CPUC rate schedule)=20 because SCE did not adhere to the FERC requirement in the Dec 15 order to= =20 schedule 95% of its load in the day ahead market ...... according to=20 Universal, if SCE had done so, then it would have had to provide Universal= =20 power at below its cost.? SCE didn't and Universal; got interrupted and now= =20 Universal owes $$$$$$$$$$$$$."? Does anyone else know about this filing?=20 Lind Guerry, veteran of the PX halcyon days, wrote, "Hi Gary.? Hope you're= =20 having a nice day.? Just wanted to let you know that I'm really enjoying th= e=20 Burrito, and am so glad you're sending it to my home email.? I really got a= =20 kick out of the "Ten Reasons...."? It's hard to believe that our wonderful= =20 state is in such incompetent hands, isn't it?? And not only are they=20 incompetent, they continue to remain so, with such regularity, you could=20 probably make a killing marketing their incompetence as a laxative.? Do you= =20 think if we tried to do that, we'd get accused of exercising market power?= =20 Think of the power we'd wield, as the holder of the largest amount of=20 incompetence!! "?=20 Lind, we need a product name for the laxative idea.? Any ideas? How about= =20 Sane Away?=20 Jobs and People=20 The folks at Dynegy sent me a couple of job postings.? If your company has= =20 similar posting or job openings, or if you are reader looking for a new gig= ,=20 drop me a line.? After all, it's free.=20 Position Description:=20 Dynegy's position has responsibility for the development of transmission an= d=20 power markets in a geographic region of the U.S.? Duties are driven primari= ly=20 by federal, regional, and state activities to restructure and deregulate th= e=20 electric power industry, and the need for industry participants to develop= =20 and implement market structures, policies, and regulations that promote=20 liquid and competitive transmission and power markets.? Significant activit= y=20 within a region to reshape the structure and operation of the transmission= =20 grid is resulting from FERC Order 2000, which directs the establishment of= =20 Regional Transmission Organizations. Extensive travel (40%-60%, and higher = at=20 times) is highly probable. Primary goals of this position are to:1) Create= =20 more liquid and competitive transmission and power markets;? 2) Maximize th= e=20 value of Dynegy's positions and assets by working closely with the trading= =20 and power groups to develop?? and implement commercial strategies that crea= te=20 and capture significant business opportunities; and 3) Provide timely and= =20 accurate information, market intelligence, and recommendations to clients. = 4)=20 Maximize the value of Dynegy's positions and assets by working closely with= =20 the trading and power groups to develop and implement commercial strategies= =20 that create and capture significant business opportunities; and=20 recommendations to clients.=20 Interested parties should contact Jolly Hayden at [email protected].=20 Odds & Ends (_!_)=20 First, I would like to welcome WPTF's newest general member, Wellhead=20 Electric.? Hal Dittmer is the founder and president of Wellhead.? I have=20 known Hal for a couple of years, first as a client for my over priced=20 consulting services, and later as a friend and source of all kinds of usefu= l=20 information.? Wellhead is one of those QF owners who are owed a boatload of= =20 money.? However, Hal's company is developing some new projects, and he is= =20 looking for prospective power buyers.? Hence, his interest in WPTF is=20 obvious. Wellhead is WPTF's 31st member.=20 Well, the Dynegy gang has been a source of comfort and joy to me this week.= ?=20 They couldn't let me leave their abode without stuffing a song in my pocket= =20 that is a tribute to their creative skills.? Timely too.? Sing it to the tu= ne=20 of "California Dreaming", by the Mamas and the Papas.=20 ISO California=20 (to the tune of Hotel California) On a dark Western highway=20 No wind in my hair=20 No rain for the hydro=20 No NOX in the air=20 Up ahead in the distance=20 I saw a flickering sight=20 The load grew heavy and the lights grew dim=20 No relief in the night=20 So we stood in the darkness=20 Down at the Taco Bell=20 And I was thinking to myself=20 This could be Heaven or this could be Hell=20 We lit up a candle=20 No power in the Bay=20 There were voices down the corridor=20 I thought I heard them say? =01(=20 Welcome to the ISO California=20 Such a lovely place=20 Such a lovely place=20 Such a lovely face=20 Powering up for the ISO California=20 What a nice surprise=20 What a nice surprise=20 Bring your alibis? =01(=20 Its mind is policy twisted=20 Can=01,t stop consumption trends=20 Got a lot of NIMBY boys=20 Cisco calls friends=20 How we sweat in the courthouse=20 Sweet summer sweat=20 Without the AC=20 We try to forget=20 So I called up the Gov=01,nor=20 Please energize this line=20 He said=20 We haven=01,t built a new plant here since 1969=20 Last thing I remember=20 We were running for the door=20 We had to find the passage back to the place we were before=20 Relax said Judge Damrell=20 California=01,s programmed to receive=20 Go belly up any time you like=20 But your power can never leave=20 ?=20 [refrain]=20 =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=20 Don't refrain.? Have a great weekend, y'all.=20 gba=20 ?

dasovich-j/all_documents/10037.

dasovich-j

['[email protected]', '[email protected]', '[email protected]']

Energy Issues-Tues

Please see the following articles: Sac Bee, Tues, 5/22: Rate hikes bigger worry than blackouts, poll says Sac Bee, Tues, 5/22: Energy Digest: Half-hour warning for blackouts? Sac Bee, Tues, 5/21: What's the hang-up? Sac Bee, Tues, 5/20: Dan Walters: One year later, we know it wasn't just a= =20 simple game of golf Sac Bee, Tues, 5/22: Daniel Weintraub: Energy crisis sapping California's= =20 confidence (Editorial) SD Union, Tues, 5/22: Panel pulls the plug on county utility plan=20 SD Union, Tues, 5/22: Business customers criticize proposed 29% SDG&E rate= =20 hike=20 SD Union, Tues, 5/22: State sends $533.2 million to company, part of April= =20 bill=20 SD Union, Tues, 5/22: 75% say power woes 'very serious'=20 SD Union, Tues, 5/22: Governor told to try seizure in power war=20 SD Union, Tues, 5/22: Head of PUC unveils evidence of power plant manipulat= ion LA Times, Tues, 5/22: State to Issue Warnings of Power Outages LA Times, Tues, 5/22: Businesses May Seek Blackout Exemption LA Times, Tues, 5/22: Legislators Set to Sue Federal Energy Agency SF Chron, (AP) Tues, 5/22: California will forecast blackouts and warn the= =20 public SF Chron, (AP) Tues, 5/22: Developments in California's energy crisis SF Chron , Tues, 5/22: How blackout warning plan works SF Chron , Tues, 5/22: Davis licenses 8th emergency power plant SF Chron, Tues, 5/22: PAY UP: Rate increases to hit more users than first= =20 reported, PUC says SF Chron, Tues, 5/22: Energy crisis not real, state's residents say=20 But poll results show most expect more blackouts SF Chron, Tues, 5/22: Power plant 'ramping' to be probed State senators als= o=20 expected to file suit,=20 charging federal regulators with failing to ensure fair rates SF Chron, Tues, 5/22: Half-hour notice of blackouts planned FAST ALERTS:=20 Power grid operator may send voice, e-mail messages SF Chron, Tues, 5/22: Time-of-use power pricing may be the answer SF Chron, Tues, 5/22: The mouth that roared=20 Mercury News, Tues, 5/22: Blackout alerts, forecasts proposed OC Register, Tues, 5/22: Blackout season may be heating up OC Register , Tues, 5/22: Cheney: Forget price caps, OPEC pressure OC Register, Tues, 5/22: A nuclear rebirth? (Editorial) Individual.com, Tues, 5/22: Mexico Seen As Medium-Term Solution To Californ= ia=20 Power Shortage ___________________________________________________________________________= ___ ______________________ Rate hikes bigger worry than blackouts, poll says=20 By Dan Smith Bee Deputy Capitol Bureau Chief (Published May 22, 2001)=20 The vast majority of Californians expect to be inconvenienced by power=20 blackouts this summer, but two-thirds continue to be far more concerned abo= ut=20 higher electricity rates they believe are unjustified, according to a Field= =20 Poll released Monday.=20 Meanwhile, 85 percent of the state's residents say they have cut back their= =20 energy use since the crisis began, and nearly two-thirds believe they can= =20 conserve an additional 5 percent to 10 percent.=20 As they were at the outset of the crisis, poll respondents remain skeptical= =20 of the power shortage's root cause. Nearly six out of 10 say the crisis is = an=20 attempt by energy companies to increase rates, rather than the results of a= =20 real market imbalance.=20 "As the seriousness of the issue has gone up, the cynicism has remained=20 high," said Mark DiCamillo, director of the San Francisco-based poll. "The= =20 public still doesn't buy the claim that it's supply and demand. They think= =20 it's an artificial crisis."=20 The poll results, obtained by interviewing a cross-section of 1,015 adults= =20 between May 11 and Sunday, are part of a special survey the Field Institute= =20 undertook to measure public opinion about the energy crisis. Subsequent=20 releases will survey attitudes about the available policy options and the= =20 policy-makers who might exercise them.=20 Monday's results show Californians are reacting negatively to higher=20 electricity rates, even though the most recent increase has yet to appear o= n=20 their monthly bills.=20 In a finding nearly identical to Field's January survey, 67 percent are mor= e=20 concerned with higher rates than power blackouts.=20 And that does not bode well for the elected officials trying to solve the= =20 problem, DiCamillo said. Pocketbook issues such as rate increases, he said,= =20 "focus more public opinion on the actors in this drama -- the politicians."= =20 A majority (52 percent) believes the $5 billion rate increase approved by t= he=20 state Public Utilities Commission last week for customers of Pacific Gas an= d=20 Electric Co. and Southern California Edison was not justified, and an=20 identical proportion believes the rate increase will cause a "somewhat" or= =20 "very serious" problem in their households.=20 The proportion of people who believe the increases will cause "very serious= "=20 problems corresponds to their family income. Among those earning $20,000 or= =20 less, 27 percent believe the increases will cause very serious problems. Te= n=20 percent of those earning $80,000 or more believe very serious problems will= =20 occur.=20 In contrast, 27 percent say blackouts have caused a "great deal" or "some"= =20 inconvenience thus far, although 71 percent believe expected blackouts this= =20 summer will cause the same degree of inconvenience. More low-income residen= ts=20 (45 percent) say they will experience a great deal of inconvenience from=20 summer blackouts, compared with just 26 percent of those in the $80,000 and= =20 above category who feel the same way.=20 The poll shows that the 85 percent of respondents who estimated they have= =20 conserved power have cut back, on average, about 8 percent. Gov. Gray Davis= =20 has asked all residents and businesses to reduce power use by=20 10 percent, although Davis' plan assumes a 7 percent reduction. Eighty-five= =20 percent also say they can conserve even more, with additional savings, on= =20 average, amounting to 4 percent.=20 Six out of 10 believe the state can avoid blackouts this summer through=20 conservation.=20 "These numbers are a good guess as to what real conservation is being=20 achieved and what is likely to be achieved, and it's not a huge amount,"=20 DiCamillo said.=20 The Bee's Dan Smith can be reached at (916) 321-5249 or [email protected].= =20 Energy Digest: Half-hour warning for blackouts? (Published May 22, 2001)=20 Grid operators are hoping to issue power blackout warnings a half-hour in= =20 advance, but the new alerts would be educated guesses and blackouts might n= ot=20 follow.=20 The proposed warning system is expected to be approved Thursday by the boar= d=20 of the California Independent System Operator, the Folsom-based organizatio= n=20 that runs most of the state's high-voltage transmission system.=20 Although an unknown number of the alerts will turn out to be false alarms,= =20 "this would be a huge step forward" for businesses, said Carl Guardino, hea= d=20 of the Silicon Valley Manufacturing Group and a member of the ISO board.=20 "For employers, a half-hour is the time needed to fire up a major generator= ,=20 to power down an assembly line, to have your employees save what they have = on=20 their computers," he said.=20 By comparison, the last two rounds of rotating blackouts came with two- and= =20 six-minute warnings, Guardino said.=20 The new system could be put in place by June 1, and might also include=20 expanded systems for giving e-mail notifications of power alerts or potenti= al=20 blackouts, ISO officials said.=20 --Carrie Peyton=20 Connell plans to borrow=20 State Controller Kathleen Connell says Gov. Gray Davis' energy plan doesn't= =20 add up.=20 Connell said at a news conference Monday that the state will spend money on= =20 electricity at a faster rate than anticipated by Davis, a fellow Democrat.= =20 As a result, Connell said, she expects to borrow about $4 billion this fall= =20 to avoid state budget cash shortages in the coming fiscal year.=20 "We are virtually in the same kind of fiscal environment that we were in a= =20 bad budget year," Connell said.=20 In recent years, the state has regularly borrowed money through one-year=20 revenue anticipation notes to avoid cash-flow problems. The notes are paid= =20 off within a year when enough tax money flows to the state treasury.=20 But Connell didn't have to resort to borrowing this year because of plentif= ul=20 revenue and a healthy reserve.=20 Connell said the state's energy purchases have changed the picture, and=20 called into question Davis' assumptions. The governor's plan calls for 11= =20 percent of the power purchases in the first half of this year to be covered= =20 by lower-cost, long-term contracts. As of last week, only 1 percent of the= =20 purchases were under contracts, Connell said.=20 But Joe Fichera, Davis' financial adviser, said that seven more long-term= =20 contracts for electricity during peak demand periods this summer will be=20 delivered to Connell's office today.=20 --John Hill=20 Suit to seek price caps The state Legislature plans to file suit today in federal court in a bid to= =20 force the Federal Energy Regulatory Commission to impose caps on power=20 prices.=20 The lawsuit will argue that the commission has failed to ensure that=20 Californians are paying just and reasonable rates, as required under the=20 Federal Power Act.=20 The suit is being filed by Senate President Pro Tem John Burton, D-San=20 Francisco, and Assembly Speaker Robert Hertzberg, D-Sherman Oaks. Hertzberg= =20 said consumer groups and others are also expected to join the suit.=20 As evidence, the suit will cite reports earlier this year by the California= =20 Independent System Operator that the state's electricity market was not=20 resulting in just and reasonable rates. The ISO is responsible for running= =20 the state's transmission grid.=20 The suit will cite evidence of how high power rates are causing harm to=20 society, Hertzberg said.=20 --John Hill=20 U.S. attacks special rate Before the idea goes any further, the federal government Monday asked state= =20 utility regulators to junk a proposal for a special, high-priced federal=20 energy rate.=20 In an emergency appeal, federal officials asked the state Public Utilities= =20 Commission to take a special vote Thursday to drop the idea of even=20 researching a pilot program, calling it discriminatory and a waste of time.= =20 As part of a vote last week that created new electricity rates, the PUC als= o=20 launched a study into charging all federal facilities market-based prices f= or=20 power -- a move widely seen as a dig against federal authorities who have= =20 refused state pleas to cap wholesale prices.=20 But three of the five PUC commissioners said at the time that they disliked= =20 the idea and would consider other options.=20 Given their reluctance, it would be a waste of utilities' scarce resources = to=20 even begin researching how to assess the special rate, the Department of th= e=20 Navy wrote the PUC on Monday, arguing on behalf of all federal executive=20 agencies.=20 --Carrie Peyton What's the hang-up? Clotheslines save energy and money, but they are considered unsightly by so= me=20 and are banned in many areas By Mary Lynne Vellinga Bee Staff Writer=20 (Published May 21, 2001) Rising electricity rates have prompted Stacey Swett to seriously consider= =20 taking a step she finds somewhat distasteful: hanging a clothesline in her= =20 back yard.=20 "I don't really like the looks of them, but you have to get past that; we= =20 have a huge issue here with our SMUD bill," Swett said.=20 The California Energy Commission touts clotheslines as a nearly cost-free w= ay=20 to conserve electricity. Statewide, clothes dryers burn about 1,000 megawat= ts=20 of electricity on a hot summer day, which could be enough to avert a blacko= ut=20 on days when state power supplies are tight. An electric dryer costs about= =20 $130 a year to run. A retractable clothesline will set you back about $14.9= 9.=20 People appear to be getting the message. Hardware stores report a sharp ris= e=20 in clothesline sales since the energy crisis hit. People are "going back to= =20 the old way of doing things," said Dave Haskin, owner of Broadway Hardware = in=20 Sacramento.=20 But the old way of doing things doesn't sit so well in some newer=20 neighborhoods. Where Swett lives, in midtown, she can decide for herself=20 whether to take the plunge and pin up the bloomers. But in many newer=20 neighborhoods -- those governed by homeowners associations -- the practice = is=20 not allowed.=20 Swett works for the management company that runs the homeowners association= =20 for the gated, Pocket-area subdivision of Riverlake. In Riverlake, it is=20 against the rules to hang your laundry where your neighbors can glimpse it.= =20 The same is true in Gold River, Rancho Murieta, Laguna West and Los Lagos,= =20 the mansion-studded Granite Bay enclave where Sacramento Kings stars Chris= =20 Webber and Jason Williams live.=20 "People think (clotheslines) are unsightly," said Dan Kocal, owner of the= =20 Folsom-based Kocal Management Group. His company manages the homeowners=20 associations for 70 communities in the Sacramento region. Not one of them= =20 allows clotheslines unless they are shielded from neighbors' views below th= e=20 fence line or behind a special enclosure.=20 When people buy into planned communities such as Gold River, Los Lagos or S= un=20 City, they agree to certain rules designed to keep the neighborhood looking= =20 neat and uniform, Kocal said.=20 "You agree that you're only going to park in the garage, that you're not=20 going to hang out clothes and that you're not going to paint your house=20 purple," Kocal said.=20 Clotheslines that can be seen from neighboring yards are banned by virtuall= y=20 all the 35,000 California subdivisions and condominium complexes governed b= y=20 homeowners associations, said Richard Monson, president of the Pasadena-bas= ed=20 California Association of Homeowners Associations.=20 "We choose to live in neighborhoods that don't hang these things out," Mons= on=20 said.=20 A few weeks ago, Monson was quoted as saying that the sight of hanging=20 laundry is "akin to graffiti in your neighborhood." Cartoonist Garry Trudea= u=20 since has devoted an entire week of his Doonesbury strip to lampooning=20 neighborhoods that don't allow clothes to be hung out to dry.=20 Now, Monson chooses his words more carefully. "When we talk about areas of= =20 communities that are less desirable, we often associate those with=20 undesirable items that are in proximity to the buildings," he said. He stan= ds=20 by his assertion that the sight of clothes flapping in the breeze could kno= ck=20 15 percent off property values.=20 Brian Rosebrock, a supervisor at the new Home Depot in Elk Grove, doesn't= =20 understand the stigma. When he was growing up in a rural area outside New= =20 York City, his mother always dried the family's clothes on the line.=20 Rosebrock, 40, still likes the smell of sun-dried clothes. He hangs his=20 jeans, socks, sheets and other cotton items in the back yard of his Rosemon= t=20 house.=20 "It's just laundry. Everybody is a little uptight here," he said of=20 Californians.=20 He may have a point. Bruce Hackett, professor emeritus of sociology at the= =20 University of California, Davis, said Californians harbor more negative=20 attitudes toward clotheslines than do people in the Midwest, where line=20 drying is more of a tradition.=20 About 10 years ago, Hackett did a survey of 45 UC Davis students and 35=20 single-family households in Green Bay, Wis. At the time, some students livi= ng=20 in married housing on the UC Davis campus were upset that they had to walk = to=20 an isolated, screened area next to the trash bins to hang their laundry.=20 "The housing office said clotheslines make the place look like a tenement,"= =20 Hackett said.=20 The attitude in Wisconsin was markedly different.=20 "On wash day, there were just clotheslines everywhere, which is something y= ou=20 don't find here," Hackett said. "One woman told me that when you move into = a=20 new home it's not really your home until your clothesline is up and your=20 clothes are on it."=20 In the wake of student complaints, the university eventually changed the=20 policy to allow the use of retractable clothes lines in the housing area,= =20 Hackett said.=20 Leaders of several Sacramento-area homeowners associations said they couldn= 't=20 think of any instance in which a homeowner has asked permission to hang a= =20 clothesline or has gotten in trouble for using one.=20 "I don't know of anyone who has a clothesline," said David Brickell,=20 president of the Los Lagos Estates Homeowners Association. He said the Los= =20 Lagos neighborhood is very concerned about the energy crisis and thus "woul= d=20 certainly consider" allowing clotheslines.=20 To save energy, the subdivision has started turning off its entrance founta= in=20 at night and is considering buying a smaller fountain pump.=20 Monson, head of the statewide association, argued that there are many ways = to=20 conserve energy without resorting to the public airing of laundry. Wet=20 clothes can, for instance, be hung in the garage or the utility room, he=20 said.=20 "The issue is not clotheslines, the issue is conservation, and hom=0F'eowne= rs=20 don't have to hang their clothes out of doors," he said.=20 But some energy-conscious citizens think discouraging the use of outdoor=20 laundry lines is ridiculous, given the state's energy situation.=20 Jennifer Putnam, 41, recently purchased a large umbrella-style apparatus to= =20 dry clothes in her Jackson back yard.=20 "We were standing outside by the (electric) meter at one point, two or thre= e=20 months ago. My husband said, 'Look at how fast that thing is going around.'= I=20 said, 'The only thing on is the dryer.' "=20 "During World War II, we had to do certain things," Putnam continued. "Now,= =20 we're looking at a power crunch, we're looking at saving an economy in=20 California. That's critical. That's important. =06? I really don't think Gr= anite=20 Bay is going to turn into a slum because people put up things to dry their= =20 clothes on."=20 The Bee's Mary Lynne Vellinga can be reached at (916) 321-1094 or=20 [email protected].=20 Dan Walters: One year later, we know it wasn't just a simple game of golf (Published May 20, 2001) California will mark -- but certainly not celebrate -- an anniversary this= =20 week. It was exactly one year ago that a late spring heat wave swept over S= an=20 Diego, and as air conditioners began drawing heavy amounts of power, San=20 Diego Gas & Electric Co. began charging its customers high, market-oriented= =20 rates for juice.=20 It was the beginning of the California energy crisis, or at least of public= =20 and political awareness that something was wrong. And a year later, every= =20 aspect of the crisis continues to grow worse. We are paying 10 times as muc= h=20 for power as we were two years ago. We have amassed more than $20 billion i= n=20 private and public debt that will grow even with sharp increases in consume= r=20 power rates. And we face potentially life-threatening summer blackouts.=20 Certainly the roots of the crisis extend much further than one year. They g= o=20 back to decisions in the 1970s to stop major power plant construction and= =20 rely on conservation and alternative generating sources. And they include a= =20 momentous decision in the mid-1990s to adopt a "deregulation" plan that was= =20 an unworkable hybrid of open markets and price controls that left us at the= =20 mercy of out-of-state generators. Of more currency is what was and wasn't= =20 done in the last 12 months to fan that spark into a uncontrolled, and perha= ps=20 uncontrollable, firestorm.=20 Gov. Gray Davis once said that he was approaching energy just as he plays= =20 golf, "one hole at a time." Unfortunately for Davis, and for the state, it= =20 was not a golf game, but one of three-dimensional, and perhaps=20 four-dimensional, chess. To manage the crisis effectively, the Democratic= =20 governor needed the ability, either personally or through trusted aides, to= =20 pull together its disparate elements into a cohesive whole.=20 The golfing approach was evident from the beginning, as Davis dealt with on= ly=20 the most immediate aspects of the situation as they evolved, rather than=20 embracing it wholly and actively. Private and public energy experts warned= =20 that what was happening in San Diego was a harbinger of a larger crisis and= =20 proposed that the 1996 "deregulation" be suspended, that rates be raised=20 slightly and that private utilities be given broad authority to enter into= =20 long-term supply contracts to stabilize the market. But Davis and his=20 handpicked state Public Utilities Commission president, Loretta Lynch,=20 stalled for time.=20 Less than a month after the crisis first surfaced, the PUC voted 3-2 to=20 authorize long-term supply contracts at about 5 cents a kilowatt-hour --=20 slightly higher than wholesale prices had been, but ridiculously cheap by= =20 contemporary standards. Publicly owned utilities saw the looming price=20 escalation and quickly locked up long-term supplies, but Lynch denounced th= e=20 commission action as "a wrong turn" that could lead to higher consumer bill= s,=20 and within days it was scuttled in legislation signed by Davis.=20 Rather than face the issue comprehensively and proactively, Davis, Lynch an= d=20 the Legislature opted for an expedient fix in San Diego, rolling back retai= l=20 rates without addressing either supply or cost issues. Within weeks, privat= e=20 utilities were beginning to take on billions of dollars in debt as wholesal= e=20 costs skyrocketed.=20 Last summer's failure to act was compounded by other errors of judgment. It= 's=20 clear now, for example, that it was a mistake for the state to continue=20 buying power at sky-high rates when the utilities had exhausted their credi= t.=20 Having a new deep pocket encouraged the generators to charge whatever the= =20 market would bear.=20 A year after he could have nipped the crisis in the bud, but didn't, Davis = is=20 busily rewriting history and blaming others, principally Republicans, for t= he=20 dilemma. But the governor cannot, or should not, escape the responsibility= =20 for approaching this very complex situation like a game of golf, or like so= me=20 routine political dispute, and thus failing to apply the aggressive and=20 sophisticated managerial touch that this crisis demanded from the onset.=20 As Gen. George McClellan discovered at the Battle of Antietam during the=20 Civil War, the unwillingness to take risk often leads to greater carnage.= =20 The Bee's Dan Walters can be reached at (916) 321-1195 or [email protected]= om . Daniel Weintraub: Energy crisis sapping California's confidence (Published May 22, 2001)=20 California's energy crisis is becoming a crisis of confidence. As electrici= ty=20 rates rise and blackouts mount, residents are losing faith in their=20 government's ability to deal with the one issue underlying this crisis and= =20 almost everything else that happens in the state -- population growth.=20 Energy and growth, in fact, are intertwined in the minds of everyday=20 Californians to an extent not yet reflected in the debate inside the Capito= l,=20 according to the results of a new poll from the Public Policy Institute of= =20 California.=20 More than three-quarters of those surveyed statewide said they believe=20 population growth contributed to the electricity shortage. And even if the= =20 energy crisis fades, people expect other problems associated with growth to= =20 worsen.=20 The crisis, in other words, has only heightened a sense that many people=20 already had, a feeling that California's famous quality of life is threaten= ed=20 by rapid growth and our failure to provide the public works and services=20 needed to make growth tolerable.=20 For the first time since the mid-1990s, more people say the state is headed= =20 in the wrong direction (48 percent) than in the right direction (44 percent= ).=20 And 56 percent said they expect bad economic times in the year ahead. That'= s=20 a quick decline from January, when a majority said they thought the state w= as=20 on the right track and 62 percent expected good economic times ahead.=20 "There is some deep-seated anxiety about the way government works, the way = we=20 plan for the future, the way we make law, the way big decisions are made by= =20 the governor and the Legislature," said Mark Baldassare, a Public Policy=20 Institute researcher who conducted the poll. "People didn't have a great de= al=20 of confidence in local and state government to begin with, and now they hav= e=20 even less."=20 Asked to cite the most important problem facing the state, 43 percent named= =20 energy. But fully one-quarter of those surveyed said growth or related=20 problems -- the environment, housing, and transportation -- were on the top= =20 of their list. Just 6 percent named schools as the top problem, a big drop= =20 from a year ago, and the same number cited the economy. Other perennial=20 favorites -- crime, health care, taxes -- barely registered on the scale.= =20 By a wide margin, Californians view growth as inevitable, but that doesn't= =20 mean they have to like it. More than 8 in 10 said the state's anticipated= =20 climb from 34 million people to 45 million by 2020 will make California a= =20 less desirable place to live.=20 Six in 10 said traffic congestion is already a big problem in their=20 community, and 23 percent said it was somewhat of a problem. Nearly=20 three-quarters said the availability of housing was a problem. Sixty-four= =20 percent said air pollution was a problem, and 61 percent complained about t= he=20 lack of opportunity for well-paying jobs.=20 The poll's respondents were conflicted about how best to deal with these=20 problems. A large majority favored local control rather than letting the=20 state taking a more active role in guiding growth and development. Yet an= =20 astounding 89 percent said local governments in a region should work togeth= er=20 rather than each city and county deciding growth issues on its own.=20 But in a reflection of their lack of confidence in government, 63 percent= =20 said local citizens should make growth decisions by voting on ballot=20 initiatives, while 35 percent said it would be better for local officials t= o=20 make those calls after thorough planning reviews and public hearings. A=20 little more than half -- 51 percent -- said they would vote today for an=20 initiative to slow the pace of development in their community even if it=20 meant having less economic growth.=20 What does all this mean for the political world? It's been clear for months= =20 that the energy crisis was sapping Gov. Gray Davis' popularity in the state= ,=20 and this poll confirms that trend. Six in 10 say they disapprove of the way= =20 Davis has handled the energy crisis, and his overall approval rating has=20 slipped to 46 percent, from 63 percent in January.=20 Conventional wisdom has been that if Davis could somehow find his way throu= gh=20 the energy crisis, he still could cruise to re-election. But that may no=20 longer be the case. Sixty-seven percent of residents say the crisis has mad= e=20 them less confident in the state government's ability to plan for the futur= e.=20 Gone is the optimism Californians once had that growth would produce a more= =20 vibrant economy and make life better for us all.=20 Californians have a vaguely uneasy feeling that things are slipping out of= =20 control, that no one really has a grip on where this state is going and how= =20 we are going to get there. The energy crisis is only the most vivid example= =20 of our failure to cope with change. People are worried. Davis should be, to= o.=20 The Bee's Daniel Weintraub can be reached at (916) 321-1914 or at=20 [email protected]. Panel pulls the plug on county utility plan=20 Backers blame SDG&E for bill's demise in Assembly committee By Bill Ainsworth=20 UNION-TRIBUNE STAFF WRITER=20 May 22, 2001=20 SACRAMENTO -- An Assembly committee yesterday thwarted a bipartisan effort = to=20 ease the way for San Diego County to form a municipal utility district that= =20 backers say would bring residents cheaper and more reliable power.=20 Proponents of the plan said San Diego Gas & Electric and its parent company= ,=20 Sempra, engineered a political power play that ensured defeat of the=20 proposal. The utility was the main opponent.=20 "Their lobbyists just got on this thing and killed it," said Bill Horn,=20 chairman of the San Diego County Board of Supervisors, who attended=20 yesterday's hearing before the Assembly Utilities and Commerce Committee.= =20 "They did a tremendous disservice to residents of San Diego County."=20 But a lobbyist for Sempra told the committee that forming a municipal utili= ty=20 wouldn't solve the energy crisis because it would do nothing to increase th= e=20 supply of electricity.=20 "We're not in the middle of a utility crisis," said lobbyist Cindy Howell.= =20 "It's a generation crisis."=20 The bill, which would have applied only to San Diego County, had strong=20 bipartisan support from local officials, including state Sens. Steve Peace,= =20 D-El Cajon, and Dede Alpert, D-Coronado, who took the unusual step of=20 personally testifying before an Assembly committee.=20 But the proposal earned just three of the 10 votes needed to clear the=20 committee. All of the votes came from Republicans.=20 The bill's author, Assemblyman Mark Wyland, R-Escondido, blasted the=20 stockholder-owned utility company for opposing the bill.=20 "They simply don't want a threat to their ability to make as much money as= =20 they can on the backs of San Diego ratepayers," he said.=20 Proponents say forming a public utility would allow residents to tap cheape= r=20 sources of power, especially future hydroelectric power planned by the San= =20 Diego County Water Authority.=20 They argue that controlling some power plants could reduce the county's=20 dependence on expensive electricity now purchased by SDG&E on the wholesale= =20 market. That, in turn, could lead to lower utility bills.=20 During the current energy crisis, communities with publicly owned power,=20 including Los Angeles and Sacramento, have paid much lower energy bills tha= n=20 communities served by investor-owned utilities.=20 But current state law makes it difficult to create a local municipal utilit= y=20 because it requires a majority of voters to endorse the plan in an election= =20 in which at least two-thirds of registered voters turn out.=20 As a practical matter, that means approval likely would occur only during a= =20 presidential election when voter interest is high.=20 Peace said the current law was written for a reason: to protect privately= =20 owned utilities.=20 "The law was written on purpose by this Legislature to make it almost=20 impossible to form a municipal utility district," he said.=20 Wyland's legislation, Assembly Bill 206, would have changed the law to allo= w=20 majority-vote approval in the new district, without regard to how many vote= rs=20 turn out.=20 A proposal to create a municipal utility would have to go through months of= =20 local hearings before it could be placed on the ballot. Wyland said he didn= 't=20 expect the new agency to replace SDG&E but merely to give residents more=20 options over the long term.=20 Initially, Sempra opposed the bill because it would have given the new publ= ic=20 agency the power of eminent domain to take over transmission lines and othe= r=20 facilities owned by SDG&E.=20 At the hearing yesterday, Wyland offered to strip eminent domain power from= =20 the new agency.=20 But Howell, the Sempra representative, still opposed the plan and argued th= at=20 there is no reason to change the voting requirement in the current law.=20 Forming a utility district, she said, is a significant step that should=20 require high voter turnout.=20 The bill also drew opposition from unionized employees of Sempra.=20 Committee chairman Rod Wright, D-Los Angeles, voted against the bill, sayin= g=20 it was vague and that San Diego legislators should get a better idea of wha= t=20 they want to do.=20 He left open the possibility that he would support a proposal to allow the= =20 county to buy power but not to form its own utility.=20 Wright, widely considered an ally of the privately owned utilities, receive= d=20 $16,500 last year in contributions from Sempra, according to the Secretary = of=20 State's Web site.=20 Other members of the committee objected to the proposed structure of the ne= w=20 utility, which would be governed by a nine-member board of two supervisors,= =20 two San Diego City Council members, three council members from county citie= s=20 and two public members.=20 The proposal seemed to turn the political parties' positions on public powe= r=20 upside down.=20 The measure failed to win any votes from Democrats, who enthusiastically=20 endorsed a new state power authority that allows California to finance, buy= =20 and seize power plants.=20 But the plan was supported by three Republicans, including Assemblymen Jay = La=20 Suer of La Mesa, David Kelley of Idyllwild and Bill Leonard of Rancho=20 Cucamonga. Republicans opposed the state power authority, with some calling= =20 it socialism.=20 Wyland said he may try to resurrect the proposal later in the year.=20 Business customers criticize proposed 29% SDG&E rate hike=20 By Craig D. Rose=20 UNION-TRIBUNE STAFF WRITER=20 May 22, 2001=20 SDG&E's commercial customers are attacking the prospect of paying an averag= e=20 of 29 percent more to cover the state's soaring cost of buying electricity.= =20 At a California Public Utilities Commission hearing in San Diego yesterday,= =20 some business customers also noted the irony that only in February did they= =20 win the same rate freeze as residential customers.=20 "We need rates we can depend on," said John Roberts, who owns an irrigation= =20 products business in San Marcos.=20 SDG&E customers were the first to bear the brunt of deregulation, and the= =20 utility's residential ratepayers were the first to win a reprieve when the= =20 state capped rates at 6.5 cents per kilowatt-hour.=20 The SDG&E cap is expected to end for all customers in the coming weeks as t= he=20 commission moves to increase SDG&E's rates to levels now paid by customers = of=20 PG&E and Edison, which are about 3 cents per kilowatt-hour higher.=20 Yesterday's hearing, however, was for commercial rates.=20 Roberts said his San Marcos-based irrigation products company has withstood= a=20 tripling of power costs over the past year, while having to cut the cost of= =20 its products because of competition, he said.=20 Roberts added that socking businesses with high costs in order to spare=20 residential electricity customers from expected rate hikes could be=20 counterproductive.=20 "If businesses leave the state, they'll be without jobs, and a $30 savings = on=20 their power bills won't mean much," Roberts said.=20 The hearing at the County Administration Building was attended by about 30= =20 people. An additional hearing is scheduled at 7 p.m. today in the Community= =20 Rooms at the Oceanside Civic Center, 330 N. Coast Highway.=20 Larger crowds are expected for hearings on residential rate increases. Date= s=20 for those hearings have not been set.=20 State sends $533.2 million to company, part of April bill=20 By Ed Mendel=20 UNION-TRIBUNE STAFF WRITER=20 May 22, 2001=20 SACRAMENTO -- One of the biggest single checks ever issued by the state of= =20 California, $533.2 million, went to an Atlanta-based firm Friday for power= =20 purchased for California utility customers during a single month, April.=20 Mirant, formerly Southern Energy, says more than half of the power came fro= m=20 three plants in the San Francisco Bay Area that it purchased from Pacific G= as=20 and Electric for $801 million under a failed deregulation plan.=20 State Treasurer Kathleen Connell, who displayed a blown-up copy of the chec= k=20 at a news conference yesterday, said she thinks the state has failed to=20 obtain enough cheap long-term power contracts and will have to borrow more= =20 than the $13.4 billion planned.=20 Connell, an elected official who issues state checks, said the power bills= =20 she had paid by last Thursday, totaling $5.1 billion, provide no basis for= =20 assuming that the price of electricity "is dropping and that it will contin= ue=20 to drop through the summer."=20 But a consultant for Gov. Gray Davis said the state, which has more long-te= rm=20 contracts than Connell has seen, is on track to control power costs with th= e=20 aid of conservation and that it plans to meet its goals without additional= =20 borrowing.=20 "I think the public should have confidence that this is not a rosy scenario= ,"=20 said Joseph Fichera of Saber Partners, a Davis consultant. "It's the expect= ed=20 scenario."=20 The state plans to issue a bond of up to $13.4 billion in late August that= =20 will repay the general-fund taxpayer money used for power purchases, about = $7=20 billion so far. The bond will be paid off over 15 years by utility customer= s.=20 Davis has declined to reveal details of state spending for power, arguing= =20 that the information would be used by power suppliers to submit higher bids= .=20 A group of newspapers and Republican legislators have filed lawsuits to for= ce=20 disclosure.=20 Connell said she has received 25 contracts from 17 power suppliers. She=20 declined to release details of the contracts, saying they are complicated a= nd=20 have varying prices.=20 Connell said the check for $533,181,235 issued to Mirant Friday is one of t= he=20 largest she has written since taking office in 1995.=20 "This purchase was made entirely at spot-market prices," Connell said, "eve= n=20 though the Department of Water Resources (the state agency that purchases= =20 power) has an executed long-term contract with this company."=20 Mirant said in a statement that, at the request of the state, its marketing= =20 arm gave the state a "helping hand" by buying power from suppliers not=20 willing to sell to the state and then reselling the power to the state.=20 "We've done the state a tremendous service in purchasing power on its=20 behalf," said Randy Harrison, Mirant's Western chief executive officer, "an= d=20 it's wrong for the transactions to be misinterpreted and skewed in a negati= ve=20 light."=20 Mirant said its subsidiaries generated 1.377 million megawatt-hours in Apri= l,=20 while its marketing arm purchased enough additional electricity to boost th= e=20 total sold to the state during the month to 2.077 million megawatt-hours.= =20 The firm said the power was sold for an average of $256.87 per megawatt-hou= r.=20 That's below the $346 average that the state expects to pay on the expensiv= e=20 spot market during the second quarter of this year, from April through June= .=20 But it's well above the average price of $69 per megawatt-hour said to have= =20 been obtained in the first round of long-term contracts negotiated by the= =20 state.=20 Mirant purchased three power plants from PG&E capable of producing 3,000=20 megawatts during a controversial part of deregulation. The state Public=20 Utilities Commission ordered utilities to sell off at least half of their= =20 fossil-fuel power plants without requiring the purchasers to provide low-co= st=20 power to California.=20 The utilities sold nearly two dozen major power plants capable of producing= =20 more than 20,000 megawatts. The largest group of plants, 4,700 megawatts,= =20 went to AES Corp. of Virginia. Three Texas firms purchased plants producing= =20 7,000 megawatts.=20 The power supply situation in California remained sound enough yesterday to= =20 ward off blackouts, although temperatures are on the rise throughout the=20 state. More heat means more air conditioning, and a greater strain on the= =20 system.=20 But starting next month, the state's electricity grid managers plan to=20 provide businesses and consumers with better forecasts of potential rolling= =20 blackouts.=20 The California Independent System Operator will post on its Web site "power= =20 warnings" when there is at least a 50 percent chance that rolling blackouts= =20 might be required during the next 24 hours. The ISO will issue a "power=20 watch" when less-critical shortages are anticipated in advance of high dema= nd=20 days.=20 The agency also plans to give a 30-minute warning before it orders utilitie= s=20 to cut power to customers, posting information about probable interruptions= =20 on its Web site. Its Web site address is http://www.caiso.com=20 "There have been a number of requests from businesses and consumers alike= =20 that would like more advance notice and to be able to plan better. That's= =20 what we are trying to do," ISO spokeswoman Lorie O'Donley said.=20 O'Donley said many details about how notifications will occur still have to= =20 be worked out, including whether e-mails or pagers might be used.=20 In other developments in the electricity crisis:=20 ?About 1.5 million compact fluorescent light bulbs will be distributed to= =20 375,000 households as part of the "Power Walk" program that began during th= e=20 weekend. Members of the California Conservation Corps are going door-to-doo= r=20 in parts of some cities to distribute the bulbs as part of a $20 million=20 conservation program.=20 ?Republican legislative leaders sent Davis a letter criticizing the governo= r=20 for using taxpayer funds to hire two aides to former Vice President Al Gore= =20 as communication consultants for $30,000 a month. The Republicans said Mark= =20 Fabiani and Chris Lehane operate "a partisan, cut-throat political=20 communications firm."=20 ?The state Auditor General said in a report on energy deregulation that the= =20 state is not meeting some of its goals for conservation and for building ne= w=20 power plants. The auditor also said the PUC does not have a process for=20 quickly approving new transmission lines. The state has been importing abou= t=20 20 percent of its power.=20 Staff writer Karen Kucher contributed to this report.=20 75% say power woes 'very serious'=20 By John Marelius=20 UNION-TRIBUNE STAFF WRITER=20 May 22, 2001=20 The overwhelming majority of Californians now regard the state's electricit= y=20 crisis as a serious problem, but say they have not yet been greatly=20 inconvenienced by it, a new Field Poll has found.=20 The nonpartisan statewide survey found that while people believe the=20 electricity problem is real, they believe it stems more from an attempt by= =20 energy companies to drive rates up than from an actual shortage.=20 They are also far more worried about soaring electricity bills than the=20 threat of blackouts.=20 And Californians offered contradictory views as to whether electricity=20 conservation can head off blackouts this summer. They believe all electrici= ty=20 consumers -- residents, businesses and government -- can reduce their usage= =20 enough to avert blackouts. But they also say they already have cut back the= ir=20 own usage about as much as they can.=20 In January, the Field Poll surveyed public attitudes about the growing=20 electricity crisis. At the time, 58 percent characterized the situation as= =20 "very serious." Now, the percentage of the population that considers the=20 situation "very serious" has grown to 75 percent.=20 Californians also hold a rather cynical view of the crisis. Thirty-six=20 percent say they believe it is the consequence of an electricity shortage,= =20 but 59 percent say it was caused by energy companies seeking to increase=20 profits.=20 The Field Poll is based on telephone interviews with 1,015 California adult= s=20 conducted between May 11 and Sunday. According to statistical theory, the= =20 poll would be accurate 95 percent of the time within a margin of error of 3= .2=20 percentage points.=20 So far, the ill effects of the electricity crisis are ones Californians see= m=20 to be willing to live with. But they worry that will not be the case much= =20 longer.=20 Eleven percent said they had been inconvenienced "a great deal" by blackout= s.=20 But looking toward the summer, 34 percent said they expected blackouts to b= e=20 a major inconvenience.=20 Likewise, 19 percent said the electricity rate increases averaging 10 perce= nt=20 that have taken effect have been a very serious problem for them. If rates= =20 were to go up another 10 percent, 36 percent would regard that as a serious= =20 problem.=20 Opinion is divided over the merits of recent rate increases approved by the= =20 state Public Utilities Commission. Forty-one percent called them justified= =20 and 52 percent called them unjustified.=20 "It's not overwhelmingly panned, which I suppose is about as well as could = be=20 expected on an issue like this," said Mark DiCamillo, associate director of= =20 the Field Poll. "It's almost like a tax increase. The public doesn't want i= t;=20 it's just whether they think it's justified or not."=20 Looking ahead, 28 percent say blackouts are the greatest threat posed by th= e=20 electricity crisis. But more than twice as many, 67 percent, say they are= =20 more concerned about escalating electricity bills.=20 By a significant ratio, 61 percent to 34 percent, Californians believe=20 additional conservation measures by all electricity users can eliminate the= =20 need for summer blackouts.=20 But when it comes to their own electricity consumption, they say they alrea= dy=20 have cut back significantly and can't do much more.=20 Californians say they have reduced their household electricity usage by an= =20 average of 8 percent. They said they could cut back by another 4 percent in= =20 their homes without causing serious problems.=20 "If the state is looking and the governor is looking for redoubled efforts,= =20 it's going to be painful because the public thinks we can do a little bit= =20 more, but not a lot," said DiCamillo. Governor told to try seizure in power war=20 By Philip J. LaVelle=20 UNION-TRIBUNE STAFF WRITER=20 May 19, 2001=20 A major San Diego business group urged Gov. Gray Davis yesterday to take=20 emergency steps in the energy crisis, including seizing power plants -- an= =20 action the governor said may be in the cards.=20 Davis met over lunch for nearly two hours with members of the San Diego=20 Building Owners and Managers Association, overseers of about 250 commercial= =20 properties here.=20 The meeting, at the University Club at Symphony Towers downtown, was closed= =20 to the media.=20 In remarks to reporters later, Davis repeated his hard line against=20 out-of-state energy producers, relating a threat made to a dozen power=20 executives in a private meeting May 9.=20 "I told the generators face to face, as close as I am to you .?.?.=20 'Gentlemen, you are going to lose your plants, and I'm going to sign a=20 windfall-profits tax, unless you help us get through this summer without=20 blackouts and without staggering prices.'?"=20 Davis also said he told them: "You know you've been ripping us off, acting = in=20 a predatory manner. If you do it this summer, you leave me no choice but to= =20 take your plants and sign a windfall-profits tax. So the ball is in your=20 court, gentlemen."=20 Building association executive Craig Benedetto said the group had "a frank= =20 exchange" with Davis. "We want to do our fair share (on conservation), but= =20 we're also concerned about the supply side," he said. The group "strongly= =20 urged him to use his emergency powers to do whatever is necessary, includin= g=20 seizing plants."=20 Association President Cybele Thompson said Davis asked for a string of=20 conservation measures. Yet some cannot be implemented without state=20 intervention, she said. For example, Davis urged that air-conditioning=20 thermostats be set at 78 degrees, but "a lot of our leases don't permit it,= "=20 she said.=20 While in San Diego, Davis received an honorary doctor of science degree fro= m=20 Scripps Research Institute.=20 Head of PUC unveils evidence of power plant manipulation=20 ASSOCIATED PRESS=20 May 19, 2001=20 LOS ANGELES =01) The head of the California Public Utilities Commission pro= vided=20 a state Senate committee with evidence showing three power generators reduc= ed=20 electricity production and then benefited from the resulting high prices.= =20 While testifying before the committee Friday, PUC President Loretta Lynch= =20 displayed charts that tracked electricity prices and power generation at=20 three plants on a single day last November.=20 According to the graphs, after the plants reduced production during the=20 middle of the day, the state was forced to declare two separate power=20 emergencies which indicate electricity reserves had fallen seriously low.= =20 After the shortfall in supply helped cause a spike in prices, the companies= =20 operating the three plants suddenly increased their electricity production = to=20 almost full capacity, allowing them to capitalize on the much higher rates.= =20 "We certainly see a pattern," Lynch told the committee, which is=20 investigating alleged manipulation of the state's wholesale power market by= =20 energy suppliers. "Many generators are playing on their experience and=20 playing, to an extent, California."=20 Maintenance records reviewed by investigators show that there were no valid= =20 reasons for the plants to cut back production, Lynch said.=20 She would not identify the power plants involved, however, Lynch did say th= at=20 they are owned by at least two companies.=20 Sen. Joseph Dunn, who heads the special committee investigating alleged=20 market manipulation, said Lynch's testimony, on its face, is "very damning.= "=20 He said his committee has uncovered additional preliminary evidence showing= =20 that several power companies have allegedly engaged in similar behavior.=20 During a break in Friday's hearing, a spokeswoman for a trade group of majo= r=20 power suppliers told the Los Angeles Times that there have been no=20 coordinated efforts to shrink supplies to increase profits.=20 "There has been no collusion," said Jean Muoz of the Independent Energy=20 Producers Association.=20 The PUC and state Atty. Gen. Bill Lockyer are jointly investigating the=20 exorbitant wholesale power prices that have cost California billions and=20 brought major utilities to financial ruin.=20 State to Issue Warnings of Power Outages=20 Electricity: Cal-ISO says it will try to give residents and businesses=20 24-hour notice of probable blackouts.=20 By MIGUEL BUSTILLO and NANCY VOGEL, Times Staff Writers=20 ?????Californians will hear an expanded forecast on their morning commutes= =20 this summer, courtesy of the energy crisis: "The 405 Freeway is jammed,=20 there's a slim chance of showers, and oh, by the way, there's a 50%=20 likelihood of blackouts." ?????By the end of this month, the California Independent System Operator,= =20 the agency that manages the state's power grid, expects to issue 24-hour=20 forecasts generally detailing when and where blackouts can be expected. ?????It is also piecing together a high-tech system to give businesses,=20 government officials and the public at least a half-hour notice of a probab= le=20 blackout in their area. ?????Just how those notices will be issued remains somewhat up in the air,= =20 but Cal-ISO is talking with private companies capable of notifying more tha= n=20 10,000 customers a minute via fax and phone, and millions a minute via=20 wireless communications such as pagers. ?????Cal-ISO assembled the plan after complaints from businesses,=20 particularly those in the Silicon Valley, that last-minute blackouts were= =20 costing California millions. The plan also responds to growing political=20 pressure for the public to be kept informed of the barrage of outages that = is=20 expected to darken the state this summer because of insufficient supplies o= f=20 electricity. ?????If Californians' electricity use pattern is similar to last year's,=20 Cal-ISO has projected, the state could suffer 34 days of blackouts, making= =20 increased notification crucial. ?????With a shortage of hydroelectric power imports from the drought-strick= en=20 Pacific Northwest, and no new power plants coming online until July, the=20 agency calculates that there will be a supply-demand gap in June of 3,700= =20 megawatts--enough power to supply 2.8 million homes. A national utility=20 industry group painted a more dire scenario last week when it predicted tha= t=20 California will experience up to 260 hours of blackouts this summer. ?????"The weather report and traffic report are good analogies; people know= =20 they are not 100% accurate, but if [a blackout] really means a lot to them,= =20 they will check in," said Mike Florio of the Utility Reform Network, who=20 serves on the Cal-ISO board. ?????Details remain sketchy, and the programs may be altered when the board= =20 meets Thursday. But a Web page called "Today's Outlook" on the agency's=20 Internet site, www.caiso.com, will be created to illustrate, hour by hour,= =20 how much electricity is available during a 24-hour period and whether there= =20 is a predicted surplus or shortfall. ?????Media outreach will be expanded to provide news bulletins on electrici= ty=20 conditions a day in advance. They will not only include demand projections= =20 and the effects of weather, but they also will define the level of emergenc= y=20 that is expected. ?????A "power watch" will be sounded during stage 1 and stage 2 shortages,= =20 and a more serious "power warning" if there is a 50-50 chance of a stage 3,= =20 which often results in blackouts. (Stage 1 emergencies occur when power=20 reserves drop below 7%, stage 2 5% and stage 3 1.5%.) ?????Most important, Cal-ISO is pledging to provide 30-minute notice of=20 probable blackouts to people in the areas served by Pacific Gas & Electric,= =20 Southern California Edison and San Diego Gas & Electric, among others. In= =20 addition to giving the warnings on the Internet and through the mass media,= =20 Cal-ISO will sound alarms to select e-mail addresses and pager numbers on= =20 "blast lists," or massive computer databases that it will assemble. ?????"The technology is there. This is a war California is in, and we shoul= d=20 be deploying high-tech solutions," said Carl Guardino of the Silicon Valley= =20 Manufacturing Group, the Cal-ISO board member who had been pushing hardest= =20 for better notification. "Every time California goes black, the economy see= s=20 red." ?????Guardino said that businesses and public agencies are now receiving ju= st=20 two- to six-minute warnings before blackouts, not nearly enough to react. ?????"A two-minute warning may be sufficient in a football game, but it is= =20 insufficient to protect California businesses and the public," he said.=20 ?????Though businesses and government agencies are expected to make the mos= t=20 of the warnings, Florio said residents also will benefit.=20 ?????"It will be more of a challenge to get the information to individual= =20 homeowners, but if someone works at home, and sets it up to get an e-mail= =20 notice, they can take advantage," he said.=20 ?????In other energy news Monday, the woman in charge of paying California'= s=20 power bills warned that a $13.4-billion bond issue to cover electricity=20 purchases will be insufficient and that the state will have to borrow $4=20 billion more before it runs out of cash in February. ?????Calling a news conference in the capital, state Controller Kathleen=20 Connell questioned the key assumptions underpinning Gov. Gray Davis'=20 financial plan for overcoming the energy crisis. The plan assumes the $13.4= =20 billion in bond sales will repay state coffers for electricity purchases an= d=20 cover future power buys for the next two years. ?????Connell's opinion is notable because, as the state's chief check write= r,=20 the independently elected Democrat is privy to information about the prices= =20 the state is paying for electricity bought on the spot market and through= =20 long-term contracts--data that Davis has largely kept secret. ?????Davis' advisors and Department of Finance officials dispute Connell's= =20 warnings. Businesses May Seek Blackout Exemption=20 Energy: PUC will accept new applications, which would be granted only to=20 minimize danger to public health and safety.=20 By NANCY RIVERA BROOKS, Times Staff Writer=20 ?????The San Francisco Giants want one, and so presumably do most other=20 California businesses: an exemption from the rolling blackouts that experts= =20 say are all but certain this summer. ?????But whether operating on a baseball diamond or in more mundane venues= =20 far from the bright lights of pro sports, few businesses will be granted su= ch=20 waivers--and then only to minimize threats to public health and safety--und= er=20 a process detailed Monday by the California Public Utilities Commission. ?????"It would be nice in a perfect world if we could exempt everyone who= =20 asks from rolling blackouts. Unfortunately, we can't do that," Commissioner= =20 Carl A. Wood said in announcing the procedure for applying for blackout=20 exemptions. ?????The PUC already exempts a fairly lengthy list of those whose services= =20 are needed to protect public health and safety, including fire and police= =20 stations and acute-care hospitals. ?????Energy experts are predicting blackouts this year ranging from a total= =20 of 20 hours at the most optimistic to 200 hours or more, based on such=20 factors as historic patterns of electricity usage, forecasts for hot weathe= r=20 and expectations of diminished hydroelectric imports from out of state. ?????Any new business exemptions, which would start no sooner than August,= =20 would be granted only to minimize danger to public health and safety.=20 ?????That means a business would not be granted an exemption from outages= =20 just because it fears revenue loss, Wood said at a Los Angeles news=20 conference. ?????Residential customers will be unable to apply for the exemptions.=20 Nevertheless, many already enjoy blackout protection by quirk of location--= if=20 they share a circuit with an exempt customer--or if they are customers of t= he=20 Los Angeles Department of Water and Power and municipal utilities such as= =20 those in Glendale and Burbank that do not rely on the statewide power grid= =20 for electricity. ?????The PUC can approve only a limited number of blackout exemptions, Wood= =20 said, because to maintain system reliability, a pool of customers=20 representing at least 40% of total system load must be available for rollin= g=20 power outages.=20 ?????Statewide, about 50% of system load is exempt from blackouts in the=20 territories served by the three big investor-owned utilities: Edison=20 International's Southern California Edison, PG&E Corp.'s Pacific Gas &=20 Electric and Sempra Energy's San Diego Gas & Electric. ?????"This is not an exercise in determining who is most affected=20 economically by rolling blackouts. Everyone is affected economically by=20 rolling blackouts," Wood said. ?????The PUC has set up a Web site, www.rotating-outages.com, and toll-free= =20 number, (888) 741-1106, for businesses seeking information and applications= .=20 The deadline to apply is 5 p.m. June 1. ?????Completed applications will be reviewed by an engineering consulting= =20 firm, Exponent Inc. of Menlo Park, Calif., which will develop a priority li= st=20 based on risk to public health and safety. ?????Only businesses that have applied would be considered for exemptions,= =20 Wood said, explaining that the commission will not excuse entire industries= . ?????The PUC is expected to vote on the exemptions by Aug. 2. ?????Wood said several companies already have applied, including the=20 operators of Pacific Bell Park in San Francisco, home of the Giants major= =20 league baseball team. Legislators Set to Sue Federal Energy Agency=20 Power: Lawmakers try a new idea: a lawsuit arguing that blackouts pose dang= er=20 to people, law enforcement and even water supply=20 By DAN MORAIN, Times Staff Writer=20 ?????SACRAMENTO--Legislative Democrats today will sue federal energy=20 regulators, charging that their inaction threatens elderly people in nursin= g=20 homes, children in day care centers, law enforcement and its ability to fig= ht=20 crime, and the state's drinking water supplies. ?????Rather than focus on record wholesale energy costs, the lawsuit takes = a=20 new tack, homing in on the threat to health and safety posed by California'= s=20 energy crisis and the blackouts likely this summer. ?????A draft of the suit seeks to force the Federal Energy Regulatory=20 Commission to set "just and reasonable" wholesale power rates as a way of= =20 ending the crisis before blackouts occur. The action is being filed by=20 veteran trial attorney Joe Cotchett on behalf of Senate President Pro Tem= =20 John Burton (D-San Francisco), Assembly Speaker Bob Hertzberg (D-Sherman=20 Oaks), and the city of Oakland.=20 ?????"A crisis of unprecedented dimensions is already taking shape in=20 California," the draft says. "The public health, safety and welfare of the= =20 state's 34 million residents is in jeopardy due to the tragic consequences = of=20 rolling blackouts and punitive prices." ?????Suit Says Blackouts Pose Threats ?????Until now, most California officials, including Gov. Gray Davis, have= =20 been urging that the regulatory commission cap wholesale power prices as a= =20 way of limiting costs to the state, which has spent more than $6 billion=20 buying electricity since January. ?????In the lawsuit, Cotchett will be arguing that while higher bills will= =20 stretch the budgets of people on fixed incomes, frail elderly people "are= =20 left to wonder if their oxygen tanks, drip IVs, dialysis machines and=20 electricity-powered therapeutic beds will respond when they are needed." ?????"Rolling blackouts represent more than just an annoyance for the men,= =20 women and children with disabilities," the suit says. "They represent an=20 imminent threat to life, health and independence." ?????Cotchett said the suit will be filed in the U.S. 9th Circuit Court of= =20 Appeals in San Francisco, bypassing the federal trial court. Cotchett said= =20 the circuit court has direct jurisdiction over FERC. ?????Joining Cotchett will be Clark Kelso, a professor at McGeorge Law Scho= ol=20 in Sacramento who briefly was insurance commissioner last year after Chuck= =20 Quackenbush resigned. Kelso said he initially was skeptical that lawmakers= =20 had legal standing to sue. But after Cotchett spoke with him, Kelso said he= =20 became convinced the suit had merit. ?????"Let's face it," said Kelso, a Republican, "this is the single most=20 important issue that the state faces for the next six months." ?????Watching the Water Supply ?????The suit cites warnings from governmental agencies about the=20 implications of blackouts, including one the state Department of Health=20 Services issued earlier this month to public water agencies statewide. The= =20 warning contains a sample notice that local water authorities should give t= o=20 consumers. ?????"If the water looks cloudy or dirty," the warning says, "you should no= t=20 drink it." The warning suggests that if people are concerned about water=20 quality, they can boil it or add "eight drops of household bleach to one=20 gallon of water, and let it sit for 30 minutes." ?????Most water agencies have back-up generators. But the suit says that "i= f=20 an agency's water treatment facilities are hit by a power outage, a two-hou= r=20 blackout can result in two-day interruptions in providing safe drinking wat= er=20 because of time needed to bring equipment back online and flush potentially= =20 contaminated water from the system." California will forecast blackouts and warn the public=20 JENNIFER COLEMAN, Associated Press Writer Tuesday, May 22, 2001=20 ,2001 Associated Press=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2001/05/22/s= tate1 651EDT7299.DTL&type=3Dnews=20 (05-22) 00:05 PDT (AP) --=20 Eds.: PMs. SACRAMENTO, Calif. (AP) -- The operator of California's electricity grid is= =20 offering a partial answer to a major consumer complaint, planning to give t= he=20 public a half-hour's warning before shutting off the lights.=20 Beginning May 30, the Independent System Operator also plans to issue=20 warnings similar to weather advisories 24 hours before expected blackouts.= =20 Up to now, the agency has refused to give more than a few minutes' warning,= =20 saying it did not want to alarm people when there was still a chance that a= =20 last-minute purchase of power could stave off blackouts. The utilities have= =20 also resisted giving warnings, saying they did not want to tip off burglars= =20 and other criminals.=20 "Definitely, it's a good idea," said Shirley Starr, a racetrack employee in= =20 the Los Angeles suburb of Rosemead. "If I know it's going to happen, I won'= t=20 defrost the refrigerator or something."=20 Like some business customers and consumer groups, she wondered if 30 minute= s=20 warning would be enough.=20 "A lot of people, if they are at work, a half hour isn't going to do any=20 good," Starr said.=20 "I think it should be more than 30 minutes," said George Aguilar, an animal= =20 control officer in El Monte. "It should be at least eight hours."=20 Californians have been warned that rolling blackouts could be a regular=20 feature this summer. The state's power system, crippled by a botched effort= =20 at deregulation, has been unable to produce or buy enough electricity to=20 power air conditioners on hot days.=20 The rolling blackouts move from neighborhood to neighborhood in a sequence= =20 that is determined by the utilities and is difficult or impossible for the= =20 public to predict. The outages last 60 to 90 minutes and then skip to anoth= er=20 neighborhood.=20 Because of the lack of notice, the six days of rolling blackouts to hit the= =20 state so far this year have led to pileups at intersections suddenly left= =20 without stoplights, trapped people in elevators, and caused business losses= =20 by bringing production lines to a halt. People with home medical equipment= =20 like oxygen fret they that they will be cut off without warning.=20 The new plan by the ISO borrows from the language of weather forecasters: I= t=20 will issue a "power watch" or "power warning" that will give notice the gri= d=20 could be headed toward blackouts.=20 The ISO will issue 30-minute warning to the media and others before any=20 blackouts actually begin. However, the ISO will not say what neighborhoods= =20 will be hit.=20 "It's better than no notice," said John Handley of California Independent= =20 Grocers.=20 He said stores could use the warning to rush customers through checkout and= =20 even move items to cold storage if necessary.=20 "Once the power goes out, we can't ring anyone up," Handley said.=20 Many small factories have production lines that cannot be interrupted witho= ut=20 risk to an entire lot of whatever they produce, said Brad Ward, president a= nd=20 chief executive of the Small Manufacturers Association of California.=20 For example, a manufacturer might be using acid to etch something on a piec= e=20 of metal. If power is shut off suddenly, the acid might not be removed in= =20 time and the piece would be ruined.=20 "This is really, really good news," Ward said.=20 The ISO said it also is looking into high-tech ways it can get word of an= =20 impending blackout quickly to homeowners and businesses through mass e-mail= s,=20 faxes, automated phone calls and pager messages.=20 On the Net:=20 California Independent System Operator: www.caiso.com=20 ,2001 Associated Press ?=20 Developments in California's energy crisis=20 The Associated Press Tuesday, May 22, 2001=20 ,2001 Associated Press=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2001/05/22/s= tate0 347EDT7321.DTL&type=3Dnews=20 (05-22) 00:47 PDT (AP) --=20 Developments in California's energy crisis:=20 MONDAY: * No power alerts as reserves stay above 7 percent.=20 * State power grid operators say they'll soon be giving residents and=20 businesses 30 minutes notice before they order rolling blackouts. The=20 Independent System Operator will also be issuing a daily energy forecast wi= th=20 projected supply and demand, and the likelihood of blackouts. Several=20 lawmakers say they'll introduce plans that would give Californians even mor= e=20 notice of blackouts -- from one day to one month.=20 * The state auditor releases a report on the state's energy crisis, saying= =20 previous estimates that the state could avoid blackouts this summer are=20 overly optimistic. The Bureau of State Audits also criticized the Californi= a=20 Public Utilities Commission, saying the commission hasn't responded to the= =20 crisis by expediting transmission line project.=20 * Gov. Gray Davis is in Chicago, speaking with city officials there about= =20 blackout procedures.=20 * Davis' energy advisers say that the state is meeting its energy goals,=20 despite doubts raised by Controller Kathleen Connell and other critics.=20 Connell questioned whether the state can buy enough electricity cheap enoug= h=20 to avoid borrowing more than the $13.4 billion approved by state lawmakers.= =20 But Davis adviser Joe Fichera says the state has signed more long-term powe= r=20 contracts that will help keep prices low.=20 * Davis' office announces that an eighth "peaker" power plant has been=20 licensed. The 135-megawatt plant in Gilroy is expected to be online by the= =20 end of September. The California Energy Commission says that more than 10,0= 00=20 megawatts of new electricity since April 1999.=20 * The California Energy Commission also announces increased rebates for=20 renewable energy systems -- such as solar panels, fuel cells or small wind= =20 generation. Rebates of up to 50 percent on the system are available for=20 residential, commercial, industrial or agricultural users.=20 * Republican legislative leaders criticize Davis for spending tax money on = a=20 political communications firm that previously advised Vice President Al Gor= e.=20 Davis is hiring Gore's former press secretary and deputy campaign manager f= or=20 six months at $30,000 a month to coordinate the governor's communications o= n=20 energy issues. Senate GOP Leader Jim Brulte and Assembly Republican Leader= =20 Dave Cox say Davis should pay them with campaign funds, not taxpayers' mone= y.=20 * Shares of Edison International closed at $11.23, down 51 cents. PG&E Corp= .=20 dropped 48 cents to close at $11.16.=20 WHAT'S NEXT: * Davis' representatives continue negotiating with Sempra, the parent compa= ny=20 of San Diego Gas and Electric Co., to buy the utility's transmission lines.= =20 * Davis is scheduled to sign a bill Tuesday that would expedite power plant= =20 siting.=20 * Republican Assemblyman Mike Briggs plans to introduce a bill that would= =20 allow people to know a month ahead if they will be affected by rolling=20 blackouts.=20 THE PROBLEM: High demand, high wholesale energy costs, transmission glitches and a tight= =20 supply worsened by scarce hydroelectric power in the Northwest and=20 maintenance at aging California power plants are all factors in California'= s=20 electricity crisis.=20 Edison and PG&E say they've lost nearly $14 billion since June to high=20 wholesale prices the state's electricity deregulation law bars them from=20 passing on to consumers. PG&E, saying it hasn't received the help it needs= =20 from regulators or state lawmakers, filed for federal bankruptcy protection= =20 April 6.=20 Electricity and natural gas suppliers, scared off by the two companies' poo= r=20 credit ratings, are refusing to sell to them, leading the state in January = to=20 start buying power for the utilities' nearly 9 million residential and=20 business customers. The state is also buying power for a third investor-own= ed=20 utility, San Diego Gas & Electric, which is in better financial shape than= =20 much larger Edison and PG&E but also struggling with high wholesale power= =20 costs.=20 The Public Utilities Commission has approved average rate increases of 36= =20 percent for residential customers and 38 percent for commercial customers,= =20 and hikes of up to 49 percent for industrial customers and 15 or 20 percent= =20 for agricultural customers to help finance the state's multibillion-dollar= =20 power buys.=20 ,2001 Associated Press ?=20 How blackout warning plan works=20 The Associated Press Tuesday, May 22, 2001=20 ,2001 Associated Press=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2001/05/22/s= tate0 347EDT7320.DTL&type=3Dnews=20 (05-22) 00:47 PDT (AP) --=20 Details of plan by California Independent System Operator to warn of=20 impending blackouts:=20 * When demand is high, ISO will issue forecasts 24 hours in advance giving= =20 projections of peak demand, supply and weather outlook. Notice will be give= n=20 to the media, emergency-services agencies and the utililities.=20 * A "Power Watch" will be issued when it is likely the grid will reach Stag= e=20 One, when the system is within 7 percent of running out of power, or Stage= =20 Two, when the system is within 5 percent of running out of power.=20 * A "Power Warning will be issued when there is at least a 50 percent chanc= e=20 of a Stage One alert -- when demand is within 11/2 percent of the available= =20 supply.=20 * 30 minutes before ordering the utility companies to trigger rolling=20 blackouts, the ISO will put out a "notice of probable load interruption."= =20 Notice goes to media and utilities, and is posted on the agency's Web site,= =20 www.caiso.com. If power is found, or if the warning prompts enough=20 conservation, blackouts can still be avoided.=20 * Plan takes effect May 30.=20 How utilities tell customers which areas will be blacked out:=20 * Pacific Gas & Electric bills presently show customers which outage "block= "=20 they are in. Blocks are blacked out in a specific order that customers can= =20 find on company's Web site. PG&E typically gives the block numbers in=20 announcing a rolling blackout.=20 * Southern California Edison plans to start a similar system of informing= =20 customers their "outage group number" by June 3.=20 * PG&E has pager, e-mail and automated telephone notification systems for b= ig=20 power users and residential customers on life-support equipment.=20 ,2001 Associated Press ?=20 GILROY=20 Davis licenses 8th emergency power plant=20 Tuesday, May 22, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/05= /22/M NL188945.DTL&type=3Dnews=20 Gov. Gray Davis announced yesterday the licensing of the eighth power plant= =20 -- a 135-megawatt site designed to meet summer demand -- under a 21-day=20 emergency review he ordered three months ago.=20 Calpine Corp. plans to build the plant -- consisting of three 45-megawatt= =20 gas-fired turbines -- next to the firm's existing cogeneration power plant = in=20 Gilroy. The plant should be producing electricity no later than Sept. 30.= =20 Calpine has guaranteed the annual sale of 2,000 hours of generation from th= e=20 "peaker" project under contract to the California Department of Water=20 Resources.=20 To swiftly beef up the state's power production during the peak summer=20 demand, Davis signed the February order directing the California Energy=20 Commission to expedite review of the peaker plants -- small, temporary,=20 simple- cycle generators that can be quickly put into operation. The eight= =20 plants licensed so far will add a total of 636 megawatts to the grid this= =20 summer.=20 PAY UP: Rate increases to hit more users than first reported, PUC says=20 David Lazarus, Chronicle Staff Writer Tuesday, May 22, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/05= /22/M N27807.DTL&type=3Dnews=20 State regulators admitted yesterday that almost two-thirds of Northern=20 California power customers will be hit with higher electricity rates,=20 contradicting an earlier claim that half of all consumers would be untouche= d=20 by rising bills.=20 Meanwhile, officials and utility executives said bills could go even higher= =20 if lawmakers try to reduce the number of households suffering rate hikes. A= =20 preliminary vote on the matter by the state Senate Energy Committee is=20 scheduled for today.=20 In adopting the biggest rate increase in California history, the Public=20 Utilities Commission told consumers that half of all residential ratepayers= =20 would be unaffected by higher bills.=20 This is roughly the case for customers of Southern California Edison, but= =20 Pacific Gas and Electric Co. said yesterday that at least 65 percent of its= =20 residential customers will experience higher bills as of June 1.=20 "I never had a great deal of confidence that 50 percent of people would be= =20 exempt from rate increases," said PUC member Carl Wood. "I was surprised by= =20 the 50 percent number."=20 Nevertheless, Wood was one of three Democratic appointees on the five- memb= er=20 commission who voted in favor of the rate plan, which included a tiered=20 system under which the heaviest power users would face the steepest increas= es=20 in monthly bills.=20 Residential customers who can stay within 130 percent of so-called baseline= =20 usage would experience no rate increases.=20 "We've been sold a false bill of goods," said Medea Benjamin, head of the S= an=20 Francisco consumer advocacy group Global Exchange. "The PUC made a huge poi= nt=20 of saying that half of all people would be unaffected. They can't promise o= ne=20 thing and then do something else."=20 RUSH JOB Regulators admit they were in a hurry to get a rate system adopted in time= =20 for PG&E and Edison to begin collecting the higher fees in their June bills= .=20 For this reason, they went ahead with last week's vote even though it was= =20 apparent that less than half of all residential ratepayers would be able to= =20 stay within 130 percent of baseline, as outlined by the tiered system.=20 "If we wanted to do it perfectly, we would never have gotten it done," Wood= =20 said. "We can't get the baseline adjusted before the end of the summer, eve= n=20 at an accelerated pace."=20 Because electricity rates have been linked to baseline usage, this once-=20 esoteric calculation has taken center stage in California's energy mess.=20 BASELINE USAGE The baseline usage figure -- included on PG&E bills -- was devised nearly 2= 0=20 years ago to define the amount of fuel "necessary to supply a significant= =20 portion of the reasonable energy needs of the average residential customer,= "=20 according to the Public Utilities Code.=20 It includes several variables, such as climate, time of year and type of=20 fuel.=20 However, the last time regulators tabulated baseline numbers was in 1994,= =20 meaning that the figures on most people's bills no longer reflect actual=20 power consumption.=20 "This was pre-computers, pre-Internet and pre- a lot of other things that a= re=20 now in the house," said Richard Bilas, a Republican PUC member who opposed= =20 last week's rate hike.=20 The average baseline for most households is about 250 kilowatt hours per=20 month, according to the 1994 numbers. To be exempt from rate hikes, a=20 household thus would need to use no more than 325 kilowatt hours.=20 However, regulators and utilities now say that actual power usage for the= =20 typical home is at least 500 kilowatt hours per month -- well above most=20 people's baseline amounts.=20 "It's not possible to stay within 130 percent of that," Bilas said. "I know= I=20 can't do it."=20 NEW BASELINE CRITERION With regulators set to begin re-examining baseline numbers Thursday, the=20 Senate Energy Committee is seeking ways to make the tabulation more equitab= le=20 by adding a new criterion to the figure: household size.=20 Now, a family of five with computers, electronic games and almost round-the= -=20 clock power consumption would have the same baseline as the bachelor living= =20 next door who is rarely home.=20 That disparity would be addressed by a bill to be submitted today by Sen.= =20 Jackie Speier, D-Hillsborough, who wants household size to be a factor in= =20 determining baseline, with the baseline limit rising in proportion to the= =20 number of people in the residence.=20 "Baseline is a totally unfair measure of the number of people in a=20 household," she said. "Families are severely impacted."=20 Robert Herrell, Speier's staff director, said state authorities would rely = on=20 "self-certification" for each household to accurately report its number of= =20 occupants -- essentially, the honor system.=20 "The last thing you want to do is create baseline police," he said.=20 "Hopefully, people wouldn't game the system."=20 But Akbar Jazayeri, director of revenue and tariffs for Southern California= =20 Edison, said that even if regulators succeed in adjusting baseline figures = to=20 better reflect household size and usage levels, this only would increase th= e=20 number of ratepayers who can stay within 130 percent of revised limits.=20 "That means more people would be exempt from rate increases," Jazayeri=20 observed. "There would be less revenue from ratepayers, so you would have t= o=20 get other people to make up for it."=20 In other words, another rate increase.=20 "We'll need another rate increase if we mess around with baseline," warned= =20 the PUC's Bilas.=20 E-mail David Lazarus at [email protected].=20 Who uses how much Most PG&E residential customers do not stay within 130 percent of baseline= =20 power usage, which means they will be subject to a rate increase. -- Customers as a percentage of baseline use Up to 130% 35% Up to 200% 23% Up to 300% 22% More than 300% 20% Source: PG&E Chronicle Graphic Energy crisis not real, state's residents say=20 But poll results show most expect more blackouts=20 Carla Marinucci, Chronicle Political Writer Tuesday, May 22, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/05= /22/M N175993.DTL&type=3Dnews=20 The overwhelming majority of Californians say the state's power crisis is= =20 "very serious" and blame the big energy companies for creating and=20 manipulating shortages, results of a new Field Poll show.=20 "In the public's view . . . this is a manufactured crisis -- not a real=20 crisis," Mark DiCamillo, director of the statewide Field Poll, said=20 yesterday. "That cynicism permeates a lot of things. . . . The public is no= t=20 sold on the explanations as to why we're in the crisis we're in."=20 The poll results, released yesterday after a year of energy woes, underscor= e=20 Californians' increasing concerns about the energy crisis and their growing= =20 list of personal conservation efforts to deal with it. The poll of 1, 015= =20 California adults was conducted May 11 to Sunday.=20 CONSUMPTION, CONSERVATION In what may be the first such tally of statewide conservation efforts,=20 California residents said they reduced their power consumption by an averag= e=20 of 8 percent -- an effort motivated by the energy crisis.=20 The new poll results also dramatized that Californians are "very attentive"= =20 to news reports and information about the energy crisis as a way of bracing= =20 themselves for the effects of increased rates and power outages.=20 But so far, it is not the politicians who are the object of their wrath -- = it=20 is big energy, DiCamillo said.=20 "They're the bad guys," he said. "But (in the public's view) no one has bee= n=20 able to stop them. No one is winning this."=20 The findings of the latest Field poll:=20 -- Three quarters of the Californians polled deemed the energy crisis "very= =20 serious," and 20 percent said "somewhat serious" -- compared with just 5=20 percent who said they didn't see it as a problem. That is similar to a=20 California Public Policy Institute survey released Monday that showed 82=20 percent of those polled believe the energy crunch is a "big problem."=20 -- Despite the widespread media coverage of the effects of blackouts, many= =20 Californians said they were not personally inconvenienced, the poll results= =20 showed. Just 11 percent reported being inconvenienced "a great deal" by=20 blackouts, and another 16 percent say they have been affected "some" by the= =20 problems, compared with 16 percent who said they'd had "a little"=20 inconvenience, and 11 percent who said "none." Almost half said they had no= t=20 experienced a blackout at all.=20 -- One-third said they expected to be inconvenienced "a great deal" by=20 blackouts during this coming summer, the poll showed.=20 -- Only 1 in 5 residents say rate increases have so far created serious=20 problems for them -- and nearly half say they haven't been affected at all,= =20 the poll showed. But most Californians say they are fully aware new rate=20 increases have been passed by the Public Utilities Commission, and "you can= =20 see the pain level goes up fairly dramatically," said DiCamillo. "They're= =20 bracing themselves for the worst."=20 WHAT LIES AHEAD DiCamillo said the poll results confirm how deeply Californians fear what m= ay=20 lie ahead in the energy arena.=20 "Up to this point, (rate increases and blackouts haven't) really touched a= =20 strong nerve, but they really feel it's coming," he said. "They don't know= =20 how it will affect them. . . . They're looking at the politicians as if=20 they're impotent in the face of these changes."=20 The Field Poll has a margin of error of plus or minus 3.2 percentage points= .=20 Tell us what you think -- What are your suggestions for saving energy? Send= =20 your best tips to Energy Desk, San Francisco Chronicle, 901 Mission St., Sa= n=20 Francisco, CA 94103; or put your ideas in an energy-efficient e-mail to=20 [email protected].=20 E-mail Carla Marinucci at [email protected]=20 Field Poll Californians' reactions to energy crisis More than half of Californians surveyed this month by the Field Poll say= =20 the energy crisis is more a product of the energy companies' efforts to dri= ve=20 up rates than a real shortage. Despite that view, 85 percent say they're=20 trying to conserve energy.=20 -- Which is closer to your view - that the current electricity shortage is= =20 real or is an attempt by energy companies to increase rates? Attempt to increase rates Real shortage No opinion May survey 59% 36% 5% January survey 57% 36% 7% May survey results by household income: Less than $20,000 54% 37% 9% $20,000 to $40,000 62% 34% 4% $40,000 to $60,000 59% 36% 5% $60,000 to $80,000 57% 37% 6% More than $80,000 55% 42% 3% -- Degree to which residents say they have cut back on electricity usage=20 since=20 the start of energy crisis: Percentage of residents who . . . Have not been able to conserve 15% Have cut back electricity use (median percentage cutback 8%):=20 5% 17% 10% 25% 15% 14% 20% 13% More than 20% 11% . Can't estimate % of savings 5% The results are based on a telephone survey conducted May 11 to 20 by the= =20 Field Institute. The survey of 1,015 California adults was completed in=20 English and Spanish using random digit dialing methods. This poll has a=20 margin=20 of error of plus or minus 3.2 percentage points. Chronicle Graphic Power plant 'ramping' to be probed=20 State senators also expected to file suit, charging federal regulators with= =20 failing to ensure fair rates Christian Berthelsen, Chronicle Staff Writer Tuesday, May 22, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/05= /22/M N151793.DTL&type=3Dnews=20 State legislators said yesterday that they will investigate charges power= =20 companies manipulated electricity prices by repeatedly ramping the output o= f=20 their plants up and down and creating artificial shortages.=20 Sen. Joe Dunn, D-Santa Ana (Orange County), who heads a special committee= =20 reviewing energy prices, called the "ramping" allegations, first disclosed = in=20 The Chronicle on Sunday, "outrageous acts of manipulation."=20 Dunn said that even if the practices did not violate current law, legislati= on=20 could be drafted to make such acts illegal in the future.=20 "We're looking at it, yes, from the point of view of civil or criminal=20 statutes that may exist but also whether legislation should be introduced t= o=20 render it a violation for future such acts."=20 Dunn's committee already has been investigating charges that power generato= rs=20 "gamed" the wholesale energy market to boost their profits.=20 The Chronicle reported Sunday that power companies used a complex tactic to= =20 alter the output of their plants, sometimes several times within an hour.= =20 Sources who work in the plants said the ploy enabled the companies to drive= =20 up the prices they receive for electricity. The firms avoided detection by= =20 still meeting the terms of their contracts, which required them to supply a= =20 certain amount of power each hour. The sources said the tactic greatly=20 contributed to deteriorating physical conditions at the plants, leading to= =20 the record level of outages now plaguing California plants.=20 The senate committee, which convened in March after The Chronicle reported= =20 that power companies had overstated the growth in demand for electricity in= =20 California, has obtained confidential bidding and generation data for power= -=20 generating companies. Dunn said the data will be analyzed to determine whic= h=20 plants employed the ramping tactic. He added that the issue would be examin= ed=20 in a public hearing in the coming weeks.=20 Meanwhile, pressure continued to mount on generating companies that drove= =20 electricity supplies through the roof during the past year.=20 Sources said the California Public Utilities Commission, which is=20 investigating allegedly unnecessary plant shutdowns, has narrowed its focus= .=20 It is targeting several plants that had no apparent defects yet went offlin= e=20 during periods when prices were rising because of limited electricity=20 supplies.=20 Commissioner Jeff Brown said the names of these plants are under court seal= .=20 However, Dow Jones reported yesterday that one of them was a San Diego-area= =20 plant co-owned by Dynegy Inc. of Houston and NRG Inc. of Minneapolis. Anoth= er=20 was a Pittsburg plant owned by Mirant Corp. of Atlanta. The companies denie= d=20 the allegations.=20 On another front, Sen. John Burton, D-San Francisco, and Assembly Speaker= =20 Robert Hertzberg, D-Sherman Oaks (Los Angeles County), were expected to fil= e=20 a lawsuit this morning against the Federal Energy Regulatory Committee for= =20 failing to carry out its stated duty of ensuring "just and reasonable"=20 electricity rates.=20 "Their central failing is that they don't follow the law," Burton said in a= n=20 interview. "Either they're letting their friends within the industry or the= ir=20 ideology get in the way of their public responsibility."=20 The California attorney general's office also is pressing forward with an= =20 investigation into the practices of wholesale power companies.=20 E-mail Christian Berthelsen at [email protected].=20 Offline firms Reliant Energy had more outages during a 39-day period examined by The= =20 Chronicle than any other power provider. Outage numbers were calculated by= =20 multiplying the number of a company's generators that were either fully or= =20 partially offline by the number of days they were out. Firm Megawatts Reliant 319 Southern 310 AES 278 Duke 261 PG&E 249 Half-hour notice of blackouts planned=20 FAST ALERTS: Power grid operator may send voice, e-mail messages=20 Lynda Gledhill, Chronicle Sacramento Bureau Tuesday, May 22, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/05= /22/M N121634.DTL&type=3Dnews=20 Sacramento -- Californians will receive 30 minutes' warning that blackouts= =20 may be imposed -- enough time, it is hoped, to get out of the elevator or= =20 through a dangerous intersection, the state's power grid managers said=20 yesterday.=20 The California Independent System Operator also will provide a daily power= =20 forecast 24 hours in advance so residents and businesses can plan for=20 blackouts the same way people prepare for severe storms.=20 "We want a system that is proactive," said Carl Guardino, an ISO board memb= er=20 and president of the Silicon Valley Manufacturing Group. "When the last few= =20 rolling blackouts hit there was as little as two minutes' warning. Two=20 minutes may be fine in a football game, but it's not fine for California's= =20 economy or safety."=20 ISO officials also said they are examining high-tech ways of quickly=20 spreading the word about impending blackouts to homeowners and businesses= =20 through mass e-mails, faxes, automated phone calls and pager messages.=20 The plan, detailed in a report issued yesterday, still falls far short of= =20 other proposals being pushed in the Legislature. Lawmakers have suggested= =20 scheduling blackout days months in advance and having California join with= =20 other Western states to form a "buyer's cartel" that would refuse to pay fo= r=20 power when prices become too high.=20 "It's not the report I was expecting, but 30 minutes of notice is certainly= =20 better than two," said Sen. Debra Bowen, D-Marina del Ray. "No matter how y= ou=20 slice it, this summer is going to be miserable. The question is whether we= =20 want to have planned misery or unplanned misery."=20 A spokesman for the California Manufacturers and Technology Association,=20 which commissioned a recent report that found unplanned blackouts could cos= t=20 the state economy $21.8 billion, said the ISO policy changes will be a=20 tremendous help to many businesses.=20 "In this electrically unreliable world, any notification manufacturers can= =20 get is good," said Gino DeCaro, a spokesman for the association. "While 30= =20 minutes won't be enough for some, for most manufacturers it will be=20 sufficient. " The ISO will wait for guidance from the governor and lawmaker= s=20 regarding more complicated issues such as the creation of scheduled=20 blackouts, said Michael Florio, an ISO board member and official at The=20 Utility Reform Network.=20 "There are bigger public policy ramifications," Florio said.=20 The ideas will be discussed in greater detail at an ISO board meeting=20 Thursday. Stephanie McCorkle, an ISO spokeswoman, said the changes are just= =20 updates of policies already in place.=20 WARNING OF 'PROBABLE' BLACKOUTS The 30-minute advance-notification system, scheduled to go into effect earl= y=20 next month, would warn of "probable" blackouts, including the amount of loa= d=20 that will have to be curtailed in each service area.=20 Until now, the agency has refused to give more than a few minutes' warning,= =20 saying it did not want to alarm people when there was still a chance that a= =20 last-minute purchase of power could stave off blackouts. The utilities also= =20 have resisted giving warnings, saying they did not want to tip off burglars= =20 and other criminals.=20 The ISO also has been working to upgrade its Web site to provide the most= =20 current information about how much electricity is being used and how much i= s=20 available. It will also establish a system this summer through which that= =20 information can be sent in an hourly e-mail.=20 This information may make it easier for larger users of electricity to plan= =20 their operations, said ISO spokeswoman Lorie O'Donley.=20 Also planned by the ISO is a "Power Watch/Power Warning" system that would= =20 provide a 24-hour notice of high-demand days.=20 Under the two-tiered system, a "Power Watch" would be declared whenever a= =20 Stage One or Stage Two alert is likely, while a "Power Warning" would be=20 issued whenever there is at least a 50 percent chance of a Stage Three aler= t.=20 With one report suggesting California may see as many as 700 hours of rolli= ng=20 blackouts this summer, lawmakers are hard at work trying to find ways to ma= ke=20 the outages easier for power customers to cope with.=20 The idea of a buyer's cartel, the subject of a Capitol hearing today, would= =20 have California -- in partnership with other states -- set a firm ceiling o= n=20 what it will pay power producers for electricity this summer -- and not one= =20 dime more.=20 The idea, which has attracted the support of some key lawmakers and the=20 cautious interest of Gov. Gray Davis, could potentially curtail the=20 exorbitantly high prices the state has been paying for electricity.=20 The trade-off would be the likelihood of more frequent blackouts than if th= e=20 state continues to pay any price electricity sellers demand.=20 The maximum the state would pay would be set by a formula, based on such=20 things as the cost of natural gas. A reasonable profit for power producers= =20 would be built in, supporters said.=20 DESIGNATING BLACKOUT DAYS Meanwhile, Assemblyman Mike Briggs, R-Fresno, will introduce a bill today= =20 that would require the state's utilities and Public Utilities Commission to= =20 designate days for potential blackouts to each block.=20 For example, a customer located in Block 3 of Pacific Gas and Electric Co. = 's=20 service area could be told in advance that power will be turned off June 5 = if=20 blackouts are needed that day.=20 "Right now, every day is a potential blackout day," Briggs said. "This way= =20 people would know when their potential days are."=20 On alert=20 -- When demand is high, the ISO will forecast peak demand, power supply and= =20 weather 24 hours in advance.=20 -- A "power watch" will be issued when it is likely the grid will reach Sta= ge=20 1 (system is within 7% of running out of power) or Stage 2 (system is withi= n=20 5% of running out of power).=20 -- A "power warning" will be issued when there is at least a 50% chance of = a=20 Stage 3 alert (demand is within 1.5% of supply).=20 Who calls a blackout?=20 Engineers in Folsom at the Independent System Operator keep watch on the=20 state's power consumption. When they determine that energy reserves have=20 dipped below 1.5 percent of available capacity, the ISO can order utilities= =20 to start cutting juice. Officials said this week they would give 30 minutes= '=20 notice before blackouts begin. The ISO tells the utilities exactly how much= =20 power to cut.=20 Q: Who decides who gets blacked out and for how long?=20 A: That's up to the utilities. PG&E has divided its 4.5 million customers= =20 into 14 blocks; each block is darkened for one to two hours at a time. The= =20 blocks are defined by PG&E's network of circuits rather than by geography.= =20 Thus, neighborhoods in San Francisco, Oakland and Pleasant Hill can be=20 blacked out simultaneously.=20 Q: How many users are blacked out at once?=20 A: Each of PG&E's 14=20 blocks represents about 550 megawatts of electricity. (A megawatt is enough= =20 electricity to power 1,000 homes.) If PG&E is told to cut more than 550=20 megawatts, it can shut down two or more blocks at a time. PG&E also can bla= ck=20 out smaller portions within each block if the ISO's requirements are for le= ss=20 than 550 megawatts.=20 Q: How is power shut off?=20 A: This is a straightforward matter of shutting off circuits in a power=20 substation by computer or sending a crew to flip the switches by hand.=20 Q: How many days of blackouts have we had this year and how many customers= =20 have been affected?=20 A: A total of 3,035,000 customers have been blacked out in the six days of= =20 rolling blackouts since Jan. 1, 2001.=20 Q: Which block of customers will be blacked out next?=20 A: Some or all customers in Block 1.=20 Q: How do I know what block I'm in?=20 A: Look for the words "Rotating Outage Block" followed by a number on your= =20 bill. If it says Block 50, you share an electrical circuit with a hospital,= =20 police station or other "essential service" that is normally exempt from=20 service cuts.=20 Q: What should I do when the lights go out?=20 A: Power experts advise:=20 -- Turn off all lights and appliances to prevent damage-causing power surge= s=20 when service is restored. Leave one light on to indicate when the electrici= ty=20 is back.=20 -- Use caution when driving because traffic signals may be out. Treat all= =20 intersections as a four-way stop.=20 -- To protect food, open refrigerator and freezer doors only when absolutel= y=20 necessary.=20 -- Keep a flashlight and radio with fresh batteries available. If you light= =20 candles, observe the usual safety precautions.=20 -- If the lights go out, check with neighbors to determine if only your hom= e=20 is affected. It may be a downed power line or some other problem, in which= =20 case you should alert PG&E or your city electrical bureau.=20 -- When the power returns, turn on one appliance at a time to prevent power= =20 surges.=20 -- Don't plug a generator into the wall; when the lights return, it can sen= d=20 a high-voltage current through the system that can electrocute power worker= s.=20 -- Tell children who are home alone to remain calm, to turn off the TV and= =20 computers, and not to use candles.=20 Sources: PG&E, Chronicle staff=20 Chronicle Graphic=20 E-mail Lynda Gledhill at [email protected].=20 Time-of-use power pricing may be the answer=20 Jane Bryant Quinn Tuesday, May 22, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/05= /22/B U225334.DTL&type=3Dnews=20 Most of the rest of the country will soon be catching California's energy= =20 disease. I don't mean blackouts and brownouts. I mean higher electricity=20 prices, which are all but inevitable.=20 Retail prices are regulated in most parts of the country. But when utilitie= s=20 pay more for wholesale power, they have to pass it on. How much prices rise= =20 will depend partly on whether we learn, again, to conserve.=20 Consumers bought into conservation after the energy shocks of the 1970s and= =20 early '80s. We not only turned down thermostats and insulated the attic, we= =20 embraced government intervention and technological change.=20 Federal energy standards brought forth more efficient refrigerators and air= =20 conditioners. New building codes made homes and offices less expensive to= =20 heat,=20 cool and light. Rebate programs helped people buy better lightbulbs and=20 appliances. Electricity use grew more slowly than the economy did.=20 But in the late '90s, with prosperity in full swing, demand began catching = up=20 with supply. Consumers stopped worrying about their energy bills. High-tech= =20 businesses gobbled megawatts for lunch.=20 Utilities and states -- California among them -- closed or scaled back thei= r=20 conservation programs. We're all free-market maniacs now. The markets were= =20 supposed to create efficiency, unaided.=20 But they haven't. So while we work out the problems and wait for new plants= =20 to come online, we need to spread the available power around.=20 Energy conservation needs a big push. The Bush administration has blinders = on=20 when it cuts conservation spending and downplays the need.=20 But a market-based question has also entered the conservation debate. Would= =20 we save power if it were priced in a different way?=20 Most consumers don't realize that the wholesale price of power changes at= =20 various times of day. Prices spike when demand is high, say on summer=20 afternoons, and fall at night when most offices have closed.=20 But most of us pay a constant price per hour, whether we use expensive hour= s=20 or cheap ones. So we have no incentive to conserve power during hours of hi= gh=20 demand.=20 Market-based pricing is intended to get you to think twice before using pow= er=20 during those expensive peaks. There are three main approaches to this today= :=20 CHANGING THE FIXED PRICE. Many utilities today charge more in the hot summe= r=20 months than in the winter months. Georgia Power goes further -- raising you= r=20 summer price as you use energy more. In the winter, your rate for extra=20 kilowatt-hours declines.=20 VOLUNTARY TIME-OF-USE PROGRAMS. You pay the most for power during weekday= =20 hours and the least on weekends and overnight. Oregon will introduce a=20 statewide time-of-use program in October. Niagara Mohawk in Syracuse, N.Y.,= =20 has 4,000 consumers on time-of-use.=20 Ahmad Faruqui of the industry's Electric Power Research Institute estimates= =20 that a well-designed time-of-use program could cut residential peak demand = by=20 about 2.5 percent. In California, that could reduce energy costs by 12=20 percent over the summer.=20 So far, however, these programs haven't persuaded many people to run their= =20 washing machines at night. Saving $20 or $30 isn't worth the hassle, says= =20 Mike O'Sheasy, Georgia Power's manager of product design.=20 REAL-TIME PRICING. Here, the utility varies your price per kilowatt-hour=20 during the day, as its own prices change. Using a "smart meter" and "smart= =20 thermostat," you could program your water heater or air conditioner to turn= =20 off automatically during times when power costs the most. Many businesses= =20 already pay on real-time.=20 How consumers like real-time pricing remains to be seen. Georgia Power trie= d=20 it 12 years ago and dropped it.=20 But Gulf Power in Pensacola, Fla., rolled out newer technology last year an= d=20 thinks it has a hit. About 1,500 customers are already online with 400 more= =20 on the waiting list, even though the smart meters cost them $4.53 a month.= =20 "People like the control over their power bill," says Gulf's Margaret Neyma= n,=20 general manager of marketing. She says customers are saving 15 percent,=20 which more than covers their participation cost.=20 Puget Sound Energy in Bellevue, Wash., has enrolled more than 420,000=20 customers in a smart-meter program. They've been getting reports, showing= =20 when they use power the most and what it costs to deliver.=20 This month, the utility started tying its smart meters to time-of-use=20 pricing. Customers pay less during night-time hours, all day Sundays and=20 holidays.=20 Consumer and environmental groups generally haven't supported market-based= =20 pricing for homes. They blame high prices, in part, on market manipulation= =20 and don't want the power sellers to profit from it.=20 They have a case. But blackouts and brownouts amount to a sales pitch for= =20 suspending clean-air rules and reopening old, polluting plants. Greenies ne= ed=20 to support any power-saving plan that works.=20 The mouth that roared=20 Rob Morse Monday, May 21, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/05= /21/M N77405.DTL&type=3Dnews=20 Last week I was watching the TV news and saw a frightening sight. An angry= =20 Gray Davis was declaring war on Texas.=20 "We are literally in a war with energy companies who are price-gouging us,"= =20 the governor said, shaking with something that looked an awful lot like=20 emotion. "Many of those companies are in Texas."=20 In typical Davis style, the governor is a little late in declaring war on= =20 Texas. If he had been president in 1942, he would have spoken of that day o= f=20 infamy in 1941.=20 It also was a typical Davis half-measure. He didn't declare war on all of= =20 Texas, just the Texans who poll badly in California.=20 Those would be George W. Bush and his friends and contributors who cut off= =20 our power, robbed us, and then used us as an example of why the nation need= s=20 holes punched in Alaska and hundreds of Homer Simpsons put in charge of=20 nuclear fuel rods.=20 Davis isn't the type to boldly declare unlimited war on all of Texas,=20 certainly not "Austin City Limits," chili and the Texans we love, like Will= ie=20 Nelson, Tommy Lee Jones, Charlotte Mailliard Shultz and Willie Brown.=20 But Davis had a Texas stereotype in mind as he spoke of the hardscrabble=20 hombres in Houston high-rises who are smart and mean and are holding us up= =20 long-distance. Yep, it's as if Texas is saying to California, "Your money o= r=20 your lifestyle."=20 Davis said he would retaliate each month by naming a Texas corporation "pig= =20 of the month."=20 Yeah, that'll hurt those guys at Reliant Energy and Enron.=20 Having Gray Davis on your side in a dustup with a bunch of Texans is like= =20 having the head of the high school av crew on your side in a rumble with th= e=20 Crips.=20 Right now the gashouse gangsters in Houston are having a jeweler make 14-= =20 karat gold pigs they can wear proudly in their lapels while they eat steak= =20 and laugh at Californians deprived of their sushi because of the loss of=20 refrigeration. Texas kids will have bumper stickers on their fuel-=20 inefficient scooters saying, "My dad is a proud pig of the month in=20 California."=20 We have to do better than this pig of the month stuff. Slogans won't do whe= n=20 you're fighting guys who are cutting off the electricity to read them by.= =20 Texans have a better slogan, "Don't mess with Texas," and they're a tight= =20 bunch who won't take kindly to Davis messing with any of their citizens, no= =20 matter how rich.=20 How is Davis going to match "Don't mess with Texas"? Sorry, but "California= ns=20 are people, too" won't cut it.=20 Long before Davis declared half-war on Texas, a couple of readers suggested= =20 that California retaliate by cutting off the supplies of our products to=20 Texas,=20 specifically wine.=20 This, of course, is indication of Californians' isolation from mesquite=20 reality. There may be six guys in Texas who ever order wine with their=20 T-bones,=20 and they're all in Austin. The menus say, "One: red. Two: white. Three rose= .=20 Please order by number." And they all might as well be from upstate New Yor= k.=20 If California were the world's only producer of beer and tequila, then we= =20 might have a chance of beating Texas by cutting off the essentials of life.= =20 There's only one way to defeat Texas short of an outright shooting war=20 pitting our kids armed by junk-gun manufacturers against their citizens wit= h=20 concealed-carry permits. We have to declare an embargo on the one thing tha= t=20 Texans really need from California -- entertainment.=20 Texans are shutting down our televisions and movie theaters, so we'll cut= =20 them off from movies and TV shows made in California. Hey, they're all made= =20 here. Until we get affordable power, it's no sitcoms and no J-Lo for them.= =20 They won't even get Westerns, since those are shot in parts of California= =20 blighted enough to look like Texas used to look. Nowadays much of Texas loo= ks=20 like Beverly Hills, hold the hills.=20 We'll also embargo that branch of entertainment known as California itself.= =20 At the border crossing into California on I-70, a heavily armed guard will= =20 peer into each car and truck looking for pointy boots and ask, "Are you=20 carrying any fruit, vegetables or Texans?"=20 Should any Texans turn up, they'll be sent packing toward El Paso, never to= =20 taste seared ahi, never to see the weirdos on the Sunset Strip, and never t= o=20 feel the natural air-conditioning they can never shut off in San Francisco.= =20 They'll have to go to Florida if they want to see a guy in a mouse head.=20 There's a governor there who won't call them pigs.=20 Rob Morse's column appears Mondays, Wednesdays, Fridays and Sundays. His=20 e-mail address is [email protected].=20 Blackout alerts, forecasts proposed=20 Posted at 10:03 p.m. PDT Monday, May 21, 2001=20 BY JOHN WOOLFOLK=20 Mercury News=20 Under pressure to give more notice before pulling the plug, California's=20 power grid managers Monday proposed issuing alerts a half-hour before=20 blackouts and forecasting the likelihood of outages a day in advance.=20 The Independent System Operator's proposal heartened business leaders who s= ay=20 unexpected rolling blackouts have cost them millions of dollars.=20 But the proposal disappointed consumer advocates and some lawmakers who hop= ed=20 grid officials would consider their suggestion to schedule rolling blackout= s=20 days or weeks in advance.=20 Grid officials compared their proposal to the weather forecasts that alert= =20 Midwesterners to tornadoes, and cautioned that the predictions are subject = to=20 change.=20 ``It's akin to a severe storm watch and a severe storm warning,'' said Greg= g=20 Fishman, spokesman for the ISO, which will consider the proposal Thursday.= =20 ``We try to give as much hard information as soon as we can. But there are= =20 days where those things are going to change very quickly.''=20 Business leaders said a half-hour warning, even if it's a false alarm, woul= d=20 be better than the two to six minutes they got during the last round of=20 rolling blackouts in April.=20 ``We're happy with what the ISO is trying to do,'' said Gino DiCaro,=20 spokesman for the California Manufacturers and Technology Association. ``It= 's=20 making a bad situation a little better.''=20 But critics said the proposal changes little and, with frequent blackouts= =20 expected this summer, urged the state to instead schedule them in advance.= =20 ``It's actually quite distressing and disappointing,'' said Michael Shames,= =20 executive director of the Utility Consumers Action Network, which proposed= =20 scheduling blackouts. ``If the public is looking for better information on= =20 blackouts, they'll have to look elsewhere.''=20 State Sen. Debra Bowen, D-Redondo Beach, whose energy committee is=20 considering notification issues today, agreed.=20 ``It's not the report I was expecting, but 30 minutes of notice is certainl= y=20 better than two,'' Bowen said.=20 The idea of scheduling blackouts is gaining ground among state lawmakers, w= ho=20 say it would let people know when to expect outages and also force down=20 runaway power prices by dampening demand.=20 The grid operator didn't propose scheduled blackouts because lawmakers=20 haven't yet agreed on the concept.=20 ``It's in the talking stage,'' Fishman said. ``There's nothing firm.''=20 Rolling blackouts, in which utilities cut power from one block of customers= =20 for an hour or so and then move to the next block, protect the system from= =20 total failure when demand threatens to overwhelm supplies. Systemwide failu= re=20 could take days to fix.=20 Bad summer forecast=20 Californians have had six days of rolling blackouts this year and will like= ly=20 see many more this summer, as power-guzzling air conditioners drive demand = as=20 much as 3,700 megawatts over available supplies. A megawatt can power about= =20 1,000 homes.=20 The ISO highlights the potential for blackouts through progressive emergenc= y=20 stages. Stage 3, the highest level, indicates rolling blackouts are possibl= e.=20 Grid managers alert utilities and public safety officials to conditions by= =20 e-mail, pager, telephone, radio and Internet postings, and notify the publi= c=20 through news broadcasts.=20 To date, two-thirds of consumers say they're more concerned about power=20 prices than rolling blackouts, according to a Field Poll released today. Bu= t=20 more than seven in 10 expect to be inconvenienced by the outages expected= =20 this summer, the poll found.=20 ``People in general are much more willing to tolerate blackouts if they kno= w=20 they're going to happen,'' said Guy Phillips, energy aide to Assembly Speak= er=20 Pro Tem Fred Keeley, D-Santa Cruz.=20 The nature of the electric system makes advance notice of blackouts=20 difficult, grid officials said. California is so short of power that weathe= r=20 changes and power plant shutdowns can dramatically affect the outlook.=20 On Monday, the state avoided blackouts amid soaring temperatures because of= =20 power imported from other states and cooler weather in Southern California,= =20 said ISO spokeswoman Lorie O'Donley. That could change as Southern Californ= ia=20 heats up today and Wednesday, but blackouts aren't expected, barring a sudd= en=20 plant failure or drop in imports, she said.=20 National Weather Service forecasters expect a high of 90 degrees in San Jos= e=20 today, with a low in the upper 50s tonight.=20 Under Monday's ISO proposal, grid managers would commit to issuing a=20 30-minute notice of ``probable interruptions,'' identifying the affected=20 utilities and how much power they must cut. It still would be up to the=20 utilities to determine which areas would be affected.=20 The ISO also would issue 24-hour grid advisories. If the ISO expects a Stag= e=20 1 or 2 emergency the next day, grid managers will issue a ``Power Watch.'' = If=20 there is a 50 percent or greater chance of a Stage 3 emergency the next day= ,=20 the ISO will declare a ``Power Warning.''=20 In addition, the ISO would bolster the ``system conditions'' report on its= =20 Web page by adding available supply figures. The report now lists only actu= al=20 and forecast demand. Customers also would be able to sign up for hourly=20 e-mail updates.=20 ISO officials also are looking into contracts with notification services=20 offering to alert customers to grid conditions by request through phones,= =20 faxes, e-mails or pagers.=20 ``We spent the last four months designing this with businesses for=20 businesses,'' said ISO board member Carl Guardino, who also heads the Silic= on=20 Valley Manufacturing Group.=20 The blackouts that hit the Bay Area on June 14 cost Silicon Valley business= es=20 $100 million, Guardino said, adding that he expects the ISO to approve the= =20 proposals by month's end.=20 `Chance to do something'=20 ``Every time the lights go out, companies see red,'' Guardino said. ``Half = an=20 hour actually gives you a chance to do something. You can deploy police=20 officers to intersections. You can power down assembly lines.''=20 Others say that's not enough.=20 ``I want 30 days' warning,'' said Assemblyman Mike Briggs, R-Fresno, who=20 plans to introduce a bill today that would schedule each utility outage blo= ck=20 for a day when blackouts are possible.=20 That would help farmers, who must have power on specific days for water=20 delivery and crop processing, Briggs said.=20 State Sen. Dede Alpert, D-San Diego, has a bill scheduled for discussion=20 today calling for the state to set a ceiling on what it will pay for power= =20 and to schedule outages the next day if there aren't enough sellers at that= =20 price.=20 Guardino said the ISO isn't ruling out scheduled blackouts, but is concerne= d=20 that such an approach could result in unnecessary outages.=20 Assembly Speaker Robert Hertzberg, D-Van Nuys, believes the ISO proposal is= a=20 good idea in any case.=20 ``Doing everything we can to let people know what's likely to happen is=20 important,'' said Paul Hefner, a Hertzberg aide, ``whether or not we can go= =20 forward with some sort of scheduled blackout.'' Blackout season may be heating up=20 Firms may seek PUC lights-out exemptions as more power comes on-line.=20 May 21, 2001=20 By KATE BERRY The Orange County Register=20 A sizzling summer-like heat wave could threaten California with rolling=20 blackouts early this week, energy officials said.=20 The blackouts could hit even as regulators debate the pros and cons of=20 pre-scheduling blackouts.=20 In addition, the state Public Utilities Commission will accept applications= =20 this week from businesses claiming they must be exempt from having their=20 lights go out.=20 Temperatures of over 100 degrees in the Central Valley and 90 degrees in th= e=20 Bay area are expected today. Southern California will bear the brunt of the= =20 heat Tuesday, so energy demand could be diffused throughout the state.=20 "We do expect this upcoming heat wave to be brutal,'' said Stephanie=20 McCorkle, a spokeswoman for the California Independent System Operator, whi= ch=20 manages the state's electric grid. "But we can't say for sure we'll be able= =20 to avoid blackouts.''=20 The good news is that the grid operator expects more than 3,000 megawatts o= f=20 power to be online this week, compared with two weeks ago, when California= =20 endured modest blackouts for two straight days. Still, about 10,000 megawat= ts=20 of electricity, or one-quarter of the state's capacity, will be out of=20 service, McCorkle said.=20 The ISO plans to release a report today on how scheduled blackouts might=20 work. The report is a response to a bill sponsored by state Sen. Dede Alper= t,=20 D-Coronado, that would allow the grid operator to refuse to buy power that = is=20 considered too expensive and instead call for rolling blackouts.=20 The PUC, which has been besieged by consumer complaints, might begin hearin= gs=20 into inequities in the "baseline'' allocation on residential utility bills.= =20 Consumers are complaining that baseline, which guarantees a subsistence lev= el=20 of electricity based on various climate regions throughout the state, is no= t=20 consistent with energy usage.=20 Cheney: Forget price caps, OPEC pressure=20 Vice president calls for more refineries and review of fuel-content rules.= =20 May 21, 2001=20 By BRIGITTE GREENBERG The Associated Press=20 WASHINGTON -- Capping electricity prices or pressuring OPEC to cut oil pric= es=20 will not solve U.S. energy problems, Vice President Dick Cheney said Sunday= =20 in defending a Bush administration energy plan that stresses production ove= r=20 conservation.=20 While Democrats want immediate relief for California's power crisis, there= =20 were few encouraging words from Cheney, who led a task force that developed= =20 the Bush plan.=20 "They got into trouble in California over a period of years, and it's going= =20 to take two or three years to get out of it," Cheney told CBS' "Face the=20 Nation." "There are going to be blackouts this summer."=20 For the short term, the administration has approved Gov. Gray Davis' reques= ts=20 to expedite permits for new power plants and has ordered federal offices in= =20 the state to reduce energy consumption this summer by 10 percent.=20 Sen. Barbara Boxer, D-Calif., said she was appalled that President George W= .=20 Bush is not considering price caps or investigating companies that she said= =20 are charging exorbitant prices for electricity. She noted that both Cheney= =20 and Bush are former oil company executives.=20 "It's really rather stunning because those of us who are living through thi= s=20 have suggested many things," Boxer told CBS. "So the vice president sits ve= ry=20 coolly, and I admire his cool, but he really sounds like an oil man, not a= =20 vice president charged with helping the people."=20 If dairy farmers sought as much profit as oil companies - in some cases 1,6= 00=20 percent - a gallon of milk would cost $190, she said.=20 Cheney said the answer to long-term price stability lies in building more o= il=20 refineries in the United States and in reviewing a system whereby different= =20 states require different blends of fuel - some mixed with the corn additive= =20 ethanol, for example - to meet clean-air standards.=20 Capping prices would not increase the supply of energy or reduce demand,=20 Cheney said.=20 "We get politicians who want to go out and blame somebody and allege there = is=20 some kind of conspiracy, whether it's the oil companies or whoever it might= =20 be, instead of dealing with the real issues," Cheney told NBC's "Meet the= =20 Press."=20 He criticized Davis for what he called a "harebrained scheme" to use the=20 state's budget surplus to buy power.=20 Senate Majority Leader Trent Lott, R-Miss., said Congress should look into = at=20 least temporarily suspending the federal gas tax, which is 18.4 cents per= =20 gallon.=20 Cheney, however, said that would pose problems for the nation's highway tru= st=20 fund, which relies on that tax to build and maintain the country's=20 transportation infrastructure.=20 Describing himself as a "pretty good environmentalist," Cheney also respond= ed=20 to criticism from some environmental groups that he did not meet with them= =20 before issuing the energy plan because he is beholden to energy producers w= ho=20 gave millions of dollars to the Bush campaign.=20 "I couldn't begin to sit down with all of those various groups. I didn't ha= ve=20 time," he said. A nuclear rebirth? Despite obstacles, it should be in the mix to help ease the electricity=20 crisis.=20 May 20, 2001 By John Seiler The Orange County Register With the lights and air conditioners set to go out in summer blackouts,=20 everyone is scrambling for more energy production. That's why nuclear power= =20 is back - cleaner, safer and more efficient.=20 President Bush set the tone in his 163-page energy plan released Thursday,= =20 calling nuclear power "a major component of our national energy policy." Th= e=20 president wants to make it easier to license new plants and give $1.5 billi= on=20 in tax credits for purchasing nuclear plants to make it easier for industry= =20 consolidation. And he wants to continue studying the construction of a=20 nuclear- waste site in Yucca Mountain, Nevada, a project that is crucial to= =20 California.=20 But California faces hurdles. The state bans new nuclear construction until= =20 the national nuclear-waste site is built and anyone who builds here has to= =20 deal with legitimate concerns about earthquake safety and adequate water fo= r=20 cooling. This state also is a major center for environmentalists who oppose= =20 nuclear power. Nevertheless, advances in technology, years of experience and other factors= =20 should make nuclear energy a serious candidate for responding to=20 California's, and the nation's, energy needs. It's a good time to think=20 through the history and the potential of this powerful energy producer. Nuclear accidents The heyday of the American nuclear power program was the 1950s through 1979= ,=20 when the Three Mile Island meltdown in Pennsylvania led to an end to new=20 plans for nuclear power. "The Three Mile Island accident destroyed the=20 reactor, but the core itself remained confined. Radioactive gases were=20 vented, but there is no accepted evidence that this harmed the public,"=20 writes John McCarthy, a Stanford professor of computer sciences with an=20 extensive Web site on nuclear power:=20 www-formal.stanford.edu/jmc/progress/nuclear-faq.html. The last American nuclear plant opened in 1996 at Watts Barr in Tennessee, = 23=20 years after its construction was given the OK. No new plant construction ha= s=20 been approved in America since 1977.=20 In 1986, the Chernobyl nuclear plant in the Soviet Union (now Ukraine)=20 exploded from high-pressure steam (not a nuclear explosion), spewing out=20 radiation and casting further doubts on the future of the American nuclear= =20 program, although no American nuclear reactor ever had anything close to th= e=20 shoddy socialist design of the Chernobyl plant. "At the end of 1998 there were 9,012 civilian power reactor years of=20 experience throughout the world, and Chernobyl is the only nuclear power=20 plant accident harming the public," McCarthy notes on his site. Put another= =20 way, excluding Chernobyl, nuclear power plants have never harmed the public= .=20 Irrational fears Contributing to the anti-nuclear atmosphere were such films as 1979's "The= =20 China Syndrome," starring Jane Fonda and 1983's "Silkwood," starring Meryl= =20 Streep. And let's not forget one of the funnier skits on "Saturday Night=20 Live" in 1979, in which Dan Aykroyd played President Jimmy Carter, who=20 becomes irradiated touring "Two Mile Island" after an accident and grows in= to=20 The Amazing Colossal President.=20 In California, sentiment was set by then-Gov. Jerry Brown, whose chief of= =20 staff was Gray Davis, now California's governor. "Well, it's not completely= =20 clear to me what a reasonably scientific position is on nuclear power -=20 except to say that where there are other potentially less destructive=20 alternatives, it doesn't make much sense to rush to increase dependency on= =20 nuclear power plants. In California there are alternatives such as=20 conservation, cogeneration combined cycle, geothermal and solar energy. In= =20 the aggregate they make it possible to slow down the growing use of nuclear= =20 power," Brown told biographer Orville Schell in Brown, published in 1978. Foreign countries don't share America's phobia about nuclear power, which= =20 provides 78 percent of France's electricity, compared to 20 percent in the= =20 United States and 16 percent in California. America has 103 operating=20 reactors out of 435 worldwide. Surfin' San Onofre "You'd catch 'em surfin' at ... San Onofre," harmonized the Beach Boys in= =20 "Surfin' USA." And the surfers still ride the waves right in front of the= =20 nuclear power plant, which has been operated in complete safety since 1968.= =20 The first nuclear reactor built was decommissioned in 1992 and is being=20 dismantled. The two remaining, newer reactors - the large cones visible as= =20 you drive by on the I-5 freeway - are licensed to operate by the federal=20 Nuclear Regulatory Commission until 2022, spokesman Ray Golden told me, and= =20 could be running until 2042 if an extension is granted. Put another way, if the state had just three more nuclear sites the size of= =20 the one in San Onofre, there would be no blackouts this summer. The state i= s=20 expected to be short 5,000 megawatts. San Onofre's two reactors together=20 produce 2,240 megawatts of power. (1,000 megawatts serves about 1 million= =20 homes.) California's only other nuclear plant is the Diablo Canyon facility, which= =20 opened in 1985 and provides 2,190 megawatts of power.=20 Last Wednesday I toured the San Onofre plant. Bechtel workers were fixing o= ne=20 turbine, on which an electrical circuit breaker had shorted out in February= =20 and caused a fire. The turbine should be fixed by sometime in June, in time= =20 for the summer energy crunch. It should be noted that the turbine is not the reactor. The turbine rotates= =20 and creates electricity the same as at any other kind of plant, so the fire= =20 didn't come close to causing problems for the reactor. The nuclear fuel the reactor uses costs about $30 million a year, Golden=20 said. That works out to a cost of "less than 3 cents a kilowatt hour," he= =20 said, but couldn't be more specific because of company policy. That compare= s=20 to a cost of 3 cents to 4 cents a kilowatt hour for natural gas. Regulatory hoops Despite the safety and need for nuclear power, there are a number of hurdle= s=20 to building new plants, especially in California: lWaste disposal. Currently, all American nuclear plants store their nuclear= =20 wastes on site, such as the large concrete bunkers I saw at San Onofre. The= =20 waste has to be stored for 10,000 years. They're awaiting the potential=20 development of the Yucca Mountain, Nevada, waste site, on which $7 billion= =20 already has been spent for studies by the U.S. Department of Energy. The si= te=20 already was the location of 100 nuclear bomb tests.=20 The site will be ready "at the earliest in 10 years," Barbara Byron, nuclea= r=20 waste policy adviser for the California Energy Commission, told me. In the meantime, California law stipulates that "no nuclear fission thermal= =20 powerplant ... shall be permitted land use in the state" until the U.S.=20 government develops a "means for the disposal of high-level nuclear waste." Another problem is that President Carter shut down America's only nuclear= =20 waste processing plant in the late 1970s, which would have recycled most of= =20 the waste, immensely relieving the problem. In March, Sen. Pete Domenici of= =20 New Mexico introduced S. 472, the Nuclear Energy Electricity Supply Assuran= ce=20 Act of 2001, which would develop a new waste reprocessing facility. lEarthquakes. The state's unstable geology adds to the risk and cost of=20 building plants here.=20 lWater. The state's lack of water makes it difficult to site new plants.=20 Byron said nuclear plants use "two and a half times as much water as other= =20 plants."=20 lIn a deregulated market, companies are less likely to pay the $2 billion t= o=20 $5 billion a new nuclear plant is estimated to cost, Byron said. How does= =20 that compare? The Electric Power Supply Association told me that it's=20 difficult to estimate the cost of building and running a new plant, whether= =20 it uses nuclear, natural gas or some other power. However, the costs of som= e=20 recent natural gas plants have ranged from $600,000 to $800,000 per megawat= t=20 of installed power, or as much as $800 million for 1,000 megawatts of power= .=20 And given that new natural-gas plants range from 50 to 1,500 megawatts,=20 there's more flexibility in designing and financing projects. New technologies But the technology keeps moving forward. One thing that should keep costs= =20 down is standardized nuclear-plant designs, an idea that has kept prices=20 reasonable in France. In the past, each nuclear plant in America was=20 basically designed as a unique unit. Since 1997, the Nuclear Regulatory Commission, which regulates all nuclear= =20 plants in America, has approved three new advanced designs: The Advanced=20 Boiling Water Reactor design by GE Nuclear Energy, which generates 1,300=20 megawatts; the System 80+ design by Westinghouse (formerly ABB-Combustion= =20 Engineering), which generates 1,300 megawatts and is similar to that used a= t=20 San Onofre; and the AP600 design by Westinghouse, which generates 600=20 megawatts. "Nine other reactor designs have been submitted for NRC review, however onl= y=20 two - the AP1000 and the Pebble Bed Module Reactor - are being actively=20 pursued at this time," the NRC reports on its Web site.=20 www.nrc.gov/OPA/gmo/tip/fsadvancedrx.html The AP1000 is a more powerful version of the AP600. But the Pebble Bed desi= gn=20 is new and is called "politically correct" by those working on it, Andrew= =20 Kadak told me; he's a professor at the Massachusetts Institute of Technolog= y=20 in the nuclear engineering department. He said the new technology is=20 "high-efficiency, helium-cooled." It runs at lower temperatures than=20 traditional nuclear plants and "uses a different type of fuel. It produces= =20 less energy per cubic meter. Essentially there's no chance for melting=20 because of the lower power density they generate. You could put them near= =20 population centers because of their safety."Each plant would generate about= =20 100 MW, or about one tenth of current plants. Construction planned for a=20 plant in South Africa will run $100 million. Even if the cost were double i= n=20 America, he said, "it's still very competitive for natural gas." The South= =20 African plant will produce power at a cost about 1.6 cents to 2 cents per= =20 kilowatt-hour, "about half what natural gas cost two years ago" when natura= l=20 gas prices were stable; the price comparison is even better today, since=20 natural gas prices have more than doubled. Kadak said the concerns over emitting gasses into the environment, the high= =20 cost of other fuels and a changing political climate make nukes feasible=20 again. Kadak said that the Pebble Bed design can be up and running within four yea= rs=20 once a site is approved. When will we go nuclear again? "For the first time in a long time it looks like it might be starting up=20 again," Fred Smith told me about nuclear power construction; he's head of t= he=20 Competitive Enterprise Institute, a Washington think-tank that advances new= =20 thinking on economic matters. "Sooner or later we will have a waste=20 facility," he said of the Yucca Mountain site. "The nuclear option is far= =20 more viable than most people thought. The anti-nuclear campaign has passed= =20 its peak. But it will take time. I think within the decade we'll have a new= =20 nuclear plant. That wasn't true two years ago." Moreover, natural gas - which will power most of the new plants coming onli= ne=20 in California - will continue to be scarce. "We haven't drilled for it,"=20 Smith said. "It's hard to transmit. We'll have to build more pipelines. It'= s=20 not easy to ship from abroad." By contrast, nuclear power's fuel prices are almost constant.=20 What's short-circuiting the construction of nuclear power? The same thing= =20 that has caused the electricity and other energy crises: politics. Even=20 though nuclear plants would alleviate concerns (real or imagined) about=20 global warming by reducing dependency on fossil fuels and coal,=20 environmentalists remain opposed, including the Sierra Club and the Green= =20 Party. The Sierra Club Web site includes several resolutions opposing nuclear powe= r.=20 The 2000 Green Party platform called for "the early retirement of nuclear= =20 power reactors as soon as possible (in no more than 5 years)." Legislation In the California Legislature, Assemblyman Bill Leonard of San Bernardino= =20 introduced Assembly Bill 1492, which would have allowed the construction of= =20 nuclear plants in California even without a national waste-disposal facilit= y.=20 But it was amended only to allow a single nuclear plant owned by the state = -=20 not a good idea. It then was made a two-year bill, meaning it won't be=20 considered until next January. Sen. Tom McClintock of Simi Valley has sponsored Senate Joint Resolution 13= ,=20 a non-binding resolution that reads, "the Legislature =01( hereby determine= s=20 that nuclear energy is a necessary source of electricity generation, with n= o=20 detrimental impact on its citizens and environment; and be it further=20 resolved that the Legislature of the State of California urges the United= =20 States Secretary of Energy to expedite the review of the scientific data=20 regarding Yucca Mountain's suitability as a permanent federal repository fo= r=20 high-level radioactive materials and make his recommendation to the preside= nt=20 this year." "This is the first step in the debate," McClintock told me.=20 The second step will begin this summer when state and federal legislators= =20 hear from citizens calling them in the dark during blackouts. That will=20 concentrate minds on the necessity of bringing back to America an electrici= ty=20 source that is safe, cheap and almost unlimited. John Seiler is an Orange= =20 County Register editorial writer.=20 INDIVIDUAL.COM Here's an article recommended by: gus perez and it comes to you via Individual.com, Inc. The following message was attached: HERE IS THE STORY WE WERE REQUESTED TO SEND YOU This story appeared on http://www.individual.com May 22, 2001 _________________________________________________________ Mexico Seen As Medium-Term Solution To California Power Shortage MEXICO CITY, May 21, 2001 (El Economista/Infolatina via COMTEX) via NewsEd= ge=20 Corporation - Increased access to electric power generated in northwestern Mexico is the main medium-term solution to the U.S. state of California's continuing power=20 shortage currently envisioned by state authorities, according to a report in Mexican financial daily El Economista. Michael Flores, California Gov. Gray Davis' representative for relations with Mexico, said boosting electricity imports= =20 from the Mexican state of Baja California was regarded as a priority north of th= e border. For geographical reasons, Baja California is not connected to the r= est of Mexico's national power grid, and, so, its excess supply cannot be diver= ted to areas of Mexico that are plagued by power shortages. Baja California's a= nd California's transmission systems are linked, and Mexican state-owned power utility the Federal Electricity Commission (CFE) has been exporting an aver= age 50 megawatts per day to California since January. Flores said there current= ly were plans to build new generation plants and expand existing ones in Baja California specifically for the purpose of exporting electricity to=20 California.

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Fwd: Edison gets more time; Calif. may sell $14 bln bonds

----- Forwarded by Jeff Dasovich/NA/Enron on 04/04/2001 11:52 AM ----- "Ronald Carroll" <[email protected]> 04/04/2001 11:41 AM To: <[email protected]>, <[email protected]>, <[email protected]>, <[email protected]>, <[email protected]>, <[email protected]>, <[email protected]>, <[email protected]>, <[email protected]> cc: Subject: Fwd: Edison gets more time; Calif. may sell $14 bln bonds ----- Message from "Tracey Bradley" <[email protected]> on Wed, 04 Apr 2001 08:34:07 -0500 ----- To: "Justin Long" <[email protected]>, "Paul Fox" <[email protected]> cc: "Jeffrey Watkiss" <[email protected]>, "Ronald Carroll" <[email protected]> Subject: Edison gets more time; Calif. may sell $14 bln bonds Tuesday April 3, 6:15 pm Eastern Time Edison gets more time; Calif. may sell $14 bln bonds (UPDATE: Recasts, adds details throughout, byline) By Jonathan Stempel NEW YORK, April 3 (Reuters) - Edison International (NYSE:EIX - news), parent of troubled utility Southern California Edison, said on Tuesday bankers are giving it and the utility more time to cure their defaults on three credit lines. The announcement came after the California Public Utilities Commission (PUC), which sets rates, also on Tuesday voted to authorize the state's Department of Water Resources to sell between $12 billion and $14 billion of bonds to finance power purchases, and examine the financial links between the utilities and their parents. The 30-day extension from Edison's banks means the banks will ``forbear,'' or not act upon, the credit line defaults. ``That will take us out to basically around April 14,'' said Ted Craver, chief financial officer of Edison International, during an investor conference call. The prior forbearance, the banks' second, had expired March 13. The California power crisis has led to periodic blackouts and left SoCal Edison, which owes more than $5.4 billion for post power costs, and the state's largest utility Pacific Gas & Electric Co., which owes about $8.9 billion, on the brink of bankruptcy. A rate freeze imposed under the state's 1996 utility deregulation law has prevented them from passing on their soaring wholesale power costs to consumers. Though the PUC awarded the utilities a roughly 40 percent rate hike last week, allowing them to collect $4.8 billion more each year, analysts and the utilities said the hike effectively does nothing to let the utilities to recoup their prior costs. ``At best the utility is standing still (in that) it hasn't improved its cash flow or its cash position,'' said Craver. ``At worst, it is going backwards. That's our basic conclusion on the numbers and the mechanisms as we understand them.'' San Francisco-based PG&E Corp. (NYSE:PCG - news), parent of Pacific G&E, has said it expects to take a $4.1 billion charge for unrecouped electricity costs, while Rosemead, Calif.-based Edison has said it may take a ``substantial'' charge that may total as much as $2.7 billion. The California Independent System Operator, which runs most of the state's power grid, early on Tuesday called another Stage Two emergency alert because of supply problems. Such alerts are declared when power reserves fall to within 5 percent of peak demand. The alert was later lifted. Edison shares closed Tuesday on the New York Stock Exchange at $12.82, up 27 cents, or 2.2 percent. PG&E shares closed on the Big Board at $11.53, down 22 cents, or 1.9 percent. Craver also said in the conference call that SoCal Edison has rolled over 364-day and 5-year Libor-based credit facilities that recently matured for a respective 30 and 90 days, and that Edison rolled over one of its own facilities for 45 days. He concluded the call by expressing relief that creditors have not yet thrown the utility into bankruptcy, which analysts have said could already have happened by now had the PUC not granted the rate hike. ``I'm somewhat amazed about how disciplined everybody has been,'' he said. ``We're seeking protection from misguided regulatory decisions, and the solution is really in that same venue, in the regulatory and political and legislative context.''

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#7 Ranking for Haas School is Best Ever in Latest US News Business

This should help Prentice's chances for employment come the Fall. You guys should have a HUGE phone bill on your room charges. Please fax me a copy of the bill. I will cover all phone charges. Also, please forward to me what I owe you for the plane flight and golf and our share of dinners, drinks, guacamole, etc. We played spades at the airport. My team lost..........again. My losing streak now ties DiMaggio's hitting streak. Best, Jeff ----- Forwarded by Jeff Dasovich/NA/Enron on 04/03/2001 10:51 AM ----- Haas NewsWire <[email protected]> Sent by: [email protected] 04/02/2001 07:58 PM Please respond to Haas NewsWire To: [email protected] cc: Subject: #7 Ranking for Haas School is Best Ever in Latest US News Business School Survey Haas NewsWire April 2, 2001 ***Pick up your tickets for CEO Exchange from 12:30 to 2:00 any day this week in the Haas courtyard.*** CONTENTS #7 Ranking for Haas School is Best Ever in Latest US News Business School Survey The Economy in Crisis: Five Haas Experts Comment on the State of the Economy Classes Start Today for New Master's in Financial Engineering Degree at Haas Sharing our Strengths: The Haas/Boalt Connection Haas Advisory Board Convenes for Semi-Annual Meeting Haas in the News Happening at Haas Haas Celebrations #7 RANKING FOR HAAS SCHOOL IS BEST EVER IN LATEST US NEWS BUSINESS SCHOOL SURVEY The Haas School of Business was ranked the 7th best business school in the United States in the latest annual survey of American graduate schools by US News and World Report magazine. This is the best showing ever by the school in the history of the US News ranking, which was released Friday. US News also ranked the Haas School's Evening MBA Program the 8th best in the country, unchanged from last year. The full-time MBA Program was number 10 in last year's ranking, up from 14th place the year before. The rankings appear in the April 9 issue; copies are available on newsstands today. The rankings and related stories are also available on line at http://www.usnews.com/usnews/edu/beyond/bchome.htm. "We are always pleased when a ranking reflects the reality we live every day, which is that the Haas School is a world-class institution, with faculty and students who are extraordinarily innovative and accomplished and, consequently, very much in demand by every type of major business and academic organization, everywhere on earth," said Jay Stowsky, associate dean for school affairs and initiatives. Several specialty programs at Haas were also ranked among the top 10 nationwide in a part of the US News survey that is based on the opinions of deans and MBA Program heads. They include: finance (10th); general management (8th); entrepreneurship (10th); marketing (8th); quantitative analysis (8th); and nonprofit organizations (7th). In addition, the Haas School's graduate program in health management was ranked the 7th best program in the country. The full-time MBA program ranking is based on a weighted average of eight measures of academic quality that fall into three major categories: reputation (40 percent); placement success (35 percent); and student selectivity (25 percent). The US News Top 10 Full-Time MBA Programs 1. Stanford 2. Harvard 3. Northwestern/Kellogg 4. Wharton 5. MIT/Sloan 6. Columbia 7. Berkeley/Haas 8. Duke/Fuqua 9. Chicago 10. Michigan The US News Top 10 Part-Time MBA Programs 1. NYU/Stern 2. Chicago 3. Northwestern/Kellogg 4. DePaul 5. Georgia State 6. UCLA/Anderson 7. Michigan 8. Berkeley/Haas 9. USC 10. Babson THE ECONOMY IN CRISIS: FIVE HAAS EXPERTS COMMENT ON THE STATE OF THE ECONOMY The Haas School community will have the opportunity to hear Haas experts speak on the state of the economy. "The Economy in Crisis: A Panel Discussion with Haas School Experts," takes place Wednesday, April 4, from 2:00 p.m. to 3:30 p.m. in Arthur Andersen Auditorium. All Haas students, faculty, alumni, and staff are invited to attend. The panel of speakers includes: Andrew Rose, the Bernard T. Rocca Jr. Professor of International Trade, director of the Clausen Center for International Business and Policy, research associate at the National Bureau of Economic Research, and a research fellow in the Center for Economic Policy Research. Ken Rosen, the California State Professor of Real Estate and Urban Economics and the chairman of the Fisher Center for Real Estate and Urban Economics. Janet Yellen, the Eugene E. and Catherine M. Trefethen Professor of Business Administration, former Chair of the Council of Economic Advisors under President Clinton, and former governor, Board of Governors of the Federal Reserve System. James Wilcox, the Kruttschnitt Professor of Financial Institutions, former chief economist at the Office of the Comptroller of the Currency, and former economist, Federal Reserve Board. Dean Laura Tyson, the Class of 1939 Professor of Economics and Business Administration, former chairman of the National Economic Council and former chairman of the President's Council of Economic Advisors. Dean Tyson also plans to address the issues surrounding graduating into a turbulent job market, including an assessment of various industry sectors. The session will be open to questions from the audience after opening remarks. CLASSES START TODAY FOR NEW MASTER'S IN FINANCIAL ENGINEERING DEGREE AT HAAS For 49 students classes start today for the Master's in Financial Engineering (MFE), a new graduate degree program at the Haas School of Business. Of the 49 students, 6 are taking the program to earn a concurrent degree with the MBA program, combining the in-depth study of financial economics and the dynamics of markets with the general management education of the MBA program. The class of 2002 is represented by an international group of highly educated scientists and professionals: The inaugural class represents 19 countries: 7 students come from China, 6 come from Canada, 5 from Korea, and 5 come from five different European countries. Also represented are South America (Chile and Colombia), Africa (Zimbabwe), and Southeast Asia (India and Indonesia), as well as Taiwan, Hong Kong, Russia, and the Republic of Georgia. Top professions include finance (25%), engineering (18%), and research & development (11%) 18% hold a Ph.D. and 25% hold a master's degree in another field. One fourth of the class performed in the top percentile of the GMAT. The Haas MFE is the first such degree program in the United States that is offered entirely under the auspices of a business school. It is also the first US program to require its students to take a three-month internship at a top financial firm as part of the learning experience. The Haas MFE program will prepare candidates with superior analytical skills for a growing niche of quantitative finance careers. MFE candidates will train for positions as risk managers, investment bankers, asset managers, derivatives traders, and developers of specialized securities at the world's leading commercial and investment banks, insurance companies, and corporate and public treasury departments. Founding sponsors include some of the world's top financial firms, namely AIG Inc., Barclays Global Investors, BARRA Inc., Gifford Fong Associates, Goldman Sachs & Co., First Union Bank, KMV LLC, MBIA Inc., Morgan Stanley Dean Witter, Quantal International Inc., The Dean Witter Foundation, and WR Hambrecht + Co., LLC. Sponsoring firms will be accepting interns from the programs. "We're seeing tremendous interest among talented individuals coming from technical backgrounds, such as engineers, mathematicians, and scientists, who are in narrow jobs and are keen to transition to a brand new career where opportunities are abundant and continue to grow," says MFE Executive Director John O'Brien. For more information on MFE, visit the web site at http://www.haas.berkeley.edu/MFE. SHARING OUR STRENGTHS: THE HAAS/BOALT CONNECTION This is the first in a continuing series of articles in Haas NewsWire chronicling the Haas School's interdisciplinary activities. The Haas School has traditionally pursued interdisciplinary partnerships on the Berkeley campus. During her tenure as dean, Laura Tyson has made it her priority to increase Haas' partnerships in the areas of teaching, research, and public service with other disciplines. One of the most vibrant of these is with the Boalt School of Law. "Haas faculty are well known for their path-breaking work on competitive strategy in the Internet age, and Boalt is recognized for having the strongest intellectual property law faculty in the country, particularly as regards IP questions arising in cyberspace," said Jay Stowsky, associate dean for school affairs and initiatives. "The collection, in one place, at the same time, of so many notable scholars in an area of rich intellectual ferment and intense public interest is an extraordinary intellectual opportunity. We intend to expand that opportunity through increased interaction between the two schools." The area of business law doesn't fit easily into just a law school or a business school, but the interdisciplinary approach between the Haas School of Business and Boalt Hall School of Law fills this gap. From creating joint courses to hosting conferences, Haas and Boalt are shaping a dynamic partnership that will serve both schools in the future. This partnership isn't new. Since 1968, Haas and Boalt have offered a joint JD/MBA degree to more than 138 UC Berkeley students (Haas also offers a JD/MBA with Hastings). In addition to the joint degree program, Haas and Boalt students are sharing classrooms when the topic calls for it. Adjunct Professor Leo Helzel and Lecturer Noel Nellis have offered "Top Down Law" for six years to law and business students. Helzel describes the course as, "what a CEO needs to know to stay in business." The class brings in practicing lawyers and business people to lecture on their specialties. "Business students should be exposed to the broader legal framework in which companies operate," says Helzel. Helzel and Nellis have also organized two debates on the Microsoft antitrust case, bringing experts from both Haas and Boalt to take sides on the issue. The Business and Public Policy group offered one course, "Law and Strategy of E-Commerce," in fall 2000 with Boalt. Pablo Spiller, the Joe Shoong Professor of International Business and Public Policy and the chair of the Business and Public Policy Group, taught the course along with Robert P. Merges, the Wilson Sonsini Goodrich & Rosati Distinguished Professor of Law and Technology and a director of the Berkeley Center for Law & Technology. In the fall 2001, Rui de Figueiredo, assistant professor in the Business and Public Policy Group, will teach "Deals" with Howard Shelanski, acting professor of law, to both business and law students. The Management of Technology (MOT) Program is sponsoring two evening conferences at Haas this spring organized with Peter Menell, professor of law. The first on "Television-Internet Convergence" took place on March 14 in Arthur Andersen Auditorium. On April 18 the second annual Boalt Hall/MOT Conference on Digital Music takes place in the Arthur Andersen Auditorium beginning at 4:00 pm. "Partnering with Boalt just makes so much sense when we're exploring issues of technology, business, and intellectual property," says Andrew Isaacs, the executive director of MOT. "The connections are there. Having BoaIt literally next door is a fantastic resource." An academic conference, "Beyond Microsoft: Antitrust, Technology, and Intellectual Property" organized by Mark Lemley, professor of law and a director of the Berkeley Center for Law & Technology, took place at Haas and Boalt on March 2 and 3. Sponsored by the Institute of Management, Innovation, and Organization (IMIO) and the Institute of Business and Economics Research (IBER), the conference included a presentation by Carl Shapiro, the Transamerica Professor of Business Strategy and the director of IBER, and participation by Dean Tyson and Professor Michael Katz. All of this hard work builds the base for long-term future collaborations, says Stowsky, "In addition to enhancing the traditional training of both managers and lawyers in the intricacies of business law, the increased collaboration positions UC Berkeley to become the leading center of academic research and policy analysis related to the economic, legal, social, and political impacts of the Internet." HAAS ADVISORY BOARD CONVENES FOR SEMI-ANNUAL MEETING This Friday, Haas will host a group of high-level CEOs, presidents, chairs, and company founders as the members of the Haas Advisory Board gather for their semi-annual meeting. The 60 plus member board, which includes representatives from major companies in almost every field of business, brings knowledge of best business practices to the Haas planning process. The current chairman, Roger Siboni, BS 76, is president and CEO of E.piphany. Since December 2000 Dean Laura Tyson has recruited five new members to the Advisory Board: Margo Alexander, BS 68, chairman & CEO of Mitchell Hutchins Asset Management, the asset management subsidiary of PaineWebber Incorporated. She is also a member of the Board of Directors for PaineWebber Incorporated. Kim Fisher, MBA 94, co-founder and CEO of AudioBasket.com, a service for personalized, broadcast-quality audio programming through web sites and wireless service providers. Prior to AudioBasket, Fisher worked for Motorola Network Ventures, a division of Motorola that invests in international wireless, paging, and Internet service providers. Arun Sarin, MBA 79, is the former chief executive officer of InfoSpace, Inc., the leading global Internet infrastructure company. He joined InfoSpace in May 2000 from Vodafone AirTouch, where he served as CEO of the US and Asia Pacific regions. Trevor Traina, MBA 96, is an entrepreneur and private investor. Most recently he was a group manager in Microsoft's MSN Internet division. Previously, he was the president and founder of Compare.Net, the leading buyer's guide on the Internet. John Williford, MBA 80, is the president and chief executive officer of Menlo Logistics and a senior vice president for CNF Transportation Inc. Williford is also responsible for managing CNF's operations in support of its contract to sort and move Priority Mail for the U.S. Postal Service. On the agenda: faculty research, possibilities for new degree programs, and the upcoming Tokyo Symposium. HAAS IN THE NEWS Correction--The Haas NewsWire mistakenly reported that Professor Michael Katz was the author of a letter to the editor published in the San Francisco Chronicle on December 29. This letter was from a different Michael Katz in Berkeley. John O'Brien, executive director of the MFE program, was quoted in the April issue of Junge Karriere (a German magazine). The article was on the establishment of the MFE program. Jenny Chatman, the Harold Furst Professor of Management Philosophy and Values, appeared in an article on how Californians secretly love blackouts. Read the full text at http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/03/29/M N106888.DTL. Ken Rosen, the California State Professor of Real Estate and Urban Economics and chairman of the Fisher Center for Real Estate, was quoted in "RUNAWAY Rental Market No More" in the San Francisco Chronicle on March 28. Rosen has released a new study of the rental market in the Bay Area predicting a decline in the cost of commercial space. Read the full text at http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/03/28/B U152390.DTL. The same study was also the source for an article in the Chronicle on March 29, titled, "80% of S.F. Dot-Coms Seen in Danger." Read the full text at http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/03/29/B U80662.DTL&type=business. Cynthia Kroll, a regional economist with the Fisher Center for Real Estate and Urban Economics was quoted in "PG&E Bills Set To Rise 40%" in The San Francisco Chronicle on March 27. She explained that declining consumer confidence, concerns about the economy, and rising utility prices could slow spending in California. Read the full text at http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/03/27/M N127686.DTL. Hal Varian, dean of the School of Information Management and Systems and a Haas professor, was quoted in the Canberra Times on March 26 on the need for information management as more information is generated and needs to be stored. Varian also took gave an interview to BusinessWeek for the March 26 issue on the Internet and potentially successful business models. Read the full text at http://www.businessweek.com/magazine/content/01_13/b3725026.htm. The Haas School was mentioned in a BusinessWeek article on March 26 about part-time MBA programs. Laura Tyson's Economic Viewpoint column in the March 26 issue of BusinessWeek was about President Bush's tax cut plan. David Vogel, the George Quist Professor of Business Ethics, was quoted in the Los Angeles Times on March 25 in an article titled, "Groups Gear Up to Battle Hemispheric Pact." Vogel commented that as free trade encourages economic growth in Latin America, environmental activism would follow. Russ Winer, the J. Gary Shansby Professor of Marketing Strategy and the chair of the Marketing Group, was quoted on the use of census data by marketing firms in the San Francisco Chronicle on March 25. Read the full text of "Marketers See Treasure Trove In Census Data" http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/03/25/M N157059.DTL. Dean Tyson was quoted in the New York Times on March 24 on the difficulties of finding a political solution to the California energy crisis. Read the full text of "California's Choices All Look Painful" at http://www.nytimes.com/2001/03/24/business/24POWE.html?searchpv=site02&pagewan ted=print. Ilse Evans was quoted in the Los Angeles Times on March 24 in the article "State's Economy Starting to Show Signs of Cracking." Tyson was quoted in the Dallas Morning News on March 24. In the article, "Power Crisis Generates Concern," Tyson commented on the difficulty of negotiating a solution to California's energy crisis. Janet Yellen, the Eugene E. and Catherine M. Trefethen Professor of Business Administration, was quoted in the Irish Times on March 23 on the Fed's rate cut. Yellen was mentioned in a Wall Street Journal article on March 22 titled, "Great Expectations and Greenspan." Yellen was quote on the front page of the Wall Street Journal in March 21 on the impact of the Fed rate cut. David Levine was quoted in the San Francisco Chronicle on March 21 in an article titled, "Layoffs in Tech World Often Prove to be a Numbers Game." Levine commented that companies are not getting the expected short-term stock boost after they announce a downsizing. Yellen was also quoted in the San Jose Mercury News on March 20 in an article titled, "Interest Rate Cut Likely Today." At that point, she was hoping for a three-quarters cut. Yellen was also quoted in USA Today on March 21. In "Former Fed Official's Lips are Sealed," Yellen commented that it is inappropriate for former Fed officials to discuss monetary policy with the current officials. Tyson was quoted in the China Daily on March 20 on the World Trade Organization. Current Evening MBA student Deepika Shah was profiled in Business Week on March 15 in an article on the lives of students in part-time MBA programs. Kroll was also quoted in the San Francisco Chronicle ton March 27 and appeared on KPIX news and KTVU Channel 2. In the past two weeks, Severin Borenstein, appeared on NPR's "Talk of the Nation," KCBS Radio, KPIX TV news, KRON TV News, KGO Radio, KCRW (NPR in LA) on "Which Way LA", NPR Talk of the Nation, KRON news, NPR All Things Considered, KPFK Radio, and KGO Radio. Borenstein was quoted in: The Los Angeles Times on March 22 in "Energy Overcharge of $5.5 Billion Is Alleged" BusinessWeek on March 26 in "How to do Deregulation Right" The San Diego Union Tribune in "Expertise on Energy No Longer Academic." Borenstein was also quoted in "Contracts Won't Meet Summer Demands" in the San Francisco Chronicle on the California energy crisis. Read the full text at http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/03/22/M N230640.DTL. HAPPENING AT HAAS Management of Technology Spring Lecture "Software: Ubiquity, Usability, and Standards," by Alan Cooper, Founder, Cooper Design Wednesday, April 4, 2001 3:45 p.m. to 5:00 p.m. Wells Fargo Room Corporate Social Responsibility "Corporate Philanthropy," by Pete Mountanos, President CEO, Charitableway.com and Nancy Pfund, Managing Director, JP Morgan H & Q Thursday, April 5, 2001 4:00 p.m. to 6:00 p.m. Room C330, Cheit Hall Haas Alumni and Evening MBA Career Fair Monday April 9, 2001 6:00 p.m. to 8:30 p.m. The Bank of America Forum FREE to companies and attendees Please contact John Morel to reserve a table. 510-642-7731or [email protected]. Management of Technology Spring Lecture "The Wireless Future," by Jan Rabaey, Prof. of Electrical Engineering, UC Berkeley; Doug Leone, Sequioa Capital Wednesday, April 11, 2001 3:45 p.m. to 5:00 p.m. Wells Fargo Room State of the School Address Dean Tyson will be giving the address twice: first, on April 12 at 7:30 p.m. in the Arthur Andersen Auditorium, then again on April 13 at 12:30 p.m. in the Haas courtyard. Corporate Social Responsibility "Global Sustainable Development: The Role of Business," by Ray Anderson, CEO, Interface Thursday, April 12, 2001 4:00 p.m. to 6:00 p.m. Room C330, Cheit Hall Haas Biotech Speaker Series Joyce Lonergan, VP Investor Relations and Corporate Development, Chiron Corp. Monday, April 16, 2001 7:30 p.m. Wells Fargo Room For more information, see http://groups.haas.berkeley.edu/haasbio/. Energy, Business and the Environment Day at UC Berkeley: Second Annual Haas Earth Day Lecture on Business and the Environment "Natural Capitalism: The Next Industrial Revolution" by Amory Lovins, CEO (Research), Rocky Mountain Institute April 19 12:45 p.m. to 2:00 p.m. Wells Fargo Room Amory Lovins, co-author of Natural Capitalism, will discuss how changes in natural capital (the natural environment and ecosystems that support all human and economic activity) are already affecting the way we do business, and how leading corporations are gaining competitive advantage through superior environmental performance. He will talk about how corporations can employ advanced resource productivity strategies to move toward becoming ecologically sustainable, reduce environmental impact, and improve the bottom line. Net Impact at Haas sponsors this event. For more information, contact Eric Strand at [email protected]. Faculty-Alumni Colloquium Saturday, May 5, 2001 8:30 a.m. to 2:00 p.m. Discussion of Global Issues by Distinguished Faculty & Alumni KEYNOTE PRESENTATION Patricia Dunn, BA 75, Global Chief Executive, Barclays Global Investors FACULTY PRESENTATIONS Ken Rosen: "National and Bay Area Economic and Real Estate Outlook" Severin Borenstein: "The California Electricity Crisis: Are Policymakers Learning the Right Lessons?" Michael Katz: "Does the New Economy Need a New Antitrust?" Homa Bahrami: "Managing the Knowledge Worker" CAREER WORKSHOP: Associate Director of Alumni Career Services, John Morel, will conduct a two-hour workshop for alumni in career transitions. For more information call Haas Alumni Relations Office at 510-642-7790, send e-mail to [email protected], or visit www.haas.berkeley.alumni/colloquium. Alumni Symposium in Tokyo The 21st Century Economy: Technology and Entrepreneurship May 31 to June 2, 2001 For more information or to register, please visit http://www.ucb-symposium.com. SEMINARS OBIR SEMINAR April Gilbert & Min-Soo Kim, PhD Candidates at Haas Wednesday, April 4, 2001 4:00 p.m. to 5:30 p.m. Room F318, Haas School of Business For more information, contact Charles Montague at [email protected]. ET GRETHER MARKETING SEMINAR "Affect, Cognition, and Communication in Hedonic Judgment: How Satisfied Are You with Your Life?," by Norbert Schwartz Thursday, April 5, 2001 3:30 p.m. to 5:00 p.m. Room C250, Cheit Hall For more information, contact Laura Gardner at [email protected]. IDS 270 INSTITUTIONAL ANALYSIS WORKSHOP "Why Firms Want to Organize Efficiently and What Keeps Them From Doing So: Evidence From the For-Hire Trucking Industry," by Brian Silverman, HBS Thursday, April 5, 2001 4:00 p.m. to 6:00 p.m. Room C325, Cheit Hall For more information, contact Serena Joe at [email protected]. FINANCE SEMINAR "Market Reactions to Tangible and Intangible Information," by Kent Daniel, Northwestern University Thursday, April 5, 2001 4:15 p.m. to 5:45 p.m. Room C210, Cheit Hall For more information, contact June Wong at [email protected]. ACCOUNTING SEMINAR Franco Wong Friday, April 6, 2001 4:00 p.m. Room C325, Cheit Hall For more information, contact Lorraine Seiji at [email protected]. OBIR SEMINAR "Role of Regulation and Finance Health Care Markets," by Paul Gertler, UC Berkeley, Health Policy and Administration Wednesday, April 11, 2001 4:00 p.m. to 5:30 p.m. Room F318, Haas School of Business For more information, contact Charles Montague at [email protected]. E.T. GRETHER MARKETING SEMINAR Puneet Manchanda, Univ. of Chicago Thursday, April 12, 2001 3:30 p.m. to 5:00 p.m. Room C250, Cheit Hall For more information, contact Laura Gardner at [email protected]. IDS 270 INSTITUTIONAL ANALYSIS WORKSHOP "Business Groups and Risk Sharing Around the World," by Tarun Khana, HBS Thursday, April 12, 2001 4:00 p.m. to 6:00 p.m. Room C325, Cheit Hall For more information, contact Serena Joe at [email protected]. FINANCE SEMINAR "Adverse Selection and Re-Trade," by Lasse Pedersen, Stanford University Thursday, April 12, 2001 4:15 p.m. to 5:45 p.m. Room C210, Cheit Hall For more information, contact June Wong at [email protected]. REAL ESTATE SEMINAR "Examining the Gains from Innovation in Mortgage Termination Modeling," by Ralph DeFranco Friday, April 13, 2001 11:00 a.m. Room C250, Cheit Hall For more information, contact Lynn Lobner at [email protected]. ACCOUNTING SEMINAR "The Incremental Value of Analysts' Earnings Forecasts in Explaining Stock Returns," by Eli Amir Friday, April 13, 2001 4:00 p.m. Room C325, Cheit Hall For more information, contact Lorraine Seiji at [email protected]. ALUMNI EVENTS San Diego Chapter Event San Diego Crew Classic Sunday, April 8, 2001 8:00 a.m. to 2:30 p.m. Crown Point at Mission Bay, San Diego Cost: $10 + parking (in advance) $ 15 + parking (at the tent) Watch the Cal Crew team defend the Copley Cup at the Crew Classic on Mission Bay. Meet the Blue and Gold at the Cal tent. Coffee and pastries will be provided for early risers. Enjoy a catered lunch and plenty of cheer. Picnics and coolers are also welcome. For more information, contact the information hotline at 619-275-7488 or RSVP to Geraldine Valdez at 619-685-4000 or Gail Forbes at 858-454-5561. East Bay Chapter Event Homebuyer and Seller Workshop Saturday, April 28, 2001 10:00 a.m. to 1:00 p.m. Arthur Anderson Auditorium, Haas School of Business Cost: $7.50 pre-registration $10 late/on-site registration Register by April 23 at http://www.acteva.com/go/eb-alumni. Or send a check payable to HAN East Bay to: Eliot Minor, 112 Shadowood Dr., Pleasant Hill, CA 94523. For more information, contact Eliot Minor at [email protected] or 925-685-3487. HAAS CELEBRATIONS Birthdays Jocelyn Newman, April 2 Dana Lund, April 9 The Haas NewsWire respects the wishes of staff and faculty who would not like their birthdays announced. Please e-mail a request to have your birthday marked "do not announce" on the central birthday list to [email protected]. The Haas NewsWire is the electronic news weekly for the Haas community published every Monday by the Marketing and Communications Office at the Haas School. Send your news, feedback, and suggestions to [email protected]. To subscribe to Haas NewsWire, address e-mail to [email protected]; in the body of the message type "subscribe haasnewswire" in the first line, and "end" in the second line. To unsubscribe to HNW, type "unsubscribe haasnewswire" in the first line, and "end" in the second line. Archived issues of Haas NewsWire are available online at http://www.haas.berkeley.edu/groups/newspubs/haasnews/archives/hncurrent.html .

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Enron Mentions

USA: WRAPUP 1-Credit quality in broad decline as defaults soar. Reuters English News Service- 10/29/01 USA: U.S. firms say deals with Enron at normal levels. Reuters English News Service- 10/29/01 Enron Bonds Stabilize But Market Players Are Concerned Capital Markets Report- 10/29/01 Enron's stock continues slide on credit woes Associated Press Newswires- 10/29/01 UK: UK power mkt focuses on prompt after low peak deal. Reuters English News Service- 10/29/01 USA: UPDATE 2-Enron says in talks with banks for new credit line. Reuters English News Service- 10/29/01 USA: TRADE IDEA-Junk rating not likely for Enron. Reuters English News Service- 10/29/01 USA: Enron shares drop to near seven-year lows. Reuters English News Service- 10/29/01 Enron long-term ratings all placed on review for downgrade - Moody's AFX News- 10/29/01 Enron Shares Fall After Moody's Cuts Credit Rating (Update6) Bloomberg- 10/29/01 Enron's Lenders to Demand Harsher Terms, Analysts Say (Update2) Bloomberg- 10/29/01 Enron Credit Cut by Moody's; CP Rating Put on Review (Update3) Bloomberg- 10/29/01 Enron May Be Royal Dutch/Shell Takeover Target, Newsletter Says Bloomberg- 10/29/01 Insiders at Electric Utilities Showing Their Faith TheStreet.com- 10/29/01 A Debacle Like Enron's Can Undermine the Entire Market RealMoney.com- 10/29/01 Moody's downgrades Enron's debt Enron asking banks for more credit=20 CBSMarketWatch.com- 10/29/01 Enron Goes Begging=20 Forbes.com- 10/29/01 In these challenging times, Enron deserves our thanks Houston Chronicle- 10/29/01 USA: WRAPUP 1-Credit quality in broad decline as defaults soar. 10/29/2001 Reuters English News Service (C) Reuters Limited 2001. (Wraps FINANCIAL-CREDITQUALITY-MOODYS and FINANCIAL-DEFAULTS-S&P)=20 By Jonathan Stempel NEW YORK, Oct 29 (Reuters) - Corporate credit quality will likely grow much= worse before it gets better, and about $100 billion of corporate debt will= likely go into default this year as the United States heads into recession= , according to reports issued on Monday by two top credit rating agencies.= =20 Moody's Investors Service said it put ratings on review for downgrade for 1= 22 U.S. companies with $543 billion of debt in the third quarter, dwarfing = the 22 companies with $66 billion of debt it put on review for upgrade. Rev= iews are a leading indicator of the direction of corporate credit.=20 "A wide excess of rating reviews for downgrade over upgrades in the third q= uarter suggests credit deterioration will persist at least into early next = year," said John Puchalla, Moody's senior economist.=20 Meanwhile, Standard & Poor's said more than 200 companies will default on a= bout $100 billion of debt this year, compared with 117 defaulting on a reco= rd $42.3 billion in 2000.=20 It said the default rate for junk bonds - those rated "BB-plus" or lower by= S&P and "Ba1" or lower by Moody's because of their credit risks - will rea= ch 9.4 percent by year end. Moody's forecasts a 10 percent rate.=20 "The U.S. economy is clearly in a recession," said S&P Chief Economist Davi= d Wyss in a statement. "Although Standard & Poor's expects it to be relativ= ely mild and end in early 2002, the risk of a longer and deeper downturn is= high."=20 Both agencies said the Sept. 11 attacks contributed to a deepening of a thr= ee-year slump in corporate credit quality. Moody's blamed 38 reviews for do= wngrade in September alone on the attacks.=20 COSTS RISE, PROTECTION WEAKENS=20 U.S. corporate credit quality is falling for many reasons.=20 These include the weakening economy, the inability of many marginal compani= es to raise cash at tolerable interest rates, share buybacks, debt-financed= merger activity, and fallout from the attacks on such industries as airlin= es, insurance and travel.=20 "Many companies in financial difficulties will see their funding sources dr= y up and be pushed over the brink," said David Keisman, managing director a= t S&P Risk Solutions.=20 Even well-known companies are suffering rating declines.=20 On Monday alone, for example, S&P downgraded McDonald Corp. after the world= 's largest fast-food chain said it will buy back up to $5 billion of stock,= at a time S&P said the company's "growth prospects for the future are less= optimistic."=20 Meanwhile, Moody's downgraded Enron Corp., and warned it may downgrade it a= gain. The energy trading giant is struggling with vanishing investor confid= ence, reflected in a share price that has plunged by more than half in two = weeks, as it tries to keep access to cash it needs to run its business.=20 Puchalla said the credit quality decline could slow next year, in part beca= use interest rates are low and companies are managing their balance sheets = more conservatively.=20 "Lower borrowing costs and slowing debt growth should reduce debt servicing= costs, and fiscal stimulus from the federal government should boost busine= ss revenues," he said.=20 Still, through Friday, Moody's has said in the fourth quarter it may downgr= ade 47 companies, and upgrade just four. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 USA: U.S. firms say deals with Enron at normal levels. By Andrew Kelly 10/29/2001 Reuters English News Service (C) Reuters Limited 2001. HOUSTON, Oct 29 (Reuters) - Major U.S. wholesale natural gas and electricit= y traders said on Monday their deals with troubled Enron Corp. are still ru= nning at normal levels.=20 But some are keeping a wary eye on the company's finances and credit status= after a downgrade by one of the major rating agencies. "We certainly are very well aware of what our exposure is to them and watch= ing that on a daily basis," Chief Executive Marce Fuller of Atlanta energy = marketer Mirant Corp. told Reuters.=20 "At this point, I would categorize it as pretty much as business as usual w= ith Enron, but we'll have to keep a close eye on it as we move forward," sa= id Fuller.=20 Officials at companies such as Houston natural gas firm El Paso Corp. and C= olumbus, Ohio, utility holding company American Electric Power Co. Inc. exp= ressed similar sentiments, saying nothing had changed in their dealings wit= h the Houston-based energy company, at least for the time being.=20 "We continue to trade with them," said spokeswoman Jennifer Pierce of Charl= otte-based utility Duke Energy Corp.. "They've always been meticulous in th= eir credit management and we continue to see that with them," she added.=20 Enron's shares fell to yet another new low on Monday as the company said it= was lobbying banks for a new credit line and rating agency Moody's Investo= r Service downgraded the company's senior unsecured debt to two notches abo= ve junk-bond status.=20 Since Oct. 12 Enron's stock has fallen some 60 percent after the company re= ported its first quarterly loss in over four years, wrote down shareholders= ' equity by $1.2 billion dollars and failed to quell investors' jitters abo= ut a series of complex off-balance-sheet financial deals.=20 CONFIDENCE CRUMBLES=20 Analysts say that if confidence in Enron continued to crumble, it could res= trict the company's access to credit and thus create problems for its core = energy trading operations.=20 European energy industry sources told Reuters earlier on Monday that there = was already evidence of European companies shying away from trading with En= ron because of credit worries.=20 Several large energy groups have frozen their dealings with Enron in Europe= as they hold urgent talks with the U.S. group about setting up new credit = arrangements, the sources said.=20 "They are talking with us about bank letters of credit," said the head of r= isk management at one U.K. utility that halted its trade with Enron last we= ek. "The people that are still trading with them are doing so on a very res= trictive basis."=20 Traders in the U.S. wholesale energy markets said on Monday that they were = continuing to deal with Enron and still regard the company as a reliable tr= ading partner.=20 "I don't have any problems dealing with Enron, especially since I'm doing d= ay-ahead trades. But I have heard the rumors of people not wanting to deal = with them," one natural gas trader in the U.S. Southeast told Reuters.=20 A trader who specializes in longer-term deals in the forwards market for el= ectricity said publicity about Enron's woes had not yet led to any loss of = market liquidity.=20 "Obviously there's a concern, but the financial situation is not a factor n= ow," the trader said.=20 Despite the public words of reassurance that many of them have been speakin= g, Enron's major competitors and trading partners continue to monitor the s= ituation closely.=20 "Any time a counterparty starts looking like their credit rating is deterio= rating, then that would certainly be a signal to us to become more worried,= " said Mirant's Fuller. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Enron Bonds Stabilize But Market Players Are Concerned By Michael C. Barr Of DOW JONES NEWSWIRES 10/29/2001 Capital Markets Report (Copyright (c) 2001, Dow Jones & Company, Inc.) NEW YORK -(Dow Jones)- Uncertainty about Enron Corp. (ENE) continues to dog= investors concerned about the future of the Houston-based energy services = company.=20 "It's such a fluid situation that the market would like to see a clarificat= ion of the company's circumstances," said Eric Bergson, portfolio manager, = Northern Trust Global Investments, Chicago. Until this occurs, the outlook = for the company's bonds is choppy, he added. Enron drew down about $3 billion in credit lines last week to increase cash= reserves and calm jittery markets, buying back its outstanding commercial = paper. And, it's currently negotiating with its bank group for an additiona= l $1 billion to $2 billion in new credit, according to a report in Monday's= Wall Street Journal.=20 Enron's troubles began earlier this month with the announcement of a $618 m= illion third-quarter loss and the disclosure of a $1.2 billion erosion of i= nvestor equity related to transactions conducted with its former chief fina= ncial officer, Andrew Fastow.=20 "The company did not learn from the mistakes of others by not being ahead o= f the game on disclosure," said Mitch Stapley, portfolio manager and chief = fixed income officer, Fifth Third Investment Advisors, Grand Rapids, Mich. = It becomes harder to regain investors' trust, he said.=20 Moody's Investors Service lowered the company's senior unsecured long-term = debt rating Monday to Baa2 from Baa1. The debt is rated triple-B-plus by St= andard & Poor's Corp., with a negative outlook. Fitch also maintains a trip= le-B-plus rating and it placed the debt on Rating Watch Negative late last = week.=20 Both Fitch and Moody's cited negative investor reaction to recent company d= evelopments. And Moody's added that its "analysis of the developing situati= on will focus on management's success in lining up further liquidity suppor= t and on their ability to retain credit availability from their major count= erparties."=20 One money manager said he was concerned "about the fallout and its impact o= n the company's ability to trade" energy.=20 The company's bonds already have suffered as a result of the uncertainty. T= he bonds with a 6.40% coupon maturing in 2006 were offered at a dollar pric= e of 80 on Friday. Many investors believe that the 80 dollar price point is= a demarcation separating high-yield debt from distressed debt levels.=20 The company's bonds improved a little on Monday, to about an 83 dollar pric= e.=20 "I'm seeing offerings but no bids," said Harold Rivkin, principal, H. Rivki= n & Co., Princeton, N.J. There is a reluctance on the part of potential buy= ers because of the threat of future downgrades, he said.=20 The cool reception that Enron's bonds are receiving is "another example of = an investment grade company not having sponsorship when it has problems," s= aid Northern Trust's Bergson.=20 The company did not respond to a telephone request for comment.=20 -By Michael C. Barr, Dow Jones Newswires; 201-938-2008; michael.barr@dowjon= es.com Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Enron's stock continues slide on credit woes 10/29/2001 Associated Press Newswires Copyright 2001. The Associated Press. All Rights Reserved. HOUSTON (AP) - Enron Corp.'s stock slid to new lows on Monday, pushed down = in part by Moody's Investors Service announcing a possible downgrade of the= company's credit rating pending a review.=20 The downgrade came as Enron negotiates with banks to establish new credit l= ines as the largest U.S. natural gas and power marketing company struggles = to bounce back from disappointing third quarter earnings and a scandal over= losses stemming from partnerships managed by the company's former chief fi= nancial officer. In trading Monday afternoon on the New York Stock Exchange, Enron shares we= re down nearly 9 percent, or dlrs 1.38 a share, at dlrs 14.02 - their lowes= t level in nearly seven years. A year ago, Enron stock sold at nearly dlrs = 85 a share.=20 Enron's efforts to acquire more credit came after the Houston-based company= last week decided to cash in about dlrs 3 billion in revolving credit it h= as with various banks to shore up investor confidence.=20 "We are in discussions about new credit lines," Enron spokeswoman Karen Den= ne said Monday. "We're taking action to restore investor and market confide= nce."=20 Denne would not disclose how much credit the company was seeking. But The W= all Street Journal quoted unidentified sources who said the amount is betwe= en dlrs 1 billion and dlrs 2 billion and that the deal is close to being co= mpleted.=20 Denne said of the dlrs 3 billion in credit Enron cashed in last week, dlrs = 2 billion of it was used to pay short term debt. Currently, there are no pl= ans for the other dlrs 1 billion, she said.=20 Moody's on Monday placed all of Enron's long term debt obligations on revie= w for downgrade, citing "substantially reduced valuations in several of its= businesses."=20 On Oct. 16, Enron reported a net loss of dlrs 638 million in the third quar= ter, taking a one-time charge of dlrs 1.01 billion attributed to investment= losses, troubled assets and unit restructurings.=20 Enron's stock was hammered over the next week as it became apparent some of= those losses were tied to partnerships managed by Enron's former chief fin= ancial officer, Andrew Fastow.=20 Concerns about a potential conflict of interest touched off an inquiry by t= he Securities and Exchange Commission.=20 Enron ousted Fastow last week.=20 Moody's said in a press release the "magnitude of the announced charges wil= l reduce Enron's equity base and increase nominal financial leverage to som= ewhat over 50 percent while slashing earnings." Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 UK: UK power mkt focuses on prompt after low peak deal. 10/29/2001 Reuters English News Service (C) Reuters Limited 2001. LONDON, Oct 29 (Reuters) - Interest in Britain's electricity markets focuse= d on the prompt after the sale of peak power at an unexpected low price tug= ged other prompt contracts lower.=20 Traders said the market was surprised by the sale of day ahead peak power f= or EFA blocks three and four, from 0700 to 1500, at 13.50 pounds per megawa= tt hour which they said was below coal-or gas-fired power stations' operati= ng cost. "It was an interesting day. It was hard to believe someone could sell at th= ose prices - it's below marginal costs," said one trader.=20 Day ahead baseload opened relatively firm at 19.50/20.50 pounds but slipped= during the day to around 18 pounds and was traded at about 17.56 pounds af= ter the low peak trades.=20 Traders said the forward curve was quite with contracts ending slightly low= er.=20 Attention focused on troubled U.S. energy trader Enron with European compan= ies shying away from dealing with the utility because of credit concerns.= =20 Several large energy groups have frozen their dealings with Enron as they h= old urgent talks with the U.S. group about setting up new credit arrangemen= ts.=20 Enron is one of the largest traders in the UK market but traders said it wa= s too early see any impact on liquidity.=20 "Friday and Monday tend to be quieter anyway - it's hard to tell if there's= any effect from Enron," said one trader.=20 Enron in London declined to comment on the situation. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 USA: UPDATE 2-Enron says in talks with banks for new credit line. 10/29/2001 Reuters English News Service (C) Reuters Limited 2001. (Changes paragraph 1, adds background details and byline, updates stock pri= ce)=20 By David Howard Sinkman NEW YORK, Oct 29 (Reuters) - Energy trading giant Enron Corp., its shares i= n a new free-fall to near seven-year lows, said on Monday it is seeking add= itional credit to bolster investor confidence after tapping about $3 billio= n in credit last week.=20 Enron, the nation's biggest energy trader, declined to comment on the size = of the credit line, which banks it is in talks with or when it expects to c= omplete an agreement on the new credit line.=20 "We want to restore investor and market confidence and nothing instills con= fidence like cash," said Enron spokesman Mark Palmer in Houston, referring = to company efforts to secure new credit.=20 Company shares again tumbled on Monday, shedding $1.57, or 10.13 percent, t= o $13.93 in midday trade on the New York Stock Exchange. Once a Wall Street= darling, the stock has tumbled more than half in price since Enron release= d earnings two weeks ago, losing about $15.1 billion in market capitalizati= on as investors fretted about the transparency of off-balance sheet transac= tions.=20 Moody's Investors Service on Monday cut Enron's senior unsecured debt ratin= g to two notches above junk status, and warned it may cut it again, as well= as its rating for Enron's commercial paper. Rating agency Standard & Poor'= s on Thursday revised its outlook for Enron's ratings to "negative" from "s= table."=20 Enron's credit-worthiness has a direct affect on the price it pays to take = out loans, and the perception among its trading partners on the company's a= bility to make good on trades.=20 Moody's said Enron is suffering from deteriorating financial flexibility si= nce it announced big write-downs and equity charges from previously undiscl= osed partnership investments. It said this triggered "difficulties in rolli= ng over commercial paper."=20 Industry sources on Monday said several large energy companies in Europe ar= e shying away from trading with Enron amid concerns about the company's cre= dit status.=20 SIGN OF WEAKNESS=20 Enron shares have tumbled since the company reported its first-quarterly lo= ss in more than four years on Oct. 16. The company also wrote down $1.2 bil= lion in equity, including transactions with partnerships formerly run by it= s chief financial officer who was forced to step down from Enron last week.= =20 The sell-off was sparked by investor concern about the transparency of the = transactions, which the Securities and Exchange Commission is examining. En= ron last week replaced CFO Andrew Fastow as part of efforts to restore inve= stor confidence.=20 The Wall Street Journal reported Monday the size of the credit line Enron i= s negotiating is between $1 billion to $2 billion. Enron said it drew down = about $3 billion in credit lines last week, and has a net cash liquid posit= ion in excess of $1 billion.=20 However, many industry observes see the request by Enron, which has about $= 63.4 billion in energy assets, for an additional credit as a sign of weakne= ss.=20 "Clearly, both the stock and bond market view Enron as being in dire strait= s," said independent research firm Gimme Credit analyst Carol Levenson, who= specializes in high grade corporate bonds.=20 "We are not of the opinion that drawing down all of one's backup bank lines= is a demonstration of financial strength, but instead it's an act of despe= ration." Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 USA: TRADE IDEA-Junk rating not likely for Enron. 10/29/2001 Reuters English News Service (C) Reuters Limited 2001. NEW YORK, Oct 29 (Reuters) - A collapse of market=20 confidence could hurt the credit quality of energy trading giant Enron Corp., but its bonds are not likely to end=20 up in junk territory, fixed-income research service GimmeCredit=20 said on Monday.=20 Moreover, Enron's bonds could be undervalued if the=20 company's off-balance-sheet obligations amount to no more=20 than $3 billion, as reported, GimmeCredit said.=20 "Worst case, Enron doesn't look like a junk credit,"=20 GimmeCredit analyst Carol Levenson said. "But perception is=20 all, and clearly both the stock and bond markets view Enron=20 as being in dire straits."=20 Enron's bonds fell sharply on Friday after the energy=20 giant drew down about $3 billion from a credit line and=20 said it was in talks with its banks to obtain a new=20 multibillion-dollar credit line.=20 The company's stock has lost more than half of its=20 value in the last two weeks as investors questioned=20 off-balance-sheet transactions between the company and two=20 limited partnerships run by former Chief Financial Officer=20 Andrew Fastow. The U.S. Securities and Exchange Commission=20 is looking into those transactions for possible conflicts=20 of interest.=20 "We admit management's financial disclosure remains=20 woefully inadequate," GimmeCredit said. "However, botched=20 investor communication does not necessarily equate to=20 illegal or fraudulent behavior."=20 Still, Enron's move last week to draw down all of its=20 backup bank lines was "an act of desperation," GimmeCredit=20 said. The move eventually may lead to renegotiated bank=20 agreements, which could be more expensive and restrictive=20 and could also subordinate the position of bondholders, it=20 said.=20 "On the plus side is our belief that management will do=20 everything in their power to preserve the company's=20 investment-grade ratings," the firm said.=20 Another positive is a precedent the rating agencies set=20 with Kmart Corp. in the mid-1990s, when they tried to avoid=20 being the cause of a company's financial downfall, GimmeCredit=20 said.=20 Moody's Investors Service on Monday cut Enron's senior=20 unsecured rating to "Baa2" from "Baa1" and kept it on=20 review for further downgrade. Moody's said its actions were=20 prompted by deterioration in Enron's financial flexibility=20 since the company announced significant write-downs and=20 equity charges in previously undisclosed partnership=20 investments.=20 Last Thursday, Standard & Poor's revised its outlook on=20 Enron to negative while affirming its "BBB-plus" long-term=20 rating. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 USA: Enron shares drop to near seven-year lows. 10/29/2001 Reuters English News Service (C) Reuters Limited 2001. NEW YORK, Oct 29 (Reuters) - Enron Corp. shares fell to their lowest level = in almost seven years in early trade on Monday following news that North Am= erica's largest natural gas and electricity trader was considering tapping = additional credit lines to ease financial concerns that have sent its stock= slumping more than 50 percent in the past two weeks.=20 Enron shares were down $1.55, or 10 percent, to $13.95 on the New York Stoc= k Exchange. The shares have not been under $14 since December 1994. Earlier, the credit-rating agency Moody's Investor Service placed all long = term-debt obligations of Enron under review for downgrade following the com= pany's announcement of significant write-downs and charges, reflecting subs= tantially reduced valuations in several of its businesses.=20 Moody's said the actions affect Enron's broadband operations, its merchant = portfolio, and the Azurix water company holdings.=20 Last week Enron shares lost almost $14 billion in market value as a series = of piecemeal disclosures about the company's involvement in complex partner= ships began to trickle out.=20 Many industry observers see Enron's request for additional credit, after th= e company tapped its banks for $3.3 billion last week, as a sign a weakness= .=20 "We are not of the opinion that drawing down all of one's backup bank lines= is a demonstration of financial strength, but instead ... it's an act of d= esperation," said Carol Levenson, an analyst with independent research firm= gimmecredit.com. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Enron long-term ratings all placed on review for downgrade - Moody's 10/29/2001 AFX News (c) 2001 by AFP-Extel News Ltd NEW YORK (AFX) - Moody's Investors Service said it placed all the long-term= debt obligations of Enron on review for downgrade following the company's = announcement of significant write-downs and charges, reflecting substantial= ly reduced valuations in several of its businesses.=20 The magnitude of the announced charges will reduce Enron's equity base and = increase nominal financial leverage to somewhat over 50 pct while slashing = earnings, Moody's said in a statement. The company's previously announced sale of Portland General, however, will = result in cash proceeds approximating 1.8 bln usd which management is earma= rking for debt reduction. In addition, the sale will remove approximately 1= bln usd of debt obligations from Enron's balance sheet.=20 However, Moody's noted that, while this transaction will go a long way to h= elp restore Enron's balance sheet, it requires regulatory approval and is l= ikely to take up to a year to complete.=20 Enron has a Baa1 senior unsecured rating.=20 lj For more information and to contact AFX: www.afxnews.com and www.afxpres= s.com Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Enron Shares Fall After Moody's Cuts Credit Rating (Update6) 2001-10-29 16:46 (New York) Enron Shares Fall After Moody's Cuts Credit Rating (Update6) (Adds bondholder quote and background on commercial paper.) New York, Oct. 29 (Bloomberg) -- Enron Corp. shares declined a ninth day as Moody's Investors Service lowered its credit rating, raising concern the largest energy trader would be cut off from raising the cash it needs to fund day-to-day operations. Moody's lowered Enron's senior unsecured long-term debt ratings to ``Baa2,'' two levels above junk, from ``Baa1'' and also placed the Houston-based company's ``P-2'' rating for commercial paper on review for downgrade. Moody's may downgrade Enron's commercial paper rating, which would make it harder for the firm to borrow the short-term cash needed to run its trading businesses. Ahead of a potential cut, Enron took out bank lines to repay $2 billion in commercial paper last week, largely removing itself from that borrowing arena. ``They've pretty much already written off coming to the commercial-paper market,'' said Shannon Bass, who holds Enron bonds in the $50 million he helps manage at Pacific Investment Management Co. ``The real issue now is trying to get their house in order.'' Pimco is ``well underweight'' Enron bonds relative to bond benchmarks the portfolios are matched to, Bass said. Shut Out Companies such as Xerox Corp., which was shut out of the commercial-paper market a year ago before its credit ratings were reduced, were forced to borrow on bank credit lines to access cash. Investors in commercial paper, borrowings due in nine months or less, also stopped buying Motorola Inc. and Lucent Technologies Inc. short-term debt, forcing the firms to restructure borrowing, sell assets, and find alternative financing sources that typically cost more. Enron shares plunged $1.59, or 10 percent, to $13.81, continuing a slide that dates back to Oct. 17, when Enron reported $1.01 billion in losses from investments outside its business of energy trading. The stock traded near $90 in September 2000 and touched a seven-year low of $13.55 today. Enron has lost more than $50 billion in market value this year. On Dec. 31, the company had a market capitalization of $62.7 billion. Today, the market value was $10.5 billion. Deterioration While Enron shares have sank about 60 percent in a week, its bonds are down about 20 percent. A company's stock typically falls faster than its debt because bondholders have first claim on assets after bank loans are paid. The company's 6.4 percent bonds maturing in 2006 fell 4 cents to 80 cents on the $1 of face value after the Moody's downgrade. Yields have risen to 12.1 percent, up from 10.8 before that downgrade, traders said. The bonds were trading at 100 cents the week before. Moody's said the cut was prompted by the ``deterioration in Enron's financial flexibility'' since the write-downs and charges. The partnership investments had not been disclosed before this month, which ``led to a substantial loss in investor confidence,'' according to Moody's. ``A credit downgrade will be punitive as far as their borrowing power,'' said Joe Correnti, who follows Enron for Wayne Hummer Investments LLC in Chicago. ``That's not a good place for them to be. They have somewhat aggressive expansion plans.'' Enron's recent woes had many investors factoring in a credit- rating reduction. ``This move was anticipated,'' said Mike Dineen, who holds Enron bonds in the $5 billion of fixed-income assets he helps manage at Mony Life Insurance Co. There are about $15.8 billion of Enron bonds outstanding, almost $9 billion of which comes due between 2003 and 2006, according to Bloomberg data. Cash Needed Last week, Enron ousted Chief Financial Officer Andrew Fastow after the U.S. Securities and Exchange Commission asked for information about transactions he conducted for partnerships he headed. In August, Jeff Skilling quit as Enron chief executive, eight months after taking the position, and Chairman Ken Lay moved back into the position. Enron is trying to get $1 billion to $2 billion in loans from Citigroup Inc., J.P. Morgan Chase & Co. and other banks to calm investors, the Wall Street Journal reported. The company's stock has plummeted 57 percent since Oct. 17, when Fastow's partnerships were disclosed. Enron uses its investment-grade credit rating to borrow money for the cash it needs every day to settle commodities trades and to keep trading partners. ``When you act as a middleman you need high credit ratings. It's likely their trading volumes will go down'' as other energy and financial firms seek higher-rated trading partners, said Sean Egan, managing director at Egan-Jones Ratings Co., which gives Enron's credit a junk grade of ``BB+.'' Enron's long-term ratings outlook was changed last week to negative from stable by Standard & Poor's. S&P affirmed the firm's rating of ``BBB+'', the equivalent of Moody's ``Baa1''. ``We have been split-rated before and it did not affect our growth,'' said Karen Denne, a spokeswoman for Houston-based Enron. ``We are still investment grade.'' Enron's Lenders to Demand Harsher Terms, Analysts Say (Update2) 2001-10-29 16:08 (New York) Enron's Lenders to Demand Harsher Terms, Analysts Say (Update2) (Updates with closing share price in last paragraph.) Houston, Oct. 29 (Bloomberg) -- Enron Corp., which can't get low-interest, short-term loans, faces skeptical lenders who will demand increasingly harsher terms as the largest energy trader tries to get cash in the bank, credit analysts said. ``Anyone providing new funding is going to be nervous,'' said Sean Egan, managing director at Egan-Jones Ratings Co. ``It's likely that lenders are going to demand collateral.'' Enron is trying to get $1 billion to $2 billion in loans from Citigroup Inc., J.P. Morgan Chase & Co. and other banks to calm investors after a 52 percent drop in the company's stock since Oct. 17, the Wall Street Journal reported. The company needs cash every day to settle commodities transactions and to keep trading partners. The company on Thursday tapped $3.3 billion in bank credit lines last week to pay off about $2 billion in commercial paper, or short-term corporate loans. A week ago, the Enron said the U.S. Securities and Exchange Commission had began an inquiry into related-party transactions. They cost the company $35 million and $1.2 billion in lost shareholder equity. ``Banks are in the driver's seat, and Enron is a little desperate,'' said Peter Petas, a debt analyst at CreditSights Inc. ``I think their interest rates for loans would go up.'' Sells Assets for Cash Companies in Enron's situation often agree to other bank terms in order to secure loans, Petas said. Those can include agreeing to use proceeds from selling assets to pay debt and putting up assets as collateral. Enron is attempting to sell assets to raise cash. Two related partnerships, Osprey and Marlin, depend on selling power plants and similar assets to repay $3.3 billion borrowed to buy the plants. Enron may have to pay any difference between the debt and sales proceeds. The company plans to complete the $2.9 billion sale of Portland General Electric, an Oregon utility, to Northwest Natural Gas Co. next year. Shares of Houston-based Enron fell $1.59, or 10 percent, to $13.81. The stock has tumbled 82 percent in the past 12 months. Enron May Be Royal Dutch/Shell Takeover Target, Newsletter Says 2001-10-29 13:31 (New York) Houston, Oct. 29 (Bloomberg) -- The Royal Dutch/Shell Group, the second-largest publicly traded oil company, may be interested in buying Enron Corp., which has seen its stock price plunge in the last two weeks, industry newsletter Power Finance & Risk reported, citing unnamed sources. With Enron's market valued dropping below $11.5 billion from a high of more than $55 billion, companies such as Royal Dutch/Shell would be able to buy it with ``little trouble,'' the newsletter reported. Royal Dutch/Shell, based in London and The Hague, Netherlands, had approached Enron about a buyout in August, and has sought to purchase the company for three years, the newsletter said, citing an unnamed banker in London and an unnamed analyst in New York. Shell spokesman Mary Brennan said the company wouldn't comment on market speculation. Enron didn't immediately return calls seeking comment on reports of possible buyout offer. Enron Credit Cut by Moody's; CP Rating Put on Review (Update3) 2001-10-29 12:29 (New York) Enron Credit Cut by Moody's; CP Rating Put on Review (Update3) (Adds yield data in fourth paragraph; adds Moody's comments in sixth and seventh paragraphs.) New York, Oct. 29 (Bloomberg) -- Enron Corp.'s credit rating was cut by Moody's Investors Service after the largest energy trader wrote down the value of its assets because of losses from private partnerships. Moody's also said it may downgrade Enron's commercial paper rating, which could make it harder for the company to borrow the short-term cash it needs to run its trading business in the future. The company borrowed from banks to repay $2 billion in commercial paper last week. ``This move was anticipated,'' said Mike Dineen, who holds Enron bonds in the $5 billion of fixed-income assets he helps manage at Mony Life Insurance Co. Enron's 6.4 percent coupon notes due in 2006 fell as much as 4 cents to bid at 80 cents on $1 of face value after the Moody's downgrade, traders said. The bonds tumbled from about par value a week ago. Yields have risen to 12.1 percent, up from 10.8 before that downgrade, traders said. Shares of Enron fell as much as $1.85, or 12 percent, to $13.55. Moody's lowered the senior unsecured long-term debt ratings of Enron to ``Baa2,'' two levels above junk, from ``Baa1.'' The ratings company said they may be lowered further. Moody's placed the company's ``P-2'' rating for commercial paper on review for downgrade. Moody's said the cut was prompted by the ``deterioration in Enron's financial flexibility'' since the write-downs and charges. The partnership investments had not been disclosed before. Enron's recent disclosures have ``led to a substantial loss in investor confidence,'' Moody's said in its news release. Cash Needed Enron reported $1.01 billion in losses this month from investments outside its business of trading commodities such as electricity and natural gas. Chief Financial Officer Andrew Fastow quit as the U.S. Securities and Exchange Commission asked for information about transactions he conducted for partnerships he headed. Enron is trying to get $1 billion to $2 billion in loans from Citigroup Inc., J.P. Morgan Chase & Co. and other banks to calm investors, the Wall Street Journal reported. The company's stock has plummeted 57 percent since Oct. 17, when the partnerships were disclosed. Enron uses its investment-grade credit rating to borrow money for the cash it needs every day to settle commodities trades and to keep trading partners. ``Enron definitely depends on higher ratings,'' Dineen said. Enron's long-term credit ratings outlook was changed last week to negative from stable by Standard & Poor's. S&P affirmed the Houston-based company's rating of ``BBB+'', the equivalent of Moody's ``Baa1''. ``We have been split-rated before and it did not affect our growth,'' said Karen Denne, a spokeswoman for Houston-based Enron. `` We are still investment grade.'' Insiders at Electric Utilities Showing Their Faith=20 By Jonathan Moreland <<mailto:[email protected]>> Special to TheStreet.com 10/29/2001 03:30 PM EST URL: <<http://www.thestreet.com/comment/moreland/10003164.html>> Name an industry where one of its best-known players went public in 1996, s= aw its stock rise more than 1,800% in the following five years, but now fin= ds its shares half off their 2001 highs? Internet? Telecom equipment?=20 Surprise! The stock is Calpine (CPN:NYSE - news - commentary) , and the ind= ustry is electric utilities.=20 Three other stocks in the same group have given investors pretty wild rides= as well, only to find themselves well off their 52-week highs: AES (AES:NY= SE - news - commentary) , Mirant (MIR:NYSE - news - commentary) and NRG Ene= rgy (NRG:NYSE - news - commentary) .=20 These four companies also have something else in common: Insiders at all of= them are signaling that their stocks are oversold. When there is significa= nt insider buying in so many related firms, we cannot help but think there = is a positive industry trend to profit from.=20 Utilities may not seem like a sexy sector, but these particular stocks have= proved that they can move as well as any small-cap, high-tech play. Their = volatility stems from the fact that the companies they represent are not re= gulated utilities paying fat dividends, but independent power producers (IP= Ps) that derive as much profit as they can from the margins over fuel costs= .=20 In some ways, IPPs are to regulated utilities what the old English navy was= to the Spanish Armada. IPPs are less restricted in the scope and geography= of their business movements. This has spurred a more entrepreneurial cultu= re at IPPs that often allows them to outmaneuver regulated utilities when c= hasing after business opportunities.=20 The insider buying at all four companies was obviously interesting. They al= l had several insiders recently purchasing within a short time period, and = many of the buyers also had good track records trading their companies' sha= res. Several were also adding significantly to their holdings.=20 At AES, for example, three of the eight executives that purchased shares in= late September for $13 a share or less, were also smart sellers over the p= ast few years when AES fetched between $40 to $60. And at Mirant, the five = insiders that purchased in September increased their holdings by an average= of 53%.=20 This confluence of positive insider signals was more than enough to get me = researching these companies and this industry further, and I like what I se= e.=20 "There's been a lot of talk about if we have an oversupply of energy," rema= rks Calpine spokesperson Katherine Potter on one of the main reasons IPP st= ocks are weak now. "But while supply may be fine right now, you also have t= o look at the quality of [that] supply. There is such a tremendous opportun= ity to replace infrastructure."=20 Out With the Old, In With the New The fact is, there are a lot of antiquated power plants and overburdened ba= ckbones in the power industry, and IPPs stand to benefit tremendously from = replacing the older infrastructure to service the growing demand for energy= in the U.S. and abroad.=20 With more scheduled and unscheduled maintenance of the present, aging facil= ities exacerbating price spikes, municipalities and industry would much rat= her choose reasonably priced energy from dependable sources if they are ava= ilable.=20 Although most IPPs use oil, gas, coal or a combination of these fuels to po= wer present facilities, the vast majority of plants they're building now ar= e a new generation of natural gas-powered turbines that are much more effic= ient than old gas-fired facilities. An IPP will typically build one of thes= e new plants near cities or other areas with high and growing electricity n= eeds, and compete with the older facilities in the region for the business.= =20 But it's not really fair competition. New plants can generate up to 40% mor= e energy from the same amount of gas used by some older designs. The new na= tural gas turbines also have a smaller footprint and fewer emissions than t= heir predecessors, and can therefore be located closer to where the power i= s needed. Can you say lower transmission costs?=20 So with the cost of the natural gas representing a good two-thirds of a gen= erator's cost, less fuel expenditure combined with a decrease in transmissi= on infrastructure to pay for leaves more love left for an IPP's bottom line= .=20 As older gas-fired and nuclear plants are decommissioned, IPPs will continu= e to increase the amount of product (and profits) they produce. At the same= time, the trend toward more efficient gas plants will help slow the increa= ses in overall demand for natural gas, and keep the cost of this commodity = from reaching stratospheric levels.=20 Although, as previously mentioned, IPP stocks are well off their highs, ana= lysts are as taken with the group as insiders are right now. Most analysts = following the four IPPs I've recommended rate them a buy or strong buy.=20 This is not too surprising considering that bottom-line growth for NRG, AES= , and Calpine next year is forecast at 24% to 25%, while analysts expect Mi= rant to boost earnings per share by 30% in 2002. All of these shares are tr= ading for 12 times or less the low end of next year's EPS expectations.=20 Chartists will note that the technicals of the IPP stocks I've mentioned st= ill look weak, and may choose to wait for a better entry point. But longer-= term investors should feel comfortable joining the insiders now.=20 Postscript Readers will note that we have not included Enron (ENE:NYSE - news - commen= tary) in our group of recommended IPPs. Although we cannot boast of foresee= ing its present travails (resulting from too-clever-by-half off-balance she= et investments), we had ignored it because Enron did not have a positive in= sider signal like its peers.=20 Insiders were still selling Enron as late as Aug. 2 of this year when the s= tock was nearly half off its highs, and although there was one insider purc= hase in August, there was not a cluster of activity as in the other IPP sto= cks we've recommended. There was no buying after Sept. 11.=20 If Enron's problems are unique to it, as the industry insiders we talked to= believe, this is yet another case of insiders giving investors an excellen= t signal of relative attractiveness of stocks within an industry.=20 A Debacle Like Enron's Can Undermine the Entire Market By James J. Cramer <<mailto:[email protected]>> RealMoney.com 10/29/2001 02:14 PM EST URL: <<http://www.thestreet.com/p/rmoney/jamesjcramer/10003162.html>> Sometimes one stock can completely transfix the market in a negative way.= =20 Right now that one stock is Enron (ENE:NYSE - news - commentary) . It trans= fixes us because it acknowledges a simple truth: We are just dealing with p= ieces of paper here, pieces of paper backed up by nothing but the honesty a= nd culture of the people who work at the company.=20 When you put it that way, you realize how fragile this game can be. We have= to believe that the system of checks and balances we have -- outside accou= ntants, lawyers and the SEC -- can put enough pressure, honest pressure, on= execs to keep them from doing the wrong thing.=20 When they don't we have no clue of what we are buying.=20 I keep thinking back to Cendant (CD:NYSE - news - commentary) , which colla= psed three years ago when it turns out that one of the companies that made = up Cendant was a bogus company: CU International. Who knew what the company= was really worth if CU was a fraud? Who knew what the multiple might be? W= ho knew what the company was worth? Who knew how to value it?=20 When you don't know, you don't average down. You sell. You ask questions la= ter.=20 That's what is going on with Enron right now, and it is freaking out everyb= ody as Enron, while not a keystone of this market, was a core holding of ou= tfits like Janus, Putnam, Citigroup, State Street and Fidelity.=20 Anytime you get a stock that is widely held that loses billions in market c= apitalization overnight, whether it be Lucent (LU:NYSE - news - commentary)= or Nortel (NT:NYSE - news - commentary) or Enron, you scare portfolio mana= gers. When the selloff is exacerbated by fears of chicanery, it gets even w= orse. Enron's turning into the story that threatens to be a crossover, one = that is doing more than just pulling down utilities. The market is about co= nfidence. We have to have confidence that paper assets are backed up by som= ething, even if it is the prestige and honor of executives. When that confi= dence is undermined in one major stock, it gets undermined in all.=20 That's where we are right now.=20 Random musings: Fixing your 401(k) today on Cramer's RealMoney; give me a c= all at 1-800-862-8686 between 3 and 4 p.m.=20 Moody's downgrades Enron's debt Enron asking banks for more credit=20 Lisa Sanders CBSMarketWatch.com 10/29/01 NEW YORK (CBS.MW) - Shares of Enron fell further Monday after Moody's Inves= tors Service downgraded Enron's long-term debt a notch. Enron, which hit a 52-week high of $84.88 on Dec. 29, was well on its way t= o another year low Monday. Heading for a ninth straight day of losses, Enro= n shed more than 9 percent, or $1.41, to $13.99. The stock was again the mo= st active mover on the New York Stock Exchange as close to 28 million share= s had changed hands. Moody's said it cut the senior unsecured long-term debt to Baa2 from Baa1, = and the ratings remain on review for potential additional downgrades. The a= ction follows Enron's reported $1.01 billion charge in the third quarter an= d was driven by the expectation of further write-downs and the swift deteri= oration of the company's financial picture, said Stephen Moore, vice presid= ent at Moody's.=20 "However, we do feel the move Enron made to draw down their revolvers to pa= y off their commercial paper was a smart business move," said Stephen Moore= , vice president at Moody's. The rating agency said it would review the Pri= me-2 rating on Enron's commercial paper. Last Thursday, Enron announced it had tapped its lines of credit to provide= more than $1 billion in cash liquidity and that would it use $2 billion to= pay down commercial paper. The decision to pay off the commercial paper, he said, accomplishes two goa= ls. "It increases liquidity on a short-term basis, and additionally, it enables= them to focus on other areas they need to focus on right now," Moore said.= "They are working on setting up an additional facility for further capital= to support their wholesale trading business."=20 Karen Denne, an Enron spokesperson, confirmed Monday that the company is in= discussions with banks for further financing. Additional credit would help= boost Enron's liquidity position. The lingering concern for Moody's is that there "yet may be something else = out there that gets to the credibility issue of Enron itself," Moore said.= =20 At the heart of the credibility issue are two limited partnerships -- LMJ a= nd LMJ2 - created in 1999 by former CFO Andy Fastow and since dissolved. En= ron ousted Fastow last week. See related story. </news/story.asp?guid=3D%7B= FCA73BA9%2D55D0%2D4EE8%2DB6E7%2DBD924898CA4B%7D&siteid=3Dmktw> "The market = was unaware," of the existence of the partnerships, Moore said. "Quite frankly, we don't think there is anything else," he said. "But Enron= is huge, and if this could happen...there is a lingering concern that some= thing else might happen. We cannot confirm or deny that this is true. We wi= ll be meeting soon with them to resolve issues such as these." Moore said the meeting could come as soon as this week. "Should the wholesale trading business and the counterparties therein becom= e impacted by these events, that could lead to the slowing growth of the wh= olesale business, the Enron engine," he said.=20 Moody's action Monday also negatively affected the ratings on two trusts --= Marlin Water Trust and Osprey, which have combined debt of $3.2 billion. M= arlin is now rated Baa2, while Osprey carries a new rating of Baa3, both do= wn a notch. The potential issue for the trusts may be "how much equity Enron would have= to issue if the sale of the underlying assets alone isn't enough to pay of= f the debt." Enron is anticipating using the proceeds from the sale of asse= ts to meet its obligation. Lisa Sanders is a Dallas-based reporter for CBS.MarketWatch.com. Enron Goes Begging=20 Forbes.com staff, Forbes.com </news>, 10.29.01, 11:40 AM ET=20 NEW YORK - Enron said this morning that it is in talks with banks for addit= ional credit, as declining investor confidence sent its stock to a six-year= low and several large energy groups put their dealings with Enron on hold.= Last Thursday, the energy trader drew down about $3 billion from a credit = line, causing its bonds to fall sharply on Friday.=20 Enron (nyse: ENE ) has been scrambling to reassure investors and business p= artners since Oct. 16--after the company reported its first quarterly loss = in more than four years. The $638 million loss included $1.01 billion in ch= arges on ill-fated investments. A week later, it disclosed that the U.S. Se= curities and Exchange Commission had asked for information on partnerships = run by Chief Financial Officer Andrew Fastow and other executives. Fastow w= as forced to step down from the company last week.=20 The turmoil makes it clearer than ever that Enron's problems weren't solved= by the recent departure of Chief Executive Jeffrey Skilling. In these challenging times, Enron deserves our thanks=20 Houston Chronicle, October 28, 2001 By BILL WHITE=20 Enron and its employees have blessed Houston, and many Houstonians should n= ow take the time to say "thanks" when the company has experienced some high= ly publicized challenges. Enron attracted thousands of great people to Hous= ton and changed Houston's economy forever. The company's management encoura= ged their employees to be active citizens, and those folks responded by mak= ing a big difference in their community.=20 Enron's lead in shaping a nationwide market for electricity gave birth to a= multibillion-dollar new industry, with Houston as its hub. Even while it c= ompeted hard to win in the marketplace, Enron's example helped show other n= atural gas pipeline and trading firms how to move into the even bigger mark= et of electricity. The downtown concentration of these firms -- industry le= aders including Reliant, Dynegy, El Paso and Duke Energy -- led London's Fi= nancial Times to refer to Louisiana Street as the Wall Street of electricit= y.=20 This explosive growth attracted bright young people -- with the average age= of Enron employees at under 35 -- and they in turn helped fuel an explosio= n in residential growth in Houston's downtown. This, in turn, helped revita= lize downtown's retail and restaurant scene. Enron's construction of a larg= e Class A office tower, still going up, is a milestone in Houston's growth,= an official end to more than a decade of large amounts of vacant office sp= ace.=20 Virtually every civic or charitable activity in Houston learned to count on= Enron for both financial support and thousands of hours of invaluable volu= nteer activities. If Enron or its chairman, Ken Lay, led a visionary effort= , such as hosting the meeting of G7 trade ministers, or more recently the p= rivate funding of the Houston Biotechnology Center, Houstonians knew it wou= ld be done right. Without Lay our town would have lost major league basebal= l and status as a big league town.=20 Employees know Enron set a standard for hiring and promoting employees base= d on their potential, with no glass ceilings. Women have run large division= s and subsidiaries. Many military officers find that Enron called on their = talents after illustrious military careers, even at ages well past normal c= orporate entry level. The most highly recruited young people flock to a com= pany that invests heavily in their training and then lets them rise as far = and fast as their talent and ability to work hard would allow them.=20 Enron's corporate success reflects the stories of so many of its employees = who have lived the American dream. With the habits of work learned on a fam= ily farm in Missouri, Ken Lay got an education ending with a graduate degre= e at the University of Houston, served his country in government and began = a career in the gas pipeline business. When Northern Natural Gas acquired t= he smaller Houston Natural Gas, Northern's chairman surprised folks by inst= alling Lay as his successor. I was at Northern's headquarters in Omaha the = week after the merger 16 years ago when Northern's chairman reassured folks= that they could count on "best young executive in the business, Ken Lay," = to direct their future in a changing marketplace. Within 15 years, most of = Enron's revenues and profits came from businesses that did not even exist w= hen Lay had taken over, all of which had been created from within the firm.= This success did not diminish the farm boy decency and sense of fairness t= hat attracted top talent to his team.=20 Enron rewarded innovation, while many firms afraid to alter the old formula= wondered why their leadership eroded. Year after year, top executives thro= ughout the country voted Enron our nation's most innovative corporation. En= ron recognized, even when financial markets do not, that innovative firms a= re secure enough to accept occasional failure and the inevitable price of o= ther successes.=20 Rather than seeking insulation from the international marketplace, as had m= any American businesses, Enron welcomed the challenge of the international = market, confident that American firms could compete and win. Enron also wel= comed the challenge of responsible environmental stewardship, and called on= industry to address the issue of global warming even as some companies fea= red the impact of pollution control on their bottom line.=20 Enron's phenomenal success created incredible and perhaps unreasonable expe= ctations, as early this year when the stock market valued the company based= on 20 percent annual growth, forever. Enron's size and success made it a c= onvenient target for politicians in California and India, even as Enron sup= plied the electricity they so needed. Sometimes it seemed the company's ups= tart origins as the David battling utility Goliaths delayed the firm's perc= eption that it had won and no longer played the role of an underdog.=20 And so if Enron experiences problems, it will learn from them, just as stro= ng people do. Let's not prejudge Enron's current challenges. The more than = a decade of my life that was dedicated to trying cases against companies wh= o hurt consumers and investors taught me both to insist on the truth but ne= ver to jump to premature conclusions based on a headline or a news story.= =20 Throughout its years of success, Enron folks have never forgotten to find s= o many ways to make the firm's hometown of Houston a better place to live a= nd work. As Enron enters a new phase of its life, let's not forget to expre= ss thanks and steady support.=20 White is a Houston business executive and civic leader and former governmen= t official, with no relationship to Enron.

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IEP News 7/11

Copley News Service, July 11, 2001, Wednesday, State and regional, 406 ????words, Davis firm on demand for $8.9 billion refund, Ed Mendel, SACRAMENTO Los Angeles Times, July 11, 2001 Wednesday, Home Edition, Page 12, 749 ????words, THE NATION; ; Referee Shift Seen in Refund Talks; Power: Participants ????say mediator was swayed by arguments that California estimates were based on ????faulty analysis., RICARDO ALONSO-ZALDIVAR, TIMES STAFF WRITER, WASHINGTON Los Angeles Times, July 11, 2001 Wednesday, Home Edition, Page 2, 325 words ????, California; ; Calpine to Buy More Natural Gas Reserves; Energy: The power ????producer is set to purchase wells in Texas and New Mexico for $355 million ????plus debt., From Bloomberg News Los Angeles Times, July 11, 2001 Wednesday, Home Edition, Page 2, 574 words ????, California; ; Edison's Finances Fare Better; Energy: After selling some ????assets, the company appears to be back on track. But it says the future of ????its utility is in the Legislature's hands., JERRY HIRSCH, TIMES STAFF WRITER The New York Times, July 11, 2001, Wednesday, Late Edition - Final, Section ????A; Page 1; Column 3; National Desk, 1519 words, Calls for Change in an ????Ancient Occupation, By EVELYN NIEVES, MOJAVE, Calif. The San Francisco Chronicle, JULY 11, 2001, WEDNESDAY,, FINAL EDITION, ????NEWS;, Pg. A3, 512 words, Governor threatens to sue utilities for refunds; ????Davis says California won't settle for $1 billion, Mark Martin, Sacramento The Washington Post, July 11, 2001, Wednesday, Final Edition, A SECTION; ????Pg. A02, 934 words, GOP Speeds Action on Limited Energy Bills, Peter Behr ????and Mike Allen, Washington Post Staff Writers Business Wire, July 10, 2001, Tuesday, 1003 words, Texas to Avoid ????California Electricity Shortage; New Customer Brochure Explains Differences ????in the Texas and California Electricity Markets, AUSTIN, Texas, July 10, ????2001 CNBC/Dow Jones - Business Video, CNBC/DOW JONES BUSINESS VIDEO, July 10, ????2001 Tuesday, Transcript # 071001cb.y50, Business, 1419 words, The Shaw ????Group - President & CEO - Interview, James Bernard, John Manley, Mark Hianes Contra Costa Times, July 10, 2001, Tuesday, CC-POWERGRID, 938 words, ????Analysts: Overloaded California Grid Can't Handle High Demand, New Plants, ????By Rick Jurgens Copley News Service, July 10, 2001, Tuesday, Commentary, 530 words, Copley ????Editorial Service The Houston Chronicle, July 10, 2001, Tuesday, 3 STAR EDITION, A;, Pg. 1, ????921 words, California to get plan for refunds; Officials celebrate judge's ????proposition, DAVID IVANOVICH, LAURA GOLDBERG, WASHINGTON, Utility Rates National Public Radio (NPR), Morning Edition (11:00 AM AM ET) - NPR, July ????10, 2001 Tuesday, 1289 words, Officials in California fail to reach ????settlement over the state's demand for more than $8 billion in refunds to ????electricity customers, BOB EDWARDS, SCOTT HORSLEY The News Tribune, July 10, 2001, Tuesday, South Sound; Pg. D1, 405 words, ????No energy refunds foreseen for California ; Power: Judge rules state is owed ????up to a billion dollars, but owes suppliers more than that, Mark Sherman; ????The Associated Press Copyright 2001 Copley News Service Copley News Service July 11, 2001, Wednesday SECTION: State and regional LENGTH: 406 words HEADLINE: Davis firm on demand for $8.9 billion refund BYLINE: Ed Mendel DATELINE: SACRAMENTO BODY: ??Gov. Gray Davis had a tough message for federal regulators yesterday after the failure of settlement talks in California's bid to get an $8.9 billion refund from electricity suppliers: ''See you in court.'' ??The governor said California will seek a full $8.9 billion refund for electricity overcharges, even if federal regulators award the maximum refund of $5.4 billion allowed under their guidelines. ??''Our message is just order what you are going to order,'' Davis said of the Federal Energy Regulatory Commission. ''We believe you should order $8.9 billion. But you order what you think is fair. We will take what you order, then we will see you in court.'' ??Davis, joined by his negotiating team, made the remarks at a news conference a day after two weeks of closed-door talks with suppliers in Washington failed to reach an agreement. ??An administrative law judge made a recommendation to the regulatory commission that Davis' top negotiator, Michael Kahn, chairman of the California Independent System Operator, expects to result in a refund of more than $1 billion. ??Davis said that a revealing decision will be made by the commission, which he hopes has embarked on a ''new path'' with the appointment by President Bush of two new members, Pat Wood of Texas and Nora Brownell of Pennsylvania. ??''Are they on the side of consumers, as the federal power act envisions them being,'' Davis asked, ''or are they just there to do the industry's bidding, as they have so often in the past?'' ??Kahn said rules adopted by FERC cut off the refund period at last October, trimming $3 billion from the $8.9 billion overcharge claimed by California dating to May 2000. ??He said FERC has no jurisdiction over municipal utilities, such as the Los Angeles Department of Water and Power, that sold power to the state. The municipal districts overcharged the state by about $600 million, according to Kahn. ??As a result, he said, the maximum refund that FERC could order for California is about $5.4 billion. ??''We made it clear to everyone that if we did not settle for $8.9 billion, we would seek redress in court for the remainder of the money above $5.4 billion,'' Kahn said. ??Calpine of San Jose and several other generators have expressed interest in the state's offer to negotiate one-on-one with the state while the federal regulators consider their decision, Kahn said. ??WAGNER-CNS-SD-07-10-01 2114PST LOAD-DATE: July 11, 2001 ??????????????????????????????4 of 54 DOCUMENTS ??????????????????????Copyright 2001 / Los Angeles Times ??????????????????????????????Los Angeles Times ????????????????????July 11, 2001 Wednesday ?Home Edition SECTION: Part A; Part 1; Page 12; National Desk LENGTH: 749 words HEADLINE: THE NATION; ; Referee Shift Seen in Refund Talks; Power: Participants say mediator was swayed by arguments that California estimates were based on faulty analysis. BYLINE: RICARDO ALONSO-ZALDIVAR, TIMES STAFF WRITER DATELINE: WASHINGTON BODY: ??For the better part of 15 days of closed-door negotiations, the federal mediator in California's price-gouging case bandied about the possible dimensions of a settlement. ??Curtis L. Wagner Jr. went as high as $4.5 billion, fully half of what California said it had been overcharged by out-of-state electricity suppliers. ??But Wagner got no takers for that figure. And in the end, when talks ended Monday with no deal between the state and the energy generators, he said publicly that $1 billion was closer to the truth. ??Participants in the talks, speaking on condition that they would not be identified, said Wagner appeared to have been persuaded by the power suppliers that California's $8.9-billion overcharge estimate was based on unreliable economic analysis. ??The state's analysis "is fatally flawed and cannot be used to . . . determine overcharges or refunds," William Tabors, an MIT economist retained by one of the companies, said in an affidavit that is part of a transcript released by the judge. ??"I certainly think Tabors was very persuasive," said an industry lawyer. ??By contrast, at another point, Wagner questioned whether California regulatory agencies were truly independent of Gov. Gray Davis, saying their representatives to the talks might as well put on "clown suits." ??Now the issue is about to move to the governing board of the Federal Energy Regulatory Commission, which had given Wagner the job of trying to broker a settlement. The California side will have one more chance to make its case. But it will have to go back to its spreadsheets and generate numbers that can withstand scrutiny. ??Wagner is to send his formal recommendation to the FERC board in a week, and the board is expected to hold a hearing on how to calculate a refund before finally deciding whether California is owed one. ??California's delegation was disappointed by what it perceived as a shift in the mediator's sentiments during the two weeks of talks. "For [Wagner] to do what he did was a 180-degree turn," said a participant familiar with the delegation. ??Clues to the arguments that swayed the judge can be found in a transcript he released of this Sunday's session, the only portion of the deliberations that has been made public. ??During his public comments at the end of the talks Monday, Wagner echoed some of the technical points that Tabors, the industry economist from MIT, made in the transcript. ??California's delegation was headed by San Francisco lawyer Michael Kahn, chairman of Cal-ISO, the California Independent Systems Operator, which runs the state's electricity grid. An industry lawyer said the decision to have Kahn, who is a political supporter of the governor but who has no experience with FERC, head the delegation may have hurt the state. ??But a source close to the Californians said Kahn was an effective leader. "We were better served by the fact that we didn't have a FERC lawyer," said the source. ??At the end of the first week of negotiations, Wagner delivered a tongue-lashing to all sides, questioning the political independence of the Californians but also growling at the generators. He warned the companies that they might be ordered to refund "substantially more" than $2 billion. ??On July 2, Wagner told the California delegation he was disappointed with the offers he had received from the generators. Later, he revealed they added up to $670 million. That total rose only $46 million by the conclusion of the negotiations. ??The next day, Wagner floated a possible deal: $2.5 billion in cash payments and $2 billion in discounts on long-term power contracts. ??The Californians were intrigued. "When you're talking about $4.5 billion, you've got to sit down and start thinking about it," said a source close to the delegation. ??An industry participant sized it up differently. "That proposal was floated out one day and never really went anywhere," he said. "No one seemed interested." ??From there the talks bounced up and down before finally ending on a decidedly down note. ??On Sunday, Wagner scheduled a session to go over once more how California had estimated that it had been overcharged by $8.9 billion. Once again, he came away unconvinced. But this time there was no next time: On Monday, Wagner ended the talks and prepared to make his recommendation to the FERC board. ??* ??RELATED STORY ??PG&E ruling: A judge bars ratepayers group from bankruptcy proceedings. B8 LOAD-DATE: July 11, 2001 ??????????????????????????????5 of 54 DOCUMENTS ??????????????????????Copyright 2001 / Los Angeles Times ??????????????????????????????Los Angeles Times ????????????????????July 11, 2001 Wednesday ?Home Edition SECTION: Business; Part 3; Page 2; Financial Desk LENGTH: 325 words HEADLINE: California; ; Calpine to Buy More Natural Gas Reserves; Energy: The power producer is set to purchase wells in Texas and New Mexico for $355 million plus debt. BYLINE: From Bloomberg News BODY: ??California power producer Calpine Corp. on Tuesday agreed to buy 236 billion cubic feet of natural gas reserves in Texas and New Mexico for $355 million in cash and $49.5 million in assumed debt to boost reserves of the fuel it uses to generate electricity. ??San Jose-based Calpine agreed to purchase 35 wells that produce 6 million cubic feet of gas a day in New Mexico's San Juan Basin from closely held Bayless Cos. ??It also agreed to buy a majority interest in Houston-based Michael Petroleum, which produces 43 million cubic feet of gas a day in south Texas, from Carrizo Oil & Gas Inc. ??The purchases increase Calpine's gas reserves to about 1.5 trillion cubic feet, spokeswoman Katherine Potter said. ??The company, a large seller of electricity in California, has been buying gas reserves to protect itself from price increases. The average price of California gas has more than tripled so far this year from a year ago. ??Potter declined to comment on the price of each transaction or to provide other details. ??Calpine has bought three Canadian gas producers in the last nine months. It agreed in February to buy Encal Energy Ltd. for about $1 billion in stock, more than doubling its gas reserves. ??In November, it bought TriGas Exploration Inc. for $103 million. In January, it bought closely held Quintana Minerals Canada Corp. for $97.6 million. ??Calpine said in April it's considering buying gas-producing properties in western Canada and offshore Nova Scotia. ??With the purchases, Calpine is meeting its goal of owning 25% of the gas it needs to produce electricity, the company said. Calpine is running or constructing enough power plants to light about 41.2 million U.S. homes. ??It expects to supply energy to 70 million homes by the end of 2005, the company said. ??Shares of Calpine rose $1.39 to close at $45.34 on the New York Stock Exchange. They have risen 30% in the last year. LOAD-DATE: July 11, 2001 ??????????????????????????????6 of 54 DOCUMENTS ??????????????????????Copyright 2001 / Los Angeles Times ??????????????????????????????Los Angeles Times ????????????????????July 11, 2001 Wednesday ?Home Edition SECTION: Business; Part 3; Page 2; Financial Desk LENGTH: 574 words HEADLINE: California; ; Edison's Finances Fare Better; Energy: After selling some assets, the company appears to be back on track. But it says the future of its utility is in the Legislature's hands. BYLINE: JERRY HIRSCH, TIMES STAFF WRITER BODY: ??Ailing Edison International will have $46 million cash in hand by year's end thanks to a series of financial transactions and asset sales the Rosemead-based power company has undertaken in the last month, company executives said Tuesday. ??Although the actions--which include a massive refinancing of bank loans and bonds, the sale of land and a home security company--will stabilize Edison International, the future of its Southern California Edison utility remains precarious, officials said. ??In a conference call with creditors that are owed nearly $1 billion by SCE, Theodore Craver Jr., Edison's chief financial officer, said the fate of the utility is largely in the hands of a state Legislature that appears reluctant to take action on a rescue plan worked out by Gov. Gray Davis. ? ??The agreement between Davis and Edison gives the Legislature until Aug. 15 to approve the deal. However, some lawmakers have said that's an arbitrary date and that the deadline could be extended. ??The Legislature is scheduled to recess July 20. ??One factor complicating efforts to rescue the utility is the recent failure in settlement talks between the state and power generators. In a hearing before a federal administrative law judge in Washington, state officials and power generators argued over $8.9 million in disputed charges without reaching an agreement. ??Settling the dispute may take months, and the judge indicated Monday that California probably will recoup less than $1 billion. ??"The delay doesn't help the odds of getting the Legislature to move," said Brian Youngberg, an analyst at Edward Jones in St. Louis. "A big refund in hand would have made things simpler for the Legislature." ??The agreement with Davis calls for the state to purchase SCE's transmission lines for $2.8 billion and for SCE to issue bonds to repay as much as $3.5 billion in debts that accrued from selling power at a loss when prices spiked. The bonds would be paid off by a rate increase. ??During the conference call Tuesday, several creditors expressed concern over the lack of legislative movement on the utility's rescue plan. SCE is making only interest payments to the creditors, which hold $931 million in defaulted bonds and notes. ??One creditor asked whether SCE would file for bankruptcy if the Legislature fails to take action by the August deadline. ??"We are not prepared to state what we would do," Craver responded. ??However, he noted that the utility let pass an earlier deadline for the California Public Utilities Commission to approve aspects of the agreement. The commission has since addressed most of the issues. ??He said SCE still believes that a bankruptcy would make solving the utility's financial problems more complicated. ??The next significant date after the August deadline is Sept. 15, when $200 million in bank loans come due. ??On Tuesday, Edison International's shares closed up 5 cents at $14.05 on the New York Stock Exchange. The stock has risen about 21% over the last five trading days. ??Recharged ??A debt refinancing and the sale of its home security business and other assets have helped stabilize the finances of Edison International, sparking a rally in its stock, which has gained nearly 21% over the last five trading days on the New York Stock Exchange. ??* ??Edison, weekly closes and latest ??Tuesday: $14.05, up 5 cents ??Source: Bloomberg News GRAPHIC: GRAPHIC: Recharged, Los Angeles Times LOAD-DATE: July 11, 2001 ??????????????????????????????7 of 54 DOCUMENTS ??????????????????Copyright 2001 The New York Times Company ??????????????????????????????The New York Times ????????????????July 11, 2001, Wednesday, Late Edition - Final SECTION: Section A; Page 1; Column 3; National Desk LENGTH: 1519 words HEADLINE: Calls for Change in an Ancient Occupation BYLINE: ?By EVELYN NIEVES DATELINE: MOJAVE, Calif. BODY: ??The shepherd was deep in the desert, eight miles from the nearest road and more than four miles of rocky brush past the closest sign of civilization, a landfill. It was midafternoon, 110 degrees, and the 500 sheep he tends 24 hours a day, seven days a week were sleeping. But with nothing else to do, he was watching them anyway, pacing the parched earth with two panting border collies by his side. ??Two years and eight months into a three-year contract as a shepherd under a federal guest worker program, the 40-year-old Peruvian said he was still waiting for a day off. He lives in a 6-by-12-foot trailer with no running water, no electricity, no phone, no toilet. ???"This is my bathroom," he says with a toothy smile, holding up a long-handled garden shovel. ??The man, who would not let his name be used for fear of angering his employer, is typical of shepherds in the United States, about 800 of whom toil in California. Mostly from Peru and Chile, they live isolated, nomadic existences here, dependent upon their employers for food, mail and all contact with the outside world. ??Aside from tinny radios or tiny televisions that some keep in their trailers, they live much as shepherd have always lived, in the middle of nowhere with no human contact save for when their bosses come to move the trailer to a new grazing spot or bring their weekly rations of food and water. ??In the universe of migrant farm labor, shepherds make up the tiniest sliver and are so invisible that with a few exceptions they have had no advocates to call for reform. ??As federal guest workers, they are brought here because their employers, the sheep ranchers, could find no Americans willing to be shepherd, even here in California's farm belt, where unemployment in some counties is over 15 percent. ??That may be not only because their living conditions make migrant farm workers seem pampered, but also because under a quirk in federal labor laws, shepherds are excluded from minimum wage regulations. Until July 1, when California's Industrial Welfare Commission, which regulates working conditions, ordered sheep ranchers to increase herders' wages by $150 a month, shepherds, who are essentially on duty 90 hours a week, made $900 a month. ??Still, shepherds in California, the largest sheep ranching state after Texas, are the lucky ones. They make the most money. In other states, the pay is $600 to $800 a month. ??Shepherds are also on the legislative map. When the state Industrial Welfare Commission refused to set working conditions for shepherds, such as overtime pay and rest periods, State Assemblyman Paul Koretz, a Democrat from West Hollywood, drafted a bill that would require rest periods and basic amenities, such as toilets, lighting, water and regular access to phones. ??The bill, which has passed the Assembly and is expected to be reviewed by a State Senate committee today, would require shepherds to be given a 30-minute meal break in a five-hour work period if someone is available to relieve them. It would also require employers to provide housing that includes toilets, heating, lighting, water, stoves and refrigerators. ??"It's logical that at some point their conditions would have to change from the days of the Old Testament," Mr. Koretz said. "I'm generally trying to bring them up to the 20th century." ??But passage of Mr. Koretz's bill is in no way assured. Ranchers vehemently deny that shepherds are mistreated, and lobbyists for the sheep ranching industry say that new regulations would kill an ailing industry. ??Over the last 20 years, sheep ranchers have seen their profits steadily erode. In 1999, California ranchers made 35 cents a pound for wool, 30 cents less than in 1994. Lamb meat wholesales for 82 cents to 83 cents a pound. In 1997, it was 91.6 cents. ??With the erosion of profits, the herd in the state has steadily declined. From 1994 to 2001, according to the United States Department of Agriculture, the number of sheep produced in California dropped by a third, to 840,000, and the number of farms with sheep has dropped by 45 percent. ??Officials of the Western Range Association, a lobbying organization representing ranchers in 11 states, did not respond to calls seeking comment. But in an article in The Fresno Bee, James Holt, an agricultural economist with the association, said the sheep ranchers had been trying to make it clear to legislators that the money to pay for any added benefits or amenities to herders is simply "not there." ??"We've tried to be responsible and responsive" to shepherds, Mr. Holt said. ??Dennis Hollingsworth, a Republican assemblyman from Temecula who voted against the bill, said he thought it would do more harm than good. The shepherds, he said, do not really need rest periods. ??"Most of the time they are resting, unless there is a danger," he said. "Most of the time, it's just watching the flock." ??Mr. Hollingsworth added that the impact of the bill "will not be better wages or working conditions for sheepherders. The impact will be that wool growers will leave this state and there will be less jobs for sheepherders to have in California." ??Mr. Koretz said that he was trying to be sensitive to the industry, and that if necessary, he would moderate his bill so it could land on Gov. Gray Davis's desk and be assured his signature. But a small, persistent group of advocates for the shepherds say that modest goals for shepherds should not be compromised. ??"We're not asking for Jacuzzis," said Chris Schneider, executive director of Central California Legal Services and a crusader for improved conditions for sheepherders for over a decade. "When an industry is going through a low period, we don't lower the minimum wage or say it could force their workers to work without getting paid." ??Last year, the Fresno-based legal aid group published a report on the conditions of 41 shepherds in the lower Central Valley counties of Fresno and Kern, which contain most of the sheep ranches in the state, and found that 90 percent of the shepherds had never had a day off and more than 95 percent had no toilets. The report also said that many shepherds were not allowed visitors, and that they were threatened with deportation if they asked for such things as more food or clean water containers. ??One former shepherd, Victor Flores, said he was dumped at a motel in Bakersfield when he asked his employer for more food. He said he was forced to take another job, as a dishwasher, and now, seven years later, works in a fruit packinghouse. He has formed an advocacy group, the Sheepherders Union, which documents the conditions and experiences of the shepherds. ??"I never thought when I came here from Peru that this country would treat people as less than human," he said. ??Ranchers say that the shepherds are paid much more than they would be making in their native countries, an argument that rankles those fighting for improved conditions. ??"When someone comes to this country, we don't take their native country into consideration in how we treat them or pay them," Mr. Schneider said. ??There is no denying that the shepherds live primitively. Visits to shepherds in Fresno and Kern Counties -- where finding just four herders took two days because of their remote locations -- found them in very old, dilapidated trailers, full of flies and mosquitoes. One shepherd had a plastic water barrel that was clearly full of fungi and smelled of rotted meat. One was spending a 113-degree afternoon in his 110-degree trailer, waiting for the sun to set so he could spend several hours putting up temporary fences to contain his sheep. All their dogs stayed in holes they had dug under the trailers to avoid the blistering heat. ??The shepherd found in the Mojave Desert, the most remote location of any shepherd interviewed, will be moved in October during what is called the lambing season, to farmland outside of Bakersfield. ??He said he looked forward to it, despite the backbreaking 13-hour days of caring for newborn lambs and their mothers, because then he has greater contact with the outside world. Two or three shepherds work together and occasionally go to stores to get supplies for the sheep. ??"I get depressed here very often," he said. ??But he also considers himself fortunate. Once a week, a kindly man he met when he was stationed near Bakersfield during the six-month lambing season brings him a newspaper. And his employer comes to check on him every other day. Many shepherds do not see their bosses for a week or two, when they bring supplies. A few weeks ago, his employer replaced the shabby 6-by-8-foot wooden trailer he was living in with a newer, 6-by-12-foot one that has seating besides a bed. ??And while he has never seen a movie, eaten at a restaurant, attended a church service or even spent a free hour walking around the one city in the United States he has glimpsed, Bakersfield, he said he would renew his contract and do the work for another three years. ??"My sons are 11 and 12 and I want the best for them," he said. "That's what I keep remembering all the time while I'm here." ??http://www.nytimes.com GRAPHIC: Photos: A Peruvian shepherd tended to his flock in the late-afternoon heat of California's Mojave Desert. (Peter DaSilva for The New York Times)(pg. A1); Many shepherds live in small trailers that lack electricity, toilets and running water, like this one in a remote area in Fresno County, Calif. (Peter DaSilva for The New York Times)(pg. A15) LOAD-DATE: July 11, 2001 ??????????????????????????????8 of 54 DOCUMENTS ?????????????????Copyright 2001 The Chronicle Publishing Co. ?????????????????????????The San Francisco Chronicle ???????????????????JULY 11, 2001, WEDNESDAY, FINAL EDITION SECTION: NEWS; Pg. A3 LENGTH: 512 words HEADLINE: Governor threatens to sue utilities for refunds; Davis says California won't settle for $1 billion SOURCE: Chronicle Staff Writer BYLINE: Mark Martin DATELINE: Sacramento BODY: One day after a federal judge rebuked California's claim that energy generators owe the state $8.9 billion, Gov. Gray Davis all but vowed to sue the companies to recoup the money. ???"If you think California will settle for $1 billion in refunds, we'll see you in court," Davis said yesterday. ???Continuing his heated rhetoric on the energy crisis, Davis blasted the energy companies for being inflexible during a 14-day negotiation session in Washington, D.C., that ended Monday. Both the state and power generators argue each is owed money as a result of California's dysfunctional electricity market. ???Federal Energy Regulatory Commission chief administrative law Judge Curtis L. Wagner ended the talks by saying the state was owed far less than it claimed, but the FERC's governing board will make a final decision on who owes what to whom in the coming months. ???Yesterday, Davis made it clear he wouldn't accept a FERC decision that strayed far from the state's calculations that power companies overcharged California nearly $9 billion. ???"The ball is in the FERC's court," he said. "They must step up and provide the refunds we've asked for." ???While Davis said California officials had gone to Washington prepared to discuss ways to reach a settlement, including renegotiating long-term contracts to buy power, an energy industry official faulted the state for its unwillingness to compromise. ???Generators put forward an offer even though they believe no refunds are owed, said Jan Smutny-Jones, executive director of the Independent Energy Producers. ???Smutny-Jones said the state needed to stop thinking it would get the $8.9 billion. ???"It's clear from the way the issue was characterized by the judge that $9 billion is not something the state is going to see any time in the near future," he added. "It is not based in reality." ???Davis also took heat from Republicans yesterday. ???"He desperately needs that refund, so he can renegotiate the dreadful contracts he has entered into," said Rob Stutzman, a consultant for the California Republican Party. "He's sitting at the poker table with very few chips." ???In other energy news yesterday, a judge refused to let a committee represent the public in the Pacific Gas & Electric Co. bankruptcy case and said a consumer lawyer's "irresponsible position" at a hearing last week could mislead PG&E customers into filing needless refund claims with the court. ???U.S. Bankruptcy Judge Dennis Montali said any refunds owed to customers were unrelated to the bankruptcy case and would be determined by regulators. ???At the hearing Thursday, attorney KaarenThomas argued that unless a committee represented customers' interests, PG&E could try to bar all refund claims that weren't filed by Sept. 5. ???Montali ruled in May that the committee was not authorized by federal bankruptcy law, and reaffirmed his ruling yesterday. ??-------------------------- ??Chronicle staff writers Lynda Gledhill and Robert Egelko contributed to this report.E-mail Mark Martin at [email protected]. LOAD-DATE: July 11, 2001 ??????????????????????????????9 of 54 DOCUMENTS ??????????????????????Copyright 2001 The Washington Post ?????????????????????????????The Washington Post ???????????????????July 11, 2001, Wednesday, Final Edition SECTION: A SECTION; Pg. A02 LENGTH: 934 words HEADLINE: GOP Speeds Action on Limited Energy Bills BYLINE: Peter Behr and Mike Allen, Washington Post Staff Writers BODY: ???House Republican leaders yesterday began a hurried campaign to pass a package of energy measures before Congress's summer recess begins in three weeks, but left many key issues on the sidelines because of differences with Democrats and a lack of clear policy signals from the Bush administration. ???A House Energy and Commerce subcommittee is scheduled to begin voting this week on a scaled-back legislative proposal that would increase federal subsidies for cleaner coal-burning technology, help more low-income households winterize homes and pay energy bills, and call for more energy-efficient television sets. ???But a much longer list of high-priority measures, including many in President Bush's energy plan, are stalled or tangled by divisions within the energy industry or between the industry and environmental critics. The delays could threaten action on the energy production and transmission problems cited by the administration eight weeks ago when it unveiled its program to address what it said was a looming national energy crisis. ???"Whatever momentum there is [for comprehensive energy legislation] is dissipating by the day," said Randall E. Davis, a Washington attorney who was a White House energy policy adviser in the Reagan administration. ???Bush administration officials are finishing legislative proposals to deal with challenges to the nation's electricity system, including siting of new power lines, transmission network reliability and the future of retail electricity deregulation. White House aides say the complexity of these energy problems takes time to resolve. ???"If we were to rush through these things, you'd be asking, 'Don't these issues require more deliberation?' " said Dan Bartlett, deputy assistant to the president. ???The test for the president, however, is whether the window of opportunity for enacting major energy legislation will close this summer or fall before the administration can weigh in -- and how much leverage Bush can exert on the politically charged issue. ???"If you don't have the White House exerting leadership, I don't see where it comes from," Davis said. ???In the face of polls suggesting that energy is becoming a political liability for the Republicans, the House GOP leadership has decided to push a first round of energy legislation forward on a fast track without waiting for the White House, aiming for votes on a package before the Aug. 4 congressional recess. ???Senate Democratic leaders say it will take most of the fall to find agreements on an energy plan that can win approval. ???Rep. W.J. "Billy" Tauzin (R-La.), the House Energy and Commerce Committee chairman, acknowledged yesterday that the bipartisan bill he and other committee members were introducing this week left a small footprint, although he called it "a good first step." ???"It does not do everything that everyone wants at this time," Tauzin said. "Energy issues are never easily addressed," he continued, but the nation's energy challenges require action now. ???The GOP strategy is to report different energy bills from three or four committees, including Commerce, Ways and Means, and Resources, and to bring them to the House floor this month under the direction of House Majority Whip Tom DeLay (R-Tex.). ???In addition to the Commerce bill, the other initiatives include opening the Arctic National Wildlife Refuge in Alaska and other federal lands to oil and gas drilling, and tax incentives and credits for coal-fired power plants and conservation. ???Some lawmakers said that compromise agreements on new conservation initiatives are possible, but will take time, and therefore should not be rushed. For now, however, the limited bill introduced in the Commerce Committee yesterday represents the extent of Republican and Democratic agreement on energy issues, legislators said. ???As the debate unfolds this month, the parties' more numerous differences on energy will be highlighted. ???At a news conference today, for example, Interior Secretary Gale A. Norton and GOP congressional leaders will begin the campaign to open the Arctic refuge to drilling. One of Bush's top priorities, it is opposed by most congressional Democrats. ???Democrats on Tauzin's committee will look for opportunities in the next few weeks to focus attention on one of their key issues, California's energy crisis. Rep. Henry A. Waxman (Calif.) and other House Democrats hope to force a vote on a measure Republican leaders oppose that would order federal regulators to impose tighter price controls on California electricity sales. ???Other energy issues that appear adrift are proposals to increase the fuel efficiency of automobiles, particularly gas-eating sport-utility vehicles; renewal of comprehensive liability insurance for nuclear plant operations; possible repeal of a 1935 law restricting power company mergers; and whether to rewrite clean air rules for power plants and refineries. ???Several administration officials professed to be mystified by congressional criticism. They said more than a dozen administration officials have held five energy meetings on Capitol Hill in the past five days, and Bush plans to address energy, among other subjects, when he meets with the House Republican Conference this morning. ???"Implementing the president's energy strategy is more important now than ever," said Jim Wilkinson, a White House communications official. "Consumers are still vulnerable to wild fluctuations in prices. We've got to make sure that next summer and the summer after that are better than this summer was." LOAD-DATE: July 11, 2001 ??????????????????????????????20 of 54 DOCUMENTS ??????????????????????Copyright 2001 Business Wire, Inc. ????????????????????????????????Business Wire ????????????????????????????July 10, 2001, Tuesday DISTRIBUTION: Business Editors LENGTH: 1003 words HEADLINE: Texas to Avoid California Electricity Shortage; New Customer Brochure Explains Differences in the Texas and California Electricity Markets DATELINE: AUSTIN, Texas, July 10, 2001 BODY: ??The Public Utility Commission of Texas (PUC) and Texas Electric Choice announced today the availability of an educational brochure that explains why Texas will not experience California-style blackouts and electricity price spikes. ??Titled "Texas is Different from California," the brochure informs electric customers that the lights will stay on in Texas because we have plenty of power reserves, diverse sources of power and a strong infrastructure to support competition. ??"Texas is implementing competition before deregulation to ensure that we get it right," said PUC Commissioner Brett Perlman. "In other parts of the country, there are legitimate causes for concern about the energy infrastructure. But Texas has a strong infrastructure to meet our needs for electricity, even during a hot Texas summer." ??Many areas of the United States have experienced strong economic growth in recent years. Questions are being raised about the supply of electricity primarily because new infrastructure to produce and deliver electricity has not kept pace with the new homes and businesses that use electricity in our growing economy. In Texas, new power plants have been built to supply electricity for our growing economy. Texas has also structured the competitive market to encourage competition among Retail Electric Providers (REP) and given them the tools to offer stable prices to customers. ??The brochure explains that Texas has plenty of power to keep up with the rising demand for electricity. More than 50 new power plants have been built or are currently under construction in Texas since 1995 and 31 more are in the planning stages. California, on the other hand, has built only two power plants since 1995. Texas gets its power from diverse sources, whereas California relies on hydroelectric power for 25 percent of its electricity needs. Therefore, during dry conditions, California is susceptible to electricity shortages. ??In 1999, the Texas Legislature passed a law that introduces retail competition in electricity beginning in January 2002. This law gives Texans the power to choose a Retail Electric Provider (REP) -- the company that provides their electricity. Customers of Texas' investor-owned utilities will be able to shop for a REP -- giving Texans more control over their electricity buying decision. The PUC will continue to enforce customer protections and regulate the delivery of electric service to ensure safety and reliability. ??To obtain a copy of the "Texas is Different than California" brochure, or for additional information about Texas Electric Choice, customers may contact the Texas Electric Choice answer center toll free at 1-866-PWR-4-TEX (1-866-797-4839). Customers may also download a copy of the brochure from the www.powertochoose.org web site. ???????????????????10 Ways Texas Differs from California ????????????Texas ???????????????????????????California 1. + More than 27 new power plants ?????- Only two new power plants ?????have been built in Texas since ??????have been built in ?????1995, with another 27 under ?????????California since 1995. ?????construction and 31 more in the ?????planning stage. 2. + It takes approximately two years ??- California has a long and ?????to build a new power plant in ???????difficult licensing process, ?????Texas. ??????????????????????????????where power plants take six ??????????????????????????????????????????to seven years to complete. 3. + Most areas of Texas have little ???- California historically ?????ability to export or import to and ??imports 25 percent of its ?????to and from other states. The ???????electricity from other ?????electricity from most of the new ????states. ?????power plants in Texas will be ?????consumed in Texas. 4. + Texas produces electricity, ???????- California is dependent upon ?????utilizing a diversity of fuel ???????hydropower for 25 percent of ?????sources, including natural gas, ?????its power needs. ?????coal, nuclear energy, wind and ??????California's power supply is ?????others. ?????????????????????????????vulnerable to dry ??????????????????????????????????????????conditions. 5. + The Texas market allows REPs to ???- California did not allow ?????enter long-term contracts for ???????long-term contracts. This ?????power, to help shield customers ?????forced electric providers ?????from price increases. ???????????????there to buy power in a ??????????????????????????????????????????daily market, where they ??????????????????????????????????????????often had to pay high prices ??????????????????????????????????????????when demand was high. 6. + Texas is aggressively building ????- California has significant ?????transmission lines to interconnect ??transmission constraints ?????new power plants; maintain ??????????that limit the ability to ?????reliability and give REPs many ??????move power between the ?????choices in where they buy power. ????Northern and Southern ??????????????????????????????????????????regions of the state. 7. + In advance of retail competition, ?- California began addressing ?????Texas has adopted rules encouraging ?rules for on-site generation ?????generation of power on customers' ???after retail competition ?????premises to give customers more ?????began. ?????control over the reliability and ?????price of electricity. 8. + The Texas rules encourage new ?????- California's rules, ?????companies to compete at a retail ????particularly the regulations ?????level. ??????????????????????????????on retail rates, discouraged ??????????????????????????????????????????competition at the retail ??????????????????????????????????????????level. 9. + Texas has learned from California ?- California was one of the ?????and other states experiences what ???first states to deregulate ?????not to do and what to do. ???????????its electric industry. 10. + Texas has a strong restructuring ?- California's restructuring ??????plan in place. ?????????????????????plan has contributed to ??????????????????????????????????????????power shortages, high prices ??????????????????????????????????????????in the wholesale market and ??????????????????????????????????????????financial problems for the ??????????????????????????????????????????state's utilities. ??CONTACT: Public Utility Commission of Texas Gary Rasp, 512/322-5386 [email protected] or Karen Springs, 214/224-8426 [email protected] ??URL: http://www.businesswire.com LOAD-DATE: July 11, 2001 ??????????????????????????????21 of 54 DOCUMENTS Content and programming copyright 2001 CNBC/Dow Jones Business Video, a division ??of CNBC/Dow Jones Desktop Video, LLC. No portions of the materials contained ?herein may be used in any media without attribution to CNBC/Dow Jones Business Video, a division of CNBC/Dow Jones Desktop Video, LLC. This transcript may not ???????????????????????be copied or resold in any media. ???????????????????????CNBC/Dow Jones - Business Video ?????????????????????SHOW: CNBC/DOW JONES BUSINESS VIDEO ????????????????????????????July 10, 2001 Tuesday ??????????????????????????Transcript # 071001cb.y50 TYPE: INTERVIEW SECTION: Business LENGTH: 1419 words HEADLINE: The Shaw Group - President & CEO - Interview GUESTS: James Bernard, John Manley BYLINE: Mark Hianes BODY: ???THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED. MARK HAINES, CNBC ANCHOR, SQUAWK BOX: Piping hot earnings right off the presses. The Shaw Group beat the Street by $0.02, third quarter earnings $0.42 a share, net income up 142 percent to $18 million. Revenues up 125 percent to nearly $400 million. The Shaw Group is a leading maker of prefabricated piping systems used mainly in the power, chemical and gas processing industries. The stock has been on a slide. It's down more than 50 percent from the highs it set just last June, just a month ago, a little more than a month ago. Late June it was over 60 from the looks of that chart, closing about 42. Since then about 50 percent. What's going on? No, wait a minute, 60 to 42 is about 30 percent. Where is the stock headed from here? Let's ask James Bernhard. He is Shaw Group's Chairman and CEO. Good morning, sir. JAMES BERNHARD, CHAIRMAN, PRESIDENT & CEO, THE SHAW GROUP: Good morning. HAINES: Is Wall Street missing something here? Your numbers look terrific and the stock is something less than that. BERNHARD: Well, I think that in our sector when FERC came out with the ruling mitigating wholesale price markets in the power business in the western part of the United States, that our stock took a momentary reflection on a downward trend. But I think once we work through those issues that the regulations that occur there has, won't build any more power plants and that is what our business is, the building of power plants, and that market has never been better. ?HAINES: Walk me through this. I guess the thinking was the FERC decision would discourage new power plant production, is that it? BERNHARD: That's it. But, you know, the need for electricity hasn't diminished so the FERC rulings won't decrease the building of power plants and we are not in the buying and selling of electricity, but are in the business of building power plants, coal, gas cycle, as well as nuclear power plants. HAINES: Have you, without naming names, are any of your customers expressing reservations about building plants in certain geographical areas where they fear the political officials? BERNHARD: No, we haven't seen any indication of a downward trend on the building of plants. We have several opportunities in Arizona and Utah and (unintelligible) where we are building plants for the California region as well as those local areas as far as the wheeling process back to California. You know, business has never been better. In fact, yesterday we received a half a billion dollar order from Florida Power and Light for a cogeneration plant in the northeastern United States. So continuing electricity is a decade building process, not an 18 month process. JOHN MANLEY: Mr. Bernhard, it's John Manley. That leads to my question, which is when you talk about the business being as good as it is has ever been, how cyclical is your business? How long can it stay this good? Is there a question of over capacity in that industry at some point in time? BERNHARD: Well, at some point in time there will be but, you know, in the United States we are going through a metamorphosis where we haven't built plants in 20 years and we have deregulation. We not only need to replace old plants but we need to build more efficient plants. And certainly we have to go back to our old coal plants and make them more environmentally -- clean air continues to be a huge factor and I think this is a business for a long time to come. The cycles are long and not the short cycles of 12 to 18 months. The cycles tend to be 10 and 15 years. HAINES: About 80 percent of your business is domestic but 20 percent is a pretty big chunk and it's overseas. What are you seeing in your overseas market? BERNHARD: Well, the overseas markets are beginning to come back, especially the power business in Europe. We think that after the United States in the next eight or 10 years the European market will begin in the next few years, with the deregulation there and the increase in capacity required that it will be also a huge market for us. HAINES: I take it that none of your customers are having difficulty getting financing? BERNHARD: I don't think so. It has been a pretty strong market out there, the need for electricity. I mean, when we are talking about blackouts in different parts of the country, that is a long way, and the need for electricity continues to grow. We are a long way from satisfying the requirements. You need to have a 17 to 20 percent reserve. HAINES: And the credit is out there, was my question, because there are suggestions that many sectors of the economy are seeing a bit of a credit liquidity crunch. All right, Mr. Bernhard, thank you very much and congratulations on some great looking numbers. We appreciate it. BERNHARD: Have a good day. Thank you. HAINES: James Bernhard is Shaw Group Chairman and CEO. SHAW GROUP INC (76%); LOAD-DATE: July 11, 2001 ??????????????????????????????23 of 54 DOCUMENTS ??????????????Copyright 2001 Knight Ridder/Tribune Business News ???????????????????????Copyright 2001 Contra Costa Times ??????????????????????????????Contra Costa Times ????????????????????????????July 10, 2001, Tuesday KR-ACC-NO: CC-POWERGRID LENGTH: 938 words HEADLINE: Analysts: Overloaded California Grid Can't Handle High Demand, New Plants BYLINE: By Rick Jurgens BODY: ??Gov. Gray Davis' visit to Pittsburg on Monday to start Calpine's new gas-fired power plant highlighted the state's scramble to avert summer blackouts by squeezing megawatts out of the fleet of generators in California and other western states. ??But while successful so far, running the electricity infrastructure at full bore raises the risk of an even more calamitous collapse, according to a report issued late last month by the Electric Power Research Institute, a Palo Alto organization funded by investor- and government-owned utilities. ??"Critical equipment -- such as large transformers -- on overloaded lines will be running at maximum capacity," according to "The Western States Power Crisis: Imperatives and Opportunities." ??"The failure of a single such critical component could result in unplanned outages that might cascade throughout the Western Region, similar to the multi-state outages of July and August of 1996." ??That July blackout plunged 2 million customers into darkness, while the August blackout in the midst of a heat wave left 7.5 million people throughout the West without power for up to seven hours. ??The institute's report warns that despite those outages and additional demands on the electricity infrastructure from the growth of region-wide electricity trading, transmission line owners have failed to invest in new lines to carry power over long distances. In addition, "routine maintenance and upkeep of transmission equipment has been significantly reduced over the past decade," the report says. ??That has left the West with a big backlog of work. ??"The estimated cost of bringing the regional transmission system back to a stable condition is $ 10 billion to $ 30 billion, to be spent over the next 10 years on new transmission lines and upgrades of existing facilities," although new technologies could trim that spending some, according to the report. Despite the need for such investment, the analysts warn, there is a "lack of adequate financial incentives for investment in the underlying infrastructure and (a) lack of alignment between 'who pays and who gains."' ??California's electricity industry makeover has worsened the problem, according to Brent Barker, the Electric Power Research Institute's corporate communications manager. "With restructuring, the responsibility has been left hanging," he said. "There's a vacuum right now." ??More dollars won't do the job alone, warned Mark Stultz, public affairs vice president for the Electric Power Supply Association, a Washington, D.C., organization of generating companies. To clear the way for effective investment, he said, federal regulators must have the authority to use eminent domain -- take private property for transmission line rights of way and other public purposes. ??But addressing the transmission investment problem won't be easy, warned Severin Borenstein, executive director of the UC Berkeley Energy Institute. "Every transmission line has huge competitive ramifications," helping some power plant owners and hurting others, he said. ??Still, power plant builders are pushing ahead. "California is building its way to total energy self- sufficiency," the governor said in Pittsburg. ??New technology could also aid that effort, enabling generating capacity to be added more cheaply by upgrading existing plants than by building new plants, the report said. Up to 5,100 megawatts -- more than nine times the capacity of Calpine's new $ 350-million, 555-megawatt plant -- could be added with an investment of only $ 460 million in upgrades, according to the institute's report. Fully 700 megawatts could come from spending only $ 2 million to change timber harvest laws to ensure a steady supply of wood chips to fuel generators, it said. ??The report criticizes California and other states that responded to a 1992 federal law encouraging electricity restructuring. They "failed to provide sufficient incentives to build needed generation facilities, increase transmission grid capacity and provide customers with better ways of managing their electricity usage," the report said. Wholesale competition was separated from retail competition, while developing a competitive wholesale electricity market presents "a significant technical challenge that has generally been overlooked by policy makers," it added. ??Stultz of the Electric Power Supply Association said California created many of its own problems. "The wholesale market has shown itself to (be) adaptive in other regions of the country." ??The report also warns against depending too much on a single fuel, natural gas, that faces growing demand and will remain expensive. "California is on the verge of an overreliance on natural gas," it said. "If all the planned additions are built, well over half of California's generation will be gas-fired, compared with about 30 percent now." ??"We may be setting up the next energy crisis down the road," Barker warned. ??To avoid future problems, the report calls for "a coordinated planning mechanism to ensure adequate investment in generation, transmission and load (demand) management" and to design power markets. It also calls for the creation of an "independent institution/agency to perform periodic assessments of the performance of the infrastructure, markets and their interface." ??But Stultz emphasized unleashing market forces. "The way to address the situation in the future is to embrace competition, not to shy away from it," he said. ??----- ??To see more of the Contra Costa Times, or to subscribe to the newspaper, go to http://www.hotcoco.com/ JOURNAL-CODE: CC LOAD-DATE: July 11, 2001 ??????????????????????????????24 of 54 DOCUMENTS ??????????????????????Copyright 2001 Copley News Service ?????????????????????????????Copley News Service ????????????????????????????July 10, 2001, Tuesday SECTION: Commentary LENGTH: 530 words HEADLINE: Copley Editorial Service BODY: ??The energy crisis settlement talks in Washington have failed to reach agreement on how much money the power companies should refund to Californians. But the conference overseen by a Federal Energy Regulatory Commission judge established one very important truth: Power companies definitely did gouge Californians. ??Administrative law judge Curtis Wagner says FERC's latest price-restraint rules should be applied retroactively to Oct. 2 in order to figure out how much the state was gouged. Oct. 2 is the date when FERC acknowledged that wholesale prices were not ''just or reasonable'' under federal law. FERC commissioners claim they have no authority to issue refunds before that date, although California claims they do. ??Wagner says California was gouged by only $1 billion or so, dating to Oct. 2. California says it's more like $4 billion. If the recent FERC price restraints were retroactive to May 2000, and overcharges by all power providers were added up, the state figures it would be owed $8.9 billion. ??Some believe California's deregulation law gave energy companies the freedom to gouge. That's not true. Price gouging in the wholesale electricity market violates the Federal Power Act of 1920, which mandates just and reasonable rates. Market power, the ability of electricity producers to force prices higher, violates that law, and the Federal Power Act requires refunds when market power exists. Market power is gouging. ??FERC, the supposed enforcer of the Federal Power Act, acknowledges that electricity companies engaged in market power but it has so far refused to order appropriate refunds. ??Following the failed settlement talks, California has several venues to press its case. First, FERC could ignore Wagner's figures and decide that power generators owe California the $4 billion. We urge commissioners to do so. ??Wagner also recommended that FERC hold a hearing in which California and the power generators could make their financial claims. If FERC refuses to hold that hearing, or issues a ruling against California, either with or without such a hearing, the state can file a protest to the commission to make its case. If the state gets no satisfaction, it can go to federal court and request a judicial review. ??Federal judges have not yet ruled on whether FERC violated the Federal Power Act by allowing gouging to continue. Federal courts have rejected requests by Southern California Edison and others for emergency action against FERC. The courts said such extraordinary requests were improper because other remedies were available. ??A judicial review would be very different. It would look directly at whether FERC is in violation of the Federal Power Act by failing to ensure just and reasonable wholesale rates. If a federal court finds that FERC has failed its regulatory duty, it could force the commission to order refunds of all charges that were unjust and unreasonable. ??FERC still has the opportunity to make the right ruling and give California ratepayers and businesses their money back. If it doesn't, the state should pursue its case aggressively. Reprinted from The San Diego Union-Tribune. LOAD-DATE: July 11, 2001 ??????????????????????????????27 of 54 DOCUMENTS ???????????Copyright 2001 The Houston Chronicle Publishing Company ????????????????????????????The Houston Chronicle ????????????????????July 10, 2001, Tuesday 3 STAR EDITION SECTION: A; Pg. 1 LENGTH: 921 words HEADLINE: California to get plan for refunds; Officials celebrate judge's proposition SOURCE: Staff BYLINE: DAVID IVANOVICH, LAURA GOLDBERG DATELINE: WASHINGTON BODY: ??WASHINGTON - Power companies failed Monday to reach agreement with California over how much to pay in refunds for alleged overcharging during the state's electricity crisis. ??And so the judge who tried to mediate those talks will recommend a plan that would generate "hundreds of millions, and maybe $ 1 billion" worth of refunds, a far cry from the $ 8.9 billion California has demanded. ??A marathon, 15-day negotiating session between California and a collection of power generators that included Houston-based Reliant Energy, Enron Corp., Duke Energy North America, Dynegy and El Paso Corp. ended without the parties coming close to clinching a deal. ??"In 15 days you can't work miracles," said Curtis L. Wagner, the administrative law judge overseeing the talks at the Federal Energy Regulatory Commission. ??As a result, Wagner will propose the five-member commission adopt a plan that would result in at least some refunds for power sold between October 2000 through May. ??California officials quickly seized on that point to claim victory. ??Michael Kahn, head of the California Independent System Operator, called Wagner's plan a "ringing endorsement" of his states' claims that refunds are necessary. ??But Wagner's methodology for determining how those refunds should be calculated tilted toward the power generators' position in many key respects, hence the wide disparity between his ballpark estimates and California's claims. ??Wagner noted that he had not run the numbers under his methodology. Instead, he will recommend regulators hold hearings within 45 to 60 days to determine exact refund totals. ??California officials insisted the final refund dollars will total "multiple billions." And they left open the very real possibility they will sue in federal court to recoup the remaining dollars they believe they are owed. ??California Gov. Gray Davis, who has been a vociferous critic of the commission, went on the offensive again Monday. ??"While in the past the FERC has shown little, if any, interest in consumers, they now have the opportunity to redeem themselves by returning the $ 8.9 billion California has demonstrated it is owed," Davis said in a prepared statement. ??During the negotiations, the electric power companies, marketers and other suppliers offered to pay $ 716.1 million, never coming anywhere close to California's demands. ??"Not surprisingly, the energy pirates that bilked rate payers out of billions of dollars stonewalled and refused to negotiate in good faith with our team in Washington," Davis said in his last salvo at the out-of-state generators. ??California wanted Reliant, for instance, to pay $ 376 million in refunds, said John Stout, senior vice president for asset commercialization for Reliant's Energy Wholesale Group. ??But that's nearly three times the $ 127 million operating margin the company garnered from its California operations between October and May, according to a filing the company made with the Securities and Exchange Commission last week. ??Stout said Reliant offered to pay slightly less than $ 50 million. ??"We were essentially offering to refund one third of the operating margin over the relevant period," Stout said. ??But Davis contends: "The energy generators and suppliers refused to recognize their responsibility to the people of California and own up to their profiteering." ??California's claims for $ 8.9 billion include sales starting in May 2000. But Wagner only considered claims from October onwards. That meant $ 3 billion of California's claims were not part of the settlement talks. ??"For California to continue this bogus claim of $ 8.9 billion, I think just shows that they are not interested in any kind of a settlement," Enron spokesman Mark Palmer said. "They are just interested in creating a whipping post. The last thing that the political leadership in California wants to do is take responsibility for the problem they created." ??Joel Newton, regulatory counsel for Dynegy and a spokesman for a coalition of generators, argued that California's analysis did not account for last year's rise in natural gas prices, high environmental costs and transportation constraints for both electricity and natural gas. ??The settlement talks were organized not only to try to resolve the differences over refunds but other outstanding disputes stemming from California's power debacle. ??California, trying to move away from its dependence on power purchases from the spot market, has been trying to line up long-term power contracts. ??As of June 12, the state had signed deals totaling $ 42.8 billion with 18 different suppliers. As a result, California purchased only 1.9 million megawatt hours of power on the spot market, down from 4 million in May. ??But with a slew of civil and potentially criminal investigations, some power companies have been loathe to sign long-term deals while those disputes are still outstanding. ??The power companies pushed, as part of the settlement negotiations, to have those other investigations dropped. But California officials refused. ??"We're disappointed that we were unable to reach a global solution," said Dynegy spokesman Steve Stengel. ??California is not the only Western state seeking refunds. Other states in the region have their own claims, totaling more than $ 6 billion. ??Wagner has proposed holding a separate negotiating session for those states, arguing that their concerns had been given short shrift in the settlement talks because of the central battle with California. GRAPHIC: Photo: California Gov. Gray Davis talks with construction workers at the new Los Medanos Energy Center before the facility was dedicated on Monday in Pittsburg, Calif. Los Medanos is the largest plant built in California since 1976 and the first built in Northern California since 1965. It is also the third plant Davis has opened in the past 13 days. Meanwhile, a judge hopes to forge an agreement between the state and power companies that will include refunds from alleged overcharging during the state's energy crisis (p. 10); Associated Press TYPE: -LINKS- LOAD-DATE: July 11, 2001 ??????????????????????????????29 of 54 DOCUMENTS Copyright 2001 National Public Radio (R). ?All rights reserved. ?No qoutes from ?the materials contained herein may be used in any media without attribution to ??National Public Radio. ?This transcript may not be reproduced in whole or in ?part without prior written permission. ?For futher information, please contact ????????????????NPR's Permissions Coordinator at (202) 513-2000. ?????????????????????????National Public Radio (NPR) ?????????????????SHOW: Morning Edition (11:00 AM AM ET) - NPR ????????????????????????????July 10, 2001 Tuesday LENGTH: 1289 words HEADLINE: Officials in California fail to reach settlement over the state's demand for more than $8 billion in refunds to electricity customers ANCHORS: BOB EDWARDS REPORTERS: SCOTT HORSLEY BODY: ??BOB EDWARDS, host: ??This is MORNING EDITION from NPR News. ?I'm Bob Edwards. ??The state of California says it's not giving up its fight for billions of dollars in refunds from wholesale electric bills. ?But power producers aren't giving that money back voluntarily. ?A 15-day negotiating period ended yesterday with no settlement of the state's claims. ?The case now goes to the Federal Energy Regulatory Commission and a regulatory judge suggests that he'll recommend only a fraction of the refunds California wants. NPR's Scott Horsley reports. ??SCOTT HORSLEY reporting: ??Lawyers for the state of California and power producers spent the last two weeks arguing over who should pay the state's electric bill. ?But despite daily negotiations, they failed to reach any agreement. Wholesale power prices have soared in the last 14 months. ?California accuses generators of price gouging and demands refunds of $8.9 billion. Generators blame the price increase on market forces. They've offered refunds of less than $1 billion. Federal regulators assigned Judge Curtis Wagner to try to broker a compromise and as late as yesterday, Wagner said, he hoped for a partial deal. ?In the end, though, Wagner emerged from the talks saying the two sides were too far apart. ??Judge CURTIS WAGNER: A lot of the parties genuinely wanted to settle; others didn't. ?As I said in the room, you can take a horse to the water but you can't make him drink. ?And if you don't want to settle, you know, you can't make them settle. ??HORSLEY: Wagner wouldn't comment on which side was the more stubborn horse in these negotiations. ?But without a settlement, he'll send the case back to the Federal Energy Regulatory Commission and Wagner's recommendation will be closer to the generators' position than to California's. ?In general, Wagner says he'll recommend the commission calculate any refunds by applying a price control order it issued last month retroactively to last October. ?Wagner says he hasn't done that calculation himself, but it's unlikely to yield anything close to the $8.9 billion figure California wants. ?In fact, Wagner says, any refund would probably be more than offset by money the generators claim they're owed for power that was purchased but never paid for by California's cash-strapped utilities. ?Power producers were cheered by the judge's stance, which sets the stage for a follow-up hearing. ??In the meantime, Brent Bailey, vice president of Duke Energy, says his company is willing to keep talking. ??Mr. BRENT BAILEY (Vice President, Duke Energy): We've had serious settlement talks with the state over the last few days and hope to continue having those over the next few days and over the next couple weeks. ?We would still like to resolve all this on a global basis 'cause we think that's in the best interest of all parties to help resolve what's going on in California right now. ??HORSLEY: Other Western states are also seeking refunds totaling around $6 billion. ?Those issues have been on hold until the California case is resolved. ??California's negotiating team struggled to put the best possible face on the bargaining session. ?Even though the judge's refund recommendation is likely to fall far short of its demand, California's lead negotiator, Michael Kahn, insists any refund amounts to a victory. ??Mr. MICHAEL KAHN (Legal Negotiator, California): We came here wanting $8.9 billion and in all candor we did not receive any meaningful settlement offers from anyone, so the negotiations were not as helpful as we had hoped them to be but the process was very useful because we feel our positions have been vindicated. ??HORSLEY: In fact, California lost on several crucial points. The judge's refund recommendation will only cover power purchased since October, while California was hoping for refunds dating back to May of last year when the spike in prices began. ?In addition, the judge plans to make several technical modifications to the commission's price control order, all of which should benefit producers. ??California will continue to press its case to the full commission and spokesman Roger Salazar of the governor's office warns that may not be the state's last stop. ??Mr. ROGER SALAZAR: We'll take whatever we can get from the folks over at the Federal Energy Regulatory Commission and if need be, we're ready and willing to go to court to get the rest. ?So one way or the other, we're going to be getting that $8.9 billion back that Californians have been bilked out of. ??HORSLEY: Governor Gray Davis himself declared yesterday that California is in a war with power generators. With the failure of the peace talks in Washington, there will apparently be more battles to come. ?Scott Horsley, NPR News, San Diego. LOAD-DATE: July 10, 2001 ??????????????????????????????30 of 54 DOCUMENTS ???????????????????????Copyright 2001 The News Tribune ???????????????????????????????The News Tribune ????????????????????????????July 10, 2001, Tuesday SECTION: South Sound; Pg. D1 LENGTH: 405 words HEADLINE: No energy refunds foreseen for California ; Power: Judge rules state is owed up to a billion dollars, but owes suppliers more than that BYLINE: Mark Sherman; The Associated Press BODY: ??WASHINGTON - California is owed no more than "a billion dollars" from power wholesalers, a federal regulatory judge said Monday at the end of 15 days of settlement talks in the state's electricity crisis. ??Curtis Wagner, the Federal Energy Regulatory Commission's chief administrative law judge, said that at the same time the power suppliers probably are owed more than that. ??The net effect of his preliminary recommendation is that California probably will receive no refunds from wholesalers. ??Wagner said power generators had offered $ 716 million in refunds. The state has asked for $ 8.9 billion since May 2000. Wagner said he will not recommend refunds for power sales that occurred before Oct. 2. ??It was not immediately clear what impact the judge's preliminary recommendation would have on efforts to settle the dispute. ??Both sides said before the judge's announcement that they expected a protracted legal battle in the event the talks did not produce a settlement. ??Michael Kahn, Gov. Gray Davis's representative in the talks, has said the state would seek more than twice the claimed overcharges if the dispute moved from mediated talks to a courtroom. ??The producers reiterated Monday that California's numbers are grossly inflated. Attorneys for the five major generators - Duke Energy, Dynegy, Mirant, Reliant Energy and the Williams Cos. - said in a statement that they have made a "very substantial global settlement offer." ??John H. Stout, a senior vice president for Reliant Energy, said his company would agree to no more than $ 50 million in refunds, as part of an overall settlement that also would have to include protection from additional legal claims. ??But Stout also said, "Reliant's fundamental position has been and remains that no refunds are justified." ??FERC ordered the talks last month in an effort to resolve differences between producers and the state over the breakdown of California's deregulated electricity market. ??The state has accused the producers of manipulating supply to unfairly drive up prices. The producers have acknowledged that prices are high, but blame jumps in the price of natural gas, which fuels many power plants, and the workings of the free market ??The bill for wholesale power in California soared to $ 27 billion last year from $ 7 billion the year before. Davis has estimated that the state could spend as much as $ 50 billion this year. LOAD-DATE: July 10, 2001

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EPSA study attributes lower electricity prices to competition

Wholesale Competition Contributed to Trend of Lower Power Prices, According to New EPSA Study PR Newswire 07/23/01, 1:00p (Copyright , 2001, PR Newswire) WASHINGTON, July 23 /PRNewswire/ -- Calls for a return to cost-plus rate regulation in the wake of the California power crisis are misplaced, according to an independent study released today that found that competitive markets contributed to a 36 percent decline in retail electricity prices among surveyed utilities. "That decrease is in sharp contrast to the increases that consumers experienced in the days of solely cost-plus rate regulation," said Electric Power Supply Association President Lynne H. Church, who released the findings during a media luncheon in conjunction with the group's summer membership meeting. "This analysis is evidence that we should continue to move forward toward more competition in order to apply downward pressure on prices." The study: "Assessing the 'Good Old Days' of Cost-Plus Regulation," analyzed sales data for 60 of the nation's investor-owned utilities during 1985-1999, when traditional cost-plus rate regulation began evolving toward more competition. Complete sales figures for 2000 were not yet available when the study was completed. The study was commissioned by EPSA and conducted by Craig Roach, Ph.D, principal of Boston Pacific Co. "In the wake of the California power crisis, some people have expressed a longing for a return to the 'good' old days of cost-plus regulation, but those days were far from good," Roach said. "People seem to forget that, in the days of cost-plus regulation between 1970 and 1985, inflation-adjusted electricity prices actually increased 25 percent for residential customers and increased 86 percent for industrial/commercial customers." "So much for the good old days," Church said. "The price increases under cost-plus regulation were precisely what drove the start of electricity competition in the early and mid-1980s." During the 1985-1999 period, according to the analysis, inflation-adjusted electricity prices decreased an average 30 percent for residential customers and 36 percent for industrial/commercial customers. "We should not allow the problems in California to cast a false shadow on competition," Church said. "The evidence presented in this study makes it clear that it would be counterproductive and unwise to go back to the old ways." "It is important to understand that what happened in California resulted, in part, from market rules that prohibited basic risk management," Roach said. "Specifically, utilities were required to take on the risk of selling at a fixed price to customers, but not allowed to manage that risk by arranging contracts with fixed-price suppliers or use other risk management tools. Managing risk appropriately benefits consumers, and risk management is more efficient and effective in a truly competitive regime." "This study bolsters our belief that the Federal Energy Regulatory Commission should continue to move expeditiously toward more efficient wholesale markets, states should continue to move quickly toward opening their retail power markets, and Congress should quickly adopt comprehensive legislation to help them along," Church said. Note: A copy of the complete study is available at www.bostonpacific.com/powerprices . EPSA is the national trade association representing independent power producers and power marketers active in U.S. and global power markets. As suppliers of reliable, clean, competitively priced electricity, EPSA members seek to bring the benefits of competition to all electricity customers. Contact: Mark Stultz, 202-628-8200 Audrey Duff, 202-354-8205 /CONTACT: Mark Stultz of Electric Power Supply Association, +1-202-628-8200; or Audrey Duff, +1-202-354-8205, for Electric Power Supply Association/ /Web site: http://www.epsa.org http://www.bostonpacific.com/powerprices /

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FYI - Energy Articles (from Rtumble.com)

California fails to find illegal acts -- An investigation by California's attorney general and state utility regulators into alleged illegal behavior by electricity generators has failed to turn up evidence of criminal behavior, persons familiar with the probe said Monday. The sources - including two commissioners on the California Public Utilities Commission and an aide to Attorney General Bill Lockyer - said generators aren't likely to be prosecuted, even though it appears they did withhold supply, and that the state may pursue civil remedies as an alternative. Jason Leopold, Dow Jones Newswires <http://quicken.excite.com/investments/news/story/djbn/?story=/news/stories/ dj/20010611/BT20010611005788.htm&symbol=EIX> -- 6/11/01 Natural gas powered generators run at capacity -- California power plants that burn natural gas to generate electricity will be allowed to run at full capacity over the next several months under an executive order by Governor Gray Davis. The order, signed by Davis today, is intended to help prevent blackouts by allowing plants fired by natural gas to exceed their air-emission limits. Millions of Californians lost electricity during six days of blackouts this year as demand for power outstripped supply. Daniel Taub at bloomberg.com <http://quote.bloomberg.com/fgcgi.cgi?T=marketsquote99_news.ht&s=AOyVitRTqQ2 FsaWYu> Jessica Berthold, Dow Jones Newswires <http://quicken.excite.com/investments/news/story/djbn/?story=/news/stories/ dj/20010611/BT20010611005869.htm&symbol=PCG> -- 6/11/01 Small generators and Edison -- A judge Monday granted a request by Edison International unit Southern California Edison to coordinate about 20 cases filed against it by small generators who haven't been paid for power deliveries, a company spokesman said. Los Angeles Superior Court judge Charles McCoy ordered a stay of action on the cases, which are currently filed in different courts throughout the state. The stay will remain in place until McCoy can hear details on the cases and determine a course of action. Jessica Berthold, Dow Jones Newswires <http://quicken.excite.com/investments/news/story/djbn/?story=/news/stories/ dj/20010611/BT20010611005813.htm&symbol=PCG> -- 6/11/01 FERC California -- The U.S. Federal Energy Regulatory Commission has scheduled a special meeting June 18 to address pending matters involving electricity markets in California and neighboring Western states. The commission's meeting notice provides no details, except to list for discussion four cases involving price mitigation in, and the structure of, volatile power markets in California and 10 other Western states. Bryan Lee, Dow Jones Newswires <http://quicken.excite.com/investments/news/story/djbn/?story=/news/stories/ dj/20010611/BT20010611004715.htm&symbol=PCG> -- 6/11/01 El Paso gas probe broadened -- Federal energy regulators broadened their investigation of El Paso Corp. to include charges that one company unit showed favoritism to another in awarding a contract that, plaintiffs say, allowed El Paso to manipulate California natural-gas prices. The company's pipeline subsidiary, El Paso Natural Gas, last year sold 1.2 billion cubic feet of capacity to the company's merchant energy unit, which makes money by trading electricity and natural gas. The Federal Energy Regulatory Commission is investigating whether the trading unit then withheld gas from the California market to drive up prices. Jim Kennett at bloomberg.com <http://quote.bloomberg.com/fgcgi.cgi?T=marketsquote99_news.ht&s=AOyVgChYyRW wgUGFz> -- 6/11/01 21 Democrats -- Twenty-one House Democrats, including House Minority Leader Dick Gephardt of Missouri, want to blast federal energy regulators at their regularly scheduled meeting on Wednesday for failing to prevent the surge in electricity prices by failing to impose price caps. The group has been critical of the Federal Energy Regulatory Commission's actions to address rising electricity costs in California's wholesale market, and Representative Anna Eshoo, a California Democrat, has sponsored a bill that would force the FERC to impose wholesale price caps. Amy Strahan Butler at bloomberg.com <http://quote.bloomberg.com/fgcgi.cgi?T=marketsquote99_news.ht&s=AOyUoQxXsRG Vtb2Ny> -- 6/11/01 S&P on Cal energy crisis -- The most significant financial risk posed by the California power fiasco is refinancing risk as power companies attempt to raise funds and roll over massive amounts of short-term funding, Standard & Poor's officials said Monday. The power industry has a need for near-term capital "at levels not seen for decades," said William Chew, managing director of corporate and government services at S&P. That need could put "real pressures on financial markets," he added. Christine Richard, Dow Jones Newswires <http://quicken.excite.com/investments/news/story/djbn/?story=/news/stories/ dj/20010611/BT20010611003280.htm&symbol=PCG> -- 6/11/01 Paying over-market for power -- California paid hundreds of millions of dollars above average market prices for electricity in the first quarter as the state bought high-cost power to avoid blackouts, Bloomberg statistics show. California, the largest power buyer in the U.S., said it paid an average of $285 a megawatt hour in the first quarter. The average daily market price was about $248 in northern California and $211 in southern California, Bloomberg data indicate. That suggests the state paid between $492 million and $985 million over market. The state bought 13.31 million megawatt hours in the period. David Ward at bloomberg.com <http://quote.bloomberg.com/fgcgi.cgi?T=marketsquote99_news.ht&s=AOyTJjhYNQ2 FsaWZv> -- 6/11/01 California natural gas prices -- The price of natural gas sold into Southern California has fallen sharply the last week after both the free fall in electricity prices and the expiration of a pipeline contract held by the El Paso Corporation that is the subject of an inquiry by federal regulators. The change in prices has prompted critics of El Paso to suggest that the drop shows how much effect the company's contract had in keeping natural gas prices high. The story is in the New York Times <http://www.nytimes.com/2001/06/11/business/11GAS.html> -- 6/10/01 Leiberman price caps -- Gov. Gray Davis picked up another powerful ally yesterday in his plea for federal aid for California's crippling power bills: Sen. Joseph Lieberman, who has named Davis to go head-to-head with federal energy regulators at a Senate hearing on the crisis. Davis said yesterday he was thrilled that the Connecticut Democrat would shine a light on the Federal Energy Regulatory Commission, which refuses to fully cap wholesale electricity prices even though critics contend it has a legal duty to prevent price gouging. Rick DelVecchio in the San Francisco Chronicle <http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2001/06/11/MN116332.DTL> Jason Leopold; Dow Jones Newswires <http://quicken.excite.com/investments/news/story/djbn/?story=/news/stories/ dj/20010611/BT20010611002032.htm&symbol=PCG> -- 6/11/01 Who'll pay billions in PG&E debt? -- A judge's decision not to meddle with electric rates has left open the biggest question in the Pacific Gas and Electric Co. bankruptcy case: Who will pay the utility's nearly $10 billion in bills? Ratepayers? Last week's decision by U.S. Bankruptcy Judge Dennis Montali left rate-setting to the state Public Utilities Commission. But experts aren't ruling out PUC approval of major increases in the prices charged to PG&E's customers. Taxpayers? They'd foot the bill if the state bailed out the utility, another reportedly live option. Claire Cooper in the Sacramento Bee <http://www.capitolalert.com/news/capalert01_20010611.html> -- 6/11/01 Less snow -- New scientific research suggests that global warming, even by what experts consider conservative estimates, will severely shrink the Sierra snowpack, which is crucial to sustaining California's economy and population. Within a lifetime, Californians will begin to see a shift in precipitation that will bring less snow and more rain to the mountains, say scientists at the Scripps Institution of Oceanography in La Jolla. They recently calculated the effect of an atmospheric increase of 2 to 4 degrees Celsius in the next 60 years--a rate of global warming that many experts consider highly likely. Nancy Vogel in the Los Angeles Times <http://www.latimes.com/news/state/20010611/t000048641.html> -- 6/11/01 Electricity traders' tech habits get scrutiny -- State officials investigating California's extraordinary energy prices are zeroing in on how energy traders use the technology tools of their profession -- from e-mail and specialized software to Internet energy data sites and online trading floors. This technology may be key, they say, to helping traders acquire the intimate knowledge needed to manipulate California's troubled energy market. With minute-to-minute knowledge of market conditions, some traders went even further, two lawsuits charge, illegally coordinating bids and sending electricity prices to record-breaking levels. Jennifer Bjorhus in the San Jose Mercury <http://www0.mercurycenter.com/front/docs1/tech0611.htm> -- 6/11/01 Davis: Energy prices settling -- A combination of factors, including government investigations, has helped lower the price of electricity in recent days, Gov. Gray Davis said Sunday, but California still needs help from the federal government. In a conference call with reporters, the governor said the state now is spending roughly $30 million a day to buy electricity, a significant drop from the $90 million a day California shelled out when energy supplies ran especially short this spring. Andrew LaMar in the Contra Costa Times <http://www.contracostatimes.com/news/california/stories/lieber_20010611.htm > -- 6/11/01 Energy price easing only temporary, Davis warns -- Electricity and natural gas prices may have tumbled last week to the lowest levels in a year, but experts say customers shouldn't get too comfortable with the idea. Gov. Gray Davis in a conference call with reporters Sunday said the drop in spot market prices for electricity and natural gas was a "temporary reprieve," which he attributed to pressure from Sacramento and Washington. "We have no power as it relates to pricing other than advocacy, lawsuits, pressure and shame," Davis said. The AP report is in the Los Angeles Daily <http://www.dailynews.com/news/articles/0601/11/new12.asp> News -- 6/11/01 Bay residents tired of state crisis decrees -- Now that the California governor has declared victory in the energy wars, many Bay Area residents are vowing to wear their low-watt fluorescent haloes and continue conserving power this summer. But others said there never was a war to begin with, and one of them, a Berkeley psychotherapist, declared she would continue to commit that California sin of all sins -- she will not unplug her hot tub. Meredith May in the San Francisco Chronicle <http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2001/06/11/MN238305.DTL> - - 6/11/01

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VentureWire, Wednesday, September 6, 2000

====================================================== VENTUREWIRE --- Wednesday, September 6, 2000 ====================================================== Private Company Business News ------ Published Daily by Technologic Partners ------- http://technologicpartners.com ====================================================== Top Stories: o Ridgewood Capital to Raise $400 Million Venture Capital Fund o Network Telephone Dials Up $256 Million in Financing o TeraBeam Founder Sells Stock, Gives Up Chairman Post o Numerical to Buy Cadabra Design Automation for $130 Million o CityReach International Raises $155 Million Third Round o Report: Pop.com Closes Following Failed Acquisition Talks |||||||||||||||||||| Advertisement |||||||||||||||||||| Spend an afternoon with VC Heidi Roizen. The Montclare Web Team invites you to join us to hear SOFTBANK VC Heidi Roizen talk about the 'new' New Economy at the Montclare Speaker Series, Sept. 13. http://www.montclare.com/speakerseries Want to improve your Web site? Ask the experts! Meet us tonight at Zibibbo, in Palo Alto: http://www.montclare.com/webteam ||||||||||||||||||||||||||||||||||||||||||||||||||||||| Also in This Issue: New Money: o MEMS Manufacturer AMS Secures $8 Million in Series A Funding o Millennia Vision Raises $27 Million In First Funding Round o Software Developer 2Ce Raises $2.75 Million in Series A o Travel Search Engine TripAdvisor Gets $2 Million First Round o U.K. Newspaper Software Firm Raises $3 Million First Round o Waste Management ASP Envectra Has $4.9 Million Seed Round o B2B Wireless ASP Terion Announces $50 Million Funding o Open-Source Firm Wasabi Systems Closes $500,000 Round One o Science Communications Secures Pre-Series A Funding o Airslide Systems Closes $35 Million Second Round of Funding o B2B Service Firm SupplySolutions Has $20 Million Round Two o Behavioral Technology Firm Gets $11.2 Million in Series B o Communications Firm Brainshark Has $14 Million Second Round o Evant Solutions Raises $12 Million in Second Round o French Mobile Location Service Provider Raises $15.1 Million o Image Sensor Tech Firm Y Media Gets $7.5 Million Series B o Net Advertising Tech Firm iWeb Closes $8.6 Million Series B o SpinCircuit and Avet Form Partnership, Avnet Takes Stake o TimesTen Performance Software Closes $21.5 Million Mezzanine o Advent Leads $4 Million Round for Shipping Site NETlogistiK o ArrayComm Raises $34 Million in Series F Funding Round o B2B Software Firm Sienna Secures $4 Million in Second Round o Deutsche Bank Takes Stake in Securities Software Firm Lewtan o Mobile Platform Firm Synchrologic Gets $22 Million D Round o ASP Reasoning Gets $15 Million Series D New Products: o Online College Student Advisor PureAdvice.com Launches o Universal Wireless Infrastructure Firm Sentica Launches o Christianity.com Launches, Ex-Pepperdine President Named CEO o Incubator Brainspark Launches Digital Design Firm EC1 Media New Deals: o Failure of Investment Talks Leads to Clickmango.com Closure o Scour Lays Off 52 Following Dissolution of Investment Talks o Ad Firms OneMediaPlace and iMediaPoint Enter Alliance o E-Security Firm iDefense in $10 Million Venture with Itochu o Silicon Peak Takes Stake in Information Firm for Physicians M&A: o Intersil Buys Wireless Component Firm SiCOM for $196 Million o ICG Increases Stake in PaperExchange.com from 20% to 83% o Network Appliance to Acquire WebManage for $75 Million o Heyde Group Acquires European VC Firm Value Partner New Directors: o Acta Technology Adds Network Appliance CFO to Board o DMR Consulting Exec Joins Software Firm infoShark's Board o incuVest Names Merck Division Senior VP to Board o Irish XML App Firm Vordel Adds Corporate Financier to Board o RedEnvelope Names Prophet Brand CEO to Its Board New People: o Net Video Firm Vividon Makes Ex-Vignette VP President, CEO o Former Motorola Executive is New CEO for Foxcom Wireless o MEI Software Systems Promotes VP to President and Acting CEO VC Fund News: o Brazil's Banco Pactual Launches BRR $75 Million Tech Fund o KPN and VNU Launch $30 Million Fund For European Tech Firms o Draper Laboratory Launches $15 Million Venture Subsidiary VC Personnel: o High Tech Venture Firm YankeeTek Ventures Gets New Partner o NIF Ventures Promotes Partner to Run Silicon Valley Office VW Corrections: o Rtime |||||||||||||||||||| Advertisement |||||||||||||||||||| Healthcare Outlook: Where Medicine Meets the Internet Will e-health complement traditional healthcare systems or create new markets? Which models will survive? Take the first look at the companies that will redefine the way healthcare is delivered. New technologies, new ideas and future market leaders. For more information and registration, Visit: http://tpsite.com/tp/conf/ho2000/default.html ||||||||||||||||||||||||||||||||||||||||||||||||||||||| ======= Top Stories ======= o Ridgewood Capital to Raise $400 Million Venture Capital Fund RIDGEWOOD, N.J. -- Ridgewood Capital said it will begin raising money for a new $400 million venture capital fund starting in October. The fund, known as Ridgewood Capital Venture Fund III, will focus on a broad variety of startups, including Internet infrastructure, software, and business-to-business e-commerce companies. The fund will invest between $4 million and $10 million per company, typically in the Series A round. The firm seeks to own between 15% and 25% of the companies it invests in. Ridgewood's prior fund, which closed earlier this year, was capitalized at about $170 million and has funded about 19 companies to date. http://www.ridgewoodcapital.com/ _____________________________________________ o Network Telephone Dials Up $256 Million in Financing PENSACOLA, Fla. -- Network Telephone, a provider of facilities-based broadband telecommunications services, said it raised $256 million in its Series D round of funding. Lehman Brothers led the round, which included Brown Brothers Harriman & Co., Desai Capital Management, Spectrum Equity Investors, and Wind Point Partners. The round comprised $156 million in cash and a $100 million secured bank line. The round brings the company's total cash investments to $204.5 million. Brown Brothers Harriman & Co. partner Lawrence Tucker; Desai Capital Management chairman, president, and chief investment officer Rohit M. Desai; and Thomas E. Darden, managing director for Wind Point Partners, have all recently joined the company's board. The company will use the funding for continued expansion of its facilities-based networks in the Southeastern U.S. Network Telephone has also been backed by Onset Ventures. http://www.networktelephone.net/ _____________________________________________ o TeraBeam Founder Sells Stock, Gives Up Chairman Post SEATTLE -- TeraBeam Networks, a developer of fiberless optical technology and services that enable the delivery of Internet data, said its founder and chairman Greg Amadon is selling a portion of his personal stock to previous investor Softbank Venture Capital in a deal worth $100 million. The company also said Mr. Amadon will give up the chairman title to TeraBeam president and CEO Dan Hesse. Mr. Amadon will not have a title with the company, although he still remains the company's largest individual shareholder. As a result of the deal, Softbank Venture Capital becomes the single largest institutional shareholder in TeraBeam Networks. The company's other backers include Capital Research and Management Group, Fidelity Management & Research, Madrona Investments, Merrill Lynch IBK Positions, Morgan Stanley Dean Witter, Oakhill Venture Partners, and T. Rowe Price Investment Services. http://www.terabeam.com/ _____________________________________________ o Numerical to Buy Cadabra Design Automation for $130 Million SAN JOSE, Calif. -- Publicly traded Numerical Technologies, which provides technology and services for producing subwavelength integrated circuits, said it plans to acquire Cadabra Design Automation, a provider of technology used to create standard cell, semi-custom, and custom integrated circuits. Numerical will exchange 3.2 million shares, worth about $130 million. Cadabra will become a wholly owned subsidiary of Numerical. Faysal Sohail, president and CEO of Cadabra, will remain president of the Cadabra subsidiary and will become senior vice president of Numerical. Cadabra's backers include CMEA Ventures, Synopsys, Access Technology Partners, and individual investors Andy Bechtolsheim, co-founder of Sun Microsystems, Atiq Raza, former president and COO at AMD, Rajeev Madhavan, co-founder, president and CEO of Magma Design Automation, and Kurt Keutzer, former CTO and senior vice president of research at Synopsys. http://www.cadabradesign.com/ http://www.numeritech.com/ _____________________________________________ o CityReach International Raises $155 Million Third Round LONDON -- CityReach International, a European provider of network management and services, said it raised $155 million in its third round of funding led by new investor Investcorp. Additional investors in the round included Morgan Grenfell Private Equity, Merrill Lynch, and Vulcan Ventures. The company said the latest round of funding will be used for the European expansion of the company's operations. Philippe Costeletos, a principal at Investcorp, will take a seat on the CityReach board of directors. The third round investment in CityReach follows a $46 million round from investors including Battery Ventures, Chase Capital Partners, and M/C Venture Partners, who also participated in the latest funding. http://www.city-reach.com/ _____________________________________________ o Report: Pop.com Closes Following Failed Acquisition Talks NEW YORK -- Pop.com, the Internet entertainment site founded by Dreamworks SKG, Imagine Entertainment, and Vulcan Ventures, will shut down, according to a report by the Associated Press. A majority of the company's 80 employees will be laid off by the end of the week, the report said. The site, which never launched after a series of delays, had been discussing the possiblity of an acquisiton by Ifilm.com but talks fell through at the end of last week. http://www.dreamworks.com/ http://www.pop.com/ ======= New Money ======= o MEMS Manufacturer AMS Secures $8 Million in Series A Funding SHREWSBURY, Mass. -- Advanced MicroSensors (AMS), a developer of MEMS and other components for telecommunications, industrial, and related markets, said it raised $8 million in its Series A round of funding. Fitel Technologies, a subsidiary of Japanese company Furukawa Electric, led the round, which also included Lafe Holdings. Fitel Technologies will name at least two members to the company's board of directors. The company will use the funding for further technology development. AMS and Fitel have also formed a strategic partnership under which AMS will provide chip fabrication to Fitel and both companies will work to develop MEMS-related products. http://www.advancedmicrosensors.com/ _____________________________________________ o Millennia Vision Raises $27 Million In First Funding Round REDWOOD SHORES, Calif. -- Millennia Vision, a provider of e-commerce services, said it raised $27 million in its first round of funding. The round was led by GE Equity and Venture Strategy. Additional investors included Encore Venture Partners, Phillips Capital Management, Pagemill Capital, and Starwood Capital Group. The company said it will use the funding for global expansion and to continue to develop application service provider offerings. http://www.mvsn.com/ _____________________________________________ o Software Developer 2Ce Raises $2.75 Million in Series A KING OF PRUSSIA, Pa. -- 2Ce, a software and Web development company, said it completed its Series A funding round with $2.75 million from individual investors. 2Ce is developing applications designed to enable users to view 25% more of their computer desktops. The company will use the funding for product and business development. 2Ce is in the process of raising a Series B round of funding. http://www.2ce.com/ _____________________________________________ o Travel Search Engine TripAdvisor Gets $2 Million First Round NEEDHAM, Mass. -- TripAdvisor, a specialized search engine for travel, said it raised $2 million in its first round of funding led by OneLiberty Ventures. The round brings TripAdvisor's total funding to $3.3 million. The funds will be used to launch tripadvisor.com, a research tool that will enable consumers to find travel information on the Web. http://www.tripadvisor.com/ _____________________________________________ o U.K. Newspaper Software Firm Raises $3 Million First Round REDDITCH, U.K. -- Parascan Technologies, which develops workflow software and services for newspaper pre-press systems, said it raised $3 million in its first round of funding provided by Quester Capital Management. The company will use the funding for expansion. Parascan products and services are designed to streamline the production of printed publications. http://www.parascan.co.uk/ _____________________________________________ o Waste Management ASP Envectra Has $4.9 Million Seed Round DAVIS, Calif. -- Envectra.com, which provides online hazardous waste management transaction services and offline logistics services to businesses, said it secured $4.9 million in a seed round funding led by Mike Starnes, founder and CEO of trucking firm MS Carriers. Envectra's ASP service enables firms to prepare documents online as well as schedule the transport and disposal of waste. The company will use the funds to expand its services and pursue strategic relationships. Envectra also expects to raise additional funds by the end of the year. http://www.envectra.com/ _____________________________________________ o B2B Wireless ASP Terion Announces $50 Million Funding MELBOURNE, Fla. -- Terion, a business-to-business wireless application service provider that utilizes two-way wireless communications, said it received $50 million in funding from SCP Private Equity Partners II, Northwestern Corp., ING Barings, Crossbow Ventures, and ACI Capital America Fund. Previous investors Penske Capital Partners, Delphi Automotive Systems, Detroit Diesel Corporation, KteCom, HVFM-II, and Madison Venture also contributed to the round. The funds will be used to increase production capacity and for marketing. Terion's patents and other intellectual properties include digital high-frequency technologies originally developed under contract by Harris Corp. as a nationwide backup communication system. http://www.terion.com/ _____________________________________________ o Open-Source Firm Wasabi Systems Closes $500,000 Round One NEW YORK -- Wasabi Systems, which develops and supports open-source NetBSD operating systems, said it raised just over $500,000 in its first round of funding from a range of institutional and individual investors. The company would not disclose the names of its investors. Wasabi said it will use the proceeds to fund growth and expand its staff. http://www.wasabisystems.com/ _____________________________________________ o Science Communications Secures Pre-Series A Funding HUNTSVILLE, Ala. -- Science Communications, a provider of e-mail marketing services, said it has secured an undisclosed amount of funding from ABS Ventures, an affiliate of Deutsche Bank Alex. Brown. The company said it would use the funds to expand to international markets. Science Communications directs online marketing campaigns and e-commerce through its EmailEngines technology. http://www.sciencecommunications.com/ _____________________________________________ o Airslide Systems Closes $35 Million Second Round of Funding HERZELLA, Israel -- Airslide Systems, which is developing an IP-based technology for cellular network infrastructures, said it has closed a $35 million second round of funding led by investment affiliates of Soros Private Equity Partners. The round included Anschutz Investment, KPNQwest, Telecom Italia Mobile, Intel Communications Fund and first round investors Sequoia Capital Seed Fund. Airslide said it will use the proceeds for development, marketing, manufacturing and sales. Sender Cohen of Soros Private Equity Partners and Scott Carpenter of Anschutz Investment will join Airslide's board of directors. http://www.airslide.com/ _____________________________________________ o B2B Service Firm SupplySolutions Has $20 Million Round Two NEW YORK -- Donaldson, Lufkin & Jenrette announced that its venture capital affiliate, the Sprout Group, has led a $20 million second round investment in SupplySolution, a provider of Internet-based application services for the automotive supply industry. Other investors who participated in the round include first round investors Enterprise Partners and Sigma Partners. SupplySolution said it will use the funds to develop products and service offerings and expand existing sales and service areas. Rakesh Sood, general partner at the Sprout Group, has taken a seat on SupplySolution's board of directors. http://www.supplysolution.com/ _____________________________________________ o Behavioral Technology Firm Gets $11.2 Million in Series B HOFFMAN ESTATES, Ill. -- Motivation Online, a developer of behavioral business systems, said it raised $11.2 million in its first, Series B round of funding. Edgewater Funds led the round, which included Mesirow Financial, Prism Opportunity Fund, and Talon Opportunity Fund. Edgewater Funds partner Brian Thompson and Mesirow Financial's Dan Howe will join the company's board of directors. The company will use the funding to expand its technology development, increase its sales and marketing efforts, and hire additional staff. Motivation Online's services are designed to enable companies to refine business processes and analyzes the effects of those processes. http://www.motivationonline.com/ _____________________________________________ o Communications Firm Brainshark Has $14 Million Second Round BURLINGTON, Mass. -- Brainshark, a provider of a Web-based communications platform, said it has raised $14 million in its second round of funding. 3i, an international venture capital firm, joined repeat investors OneLiberty Ventures, SI Ventures, Citizens Capital, and Reach in the round. Brainshark said it will use the funds to expand its rich-media communications platform and to enhance its Web-based services. The company's Web-based communication platforms allow its customers to create and deliver content while building a database. An official of 3i is expected take a seat on Brainshark's board. http://www.brainshark.com/ _____________________________________________ o Evant Solutions Raises $12 Million in Second Round SAN FRANCISCO -- Evant Solutions, a provider of supply-chain services to online companies, said it raised $12 million in its second round of funding. Softbank Venture Capital led the round, with participation from Kline Hawkes & Co. and Bain Capital. Scott Russell from Softbank and Jay Ferguson from Kline Hawkes & Co. will join Evant's board. http://www.evant.net/ _____________________________________________ o French Mobile Location Service Provider Raises $15.1 Million SOPHIA-ANTIPOLIS, France -- Opteway, a multi-access mobile location service provider, raised $15.1 million in its most recent funding round. The round included investments from Goldman Sachs, Morgan Stanley Dean Witter, Part'Com, and previous investor 3i. The company said the funding will be used to support product launches in the last half of the year and global expansion through marketing and partnerships. The company has expanded its staff from 10 to 70 employees after more than a year of operations. http://www.opteway.com/ _____________________________________________ o Image Sensor Tech Firm Y Media Gets $7.5 Million Series B LAGUNA HILLS, Calif. -- Y Media, which develops digital image sensor technology for portable electronic devices, said it raised $7.5 million in its Series B funding from previous investors Enterprise Partners, which led the round, Chase Capital Partners, and TechFund Capital. The company will use the funding for mass product production and for intellectual property development program. The company expects this round of funding to last it through profitability. Y Media is relocating its headquarters this month to Irvine, Calif. http://www.y-media.com/ _____________________________________________ o Net Advertising Tech Firm iWeb Closes $8.6 Million Series B NEW YORK -- iWeb, a provider of technology and services that enable the targeted delivery of advertising and content via the Internet, said it closed its Series B round of funding led by Apax Partners. The ICE Group, a European merchant bank, individual partners from Hellman & Friedman, a private equity investment firm, and second round investors Young & Rubicam all participated in the round. http://www.iweb.com/ _____________________________________________ o SpinCircuit and Avet Form Partnership, Avnet Takes Stake SAN JOSE, Calif. -- SpinCircuit, a provider of a Web-based supply chain for the electronics industry, and publicly traded Avnet said they formed a strategic partnership. Avnet and SpinCircuit will provide component and manufacturing information to engineers through SpinCircuit. As part of the deal, Avnet has also acquired an equity stake in SpinCircuit for an undisclosed amount. The companies have signed a joint marketing agreement as well. SpinCircuit is also backed by Cadence Design Systems, Flextronics International, and Hewlett-Packard. http://www.spincircuit.com/ _____________________________________________ o TimesTen Performance Software Closes $21.5 Million Mezzanine MOUNTAIN VIEW, Calif. -- TimesTen Performance Software, which develops a database that runs from main memory, said it received $21.5 million round in mezzanine financing led by new investor Technology Crossover Ventures with new investors Sun Microsystems and BEA Systems contributing. Previous investors Intel's IA-64 Fund, Morgenthaler Ventures, ABS Ventures, Mayfield Fund, Weiss Peck and Greer Venture Partners, and Sippl Macdonald Ventures also participated. The company will use the funds for product development. http://www.timesten.com/ _____________________________________________ o Advent Leads $4 Million Round for Shipping Site NETlogistiK MEXICO CITY -- Advent International said it lead a group of investors in a $4-million round of funding for NETlogistiK.com, an online logistics marketplace for the transportation and logistics industry in Central and South America. Advent contributed $1 million to the round. CarrierPoint, an Atlanta-based company with which NETlogistiK.com signed an exclusive software agreement, also holds an equity stake in the shipping marketplace. http://www.netlogistik.com/ _____________________________________________ o ArrayComm Raises $34 Million in Series F Funding Round SAN JOSE, Calif. -- ArrayComm, which develops antenna-based wireless communications products and services, said it secured $34 million in its Series F round of funding. New investor Nomura International led the round, which included new investors American Century, Cornerstone Equity Investors, and Sands Brothers Ventures as well as previous investors Amerindo Investment Advisors, Ballentine Capital Partners, and Spinnaker Ventures. Nomura International and Cornerstone Equity Investors each invested $10 million. The company said it will appoint one new member to its board of directors resulting from the round. The company will use the funding for deploying its broadband wireless networks and building its telecommunications applications. ArrayComm has also received investment from Sony Corporation of America. http://www.arraycomm.com/ _____________________________________________ o B2B Software Firm Sienna Secures $4 Million in Second Round SYDNEY, Australia -- Sienna Technologies, a developer of business-to-business applications, said it raised $4 million in its second round of funding. Nanyang Ventures, the fund manager for St. George Bank, led the round with a $3 million investment. Previous investor Technology Venture Partners invested the other $1 million. Nanyang Ventures' Mike Hirshorn will join the company's board of directors. The company will use the funding for expansion into international markets by establishing offices in Singapore and the U.S. by the end of the year. Sienna Technologies plans to open an office in Europe in 2001. http://www.sienna.com.au/ _____________________________________________ o Deutsche Bank Takes Stake in Securities Software Firm Lewtan NEW YORK -- Lewtan Technologies, a software and Internet company focused on the asset-backed securities market, said Deutsche Bank has taken an undisclosed minority equity stake in the company. The bank's Corporate Trust & Agency Services business will develop new applications for financial markets services with the company. Deutsche Bank will take one seat on Lewtan's board of directors. Lewtan Technologies is also backed by Applied Technology Investors and Little Diamond Enterprises. http://www.lewtan.com/ _____________________________________________ o Mobile Platform Firm Synchrologic Gets $22 Million D Round ATLANTA -- Synchrologic, which provides synchronization platform for managing mobile devices and enabling access to business data and applications from anywhere, said it closed a $22 million Series D funding round led by Chicago-based JK&B Capital. The round also included Financial Technology Ventures and previous investors Grotech Capital, Noro-Mosley Partners, Alliance Technology Ventures, and Boston University's Community Technology Fund. The company said it will use the funds to grow and strengthen its market share. Richard Finkelstein of JK&B Capital will assume a seat on Synchrologic's board of directors. http://www.synchrologic.com/ _____________________________________________ o ASP Reasoning Gets $15 Million Series D MOUNTAIN VIEW, Calif. -- Reasoning, an ASP that specializes in software modernization, said it secured $15 million in a Series D funding led by C.E. Unterberg, Towbin. Aspen Ventures, Novis Ventures, and NIF Ventures USA also contributed to the round. The funds will be used for research and development and infrastructure. http://www.reasoning.com/ ======= New Products ======= o Online College Student Advisor PureAdvice.com Launches NEW YORK -- PureAdvice.com, a one-on-one online college admissions and financial aid advice service for students, announced its launch. Doublespace, a Silicon Alley-based incubator provided the company with an undisclosed amount of seed capital. PureAdvice.com, founded by CEO Michael Lythcott and company president Steven Ehrlich, has also received funding from Oliver, Wyman & Co. http://www.pureadvice.com/ _____________________________________________ o Universal Wireless Infrastructure Firm Sentica Launches SAN JOSE, Calif. -- Sentica, which provides universal application-enabling infrastructure for mobile devices, announced its launch. The company's technology enables communication between any application and any wireless device. Sentica is backed by Athena Technology Ventures and Tallwood Ventures. http://www.sentica.com/ _____________________________________________ o Christianity.com Launches, Ex-Pepperdine President Named CEO HAYWARD, Calif. -- Christianity.com, which will provide individuals, churches and organizations with a network of services and tools, announced its launch. David Davenport, former president of Pepperdine University for 15 years, will serve as chief executive officer. Christianity.com, which will also offer its clients Web site development and management and Internet marketing and fundraising services, is backed by Sequoia Capital, Comdisco, and CBN. http://www.christianity.com/ _____________________________________________ o Incubator Brainspark Launches Digital Design Firm EC1 Media LONDON -- Business incubator Brainspark announced the launch of EC1 Media, a digital production, design, and consulting agency. Paul Cackett of Brainspark will head the company's operations. Brainspark has received backing from Diamond Tech Partners. http://www.brainspark.com/ ======= New Deals ======= o Failure of Investment Talks Leads to Clickmango.com Closure LONDON -- Clickmango.com, the U.K.-based online health retailer, said it would close operations on Sept. 11. The company's Web site will be taken down the following day. The company said it will honor all outstanding orders and agreements using the remainder of its capital to fulfill outstanding orders. Most of the company's 18 employees will depart Sept. 8 with a skeleton crew continuing operations until the end of the month. The company had raised GBP 3 million from Atlas Ventures and was seeking additional investments until last week. With the failure to find new capital the directors decided to close the site down. http://www.clickmango.com/ _____________________________________________ o Scour Lays Off 52 Following Dissolution of Investment Talks LOS ANGELES -- Scour, a broadband entertainment portal that enables user to trade music and other media online, said it laid off 52 employees citing a lack of investment. The company was in negotiations for its next round of financing but talks stalled after the Motion Picture Association of America, the Recording Industry Association of America, and the National Music Publishers Association filed a suit against Scour on July 20, claiming copyright infringement. Scour said potential investors were concerned about the cost and management distraction resulting from the legal action. Scour received previous investments from Michael Ovitz and Yucaipa Companies. http://www.scour.com/ _____________________________________________ o Ad Firms OneMediaPlace and iMediaPoint Enter Alliance NEW YORK -- OneMediaPlace, which provides management services for advertising online, and iMediaPoint, which provides a European marketplace for advertising, said they have entered a strategic alliance. OneMediaPlace made an undisclosed equity investment in iMediaPoint as part of the agreement. In addition to the minority stake, OneMediaPlace will also gain an outlet in Europe for its services. Through the terms of the agreement iMediaPoint will be able to market its advertising services to new media companies in the U.S. as well as the traditional media it caters to in Europe. OneMediaPlace is backed by investors including CMGI @Ventures, Primedia, Liberty Media, Artemis, Amerindo Investment Advisors, Convergence Partners, Fayez Sarofim & Co., Geneva Partners, Lehman Brothers, New Millennium Partners, and Viventures. http://www.imediapoint.com/ http://www.onemediaplace.com/ _____________________________________________ o E-Security Firm iDefense in $10 Million Venture with Itochu FAIRFAX, Va. -- iDefense, which provides cyber intelligence and electronic security services, and Itochu, which provides business services such as natural resource development, project financing, retailing, and strategic investing, said both companies will enter into a strategic partnership to launch iDefense Japan. The new venture will have the exclusive technology license in Japan for iDefense's iAlert cyber-threat intelligence and can warn its clients in advance of emerging threats in the Asia-Pacific region. Itochu will invest approximately $10 million in the company to support its expansion and development. iDefense backers also include individual investors. http://www.itochu.co.jp/ http://www.idefense.com/ _____________________________________________ o Silicon Peak Takes Stake in Information Firm for Physicians WILLISTON, Vt. -- Silicon Peak, an Internet business accelerator, said it formed a partnership with Philadelphia-based based PharmaDetailing.com, which provides Internet and handheld device-based information on pharmaceutical and medical products to physicians. As part of the deal, Silicon Peak will serve as PharmaDetailing.com's Internet technology team and will provide the company with technology services, Web site design, technical infrastructure, and advisory services in exchange for an undisclosed equity stake. http://www.pharmadetailing.com/ ======= M&A ======= o Intersil Buys Wireless Component Firm SiCOM for $196 Million SCOTTSDALE, Ariz. -- SiCOM, a provider of modem semiconductors for broadband wireless communications, said it was acquired by publicly traded Intersil Holding in a stock deal worth about $196 million. Under the terms of the deal, Intersil will buy SiCOM for about 3.7 million shares. SiCOM's silicon products and circuit card products are embedded in broadband satellite and terrestrial microwave wireless network products. SiCOM's has received funding from Quantum Partners. http://www.sicom.com/ _____________________________________________ o ICG Increases Stake in PaperExchange.com from 20% to 83% WAYNE, Pa. -- Internet Capital Group (ICG) said it increased its ownership stake in PaperExchange.com, a marketplace for the pulp and paper industry, from 20% to 83% in exchange for approximately 4.8 million shares, worth about $187 million. Internet Capital Group purchased the additional interest from Kraft Group, which still owns about 10% of the company. Robert Kraft remains chairman of the PaperExchange.com. http://www.paperexchange.com/ _____________________________________________ o Network Appliance to Acquire WebManage for $75 Million SUNNYVALE, Calif. -- Publicly traded data access service provider Network Appliance said it agreed to acquire WebManage Technologies, which provides Web site resource, performance management, reporting, and analysis services. Network Appliance will make the acquisition with common stock, assumed options, and cash for a total of $75 million. WebManage Technologies is backed by IT Investments Fund and others. http://www.netapp.com/ http://www.webmanage.com/ _____________________________________________ o Heyde Group Acquires European VC Firm Value Partner FRANKFURT AM MAIN, Germany -- Heyde, a publicly traded supplier of information technology consulting, software development, and systems integration, said it acquired venture capital firm Value Partner. Value Partner has approximately $14 million in assets with an additional $10.6 million in capital commitments in Germany, the U.K., and Israel. The investment fund is planning to raise $89 million. The total assets of the Heyde-controlled investment fund will be derived from institutional and individual investors from the U.S. and Germany. Value Partner also holds a 20% stake in London-based incubator Kick Start Ventures and a 50% stake in its German subsidiary Kick Start Ventures Deutschland. The Kick Start investments have a valuation of $36 million. Axel Jager serves as managing director of the Value Partner investment group. The new fund will continue to invest in the core markets that comprise Heyde's business financial services, multimedia agencies, information technology, and telecommunications. http://www.heyde.com/ ======= New Directors ======= o Acta Technology Adds Network Appliance CFO to Board MOUNTAIN VIEW, Calif. -- Acta Technology, which provides a platform designed to speed the delivery of data for business-to-business Internet commerce and business analytics, said it appointed Jeffry Allen to its board of directors, bringing the board's total to six. Mr. Allen is CFO and vice president of finance and operations for Network Appliance. Investors for Acta include Colman Partners, Comdisco Ventures, Greylock, Norwest Venture Partners, Sycamore Venture Capital, U.S. Venture Partners, and Van Wagoner Fund. http://www.acta.com/ _____________________________________________ o DMR Consulting Exec Joins Software Firm infoShark's Board CHANTILLY, Va. -- InfoShark, a provider of software products that enable enterprises to build a business-to-business infrastructure for accessing, exchanging and transmitting XML data, said it elected Michael J. Poehner, president and chief executive officer of DMR Consulting, to its board of directors. Investors include JMI Equity Fund, Lazard Technology Partners, and 21st Century Ventures. http://www.infoshark.com/ _____________________________________________ o incuVest Names Merck Division Senior VP to Board NEW YORK -- incuVest, a venture capital incubator and accelerator, said it appointed Margaret G. McGlynn of Merck & Co. to its board of directors. Ms. McGlynn serves as senior vice president of Merck's human health marketing division. Ms. McGlynn will use her expertise in the pharmaceutical industry to aid in incuVest's growth as the company incubates and invests in new technology companies. incuVest also has offices in Austin, Texas, Research Triangle Park, North Carolina, and Sebastian, Florida. http://www.incuvest.com/ _____________________________________________ o Irish XML App Firm Vordel Adds Corporate Financier to Board DUBLIN -- Vordel, a provider of XML-based applications and tools for business-to-business uses, said it named Paul Connolly to its board of directors. Mr. Connolly is the chief executive officer of Connolly Corporate Finance, an international finance company. He has served with KPMG Chartered Accountants and Hibernia Meats Group as a financial controller before founding Connolly Corporate Finance in 1991. He also sits on the boards of several companies, including Hibernia Foods and Torc Telecom and is a former board member of Esat Telecom. Vordel is backed by individual and institutional investors. http://www.vordel.com/ _____________________________________________ o RedEnvelope Names Prophet Brand CEO to Its Board SAN FRANCISCO -- RedEnvelope Gifts Online, an online store which offers a refined selection of gifts, said it named Michael Dunn, president and CEO of San Francisco-based Prophet Brand Strategy, to its board of directors. Prophet and RedEnvelope have been working together since 1999. Investors for RedEnvelope Gifts Online include Atrium Capital, Comdisco Ventures, Crown Technology Partners, Sequoia Capital, Weston Presidio Capital, Sippl MacDonald Ventures, Silicon Valley Angel Fund, and Philips-Smith Specialty Retail Group. http://www.redenvelope.com/ ======= New People ======= o Net Video Firm Vividon Makes Ex-Vignette VP President, CEO SADBURY, Mass. -- Vividon, which develops content delivery servers for streaming video, said it has appointed David Ellenberger as president and CEO. Mr. Ellenberger recently served as vice president of Vignette. When Vignette acquired DataSage in January, Mr. Ellenberger became president and board member of the acquired company. Vividon has received funding from Atlas Venture, Carlyle Venture Partners and private investor James Dow. http://www.vividon.com/ _____________________________________________ o Former Motorola Executive is New CEO for Foxcom Wireless VIENNA, Va. -- Foxcom Wireless, a provider of indoor coverage technology for the wireless industry, said it named Tom Hinton as its new chief executive officer. Mr. Hinton was most recently with Motorola, where he worked in executive positions including director of international business development, general manager of the company's greater China network solutions division, and assistant general manager of the Asia Pacific network systems business. He also worked as an executive with AT&T and BellSouth. Mr. Hinton succeeds former chief executive officer Ofer Ronen, who remains with the company as president and COO. Foxcom Wireless is backed by 3Com, APAX, AIG Orion, CDB WebTech, Eurofund, Genesis Partners, Global Crossing, Israel Seed Partners, KTB, Microsoft, STI Ventures, and Unico. http://www.foxcomwireless.com/ _____________________________________________ o MEI Software Systems Promotes VP to President and Acting CEO RESTON, Va. -- MEI Software Systems, a provider of software and services for associations, said it promoted James Dennis to president and acting CEO. Mr. Dennis is a nine-year veteran of the company, most recently serving as vice president for consulting and technical services. He succeeds Henry S. Firey, who resigned from the company in early August. The company also announced a series of other new corporate appointments and promotions. MEI Software Systems is backed by E2Enet. In addition to association management products, MEI offers portal management software and services to associations. http://www.meisoft.com/ ======= VC Fund News ======= o Brazil's Banco Pactual Launches BRR $75 Million Tech Fund RIO DE JANEIRO -- Brazilian bank Banco Pactual said it has raised BRR 75 million ($41 million) for a new fund, Pactual Tecnologia. The fund will focus on investments in technologies related to health, media and marketing, and education. To date, the fund has invested in Genexis, a business-to-business portal for the pharmaceutical and healthcare industries backed by private equity fund Pactual Electra Capital Partners. Pactual Electra was jointly formed by Banco Pactual and fund management group Electra Fleming. Pactual Tecnologia will make investments of between $1 million and $5 million. While the fund will focus primarily on Brazilian companies, it may also invest in firms in Argentina, the U.S., or other countries in Latin America. http://www.pactual.com.br/ http://www.genexis.com/ _____________________________________________ o KPN and VNU Launch $30 Million Fund For European Tech Firms THE HAGUE, Netherlands -- KPN Royal Dutch Telecom and VNU, an international publishing and information company, said they launched a new fund. The KPN-VNU Convergence Fund will launch in October with committed capital of $30 million. Both companies are equal investors in the new fund, which will concentrate its investments on European mobile Internet applications and broadband content delivery startups. The companies intend to capitalize on technologies developed by the fund. The new fund will be managed through the KPN investment subsidiary KPN Valley, which already holds $89 million in capital for investment. In addition to this European investment, KPN has invested in funds concentrating on Israeli startups through the Magnum Communications Fund and American technology companies through Advent International. http://www.kpn.com/ _____________________________________________ o Draper Laboratory Launches $15 Million Venture Subsidiary CAMBRIDGE, Mass. -- The Charles Stark Draper Laboratory, a developer of technology for global positioning systems, information systems, and other technology for commercial and military uses, said it created Navigator Technology Ventures (NTV). The new subsidiary will incubate companies in the fields of electronics, information technology, wireless communications, and biotechnology. NTV will manage a $15 million development and seed fund and make typical investments between $200,000 and $2 million. The new venture will also provide services including business and marketing functions, operating space, and access to laboratory facilities. http://www.ntven.com/ ======= VC Personnel ======= o High Tech Venture Firm YankeeTek Ventures Gets New Partner CAMBRIDGE, Ma. -- YankeeTek Ventures, which invests in early stage technology companies, said it has appointed Timothy J. Kraskey to serve as managing director. Prior to joining YankeeTek he was a founding partner of Mentor Group, where he coached and made equity investments in high-tech start-up teams. Mr. Kraskey also co-founded and was vice-president of sales and marketing for Sahara Networks, which was acquired by Cascade Communications. YankeeTek, which has $60 million under management, is backed by Advanced Technology Ventures, Advent International, Bain Capital, Battery Ventures, Boston Millennia Partners, HarbourVest Partners, and the TH Lee, Putnam Internet Fund. http://www.yankeetek.com/ _____________________________________________ o NIF Ventures Promotes Partner to Run Silicon Valley Office PALO ALTO, Calif. -- NIF Ventures, the Tokyo-based venture capital unit of Daiwa Securities Group, said it promoted partner Jim Timmins to managing partner of the firm's Silicon Valley office. Mr. Timmins served with Redwood Partners and Hambrecht & Quist prior to joining NIF in 1998. NIF Ventures manages approximately $1.2 billion. Its portfolio companies include AccessLan, eFinance, SpectraSwitch, and WaveSplitter. Telephone 650-461-5000. ======= VW Corrections ======= o Rtime NEW YORK -- An item in yesterday's VentureWire about Sony's acquisition of Rtime incorrectly listed the company's URL. Rtime's URL is http://www.rtimeinc.com. |||||||||||||||||||| Advertisement |||||||||||||||||||| Has patent law gone too far? The courts have granted protection to one-click shopping, but is this way of doing business so obvious and trivial that lawmakers should intervene? And what about online auctions for selling vacant airline seats? Is intellectual property law able to cope in the era of Amazon.com and Priceline.com, or has it become patently absurd? Join us in the search for answers at this year's Wall Street Journal Technology Summit, featuring Stanford law professor Larry Lessig. Register today at http://info.wsj.com/techsummit/ ||||||||||||||||||||||||||||||||||||||||||||||||||||||| SEND TO A FRIEND To subscribe to VentureWire, tell your friends and colleagues to go to: http://www.venturewire.com/register/vw This copy of VentureWire may be distributed freely, provided that the distribution is without charge, that the issue is distributed complete and unaltered, and that all copies retain the Technologic copyright notice. _____________________________________________ TO SUBSCRIBE go to: http://www.venturewire.com/register/vw To CHANGE your address, send your old and new e-mail address to [email protected] To UNSUBSCRIBE, send e-mail to: [email protected] Send COMMENTS, QUESTIONS, or NEWS ITEMS to: [email protected] Entire Contents Copyright 2000 by Technologic Partners VentureWire is a Service Mark of Technologic Partners =====================================

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Connected

----- Forwarded by Sue Nord/NA/Enron on 01/25/2001 01:37 PM ----- =09Lara Leibman@ENRON COMMUNICATIONS =0901/25/2001 12:53 PM =09=09=20 =09=09 To: Sue Nord/NA/Enron@Enron =09=09 cc:=20 =09=09 Subject: Connected here you go . . . ----- Forwarded by Lara Leibman/Enron Communications on 01/25/01 12:59 PM= =20 ----- =09Internal Newsroom =0901/24/01 11:47 PM =09=09=20 =09=09 To: xxEBS Employees -- Everyone =09=09 cc:=20 =09=09 Subject: Connected Market Close 1/24/01 79 3/4 + 1 3/16 Bandwidth Intermediation (through 1/19/01) YTD Transactions 63 Counterparties 8 LTD Transactions 275 Counterparties 36 January 24, 2001 FINANCIAL ANALYST MEETING TO TAKE PLACE TOMORROW Enron's annual financial analyst meeting will take place tomorrow, January= =20 25. The theme of the all day meeting is "Executing and Extending the Enron= =20 Business Model," and Ken Lay and Jeff Skilling will begin the day with an= =20 overview of the past year. They will be followed by presentations by each = of=20 the business unit heads. =20 Ken Rice and Kevin Hannon will conclude the day with an hour and a half=20 presentation on EBS. Their presentation will be repeated at the upcoming= =20 all-employee meetings in February. Stay tuned for more details. =20 LAUNCH OF IPNET CONNECT The Enterprise Services group recently launched the IPNet Connect service= =20 offering which will provide a host of tiered IP transit options that delive= r=20 data with guaranteed service level agreements. The service allows customer= s=20 to select IP connectivity configurations and service classes to fit the=20 customers' business needs on a per application basis. IPNet Connect, the industry=01,s first service to differentiate and guarant= ee=20 quality of service over an IP network, provides a unique value proposition = to=20 customers when combined with EBS=01, financial structuring and risk managem= ent=20 tools. You'll soon be hearing much more about IPNet Connect as the EBS=20 Education Center will offer training on IPNet Connect to interested employe= es. PTC CONFERENCE EBS representatives from the Asia-Pacific group recently attended the Pacif= ic=20 Telecommunications Council 2001 (PTC) in Honolulu, Hawaii on January 14-18.= =20 The conference offered a comprehensive and thought provoking program on=20 telecommunications and related convergent technologies in the Asia-Pacific= =20 region and provided educational and networking events including workshops,= =20 round tables, concurrent and managed sessions, social events and exhibits. = =20 The conference provided the largest gathering of telecommunications compani= es=20 from the region and provided a central location for strategic meetings on= =20 EBS' role in the telecom business in Asia. =20 SUNDANCE ONLINE FILM FESTIVAL Several EBS employees are currently attending the first ever Sundance Onlin= e=20 Film Festival in Park City Utah, January 18-28, 2001. The Sundance Online= =20 Film Festival provides a unique opportunity for EBS to reach out to the=20 independent film market for content beyond the Blockbuster offering. David= =20 Cox, who attended the festival, said, "EBS used the event to make independe= nt=20 filmmakers and distributors aware that we can deliver their films via the= =20 Blockbuster Entertainment On-Demand service." To view the film content=20 streamed by EBS, visit http://www.sundanceonlinefilmfestival.org/.=20 EBS EMPLOYEES ATTEND BUSH INAUGURATION Last weekend, several Enron employees attended the inauguration festivities= =20 as George W. Bush was sworn into office as the nation's 43rd president in= =20 Washington D.C. Enron representatives attended the weekend's plethora of= =20 activities which included the Texas State Society's Black Tie and Boots=20 Inauguration Ball, a Kay Bailey Hutchison sponsored pre-Inauguration=20 breakfast, a post-Inauguration parade, and the Inauguration itself. =20 EBS' own Kevin Hannon, Eddie Sera and Marilyn Baker attended, and each=20 visited several of the Enron sponsored events. According to Kevin, "It wa= s=20 an amazing opportunity to share in a part of history, especially with so ma= ny=20 Enron representatives watching on in support of George W. Bush and his new= =20 administration."=20 EBS TO HOST CLIENTS AT SUPERBOWL Several of EBS' key business contacts will be joining EBS representatives a= t=20 this weekend's Superbowl in Tampa Bay, Florida. Clyde Drexler will join=20 several Enron employees as they serve as hosts to EBS customers. The weeke= nd=20 highlights will include strategic business meetings, rounds of golf with=20 Clyde and Sunday's football game. =20 Lynx Photonic Networks Secures $30 Million in Funding Lynx Photonic Networks announced that it has closed a $30 million mezzanine= =20 financing round. Lynx develops patented, high reliability, optical=20 communications switching modules and sub-systems.=20 The following courses will be offered by the EBS Education Center in the=20 coming months. To register for the courses, call Rita Ramirez at x3-4711. INTRODUCTION TO BANDWIDTH RISK MANAGEMENT FUNDAMENTALS This one day course covers the basic risk management fundamentals in EBS=20 bandwidth, commercial origination and deal structuring. It is designed as= =20 an introduction to risk management fundamentals, and would be appropriate f= or=20 individuals who do not have a comprehensive understanding of these principl= es. Dates: February 6, 2001 - Portland (Riverplace Hotel)=20 February 16, 2001 - Houston - Shepherd Time: 8:00 am - 5:00 pm Cost: $350 (charged to your cost center) ADVANCED BROADBAND RISK MANAGEMENT This advanced two day Broadband Risk Management course is the companion cla= ss=20 to the Introduction to Bandwidth Risk Management. It covers trading=20 bandwidth, using options to manage bandwidth risk, and strategic issues in= =20 bandwidth risk management. This class uses case studies for practical=20 application of bandwidth risk management concepts.=20 Dates: February 22/23, 2001 - Houston - Shepherd March 13/14, 2001 - Pleasanton - PG&E Learning Center April 3/4, 2001 - Houston - Shepherd Time: 8:00 am - 5:00 pm Cost: $700 (charged to your cost center) Prerequisite: Introduction to Bandwidth Risk Management Do you have an idea for an article or feedback? Please click here>=20

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Former Gore Staffers Join Davis' Energy Team

Just in case anyone had any doubts about how Davis is approaching the issue...... Davis announces four new energy advisors Updated: May 18, 2001 - 2:54 p.m. Gov. Gray Davis has added four new advisers to his energy staff, including members of former Vice President Al Gore's staff and campaign team. Chris Lehane, former Gore press secretary, and Mark Fabiani, a deputy campaign manager for the Gore-Lieberman presidential run, will coordinate the governor's communications staff on energy issues and help recruit a new director of communications. Lehane and Fabiani's company will earn $30,000 per month for six months. Nancy McFadden, former deputy chief of staff to Gore, will earn $118,000 a year as a senior adviser to the governor, said Steve Maviglio, Davis' spokesman. McFadden will concentrate on the governor's relations with federal regulators and with generators. Davis also has recruited Kellan Fluckiger, chief operations officer for the Independent System Operator, keeper of the state's power grid. Fluckiger is "on loan" from the ISO, and will work with energy suppliers, Maviglio said. -- Associated Press

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Energy Issues

Please see the following articles: Sac Bee, Thurs. 6/14: Getting turned on over a turn-off Sac Bee, Thurs. 6/14: New pacts could ease blackouts:Edison crafts five-ye= ar=20 deals to help relieve the fiscal burden on its alternative energy suppliers Sac Bee, Thurs. 6/14: Lockyer to seek grand jury probe of power players Sac Bee, Thurs. 6/14: Energy Digest: PUC: Edison must pay some QF debts SD Union, Wed. 6/13: New price restrictions for electricity said to be=20 coming=20 SD Union, Wed. 6/13: Governor plans to release details on state's power=20 purchases SD Union, Wed. 6/13: Draft of blackout plan offers forecasts instead of=20 warnings SD Union, Wed. 6/13: California governor to release details of state's pow= er=20 purchases=20 SD Union, Wed. 6/13: Report: Energy executives selling stock for millions= =20 (Ken Lay and Jeff Skilling mentioned) SD Union, Wed. 6/13: News briefs on California's power crisis SD Union, Thurs. 6/14: Customers of SDG&E may not get back $300 million Money might be a part of state deal to buy electric grid=20 SD Union, Wed. 6/13: Vallejo City Council votes to switch work hours to sa= ve=20 power SD Union, Thurs. 6/14: Davis announces deal to boost summer power supply= =20 SD Union, Thurs. 6/14: FERC appears set to expand its price curbs SD Union, Thurs. 6/14: State must bare secret energy deals Judge orders release of pacts with suppliers=20 LA Times, Thurs. 6/14: Senate Democrats to use power to illuminate Bush=20 energy plan=20 LA Times, Thurs. 6/14: US invites private funding for grid expansion=20 Bush plan targeting Path 15, a key transmission point in the central valley= ,=20 sets up a showdown with the state LA Times, Thurs. 6/14: Blackouts and businesses: Dying for an exemption? LA Times, Thurs. 6/14: Price for more megawatts is more smog=20 Pollution: relaxed rules for "peaker" plants could push Ventura County over= =20 ozone limits. The effect elsewhere may prove minimal LA Times, Thurs. 6/14: PUC acts to aid alternative energy suppliers Regulators permit utilities to modify contracts with small power providers = to=20 maximize production LA Times, Thurs. 6/14: State still seeks to veil portions of power pacts SF Chron, Thurs. 6/14: Plan would allow private energy companies to own gr= id=20 rights SF Chron, Thurs. 6/14: News briefs on the California power crisis=20 SF Chron, Thurs. 6/14: Refineries may keep chugging in outages PUC looks t= o=20 grant blackout exemption=20 SF Chron, Thurs. 6/14: FERC set to extend power caps=20 Government sources say price controls will be round-the-clock SF Chron, Thurs. 6/14: Judge orders contact disclosures State told to release edited versions of energy agreements tomorrow=20 SF Chron, Wed. 6/13: Energy Report=20 SF Chron, Wed. 6/13: EPA rejects state waiver on fuel additive Refusal could cost 50 cents a gallon at pump, Davis says SF Chron, Wed. 6/13: Governor set to reveal terms of power deals Court must decide confidentiality issue Mercury News, Thurs. 6/14: Price caps elicit fierce debate in congress Mercury News, Thurs. 6/14: PUC commissioner issues draft decision to exemp= t=20 refineries from blackouts OC Register, Wed. 6/13: FERC may expand cap Senators say regulators are set to extend price controls throughout the Wes= t=20 OC Register, Wed. 6/13: Political heat triggers FERC's switch=20 The panel seems more responsive to the voice of public officials OC Register, Wed. 6/13: Davis to air details about power buys He had refused to divulge the contract terms OC Register, Wed. 6/13: Energy notebook Edison makes deal to pay generators of renewable power Getting turned on over a turn-off By Carrie Peyton Bee Staff Writer (Published June 14, 2001)=20 Political action doesn't get much easier than this: Pull a plug. Flip a=20 switch.=20 If you dislike utilities, like the environment or know anyone who does you= =20 might already have received an e-mail call to "Roll Your Own Blackout" for= =20 three hours next week on the day of the summer solstice.=20 Flocks of anonymous e-mails have been swooping across the Internet for week= s=20 promoting the hand-rolled, voluntary blackout aimed at fostering=20 conservation.=20 It is a phenomenon that points out just how deeply energy issues have worme= d=20 into the national consciousness, as well as how much the Internet has becom= e=20 the world's water cooler and its bulletin board.=20 The messages urge people everywhere to turn out their lights and unplug wha= t=20 they can from 7 to 10 p.m. Thursday, creating a dip in energy use that woul= d=20 roll across time zones -- part protest and part party.=20 "Talk to your kids. Watch the stars come out. Cuddle. Pretend the TV's=20 broken. Think what can happen when tens of thousands join this peaceful=20 protest against price-gouging and environmental irresponsibility," exhorts = a=20 Web page devoted to the idea.=20 Marilyn Nyborg of Grass Valley says she's thinking about flipping a circuit= =20 breaker to cut off all power to her house Thursday night, but at the very= =20 least her lights and television will be off.=20 "It's beautiful outside now. It's nice to sit on the porch. As it gets dark= er=20 I don't mind using a flashlight to read and spend some time with my partner= =20 and our new kitties," she said.=20 Nyborg, 62, a high-tech recruiter who calls herself a "quiet activist," sai= d=20 she'll be taking part to demonstrate that people can come together to=20 conserve.=20 "I take great offense at (President) Bush's comment that it's our right as= =20 Americans to waste fuel. I don't think it is. We're also stewards of the=20 planet," she said.=20 David Aragon, a Berkeley engineer who says he coined the phrase "Roll Your= =20 Own Blackout" online for a similar protest, said the idea had its roots in= =20 politics but is nonpartisan.=20 He said he just learned this week that Los Angeles artist Monica Rex was th= e=20 one who expanded his notion, scheduled it for the first day of summer and= =20 sent it out into the world.=20 Rex said she e-mailed a few paragraphs to about 50 friends in mid-April and= =20 posted them on a handful of Web sites to make people aware that they have t= he=20 power over how energy is used.=20 She thought so little of it at the time that she didn't keep a copy.=20 "I didn't know it would get anywhere, actually," she said. But it took off.= =20 By mid-May, multiple copies were landing in e-mail boxes of nearly everyone= =20 with environmental or energy interests. An organic farming public relations= =20 firm publicized it further, saying "millions" of people had been alerted.= =20 Newspapers from Seattle to Denver began writing about the anonymous=20 upswelling. Web pages sprang up dedicated to it.=20 "Everyone I know has seen it. This has swept the globe," said Jeff Softley,= a=20 West Hollywood bartender and longtime environmentalist who has tried for mo= re=20 than a decade to promote the idea of an "Energy Fast" on Earth Day.=20 Softley, who knows a little about stirring up community action, was so stru= ck=20 by how quickly the message moved that he speculated a big environmental gro= up=20 was probably behind it, trying to appear grass-roots.=20 "I just think it caught people's imagination," said Rex. "I am just amazed = at=20 how things move around the Internet." She theorizes that her name was=20 stripped off early in the forwarding process, making it appear anonymous wh= en=20 she had no particular interest in either hiding from the idea or in promoti= ng=20 it.=20 It really doesn't take much to bring a single idea to millions of people,= =20 said David Goff, a University of Southern Mississippi professor who co-edit= ed=20 the book "Understanding the Web."=20 "When you get it in the hands of like-minded people, it doesn't take long f= or=20 that multiplier effect to operate, and it will go very far very fast," he= =20 said.=20 E-mail- and Web-driven protests have triggered fuel boycotts in Great Brita= in=20 and Internet boycotts in France, Goff said, and "we're in the early stages = of=20 this."=20 The whimsical blackout message -- circulated in several versions -- calls o= n=20 people turn off what they can, then "light a candle to the sun god, kiss an= d=20 tell, make love, tell ghost stories, do something instead of watching=20 television, have fun in the dark."=20 Many versions say the voluntary blackout -- "a simple protest and a symboli= c=20 act" -- is being held to protest Bush's disdain for conservation, energy=20 efficiency and alternative fuels.=20 Some variants direct people to books on alternative energy and energy=20 efficiency. Some say the candle should burn for the sun goddess. Some add a= =20 gentle caution, to unplug only what can be "safely" dispensed with.=20 Michael Straus of Point Reyes said he plans to take part by having a=20 candlelight dinner with his parents. Straus, whose "Beyond Organic" PR firm= =20 helped tout the idea, said he put the message out over a public interest an= d=20 academic news wire after it kept landing in his mailbox.=20 The message has zinged from state to state and reportedly reached Europe an= d=20 Asia. It has hit e-mail lists devoted to everything from feminism to=20 used-book sellers. A Texas newspaper credited it to a river protection grou= p=20 called American Rivers, something the flattered but bemused organization=20 denied.=20 Millions of people would have to be involved for their efforts to show up o= n=20 the computers of the California Independent System Operator in Folsom, whic= h=20 constantly monitors electricity use to match demand with supply.=20 If 10 million households turned off a single 100 watt light bulb at once, 1= 00=20 megawatts would drop off the state's electric grid -- probably not noticeab= le=20 amid 30,000 or so megawatts of early evening demand, said Jim Detmers, an I= SO=20 vice president.=20 But 200 to 300 megawatts of reduced demand might be detectable under the=20 right conditions, if sudden changes in wind or temperatures or cloud cover= =20 don't obscure the effect, he said.=20 Computer engineer Aragon said he has no idea how many people will turn off= =20 and tune out June 21.=20 "That's almost like speculating on the spot price of electricity," he said.= =20 "I wouldn't touch it."=20 The Bee's Carrie Peyton can be reached at (916) 321-1086 or=20 [email protected]. =09=09 =09=09 =09=09 =09=09 =09=09 =09=09New pacts could ease blackouts: Edison crafts five-year deals to help= relieve=20 the fiscal burden on its alternative energy suppliers. =09=09By Jim Sanders Bee Capitol Bureau (Published June 14, 2001)=20 =09=09In a move that could help ease blackouts this summer, Southern Califo= rnia=20 Edison has negotiated five-year deals designed to relieve the financial=20 burden on its alternative energy suppliers.=20 =09=09Gov. Gray Davis hailed the pacts, which state officials helped negoti= ate, as=20 an important step toward stabilizing the energy market and ending litigatio= n=20 over about $1.3 billion owed by Edison.=20 =09=09The move also could help taxpayers, cutting up to $100 million off th= e=20 state's energy tab this year by reducing the amount of power needed from th= e=20 expensive spot market, officials said.=20 =09=09The agreements apply specifically to Edison's suppliers, however, and= do not=20 resolve similar disputes involving Pacific Gas and Electric Co.=20 =09=09The pacts also add a new twist to an ongoing dispute over Davis' bid = to save=20 Edison from bankruptcy by buying its transmission lines for $2.76 billion a= nd=20 providing other financial incentives.=20 =09=09Davis warned at a press conference Wednesday that rates promised in t= he pacts=20 are tied to legislative approval of the rescue plan.=20 =09=09"I believe, given the changed circumstances, that legislators will ta= ke a=20 different look at the (plan)," he said. "I'm not saying it's a certainty, b= ut=20 I'm saying there's now renewed interest."=20 =09=09Senate President John Burton ridiculed the governor's assertion and m= ade it=20 clear he won't be pressured.=20 =09=09"There are an awful lot of questions here, and I think it ill behoove= s the=20 governor, who has not always moved with alacrity, to say that the Legislatu= re=20 is dragging its hands on this issue," Burton said.=20 =09=09Legislators currently are crafting one or more alternatives to the go= vernor's=20 rescue plan, which they say has little support in the Assembly or Senate.= =20 =09=09Southern California Edison, a massive private utility, declined comme= nt=20 Wednesday on the QF -- "qualified facilities" -- agreements or the governor= 's=20 rescue plan.=20 =09=09California taxpayers have spent billions of dollars since January buy= ing=20 power on behalf of Edison and another financially strapped private utility,= =20 PG&E.=20 =09=09One major problem for Edison has been the $1.3 billion debt owed to f= irms=20 that generate alternative energy from wind, geothermal, solar, biomass and= =20 gas-fired cogeneration facilities.=20 =09=09As debts rose each week, some QFs were forced to quit producing elect= ricity,=20 thus exacerbating the energy crisis and forcing California to buy more powe= r=20 on the spot market.=20 =09=09Statewide, most of the alternative energy providers, though still fin= ancially=20 strapped, have resumed production.=20 =09=09The new Edison pacts would add 100 to 300 megawatts of new electricit= y by=20 enticing suppliers to exceed existing contracts.=20 =09=09They would provide a mechanism for repaying Edison's debts to the alt= ernative=20 energy firms. They also promise separate rates for electricity from renewab= le=20 sources and gas-fired facilities.=20 =09=09Key parts of the deal include:=20 =09=09Rates for electricity produced by gas-fired plants would vary based o= n the=20 cost of natural gas at the California-Arizona border.=20 =09=09Edison would pay 5.37 cents per kilowatt-hour, plus a capacity charge= , for=20 energy produced by wind, solar and other renewable energy sources.=20 =09=09The firm would pay an estimated 4 to 9 cents per kilowatt-hour, depen= ding on=20 natural gas costs, for electricity produced by gas-fired plants.=20 =09=09The pacts give Edison and the owners of gas-fired cogeneration facili= ties the=20 ability to renegotiate if market conditions change dramatically.=20 =09=09"The initial reaction from a number of (firms) has been favorable," s= aid=20 Steven Kelly of Independent Energy Producers, an association of wholesalers= .=20 =09=09"We're hopeful this can be implemented in PG&E territory, too," said = Joe=20 Ronan, an official of the Calpine energy firm and chairman of Independent= =20 Energy Producers.=20 =09=09 =09=09The Bee's Jim Sanders can be reached at (916) 326-5538 or jsanders@sa= cbee.com .=20 =09=09Bee Staff Writer Kevin Yamamura contributed to this report.=20 =09=09 =09=09 =09=09 =09=09 =09=09 =09=09 =09=09 =09=09 =09=09 =09=09Lockyer to seek grand jury probe of power players =09=09By Dan Smith Bee Deputy Capitol Bureau Chief (Published June 14, 2001)=20 =09=09Attorney General Bill Lockyer said Wednesday that he will ask the Sac= ramento=20 County grand jury to look into potential criminal actions by power generato= rs=20 and natural gas companies that have led to skyrocketing wholesale power=20 prices.=20 =09=09Lockyer said he has reached no conclusions about possible criminal ac= ts by "a=20 dozen or so" companies his office is investigating, but is hopeful grand ju= ry=20 testimony will assist in the probe.=20 =09=09"I just want to make sure that we thoroughly investigate every possib= ility,"=20 Lockyer said. "Some people conclude that we don't have evidence. That's not= =20 what I'm saying either. I'm saying we're in the middle of evaluating the=20 evidence."=20 =09=09Lockyer will take the investigation to the grand jury after July 1, w= hen 19=20 jurors convene for the new fiscal year. He would not predict how long the= =20 process would last.=20 =09=09He said many of the 80 lawyers in his office assigned to the energy c= risis=20 are looking at possible civil violations relating to market manipulation an= d=20 other allegations against power players.=20 =09=09Possible criminal violations involve the state's racketeering, unfair= =20 business practices, fraud and antitrust statutes, Lockyer said.=20 =09=09Power companies have consistently denied allegations that they have v= iolated=20 any civil or criminal statutes.=20 =09=09Besides Lockyer's probe, several legislative committees are investiga= ting=20 power interests' actions in California's energy crisis.=20 =09=09 =09=09The Bee's Dan Smith can be reached at (916) 321-5249 or smith@sacbee.= com.=20 =09=09 =09=09 =09=09 =09=09 =09=09 =09=09 =09=09 =09=09 =09=09 =09=09 =09=09Energy Digest: PUC: Edison must pay some QF debts=20 =09=09 (Published June 14, 2001)=20 =09=09Southern California Edison should pay at least 15 percent of its back= debts=20 to any alternative power producer, called a "qualifying facility," that nee= ds=20 the money to get back into operation this summer, utility regulators agreed= =20 Wednesday.=20 =09=09The 5-0 decision by the state Public Utilities Commission also endors= ed=20 agreements reached Tuesday between Edison and some key qualifying facilitie= s=20 that call for incentive payments for increased production and a price of $5= 4=20 a megawatt-hour for five years for some producers.=20 =09=09Ensuring that every power plant is up and running at maximum levels t= his=20 summer will be critical to keeping prices low and blackouts rare,=20 commissioners said. However, several added that they supported the revised= =20 contracts reluctantly because of long-term costs.=20 =09=09"California consumers have overpaid billions of dollars to QFs" alrea= dy, said=20 Commissioner Carl Wood. He warned that as more new plants are built, "we ma= y=20 not need this power, and yet we will be obligated to purchase it at prices= =20 that are vastly higher than other power that will be available."=20 =09=09--Carrie Peyton=20 =09=09New members rock FERC =09=09WASHINGTON -- The arrival of two new members is showing signs of shak= ing up=20 the Federal Energy Regulatory Commission, a once-obscure agency that may be= =20 the best hope for controlling wholesale electricity prices in power-starved= =20 California.=20 =09=09Patrick Wood III, former chairman of the Texas Public Utility Commiss= ion, and=20 Nora Mead Brownell, a former member of the Pennsylvania Public Utility=20 Commission, will participate in their first meeting Monday when the panel= =20 meets in an unusual session on California rates.=20 =09=09Among those most heartened to see the new members was William Massey,= a=20 Democrat and frequent dissenter on the five-member panel who strongly favor= s=20 price controls to head off what he has described as a looming economic=20 catastrophe for the state this summer.=20 =09=09"I never thought I would be so thrilled to see two Republicans coming= over=20 the horizon," Massey said.=20 =09=09Massey's enthusiasm is shared by many California Democrats who believ= e Wood=20 and Brownell will tilt the balance toward stronger action in their crusade= =20 for lower wholesale rates.=20 =09=09--David Whitney=20 =09=09 =09=09 =09=09 =09=09 =09=09 =09=09 =09=09New price restrictions for electricity said to be coming=20 =09=09 =09=09 =09=09 =09=09 =09=09By H. Josef Hebert ASSOCIATED PRESS=20 =09=09June 13, 2001=20 =09=09WASHINGTON =01) Under growing political pressure, federal regulators = are=20 preparing new but still limited price restrictions for electricity in=20 California and other Western states, according to government officials.=20 =09=09Congressional and private industry sources said the Federal Energy Re= gulatory=20 Commission is almost certain, at a meeting next week, to expand a price=20 mitigation directive to cover all transactions in California and expand it = to=20 other states, including the Pacific Northwest.=20 =09=09The limited price caps, announced in April, now apply only to Califor= nia and=20 only to periods when a supply emergency is in effect because power reserves= =20 have fallen below 7.5 percent. California Gov. Gray Davis has called them= =20 inadequate and full of loopholes for power generators to skirt controls.=20 =09=09Sen. Dianne Feinstein, D-Calif., told a Senate hearing "it now appear= s" that=20 the April order will be broadened. She said it was "another step forward" b= ut=20 far short of the cost-based price caps she and other congressional Democrat= s=20 have sought.=20 =09=09Several other sources, speaking on condition of anonymity, also said = they=20 expected the FERC to broaden the April order.=20 =09=09The commission chairman, Curtis Hebert, said price mitigation issues = will be=20 discussed at its Monday meeting.=20 =09=09The five-member commission of three Republicans and two Democrats has= come=20 under attack from Democrats in Congress and from Davis. They contend the=20 agency has been far too timid in curtailing price gouging in the wholesale= =20 Western power markets.=20 =09=09The commission regulates wholesale electricity markets and interstate= natural=20 gas pipelines. Under a 1934 law, it is required to ensure prices are just a= nd=20 reasonable.=20 =09=09Hebert, a Republican named as chairman by President Bush in January, = defended=20 the agency at an energy forum Wednesday.=20 =09=09"Our price mitigation plan is working," said Hebert, citing recent de= clines=20 in electricity and natural gas prices in California and elsewhere in the=20 West. Acknowledging the criticism, he said of the FERC: "We're not the most= =20 popular people in town right now."=20 =09=09This week, electricity prices on the spot market in California fell t= o below=20 $100 a megawatt-hour for the first time this year. Natural gas prices also= =20 eased. Earlier year price have frequently surpassed $300 a megawatt hour, t= en=20 times what they were in pre-crisis 1999.=20 =09=09A megawatt is enough electricity to serve about 600 homes.=20 =09=09California officials have said it is too early to tell how the FERC's= April=20 order has affected prices.=20 =09=09The reason for the price drops is unclear, Feinstein said. She noted = that=20 California's attorney general this week announced plans for a grand jury to= =20 consider criminal charges against some power generators and marketers.=20 =09=09Also Wednesday, several economists told a Senate hearing that tempora= ry price=20 controls, if structured properly, should not impede electricity investments= =20 and supplies as Republican lawmakers and the administration repeatedly have= =20 argued.=20 =09=09"It is incorrect that regulation necessarily interferes with supplies= ,"=20 Cornell economist Alfred Kahn, a prominent deregulation advocate, told the= =20 Senate Governmental Affairs Committee.=20 =09=09It was the Senate's first hearing on California's energy crisis since= =20 Democrats recently took power.=20 =09=09Kahn said that if price caps were temporary, exempted new power plant= s, and=20 provided sufficient profits, "there will be no shortage of people intereste= d=20 and willing to build new power plants."=20 =09=09"The greatest danger is continued chaos," said Paul Joskow, an econom= ist at=20 the Massachusetts Institute of Technology. He, too, urged some price contro= ls=20 based on costs of production.=20 =09=09Sen. Fred Thompson, R-Tenn., said the economists were painting " a ro= sy=20 picture." He read letters from several Wall Street analysts who insisted th= at=20 price controls would be a "recipe for disaster" and make investors reluctan= t=20 to enter the California power market.=20 =09=09Senate Democrats have promised to move forward with legislation to re= quire=20 the FERC to act unless the commission takes additional steps to address=20 allegations of price gouging in California.=20 =09=09"If we ignore these problems, we put our economy at risk," said Sen. = Joseph=20 Lieberman, D-Conn.=20 =09=09?? =09=09 =09=09On the Net:=20 =09=09FERC: www.ferc.gov/=20 =09=09Senate committee witness list: www.senate.gov/(tilde)gov=01) affairs/061301witness=01)list.htm=20 =09=09 Governor plans to release details on state's power purchases=20 By Don Thompson ASSOCIATED PRESS=20 June 13, 2001=20 SACRAMENTO =01) California signed long-term electricity contracts at prices= =20 higher than those now available on the daily spot market, Gov. Gray Davis= =20 acknowledged Wednesday as a judge ordered him to release the pacts' details= .=20 But Davis said the long-term contracts between the state and power generato= rs=20 helped break the price spiral that had driven electricity prices to record= =20 heights.=20 Critics said other factors played a larger role in what they warned is a=20 temporary price drop, and said Davis foolishly locked in long-term rates at= =20 the market's peak.=20 "The price, the spot market on electricity is coming down because we've=20 locked in long-term contracts," Davis said. "This is Economics 101. ... We= =20 were paying a lot more in January and February than we are now on the spot= =20 market because we have dramatically shrunk the spot market, providing=20 reliable power for California at affordable rates."=20 By next month, the state will have to buy less than half the power it needs= =20 on the daily market, making the generators compete for a smaller share of t= he=20 market and forcing prices down, he said.=20 Davis said that will stabilize a wildly fluctuating market for the long ter= m,=20 although the cost may exceed market costs in years to come.=20 The contracts, along with new plants, more conservation, criminal and=20 regulatory investigations into price gouging and possible price caps have= =20 combined to cut costs, Davis said.=20 Saying "there will be a day of accounting" for price gougers, Davis also sa= id=20 a "pincer effort from Sacramento and Washington" forced energy producers to= =20 lower prices.=20 Davis appeared Wednesday as a San Diego superior court judge ordered the=20 state to release the contract details by noon Friday.=20 Several news organizations and Republican Assemblyman Tony Strickland,=20 R-Thousand Oaks, sued Davis, saying the contracts used state money and shou= ld=20 be open to the public.=20 For months, Davis had refused to do so, saying that would hurt the state's= =20 negotiating position. Earlier this week, however, he asked San Diego Superi= or=20 Court Judge Linda B. Quinn to lift the confidentiality clauses in the 38=20 contracts, because the secrecy was no longer that important.=20 The contracts, worth almost $43 billion, could keep long-term rates=20 relatively high for years if the recent decline in prices remains in place.= =20 Contract records obtained by the Los Angeles Times showed the state is=20 committed to buying power at prices up to $154 a megawatt-hour during peak= =20 demand periods and more than $95 for power at times when demand is low.=20 By comparison, the state recently bought peak power for less than $100 an= =20 hour and less than $20 an hour at night when demand is less.=20 Wholesale prices have dropped recently, but they could rise this summer whe= n=20 temperatures and air conditioning use climb.=20 Energy analysts agreed with Davis that a convergence of factors led to lowe= r=20 prices, not just the long-term contracts.=20 Severin Borenstein, director of the University of California Energy=20 Institute, called the prices in the state's contracts "disturbingly high"= =20 compared to those available a few years ago, but the state didn't have much= =20 choice.=20 In essence, Borenstein said, the contracts mean California now pays its hig= h=20 power bill "on an installment plan" in which generators agree to string out= =20 their profits over years instead of recouping them now.=20 But Peter Navarro, an economist at the University of California, Irvine, sa= id=20 the Davis administration negotiated "from a position of severe weakness. Th= ey=20 (generators) had us over a barrel and they stuck it to us."=20 Davis, Navarro said, "adopted a long-term strategy to fight a short-term=20 crisis."=20 The administration will look particularly foolish if the Federal Energy=20 Regulatory Commission acts next week to rein in higher power prices after= =20 months of refusing to intervene, Navarro said.=20 "This is a huge mistake that's been made by the state and what's being show= n=20 here is the depth of it," said Assemblyman David Cogdill, R-Modesto, who=20 supported Strickland's suit.=20 "In effect, we locked in an energy crisis for the next 10 years," said Harv= ey=20 Rosenfield of the Foundation for Taxpayer and Consumer Rights. He called fo= r=20 Attorney General Bill Lockyer to toss out any contracts he determines=20 overcharge the state.=20 Davis energy adviser S. David Freeman, former head of the Los Angeles=20 Department of Water and Power, said the contracts altered the marketplace a= nd=20 freed the state from its nearly total reliance on the volatile spot market.= =20 "The war ain't over," Freeman said, "but we have landed on enemy territory= =20 and we are rolling them back."=20 Draft of blackout plan offers forecasts instead of warnings=20 By Jennifer Coleman ASSOCIATED PRESS=20 June 13, 2001=20 SACRAMENTO =01) In May, Gov. Gray Davis announced a plan to give California= ns=20 detailed warnings of rolling blackouts to help businesses and residents pla= n=20 for outages.=20 But a draft of the plan, obtained by The Associated Press, has changed the= =20 proposed one-hour "blackout warning" to a "probability forecast," which one= =20 utility official called a "vague warning that's wrong more often than it's= =20 right."=20 The one-hour notice is expected to be wrong two-thirds of the time, because= =20 the Independent System Operator will continue to look for power to keep the= =20 lights on, said several people who participated in meetings to plan the=20 blackout notifications.=20 Under Davis' plan, the ISO, manager of the state's power grid, will also=20 issue a 48-hour rolling blackout forecast and the 24-hour location=20 notification.=20 Peter Navarro, an economist with University of California, Irvine who works= =20 on energy issues, called the one-hour blackout notice "a very blunt=20 instrument."=20 "It's going to be like the typical California forecast =01) sunny, hot and = dry=20 with a chance of rolling blackouts," Navarro said. "How do you prepare for= =20 that?"=20 The Governor's Office of Emergency Services coordinated the plan to impleme= nt=20 Davis' order by consulting private and municipal utilities, the ISO and the= =20 Public Utilities Commission. The plan will be presented to Davis by Friday.= =20 Even after the issuing the 60-minute blackout notice, the state will keep= =20 looking for last-minute power, said ISO spokeswoman Stephanie McCorkle. "Th= e=20 public knows the ISO doesn't have a crystal ball, but it can provide=20 information to help them make critical decisions."=20 A utility official, who participated in the calls and who spoke on the=20 condition of anonymity, said the one-hour blackout probability forecast=20 "doesn't come anywhere close to what's been promised to the public.=20 "Instead of a real one-hour notice of an outage that people can rely on and= =20 make plans for, they're just going to get another vague warning that's goin= g=20 to be wrong far more often than it's right," the executive said.=20 The utilities will make the biggest differences in handling blackouts, said= =20 Steve Conroy, a spokesman for Southern California Edison, which participate= d=20 in one of the conference calls.=20 "There is more advance notice from the utilities to our customers," Conroy= =20 said.=20 Edison and San Diego Gas and Electric Co. have joined Pacific Gas and=20 Electric Co. in assigning customers a "block number" so they will know what= =20 neighborhood are next to be hit by a blackout.=20 "The newest element that's required is to make geographic information=20 available to the public. It was already available to public safety offices,= "=20 said John Nelson, spokesman for PG&E.=20 Blackout forecasts, Conroy said, are "very much like a weather forecast" an= d=20 subject to change. McCorkle said forecasts will also encourage power=20 conservation and further lessen the chance of blackouts.=20 Eric Lamoureux, an emergency services spokesman, said the plan isn't intend= ed=20 to predict a blackout but give a sense of when they're likely.=20 Utility customers don't need a guarantee, just a warning that blackouts cou= ld=20 occur, said Michael Shames, executive director of Utility Consumers' Action= =20 Network.=20 "The objective here is to allow customers to prepare for the eventuality of= =20 blackouts," he said. "The people will not rebel if the lights stay on. What= =20 we do need is more than 30 minutes notice."=20 Jennifer Ng, the owner of Moonlight Cleaners in Elk Grove, said she'd welco= me=20 two days' notice for blackout. It took her more than a week to catch up on= =20 work that a couple hours of blackouts halted at the dry cleaners, she said.= =20 "It affects businesses more than people think," Ng said. "If I had more=20 warning, I would be able to stay late the night before or bring in more=20 people."=20 To really give a true blackout warning, Shames said, the ISO must "draw the= =20 line" and stop shopping for electricity to keep the lights on.=20 Plus, Shames added, repeated false alarms could lose their effectiveness.= =20 "That's why they shouldn't be issued cavalierly."=20 Shames and Navarro have called for a price ceiling for last-minute power bu= ys=20 and a willingness to suffer blackouts in prices don't come down. The=20 Legislature is now considering a bill to allow state power buyers to stop= =20 shopping for power.=20 California governor to release details of state's power purchases=20 By Alexa Haussler ASSOCIATED PRESS=20 June 13, 2001=20 SACRAMENTO =01) Gov. Gray Davis is close to releasing details of 38 long-te= rm=20 contracts between the state and power generators, a move that would end a= =20 lengthy battle over whether the agreements should remain confidential.=20 Davis for months had refused to release information on the contracts, but h= is=20 aides said Tuesday the disclosure was expected this week.=20 The Los Angeles Times reported Wednesday that confidential government recor= ds=20 show state officials agreed to contracts at prices higher than those now=20 being paid in the daily spot market.=20 The contracts, which total nearly $43 billion, could burden consumers with= =20 relatively high utility rates if the recent trend toward lower electricity= =20 and natural gas prices continues.=20 Records obtained by the Times show the state is committed to buying power a= t=20 prices up to $154 a megawatt-hour during peak demand periods and more than= =20 $95 for power at times when demand is low. In comparison, the state recentl= y=20 purchased peak power for less than $100 an hour and less than $20 an hour a= t=20 night when demand dropped.=20 The recent purchases reflect a drop in wholesale prices, which could rise= =20 again this summer when temperatures climb and air conditioning use surges.= =20 "The theme here is the governor embarked on a long-term strategy for a=20 short-term crisis," Peter Navarro, an economist at University of California= =20 Irvine, told the Times. "They pretty much got this exactly wrong."=20 State officials defended the long-term contracts, crediting the agreements= =20 with altering the marketplace. The contracts also have freed the state from= =20 its nearly total reliance on the volatile spot market.=20 "This was all a well thought-through plan of action," said Davis energy=20 adviser S. David Freeman, former head of the Los Angeles Department of Wate= r=20 and Power. "The war ain't over. But we have landed on enemy territory and w= e=20 are rolling them back."=20 Republican lawmakers and several news organizations, including The Associat= ed=20 Press, sued Davis in March, saying his refusal to release the contracts'=20 details violated the California Public Records Act.=20 Still, Davis refused, saying that revealing the details would put the state= =20 at a competitive disadvantage in other contract talks.=20 Oklahoma-based Williams Energy, one of the generators with a state contract= ,=20 opposes the release of the contract details.=20 "Information contained in those is proprietary information that allows us t= o=20 be competitive and to bid competitively," said spokeswoman Paula=20 Hall-Collins.=20 Raymond Hart, Department of Water Resources deputy director, wrote power=20 generators Monday saying the department would ask a judge Wednesday to thro= w=20 out a confidentiality provision in the contracts.=20 Meanwhile, the Times also reported Wednesday that executives and board=20 directors from power companies gained millions of dollars through stock sal= es=20 last year.=20 State officials accuse them of profiteering from the energy crisis, but som= e=20 executives netted upwards of $123 million in option transactions in 2000,= =20 according to a filing with the Securities and Exchange Commission. Stock=20 prices for energy companies enjoyed robust growth last year.=20 Report: Energy executives selling stock for millions=20 ASSOCIATED PRESS=20 June 13, 2001=20 LOS ANGELES =01) Executives and board directors from power companies that s= tate=20 officials accuse of profiteering from the energy crisis have gained million= s=20 of dollars through stock sales, according to a newspaper report.=20 The Los Angeles Times reported Wednesday that these executives exercised=20 options and sold stock for double, triple and even 10 times the level of=20 prior years. The newspaper based its findings on trading data supplied by= =20 First Call/Thomson Financial and federal regulatory findings.=20 Kenneth L. Lay, chairman of Enron, netted $123 million in option transactio= ns=20 in 2000, according to a filing with the Securities and Exchange Commission.= =20 The amount was triple his 1999 level and nearly 10 times what he made in=20 1998.=20 Lay also has made stock sales since November that have been worth nearly $2= 3=20 million.=20 Lay and other power company executives have shown a knack for timing their= =20 stock sales near the top of the market. Many of the companies' shares have= =20 fallen since the bulk of the stock sales, the Times reported.=20 Critics claim corporate profits for the power companies have been driven up= =20 by the energy crisis in California and the West. The crisis created a bull= =20 market for publicly traded power companies, making the shares held by the= =20 executives particularly lucrative.=20 State officials were outraged, but not surprised by the transactions.=20 "It is part of a pattern of smart trading by these guys," said state Sen.= =20 Debra Bowen, D-Marina del Rey, who chairs the Senate Energy, Utilities and= =20 Communications Committee. "The mentality is to get everything that you can= =20 and then ride out the bust.=20 "I think they are figuring that by this time next year the party will be ov= er=20 and they will be left sitting in a room with plastic cups half-filled with= =20 stale beer," Bowen added.=20 The stock sales seemed logical to Loretta Lynch, president of the Californi= a=20 Public Utilities Commission.=20 "It stands to reason that if the companies are making exorbitant profits,= =20 then the individuals who run the companies are also making exorbitant=20 profits," she said.=20 The power executives who sold stock dealt shares of the following companies= :=20 Virginia-based AES Corp.; Duke Energy Corp. of North Carolina, the=20 Houston-based energy firms of Enron Corp. and El Paso Corp. and San=20 Jose-based Calpine Corp.=20 Jeffrey K. Skilling, CEO of Enron, filed regulatory documents in May=20 announcing his intention to sell 140,000 shares of Enron stock for $7.98=20 million. Skilling in 2000 netted more than $62 million in similar=20 transactions.=20 Harvey Padewer, president of Duke Energy's Energy Services division, sold= =20 Duke stock for $12.26 million in February, netting $2.99 million.=20 State and federal agencies are investigating several large energy companies= =20 to determine if they conspired to boost prices either by limiting the=20 construction of power plants or by manipulating the supply of natural gas= =20 needed to run power plants.=20 No one is claiming the stock trades were illegal, but critics have linked t= he=20 transactions to the profits gained in California.=20 "The generators have no shame," said Steve Maviglio, a spokesman for Gov.= =20 Gray Davis. "It speaks to how there has been a massive transfer of wealth= =20 from California and the West to Texas and the Southeast."=20 Lay and Enron officials declined to comment on stock trading by executives= =20 and a spokesman for AES also declined to comment on the matter.=20 A spokesman for Duke Energy said many of the sellers at Duke continue to ho= ld=20 large amounts of the company's stock and sold the their stock to capitalize= =20 on a healthy market.=20 "Many of these people have a lot of stock, and this 7/16is 3/8 an opportuni= ty=20 to diversify their personal portfolios at an opportune time when Duke's sto= ck=20 is up," said Terry Francisco, a spokesman for Duke Energy.=20 News briefs on California's power crisis=20 ASSOCIATED PRESS=20 June 13, 2001=20 HUNTINGTON BEACH =01) An energy company says a restriction prohibiting it f= rom=20 selling power generated at its California plants out-of-state violates=20 interstate commerce laws.=20 AES Corp. filed a petition Monday with the California Energy Commission=20 claiming the restriction should be withdrawn because it hinders the company= 's=20 efforts to negotiate a contract with the state Department of Water Resource= s,=20 which brokers power deals for the state.=20 AES spokesman Aaron Thomas said Tuesday that the two sides are close to an= =20 agreement and filing the petition was a backup if negotiations fail.=20 The Arlington, Va.-based company recently won approval from the state's=20 Energy Commission to restart two idle generators in Huntington Beach, but= =20 were told it could only sell the 450 megawatts produced at the Orange Count= y=20 plant to California utilities.=20 The 40-year-old units, which will reopen in August, will generate 10 percen= t=20 of the 5,000 megawatts needed by the state to avoid rolling blackouts this= =20 summer.=20 Customers of SDG&E may not get back $300 million=20 Money might be part of state deal to buy electric grid By Jeff McDonald=20 UNION-TRIBUNE STAFF WRITER=20 June 14, 2001=20 Talks to allow state ownership of the poles and wires that push electricity= =20 across San Diego County have dragged on in numbing detail for months.=20 But with the deal between Gov. Gray Davis and Sempra Energy "extremely=20 close," local politicians and a consumer advocate fear its price will inclu= de=20 hundreds of millions of dollars that had been headed for ratepayers' pocket= s.=20 San Diego city and county officials took the unusual step yesterday of=20 criticizing regulators and the parent company of SDG&E for excluding them= =20 from secret negotiations.=20 State must bare secret energy deals=20 FERC appears set to expand its price curbs=20 Davis announces deal to boost summer power supply=20 Continuing coverage: California's Power Crisis=20 ?=20 Mayor Dick Murphy, meanwhile, dispatched a letter to the president of the= =20 California Public Utilities Commission pleading to be invited to the table.= =20 "I need your assurance that the city will be permitted to actively=20 participate in the formation of any proposed settlement," the San Diego may= or=20 wrote. "The ratepayers of San Diego city and county deserve no less."=20 At stake: more than $300 million paid to SDG&E by its 1.2 million customers= =20 over recent months.=20 Utility company executives claim the cash should go to shareholders, while= =20 local elected officials, consumer advocates and even state regulators say t= he=20 money belongs to customers.=20 The disputed windfall accumulated over several months, as SDG&E used=20 long-term contracts to buy power at one price then sell the electricity to= =20 consumers at a much higher rate.=20 Customers were billed the larger of the two costs, a practice SDG&E parent= =20 Sempra Energy said was appropriate even though SDG&E has insisted for month= s=20 that under deregulation it merely distributes power.=20 "Shareholders deserve to make money on contracts that they took the risk=20 for," said company spokesman Ed Van Herik, who was unable to specify how mu= ch=20 electricity is bought and sold under the agreements.=20 SDG&E may still be benefiting from the long-term deals it reached with=20 Louisville Gas and Electricand Pacificorp.=20 The agreements ran between 1997 and the end of this year, according to San= =20 Diego City Attorney Casey Gwinn. Because of the litigation, he was allowed = to=20 review the contracts but is not permitted to disclose their value.=20 "There is a fundamental fairness principle that is at issue here," Gwinn=20 said.=20 Earlier this year, state regulators ruled that the value of the contracts= =20 should help pay down a so-called balancing account -- some $750 million SDG= &E=20 says it spent on power but hasn't been allowed to collect from customers.= =20 Utility company lawyers appealed that ruling and the case remains locked in= =20 litigation.=20 But in an apparent policy reversal, the PUC last week joined Sempra in aski= ng=20 the appeals court to delay considering the claim while the governor's offic= e=20 deals for the network of SDG&E power poles and transmission lines. Gwinn's= =20 office was served notice of that filing Tuesday.=20 The value of the long-term contracts has become a critical issue in those= =20 executive-level discussions, which San Diego area politicians say is unfair= .=20 "It's a slap in the face," county Supervisor Dianne Jacob said. "They charg= ed=20 us more and now they're making a big profit."=20 Michael Shames of the Utility Consumers' Action Network said a closed-door= =20 deal between Davis and Sempra could undermine the PUC ruling that the SDG&E= =20 contracts are ratepayer assets.=20 "The PUC will never hear it, the city of San Diego and UCAN will never get = a=20 chance to argue it" in court, he said.=20 Davis spokesman Steve Maviglio said the governor is carefully weighing the= =20 plight of San Diego consumers as he pushes ahead with negotiations to buy t= he=20 SDG&E electric grid.=20 "We're extremely close to an agreement with the utility, and first and=20 foremost in the governor's mind are the interests of San Diego ratepayers,"= =20 he said. "The deal is going to be a balanced business transaction."=20 Acquiring the poles and wires that move power across the state is a key pie= ce=20 of the governor's plan to resolve the electricity crisis in California. Dav= is=20 struck a deal with Southern California Edison, but Pacific Gas and Electric= =20 declared bankruptcy in April, so those assets are in dispute.=20 Even though transmission lines make money for the three investor-owned=20 utilities, critics worry that buying the electric grid may not be wise=20 because the system is old and in need of more than $1 billion in upgrades.= =20 PUC attorney Gary Cohen said he sympathizes with the San Diego County elect= ed=20 officials who first brought the complaint over the SDG&E contracts to his= =20 office. But ending the power struggle in California is more important.=20 "If there's a deal, those contracts are just one part of it," Cohen said. "= I=20 understand their frustration. The contracts are up on appeal and they won.= =20 But in fairness, everybody needs to wait and see what the whole resolution= =20 will be."=20 Discussions include not only talk of a price for SDG&E transmission lines -= -=20 likely around $1 billion, according to Shames -- but also whether the utili= ty=20 adequately hedged its power purchases against rising costs and the=20 reasonableness of other buying practices.=20 "There's a bunch of issues on the table," Cohen said. "It's difficult and= =20 conceivably impossible to settle cases where you have a whole bunch of=20 parties if everybody is insisting they're part of the negotiations."=20 State Sen. Dede Alpert, whose September legislation established the=20 "balancing account" now in dispute, said she doesn't care who receives publ= ic=20 accolades for steering the value of the SDG&E contracts to ratepayers.=20 "I certainly expect this needs to be something that benefits the people of= =20 San Diego," the Coronado Democrat said. "But whether the credit goes to the= =20 city of San Diego, the PUC or the governor I don't think matters."=20 ?=20 Vallejo City Council votes to switch work hours to save power=20 ASSOCIATED PRESS=20 June 13, 2001=20 VALLEJO =01) In an effort to save an estimated $11,000 in electricity costs= ,=20 City Council members unanimously voted to switch city hall workers to a=20 four-day workweek.=20 The 7-0 vote came Tuesday as a result of the city's increased energy bills.= =20 Since the Association of Bay Area Governments suspended its electricity=20 purchasing program, which allowed participants to buy power cheaper than=20 other cities, Vallejo has seen an increase from 9.5 cents a kilowatt hour t= o=20 20 cents per kilowatt hour.=20 The switch to 10-hour days begins July 9 and will continue through Nov. 9.= =20 City Hall will be open 7:30 a.m. to 7 p.m. Monday through Thursday. The=20 current hours are 8:30 a.m. to 5:15 p.m. Monday through Friday.=20 Police and fire departments will be unaffected by the change.=20 City officials also recently negotiated with O'Hara Energy Corp. to install= =20 special meters to monitor and control energy use at City Hall. That program= =20 is expected to save $50,000.=20 Davis announces deal to boost summer power supply=20 By Ed Mendel=20 UNION-TRIBUNE STAFF WRITER=20 June 14, 2001=20 SACRAMENTO -- Gov. Gray Davis, claiming momentum toward solving the=20 electricity crisis, announced an agreement yesterday to keep unpaid small= =20 generators on line this summer.=20 Davis said a pincers movement from Washington, D.C., and Sacramento is=20 telling energy price-gougers that "the days of figuratively raping and=20 pillaging California are over and there will be an accounting."=20 Attorney General Bill Lockyer announced that a criminal grand jury will beg= in=20 meeting in Sacramento early next month to investigate whether the state's= =20 electricity and natural gas markets were manipulated and whether illegal=20 profits were made.=20 Davis also said he was optimistic about getting legislative approval of som= e=20 variation of his long-stalled plan to keep Southern California Edison out o= f=20 bankruptcy.=20 "I'm not saying it's a certainty," Davis said. "But I am saying there is no= w=20 a renewed interest in ratifying something like the memorandum of=20 understanding that we have worked out with Edison."=20 Davis said the Legislature can change the proposal, but the amendments must= =20 be acceptable to him and to Edison. The Senate is planning to begin hearing= s=20 on the Edison plan in a few weeks.=20 The governor said pressure on electricity suppliers is coming from=20 investigations, long-term contracts that have lowered spot market prices an= d=20 increased energy conservation by Californians.=20 Davis said pressure in Washington is coming from congressional hearings and= =20 the possibility that the Federal Energy Regulatory Commission will order=20 regional price limits or refunds for overcharges in California.=20 The governor also said three new power plants could begin operating in the= =20 next 30 days, an apparent reference to Calpine's 500-megawatt plant near Yu= ba=20 City and its 559-megawatt plant at Pittsburg and a 320-megawatt Mission=20 Energy-Texaco plant in Kern County.=20 The small non-utility generators that operate as "qualifying facilities"=20 under a federal program are capable of providing about a quarter of the pow= er=20 needed by the state.=20 In March, blackouts during two days were said to have resulted, in part, fr= om=20 small generators who were not operating because they had not been paid. Dav= is=20 announced an agreement yesterday between Edison and its QF contractors.=20 The Davis administration thinks the agreement could produce an additional 1= 00=20 to 300 megawatts of power (a megawatt is enough for 750 to 1,000 homes) thi= s=20 summer because some generators had previously contracted to sell less power= =20 than they are capable of producing.=20 Richard Katz, a former assemblyman from Van Nuys asked by Davis to negotiat= e=20 the agreement, said the QF contractors will receive an average of about 11= =20 cents per kilowatt-hour during the five-year contracts.=20 Katz said generators who use renewable energy sources -- such as solar, win= d,=20 geothermal, and biomass -- will be paid an average of about 7.37 cents per= =20 kilowatt-hour.=20 He said that co-generators, who use natural gas and sell the excess heat to= =20 businesses, will receive an average of 15 cents to 16 cents per=20 kilowatt-hour.=20 The generators will receive 10 percent of the money they are owed when the= =20 contracts are signed, and the full debt eventually will be paid with=20 interest.=20 Katz said the new rates for the small contractors are tied to legislative= =20 approval of the Edison rescue plan. But Senate President Pro Tempore John= =20 Burton, D-San Francisco, disagreed, saying action by the Public Utilities= =20 Commission yesterday implemented the agreement between Edison and the small= =20 contractors.=20 ?=20 FERC appears set to expand its price curbs=20 By Joe Cantlupe=20 COPLEY NEWS SERVICE=20 June 14, 2001=20 WASHINGTON -- Facing mounting political pressure, the Federal Energy=20 Regulatory Commission seems poised next week to greatly expand existing=20 energy price restrictions that now kick in only during emergencies.=20 Hints of the move surfaced yesterday as a Senate committee started=20 investigating FERC's response to the California power crisis.=20 The current order limits prices only when the state's power reserves dip=20 below 7.5 percent, the level at which a Stage 1 alert is called.=20 Critics, including Gov. Gray Davis, say that order is full of loopholes=20 because any price can be charged when no emergency has been declared, which= =20 is most of the time.=20 Sen. Dianne Feinstein, D-Calif., told the Governmental Affairs Committee=20 yesterday that "it now appears that on Monday, FERC may extend this order t= o=20 the entire Western energy market and may ensure that the order stays in pla= ce=20 at all times."=20 "This sounds good on the face of it, and it may well be," added Feinstein.= =20 "However, this situation is ripe for manipulation, as I believe they have= =20 been doing," she said of power generators in the state.=20 She said that FERC is essentially considering a "flexible price cap" that,= =20 like the existing order, sets the price on the cost of producing electricit= y=20 at the most-costly, least-efficient power plant.=20 FERC officials declined to discuss the agency's possible action next week, = or=20 Feinstein's remarks.=20 FERC's previous "price mitigation" order went into effect May 29 and some= =20 federal regulators say it caused wholesale electricity prices to plummet in= =20 California. Megawatts that once cost an average of more than $300 -- and=20 sometimes several thousand dollars -- recently dropped to below $100 during= =20 peak usage. A megawatt powers about 750 homes.=20 But some observers say that many factors are responsible for the sudden pri= ce=20 drop, including cooler weather, conservation and state long-term electricit= y=20 contracts.=20 At a meeting of the California Public Utilities Commission in San Francisco= =20 yesterday, Chairwoman Loretta Lynch said she is "very encouraged" that FERC= =20 is reconsidering its earlier decision, but said the result would be=20 "absolutely inadequate" because FERC would cap prices at a relatively high= =20 rate, according to The Associated Press.=20 Yesterday's Washington hearing by the Governmental Affairs Committee was th= e=20 Democratic-controlled Senate's first foray into California's emotionally=20 charged power crisis and seemed a harbinger of intensified partisan wrangli= ng=20 to come.=20 Feinstein and Sen. Barbara Boxer, D-Calif., used the hearing to make pleas= =20 for immediate action on price caps and to complain about FERC.=20 "Today, we see no semblance of really meaningful regulation," Feinstein sai= d.=20 Committee Chairman Joseph Lieberman agreed.=20 "The fact of the matter is that the California market is not even=20 functional," said Lieberman, D-Conn. "I think it's fair to say if the feder= al=20 government doesn't step in and provide temporary price relief, the natural= =20 trend toward deregulation will come to a halt."=20 California officials have sought price caps to rein in what they term=20 outrageous electricity costs charged by out-of-state companies.=20 But the Bush administration has vehemently opposed caps, saying they would= =20 discourage investment in new power plants.=20 In recent weeks, however, some key congressional Republicans have softened= =20 their position, saying they would not oppose limited controls.=20 FERC itself -- heavily criticized by Davis and others as a do-nothing agenc= y=20 -- appears to be showing a new face, with two new members appointed by Bush= =20 promising more aggressive monitoring of the power industry.=20 Feinstein and Rep. Henry Waxman, D-Los Angeles, have sponsored bills that= =20 would enact tougher price caps. The legislation is expected to be debated= =20 later this month.=20 Sen. Fred Thompson, R-Tenn., the ranking Republican on the committee, oppos= ed=20 Boxer and Feinstein's calls for price caps and said that California officia= ls=20 were partly to blame for the state's problems for acting "too late."=20 ?=20 State must bare secret energy deals=20 Judge orders release of pacts with suppliers By Karen Kucher and Craig D. Rose=20 UNION-TRIBUNE STAFF WRITERS=20 June 14, 2001=20 The state's secret energy deals won't be secret much longer.=20 Even as some details about California's long-term power contracts began to= =20 emerge, a Superior Court judge yesterday ordered the almost-full release of= =20 the state's agreements with power suppliers by noon tomorrow to attorneys= =20 representing news organizations and a dozen state lawmakers.=20 Judge Linda B. Quinn also set a hearing for June 27 to decide whether to=20 order the state to release information about its costly spot-market=20 electricity purchases, something the state only wants to do six months afte= r=20 the transactions are completed.=20 The news organizations and legislators filed suit under the Public Records= =20 Act, seeking the contracts that bind the state to more than $40 billion in= =20 power purchases over the next decade.=20 Revelations that California has contracted to pay as much as $154 per=20 megawatt-hour to Constellation Energy Group Inc. quickly brought complaints= =20 that the state had overpaid for electricity. The price of the commodity is= =20 now plunging.=20 The Los Angeles Times? and at least one other newspaper, which obtained som= e=20 of the long-term state contracts, reported that power costs ranged to as lo= w=20 as $58, and down to about $22 when the state supplies fuel to generating=20 plants.=20 By comparison, spot prices yesterday for power were from $55 to $65 per=20 megawatt-hour, far below levels earlier this year when prices averaged more= =20 than $250 for several months and reached a high of nearly $3,900.=20 Until last June, prices rarely exceeded $50 per megawatt-hour. Deregulation= =20 advocates said prices would decline as the market was opened up.=20 Gov. Gray Davis' strategy in dealing with budget-busting costs over the pas= t=20 year has been to sign long-term deals to avoid buying in daily markets.=20 Yesterday, he said comparing contracted electricity costs to spot prices is= =20 unfair.=20 "The price of spot market electricity is coming down because we have locked= =20 in long-term contracts," Davis said. "We knew this going in. The purpose of= =20 getting long-term contracts is to wean ourselves away from a spot market."= =20 The governor referred to the often-cited criticism that California's soarin= g=20 power prices were caused partly by an excessive dependence on buying power = in=20 daily markets, as opposed to under longer contracts.=20 Severin Borenstein, an expert in electrical deregulation from the Universit= y=20 of California Energy Institute, agreed that comparing current spot prices= =20 with contract prices was unfair.=20 Speaking at a news conference yesterday hosted by the governor's press=20 secretary, Borenstein said the deals should be analyzed in the context of= =20 conditions that existed as they were negotiated.=20 Spot prices during the first three months of this year, for example, averag= ed=20 about $285 per megawatt hour.=20 But a prominent critic of deregulation said that neither buying strategy=20 presented an acceptable option for consumers.=20 "They gouge you with spot prices or they gouge with term contracts," said= =20 Harvey Rosenfield, president of the Foundation for Taxpayer and Consumer=20 Rights in Santa Monica, which is expected to lead a ballot initiative next= =20 year over deregulation.=20 "We have to get out of this deregulation disaster."=20 Parts censored For months, Davis refused to make public details about the contracts, sayin= g=20 that revealing information about the deals would put the state at a=20 disadvantage in contract negotiations.=20 The state became a major electricity buyer after the near-bankrupt utility= =20 companies were unable to make purchases on their own.=20 This week, however, Davis agreed to release the contracts, with certain=20 portions censored. The governor's change of heart came as the newspaper=20 reports emerged and critics alleged that the state was overpaying.=20 A spokesman for Enron Corp. said yesterday that the state had many=20 opportunities to secure power at lower prices than it appears to have paid= =20 under the contracts. Enron, however, declined to sell any power to the stat= e=20 under contract.=20 Outside of court yesterday, Deputy Attorney General Tim Muscat said that th= e=20 state has secured enough contracts in the past month to feel comfortable=20 releasing long-term contract details.=20 The state has signed 61 contracts or agreements in principle that cover muc= h=20 of the state's unmet electricity needs, he said.=20 "We have finally reached critical mass and now we think we can disclose the= =20 contracts and still protect the public's interest in getting the best deal= =20 and going forward with negotiating agreements," Muscat said.=20 But he added that the state wants to keep private some technical contract= =20 information that could harm the state's contract partners.=20 Media opposed "You are going to be looking at a contract that has 98 to 99 percent of the= =20 content in it," Muscat told reporters gathered outside Quinn's San Diego=20 courtroom. "The only thing that could be removed are some technical issues.= "=20 Alonzo Wickers, an attorney representing the coalition of media=20 organizations, said he will oppose allowing the state to omit portions of t= he=20 contracts and will seek full information about spot market buys.=20 Wicker said that having complete access to the documents "is essential to t= he=20 public's full understanding of the contracts."=20 Wickers is representing the Copley Press, which publishes The San Diego=20 Union-Tribune; the Los Angeles Times; the San Jose Mercury News; the San=20 Francisco Chronicle; Dow Jones; the McClatchy newspapers; The Orange County= =20 Register; Bloomberg, and The Associated Press.=20 Muscat had unsuccessfully sought 14 days to provide the documents to=20 plaintiffs. He said the state's business partners needed to have the=20 opportunity to raise objections to releasing the information. The contracts= =20 contain confidentiality clauses.=20 Among those seeking a delay in the judge's ruling yesterday was an attorney= =20 representing Morgan Stanley, a marketer in power transactions, who said he= =20 had just learned of the litigation this week.=20 "Once the contracts are publicly disclosed, the eggs cannot be unscrambled,= "=20 said attorney Eric Landau, who said his client's competitive position could= =20 be hurt by the release of information. Staff writer Ed Mendel contributed to this report.=20 NEWS ANALYSIS Senate Democrats to Use Power to Illuminate Bush Energy Plan=20 By RONALD BROWNSTEIN, Times Political Writer=20 ?????WASHINGTON--It was a sign of things to come when Sen. Joseph I.=20 Lieberman (D-Conn.) bounded into the chairman's seat Wednesday to convene a= =20 hearing on electricity price controls in the Senate Governmental Affairs=20 Committee. ?????With their sudden ascension into the Senate majority, Democrats have= =20 regained control of one of Congress' most effective weapons: the power to= =20 summon witnesses to investigative hearings, backed by the authority to=20 subpoena documents. And that could signal a major shift in the debate on a= =20 broad range of issues--energy policy foremost among them. ?????Though the Democrats lack a coordinated strategy, several committees= =20 plan hearings through the summer and fall that will shine a sustained=20 spotlight on Bush administration energy policy decisions, and the role of= =20 energy companies in rising gasoline and electricity prices. Through these= =20 hearings, the Democrats hope to reshape the climate of public opinion aroun= d=20 the energy debate, pressure both federal regulatory agencies and private=20 companies to change their behavior--and score some political points by=20 painting President Bush's policies as a boon to the energy industry. ?????"What this allows us to do is continue some of the unpleasant=20 conversations that Bush is trying to avoid and that Bush could avoid in the= =20 more controlled atmosphere when Republicans held the Senate," said one=20 Democratic strategist. ?????That prospect presents obvious problems for Bush, who already is=20 battling the perception in opinion polls that he favors producers over=20 consumers in the energy debate. But these inquiries also carry dangers for= =20 Democrats, who spent six years charging that congressional Republicans=20 misused their investigative authority through repeated hearings into allege= d=20 ethical misdeeds by the Clinton administration. ?????"The public doesn't want to see a party that's out for blood. If they = go=20 down that path, the public will turn off just like it turned off on the=20 Republicans," said John Podesta, President Clinton's White House chief of= =20 staff. "But what these investigations and oversight hearings can do is real= ly=20 help tell a story about whose side this White House is on . . . and what th= e=20 impact is on real people's lives."=20 ?????Senate Republicans wasted no time denouncing the hearings as a waste o= f=20 time. "Let me tell you what the name of the game is now: It's pure politics= ,"=20 said Sen. Frank H. Murkowski (R-Alaska), who chaired the Energy and Natural= =20 Resources panel until the Democratic takeover. ?????Asked about Wednesday's proceedings, he replied: "Is that going to=20 produce any more energy?" ?????Conscious of both the opportunities and risks, Democrats are moving=20 cautiously to exercise their new clout. Lieberman has not issued any=20 subpoenas in his investigation into California's power crisis, and his firs= t=20 hearing Wednesday was a sedate affair that broke no new ground. ?????Still, the authority to investigate has always been one of Congress'= =20 most potent tools, particularly when Capitol Hill and the White House are= =20 held by different parties. ?????Over the last century, congressional hearings have largely divided int= o=20 three categories. One tradition centers on allegations of ethical wrongdoin= g=20 in the executive branch--such as the probes that unearthed the Teapot Dome= =20 oil scandal during Warren G. Harding's presidency, vetted the Watergate=20 burglary that led to President Nixon's downfall or examined the Whitewater= =20 land deal and campaign fund-raising during Clinton's presidency. ?????Hearings also have been used to look for misbehavior in the private=20 sector, usually as an attempt to lay the groundwork for reform legislation,= =20 such as the Depression-era hearings on the stock market crash that led to t= he=20 creation of the Securities and Exchange Commission. ?????And, finally, legislators have used the hearing forum as a competitor = to=20 the president's bully pulpit--as a means to draw attention to ideas the Whi= te=20 House opposes. Probably the most successful example of that occurred in the= =20 1960s, when nationally televised hearings by Sen. William Fulbright (D-Ark.= )=20 on Vietnam crystallized opposition to the war. ?????During Clinton's presidency, Republicans emphasized ethics=20 investigations. So far, in the energy debate, Democrats are focusing on the= =20 second and third categories. ?????"Hearings of the sort Lieberman is conducting aren't designed to disru= pt=20 [like the hearings during the Clinton administration]; they are designed to= =20 force new issues in the debate," said Johns Hopkins University political=20 scientist Benjamin Ginsberg, who has written extensively on the process. "A= s=20 long as the energy debate was conducted only inside the Republican Party, i= t=20 was a debate between proponents of free markets and proponents of freer=20 markets." ?????At Wednesday's hearing, Lieberman summoned half a dozen economists to= =20 make the case for the price caps on electricity rates that California Gov.= =20 Gray Davis supports and Bush adamantly opposes. Next Wednesday, Lieberman= =20 will convene a second hearing that will give Davis a national forum to make= =20 his case for price controls--then summon officials from the Federal Energy= =20 Regulatory Commission to explain why they have rebuffed that request. ?????Sources say Lieberman is considering a third hearing that would summon= =20 electricity producers, whom Davis has accused of "gouging" California. ?????As Lieberman proceeds, Sen. Jeff Bingaman (D-N.M.), the Energy=20 Committee's new chairman, is scheduling hearings next week on electricity= =20 prices and the Environmental Protection Agency's decision to continue=20 requiring the use of ethanol as a fuel additive in California. ?????Sen. Carl Levin (D-Mich.) is advancing on a slower but potentially=20 broader track as he examines rising gas prices. The subcommittee he heads= =20 intends to ask major oil companies to voluntarily produce various documents= =20 on the issue, a request aides expect will be followed up with a subpoena=20 during the summer. The aides say Levin is not likely to require oil company= =20 executives to publicly testify until late fall. ?????Sen. Larry E. Craig (R-Idaho) predicted Democrats will have a difficul= t=20 time attacking Republicans on energy. "They're going to try to make politic= s=20 out of a crisis," he said. But "for eight years [under Clinton], there has= =20 been this silent echo of nothing in the area of production. . . . Under the= ir=20 watch, little to nothing has been done, and many forms of energy have been= =20 discouraged." ?????Even inside Democratic ranks, opinion varies on what the hearings migh= t=20 accomplish. ?????Davis aides believe the forums could create momentum for price-cap=20 legislation sponsored by Sens. Dianne Feinstein (D-Calif.) and Gordon Smith= =20 (R-Ore.). But that bill faces difficult odds in the Senate; the more=20 practical benefit of the hearings, one source close to Lieberman said, may = be=20 to increase pressure on FERC to act. That may already be happening: Senior= =20 FERC officials told The Times on Tuesday that in response to the growing=20 political heat, the agency is considering a significant expansion of the=20 price limits it has already ordered. ?????Likewise, Levin believes that the prospect of subpoenas and compelled= =20 public testimony later this year "will have a moderating quality" on gasoli= ne=20 price and supply decisions that oil executives make this summer, as one aid= e=20 put it. ?????More broadly, Democrats believe any evidence that either oil or=20 electricity producing companies have manipulated price increases will make = it=20 tougher for Bush to sell an energy agenda that stresses increased productio= n.=20 And during the hearings, Democrats see an opportunity to solidify their=20 contention that the administration has given the energy industry too loud a= =20 voice in setting policy. ?????"One of the things these hearings can do is begin to pull back the=20 curtain on . . . who is in the room," Podesta said. "Who is giving the=20 advice? Who is calling the shots?" ?????Yet Democrats also appear acutely conscious of the danger of appearing= =20 overly partisan, particularly Lieberman, who has meticulously cultivated a= =20 reputation for working across party lines. Tellingly, sources close to both= =20 Davis and Lieberman say that the governor's appearance at next week's heari= ng=20 was more his idea than the senator's. "The goal here isn't to get Bush,"=20 insisted one close Lieberman advisor. "It's to crystallize some of the=20 differences in terms of policy approaches." ---=20 ?????Times staff writer Richard Simon contributed to this story. U.S. Invites Private Funding for Grid Expansion=20 Bush plan targeting Path 15, a key transmission point in the Central Valley= ,=20 sets up a showdown with the state.=20 By NANCY VOGEL, Times Staff Writer=20 ?????SACRAMENTO--Private energy companies could own rights to a key piece o= f=20 California's electrical transmission grid, thereby gaining influence over t= he=20 flow of electricity and its price, under a plan launched Wednesday by the= =20 federal government. ?????At the direction of President Bush, a federal power agency Wednesday= =20 invited "outside parties" to help pay for the expansion of Path 15, an=20 85-mile stretch of high-voltage wires in the Central Valley that constrains= =20 the flow of power. ?????Pacific Gas & Electric owns the original wires, which can move about= =20 3,000 megawatts of power, but the financial backers of an expansion would w= in=20 the rights to move an additional 800 megawatts on the new lines. ?????Any company or utility hoping to move electricity through that choke= =20 point would have to pay the owners of the transmission rights a fee and abi= de=20 by their rules. ?????The federal solicitation for investment sets up a showdown with=20 California, which is urging Pacific Gas & Electric to expand its existing= =20 lines at Path 15. Gov. Gray Davis also is pursuing outright purchase of the= =20 transmission grids owned by PG&E, Southern California Edison and San Diego= =20 Gas & Electric. ?????"What you have is two processes on two different tracks," said Jim Pop= e,=20 president of a group of municipal utilities eager to expand Path 15. ?????He said the hope of his organization, called the Transmission Agency o= f=20 Northern California, is that "we don't go down different tracks and end up = in=20 a train wreck at Path 15." ?????The federal government has power of eminent domain, like PG&E, but wou= ld=20 not have to go through a state Public Utilities Commission review process t= o=20 expand Path 15. ?????Path 15 will become increasingly important to the state as the dozens = of=20 long-term contracts recently signed with power producers take effect. Many = of=20 those contracts are for power generated in Southern California, which must = be=20 squeezed up Path 15 to meet demand in the Silicon Valley and San Francisco. ?????Ray Hart, deputy director of the state Department of Water Resources,= =20 which signed the power contracts, called the federal effort to attract=20 partners on a Path 15 expansion project "disconcerting." ?????"I think the governor's plan to acquire the transmission [grid] is goo= d=20 for the people of California," said Hart. "I think it protects them from=20 marketers that would have a tendency to want to lock it up and jack the rat= es=20 up." ?????Federal law mandates that transmission grid owners offer fair fees and= =20 open access. But owners of transmission rights can sell that ability to mov= e=20 electricity in a secondary market, and experts say that in the complicated= =20 rules that govern transmission rights, there is room for manipulation.=20 Transmission constraints can influence price by barring some buyers and=20 sellers from reaching one another. ?????"If you're going to pay for 25% of the line, then you're going to want= =20 25% of the line for your own use," said Armando Perez, director of grid=20 planning for the California Independent System Operator, which manages much= =20 of California's electron highway system. "It makes less transmission=20 available" for others. ?????The Path 15 power lines near Los Banos have been eyed for expansion fo= r=20 at least a decade. As California's demand for electricity swung upward in t= he=20 last five years and the state opened its electric industry to competition,= =20 the congestion at Path 15 worsened. The choke point was a culprit, grid=20 operators say, in the mid-January blackouts in Northern California. ?????As part of his national energy plan announced last month, Bush directe= d=20 the U.S. Department of Energy to investigate outside interest in financing = a=20 fix for Path 15. ?????U.S. Energy Secretary Spencer Abraham put the federal effort in the=20 hands of the Western Area Power Administration, which sells the electricity= =20 produced at 55 powerhouses on federally built reservoirs in the West. ?????"Western Area Power Administration wants you," states a news release t= he=20 agency issued Wednesday. "That is, if you are interested in partnering to= =20 finance and co-own necessary improvements to relieve a transmission=20 bottleneck in California." ?????Just how much transmission capacity the backers of the project would w= in=20 title to is up for negotiation, said power administration spokesman Dave=20 Christy. ?????Energy industry officials said they expect interest from both=20 electricity and natural gas companies. Companies have until July 12 to=20 indicate how much they would be willing to finance of a job expected to cos= t=20 $200 million to $300 million and take at least two years. ?????Representatives of several power generators and marketers said Wednesd= ay=20 that it was too early to know whether their companies would seek to gain=20 transmission rights on Path 15. ?????But Trans-Elect, a company based in Washington, D.C., is definitely=20 interested, said Executive Vice President Robert L. Mitchell. ?????He said he intends to send a letter next week to Southern California= =20 Edison chief John Bryson, offering to buy the utility's transmission grid f= or=20 $1.8 billion. Trans-Elect aims to create a national network of independentl= y=20 owned electrical grids, with profits coming from transmission fees. ?????Davis has offered Edison $2.76 billion as part of a complicated plan t= o=20 restore the utility's financial health. Edison officials had no comment=20 Wednesday on Mitchell's offer. Blackouts and Businesses: Dying for an Exemption?=20 By JOSEPH MENN, Times Staff Writer=20 ?????Never mind getting stuck in an elevator. Next time there's a power=20 outage, pray you're not at La Scala. ?????The upscale Beverly Hills eatery says that 26 to 100 of its patrons ar= e=20 likely to die, "depending upon how many guests are in the restaurant during= a=20 blackout, and how many guests are subjected to contaminated food." ?????If "likely to die" sounds a little harsh, that prognosis is surprising= ly=20 common. ?????La Scala is one of more than 10,000 businesses and public agencies tha= t=20 filed applications in the last few weeks to be spared from an anticipated 2= 0=20 to 200 hours of rolling blackouts once temperatures start rising this summe= r=20 and electricity gets more scarce. ?????Dental offices, cemeteries, churches, beauty salons, hotels, law firms= =20 and at least one dance studio are vying for the expected handful of=20 exemptions, all arguing that members of the public could hurt themselves in= =20 the dark or have heart attacks in a panic. ?????Food poisoning is just the beginning. Applicants raise the specter of= =20 chemical spills, heavy-machinery failures, medical emergencies and even civ= il=20 unrest. ?????Because the Public Utilities Commission has declared that only health= =20 and safety concerns--and not economic hardship--will qualify businesses for= =20 the new round of discretionary exemptions--some companies are letting their= =20 imaginations flourish. ?????Evidently reluctant to simply throw away spoiled food, the restaurant= =20 and catering industries alone could be responsible for scores of=20 bacteria-related massacres, were one to accept at face value the applicatio= ns=20 made public this week on a PUC computer terminal. ?????La Scala Vice President Wendy Ham declined to be interviewed about the= =20 restaurant's filing with the commission. Other businesses were more=20 forthcoming. ?????Santa Ana catering firm A Perfect Affair, for example, says in its=20 application that it is likely to serve last meals to some 100 to 1,000 soul= s. ?????"I didn't fudge that at all," said owner Stephen Server. "It was=20 basically my opinion. . . . I'm not a soothsayer." ?????Galley Catering of Long Beach, more modestly, foresees one to three=20 deaths and 100 to 1,000 minor health problems resulting from "food-based=20 bacteria issues." Of course, business there could be slow. ?????The PUC recently extended the filing deadline to Friday for applicatio= ns=20 via a Web site, www .rotating-outages.com. The agency hired Menlo Park=20 engineering consultant Exponent Inc. to rank the sometimes apocalyptic=20 visions--all submitted under penalty of perjury--and plans to vote on them= =20 Aug. 2. ?????Public Utilities Commissioner Carl Wood said the exaggeration is=20 regrettable but not surprising. ?????"It doesn't make it easier when people stretch the law of probability,= =20 but it's to be expected," Wood said. "We understood we could get people=20 trying to make their best case." ?????Such apparent self-interest is nothing new, said James C. Williams,=20 author of "Energy and the Making of Modern California" (1997). ?????"People just don't care a whit about the larger society as long as the= y=20 make money," said Williams, a professor at De Anza College. ?????Exponent's project manager, Subodh Medhekam, estimates that more than= =20 300 companies say they each will lay waste to at least 1,000 lives in the= =20 event of a blackout. Hundreds more claim they will cause at least one human= =20 being to pass on. ?????"There are some people who may not have been all that truthful,"=20 Medhekam said. "You can see our problems here." He said Exponent isn't=20 blindly accepting anyone's predictions. ?????Among those that say they pose the most dire threats in the event of= =20 blackouts are broadcasters, factories handling noxious chemicals and those = in=20 the ordinarily nonthreatening world of food service. ?????With the latter, size is no obstacle. At tiny but apparently potent J&= W=20 Liquor in Blythe, owner Joyce Wong said in her filing that she sells=20 perishable foods to more than 100 customers a day, and that at least that= =20 many are likely to expire if the power is off for more than two hours. ?????Many key public safety operations already are exempt from conservation= =20 blackouts, including hospitals, defense outposts, utilities, air and sea=20 transport communications, trains and other mass transit, and radio and=20 television broadcasters that carry emergency information. ?????Then there are the lucky homes and businesses that share the same piec= e=20 of the electric network as providers of essential services, bringing the=20 total amount of protected power to 50% of the peak load. The PUC says it ca= n=20 exempt a maximum of an additional 10% through the new program. ?????Some of those already exempt have applied again, either because they= =20 don't know they are protected or because the utilities can knock them off= =20 that list if they have enough backup power. ?????KSON-AM radio in San Diego said more than 1,000 people would probably= =20 die if it couldn't broadcast emergency news. Cocola Broadcasting Cos. of=20 Fresno said that if its 20 television stations lost power, as many as 100= =20 people would perish. ?????Cocola President Gary Cocola conceded that some viewers might just tur= n=20 to another channel to get emergency information. ?????"Maybe the guy who filled that form out got a little ambitious," he sa= id=20 in an interview. But some who watch his stations' broadcasts of the Home=20 Shopping Network are more at risk, he said. ?????"The women who watch our station put that on and leave it on. They=20 become addicts," Cocola said. "If the channel goes off the air, they may no= t=20 be switching around." ?????Other applicants make a more persuasive case, such as dialysis centers= =20 and medical offices. ?????But even some health-care providers may be stretching the point. ?????Daly City's Home Sweet Home is licensed to care for 57 elderly residen= ts=20 with dementia, all of whom wear sensors to alert the staff if they wander o= ff=20 the grounds. ?????In the event of a blackout, administrator Carlene Burton said in an=20 interview, the home would have to station a staff member at every door. ?????Not ideal, certainly, but a far cry from the 26-plus deaths predicted = in=20 the company's application. No one was hurt during the last blackout, owner= =20 Yelka Matijas said. But the next time, she said, "I don't want to think abo= ut=20 it." ?????Another set of applicants took advantage of the electronic form's=20 failure to specify that the potential deaths must be human. Several=20 veterinary clinics complained that patients could die on the operating tabl= e. ?????Nightclub owners also applied in droves. ?????The House of Blues in West Hollywood wrote that, even though it has an= =20 emergency lighting system, severe health effects were "somewhat likely" if = a=20 show were suddenly forced to go acoustic. ?????"People who have consumed alcohol can become overheated very quickly, = as=20 well as [fail to use] good judgment in remaining calm," the club wrote. It= =20 added, a bit cryptically, that this is true "especially depending on the=20 demographic for that show." ?????Many retailers realize they face long odds of winning exemption. Yet= =20 Gibson Jewelers in Escondido said that as many as 10 deaths are "somewhat= =20 likely" in a brief outage because it anticipates an armed robbery.=20 ?????Interestingly, most of those predicting horrific consequences=20 simultaneously admit they have no backup generators--providing plaintiffs= =20 lawyers with the documentary equivalent of a smoking gun, should someone=20 actually get hurt. ?????Others have complained that sudden blackouts would cut power to worker= s=20 operating heavy machinery, but they conceded in interviews that they hadn't= =20 mentioned such risks to the workers themselves. ?????Commissioner Wood said that as an application nears approval, the=20 business must sign a statement supporting its claims. He wouldn't rule out= =20 penalties for misstatements but said they wouldn't be a high priority. ?????"We're not playing 'gotcha!' " he said. ?????Alongside those with more creative applications, small businesses from= =20 the Gardena Bowling Center to Gucci America in Beverly Hills said that no o= ne=20 was likely to be harmed if the lights went out but asked to be spared anywa= y.=20 (A Los Angeles Times printing plant in Costa Mesa falls in that category.) ?????"People are treating it like a lottery," said PUC consultant Medhekam. ?????One thing that might have made his task easier, he said, would have be= en=20 simple: a $100 application fee. ?????"That would have weeded out some frivolous applications," he said. "An= d=20 the state would have made a lot of money." Price for More Megawatts Is More Smog=20 Pollution: Relaxed rules for "peaker" plants could push Ventura County over= =20 ozone limits. The effect elsewhere may prove minimal.=20 By GARY POLAKOVIC, Times Environmental Writer=20 ?????Gov. Gray Davis' decision this week to relax emission controls at powe= r=20 plants will help keep the juice flowing, but will also retard progress=20 against smog. ?????The changes are bound to cause mischief for some California areas on t= he=20 cusp of achieving healthful air after more than 30 years of effort. Even a= =20 little extra pollution could be enough to thwart attainment of the national= =20 health-based ozone standards in the Bay Area, San Diego and Ventura County,= =20 officials say. ?????Moreover, in case the governor's strategy doesn't work, he has left op= en=20 the option of tapping the dirtiest power source available--legions of backu= p=20 diesel generators. Those 12,000 engines would provide a few hundred more=20 megawatts, but at a terrible price for air quality, because they lack=20 controls and can spew about 10 times more pollutants than the very dirty=20 "peakers" that Davis exempted from emissions controls Monday. ?????"We're trying to make the best of a bad thing, but in the short term, = we=20 are getting rolled. Air quality is going to suffer more this year, and ther= e=20 will be some impacts," said Dick Baldwin, executive officer for the Ventura= =20 County Air Pollution Control District. ?????Across most of Southern California, however, the energy crisis is not= =20 likely to lead to dirtier air this year, air quality officials say. ?????The reason is that California's power plants, some of the cleanest in= =20 the nation, contribute just 5% of the smog-forming emissions during summer= =20 and half as much the rest of the year. The lion's share of the Southland's= =20 air pollution comes from cars and trucks. Two-thirds of the 16 power plants= =20 in the region will be equipped with devices to render them 90% cleaner by= =20 summer, according to the South Coast Air Quality Management District, which= =20 regulates air pollution in Los Angeles, Orange and parts of Riverside and S= an=20 Bernardino counties. ?????Those improvements should reduce overall power plant emissions about a= =20 third this year, although pollution from individual generators may be highe= r,=20 according to the state Air Resources Board.=20 ?????For the most part, California air quality officials say the challenges= =20 they will face because of the energy crisis are temporary and surmountable,= =20 but they acknowledge that they are under intense pressure from politicians,= =20 energy companies and manufacturers to relax regulations. California has mor= e=20 smog than any other state and the world's most stringent and comprehensive= =20 program to tame it, although progress toward a healthy environment is still= =20 slow. ?????On the other hand, officials are attempting to balance the need for a= =20 clean environment with the need to keep the economy humming. The power=20 crisis, too, can be hazardous to people when blackouts knock out traffic=20 signals or cause heavy equipment to malfunction in the workplace.=20 ?????An executive order that Davis issued Monday lifts emissions limits on= =20 heavily polluting power plants, allowing municipalities and energy companie= s=20 to produce as much power, and smog, as necessary. ?????The decision was reached after utilities such as the Los Angeles=20 Department of Water and Power noted that operating restrictions on so-calle= d=20 "peaker" plants were leaving hundreds of megawatts of capacity unused.=20 Peakers are typically run by gas-fired turbines, similar to jet engines. Th= ey=20 produce limited power, but lots of pollution, which is why their use was=20 strictly controlled in the first place. ?????Under the governor's plan, power producers will pay $15,000 per ton of= =20 extra smog produced by the turbines. The money will go into a fund to pay f= or=20 cleaning up dirty trucks, buses, boats and farm equipment to offset the=20 pollution from the power plants. Government estimates show that the plan=20 could provide up to 1,200 megawatts of additional electricity, but an=20 additional 500 tons of pollutants this summer. ?????Meanwhile, emissions from cars, trucks, buses and consumer products=20 continue to decline. Air quality is dramatically better today in the=20 Southland than it was a decade ago. Credit rigorous controls on everything= =20 from lighter fluid to paint, oil refineries to autos, bakeries to landfills= . ?????The trend of improving air quality should accelerate as power companie= s=20 pay the millions of dollars in fees and penalties to help fund smog-cutting= =20 programs. The funds will be used to switch vehicles, farm equipment and boa= ts=20 to clean fuels, many of which can be converted this year to help offset pow= er=20 plant emissions, said Catherine Witherspoon, policy advisor for the state a= ir=20 board. ?????"On the whole, there's not going to be a lot more smog. We expect=20 declining emissions from power plants," Witherspoon said. ?????Across Southern California, power plant emissions are up this year whi= le=20 smog levels remain largely unchanged. Boilers and turbines have released mo= re=20 than 2,045 tons of pollutants so far--twice as much as they had by this tim= e=20 last year. Yet just 11 days of unhealthful ozone levels have been recorded= =20 anywhere in the region so far this year. The peak ozone reading has been 0.= 18=20 parts per million, a level comparable to last year's, said Joe Cassmassi,= =20 senior meteorologist for the AQMD. ?????Smog levels are strongly influenced by weather, and in the approaching= =20 summer ozone season, Cassmassi said, conditions this year should be no wors= e=20 than last year. In fact, he forecasts that by August tropical storms from t= he=20 Gulf of California will bring unsettled air, which tends to reduce smog. He= =20 said that by year's end the region can expect a gradual return to El Ni=0Fo= =20 conditions, which portends an early end to smog season. ?????"The way the weather is lining up, it will be a typical year in a=20 long-term trend and the trend is toward improving air quality," he said. ?????The increased emissions from power plants, however, might be just enou= gh=20 to add one or two smoggy days to some communities with little margin for=20 error. San Diego, the Bay Area and Ventura are close to meeting the federal= =20 one-hour ozone standard--the benchmark for healthful air and the culminatio= n=20 of a multibillion-dollar cleanup effort spanning decades. Those communities= =20 are racing against Clean Air Act deadlines that, if not met, could trigger= =20 federal sanctions and restrictions on highway funds. ?????"If we can make it through November without having two more violations= =20 this year, we would be in attainment," said Dick Smith of the San Diego=20 County Air Pollution Control District. "That means the air quality is not= =20 being exceeded, and it would allow certain onerous and burdensome regulatio= ns=20 to go away." ?????The margin is even closer in Ventura County, which was once one of the= =20 smoggiest places in the nation. Now the county is almost in compliance with= =20 air quality standards, but just one day of unhealthy ozone would push it ov= er=20 the line, Baldwin said. A 132-megawatt Reliant Energy Co. peaker plant in= =20 Oxnard may be the deciding factor; it might produce up to 12 tons daily of= =20 smog-forming nitrogen dioxide this summer, a 25% increase in those emission= s=20 in the county, Baldwin said. ?????Air quality officials opposed the governor's decision, but acquiesced= =20 with an understanding that an alternative plan to press into service backup= =20 diesel generators would be delayed. ?????"In the short term, there may be some negative impacts on air quality,= =20 but if it avoids use of diesel backup generators, it's a small price to pay= ,"=20 said Barbara Lee, president of the California Air Pollution Control Officer= s=20 Assn PUC Acts to Aid Alternative Energy Suppliers=20 Regulators permit utilities to modify contracts with small power providers = to=20 maximize production.=20 By TIM REITERMAN and DAN MORAIN, Times Staff Writers=20 ?????SAN FRANCISCO--Moving to end disputes that have threatened to increase= =20 blackouts, state regulators Wednesday took steps to stabilize prices paid t= o=20 hundreds of alternative-energy producers, while encouraging them to increas= e=20 the amount of power they provide to California utilities this summer and=20 beyond. ?????The Public Utilities Commission gave permission for the utilities to= =20 change their contracts to make them more attractive to the generators, whic= h=20 supply more than a quarter of the state's electricity. ?????PUC President Loretta Lynch said that such contracts would provide lon= g- term stability and reasonable prices for generators that rely on expensive= =20 natural gas and for producers of renewable energy such as solar and wind=20 power. ?????"It means the maximum amount of power will be available this summer,"= =20 she said. ?????The disputes between the energy producers and the utilities that owe= =20 them hundreds of millions of dollars have erupted in state courts, U.S.=20 Bankruptcy Court, the PUC and the state Capitol. Although the vast majority= =20 of the generators are delivering power, many have said they are in financia= l=20 difficulty and want out of their contracts with the utilities. ?????The commission specifically encouraged the utilities to adopt five-yea= r=20 contracts at fixed prices proposed by the Independent Energy Producers and= =20 incentive payments to induce generators to produce more power than their=20 contracts currently require. ?????The PUC also unanimously ratified settlements reached Tuesday between= =20 Southern California Edison and dozens of small power producers, but the=20 agreements are tied to Gov. Gray Davis' controversial deal to rescue the=20 Rosemead-based utility from near-bankruptcy. ?????"It is a substantial move forward," Davis said. ?????Jerry Bloom of the California Cogeneration Council also praised the=20 PUC's action as a step forward for the state's 600 small generators. But he= =20 cautioned that 300 of the companies providing power to Pacific Gas & Electr= ic=20 and San Diego Gas & Electric still do not have contracts that provide a fai= r=20 return. ?????"That leaves half of them operating at a loss, and the possibility of= =20 severe blackouts still hovers over the state," Bloom said. ?????Before the Southern California Edison agreements can be consummated,= =20 Davis said, the state Legislature must approve the complex deal he struck= =20 with the utility in April to allow it to pay off its debts and regain=20 financial stability. The deal calls for the state to buy Edison's=20 transmission lines for nearly $2.8 billion and issue up to $3.5 billion in= =20 ratepayer-secured bonds to allow the utility to pay off debts from=20 electricity purchases. ?????Davis' Edison rescue plan has stalled, with virtually no support in=20 either house, and the governor urged that lawmakers begin hearings on it.= =20 Otherwise, he warned, the Southern California utility could go bankrupt. ?????Senate leader John Burton (D-San Francisco) said many lawmakers from= =20 both parties are convinced that Davis is trying to place the Legislature in= a=20 position to take political heat if the Edison deal goes sour and the utilit= y=20 follows PG&E into filing for bankruptcy protection. ?????In a filing with the PUC, Edison said its agreements with the generato= rs=20 will provide significant benefits to the utility and its ratepayers, the=20 alternative-energy producers and the state "by providing for stable and=20 reasonable . . . pricing over the next five years at a time when both prici= ng=20 and supply are highly uncertain." ?????The agreements--reached Tuesday after months of negotiations that were= =20 facilitated by the governor's office--address the issues of repaying debts = to=20 generators while establishing prices for future sales. ?????Edison stopped paying those generators in November and resumed in late= =20 March only under orders from the PUC. PG&E, which also resumed payments in= =20 March, had been paying 15 cents of each dollar owed its alternative produce= rs. ?????By the time the PUC ordered continuing payments to the alternative=20 energy producers, which Edison owes as much as $1.3 billion, the small=20 companies were running out of cash and some had stopped operating, helping = to=20 cause two days of statewide rolling blackouts in March. ?????Under terms worked out with key representatives of the=20 alternative-energy producers, Edison would pay 10% of what it owes the=20 generators for electricity produced between last Nov. 1 and March 27. In=20 addition, Edison would pay 7% annual interest on the debt. ?????A second 10% payment would be made when Edison is restored to=20 credit-worthiness through approval of the rescue deal by the PUC and the=20 state Legislature or by some other solution, Edison said. Full payment woul= d=20 be made to the generators five days after Edison receives funds to pay off= =20 its own debts. Edison also agreed to pay producers of renewable energy a=20 fixed rate of $53.70 a megawatt-hour for five years. ?????The PUC, meanwhile, failed to meet a deadline of last Friday for actin= g=20 on aspects of Davis' deal with Edison. "I have urged them to move more=20 quickly," the governor said. ---=20 ?????Reiterman reported from San Francisco, Morain from Sacramento. Times= =20 staff writers Nancy Rivera Brooks in Los Angeles and Miguel Bustillo in=20 Sacramento contributed to this story. State Still Seeks to Veil Portions of Power Pacts=20 By TONY PERRY, Times Staff Writer=20 ?????SAN DIEGO--Despite statements from Gov. Gray Davis that full disclosur= e=20 of the state's long-term power contracts was imminent, attorneys for the=20 state balked Wednesday at disclosing the contracts until key details are=20 removed. ?????The attorneys also opposed making public any short-term "spot market"= =20 contracts for at least six months, warning that to divulge those contracts= =20 now would undercut the state's negotiating stance and ensure summer blackou= ts. ?????Attorneys for several news organizations and Republican state=20 legislators accused the governor's attorneys of stalling and making the iss= ue=20 needlessly complex. ?????On Tuesday, Davis dropped his earlier opposition to making long-term= =20 contracts public and indicated that the contracts might be made public as= =20 early as Wednesday. ?????But Deputy Atty. Gen. Tim Muscat, representing Davis, asked Superior= =20 Court Judge Linda Quinn for two weeks to prepare redacted versions of the 3= 8=20 long-term contracts that total nearly $43 billion. ?????Opposing attorneys, who had sued to make the contracts public,=20 complained that the facts that Davis wants to keep secret are key to=20 understanding the contracts and to determining whether the governor has=20 obligated taxpayers to pay inflated prices. ?????"They've conceded the public interest [in disclosure] and no matter ho= w=20 thin they slice the baloney, that concession is really deafening," said=20 Sacramento attorney Charles Bell, representing 10 legislators who assert th= at=20 keeping the contracts secret violates the California Public Records Act. ?????Quinn ruled that the long-term contracts must be made public by noon= =20 Friday although she will allow the governor to keep certain portions secret= =20 at least until June 27 while she considers legal arguments from both sides. ?????She expressed annoyance at the slow pace of negotiations between the t= wo=20 sides and the apparent slowness of the attorney general's efforts to alert= =20 private companies that their contracts with the state might be made public. ?????"This is an amazing situation," Quinn said. ?????Eric Landau, Orange County attorney for Morgan Stanley Dean Witter &= =20 Co., the Wall Street brokerage firm that serves as an energy marketer, said= =20 he had only recently learned that the contracts might become public. "All w= e=20 are asking for is the ability to review the proceedings," he said. ?????Muscat said the governor wants to avoid details including indexes that= =20 would link the price of electricity to natural gas prices, delivery points= =20 and transaction costs. ?????Disclosure of those terms, he said, would provide information to=20 competitors of the companies that have signed agreements with the state and= =20 allow for market manipulation. ?????The Times reported Wednesday that the state has committed to buying=20 power at prices up to $154 a megawatt-hour during peak demand periods and= =20 more than $95 for power at times when demand is low. ?????By comparison, the state recently purchased peak power for less than= =20 $100 an hour and less than $20 an hour at night. Plan would allow private energy companies to own grid rights=20 Thursday, June 14, 2001=20 ,2001 Associated Press=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2001/06/14/s= tate0 930EDT0157.DTL&type=3Dnews=20 (06-14) 06:30 PDT SACRAMENTO (AP) --=20 The federal government has endorsed a plan that calls for private energy=20 companies to purchase the rights of a key piece of California's transmissio= n=20 grid.=20 The plan would allow those private companies to control the flow of=20 electricity and charge transmission fees to any agency or utility wanting t= o=20 move power on the lines.=20 The U.S. Department of Energy on Wednesday invited private energy companies= =20 to help pay for the expansion of the transmission grid known as Path 15 -- = an=20 85-mile stretch of high-tension wires in the Central Valley. The wires can= =20 move about 3,000 megawatts of power between Southern California and Silicon= =20 Valley and San Francisco.=20 Pacific Gas & Electric owns the original lines and has been urged by state= =20 officials to expand the grid's capacity.=20 The wires may become increasingly important this summer when rolling=20 blackouts are expected. Long-term contracts recently signed by the state an= d=20 power wholesalers are for electricity produced in Southern California but= =20 transported to Northern California through Path 15.=20 Gov. Gray Davis has sought to outright purchase transmission grids owned by= =20 PG&E, Southern California Edison and San Diego Gas & Electric.=20 Several power generators said Wednesday they didn't know whether they would= =20 pursue rights to the Path 15 grid. Expanding the grid will cost between $20= 0=20 and $300 million and take two years to complete. Companies have until July = 12=20 to express their interest to the federal government.=20 One company based in Washington, D.C., has shown interest in Southern=20 California Edison's grid. Trans-Elect executive vice president Robert L.=20 Mitchell said he plans to send a letter next week to Edison chief John Brys= on=20 offering to buy the grid for $1.8 billion.=20 ,2001 Associated Press ?=20 News briefs on the California power crisis=20 The Associated Press Thursday, June 14, 2001=20 ,2001 Associated Press=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2001/06/14/s= tate0 624EDT0135.DTL&type=3Dnews=20 (06-14) 03:24 PDT CARLSBAD, Calif. (AP) --=20 San Diego Gas & Electric officials told a group of business leaders that=20 customers can expect about 150 hours of rolling blackouts this summer.=20 The figure was the utility's latest estimate and was announced Wednesday at= a=20 workshop that drew about 100 people.=20 "For the summer, that means about 35 days with interruptions if (the=20 temperatures and power generation) conditions we foresee present themselves= ,"=20 said Mike Manry, emergency services manager for SDG&E. "As business owners,= =20 get prepared for multiple days in a row of interruptions."=20 Customers can sign up to receive either an e-mail warning or a page if a=20 blackout should occur in their neighborhood. The blackouts are expected to= =20 last up to 90 minutes.=20 CHULA VISTA, Calif. (AP) -- The state's Energy Commission has paved the way= =20 for a new power plant to be built in Chula Vista despite city opposition.= =20 The commission Wednesday approved plans submitted by Ramco Inc. for a natur= al=20 gas-fired generator that can produce up to 62 megawatts during peak usage.= =20 The company will begin construction June 25 and the plant must be operation= al=20 by Sept. 30.=20 The site already is home to a 44-megawatt plant.=20 The commission has approved 10 licenses for new energy sources after Gov.= =20 Gray Davis gave it the authority to fast-track plant production.=20 City officials opposed Ramco's additional plant because they fear it would= =20 contribute to air pollution and noise. The commission said Ramco must exten= d=20 a sound wall on the 3-acre site to curb noise.=20 ,2001 Associated Press ? Refineries may keep chugging in outages=20 PUC looks to grant blackout exemption=20 Kelly St. John, Chronicle Staff Writer Thursday, June 14, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/06= /14/M N58088.DTL&type=3Dnews=20 Demands by the state's oil refineries for protection from rolling blackouts= =20 should be met, a member of the state Public Utilities Commission said=20 yesterday in releasing a draft decision to grant the exemption.=20 While the recommendation from PUC Commissioner Carl Wood still faces a full= =20 hearing by the five-member PUC later this month, oil industry officials=20 consider it a promising development in their intense lobbying campaign to= =20 keep refineries running.=20 "This is a very good step," said Scott Folwarkow, spokesman for the Valero= =20 refinery in Benicia, which has no backup generators to use in blackouts. "W= e=20 do play an essential role, and (the refinery) needs to be protected."=20 The industry has repeatedly issued warnings that gasoline prices would soar= =20 if refineries were hit by rolling power blackouts. Power interruptions of= =20 just an hour can send refineries out of commission for days, shrinking gas= =20 supplies and leading to higher prices.=20 Earlier this month, San Francisco-based Chevron Corp. warned that it would= =20 reduce gasoline production at its two California refineries unless it was= =20 exempted from power outages.=20 Gov. Gray Davis has also urged the PUC to designate petroleum refineries as= =20 "essential-use customers" who are exempt from blackouts because their=20 services are needed for public health and safety.=20 A Davis spokesman declined comment on the draft decision last night.=20 Skilled-nursing facilities and water agencies have joined oil refineries in= =20 intense lobbying for the "essential-use" designation. But the PUC has a=20 limited number of exemptions it can offer to businesses.=20 By the agency's own standard, at least 40 percent of the electrical load mu= st=20 be exposed to blackouts. Today, half of the load is already exempt, leaving= =20 just a 10 percent margin to divide between facilities.=20 Yesterday, a PUC administrative law judge issued a companion ruling asking= =20 energy producers, the California Energy Commission and electric utilities t= o=20 provide additional information on fossil fuel production.=20 The PUC will consider that information, along with public comment, when it= =20 votes on Wood's draft decision June 28.=20 "While the economic impacts caused by disruption of fossil fuel production= =20 are potentially devastating," Wood said, "the commission must balance these= =20 economic impacts against the potential impacts on public health and safety= =20 asserted by applicants in our other exemption process."=20 Last January, the Bay Area got a glimpse of what can arise when refineries= =20 are hit by power outages.=20 Pacific Gas and Electric Co. interrupted power for Kinder Morgan Energy=20 Partners, a pipeline company servicing local refineries, for four consecuti= ve=20 days. The curtailments threatened to cause a fuel shortage at San Francisco= =20 International Airport before politicians -- including Mayor Willie Brown --= =20 intervened.=20 E-mail Kelly St. John at [email protected].=20 ,2001 San Francisco Chronicle ? Page?A - 17 FERC set to extend power caps=20 Government sources say price controls will be round-the-clock=20 Carolyn Lochhead, Chronicle Washington Bureau Thursday, June 14, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/06= /14/M N215916.DTL&type=3Dnews=20 Washington -- Federal regulators are poised to impose round-the-clock price= =20 restrictions on wholesale electricity sold to California, a move short of= =20 what Democrats have urged but far stronger than what the Bush administratio= n=20 has for months indicated it was willing to do.=20 The Federal Energy Regulatory Commission is expected Monday to extend its= =20 April 26 order -- which limits prices generators can charge during power=20 emergencies -- to apply at all times and across the entire Western region,= =20 sources inside the agency confirmed yesterday.=20 FERC also is expected to increase market monitoring, expand refunds for=20 overcharges by generators during power emergencies and order generators to= =20 sell into the Western grid during power emergencies, among other things.=20 FERC Commissioner William Massey, a Democratic appointee who strongly=20 dissented from the April order because he believed it was too narrow, would= =20 not comment on the expected action other than to say he had been urging=20 greater intervention relentlessly for some time.=20 Although power prices are plunging for the first time since the crisis bega= n,=20 Massey said it was "too soon to declare victory."=20 "We don't know what's going to happen in the next hour or tomorrow or the= =20 next month," Massey said. "We are certain this is a market short of power= =20 plants. Supply and demand are not in reasonable equilibrium, and, when that= =20 is true, prices can soar at the drop of a hat and the wealth transfer can b= e=20 exorbitant."=20 Massey said that until supply and demand came into "reasonable balance" in= =20 California, which he expects to occur in 18 months to two years as new powe= r=20 plants come on line, "there has got to be 24-hours-a-day, seven-days-a-week= =20 price mitigation in effect to protect consumers, period."=20 The expected FERC action coincides with rising political pressure on the=20 agency from Democrats and increasing numbers of Republicans to intervene mo= re=20 forcefully in California's power market despite fierce resistance to price= =20 controls from the Bush administration.=20 REINFORCEMENTS That pressure ratcheted up sharply when Democrats assumed control of the=20 Senate and began scheduling legislation to order FERC to impose price caps.= =20 The agency's move also coincides with the arrival of two new Bush appointee= s,=20 Patrick Wood III and Nora Mead Brownell, who are widely viewed as more=20 receptive to intervention than the current chairman, Curt Hebert, a=20 Republican appointed by former President Bill Clinton and named chairman by= =20 President Bush.=20 The agency's April order, which took effect May 26, puts a ceiling on price= s=20 pegged to the least efficient power plant. It has been applied during two= =20 power emergencies so far. Experts are divided on how much, if any, effect t= he=20 order has contributed to the recent sharp drop in prices. Many factors, fro= m=20 cool weather to increased conservation to the return of several nuclear=20 generators that were down for maintenance, are also at work.=20 Rep. Doug Ose, a Sacramento Republican who first pushed FERC to expand its= =20 April order, said yesterday he believed the expected new action would provi= de=20 "a pretty good middle ground" between Democrats' call for a specific maximu= m=20 price -- or cap -- the generators can charge and the Bush administration's= =20 opposition to price controls.=20 Rep. Darryl Issa, an Oceanside Republican, added that the agency's action w= as=20 part of "a pattern of escalating engagement" by the administration and "a= =20 more activist FERC."=20 'AS LONG AS IT WORKS'=20 Sen. Dianne Feinstein said the action expected Monday was likely to fall=20 short of what she wanted, although she called it "another step forward."=20 While FERC is likely to avoid using the words "price caps" to describe its= =20 plan (it called its original order "price mitigation"), Feinstein said, "I= =20 don't care what you call it as long as it works."=20 Feinstein, testifying yesterday at a Government Affairs Committee hearing o= n=20 energy, said she believed the new order would still permit price manipulati= on=20 because the caps are set at the price charged by the least- efficient --=20 therefore highest cost and most polluting -- generators.=20 Feinstein's bill to force FERC to impose price caps until 2003 is scheduled= =20 for committee action this month. She wants firm price caps based on each=20 generator's costs, much like the regulatory regime in place before=20 California's electricity restructuring.=20 Some economists argue, however, that the type of price controls FERC is=20 expected to use more closely correspond to the price that a functioning=20 market would produce.=20 Price caps have become the nexus of the entire Washington debate over=20 California's electricity crisis. The Bush administration contends that pric= e=20 controls would make blackouts worse by discouraging electricity sales and= =20 investment, while Democrats, led by Feinstein and California Gov. Gray Davi= s,=20 contend that generators are deliberately withholding power to jack up price= s.=20 OBJECTIONS TO CONTROLS WITHER Republicans on Capitol Hill, many of whom face re-election next year, have= =20 shown less resistance to price controls, and that resistance melted even mo= re=20 yesterday after a letter from several House Republicans urged FERC to=20 intervene more forcefully.=20 Still, most of the Republicans now urging greater federal regulation of=20 electricity markets hail from California. Republicans from outside the stat= e=20 yesterday blasted Davis for mishandling the crisis and blaming the Bush=20 administration for not helping.=20 "The efforts to place the blame on the current administration or hire $30,= =20 000 a month consultants to spin the issue . . . do not help," said Sen. Fre= d=20 Thompson, R-Tenn., referring to two high-priced political aides Davis has= =20 hired.=20 "Some suggest temporary price controls through 2003," Thompson said. "While= =20 that may get us through the next election, temporary price controls have=20 rarely stayed temporary."=20 Sen. Larry Craig, an Idaho Republican, argued there were a host of reasons= =20 for California's blackouts, from a drought in the Northwest to a shortage o= f=20 power plant construction across the West.=20 "Leave it to politicians running scared and looking for scapegoats to=20 obfuscate this otherwise obvious reality," Craig said. "Put simply and=20 bluntly,=20 this reality does not suit the political needs of Gov. Davis and his=20 compatriots."=20 Energy at a glance=20 Energy-related developments yesterday:=20 -- PUC TELLS EDISON TO PAY 15% OF BILL OWED TO SMALL FIRMS=20 Small companies that need cash to continue generating power will be paid 15= =20 percent of their back bills by Southern California Edison under an order=20 passed yesterday by the state Public Utilities Commission.=20 The measure is one of the remedies designed to ensure that 680 small power= =20 plants stick with their contracts to sell electricity to California's three= =20 cash-strapped utilities. Pacific Gas and Electric Co. has already been=20 ordered by a bankruptcy judge to pay 20 percent of its back debt to its sma= ll=20 generators. San Diego Gas and Electric Co. had no outstanding bills.=20 The commission also opened the door to higher rates for small suppliers tha= t=20 can prove their operating costs are not being covered by a state payment=20 formula. Others can opt for a new fixed-rate contract. All can earn higher= =20 rates if they boost their power output.=20 DAVIS SAYS PRICES FALLING ON SPOT MARKET Gov. Gray Davis released new figures yesterday showing that the state has= =20 been able to secure lower prices on the spot market for electricity.=20 Davis released figures that show the average price for power on the day-=20 ahead spot market was $275 per megawatt hour Jan. 17-31. The price was $236= =20 in February, $212 in March, $262 in April, $243 in May and $121 so far in= =20 June.=20 Davis credits the state's long-term contracts with shrinking the amount of= =20 power that has to purchased on the spot market. -- Chronicle staff reports= =20 E-mail Carolyn Lochhead at [email protected].=20 ,2001 San Francisco Chronicle ? Page?A - 1 Judge orders contract disclosures=20 State told to release edited versions of energy agreements tomorrow=20 Bob Egelko, Chronicle Staff Writer Thursday, June 14, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/06= /14/M N183457.DTL&type=3Dnews=20 A day after Gov. Gray Davis agreed to release previously withheld details o= f=20 the state's long-term energy contracts, his attorney asked for a two-week= =20 delay. But a judge ordered the state to disclose edited versions of the=20 contracts tomorrow.=20 San Diego Superior Court Judge Linda Quinn scheduled another hearing for Ju= ne=20 27 to decide whether more details of the long-term deals should be disclose= d=20 and whether short-term energy contracts should be released over Davis'=20 opposition.=20 Since the state started buying power for customers of California's reeling= =20 utilities in January, Davis has refused to make the contracts public, sayin= g=20 disclosure would reveal the state's negotiating strategies, give power=20 sellers an advantage and drive prices up. In court documents, the governor'= s=20 lawyers said the information should remain secret until January 2003, when= =20 the state's current power purchasing authority expires.=20 News organizations, including The Chronicle, and eight Republican legislato= rs=20 sued for disclosure, saying the documents were public records that would le= t=20 Californians evaluate the spending of billions of tax dollars.=20 On Tuesday, Davis reversed course and said he was willing to make public=20 immediately the details of $42.8 billion in long-term contracts with 18=20 suppliers if the judge released the state from confidentiality agreements i= n=20 the contracts. The governor said that market conditions had improved and th= at=20 enough contracts had been signed that disclosure would not seriously damage= =20 the state's bargaining position.=20 He gave reporters a few more details yesterday, acknowledging that the stat= e=20 was locked into some long-term contracts at prices above those now availabl= e=20 on the spot market.=20 "We were paying a lot more in January and February than we are now on the= =20 spot market because we have dramatically shrunk the spot market, providing= =20 reliable power for California at affordable rates," Davis said.=20 In court yesterday, however, Deputy Attorney General Timothy Muscat sought = to=20 delay contract disclosure two weeks to give the energy sellers -- who are n= ot=20 parties to the lawsuit -- time to comment.=20 But the judge said the state's failure to keep contracting companies abreas= t=20 of the suit did not justify delaying disclosure. Quinn ordered the long-ter= m=20 contracts released Friday after the state deletes details that would reveal= =20 suppliers' trade secrets and other proprietary information.=20 Muscat said the state would edit out several categories of information he= =20 described as technical, including energy delivery points and data on=20 suppliers' efficiency in converting natural gas to electricity. News media= =20 lawyer Alonzo Wickers IV protested any deletions.=20 "Keeping those so-called technical issues secret thwarts the public's=20 understanding of the contracts," he said.=20 Quinn said she would consider objections to the deletions at the June 27=20 hearing. Muscat, the state's lawyer, contended secrecy was essential for=20 deal- making in the volatile short-term market.=20 "We are heading into a hot, long summer," he said. "If we have to reveal ou= r=20 negotiation strategy . . . we are going to have blackouts."=20 Tell us what you think -- What are your suggestions for saving energy? Send= =20 your best tips to Energy Desk, San Francisco Chronicle, 901 Mission St., Sa= n=20 Francisco, CA 94103; or put your ideas in an energy-efficient e-mail to=20 [email protected].=20 Correspondent Valerie Alvord contributed to this report from San Diego. /= =20 E-mail Bob Egelko at [email protected].=20 ,2001 San Francisco Chronicle ? Page?A - 17 ENERGY REPORT=20 Chronicle Staff and News Services Wednesday, June 13, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/06= /13/M N226095.DTL&type=3Dnews=20 Burton bills on stoplights, price hike Senate President Pro Tem John Burton= ,=20 D-San Francisco, introduced two energy bills. One would pay for back-up=20 batteries at key intersections so they could continue operating in a=20 blackout; the other would order the Public Utilities Commission not to=20 automatically raise rates 10 percent next March, as part of the original=20 deregulation law approved in 1996.=20 Burton also introduced a resolution saying the state Senate supports Gov.= =20 Gray Davis seizing energy plants under his emergency powers authority. Davi= s=20 has threatened in the past to do so but now says such action could cost the= =20 state expensive legal fees. The resolution is unlikely to sway the Democrat= ic=20 governor.=20 Alternative generators,=20 Edison reach accord=20 Southern California Edison Co. said it reached an agreement with alternativ= e=20 power generators that could give California a critical source of energy thi= s=20 summer and ease the bankruptcy threat the utility is facing. The utility=20 agreed to make partial back payments to the generators, many of which have= =20 sued the utility and curtailed power production. The California Public=20 Utilities Commission is expected to approve the plan today.=20 Hearings set on plan=20 to bail out Edison=20 The state Senate scheduled a series of hearings, beginning next week, on th= e=20 governor's deal to bail out Southern California Edison.=20 Judge allows trading=20 by PG&E's creditors=20 Stipulating that the companies involved must set up procedures to guard=20 against misuse of confidential information, U.S. Bankruptcy Judge Dennis=20 Montali yesterday allowed members of PG&E's creditors' committee to trade i= n=20 the utility's securities without risking their debt claims. Montali also sa= id=20 he would probably allow a larger group of committee members, including Enro= n=20 Corp. and Dynergy, to make energy deals that could have an impact on PG&E.= =20 The city of San Francisco, which has sued Enron, Dynergy and other energy= =20 dealers, claims the trading would invite conflicts of interest.=20 ,2001 San Francisco Chronicle ? Page?A - 16 EPA rejects state waiver on fuel additive=20 Refusal could cost 50 cents a gallon at pump, Davis says=20 Jane Kay, Chronicle Environment Writer Wednesday, June 13, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/06= /13/M N175671.DTL&type=3Dnews=20 The Environmental Protection Agency turned down Calfifornia's request for a= =20 waiver of a clean-air law yesterday, forcing the state to begin using ethan= ol=20 in gasoline as it phases out another additive that has polluted groundwater= .=20 State officials have argued that ethanol, which reduces smog-producing=20 chemicals, is not needed to meet the state's air pollution requirements.=20 Gov. Gray Davis reacted angrily to the EPA's decision, saying it would rais= e=20 gas prices significantly and expose the state to shortages.=20 "Their refusal will probably cost Californians 50 cents a gallon at the=20 pump," Davis said yesterday while visiting a community health center in San= =20 Francisco. "It will do nothing to clean up the air, and it is the triumph o= f=20 politics over good science.=20 "The consumers of California once again get the shaft. The Bush=20 administration once again sides with special interests. I'm not going to ta= ke=20 it."=20 The EPA's denial is the latest sign of friction between the White House and= =20 Davis, who have been battling over electricity prices.=20 The California Energy Commission estimates that consumers will pay $450=20 million more a year for gasoline if refineries have to convert to ethanol.= =20 That translates to an increase of 3 to 6 cents for each gallon of gas.=20 If ethanol supplies are inadequate or if refineries encounter problems,=20 consumers could see gas shortages and price spikes as high as 50 cent a=20 gallon, according to the commission.=20 But EPA Administrator Christie Whitman said that the state had failed to sh= ow=20 that a waiver of a federal Clean Air Act provision would not reduce air=20 quality. The law requires regions of the country with the worst air to use= =20 oxygen additives in gas to reduce smog.=20 California requested the waiver because it is phasing out the additive MTBE= ,=20 or methyl tertiary butyl ether, which has polluted groundwater throughout t= he=20 state. Ethanol is the only other additive approved under the federal Clean= =20 Air Act.=20 DIFFICULTIES ADMITTED Whitman acknowledged that California faced a dilemma in keeping MTBE out of= =20 its drinking water while satisfying the federal law. However, she said,=20 oxygen- adding substances such as MTBE and ethanol in gasoline do reduce=20 smog-forming chemicals and should be used in urban areas with the worst air= =20 quality.=20 MTBE DILEMMA "The administration is concerned about the risks of MTBE in drinking water = in=20 California and other states," Whitman said. "Clean air and clean water are= =20 equally important. We do not want to pursue one at the expense of the other= ."=20 Since the widespread use of MTBE in 1997, it has become a major problem in= =20 California and other states, tainting groundwater and threatening the=20 drinking water supplies of some areas.=20 Winston Hickox, secretary of the California EPA, said yesterday that the=20 planned ban might be delayed if the state Energy Commission decided there= =20 were unsurmountable problems with converting to ethanol. But he didn't=20 believe California would back off on its efforts to rid gas of MTBE.=20 Sen. Dianne Feinstein yesterday accused President Bush of turning "a blind= =20 eye to California," and Sen. Barbara Boxer said the decision was another=20 example of Bush's insensitivity to Californians. Feinstein has introduced a= =20 bill that would give governors the authority to waive the additive=20 requirement if their gas met other standards.=20 OIL INDUSTRY DISMAYED Oil industry officials in California, who have argued that refiners could= =20 make an additive-free gas that qualified with federal and state requirement= s=20 to reduce smog, also said they were disappointed with the decision.=20 "Over the last four years, we've made more than 2 billion gallons of=20 cleaner-burning gas that had no added oxygen -- no MTBE, no ethanol," said= =20 Fred Gorell, spokesman for Chevron Corp. "The gas meets all the requirement= s.=20 But we can't sell it in Southern California and Sacramento because of the= =20 federal requirement."=20 BOON TO FARMERS If MTBE is banned in 2003, and there's an oxygen additive requirement, ther= e=20 would be no other choice than to use ethanol, Gorell said.=20 Ethanol is made primarily from corn, and the EPA decision is a boon to=20 Midwestern corn growers and lawmakers from states such as Illinois, Iowa,= =20 Minnesota and South Dakota, who had lobbied the Bush administration heavily= =20 to deny the waiver. The decision would create a substantial market for=20 ethanol.=20 According to the Renewable Fuels Association, an ethanol industry group,=20 California would need about 580 million gallons a year to use as an additiv= e=20 in gas. In 2001, the industry expects to produce 2.1 billion gallons, and i= s=20 gearing up to make 300 million gallons more with the addition of 34 plants.= =20 BIG INITIAL COSTS Adding ethanol to California's gas supply would require a major investment = in=20 infrastructure, Gorell said. Some of the costs would go to modify refinerie= s=20 as well as terminals where the ethanol blending would be done.=20 Costs of transporting ethanol from Midwestern states would not be the bigge= st=20 problem, Gorell said. Ethanol can be brought by ships and barges, just as= =20 most of the MTBE is brought now. Ethanol also can be brought by railcars,= =20 which are prohibited from carrying MTBE.=20 But refiners can work with ethanol, he said. Even if the waiver were grante= d,=20 there would a new market for ethanol in Los Angeles to combat carbon monoxi= de=20 in the winter anyway.=20 Environmental groups welcomed the EPA's decision yesterday. Bluewater Netwo= rk=20 of San Francisco said a coalition of 93 groups supported maintaining the=20 additive requirement to protect the air and the use of renewable ethanol in= =20 gas.=20 The requirement could also be a boon to the state's agricultural industry.= =20 The state has only two plants that make about 10 million gallons of ethanol= a=20 year from cheese whey and the sugar and starch from outdated soda pop. Six= =20 new California plants are planned for next year.=20 The boost in ethanol would help farmers who are suffering from global=20 competition and other problems, said Cynthia Cory, director of environmenta= l=20 affairs for the California Farm Bureau.=20 Chronicle Staff Writers Lynda Gledhill and David Baker contributed to this= =20 report.=20 E-mail Jane Kay at [email protected].=20 ,2001 San Francisco Chronicle ? Page?A - 1=20 Governor set to reveal terms of power deals=20 Court must decide confidentiality issue=20 Lynda Gledhill, Chronicle Sacramento Bureau Wednesday, June 13, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/06= /13/M N156901.DTL&type=3Dnews=20 Sacramento -- Gov. Gray Davis reversed course yesterday on the secrecy of= =20 long-term energy contracts, saying he now wants to make public details of t= he=20 deals the state has signed with electricity generators.=20 Davis and his advisers said they have signed enough contracts that releasin= g=20 the information will not seriously jeopardize the state's bargaining=20 position. Administration officials, however, said the contracts contain=20 confidentiality clauses and they will ask a judge today to release the stat= e=20 from those provisions.=20 Republican lawmakers and several media organizations, including The=20 Chronicle, have filed suit against Davis, demanding that the contracts be= =20 made public.=20 "We now believe that the balance tips in favor of disclosure rather than=20 continuing to withhold the contracts," said Davis senior adviser Nancy=20 McFadden.=20 In San Francisco yesterday, Davis said he always intended to release the=20 information six months after the contracts were signed.=20 "Obviously, the market conditions are a little more favorable now," he said= .=20 "On balance, we think it's the appropriate time to release the information.= "=20 Davis' request will be heard at a court hearing today in San Diego on the= =20 suits filed by the media and GOP lawmakers against Davis.=20 But it is unclear whether the judge will go along with the administration's= =20 request or how the Davis administration will be able to proceed if it is=20 denied.=20 Paula Hall-Collins, a spokeswoman for Williams Co., said the energy company= =20 will monitor the court hearing.=20 "We maintain that the contracts contain proprietary information," she said.= =20 Patrick Dorinson, a spokesman for Mirant, also expressed concern about what= =20 information might be released.=20 "We think it is important for the people of California to have information = on=20 revenue and capacity information, but we are sensitive to specific terms=20 being released that could be misused by our competitors in the marketplace,= "=20 he said.=20 The state has been purchasing power since Jan. 17. While much of that has= =20 been on the expensive spot market, state officials have also locked in 38= =20 contracts for long-term deals.=20 However, no information on the terms of the contracts or how much the state= =20 is committed to spend has been released.=20 Ray Hart, Department of Water Resources deputy director, sent letters to=20 power generators yesterday saying the department will ask a judge to throw= =20 out the confidentiality provision in the contracts.=20 The letter states that there will be some redactions on information that is= =20 considered proprietary.=20 McFadden said the move was not made because the state was concerned about= =20 losing its lawsuits.=20 She said she expected the court to release the state from the confidentiali= ty=20 agreement. The governor's office then would release the documents as early = as=20 this week, she said.=20 Lawmakers also have been demanding the release of the information so that= =20 they can proceed on a plan to keep Southern California Edison out of=20 bankruptcy.=20 If the judge refuses to release the state from the confidentiality clause,= =20 the administration will negotiate with the generators individually to allow= =20 the contracts to be made public, McFadden said.=20 But Terry Francke, general counsel with the California First Amendment=20 Coalition, said he would be surprised if a judge allowed the request.=20 "I don't believe the court would simply absolve a party from a contractual= =20 agreement at a proceeding where the other party is not present," he said.= =20 Francke also questioned whether the state had the right to sign contracts= =20 containing a confidentiality clause.=20 "There is a very serious question as to whether the state of California can= =20 legally in effect promise to ignore the Public Records Act," he said.=20 Roger Myers, an attorney for The Chronicle, said there is good case law in= =20 the state supporting the releasing of the information.=20 "You can't enter into an agreement and convert public information into=20 confidential information," he said.=20 E-mail Lynda Gledhill at [email protected].=20 ,2001 San Francisco Chronicle ? Page?A - 15 Price caps elicit fierce debate in Congress BY JIM PUZZANGHERA Mercury News Washington Bureau=20 WASHINGTON -- California moved to political center stage Wednesday as=20 Democrats and Republicans clashed in Congress over how to solve the state's= =20 electricity problems.=20 Wielding the new power gained since the Senate shifted from Republican=20 control last week, Sen. Joseph Lieberman, D-Conn. held the first of two=20 hearings into the response of federal regulators to California's energy=20 crisis. The Democrats are focusing their pressure on members of the Federal= =20 Energy Regulatory Commission who are poised Monday to consider a major=20 expansion of limited electricity price controls enacted in April.=20 ``The heat is on and it's going to produce some light at the end of the=20 tunnel,'' predicted Sen. Dianne Feinstein, D-Calif.=20 Feinstein has sponsored legislation to force the commission to set temporar= y=20 price caps. The bill is scheduled to be considered by the Senate Energy and= =20 Natural Resources Committee on June 27 after wallowing for months while=20 Republicans controlled the Senate.=20 Republicans assailed the Democrats for failing to address the problem of=20 increasing the supply of energy, in favor of short-term fixes such as price= =20 caps. ``Let me tell you what the name of the game is now: It's pure=20 politics,'' said Sen. Frank Murkowski, R-Alaska, the leading Republican on= =20 the energy committee. ``And the Democratic plan is to try to cement in the= =20 minds of voters that President Bush favors corporate interests at the expen= se=20 of consumers.''=20 But in a nod to the growing pressure for some federal action, Murkowski, an= =20 ardent opponent of price caps, said he would support a 90-day ceiling on=20 electricity prices in California set at $1,000 a megawatt-hour throughout t= he=20 West.=20 The idea would be to prevent the sharp spikes in prices during emergency=20 periods that have led to power suppliers' selling electricity to California= =20 at short-term prices of as much as $3,800 a megawatt-hour. Governors of=20 Western states could opt out of the plan, and the limits could be extended = as=20 much as 90 more days in one-month increments.=20 Such high-price limits are also known as ``circuit breakers'' and have been= =20 put in place in Texas, Pennsylvania and in New England in the past. It coul= d=20 emerge as a Republican alternative to Feinstein's bill, which would set=20 harder price caps for 18 months, based on each supplier's cost to produce t= he=20 energy plus a built-in profit level.=20 But Feinstein and California Gov. Gray Davis would not support the $1,000= =20 ceiling. ``This proposal says `Go ahead, gouge us all the time except for a= =20 few hours during periods of extreme peak demand,'?'' said Davis media=20 representative Steve Maviglio. ``It's toothless and provides no real=20 temporary relief.''=20 There was no consensus on price caps from a group of six leading energy=20 experts convened by Lieberman before his Senate Governmental Affairs=20 Committee on Wednesday. Four invited by Lieberman, including Severin=20 Borenstein, director of the Energy Institute at the University of=20 California-Berkeley, supported price caps. Two experts invited by the=20 Republicans -- Lawrence Makovich, senior director at Cambridge Energy=20 Research Associated and William Hogan, of Harvard University's Kennedy Scho= ol=20 of Government -- did not.=20 But Alfred Kahn, a retired Cornell University economics professor who helpe= d=20 deregulate U.S. airlines in the 1970s, said temporary price relief is=20 necessary, and failure to help California could lead other states to halt= =20 their electricity deregulation plans. And rather than discouraging investme= nt=20 in new power plants, electricity regulation through the years encouraged su= ch=20 high spending on infrastructure that Kahn referred to it as ``gold-plating = of=20 circuits.''=20 ``With electric power, we have not had the problem of shortages under=20 regulation,'' he said.=20 All the experts agreed that the Federal Energy Regulatory Commission needs= =20 more resources and should become more vigilant in the way it monitors=20 electricity.=20 ``They have some very good people at FERC, but they don't have enough,''=20 Hogan said. Paul Joskow, the director of the Center for Energy and=20 Environmental Policy Research at the Massachusetts Institute of Technology,= =20 said the commission must become more like the Securities and Exchange=20 Commission in actively monitoring possible electricity markets.=20 All five commissioners, along with Davis, will testify at a hearing Wednesd= ay=20 by Lieberman's committee regarding whether FERC has fulfilled its obligatio= ns=20 to ensure ``just and reasonable'' electricity rates in California.=20 Curt H,bert, the FERC chair, Wednesday defended the commission and said its= =20 California price mitigation plan put in place in April has helped lower=20 prices in California in recent days.=20 ``There is no doubt the plan is working to bring down prices'' and making= =20 generation capacity available, H,bert said. He would not say whether the=20 commission would expand its plan around-the-clock and to other Western=20 states, as a commission source told the Mercury News is being considered.= =20 FERC has been urged to do that by some key Republicans in Congress.=20 On the same day, Energy Secretary Spencer Abraham went before a House=20 subcommittee to push for action on the administration's national energy pla= n,=20 which calls for increasing domestic supplies through more oil and natural-g= as=20 drilling and greater use of coal and nuclear power.=20 ``Every step we take toward wiser use of energy and more diverse supplies a= t=20 home will make us that much less dependent on overseas suppliers and less= =20 vulnerable to supply shocks imposed on us from abroad,'' Vice President Dic= k=20 Cheney, who headed the task force that drafted the plan, said in a speech= =20 before the United States Energy Association's Efficiency Forum Wednesday.= =20 Wednesday, congressional Republicans, charging that Democrats had tried to= =20 derail the plan, threatened to use parliamentary stalling tactics unless=20 Democrats set a date in the near future to consider Bush's proposals. PUC commissioner issues draft decision to exempt refineries from blackouts SAN FRANCISCO (AP) -- A state power regulator has issued a draft decision= =20 that would exempt oil refineries from rolling blackouts and keep California= 's=20 gasoline prices from potentially skyrocketing.=20 The California Public Utilities Commission will consider commissioner Carl= =20 Wood's proposal on June 28. Administrative Law Judge Burton Mattson issued = a=20 companion ruling Wednesday requesting a coalition of energy producers, PUC= =20 commissioners and electric utilities to provide more information about foss= il=20 fuel production to help the PUC decide whether to grant more exemptions.=20 Gov. Gray Davis has asked the PUC to come up with a plan to minimize=20 disruption of fossil fuel production this summer. A rolling blackout is=20 capable of causing refineries to lose up to a week of production, which cou= ld=20 create gasoline shortages and drive up prices at the pump.=20 ``While the economic impacts caused by disruption of fossil fuel production= =20 are potentially devastating, the commission must balance these economic=20 impacts against the potential impacts on public health and safety asserted = by=20 applicants in our other exemption process,'' Wood said in a written=20 statement.=20 Four oil refiners -- Valero Energy, Tosco, Exxon Mobil and Equilon=20 Enterprises-- are petitioning the PUC for blackout exemptions at facilities= =20 that produce about one-fourth of the state's refining capacity of 2.3 milli= on=20 barrels per day.=20 Meanwhile, California's biggest refiner, Chevron Corp., has taken its=20 exemption case directly to Davis. The San Francisco-based company, which=20 controls about 18 percent of the state's refining capacity, told Davis the= =20 company will curtail production unless regulators or state lawmakers protec= t=20 its two California refineries from blackouts.=20 Davis sent a letter last week to the PUC supporting the oil industry's=20 request for a blackout exemption, said his spokesman, Steve Maviglio. FERC may expand cap=20 Senators say regulators are set to extend price controls throughout the Wes= t.=20 June 13, 2001=20 By DENA BUNIS The Orange County Register=20 WASHINGTON Federal energy regulators are poised Monday to extend limited=20 price controls on the electricity market to 24 hours a day, seven days a we= ek=20 throughout the Western states, California's senators said Tuesday.=20 If the Federal Energy Regulatory Commission does what Democratic Sens.=20 Barbara Boxer and Dianne Feinstein have heard it plans to do, it would=20 represent a further softening by FERC in the face of mounting political=20 pressure. FERC had adamantly opposed limits on a free electricity market=20 until April, when it approved its first limited controls.=20 Experts believe such a move could moderate wholesale prices, but to what=20 extent and what the effect could be on ratepayers is uncertain.=20 "It would be a step in the right direction," Boxer said Tuesday after she,= =20 Feinstein and 40 California House members from both parties met with Vice= =20 President Dick Cheney. "It still doesn't give us the kind of help with pric= e=20 gouging that we need."=20 Cheney, who reiterated the administration's opposition to firm price caps,= =20 told members who pressed him for a California-specific solution to watch wh= at=20 FERC does at its meeting next Monday.=20 Two new FERC commissioners, recently appointed by President George W. Bush,= =20 could be voting Monday. Energy watchers say their presence could turn FERC= =20 into a more activist agency.=20 In April, FERC ordered a price-control plan based on a complicated formula = of=20 what it costs generators to produce a kilowatt of electricity. But critics,= =20 particularly FERC Commissioner Richard Massey, called it meaningless becaus= e=20 it only applied during shortages and did not extend beyond California. Political heat triggers FERC's switch=20 The panel seems more responsive to the voice of public officials.=20 June 13, 2001=20 By DENA BUNIS and KATE BERRY The Orange County Register=20 WASHINGTON The Federal Energy Regulatory Commission may be an independent= =20 body. But its members sure can feel a political sledgehammer coming at them= .=20 For months, the pro-open markets majority on the commission has resisted=20 pleadings by California officials to put price caps on wholesale electricit= y=20 prices.=20 They broke down somewhat in April and put limited controls on the market on= ly=20 during electricity emergencies and only in California.=20 Since then, the political heat has become intense.=20 And it's come to a head this week as:=20 The new Democratic-controlled U.S. Senate begins hearings today on the=20 electricity crisis in California.=20 The two new FERC commissioners - Nora Mead Brownell and Patrick Wood - have= =20 been sworn in and will begin attending meetings. Brownell, who was sworn on= =20 as the fifth commissioner on Tuesday, said she and Wood were planning a tri= p=20 to California soon after next week's second Senate hearing, at which they= =20 will testify.=20 Key Republicans -- House Energy and Commerce Committee Chairman Rep. Billy= =20 Tauzin, R-La., and energy subcommittee chairman Rep. Joe Barton, R-Texas,= =20 sent a letter to FERC urging it to expand its limited controls this summer = to=20 cover all the western states all the time.=20 "I think there is a growing political consensus in Congress, in California,= =20 most everywhere, that an effective price mitigation plan in this California= =20 market has to cover all hours,'' Richard Massey, a FERC commissioner who ha= s=20 been critical of what he calls "half a loaf" measures his colleagues have= =20 taken thus far, said Tuesday.=20 Massey would not confirm that the commission plans on Monday to expand pric= e=20 controls to 24 hours a day and to other Western states.=20 But even if it does, it's unclear how far such an action will go toward=20 solving California's problem and whether it could open up new problems.=20 Stephanie McCorkle, a spokeswoman for the California Independent System=20 Operator, which manages most of the state's electric grid, said the plan=20 would have some effect on prices in California.=20 "But it may not go far enough,'' she said. "We welcome any decision to move= =20 forward with round-the-clock mitigation, which is something we've called fo= r=20 from the beginning.''=20 Energy experts and some lawmakers worry that the method the FERC plan uses = -=20 which sets cost-based wholesale rates based on the least-efficient power=20 plants operating in California - could lead to market manipulation.=20 "The minute prices are linked to the cost of operating the least efficient= =20 plant, an incentive for plants to be inefficient is created,'' said Sen.=20 Dianne Feinstein, D-Calif. "I am concerned that this order will continue to= =20 provide energy generators the opportunity to manipulate prices, as I believ= e=20 they have been doing.''=20 Democrats in California and on Capitol Hill have been calling for firm pric= e=20 caps. That's the only way, they say, that the generators can be prevented= =20 from gouging the state's ratepayers.=20 But Gov. Gray Davis is ready to be convinced this latest possibility will= =20 work.=20 "The devil's in the details, of course'' Davis said in a statement. "Mark m= e=20 down as a doubting Thomas. The FERC has been on a sit-down strike, but if= =20 they are finally for price relief, hallelujah."=20 Wholesale power prices have dropped dramatically in the state in the past t= wo=20 weeks. But Feinstein said so far it's unclear what has caused the decline -= =20 the earlier FERC action, the possibility that generators are worried about= =20 investigations into alleged price manipulation or the increased pressure fr= om=20 Congress.=20 There is some evidence that the April FERC action had an effect.=20 Two weeks ago, during a Stage 2 alert, California's Independent System=20 Operator imposed FERC's pricing plan and bought power at $108 a megawatt,= =20 about one-third the price offered earlier that day, said Nettie Hoge,=20 executive director of The Utility Reform Network, a consumer advocacy group= =20 in San Francisco.=20 But Hoge said even it FERC expands controls on Monday, California has alrea= dy=20 paid too high a price. The state has already spent more than $6 billion too= =20 much on electricity in the past year, said Hoge.=20 Register staff writer John Howard contributed to this report. Davis to air details about power buys=20 He had refused to divulge the contract terms.=20 June 13, 2001=20 By ALEXA HAUSSLER The Associated Press=20 SACRAMENTO -- After fighting off demands for information for months, Gov.= =20 Gray Davis plans to release this week the much-sought details of 38 long-te= rm=20 contracts between the state and power generators, aides said Tuesday.=20 At issue are details of contracts with 18 companies, worth $42.8 billion ov= er=20 the next 20 years for the purchase of nearly 600 million megawatt-hours of= =20 electricity, Davis administration officials said.=20 The contracts' fine print was not immediately disclosed. The average price= =20 was about $71 per megawatt-hour. In recent months, the cost of wholesale=20 electricity in California has fluctuated widely, from less than $100 per=20 megawatt-hour to $3,880. Early last year, before California's energy crisis= =20 exploded, power cost $20 to $40 per megawatt.=20 Republican lawmakers and several news organizations, including The Orange= =20 County Register, sued Davis in March, saying his refusal to release the=20 contracts' details violates the California Public Records Act.=20 Davis still refused, saying that revealing the details would put the state = at=20 a competitive disadvantage in other contract talks.=20 Raymond Hart, Department of Water Resources deputy director, wrote power=20 generators Monday saying the department will ask a judge today to void a=20 confidentiality provision in the contracts.=20 Oklahoma-based Williams Energy, one of the generators with a state contract= ,=20 opposes the release of the contract details, a spokeswoman said. Energy notebook=20 Edison makes deal to pay generators of renewable power.=20 June 13, 2001=20 ROSEMEAD Southern California Edison has reached an agreement with small pow= er=20 generators that could ease the bankruptcy threat the utility is facing and= =20 ensure Californians a critical source of power through the summer.=20 The California Public Utilities Commission is expected Wednesday to approve= =20 the plan that would require Edison to make partial back payments to renewab= le=20 energy generators, many of which have sued the utility and curtailed power= =20 production.=20 The plan would raise the rates being paid to generators that use natural ga= s=20 and offer a stable rate for five years to generators using wind, solar,=20 geothermal or other renewable sources.=20 The agreement also requires Edison to pay at least 15 percent of what it ow= es=20 generators.=20 The deal removes the threat of legal action against the utility if full=20 payment for power bought since January is made within six months after the= =20 PUC order becomes final.=20 "I think it's a good, balanced deal for both sides, and the only issue will= =20 be making sure the PUC will adopt the deal," said Jerry Bloom, a spokesman= =20 for the California Co-generation Council, which represents many small natur= al=20 gas-fired power generators.=20 Burton calls for batteries to keep traffic signals lit=20 SACRAMENTO State Senate President Pro Tem John Burton, D-San Francisco,=20 introduced a bill Monday that would provide battery backups for traffic=20 signals at critical intersections throughout the state in hopes of preventi= ng=20 potentially deadly accidents during rolling blackouts.=20 The bill would require the California Energy Commission, with the Californi= a=20 Highway Patrol, to identify critical intersections based on traffic,=20 accidents and the presence of children.=20 Although the state has 45,000 signalized intersections, only the estimated= =20 13,500 intersections equipped with light-emitting diodes, a more=20 energy-efficient kind of light, would be eligible.=20 Battery backups cost $3,000 to $5,000 each.=20 The money for the program would come from funds provided to the California= =20 Energy Commission for conservation efforts, said Dave Sebeck, a Burton=20 spokesman.=20 It is unclear whether cities, counties and other agencies that have already= =20 installed backups would be reimbursed by the state.=20 To become law, the bill must be approved by the energy and appropriation=20 committees in the Senate and Assembly, pass both houses by a two-thirds=20 majority and be signed by Gov. Gray Davis, Sebeck said.=20 Officials at the energy commission and the CHP declined to comment Tuesday= =20 because they have not reviewed the legislation.=20 In Orange County, only 209 of 3,030 intersections in a Register survey=20 released this week will be equipped with battery backups as of July 1.=20 Bill to allow state seizure of power plants advances=20 SACRAMENTO A State Assembly committee approved legislation Tuesday that wou= ld=20 allow the state to seize power plants that regulators determined had charge= d=20 unreasonable prices for electricity.=20 The Assembly Judiciary Committee voted 6-3 to approve a bill by Assistant= =20 Majority Leader Juan Vargas to allow the state to seize and run power plant= s=20 for 18 to 24 months and then pay their owners for the use of the plants.=20 The state Public Utilities Commission would first have to determine if the= =20 plants sold electricity at "unjust and unreasonable" prices.=20 The measure, which supporters concede stands little chance of becoming law = at=20 this point, is designed as a warning to power generators selling electricit= y=20 in the California market.=20 "It's a tremendous effort to send a message to the generators," said Wendy= =20 Harmon, a spokeswoman for Vargas, a Democrat from Chula Vista.=20 The bill still must pass at least one Assembly committee, as well as pass a= =20 floor vote and be approved by the state Senate and then signed by the=20 governor.=20 Gov. Gray Davis has said he wants to "leave the option open" of supporting= =20 legislation allowing the state to seize power plants.=20 Power generators say that the possibility the state may seize power plants= =20 has slowed the building of new plants in the state, prolonging the supply= =20 shortage that has contributed to soaring wholesale prices.=20 Mirant said this month it was postponing construction of an already-approve= d=20 plant in Contra Costa because of concern about whether the state would seiz= e=20 power plants.=20 A spokesman for Davis said at the time he would be surprised if the company= =20 didn't proceed with its plans.=20 Register staff writer Tiffany Montgomery and The Associated Press contribut= ed=20 to this report.

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dasovich-j

['[email protected]']

GIR proceeding-- Potential Financial Impact to TW

Jeff, Sorry I've been hard to get a hold of... we held a workshop today to talk about our proposed Transport Options program. I found a copy of what I'd sent to you before. I'll stand behind these numbers today as representing the dollar value of the risk Transwestern faced in the proceeding. What's not clear from my original note is that these cost impacts were annual, and such impacts would continue year to year thereafter until conditions/circumstances changed. I hope this is useful. ---------------------- Forwarded by Jeffery Fawcett/ET&S/Enron on 08/31/2000 05:25 PM --------------------------- Jeffery Fawcett 03/06/2000 04:40 PM To: Jeff Dasovich/SFO/EES@EES cc: Subject: GIR proceeding-- Potential Financial Impact to TW Jeff, You asked me to try to quantify the impact of Transwestern losing access rights to 200 MMcf/d of capacity at SoCal Needles as part of the GIR proceeding. Unfortunately, it's not a precise science inasmuch as it depends on the shippers' reaction and/or retaliation to such circumstances. As a baseline, Transwestern is almost fully subscribed under various term length contracts (and has been since 1998) to the California Border, including the 750 MMcf/d of capacity available at SoCal Needles. In concept, under SFV rates, the majority of revenues would otherwise be realized by TW, notwithstanding the circumstance of TW shippers being denied full access to their primary delivery point. In this "best case," the loss to TW would be the commodity rates (theoretically, a wash, since they presumably represent the true variable cost of TW providing the service), and the revenue benefit associated with the fuel margin, calculated to be $5.8MM. If TW shippers took the position that TW was responsible, and therefore, accountable for their inability to consumate a portion of their transactions into SoCal Gas' system, then TW faces a "more onerous case" in which it loses the demand charge component of their contracts calculated to be $16.5MM. Coupled with the aforementioned fuel margin, the total loss is $22.3MM. In the worst case, in addition to the actual damages or costs to TW's shippers described above, TW shippers may face performance penalties or other contractual damages involving their commodity sales to customers behind SoCal Gas. Therfore, TW shippers may attempt to extract those same penalties and costs from TW. Realistically, I'd say that TW faces a loss somewhere between the best case and the more onerous case, maybe in the $12 - $15MM range. I hope this information is useful for purposes of your analysis. Let me know if I can be of any further assistance.

dasovich-j/all_documents/969.

dasovich-j

[]

Enron Mentions

Enron Unit Must Honor Pact With California Schools (Update1) Bloomberg, 04/11/01 Judge orders Enron to deliver electricity to universities Associated Press Newswires, 04/11/01 WSJ.COM: Rumors? Firms Ponder How To Announce Layoffs Dow Jones News Service, 04/11/01 U.K. Wind Power Gears Up For The Great Leap Offshore Dow Jones Energy Service, 04/11/01 INDIA: Enron names Australian conciliator for India project. Reuters English News Service, 04/11/01 Chile's Enersis Weighs Building Electric Plants In Brazil Dow Jones International News, 04/11/01 U.A.E.'s Dolphin May Supply Natural Gas to India, Agency Says Bloomberg, 04/11/01 PG&E's Peter Darbee (Transcript of Interview) Bloomberg, 04/11/01 Enron Unit Must Honor Pact With California Schools (Update1) 2001-04-11 16:30 (New York) Enron Unit Must Honor Pact With California Schools (Update1) (Adds comment from judge, details of hearing starting in third paragraph.) San Francisco, April 11 (Bloomberg) -- An Enron Corp. unit must provide electricity to California universities under an existing contract, U.S. District Judge Phyllis J. Hamilton ordered. Enron Energy Services Inc. had agreed to provide energy and related services to the University of California and California State University, said Douglas R. Young, a lawyer for the universities. The company cut off the schools on Feb. 1, and transferred the accounts to PG&E Corp. and Edison International utilities, Young said at a hearing today in San Francisco. The schools say they want to keep the contract with Enron, because it is more reliable than the utilities. Both utilities are burdened with billions in power-buying debt, and Pacific Gas & Electric Co. has filed for bankruptcy. The utilities' customers have been subjected to rolling blackouts amid power shortages in the state. ``Enron did not have the right to return the university systems to the utilities,'' Hamilton said. She granted the universities' preliminary injunction, forcing Enron to honor the contract for now. Enron and the universities announced the four-year contract in 1998, valuing the agreement at $300 million to $500 million in electricity sales. Cal State would save $1.5 million a year through the contract, they said, and U.C. would save $2.4 million. The Switch Enron lawyer A. William Urquhart said the company didn't cancel the contract; it just switched the source of supply to the utilities. Enron said it will file an immediate appeal with the 9th U.S. Circuit Court of Appeal in San Francisco. During the hearing, Urquhart said Enron had a ``responsibility to its shareholders'' to make financially prudent decisions. At most, the universities have suffered some economic damage, which would not entitle them to enforce the contract, Urquhart said. California Attorney General Bill Lockyer, who filed a ``friend of the court'' brief in the case, said that Enron's duty to its shareholders ``seems to be to rip off California consumers.'' Enron is saying ``we don't want to sell power at the prices we promised,'' Lockyer said. ``We continue to believe that we're acting in the best interests of our clients,' Enron Energy Services spokeswoman Peggy Mahoney said after the hearing. Lawsuit The universities sued Enron in March, seeking to enforce the four-year contract. The schools also said in court documents that buying from utilities would render obsolete new electricity meters that help them conserve. The universities have installed meters to collect data on consumption, helping them reduce power bills. Those $1,500 meters can't be used on the ``bundled'' systems like the utilities' and would have to be removed, said Charles McFadden, spokesman for the University of California. Enron says that it has offered to continue to provide all campuses with the metering, billing and related services under the agreement. Judge Hamilton ordered the universities to post a $1 million bond. The routine order assures Enron's losses will be paid, if the energy company prevails in the case. Judge orders Enron to deliver electricity to universities By DAVID KRAVETS Associated Press Writer 04/11/2001 Associated Press Newswires Copyright 2001. The Associated Press. All Rights Reserved. SAN FRANCISCO (AP) - Saying that Enron Energy Systems Inc. may be in breach of contract, a federal judge Wednesday ordered the Houston company to abide by its agreement to sell cheap power to the state's public universities. Enron was attempting to get out of delivering power for the final year of a four-year deal with the California State University and University of California systems. Enron, which buys power from producers and sells it on the market, said the contract would cost the energy concern $12 million a month because of skyrocketing wholesale power prices. Enron said the state should free Enron from its obligation and taxpayers should pick up the tab. "It's our economic interest to provide a service with the least amount of dollars we can provide it for," Enron attorney A. William Urquhart said. He later described the case as being "all about money. It's all about money." Enron said it would file an emergency appeal to the 9th U.S. Circuit Court of Appeals in San Francisco to overturn U.S. District Judge Phyllis Hamilton's ruling in the suit brought by the state's two university systems. Appearing in federal court, state Attorney General Bill Lockyer argued that Enron wants out of the contract so it can engage in a "marketing game" with the universities' promised power and sell it on the open market for 10 times more than what the electricity cost Enron. He said lawmakers may have "left the keys in the car" when they approved California's failed energy deregulation scheme that has prompted the energy crisis, "But it is still theft to steal the car." The judge issued a temporary injunction against Enron, forcing it to continue providing service as the suit brought by the universities proceeds. When the judge issued the order, she also said there is a likelihood Enron will lose the suit. "I am persuaded, in the end, there is a very strong likelihood of success on the breach of contract claim," the judge said. UC's annual electric bill is about $87 million and its natural gas bill is about $26 million. CSU annually pays about $40 million for electricity and $20 million for natural gas. The case is UC Regents vs. Enron Energy Systems Inc., 01-1006. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. WSJ.COM: Rumors? Firms Ponder How To Announce Layoffs By Stephanie Miles 04/11/2001 Dow Jones News Service (Copyright (c) 2001, Dow Jones & Company, Inc.) WSJ.com NEW YORK -(Dow Jones)- When British technology publisher Future Network PLC announced a broad restructuring that would result in 350 layoffs, few employees were surprised. For a week, workers had been glued to an industry-gossip site. "Everybody was waiting, expecting to be fired," says Scott Laine, who was laid off from a job in sales for Revolution magazine, published by Future's U.S. subsidiary Imagine Media. Managers were watching the message boards, too. So, when Future announced the restructuring in February, it sent a short companywide e-mail with the press release attached. The company also sent out two more detailed letters, from Future's chairman and chief executive respectively, explaining in more detail the circumstances surrounding the layoffs. But instead of beaming them electronically, the U.S. unit printed out color paper copies and placed them on employees' desks, in an effort to keep the note from being quickly posted online or cleanly photocopied. "Why make it easy?" says Nancy O'Neill, then president of Imagine Media. O'Neill stepped down as president at the end of March. Leaks are nothing new. But the "post once, read anywhere" nature of Internet rumors has forced companies to make much quicker decisions about when to release information about layoffs to employees and the public, and what exactly to say. Companies, for a variety of reasons, are often stuck saying "no comment," only to confirm the layoff rumors later on. Worse, a scramble to respond to investor and press inquiries can sometimes result in embarrassing reversals. Wake-Up Calls The Web-consulting industry is among the most closely scrutinized sectors on Web rumor boards, and companies are under constant pressure to respond. It's no accident: Consulting firms have been going through wrenching downsizings due to a slowdown in demand for Internet projects. After rumors popped up online last month, consulting firm Razorfish Inc. (RAZF) confirmed to several press organizations that it was offering a "voluntary termination plan" to an undisclosed number of employees. But a little more than a week after the reports of the voluntary plan, postings on Vault.com message boards were abuzz with reports of early morning wake-up calls. "Woke me from a sound sleep," wrote one anonymous poster at noon Saturday. "Anybody else get jousted (sic) out of bed?" Other cryptic notes followed, and a note on Sunday spelled it out: "They didn't get as many people to volunteer as they wanted to, so from now on it's involuntary." Melissa Kramer, a Razorfish spokeswoman, confirmed that the company called an undisclosed number of employees at home Saturday to tell them they no longer had jobs, and sent them packages confirming their involuntary termination. She says the voluntary plan hadn't drawn as many people as hoped. Kramer says the activity on the message boards had no effect on how layoffs were carried out, either in terms of how affected employees were notified or the timing of the announcement. In general, companies have a lot of latitude in deciding what information to release. Aside from releasing quarterly earnings reports, public companies are required to disclose news that is material to their operations. But when it comes to layoffs, the requirements laid out by the Securities and Exchange Commission are fuzzy. "It's a fact-specific situation," says John Heine, an SEC spokesman, explaining that the SEC expects companies to report any material changes in the company's outlook in its quarterly and annual reports. Severance pay and other layoff-related expenses will show up in quarterly reports as restructuring charges, but "there isn't a specific [SEC] rule that I can point you to that deals with layoffs," Heine says. Business Decision Unless the job cuts are so large that local or federal authorities are required to be notified under plant-closure or other laws, publicly held companies are generally under no obligation to confirm the number of layoffs, specific firings, or other work-force changes, experts say. Disclosing job cuts is often "less of a legal determination than it is a business decision," says Richard Rowe, a corporate attorney and partner with Proskauer & Rose LLC in Washington D.C. Another issue is timing. Some companies issue a press release announcing cuts right away, others wait to release the news with their quarterly earnings reports, while others refuse to even comment. (Dow Jones & Co., publisher of The Wall Street Journal, recently said that it is laying off an undisclosed number of employees at WSJ.com. The company said it will provide more details in its quarterly report slated for this week.) The decision depends often on how the company thinks layoffs will play with investors and surviving employees. For Old Economy industrial firms, cuts are often seen as effective way to slash overhead costs. But in the beleaguered Internet sector, layoffs often are viewed as a harbinger of future troubles. For example, defunct e-tailers eToys Inc. and Garden.com Inc., which traded on the Nasdaq Stock Market, both disclosed broad layoffs about three months before the companies shut down altogether. If the jobs cuts "are enhancing shareholder value, that's really good news for a publicly traded company," says John Kroen, executive vice president at investor-relations firm Dresner Corporate Services. "As long as it doesn't signal the end." Adding to the pressure on companies facing layoffs are new rules about disclosure. While the Internet has loosened companies' control of information, the new Regulation FD, which prohibits selective disclosure of information, largely limits companies' dissemination options. News can't be filtered through analysts or large investors as in the past, so for the most part, companies have to either make a public statement or stay mum. Take Amazon.com Inc. (AMZN). In January, rumor site DotComScoop.com predicted that the e-tailer was about to announce widespread layoffs, but Amazon declined to comment publicly, citing a policy of not commenting on speculation or rumors. Days later, in its fourth-quarter earnings report, the company announced that it was firing 1,300 workers and closing a distribution facility. Amazon didn't return calls seeking comment. When EMC Corp. (EMC) fired several hundred workers in February as part of an annual review, word leaked out on investor message boards run by Yahoo! Inc. (YHOO). Although the storage maker maintains that the job cuts were a routine course of business, the company's shares fell as rumors hit the Internet. In years past, EMC didn't publicly disclose what it termed performance-based firings, according to Mark Fredrickson, vice president of corporate communications. This time, however, the company decided to confirm the firings in the press in order to make clear that the job cuts weren't related to the state of the economy or the technology sector. "I think it attracted attention because of the environment," he says, adding that the company didn't consider the cuts, of roughly 3% of EMC's 24,000 employees, of material importance to investors. "Two years ago, in the midst of the high growth which we were enjoying, this would not be news." But sometimes, being proactive in the face of rumors can help change the tone of coverage. "It's better to put your words out there yourself then have them cut and pasted back at you," says Elliot Sloane, president of Sloane PR (www.sloanepr.com), a public- and investor-relations firm. Last month, for instance, energy company Enron Corp. (ENE) publicly denied rumors that it was planning layoffs in its broadband Internet unit, rumors that had helped to send its stock to a 52-week low. The company had recently terminated a video-on-demand partnership with Blockbuster Inc. (BBI). But in a conference call that reiterated the company's 2001 earnings outlook, the company explained that third-party contracts for broadband capacity had eliminated some of the need to build its own network. An undisclosed number of employees had been redeployed as a result, the company said, but the rumors of layoffs were false. The stock rallied, reaching $59.40 at 4 p.m. that Friday, up from a low of $51.51 Thursday morning. Circling the Wagons Still, many executives resist issuing any comment on layoffs or work-force shifts. "The majority of the CEOs I've dealt with want to keep it as much in-house as possible," says Dresner 's Kroen. "It's rare that you find a CEO who wants to tell as much as possible. They have to be pushed to air their dirty laundry." While top executives huddle to put the final touches on layoff plans and discuss how much information to release publicly, employees can face days or weeks of waiting for the ax to fall. Message boards can get very crowded. At Imagine, O'Neill says, "I wish we could have done something different [to avoid] a period of anxiety where people were searching for anything that's a scrap of news." But British financial disclosure rules governing parent Future Networks dictated the timing of the announcement, she says. As a result, the official news came out nearly a week after rumors first surfaced on the Web. In the meantime, so many co-workers were piling onto F____edCompany.com that one participant piped in: "Hi, since everyone here seems to be from Imagine, I lost my bathroom key and entry card yesterday. If anyone finds it, could they please post here?" Write to Stephanie Miles at [email protected] Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. U.K. Wind Power Gears Up For The Great Leap Offshore By Geoffrey T. Smith Of DOW JONES NEWSWIRES 04/11/2001 Dow Jones Energy Service (Copyright (c) 2001, Dow Jones & Company, Inc.) LONDON -(Dow Jones)- Ten years ago, Peter Edwards, a dairy farmer in Delabole, Cornwall, sold his herd to raise the money for what was then the U.K.'s first wind farm. It was uncompetitive and did nothing to lessen the country's dependence on fossil fuels. All in all, it was not the most convincing vision of the future. Today, you would think most U.K. farmers would willingly change places with him. As livestock farming staggers from one crisis to the next, wind farming goes from strength to strength, passing a notable landmark last week when the U.K.'s Crown Estates issued seabed leases for 13 offshore wind farm projects to established generating companies more traditionally associated with fossil-fuel burning. These projects could attract up to GBP1.6 billion in investment and lead to the installation of 1,500 megawatts of generation capacity around Britain's coast by 2004. That would meet the electricity needs of 1.1 million households, according to estimates by the British Wind Energy Association. The projects - seven in the Irish Sea and six in the North Sea - represent the first concerted effort in the U.K. to raise the contribution of renewable energy sources, other than hydropower, in the overall energy mix. Until now, the prime contribution of wind to the U.K.'s energy sector has been to blow the emissions of coal and gas-fired plants across the North Sea to Norway, affecting the environmental consciousness of both countries accordingly. For the wind industry, going offshore is somewhat like inventing Henry Ford's assembly line. If the engineering is robust enough, it will revolutionize the economics of the sector. Huge economies of scale beckon: larger numbers of more powerful turbines, driven by higher wind speeds. It also goes a small part of the way to addressing wind power's major drawback, its unpredictability. Offshore wind are more constant than onshore. The days when such projects were the preserve of companies on the fringe of the energy sector, let alone dairy farmers, are long gone. Among those to be awarded leases were arms of numerous established U.K. generators such as Innogy PLC (IOG), Powergen PLC (PWG), Scottish Power PLC (SPI) Enron Corp (ENE) and TXU Europe (TXU). All of these will be forced, by the government's Renewables Obligation, to source an amount probably not less than 5% of their supplies to renewable sources of energy by 2003, rising to 10% by 2010. A system of tradable 'green certificates' will be set up to enable them to trade any surplus of renewable power they have on the open market with suppliers who can't meet the Obligation by themselves. Wind farms have flourished even more in countries where the political consensus has allowed a more aggressive subsidizing of the technology, such as Germany and Denmark, which had installed capacity bases of almost 5,500 MW and 2,280 MW respectively at the end of last year, according to estimates by analysts at Dresdner Kleinwort Wasserstein. Crown Estates and the BWEA are currently in negotiations over a second round of licenses for larger sites but a spokeswoman for Crown Estates said there is no timetable for awarding these leases yet. In contrast to Germany and Denmark, the emphasis of U.K. policy-makers for the last 10 years has been squarely on bringing prices down, rather than making energy greener. This has tended to work against renewable sources such as wind, whose generation costs have been traditionally higher than those for conventional sources such as coal, natural gas and nuclear power. However, as Alison Hill, communications manager at the British Wind Energy Association, points out, the generation costs of existing onshore facilities have fallen from around 11 pence a kilowatt-hour for first-generation technology to between 1.9-3.5 pence a kilowatt-hour today. By comparison, base loads for the coming winter currently trade at around 2.1-2.2p/KWh in what is arguably the world's most competitive and deregulated electricity market. She notes that a pilot project off Blyth in north-east England is currently generating at between 5p-6p/KWh. If offshore technology can improve at anything like the same rate as onshore technology has done, the need for any form of subsidy may not be long-lived. "If we can just get capital grants to offset the initially higher cost, they should be enough to bring these projects into a competitive position on the open market," Hill says. The existing stock of subsidy for wind in the U.K. is a mere GBP49 million, is not much compared to the GBP1.6 billion investment to be expected from the first round of offshore farms, and less than half of what the U.K. government doled out to its domestic coal industry last year. But even if generating costs fall to a level where wind power can compete with fossil fuels, there are other ways in which it may increase the cost of electricity to consumers. Investment in electricity grids will probably have to rise to ensure that they are robust enough to deal with large and sudden surges in power supply, and such investments are generally financed by fees levied on all grid users. Equally, a bigger share of intermittent power may lead to greater volatility in the 'balancing market', the market segment in which the grid operator matches demand and supply on a second-by-second basis. The U.K.'s Office of Gas and Electricity Markets reckons that under the New Electricity Trading Arrangements, balancing shouldn't account for more than 10% of the overall market, but it is also the highest-priced market segment, and prices have been uncomfortably volatile since NETA was introduced two weeks ago. Neither regulator, grid operator nor traders right now would relish the thought of exposing it to a factor which would heighten that. Even so, they may still prefer it to being a dairy farmer in Cornwall. -By Geoffrey T. Smith, Dow Jones Newswires; (+44 20) 7842 9260; [email protected] Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. INDIA: Enron names Australian conciliator for India project. By Maria Abraham 04/11/2001 Reuters English News Service (C) Reuters Limited 2001. BOMBAY, April 11 (Reuters) - U.S. energy giant Enron has named a former Australian state chief justice to act as conciliator in a dispute over unpaid bills involving its controversy-ridden power project in western India. India said on Tuesday it would enter conciliation with Enron after the multinational's Indian unit, the Dabhol Power Co (DPC), sent a "political force majeure" notice to the Maharashtra State Electricity Board (MSEB). Such a notice is a contractual clause unhappy parties give as a first step toward possibly dissolving a contract. In March, Enron invoked a counter-guarantee of the Indian government after the state utility failed to clear its bill of 1.02 billion rupees ($21.91 million) for December. Last week, Enron, which owns 65 percent of Dabhol, notified the government it was applying to an arbitration court in London to consider its claim for the 1.02 billion rupees. The DPC spokesman said that "Sir Laurence Street, the former Chief Justice of New South Wales, has been appointed as conciliator for DPC". He said the government had said it would name a conciliator within a week to sort out the dispute involving the $3-billion project at Dabhol, the biggest foreign investment in India. Both the conciliators would then appoint a third person and the three-party panel would begin the conciliation process. Should the panel fail to resolve the issue, the two parties would then enter into arbitration, the spokesman said. The conciliation is the latest step to resolve the long-running confrontation between the Houston-based company and the Maharashtra government over unpaid bills. It comes at a time when India is struggling to attract foreign investment to meet a growing hunger for power. Dahbol has come under fire because of the relatively high cost of its power. Critics object to it charging 7.1 rupees per kilowatt hour versus 1.5 rupees charged by other suppliers. Politicians have called for a renegotiation of Dabhol's contract and a re-examination of whether the facility's second phase, which now is being built, should be completed. Also on Wednesday, the state government said the report of a committee set up to examine all aspects of the Enron project would be put before the legislative assembly on Thursday. The committee, chaired by former bureaucrat Madhavrao Godbole, is expected to submit its final report next month, state energy minister Padamsinh Patil told Reuters. ($1=46.56 Indian Rupee). Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Chile's Enersis Weighs Building Electric Plants In Brazil 04/11/2001 Dow Jones International News (Copyright (c) 2001, Dow Jones & Company, Inc.) SANTIAGO -(Dow Jones)- Chile's Enersis SA (ENI) is studying the possibility of building two electricity generation plants in Brazil, one in the state of Ceara and another in the Rio de Janeiro area, local paper El Diario said Wednesday. Enersis CEO Enrique Garcia told El Diario each facility would be designed to initially produce between 300 and 350 megawatts of electricity, beginning in 2004. Garcia estimated that $700 million in investment would be required to build both facilities. Garcia added that Enersis is still interested in acquiring existing generation facilities in Brazil, which is expected to experience a possibly severe electricity supply shortage in coming months. Garcia confirmed that Enersis is particularly interested in participating in government privatization auctions of generators Companhia Energetica de Sao Paulo (E.EPL), or Cesp, and Companhia Paranaense de Energia (E.CPE), or Copel. Enersis executive Rafael Miranda recently said Enersis will also evaluate the possible purchase of Brazil's Electrogen, which is now controlled by U.S. company Enron. Enersis is owned 64% by Spain's Endesa SA (ELE). Company Web site is http://www.enersis.cl -Andrea Welsh, Dow Jones Newswires; 562-460-8547; [email protected] Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. U.A.E.'s Dolphin May Supply Natural Gas to India, Agency Says 2001-04-11 11:00 (New York) Doha, Qatar, April 11 (Bloomberg) -- Dolphin Energy Ltd., a venture of the Abu Dhabi government, Total Fina Elf SA and Enron Corp., said it has held talks on supplying natural gas to India through undersea pipeline, India Abroad News Service reported. ``We are currently in India to listen and find out the security issues and the country's needs to secure cheap and clean energy fuel,'' said Ghanim Alazdi, a Dolphin project manager, IANS reported. Dolphin has signed an accord with Qatar to develop its North Dome field, the world's largest natural-gas deposit, and build a pipeline under the Persian Gulf to the United Arab Emirates, Oman and eventually Pakistan. A separate pipeline from Oman could cross the Arabian Sea to India, Alazdi said. India needs to import natural gas to service its population of more than 1 billion. Plans for an overland pipeline from Iran have been blocked by Pakistan, which lies along the route and has fought three wars with India. Dolphin is working with the state-owned Gas Authority of India Ltd., Alazdi said. Dolphin has already agreed to sell 1 billion to 1.5 billion cubic feet of gas per day to Pakistan. Oman's government has said a pipeline from its territory to India would cost about $10 billion, too expensive to recoup costs. The U.A.E. Offsets Group, an arm of the Abu Dhabi government, controls 51 percent of Dolphin. Total and Enron split the rest. India has signed a contract to buy 5.5 million tons of gas a year starting in 2003 from Qatar's Ras Laffan Liquified Natural Gas Co., which is 70 percent owned by Qatar, with Exxon Mobil Corp. holding the remainder. The gas will arrive at the port of Dahej in Gujarat State. Liquefied natural gas, or LNG, is cooled to a liquid form to allow for transport in ships. PG&E's Peter Darbee (Transcript of Interview) 2001-04-11 17:17 (New York) ****THE FOLLOWING IS AN UNOFFICIAL TRANSCRIPT.**** BLOOMBERG L.P. DOES NOT GUARANTEE THE ACCURACY OF THIS TRANSCRIPT. San Francisco, April 11 (Bloomberg) -- The following is a transcript of a Bloomberg interview with Peter Darbee, chief financial officer at PG&E Corp. The reporter is Su Keenan. KEENAN: JOINING US NOW FROM SAN FRANCISCO IS PETER DARBEE. HE IS THE CHIEF FINANCIAL OFFICER FOR PG&E CORPORATION, WHICH IS THE PARENT COMPANY OF PACIFIC GAS & ELECTRIC. AND WHAT HIS COMPANY'S REASONING BEHIND THE MOVE TO FILE FOR BANKRUPTCY IS ONE OF THE THINGS WE'RE GOING TO ASK HIM, AS WELL AS WHAT'S NEXT. LET'S TALK ABOUT THE REASONING FOR FILING, NOW EDISON COULD HAVE GONE THIS ROUTE BUT DECIDED NOT TO. WHY WAS IT THE RIGHT MOVE FOR YOUR COMPANY? DARBEE: WELL, SU, THERE WERE A NUMBER OF FACTORS THAT WE CONSIDERED. THE FIRST IS THAT THE CALIFORNIA PUBLIC UTILITIES COMMISSION WAS COMING OUT WITH ORDER AFTER ORDER WHICH DE- POSITIONED US AND PUT US IN A WORSE POSITION VIS-A-VIS BOTH OUR CREDITORS AND OUR SHAREHOLDERS, SO THAT WAS THE FIRST FACTOR. THE SECOND FACTOR WAS THAT THE STATE WAS NOT CLEAR WITH US REGARDING THE ONGOING LIABILITY THAT MIGHT BE PASSED THROUGH TO US FROM THE INDEPENDENT SERVICE OPERATOR, AND THEREFORE, WE WERE FACED WITH A LIABILITY THAT LOOKED LIKE IT WAS INCREASING BY $300 MILLION PER MONTH. AND LASTLY, AS WE REVIEWED WHERE NEGOTIATIONS WITH THE STATE WERE GOING, WE COULD NOT SEE SUBSTANTIAL PROGRESS, AND LIKELIHOOD IN THE NEAR TERM THAT WE WOULD BE ABLE TO ACCOMPLISH A SUCCESSFUL DEAL WITH THE STATE OF CALIFORNIA. SO ALL OF THOSE FACTORS CONSIDERED, WE MADE THE DECISION THAT WE WERE BEST SERVED IN THE BANKRUPTCY COURT. KEENAN: I KNOW IT WAS A TOUGH DECISION. LET ME ASK YOU, DO YOU HAVE ANY REGRETS AS YOU LOOK BACK AT THE FLAWED DEREGULATION PLAN THAT WAS PUT TOGETHER BACK IN THE MID-1990'S? ANYTHING THAT YOU WOULD HAVE DONE OR DESIGNED DIFFERENTLY? DARBEE: WELL THE BIGGEST POINT THAT WE BELIEVE FIRMLY SHOULD HAVE BEEN PURSUED WAS LONG-TERM CONTRACTS. WE ARGUED VIGOROUSLY THAT ALL OF THIS POWER THAT WE CONSUME EVERYDAY SHOULD NOT BE PURCHASED IN THE SPOT MARKET OR THE DAY-AHEAD MARKET. I TRULY BELIEVE THAT IF WE HAD BEEN PERMITTED, AS WE WANTED TO, TO ENTER INTO 10-YEAR CONTRACTS AT THE TIME WE WERE FORCED TO SELL OUR POWER PLANTS, CALIFORNIA WOULD NOT BE IN THE POSITION THAT IT WAS TODAY. KEENAN: ALL RIGHT, NOW PG&E CHAIRMAN ROBERT GLENN WAS SAYING AS LATE AS 1998 THAT THE LONG-TERM TREND OF PRICES IS DOWN AND THAT'S WHAT HE'S BASING THE BUSINESS ON. WHAT DIDN'T HE SAY? DARBEE: WELL I THINK THE LONG-TERM VIEW WAS THAT POWER PRICES, UNDER COMPETITION, WOULD COME DOWN, AND I STILL BELIEVE THAT THAT'S THE CASE. WHAT HAPPENED WAS, CALIFORNIA WENT THROUGH A PERIOD OF UNPRECEDENTED GROWTH. OUR POWER DEMANDS INCREASED BY ABOUT 30% AND AT THE SAME TIME, THERE WASN'T SUBSTANTIAL CONSTRUCTION OF NEW POWER PLANTS. AND THESE TWO PATTERNS OF SUPPLY AND DEMAND CAME TOGETHER IN A TERRIBLE COLLISION. WE FIRST EXPERIENCED LAST JUNE, WHEN THE TEMPERATURE WENT UP VERY SUBSTANTIALLY AND WE HAD SOME VERY BIG SPIKES IN THE THERMOMETER. KEENAN: ENRON, SOUTHERN, AND OTHERS -- THEY DIDN'T SUFFER QUITE THE SAME COLLISION. DO YOU KNOW WHY? DARBEE: WELL, THEY ARE NOT UTILITIES. HERE IN CALIFORNIA, ENRON IS REALLY NOT IN THE UTILITY BUSINESS. AND THEREFORE, THEY WEREN'T SUBJECT TO THE REGULATIONS THAT WE WERE, WHICH FROZE RATES AT A RETAIL LEVEL OF ABOUT 5 1/2 AND 6 CENTS A KILOWATT HOUR AND LET WHOLESALE PRICES RISE UP TO 30 CENTS AND MUCH HIGHER THAN THAT PER KILOWATT HOUR SO THEY WEREN'T IN THE POSITION TO GET CAUGHT IN THE BIND AS WE WERE AS A RESULT OF THE REGULATION WE WERE UNDER. KEENAN: NOW SINCE THE DEREG, YOU GUYS HAVE SHIFTED ABOUT $4 BILLION FROM THE UTILITY TO THE PARENT COMPANY. HOW MUCH OF THAT ASSET SHOULD REALLY BE HELPING THE UTILITY NOW? DARBEE: WE BELIEVE NONE. ABSOLUTELY NONE. WHAT HAPPENED IS WE WERE REQUIRED TO SELL OFF OUR POWER PLANTS, AND JUST TO ENCOURAGE US TO DO SOMETHING, WE WERE ASSIGNED A PUNITIVE RATE OF 6.77% RETURN ON OUR EQUITY TO ENCOURAGE US TO DO THAT AS QUICKLY AS POSSIBLE. THE PUBLIC UTILITY DID NOT WANT US TO HOLD ONTO THAT EXCESS CASH. THEY WEREN'T ABOUT TO GIVE US A 12% RETURN ON IDLE CASH BALANCES THAT WERE SITTING THERE, AND SO WE WERE ENCOURAGED TO PASS THOSE ONTO OUR SHAREHOLDERS. THE BULK OF THAT MONEY WENT TO REPAY DEBT AND CAPITAL GAINS TAX ON THOSE ASSETS AND THERE WAS A RESIDUAL AMOUNT THAT WENT TO PAY DIVIDENDS, AS WELL AS BECAME AVAILABLE FOR INVESTMENT IN OUR NATIONAL ENERGY BUSINESS. KEENAN: ALL RIGHT. WE HEAR YOU ON THAT ONE. PETER DARBEE, WE'RE GOING TO HAVE TO LEAVE IT THERE. HE IS AGAIN, THE C.F.O. OF PG&E. ***END OF TRANSCRIPT***

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Enron Mentions

The State Lockyer Fires Earthy Attack at Energy Exec Los Angeles Times, 05/23/01 World Watch The Wall Street Journal, 05/23/01 Consumer rights cited in petition with Texas PUC Houston Chronicle, 05/23/01 Enron to meet with Indian officials Houston Chronicle, 05/23/01 New Cynet president to administer change Houston Chronicle, 05/23/01 Enron, Indian goverment talks on power dispute put off Associated Press Newswires, 05/23/01 Enron says Indian panel calls off power contract meeting, gives no explanation AFX News, 05/23/01 Enron, Maharashtra Power Dispute Negotiator Resigns (Update4) Bloomberg, 05/23/01 INDIA: Head of India state panel for Enron talks quits. Reuters English News Service, 05/23/01 India Enron Negotiator Offers To Resign After Criticism Dow Jones International News, 05/23/01 India Dabhol Pwr Co: Mtg With State Govt Panel Canceled Dow Jones Energy Service, 05/23/01 INDIA PRESS: Dabhol Row To Cause INR30B Loss To Lenders Dow Jones International News, 05/23/01 INDIAN CHIEF MINISTER URGES PANEL CHAIRMAN TO WITHDRAW RESIGNATION Asia Pulse, 05/23/01 India: MSEB to pay Dabhol bill 'under protest' Business Line (The Hindu), 05/23/01 US ENRON CORP PULLS OUT OF QATAR-UAE GAS PROJECT Asia Pulse, 05/23/01 Maharashtra may terminate DPC's services The Economic Times, 05/23/01 ASIA-PACIFIC: Enron may seek damages NEWS DIGEST Financial Times; May 23, 2001 Enron goes for valuation of businesses in India Business Standard, 05/23/01 SEC Task Force Says Investors Need More 'Soft' Data Dow Jones Business News, 05/22/01 BANDWIDTH BEAT: Video On Demand II May Have Happy Ending Dow Jones Energy Service, 05/22/01 USA: FERC sets Thursday conference on Calif natgas problems. Reuters English News Service, 05/22/01 Enron Hires Consultants to Value Business in India, Paper Says Bloomberg, 05/22/01 California; Metro Desk The State Lockyer Fires Earthy Attack at Energy Exec JENIFER WARREN TIMES STAFF WRITER 05/23/2001 Los Angeles Times Home Edition B-7 Copyright 2001 / The Times Mirror Company SACRAMENTO -- In a dramatic escalation of energy crisis rhetoric, California Atty. Gen. Bill Lockyer this week suggested the chairman of a Houston-based power company should be locked in a prison cell with an amorous, tattooed inmate named Spike. Lockyer, who is investigating whether energy firms have manipulated prices on the wholesale electricity market, made the comment in an interview with the Wall Street Journal that appeared Tuesday. "I would love to personally escort [Enron Corp. Chairman Kenneth] Lay to an 8-by-10 cell that he could share with a tattooed dude who says, 'Hi my name is Spike, honey,' " Lockyer said. Enron spokesman Mark Palmer called the comment "counterproductive rhetoric" that "does not merit a response." But other industry representatives denounced the remark as "outrageous," especially because neither Lockyer's office nor any investigative panel has filed charges against Enron or other companies. "You'd expect that the state's chief legal counsel would file charges first and make public statements second," said Gary Ackerman of the Western Power Trading Forum, an association of energy producers and traders. "We're very disappointed with his choice of words, which don't exactly fit the profile of his office." In an interview Tuesday, Lockyer said he decided to "ratchet up" the commentary to "put [energy companies] on notice" that "we are not afraid of them and have the will to prosecute." "What I'm trying to do is let these economic buccaneers understand that if we catch them, they're going to be prosecuted," Lockyer said. "Just because they're multimillionaires and run big corporations, it doesn't provide them with immunity." The attorney general is investigating whether power company officials tried to maximize profits through illegal manipulation of prices on the wholesale energy market. Several panels, including a state Senate committee and the California Public Utilities Commission, are conducting similar probes. On Tuesday, Lockyer announced that three power companies have agreed to turn over documents subpoenaed months ago by his investigators. The attorney general went to court to obtain the documents after the companies failed to meet a March 19 deadline to hand them over. Lockyer said the forthcoming documents would help his office as it sifts through mountains of evidence in search of possible violations of antitrust or unfair business practice laws. "Evidence is accumulating that certainly infers illegal activity," Lockyer said. "But we need to make sure it's compelling and clear enough that you can convince a jury." Lockyer said he singled out Enron's chairman because the Houston company is the world's largest energy trader. At least one observer found Lockyer's comments refreshingly candid. Harry Snyder, a senior advocate of Consumers Union, said, "Let Lockyer be Lockyer." * Times staff writer Dan Morain contributed to this story. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. International World Watch Compiled by David I. Oyama 05/23/2001 The Wall Street Journal A21 (Copyright (c) 2001, Dow Jones & Company, Inc.) Enron Unit Threatened With India Fine An Indian state utility is planning to impose a second penalty of four billion rupees ($85 million) on U.S. energy company Enron's local unit, barely a week after Enron took its first step to pull out of the embattled power project. A Maharashtra State Electricity Board official said the fine on Dabhol Power would be for not meeting capacity targets within a stipulated period. Dabhol Power officials declined to comment. The MSEB earlier this year imposed a similar penalty on Dabhol, which it hasn't paid, saying its plant couldn't be ramped up to full capacity within three hours from a cold start. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. May 23, 2001, 4:38AM Consumer rights cited in petition with Texas PUC By LAURA GOLDBERG Copyright 2001 Houston Chronicle Residential consumers switching power companies under a pilot deregulation program aren't being properly informed of their rights, four consumer groups said Tuesday. At issue is a document called "Your Rights as a Customer" that electric providers are required by the state Public Utility Commission to give consumers signing up to switch companies. The document must include information on a variety of topics, including filing complaints against providers, protection against unauthorized service switches, meter testing and privacy rights. Consumers Union, Texas Legal Services Center, Texas Ratepayers' Organization to Save Energy and the AARP Capital City Task Force for Deregulation of Electricity filed a petition Tuesday with the PUC. In it, they asked the PUC to require electric providers to fix their documents, to take any other action needed to clear up consumer confusion that may be occurring, and to develop a standard document format for providers to use. They also ask that the PUC's education campaign better inform consumers of their rights. Starting Jan. 1, when the Texas electricity market deregulates, all Texas consumers will be able to choose power providers. Before that, a limited number of consumers will be able to get power from new providers under the state's pilot program starting in July. Nearly 50,000 residential customers have signed up for the pilot, and thousands of slots are still open. That Texas consumers haven't had to shop for electricity presents a challenge to start with, said Janee Briesemeister, senior policy analyst with Consumers Union Southwest Regional Office. "And when the information that is given to consumers is confusing, they're at a further disadvantage," she said, adding that the PUC said it would adopt a standard format for the document and hasn't done so yet. Terry Hadley, a spokesman for the PUC, said the agency did promise a standard format for full competition, which starts in January. Officials hope to work with the consumer groups to address their concerns, he said. "It is yet another reason for the pilot project, so that we can get all these things done to everyone's satisfaction before the full roll-out come January," he said. The commissioners may discuss the petition at its open meeting Thursday. The consumer groups analyzed the "Your Rights as a Customer" documents being used by seven electric providers and concluded that none satisfied all the PUC disclosure requirements. Some try to put information in easy-to-understand language, while others don't, the groups said. The procedure to file complaints with electricity providers, and then with the PUC, are identical for all providers, the petition noted. "However, depending on which `Your Rights' document you read, the way the complaint process works and how you access it varies," it goes on to say. "Accessing and utilizing the customer complaint process should be straightforward and objective, not a riddle for consumers to solve." For example, the petition says, one provider doesn't explain an electric provider's responsibility to do an investigation and give the customer the results within 21 days, while another leaves out PUC important contact information and basics on what information is needed to file a complaint. The groups reviewed the "Your Rights" documents being given to consumers by following companies: Entergy Solutions, First Choice Power, Green Mountain Energy Co., The NewPower Co., Shell Energy and TXU Energy Services. All are vying for customers in Houston. The document of Reliant Energy Retail Services, which is marketing to customers outside Houston, was also included. Officials with Shell Energy, NewPower and First Choice said they were still reviewing the petition and couldn't comment on it, while TXU couldn't be reached. Green Mountain Power said it followed appropriate guidelines in creating its document but does support a standard format, while Shell said it would back anything that makes it easier for customers to understand their rights. "While Entergy Solutions is very confident that our document provides a complete picture of consumer protections, we agree that `Your Rights as a Customer' should be standardized," said Jim DeLong, Entergy's vice president of retail markets. Pat Hammond, a Reliant spokeswoman, said the company had already incorporated suggestions about its document made by PUC officials, who reviewed a draft. Most of the petition's comments relate to items that don't apply until full deregulation starts, Hammond said. While Reliant believes its document follows the rules, it plans to draft a new one for full deregulation. May 23, 2001 Houston Chronicle Enron to meet with Indian officials BOMBAY, India -- The Indian subsidiary of Houston-based power concern Enron Corp. said Tuesday it would meet government officials for talks on a power supply dispute. "We look forward to hearing the proposed solutions ... particularly relating to creditworthy purchases for the power," said a statement from Dabhol Power Co., Enron's Indian unit. The statement comes two days after the company issued a preliminary notice to the Maharashtra State Electricity Board, a state-run utility, that it would stop supplying electricity if the government company continued to default on payments. Representatives from Houston-based Enron will meet today with officials from the utility, the federal government and Maharashtra, the western Indian state where the project is located. The electricity board has denied it defaulted on paying electricity bills to the power company that is setting up a $3 billion project in Maharashtra state. Electricity board officials said overdue December and January bills of $48 million should be offset against a fine of $85.31 million it imposed on Enron for not supplying power during the period. Enron disputes the fine. Politicians in Maharashtra say the cost of Dabhol power is too high and have called for renegotiating the tariff. Others have suggested selling power to nearby power-hungry states. May 23, 2001 Houston Chronicle New Cynet president to administer change Executive plucked from vendor in Michigan By TOM FOWLER Copyright 2001 Houston Chronicle Houston company Cynet has chosen an executive from one of its vendors to lead it through a reorganization as its new president and chief operating officer. Robert Demyanovich, the founder of Michigan-based Mail2Media, a company Cynet planned to work with as a vendor, will take on the new posts to help the company reach profitability by early next year. "What caught our eye about him was his background in a part of our core business through fax and e-mail," said Sam Beale, vice president and general counsel for Cynet. Demyanovich will continue to have an advisory capacity with his prior company, but will move from Detroit to Houston to take on the Cynet position full time. Vincent Beale Sr., chairman and chief executive officer of Cynet, said Demyanovich will help the company focus on growing its two core products, global messaging software and wireless device technology. "He has already been instrumental in helping the company shape its revised business plan, along with aggressive cost reduction initiatives as the primary drivers in reaching profitability," Vincent Beale said. Part of the reorganization has included cutting its staff by about 60 percent. Cynet has been steadily eliminating jobs since last winter, going from a high of about 125 workers to about 50. In February, Cynet also signed an agreement with AECsoftUSA to transfer all existing accounts through its Cynet Interactive service to AECsoft. In exchange, AECsoft would forgive outstanding amounts owed by Cynet. The company expects to take a one-time charge in the current quarter to account for the reorganization, but officials expect it to cut the quarterly cash burn rate from $2 million to cash flow positive by the first quarter of 2002. Both the changing climate for technology companies and the failure of a deal to sell off part of the business to a French company fueled the reorganization. The technology market downturn that started last spring has made investors demand a clearer path to profit rather than simply revenue growth, the Beales said, meaning the company needed to slim down and focus on running efficiently. The company also saw a deal to sell its fax broadcasting business to I-Media Group of France fall apart when I-Media couldn't raise the $6.7 million negotiated in the deal. Instead, Cynet decided to integrate that technology back into its global messaging product, said Chief Financial Officer Greg Smith. The global messaging product line will now let businesses send out messages to thousands of recipients at once via fax, e-mail or voice messaging. With new technology that will be introduced by Cynet's relationship with Demyanovich, the software will also let a user design a message and send it via printed media, such as a letter through the mail. The company will also focus on its high-speed wireless technology offerings, such as an add-on to the Compaq iPaq Pocket PC that turns the hand-held digital assistant into a cell phone. When it went public in January 2000, Cynet became Houston's only African-American-managed publicly traded company. It has received financial backing from Enron and Compaq Computer Corp., which has an 8.9 percent stake in the company from an earlier $2 million investment and a recent loan. Enron, Indian goverment talks on power dispute put off 05/23/2001 Associated Press Newswires Copyright 2001. The Associated Press. All Rights Reserved. BOMBAY, India (AP) - Talks on a power supply dispute between government officials and the Indian subsidiary of the American energy company Enron were canceled Wednesday after the head of a negotiating panel resigned. Madhav Godbole, chairman of the panel of state and federal government officials and officers of a state power utility, resigned to protest a statement by a top politician that implied the panel had a "negative" attitude. Sharad Pawar, leader of the Nationalist Congress Party that runs the Maharashtra state coalition government, told reporters late Tuesday that he did not foresee a positive resolution since the panel was headed by a person with "negative attitudes." Pawar, who did not name Godbole, later said his statement had been misinterpreted. He said he had merely stated that the panel needed to work with a more positive frame of mind. Representatives of Dabhol Power Co., Enron's Indian unit, were scheduled to meet the state-government appointed panel three days after the company issued a notice to stop supplying electricity if the Maharashtra State Electricity Board continued to default on payments. A new date for the next meeting has not yet been fixed. Godbole earlier headed a five-member committee that submitted a 198-page report last month to the state government recommending renegotiating a power supply agreement with Enron to lower prices. State government ministers have protested that the power supplied by phase one of Dabhol's two-year-old naphtha unit is "unaffordable." While Enron has demanded that the power utility, the Maharashtra State Electricity Board, make electricity payments on time, the board denies it is a defaulter. The board has asked that overdue December and January bills of dlrs 48 million be offset against a fine of 4 billion rupees (dlrs 85.31 million) it slapped on Enron for not supplying power during the same period. Enron has refuted the fine. (rtb-ng-bdb-twx) Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Enron says Indian panel calls off power contract meeting, gives no explanation 05/23/2001 AFX News (c) 2001 by AFP-Extel News Ltd NEW DELHI (AFX) - U.S.-based Enron Power Corp said a meeting with an Indian expert panel set up to renegotiate an electricity supply contract to Maharashtra state had suddenly been called off. "We went to attend the meeting and we were told the meeting was called off. We were not assigned any reason for that," a spokesman for Enron's Indian arm told Agence France-Presse. jn For more information and to contact AFX: www.afxnews.com and www.afxpress.com Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Enron, Maharashtra Power Dispute Negotiator Resigns (Update4) 2001-05-23 07:08 (New York) Enron, Maharashtra Power Dispute Negotiator Resigns (Update4) (Adds Maharashtra chief minister's comments in third section.) Mumbai, May 23 (Bloomberg) -- A negotiator trying to resolve a payment dispute between Enron Corp. and India's Maharashtra State Electricity Board resigned after being criticized for the way he handled the talks, setting back hopes for a compromise. ``The meeting has been canceled because (Madhav) Godbole has put in his papers,'' said Vinay Bansal, chairman of the electricity board. ``It's not certain when the meeting will be held again.'' The meeting had been scheduled for 11 a.m. Mumbai time. Dabhol on Saturday began a procedure to end its power supply contract by serving a ``preliminary termination notice'' on the electricity board because of unpaid electricity bills. India's federal and state governments, which have guaranteed payments for power by the board and some of the loans to help fund the project, may have to pay Dabhol more than 170 billion rupees ($3.6 billion) if it carries through termination of the 2,184 megawatt power venture. Dabhol is owed 3 billion rupees by the board for power supplied in December and January. The board has refused to pay because it said the bills should be lower to reflect a penalty Dabhol should pay for failing to supply power at full capacity. Dabhol is 65 percent owned by Houston-based Enron, the world's biggest energy trader. Godbole, a former chairman of the electricity board, was criticized for his handling of the negotiations between Enron and the electricity board. Statements ``I have resigned because of statements made against me'' by Sharad Pawar, leader of the Nationalist Congress Party in the state's ruling coalition, Godbole said in an interview. The decision to quit was ``well-considered,'' he said. The Economic Times quoted Pawar as saying ``a person with a positive attitude should head the renegotiation panel. A pessimistic disposition about Enron will further antagonize the two parties.'' Pawar was the state's chief minister when Enron first signed the power supply agreement with the electricity board. Anti-Enron activists went to Godbole's residence in South Mumbai to try to persuade him to return to the negotiating committee, as they view him as a supporter of their cause. ``It's important to get him back,'' said Pradyumna Kaul, an activist with Enron Virodhi Andolan, a non-governmental organization opposed to the project. Still, he said Godbole's resignation has helped focus attention on the need for a solution. Press Conference At a press conference, Maharashtra Chief Minister Vilasrao Deshmukh said the state government hasn't accepted Godbole's resignation. ``We are going to ask him to start working again,'' he told reporters. ``We'll clear all the misunderstandings.'' Chhagan Bhujbal, deputy chief minister of the Maharashtra government, and a member of the Nationalist Congress Party, said his party supports Godbole. ``Let the state government's response come, and I will give it a thought,'' Godbole said, when told of the comments at the press conference. About ten days ago, three other members of the committee led by Godbole, including Deepak Parekh, chairman of Housing Development Finance Corp., India's biggest home mortgage lender, quit citing personal reasons. The committee was set up by Maharashtra after Dabhol in April authorized its Managing Director Wade Cline to cancel the power supply contract. Enron has called on India's federal government to ensure a resolution of the dispute. ``I am awaiting the return of the power minister who is abroad,'' Finance Minister Yashwant Sinha told reporters in New Delhi. Power Minister Suresh Prabhu was in France and is returning later today. INDIA: Head of India state panel for Enron talks quits. 05/23/2001 Reuters English News Service (C) Reuters Limited 2001. BOMBAY, May 23 (Reuters) - The head of an Indian panel examining ways to restructure U.S. energy giant Enron Corp's troubled power project resigned on Wednesday, dashing hopes of an early settlement of the dispute. Enron's $2.9 billion project in the western state of Maharashtra is widely seen as a test case for India's plans to privatise its power sector. "I spoke to the chief minister (of Maharashtra) this morning and I have submitted my resignation to him," panel chief Madhav Godbole told Reuters. After months of wrangling over a payments dispute with the cash-strapped state electricity board, the Enron unit that runs the project, Dabhol Power Co, last Saturday issued a preliminary notice to terminate its contract to sell power to the utility. Godbole said he did not approve of a statement on Tuesday by Sharad Pawar, president of the National Congress Party (NCP), describing Godbole, a former bureaucrat, as having a negative approach. Pawar's NCP is a major ally of the coalition government that rules Maharashtra. A meeting between the panel and Enron's Dabhol Power Company scheduled for Wednesday has been cancelled, Godbole said. The negotiating panel was expected to look at cutting power tariffs as well as third-party sales if the state-run utility could not absorb the power generated by the power project, located at Dabhol, on India's west coast. Media reports on Wednesday quoted Pawar as saying the attitude of the renegotiating committee was a cause of concern. "If you have to renegotiate, you have to strengthen and not weaken the hands," Godbole said. "This way there is no productive work that can be done." Dabhol's termintion notice is widely seen as a first step by Houston-based Enron to pull out of the 21,84 MW power project. The project's 740 MW first phase has begun operation, and the 1,444 MW second phase is expected to be commissioned later this year. Dabhol Power Corp is 65 percent owned by Enron. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. India Enron Negotiator Offers To Resign After Criticism 05/23/2001 Dow Jones International News (Copyright (c) 2001, Dow Jones & Company, Inc.) NEW DELHI -(Dow Jones)- Madhav Godbole, chairman of the committee appointed by the Maharashtra government to renegotiate the power purchase agreement with the Enron Corp.'s (ENE) Indian unit Dabhol Power Co. resigned from the panel Wednesday, according to Press Trust of India. "I have resigned due to the derogatory remarks made against me by Nationalist Congress Party Chief, Sharad Pawar, last night," Godbole told Press Trust. He has sent his resignation to Maharashtra state Chief Minister Vilasrao Deshmukh, Press Trust reports. But Star TV said Deshmukh has asked Godbole to stay on. In an apparent criticism of Godbole, Pawar who is a member of the state coalition government, said last night he was apprehensive about the outcome of the renegotiations "as those leading the talks from the government side are working with a negative approach." Late Tuesday, Enron said it was prepared to meet government officials for talks scheduled Wednesday on a power supply dispute. "We look forward to hearing the proposed solutions... particularly relating to creditworthy purchases for the power," said a statement from Dabhol Power Co. The statement came two days after the company issued a preliminary notice to the Maharashtra State Electricity Board, a state-run utility, that it would stop supplying electricity if the government company continued to default on payments. Enron representatives were scheduled to meet officials from the western Indian state of Maharashtra, where the project is located, and federal government and MSEB officials Wednesday. The MSEB has denied it defaulted on paying electricity bills to the power company that is setting up a $3 billion project in Maharashtra state. MSEB officials said overdue December and January bills of $48 million should be offset against a fine of 4 billion rupees ($1=INR47.005) it imposed on Enron for not supplying power during the period. Enron disputes the fine. Politicians in Maharashtra say the cost of Dabhol power is too high and have called for renegotiating the tariff. Others have suggested selling power to nearby power-hungry states. Politicians complain Dabhol's costs have averaged more than INR4 as against INR1.8 per unit agreed in 1995 for the naphtha-generated electricity from the 740-megawatt plant. The controversy erupted last year when prices shot up to INR7 per unit because of worldwide fluctuations of oil prices and depreciation of the rupee. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. India Dabhol Pwr Co: Mtg With State Govt Panel Canceled 05/23/2001 Dow Jones Energy Service (Copyright (c) 2001, Dow Jones & Company, Inc.) NEW DELHI -(Dow Jones)- Enron Corp.'s (ENE) Indian unit Dabhol Power Co. said Wednesday a meeting with the Maharashtra state government's expert panel - scheduled for 0530 GMT Wednesday - has been called off, spokesman Jimmy Mogal told Dow Jones Newswires. The aim of meeting was to renegotiate a power purchase agreement between DPC and the Maharastra State Electricity Board. "We went to the meeting today (Wednesday) but we were told the meeting had been called off. Although no official reason was given, we were given to understand that the chairman of the panel, Madhav Godbole, had resigned." Local press reports confirmed Godbole's resignation Wednesday. "I have resigned due to the derogatory remarks made against me by Nationalist Congress Party Chief, Sharad Pawar, last night," Godbole told the Press Trust of India. Mogal said Dabhol will be waiting to hear from the Maharashtra state government and the MSEB to determine its future course of action. He declined to say whether the DPC will participate in a meeting with the state panel if it was headed by a new chairman. "I would not comment on this issue now. Let the Maharashtra state government decide first on what they want to do next," Mogal said. Late Tuesday, Enron said it was prepared to meet government officials for talks scheduled Wednesday on the long-running power supply dispute. "We look forward to hearing the proposed solutions... particularly relating to creditworthy purchases for the power," said a statement from Dabhol Power Co. The statement came two days after the company issued a preliminary notice to the MSEB, a state-run utility, that it would stop supplying electricity if the government company continued to default on payments. The MSEB has denied it defaulted on paying electricity bills to the power company that is setting up a $3 billion project in Maharashtra state. MSEB officials said overdue December and January bills of $48 million should be offset against a fine of 4 billion rupees ($1=INR47.005) it imposed on Enron for not supplying power during the period. Enron disputes the fine. -By Himendra Kumar, Dow Jones Newswires; 91-11-461-9427; Himendra [email protected] Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. INDIA PRESS: Dabhol Row To Cause INR30B Loss To Lenders 05/23/2001 Dow Jones International News (Copyright (c) 2001, Dow Jones & Company, Inc.) BOMBAY -(Dow Jones)- The three Indian lenders to the Dabhol Power Company - Industrial Development Bank of India, State Bank of India and ICICI - may take a loss of 30 billion rupees ($1=INR47.005) if the company decides to invoke the accelerable guarantee clause in the wake of the preliminary termination notice, the Business Standard reports. The clause says that the lenders will have to cover the loans should the project fail. Also at stake is the lenders' INR22.5 billion in direct loans outstanding from the Dabhol Power Company, the Indian arm of Enron Corporation, the newspaper said. According to the newspaper, if the accelerable guarantee clause is invoked, the three Indian financial intermediaries will face a massive cash crunch. From phase 1 of Dabhol's project, the outstanding foreign loan from Exim of the U.S. for $221 million is backed by the guarantees of the three Indian lenders. The project has run into controversy with the Maharashtra government and the Maharashtra State Electricity Board over power supply dues. The power company has threatened to withdraw from the massive power project, one of India's largest foreign direct investments. Web Site: www.business-standard.com -By Bombay Bureau, Dow Jones Newswires; 91-22 2884211;[email protected] -0- 23/05/01 04-44G Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. INDIAN CHIEF MINISTER URGES PANEL CHAIRMAN TO WITHDRAW RESIGNATION 05/23/2001 Asia Pulse (c) Copyright 2001 Asia Pulse PTE Ltd. MUMBAI, May 23 Asia Pulse - The Chief Minister of the western state of Maharashtra, Vilas Rao Deshmukh, today appealed to Madhav Godbole to withdraw his resignation from chairmanship of the committee set up for negotiating the power purchase agreement (PPA) with the Enron-promoted Dabhol Power Company (DPC). Godbole, former federal Home Secretary, submitted his resignation to the chief minister this morning after an adverse comment made against him by the Nationalist Congress Party president Sharad Pawar at a public function last night. "Godbole's in-depth knowledge and experience makes him indispensible for handling vexed issues such as renegotiation with the US energy giant," Deshmukh told PTI. "I am requesting on behalf of Maharshtra government that he reconsider his decision to resign," he added. In an apparent criticism of Godbole, Pawar had said, he was "apprehensive of the outcome of the discussions with Enron as those leading the talks from the government side are working with a negative approach". (PTI) 23-05 1751 Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. India: MSEB to pay Dabhol bill 'under protest' 05/23/2001 Business Line (The Hindu) Copyright (C) 2001 Kasturi & Sons Ltd (KSL); Source: World Reporter (TM) - Asia Intelligence Wire MUMBAI, May 22. THE Maharashtra State Electricity Board will pay Dabhol Power Company's April bill on May 25 "under protest". "We will pay DPC Rs 137 crore under protest unless Enron takes any step to jeopardise the situation," a senior MSEB official said. The two companies will come face-to-face at the negotiating table on Wednesday. According to the official, the board will pay the bill "under protest" because DPC refused to adjust the rebate slapped on MSEB in its earlier bills. "We had asked them (DPC) to carry out corrections in their February bill when we had slapped the penalty. We had asked them to show the shortfall in supplying power to MSEB, for which we charged them the rebate, in their earlier bills. But DPC did not do so," the official said. The board plans to charge DPC for the shortfall in supply for February and May. The rebate is calculated once in four months and the last couple of defaults in supply will be charged at the end of this month, he said. "There is a cap on the rebate amount we can charge so the amount may not exceed Rs 400 crore," the official said. MSEB had earlier slapped a rebate of Rs 401 crore on DPC for shortfall in power supply on January 28. "Although we are paying the April bill under protest, we hope that DPC will make the required corrections in the May bill which is due on June 5," the official said. Enron keen on Dabhol: Meanwhile, according to sources, Enron is keen on continuing with the Dabhol power project and would like its lenders to continue disbursements, in spite of beginning the termination process. They said some lenders are also of the view that since it is more than 90 per cent complete, it makes more sense to finish the project. Lenders had stopped disbursement of funds to the project some time early this year following the dispute between DPC and MSEB. Indian lenders had consistently maintained that they preferred going ahead with DPC. They had also succeeded at a London meeting last month to persuade all lenders to not consent to terminating the project. It was, however, the foreign lenders' will that prevailed ultimately, and they gave their consent last week to invalidate the power purchase agreement with MSEB. DPC today confirmed that it would be present at the Godbole Committee meeting on Wednesday. DPC's stand is also being viewed by Indian lenders as a "positive" development after the pre-termination notice being served. DPC said in a release issued here, "consistent with our traditional practice of being open to discussions with MSEB, State Government and the Centre, we confirm that DPC will be represented at the Godbole panel meeting tomorrow. We look forward to hearing the proposed solutions from the committee, particularly related to creditworthy purchasers for the power. In addition, we are extremely interested in the Centre's attendance and learning of their expected role." The Central Government representative, Mr A.V. Gokak, was not present at the last meeting as he was "appointed at too short a notice". DPC had cited it as the Centre's unwillingness to take any "positive" role in the process. Our Bureau Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. US ENRON CORP PULLS OUT OF QATAR-UAE GAS PROJECT 05/23/2001 Asia Pulse (c) Copyright 2001 Asia Pulse PTE Ltd. ABU DHABI, May 23 Asia Pulse - US Enron Corp. has bowed out from a US$500 million phase of a US$6-US$S8 billion project to route Qatari gas to the United Arab Emirates and has sold its 24.5 per cent stake in Dolphin Energy Ltd (DEL) to UAE Offsets Group (UOG) for an undisclosed amount, regional newspapers including Oman Observer report today. Reuters reported that a senior Enron official for the Middle East explained at a press conference that Enron was not suited to a project that had evolved into a major upstream venture. Last week, the Middle East Economic Digest reported that the profit margin for Enron would be low and that other partners in the project regarded the company's estimated cost for constructing and laying pipeline as too high. TotalElfFina is reported to be interested in increasing its 24.5 per cent stake in the project although DEL Chairman Ahmed Ali Al Sayegh emphasised that DEL would seek another partner in the project. Qatar sits on the world's third largest gas reserves. (ONA) 23-05 1431 Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Maharashtra may terminate DPC's services Girish Kuber 05/23/2001 The Economic Times Copyright (C) 2001 The Economic Times; Source: World Reporter (TM) MUMBAI THE DABHOL Power Company is likely to be served with a primary termination notice from the Maharashtra government. Senior officials of the state's energy department and the Maharashtra State Electricity Board on Tuesday, separately, held a series of meetings with Maharashtra's Advocate-General to decide their strategy. "This is certainly the first option we are looking at to tackle the situation after the Enron served a PTN to MSEB," sources from the state's energy minister said. The state government and MSEB will issue a primary termination notice to DPC if Enron refuses to change its stand and 'non-cooperation' with the Godbole panel continues. "This could be the only option left with us to face the crisis," said sources. The decision to issue the termination notice will be arrived at only after a meeting of the Godbole panel on Wednesday. The meet will also be attended by A V Gokak, the Centre's nominee on the Godbole panel. This will be the first meeting being held after DPC issued the notice and also the first in which a Centres's nominee will be present. Meanwhile, changing its earlier stand, US energy major Enron, DPC's promoter, has also decided to attend the meet. Enron said it was looking forward to "hearing proposed solutions from the Godbole panel particularly related to credit-worthy purchasers for the power". An Enron spokesman said they were "specially interested in the Centre's presence and learning of their expected role". Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. ASIA-PACIFIC: Enron may seek damages NEWS DIGEST Financial Times; May 23, 2001 By JULIE EARLE Enron may seek damages Enron, the US power company, warned yesterday it would move to recoup significant termination damages if it was unable to settle a dispute over unpaid bills with the Maharashtra State Electricity Board (MSEB). It is understood that Enron would seek damages of Dollars 3.5bn (Pounds 2.4bn) to Dollars 5bn (Pounds 3.4bn). It has a 65 per cent stake in the Dabhol Power Company (DPC), which operates the Bombay plant that has supplied the MSEB. Julie Earle, New York For regional reports, www.ft.com/asiapacific Copyright: The Financial Times Limited Enron goes for valuation of businesses in India P Vaidyanathan Iyer & Parul Gupta NEW DELHI 05/23/2001 Business Standard 1 Copyright (c) Business Standard In a move which may be a prelude to Enron's complete exit from India, the company has appointed Arthur Andersen and Jones Lang La Salle to undertake a valuation exercise of all its businesses in the country, including the controversial Dabhol Power Company. While Jones Lang La Salle will assess all the real estate investments of Enron in India, Arthur Andersen will value the business worth of the Houston-based energy major's Indian set-up. When contacted, a company spokesperson declined to comment. "Nobody in Enron will talk about it," he said. However, sour- ces said the appointment of consultants was in line with Enron's strategic decision of pulling out of the 2,144 mw power venture which has been mired in controversy from day one. According to sources, Enron's real estate investments have taken a big hit. "Enron invested in prime real estate during 1992-1995 when the prices were at a peak. However, they have touched more realistic levels now," said a real estate consultant. Jones Lang La Salle is, however, tight-lipped about such a mandate from Enron. Meanwhile, sour- ces said that Cushman & Wakefield which had earlier finalised certain real estate investments for Enron was also in the race. CB Richard Ellis has also proposed certain clients to Enron for buying/leasing some of its property. Enron's Houston-based president Jeffrey Skilling had in February said in an interview to Business Week that Enron "should not be in there (India) building $2 billion power plants. Our cost of capital is too high for that." DPC had disregarded the contents of the Godbole Committee report when it issued a preliminary termination notice to MSEB on May 19. The PTN gives DPC, MSEB, the state government and the Centre six months to resolve the issue amicably. If the talks fail, DPC would issue the final termination notice. Enron India had earlier this year also decided to abandon the proposed joint venture with MSEB and Global Telesystems for a broadband network in Maharashtra. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. SEC Task Force Says Investors Need More 'Soft' Data By Judith Burns 05/22/2001 Dow Jones Business News (Copyright (c) 2001, Dow Jones & Company, Inc.) Dow Jones Newswires WASHINGTON -- A new Securities and Exchange Commission task-force report calls for an overhaul of federal accounting rules, saying financial statements don't reflect the true value of public companies. "At a time when our stock markets loom so large in the economy, we need to close large gaps in the quality of information that companies disclose," said task-force chairman Jeffrey Garten, dean of Yale University's School of Management. The task force wants to close the gaps by providing investors with so-called soft data, such as intangible assets, that don't appear on corporate balance sheets. Any information that helps investors assess future corporate profits and cash flow "should be encouraged" by regulators and accountants, the task force said in a report issued Tuesday. It stopped short of saying regulators should require companies to divulge such information, but suggested protecting firms from litigation as long as they report truthfully. "Soft" data such as financial information about a company's business model, competition, intangible assets and operating performance measures is likely to become increasingly valuable, the task force predicted. Indeed, it said markets are likely to penalize companies that don't voluntarily provide such results. Intangible assets such as patents, technology licenses, customer lists, business alliances, brand-name recognition and a highly skilled work force aren't given sufficient recognition under current accounting rules, the task force concluded. Industry performance measures such as revenue per customer, inventory turnover, order backlogs, and speed at introducing new products to market also get short shrift under existing accounting rules, the task force added. The report suggests lawmakers encourage companies to disclose this data without fear of being sued, provided the information is clearly labeled and the company doesn't intend to deceive. "Intangible assets may seem esoteric, yet they are the reasons why many companies attract investments in this information age," said House Financial Services Committee chairman Michael Oxley, an Ohio Republican. In a statement, Mr. Oxley said he supports voluntary disclosure of off-balance sheet items such as intangibles, saying it will give investors "more accurate information on which to base their financial decisions." SEC officials had no immediate comment on the task-force recommendations. Former SEC chairman Arthur Levitt asked Mr. Garten to create the task force in October 1999, focusing on whether corporate financial reports provide enough information to investors. The group concluded that current disclosure, based on generally accepted accounting principles, or GAAP, and quarterly and annual reports required by the SEC, produces backward-looking documents showing past transactions that offer little help for understanding where the company is headed in the future. To spur companies to provide more forward-looking information, the group rejected the idea of more regulation, saying "a far better approach" would be to make it easier and safer for companies to disclose information beyond what appears in standard financial statements. Adopting standard rules for reporting "soft" results would be difficult since much of the missing information is specific to particular industries or companies, the report noted, and rapid changes in economic and business models would quickly make new rules out of date. Mr. Garten's group acknowledged that without rules in place, companies might tend to skew soft financial results, reporting only those that show the company in a favorable light, or calculating them in a nonstandard way that makes comparisons impossible. But the group said there is an easy fix to such problems, asserting "market forces will penalize companies that provide inadequate information relative to their peers." The task force includes venture capitalist John Doerr; Rob Glaser, chairman and CEO of RealNetworks Inc. (RNWK); Enron Chairman Kenneth Lay; investment banker Peter Peterson; Cisco Systems Inc. (CSCO) controller Dennis Powell; Professor Baruch Lev of New York University; Professor Joseph Stiglitz of Stanford University; and Hal Varian, dean of the University of California-Berkeley's School of Information Management and Systems. Write to Judith Burns at [email protected] Copyright (c) 2001 Dow Jones & Company, Inc. All Rights Reserved Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. BANDWIDTH BEAT: Video On Demand II May Have Happy Ending By Michael Rieke Of DOW JONES NEWSWIRES 05/22/2001 Dow Jones Energy Service (Copyright (c) 2001, Dow Jones & Company, Inc.) HOUSTON -(Dow Jones)- The prospects for video on demand took a blow in March, when a deal between Enron Corp. (ENE) and Blockbuster Inc. (BBI) fell apart. The split not only broke up a partnership of giants in their fields, but also revealed some of the inherent difficulties in getting the business going. Nevertheless, transcontinental telecommunications networks like Williams Communications Group (WCG) and Global Crossing (GX), as well as major studios and even utilities, are still interested in providing the service. Once the hurdles are cleared, video on demand has a shot at producing significant revenue. Jason Bazinet, a senior research analyst in Internet infrastructure services for J.P Morgan Securities, estimates the market could surpass $1.5 billion in revenue by 2005, with two-thirds of that growth in 2004 and 2005. "We'll be ready," said Greg Onyszchuk, a vice president at Williams' Vyvx Broadband Media unit. "And I don't think we'll be the only network ready." The Blockbuster-Enron team-up sounded like a great idea when the two companies announced it. Blockbuster is known for having videotapes of just about every movie you'd want to see. Enron, always an innovator, promised to move the videos across its long-haul fiber-optic network to local phone companies, like SBC Communications Inc. (SBC), which would deliver them to homes. But there were problems. Blockbuster said Enron's network couldn't deliver the quality needed for transmitting the large video files. And Enron said Blockbuster, whose agreements with movie studios only cover videos rented through its stores, couldn't deliver the content. Those shortcomings point to the significant hurdles that remain before video on demand, also called VOD, can be made viable. Studios Want In As Blockbuster learned, major motion picture studios want a bigger piece of the VOD action, and they're interested in cutting out middlemen between themselves and viewers at home. Clearing that hurdle is trickier than it sounds, even without getting into antitrust issues. Interest by the studios is more rumored than publicly discussed. Still, Onyszchuk believes all the major studios have VOD initiatives under way, because they're already getting big revenues through rentals. Individual studios can't pull it off on their own. The 20 to 25 most popular movies account for a huge percentage of video rentals at any given time, Onyszchuk said. Even two studios working together would still probably have only seven to 10 of the Top 25 pictures, which isn't enough. "If you want to be in the VOD business, you've got to have a current library of hits," he said. "You need most of them." Security is also a big issue for the studios, which want to be sure their movies aren't pirated from a transmission network. A software program called Divx is threatening to do for video what MP3 did for audio distribution via the Internet. Once pirated, a video file can be burned on to a DVD disk and distributed without paying royalties to the studios. Paying users bring their own hurdles: Motion picture studios aren't set up to handle billing and collection from subscribers. Retail End Underdeveloped Problems also exist on the other end of the fiber. To be profitable, the market needs 10 million to 20 million subscribers with high-speed Internet connections, Onyszchuk said. Those volumes won't really be in place for two years. Studies predict that 10 million homes will have high-speed connections by the end of the year, with 20 million connections expected in the next 18-24 months. Storage is another issue. When Enron and Blockbuster tested their VOD service, movies were streamed directly from Los Angeles to individual homes. That system can work when a transmission network is uncongested. But long-haul transmission can develop glitches when there's heavy traffic on a network - like that created by, say, 20 million VOD customers. It makes more sense to have video files of movies in data storage centers in the top 125 cities in the country, Onyszchuk said. Then they would have to be transmitted only a few miles to local subscribers. But most data storage centers are designed to store Web pages, files of 5,000-10,000 bytes. Movies are much larger - 3 billion to 4 billion bytes. VOD calls for terabit storage (that's 1 trillion bytes) in metro areas, he said. Vyvx has a 100-terabyte data storage center in Tulsa, which Onyszchuk said could handle hundreds of movies. Companies like Exodus Communications (EXDS) and StorageNetworks Inc. (STOR) are deploying more data centers with terabyte storage capacity to handle expected demand for services like VOD and streaming video. Aggregation at either end of the long-haul transmission networks could help overcome some problems. Aggregation of content at the studio end would make most if not all popular movies available to subscribers. The model for VOD distribution would be companies like Blockbuster, which aggregate distribution rights for movies on video tape. Aggregation at the other end of the networks could bring all subscribers into the market whether they have high-speed cable-TV connections or high-speed digital subscriber lines from phone companies. Aggregation at the local level seems ideal for utilities that are getting into the telecom sector. They have the billing systems and most if not all the local customers needed to make the service work. Two utilities, Reliant Energy Inc. (REI) and Potomac Electric Power Co. (POM), have opened the door to future revenue from VOD. Reliant Energy Inc. has invested in Grande Communications, which provides Internet access, phone service and cable television. Potomac Electric and RCN Corp. (RCN) have a joint venture, StarPower Communications, which provides cable television service in the Washington, D.C., area. -By Michael Rieke, Dow Jones Newswires; 713-547-9207; [email protected] Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. USA: FERC sets Thursday conference on Calif natgas problems. 05/22/2001 Reuters English News Service (C) Reuters Limited 2001. WASHINGTON, May 22 (Reuters) - Key players in the California power crisis will address the Federal Energy Regulatory Commission staff at a special conference on Thursday on the state's need for future natural gas supplies. Executives with Enron Corp , El Paso Corp , PG&E Corp's Pacific Gas & Electric , and Sempra Energy's Southern California Gas will make presentations at the conference, FERC said on Tuesday. The companies are among two dozen utilities, pipelines, marketers, and state regulators scheduled to speak at the technical conference organized by FERC staffers. The technical conference will gather information and recommendations about California's future demand for natural gas, projected interstate pipeline capacity into California, interconnections between interstate and intrastate pipelines, and how the intrastate pipeline capacity is allocated. The conference will begin at 10 a.m. EDT (1400 GMT) on Thursday at FERC's headquarters in Washington, D.C. All participants were to submit copies of their presentations to FERC by Wednesday, and the agency said it would publish the documents on its Internet site. Energy-starved California is facing an estimated 260 hours of blackouts this summer, due in part to tight supplies of natural gas to fuel power plants. A public opinion survey released on Tuesday found that California residents are increasingly fearful of their state's energy crisis. Some 75 percent of the 1,015 adults surveyed said they viewed the energy problem as "very serious," up from 58 percent in January. More than half of those surveyed said they believed the energy crisis was an attempt by energy companies to boost prices, while one-third say they believed there was a genuine shortage of electricity. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Enron Hires Consultants to Value Business in India, Paper Says 2001-05-22 22:51 (New York) Mumbai, May 23 (Bloomberg) -- Enron Corp. appointed two consultants to value its Indian assets and businesses, including Dabhol Power Co., as a prelude to its exit from the country, the Business Standard reported, without identifying sources. Enron appointed Arthur Andersen LLP and Jones Lang LaSalle Inc., to value properties and overall business in the country, the paper said. On Monday, Enron pulled out of a $2 billion pipeline project in Qatar as it became increasingly likely that its Indian power- sales agreement will collapse. Last week Dabhol Power, owned 65 percent by Enron, served a preliminary termination notice on India's Maharashtra State Electricity Board to stop supplying power because it's owed 3 billion rupees ($64 million) by the board.

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Re: QF Meeting Today--Highlights

Are we working on this in Sacramento? Do we have language? What is the level of interest? Jim ----- Forwarded by James D Steffes/NA/Enron on 03/01/2001 09:05 PM ----- Mark Fillinger@ECT 02/28/2001 02:18 PM To: Alan Comnes/PDX/ECT@ECT cc: Christopher F Calger/PDX/ECT@ECT, David Parquet/SF/ECT@ECT, Hap Boyd/EWC/Enron@Enron, James D Steffes/NA/Enron@Enron, Jeff Dasovich/NA/Enron@Enron, Michael Etringer/HOU/ECT@ECT, Paul Kaufman/PDX/ECT@ECT, Richard Shapiro/NA/Enron@Enron, Sandra McCubbin/NA/Enron@Enron Subject: Re: QF Meeting Today--Highlights For the last two days I participated in the negotiations between several QFs and the utilities regarding implementation of SBX 47. The goal of the meeting was to present a substantially complete "Agreement of Long-Term Gas Purchase Arrangement" to Battin this Thursday. Through this document they intend to describe what the parties have agreed to and the changes required in the bill to conform to the parties agreement. Attendees included PG&E and SDG&E (SCE is clearly opposed to the bill), Calpine, El Paso, Sithe and the CCC represented by White and Case. It appears that SDG&E's support for the bill is weakening with their mantra being "if this doesn't guarantee a price reduction over the five years we won't support the bill." We explained that the goal is not so much overall price reduction as price stabilization, with current period price reduction. PG&E clearly gets it. I was successful in introducing and inserting the financial hedging option into the Gas Agreement. Both PG&E and SDG&E are very supportive of such an option as they are currently prohibited from entering into such arrangements. It is less clear if the large QFs are supportive. Their primary goal is to find a safe harbor from the Wood decision for the next five years. I also believe the proposed gas procurement structure provides some option value to the larger QFs. Although it looks like our language will be in the Gas Agreement, I think we need to get some language in the bill itself. I am working with Sandi and Mike Day to make that happen. We may also want to add the concept of economic dispatch to the bill. Mike, do you have any suggested language that I could forward to Sandi and Mike Day? Finally, I suggest we try and set up individual meetings with the utilities (including SCE) to discuss our ideas further. I'm not sure what other conversations are occurring with the utilities, but I would be happy to set up the meetings with the appropriate people. Thanks, Mark Alan Comnes 02/27/2001 08:32 PM To: David Parquet/SF/ECT@ECT, Michael Etringer/HOU/ECT@ECT, Christopher F Calger/PDX/ECT@ECT, Mark Fillinger/SF/ECT@ECT, Sandra McCubbin/NA/Enron@Enron, Hap Boyd/EWC/Enron@Enron, James D Steffes/NA/Enron@Enron, Richard Shapiro/NA/Enron@Enron, Jeff Dasovich/NA/Enron@Enron, Paul Kaufman/PDX/ECT@ECT cc: Subject: QF Meeting Today--Highlights Despite the fact the bill, by itself, does not guarantee payment for overdue receivables, the QFs on today's call decided to go forward and push for SBX 47 irrespective of the progress on SBX 33. A press conference is planned for Friday by IEP. Bowen, who heads up the first committee that this bill will go through will have hearings on this bill on Tuesday at the earliest. Jan S-J asked every QF to fax to IEP a description of all QF generation and the zip code of each project so that they can begin lobbying specific legislators. A significant PR push is planned. SBX 47 is opposed by SCE. PG&E's position appears more ambivalent. One angle would be to try to get PG&E to support Enron's swap/SC language and make inclusion of such language a condition of PG&E's support. GAC

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Re: Dow Jones says CPUC will "Order" utiltities to pay QFs $1 bil

---------------------- Forwarded by Alan Comnes/PDX/ECT on 03/20/2001 02:36 PM --------------------------- "Robert Weisenmiller" <[email protected]> on 03/20/2001 01:25:57 PM To: [email protected], Michael Etringer/HOU/ECT, Terry W Donovan/HOU/ECT, Julie Sarnowski/HOU/ECT cc: Subject: Re: Dow Jones says CPUC will "Order" utiltities to pay QFs $1 bil Two articles on QFs. http://www.latimes.com/news/state/20010320/t000024257.html Back to story Tuesday, March 20, 2001 Small Power Firms' Cutbacks Contribute to Blackouts Outages: Alternative generators of solar, wind and biomass energy, and smaller gas-fired plants, haven't been paid since November. By JULIE TAMAKI, Times Staff Writer SACRAMENTO--The rolling blackouts that swept California on Monday were sparked in part by a crucial group of small energy producers that have cut supplies to the state's utilities because they are not being paid. California's power supply dropped Monday when alternative producers reduced output or went offline, cutting their usual deliveries to utilities in half. The lost electricity--more than seven times the cuts the companies were making just weeks ago--could have served 3 million homes. "I think we're just getting at a breaking point for many of these businesses," said Ed Tomeo, president of UAE Energy Operations Corp., a San Ramon company that operates a biomass plant and a small gas-fired plant. Tomeo said he expects to take his gas-fired plant offline today because he's run out of money to buy natural gas. Tomeo's firm is among the nearly 700 alternative energy producers that generate more than a fourth of the power consumed in California. Collectively, the group estimates it is owed $1.5 billion by the state's two largest utilities. Big out-of-state power producers are getting paid because the state stepped in to buy electricity for the foundering utilities. But the California producers of solar, wind and biomass energy and, typically, smaller gas-fired generators, have received no payments since November from Southern California Edison and only partial payments from Pacific Gas & Electric Co. for December and January deliveries. Edison's debt to the producers is estimated at $835 million as of March 1. PG&E's debt to the producers was $651 million as of March 8. Jim Detmers, director of the California Independent System Operator, the agency that operates the state's power grid, said Monday's shortfall from the alternative producers was mostly caused by reduced output by about a dozen companies that have been cutting back electricity deliveries for the past two months. Detmers said he could not say whether the action was orchestrated, but it appeared to be a business decision. The cuts have grown from about 400 megawatts a day in early February to 3,000 megawatts over the last several days, according to state officials. Assemblyman Fred Keeley, a Boulder Creek Democrat, said he did not blame the small producers, who are formally referred to as "qualifying facilities," for shutting down. "Although I feel it is unfortunate for consumers, I don't blame [them] at all," Keeley said. "They're the only ones generating electricity and not getting paid." Keeley said he will revive efforts to pass legislation that would ensure that the alternative energy producers get paid while cutting their rates. A previous effort to slash the rates paid to the group, SB 47X by Keeley and Sen. Jim Battin (R-La Quinta), appears doomed. Gov. Gray Davis huddled for more than two hours with Democratic legislative leaders Monday, after keeping his distance for several weeks, and an agreement emerged to give small generators a choice: Take a higher price in exchange for short-term commitments to buy their power, or accept a lower price in exchange for a multiyear commitment to buy their power, sources who attended the meeting said. And the governor and Legislature would quickly devise a way to ensure that the producers start getting paid, at least for power they continue to produce. As long as the utilities are collecting money from their customers, Davis later told a labor group, "they're going to make the payments." The alternative producers' rates are pegged to the price of natural gas, which has skyrocketed in recent months. Driving down and stabilizing their prices is a critical factor in Davis' overall plan of buying power without imposing additional consumer rate hikes. As a growing number of unpaid producers have dropped offline, state officials have been forced to purchase replacement supplies on the pricey spot market. A worst-case scenario materialized Monday, when a lack of electricity supplies forced state officials to order rolling blackouts. "A number of plants are out for maintenance, but it's very clear to me that there are a significant number that are off due to nonpayment," said Jan Smutny-Jones, executive director of the Independent Energy Producers. "My concern is that this is a prelude to what we'll see this summer." PG&E spokesman John Nelson described the alternative producers as victims of the state's energy meltdown. "Many of these generators are relatively small enterprises that cannot afford to continue operating on a daily basis." Nelson said his company's inability to fully pay the producers it has contracts with is caused by the rate freeze that bars PG&E from passing the true cost of electricity on to customers. * * * Times staff writers Miguel Bustillo, Nancy Rivera Brooks, Dan Morain and Nancy Vogel contributed to this story. Copyright 2001 Los Angeles Times steven k. says the la times is closer to correct (going forward costs but not payables) Bob At 12:46 PM 3/20/01 -0800, you wrote: >Bob, > > > >If you learn anything more than what's in the papers, send it my way. > Thanks. > > > >Alan > > >cc: > >Subject: Dow Jones says CPUC will "Order" utiltities to pay QFs $1 bil > >Here's the link: > >http://quicken.excite.com/investments/news_center/article/printer.dcg?story=/ news/stories/dj/20010320/ON20010320000069.htm > >Sue Mara >Enron Corp. >Tel: (415) 782-7802 >Fax:(415) 782-7854

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Energy Issues

Please see the following articles: Sac Bee, Mon, 5/18: Bush may back some price caps Sac Bee, Mon, 5/18: TV ads to pin blame on Davis for power woes Sac Bee, Sun, 5/17: Dan Walters: Political war between Sacramento and=20 Washington is escalating Sac Bee, Sat, 5/16: Veil is lifted on pacts SD Union, Mon, 5/18: Deal would let SDG&E clients off the hook SD Union, Mon, 5/18: State officials to hold hearings on proposed=20 high-voltage line=20 SD Union, Sun, 5/17: Power grid operators issue blackout warnings for first= =20 time SD Union, Sun, 5/17: High energy prices to continue long term, experts say SD Union, Sun, 5/17: Ad criticizing Davis expected as officials consider=20 price caps SD Union, Sat, 5/16: Energy deals rest on unsteady markets LA Times, Mon, 5/18: Bush Says FERC Plan Is Not Price Controls LA Times, Mon, 5/18: U.S. May Hike Aid for Poor's Utilities LA Times, Sat, 5/16: Power Debate Heats Up as Davis Reveals Contracts LA Times, Sat, 5/16: Ad Will Blame Davis for Crisis SF Chron, Mon, 5/18: Blackout alert for next 2 days=20 State's first advance warning puts PG&E's Block 1 on notice SF Chron, Mon, 5/18: California's path to energy independence (by Gray Dav= is) SF Chron, Mon, 5/18: Developments in California's energy crisis SF Chron, Mon, 5/18: Federal panel considering ways to rein in Western ener= gy=20 prices SF Chron, Mon, 5/18: Tougher price caps prompt controversy=20 Consumer boon or bane? Experts split SF Chron, Sun, 5/17: THE ENERGY CRUNCH=20 Pacts may give upper hand to gas traders=20 Clause allows price of electricity to change with production cost SF Chron, Sun, 5/17: The zero percent solution SF Chron, Sat, 5/16: Davis reveals power contracts=20 Critics point fingers after forced release of details Mercury News, Mon, 5/18: California energy market strategy criticized Mercury News, Mon, 5/18: U.S. energy regulators to vote on power caps for W= est Mercury News, Mon, 5/18: Bush: FERC Western power plan not price controls OC Register, Mon, 5/18: FERC considers new price limits today OC Register, Mon, 5/18: Atomic generation revisited OC Register, Mon, 5/18: Blackouts could hit today, Cal-ISO says OC Register, Mon, 5/18: San Onofre generating power full bore again OC Register, Mon, 5/18: Opening the contracts (Commentary) Individual.com (AP), 5/18: California ISO Unveils Outage Notification Plan; Meets Deadline for Governor's Executive Order to Roll Out Warnings to Publi= c=20 Individual.com (AP), 5/18: BPA and California Ink Summer Assistance Plan=20 Wash Post, Mon, 5/18: California 's Energy Woes (Cont'd) (Editorial) Wash Post, Mon, 5/18: Bush to Back FERC Energy Price Limits; Proposed=20 Restraints Would Affect 11 States WSJ, Mon, 5/18: California Struggles in Role of a Large Buyer of Power ---------------------------------------------------------------------------= --- ------------------------------------------------------ Bush may back some price caps Updated: June 18, 2001 - 6:38 a.m.=20 WASHINGTON -- President Bush, who has argued against price caps on Californ= ia=20 electricity, plans to support less-stringent price limits expected to be se= t=20 by the Federal Energy Regulatory Commission today, administration officials= =20 said Sunday. FERC will meet today to consider new restraints on the wholesale price of= =20 electricity in California. An aide to Gov. Gray Davis said the governor=20 considers the commission's leading proposal to be "too little, too late" as= =20 the state continues its efforts to stave off the threat of rolling blackout= s. But with summer officially beginning this week, a statewide heat wave=20 prompted the California Independent System Operator, the agency that manage= s=20 much of the state's transmission grid, to report that a Stage 2 power alert= =20 is probable for today and Tuesday and that a Stage 3 alert is possible both= =20 days. In a Stage 2 alert, consumers are urged to reduce their use of=20 electricity, while rotating blackouts would be instituted between noon and = 8=20 p.m. under Stage 3. On Sunday, Bush administration officials said they would argue that the=20 president can support new FERC limits that are based on market factors and= =20 would contend Bush has not changed his position. Nevertheless, the willingness to embrace new limits should temper the anxie= ty=20 of some Capitol Hill Republicans, who fear the Bush administration has=20 handled the matter callously. Rep. Anna Eshoo, D-Atherton, said Vice President Dick Cheney had rankled so= me=20 members of the California delegation during a meeting last week. "He lectured us about markets," Eshoo said Sunday during a conference call= =20 organized by Davis' office. "When I reminded him that our market was=20 dysfunctional and that in a healthy market there's competition, he looked a= t=20 his watch." FERC, an independent agency with the commissioners appointed by the=20 president, now has limits on wholesale electricity prices in California tha= t=20 are in effect only during emergency power shortages. FERC sets a target pri= ce=20 based on the costs of the least-efficient producer, and companies have to= =20 explain in writing if they exceed that target. At its special meeting today to deal with California energy issues, the=20 commissioners will consider a proposal from congressional Republicans that= =20 would extend those restraints around the clock during the next year and to = 10=20 other Western states. Two recently appointed members of the commission -- Patrick Wood III, forme= r=20 chairman of the Texas Public Utility Commission, and Nora Mead Brownell, a= =20 former member of the Pennsylvania Public Utility Commission -- will=20 participate in their first meeting today. At their confirmation hearings, Wood and Brownell won praise from Democrati= c=20 Sen. Dianne Feinstein, D-Calif., after they said they thought FERC should= =20 move further than it had so far to rein in high wholesale prices and did no= t=20 rule out price controls. Among those most heartened to see the new members was William Massey, a=20 Democrat and frequent dissenter on the five-member panel who strongly favor= s=20 price controls to head off what he's described as a looming economic=20 catastrophe for the state this summer. "I never thought I would be so thrilled to see two Republicans coming over= =20 the horizon," Massey said last week. While FERC renews its focus on California's power problems, Congress also i= s=20 feeling heat from constituents over rising energy costs and is seeking ways= =20 to help. Lawmakers may vote as early as this week on a big budget increase= =20 for a once-obscure federal program that helps the poor pay their utility=20 bills. The House measure would appropriate $300 million in current-year emergency= =20 funding -- twice as much as requested by Bush -- for the Low-Income Home=20 Energy Assistance Program. The Senate is talking about doubling the figure= =20 again, to $600 million. Even bigger increases appear probable for 2002. Bush is seeking $1.7 billio= n=20 for the program, up from $1.4 billion this year. In the Senate, there's tal= k=20 of a $3.4 billion budget. "There's been a change in mood," said Rep. Bernard Sanders, a Vermont=20 independent who has joined Democrat Barbara Lee of Oakland and Republican= =20 John M. McHugh of New York in a campaign to boost the emergency funding bil= l=20 to $800 million "People in California, among others, are now concerned about this issue in = a=20 way that had not been the case. ... Plus the fact that oil prices are going= =20 up all over this country," Sanders said. Passage of the emergency appropriation may be Congress' first direct respon= se=20 to the energy price spikes and supply shortages that have bedeviled=20 California and states. The assistance program, which arose from the 1970s energy crises, works=20 directly with utilities to help lower low-income households' air-conditioni= ng=20 and heating bills and avoid utility cutoffs for nonpayment. The surge of support in Congress for the program is broad and bipartisan,= =20 even though the program offers nothing to more-affluent Americans who also= =20 would like relief from higher energy expenses. Those eligible for assistance include a large number of senior citizens, an= =20 important political constituency for Republicans and Democrats. And the=20 program is endorsed by utility companies because it helps people pay their= =20 heating and cooling bills. Compiled from Washington Post and Los Angeles Times. David Whitney of The B= ee=20 Washington Bureau contributed to this report. TV ads to pin blame on Davis for power woes By Amy Chance Bee Political Editor (Published June 18, 2001)=20 An interest group calling itself the American Taxpayers Alliance is set to= =20 begin airing television ads in California today aimed at Gov. Gray Davis,= =20 saying he "ignored all the warning signals" about the state's energy troubl= es=20 and "turned the problem into a crisis."=20 The ads, featuring grainy footage of Davis, also maintain that he has done= =20 too little to boost energy generation and thwarted utilities' efforts last= =20 year to buy electricity under long-term contracts.=20 Aides to Davis said Sunday they believe Republican political strategists an= d=20 at least one energy generator are behind the spots, which were delivered to= =20 television stations late last week.=20 "The governor believes strongly that Californians will see right through th= e=20 smokescreen," said Davis spokesman Steve Maviglio, who said in a conference= =20 call with reporters that "the generators that have robbed billions from us"= =20 are now "trying to con us into believing what they're doing is a good idea.= "=20 He cited a newly released Time magazine article which alleges that Reliant= =20 Energy is one of "hundreds of corporations" providing funding for the ad.= =20 A consultant for Reliant, however, said while the company is considering a= =20 broader informational campaign on the energy crisis, it is not political in= =20 nature.=20 "I doubt very much that hundreds of corporations have funded any given ad= =20 campaign. They may have funded the sponsoring organization," said Darry=20 Sragow, a Democratic political consultant to Reliant. "Whether Reliant Ener= gy=20 is one of them or not, I have no idea."=20 He said he would not doubt, however, that Republicans are behind the effort= .=20 "Gray Davis is not terminally damaged, but he's in a tough spot, and he has= =20 not had any significant resources directed against him in ... some kind of= =20 political message that reaches voters," Sragow said. "It doesn't take a=20 political rocket scientist to figure out that's a tempting situation for th= e=20 Republicans."=20 The television campaign against Davis will begin as the Federal Energy=20 Regulatory Commission meets to once again address the Democratic governor's= =20 call for federal price caps on wholesale electricity prices.=20 The commission is widely expected to expand an earlier price control plan= =20 effective only during California power emergencies, making it apply to all = 13=20 Western states and around the clock.=20 Democrats said they appreciated the effort, but said the effort is simply t= oo=20 little, too late.=20 "This puts into place the highest price from the dirtiest generators. If=20 that's price relief, I'll eat my hat," said Rep. Anna=20 Eshoo, D-Atherton. She said while her delegation has been calling for "real= =20 PR -- price relief," the FERC and the Bush administration have resisted=20 serious attempts at price control.=20 "And yet the gouging that is taking place, the dollars that have been cream= ed=20 off the top of our constituents are now being poured into a campaign to blu= r=20 the issue," Eshoo said.=20 Democrats in Congress have weighed in recently with political messages of= =20 their own, releasing radio ads on Memorial Day weekend blaming President Bu= sh=20 and congressional Republicans for higher gas and electricity prices.=20 The Bee's Amy Chance can be reached at (916) 326-5535 or [email protected]= .=20 Bee metro staff contributed to this report.=20 Bee Column Dan Walters: Political war between Sacramento and Washington is escalating (Published June 17, 2001) A U.S. diplomat negotiated at least a temporary cease-fire last week in the= =20 months-long violent conflict between Israelis and Palestinians, which=20 threatened to become a wider Mideast war.=20 Having achieved the near-impossible, perhaps the envoy, CIA Director George= =20 Tenet, should now take on another escalating conflict: the political war=20 between President Bush and Gov. Gray Davis.=20 Davis is simultaneously attempting to manage a severe energy crisis, burnis= h=20 his own image for a re-election campaign next year, and position himself as= a=20 potential Democratic challenger to Bush in 2004. With advice from veterans = of=20 the Clinton-Gore political operation, Davis has been dispatching increasing= ly=20 sharp political salvoes accusing Bush of neglecting California while servin= g=20 the interests of Texas-based energy companies.=20 The more partisan, even personalized, tone of the Davis attacks has been=20 working from a purely political standpoint, gaining Davis face time on=20 national television and, according to his own pollsters, arresting the=20 decline in his approval ratings in California.=20 The turning point came during a Bush visit to California a couple of weeks= =20 ago, which included a brief personal meeting with Davis. The governor and h= is=20 political advisers orchestrated the event to his advantage while Bush=20 demonstrated little empathy for California's travails.=20 The visit bolstered Davis' efforts to shift the onus for California's energ= y=20 woes from himself to the Federal Energy Regulatory Commission. And while=20 Davis aides crowed about the salutatory effects on their boss's image,=20 Republicans -- especially those in California -- began worrying that the=20 White House was exposing them to political fallout. The Democrats'=20 congressional campaign organization began broadcasting ads in the districts= =20 of potentially vulnerable GOP congressmen in California, portraying them as= =20 lackeys of the Bush White House and Texas energy firms.=20 Those targeted congressmen -- such as Sacramento's Doug Ose -- have been=20 demanding that FERC step into the California crisis by imposing some form o= f=20 price controls. And FERC last week began emitting signals that it's plannin= g=20 some price-control step that would implicitly provide Bush and Republican= =20 congressmen with political cover. A Democratic takeover of the U.S. Senate= =20 adds still another dimension to the politics of the feud -- Senate hearings= =20 on the crisis, with Davis as a star witness, being one example.=20 Bush doesn't appear to be particularly concerned about his own image in=20 California. He lost the state by more than a million votes last November=20 while amassing enough electoral votes to win the presidency in other states= =20 -- a feat that validated an oft-voiced theory among GOP strategists that=20 California was not as important in presidential politics as most analysts= =20 assumed. And presumably, his strategy for 2004 assumes that he won't have= =20 California's votes.=20 That said, the very narrow GOP margin of control in the House could vanish = if=20 Democrats take away enough seats from Republicans in California through a= =20 combination of redistricting and using the Bush administration as a whippin= g=20 boy on energy.=20 The war took still another turn last week when the White House dismissed a= =20 California plea to lift the federal requirement that "oxygenates" be added = to=20 gasoline sold in the state to fight air pollution. Davis had already decree= d=20 that MTBE be removed from gasoline because it pollutes water, leaving only= =20 ethanol as a replacement. But adding huge quantities of the alcohol distill= ed=20 from agricultural wastes would add substantially to California gasoline=20 prices. The Bush decree may irritate Californians and their politicians, bu= t=20 it shores up Bush's environmental credentials and his position in the=20 Midwest, where ethanol is a major product. And it will benefit=20 Archer-Daniels-Midland, the nation's leading ethanol producer and a major= =20 source of campaign funds.=20 One can only wonder where the next skirmish in the war will break out, but= =20 there are plenty of potential battlegrounds -- offshore oil drilling,=20 perhaps, or timber harvesting, or water.=20 The Bee's Dan Walters can be reached at (916) 321-1195 or [email protected]= om . Veil is lifted on pacts The scrutiny begins, but one thing is certain -- prices can go either way By Carrie Peyton, Dale Kasler and John Hill Bee Staff Writers=20 (Published June 16, 2001) The $43 billion California is spending on long-term power contracts is only= =20 an estimate, state officials acknowledged Friday, and the amount could easi= ly=20 go higher or lower because about half the supply is tied to fluctuating=20 natural gas prices.=20 The disclosure came as the state released edited versions of the 38=20 electricity contracts it has signed so far, many at prices that exceed the= =20 newly deflated spot and futures markets.=20 It also unveiled the most detailed portrait yet of $7.6 billion in state=20 spending since January, when California stepped in to buy power on behalf o= f=20 battered utilities which said they could no longer afford to pay their=20 suppliers. For the first time, the state provided a day-by-day list of mone= y=20 spent and power bought through March 31, and it promised similar tallies wi= ll=20 be released each quarter.=20 The power contracts came in for immediate criticism from those who said=20 California picked the worst time to try to lock in long-term deals and now= =20 will be stuck for a decade or more with above-market electricity costs.=20 But Gov. Gray Davis and his energy advisers contend the recent dip in=20 last-minute or "spot" prices simply proves that their long-term deals have= =20 helped cool an overheated wholesale market, robbing sellers of some of thei= r=20 clout.=20 While people can "nit pick" if they choose, Davis said, "On May 10, the sta= te=20 spent $110 million for power, total cost. Two days ago we spent $29 million= =20 for total power. So clearly our strategy is beginning to work."=20 The state contracts provide for a dizzying array of deals to purchase power= =20 -- on-peak, off-peak, around the clock, and even swaps -- many of them=20 intricately priced. They cover about half the power the state will need to= =20 buy and will cost an average of $69 per megawatt-hour over the next 10 year= s,=20 state officials have said.=20 Up to 70 percent of the electricity will come from new plants yet to come= =20 online, said Ray Hart, deputy director of the state Department of Water=20 Resources, which handles the state's power buying.=20 That was one of the few bright spots seen by consumer advocates, who said= =20 such deals might help finance the building of newer, cleaner power plants.= =20 It will take analysts days to read through the hundreds of pages of contrac= ts=20 to determine how good or bad the newly unveiled deals are for California --= =20 and even then it might be hard to tell, experts said.=20 A contract with power trader Dynegy, for example, "looks to me like an=20 extremely high fixed price," said Robert Michaels, an economics professor a= t=20 California State University, Fullerton, and a consultant to generators and= =20 traders.=20 The $119.50 a megawatt-hour for power in 2002 through 2004 is close to twic= e=20 what it would cost today for delivery in Southern California, but that's no= t=20 enough information to truly evaluate the contract, he said.=20 The state edited out all references to which plants will supply the power,= =20 where it will be delivered and what transmission will be used, and without= =20 that, Michaels said, "essentially you can't see whether the state got rooke= d=20 really badly or not."=20 State officials, who balked for months at releasing the contracts because= =20 they said it would tip their negotiating hand, changed their stance just=20 before a hearing in a lawsuit by several news organizations to force the=20 release. A further hearing is scheduled into whether the state will be=20 permitted to keep some details private.=20 Overall, "we're very proud of these contracts," said S. David Freeman, a ke= y=20 energy adviser to Davis who helped negotiate some of the deals. He said the= =20 state has no interest in turning its back on any of the contracts, even=20 though they were signed when the state was frantic to escape a blistering= =20 spot market.=20 Legislators and consumer advocates have already begun talking about whether= =20 the state can find escape clauses from buying power that now sounds too=20 pricey.=20 But generators said the state got a better deal than the critics realize.= =20 "It's a lot of fun to pick on the governor, but spot prices go down and spo= t=20 prices go up," said Pete Cartwright, president and chief executive of San= =20 Jose-based generator Calpine Corp., which signed billions of dollars worth = of=20 contracts ranging from $58 to $115 a megawatt-hour.=20 "(Davis) has stabilized prices for a long time, and that's good," he said.= =20 Among the sellers are affiliates of two of the utilities for which the wate= r=20 department is buying the electricity: Sempra Energy Resources, whose parent= =20 company owns San Diego Gas & Electric; and PG&E Energy Trading, whose paren= t=20 owns Pacific Gas and Electric Co.=20 The Sempra contract pays the seller $189 a megawatt-hour this summer, even= =20 though summer power was selling for more than $320 back when the contract w= as=20 signed in early May.=20 "We're trying to be part of the solution," said Michael Niggli, president o= f=20 Sempra Energy.=20 However, the contract would revert to the May market prices -- $320 and up = --=20 if the state doesn't complete its multibillion-dollar bond offering by Sept= .=20 30, and if Sempra backs out of the deal. The bond offering is to raise mone= y=20 for the power purchases and to spread their cost over many years.=20 The PG&E Energy Trading contract, calling for 66.6 megawatts of capacity=20 through September 2011, will cost the state $58.50 a megawatt-hour.=20 The costliest contract -- in terms of dollars per megawatt -- appears to be= =20 with Alliance Colton of Littleton, Colo., which has begun delivering power= =20 from two "peaker plants" that generally operate only during high-demand=20 periods. Alliance will be paid $258 a megawatt-hour beginning Aug. 1 and $2= 78=20 next summer, although the price will vary from year to year. The contract= =20 runs out in 2010.=20 "It's a peaker, which is usually more expensive," said water department=20 spokesman Oscar Hidalgo.=20 Some of the cheapest power, at about $58 per megawatt-hour, comes from PG&E= =20 Energy and Calpine.=20 Now that prices have fallen, Assembly Speaker Pro Tem Fred Keeley said he= =20 wants to examine the contracts to see if the state can bail out. Seven=20 Assembly staffers began going through the contracts immediately, and Assemb= ly=20 leaders plan to get together Sunday night to discuss what they've found, he= =20 said.=20 The information comes just in time, Keeley said, giving lawmakers the kind = of=20 detail they'll need to decide on Davis' plan to keep Southern California=20 Edison out of bankruptcy, as well as options for letting some consumers=20 choose their power suppliers.=20 Sen. Debra Bowen, D-Marina del Rey, said she also has had discussions about= =20 possible bailout provisions, saying it will be "real, real tempting to=20 second-guess" the administration's contracts.=20 "But none of the second-guessers have more experience negotiating contracts= =20 than David Freeman," she said.=20 Assembly Republicans were among the first second-guessers.=20 Republican leader Dave Cox of Fair Oaks questioned several provisions,=20 including ones that appeared to allow some generators to pass along tax=20 increases in their prices, make the state liable for some emission credit= =20 payments for exceeding pollution standards, and prevent the Public Utilitie= s=20 Commission from cutting electric rates unless the state can prove it won't= =20 jeopardize its contract payments.=20 "These contracts are sweetheart deals for the generators Gray Davis is so= =20 busy trying to demonize," Cox said in a press release.=20 Other critics included Mirant California, which owns Bay Area power plants= =20 and bristled at the state unveiling the terms of its deal, which pays it $1= 48=20 per megawatt-hour from June 1 through the end of 2002.=20 However, energy economist Severin Borenstein, defending the contracts on th= e=20 governor's behalf, said that just because the spot price has fallen, "that= =20 ... is not evidence the contract was a mistake."=20 "When you sign long-term contracts you're buying an insurance contract," he= =20 said. "If your house didn't burn down at the end of the year, you don't sco= ld=20 yourself."=20 The Bee's Carrie Peyton can be reached at (916) 321-1086 or=20 [email protected].=20 Bee Staff Writer Stuart Leavenworth contributed to this report.=20 Deal would let SDG&E clients off the hook=20 Tentative pact has state paying $1 billion for lines By Ed Mendel=20 UNION-TRIBUNE STAFF WRITER=20 June 18, 2001=20 SACRAMENTO -- San Diego Gas & Electric ratepayers would not have to pay off= =20 any of the utility's $750 million debt for power purchases under a tentativ= e=20 agreement that would have the state buy SDG&E's transmission system for $1= =20 billion.=20 The apparent deal was reached by Gov. Gray Davis and SDG&E after months of= =20 closed-door negotiations, according to sources close to the talks.=20 Davis wants the state to purchase the transmission systems of California's= =20 three major utilities to help them pay off huge debts caused by soaring=20 wholesale electricity costs.=20 It was widely believed that SDG&E's customers would have to pay off the=20 utility's debt, often referred to as a "balancing account" or=20 "undercollection." Some San Diego legislators and lobbyists were enthusiast= ic=20 last week about the possibility that the pending agreement might eliminate= =20 SDG&E's debt without burdening ratepayers.=20 With control over the transmission systems, the state could use low-interes= t=20 government financing to remove bottlenecks and could gain leverage over pow= er=20 generators, whom state officials accuse of price-gouging.=20 In exchange for relieving ratepayers of the debt, SDG&E would get most of t= he=20 controversial profit -- reportedly more than $200 million -- from two=20 power-purchasing agreements made several years ago.=20 Spokesmen for the governor and SDG&E yesterday were optimistic, but guarded= .=20 "Negotiations are continuing, and progress is being made," said Steve=20 Maviglio, Davis' press secretary.=20 "We have made substantial progress in the negotiations," said Doug Kline, a= n=20 SDG&E spokesman. "At this point we don't have anything to announce."=20 If the agreement is completed as expected, it is not clear how it will be= =20 received by the Legislature. Some key legislators who once supported the id= ea=20 of the state purchasing the utility transmission systems are now cool to th= e=20 plan.=20 The $1 billion that the state would pay for the 1,800-mile SDG&E transmissi= on=20 system is said to be comparable to the governor's stalled proposal to buy t= he=20 Southern California Edison transmission system.=20 Fear that SDG&E ratepayers eventually would be stuck with a "balloon paymen= t"=20 was one of the criticisms of legislation that capped rates for residences a= nd=20 many small businesses last September.=20 SDG&E's cost for power as wholesale electricity prices soared was far above= =20 the capped rate it could collect from customers. The difference came to $75= 0=20 million earlier this year.=20 The debt stopped growing in February after the state began buying a large= =20 amount of electricity for SDG&E customers.=20 SDG&E says the state purchases have ranged from 40 to 70 percent of the tot= al=20 amount of power used by its customers. SDG&E serves about 3 million people= =20 and has 1.2 million metered customers, including 100,000 in southern Orange= =20 County.=20 Other parts of the tentative agreement would require SDG&E to provide=20 low-cost power for a decade from its share of the San Onofre nuclear power= =20 plant, which is about 20 percent of the plant's capacity, or 440 megawatts.= =20 Sempra, SDG&E's parent firm, would be required to spend "billions" to impro= ve=20 the electricity and natural gas distribution systems, an investment that=20 presumably would be recovered from ratepayers over time, according to=20 sources.=20 The agreement also would give the state the right to purchase environmental= ly=20 sensitive land owned by SDG&E in the Colorado River area. And SDG&E would= =20 drop any lawsuits that could affect the agreement.=20 The profits SDG&E has made from two previous power agreements, and would=20 largely keep under the tentative agreement, had been in dispute.=20 Last week, officials in San Diego complained that the governor's negotiatio= ns=20 appeared to be giving SDG&E, rather than ratepayers, more than $300 million= =20 in profits from those two long-term power contracts.=20 After deregulation was enacted in 1996, SDG&E obtained the two contracts fo= r=20 250 megawatts from Pacific Corp. and Louisville Gas & Electric.=20 Those long-term contracts were said to be a hedge to make sure SDG&E would= =20 recover all of its "stranded costs" -- the power plant investments and othe= r=20 power-purchase contracts thought to be uneconomical in a deregulated market= .=20 SDG&E argued that the two contracts in question were financed by=20 shareholders, at no risk to ratepayers, and the power was sold on the open= =20 market, which produced big profits last year when wholesale power prices=20 skyrocketed.=20 The state Public Utilities Commission ruled that the profits should be give= n=20 to ratepayers, but SDG&E contested the ruling and filed an appeal with an= =20 appellate court.=20 The tentative agreement allows SDG&E to keep most of the contract profits, = an=20 amount which is said to be less than a third of the utility's $750 million= =20 undercollection debt.=20 The agreement apparently gives SDG&E other things in exchange for absorbing= =20 all of that debt instead of passing it on to ratepayers. But sources close = to=20 the negotiations said they were not aware of all of the provisions of the= =20 tentative deal.=20 Whether the state would be overpaying for the SDG&E transmission system may= =20 be another issue. Davis wants to buy the larger Edison transmission system= =20 for $2.76 billion, or 2.3 times book value.=20 The $1 billion offered for the SDG&E system is a roughly similar deal. SDG&= E=20 says the book value of its transmission system is $430 million.=20 Book value is a standard accounting device that reflects depreciation from= =20 the original price and other factors. But the market value is much higher= =20 because of the current cost of building a similar system. For the SDG&E dea= l=20 to go through, the governor will need support from state legislators. The= =20 state Public Utilities Commission could enact most of the agreement, but th= e=20 Legislature would have to approve the purchase of the transmission system.= =20 The governor's proposal to buy the Edison transmission system, part of a=20 sweeping rescue plan for that more-troubled utility, has been stalled in th= e=20 Legislature for two months. Critics say it is an overly generous bailout fo= r=20 Edison.=20 The state purchase of the major utilities' transmission systems was suggest= ed=20 in early February by a San Diego consumer group, the Utility Consumers Acti= on=20 Network.=20 Senate President Pro Tempore John Burton, D-San Francisco, among others, wa= s=20 an early supporter of purchasing utility transmission systems.=20 But the situation has changed since then. Pacific Gas and Electric filed fo= r=20 bankruptcy in early April, and Davis would now have to persuade PG&E=20 creditors to approve the sale of the transmission system.=20 Burton said last week that he is no longer focusing on the purchase of the= =20 transmission systems, but on a controversial new plan that would have the= =20 large businesses that pushed for deregulation pay off most of the utility= =20 debt.=20 State officials to hold hearings on proposed high-voltage line=20 ASSOCIATED PRESS=20 June 18, 2001=20 TEMECULA =01) State officials will travel to Southern California this week = to=20 hear from local residents about a proposed high voltage transmission line= =20 that would crisscross area subdivisions and vineyards.=20 The $271 million Valley-Rainbow Project would connect San Diego Gas &=20 Electric Co.'s grid to that of Southern California Edison, helping link the= =20 southern portion of the state to power plants being built elsewhere in the= =20 Southwest and Mexico.=20 The Public Utilities Commission will collect comments during a series of=20 public hearings scheduled for Monday through Wednesday, and plans to hold a= =20 prehearing conference Thursday.=20 "Right now, we are one of the weakest links," said James Avery, SDG&E's=20 senior vice president for fuel and power operations. "If there's a break in= =20 the line at one point, everything else is in trouble."=20 The California Independent System Operator, which manages the state's power= =20 grid, has already signed off on the project to string the 500,000-volt=20 transmission lines across the Temecula area.=20 That move sparked an outcry among local officials and residents concerned= =20 about the project, which would force property owners to give up their land.= =20 "All along this route, people are calling their real estate agents asking,= =20 'What is going to happen?'" said Loma Bosinger, co-chairwoman of the=20 grassroots-group Save Southwest Riverside County.=20 SDG&E officials said the project is required to bring more power to the San= =20 Diego area by 2004.=20 "I have an obligation and responsibility to maintain reliability and power = to=20 our customers," Avery said. "This line is the only way I can do that."=20 But increased local generation of power =01) perhaps two dozen new plants b= y=20 2004 in San Diego County alone =01) could make that a moot point, activists= =20 claim.=20 "In order to keep a balanced grid, you need to disperse the power ... or=20 build more lines. You don't have to do both," said Michael Shames, executiv= e=20 director of Utility Consumers Action Network, a San Diego watchdog group.= =20 Power grid operators issue blackout warnings for first time=20 ASSOCIATED PRESS=20 June 17, 2001=20 SAN FRANCISCO =01) Blackout warnings were issued Sunday by the agency that = runs=20 California's power grid.=20 The California Independent System Operator said potential blackouts could= =20 occur Monday and Tuesday afternoons between noon and 8 p.m. both days.=20 The early word marked the first time the ISO issued warnings under the new= =20 early warning system, which lets customers know of possible outages 24 to 4= 8=20 hours in advance.=20 Temperatures in the mid-90s to triple digits are expected Monday and Tuesda= y=20 in many areas served by Pacific Gas and Electric Co. beyond the San Francis= co=20 and Humboldt Bay regions, from Redding to Bakersfield. As a result, an=20 increased energy demand is forecast. The ISO expects Monday's load to peak = at=20 37,735 megawatts.=20 Pacific Gas and Electric Co. officials said if rolling blackouts are ordere= d,=20 they will begin in block one, which is the next scheduled rotating outage= =20 block.=20 High energy prices to continue long term, experts say=20 Contracts' provisions leave state ratepayers vulneralble By Craig D. Rose? UNION-TRIBUNE STAFF WRITER=20 June 17, 2001=20 The 600 pages of contracts that commit California to $43 billion in=20 electricity purchases over the next decade contain a host of potential=20 surprises -- and few may be pleasant for state residents, experts say.=20 Among the details in the deals with 18 suppliers:=20 ?Should electricity prices rise, some providers could reduce their=20 deliveries, leaving the state little recourse but to return to spot power= =20 markets for expensive purchases.=20 Attempts to impose windfall profit taxes on generators -- an idea being=20 considered by the Legislature -- will be complicated by at least one=20 agreement, which promises reimbursement for such taxes.=20 ?California will pay all new emission costs -- a potentially expensive outl= ay=20 -- under agreements with several large suppliers.=20 And there is one pleasant possibility: Natural gas prices might fall and=20 provide cheaper-than-expected electricity under some of the deals. Then=20 again, gas prices might rise.=20 Roger Bohn, an associate professor of management at UCSD and a former membe= r=20 of the California Power Exchange's market monitoring unit, said the state d= id=20 not have a strong hand going into negotiations with electricity suppliers.= =20 And, he added, the results reflect that weakness.=20 "The state negotiators have locked in high prices in the years beyond 2004,= =20 and they haven't solved the short-term problem," said Bohn, who was retaine= d=20 by The San Diego Union-Tribune to examine the contracts.=20 "To a large extent, we're still at the mercy of generators who have lots of= =20 market power and still want to stick it to us."=20 Bohn said energy experts he has consulted calculate that the contracts will= =20 cause the state to pay 33 percent above market rates over the next five=20 years.=20 "Compared to the panic situation we experienced in March, we did as well as= =20 can be expected," Bohn said. "Compared to what we'll be thinking in two=20 years, there is a high chance we'll be regretting a lot of these contracts.= "=20 The documents were released Friday at the order of a San Diego Superior Cou= rt=20 judge. The Copley Press, which publishes the Union-Tribune, and several oth= er=20 news organizations sought the order after Gov. Gray Davis refused to reveal= =20 specific details from the contracts.=20 California turned to long-term contracts as a refuge from spot market price= s=20 for electricity that soared under deregulation to an average $275 per=20 megawatt-hour for the first five months this year, or about nine times high= er=20 than last year's levels.=20 Energy companies and others insisted the high prices were largely a result = of=20 the state's excessive dependence on day-ahead power purchases. Others warne= d=20 that turning to long-term contracts at the height of the crisis was akin to= =20 buying flood insurance in the midst of a deluge.=20 Spot prices have plummeted in recent weeks to trade between $40 and $70 for= =20 most hours of the day.=20 S. David Freeman and Vikram Budhraja, leaders of the state's bargaining tea= m=20 for the deals, say the long-term contracts are largely responsible for the= =20 decline in spot prices. And they insist they have taken a big step toward= =20 resolving the crisis with agreements that secure nearly half the state's ke= y=20 power purchases for 10 years.=20 Budhraja hailed average prices of $80 per megawatt-hour for the first five= =20 years and $69 for a decade as a victory given the market conditions earlier= =20 this year.=20 "You can't let the perfect solution be the enemy of the good solution," sai= d=20 Budhraja, who helped draft the contracts while on retainer as a consultant = to=20 Southern California Edison.=20 But as examination of the agreements continues, it's clear the state has=20 again paid a steep price for deregulation, which promised to lower prices f= or=20 power customers.=20 Michael Shames, executive director of the Utility Consumers' Action Network= ,=20 noted that some of the agreements will have the state pay more than $180 fo= r=20 power in the years 2003 and 2004, the same years traders report power is=20 available for about $50 per megawatt-hour.=20 "What we're seeing now is prices that were extorted out of the state when i= t=20 had no bargaining leverage," Shames said. He added that if an array of lega= l=20 investigations against electricity suppliers result in successful=20 prosecutions, he would expect many of these agreements to be nullified.=20 In the meantime, the state could find itself confronting an array of=20 troubling contractual aspects.=20 Under an agreement with Williams Cos., for example, the Tulsa company has a= =20 contractual obligation to provide 1,000 megawatts. But the generator could= =20 reduce the amount far below that level with little penalty, Bohn said.=20 "So basically Williams can sell or not sell to the state depending on price= ,"=20 he said.=20 The state's contract with Dynegy has a similar weakness, Bohn added.=20 California's agreement with Calpine will have the state shouldering increas= es=20 in costs from windfall profit taxes or any other source. Bohn said the=20 state's contract with Calpine appears to include what he characterized as a= =20 very high subsidy for new plant construction.=20 The state's new portfolio of contracts also puts the parent company of San= =20 Diego Gas and Electric in a curious position. Sempra Energy Resources, a=20 sister company of the local utility, now becomes one of the state's key pow= er=20 suppliers, providing up to 1,900 megawatts of electricity.=20 Bohn said there was an inherent conflict between Sempra's power selling=20 business -- which seeks the highest prices -- and SDG&E, which is charged= =20 with seeking the lowest prices for consumers.=20 A spokesman for Sempra Energy said the company avoids the conflict because = it=20 sells its power to the state, not SDG&E.=20 For nearly half the contracted power, meanwhile, information about natural= =20 gas costs -- the prime fuel for generating electricity -- remains secret.= =20 Industry experts forecast tightening supplies of natural gas as new gas-fir= ed=20 generating plants are built across the country.=20 Bohn said he fails to understand the state's continued secrecy surrounding= =20 those prices. Budhraja yesterday declined to disclose what assumptions were= =20 made about gas prices in estimating future electricity costs.=20 The secrecy creates concern.=20 "We're hitching the future of the California economy to the volatility of= =20 natural gas prices," said Matt Freeman, attorney for Toward Utility Rate=20 Normalization, a San Francisco consumer group.=20 But Harvey Rosenfield, president of the Foundation for Taxpayer and Consume= r=20 Rights, said there is a larger concern: "We've just locked in a long-term= =20 energy crisis for the next decade. Clearly, they made things worse by=20 agreeing to terms of 10 years or more." Staff writer Dean Calbreath and library researcher Cecilia Iniguez=20 contributed to this report.=20 Ad criticizing Davis expected as officials consider price caps=20 By Andrew Bridges ASSOCIATED PRESS=20 June 17, 2001=20 LOS ANGELES =01) Power company profits gained in California's electricity c= runch=20 are funding a new ad campaign blaming Gov. Gray Davis for rising costs, sta= te=20 Democratic officials said Sunday.=20 The television advertisement is set to begin airing Monday, the same day=20 federal officials are expected to slap new limits on wholesale electricity= =20 prices in the state.=20 The ad campaign, credited to a group called American Taxpayers Alliance but= =20 produced by GOP strategists, features grainy footage of Davis and attacks h= im=20 for failing to secure long-term, cost-saving contracts before the wholesale= =20 price of electricity soared.=20 Democrats said Sunday in a conference call with reporters that they expect= =20 the group will spend $5 million on the ad campaign. Time magazine reported= =20 that Reliant Energy, one of the companies state officials have accused of= =20 price-gouging, is among hundreds of corporations providing money for the=20 campaign.=20 "The dollars that have been creamed off the top of our constituents are now= =20 being poured into a campaign to blur the issue," said Rep. Anna Eshoo,=20 D-Calif.=20 S. David Freeman, Davis' chief energy adviser, said California has been=20 overcharged anywhere from $8 billion to $15 billion for the electricity it= =20 uses.=20 But some relief for California may come as early as Monday at a special=20 meeting of the Federal Energy Regulatory Commission. The commission, which= =20 regulates wholesale electricity transactions, is expected to slap 24-hour= =20 caps on the price of power in the West, The Washington Post reported Sunday= .=20 FERC approved a limited price "mitigation" program in April to rein in the= =20 wholesale price of power. California officials said Sunday the move had=20 accomplished little, and asked for more direct action.=20 "If FERC does not intervene and help us we are subject again to the whims a= nd=20 caprices of the generators," said Michael Kahn, chairman of the California= =20 Independent System Operator, which manages the state's power grid.=20 California officials maintain that long-term contracts secured by the state= =20 and an aggressive conservation program have led to a recent softening of=20 electricity prices. The state has signed $43 billion in long-term power=20 contracts, but still buys about half of its electricity on the volatile spo= t=20 market.=20 "The reason the spot market prices are lower is we have added to supply and= =20 subtracted from demand," Freeman said.=20 The expected FERC action would control the wholesale price of power around= =20 the clock, expanding on the current order that reins in prices only during= =20 the most drastic shortages. The move comes as House Democrats =01) and some= =20 Republicans =01) have pushed for legislation that would force FERC to impos= e=20 some sort of price caps.=20 Freeman said he favors cost-based price caps, which make allowances for=20 "reasonable" profits.=20 Kahn said if the new limits do nothing more than extend the previous=20 mitigation plan, they will accomplish little.=20 "We would have to say that is too little, too late and simply not enough,"= =20 Kahn said.=20 Davis will take up the issue himself on Wednesday, when he is expected to= =20 testify before the Senate Governmental Affairs Committee.=20 The committee, whose new chairman is Sen. Joseph Lieberman, D-Conn., will= =20 examine how the federal government regulates energy.=20 Energy deals rest on unsteady markets=20 Predictions tough; many power plants yet to be constructed By James P. Sweeney and Michael Gardner=20 COPLEY NEWS SERVICE and Ed Mendel and Craig D. Rose=20 UNION-TRIBUNE STAFF WRITERS=20 June 16, 2001=20 SACRAMENTO -- Long-term electricity contracts that were expected to lead=20 California out of its energy crisis depend heavily on unpredictable natural= =20 gas prices and power plants yet to be built.=20 Of nearly $43 billion worth of power secured for the next decade, the price= =20 of half will fluctuate with the natural gas market, said S. David Freeman,= =20 Gov. Gray Davis' chief energy adviser.=20 Seventy percent of the contracted energy has been promised from power plant= s=20 that don't yet exist.=20 But Freeman and other state officials said they believe the electricity wil= l=20 be delivered at an average price of $69 per megawatt-hour.=20 That price, which is 6.9 cents per kilowatt-hour in consumer terms, is abou= t=20 what most utility customers pay now.=20 An energy industry analyst, however, said that predicting electricity price= s=20 from these deals is problematic because of the link to natural gas costs,= =20 which can fluctuate almost as wildly as electricity costs.=20 Natural gas prices, which earlier had been below $3 per million British=20 thermal units, stayed above $10 for weeks this winter and spiked to $60 in= =20 December.=20 "Has the state locked in electricity prices? Probably not," said Andrew=20 Safir, president of Recon Research Corp. in Los Angeles.=20 Harry Snyder, a senior advocate for Consumers Union in San Francisco, blast= ed=20 the contracts as a bad deal for customers, even if they can deliver power a= t=20 $69 a megawatt-hour.=20 "The price of power from all these generators is going down, with the marke= t=20 predicting a lot of power plants coming online," Snyder said. "And now they= =20 are locked in at $69."=20 The long-term deals, intended to wring some of the windfall profits out of= =20 the deregulated energy market, stretch from a few months for some contracto= rs=20 to 20 years for a San Jose-based generator, Calpine Energy Services.=20 The contracts should cover 45 percent of the state's peak power needs in th= e=20 immediate future, and all of its projected demand in 2004, before scaling= =20 back in later years, state officials said.=20 The threat of rolling blackouts, however, has not been lifted.=20 "No one is declaring victory. No one is saying the crisis is over, but we a= re=20 very proud of the role long-term contracts are playing," Freeman said.=20 The state released the details of 38 electricity contracts with 18 supplier= s=20 to comply with an order issued by a San Diego Superior Court judge.=20 Several news organizations, including The Copley Press, which publishes The= =20 San Diego Union-Tribune, sought the order after Davis refused to make the= =20 contracts public.=20 The complex contracts, which cover more than 600 pages, promise nearly 600= =20 million megawatt hours over the next decade. Contract sections considered= =20 sensitive or proprietary were blacked out, making comparisons and analyses= =20 difficult.=20 A spot check late yesterday raised questions about some aspects of the=20 contracts for one expert.=20 Could be trouble "There appear to be a lot of little 'gotcha' clauses here that if the selle= r=20 wanted to push them could be troublesome to the state," said Roger Bohn, a= =20 professor of management at UCSD and co-author of the book "Spot Pricing of= =20 Electricity." He is a former member of the market monitoring committee of t= he=20 California Power Exchange.=20 Such provisions might allow a supplier to alter the quantity of electricity= =20 it provided to the state in response to spot market prices in a way that=20 would be a disadvantage to California, Bohn said. The Union-Tribune? retain= ed=20 Bohn to examine the agreements.=20 The state has struck tentative deals on an additional 23 contracts that cou= ld=20 be signed in the coming weeks or months.=20 The 6.9 cent average, if it holds up, is more than double what power cost= =20 before prices spiked last summer. Advocates had predicted that deregulation= =20 would lower electricity prices 20 percent by 2002.=20 "Some of these contracts are very expensive deals," said Michael Shames,=20 executive director of Utility Consumers' Action Network of San Diego.=20 He criticized a deal that will pay Dynegy $140 per megawatt-hour -- 14 cent= s=20 per kilowatt-hour -- through 2004. Power likely will drop to $50 per=20 megawatt-hour by 2003, he said.=20 But the governor and Freeman said the long-term contracts, some of which ha= ve=20 already kicked in, have punctured an inflated market.=20 "The reason the spot market is down where it is, is we've reduced the volum= e=20 we have to buy in that market," Freeman argued.=20 Conservation effort California businesses and households also have responded to the governor's= =20 call for a conservation effort.=20 While contracts for half the energy allow generators to pass along natural= =20 gas prices, Freeman and Raymond Hart, a deputy director of the state=20 Department of Water Resources, said they expect natural gas rates to contin= ue=20 to decline.=20 Natural gas accounts for about 80 percent of the cost of electricity in=20 gas-fired plants, Freeman said. As a safeguard, the state reserved the righ= t=20 to purchase gas supplies directly for power plants.=20 Hart suggested that the state also will attempt to line up a share of its= =20 projected natural gas needs at fixed rates.=20 Michael Aguirre, an attorney pressing a class action suit against generator= s,=20 said consumer attention should now be on natural gas prices.=20 "We shifted from one volatile commodity to another," Aguirre said. "This is= a=20 ruse. It does not give the people of California the protection we thought i= t=20 gave us."=20 While some of the anticipated new power plants could be delayed or might=20 never be built, Hart said, the generators who want to build the plants woul= d=20 not even be able to get financing without the long-term contracts.=20 "That means we're going to have more competition in the future," he said.= =20 Mike Niggli, president of Sempra Energy Resources of San Diego, suggested= =20 that the lengthy agreements may calm the market.=20 'Service to customers' "Not only does it minimize price spikes, there's less to be purchased and= =20 sold on the spot market," Niggli said. "The state, having locked up long-te= rm=20 energy, has done a service to customers."=20 At least one power supplier, however, apparently sought to safeguard itself= =20 against tough state action that could occur if volatility returns. A contra= ct=20 with Allegheny Energy Supply Co. includes provisions for special payments t= o=20 the company in the event California seizes its plants using powers of emine= nt=20 domain.=20 UCSD's Bohn called the feature an unusual inclusion in an electricity power= =20 supply contract.=20 Not much in any of the contracts appealed to Assembly Republican Leader Dav= e=20 Cox, who dismissed the agreements as "sweetheart deals for the generators= =20 Gray Davis is so busy trying to demonize."=20 "The most frightening aspect of these contracts is that Gov. Davis'=20 mismanagement has saddled this state with high rates and an uncompetitive= =20 economy for years to come," said Cox of Sacramento.=20 But Democratic state Sen. Debra Bowen, one of the Legislature's utility=20 experts, said the state simply traded lower costs today for higher prices= =20 later.=20 "There weren't a lot of choices. They didn't hold many cards," she said of= =20 state negotiators.=20 Steve Stengel, a spokesman for Dynegy, a Houston-based generator, agreed th= at=20 the contracts "have the potential to take some of the volatility out of the= =20 market."=20 Supply and demand But Reliant spokeswoman Pat Hammond cautioned that "supply and demand remai= n=20 the driving force behind price spikes." Houston-based Reliant and the state= =20 have been negotiating a multiyear contract to no avail.=20 Much of the relatively cheap power that the state will purchase during peak= =20 periods this summer comes from long-term contracts seized from the defunct= =20 Power Exchange, a step taken by the governor earlier this year under his=20 emergency powers.=20 The seized contracts provided 1,150 megawatts during February through March= =20 for prices ranging from $46 to $91.50 per megawatt-hour. In the second=20 quarter, April through June, the contracts are providing 775 megawatts for= =20 $53 to $78.50 per megawatt-hour.=20 In July through September, the contracts will provide 1,425 megawatts at=20 prices from $71.20 to $146 per megawatt-hour. Most of the contracts seized = by=20 the state from the Power Exchange are with Duke, Mirant, Enron and=20 Constellation.=20 Among the contracts negotiated by the state Department of Water Resources, = a=20 Houston firm, Coral Power, receives some of the highest prices for power=20 delivered during peak periods this year, $249 per megawatt-hour. Coral agre= ed=20 to provide 100 megawatts during peak hours this month, 150 megawatts in Jul= y,=20 250 megawatts in August, and 325 megawatts in September. Bush Says FERC Plan Is Not Price Controls From Times Wire Services=20 ?????President Bush said today he did not consider an electricity=20 price-relief plan for the Western region that the Federal Energy Regulatory= =20 Commission was expected to approve to be a form of price controls. ?????Bush said he remained opposed to electricity price controls. But he sa= id=20 the plan that FERC was expected to approve for limited wholesale price curb= s=20 in the West was different. ?????"I'm interested to see what FERC comes up with. They're not talking=20 about firm price controls, they're talking about a mechanism to mitigate an= y=20 severe price spike that may occur, which is completely different from price= =20 controls," Bush told reporters. ?????Amid mounting congressional pressure for action, FERC was to hold a=20 special meeting to address the chronic electricity problems affecting=20 California and the rest of the West. ?????FERC, which oversees interstate power sales, was widely expected to vo= te=20 for a compromise approach to limit prices on wholesale electricity sold in= =20 the West, according to congressional sources. ?????That approach would mean expanding a monitoring plan rolled out last= =20 month that only applied to California after state officials declared a powe= r=20 emergency. ?????Under the agency's existing "price mitigation" plan, the California=20 price limits are based on the amount that generators can charge to produce= =20 power at the least efficient plant. Generators may charge higher prices if= =20 they can justify them to the agency. ?????Expanding the plan to the entire Western region would fall short of th= e=20 strict price caps sought by California Gov. Gray Davis and many Democrats b= ut=20 would still amount to a significant change in policy for FERC. ?????The stricter price caps sought by Democrats would allow a generator to= =20 sell wholesale power based on a formula covering actual production costs,= =20 plus a moderate profit. That approach would be similar to the way U.S.=20 utilities were regulated for decades. ?????FERC's Republican chairman, Curtis Hebert, has repeatedly rejected the= =20 idea of price caps, saying market forces should set power prices. ?????However, Republican lawmakers fear they may take a political hit for t= he=20 Bush administration's decision to oppose strict price caps and therefore=20 pushed for the compromise that calls on FERC to expand its limited price=20 curbs. ?????The White House says it is worried that price caps would discourage=20 investment in new power plants and fail to encourage consumers to cut home= =20 energy use. ?????Today's meeting, due to begin at 1 p.m. EDT, would also mark the first= =20 time that FERC has been fully staffed with five commissioners since the=20 California energy crisis began last year. ?????Republican commissioners Pat Wood of Texas and Nora Brownell of=20 Pennsylvania were nominated to the agency by President Bush. Wood is viewed= =20 as a Bush confidant, having led the Texas Public Utilities Commission while= =20 Bush was governor of the state. ?????FERC has been under growing pressure from Democrats and Republicans to= =20 help find a solution to California's power deregulation fiasco. ?????Agency officials say that their measures are working. Since the FERC= =20 plan for California price relief went into effect on May 29, wholesale powe= r=20 prices in the state have dropped under $100 a megawatt from more than $300= =20 earlier in May. Copyright 2001 Los Angeles Times U.S. May Hike Aid for Poor's Utilities=20 Energy: Congress is likely to boost funds for program that arose from 1970s= =20 crises. It could be the first direct response to price spikes and supply=20 shortages.=20 By RICHARD SIMON, Times Staff Writer=20 ?????WASHINGTON--Members of Congress, feeling heat from constituents over= =20 rising energy costs, are preparing to approve a big budget increase for a= =20 once-obscure federal program that helps the poor pay their utility bills. ?????California, where an estimated 2.1 million low-income households are= =20 eligible for assistance, would receive a proportionately larger share of th= e=20 money than ever before. ?????The House may vote as early as this week to appropriate $300 million i= n=20 current-year emergency funding--twice as much as requested by President=20 Bush--for the Low-Income Home Energy Assistance Program. The Senate is=20 talking about doubling the figure again, to $600 million. ?????Even bigger increases appear likely for 2002. The president is seeking= =20 $1.7 billion, up from $1.4 billion this year. In the Senate, there's talk o= f=20 a $3.4-billion budget. ?????"There's been a change in mood," said Rep. Bernard Sanders, a Vermont= =20 independent who has joined Democrat Barbara Lee of Oakland and Republican= =20 John M. McHugh of New York in a campaign to boost the emergency funding bil= l=20 to $800 million. "People in California, among others, are now concerned abo= ut=20 this issue in a way that had not been the case. . . . Plus the fact that oi= l=20 prices are going up all over this country." ?????Passage of the emergency appropriation may be Congress' first direct= =20 response to the energy price spikes and supply shortages that have bedevile= d=20 California and other parts of the country. ?????The assistance program, which arose from the 1970s energy crises, work= s=20 directly with utilities to help lower low-income households' air-conditioni= ng=20 and heating bills and avoid utility cutoffs for nonpayment. ?????To be eligible for this assistance in California, a family of four mus= t=20 earn less than $33,125 a year. Priority is given to low-income families who= se=20 fuel bills consume a large proportion of their incomes, and to the elderly,= =20 the disabled and families with young children. The average benefit is $326= =20 per year. ?????California officials also use about a fourth of the program funds to= =20 offer free home weatherization services to low-income families, as well as= =20 providing more energy-efficient appliances. ?????Supporters acknowledge that LIHEAP's surging popularity represents a= =20 remarkable comeback: Several years ago, lawmakers were talking about killin= g=20 the program.=20 ?????One Senate Democrat, John D. "Jay" Rockefeller IV of West Virginia, ev= en=20 wants to expand the concept by creating a federal program to help poor peop= le=20 buy gasoline for long drives to work, school or medical appointments. ?????Rockefeller has proposed initial funding of $500 million to provide ga= s=20 subsidies of $25 to $75 a month to low-income workers who must commute more= =20 than 30 miles a day or 150 miles a week. ?????While Rockefeller's gasoline subsidy appears to be a longshot for now,= =20 more money is clearly headed toward LIHEAP. ?????"We finally have the attention of the administration on the need for= =20 some additional funds," said Sen. Jeff Bingaman of New Mexico, the new=20 Democratic chairman of the Senate Energy Committee. Bingaman wants to=20 disentangle the assistance program from the array of other energy policy=20 issues that Congress will be debating this year, so it can boost funding=20 sooner rather than later. ?????Sen. John F. Kerry (D-Mass.) said there is "far greater support" for a= =20 funding increase now than ever before. But he cautioned that more work lies= =20 ahead "with the fiscal straitjacket imposed by President Bush's=20 budget-busting tax bill." ?????The surge of support for the program is broad and bipartisan, even=20 though the program offers nothing to more affluent Americans who also would= =20 like relief from higher energy expenses.=20 ?????That sentiment appears to be particularly strong in California, where= =20 big rate hikes approved in response to the power crisis are showing up in= =20 electricity bills. Southern California Edison's residential customers, for= =20 example, will pay 21% more on average, with some increases topping 40%. ?????California regulators provided a rate-hike exemption to low-income=20 households that sign up for a state-approved discount program, but so far= =20 only about 60% of those qualified have done so. And the exemptions have no= =20 bearing on high natural gas prices, which increased bills in Southern=20 California by an average of 60% last winter. ?????An Inexpensive Way to Show Action on Crisis ?????For members of Congress who find themselves on the hot seat, the feder= al=20 program is a comparatively cheap way to counter the perception that they ar= e=20 doing little to help people cope with the energy crisis. Those eligible for= =20 assistance include a large number of senior citizens, an important politica= l=20 constituency for Republicans and Democrats alike. And the program is endors= ed=20 by utility companies because it helps people pay their heating and cooling= =20 bills. ?????Still, some California Democrats assert that more money for low-income= =20 energy assistance is no substitute for broad price controls on wholesale=20 electricity, which the Bush administration and many Republican lawmakers ha= ve=20 opposed. ?????"The problem is if the LIHEAP money is used to pay energy rates that a= re=20 3,000% higher than they should be, the [money] isn't going to go very far,"= =20 said Rep. Jane Harman (D-Redondo Beach). ?????Nationally, 29 million households are eligible for this assistance. Bu= t=20 only about 5 million will receive subsidies this year, said Mark Wolfe,=20 executive director of the National Energy Assistance Directors' Assn. Many= =20 eligible households never apply for assistance, and some states run out of= =20 money long before they run out of potential recipients.=20 ?????In California, fewer than 10% of the 2.1 million eligible households= =20 will receive program assistance unless funding is increased, state official= s=20 say. ?????From the late 1970s through most of the 1990s, the share of the averag= e=20 family budget devoted to energy gradually declined. Then, suddenly, the tre= nd=20 reversed: From 1998 through 2000, average family spending on energy rose fr= om=20 3.8% to 4.8% of after-tax income, according to federal officials. ?????In California, state officials assisted as many families during the=20 first five months of this year as they did in all of 2000. ?????Although the program has enjoyed bipartisan support, it received a=20 political boost when Sen. James M. Jeffords of Vermont abandoned the=20 Republican Party and became an independent, handing the Democrats control o= f=20 the Senate and Bingaman the chairmanship of the energy committee. ?????Sen. Frank H. Murkowski (R-Alaska), the former energy committee=20 chairman, already had called for increasing its annual budget from $1.4=20 billion this year to $3 billion next year. But Bingaman immediately raised= =20 the stakes, calling for a $3.4-billion budget and identifying the assistanc= e=20 program as a priority. ?????Supporters are attempting to build support for the program outside the= =20 Northeast and Midwest by showing lawmakers from other regions that their=20 constituents stand to benefit if funding is increased.=20 ?????Once funding reaches $2 billion, a new outlay formula will take into= =20 account population changes since 1980 and give more consideration to hot=20 weather. ?????State's Share Would More Than Triple ?????If Congress approves a $3.4-billion budget, California's share would= =20 jump from $63 million to $201 million, said Jim Benfield, executive directo= r=20 of the Campaign for Home Energy Assistance. The funding formula gives the= =20 state 4.6% of the available assistance, even though the state is home to=20 14.6% of the nation's poor and pays among the highest natural gas prices in= =20 the country.=20 ?????"It seems like the program is in play more than ever before," said=20 Wolfe, of the National Energy Assistance Directors' Assn. "What they're=20 talking about now is taking LIHEAP from a regional program that primarily= =20 serves the Northeast and Midwest and making it into a national program. It'= s=20 because caseloads are increasing." ?????Although the funding increases under consideration could be affected b= y=20 growing concern about the possibility of future budget shortfalls, there's = no=20 question that the assistance program has come a long way: Several years ago= ,=20 there was talk in Congress of killing it. ?????"No longer are we debating the survival of the program," said Dana=20 Johnson, deputy chief of staff for McHugh. "Now it's to make sure there are= =20 adequate funds."=20 ?????And new sources of revenue are being discussed. The administration's= =20 comprehensive energy plan calls for diverting to the assistance program an= =20 unspecified portion of government royalties from wells drilled on federal= =20 land if energy prices rise beyond a certain level. ?????But some critics worry that linking funding to new drilling on public= =20 land could pit environmentalists against advocates for the poor. ---=20 ?????For more information about California's LIHEAP program, phone (800)=20 433-4327 or check the state's Web site: ?????www.csd.ca.gov/LIHEAP.htm Copyright 2001 Los Angeles Times Power Debate Heats Up as Davis Reveals Contracts=20 By RICH CONNELL,NANCY RIVERA BROOKS and DAN MORAIN, Times Staff Writers ?????SACRAMENTO--After months of resisting disclosure, Gov. Gray Davis on= =20 Friday released 38 long-term power contracts that aides said show the=20 administration is deftly managing the energy crisis, but that critics warn= =20 contain clauses and costs that may burden consumers with unpredictably high= =20 prices for years.=20 ?????Provisions in some of the contracts protect generators from new state= =20 taxes, shield them from potential action by federal regulators and give the= m=20 a break on environmental costs. At the same time, the documents are so=20 heavily censored in crucial areas that it is impossible to fully assess the= ir=20 impact on the state and its residents. ?????State officials insist that the complex agreements, extending as much = as=20 20 years and costing an estimated $43 billion, already have slowed the=20 hemorrhaging of state spending on power and sheltered consumers from wild= =20 electricity price swings in the future. ?????"These provide a major building block for lifting this energy crisis,"= =20 Davis' top energy advisor, S. David Freeman, said as a 600-page stack of=20 agreements was made public in response to a court order. "That was our=20 longer-term strategy. We implemented it, and it's worked." ?????The governor, questioned after a public appearance at Mather Air Force= =20 Base, echoed his advisor's optimism, but added: "I'm under no illusions. I= =20 think the summer is going to be hot and the peak prices will spike up." ?????For months, Davis has publicly vilified the generators with whom his= =20 administration has now become contractually bound. Asked whether his nemese= s=20 negotiated in good faith, the governor said: "I do not think the generators= =20 have our best interests at heart. . . . They're laughing all the way to the= =20 bank. My job is to fight back." ?????Davis has a heavy political investment in the pacts, which the state= =20 began negotiating in January as blackouts hit, power prices soared and the= =20 state's large utilities slipped toward insolvency.=20 ?????Crediting the contracts, Davis aides noted the state was paying an=20 average of $332 a megawatt hour for power in January, but only $179 this=20 month. The contracts call for an average price of about $85 per megawatt ho= ur=20 over the next five years and about $69 over the next 10 years. ?????Critics have noted that the state's current average costs under the=20 contracts exceed those now available on the daily market. But Davis contend= s=20 the current reduced prices are largely a result of his contracting strategy= . ?????Partly because of the secrecy Davis imposed on the deals, they have=20 become a focal point of suspicion over his handling of the crisis. News=20 organizations--including The Times--and Republican officeholders sued to ge= t=20 them. Consumer groups, meanwhile, complained about being hit with historic= =20 utility rate increases for deals no one could examine. ?????The controversy seemed to intensify Friday, despite efforts by the=20 governor's team to portray the agreements as a major tactical victory again= st=20 out-of-state power marketers who exploited the state's flawed deregulation= =20 scheme. ?????GOP Leader Attacks 'Sweetheart Deals' ?????Assembly Republican Leader Dave Cox of Fair Oaks, whose staff pored ov= er=20 the documents, attacked the governor for brokering "sweetheart deals for th= e=20 generators."=20 ?????Even a key Democrat, state Sen. Joe Dunn (D-Garden Grove), expressed= =20 serious concerns about a number of provisions in the deals that seem to off= er=20 special relief to generators. ?????Some lawmakers and consumer groups pointed to provisions that would=20 allow generators to shift the cost of new taxes to the state and possibly= =20 exempt the firms from a windfall profits tax. ?????"It ups the ante as far as the ultimate burden that the contracts will= =20 place on the shoulders of California ratepayers and taxpayers," said Dunn,= =20 who is heading a special committee investigating alleged manipulation of th= e=20 state's energy market. ?????The senator said he also is concerned about provisions such as one=20 negotiated with GWF Energy, which prevents the state from pressing any futu= re=20 claims with federal regulators regarding the company's profits. ?????"It is very disconcerting that we would willingly give up the right to= =20 challenge any of these [prices]," Dunn said. ?????Consumer advocate Harvey Rosenfield called some of the contract terms= =20 outrageous. Rosenfield, who heads the Foundation for Taxpayer and Consumer= =20 Rights in Santa Monica, said it was "bad enough" that the long-term contrac= ts=20 resulted in "high rates for Californians for a decade." He said Friday's=20 disclosures pointed to other "giveaway" perks. ?????Freeman, who formerly headed Los Angeles' Department of Water and Powe= r,=20 insisted that generators won no special windfall profit protections. The on= ly=20 tax increases generators can pass along to the state, he said, are those=20 directly tied to production of the power in the contracts, such as new taxe= s=20 on natural gas. ?????"I'm not going to say some lawyer won't argue" that the generators wil= l=20 not claim they are exempt from a windfall profits tax. "But the contract is= =20 very clear and the law is very clear." ?????Some of the pacts lock in specific prices, such as $58 a megawatt hour= =20 for around-the-clock power from Baltimore-based Constellation Energy Group.= =20 The Davis administration said those guard against price spikes in future=20 years. ?????Other contracts, officials said, balance the portfolio. They include= =20 deals such as those with Dynegy Inc., which tie prices to the cost of fuel = in=20 future years. ?????A number of energy insiders found reason to praise the contracts. ?????"The point of signing long-term contracts is not to get a great deal,= =20 it's to reduce risk" from the volatility of spot markets, said Severin=20 Borenstein, director of the Energy Institute at UC Berkeley. ?????Edison Cites Hedge Against Price Spike ?????The long-term power contracts will be an important factor in limiting= =20 the state's exposure to future price spikes, said Bob Foster, senior vice= =20 president of public affairs for Rosemead-based Edison International, the=20 corporate parent of Southern California Edison. ?????"This was California's problem to begin with," Foster said. "You don't= =20 want to be buying a lot of power traded on the spot market. What we really= =20 need is a portfolio of contracts that range from one to seven years and tha= t=20 take out the volatility from a large percentage of the market." ?????Davis advisors stressed that most of the contracted power also is link= ed=20 to development of new California generating plants, a key part of the=20 governor's drive to free the state from reliance on out-of-state power=20 trading companies. ?????About 60% to 70% of all the power that will be purchased in future yea= rs=20 under the contracts will be from new plants. The agreements, Freeman said,= =20 helped developers obtain bank financing for their proposed plants. ?????By nurturing new plants, the state is signaling energy companies that= =20 "this gravy train of high [prices] is not going to last forever," said Vikr= am=20 Budhraja, California's lead consultant in the bargaining. ?????But as analysts pored over the details, some challenged the governor's= =20 basic premise that the long-term deals were largely responsible for recent= =20 falling prices. They attribute the softening market to a host of other=20 factors, including cooler weather, falling natural gas prices and more plan= ts=20 completing spring maintenance. ?????In fact, some scholars say that the current prices simply prove that t= he=20 state committed to paying the power companies too much for too long. ?????"The governor's spin doctors claim that not entering into the contract= s=20 would have been gambling," said UC Irvine economist Peter Navarro. He said= =20 that in the years ahead, odds are are heavily against the contracts being a= =20 bargain. "That makes those contracts a long shot," he said, "which is=20 gambling in the worst sense of the word."=20 ?????Analyst Sees Too Much Uncertainty in Contracts ?????Reviewing contracts Friday, energy economist Robert Michaels of Cal=20 State Fullerton said he was also troubled by the financial risks the state= =20 appears to be assuming in some contracts for power plant pollution control= =20 expenses. In some cases, he said, the state could be charged for costly=20 emission control upgrades. ?????"There's such uncertainty about what future state policy is going to b= e=20 in terms of cost of permits, retrofit requirements and new technology," sai= d=20 Michaels, who reviewed the contracts at The Times' request. "I am not=20 familiar with any power contracts where I've seen that. It strikes me as=20 unusual."=20 ?????Assemblyman Tony Strickland (R-Thousand Oaks), who independently sued= =20 Davis to reveal the power contracts, said the public would not have been ab= le=20 to weigh such trade-offs if the governor had continued the secrecy. ?????Davis relented Tuesday, a day before a San Diego Superior Court judge= =20 was to hear the public records challenge. ?????Some complained the administration is still withholding key informatio= n.=20 Attorneys for the news organizations who sued the administration will retur= n=20 to court later this month to argue for release of the redacted material. ?????The released contracts blacked out the indexes used to set natural gas= =20 prices, the amount of natural gas needed to fire specific generators and=20 which pipelines are being used to ship the gas. That's important because ga= s=20 shipped into Southern California is more costly than gas shipped into=20 Northern California. ?????Additionally, the state is withholding information on whether the stat= e=20 or the generators should pay when there are breakdowns or congestion on the= =20 transmission system, resulting in a failure to deliver power. ?????Documents' Release Doesn't Stop Dispute ?????Experts said transmission-related provisions can be crucial to such=20 contracts final costs. ?????In arguing for continuing confidentiality, Davis maintained that the= =20 disclosure of detailed contract information would undercut the state's=20 negotiators by tipping off competing generators. On Friday, however, some= =20 critics attributed to the move to politics. ?????"If they were great contracts, they would have been released months=20 ago," said Navarro of UC Irvine. ?????But Davis' defenders, including Assemblyman Roderick Wright (D-Los=20 Angeles), chairman of the Utilities and Commerce Committee, said the=20 contracts accomplished exactly what they were intended to do: stabilize the= =20 price and supply of electricity. ?????"If all of a sudden you dump all these contracts, and all this power= =20 went back into the spot market, guess what? We'd be in the same damn positi= on=20 we were in last year." * * * ?????Times staff writers Robert J. Lopez, Miguel Bustillo, Julie Tamaki,=20 Virginia Ellis in Sacramento and Jerry Hirsch and Doug Smith in Los Angeles= =20 contributed to this story. Copyright 2001 Los Angeles Times=20 Ad Will Blame Davis for Crisis Politics: GOP-linked TV spot says governor and PUC could have saved the sta= te=20 from soaring prices. Its funding is murky because of campaign law. By MARK Z. BARABAK, Times Political Writer ?????Acting under cover of a taxpayer group, Republicans are preparing a=20 statewide ad blitz blaming Gov. Gray Davis for California's energy crunch, = a=20 move certain to escalate partisan tensions. ?????The commercial is credited to an organization called the American=20 Taxpayers Alliance, but it was placed by a GOP consulting firm and apparent= ly=20 produced by Alex Castellanos, a Republican strategist renown for his attack= =20 advertising. ?????The campaign-style TV ad is set to air Monday, more than 16 months=20 before Davis faces reelection. The spot does not promote a rival candidate.= =20 Rather, it assails Davis and his appointees on the Public Utilities=20 Commission for failing to sign "long-term, cost-saving contracts" before=20 wholesale prices soared. ?????"That's why newspapers say Davis ignored all the warning signals and= =20 turned the problem into a crisis," the advertisement states. ?????The source of the ad and its funding have been shielded under the murk= y=20 laws that govern so-called independent expenditure campaigns. The American= =20 Taxpayers Alliance paid roughly $350,000 for the first wave of ads. ?????Castellanos has close ties to the White House. Last year he created=20 negative spots that Republicans ran against Vice President Al Gore, includi= ng=20 a controversial one that flashed the word "RATS" on screen for a split seco= nd. ?????But Republican officials from the Bush administration on down denied a= ny=20 connection to the anti-Davis spots, scheduled to air in Los Angeles, San=20 Diego, Fresno, San Francisco and Sacramento. ?????Castellanos declined to comment. ?????"Unlike Gov. Davis, the RNC is not using slick political consultants t= o=20 spin our way out of this problem," Trent Duffy, a spokesman for the=20 Republican National Committee, said Friday. ?????Representatives of several major out-of-state generators, who have bee= n=20 warring with Davis for months, also denied any connection to the ads. "We'r= e=20 not participating in that," said Richard Wheatley, spokesman for power=20 supplier Reliant Energy Inc. of Houston. ?????"We're completely out of the loop on these ads," said Jim Owen,=20 spokesman for Edison Electric Institute, an industry umbrella group in=20 Washington. ?????However, the generators have done extensive public opinion research in= =20 California over the past several months. Their surveys have found that=20 Californians give Davis poor marks for his handling of the crisis but=20 generally do not blame him for causing the problem. ?????The ad shipped this week to TV stations around California appear=20 designed to convince people that Davis, indeed, is at fault. "He's pointing= =20 fingers and blaming others," the commercial states. ". . . But who runs the= =20 PUC? The people Gray Davis appointed." ?????Last year the state's major utilities repeatedly asked for permission = to=20 enter long-term contracts that could have helped control wholesale prices.= =20 Regulators turned them away before finally allowing them to negotiate=20 longer-term contracts at rates that ended up higher. ?????However, while Loretta Lynch--who is named in the ad--was head of the= =20 PUC at the time, Davis had not yet appointed a majority of the commission. ?????The ad campaign comes as the two major parties are moving closer in=20 Washington toward a consensus on wholesale price relief for California and= =20 other Western states, which face high summer electricity bills and fears of= =20 spot shortages. ?????Even so, Republicans on Capitol Hill have fretted that Democrats--led = by=20 Davis and their new Senate majority--are winning the public relations and= =20 political battles. ?????Last month, senior aides to House Speaker Dennis Hastert (R-Ill.) and= =20 others voiced their concerns to lobbyists from conservative groups and majo= r=20 power firms. ?????"We basically said, 'Are you planning on doing anything to promote you= r=20 side?' " said one senior House aide involved in the talks. ?????While disavowing any connection, House Republicans said Friday they=20 welcomed news of the impending ad campaign. "It's been a tough communicatio= ns=20 battle," said Brian Kennedy, press secretary for Republican Rep. George P.= =20 Radanovich of Mariposa. "Largely because Democrats have been going out=20 saying, 'Give us price caps.' And to this point we've just said 'No.' " ?????Democrats, predictably, were outraged. Ignoring White House denials,= =20 Rep. Anna G. Eshoo (D-Atherton) rounded up more than two dozen colleagues w= ho=20 dispatched an angry letter to Vice President Dick Cheney. ?????"While the administration repeatedly has rejected enforcing the law an= d=20 allowing price relief for Californians, it now seems to be coming together= =20 with the [energy] industry . . . to run a campaign telling Californians tha= t=20 'gouging is good,' " Eshoo wrote. "California needs real P.R. . . . price= =20 relief." cen * * * ?????Times staff writers Nancy Rivera Brooks, Robin Fields and Greg Miller= =20 contributed to this story. Copyright 2001 Los Angeles Times=20 Blackout alert for next 2 days=20 State's first advance warning puts PG&E's Block 1 on notice=20 Erin Hallissy, Chronicle Staff Writer Monday, June 18, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/c/a/2001/06/18/MN199044.D= TL=20 Expecting no relief from hot weather across much of California, the state's= =20 power grid operators yesterday issued their first long-term warnings for=20 possible rolling blackouts today and tomorrow.=20 California's Independent System Operator was acting under a new policy by= =20 Gov. Gray Davis to alert people up to 48 hours in advance -- instead of jus= t=20 one hour -- of the possibility of rolling blackouts. Unless enough power is= =20 found to keep all those lights and air conditioners running at homes and=20 offices throughout the state, outages would be most likely to happen betwee= n=20 noon and 8 p.m. Peak demand on both days is expected at 4 p.m.=20 Although parts of the Bay Area should be relatively cool, with highs today = in=20 the 60s along the coast to upper 90s inland, the heat is expected to reach= =20 triple digits in many other parts of the state. The Central Valley from=20 Stockton to Bakersfield should hit 100 today and tomorrow, as should=20 Riverside and desert areas around Palm Springs, according to the National= =20 Weather Service.=20 If rolling blackouts happen, Pacific Gas and Electric Co. will begin with= =20 customers in Rotating Block 1.=20 "Any additional conservation that people can put into effect during those= =20 hours would be very helpful," said ISO spokeswoman Lorie O'Donley.=20 So far this year, there have been six days of rolling blackouts affecting= =20 about 3 million customers in California. State officials have lauded=20 residents and businesses for keeping demand for power low by cutting use by= =20 11 percent since last year, adjusted for temperature and population.=20 State officials pointed out the conservation efforts during a press=20 conference called by Davis' office yesterday to put the heat on the Federal= =20 Energy Regulatory Commission to implement stricter price controls on power= =20 companies.=20 FERC is expected to extend an emergency price cap, but Democratic leaders a= nd=20 state energy officials said yesterday it doesn't go far enough. They urged= =20 the commission to "take a stand for consumers" by implementing real price= =20 relief and giving refunds to Californians who have been gouged by power=20 companies.=20 "We want the generators to be stopped right now from overcharging us," said= =20 ISO Chairman Michael Kahn. "There's been a lot of talk about refunds . . .= =20 but we haven't seen any action."=20 Under the FERC price mitigation program, which is expected to be extended= =20 from emergencies to 24 hours a day, the state would buy power at prices=20 determined by the least efficient generator.=20 Kahn said the mitigation program "is simply an invitation to years of=20 litigation."=20 U.S. Rep. Anna Eshoo, D-Atherton, said the program does not give any break = to=20 consumers.=20 "What has been touted is under the guise of price relief," Eshoo said. "Thi= s=20 puts into place the highest price for the dirtiest generators. If that's=20 price relief, I'll eat my hat."=20 AD CAMPAIGN Eshoo also complained about a new $5 million advertising campaign financed = in=20 part by energy companies that have been accused of price-gouging.=20 The ads, which are supposed to start airing today, blame Davis for causing= =20 the energy crisis.=20 "The dollars that have been creamed off the top of our constituents are now= =20 being poured into a campaign to try to blur the issue," Eshoo said.=20 Eshoo said she doesn't know what formal action, if any, Democrats will take= =20 to counter the ad.=20 "We've been responding in writing and verbally, which may not be powered by= =20 millions and millions of dollars," she said.=20 Steve Maviglio, a spokesman for Davis, said he believes Californians will= =20 "see right through this smoke screen."=20 FERC IS URGED TO ACT Meanwhile, Davis' chief energy adviser, S. David Freeman, said FERC should = do=20 more to help bring down the cost of power from generators. He said=20 Californians have done their part in the energy crisis by conserving, and= =20 Davis has done his part by approving new power plants in the state.=20 "We have reduced demand and increased supply. It's Economics 101," Freeman= =20 said. "All we're asking is that the federal government join us in this=20 battle. Thus far, it's been too little, too late."=20 Blackouts=20 A warning has been issued for possible rolling blackouts today and tomorrow= .=20 -- Where:=20 PG&E Rotating Outage Block No. 1 is next up for rolling blackouts. Customer= s=20 can determine which block they occupy by looking for the words "Rotating=20 Outage Block" on their bills followed by a number. If those words do not=20 appear, the customer shares an electrical circuit with an "essential servic= e"=20 that is exempt from blackouts.=20 TIPS -- Have a flashlight and radio with fresh batteries available.=20 -- In a blackout, unplug or turn off all appliances, TVs and computers. Lea= ve=20 one light on to warn you when the power comes back.=20 -- When the power returns, turn one appliance on at a time to prevent power= =20 surges.=20 -- Don't plug a generator into the wall; when power returns, it can send a= =20 high-voltage current through the system that can electrocute power workers.= =20 -- Tell children who are home alone to remain calm, turn off TV and compute= rs=20 and not to use candles.=20 Tell us what you think -- What are your suggestions for saving energy? Send= =20 your best tips to Energy Desk, San Francisco Chronicle, 901 Mission St., Sa= n=20 Francisco, CA 94103; or put your ideas in an energy-efficient e-mail to=20 [email protected].=20 E-mail Erin Hallissy at [email protected].=20 ,2001 San Francisco Chronicle ? Page?A - 1=20 California's path to energy independence=20 Gray Davis Monday, June 18, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/06= /18/E D372.DTL=20 WE ARE still a long way from being out of the woods in this energy crisis.= =20 Yet, we are on a path toward taming a problem that just a few months ago=20 seemed insurmountable.=20 My administration has licensed 16 major new power plants, and we have more= =20 than 4,000 megawatts of new power generation coming on line this summer.=20 Nearly 40 new contracts for electricity worked out by my negotiators alread= y=20 are putting strong downward pressure on the prices the state is paying for= =20 electricity. Some 43 percent of the power we're buying to keep the lights o= n=20 is now under long-term contract.=20 In addition, conservation is playing a big part in this turnaround.=20 In January, I called the state Legislature into special session to work out= =20 solutions to our power problems. One result was legislation appropriating= =20 more than $850 million for conservation projects - the largest such=20 conservation program ever offered by California or any other state. Among i= ts=20 features are home weatherization assistance, residential air conditioning a= nd=20 appliance rebates, and peak-load reduction incentives for agriculture and= =20 industry.=20 In response to these measures and to my call for conservation, Californians= =20 are dramatically reducing their electricity use, especially during peak hou= rs=20 when electricity is the most expensive and hardest to come by.=20 Some might believe that we are just sweating in the dark in order to produc= e=20 these savings. But that is simply not true. Conservation goes hand in hand= =20 with energy efficiency, and in this regard we in California are a world=20 leader.=20 For instance, we are pioneering the use of light-emitting diodes (LED) in= =20 traffic signals that use 75 percent less power than conventional traffic=20 lights.=20 Through our Powerwalk program, members of the California Conservation Corps= =20 are distributing 1.5 million compact fluorescent lightbulbs that use a=20 fraction of the power of similar-sized incandescent bulbs, saving enough=20 electricity to power 100,000 homes.=20 Use of other new technology such as variable-speed motors, high-efficiency= =20 air conditioners and real-time metering also will produce results.=20 State government also has been at the forefront of this conservation effort= .=20 On average, state agencies this year have reduced energy consumption in sta= te=20 office buildings by approximately 20 percent.=20 They are shutting off unnecessary lights, regulating indoor temperatures an= d=20 turning off computers when they aren't needed. In one simple but effective= =20 strategy, state building managers have instructed janitors to clean buildin= gs=20 one floor at a time, allowing the rest of the building to remain dark, and= =20 thereby cutting lighting use significantly.=20 The state also has adopted the country's most energy-efficient building=20 standards for residential and commercial structures. This effort has won th= e=20 support of the building industry, and will save California an estimated 200= =20 megawatts or more a year.=20 One state building project alone - the Capitol Area East End project in=20 Sacramento - will save taxpayers an estimated $400,000 a year in energy=20 costs.=20 Expanding this effort to local government, we've entered into energy=20 conservation partnerships with 225 California counties, cities and special= =20 districts. And partnerships with businesses and private organizations have= =20 been central to the state's conservation efforts. Just last week, for=20 example, I issued an executive order offering incentives for businesses tha= t=20 voluntarily cut their electricity use during peak periods.=20 Businesses are cooperating in other ways, too.=20 McDonald's, for example, has agreed to place energy conservation messages o= n=20 4 million tray liners in their 1,100 restaurants statewide. Through the=20 California Grocers Association, supermarkets such as Safeway have placed=20 energy conservation tips on grocery bags and in stores.=20 A unique partnership between the state, the Building Owners and Managers=20 Association and the Service Employees International Union has produced a=20 five- point plan to reduce energy use by 10 percent or more in some 300=20 million square feet of commercial office space.=20 Moreover, we know that the cheapest megawatt of power is the one we don't= =20 have to buy. That is why I have instituted the 20/20 program for customers = of=20 Pacific Gas and Electric Co., Southern California Edison and a similar 15/2= 0=20 program for customers of San Diego Gas & Electric.=20 Those who reduce their summer 2001 use by 20 percent over what they used la= st=20 summer (a 15 percent reduction for SDG&E customers) will receive a rebate o= f=20 20 percent on their electric bills. This program has the potential to reduc= e=20 power use by thousands of megawatt-hours over the summer.=20 Finally, I have reached an agreement with 137 California companies, includi= ng=20 major banks, manufacturers and technology companies, to reduce their energy= =20 consumption by 20 percent between June 1 and Sept. 30. I am tremendously=20 encouraged by how enthusiastically Californians have pursued energy=20 conservation.=20 In the long run, there are two truly essential pieces to the solution to ou= r=20 energy crisis: We must continue to build more power supply and we must=20 continue to dampen demand through improved energy efficiency.=20 Together, these measures will ensure that there is enough power available t= o=20 keep prices reasonable and our economy strong and stable long into the=20 future.=20 Gray Davis is the governor of California.=20 ,2001 San Francisco Chronicle ? Page?A - 17=20 Developments in California's energy crisis=20 The Associated Press Monday, June 18, 2001=20 ,2001 Associated Press=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2001/06/18/s= tate2 131EDT0193.DTL=20 (06-18) 07:48 PDT (AP) --=20 Developments in California's energy crisis:=20 MONDAY: * A heat wave may mark the return of rolling blackouts to California, with= =20 the ISO forecasting the possibility of Stage 3 alerts for Monday and Tuesda= y.=20 SUNDAY: * In a conference call, state Democrats said power company profits gained= =20 during the electricity crisis will go toward a new ad campaign blaming Gov.= =20 Gray Davis for the rising costs. The advertisement is set to begin airing= =20 Monday on television. Democrats said they expect the American Taxpayers=20 Alliance will spend $5 million on the campaign. The ad is produced by GOP= =20 strategists.=20 SATURDAY: * At a town hall meeting, a panel of state officials offered few answers to= =20 San Francisco residents who wanted to know how the $43 billion in long-term= =20 contracts released by Gov. Gray Davis Friday would affect their energy cost= s.=20 Ambassador Richard Sklar said he had not read the contracts yet, but hoped= =20 they made sense. Sklar is the chair of Davis' Generation and Implementation= =20 Task Force. For the 100 people that gathered at the meeting, the contracts= =20 appear to have added to confusion over the energy crisis.=20 WHAT'S NEXT: * A heat wave may mark the return of rolling blackouts to California this= =20 week, with the ISO forecasting the possibility of Stage 3 alerts for Monday= =20 and Tuesday.=20 * Federal officials are expected Monday to slap new limits on wholesale=20 electricity prices. The Federal Energy Regulatory Commission, which regulat= es=20 wholesale electricity transactions, is expected to put 24-hour caps on the= =20 price of power in the West.=20 * The Senate Energy Committee begins hearings Tuesday on variations of Gov.= =20 Gray Davis' proposal to aid financially strapped Southern California Edison= .=20 Senate Judiciary and Senate Natural Resources committees also plan hearings= =20 in advance of the Aug. 15 deadline for action.=20 * Davis' representatives continue negotiating with Sempra, the parent compa= ny=20 of San Diego Gas and Electric Co., to buy the utility's transmission lines.= =20 * The Senate Governmental Affairs Committee, chaired by U.S. Sen. Joseph=20 Lieberman, D-Conn., holds hearing Wednesday on the power crisis.=20 THE PROBLEM: High demand, high wholesale energy costs, transmission glitches and a tight= =20 supply worsened by scarce hydroelectric power in the Northwest and=20 maintenance at aging California power plants are all factors in California'= s=20 electricity crisis.=20 Southern California Edison and Pacific Gas and Electric say they've lost=20 nearly $14 billion since June to high wholesale prices the state's=20 electricity deregulation law bars them from passing on to consumers. PG&E,= =20 saying it hasn't received the help it needs from regulators or state=20 lawmakers, filed for federal bankruptcy protection April 6.=20 Electricity and natural gas suppliers, scared off by the companies' poor=20 credit ratings, are refusing to sell to them, leading the state in January = to=20 start buying power for the utilities' nearly 9 million residential and=20 business customers. The state is also buying power for a third investor-own= ed=20 utility, San Diego Gas and Electric, which is in better financial shape tha= n=20 much larger Edison and PG&E but also struggling with high wholesale power= =20 costs.=20 The Public Utilities Commission has approved average rate increases of 37= =20 percent for the heaviest residential customers and 38 percent for commercia= l=20 customers, and hikes of up to 49 percent for industrial customers and 15=20 percent or 20 percent for agricultural customers to help finance the state'= s=20 multibillion-dollar power buys.=20 ,2001 Associated Press ?=20 Federal panel considering ways to rein in Western energy prices=20 H. JOSEF HEBERT, Associated Press Writer Monday, June 18, 2001=20 ,2001 Associated Press=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2001/06/18/n= ation al1008EDT0498.DTL=20 (06-18) 07:08 PDT WASHINGTON (AP) --=20 As a federal energy commission -- with two new Bush appointees on board --= =20 prepared Monday to take up proposals to ease Western electricity prices,=20 President Bush emphasized his opposition to price controls.=20 The Federal Energy Regulatory Commission, at a meeting later in the day, wa= s=20 expected to expand electricity price limits in California to include 10 oth= er=20 Western states and to cover sales outside of periods of power emergencies.= =20 "I want to see what they have to say," Bush told reporters at the White Hou= se=20 Monday. "Although I've had the opportunity of naming two members to the FER= C,=20 they are independent. They know full well my administration's belief that= =20 price controls will not solve the problem."=20 Other Republicans hoped action by FERC would stem growing pressure in=20 Congress for the federal government to impose broader cost-based price=20 controls on Western electricity sales.=20 Democrats, newly in control of the Senate, made clear last week that they= =20 intend to make energy costs a key issue in the coming weeks. They already= =20 have launched a series of hearings on the California power problems and=20 called for price caps on Western electricity sales.=20 Western power markets "are out of whack" and the federal government is=20 obligated under the law to assure prices are just and reasonable, Senate=20 Majority Leader Tom Daschle, D-S.D., said on "Fox News Sunday."=20 Bush has strongly opposed price controls in energy markets, including=20 California's electricity sales, which for much of the year have been 10 tim= es=20 what they were in 1999 before dropping in recent weeks.=20 However, The Washington Post quoted unidentified administration officials a= s=20 saying the president would endorse less stringent price limits imposed by= =20 FERC.=20 GOP congressional leaders, meanwhile, stayed firm in their opposition to=20 price controls.=20 "When Democrats say price caps, I believe that's the problem, not the=20 solution," said Senate Minority Leader Trent Lott, R-Miss. He promised to= =20 fight price cap legislation and urged Bush to veto any such bill should it= =20 pass.=20 But a growing number of GOP lawmakers also have become worried that if=20 Republicans are viewed as obstructionist in the face of soaring Western=20 electricity costs and high gasoline prices nationwide, they could lose=20 control of the House in the 2002 midterm elections.=20 In a letter last week, more than a dozen House Republicans urged the=20 commission to broaden the electricity "price mitigation plan" it approved i= n=20 April and extend price limits to all sales and to 10 other Western states.= =20 Currently, the order is confined to whenever California's energy reserve dr= op=20 below 7.5 percent, triggering an emergency.=20 California Gov. Gray Davis, a Democrat, claims FERC's earlier action has do= ne=20 little to ease his state's power problems because it sets limits too high a= nd=20 includes loopholes that allow power providers to easily avoid them=20 altogether.=20 "If they plug some of the loopholes ... then they will have begun to do the= ir=20 job," Davis said.=20 The commissioners have refused to discuss their plans, but FERC Chairman=20 Curtis Hebert is said to view an expansion of the April order favorably. Th= e=20 April plan passed 2-1 with Commissioner William Massey, one of two Democrat= s,=20 opposing it on grounds it did not go far enough to stop price gouging.=20 Since then, the commission has gained two more members: Pat Wood, a Bush=20 confidant and former head of the Texas utility commission; and Nora Mead=20 Brownell, a former Pennsylvania utility regulator. Although both are Bush= =20 appointees, they are viewed as more receptive to price intervention than is= =20 Hebert, a staunch defender of the free-market system.=20 Whatever action the five-member FERC may take, it is viewed pivotal by=20 lawmakers of both parties.=20 Sen. Jeff Bingaman, D-N.M., the new chairman of the Senate Energy and Natur= al=20 Resources Committee, warned that unless the commission takes more steps to= =20 curtail profiteering, he will push legislation within the next two weeks=20 requiring further federal measures.=20 In the House, Democrats likewise believe they have a politically potent=20 issue.=20 Last week, when a House committee rejected by a party-line vote a spending= =20 bill rider on price caps, an angry Rep. Nancy Pelosi, D-Calif., the measure= 's=20 sponsor, snapped: "I think Republicans don't know how much damage they did = to=20 themselves today. They voted in favor of the gougers."=20 It's the kind of rhetoric that is making GOP members nervous.=20 "We hope FERC will do its job," said Rep. Randy Cunningham, R-Calif., who h= as=20 had to explain the high power costs and blackouts to his constituents. "If= =20 they find unreasonable charges they should act."=20 ,2001 Associated Press ?=20 Tougher price caps prompt controversy=20 Consumer boon or bane? Experts split=20 Carolyn Lochhead, Chronicle Washington Bureau Monday, June 18, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/06= /18/M N118354.DTL=20 As a petri dish for electricity deregulation, California has had a rough ti= me=20 of it. Now the state and the rest of the West stand poised to undergo anoth= er=20 big experiment to fix the first one: imposing price caps on wholesale=20 electricity.=20 The potential consequences will be no less far-reaching. But unlike the=20 obscure mid-1990s debate over deregulation, the price-cap decision is being= =20 made in a supercharged political climate where expert opinion is fiercely= =20 divided.=20 Some of the nation's leading economists contend price caps are essential to= =20 protect consumers from price gouging this summer. Others insist they are a= =20 recipe for further chaos.=20 One leading expert said price-cap proposals are based on the same arguments= =20 that created the worst fuel shortage in U.S. history. Another called fears= =20 that intervention will create havoc like the 1970s gasoline lines "silly."= =20 For consumers in California and throughout the West, it matters a great dea= l=20 who's right.=20 The Federal Energy Regulatory Commission is expected today to extend the=20 price-cap order now limited to power emergencies to all times of the day an= d=20 to the entire Western region. Such action falls short of the cost-based pri= ce=20 caps advocated by California's Democratic Sen. Dianne Feinstein and Gov. Gr= ay=20 Davis, which essentially would return the state to its old regulatory regim= e=20 before the ill-fated 1996 restructuring.=20 But the new price cap plan goes much further than anything regulators have= =20 attempted so far under deregulation, and would come close to the price caps= =20 many have advocated.=20 Price caps have become the flash point of the entire debate over California= 's=20 electricity crisis. The Bush administration argues that caps will create mo= re=20 blackouts by discouraging suppliers from providing more power. Democrats=20 contend they will prevent blackouts because price-gouging generators are=20 deliberately withholding power to drive up prices.=20 Alfred Kahn, the Cornell University economist who crafted the successful=20 deregulation of the airline and trucking industries during the Carter=20 administration, led 10 economists who wrote President Bush to express "deep= =20 concern" about the federal failure to intervene.=20 Paul Joskow, a leading expert on electricity deregulation at the=20 Massachusetts Institute of Technology, Severin Borenstein, director of the= =20 Energy Institute at the University of California at Berkeley, and Frank=20 Wolack,=20 a Stanford University economist who headed California's electricity market= =20 monitoring committee, all signed the letter and testified at a Senate panel= =20 Wednesday.=20 They contend conditions are ripe in California to allow power generators to= =20 drive up electricity prices to outlandish levels by strategically withholdi= ng=20 supply.=20 In their view, Californians are trapped in a classic monopoly vise created = by=20 a deeply flawed deregulation scheme, drought-induced hydropower shortages,= =20 high natural gas prices, a shortage of capacity and over-reliance on spot= =20 markets.=20 Electricity is unique, they say, because it is impossible to store, so ther= e=20 are no inventories to smooth out demand and supply. And because the vast=20 majority of consumers do not have meters that reflect minute-by-minute pric= e=20 changes, and power plants take years to build, short-term demand and supply= =20 are unresponsive to prices. As a result, even a tiny reduction in supply ca= n=20 send prices soaring.=20 These economists insist it is the responsibility of federal regulators to= =20 intervene to prevent a huge transfer of wealth this summer from California= =20 consumers to power-generating companies.=20 If price caps are temporary, exempt new power plants and allow sufficient= =20 profits, Kahn told the Senate Governmental Affairs Committee, "there will b= e=20 no shortage of people interested and willing to build new power plants."=20 Added Borenstein: "To dismiss price controls because they were used badly i= n=20 the 1970s is as silly as dismissing deregulation because California did it= =20 badly."=20 But other economists view the political momentum for price caps with alarm.= =20 Paul MacAvoy, a Yale University economist and the nation's leading authorit= y=20 on the deregulation of natural gas, said Kahn is basing his arguments on=20 those he made in the 1960s when urging Congress to control natural gas=20 prices.=20 By 1974, MacAvoy said, Kahn's ideas had become "the prime, if not the only,= =20 cause of the most massive shortage of a fuel in the history of America,"=20 which he called "the Kahn natural gas crisis of the mid-1970s.=20 "Most of urban and rural America from Iowa to Pennsylvania was shut down fo= r=20 months at a time in the cold winter of '76-'77," MacAvoy said. "People had = to=20 go and sleep on the floor of schoolhouses because there was no gas."=20 MacAvoy and other economists contend that price spikes are a symptom of=20 California's capacity shortages. Controlling prices will aggravate the=20 underlying problem, they say. If prices are not allowed to ration=20 electricity, then it will be rationed through blackouts -- just as price=20 controls on oil in the 1970s created lines at the gas pump.=20 Wayne Angell, a former Federal Reserve Board member, bluntly called price= =20 controls "a recipe for disaster," in a letter to Sen. Fred Thompson, R-Tenn= .=20 Angell said California has already proven that point by keeping a cap on=20 retail rates that officials only recently and partially raised, but which= =20 helped bankrupt one of the state's two investor-owned utilities.=20 MacAvoy said none of the studies done by Joskow, Borenstein and others=20 alleging that generators can exercise power over the market in California a= re=20 convincing -- much less the dramatic charts of power plant outages and pric= e=20 spikes that are a regular feature of Capitol Hill press conferences.=20 Even the best of these studies, MacAvoy said, find that market power might = be=20 exercised 0.5 percent of the time in California.=20 Whether electricity price caps succeed or fail could hinge on critical=20 details that have been obscured by politicians, such as the exact level of= =20 any price cap and how it would be administered and monitored. Even the=20 staunchest proponents say any cap must be temporary and must remain above= =20 production costs -- even though political forces often drive caps below cos= t=20 and keep them on for decades.=20 "Listening to some of the testimony this morning reminds me of the dangers = of=20 price controls," Borenstein said Wednesday. "Once we go down this road, we= =20 are going to have to be careful. . . . In the 1970s we tried to control the= =20 transfer of wealth in a very competitive market, and we ended up completely= =20 screwing up the market and causing shortages."=20 Mitch Wilk, a former head of the California Public Utilities Commission who= =20 favors temporary price caps, also warns that they are no easy fix.=20 "The very same government that got us into this mess," Wilk warned, "is the= =20 same group that we're going to be looking to, whether it's federal or state= ,=20 to fit a price cap regime to particular market conditions that could exist= =20 today but be completely different in a week or a month from now."=20 Price regulation of electricity is very complex and "implies government=20 knowledge and skill and precision that I think . . . this crisis has shown= =20 does not exist," Wilk said.=20 Energy Secretary Spencer Abraham warned in an interview that Canadian=20 suppliers, who provide 13 percent of the power to the Western grid, could= =20 pull out of the market if prices are set too low.=20 "Prices are a problem, we don't deny that," Abraham said, "but they're not= =20 nearly the kind of problem that a blackout creates, whether it's an economi= c=20 impact or a health and safety impact."=20 E-mail Carolyn Lochhead at [email protected]=20 ,2001 San Francisco Chronicle ? Page?A - 1=20 THE ENERGY CRUNCH=20 Pacts may give upper hand to gas traders=20 Clause allows price of electricity to change with production cost=20 Bernadette Tansey, Chronicle Staff Writer Sunday, June 17, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/06= /17/M N93079.DTL=20 When Gov. Gray Davis showed his hand last week by releasing details of the= =20 state's long-term electricity contracts, he claimed California now had=20 leverage in the high-stakes power game that has nearly cost the state its= =20 shirt.=20 But the state's hand contains a wild card. Some contracts have provisions= =20 that allow the price of electricity to rise or fall with the price of natur= al=20 gas, the fuel that runs most electricity generating plants.=20 Those "fuel adjustment" clauses raised alarms for some energy analysts, who= =20 say the state's promise to cover generator costs if fuel prices rise could = be=20 an open invitation for gas traders -- some of whom also sell electricity to= =20 the state -- to hike their rates.=20 Disclosure of the provisions also means that the $43 billion figure that=20 state officials attached to the long-term contracts only represents an=20 estimate of what the state will pay.=20 Davis' chief energy adviser, S. David Freeman, said the price of natural ga= s=20 can fall just as easily as it can rise -- yielding savings for California= =20 under the electricity agreements. And the state, he said, has a strategy=20 ready if suppliers claim unreasonable gas costs: Under the contracts, the= =20 state can serve as a backup buyer if it can deliver natural gas at cheaper= =20 rates.=20 "The state can go and get our own gas if we don't like producers' prices,"= =20 Freeman said Friday, signaling for the first time that California is prepar= ed=20 to greatly expand its controversial role as an energy trader.=20 But the state could be getting into the natural gas game just as critics sa= y=20 it may have been outplayed by energy giants in the electricity deals.=20 "They're basically playing chess, and the governor is playing checkers," sa= id=20 University of California at Irvine economist Peter Navarro. "They're really= =20 out of their league."=20 Freeman said the state can maintain its own portfolio of natural gas=20 contracts at better-than-market rates. That's a complex task that can invol= ve=20 out-of-state gas purchases, pipeline transportation contracts and storage= =20 strategies that would put the state in the same league as Enron Corp.,=20 Dynegy, El Paso Corp. and other masters of global energy markets.=20 Navarro, an expert on energy regulation, said generators had the state over= a=20 barrel when they locked in the adjustment clauses, because they forced the= =20 state to bear the risks of the notoriously volatile natural gas market.=20 Prices for natural gas peaked last winter at 10 times the nationwide averag= e=20 at the Southern California border.=20 And that market, controlled by a small number of sophisticated players, is= =20 rife with opportunities for gaming, he said. Natural gas companies could se= nd=20 all their high-priced gas to California, manage pipeline contracts to=20 maximize gas prices or sell gas to their own power affiliates at favorable= =20 rates.=20 "The governor negotiated those contracts in a panic, bargaining from=20 weakness," Navarro said.=20 In about half of the 38 long-term contracts, payments for electricity depen= d=20 on the rise or fall in the price of natural gas, the fuel for the new power= =20 plants that will contribute 70 percent of the juice lined up by the state.= =20 Most details of the fuel arrangements were blacked out in the contracts=20 released by the governor, along with other undisclosed provisions that=20 experts say make it impossible to fully assess what the state will pay in= =20 future months and years.=20 A crucial question is what number the generators can use to claim increased= =20 gas costs, said energy consultant Tom Beach of Cross Border Energy in=20 Berkeley. Will they have to demonstrate their actual cost by producing thei= r=20 signed gas contracts, Beach wonders, or do the state deals peg electricity= =20 payments to a commonly used market index -- the spot price of gas at the=20 Southern California border?=20 "That particular price has caused a lot of problems in the past," said Beac= h.=20 Beach and other analysts say California has already been through an expensi= ve=20 exercise with power contracts pegged to the spot cost of gas when it arrive= s=20 in the state on interstate pipelines from gas producing basins in the=20 Southwest, Canada and elsewhere.=20 A host of state and federal investigators are still trying to determine why= =20 natural gas spot prices went through the roof when the fuel passed over the= =20 California border -- particularly near Topock, Ariz. The state Public=20 Utilities Commission has accused El Paso Corp. of restricting the flow of g= as=20 in its pipeline through Topock, making gas scarcer in California and thus= =20 more expensive on the spot market.=20 Whatever the cause of the spot price spikes, investor-owned utilities were = on=20 the hook for millions more in payments to small generators who had negotiat= ed=20 electricity prices with the utilities pegged to the natural gas border pric= e.=20 Some of those generators were owned or controlled by El Paso -- the same=20 company accused of engineering the border price hike.=20 The Federal Energy Regulatory Commission this month expanded its probe of t= he=20 allegations of market manipulation against El Paso. Freeman said recent=20 regulatory commission actions have raised hopes that federal regulators wil= l=20 monitor California's gas market more closely to ensure competition that cou= ld=20 control prices.=20 The risk of market gaming could apply to any new state contracts with "fuel= =20 adjustment" clauses, Beach said.=20 "That can be a problem," he said. "(The cost of gas) is just a complete=20 pass-through."=20 Navarro said the danger is heightened in an energy economy like California'= s,=20 where the same firms that sell electricity to the state may also be the gas= =20 suppliers for their own generating plants. The natural gas affiliates could= =20 make "sweetheart deals" to sell gas to their sister power plants at prices= =20 higher than market rates. The power affiliate would bear no risk from the= =20 high-priced sale, because its gas costs could be covered by the state, he= =20 said.=20 Companies like Enron, El Paso and Williams, which control both pipelines an= d=20 power generated for the state, could also work together to prop up gas=20 prices, Navarro said.=20 "The general concern here is when you have fuel adjustment clauses you need= =20 to worry about the possibility of manipulation of the gas price," Navarro= =20 said.=20 Representatives of Dynegy, which has state contracts pegged to gas costs, d= id=20 not respond to requests for comment.=20 Tom Murnane, a spokesman for Sempra Energy Resources, said the "fuel=20 adjustment" provisions for Sempra and other companies will not lead to gas= =20 price manipulation.=20 "It's highly unlikely," Murnane said.=20 To have an impact on gas prices, he said, a company would have to control= =20 very large volumes of gas.=20 El Paso now shares with other gas shippers the huge block of capacity on it= s=20 pipeline to Southern California that used to be controlled by an El Paso=20 marketing affiliate. El Paso has one of the new state power contracts, but = it=20 only covers 100 megawatts, said El Paso spokeswoman Norma Dunn.=20 Murnane said state utility regulations would prevent Sempra Energy Resource= s=20 from making anti-competitive deals with its affiliate Southern California= =20 Gas, a regulated utility.=20 Larry Foster, a natural gas expert for Platts energy news services, said th= e=20 state contracts are unlikely to become a driver boosting natural gas costs.= =20 He said ordinary market forces such as the balance of supply and demand are= =20 the main factors that will set the rates.=20 Foster said state officials hold a lot of power to improve gas supplies=20 flowing into California by encouraging the construction of badly needed=20 pipeline capacity. Doing that could actually drop gas prices, and lead to= =20 lower power prices under the state electricity contracts.=20 "I think it's pretty clear to a number of officials in California that the= =20 state (pipeline) system needs to be expanded," Foster said.=20 But Foster agreed with other experts that great uncertainty remains in the= =20 cost of the power contracts linked to fuel costs. And he said a case could = be=20 made that powerful energy firms dealing in both gas and electricity could= =20 prop up gas prices in California.=20 "The consequences of that argument are that the state did a really horrible= =20 job of writing those contracts," Foster said.=20 E-mail Bernadette Tansey at [email protected].=20 ,2001 San Francisco Chronicle ? Page?A - 1=20 The zero percent solution=20 Gary Ackerman Sunday, June 17, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/06= /17/I N122295.DTL=20 The "solution" to California's energy crisis proposed by so many -- includi= ng=20 Gov. Davis, members of the California Legislature, and Democratic as well a= s=20 some Republican lawmakers in Washington -- has a success rate of precisely= =20 zero.=20 The object of their affection is popularly called "price caps." They hope= =20 that, perhaps as early as tomorrow, the feds will impose caps, or something= =20 like them, on wholesale electricity rates in the West.=20 But price caps have never worked, and they never will.=20 So why are politicians and a healthy proportion of our citizenry jazzed abo= ut=20 a blunt policy tool that, if anything, will make matters worse?=20 Because people are frustrated. They are tired of feeling victimized by a=20 deregulation law, passed in 1996, that was fatally flawed. They are angry= =20 about footing the bill. They are fed up with endless legislative "fixes" th= at=20 don't really fix a thing.=20 So, as in any desperate situation, people are tempted to turn to ideas that= =20 have no chance -- like victims stranded on an open sea with nothing but sea= =20 water to slake their thirst.=20 Previous attempts to impose price caps didn't work either.=20 In the 1950s, the federal government chose to regulate natural gas prices= =20 based on "cost." As natural gas usage increased for home heating and=20 industrial processes, the scheme proved impossible to administer. Prices we= re=20 set too low to prompt energy entrepreneurs to explore and produce more. The= =20 result two decades later was a natural gas shortage so severe that, by=20 February 1977, some 4,000 manufacturing plants were idled, 1 million worker= s=20 laid off and hundreds of schools closed for lack of heating.=20 Congress responded in 1978 with the Natural Gas Policy Act, establishing a= =20 program for phased deregulation of natural gas. Since then, natural gas=20 shortages have never reappeared.=20 It happened again in 1979. Crude oil prices were surging while the nation w= as=20 saddled with a system of oil price controls inherited from the Nixon=20 administration. Despite the urging of Energy Secretary James Schlesinger,= =20 President Jimmy Carter refused to eliminate federal price controls on=20 domestic petroleum. The result: long lines at the gas pump.=20 The current energy crisis in California can be laid directly at the door of= =20 the misguided belief that price caps not only work but benefit consumers.= =20 While freeing up wholesale prices, the 1996 deregulation act (AB 1890) froz= e=20 retail electric rates. The result: the bankruptcy of Pacific Gas & Electric= =20 and the near financial ruin of Southern California Edison.=20 Perhaps the strongest impetus for price caps on wholesale prices is the fea= r=20 of rolling blackouts this summer. But caps won't keep the lights on. Cappin= g=20 prices reduces both the incentive to produce and the urge to conserve, maki= ng=20 blackouts even more likely.=20 Responding to prevailing political winds, however, federal regulators, --= =20 according to press reports -- are set to announce some sort of "price=20 mitigation" program, beyond the current scheme that imposes limits when pow= er=20 reserves fall below 7.5 percent.=20 Various plans have been reported, including one that would peg the price to= a=20 previous day's price -- presumably the highest -- charged by the "least=20 efficient" generator. That sounds simple, but in practice would be=20 unworkable. "Least efficient" and highest price don't always go hand in han= d.=20 Especially in a region that spans 13 western states, and where fuel prices= =20 vary all over the regional map.=20 Such a scheme sounds similar to the natural gas price caps of the 1950s. It= =20 won't work any better now than it did then, and for the same reasons:=20 Producing and bringing electricity to market has more variations and=20 complexities than almost any other commodity.=20 And supporters of price caps are in for big disappointment: Many of the=20 largest producers in the region's power sector -- municipal utilities,=20 irrigation districts, public utility districts and Canadian producers -- ar= e=20 not regulated by the feds and will not be subject to these new rules.=20 A final irony: The power market has demonstrated over the last few weeks th= at=20 price caps are unnecessary. Thanks to market forces that increased supply a= nd=20 mild weather that lessened demand, wholesale prices have fallen dramaticall= y.=20 We aren't out of the woods. This is probably a temporary break. But the=20 wholesale electricity market is working, which must be something of a=20 disappointment to politicians looking to crucify the power industry on the= =20 crosses of "price-manipulation," "gouging" and "collusion."=20 If things were only so simple. How nice to wave a magic price-cap wand and= =20 instantly reduce your electricity bill. But there is no such wand. Never ha= s=20 been. Never will be.=20 Gary Ackerman is executive director of the Western Power Trading Forum in S= an=20 Jose. E-mail: [email protected]=20 ,2001 San Francisco Chronicle ? Page?D - 5=20 Davis reveals power contracts=20 Critics point fingers after forced release of details=20 Lynda Gledhill, Christian Berthelsen, David Parris, Chronicle staff writers Saturday, June 16, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/06= /16/M N114282.DTL=20 Sacramento -- Under court order, Gov. Gray Davis released details yesterday= =20 of long-term power contracts that lock in $43 billion in power for Californ= ia=20 over the next 20 years, most of it coming from plants now under development= .=20 The average price of $69 per megawatt hour is much cheaper than the price t= he=20 state has been paying in the spot market. Critics warned, however, that it= =20 may leave the state paying far too much for power in just a few years. The= =20 price is also twice the average cost charged just a year ago.=20 But S. David Freeman, Davis' chief negotiator on the contracts, said the=20 state got a good deal despite being in a weak bargaining position when it w= as=20 suddenly plunged into the power-buying business as rolling blackouts swept= =20 the state in January. Nailing down the long-term contracts, he said, forced= =20 down the price of electricity on the spot market.=20 "These are a major building block for licking this energy crisis," he said.= =20 This month, energy prices dropped to their lowest in nearly a year. Critics= =20 of the long-term contracts say they believe generators took advantage of th= e=20 state, and they say other factors -- including milder weather and changing= =20 political winds that may force federal regulators to rein in wholesale pric= es=20 -- led to price drops.=20 "The problem with the contracts is that the governor adopted a long-run=20 strategy for a short-term crisis," said Peter Navarro, a University of=20 California at Irvine economics professor. "The generators wanted these --= =20 they locked in lucrative long-term contracts knowing full well that the pri= ce=20 will drop."=20 Davis -- who released portions of the 38 contracts only after Republican=20 lawmakers and media organizations, including The Chronicle, sued to make th= em=20 public -- defended his energy-buying strategy.=20 "What matters is the total price of power, and on May 10 the state had to p= ay=20 $110 million for power. Two days ago we spent $29 million," Davis said. ". = .=20 . The combination of building new plants, record conservation, long-term=20 contracts are all working to bring the total price of power down in=20 California."=20 Davis officials say the contracts for 600 million megawatt hours help ensur= e=20 that supply will increase over the next several years because 70 percent of= =20 the electricity is contracted to come from plants either under construction= =20 or on the drawing board in California.=20 Some of the agreements contain several clauses, however, that allow prices = to=20 fluctuate with the price of natural gas and require that the state pay for= =20 new taxes levied on power producers.=20 Generators also can walk away from the contracts if the state does not issu= e=20 $12.5 billion in revenue bonds to cover the cost buying electricity on beha= lf=20 of California's cash-strapped utilities by July 1.=20 Although the state treasurer does not expect to issue the bonds until early= =20 September, state power negotiators say they are working with generators to= =20 revise those parts of the contracts. They say generators now have little=20 incentive to abandon the contracts in light of lower wholesale costs.=20 The average price of power on the day-ahead market has dropped from $275 pe= r=20 megawatt hour in January to just $121 for the first part of June. One=20 megawatt is enough electricity to power 1,000 homes for one hour.=20 The contracts are all of different lengths, prices and conditions. They tot= al=20 about 50 percent of the state's needs over the next decade. The state still= =20 has 23 agreements with generators that have not been turned into signed=20 contracts.=20 Freeman said generators drove a hard bargain. Asked if any of them requeste= d=20 that various state investigations into allegations of price gouging be=20 dropped as part of the deals, he responded, "People attempted everything, b= ut=20 we resisted."=20 Although ratepayers will ultimately foot the bill for the power, Freeman sa= id=20 he doesn't believe any new rate increases will be needed as a result of the= =20 contracts.=20 Nettie Hoge, director of The Utility Reform Network, said her staff attorne= ys=20 are still analyzing the contracts, but, so far, they seem to offer a mixed= =20 bag.=20 "These are fairly steep contracts," Hoge said. "They're costly. I think we= =20 paid too much for stability. But to put that all on the governor would be a= =20 mistake. Had FERC acted more rapidly (to cap prices), this wouldn't be=20 necessary."=20 One contract with Dynegy is fixed at $119.50 per megawatt hour for 1200=20 megawatts through the end of this year. The contract then extends through t= he=20 end of 2004 for 800 megawatts of peak and off-peak power.=20 One of the highest prices paid is $249 per megawatt hour for a contract wit= h=20 Coral Power, L.L.C. of Houston. The contract for 100 to 325 megawatt hours= =20 runs from June 1 to Oct 31 of this year.=20 Vikram Budhraja of the Electric Power Group, a consultant to the state=20 Department of Water Resources, said many new power plants in the works woul= d=20 not have been built without the contracts.=20 "These contracts fundamentally alter the supply and demand balance," he sai= d.=20 Mike Wilczek, a senior energy market analyst for the energy industry=20 publication Platts, reviewed the contracts yesterday and said they seemed= =20 appropriate for the time they were written.=20 "They were basically negotiating a lot of these deals at the peak of the=20 market," he said, "when the fears were the worst and when nobody knew what= =20 was going to happen and when everyone was holding onto the power they had."= =20 Wilczek said the state ultimately may have made the right decisions.=20 "It was a risk to wait," he said. "The smart thing was to lock in something= ,=20 and a lot of people did just that, not just the state. The utilities=20 throughout the West were buying on the forward market."=20 Freeman also defended the contracts that include a clause that allows the= =20 price to fluctuate with the price of natural gas. Some of the companies und= er=20 contract also have natural gas divisions. Natural gas costs account for abo= ut=20 80 percent of electricity costs, Freeman said.=20 Consultant Tom Beach of Cross Border Energy in Berkeley said the state may= =20 have traded one set of problems for another with contracts that hinge power= =20 prices on the volatile rates in the natural gas market.=20 "Your electricity price is then pegged to the gas spot market rather than t= he=20 electricity spot market," Beach said.=20 The state said that it would supply its own natural gas if the prices charg= ed=20 by the generators are too high.=20 The contracts are with companies such as Mirant, Dynegy and El Paso, the sa= me=20 companies that Davis has spent months lambasting for gouging the state.=20 That has led some to consider instituting a windfall profits tax on the=20 generators, but Freeman said the contracts would not be subject to the tax= =20 because the prices are reasonable.=20 At least one generator expressed concern about the release, citing=20 confidential information.=20 Anne M. Cleary, president of Mirant California, said releasing the contract= s=20 will jeopardize the price of future contracts. She said the contracts canno= t=20 be put into proper context without, among other things, the price of natura= l=20 gas at the time the deal was negotiated; that information was blacked out o= f=20 the contracts.=20 Nevertheless, she said, "It matters to us because we believe that if everyo= ne=20 in the market has access to this information, then the DWR will not be able= =20 to be as competitive in their procurement ability."=20 Key details of the contracts were blacked out, including data that could=20 identify the plants under contract. Davis insisted on keeping the contracts= =20 secret until this week, saying the details would weaken the state's=20 bargaining position. Critics said the deletions make a thorough analysis of= =20 the deals impossible.=20 "They've taken out most of the stuff we're interested in," said attorney Al= =20 Wickers, who represented The Chronicle and others in the fight to release t= he=20 contracts. The missing material is "essential to the public understanding o= f=20 the true costs and risks of these contracts," he added.=20 Key parts of the deal=20 -- About 70 percent of the electricity would come from plants that are=20 planned or under construction.=20 -- The power represents 50 to 60 percent of California's long-term needs.= =20 -- Some contracts allow the price of electricity to go up or down based on= =20 the price of natural gas or pollution credits.=20 -- A few contracts contain allow the generator to pass along to the state t= he=20 cost of any new taxes imposed.=20 -- Some key details were omitted, including data that could identify plants= =20 under contracts.=20 Chronicle staff writers Robert Salladay, Bernadette Tansey and Chuck=20 Squatriglia contributed to this report. / E-mail Lynda Gledhill at=20 [email protected].=20 ,2001 San Francisco Chronicle ? Page?A - 1=20 California energy market strategy criticized=20 Posted at 11:19 p.m. PDT Sunday, June 17, 2001=20 BY BRANDON BAILEY=20 Mercury News=20 As temperatures climbed in California last July, one power generator offere= d=20 to sell electricity at $500 per megawatt hour -- almost five times what sta= te=20 officials believe it cost to produce.=20 When the state's power demand rose to peak levels on five consecutive days,= =20 utilities couldn't find enough electricity for sale at a lower cost. On eac= h=20 day, officials who manage the power grid reluctantly accepted the company's= =20 offer and paid what they considered an excessive price.=20 Today, the Federal Energy Regulatory Commission meets to consider limits on= =20 the wholesale price of electricity. As they seek Washington's help in fixin= g=20 the energy market, state officials say that what happened last July is=20 evidence that federal regulators were mistaken when they concluded that=20 competitive forces in California would keep power companies from setting=20 their prices too high.=20 In order to sell electricity in California's newly deregulated market, each= =20 of the state's power suppliers had to win permission from FERC to charge=20 whatever price the market would bear. To do that, each company had to=20 demonstrate it would not have ``market power'' -- the ability to drive up= =20 prices and keep them high.=20 State officials now contend that FERC used a faulty economic premise to=20 evaluate those claims: The commission assumed that if a company controlled= =20 less than 20 percent of the electricity supply, it would be unable to=20 exercise significant market power.=20 ``This was a really bad rule of thumb,'' said Severin Borenstein of the=20 University of California Energy Institute. ``The FERC has been using=20 antiquated methods that really don't help in diagnosing market power in=20 electricity markets.''=20 Each of the state's five big commercial power suppliers controls between 5= =20 and 10 percent of California's electrical generating capacity. But critics= =20 say that gives the companies more than enough leverage to charge excessive= =20 rates.=20 ``If demand is high, even a 5 percent market share could be pivotal in=20 setting the price,'' said Anjali Sheffrin, an economist for the California= =20 Independent System Operator, the state's grid manager.=20 The ISO has formally petitioned FERC to revoke the big generators' permissi= on=20 to charge unregulated rates, essentially returning to a system where rates= =20 are based on the cost of production plus a reasonable profit.=20 A complex market=20 Suppliers insist they aren't manipulating prices. But one industry consulta= nt=20 agreed that FERC's 20 percent rule fails to recognize the complexity of the= =20 market.=20 The stakes are high: The grid operator has charged that power suppliers=20 reaped nearly $7 billion in excess revenues last year. And the argument may= =20 ultimately determine how energy is bought and sold in California.=20 Other state agencies are investigating whether power suppliers illegally=20 manipulated power supplies or prices. But experts say that's hard to prove.= =20 The ISO petitions simply argue that the companies should no longer be allow= ed=20 to set their own rates, because the market isn't competitive.=20 Indications are that FERC, which meets today to consider limits on the=20 wholesale price of electricity, will impose new controls. The Washington Po= st=20 reported Sunday that administration officials said President Bush plans to= =20 support less stringent price controls, provided they are based on market=20 factors.=20 Still, most experts are predicting the commission will stop short of the=20 sweeping changes that state officials want. They said it's likely the state= =20 will continue challenging FERC's standard.=20 FERC officials declined comment, but a spokeswoman provided documents=20 confirming the commission has used the 20 percent rule in deciding to let= =20 companies charge unregulated rates.=20 The rule's origin=20 The rule is derived from a more complicated formula originally adopted by t= he=20 U.S. Department of Justice to use in gauging whether corporate mergers in= =20 other industries would violate anti-trust law, according to economists=20 familiar with the standard.=20 But critics say it makes no sense to apply this rule to electricity.=20 Unlike other products, electricity can't be stored in large volumes, so=20 consumers can't buy power when prices are low and use it later when prices= =20 get high.=20 Conservation can help cut demand, but electricity is so essential that the= =20 state has kept buying even when the cost has soared.=20 On a hot day when the state needs plenty of power, for example, demand migh= t=20 reach 38,000 megawatts.=20 If there are only 40,000 megawatts available, and one company controls 3,00= 0=20 megawatts, the state will be forced to buy at least 1,000 megawatts from th= at=20 company. Because the company knows that, the ISO has argued to FERC, the fi= rm=20 can effectively set the price.=20 The ISO estimated what prices the companies should be able to charge under= =20 competitive conditions, based on such factors as fuel prices, operating cos= ts=20 and a reasonable profit. If one company charges higher rates, the theory=20 goes, there should be competing suppliers who will sell for less.=20 No fear of underbids=20 Sheffrin said her studies show the major power suppliers have been able to= =20 charge essentially whatever price they wanted, without fear that competitor= s=20 would underbid them. The studies are based on detailed analyses of power=20 sales by the five major companies and other suppliers.=20 Industry spokesmen say the ISO's economists used flawed assumptions to make= =20 normal behavior seem sinister.=20 ``We stand by the fact that we've operated ethically and legally,'' said=20 Richard Wheatley of Reliant Energy Inc. He said the ISO failed to consider= =20 all the costs of producing power, including the need to recover long-term= =20 investments in buying or building plants.=20 Without seeing the ISO's confidential data, University of Southern Californ= ia=20 economics Professor Charles Cicchetti said he's not convinced the power=20 companies are doing anything wrong.=20 But Cicchetti, who advised Duke Energy when it won FERC's permission to=20 charge market-based rates in 1999, agreed that the commission's 20 percent= =20 rule was overly simplistic.=20 FERC didn't recognize that California really isn't a single open market, he= =20 said.=20 Power produced in Northern California isn't always available for consumers = in=20 Southern California, because of grid congestion. Electricity sold on a=20 long-term contract may not be available in the spot market.=20 And until this year, buyers and sellers could choose between transacting=20 business through the now-defunct California Power Exchange, or the ISO.=20 Feeling the heat=20 By asking FERC to revoke the suppliers' right to charge market rates,=20 Cicchetti says, the state is effectively trying to end deregulation. Instea= d,=20 he believes authorities should concentrate on fixing the flaws in the syste= m.=20 ISO officials have said they will consider legal action if FERC doesn't=20 respond by the end of this month.=20 Democratic leaders in the state Legislature have already raised a similar= =20 challenge in a federal lawsuit.=20 Though a court declined to issue an emergency ruling last month, attorney= =20 Joseph Cotchett said he is continuing to press the case before the Ninth U.= S.=20 Circuit Court of Appeals.=20 Courts are often reluctant to second-guess a regulatory agency. Still, Fran= k=20 Wolak, a Stanford economist who advises the ISO, said he raised the issue i= n=20 congressional testimony last week.=20 ``The truth is going to come out,'' he vowed. ``FERC is going to feel the= =20 heat.''=20 Contact Brandon Bailey at [email protected] or (408) 920-5022.=20 U.S. energy regulators to vote on power caps for West=20 Posted at 6:40 a.m. PDT Monday, June 18, 2001=20 WASHINGTON (Reuters) - Federal energy regulators were expected Monday to=20 expand a form of price relief for wholesale electricity sold in California = to=20 prevent power costs in the Western region from soaring this summer.=20 Amid mounting congressional pressure for action, the Federal Energy=20 Regulatory Commission (FERC) was to hold a special meeting to address the= =20 chronic electricity problems affecting California and the rest of the West.= =20 FERC, which oversees interstate power sales, was widely expected to vote fo= r=20 a compromise approach to limit prices on wholesale electricity sold in the= =20 West, according to congressional sources.=20 That approach would mean expanding a monitoring plan rolled out last month= =20 that only applied to California after state officials declared a power=20 emergency.=20 Under the agency's existing ``price mitigation'' plan, the California price= =20 limits are based on the amount that generators can charge to produce power = at=20 the least efficient plant. Generators may charge higher prices if they can= =20 justify them to the agency.=20 Expanding the plan to the entire Western region would fall short of the=20 strict price caps sought by California Gov. Gray Davis and many Democrats b= ut=20 would still amount to a significant change in policy for FERC.=20 ECONOMIC, POLITICAL CONSIDERATION=20 The stricter price caps sought by Democrats would allow a generator to sell= =20 wholesale power based on a formula covering actual production costs, plus a= =20 moderate profit. That approach would be similar to the way U.S. utilities= =20 were regulated for decades.=20 FERC's Republican chairman, Curtis Hebert, has repeatedly rejected the idea= =20 of price caps, saying market forces should set power prices.=20 However, Republican lawmakers fear they may take a political hit for the Bu= sh=20 administration's decision to oppose strict price caps and therefore pushed= =20 for the compromise that calls on FERC to expand its limited price curbs.=20 The White House says it is worried that price caps would discourage=20 investment in new power plants and fail to encourage consumers to cut home= =20 energy use.=20 Monday's meeting, due to begin at 1 p.m. EDT, would also mark the first tim= e=20 that FERC has been fully staffed with five commissioners since the Californ= ia=20 energy crisis began last year.=20 Republican commissioners Pat Wood of Texas and Nora Brownell of Pennsylvani= a=20 were nominated to the agency by President Bush. Wood is viewed as a Bush=20 confidant, having led the Texas Public Utilities Commission while Bush was= =20 governor of the state.=20 FERC has been under growing pressure from Democrats and Republicans to help= =20 find a solution to California's power deregulation fiasco.=20 Agency officials say that their measures are working. Since the FERC plan f= or=20 California price relief went into effect on May 29, wholesale power prices = in=20 the state have dropped under $100 a megawatt from more than $300 earlier in= =20 May. Bush: FERC Western power plan not price controls=20 WASHINGTON (Reuters) - President Bush said Monday he did not consider an=20 electricity price-relief plan for the Western region that the Federal Energ= y=20 Regulatory Commission was expected to approve to be a form of price control= s.=20 Bush said he remained opposed to electricity price controls. But he said th= e=20 plan that FERC was expected to approve Monday for limited wholesale price= =20 curbs in the West was different.=20 ``I'm interested to see what FERC comes up with. They're not talking about= =20 firm price controls, they're talking about a mechanism to mitigate any seve= re=20 price spike that may occur, which is completely different from price=20 controls,'' Bush told reporters. FERC considers new price limits today=20 State officials say a plan by federal regulators for 24-hour control of=20 wholesale power is 'too little, too late.'=20 June 18, 2001=20 By KATE BERRY The Orange County Register=20 Federal energy regulators will meet today to consider imposing 24-hour=20 controls on wholesale electricity prices in California and the West, but=20 state officials criticized the plan as "too little, too late.''=20 The Federal Energy Regulatory Commission might adopt around-the-clock=20 controls that would require power suppliers to justify prices above a certa= in=20 level. The controls would expand a FERC order that took effect May 29, but= =20 only applied during emergency alerts.=20 State energy officials said the price controls would not help California mu= ch=20 because they are based on the cost of running the least-efficient power pla= nt=20 in the state, typically at high prices.=20 "What has been touted under the guise of price relief puts into place the= =20 highest price,'' said Rep. Anna Eschoo, D-Atherton.=20 Michael Kahn, chairman of the California Independent System Operator, which= =20 manages 75 percent of the electric grid, said FERC must impose price caps o= r=20 cost-based pricing.=20 He dismissed the ability of FERC to order refunds from power suppliers if= =20 prices are deemed excessive. Generators are contesting the $124 million in= =20 refunds - out of a potential $6.8 billion - that FERC has ordered so far.= =20 "This is simply an invitation for years of litigation,'' Kahn said of=20 extending the price controls. "We want the generators to be stopped right n= ow=20 from overcharging us.''=20 Eschoo joined advisers to Gov. Gray Davis in a conference call Sunday to=20 complain that Republican strategists had launched a $5 million advertising= =20 campaign blaming Davis for high power costs.=20 The ads, set to air today, were funded by the American Taxpayers Alliance, = a=20 politically active nonprofit group associated with the Washington law firm= =20 Webster, Chamberlain & Bean. The law firm successfully defended George W.= =20 Bush in the recent Florida vote-count controversy. Atomic generation revisited=20 Energy shortages in the '60s and '70s put the spotlight on nuclear power. N= ow=20 it has new supporters.=20 June 18, 2001=20 By JOHN WESTCOTT The Orange County Register=20 The airplane's engines hummed just south of Orange County as President John= =20 F. Kennedy and his entourage rested during a short hop from San Diego to Sa= n=20 Francisco.=20 The year: 1961.=20 CIA Director John McCone pointed out the pristine bluffs of San Onofre. The= =20 surf crested white on the empty beach, by the brown hills of Camp Pendleton= =20 and the thin strip of Highway 101.=20 Wouldn't that make a nice spot for a nuclear power plant? McCone asked,=20 trying to tie up one last loose end from his recent stint as Atomic Energy= =20 Commission chairman.=20 The president, who liked the idea of splitting atoms for peace, had to agre= e.=20 That casual airplane conversation broke a political logjam, suddenly puttin= g=20 plans for the San Onofre Nuclear Generating Station on track. By 1968,=20 Southern California Edison would switch on the world's largest nuclear powe= r=20 plant.=20 In the decades that followed, San Onofre helped spark the same questions=20 about energy that bedevil us today.=20 How would we get enough power to light all those homes and heat all those= =20 swimming pools? Where is the line drawn between power plants, the environme= nt=20 and blackouts? What role should nuclear power play?=20 Power shortages and the stratospheric cost of electricity have put dozens o= f=20 new power plants on the fast track, though probably none of them will be=20 online in time to fend off summer outages.=20 Old idea gains new proponents=20 Today's energy crunch also has Californians mulling an option once left for= =20 dead: nuclear power. Decades after the horrors of Three Mile Island and=20 Chernobyl turned most people against atomic power, 59 percent of California= ns=20 now favor building more nuclear plants, according to a Field poll in May.= =20 Nuclear energy was the wave of the future in 1963, when the AEC predicted= =20 half the nation's electricity would be nuclear-generated by 2003.=20 A citizens group fought plans for the San Onofre plant. Edison and its=20 partner, San Diego Gas & Electric Co., issued a joint statement describing= =20 nuclear power as "vital to the continued growth and prosperity of Southern= =20 California."=20 At the time, earthmovers were scraping 1.5 million cubic yards of rock and= =20 dirt from San Onofre's bluffs. Lead contractor Bechtel Corp. began erecting= a=20 steel containment shield that would enclose a nuclear reactor and three ste= am=20 generators. An inch thick, pale blue and perfectly round, it was soon dubbe= d=20 "the Beach Ball."=20 A 350-pound reactor vessel squeezed through the Panama Canal on its way to= =20 Long Beach, then crawled down Highway 101 by night at about 3 mph, when it= =20 wasn't hobbled by flat tires. More than 28,000 rods were installed in the= =20 vessel, then filled with uranium oxide pellets.=20 Public interest swelled as the mammoth project continued. More than 58,000= =20 visitors from all 50 states and 27 nations had come to see it by the fall o= f=20 1965.=20 On Jan. 1, 1968, San Onofre's Unit 1 began lighting up parts of Orange and= =20 San Diego counties. It soon revved up to 450 megawatts, enough to light hal= f=20 a million homes.=20 It was by far the most powerful nuclear power plant anywhere, remembers=20 Jarlath Curran, a plant engineer in the early years and today a project=20 manager at San Onofre.=20 "There were no water lines at first, so we used flash evaporators to make= =20 ocean water pure," he said. "They didn't have all the fences and intrusion= =20 detectors they do now. Only about 100 people worked there. There's about=20 2,000 now."=20 Edison soon applied for a major expansion. By then, numerous environmental= =20 groups born in the early 1970s battled it with lawsuits, delaying=20 construction for years.=20 Development plans cut in half=20 Still, many people heralded nuclear power as the clean energy of the future= .=20 One of the most enthusiastic was John Briggs, then a Fullerton state=20 assemblyman.=20 The city of San Clemente also was a fan, but mostly of San Onofre's revenue= =20 possibilities. The city tried in the early 1970s to annex the plant - drawi= ng=20 snickers from San Diego County that it might try to annex Disneyland.=20 The Three Mile Island accident in 1979 turned many against nuclear power.= =20 More than 200 nuclear plants were once expected by the end of the century.= =20 Only about 100 plants operate today.=20 The twin 1,120-megawatt reactors now covered by huge white domes began=20 operating in 1983 and 1984, supplying enough power to run 2.2 million homes= .=20 They tower over the old "beach ball," now encased in concrete. The old plan= t,=20 shut down in 1992, is slowly being torn down.=20 Orange County had only one power plant actually inside its borders, the=20 Huntington Beach Steam Generation Plant. Edison unsuccessfully tried to=20 expand it in the 1970s. It's now owned by the AES Corp., which recently won= =20 the right to fire up its two old generators, churning up enough electrons t= o=20 light up 37,000 homes.=20 Another nuclear plant was once planned for an artificial island off Bolsa= =20 Chica in the 1960s, not for energy but to produce another scarce commodity:= =20 clean water.=20 After years of planning and many hearings, the proposed desalination plant= =20 was scrapped as too expensive.=20 The San Onofre plant today is still among the largest nuclear power plants = in=20 the nation, second only to the Palo Verde plant near Phoenix.=20 More nuclear plants probably lie in California's future, said Ray Golden,= =20 Edison spokesman. But don't expect anything soon.=20 No utility has announced plans for such a plant, and it would take at least= =20 four to six years to build one, he said. Blackouts could hit today, Cal-ISO says=20 Heat wave is expected to tighten supplies, power officials say.=20 June 18, 2001=20 By GARY ROBBINSThe Orange County Register=20 The state could experience power disruptions as early as today due to a=20 growing heat wave that will scorch much of inland California through=20 Thursday, power officials said Sunday.=20 The California Independent System Operator, or Cal-ISO, which manages the= =20 state's power grid, said Stage 1 and 2 power alerts are likely today and=20 Tuesday and that rolling blackouts are possible both days. Power supplies= =20 will be tightest from noon to 8 p.m. today, and during late afternoon=20 Tuesday, when temperatures hit 100 degrees in some parts of the San Joaquin= =20 Valley and the 90s in the San Fernando Valley and Inland Empire.=20 Things could get worse from there.=20 "The hottest days will be Wednesday and Thursday when high pressure covers= =20 all of California, Utah, Arizona and some of the Pacific Northwest," said J= oe=20 Dandria, a National Weather Service forecaster in San Diego.=20 The heat could send energy use soaring past today's projected demand of=20 37,725 megawatts and the forecast 38,700 megawatts Tuesday. Energy demand h= it=20 31,778 megawatts on Sunday.=20 Dandria said a sea breeze will make temperatures tolerable in most coastal= =20 areas. But the breezes won't penetrate very far inland, allowing temperatur= es=20 to soar Wednesday and Thursday, the first full day of summer.=20 Forecasters issued their warning as Gov. Gray Davis was saying that the sta= te=20 could suffer the worst fire season in years. San Onofre generating power full bore again=20 June 18, 2001=20 By JOHN WESTCOTT The Orange County Register=20 San Onofre's turbines are whirring at full strength for the first time in s= ix=20 months, and that's good news for anyone dreading summer reruns - the=20 blackouts of last March and May.=20 Unit 3 reactor, powerless since Jan. 2 because of a routine refueling and= =20 then a disastrous fire, is back joining forces with its identical sister,= =20 Unit 2. That combination gives us a 2,240-megawatt jolt, enough juice to ke= ep=20 2.2 million homes running.=20 A lot of those homes are ours, though some Orange County residents rarely= =20 think about the nuclear plant just across the San Diego border. Unless we'r= e=20 zipping by those two huge domes on I-5, or making nervous jokes about glowi= ng=20 three-eyed fish.=20 San Onofre has been spewing electrons to our televisions and air conditione= rs=20 since Jan. 1, 1968, when Unit 1 was the world's largest nuclear reactor.=20 Then, nuclear power was the "clean" fuel, destined to run everything from= =20 locomotives to toasters.=20 The environmental movement, concerns about nuclear waste and the one-two=20 punch of Three Mile Island and Chernobyl helped derail that future.=20 Now, nuclear power is back - at least it's back in the debate about where o= ur=20 energy is going to come from in the years ahead. Monday, June 18, 2001=20 Opening the contracts=20 The facts starting to trickle out in the wake of a court order to make publ= ic=20 the details of what Gov. Gray Davis has committed California taxpayers to p= ay=20 in long-term electricity contracts demonstrate how important it was to pier= ce=20 the veil of secrecy that has surrounded these contracts since January and= =20 February. The Register was one of several news organizations that joined to= =20 sue Gov. Davis to force full disclosure.=20 The principle is pretty simple. A private business could make a case for th= e=20 importance of keeping details of transactions under wraps for a while on=20 competitive or proprietary grounds - although managers who made a habit of= =20 keeping secrets that have a material impact on financial results from=20 shareholders would find themselves looking for new jobs before long. But th= e=20 governor and his panel of supposed experts were at the negotiating table=20 using money extracted by force from California taxpayers. Given the sometim= es=20 purposely convoluted paths of accountability built into most political=20 systems, the taxpayers can't expect much actual control over how the=20 politicians spend their money. But at least they should be able to find out= =20 how it's being spent, and on a timely basis.=20 Sure enough, some of the concerns expressed at the time the contracts were= =20 being negotiated in secret turn out to be valid. In electricity purchases, = 10=20 years is an unheard-of time period for a long-term contract. As Cal State= =20 Fullerton energy economist Robert Michaels explained to us, electricity is = an=20 inherently volatile commodity and market players are just beginning to=20 develop risk-reduction financial instruments - futures, options, hedges,=20 flexible market-price-based contracts, as have recently been developed for= =20 natural gas markets - as they learn to cope with less rigid price regulatio= n.=20 It looks as if - although some risk-reducing provisions may turn up on=20 further analysis of the contracts - California taxpayers could be locked in= to=20 paying prices that reflect the extremely unstable sellers' market of a few= =20 months ago for up to 10 years. The daily "spot market" prices today are=20 actually lower than what California taxpayers are committed to for years -= =20 although those spot prices could easily rise significantly as the summer=20 heats up. Well, at least the contracts are being opened up for scrutiny and= =20 we are beginning to discover how misguided the state, and the whole idea,= =20 really, was.=20 Whether that will sink in and affect public opinion the next time someone= =20 proposes to invite the government take a bigger role in solving some future= =20 market crisis, is another question.=20 California ISO Unveils Outage Notification Plan; Meets Deadline for=20 Governor's Executive Order to Roll Out Warnings to Public=20 June 18, 2001=20 FOLSOM, Calif.--(BUSINESS WIRE)--June 15, 2001 via NewsEdge Corporation -= =20 The California Independent System Operator (ISO) unveiled a plan today,=20 Friday June 15, 2001, aimed at giving Californians as much notice as possib= le=20 about the likelihood of rotating outages. The notification plan is in=20 response to a June 1st Executive Order by Governor Gray Davis, and a=20 corresponding directive by the ISO Board of Governors.=20 ISO Board of Governors Chair Michael Kahn said the plan will help people co= pe=20 with rotating outages. "Along with giving customers, business and public=20 safety officials adequate time to prepare for possible outages, the warning= s=20 are also expected to spur conservation," said Kahn. "Conservation may even= =20 obviate the need for the outage."=20 As of today, the California ISO has in place a system for issuing a public= =20 warning two days before the possibility of rotating blackouts, which will b= e=20 refined 24 hours ahead of time based on dynamic factors such as weather,=20 power plant and transmission line outages, and conservation. If rotating=20 outages appear imminent, the ISO will notify local utilities and the=20 Governor's Office of Emergency Services 90 minutes ahead. That will give=20 utilities time to provide a one-hour's notice to the news media, the public= =20 and other agencies about where the outages will occur and how many customer= s=20 will be affected.=20 Matching the supply and demand of electricity in California is a constant= =20 balancing act. The weather, the flow of imported power and conservation=20 efforts and overall demand can fluctuate hour by hour. California ISO=20 President and CEO Terry Winter said people need information about the=20 possibility of blackouts. "Our goal is to give people the information they= =20 need to plan their lives, run their businesses, and reduce the impact of=20 rotating outages. We will be fine tuning this system through the summer to= =20 make sure we're achieving that goal."=20 Electronic notices will be issued 48 and 24 hours ahead of challenging days= =20 when the grid operators forecast possible rotating blackouts. These notices= =20 are an extension of the ISO's current electrical emergency notifications=20 issued via its Alerts, Warnings and Emergencies System, which are e-mailed= =20 and e-paged to key governmental agencies, utilities and media.=20 The ISO's unique System Conditions section of its website www.caiso.com,=20 which currently features AWE notices, demand forecasts and other informatio= n,=20 will be enhanced by the addition of "Today's Outlook." The new resource wil= l=20 forecast the supply and the demand of electricity, any expected shortfall,= =20 and other pertinent information. Today's Outlook is already on line and=20 posted at www.caiso.com/SystemStatus.html.=20 The California ISO is charged with managing the flow of electricity along t= he=20 long-distance, high-voltage power lines that make up the bulk of California= 's=20 transmission system. The not-for-profit public-benefit corporation assumed= =20 the responsibility in March 1998, when California opened its energy markets= =20 to competition and the state's investor-owned utilities turned their privat= e=20 transmission power lines over to the California ISO to manage. The mission = of=20 the California ISO is to safeguard the reliable delivery of electricity,=20 facilitate markets and ensure equal access to a 25,526 circuit mile "electr= on=20 highway."=20 CONTACT: California ISO, Folsom | Stephanie McCorkle, 888/516-NEWS BPA and California Ink Summer Assistance Plan=20 June 18, 2001=20 PORTLAND, Ore., June 15 /PRNewswire/ via NewsEdge Corporation -=20 The Bonneville Power Administration, the California Department of Water=20 Resources and the California Independent System Operator have reached=20 agreement on a plan that outlines when and how BPA may be able to help=20 California during this summer's anticipated energy shortages.=20 "The principles on which the plan is based," said Steve Wright, BPA's actin= g=20 administrator, "will ensure that all transactions will benefit both the=20 Pacific Northwest and California and that reliability problems will not be= =20 shifted from one region to the other. This agreement protects and benefits= =20 the Northwest while helping California when it is possible."=20 According to the plan, BPA and the California Department of Water Resources= =20 will share information on each power supply situation. If California is in= =20 imminent danger of rolling blackouts, CDWR will alert BPA and the agency wi= ll=20 determine what, if anything, it can do to help. Because of the drought in t= he=20 Northwest, there may be times when BPA may not be able to help. If the agen= cy=20 can help, CDWR and BPA will agree on the terms.=20 The transactions are expected to be in the form of energy exchanges with th= e=20 exchange ratios and the timing of the returns to be mutually agreed upon at= =20 the time of the transaction. Instead of the fixed 2-to-1 exchange ratios BP= A=20 and California used earlier this year, the ratios will depend on market=20 conditions, the shape of BPA's system and the nature of the request. The=20 ratios will always be better than 1 to 1 for BPA. The exchange energy would= =20 be returned to BPA in 24 hours, in seven days or next fall depending on BPA= 's=20 energy needs.=20 "We want California to know that we're prepared to help them if we can as= =20 long as it does no harm to the Pacific Northwest," said Wright. BPA would= =20 only alter the way it operates the hydro system to benefit fish listed as= =20 threatened and endangered if California authorities assert that blackouts= =20 sufficient to threaten human health and safety are imminent.=20 Changes to fish operations are possible under the National Marine Fisheries= =20 Service biological opinion in order to preserve system reliability. If fish= =20 operations must be modified, an environmental premium of 0.5 megawatts woul= d=20 add to the exchange return ratio for those hours in order to fund any neede= d=20 environmental remediation. This would, for example, change a 1.5 to 1=20 exchange into a 2 to 1 exchange.=20 BPA and California officials will continue discussions to arrive at a=20 contingency plan that would determine the conditions under which California= =20 may be able to help the Northwest in the event of energy shortages during t= he=20 winter when Northwest energy usage is at its highest.=20 MAKE YOUR OPINION COUNT - Click Here=20 http://tbutton.prnewswire.com/prn/11690X61507545=20 SOURCE The Bonneville Power Administration=20 CONTACT: Ed Mosey or Mike Hansen, both of The Bonneville Power=20 Administration, 503-230-5131=20 Web site: http://www.bpa.gov=20 Editorial=20 California 's Energy Woes (Cont'd) ?=20 06/18/2001=20 The Washington Post=20 FINAL=20 Page A16=20 Copyright 2001, The Washington Post Co. All Rights Reserved=20 A May 31 Business story questioned the historical effectiveness of price ca= ps=20 but unwittingly made the case for them in regard to electricity in Californ= ia=20 .=20 The reporters wrote, "Economists say that price caps make the most sense wh= en=20 markets are not working properly -- when a shortage of sellers, for instanc= e,=20 means there is no real competition."=20 That summarizes California 's problem: It has only a few sellers of energy,= =20 and unscrupulous suppliers can game the market and push wholesale prices fo= r=20 electricity to unprecedented levels.=20 For that reason, Sen. Gordon Smith (R-Ore.) and I have introduced legislati= on=20 that would force the Federal Energy Regulatory Commission to impose a=20 temporary wholesale rate cap or cost-based rates on energy sold into the=20 Western region.=20 As 10 noted economists recently wrote to President Bush, cost-of-service=20 prices are an "obvious remedy" to California 's broken market and will help= =20 ensure "just and reasonable rates."=20 DIANNE FEINSTEIN=20 U.S. Senator (D-Calif.)=20 Washington=20 *=20 "I'm going to hold my breath until you buy me a pony!" seems to be the logi= c=20 in California these days.=20 Californians want price caps on their electricity , which means that the re= st=20 of us must subsidize them by paying higher electricity rates and sending th= em=20 our available power. At the same time, I watch them on TV, demonstrating=20 against building more generating plants.=20 Californians won't get real (we knew that already), but the rest of us=20 should. We should tell them to solve their own shortage by increasing their= =20 own supply.=20 CHRISTOPHER M. WALLACE=20 Dale City=20 *=20 In his June 13 op-ed column, Robert J. Samuelson tries to minimize the=20 negative effects of the huge price increases California is paying for=20 electricity by noting that the increases are only 2 percent of California '= s=20 economic output in dollars. Ask a small-business owner what percentage that= =20 comes to in operating costs. Some have had their rates increased by more th= an=20 50 percent. California paid $7 billion for electricity in 1999 and $27=20 billion in 2000; it expects to pay $50 billion this year with little or no= =20 increase in consumption. No matter what percentage of the total economic=20 output, it is easy to tell when you are getting gouged.=20 The large vacillations in prices because of supply and demand make a strong= =20 argument against deregulation. We do not need an electricity market in whic= h=20 one pays hardly anything one year and the next year one has to refinance th= e=20 house to cover the power bills. Unregulated markets, with prices rising and= =20 falling wildly, are not well suited for basic necessities, such as=20 electricity , natural gas and gasoline, especially where there is a long ti= me=20 between shortages and reinvestment to increase supply.=20 RICH WILLIAMS=20 Petaluma, Calif.=20 http://www.washingtonpost.com=20 Contact: http://www.washingtonpost.com=20 A Section=20 Bush to Back FERC Energy Price Limits; Proposed Restraints Would Affect 11= =20 States Mike Allen ?=20 06/18/2001=20 The Washington Post=20 FINAL=20 Page A02=20 Copyright 2001, The Washington Post Co. All Rights Reserved=20 President Bush, who has argued against price caps on California electricity= ,=20 plans to support less stringent price limits by the Federal Energy Regulato= ry=20 Commission, administration officials said yesterday.=20 The commission will meet today to consider new restraints on the wholesale= =20 price of electricity in California . An aide to California Gov. Gray Davis= =20 (D) said the governor considers the commission's leading proposal to be "to= o=20 little, too late."=20 Administration officials said they will argue that Bush can support new FER= C=20 limits that are based on market factors, and will contend that the presiden= t=20 has not changed his position.=20 Nevertheless, the willingness to embrace new limits could temper the anxiet= y=20 of some congressional Republicans, who fear Bush has handled the matter=20 callously. Rep. Anna G. Eshoo (D-Calif.) said Vice President Cheney rankled= =20 some members of the California delegation during a Capitol Hill meeting las= t=20 week.=20 "He lectured us about markets," Eshoo said yesterday on a conference call= =20 with reporters organized by Davis's office. "When I reminded him that our= =20 market was dysfunctional and that in a healthy market there's competition, = he=20 looked at his watch."=20 FERC, an independent agency with commissioners appointed by the president,= =20 has limits on wholesale electricity prices in California that are in effect= =20 only during emergency power shortages. FERC sets a target price based on th= e=20 costs of the least efficient producer, and companies have to explain in=20 writing if they exceed that target.=20 At a special meeting today to deal with California energy issues, the=20 commissioners will consider a proposal supported by congressional Republica= ns=20 that would extend those restraints around the clock during the next year, a= nd=20 to 10 other Western states, federal officials said.=20 Davis plans to use a Capitol Hill appearance this week to reiterate his=20 request for the federal government to order electricity generators to refun= d=20 billions of dollars to his state, an aide said.=20 Power producers are planning television ads in California that Democratic= =20 officials consider to be anti-Davis, and the governor plans to point to tho= se=20 campaigns as evidence that generators have made excessive profits during th= e=20 state's power crunch, the aide said.=20 One of California 's leading electricity generators, Reliant Energy Inc. of= =20 Houston, said it is considering television ads in California but has not ma= de=20 them yet. Richard N. Wheatley, the firm's director of corporate=20 communications, said the ads would be "educational, talking about the=20 supply-demand imbalance in California ."=20 Asked about Davis's planned comments about the ad spending, Wheatley said,= =20 "There's been a tremendous amount of misinformation coming out of Sacrament= o,=20 so I'm not surprised by the tenor of the remarks."=20 Time magazine reported that Republican consultants hope to raise $25 millio= n=20 to run an anti-Davis ad in California beginning today under the name of the= =20 American Taxpayers Alliance.=20 Davis will make his request for refunds at a hearing Wednesday called by Se= n.=20 Joseph I. Lieberman (D-Conn.), the new chairman of the Governmental Affairs= =20 Committee. Lieberman held his first hearing on energy regulation last week= =20 and said the commission had done too little to carry out its mandate to=20 ensure "just and reasonable" wholesale energy rates following deregulation = in=20 California .=20 Lieberman's hearings are an example of the benefits to Democrats of=20 controlling the Senate. But Senate Majority Leader Thomas A. Daschle (D-S.D= .)=20 doused some Democratic officials' desires for investiga- tions of financial= =20 dealings of Bush administration officials.=20 "Democrats want to legislate, not investigate," Daschle said on "Fox News= =20 Sunday." "We're not going to engage in payback. There's plenty of temptatio= n=20 to do that, but we're not going to do that."=20 Staff writer Peter Behr contributed to this report.=20 http://www.washingtonpost.com=20 Contact: http://www.washingtonpost.com=20

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Enron Mentions

Enron and Exelon Unit Set Chicago Power Deal The Wall Street Journal, 06/07/01 World Watch The Wall Street Journal, 06/07/01 Enron Broadband invests in AP Engines Houston Chronicle, 06/07/01 Attempt to save Enron power project in India extended to third day Houston Chronicle, 06/07/01 Derwent Valley. : Grosvenor Place Pre-letting Dow Jones International News, 06/07/01 India Dabhol Pwr Lenders Mtg Ends "Positively" - Source Dow Jones Asian Equities Report, 06/07/01 INDIA: Private firms expect Enron India's woes to end. Reuters English News Service, 06/07/01 India IDBI Exec Leaves Dabhol Mtg Early; Reason Unknown Dow Jones International News, 06/07/01 INDIAN PM CONFIDENT OF RESOLVING ENRON DISAGREEMENT SOON Asia Pulse, 06/07/01 Walking the talk? The Daily Deal, 06/07/01 GM, Other U.S. Companies Blast Bush Move to Shield Steelmakers Bloomberg, 06/07/01 Pacific Hydro Bends With the Wind, Flows With Water (Update5) Bloomberg, 06/07/01 Council status quo for blacks Hispanic growth likely to affect white wards Chicago Tribune, 06/07/01 Enron Plans to Challenge Power Regulator's Order, Paper Says Bloomberg, 06/07/01 Since when does rape equal justice? Chicago Tribune, 06/07/01 PPA in force, claims DPC Business Standard, 06/07/01 Calif Eyes Ending Access To Alternative Power Suppliers Dow Jones Energy Service, 06/06/01 Enron and Exelon Unit Set Chicago Power Deal Dow Jones Newswires 06/07/2001 The Wall Street Journal A4 (Copyright (c) 2001, Dow Jones & Company, Inc.) CHICAGO -- Enron Corp. and Exelon Corp.'s Commonwealth Edison Co. signed an agreement to supply power to the city of Chicago and 47 suburban communities, in the largest such deal since Illinois deregulated its electricity industry in 1997. Under the agreement, Enron will provide 60% of the 400 megawatts of power contracted annually while ComEd will provide the rest. Terms of the contract, expected to go into effect this year, weren't disclosed. The coalition of governments sent out requests for bids to the state's 13 registered electricity providers last summer in a bid to bring down power costs. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. International World Watch Compiled by David I. Oyama 06/07/2001 The Wall Street Journal A17 (Copyright (c) 2001, Dow Jones & Company, Inc.) ASIA/PACIFIC Lenders to Enron Unit Continue Talks Foreign and Indian lenders are scheduled to meet again today in Singapore, after two days of talks with Dabhol Power, U.S. energy company Enron's Indian unit, ended in deadlock, according to R.M. Ganatara, general manager of the Industrial Development Bank of India. The talks are over the future direction of its $2.9 billion power project near Bombay. "Something is being hammered out; there isn't a common meeting point yet. We will be looking toward a solution to end this crisis" at today's meeting, he said. But he said he wasn't "sure how and where the talks will end" concerning the project, which has been torn by a bitter dispute between Dabhol and the Maharashtra State Electricity Board over nonpayment of bills and power charges. June 7, 2001, 12:09AM Briefs: Houston & state Enron Broadband invests in AP Engines Enron Broadband Services, a division of Houston-based Enron Corp., took part in a $30 million venture investment into Massachusetts-based tech firm AP Engines. Private equity fund Thomas Weisel Capital Partners led the round, while Atlas Venture, Bessemer Venture Partners and Commonwealth Capital Ventures, Lighthouse Capital Partners and Mentmore Venture Partners also participated in the round. AP Engines develops software that allows broadband Internet service providers, such as cable and telephone companies, to move a variety of data types, including, e-mail, voice, video-on-demand and video conferencing over their networks. June 7, 2001, 9:58PM Houston Chronicle Attempt to save Enron power project in India extended to third day Bloomberg Business News SINGAPORE -- Indian banks that funded Dabhol Power Co., a unit of Enron Corp., and international lenders extended a meeting into a third day to try to save the $3 billion power project from closure, bankers said Wednesday. Executives from Industrial Development Bank of India, or IDBI, other Indian banks and international lenders such as ABN Amro Holding NV decided to meet again today after initially planning a two-day meeting, the bankers said. The meeting was called to resolve a dispute related to power prices that has resulted in Dabhol and the Maharashtra State Electricity Board, its only customer, starting to terminate the project. The fate of Houston-based Enron's first investment in India is seen as a litmus test for future foreign involvement in infrastructure projects in the country. Indian banks have the most at stake. Unlike them, international lenders received government guarantees for about $600 million they lent to the project. The Indian banks, which have given as much as $1.4 billion in unsecured loans, are that concerned foreign creditors may call for a termination of the project and invoke their guarantees and are seeking ways to keep it alive. Lenders such as ABN Amro, Citibank N.A., a unit of Citigroup, Bank of America and Credit Suisse First Boston in April approved Dabhol's decision to begin termination of its power supply contract with the board. Foreign banks wouldn't comment on what solution they are seeking from the Indian lenders at the Singapore meeting. Derwent Valley. : Grosvenor Place Pre-letting 06/07/2001 Dow Jones International News (Copyright (c) 2001, Dow Jones & Company, Inc.) LONDON -(Dow Jones)- The company has, through one of its subsidiaries, pre-let further office space at 21 Grosvenor Place, SW1 to Enron Power Operations. Enron took 1,980 sq. m (21,300 sq. ft) earlier this year and is now taking an additional 1,170 sq. m (12,600 sq. ft), at GBP0.7m per annum. The rent payable equates to GBP55 per sq. ft, for a lease expiring in 2014, with reviews in 2004 and 2009. Refurbishment of this newly-let space will be incorporated into the current scheme, at an additional cost of GBP1m, with the work scheduled for completion at the end of 2001. ICV Edited News from Dow Jones Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. India Dabhol Pwr Lenders Mtg Ends "Positively" - Source 06/07/2001 Dow Jones Asian Equities Report (Copyright (c) 2001, Dow Jones & Company, Inc.) SINGAPORE (Dow Jones) A three-day meeting involving institutional domestic and foreign lenders to U.S. Enron Corp.'s (ENE) troubled Dabhol Power Co. project in India ended Thursday "positively," one of the lenders told Dow Jones Newswires. He added no further meetings were planned in Singapore. Dabhol, India's largest private power plant, was scheduled for commissioning in two phases. The project's first phase, a 740-megawatt power plant, has already been commissioned and 1,444-megawatt phase two is due to be completed later this year. The $3 billion Dabhol project has been mired in financial disputes when its main customer, the Maharashtra State Electricity Board, has failed to pay several of its bills. Dabhol has come under fire because of the relatively high cost of its power. Critics object to Dabhol charging INR7.1 a kilowatt-hour for its power, compared with INR1.5/KWh charged by other suppliers. Enron Corp. (ENE) has a 65% controlling stake in the controversial 2,184-megawatt, $3 billion Dabhol project, which supplies power to the State Electricity Board. MSEB has 15%, General Electric Co. (GE) has 10% and Bechtel (X.BTL) with 10% are the other shareholders in the project. A senior official with an Indian lender involved in the DPC project confirmed that the meeting's outcome was positive. "There were some positive developments. That's all I can say," the official told Dow Jones Newswires by telephone. IDBI Executive Director R.S. Agarwal denied media reports that lenders had proposed mothballing the second phase of the power project at the lenders meeting in Singapore. "We aren't considering any such thing. Reports that say so are wrong. That was a proposal from Dabhol Power to mothball the DPC's Phase Two for a year," Agarwal said, speaking from Bombay. The DPC had proposed suspending construction of Phase Two of the power project for "about a year or so until basic issues are sorted out," he said. "It was felt in the meeting that the (Phase Two) of project should be mechanically completed in all respects, and then the project's position should be reviewed thereafter," he said. "We have forwarded the DPC's proposal to the lenders' engineer Stone & Webster (U.SEW) to study its commercial implications and have asked them to report back," Aggarwal said. He said Stone & Webster's assessment should be completed in around one week's time. DPC refused to comment on the result of the lenders' meeting. A Bombay-based DPC spokesman said he couldn't pass comment on "the internal talks of a meeting." The second phase of the project, a 1,444 megawatt power plant, is more than 90% complete. Speaking earlier Thursday, Wade Cline, DPC's managing director, said an informal deadline of mid-June had been set to decide whether to continue with Phase Two construction. However, Cline said the deadline was "not a definitive D-Day." "One of the key decisions they (the lenders) are focusing on is continuing with (Phase Two) construction at the site," he said. Wade said that an unspecified sum of money had yet to be paid to Phase Two's contractors led by Bechtel (X.BTL). "It's a significant amount of money," Cline said, without elaborating further. "(Phase Two) of the Project hasn't had any loan disbursements in the last three months," he added. One informed source familiar with the lenders' discussions said Phase Two completion "would require US$500 million," adding the amount owed to contractors is in the region of US$30 million-US$40 million. Lenders are attempting to steer the government towards considering additional buyers for the power produced by DPC. "We are now at a time when there isn't a lot of certainty as to who is going to buy the power. We are all working to find solutions to that problem," Cline said. -By Sri Jegarajah, Dow Jones Newswires; 65-415-4066; [email protected] (Himendra Kumar in New Deli and Daniel Pearl of the Asian Wall Street Journal contributed to this report.) Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. INDIA: Private firms expect Enron India's woes to end. 06/07/2001 Reuters English News Service (C) Reuters Limited 2001. NEW DELHI, June 7 (Reuters) - India's private power producers expect an early end to the dispute between Enron Corp and a local utility after Prime Minster Atal Behari Vajpayee said he was optimistic about the U.S. firm's $2.9-billion project. "Now the central government is taking interest. That too at the highest level. That is very nice," Harry Dhaul, director-general of the Independent Power Producers' Association of India, told Reuters. On Wednesday Vajpayee said he was confident that Dabhol Power Co, 65-percent owned by Enron, and the Maharashtra State Electricity Board (MSEB), the plant's only buyer, would sort out their problems. MSEB, which complains that Dabhol produces costly power, defaulted on payments of $48 million to DPC last year. The squabble provoked Enron to serve a preliminary termination notice to MSEB and the utility declared late in May that it had stopped buying power from the controversial plant. Dabhol's first phase of 740 MW is already operational and the next phase was scheduled to add 1,444 MW later this year. MSEB has already said it would not buy power from the project's next phase. Private power producers, who have been demanding federal intervention in the dispute said Vajpayee's comments augured well for the plant and will help refurbish India's image that took a beating after the dispute involving its largest direct foreign investor. "I think the prime minister has done absolutely the right thing. It is going to send the right signal that we are back on track and the international investors concern will be duly met." Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. India IDBI Exec Leaves Dabhol Mtg Early; Reason Unknown 06/07/2001 Dow Jones International News (Copyright (c) 2001, Dow Jones & Company, Inc.) NEW DELHI -(Dow Jones)- Industrial Development Bank of India Executive Director R.S. Agarwal returned to India from Singapore late Wednesday after two days of talks between domestic and foreign lenders on the future of Enron Corp.'s (ENE) troubled Dabhol Power Co. Agarwal has returned to India before the meeting has concluded. The meeting - originally scheduled for two days - has been extended into a third day as both parties have failed to reach any common ground on how to resolve a prolonged dispute between the DPC and its sole buyer of power the Maharashtra State Electricity Board. Agarwal didn't give a reason as to why he had returned from the meeting early. Late Wednesday, R.M. Ganatra, IDBI general manager said talks had ended in a deadlock. "Something is being hammered out, there isn't a common meeting point yet." Speaking from the company's Bombay headquarters, Agarwal said "some (IDBI) representatives are there still (in the Singapore lenders' meeting)." He didn't elaborate further. DPC officials are also attending the meeting. Domestic lenders which include IDBI, State Bank of India (P.SBI) and ICICI Ltd. (IC) have lent US$1.4 billion to the US$2.9 billion Dabhol Power project. Last month, Dabhol Power issued a preliminary notice to terminate its agreement to sell power to India's Maharashtra state government and to provide power from its online 740-megawatt Dabhol Power plant. Dabhol Power issued the notice to terminate after the state failed to pay December and January power bills amounting to US$48 million on time. The state and Dabhol Power are currently in talks in an effort to see if they can renegotiate the deal including a power purchase agreement the state says is now too expensive. Also, a second phase of the project, a 1,444-megawatt power plant more than 90% complete, also is in doubt. -By Himendra Kumar, Dow Jones Newswires; 91-11-461-9427; [email protected] Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. INDIAN PM CONFIDENT OF RESOLVING ENRON DISAGREEMENT SOON 06/07/2001 Asia Pulse (c) Copyright 2001 Asia Pulse PTE Ltd. MUMBAI, June 7 Asia Pulse - The Indian Prime Minister, Atal Bihari Vajpayee, today expressed confidence that the 7-month old imbroglio over purchase of power from Enron promoted-Dabhol Power Company (DPC) would be resolved soon. Vajpayee, who arrived here for a knee surgery, told reporters that there were difficulties in finding a solution, but expressed confidence that the issue would be sorted out. "Right steps are being taken to sort out the matter," he said, adding the Maharashtra government and the U S energy major Enron were in a position to resolve the imbroglio. Centre has already directed the Central Electricity Authority (CEA) to scout for buyers of DPC power, mainly in the power-deficient states. Asked whether the federal government would be buying surplus power from Enron -promoted Dabhol Power Company, Vajpayee commented "Who will purchase such a costly power?" (PTI) 07-06 0950 Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Industry Insight Walking the talk? by Lachlan Colquhoun 06/07/2001 The Daily Deal Copyright (c) 2001 The Deal LLC India's finance minister says the country is open for business, but delayed deals and investor wariness tell a different story. Indian Finance Minister Yashwant Sinha promised earlier this year he would "walk the talk" on liberalizing the country's famously protectionist foreign direct investment regime. Five months on, he's clearly proud of his accomplishments. Too proud. "The reform measures the government has put in place have paid significant attention to foreign direct investment," Sinha said in an interview. "An investor-friendly policy regime has been put in place with foreign investment being permitted in almost all sectors under the automatic route." Sinha initially won applause from foreign investors for introducing a program that included key privatization initiatives and select sector foreign direct investment liberalization. But the minister has stumbled recently on four key deals. The main privatization targets for this year -- state flag carrier Air-India Ltd., car maker Maruti Udyog Ltd. and local telecom giant Videsh Sanchar Nigam Ltd. -- all remain unsold. And Enron Corp.'s long-troubled effort to make a profit from its $3 billion investment in a 65%-owned power plant in the state of Maharashtra -- the largest foreign investment in India -- has hit a brick wall. The Houston power company moved in May to abandon its decade-long effort after repeated run-ins with the state government over unpaid bills. For corporate dealmakers, India continues to tempt and disappoint. With a population of 1 billion and an emerging middle class, the prospect of a reforming, open Indian economy fascinates foreign companies in the way China did in the 1990s. The only problem is the government's inability to implement its rhetoric on reform. Sinha described the reform process as "irreversible." However, he said the country was following a "calibrated" approach to "allow the economy enough time to absorb the impact of restructuring." But calibrated to what? No foreign groups, for example, were among the bidders expressing interest in the 25% stake in Videsh Sanchar Nigam the national government is selling. India's tangled telecom regulations made a bid far too problematic. New Delhi's effort to sell 40% of Air-India is also freighted with red tape. First off, the government is offering only 26% to a foreign carrier. This led Delta Air Lines Inc. of the U.S. and Air France, which were planning a joint bid, to drop out of the race. That cleared the path for a bid by Singapore Airlines Inc. in partnership with the local Tata group, the original owners of the nationalized air carrier. But what is a minority stake in perpetually money-losing Air-India worth? SIA and Tata could well balk if New Delhi asks too much. Then there is the government's 50% stake in Maruti Udyog. Joint venture partner Suzuki Motor Corp. has the first right of refusal on the government's choice of buyer. The Japanese carmaker prefers that General Motors Corp., which holds a 20% stake in the local carmaker, buy out the government. But the government has said no. With New Delhi and Suzuki barely on speaking terms, the sale could be a long way off. This would make the issue "forever and after the epitome of lost privatization opportunities," says Udayan Bose, chairman and CEO of Lazard India. Sinha's response? "The government appointed a committee on March 26 to negotiate with Suzuki. The committee has commenced formal negotiations with Suzuki." To be fair, Sinha has one piece of reform of which to be proud. Passage of legislation liberalizing the insurance sector last year was his major triumph and a landmark for global insurance giants. Standard Life Assurance Co. and Prudential Corp. plc of Britain, as well as Metropolitan Life Insurance Co. and American International Group Inc. of the U.S., are among the foreign players already hooked up with Indian partners. Sinha says the reforms will triple the size of the local insurance market within three years. Sinha predicts other victories soon. "We have already taken the decision to privatize 27 public sector companies," he said. "In most of these cases, the process is on. We have streamlined procedures, and it is our duty to convince the people of this country and Parliament that the process is transparent." Still, the privatizations of Air-India, Maruti Udyog and VSNL mean the government's $2.3 billion sales target for this year is clearly in trouble. And recent overall FDI figures are not encouraging, either. According to the Reserve Bank of India, approval was granted for FDI of $55.1 billion between 1991 and 1998, but only $12 billion was actually invested. India's infamous bureaucracy turned many potential investors away. But also of concern is the economy. GDP growth, which many regard as inflated by statistical quirks anyway, has declined from 6.6% in the fiscal year ending March 2000 to an estimated 6% in fiscal 2001. Industrial growth fell from 8.2% to 6%. Pressed about a lackluster macroeconomic picture Sinha pointed instead to the nation's undoubted strengths. "India offers a vast reservoir of well-skilled technical manpower, an abundance of natural resources and a well-developed communication network," he boasted. "The country has liberalized in practically all sectors and has developed a substantial degree of openness." More's the pity, then, that the country has a demonstrated ability to shoot itself in the foot whenever economic reform looks promising. Lachlan Colquhoun is a Daily Deal correspondent based in Syndey. http://www.thedeal.com Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. GM, Other U.S. Companies Blast Bush Move to Shield Steelmakers 2001-06-07 00:01 (New York) Washington, June 7 (Bloomberg) -- General Motors Corp. is concerned that an investigation President George W. Bush ordered of foreign steel in the U.S. may lead to import curbs, pushing up prices for the cars and trucks it sells consumers. Stripmatic Products Inc., a Cleveland company with 30 employees that supplies brake components to GM and other automakers, has a deeper worry: If it's forced to buy more expensive U.S. steel, it may lose all its customers. ``If they put on import tariffs, I will lose my business to overseas manufacturers,'' said Stripmatic President Bill Adler, whose 55-year-old company imports low-grade stainless steel exclusively from a French manufacturer. GM, the world's largest automaker, and Stripmatic were among the U.S. steel-consuming companies that blasted Bush's Tuesday order, warning it may cost money and jobs in the $37 billion U.S. steel industry. ``Imported steel has the effect of keeping a dampener on prices,'' said Bill Noak, a General Motors spokesman. Bush told the International Trade Commission, a U.S. agency, to look into whether steel imports were harming domestic producers, a step that may clear the way for remedies such as tariffs, import curbs or an outright ban on the foreign products. The president responded to pressure from U.S. steelmakers such as LTV Corp., Bethlehem Steel Corp. and Weirton Steel Corp., which have been lobbying for import protection since 1998, when a flood of foreign metal sent steel prices and profits plunging. Since 1998, 18 U.S. steel companies, including LTV, the country's second largest, filed for bankruptcy. Pushing for Protection The U.S. industry has lost 80 percent of its jobs in the last two decades, and steelmakers and steelworkers mostly blame imports, which now take up about 27 percent of the U.S. market, the world's largest. They charge that unfair trade practices, including government subsidies that allow companies from South Korea to Brazil to sell steel in the U.S. below the cost of production, have made it impossible to compete on price. A metric ton of structural steel used in high-rise buildings cost about $615 in the U.S. at the end of last year -- and $275 in Russia, according to the International Cost Engineering Council, a nonprofit group. Bush backed that contention when he said the U.S. industry has been ``affected by a 50-year legacy of foreign government intervention in the market.'' ``All we've ever asked for is a fair and level playing field,'' said Daniel Dimicco, president of Charlotte-based Nucor Corp., a ``mini-mill'' that makes steel by melting scrap and was the most profitable domestic steelmaker last year. ``That is the message the president is sending, and we support it.'' 8 Million Workers Officials from companies that consume steel in the U.S. contend that such protection would cost the U.S. far more than the steel industry would gain. About 8 million Americans are employed by steel-consuming industries -- including auto and appliance makers, construction companies and energy companies, according to the Consuming Industries Trade Action Coalition, a group of steel consumers including Caterpillar Inc., Procter & Gamble Co. and Enron Corp. Steel producers employ about 160,000 people, down from 800,000 20 years ago. An April study by the coalition examined the effect of steel import quotas and tariffs and found that manufacturers using steel would be forced to cut jobs because of higher costs. That would result in an overall loss of between 19,000 and 32,000 jobs, while protecting only about 3,700 steelworker jobs. Michael Fanning, a spokesman for Michelin North America, the number two U.S. tire maker that also manufactures the B.F. Goodrich and Uniroyal brands, said any move by the U.S. to add tariffs or restrict imports ``will hurt the downstream users.'' No Domestic Suppliers ``We import a lot of high-quality steel from outside the United States from companies in Germany, France, Japan, simply because we can't get it in this country,'' Fanning said. ``We find it disheartening that we would be penalized simply because we can't get any domestic supplier.'' The American Institute for International Steel, an association of U.S. and foreign companies that support free trade, said American steel companies themselves would be damaged by import restrictions because they are among the largest importers of foreign products. Domestic steelmakers imported almost a third of the 37.8 million tons of foreign steel brought into the U.S. last year, the institute said. Most was in the form of ``slab'' -- raw steel -- or semi-finished products that were finished by U.S. companies. Bill Jens, owner of Ataco Steel Products Corp. of Cedarburg, Wisconsin, whose 100-employee company annually sells $13 million in lawn and garden implements, among other products, said Bush's move is aimed at ``protecting companies that are really something of a dinosaur.'' ``They haven't been keeping up technologically with what's been going on in the world, and all of a sudden we're going to be forced to buy their steel at a higher price because they can't keep up?'' he said. ``I don't think that's right.'' Pacific Hydro Bends With the Wind, Flows With Water (Update5) 2001-06-07 02:18 (New York) Pacific Hydro Bends With the Wind, Flows With Water (Update5) (Closes stock price.) Melbourne, June 7 (Bloomberg) -- Pacific Hydro Ltd., the best- performing stock in Australia's key index in the year to date, hopes the westerly gales that buffet the southern coast will lift its shares even higher. The Melbourne-based company plans to turn squalls into electricity by building 114 windmills on the Victoria coastline. It says the nation's biggest wind farm would provide enough power for 200,000 households. After tumbling this week, Pacific Hydro shares rose 8.8 percent today, its biggest daily gain in almost six months. That brings its increase in the past six months to 96 percent, outpacing rivals on the S&P ASX 200 Index, and some investors say it could keep rising. ``In a climate of higher energy prices, we like renewable energy and this company is doing it very well,'' said Ian Huntley, who holds Pacific Hydro shares among the A$44 million ($23 million) he manages at Huntley Investment Co. ``Looking at its growth in revenue and earnings, it does very well whatever business it's in.'' Granted, Pacific Hydro isn't cheap. Even after this week's 15 percent slump, it trades at 72 times earnings -- almost twice the average ratio on an index of local utility stocks. Earnings from power stations in the Philippines, Australia and New Zealand may not justify that high a valuation. ``They're probably the foremost experts in wind energy in Australia -- management is very good,'' said Andrew King, whose A$350 million of stocks at Investors Mutual Ltd. don't include Pacific Hydro. Still, ``it's just a bit too high on valuation at the moment,'' he said. California Yet comparable companies elsewhere are even more expensive on a price-earnings basis. Denmark's Vestas Wind Systems A/S, for example, trades at almost 80 times earnings. Its shares more than tripled last year. Managing Director Jeff Harding's ambition could see his company build as many as 1,000 windmills, rivaling the largest windmill owners like U.S.-based FPL Group Inc., Enron Corp., and Iberdrola SA, Spain's second-largest utility. Besides its expansion plans, the company can also take advantage of a new Australian law that raises the amount of electricity the nation gets from renewable resources to 12 percent from 10 percent. A wind farm takes only nine months to build compared with a hydroelectric power station, which can take as long as seven years. Commodity prices have cooperated in pushing up prices of so- called green stocks like Pacific Hydro. The price of natural gas more than quadrupled in the past year. Oil doubled since 1999. The price of coal, used to produce 80 percent of Australia's electricity, rose more than 50 percent in 12 months. In California, meantime, power shortages have crippled the wealthiest U.S. state, boosting demand for alternative energy sources like wind and water. ``People have seen what's happened to the energy sector in the States,'' said Stuart Smith, an analyst at Merrill Lynch & Co. ``Even though (Pacific Hydro stock) has pulled back a lot, it's still been a performer.'' Nepal Australians are hungry for energy. They are the fifth-biggest consumers of electricity, lagging Norway and the U.S. Pacific Hydro's earnings may triple this year to A$18.5 million, helped by the start of its Bakun hydroelectric station on the northwest Philippines island of Luzon, which almost doubled the company's electricity generation. It plans to build another hydro station on the southern Mindanao Island with joint venture partner Aboitiz Equity Ventures Inc. Though a new Philippine law to allow more competition in the electricity industry will drive down power prices, Pacific Hydro's Harding said most of its output will be sold under long-term contracts. Its next target country may offer even greater challenges. As Nepal struggles to launch an inquiry into the massacre of its royal family, Harding is awaiting the kingdom's decision on whether to accept a bid to build two hydroelectric dams. ``Only one in 14 Nepalese has access to electricity, so there is quite a demand for power within Nepal and northern India,'' Harding said. Because of rivers that run from the Himalayas, the world's tallest mountain peaks, ``Nepal has the best hydro resources in the world.'' Pacific Hydro, which has risen 67 percent in the year to date, rose 35 cents, or 8.8 percent, to A$4.32. Metro Council status quo for blacks Hispanic growth likely to affect white wards Gary Washburn, Tribune staff reporter 06/07/2001 Chicago Tribune North Sports Final ; N 1 (Copyright 2001 by the Chicago Tribune) The Chicago City Council on Wednesday approved a blueprint for drawing new ward boundaries that calls for maintaining the current level of African-American representation in the council. In practical terms, passage of the measure means that growth in the number of Hispanic wards--something that is a foregone conclusion given new census numbers that show explosive Latino population increases--is likely to come out of the current total of white wards. There now are 23 wards with majorities of white voters, 20 with African-American majorities and seven Hispanic. Because of a slight population decline among African-Americans and, more importantly, a dispersion of population from historically black South Side neighborhoods to other areas of the city, African- American aldermen feared losing a seat. But the ordinance passed Wednesday calls for a remap that "avoids retrogression in the voting strength" of minorities protected by the federal Voting Rights Act, a provision aimed directly at maintaining African-American strength in the council. "We are not going to get into a fight with Hispanics [and] we are not going to give up any wards in this world or the world to come," declared Ald. Ed Smith (28th), who represents a predominantly black ward on the West Side. Despite the apparent victory for the council's black caucus, Ald. Dorothy Tillman (3rd), one of its members, voted against the plan. She complained that she is being denied an attorney to represent her as the remap process begins to pick up steam. Though the black caucus recently chose attorney Burton Odelson to represent its interests, Tillman said she now has misgivings about the selection, saying that Odelson is a conservative who has represented Republicans in the past. Ald. Richard Mell (33rd), chairman of the council's Rules Committee, rejected Tillman's request to hire James Montgomery, a former city corporation counsel. Individual aldermen do not have the right to have representation funded by the city, Mell asserted. He suggested Tillman's concern has more to do with changes in her ward, which has lost more than 17,000 residents and faces a potentially radical boundary change, than with Odelson's politics. Ald. Joe Moore (49th) and Ald. Michael Wojcik (30th) also voted against the remap blueprint, objecting to a parliamentary maneuver used by the majority to force consideration of the measure on Wednesday. Wojcik's ward is one of those expected to be majority Hispanic in the new map. But the opponents were snowed under by a 44-3 vote. Among other provisions, the blueprint also spells out the number of public hearings to be held before a new map is drawn, mandates creation of an Internet site where citizens can get information on the redistricting process and requires a "redistricting impact statement" explaining how the new map that will be drawn complies with the Voting Rights Act and state and federal constitutions. In other action, Mayor Richard Daley introduced a proposal calling for the purchase of 60 percent of the electricity used in city buildings and other municipal facilities from Houston-based Enron Corp. Under a deal negotiated with the energy-provider, the city would reduce its $50 million-a-year electric bill by about $3 million, officials said. Commonwealth Edison Co., now the city's sole provider, would supply the remainder of the city's electricity needs if the agreement is approved by the City Council. Officials in California have accused Enron and other energy providers of limiting supplies to drive up prices there. "We are more than well aware of the implications of California and the fact that that Enron is involved in that market," said city Environment Commissioner William Abolt. "We think that generally nobody is going to come out of that with clean hands, from government to regulators to companies that are supplying energy." Enron has stood by its contracts with its customers to provide power at agreed-upon rates, he said. Under the proposed eight-year deal, the city's price would be locked in at a guaranteed level initially and later would be tied to an independent financial index. Also on Wednesday, the City Council voted unanimously to prohibit racial profiling by Chicago police and other law enforcement officers. Officials believe Chicago is the first big city in the nation to approve such a measure. PHOTO; Caption: PHOTO: Ald. Dorothy Tillman (3rd) says Wednesday she is being denied a lawyer to represent her as the city redraws ward boundaries. Tribune photo by Phil Greer. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Enron Plans to Challenge Power Regulator's Order, Paper Says 2001-06-06 23:24 (New York) Mumbai, June 7 (Bloomberg) -- The Indian unit of Enron Corp. plans to challenge an order from the Maharashtra state power regulator that prevents the company from seeking international arbitration, the Business Standard said, without citing people. The regulator barred Dabhol Power Co., the Indian unit of Enron, from seeking arbitration about its payment dispute with the Maharashtra State Electricity Board until June 14, the paper said. Dabhol has decided to challenge the order in court on the grounds that it is beyond the Maharashtra Electricity Regulatory Commission's rights to bar the company from resorting to arbitration, the paper said. Dabhol and the Maharashtra State Electricity Board, its only customer, are in a dispute over power tariffs. The board stopped buying power from Dabhol after the U.S. energy company took steps to end a $3 billion power venture. Commentary Since when does rape equal justice? Steve Chapman Steve Chapman is a member of the Tribune's editorial board 06/07/2001 Chicago Tribune North Sports Final ; N 29 (Copyright 2001 by the Chicago Tribune) The attorney general of California is very unhappy about the state's energy crisis, and he has come up with the perfect solution. It involves a creative type of punishment for Kenneth Lay, chairman of the Houston-based energy company Enron. Though Lay has not been convicted of any crime, Bill Lockyer says, "I would love to personally escort Lay to an 8-by-10 cell that he could share with a tattooed dude who says, `Hi, my name is Spike, honey.' " Let the record show that the chief law enforcement officer for the nation's biggest state regards prison rape as a valuable feature of his correctional system. Soft-hearted souls may lament the sexual victimization of jail and prison inmates by violent sociopaths, but Lockyer's chief concern is that there are some people who have yet to experience this form of justice. It used to be that prison was feared because it meant a prolonged loss of freedom, hard labor, separation from family and, sometimes, violence by guards. But somewhere along the line, Americans got used to the idea that it also involves sadistic sexual abuse with no one doing anything to stop it. Why are we so nonchalant? We might be outraged that anti-social thugs are getting away with horrific new crimes every day, under the very noses of law enforcement. Instead, many people--Lockyer among them--have embraced the proposition that the victims are getting only what they deserve. One of the reasons this phenomenon gets little attention is that it's largely invisible. Even critics can only make educated guesses about the scope of the problem. But it's clearly large. A survey of seven men's prisons in four states, published last year in Prison Journal, found that 21 percent of inmates had been coerced or forced into sexual contact, with 7 percent reporting they had been raped. When Human Rights Watch did a confidential poll of prison guards in an unnamed southern state, they estimated that one in five inmates were victims of such abuse. Inmates said it was more like one in three. Suppose we take a conservative estimate and say that one of every 10 inmates suffers this misfortune. With more than 1.8 million men behind bars at any given time, that means at least 180,000 inmates are forcibly violated every year. And that's not counting what goes on in juvenile facilities. For comparison's sake, in the entire United States, there were 124,730 reported rapes of females in 1999. How can sexual abuse possibly be regarded as an appropriate part of serving time? Some of the victims are vicious thugs themselves. But many people in prisons and jails were arrested for nonviolent offenses. Many of us, if a close relative were found guilty of one of these crimes, would think he should pay for his offense by losing his freedom for a long while. But few of us would agree he deserves to be beaten, stabbed, sodomized and infected with AIDS, which is what prison often means. If a judge were to give a convict a sentence like that, it would be ruled cruel and unusual punishment. Lockyer might not have the stomach to actually watch one of the encounters that he finds so amusing. One inmate interviewed by Human Rights Watch had complained to guards after being raped. His assailant then beat him with a combination lock--breaking his neck, jaw, collarbone and finger, dislocating his shoulder, and giving him two serious concussions--before raping him again. Afterward, the victim could read the word "Master," the brand of the lock, on his forehead. Many inmates submit rather than risk being stomped to a pulp. Atrocities like this happen all the time, mainly because hardly anyone minds. Authorities have no great incentive to take the problem seriously because they generally can't be held liable for attacks. In overcrowded, understaffed facilities, prevention may be impossible. Prosecutors, meanwhile, see no need to seek punishment. Treating prison rape like the crime it is would deter some attacks. Prisons could also act swiftly to segregate the perpetrators from the rest of the inmate population. The surest remedy is also the most expensive: Put all prisoners in one-man cells, so they don't have to sleep with one eye open. Or maybe we should just require all government officials with responsibility for prisons and jails to spend a couple of nights a year in one of their own facilities. Since you're already acquainted, Mr. Lockyer, you'll be rooming with Spike. ---------- E-mail: [email protected] GRAPHIC; Caption: GRAPHIC: Illustration by Dean Rohrer. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. PPA in force, claims DPC S Ravindran Mumbai 06/07/2001 Business Standard 3 Copyright (c) Business Standard The Dabhol Power Company could continue billing the Maharashtra State Eelctricity Board from its second phase, which was due to start operations on June 7. Sources close to DPC told Business Standard: "If MSEB had cooperated with DPC, commercial production could have begun tomorrow. Under the PPA, they would have been forced to buy this power." "While MSEB contends that it has rescinded the PPA, DPC claims that it continues to be in force. Under these circumstances, DPC will definitely charge MSEB for the second phase power at some future date," sources added. MSEB has stopped buying power from DPC. Meanwhile, lenders to DPC are yet to arrive at a decision on the issue of the transfer notice being served to the MSEB. "The lenders are yet to get back to DPC with their views on the subject," sources said. This was one of the DPC executives' suggestions to the lenders. The mothballing of the 1,444 mw second phase of the project was also discussed. DPC executives also spelt out the differences between the company and the Godbole panel to a consortium of Indian and foreign lenders. "DPC representatives pointed out that there was a chasm between the Godbole panel members and the company. The bone of contention is the plant load factor (PLF) at which DPC will sell power to MSEB. DPC is keen on a PLF of 90 per cent which will bring down the tariff. The Godbole panel wants a much lower offtake of power by MSEB," sources close to DPC told Business Standard from Singapore. The meeting was attended by Enron India managing director K Wade Cline, DPC president and CEO Neil McGregor and representatives of Indian FIs and banks like IDBI, ICICI, SBI. DPC executives will hold another round of talks with the lenders tomorrow. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Calif Eyes Ending Access To Alternative Power Suppliers By Jason Leopold Of DOW JONES NEWSWIRES 06/06/2001 Dow Jones Energy Service (Copyright (c) 2001, Dow Jones & Company, Inc.) LOS ANGELES -(Dow Jones)- California utility regulators appear ready to vote next week on a proposal to suspend the ability of large electricity users to sign contracts directly with energy suppliers. The move is called for in the February bill that put the state in the power business, but its approval by the California Public Utilities Commission would damp plans in the Legislature to reduce the burden on Edison International (EIX) unit Southern California Edison by making large industrial customers responsible for securing their own power. "We're still trying to figure that out," said an aide to Assembly Speaker Pro Tem Fred Keeley, D-Boulder Creek. "We don't know how to get around that right now." Keeley is expected to introduce legislation to shift the burden of rescuing Southern California Edison to large businesses. Under the proposal, which is also supported by Assembly Speaker Robert Hertzberg, customers that use 500 kilowatt-hours of power a month or more would pay a surcharge on their bills to help Southern California Edison recoup its losses on wholesale power. The so-called direct-access component - under those large users would buy their power from suppliers - is the cornerstone of the Keeley plan, for which Enron has been lobbying hard in recent weeks, according to several aides to key legislators. The Keeley plan is an alternative to the memorandum of understanding Gov. Gray Davis signed with Southern California Edison two months ago. Under that proposal, the state would buy Southern California Edison's power lines for $2.76 billion and allow the utility to issue $2 billion in bonds backed by ratepayers to recover $3.5 billion in net uncollected power costs. That plan has run into snags in the Legislature, which must enact it into law, and the PUC, which has been slow to rule on enabling measures. One key Democratic Senator said the PUC's move to quash direct access is an attempt to ensure a deal to rescue Southern California Edison doesn't pass through the Legislature. "The PUC has demonstrated it does not want SoCal Ed to remain solvent," the senator said. "They have dragged their feet on several key issues they need to address in order to make sure legislation to save the utility is never heard." A PUC spokesman didn't return calls for comment. Direct-access was the key part of the state's 1996 deregulation law, giving retail customers the opportunity to choose from a variety of energy suppliers in an effort to lower their electric rates. Commissioners Richard Bilas and Henry Duque said they support direct access and would vote against any measure to reverse it. "I would never vote against direct access," said Bilas, a Republican, who authored the agenda item. Bilas said the item was amended by another commissioner. The measure could be held, because it might disrupt negotiations between the Legislature and Southern California Edison, said PUC Commissioner Geoffrey Brown, a Democrat. The PUC may be looking to protect the state's interest as a power purchaser, some legislative aides said. The DWR's long-term power supply contracts cover the state's wholesale-market power needs in 2002 and 2003. If large industrial customers were to sign direct-access contracts, the DWR would lose them as customers and thus fail to collect enough revenue to pay off the long-term contracts. The agency could be stuck with a large surplus of electricity that it would be forced to sell it on the open market at a loss. The market price of power in the coming years is expected to be lower than what the state paid for forward power in 2001. Wholesale power prices plunged this week, and the DWR for the first time sold excess power on the open market, according to Oscar Hidalgo, DWR spokesman. Arnold Rosenthal, of Newport Beach-based Utility Resource Management Group, an organization that represents more than 700 large electricity users in the state, said state regulators are "looking to get us back into a mode where we are held captive once again." "The DWR is acting as this super utility," Rosenthal said. "What you're left with is absolutely no choice. Instead, we'll be subjected to several large rate increases." Rosenthal said some of his San Diego clients have direct access deals. A number of clients served by Southern California Edison want to sign direct-access contracts to escape recent rate increases imposed by the PUC. -By Jason Leopold, Dow Jones Newswires; 323-658-3874; [email protected] Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved.

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Enron Mentions - 10-06-01 - 10-07-01

THE NATION States Taking the Initiative to Fight Global Warming Environment= : Unhappy with Bush's policies, local officials work to slow climate change= . Los Angeles Times, 10/07/01 Many stuck in anti-terror dragnet/Future uncertain for Houston man, 23, hel= d and cleared in attacks Houston Chronicle, 10/07/01 Enron Close to 5-Yr Contract With Equity Office, Crain's Says Bloomberg, 10/07/01 Enron Reaches a Deal to Sell Oregon Utility for $1.9 Billion The New York Times, 10/06/01 IN BRIEF / ENERGY Northwest in Talks to Buy Portland GE Los Angeles Times, 10/06/01 Enron talks utility sale in Oregon / Northwest Natural Gas is second possib= le buyer Houston Chronicle, 10/06/01 COMPANIES & FINANCE INTERNATIONAL - Northwest may buy Enron asset. Financial Times (U.K. edition), 10/06/01 NW Natural Gas in talks for Portland General The Daily Deal, 10/06/01 NW NATURAL WEIGHING PURCHASE OF PGE The Columbian, 10/06/01 Enron to Announce Sale of Portland General on Monday, NYT Says Bloomberg, 10/06/01 PUC RIGHTLY OPEN TO RECONSIDERING Portland Oregonian, 10/06/01 Civil rights advocates worry about detaining immigrants Associated Press Newswires, 10/06/01 India: LNG: Ministry willing to pare charter hire rates for Dabhol Business Line (The Hindu), 10/06/01 Gun found in car at Millard North Omaha World-Herald, 10/06/01 POWER GIANT BUYS ISLAND IN SEARCH FOR GAS PIPELINE South Florida Sun-Sentinel, 10/06/01 DIESEL BAN MAY SWAY OPPONENTS OF POWER PLANT South Florida Sun-Sentinel, 10/06/01 Enron Offshoot Leads Texas Complaints for Unauthorized Electric Accounts KRTBN Knight-Ridder Tribune Business News: Fort Worth Star-Telegram - Texas= , 10/06/01 National Desk THE NATION States Taking the Initiative to Fight Global Warming Environment= : Unhappy with Bush's policies, local officials work to slow climate change= . GARY POLAKOVIC TIMES ENVIRONMENTAL WRITER 10/07/2001 Los Angeles Times Home Edition A-40 Copyright 2001 / The Times Mirror Company More than two dozen U.S. states and cities, no longer waiting for the Bush = administration to seize the initiative against global warming, have begun t= aking steps to reduce emissions that scientists say are heating the planet.= =20 From Vermont to Oregon, state and local governments are calling for broader= use of energy-saving devices, more energy-efficient building standards, cl= eaner-burning power plants and more investment in such renewable energy sou= rces as wind and solar power--all to help reduce greenhouse gases that trap= the sun's energy near the Earth's surface. Many of the strategies being promoted mimic those endorsed in July by 180 n= ations as part of an international campaign against global warming that the= Bush administration declined to join.=20 In August, six New England states and five eastern Canadian provinces signe= d a pact to reduce greenhouse gas emissions. Under the agreement, the signa= tories pledged to cut emissions to 1990 levels by 2010 and by 10% below tha= t level by 2020. Those cuts are to be followed by even deeper reductions. I= t is the most ambitious goal set by state governments and it was supported = by three Republican governors, two Democrats and one Independent from Massa= chusetts, Connecticut, Rhode Island, New Hampshire, Vermont and Maine.=20 No single state or region can make a substantial reduction in the gases tha= t contribute to global warming. Moreover, much of the success of state and = local efforts relies on voluntary compliance from industry.=20 Still, advocates of state and local initiatives are confident that there is= enough public support to ensure broad cooperation in the private sector.= =20 "Public demand for action on climate change increased when the United State= s was not a part of the [international] agreement. It had a powerful impact= on the thinking of all kinds of people, including governors and heads of l= arge companies," said Tom Peterson, director of domestic policy for the Cen= ter for Clean Air Policy in Washington.=20 The center was created in 1985 by a bipartisan group of governors to promot= e economical solutions to air pollution.=20 "This is a way [for states] to distinguish themselves from the Bush adminis= tration," California Resources Secretary Mary Nichols said. "A lot of pract= ical, moderate people are recognizing climate change is a reality, not a th= eory, and they need to take it into account and help move the direction of = the world by doing something about it."=20 California was an early leader in reducing dependence on fossil fuels that = release greenhouse gases. Today, 12% of its electrical power comes from ren= ewable sources, more than any other state.=20 President Bush has sent mixed signals concerning global warming. Shortly af= ter he took office, he reneged on a campaign promise to cut emissions of ca= rbon dioxide, the most abundant greenhouse gas. He said he rejected the int= ernational accord, outlined in Kyoto, Japan, in 1997 and ratified last summ= er, because it would cost U.S. jobs and did not immediately impose limits o= n emissions from developing countries, including India and China.=20 Last spring, Bush announced the formation of a task force of Cabinet member= s to formulate U.S. policy. The work of the task force was slowed by disagr= eements among its members and by the Sept. 11 terrorist attacks.=20 In the meantime, several members of Congress, including Sens. James M. Jeff= ords (I-Vt.), John McCain (R-Ariz.) and Joseph I. Lieberman (D-Conn.), have= begun formulating policy. McCain and Lieberman announced in August that th= ey would develop legislation to cap greenhouse emissions and reduce them us= ing a market-based trading mechanism. But that bill, too, has been delayed = as Congress grapples with the enormous fallout from the attacks on the Worl= d Trade Center and the Pentagon.=20 Meanwhile, officials of several states say they are making measurable progr= ess.=20 In New Jersey, officials say they are on track to cut greenhouse gases by 3= .5% below 1990 levels by 2005. The plan relies on capturing emissions from = methane--which traps 20 times more heat than carbon dioxide--from landfills= , securing voluntary reductions from various industries and preserving open= space and trees, which can absorb carbon dioxide from the atmosphere, said= Amy Collings, spokeswoman for the state Department of Environmental Protec= tion.=20 New York Gov. George Pataki in June announced a series of measures to impro= ve energy efficiency and trim greenhouse gases. Specifically, the Republica= n governor ordered state buildings to get 20% of their electricity from ren= ewable sources, such as solar or wind power, by 2010.=20 In the Northwest, Seattle City Light, the local electric utility, will offs= et any carbon dioxide emissions from power generation with wider use of cle= an-fueled vehicles and other measures.=20 In Oregon, more than 20,000 people have signed up for the "Blue Sky Program= " by paying an extra $3 per month on their utility bills to ensure that Pac= ific Power and Light purchases electricity from sources that don't contribu= te to global warming, said Tim Honadel, sustainability coordinator for Gov.= John Kitzhaber.=20 The California Legislature has established a registry to track greenhouse g= as production. It gives businesses interested in reducing their emissions a= place to record their progress. Such progress will be rewarded when the st= ate, as anticipated, begins to regulate greenhouse gas emissions.=20 There are growing indications that businesses, large and small, do want to = cooperate, if only to ensure that they have a hand in crafting policies and= regulations many see as inevitable.=20 A group of Fortune 500 companies joined with the Philadelphia-based Pew Cha= ritable Trusts to study and develop market-driven solutions to global warmi= ng. Among the companies participating in the project are British Petroleum,= Boeing Co., Enron, Lockheed Martin Corp., Toyota Motor Corp. and Internati= onal Energy Corp.=20 At a carpet mill in Industry, where Interface Inc. employs 500 people, work= ers are busy producing "climate neutral" carpet for commercial buildings, w= hich is made without generating greenhouse gases. The company recently inst= alled a $1-million solar array at its plant so it can make its product with= out any adverse impact on the Earth's atmosphere, said Jim Hartzfeld, vice = president of sustainable strategies for the Atlanta-based corporation.=20 "This is about good business," Hartzfeld said. "It's not about philanthropy= or altruism. It's about delivering better value." Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Many stuck in anti-terror dragnet / Future uncertainfor Houston man, 23, he= ld and cleared in attacks=20 By DALE LEZON Staff Houston Chronicle On his Web site, Asem Atta was hip and playful, regaling friends with accou= nts of his social escapades.=20 He had plenty to tell. At 23, Atta had a good job at Enron Corp. and lived = at one of Houston's trendy midtown addresses. He wrote of sporting events a= nd fireworks shows. His computer home page featured pictures of himself and= his pet and links to Internet sites devoted to the rock bands Jane's Addic= tion and Red Hot Chili Peppers.=20 He was, he said, living "La Vida Houston."=20 That all changed after Sept. 11, when the Pakistani national was swept up i= n the government's ever-widening anti-terrorist dragnet.=20 Though federal law-enforcement officials quickly concluded that Atta was no= t connected to the attacks in New York and near Washington, D.C., he was fo= und to have an expired visa and apparently was detained by the U.S. Immigra= tion and Naturalization Service.=20 His co-workers have not seen him since at least Sept. 12, an Enron official= said. His friends have not seen him either, and they are worried. His apar= tment appears vacant. His telephone and the message service at the door to = his apartment building are disconnected. He did not tell Enron officials he= planned to leave.=20 "What on earth is going on?" one of his close friends asked the Chronicle i= n response to an e-mail message.=20 Atta's plight, similar to that of many Middle Eastern immigrants, has spark= ed worries among some civil libertarians and congressional leaders. More th= an 500 people, many of them immigrants held for possible immigration violat= ions, have been detained so far as possible suspects or material witnesses = as the government's investigation broadens almost daily.=20 Many were questioned and detained because they had Arabic-sounding names. T= he Washington Post reported on Sept. 19, for instance, that Atta was sought= for questioning because he had the same surname as one of the suspected hi= jackers, Mohamed Atta.=20 The next day, the FBI said it "has no interest in" Asem Atta, but claimed t= hat he had overstayed his visa, said FBI spokesman Bob Doguim. An expired v= isa could lead to deportation. In Atta's case, that could mean being return= ed to Pakistan, a country that is bracing for possible U.S. attacks on neig= hboring Afghanistan.=20 Carl Rusnok, an INS spokesman, said he could not comment on individual INS = cases.=20 Civil rights advocates acknowledge the need to question people to avert pos= sible terror strikes, but they fear law-enforcement officers may unjustly t= arget some immigrants simply because they are foreigners.=20 "They're supposed to be looking for terrorists, but unfortunately they are = picking up a lot of people who haven't done anything wrong or are innocent = or of Middle Eastern descent," said Bruce Coane, an immigration attorney in= Houston and past president of the American Immigration Lawyers Association= .=20 Coane said he fears that at least one of his clients, mistakenly hauled in = during the sweep, had his civil rights violated.=20 He represents a Jordanian legal immigrant who was picked up by the INS on S= ept. 21. More than a week later, the INS admitted the man had been apprehen= ded and detained without reason and should be released, Coane said.=20 Coane said he could not identify the man because INS proceedings are not pu= blic, but said his client had been convicted of two misdemeanors prior to r= eceiving a green card, a document that allows noncitizens to remain in the = United States legally.=20 INS can use criminal convictions as grounds for detaining immigrants, somet= imes indefinitely, or deporting them. But Coane said the INS knew about the= misdemeanors before issuing the man a green card.=20 U.S. Rep. Sheila Jackson Lee, D-Houston, ranking member on the House Subcom= mittee on Immigration and Claims, said that in the wake of the Sept. 11 att= acks, the government must give law enforcement powers to protect against po= ssible terrorist assaults. But it also must safeguard civil liberties for i= mmigrants, she added.=20 "We want to . . . make sure that people are not brought in unfairly for que= stioning," she said.=20 Congress is considering measures to broaden anti-terrorist police powers, s= uch as holding immigrants with possible links to terrorism longer between c= ourt appearances.=20 Edward Gillett, a Houston immigration attorney, said he does not fault the = INS for interviewing immigrants to find possible links to the hijackers or = immigration violations. Had the hijackers' immigration status been reviewed= ahead of time, he said, the attacks may have been prevented. Several of th= e suicide hijackers had immigration violations that were not uncovered unti= l after the attacks.=20 "I wish they'd done this before it happened and maybe they could have preve= nted some of it," Gillett said.=20 Efforts to reach Atta or determine his whereabouts last week were unsuccess= ful.=20 Typically, when a visa is expired, according to the INS, the agency can det= ain the immigrant but must explain to him within 72 hours why he is being h= eld and what charges he faces.=20 Soon after that, the immigrant would probably be given a bond hearing to de= termine if he should be detained while awaiting a hearing on his possible d= eportation. The INS can hold immigrants indefinitely if they are deemed a f= light risk or a danger to the community.=20 The deportation hearing may not take place for weeks or months, depending o= n the immigration judge's work load.=20 To stay in the country legally, Atta, or anyone in his situation, may be ab= le to obtain a sponsor - a relative or employer who is a U.S. citizen, for = instance - or could marry a U.S. citizen. He may be able to return to his n= ative country to apply for another visa. If his visa has been expired for m= ore than one year and he leaves the country, however, he will be barred fro= m returning for 10 years.=20 If the visa has expired for 180 days or more, and he leaves the country, he= won't be allowed to return for three years.=20 Atta could also apply for political asylum.=20 Sahdi Shalabi, 24, one of Atta's closest friends from high school, said he = had hoped to see Atta in the next few weeks. But now he is uncertain. He de= scribed his friend, whom he first met in Kuwait in 1990, as "very playful, = very easy going." He liked computers and talking to girls.=20 Shalabi said Atta attended an English-style high school in Kuwait and that = Atta's father worked for the Kuwait Oil Co. Atta moved to the United States= after graduating from high school, enrolled at Wichita State University ab= out 1994 and landed a job at Enron in Houston in 1999.=20 According to his resume, Atta played indoor soccer at college and coached a= soccer team for young girls.=20 Shalabi, who works for Nortel Networks in Ontario, Canada, said his friend = was Muslim but did not practice the religion.=20 "He's totally Westernized," he said. Enron Close to 5-Yr Contract With Equity Office, Crain's Says 2001-10-07 18:31 (New York) Chicago, Oct. 7 (Bloomberg) -- Enron Corp. is close to winning a five-year contract to supply power to Sam Zell's Equity Office Properties Trust, Crain's Chicago reported, without citing sources. Under the agreement, Houston-based Enron would deliver power to the Chicago-based property company's office buildings in Chicago, Boston, California and New York, Crain's said. Zell's company owns 30 buildings in the Chicago area, 55 in Boston, six in New York and 309 in California, Crain's said, citing a filing with the U.S. Securities and Exchange Commission. Business/Financial Desk; Section C Enron Reaches a Deal to Sell Oregon Utility for $1.9 Billion By ANDREW ROSS SORKIN 10/06/2001 The New York Times Page 4, Column 5 c. 2001 New York Times Company Enron is planning to announce on Monday that it has agreed to sell Portland= General Electric to another Oregon utility, Northwest Natural Gas, for abo= ut $1.9 billion in cash and stock, executives close to the deal said yester= day.=20 The sale is part of Enron's effort to discard lower-margin utility business= es as it focuses on the more lucrative business of trading electricity and = gas. The deal would consolidate the two gas and electricity providers in Po= rtland. Officials from Enron and Northwest Natural were still considering the detai= ls of the transaction last night and planned to vote in favor of the deal t= oday, barring a last-minute delay, the executives said.=20 Enron had reached an agreement to sell Portland General to Sierra Pacific f= or $3.1 billion, but that deal collapsed in late April when Sierra Pacific = backed out, citing regulatory hurdles.=20 Under the terms of the deal being considered last night, Northwest Natural = would pay about $1.5 billion in cash, $100 million in common stock and near= ly $300 million in preferred convertible stock to Enron, the executives sai= d. Northwest Natural would also assume about $1.1 billion in debt. Enron wo= uld retain about a 5 percent stake, the executives said. Enron bought Portl= and General in 1997 for $2.9 billion in stock and debt.=20 Shares of Enron fell $1.37, or 4.1 percent, to $31.73, after Northwest Natu= ral acknowledged that it was in talks to buy Portland General. Northwest's = shares fell $2.58, or 9.9 percent, to $23.41.=20 In its effort to sell assets to raise cash, Enron is also in talks to sell = its 65 percent stake in the Dabhol Power project in India for more than $2.= 1 billion, executives close to the company said. A deal is not yet imminent= , but Enron has held discussions with India's largest private utility, Tata= Power, the executives said.=20 A spokesman for Enron declined to comment. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Business; Financial Desk IN BRIEF / ENERGY Northwest in Talks to Buy Portland GE Reuters 10/06/2001 Los Angeles Times Home Edition C-2 Copyright 2001 / The Times Mirror Company Northwest Natural Gas Co. said it was in talks to acquire Enron Corp.'s Por= tland General Electric Co., a deal that would bring together two Oregon uti= lities.=20 A deal would be a major step in Enron's plan to shed slower-growth assets a= nd focus on its core energy marketing and trading business. A deal to sell = Portland GE to Sierra Pacific Resources collapsed five months ago. Sources familiar with the situation said Northwest was offering $1.8 billio= n in cash and stock and would also take on $1 billion of debt in the deal. = They said the talks were at an advanced stage and Northwest's board could v= ote on the deal over the weekend.=20 Northwest confirmed the talks but said there was no assurance that a deal w= ould be struck and it would not make any additional comments on the matter = unless a formal agreement was reached.=20 Enron acquired Portland GE in July 1997 for $2.1 billion.=20 Northwest shares fell $2.58, nearly 10%, to $23.41, and Enron fell $1.37, o= r 4%, to $31.73, both on the New York Stock Exchange. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 BUSINESS Enron talks utility sale in Oregon / Northwest Natural Gas is second possib= le buyer LAURA GOLDBERG Staff 10/06/2001 Houston Chronicle 3 STAR 1 (Copyright 2001) Northwest Natural Gas Co. is negotiating to buy Portland General Electric f= rom Houston-based Enron Corp., which has had a for sale sign on the power u= tility for months. The deal being discussed would be valued between $1.8 bi= llion and $2 billion, with as much as $1.5 billion in cash and the rest in = stock, a source familiar with the talks said Friday. In addition, Northwest= Natural Gas, based in Portland, Ore., would assume about $1.1 billion in d= ebt. Also as part of the deal's terms, Enron could end up with a very small= stake in Northwest Natural Gas, the person said. The person described the = talks as highly advanced and said a deal could be announced as soon as Mond= ay. Northwest Natural Gas, in a brief statement Friday, confirmed it was ta= lking to Enron. Enron spokeswoman Karen Denne declined to comment. If a dea= l is announced, it would be the second time Enron struck an agreement to se= ll Portland General. Nevada- based Sierra Pacific Resources agreed to buy P= ortland General in November 1999. It was to pay $2.1 billion, including $2.= 02 billion in cash. It also was to assume about $1 billion in debt and pref= erred stock. The deal was officially called off in April, although it had b= een considered dead for months before. Sierra Pacific planned to sell some = of its Nevada assets to raise cash for the deal, but Nevada's move to elect= ricity deregulation was delayed, and Sierra couldn't carry out the sales. E= nergy trader Enron, which as part of a general strategy is shedding certain= assets, kept looking for a buyer. "Enron needed some positive news, so thi= s should help the stock performance," Carol Coale, an analyst with Prudenti= al Securities in Houston. In a research note Friday, Robert Christensen, an= analyst with First Albany Corp. in New York, said benefits to Enron from a= sale include "removal of a low single-digit earnings grower" and balance s= heet improvement. Shares in Enron closed regular trading Friday at $31.73, = down $1.37. Northwest Natural Gas provides natural gas to more than 500,000= residential and business customers throughout Oregon and Vancouver, Wash.,= while Portland General has more than 1.4 million customers in Oregon. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 COMPANIES & FINANCE INTERNATIONAL - Northwest may buy Enron asset. By MATTHEW JONES and SHEILA MCNULTY. 10/06/2001 Financial Times (U.K. edition) (c) 2001 Financial Times Limited . All Rights Reserved Northwest Natural Gas said yesterday it was in talks to buy the Portland Ge= neral Electric Company from Enron, the US energy giant. Enron declined to c= omment.=20 Houston-based Enron is also trying to dispose of $4.5bn-$5bn in other asset= s. They are primarily international infrastructure projects in developing c= ountries where Enron believes there is little chance of developing its whol= esale and retail business around those assets. While the company has been generally doing well in Europe, Enron has said i= t will cut up to 500 jobs from its European division in the first sign of s= lowing growth since it started operating in Europe in 1989. The division em= ploys 5,000 people in 10 offices across the continent.=20 Analysts said liberalisation of European energy markets had been slower and= more patchy than some energy trading companies had envisaged. Newly traded= products such as credit risk and carbon emissions were also developing les= s rapidly than expected. Sheila McNulty, Houston, and Matthew Jones, London= .=20 (c) Copyright Financial Times Ltd. All rights reserved.=20 http://www.ft.com. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 M and A NW Natural Gas in talks for Portland General By Claire Poole in Houston 10/06/2001 The Daily Deal Copyright (c) 2001 The Deal LLC Portland, Ore.-based utility, Northwest Natural Gas, confirms it is in talk= s to acquire Portland General Electric from energy trading giant Enron Corp= .=20 Portland, Ore.-based utility Northwest Natural Gas Co. confirmed Oct. 5 it = is in talks to acquire Portland General Electric Co. from Houston energy tr= ading and marketing giant Enron Corp. In a terse statement, Northwest Natural Gas revealed no details of the nego= tiations, but warned that a deal was no certainty.=20 "There can be no assurances that any transaction will result from these dis= cussions," it said. "NW Natural does not intend to make any additional comm= ents regarding this matter unless and until a formal agreement has been rea= ched."=20 Enron spokeswoman Karen Denne would not confirm whether the company was tal= king with Northwest Natural Gas or anyone else about Portland General.=20 "It's our standard corporate policy not to comment on potential acquisition= s or divestitures," she said.=20 Enron has been trying to shed the utility since April, when its $3.1 billio= n sale to Reno, Nev., utility Sierra Pacific Resources Corp. fell through i= n the wake of California's power crisis.=20 In March, Nevada regulators, nervous about power supply problems in neighbo= ring California, backtracked from a plan to open their state to competition= , which scuttled Sierra Pacific's plan to sell seven power plants for $1.7 = billion to help pay for Portland General.=20 The Federal Energy Regulatory Commission and Oregon regulators had already = approved the sale, which only required U.S. Securities and Exchange Commiss= ion clearance.=20 Talk about another buyer reached a high pitch Sept. 5, when Chairman Kennet= h Lay said Enron was close to a sale.=20 Several companies have reportedly kicked the tires, including Scottish Powe= r plc, which already owns another Oregon-based utility, PacifiCorp.; Charlo= tte, N.C.-based Duke Energy Corp. and Juno Beach, Fla., FPL Group, whose $1= 4 billion acquisition of New Orleans-based Entergy Corp. also fell apart in= March over management control and financial disclosure issues.=20 But Northwest Natural Gas has always been the favorite to win the utility. = Portland General, which serves 725,000 electric customers in northwest Oreg= on, would fit nicely with Northwest Natural Gas, which serves more than 530= ,000 gas customers in western Oregon and Vancouver, Wash. And its chairman,= Richard Reiten, is a former top executive at Portland General.=20 Financing would be the hitch. Northwest Natural Gas had a market capitaliza= tion of just $593 million as of Friday. Investors sent its stock down 9% on= the news of a possible acquisition to $23.62 by mid-afternoon Friday.=20 Enron's wish price is reportedly $3 billion. But the Wall Street Journal, c= iting sources, reported Friday that the number was $2.8 billion, $1.8 billi= on in cash and stock plus debt assumption of another $1 billion. The articl= e also said Enron was considering taking a minority stake in the company, w= hich could explain the lower price.=20 The newspaper said the two were in "advanced talks" and an announcement cou= ld come within days. Reuters, citing unnamed sources, reported that Northwe= st's board still had to vote on the deal but that it could be announced as = early as Monday.=20 Enron acquired Portland General in July 1997 for stock valued at $2.1 billi= on in a deal hailed for combining power assets with natural gas pipelines. = But it decided to dump the business after razor-slim margins and a very pub= lic clash with the Oregon Public Utilities Commission, which blocked its at= tempts to sell the utility's electricity generating assets, including its h= ydroelectric facilities, and forced it to cut rates by $80 million.=20 Portland General is not the only asset Enron is trying to shed.=20 The company is working furiously to dump $4 billion to $5 billion worth of = assets all around the world as it refocuses on "asset-light" businesses, su= ch as trading and marketing.=20 But the effort hasn't gone well. It announced Oct. 3 it agreed to sell its = Enron Oil & Gas India Ltd. unit to BG Group plc of the U.K. for $388 millio= n. The unit owns a 30% interest in the Tapti gas field and the Panna/Mukta = oil and gas fields and almost 63% of the CB-OS/1 exploration license in wes= tern India.=20 It now looks as if that deal could also come unstuck. Indian media reports = have suggested that the government wants the operatorship of the assets to = pass to two of Enron's joint venture partners -- state-owned Oil & Natural = Gas Corp. and Reliance Industries Ltd. -- rather than remain with Enron Oil= & Gas India.=20 Such a development would render the acquisition unattractive for the U.K. c= ompany and likely scupper the deal.=20 A BG spokeswoman said the company still has "every confidence" Enron Oil & = Gas India will retain the operating license for the assets, adding that not= hing has changed since the deal was announced. Negotiations are continuing = with the joint venture partners and the Indian government, she said.=20 Enron spokesman Johan Zaayman said BG is making arrangements to take over o= peration of the fields. "Once that's done, the deal's a go," he said. "We'r= e hopeful we'll be concluded in late October, early November."=20 Enron is also trying to quit the $2.9 billion Dabhol power plant in India, = in which it owns a 65% stake.=20 Tata Power Co., India's largest private utility, told reporters Oct. 1 it h= ad been in preliminary talks with Enron to acquire the 740-megawatt facilit= y, which has been shuttered since June after its sole customer, the Maharas= htra State Electricity Board, which owns 15% of the facility, stopped purch= asing power and defaulted on payments.=20 Newspapers reported Friday that Tata plans to finalize its bid in three wee= ks.=20 -- Laura Board in London contributed to this report=20 www.TheDeal.com Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Business NW NATURAL WEIGHING PURCHASE OF PGE WILLIAM McCALL, Associated Press writer 10/06/2001 The Columbian E2 (Copyright 2001) PORTLAND -- Four years after buying its way into the Pacific Northwest mark= et, Texas energy trader Enron Corp. may be ready to sell off Portland Gener= al Electric to another Oregon utility just down the street.=20 Northwest Natural Gas confirmed Friday it is talking with Enron about buyin= g Portland General Electric, returning the headquarters of a major business= to a state that has seen several big companies head elsewhere after merger= s or acquisitions. There was no other comment from the three companies, but some analysts say = an announcement could come as early as next week.=20 "It's probably a trial balloon," said Mike Heim of A.G. Edwards & Sons. "Ei= ther they wanted to see how the market would take it, or they put up a tria= l balloon to finalize terms of the deal."=20 "It certainly leads me to believe they're in the very late stages of their = talks," said Allyson Rodgers of Wells Fargo Van Kasper.=20 Enron started shopping Portland General Electric not long after acquiring t= he Portland-based utility in 1997 for $3.2 billion.=20 Disappointed by a slower-than-expected pace of deregulation in Oregon, Enro= n tried to unload PGE to Sierra Pacific Resources, based in Reno, Nev. But = the deal faltered and was called off in March, about a year and a half afte= r it was announced in November 1999.=20 A merger with Northwest Natural Gas would be a much better fit for PGE than= either Enron or Sierra Pacific, Rodgers said.=20 Northwest Natural and PGE have worked closely together for the past two yea= rs on various projects, including joint meter-reading and joint trench-digg= ing projects, because their service areas overlap in the Portland metro are= a, she said.=20 The downtown headquarters for the two companies are just blocks apart.=20 Heim said Houston-based Enron, the nation's top natural gas trader and the = leading wholesale electricity marketer, has been trying to tighten up its b= alance sheet after being punished on Wall Street for the failure to sell PG= E, fallout from the Pacific Gas & Electric bankruptcy in California, and a = push into the Internet that took a nosedive along with the rest of the tele= communications industry.=20 "Enron has stumbled a little bit with their noncore investments," Heim said= .=20 Bob Valdez, spokesman for the Oregon Public Utility Commission, said commis= sioners have not been notified of any pending deal, but they would review i= t as soon as an offer is made. The approval process could take about 10 mon= ths if a deal is announced, he said.=20 PGE has 730,000 customers in Oregon while Northwest Natural Gas has about 5= 30,000 customers, including some in Southwest Washington. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Enron to Announce Sale of Portland General on Monday, NYT Says 2001-10-06 12:48 (New York) Enron to Announce Sale of Portland General on Monday, NYT Says Houston, Oct. 6 (Bloomberg) -- Enron Corp. plans to announce Monday an agreement to sell Portland General Electric to Northwest Natural Gas Co. for $3 billion in cash, stock and assumed debt, the New York Times reported, citing executives close to the transaction. The purchase would combine the electric and gas utilities in Portland, Oregon. Northwest would pay about $1.5 billion in cash, $100 million in common stock and almost $300 million in preferred convertible stock, the Times said. Enron spokesman Mark Palmer and Judith Wilkinson, spokeswoman for Northwest, declined to comment. Enron bought Portland General in 1997 and has been trying to sell the utility for about two years, as it sheds slow-growing businesses to focus on trading of commodities such as electricity, natural gas and lumber. A planned sale to Sierra Pacific Resources collapsed about five months ago because of regulatory snags. Trading doesn't require ownership of expensive assets such as power plants and pipelines, and Enron's profit from the business is growing at about 25 percent a year, analyst Robert Christensen of First Albany Corp. said. Portland General, while profitable, is expected to boost earnings by just 1 percent next year, he said. Houston-based Enron would retain about a 5 percent stake in Portland General, the Times said. Enron and Northwest officials plan to approve the deal today, the paper said. Northwest said yesterday the companies were in talks, confirming an earlier report by the Wall Street Journal. Northwest Debt Northwest, based in Portland, would assume about $1.1 billion in Portland General debt, the Times said. Northwest's shares fell $2.58, or 9.9 percent, yesterday to $23.41, cutting its market value to about $588 million. The company already has about $450 million in debt, said bond- rating firm Egan Jones, which yesterday lowered its credit rating on Northwest to ``A-'' from ``A,'' still investment grade. Northwest serves more than half a million Oregon and Washington customers. Richard Reiten, the company's chairman and chief executive, was president of Portland General from 1989 to 1996. The acquisition would make Northwest a bigger gas purchaser, helping it negotiate lower prices from suppliers, analysts said. The company also might reduce costs through job cuts and eliminating duplicate services. Enron also is in talks to sell its 65 percent stake in the Dabhol power project in India for more than $2.1 billion, the Times said, citing the executives. A deal isn't imminent, the paper said. Enron shares fell $1.37, or 4.1 percent, to $31.73 yesterday. They have declined 62 percent this year, mostly because of the resignation of Chief Executive Jeff Skilling, concerns about the California power market, losses at its bandwidth-trading business and a contract dispute in India. Sierra Pacific, based in Reno, Nevada, canceled its proposed $3.1 billion acquisition of Portland General on April 26 after California legislators, worried about a power shortage that had driven up prices, banned sales of generators serving the state. The move blocked Sierra Pacific from the sale of a power- plant stake needed to win clearance for the Portland General purchase. EDITORIAL PUC RIGHTLY OPEN TO RECONSIDERING 10/06/2001 Portland Oregonian SUNRISE E06 (Copyright (c) The Oregonian 2001) Watching the rapidly cooling -- and now badly shocked -- economy, Oregon bu= siness leaders and consumer advocates are understandably raising concerns a= bout the substantial utility rate hikes that went into effect this week.=20 Considering utility costs, the raises can be justified. But the fragile sta= te of the economy argues powerfully for openness to re- examine rates quick= ly -- and the Public Utility Commission seems encouragingly open to doing t= hat. Boosts ranging from 20 percent for natural gas to 31.5 percent to 53 percen= t for electricity come at a time when users will have a tougher time absorb= ing increases. The announcement that Northwest Natural Gas may acquire Port= land General Electric wouldn't have any impact on current rates. And adjust= ing rates won't be a simple matter of pleading economic duress.=20 The PUC approved the rate hike, based on the utilities' increased costs and= their legal guarantee of a regulated profit. It turned down advocates' app= eals for a postponement. But properly, it did agree to consider whether it = would revisit rate cases.=20 That's an unusual step. But it's reasonable given the worsening economy and= surrounding uncertainty.=20 Natural gas and electricity prices have fallen recently, below the forward = contract prices paid by Northwest Natural and PGE. Normally, if utilities' = costs go down, the drops are reflected in lower prices to users in the futu= re, or in rebates.=20 If the rate increases could be softened by being phased in, or reviewed mor= e frequently to take in lower costs, it could greatly help consumers and bu= sinesses.=20 The PUC has some flexibility and will decide by the end of the month on reo= pening rate cases. Its openness to the idea is proper and prudent -- and ju= st a little encouraging. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Civil rights advocates worry about detaining immigrants 10/06/2001 Associated Press Newswires Copyright 2001. The Associated Press. All Rights Reserved. HOUSTON (AP) - Before last month's terrorist attacks, Asem Atta lived in a = trendy Houston midtown address, had a good job at Enron Corp. and even had = his own Web page where he detailed his enjoyment of his life in America.=20 But the Pakistani national was one of many Middle Eastern immigrants swept = up in the government's ever-widening anti-terrorist dragnet. Atta's friends= have not heard from him since he was picked up and worry about what will h= appen to him. Though federal law-enforcement officials quickly concluded that Atta, 23, w= as not connected to the Sept. 11 attacks in New York and Washington, D.C., = he was found to have an expired visa and apparently was detained by the U.S= . Immigration and Naturalization Service.=20 Now his future is up in the air and civil rights advocates worry Atta's cas= e and those of other immigrants are growing examples of law enforcement off= icers unjustly targeting some people simply because of where they are from,= the Houston Chronicle reported in its Sunday editions.=20 "They're supposed to be looking for terrorists, but unfortunately they are = picking up a lot of people who haven't done anything wrong or are innocent = or of Middle Eastern descent," said Bruce Coane, an immigration attorney in= Houston and past president of the American Immigration Lawyers Association= .=20 Sahdi Shalabi, 24, one of Atta's closest friends from high school, describe= d him as "very playful, very easy going." He liked computers and talking to= girls. Atta moved to the United States after graduating from high school i= n Kuwait, enrolled at Wichita State University about 1994 and landed a job = at Enron in 1999.=20 Shalabi, who works in Ontario, Canada, said his friend was Muslim but did n= ot practice the religion.=20 "He's totally Westernized," he said.=20 The Washington Post reported on Sept. 19 that Atta was sought for questioni= ng because he had the same surname as one of the suspected hijackers, Moham= ed Atta.=20 The next day, the FBI said it "has no interest in" Asem Atta, but claimed t= hat he had overstayed his visa, said FBI spokesman Bob Doguim. An expired v= isa could lead to deportation. In Atta's case, that could mean being return= ed to Pakistan, a country that is bracing for possible U.S. attacks on neig= hboring Afghanistan.=20 Carl Rusnok, an INS spokesman, said he could not comment on individual INS = cases.=20 Coane said he represents a Jordanian legal immigrant who was picked up by t= he INS on Sept. 21. More than a week later, the INS admitted the man had be= en apprehended and detained without reason and should be released, Coane sa= id. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 India: LNG: Ministry willing to pare charter hire rates for Dabhol 10/06/2001 Business Line (The Hindu) Fin. Times Info Ltd-Asia Africa Intel Wire. Business Line (The Hindu) Copyr= ight (C) 2001 Kasturi & Sons Ltd. All Rights Res'd NEW DELHI, Oct. 5. THE Ministry of Shipping has expressed its willingness t= o take a cut in the charter hire rates for the LNG shipping deal for the tr= oubled Dabhol Power Company (DPC) in a bid to scale down the shipping costs= and salvage the LNG facility planned by Enron.=20 This was indicated by the Shipping Ministry during a meeting held here on T= hursday between the financial institutions and the Government in which mini= stries and departments concerned with various aspects of the deal participa= ted. The Shipping Ministry controls the Shipping Corporation of India (SCI) whic= h is a 20 per cent equity partner in the joint venture Greenfield Shipping = Company formed for owning and operating a 137,000 cubic metre capacity tank= er for transporting LNG from Oman to the Enron-promoted power plant in Maha= rashtra, now clouded in controversy.=20 While the shipbuilding cost of $220 million is unlikely to be pared down ma= inly due to the fact that the 137,000 cubic metre tanker is nearing complet= ion at Japan's Mitsubishi yard, the promoters of LNG Laxmi will have to go = for a cut in the time charter hire rate of $98,600 per day for 10 years agr= eed with the DPC, Government sources told Business Line.=20 The Greenfield Shipping Company will have to take possession of the LNG ves= sel on November 15 when the tanker will be ready for delivery as per the Sh= ipbuilding Contract (SBC) signed with the Japanese yard.=20 The Godbole Committee set up by the Maharashtra Government to review the En= ron deal had concluded, among other things, that the time charter hire rate= of $98,600 per day agreed between DPC and Greenfield Shipping Company was = very much on the higher side.=20 A section within the Government even thinks that the contracted shipbuildin= g cost of $220 million comprising a bare vessel cost of $189 million and fi= nancing cost of $21 million was higher than the market price prevailing at = the time by atleast $18,000 to $20,000.=20 With the power project facing trouble, the lenders to the LNG shipping proj= ect led by ANZ Investment Bank has declared an event of default and suspend= ed the last trance of the project loan worth $55 million out of a total loa= n component of $165 million.=20 The three promoters will now have to make up for the gap in the project fun= ding by putting in additional money in proportion to their equity holding t= o get the project going.=20 Besides SCI, Japan's Mitsui O.S.K.Lines hold 60 per cent equity while Atlan= tic Commercial Inc.(an Enron affiliate) has the remaining 20 per cent.=20 However, sources feel that SCI's additional investment in the project along= with a proposed cut in the charter hire rate (this has to be re-negotiated = with the new owner of DPC) suggested by the Shipping Ministry, would render= SCI's investment in the LNG shipping project unviable.=20 Another spot of bother for the SCI is that the time charter hire rates for = LNG shipping have gone down substantially from the time when the time chart= er party was signed with DPC at a rate of $98,600 per day.=20 With the LNG facility of DPC now put on the back- burner and given the fact= that the tanker will have to be deployed elsewhere on spot basis upon poss= ession till the fate of the proposed LNG facility is decided, sources said = that the viability of the project will not work out in the face of a declin= ing trend world-wide in the charter hire rates for LNG shipping.=20 The charter hire rates are now ruling about $67,000 per day and are expecte= d to dip even further to about $50,000 per day. "In such a scenario, SCI's = investments would fetch only a paltry 4 per cent to 4.5 per cent rate of re= turn as against the Government norm of 12 per cent for projects involving s= tate- funding", the sources said.=20 P.Manoj and Balaji C Mouli Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 News Gun found in car at Millard North Patrick Strawbridge Julie Anderson Erin Grace Paul Goodsell Todd von Kampen= Deborah Alexander Julia McCord World-Herald Staff Writers 10/06/2001 Omaha World-Herald Sunrise 2 (Copyright 2001 Omaha World-Herald Company) Parents of Millard North High School students received a letter Friday info= rming them that a gun had been found in a student's vehicle at the school e= arlier in the week.=20 Amy Friedman, a spokeswoman for Millard Public Schools, said the school's r= esource officer received a tip that the student had the gun and discovered = a hunting rifle in the student's vehicle. Friedman said state law and district policy require the expulsion of any st= udent found to have a gun on school property.=20 Sgt. Dan Cisar, an Omaha police spokesman, said a citation was issued to an= 18-year-old male in connection with the incident.=20 Friedman said the letter was sent home to combat any rumors about the incid= ent and promote the school's safety policy. - Patrick Strawbridge Helicopte= rs to place cell towers Sunday=20 Helicopters will be busy over Omaha on Sunday as a construction company pla= ces new cellular communications towers on two buildings.=20 Jim Labenz, general manager, of Digitcom Inc. in Arlington, Texas, said his= company will be placing towers for Cricket Communications, a new cellular = telephone company set to launch in the area in mid- October.=20 A helicopter will lift equipment onto a 16-story building at 72nd Street an= d Mercy Road about 7:30 a.m. Sunday. The next lift will be at 9 a.m. at the= southwest corner of 16th and Farnam Streets. - Julie Anderson Enron boosts= teacher scholarships=20 When Edna Campbell's family moved from Mexico to the United States 20 years= ago, Campbell, then a school-age child, couldn't speak English.=20 To repay the California teachers who taught her how, Campbell is trying to = become a teacher, too. An Enron grant is helping her achieve that goal in O= maha.=20 Campbell, one of four education students at the University of Nebraska at O= maha studying under scholarships from the Omaha office of Enron this year, = helped to announce the company's gift Friday.=20 A $32,000 grant from the energy company to the University of Nebraska Found= ation is helping UNO expand an existing scholarship program that encourages= minority students to become teachers.=20 The program also helps to put more students into the community because one = of the requirements is volunteer work. The Enron scholars each will spend a= t least 20 hours a semester helping a northeast Omaha after-school program = to staff a relatively new computer lab.=20 The Hope Center, 2200 N. 20th St., serves dozens of children in an after-sc= hool program that includes a hot meal, computer training, homework help and= Bible study. - Erin Grace Westside walk will help victims=20 Students, parents and residents of Westside Community Schools will particip= ate in a walk Sunday in support of the victims of last month's terrorist at= tacks.=20 The "Route 66/Walk for America" will begin at 2 p.m. at Westside High Schoo= l, 8701 Pacific St. Participants, who are encouraged to wear red, white and= blue clothing, will follow a course of less than a mile before returning t= o the school.=20 Donations will be collected for a relief fund established through the Wests= ide Foundation. - Paul Goodsell NEBRASKA Project Extra Mile seeks nominees= =20 Project Extra Mile's five Nebraska offices are seeking nominations of peopl= e or agencies that make a difference in preventing underage drinking.=20 Winners will be recognized at the organization's annual dinner Nov. 8 at Om= aha's Champions Club. Categories for nominations are education, public poli= cy, media, youth, retail businesses, law enforcement and community advocate= s. Nominations will close Oct. 26.=20 Jack Calhoun, president and chief executive officer of the National Crime P= revention Council, will speak at the dinner. Tickets are $25 each.=20 For nomination forms or information on the dinner, call or e-mail the group= 's nearest office: Omaha, (402) 963-9047, [email protected]; Grand Island, (308) 398-0413, [email protected]; Scotts-bluff, (308) 220-4137, [email protected]; Hastings, (402) 463-0558, [email protected]; Columbus, (402) 562-7089, [email protected]. - Todd von Kampen Reservists, enlistees may get tax d= eferral=20 Reservists called to active duty and new enlistees in the armed forces migh= t qualify for a deferral of taxes owed if they can show their ability to pa= y is impaired because of their military service.=20 The Internal Revenue Service announced the deferral this week. It covers ac= tive-duty members of the Army, Navy, Air Force, Marine Corps and Coast Guar= d.=20 National Guard personnel not serving in a federalized status - on state act= ive duty for disaster relief - are not covered.=20 The deferral applies to taxes due before or during military service and ext= ends the payment deadline to six months after military service ends.=20 The deferral is not automatic. It also does not extend the deadline for fil= ing any tax returns. Taxpayers may get extra time to file under other provi= sions, such as being stationed overseas or in a combat zone.=20 Further information on the tax payment deferral can be found at www.irs.gov= or calling 1-800-TAX-FORM. - Deborah Alexander Lincoln nurses to aid D.C. = burn victims=20 LINCOLN - Two nurses from the burn center at St. Elizabeth Regional Medical= Center in Lincoln left Friday for Washington, D.C., to tend patients there= who were burned in the terrorist attack on the Pentagon Sept. 11.=20 The two - Cari Steiner and Melissa Shotkoski - will spend two weeks in Wash= ington, said Jo Miller, the hospital's public relations director. - Julia M= cCord Harvest pageant winner is named=20 GRAND ISLAND, Neb. - Alysia Wardyn was named Miss Harvest of Harmony in a p= ageant Friday night that is part of the annual Harvest of Harmony festiviti= es.=20 Wardyn, the daughter of Leonard and Marcia Wardyn of Farwell, represented S= t. Paul High School. She topped 41 other high school seniors in the contest= .=20 Rachel Rowley of Grand Island Senior High was first runner-up in the pagean= t, with Meghan Bernt of Columbus Scotus as second runner- up. Jenna Johanse= n of Osceola was named Miss Congeniality.=20 Other finalists were Kayla Gross of Burwell, Stefanie Schaefer of Franklin,= Rebecca Stanczyk of Fullerton, Amy Jensen of Hastings, Jo Ella Adelung of = Nebraska City, Amanda Hageman of Overton and Mikele Boshart of Wood River. = - World-Herald News Service Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 LOCAL POWER GIANT BUYS ISLAND IN SEARCH FOR GAS PIPELINE David Fleshler Staff Writer 10/06/2001 South Florida Sun-Sentinel Broward Metro 1A (Copyright 2001 by the Sun-Sentinel) In an attempt to serve South Florida's surging energy market, an internatio= nal power company has bought a tiny Bahamas island where it plans to build = a $1.3 billion complex of electric power and natural gas plants.=20 AES Corp., which owns power plants all over the world, purchased Ocean Cay,= a manmade island about 50 miles east of Miami. The 90- acre island, part o= f the Bimini Islands, is the site of an aragonite mine. But under a proposal outlined this week to state and Broward County officia= ls, the island would become an important offshore power supplier to Florida= . Liquified natural gas would arrive in tankers. A plant would convert it t= o gaseous form and it would be sent to Port Everglades through a 70-mile un= dersea pipeline. The company also plans to build a 1,200-megawatt power pla= nt, with an undersea transmission line to South Florida.=20 "It's a good project to deliver energy into the state of Florida," said Don= Bartlett, vice president of AES Coral Inc., the company's Miami subsidiary= . "It's a very economically doable project."=20 With its proposal, AES has emerged as a rival to Enron Corp. and El Paso Co= rp. in the race to build an undersea natural gas pipeline from the Bahamas = to the United States.=20 AES Corp., based in Arlington, Va., is one of the biggest energy companies = in the world. The company owns or holds interests in 180 power plants in Ch= ina, Sri Lanka, Argentina, Hungary, Brazil and many other countries.=20 It reported revenues of $6.7 billion last year and employs 60,000 people.= =20 All three companies' proposals will face hard questions from regulators abo= ut public safety, possible damage to coral reefs and potential harm to othe= r ocean habitats.=20 Mary Murphy, a state DEP administrator who met with the AES representatives= , said she told them that they would have to explain how they would cross t= he bands of coral reefs along the coast.=20 They would have to show how the pipeline would avoid harming wetlands while= on land.=20 They would have to show whether the route would go through populated areas = or heavily trafficked sections of Port Everglades and how they would keep t= he public safe from accidents.=20 "We're looking at public health and safety, the environment, and we want to= know what they're going to do to address these concerns," she said. "We wa= nt to know if they're going through residential areas, if they're going thr= ough commercial areas. What kinds of reef are you impacting? Are you going = to drag your pipes along the reefs? They need to look at the other uses -- = beach renourishment, cables, treasure salvage leases, possible archaeologic= al sites."=20 Bartlett said the company would work with environmental officials to find a= route that minimizes environmental harm. The company plans to drill a rout= e under the reefs, using the technique of horizontal drilling, which should= leave the reefs undisturbed, he said.=20 "Our objective is to not have any environmental impact at all, and that's w= hat we're trying to achieve," he said.=20 By building a power plant offshore, AES would avoid the local opposition th= at doomed two power plant proposals in South Florida this year.=20 "The advantage to Broward County and the state of Florida is that 1,200 meg= awatts will come ashore without siting a power plant in Broward County," Ba= rtlett said. "Siting plants in South Florida is pretty tough."=20 In addition to directly supplying electricity, the project would deliver na= tural gas to the region's power plants.=20 Demand for natural gas has surged in the United States. The vast majority o= f new electric power plants use it for fuel because it generates far less p= ollution than coal or oil.=20 Two power plants proposed for Deerfield Beach would both use natural gas, a= lthough one would use diesel oil as a backup fuel in case the natural gas s= upply was interrupted.=20 But the AES proposal faces competition from two Houston energy companies. E= l Paso Corp. has proposed a natural gas pipeline from Grand Bahama Island t= o a point near the Port of Palm Beach, where it would hook up with the stat= e's gas transmission system. Enron Corp. has filed applications for permits= to construct a pipeline from Grand Bahama to Port Everglades.=20 The decision on who gets to build the pipeline could ultimately be up to th= e Federal Energy Regulatory Commission, which governs the distribution of n= atural gas throughout the country. Enron has moved the furthest in the appr= oval process, having filed applications with the commission, the state Depa= rtment of Environmental Protection and other agencies.=20 It is unclear whether all three pipeline projects could go forward, since t= hey would be seeking to sell natural gas to many of the same customers. Enr= on spokesman John Ambler said the state's demand for energy could support m= ore than one new source of supply.=20 "I think it's clear that Florida needs more gas," he said. "A diversity of = sources of supply is probably a good thing. I don't know if we need all of = the proposals that are being speculated about. But the demand projection ov= er the next 10 years is that Florida is going to need another 12,000 megawa= tts of power, and that means a lot of gas is going to be needed." MAP; Caption: Staff graphic Map: Locates Ocean Cay in Bimini Islands.=20 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 LOCAL DIESEL BAN MAY SWAY OPPONENTS OF POWER PLANT Jeremy Milarsky Staff Writer 10/06/2001 South Florida Sun-Sentinel Broward Metro 1B (Copyright 2001 by the Sun-Sentinel) A deal in the works between top officials at City Hall and a Houston-based = power company may remove a critical sticking point for people who oppose pl= ans for a 510-megawatt energy plant here.=20 Deerfield Beach Mayor Al Capellini said representatives of Enron Corp. last= month asked to make minor changes to their financial agreement with the ci= ty. In exchange, Capellini wants the company to abandon plans to use diesel= fuel as a backup power source for their proposed power plant on Green Road= just east of Florida's Turnpike. That's an important condition for government officials in Coral Springs and= other North Broward cities, who fear that diesel fuel emissions would poll= ute the air in the region. Enron's plans call for the plant to be fueled pr= imarily by natural gas, which is relatively clean, but they want to be able= to use diesel fuel in case the gas runs out.=20 "If they want to open up their [financial] agreement, they would have to re= move the diesel fuel part of their plant," Capellini said.=20 The financial agreement calls for Enron to pay the city $1.5 million in fee= s before they build the plant, and at least $1.7 million in property taxes = annually. Enron last week paid the first $500,000 of the fees, but they hav= e asked for a different payment schedule, Capellini said.=20 Enron officials want to be able to burn diesel fuel as a backup power sourc= e because currently, only one natural gas pipeline operates in Florida. But= two other pipelines -- one coming across the Gulf of Mexico and the other = coming from the Bahamas -- are in the works.=20 Enron might be willing to drop their plans for diesel fuel, but only if "on= e or both" of those pipelines works by the time they build their plant, sai= d Eric Thode, a company spokesman.=20 "Functionally, the plant is an ambulance service," Thode said. "It has to b= e able to be used at a moment's notice."=20 If Capellini were to convince Enron Corp. to drop the diesel fuel portion o= f their plans, it would represent a political victory for him and his city.= That's because the mayor of Coral Springs, one of the cities that has chal= lenged the state's intention to give Enron an air-quality permit, has said = that he will back off if they drop their plans to burn diesel fuel.=20 So far, Coral Springs has declined to take as aggressive a stance as neighb= oring Coconut Creek, where government attorneys sued Deerfield Beach on Jul= y 13. Coconut Creek attorneys argue that a conflict in zoning laws made it = illegal for Deerfield Beach city officials to approve the Enron plant the w= ay they did.=20 Broward Circuit Judge Leonard Stafford dismissed the lawsuit last month bec= ause he said Coconut Creek had not followed proper procedure, but allowed t= he city to change the suit and file again. Last week, they did just that, s= aid Mitch Bernstein, an attorney for Coconut Creek.=20 "The claims are essentially the same, but they are more thoroughly supporte= d by the events that took place in Deerfield Beach when they considered Enr= on's application," Bernstein said.=20 Capellini said Tuesday evening there were numerous parts of Coconut Creek's= lawsuit that are inaccurate.=20 Jeremy Milarsky can be reached at [email protected] or call 954-57= 2-2020. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Enron Offshoot Leads Texas Complaints for Unauthorized Electric Accounts R.A. Dyer 10/06/2001 KRTBN Knight-Ridder Tribune Business News: Fort Worth Star-Telegram - Texas Copyright (C) 2001 KRTBN Knight Ridder Tribune Business News; Source: World= Reporter (TM) AUSTIN, Texas--An offshoot company of Houston-based Enron led the state in = "slamming" complaints on allegations of attempting to sign up electric cust= omers without their consent, state records show.=20 The Texas Public Utility Commission has received at least 14 complaints aga= inst the Enron-created NewPower Co. and one each against providers Green Mo= untain, Reliant, First Choice and Shell, according to documents filed with = state regulators. The Texas electric deregulation law prohibits the practice and sets penalti= es of up to $5,000 per day, per customer, but the PUC has taken no official= enforcement action against any of the companies.=20 "Slamming" is slang for changing customers' utility providers without their= permission.=20 A NewPower spokeswoman said the company is aware of the complaints and has = begun an investigation.=20 "NewPower has a zero tolerance policy towards slamming," said company spoke= swoman Terri Cohen. "We have more than 50,000 Texans who have chosen to swi= tch to NewPower. Even a fraction of a percent of slamming complaints -- whi= ch is what this is -- is not acceptable to us."=20 Under the state's new deregulation law, companies such as NewPower can offe= r lower prices and different service plans to lure customers away from the = state's utility companies.=20 A pilot project that began this year allows companies to compete for up to = 5 percent of customers. Most of the Texas market will open Jan. 1.=20 The process is overseen by the PUC and a nonprofit corporation that manages= the state's electric power grid.=20 Under the Texas Open Records Act, the Star-Telegram obtained information on= 68 complaints about the pilot project filed between March 1 and Sept. 27. = Other complaints involved billing, customer frustrations over delays in the= pilot project, customer service and deceptive trade practices.=20 James Pittman, 52, of Houston, said he switched to NewPower after a telepho= ne marketer told him he would have to choose a new electric company -- or t= he state would choose one for him.=20 Pittman said the telemarketer incorrectly told him he would have to pay fee= s for a forced switch but could switch to NewPower for no charge.=20 "I just flat out told her that I just got out of the hospital from a heart = attack, and I didn't feel like I was up to any of this," Pittman said.=20 "She told me that I had to change (electric service), or the state would ch= ange it for me. She said it wouldn't be our choice. It would be whatever th= e state decided."=20 Pittman said he then had difficulty switching back to Reliant.=20 Several Texas residents, including some TXU customers in North Texas, also = reported receiving switch notifications even though they had not requested = new service.=20 PUC spokesman Terry Hadley said some of the slamming complaints may have be= en prompted by computer glitches at the power grid. Others may have been ca= used by confusion by marketers and the public over the new deregulation law= .=20 Hadley said regulators will continue to monitor complaints, although it is = premature for the PUC to take enforcement actions.=20 "It's early in the game and we would expect that as education increases, we= might not see the so-called complaints in the future," Hadley said.=20 He said lawmakers had inserted strong anti-slamming language into the dereg= ulation law after witnessing similar problems with the deregulation of long= -distance telephone service. The PUC received 5,700 such complaints in one = year alone, he said.=20 But Reggie James, director of the Austin office of the Consumers Union, sai= d the PUC should have done a better job of educating consumers about their = rights under the new law.=20 He said a $12 million customer-education campaign by the PUC has focused fo= r the most part on "happy talk" to defend deregulation.=20 "If deregulation is going to work, it will require the confidence of all co= nsumers," said James. "And if people think they're going to get ripped off = by the companies that are competing, it will hurt all the competitors."=20 Complaints about slamming and other problems can be lodged with the PUC by = calling (888) 782-8477. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09

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Topping Out In Houston Again Time Magazine, 05/28/01 Enron to meet government for talks on power dispute Associated Press Newswires, 05/22/01 Enron to meet government for talks on power dispute Associated Press Newswires, 05/22/01 INDIA: WRAPUP 1-Indian state questions power deals, cites Enron. Reuters English News Service, 05/22/01 Enron pulls out of venture drilling in Qatar's waters Associated Press Newswires, 05/22/01 GERMANY: Enron says Lampertheim hub attracting interest. Reuters English News Service, 05/22/01 May 28, 2001 TIME Magazine Topping Out In Houston Again BY CATHY BOOTH THOMAS/DALLAS Send the architects south. Silicon Valley may be powerless and profitless, but Houston, the nation's energy capital and home to the oil-baron excesses of the 1980s, is back in "bidness." The energy giants in Texas have big fat wallets these days--and even bigger construction plans. Not since the boom days of 1982, when trophy architects like Philip Johnson and I.M. Pei reconfigured the skyline, has Houston seen so much construction activity by the energy sector. Leading the parade, ironically, is Enron, an old energy behemoth that has reinvented itself as a high-tech trading firm dealing in everything from natural gas to Internet bandwidth. In fact, its new 40-story headquarters, designed by Cesar Pelli, will be fronted by a seven-story "podium"--or shorter building--to house what Enron is calling the largest commodities-trading environment in the world. This environment, spread over four floors, each the size of a city block, will become home this August to 2,000 employees trading commodities that range from Old World (crude oil, petrochemicals, steel and lumber) to New World (emission credits and derivatives). Chairman Kenneth Lay and CEO Jeff Skilling are even moving from their skyboxes to work in seventh-floor offices so they can peer down into the pit. When the bigger 40-story structure is finished in December, Enron's will be the first new skyscraper in downtown Houston since 1987--to be followed by three more by 2003. Besides Enron, Calpine Corp., the nation's leading independent-power company, based in California, will move into a new 32-story high-rise. And Reliant Resources, the IPO spun off this month from its Houston parent to deal with Texas' new deregulated electricity market, has signed on for offices in a 36-story skyscraper. What's fueling the high-rise fever is simple: excess cash. Enron's first-quarter revenues were up 281%, while Calpine's revenues and net income were each up more than 400%--even with California's deadbeat utility PG&E owing the company more than $300 million. After a decade of contraction in the business, with companies having shut offices from New Orleans to Oklahoma, deregulation and new marketing strategies are sparking Houston's renaissance. "Enron is a leading example of the new energy industry. Ten years ago, there were no trading floors," points out Stephen Brown, senior economist with the Federal Reserve Bank in Dallas. Both Calpine and Reliant will also have trading operations in their new offices. Though Houston no longer relies so heavily on the energy business (down to 48% of the local economy from 82% in 1982) the turnaround sure feels good after the city lost more than 15,000 energy-sector jobs two years ago, says Barton Smith, director of the Institute for Regional Forecasting at the University of Houston. It has gained those jobs back, plus some. Says Smith: "The current boom is what's keeping Houston afloat while the rest of the country is suffering." None of this matters to real Houston lovers, of course. They're just interested in bragging rights. After a bad decade, they're beginning to sound like the biggest and the best in Texas again. "Boomlet?" says Laura Schwartz, spokeswoman at Enron. "It's more than a mini-boom. It's a boom." Enron to meet government for talks on power dispute By RAMOLA TALWAR BADAM Associated Press Writer 05/22/2001 Associated Press Newswires Copyright 2001. The Associated Press. All Rights Reserved. BOMBAY, India (AP) - The Indian subsidiary of American power concern Enron Corp. said Tuesday it would meet government officials for talks on a power supply dispute. "We look forward to hearing the proposed solutions ... particularly relating to creditworthy purchases for the power," said a statement from Dabhol Power Co., Enron's Indian unit. The statement comes two days after the company issued a preliminary notice to the Maharashtra State Electricity Board, a state-run utility, that it would stop supplying electricity if the government company continued to default on payments. Representatives from Houston-based Enron will meet Wednesday with officials from the utility, the federal government and Maharashtra, the western Indian state where the project is located. The MSEB has denied it defaulted on paying electricity bills to the power company that is setting up a $3 billion project in Maharashtra state. MSEB officials said overdue December and January bills of $48 million should be offset against a fine of $85.31 million it imposed on Enron for not supplying power during the period. Enron disputes the fine. Politicians in Maharashtra say the cost of Dabhol power is too high and have called for renegotiating the tariff. Others have suggested selling power to nearby power-hungry states. Politicians complain Dabhol's costs have averaged more than 4 rupees (11 cents) as against 1.8 rupees (four cents) per unit agreed in 1995 for the naphtha-generated electricity from the 740-megawatt plant. The controversy erupted last year when prices shot up to 7 rupees (15 cents) per unit because of worldwide fluctuations of oil prices and depreciation of the Indian rupee. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Enron to meet government for talks on power dispute By RAMOLA TALWAR BADAM Associated Press Writer 05/22/2001 Associated Press Newswires Copyright 2001. The Associated Press. All Rights Reserved. BOMBAY, India (AP) - The Indian subsidiary of American power giant Enron said Tuesday it would meet government officials for talks on a power supply dispute. "We look forward to hearing the proposed solutions ... particularly relating to creditworthy purchases for the power," said a statement from Dabhol Power Company, Enron's Indian unit. The statement comes two days after the company issued a preliminary notice to the Maharashtra State Electricity Board, a state-run utility, that it would stop supplying electricity if the government company continued to default on payments. Enron representatives will meet officials from the western Indian state of Maharashtra, where the project is located, and federal government and MSEB officials Wednesday. The MSEB has denied it defaulted on paying electricity bills to the power company that is setting up a dlrs 3 billion project in Maharashtra state. MSEB officials said overdue December and January bills of dlrs 48 million should be offset against a fine of 4 billion rupees (dlrs 85.31 million) it imposed on Enron for not supplying power during the period. Enron disputes the fine. Politicians in Maharashtra say the cost of Dabhol power is too high and have called for renegotiating the tariff. Others have suggested selling power to nearby power-hungry states. Politicians complain Dabhol's costs have averaged more than 4 rupees (11 cents) as against 1.8 rupees (four cents) per unit agreed in 1995 for the naphtha-generated electricity from the 740-megawatt plant. The controversy erupted last year when prices shot up to 7 rupees (15 cents) per unit because of worldwide fluctuations of oil prices and depreciation of the Indian rupee. (rtb, nnm-js) Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. INDIA: WRAPUP 1-Indian state questions power deals, cites Enron. By Sriram Ramakrishnan 05/22/2001 Reuters English News Service (C) Reuters Limited 2001. BOMBAY, May 22 (Reuters) - India's ambitious plans to throw open its cash-strapped power sector to the private sector, already wracked by controversy involving Enron , received a further setback after Karnataka state said it would reopen sealed deals with 11 power firms. The technology-friendly southern state of Karnataka said late on Monday that it was re-opening power deals with 11 private sector firms which together were due to meet half the state's demand over the next 10 years. "Enron is a lesson for all of us. Now, it (electricity) cannot be at any cost," V.P. Baligar, chairman and managing director, Karnataka State Power Transmission Corp (KPTCL), the state's monopoly power distributor, told Reuters in an interview late on Monday. The 11 power projects are based on the Enron model and involve a total of 2,000 megawatts (MW). None of the 11 projects have started generation. Analysts fear that Karnataka's move, coming amidst the raging controversy over Enron's giant power project, will scare away badly needed private investment from the country's inefficient power sector. India needs to add 100,000 MW of power over the next 10-15 years to meet growing demand and is hoping to get this through investment from private and foreign companies. But investment has been hampered by a slow-moving bureaucracy, legal hassles and loss-making utilities who are frequently unable to pay for the power purchased. ENRON IMBROGLIO Last week, Enron's Dabhol Power Company moved to break a contract to sell power to Maharashtra state, peeved over payment defaults by the state utility Maharashtra State Electricity Board (MSEB). This is widely seen as leading to a pull out. MSEB and Dabhol have been at loggerheads for over six months over payments due to DPC by the state utility. The project has been marred by controversy since its inception in 1991, with critics charging that it was charging too much for the power it produced. MSEB, which DPC says owes it $48 million, is planning to retaliate by slapping a penalty of 4.0 billion rupees ($85.2 million) on DPC for failing to ramp up capacity. "We will issue the penalty as soon as the bill for May is received," the official, who did not want to be quoted, told Reuters on Tuesday. MSEB had imposed a similar penalty on DPC - which DPC has not paid - saying its plant could not be ramped upto full capacity within three hours from a cold start. DPC officials refused to comment on the issue. The Enron project was first billed as a showcase of India's decade-old reform programme but now is regarded by critics as a symbol of policy bungling. The project involves the setting up of a 2,184 MW power project costing $2.9 billion in two phases. The first, of 740 MW, is up and running while the second, of 1,444 MW, is due to be commissioned next month. ( $1 = 46.9 rupees). Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Enron pulls out of venture drilling in Qatar's waters 05/22/2001 Associated Press Newswires Copyright 2001. The Associated Press. All Rights Reserved. HOUSTON (AP) - Executives of Enron Corp. say they are withdrawing from a large natural gas project off Qatar, partly because the venture doesn't fit with the energy company's focus. Plans for the Dolphin project called for Houston-based Enron to work with Elf, a subsidiary of France's Total Fina, and the United Arab Emirates Offsets Group to develop and pipe natural gas from a block of the Qatar North Field. But the company pulled out, believing there are better places to invest its money, said Alex Parsons, a company spokesman in London. He said the project doesn't fit with Enron's current focus of emphasizing businesses such as marketing and trading in wholesale markets such as those for natural gas and electricity and broadband. Those involved with the project said last year it could end up requiring investments of up to dlrs 10 billion over six or seven years. Enron said Monday it was transferring its 24.5 percent stake in the project to the United Arab Emirates Offsets Group, which said in a news release it had started negotiating with other international players to become stakeholders. With the transfer, United Arab Emirates Offsets Group will own 75.5 percent of Dolphin. Terms of the deal weren't released. Enron said it would consider future ventures with the United Arab Emirates Offsets Group that were "in line with our core business activities." M. Carol Coale, an energy analyst with Prudential Securities in Houston, said Enron's move is consistent with its exit strategy from international assets that generate low returns. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. GERMANY: Enron says Lampertheim hub attracting interest. 05/22/2001 Reuters English News Service (C) Reuters Limited 2001. DUESSELDORF, May 22 (Reuters) - U.S. trader Enron said on tuesday there was growing support for the south west German Lampterheim gas hub it had been actively promoting since early April. "Liquidity is growing slowly, it is not (Belgian hub) Zeebrugge, but customers are posting orders and are coming forward with surplus amounts," sales chief Helge-Juergen Beil of the company's German division in Frankfurt told Reuters during a Euroforum industry conference. "Our main strength is that we both sell and buy for various periods." Beil said a number of deals had been done, but would not quantify them. Enron on its trading platform enrononline.com currently quotes Lampertheim gas sales and purchases in parcels of 20 megawatt hours in euros for the spot market and the year ahead. The town, near Heidelberg on the border of the Hesse and Baden-Wuerttemberg states, complements border hubs such as Bunde-Oude, Aachen, Baumgarten, Waidhaus and Oberkappel. Beil also said Enron was supplying eight local and regional utilities and industrial gas customers in central and southern Germany with a total four terawatt hours of annual demand. Enron's share of total requirements in each case varied between 20 and 94 percent of their annual purchases. He said non-discriminatory access to the German pipeline grid had not been achieved by newcomers to the market. In order to help create fair rules for access and their montoring, Enron, like other newcomers, was demanding a state-installed arbiter to supervise the liberalisation process. Other speakers at the conference said the success of newcomers was still hampered by the long distribution chain and an enforced need for hourly, rather than longer term, balancing, which could cause exorbitant penalties payable to incumbents. But some gas grid owners had turned out to be co-operative, customers were queueing up, and there were prospects that existing surplus gas volumes from international take-or-pay contracts could be freed up and eventually traded. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved.

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Democrats Prepare to Duel Bush Over Energy Price Caps in West The Wall Street Journal, 06/01/01 Electricity Trading Is Target of State Probe Regulation: A special Senate panel is investigating alleged price manipulation of power transactions. Los Angeles Times, 06/01/01 Companies Rush to Purchase Their Indian Units, Boosting Share Prices of Concerns With Foreign Ties The Wall Street Journal, 06/01/01 Exxon, Shell Poised to Win Saudi Deals --- They Appear Favored To Lead Key Projects In Coveted Gas Sector The Wall Street Journal, 06/01/01 NEW PACKAGE TO RESOLVE DPC, INDIA'S MSEB SITUATION: OFFICIAL Asia Pulse, 06/01/01 GLOBAL INVESTING: Betting on better times for utilities Financial Times; Jun 1, 2001 INTERNATIONAL ECONOMY, MIDDLE EAST & AFRICA: Hopefuls await details of Saudi gas deal Financial Times; Jun 1, 2001 FITCH PLACES INDIA ON NEGATIVE RATING OUTLOOK ON FISCAL CONCERNS Asia Pulse, 06/01/01 Thomas E. White becomes Secretary of the Army M2 Presswire, 06/01/01 Some light at last! The Economic Times, 06/01/01 Calif. investigations focus on whether out-of state wholesalers manipulated energy prices Associated Press Newswires, 06/01/01 California Lawmakers Eye Billing Businesses for Edison Rescue Dow Jones Business News, 05/31/01 Construction of power plant in DeSoto County is underway Associated Press Newswires, 05/31/01 Politics & Policy Democrats Prepare to Duel Bush Over Energy Price Caps in West By John Harwood and Jeanne Cummings Staff Reporters of The Wall Street Journal 06/01/2001 The Wall Street Journal A16 (Copyright (c) 2001, Dow Jones & Company, Inc.) WASHINGTON -- If you talk to economists, many will say President Bush is on solid ground in opposing caps on soaring electricity prices in California and elsewhere. But if you talk to voters, many will suggest he has political problems. And now that Democrats control the U.S. Senate, they are poised to make those problems a lot worse. Mr. Bush got a taste of what is coming in his widely touted showdown with California Gov. Gray Davis in Los Angeles this week. The Republican president repeated his familiar argument that capping wholesale electricity prices would do nothing to curb demand or increase the supply of power for California. But the Democrats' Mr. Davis, fortified by polls showing that 70% of Californians favor price caps, managed to get equal billing during Mr. Bush's visit for his argument that they are needed to keep the state from slipping into recession and threatening the national economy in the process. Because Sen. Jim Jeffords of Vermont left the Republican Party last week and changed control of the Senate, Democrats now have a more effective national platform to press the same arguments -- and to threaten Mr. Bush's political standing beyond the already hostile turf of California. The incoming chairman of the Senate Energy and Natural Resources Committee, Democratic Sen. Jeff Bingaman of New Mexico, says he plans to move soon on legislation capping prices for California and other Western states, a bill that has attracted some GOP support as well. "I think it's clear to anybody that the prices being charged for wholesale power are excessive," said Sen. Bingaman, in an interview while he was heading toward California on a fact-finding mission. "I don't believe it's going to be adequate to get us through this summer, to just continue saying that eventually supply will come into line with demand and the problems will be resolved." Meantime, the incoming chairman of the Permanent Subcommittee on Investigations, Democratic Sen. Carl Levin of Michigan, plans to investigate the role of oil companies in higher gas prices. "This is the manipulation of prices, and we've got to investigate it because our people in Michigan are absolutely furious," Sen. Levin says. Just as Republicans once used the machinery of Congress to probe then-President Clinton's problems, Democrats see ripe opportunities for embarrassing an ex-oilman president with strong links to Texas energy-producing companies that are profiting from today's supply squeeze. During the 2000 presidential campaign, five of the major companies now supplying power to California -- Duke Energy Corp., Dynegy Inc., Enron Corp., Reliant Energy Inc., and Williams Cos. -- gave some $3.6 million to Mr. Bush and the GOP, more than triple the amount donated to Democrats. Three of those companies are based in Mr. Bush's home state of Texas, which only adds to the political tensions. The Democratic offensive has the GOP worried. Price caps amount to "terrible policy, but good politics," frets Republican pollster Neil Newhouse. Mr. Bush now faces "a difficult job" overcoming the Democratic arguments for caps, he adds, because "control of the Senate has given them a megaphone on issues that they just didn't have before." That doesn't necessarily mean Mr. Bush ultimately will suffer grave damage. As congressional Republicans learned to their chagrin in battles with Mr. Clinton, the presidential bully pulpit remains the most potent weapon in American politics for framing policy debates. Even with that advantage, though, the Clinton administration found that the initial appeal of arguments on issues such as tobacco regulation and prescription drugs faded under sustained counterattack by Republicans and affected industries. And so far, polls are showing that Mr. Davis also is paying a political price in California for the crisis. Still, Mr. Davis, who faces re-election next year and may later seek the 2004 Democratic presidential nomination, believes he can limit the damage by emphasizing his efforts to expand supply and spotlighting the actions of energy companies in Texas and elsewhere. On CNN's "Larry King Live" this week, he complained that "money sucked out of this state" amounts to "a massive transfer of wealth" from Californians to the industry. Whatever the political ramifications, they aren't limited to California. Consumers in Washington, Idaho and Montana that are serviced by the same electric grid have seen 30% increases in their utility rates. That is why Mr. Davis, with support from some GOP governors in the West, is asking the Federal Energy Regulatory Commission to impose short-term wholesale price caps to help protect electricity consumers from soaring rates until new power plants approved for construction in California increase supply enough to bring prices down through market forces. California Democratic Sen. Dianne Feinstein and Oregon Republican Sen. Gordon Smith are offering legislation to accomplish that in the committee that Mr. Bingaman now will chair. As a matter of policy, most economists probably would agree with Mr. Bush's free-market position on price caps, though that sentiment is hardly unanimous. As he met with the president this week, Mr. Davis released a letter from 10 prominent economists backing price caps as a temporary remedy for a market "not characterized by effective competition." One of the signatories was Alfred Kahn, architect of airline deregulation under President Carter. But Bush economic advisers, heeding the free-market arguments that have held the high ground in regulatory policy debates since the Reagan era, insist that such caps would distort the energy market and be difficult to abandon even when market conditions turn more favorable for consumers. "Price caps do nothing to reduce demand, and they do nothing to increase supply," Mr. Bush said in California this week. Mr. Davis says the Federal Energy Regulatory Commission is obliged under law to assure "just and reasonable" prices, and he says he will sue the agency to force it to act despite the dismissal earlier this week of a similar lawsuit filed by California's Democratic legislative leaders. Whether the governor's effort succeeds, it could provide another forum in which supporters of price caps can make their case. In discovery, for instance, California attorneys may be able to get industry data on how much the wholesalers are paying to produce electricity and their real costs of delivering it. Such transactions are drawing attention because of the significantly higher prices being charged in California compared with other states. This week, for instance, the price of a million British Thermal Units of natural gas in the San Juan Basin in New Mexico was $2.80, said one economist for the Senate Energy Committee. But when that gas arrived at the Southern California border, she said, the price was $10.20 per million BTUs. Mr. Bush himself voiced concern about such differentials in his meeting with Mr. Davis, and ordered the FERC to step up monitoring for price gouging. He has designated Pat Wood, a recent FERC appointee who headed the Texas Public Utilities Commission during his governorship, as the administration's lead liaison to California. Mr. Wood, in fact, could end up an increasingly important player as the crisis in California and other Western states plays out this summer. Mr. Wood, who supported some price caps in Texas, is considered more flexible on the issue than is FERC's current chairman, free-market champion Curtis Hebert. During his confirmation hearings, Mr. Wood said it may be too late for price caps because the commission would need months to study materials and determine an appropriate market rate. If the administration continues resisting caps, Democrats vow to score political points heading into the 2002 congressional elections. "Bush is the individual who ginned this up into a crisis" by frequently calling attention to the nation's energy problems, says Jim Jordan, executive director of the Democratic Senatorial Campaign Committee. "Yet the administration won't consider any serious short-term action to alleviate the problem for the public." --- Energy Problems? Public views of President Bush and energy problems, nationally and among Californians: Nationally Q: In general, do you approve or disapprove of the way President Bush is handling his job as president? Approve 52% Disapprove 38% Q: Based on what you have read or heard, do you favor or oppose President Bush's plan to deal with the country's current energy problems? Poor job 49% Good job 38% Q: How do you think President Bush is handling energy? Oppose 42% Favor 38% Unsure 20% In California Is it a good or bad thing for the federal government to cap energy prices? GOOD THING BAD THING NO OPINION All adults 70% 24% 6% Registered voters 68 26 6 Democrats 79 17 4 Republicans 57 37 6 Other 63 29 8 Sources: National poll numbers from CNN/Time poll; California numbers from the Field Poll Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. California; Metro Desk Electricity Trading Is Target of State Probe Regulation: A special Senate panel is investigating alleged price manipulation of power transactions. RICH CONNELL; ROBERT J. LOPEZ TIMES STAFF WRITERS 06/01/2001 Los Angeles Times Home Edition B-1 Copyright 2001 / The Times Mirror Company California officials are probing a vast private network of electricity trading floors suspected of being a central culprit in California's spiraling energy prices. A special state Senate panel investigating alleged manipulation of the energy market is zeroing in on hundreds of thousands of secretive transactions each year that help determine whether California will have the power it needs--and what it will have to pay to get it. Those activities also are central to a lawsuit by the San Francisco city attorney, who has accused power companies of using unfair business practices to reap huge profits from the state's volatile and vulnerable energy market. A single electron may be traded nearly a dozen times, often at escalating prices, before reaching California. By then, the actual cost of producing the electricity may have no relation to its price. Unlike other commodity and stock exchanges, the frenzied daily activity on the energy trading floors escape any independent oversight, which critics contend makes the operations ripe for collusion and price-fixing. "They're playing the California power game," said attorney Michael Aguirre, a former federal prosecutor now suing power companies on behalf of Lt. Gov. Cruz Bustamante. "The trading is the epicenter of the whole enchilada. They trade and inflate the value." Power company representatives say their trading floors operate legally and ethically. "I don't think there has ever been the slightest shred of evidence [of] something illicit or wrongdoing," said Gary Ackerman of the Western Power Trading Forum, an industry trade group. Ackerman and players in the market say prices are not always ratcheted up through the trading. Often, they say, traders can match supply and demand to help stabilize prices through daily transactions and long-term contracts. Still, Aguirre and others say, these sophisticated trading operations have outmaneuvered bureaucrats at Cal-ISO and the state Department of Water Resources, the agencies responsible for buying billions of dollars worth of power over the past several months. The sprawling trading floors, scattered across the country, are marvels of high technology. Amid banks of computers and huge wall screens that track weather, electricity prices and demand across vast regions, mathematicians, meteorologists and rows of gung-ho traders try to optimize profits buying and selling one of the world's most volatile commodities. "These are trading floors that are well outside any regulatory format," state Sen. Joseph Dunn (D-Santa Ana) said Thursday. "What impact do these trading floors have on the situation in California?" Plant Operations Also Scrutinized Although trading floors are an important focus of state authorities, the probes of the power companies include an array of issues. Investigators are digging into the operations of power plants to determine whether unnecessary shutdowns have been used to tighten supplies and hike prices. Dunn, a onetime consumer attorney, is heading the Senate investigation panel that is trying to unravel these issues and the role of the trading floors, operated by the nation's largest power marketers: Enron, Mirant, Duke Energy, Dynegy Inc., Williams Cos. and Reliant. The committee is seeking records that could determine whether the power companies have swapped information on trading tactics to maximize prices. Among dozens of categories of documents Dunn's committee has requested--and may ultimately subpoena--are computer records from trading floors, recordings of communications between traders for different companies and training manuals for traders. "We know one product of that trading is it drives up the price. . . . What are you trading for, other than to drive up the price?" Dunn said in a recent interview. His committee, which has yet to uncover any wrongdoing, is battling with the power companies to obtain information the firms insist is confidential. San Francisco City Atty. Louise H. Renne also is focusing on trading-floor activity. "That is a central concern of ours," said Owen Clements, Renne's chief of special litigation. Clements suspects power traders may be "churning" megawatts through repeated sales and boosting prices. "If everyone passes it around and makes a profit, and the ratepayer and the state of California are stuck with the bill . . . that certainly looks like an unfair business practice," he said. A spokesman for Houston-based Enron, which operates one of the busiest trading operations, said critics misunderstand the energy market, where profits are not necessarily tied to high prices. "We're agnostic about the direction of prices," Mark Palmer said. "We make money one way or the other." He said the trick is in having a diversified portfolio--and offering unique risk services--to absorb the changing market. Palmer said those implying misconduct on the trading floors are "100% politically motivated. . . . These are folks who want to return California to [power] regulation." Still, some industry officials acknowledge that some additional oversight of trading floors may be needed. Ackerman, of the power trading association, said his members have asked federal regulators to consider an auditing program to review trading activities. "If people don't have confidence in trading floors," Ackerman said, "that's a problem." * Times staff writer Miguel Bustillo contributed to this story. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. World Stock Markets Companies Rush to Purchase Their Indian Units, Boosting Share Prices of Concerns With Foreign Ties By Jesse Pesta Staff Reporter of The Wall Street Journal 06/01/2001 The Wall Street Journal C11 (Copyright (c) 2001, Dow Jones & Company, Inc.) NEW DELHI -- Foreign companies are on a shopping spree in India's stock market, buying up their own affiliates and hoping to take them private. In recent weeks, companies ranging from Otis Elevator Co. and Carrier Corp., both of Farmington, Conn., to Hoganas AB of Sweden, a player in the global iron-powder business, have made open offers for the shares of their Indian units, sometimes at prices that suggest they consider themselves a bargain. Boston chemicals maker Cabot Corp. offered 100 rupees ($2.13) a share for Cabot India Ltd. at a time when it was trading around 55 rupees. Royal Philips Holland has offered to buy the 17% of light-bulb maker Punjab Anand Lamp Industries it doesn't already own, according to Punjab. Otis and Carrier, which are units of United Technologies Corp., Hartford, Conn., have offered to buy all shares outstanding of their Indian affiliates, Otis Elevator Co. (India) Ltd. and Carrier Aircon Ltd. The price for Carrier shares was a nearly 100% premium to the stock's price prior to the offer. The buybacks have triggered a surge in the stocks of other companies with a foreign pedigree. Companies including Rayban Sun Optics India Ltd. (a unit of Bausch & Lomb Inc., Rochester, N.Y.) and Philips India Ltd. (a unit of Royal Philips Holland) have seen share prices rise as much as 40% or more since the mid-May offers for Otis and Carrier, which were two of the early ones in the current wave. Both Rayban and Philips India deny open offers are planned. In any case, Philips already boosted ownership in its Philips India unit to 83% from 51% late last year. In contrast to the surging shares of multinationals since mid-May, the Bombay Sensitive Index has risen only 1.56%. It closed yesterday at 3631.91, down 30.13. The trend has several drivers. For one thing, Indian stocks remain battered after a rash of big market scandals earlier this year. Meantime, taking a company private means it no longer is required to share as much information about its business either with the market or a local partner. "In tough times it will safeguard your interest," says Jignesh Shah, strategist at Ask-RJ Investment Management in Bombay. But most significantly, India has slowly made it easier in recent years for foreigners to invest. Indeed, the buyback trend contrasts with the feud between Dabhol Power Co. and its customer, the Maharashtra State Electricity Board, over unpaid electricity bills. Dabhol, which is 65%-owned by Houston's Enron Corp., is India's largest foreign investment and an emblem of the difficulties foreign companies have encountered through the years. But the buyback trend "works against the story of negative foreign-investment environment" in India, one analyst notes. As a rule, the companies play down the importance of stock price. Hoganas's buyback for instance reflects the company's global strategy, but reflects as well on a liberalizing India: Everywhere else in the world Hoganas owns 100% of its subsidiaries, even Japan and China, says Virendra Sud, managing director. But India didn't allow full foreign ownership 15 years ago, when the company came here, he says, or else "we would have done it then." It's purely coincidental that the buyback comes just as the stock market "has sort of hit rock bottom," he says. Otis attributes its buyback partly to India's growing appetite for more sophisticated elevators, which means transferring advanced designs here. Technology transfer heightens the need for closer cooperation with the parent, says Managing Director Ashok Malhotra. But the company's reason for going public in the first place sheds light on the regulatory cycle playing out today in India. In the 1970s, India went through a phase of requiring foreign companies to be part locally owned, so Otis made the public offer that it is trying to undo today. "You have to work under the rules of the time," Mr. Malhotra says. --- Yesterday's Market Activity Nasdaq's losses overnight pressured markets throughout Asia as Tokyo blue chips tumbled 1.7% and South Korea's benchmark index fell 2.6%. European markets rebounded somewhat from the previous day's declines, though volume was thin. Overall, the Dow Jones World Stock Index rose 0.10%, or 0.20, to 195.33. Excluding the U.S., the index fell 0.68%, or 0.96, to 141.08. In TOKYO, the Nikkei Stock Average was down 1.7%, or 231.21 points, to 13262.14. Nomura Securities downgraded its ratings on Fujitsu, Toshiba and NEC, causing a broad slump in technology shares. Fujitsu ended down 2.8% at 1,543 yen, NEC slumped 3.9% to 1,947 yen, and Toshiba fell 3.6% to 675 yen. In HONG KONG, the Hang Seng Index ended down 1.8%, or 245.72 points, at 13174.41. China Mobile fell 2.8% or 1.1 Hong Kong dollars to close at HK$37.80. Property concern Cheung Kong dropped 3.4% to HK$85 and Sun Hung Kai finished down 2.4% at HK$72.75. In LONDON, the FTSE 100 Index slipped 0.01%, or 0.8 points, to 5796.10. Services company Rentokil Initial surged 12.9% to 215 pence after it said sales from continuing businesses were up 7.1% and operating profit was up 9% year on year. It also said it has bought back 120 million of its own shares since March. Invensys closed 6% higher at 142 pence after posting results in line with expectations. Retailer Boots ended 3.5% higher at 597 pence after posting earnings results in line with expectations. In PARIS, the CAC 40 Index closed up 0.2%, or 9.92 points, to 5454.19. Alcatel closed up 2.4% to 29.95 euros following the release Wednesday of weaker-than-expected results and the demise of merger talks with Lucent Technologies. J.P. Morgan cut its earnings-per-share forecast for the communications-equipment supplier. Deutsche Bank also expressed negative sentiment about the company, saying an industry turnaround is unlikely before the fourth quarter of 2001. Car maker Renault closed down 1.1% to 55.15 euros. Lehman Brothers cut its 2001 earnings forecast, citing exposure to falling demand in U.S. and Europe. --- MSCI Indexes % FROM May 30 May 29 12-00 U.S. ........... 1183.7 1201.5 -5.3 Britain ........ 1723.9 1744.4 -6.4 Canada ......... 1030.8 1049.4 -10.9 Japan .......... 828.4 844.2 +2.5 France ......... 1763.4 1794.3 -7.3 Germany ........ 755.2 767.4 -7.7 Hong Kong ...... 6844.0 6920.0 -11.0 Switzerland .... 939.5 946.6 -7.6 Australia ...... 700.3 702.9 +9.4 World Index .... 1120.6 1136.4 -8.2 EAFE MSCI-p .... 1325.6 1342.7 -11.2 As calculated by Morgan Stanley Capital International Perspective, Geneva. Each index, calculated in local currencies, is based on the close of 1969 equaling 100. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. International Exxon, Shell Poised to Win Saudi Deals --- They Appear Favored To Lead Key Projects In Coveted Gas Sector By Bhushan Bahree Staff Reporter of The Wall Street Journal 06/01/2001 The Wall Street Journal A11 (Copyright (c) 2001, Dow Jones & Company, Inc.) PARIS -- Exxon Mobil Corp. and the Royal Dutch/Shell Group appear poised to win coveted leadership roles this weekend in a historic reopening of Saudi Arabia's energy industry. People familiar with developments said that barring last-minute upsets, Exxon, the world's largest publicly owned oil company, will be named operator of the largest opening being offered by the Saudis, the South Ghawar natural-gas project that will require investment of $15 billion and is named after the world's largest oil field, in the country's eastern province. But, they cautioned, because Shell has been competing hotly for South Ghawar, nothing can be taken for granted until the Saudis officially name the winners and sign memorandums of understanding on Sunday. As of late last night, Shell, the second largest company, was expected to win the second prize: leadership of the Shaybah gas project, which requires investment of $5 billion and is named after a recently developed oil field in the kingdom's remote Empty Quarter, a southeastern desert region. Saudi Arabia already has named Exxon leader of the third and last gas project opened to foreign investment, the Red Sea project that requires investment of as much as $5 billion. Saudi Arabia's energy industry was nationalized in the 1970s, but over the past two years has been reopened to foreign investment, prompting a fierce contest among the world's largest oil companies. The people familiar with developments cautioned that until the choices have been endorsed by an 11-member ministerial committee headed by Saudi foreign minister Prince Saud al-Faisal, and given the final nod by Saudi Crown Prince Abdullah, they couldn't be considered final. The people said the ministerial committee met late yesterday ahead of a formal signing ceremony planned for Sunday in Jeddah, the Saudi city on the Red Sea coast. Such is the importance of getting into Saudi Arabia that the chief executives of the eight companies chosen to participate in the gas projects are flying to Jeddah to sign the memorandums, a prelude to negotiations about fiscal and other terms. Final agreements aren't expected until year's end at the earliest. Officials of Exxon, Shell and the Saudi government declined to comment on the choices made by the kingdom, which has the world's largest crude reserves and is fifth in the natural-gas reserves after Russia, Iran, Qatar and the United Arab Emirates. A leadership role -- or operatorship in industry parlance -- brings the opportunity to set the pace of the project and create local networks that can prove valuable for future projects. The kingdom still isn't allowing foreign companies into its crude-oil business, which is run by the state-owned Saudi Aramco, but foreign oil companies hope they eventually will be allowed into that sector, too. Indeed, Aramco is expected to participate in the gas projects opened to foreigners, with voting rights that have yet to be determined. The projects are wide-ranging and encompass a long chain from exploration and production of natural gas, to its transportation and use to generate electricity and in water desalination plants. Last month, Saudi Arabia named eight foreign companies, from a list of 11, to take part in three consortiums for these projects. Besides Exxon and Shell, they are BP PLC, TotalFinaElf SA, Conoco Inc., Phillips Petroleum Corp., Occidental Petroleum Corp. and Enron Corp. The three companies that sought but failed to get a place are Chevron Corp., ENI SpA, and Marathon Oil Canada Inc. Industry officials say the competition was some of the fiercest ever. Said a senior industry executive: "Everybody is looking 10 years down the road, and the place to be is in Saudi Arabia." Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. NEW PACKAGE TO RESOLVE DPC, INDIA'S MSEB SITUATION: OFFICIAL 06/01/2001 Asia Pulse (c) Copyright 2001 Asia Pulse PTE Ltd. NEW DELHI, Jun 1 Asia Pulse - A new package 'acceptable to all' is being evolved to resolve the seven-month old wrangle between Enron promoted Dabhol Power Company and the Maharashtra State Electricity Board (MSEB) over the issue of cost of power and payment of bills, A V Gokak, the federal government's representative in Maharashtra's negotiation committee said today. "Things are moving in the right direction and government is serious to resolve the crisis," Gokak told PTI after a meeting with the Finance Minister, Yashwant Sinha, here. Gokak said none of the parties to the dispute are in favour of closure of the $3 billion project. Earlier, the Indian government had asked Central Electricity Authority (CEA) to explore possibility of selling the DPC power to deficient states. But the Power Minister, Suresh Prabhu, had ruled out possibility of National Thermal Power Corporation (NTPC) lifting DPC power. Prabhu had stated that the government would make all efforts to settle the matter in consultation with the stake holders. Asked if any time frame has been set to break the impasse, Gokak said "delay is in nobody's interest, but there are no readymade solutions." The negotiating committee, headed by Madhav Godbole, has held two rounds of negotiations with the last round held earlier this week being termed "positive" by both DPC and the MSEB. Gokak is believed to have put forward alternative solutions in resolving the crisis. (PTI) MYB 01-06 2030 Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. GLOBAL INVESTING: Betting on better times for utilities Financial Times; Jun 1, 2001 By JOHN DIZARD The share price of one large electron-pushing company is up nearly 70 per cent this year, but could be in line for another pop to the upside. That may sound like a report from Mary Meeker, the formerly omniscient internet stock guru, or like your broker's stock-of-the-week pitch. Well, neither will be making such a claim at the moment - their legal departments have them on too tight a leash. And the stock I have in mind is not a technology stock in the sense of a silicon basher or programmer farm. It is Edison International, the California electric power holding company, whose Southern California Edison utility has been very publicly hovering at the edge of bankruptcy for several months. The day after President George W. Bush made his "You're on your own, California" speech, Edison's share price dropped more than 5 per cent. And while the year-to-date rise, from Dollars 6.25 to Dollars 10.50 this week, has been impressive, share-holders have seen a 46 per cent loss year on year. So why should anyone be optimistic about the chances for the common shareholders in the holding company? Essentially because the state legislators are being terrified into coming up with a bail-out plan - not exactly the plan of Gray Davis, the governor of California, but one that will preserve some value for the holding company shareholders and give them a more predictable future. By now every one knows that the California utilities were squeezed by fixed retail rates and rising wholesale costs. Edison has said it has Dollars 3.5bn in "undercollected" wholesale power purchase costs. The state of California (and its taxpayers) stepped in to buy power when the utilities ran out of borrowing capacity in January. PG&E, the other big investor-owned utility, filed for Chapter 11 protection back in April. Edison held off from filing, preferring to try to get a state government bail-out. Much is missing from the standard account. For example, consumer groups believe there is a lot of padding in the "undercollect", and that the holding company should cough up billions in assets paid for with dividends supplied by the SCE subsidiary. Many of the California public believe that the merchant generators such as Duke Energy and Enron should pay back overcharges rather than get any back bills paid. And yet the legislative tide is turning in Edison's favour. Within the next couple of weeks, I expect the Democrats - who control both the state Assembly and Senate - to come up with a bail-out plan for Edison that has a good chance of passing both houses and being signed into law by the governor. The reason is the the distinction they have begun to make between ratepayers and taxpayers. To a legislator, tax payments, as distinct from utility rates, are things that run through their hands and go to favoured programmes. Taking over the payment of electric wholesale costs did not look too scary back in January, when Governor Davis said it would go on for a few weeks and be easily covered with the cash on hand. Well, the state has paid out nearly Dollars 8bn and its cash reserves will be under increasing pressure until a Dollars 12bn-Dollars 13bn bond issue can be floated some time after August 15. A decline in tax receipts is putting even greater stress on the state government's resources. So the legislators want to get as far out of the power business as they can, as fast as they can. That means saving Southern California Edison from Chapter 11. The deal being negotiated within the Democratic leadership looks something like this. The state will make a large loan, call it Dollars 1bn, against the security of Edison's transmission system, to be repaid either through a sale of the system to the state or a deduction from the allowed return on the towers and wires. The holding company will pay out about Dollars 400m to prop up the subsidiary. The rest of the undercollect will be paid for by a "dedicated rate component", or charge to ratepayers - mostly commercial, industrial and large users - that cannot be revoked by the Public Utility Commission. The generators can get 70 cents on the dollar for their back bills right away, or they can litigate forever. There are a few details that lawyers will quibble over, such as the constitutionality of retroactively raising rates. And some may ask if it is not cheaper just to let Edison go into Chapter 11, because even with the plan it will not be able to take the state's place as a wholesale buyer at any time soon. But I would bet on its passing anyway. And that would be good news for Edison International shareholders, since they will have held on to most of the holding company's assets, and still have an ongoing business in the subsidiary. Don't bet the rent money on it, but it looks closer to me than a comeback in spending on semiconductors. Maybe the children's college money - if you lose it, they should work harder anyway. Copyright: The Financial Times Limited INTERNATIONAL ECONOMY, MIDDLE EAST & AFRICA: Hopefuls await details of Saudi gas deal Financial Times; Jun 1, 2001 By ROBIN ALLEN and MATTHEW JONES ExxonMobil and Royal Dutch/Shell are the favourites to lead two of Saudi Arabia's multi-billion dollar upstream gas projects to be opened to foreign companies, according to industry observers in the Middle East. A committee of Saudi ministers responsible for the developments was due to meet late last night. The companies are expected to learn the size of their stakes either late today or early tomorrow, an official close to the projects said. Saudi Arabia, which has excluded foreign companies in upstream operations since 1975, last month announced the selection of eight oil groups to participate in three gas projects requiring initial investment of around Dollars 25bn. Exxon has already been appointed leader of Core Venture 2, on the Red Sea coast, which also includes Occidental Petroleum and Enron Corp of the US. The partners in Core Venture 3, the Shaybah development in the south-eastern quarter of the kingdom, are Shell, TotalFinaElf of France and Conoco of the US. Analysts and industry experts in Riyadh and Abu Dhabi said Exxon was expected to be named leader of South Ghawar, also known as Core Venture 1, with a 35 per cent stake. BP and Shell would each be awarded 25 per cent shares while Phillips would receive 15 per cent. Exxon was expected to be given a 70 per cent share of Core Venture 2, with the remainder split equally between Occidental and Enron. Shell was tipped to lead Core Venture 3 with 40 per cent of the project, while Total and Conoco were expected to win 30 per cent each. One analyst said there was an outside chance that BP would be awarded leadership of Core Venture 1 for political reasons. A BP official last night said the group had had no indication of the decision, but added: "Even if we are not selected we will still have a very significant part in a huge project. The important thing is to be there." Additional reporting by Robin Allen in Dubai Copyright: The Financial Times Limited FITCH PLACES INDIA ON NEGATIVE RATING OUTLOOK ON FISCAL CONCERNS 06/01/2001 Asia Pulse (c) Copyright 2001 Asia Pulse PTE Ltd. NEW DELHI, June 1 Asia Pulse - International ratings agency Fitch has changed the Rating Outlook on India's sovereign ratings from Stable to Negative, citing well-flagged concerns about fiscal policy, privatization and the deterioration in the foreign investment climate. Fitch currently rates the foreign and local currency obligations of India at BB+ and BBB- respectively. The negative rating outlook reflects the slow progress of the government in implementing privatization and addressing the weaknesses in public finances. The fiscal-monetary policy mix in India remains unfavorable, resulting in relatively high real interest rates and crowding out of private sector investment. Until the authorities display a concerted willingness to address fiscal imbalances, India will remain locked in a stop-go cycle of growth and the sovereign could slip into a debt trap, Fitch said in a press statement. The recent corruption scandal, involving the ruling Bhartiya Janata Party (BJP)-led coalition government, threatens to exacerbate these trends and slow economic reform. India's general government fiscal deficit at over 9 per cent of GDP is among the highest in the realm of rated sovereigns. Persistently high fiscal deficits have led to a build-up of the general government's debt burden, estimated to be over 60 per cent of GDP. In addition, the government has guarantees outstanding amounting to 9 per cent of GDP. Fitch reiterates the point that such guarantees, issued to back mainly infrastructure projects, are contingent liabilities of the government. This has most recently been borne out in the case of Enron, where the US power company has invoked a central government guarantee for payment arrears accumulated by the Maharashtra State Electricity Board. ASIA PULSE 01-06 1609 Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Thomas E. White becomes Secretary of the Army 06/01/2001 M2 Presswire Copyright 2001 M2 Communications, Ltd. All Rights Reserved. Thomas E. White became the 18th secretary of the Army today after being nominated by President George W. Bush on May 1, 2001, and confirmed by the Senate on May 24. White expressed his gratitude to the president and the secretary of Defense for their confidence and trust in him. During his confirmation hearing before the Senate Armed Services Committee on May 10, White identified four objectives he will pursue as secretary of the Army in support of the president and the secretary of Defense: to invest in people, to assure readiness, to transform the entire Army and to adopt sound business practices. The secretary of the Army is the U.S. Army's senior civilian, responsible by statute for all matters relating to Army manpower, personnel, reserve affairs, installations, environmental issues, weapons systems and equipment acquisition, communications and financial management. The secretary leads a work force of some one million active duty, National Guard and Army Reserve soldiers and 225,000 civilian employees. The department has an annual budget of approximately 70 billion dollars. Before his appointment as secretary of the Army, White was the vice chairman of Enron Energy Services, the Enron corporation subsidiary responsible for providing energy outsource solutions to commercial and industrial customers throughout the United States. White began his service to the nation in 1967, after graduating from the U.S. Military Academy at West Point. His distinguished career as a commissioned Army officer included two tours in Vietnam and service as commander, 1st Squadron, 11th Armored Cavalry Regiment; commander, 11th Armored Cavalry Regiment, V Corps; and executive assistant to the chairman, Joint Chiefs of Staff. He retired from the Army in 1990 with the rank of brigadier general. For additional information, see the Army web site at http://www.dtic.mil/armylink or contact Army Public Affairs at (703) 697-7550. ((M2 Communications Ltd disclaims all liability for information provided within M2 PressWIRE. Data prepared by named party/parties. Further information on M2 PressWIRE can be obtained at http://www.presswire.net on the world wide web. Inquiries to [email protected])). Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Some light at last! 06/01/2001 The Economic Times Copyright (C) 2001 The Economic Times; Source: World Reporter (TM) NEW Delhis intervention in the tussle between Enron and the Maharashtra government is a welcome development. The government wants the Central Electricity Authority to find out whether electricity generated by Dabhol Power Company can be sold to states which need power badly if it cant be used by Maharashtra. This is a good idea India is seriously short of reliable, quality electricity supply. Maharashtra claims that it doesnt need even the 740 MW now generated by DPC at going rates. This creates further trouble: the lower Maharashtras offtake, the higher the unit price of DPC power. Once other power hungry states start buying up electricity from DPC, the price per kilowatt hour will fall sharply. The first step to getting DPC out of the hole that Enron, Maharashtra and successive Indian governments have dug it into, is to allow the utility to sell power to anyone who wants to purchase it at going rates. However, asking central utilities like the fledgling Power Trading Corporation to evacuate DPC power for sale outside Maharashtra wont solve the hassles of the sector for all time. The government should modify electricity laws to allow generating companies to sell electricity to all users immediately. An ordinance passed by New Delhi will do the trick power is a concurrent subject, with central legislation overriding states. But even if that happens, it is doubtful if there will be too many buyers for Dabhol power at its present price about Rs 4 per unit with the plant running at high capacities. If the price is to be brought down further, the deal with MSEB will have to be renegotiated. The Godbole Committee says that some financial restructuring, de-dollarising of debt and equity, and so on can bring prices down by about 30 per cent from DPCs minimum Rs 4 per unit rate today. Otherwise, as the GC points out, it will be impossible for the project to be viable at current tariffs. India desperately needs electricity to grow. For the power sector to grow, reforms are necessary at every level renegotiations, yes, but also changes in laws and the rules of the game. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Calif. investigations focus on whether out-of state wholesalers manipulated energy prices By MICHAEL LIEDTKE AP Business Writer 05/31/2001 Associated Press Newswires Copyright 2001. The Associated Press. All Rights Reserved. SAN FRANCISCO (AP) - State energy regulators say they are close to finishing probes into whether electricity wholesalers illegally aggravated the state's power squeeze. In one year, California's power crisis has raised customer rates by $5.7 billion and dumped a $13 billion bailout bill on taxpayers. State officials hope to recover the money if they find evidence that out-of-state wholesalers manipulated the market to illegally driving up prices. The wholesalers say they are being turned into scapegoats for a 1996 deregulation law sculpted by California lawmakers and the state's two largest utilities, Pacific Gas and Electric and Southern California Edison. The utilities have reported a combined $8.2 billion in losses since June 2000. Two legislative committees are investigating allegations that wholesalers created artificial supply shortages that drove wholesale electricity prices as high as $1,900 per megawatt hour. Before June 2000, wholesale prices for energy sold under similar terms rarely climbed above $150 per megawatt hour. At least five lawsuits, including one filed by San Francisco City Attorney Louise Renne, seek damages from wholesalers on behalf of all Californians. "I don't think these are going to be very hard cases to make," said Owen Clements, chief special litigator for San Francisco. "Even if they didn't break the letter of the law, they clearly have violated the spirit of the law." Attorney General Bill Lockyer is offering multimillion-dollar rewards to power plant workers and energy traders who provide the state with inside information about wholesaler's decisions. "Everyone feels like they're being ripped off. There's a lot of emotional belief that unfair things have been done, but we're still working through the case," said Lockyer, a Democrat who voted for the deregulation law when he served in the state Senate. The state utilities commission is inspecting power plant documents that may show whether some facilities shut down unnecessarily to diminish supply. The commission and Lockyer are investigating whether the plants then increased production to reap big profits. Power wholesalers maintain that the plants, many of which are 30 to 40 years old, shut down for legitimate equipment repairs and maintenance. "No one in our industry cuts back on production so a competitor can make more money. It just doesn't happen, at least not on planet Earth," said Gary Ackerman, executive director of the Western Power Trading Forum, a trade group. The Federal Energy Regulatory Commission earlier this year alleged that Tulsa, Okla.-based Williams profited from the closure of two Southern California power plants owned by a business partner, Arlington, Va.-based AES Corp. Without admitting wrongdoing, Williams refunded $8 million to settle the charges. California's investigations are examining the conduct of Williams, as well as several other prominent power wholesalers, including Houston-based Enron Corp., Dynegy Inc., and Reliant Energy, Charlotte, N.C.-based Duke Energy and Atlanta-based Mirant Corp. Cohen said the utilities commission could file a civil lawsuit against the wholesalers by the end of June. Lockyer expects to wrap up an investigation in late July at the earliest. --- On The Net: California Public Utilities Commission: http://www.cpuc.ca.gov California Attorney General: http://www.caag.state.ca.us http://www.enron.com http://www.reliant.com http://www.dynegy.com http://www.duke-energy.com http://www.williams.com http://www.mirant.com Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. California Lawmakers Eye Billing Businesses for Edison Rescue By Jason Leopold 05/31/2001 Dow Jones Business News (Copyright (c) 2001, Dow Jones & Company, Inc.) Dow Jones Newswires LOS ANGELES -- California lawmakers are mulling yet another set of ideas for rescuing embattled Southern California Edison, and this time businesses would be on the hook. In an attempt to deflect charges of a bailout that have thus far stymied efforts to restore the utility to solvency, legislators are now considering ways to shift the burden of financing the rescue from residential ratepayers to the state's largest businesses, aides to key state lawmakers said this week. The ideas being worked over by Senate President Pro Tem John Burton, Assembly Speaker Robert Hertzberg and Assemblyman Fred Keeley have yet to take shape as formal proposals. But an aide to Burton said some key lawmakers are so "desperate" to keep Edison International (EIX) utility Southern California Edison from following PG&E Corp. (PCG) unit Pacific Gas & Electric into bankruptcy court that they are willing to consider anything that will takse residential consumers out of the equation. "The idea is that the large industrial customers are the ones who pushed for deregulation in the first place, so they should be responsible for bailing out Edison," the aide said. "We're looking to take the burden off of residential ratepayers." The premise of a plan discussed by lawmakers on a conference call Thursday is to designate Southern California Edison's largest commercial ratepayers as non-core customers. Those customers -- some 3,600 users of more than 500 kilowatt-hours a month -- would be responsible for financing the cost of power the utility must purchase or have purchased for it in the wholesale market. The non-core customers would also help the utility recoup most of its $5.5 billion in unrecovered power costs through a surcharge on their bills. Core residential customers would be protected from the wholesale power market as the primary beneficiaries of the low-cost power the utilities generate themselves or have locked up in long-term contracts. Enron Pushing Access to Customers Separately, Enron Corp. (ENE) has been lobbying lawmakers for several weeks to win approval to sign power-supply contracts with Southern California Edison's largest commercial customers, leaving the utility to serve just its residential customers and small businesses, aides to Gov. Gray Davis, Messrs. Burton and Hertzberg said. An Enron executive confirmed that the company sent a four-page proposal to Mr. Hertzberg proposing that Southern California Edison's large industrial customers sign so-called direct-access contracts with Enron. Enron also has recently made a presentation about direct access to some members of the California Chamber of Commerce. Under the proposal, heavy users would be required to contract directly with companies like Enron for their power. Direct access was a key part of the state's 1996 deregulation plan, but was scrapped early this year when the state started buying wholesale power in place of the utilities. The core/non-core proposal is one of several being discussed by lawmakers as alternatives to a memorandum of understanding Mr. Davis struck with Edison in April. The MOU -- which doesn't vary much from an agreement in principle reached in February -- has been called dead on arrival by some lawmakers, who have been mulling various alternatives rather than moving the agreement forward. State Sen. Debra Bowen, a Redondo Beach Democrat and chairwoman of the Senate energy committee, said there are so many "Plan B's" floating around the Legislature that, "We're going to need to hire an apiculturist." Steve Maviglio, a spokesman for the governor, said the Davis administration is still dedicated to seeing legislation to enact the memorandum of understanding move through the Legislature, but said separating the utility's "core and non-core" customers would be at the forefront of new discussions. It was too early to say whether the governor would support the plan, he said. Dominic DiMare, a lobbyist with the California Chamber of Commerce, said the chamber has told the Davis administration that shifting the burden of the Southern California Edison bailout to businesses is "a very bad idea" that could cost the state billions of dollars in economic activity. "This [plan] would really screw businesses," Mr. DiMare said. "We just got hit with a 50 to 90% rate increase. We're dangerously close to losing our businesses to other states." Write to Jason Leopold at [email protected] Copyright (c) 2001 Dow Jones & Company, Inc. All Rights Reserved Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Construction of power plant in DeSoto County is underway By TIMOTHY R. BROWN Associated Press Writer 05/31/2001 Associated Press Newswires Copyright 2001. The Associated Press. All Rights Reserved. JACKSON, Miss. (AP) - A North Carolina-based independent electric power plant developer and operator has started construction on a $490 million generating facility in DeSoto County. Cogentrix Energy Inc. will build the 800-megawatt power plant in Southaven on 40 acres next to existing TVA and Entergy electric substation facilities. The plant is the largest economic development project in the history of the north Mississippi county. The second largest project is a $150 million power plant currently being built by Duke Energy. Both are expected to be operational in 2003. The National Energy Production Corporation, a subsidiary of the Enron Corp., is serving as the engineering and construction contractor for the Congentrix project. "It is in construction as we speak," Jeff Freeman, Congentrix vice president for corporate communications, said Thursday. "NEPCO is mobilized on site and they are doing earth work. It will probably take them 24 to 27 months to get the plant in commercial operation." Freeman said the Charlotte, N.C., company found several reasons why building a plant in Southaven, a fast-growing city located just south of Memphis, Tenn., was a good investment. "The first thing that we look for in any project is a basic need for the commodity that we produce, which is electricity," Freeman said. "The area served by the transmission systems, TVA and Entergy, at this location provide access to areas that need electricity." The plant will use natural gas as fuel and will include the latest in environmental and combustion control technologies, Freeman said. Cogentrix owns all or part of 27 facilities with a capacity to generate about 7,000 megawatts in 14 states. Southaven Mayor Greg Davis said both plants will generate about $300,000 to the city, in lieu of taxes, and about $1 million each to the county school system. Davis said the plants will not employ many workers so traffic in the area will not increase. He also pointed to the positive impact of temporary jobs during construction. "Then, road and bridge tax that they will be paying is substantial also," Davis said. "So from a financial impact we will see a great return in the investment." --- On the Net: Congentrix: http://www.congentrix.com Duke Energy: http://www.duke-energy.com Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved.

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VentureWire, Wednesday, May 30, 2001

=09=09?=09 ?=09VentureWire =09Wednesday, May 30, 2001=09=09? ?=09CONTENTS | COMPANIES | INVESTORS | ADVERTISE | TELL A FRIEND=09VentureW= ire Index =09=09'VentureWire =09=09today: 699.6 ? -1.40%=09? ? =09=09 =09=09 =09=09top stories =09=09 =09=09 =01=07 NotifyMe Networks Fails to Close Series D, Shuts Down =09=09 =01=07 Software Firm MetaStorm Captures $20 Million in Round Two =09=09 =01=07 Boxerjam Lays Off 37 to Stay Afloat, Searches for Buyers =09=09 =01=07 Real Media's Co-Founder Leaving To Start New Online Company= =20 =09=09 =09=09 =09=09TODAY'S FEATURES=20 =09=09Koch Ventures Investing Less But Expanding Presence =09=09By Matthew Sheahan =09=09Although the venture capital unit of Wichita, Kan.-based Koch Industr= ies will=20 see a drop of between 10% and 15% in its investments this year, the unit is= =20 expanding with new offices in the Southwest, including Dallas and southern= =20 California. more>> =09=09UPCOMING EVENTS =09=09June 5-6: San Francisco =09=09Mobile Outlook 2001 =09=09 =09=09The world's second-largest ISP is now mobile. NTT DoCoMo boasts 24 mi= llion=20 i-mode subscribers, making it second only to AOL. The mobile Internet is th= e=20 future so come cut the wires at Mobile Outlook. Mobile Outlook is now less= =20 than 1 week away but there is still time to take part in the analysis of th= e=20 future of this industry. Register Today!=20 =09=09 =09=09 =09=09Now more relevant than ever. RED HERRING. =09=09 =09=09Since its launch in 1993, RED HERRING has become the favored =09=09source of insider information for entrepreneurs, venture =09=09capitalists, investment bankers and senior executives =09=09redefining the new technology-driven world of business. =09=09 =09=09From MEMs to biotech to the top 100 companies that still =09=09matter, RED HERRING gives you a unique perspective =09=09you won't find in conventional business publications. =09=09Get a FREE TRIAL ISSUE of RED HERRING=20 today!http://www.redherring.com/service/circ/subs_ZP.html =09=09 =09=09 =09=09 =09=09 =09=09 =09=09 =09=09new money =09=09 =09=09 =01=07 Voice and Data Co. Spotwave Wireless Has $1.9M Series A=20 =09=09=01=07 Bernina Biosystems Raises $6.5M in Second Round=20 =09=09=01=07 Telecom Software Firm Trendium Closes Round Two at $25M =09=09 =01=07 Australian Seek Communications Closes $1.6M Round =09=09 =01=07 Newtek Capital Puts $3.6M in Universal Processing Services =09=09 =01=07 vSimplify Closes Series B at $2.75 Million =09=09 =01=07 Core Networks Receives Follow-On Financing in Series B =09=09 =01=07 Speech Recognition Software Firm InfoTalk Nabs $12M =09=09 =01=07 Meetings and Events Firm StarCite Closes $10M Round Three =09=09 =01=07 Communications Provider eKit Raises $6.2 Million Series C =09=09 =01=07 Biotech Firm Encelle Gets $7 Million Series C =09=09 =01=07 Pegasus VC Invests in Info Security Firm Core SDI =09=09 =01=07 Software Firm Esterel Raises $10.5 Million Third Round=20 =09=09 =09=09 =09=09bad news =09=09 =09=09 =01=07 Sports and Fitness Portal Asimba Winds Down Operations =09=09 =01=07 StockHouse Slashes 68% of Staff, Closes Four Offices =09=09 =01=07 Hookt.com Files For Chapter 11, Seeks Buyer =09=09 =09=09 =09=09new products =09=09 =09=09 =01=07 Software Vendor Exteriority Launches, Buys Assets of PaperX= =20 =09=09=01=07 cPower Launches To Assist Tech Firms with Product Marketing =09=09 =09=09 =09=09m&a =09=09 =09=09 =01=07 IT Factory Makes Eighth Acquisition with NotesHouse =09=09 =01=07 Online Sales Tech Firm NetSales Seeks Buyer =09=09 =01=07 Sonik Acquires Broadbank Assets of RadioConnect =09=09 =01=07 Chordiant Software Acquires Assests of ASP Outfitter =09=09 =01=07 focusCORE Accepts Acquisition Offer by Avrio Group =09=09 =09=09 =09=09new directors =09=09 =09=09 =01=07 NETdelivery Adds Ex-AT&T President to Board =09=09 =01=07 Systems Design Firm Nallatech Names Pentair Exec As Chair =09=09 =09=09 =09=09new people =09=09 =09=09 =01=07 Converged Switching Firm Gluon Names President & CEO =09=09 =01=07 Enterprise Security Firm Solsoft Names New Chairman and CEO= =20 =09=09=01=07 Corechange Names Charles F. Kane President =09=09 =01=07 InfoImage Appoints Thomas Niccoli as COO, President =09=09 =01=07 Knowledge Management Firm QED Solutions Names President =09=09 =09=09 =09=09vc fund news =09=09 =09=09 =01=07 Woodside Investing On An Upswing Despite Market Woes =09=09 =01=07 Pakistani Firm KASB TechVentures to Close Down in June =09=09 =01=07 Southern Capitol Partners with State-Funded Biotech Center =09=09 =09=09 =09=09vc personnel =09=09 =09=09 =01=07 Ex-Pequot Capital VP Joins Partech as Portfolio Manager =09=09 =09=09 TOP STORIES... NEW MONEY... BAD NEWS... NEW PRODUCTS... M&A... NEW= =20 DIRECTORS... NEW PEOPLE... VC FUND NEWS... VC PERSONNEL =09=09 =09=09 =09=09top =09=09 =09=09 =09=09Everyone's talking about collaboration-from collaborative =09=09e-commerce to collaborative manufacturing. Everyone's also =09=09trying to don the collaboration mantle as they vie for =09=09attention from customers and investors. =09=09 =09=09Enterprise Outlook will cut through the hype. Learn about =09=09fundamental technologies and issues that must be ironed out =09=09before businesses can work together. See which applications =09=09truly merit being called "collaborative." Discover how the =09=09supply chain takes on new power when companies can talk =09=09machine-to-machine, application-to-application, and =09=09person-to-person. =09=09 =09=09Register and reserve your place=20 today:http://www.enterpriseoutlook.com/register.asp =09=09 =09=09 =09=09 =09=09 top stories=20 =09=09? =09=09NotifyMe Networks Fails to Close Series D, Shuts Down =09=09 mail? top =09=09 =09=09 SUNNYVALE, Calif. (VENTUREWIRE) -- NotifyMe Networks, which distribu= ted=20 customizable interactive alerting services that enable real-time, two-way= =20 communication across phones, pagers, and e-mail platforms, has shut down,= =20 according to CEO Chuck Dietrick. Mr. Dietrick said that despite securing a= =20 lead investor and raising half of the approximately $15 million Series D=20 financing, the company was unable to close the round and thus shut down. Th= e=20 company employed a staff of 50. NotifyMe Networks now looks to sell off its= =20 business assets through assignment company DSI. Ideally, said Mr. Dietrick,= =20 the company will sell for "north of $5 million." Potential buyers include= =20 large telecommunications and software companies. Prior to its efforts to=20 raise a Series D, NotifyMe Networks had raised $14.2 million from Attractor= =20 Investment Management and individuals. =09=09http://www.notifyme.com =09=09 =09=09 =09=09Software Firm MetaStorm Captures $20 Million in Round Two =09=09 mail? top =09=09 =09=09 SEVERNA PARK, Md. (VENTUREWIRE) -- MetaStorm, which develops softwar= e that=20 enables companies to integrate data and systems, announced the close of $20= =20 million in second round financing. New investor UBS Capital Americas II led= =20 the round, which also included new investor Ironside Ventures and 3i Group,= =20 an existing investor. A company spokesperson declined to reveal post-money= =20 valuation, but said it was "down moderately." Lawrence Handen, partner at U= BS=20 Capital Americas, joins the board, which now has seven directors. Funds wil= l=20 be used for sales, marketing, distribution, and customer support in North= =20 American and international markets, expanding the company's presence in=20 Germany, Italy, South Africa, Australia, France, Spain, and Switzerland.=20 Metastorm, which employs about 150 people, expects to add another 20 to 25= =20 employees by the end of the year. The company expects to see roughly $25=20 million in revenues for 2001. =09=09http://www.metastorm.com =09=09 =09=09 =09=09Boxerjam Lays Off 37 to Stay Afloat, Searches for Buyers =09=09 mail? top =09=09 =09=09 CHARLOTTESVILLE, Va. (VENTUREWIRE) -- Boxerjam, a producer and distr= ibutor=20 of games and game shows for online, wireless, and broadcast networks is=20 looking for a buyer, according to CEO Alan Cunningham, who confirmed Tuesda= y=20 that 37 employees have been laid off and seven people remain at the company= .=20 He said the company is currently engaged in discussions with prospective=20 buyers, adding that it was too early to say if anyone is interested. Mr.=20 Cunningham blamed the move on the present market environment, stating that= =20 Boxerjam is still in business, but "operating on a low budget." All the=20 laid-off employees received a severance package consistent with market=20 standards, he said. Boxerjam, which has raised $15 million in funding to=20 date, is backed by New Enterprise Associates and Oak Investment Partners.= =20 =09=09http://www.boxerjam.com =09=09 =09=09 =09=09Real Media's Co-Founder Leaving To Start New Online Company=20 =09=09mail? top =09=09 =09=09 NEW YORK (VENTUREWIRE) -- Real Media, an online advertising firm, sa= id David=20 Morgan, a co-founder and co-chairman of the company, will be leaving the=20 company on June 30 to start a new online company. Mr. Heinz Waegli, the CFO= =20 of the PubliGroupe, will replace Mr. Morgan as co-chairman of the company.= =20 The PubliGroupe holds a majority interest stake in Real Media. Mr. Morgan,= =20 who said he was leaving to find another entrepreneurial challenge, also sai= d=20 the new company would develop software tools to enable media companies to= =20 capture and manage data about their audiences. For the moment Mr. Morgan sa= id=20 he is financing the new venture by himself and has no plans for outside=20 funding. Real Media's other co-founders, CTO Gil Beyda and executive vice= =20 president Charles Smith, will remain with the firm. Real Media said it=20 expects to reach profitability before the end of the year. The company has= =20 raised more than $30 million from Advance Internet, Destination Group, and= =20 PubliGroupe. =20 =09=09http://www.realmedia.com =09=09 =09=09 =09=09 new money=20 =09=09? =09=09Voice and Data Co. Spotwave Wireless Has $1.9M Series A=20 =09=09mail? top =09=09 =09=09 OTTAWA (VENTUREWIRE) -- Spotwave Wireless, a provider of voice and w= ireless=20 data services, said it raised CAD $3 million ($1.9 million) in Series A=20 financing, co-led by Venture Coaches and Primaxis Technology Ventures of=20 Toronto. The company plans to use the funding for product development.=20 Post-money, Spotwave has a valuation of $9.1 million. As a result of this= =20 financing, Kerri Golden, a vice president of Primaxis Technology Ventures,= =20 has been granted the sixth seat on the company's board of directors, which= =20 also includes Claude Haw, managing partner of Venture Coaches; Conrad Lewis= ,=20 principal of Eagle One Ventures Corporation; and Luc Lussier, president and= =20 CEO of Lumic Electuronics. A company spokesperson declined to reveal a burn= =20 rate, but said Spotwave expected the funds to last through to the end of th= e=20 year. The company is currently raising a Series B round of $10 million to $= 15=20 million, to close before the year's end. =09=09http://www.spotwave.com =09=09 =09=09 =09=09Bernina Biosystems Raises $6.5M in Second Round=20 =09=09mail? top =09=09 =09=09 TUTZING, Germany (VENTUREWIRE) -- Bernina Biosystems, which develop= s drug=20 delivery technology, said it raised DEM 15 million ($6.5 million) in=20 second-round funding led by new investor High Tech Beteiligungen, which=20 invested $3.5 million. Belgian Fonds Rendex, another new investor, invested= =20 $1.3 million, and previous investors Earlybird and BioM invested $1.7=20 million. Bernina said the financing would be used to develop its=20 organ-specific drug delivery platform technology. The company also said it= =20 has established partnerships with departments at the University of=20 Duesseldorf and the Regensburg University in Germany. Bernina said it is=20 targeting to reach profitability in 2003 or 2004.=20 =09=09http://www.bernina-biosystems.com =09=09 =09=09 =09=09Telecom Software Firm Trendium Closes Round Two at $25M =09=09 mail? top =09=09 =09=09 SUNRISE, Fla. (VENTUREWIRE) -- Trendium, a provider of high-end spec= ialized=20 software for telecommunications firms, Internet service providers, and=20 broadband carriers, said it has closed its second round of funding at $25= =20 million led by Mellon Ventures. Mellon was joined by other new investors=20 Vertex Management, Crossbow Ventures, GKM Venture Partners, as well as=20 individuals from the communications industry. Previous investors M/C Ventur= e=20 Partners and Trinity Ventures also participated in the round. Trendium, whi= ch=20 raised $13.5 million in its first round of funding, said it will use the=20 latest funds to expand its sales and marketing in North America and Europe= =20 and add new functions and features to its products, which are being tested= =20 and deployed by several service providers. =09=09http://www.trendium.com =09=09 =09=09 =09=09Australian Seek Communications Closes $1.6M Round =09=09 mail? top =09=09 =09=09 MELBOURNE, Australia (VENTUREWIRE) -- Seek Communications, an Intern= et job=20 site for Australia and New Zealand, said it raised AUD 3.1 million ($1.6=20 million) from return investors Yahoo!, AMWIN, Macquarie Technology Ventures= ,=20 AMCF, and new investor Acer Technology Partners Fund. No new board seats we= re=20 granted as a result of this funding. In July of 2000, the company received = an=20 investment of $3.2 million from Yahoo!. Seek Communications' chairman Irvin= =20 Rockman is also an investor in the company. Seek has raised $12.9 million t= o=20 date.=20 =09=09http://www.seek.com.au =09=09 =09=09 =09=09Newtek Capital Puts $3.6M in Universal Processing Services =09=09 mail? top =09=09 =09=09 NEW YORK (VENTUREWIRE) -- Newtek Capital, a publicly traded firm whi= ch=20 invests in early-stage technology and Internet companies, said it invested= =20 $3.6 million in first-round funding for Universal Processing Services, a=20 provider of electronic processing technology for retail commerce=20 transactions. Universal Processing Services plans to dedicate the new funds= =20 to expansion of its marketing programs, corporate infrastructure, and team.= =20 As a result of this financing, Newtek received a 60% ownership interest in= =20 Universal Processing Services and was granted three seats on the company's= =20 five-member board.=20 =09=09http://www.newtekcapital.com =09=09 =09=09 =09=09vSimplify Closes Series B at $2.75 Million =09=09 mail? top =09=09 =09=09 STAMFORD, Conn. (VENTUREWIRE) -- vSimplify, which hosts corporate in= tranets,=20 online benefit enrollment, and voluntary benefits for small to midsize=20 companies, said it closed its Series B at $2.75 million with funding from= =20 strategic lead investor Skandia Innovation U.S., previous investor=20 Connecticut Innovations, and Lexam Capital. The company said it will use th= e=20 money for infrastructure development and sales and marketing. America=20 Skandia, a subsidiary of Sweden-based Skandia Insurance, will co-market=20 vSimplify's products. Connecticut Innovations will provide marketing and=20 business development for the company. vSimplify closed its Series A round i= n=20 June 2000, led by Connecticut Innovations, at $4.5 million with participati= on=20 from American Skandia and individual investors. Founded in 1999, the compan= y=20 reports a $300,000 monthly burn rate. The company also announced the additi= on=20 of three board members: Anders O. Soderstrom, president of Skandia=20 Innovation, US; Peter Longo, managing director of Connecticut Innovations;= =20 and David W. Mullins Jr., former vice chairman of the Federal Reserve Board= =20 under Alan Greenspan, and assistant secretary of the treasury for domestic= =20 affairs in the first Bush administration. Mr. Mullins previously sat on the= =20 advisory board of vSimplify. =09=09http://www.vsimplify.com =09=09 =09=09 =09=09Core Networks Receives Follow-On Financing in Series B =09=09 mail? top =09=09 =09=09 HALIFAX, Nova Scotia (VENTUREWIRE) -- Core Networks, which develops= =20 activation and network management software applications for the high-speed= =20 Internet-over-cable industry, said it received follow-on financing to its= =20 Series B round, in which the company raised $10.5 million in March. The=20 amount of this investment was not disclosed. Return investor Royal Bank=20 Capital Partners and new investor Intel Capital provided the new financing,= =20 which will be used for business development. The deal was based on the same= =20 valuation as the March funding, which was provided by Royal Bank Capital=20 Partners Telecommunications Fund, ACF Equity Atlantic, and Skypoint Capital= .=20 =09=09http://www.corenetworks.com =09=09 =09=09 =09=09Speech Recognition Software Firm InfoTalk Nabs $12M =09=09 mail? top =09=09 =09=09 HONG KONG (VENTUREWIRE) -- InfoTalk, which develops conversational s= peech=20 recognition technology, said it has closed $12 million in a round of=20 financing. New investor imGO led the round, with participation from other n= ew=20 investors Accenture Technology Ventures and HSBC Private Equity Asia.=20 Existing investor Walden International also participated in the round. J.P.= =20 Morgan acted as placement agent. Funds will be used for expansion. Prior to= =20 this round, InfoTalk had received $4 million from Walden International and = $1=20 million from Singaporean technology fund TDF Management. =09=09http://www.infotalk.com.hk =09=09 =09=09 =09=09Meetings and Events Firm StarCite Closes $10M Round Three =09=09 mail? top =09=09 =09=09 PHILADELPHIA (VENTUREWIRE) -- StarCite, a provider of supply-chain= =20 purchasing and management technology for the meetings and events industry,= =20 said it raised $10 million in third round of financing led by new investor= =20 American Express with participation from Breakaway Solutions, Maritz Travel= ,=20 Starwood Hotels & Resorts Worldwide, Strattech Partners, and VerticalNet.= =20 Previous investors Internet Capital Group, McGettigan Partners, Mellon Bank= ,=20 and Networld also participated in this round. The company plans to dedicate= =20 the new funds to working capital and expansion. A company spokesperson=20 declined to reveal the valuation, but indicated that this was a down round.= =20 As a result of this financing, American Express and Starwood Hotels & Resor= ts=20 Worldwide have each been granted one seat on the company's seven-member=20 board, which includes Mike Forster of the Internet Capital Group and Davor= =20 Gjivoje of Networld. Prior to this round, StarCite raised a first round of = $6=20 million in October of 1999 from the Internet Capital Group and McGettigan= =20 Partners. In June of 2000 the company closed $14 million in second-round=20 financing from the Internet Capital Group, Mellon Bank, and Networld.=20 =09=09http://www.starcite.com =09=09 =09=09 =09=09Communications Provider eKit Raises $6.2 Million Series C =09=09 mail? top =09=09 =09=09 MELBOURNE, Australia (VENTUREWIRE) -- eKit, a provider of unified me= ssaging=20 technology services for travelers, said that it received AUD $12 million=20 ($6.2 million) in Series C financing led by previous investor Allen &=20 Buckeridge, with unnamed existing investors participating. Intel Capital, a= =20 new investor, also participated in this round. The company plans to use the= =20 new funds for product development and international expansion in Europe,=20 North America, and Asia. As a result of this financing, Intel was granted a= =20 non-voting observer seat on the company's four-member board, which includes= =20 Frank Foster of Arllen & Buckeridge. According to co-CEO Bryan Rowe, this w= as=20 a down round, with a post-money valuation of approximately $13 million. Wit= h=20 a burn rate of "between $100,000 and $200,000" per month, Mr. Rowe=20 anticipates that the company will reach profitability by the fourth quarter= =20 of this year and does not expect to raise additional capital in the near=20 future. Prior to this round the company raised approximately $7 million fro= m=20 Allen & Buckeridge, AMP Investments, Escor, JGL Investments, and unnamed=20 individuals.=20 =09=09http://www.ekit-inc.com =09=09 =09=09 =09=09Biotech Firm Encelle Gets $7 Million Series C =09=09 mail? top =09=09 =09=09 RALEIGH, N.C. (VENTUREWIRE) -- Encelle, which develops an injectable= =20 biopolymer that helps skin ulcers heal, announced that it has raised a Seri= es=20 C round of $7 million co-led by previous investor InterSouth Partners and n= ew=20 investor Koerner Capital. There has also been participation from previous= =20 investors Child Health Investment, Cordova Ventures, the N.C. Enterprise=20 Fund, and North Carolina BioScience Fund/Eno River Capital. New investors= =20 Hibernia Capital and Coastal Growth Partners also participated in this roun= d,=20 which had its first close at $4 million in December of 1999. The company=20 plans to use the new funds for continued human clinical trials and staff=20 expansion. According to Encelle CEO James D. Woodward, this round was "just= =20 slightly up," with a post-money valuation of $20 million. As a result of th= is=20 financing, John Koerner of Koerner Capital has joined as the seventh member= =20 of the company's board of directors, which includes Dr. Teo Dagi of Cordova= =20 Ventures and Dennis Dougherty of Intersouth Partners. Mr. Koerner will be= =20 taking the seat of company co-founder John Sherwin Jr., who has resigned fr= om=20 the board. Encelle is currently raising a Series D round of $8 million in a= =20 combination of strategic and venture capital, to close this fall. =09=09http://www.encelle.com =09=09 =09=09 =09=09Pegasus VC Invests in Info Security Firm Core SDI =09=09 mail? top =09=09 =09=09 BUENOS AIRES, Argentina (VENTUREWIRE) -- Pegasus Venture Capital, a = Latin=20 American investment fund, said it led a $3 million round of financing for= =20 Core SDI, a provider of security products and services for information=20 systems. Pegasus contributed $2.5 million, while individuals invested the= =20 remaining $500,000. Core's flagship product, Core Security Solution, provid= es=20 services for security administration and management for large enterprises.= =20 Customers include Ernst & Young, Amazon.com, Microsoft , Bank of Boston, an= d=20 PricewaterhouseCoopers. =09=09http://www.core-sdi.com =09=09 =09=09 =09=09Software Firm Esterel Raises $10.5 Million Third Round=20 =09=09mail? top =09=09 =09=09 GUYANCOURT, France (VENTUREWIRE) -- Esterel Technologies, which deve= lops=20 software tools for verification and validation of embedded systems, said it= =20 secured EUR 12.3 million ($10.5 million) in third-round funding from Advanc= ed=20 Capital Europe, CDC Innovation Partners, Galileo Partners, and Intel Capita= l.=20 The company said the funding would be used for its expansion in North=20 America, the U.K., Germany, Scandinavia, and Asia. Esterel Technologies has= =20 received funding from eNgenuity Technologies, which owns a 22.7% equity sta= ke=20 in the firm, and from Financiere de Brienne, Inria Transfert, Innoven,=20 Innotech, Finno, and Thales Corporate Ventures.=20 =09=09http://www.esterel-technologies.com =09=09 =09=09 =09=09 bad news=20 =09=09? =09=09Sports and Fitness Portal Asimba Winds Down Operations =09=09 mail? top =09=09 =09=09 REDWOOD CITY, Calif. (VENTUREWIRE) -- Asimba, a sports and fitness l= ifestyle=20 site, has ceased operations and is "actively" looking for a buyer, a=20 spokesman for the company said. Asimba did not say what led to the shut dow= n,=20 but said it will continue to operate its Web site and service its existing= =20 customers. However, the company will not "be taking on new businesses."=20 Asimba is backed by McCown De Leeuw & Co., I-Hatch Ventures, CMGI@Ventures,= =20 Global Retail Partners, and Fayez Sarofim & Co.=20 =09=09http://www.asimba.com =09=09 =09=09 =09=09StockHouse Slashes 68% of Staff, Closes Four Offices =09=09 mail? top =09=09 =09=09 VANCOUVER, British Columbia (VENTUREWIRE) -- StockHouse Media, which= =20 provides online financial content and development products and services, sa= id=20 it cut 85 positions, or 68% of its staff, last Wednesday as the company=20 restructures in response to market conditions. StockHouse also said it clos= ed=20 its offices in Australia, Hong Kong, Singapore, and the U.K., but will=20 continue to operate its Web sites for these countries out of its North=20 American offices. StockHouse said the cuts were concentrated in content and= =20 software development and all the laid-off employees received severance. For= ty=20 people remain with StockHouse Media in its offices in Toronto, Sarasota,=20 Fla., and Vancouver. StockHouse said it would continue to provide its free= =20 online services but also plans to launch a fee-based, real-time stock=20 information service this summer. The company, which said the layoffs reduce= d=20 the monthly burn rate by almost 50%, is targeting to reach profitability by= =20 the end of the year. In addition, StockHouse said it plans to raise a $10= =20 million to $15 million third round within the next six months. To date,=20 StockHouse has raised over $30 million from chinadotcom, New World CyberBas= e,=20 SCMP.com, and individual investors.=20 =09=09http://www.stockhouse.com =09=09 =09=09 =09=09Hookt.com Files For Chapter 11, Seeks Buyer =09=09 mail? top =09=09 =09=09 NEW YORK (VENTUREWIRE) -- Hookt.com, an online destination for hip-h= op=20 music, news, culture, fashion, and shopping, said it has filed for=20 reorganization under Chapter 11 bankruptcy. The company said pending lawsui= ts=20 against the company by two of its former Web developers prompted it to file= .=20 Hookt said Chapter 11 filing will result in an automatic stay of all actual= =20 and pending litigation and that the company will continue its day-to-day=20 operations while it evaluates its alternatives--including the potential sal= e=20 of the company. In January, Hookt merged with Platform.net, an urban=20 lifestyle portal and e-commerce network. The merged companies consolidated= =20 staff and operations at Hookt's Manhattan offices, but remained separately= =20 branded Web sites. A Hookt spokesperson said Platform is a subsidiary of=20 Hookt and has not filed for bankruptcy. Hookt has a staff of 25. Hookt, whi= ch=20 recently raised a $5 million round of funding, is backed by investors=20 including Warburg Pincus, Chase Capital Entertainment Partners, and=20 Quetzal/Chase Capital Partners. Platform.net's backers include Spinnaker=20 Capital, Sony Music Entertainment, and individual investor Michael Tannen. =09=09http://www.hookt.com =09=09http://www.platform.net =09=09 =09=09 =09=09 new products=20 =09=09? =09=09Software Vendor Exteriority Launches, Buys Assets of PaperX=20 =09=09mail? top =09=09 =09=09 LONDON (VENTUREWIRE) -- Exteriority said it acquired the software as= sets of=20 PaperX, a defunct London-based paper marketplace, and is launching a new=20 e-commerce software business. The terms of the deal were not disclosed.=20 Exteriority was founded by Borge Bogaard, Christoph Ferch, and Ian Leader,= =20 former members of the PaperX management team. Mr. Leader, who was PaperX's= =20 technology director, said Exteriority will not continue the marketplace=20 business of PaperX. Instead, it will provide private marketplace and=20 supply-chain software to businesses. PaperX closed down in February and lai= d=20 off all of its employees. Mr. Leader said three people from PaperX's=20 technology team have joined Exteriority, which is headed by Mr. Ferch, the= =20 CEO. Mr. Bogaard is chairman and chief operating officer, and Mr. Leader is= =20 the chief technology officer. According to Exteriority, PaperX invested mor= e=20 than EUR 11 million ($9.5 million) in the development of its software, with= =20 venture capital provided by Apax Ventures, Finnish investor Menire, and=20 Insight Capital's European fund. PaperX had raised a total of $12.9 million= =20 in venture financing, Mr. Leader said. Exteriority is backed by undisclosed= =20 individual investors. The company also announced it has teamed up with the= =20 European Bio-Energy Exchange to develop an e-procurement software platform= =20 for bio fuels.=20 =09=09http://www.exteriority.com =09=09 =09=09 =09=09cPower Launches To Assist Tech Firms with Product Marketing =09=09 mail? top =09=09 =09=09 SAN DIEGO (VENTUREWIRE) -- cPower, a consulting firm providing marke= ting=20 services to business-to-business firms, announced the company's launch and= =20 spin off from the advertising firm DRB Partners. cPower will help both high= =20 technology and other types of companies launch new products. P. Griffith=20 Lindell, a former senior partner at DRB, founded the company with Richard P= .=20 Fedchenko, Raymond Brown, Karen Milne, and Victor Chinn. cPower also said i= t=20 aims to close a first round of funding for between $1.6 million and $5=20 million within the next six months. It also said it expects to be profitabl= e=20 in three years. =20 =09=09http://www.cpowerinc.com =09=09 =09=09 =09=09 m&a=20 =09=09? =09=09IT Factory Makes Eighth Acquisition with NotesHouse =09=09 mail? top =09=09 =09=09 BOSTON (VENTUREWIRE) -- IT Factory, an international supplier of=20 collaborative Internet business products and services and a Lotus independe= nt=20 software vendor, said it plans to complete its acquisition of NotesHouse, a= =20 Lotus Notes consultancy firm, within the next 30 days. No financial details= =20 were disclosed. This is IT Factory's eighth acquisition. The company said t= he=20 acquisition would be fully incorporated but also said there would be no=20 changes to NotesHouse's Copenhagen, Denmark-based office and 16-person staf= f.=20 Christian Holst Jensen, the managing director of NotesHouse, will continue= =20 with the company and become a vice president with IT Factory. NotesHouse ha= d=20 not received outside funding. IT Factory, which is backed by 2M Invest,=20 BankInvest, Den Danske Bank, and Gilde, also said it plans on closing a $20= =20 million to $30 million round with all new investors within the next 60 to 9= 0=20 days. Salomon Smith Barney is acting as the placement agent for the round.= =20 Edwards & Angell provided legal counsel to IT Factory.=20 =09=09http://www.itfactory.com =09=09 =09=09 =09=09Online Sales Tech Firm NetSales Seeks Buyer =09=09 mail? top =09=09 =09=09 OVERLAND PARK, Kan. (VENTUREWIRE) -- NetSales, a provider of technol= ogy and=20 support services aimed at connecting buyers and suppliers to each other via= =20 the Internet, said it is seeking a buyer. "They are in discussions concerni= ng=20 potential sale of assets or the whole company," said a company spokesperson= .=20 The company laid off 63 employees across the board last December, saying it= =20 was focusing more on supplier integration. Last summer NetSales sold its=20 online software sales division, eliminating 70 jobs, as part of its shift= =20 from a business-to-consumer focus to a business-to-business market. The=20 spokesperson said while there have been no more layoffs, the company is=20 "constantly evaluating." NetSales' backers include Advanta Partners, Chase= =20 Manhattan, HarbourVest Partners, and Kansas City Equity Partners, Norwest= =20 Equity Partners, Time Warner, and Wells Fargo.=20 =09=09http://www.netsales.com =09=09 =09=09 =09=09Sonik Acquires Broadbank Assets of RadioConnect =09=09 mail? top =09=09 =09=09 VISTA, Calif. (VENTUREWIRE) -- Sonik Technologies, which develops a= nd=20 manufactures radio frequency-based systems for wireless networks, said it= =20 acquired the Broadband Wireless Spread Spectrum product line of RadioConnec= t,=20 and that RadioConnect's founder and employees have joined Sonik. Financial= =20 details were not disclosed. RadioConnect's founder H. Maurice France is now= =20 vice president of RadioConnect products at Sonik. All of RadioConnect's=20 employees, which numbered less than ten, have relocated from their Torrance= ,=20 Calif. location to Sonik's headquarters in Vista, Calif. Sonik Technologies= =20 is a subsidiary of Vytek Wireless, a wireless data firm. Sonik Technologies= =20 is profitable and was acquired by Vytek in October 2000. Vytek Wireless is= =20 backed by CIBC World Markets, Charterhouse Group International, and Softban= k.=20 =09=09http://www.sonik.com =09=09http://www.vytek.com =09=09 =09=09 =09=09Chordiant Software Acquires Assests of ASP Outfitter =09=09 mail? top =09=09 =09=09 CUPERTINO, Calif. (VENTUREWIRE) -- Chordiant Software, a publicly tr= aded=20 company that provides CRM applications, said it acquired certain assets of= =20 ASP Outfitter. While full terms of the deal were not revealed, Chordiant di= d=20 receive intellectual property assets and server technology. According to a= =20 Chordiant spokesman, the remaining assets of ASP Outfitter have been merged= =20 with a hardware company that is part of the portfolio of Palo Alto,=20 Calif.-based venture capital firm Crescendo Ventures, which was a majority= =20 investor in ASP Outfitter. Crescendo could not be reached for comment. ASP= =20 Outfitter was also backed by West Covina, Calif.-based Falcon Fund.=20 =09=09http://www.chordiant.com =09=09 =09=09 =09=09focusCORE Accepts Acquisition Offer by Avrio Group =09=09 mail? top =09=09 =09=09 IRVINE, Calif. (VENTUREWIRE) -- focusCORE, a provider of subscriptio= n-based=20 computing services and managed application hosting, announced that it has= =20 accepted an acquisition offer by Avrio Group, a management advisory and=20 investment group specializing in communications and Internet technologies.= =20 The companies expect the transaction, the terms of which were not disclosed= ,=20 to close by June 15. focusCORE's backers include Network Ventures and unnam= ed=20 individuals.=20 =09=09http://www.focuscore.com =09=09 =09=09 =09=09 new directors=20 =09=09? =09=09NETdelivery Adds Ex-AT&T President to Board =09=09 mail? top =09=09 =09=09 BOULDER, Colo. (VENTUREWIRE) -- NETdelivery, which provides digital= =20 applications for next generation online data management, said John R. Walte= r=20 has become the seventh member of the board of directors. He was introduced = to=20 the company through the board. Previously, Mr. Walter was AT&T's president= =20 and COO and R.R. Donnelley and Sons's chairman, president, and COO. He is= =20 currently a member of the following boards: Abbott Laboratories, Deere &=20 Company, Celestica, Manpower, and Jones Lang LaSalle. Founded in 1995,=20 NETdelivery's investors are Apex Venture Partners, First Analysis, Keystone= =20 Venture Capital, and the Productivity Fund. The company expects to announce= =20 an eighth member to its board by the end of the week and will also appoint = a=20 new vice president of sales within the next few weeks.=20 =09=09http://www.netdelivery.com =09=09 =09=09 =09=09Systems Design Firm Nallatech Names Pentair Exec As Chair =09=09 mail? top =09=09 =09=09 GLASGOW, Scotland (VENTUREWIRE) -- Nallatech, an electronic systems = design=20 and supply company, said it appointed Ken Lewandowski as chairman of its=20 board of directors. Mr. Lewandowski currently serves as president of Pentai= r=20 Enclosures Group Europe, a division of publicly traded Pentair, a=20 manufacturer with core businesses in the tools, water technologies, and=20 enclosures markets. In December 2000 Nallatech raised $2.9 million in its= =20 first round of funding from 3i and Scottish Equity Partners.=20 =09=09http://www.nallatech.com =09=09 =09=09 =09=09 new people=20 =09=09? =09=09Converged Switching Firm Gluon Names President & CEO =09=09 mail? top =09=09 =09=09 PETALUMA, Calif. (VENTUREWIRE) -- Gluon Networks, a developer of con= verged=20 switching and management systems for local service providers, said it has= =20 appointed Jo Anne Heywood Miller as president and CEO. Ms. Miller, who=20 officially joins the company on June 26, replaces George Hawley, who will= =20 continue with the company as chairman of the board and will also serve as a= =20 senior advisor to the company. Prior to joining Gluon Networks, Ms. Miller= =20 was founding vice president of engineering for wireless and voice-over-IP= =20 firm JetCell, which was acquired by Cisco Systems in May 2000. Gluon Networ= ks=20 has a seven-member board which includes investor representatives David Brit= ts=20 of J.P. Morgan and Tom McConnell of New Enterprise Associates. The company = is=20 also backed by the Texas Pacific Group.=20 =09=09http://www.gluonnetworks.com =09=09 =09=09 =09=09Enterprise Security Firm Solsoft Names New Chairman and CEO=20 =09=09mail? top =09=09 =09=09 MOUNTAIN VIEW, Calif. (VENTUREWIRE) -- Solsoft, a provider of a mana= gement=20 system for enterprise security, said it named Robert de Monts as chairman a= nd=20 CEO. Mr. de Monts previously served as president and COO of BoostWorks, an= =20 Internet infrastructure software company. He replaces Victor C. Langford, w= ho=20 was promoted from president and chief operating officer last October. A=20 company spokesperson said Mr. Langford has joined Avaya, a Lucent spinoff,= =20 but remains a large shareholder of Solsoft. The company is backed by Carlyl= e=20 Internet Partners Europe, Intel Capital, Cita, Innovacom-Technocom, Societe= =20 Generale Asset Management, Sofinnova Partners, Vantech, and Viventures.=20 =09=09http://www.solsoft.com =09=09 =09=09 =09=09Corechange Names Charles F. Kane President =09=09 mail? top =09=09 =09=09 BOSTON (VENTUREWIRE) -- Corechange, a provider of e-business access = software=20 for deploying portals, said it named Charles F. Kane as president of the=20 company. Mr. Kane joined Corechange as COO and CFO, and will continue to=20 serve in those positions. He replaces Corechange founder and CEO Ulf Arnetz= ,=20 who has been named chairman of the board of directors and remains CEO. Mr.= =20 Arnetz replaces Martin Hart as chairman, who will remain on the board. Prio= r=20 to joining Corechange, Mr. Kane served as vice president and CFO of Ardent= =20 Software. Earlier this month, Corechange announced it raised a $25 million= =20 Series C round led by UBS Capital Americas that included new investors Exel= on=20 Capital Partners, Nortel Networks, and SG Cowen Ventures, as well as previo= us=20 investors ABN AMRO Private Equity and HarbourVest Venture Partners. =09=09http://www.corechange.com =09=09 =09=09 =09=09InfoImage Appoints Thomas Niccoli as COO, President =09=09 mail? top =09=09 =09=09 PHOENIX (VENTUREWIRE) -- InfoImage, which provides enterprise decisi= on=20 software, said Thomas Niccoli has joined as president and the company's fir= st=20 chief operating officer. CEO Randy Eckel had held those responsibilities=20 before Mr. Niccoli's appointment. Prior to InfoImage, Mr. Niccoli founded a= nd=20 served as managing partner for the USWeb office in Phoenix. He also held=20 senior positions at Xantel and ComputerLand. He was introduced to Mr. Eckel= =20 by a mutual associate. InfoImage has raised $38 million to date from Boston= =20 Millennia Partners, Geo Capital, Global Technology Group, meVC Draper Fishe= r=20 Jurvetson, Microsoft, National Bank of Kuwait, and Tudor Investment=20 Corporation.=20 =09=09http://www.infoimage.com =09=09 =09=09 =09=09Knowledge Management Firm QED Solutions Names President =09=09 mail? top =09=09 =09=09 TYSONS CORNER, Va. (VENTUREWIRE) -- QED Solutions, which provides so= ftware=20 platforms that support data conversion, cleanup, coding, training, and=20 process development for drug safety information, said Richard B. Toren has= =20 joined the company as its first president. Mr. Torens, who takes over some= =20 duties from CEO and chairman Victor Gogolak, was introduced to QED by searc= h=20 firm J. Robert Scott. As president, Mr. Torens will focus on business=20 development, product development, and expanding database capabilities. The= =20 company is backed by Westport, Conn.-based Oxford Bioscience Partners. =09=09http://www.qedrx.com =09=09 =09=09 =09=09 vc fund news=20 =09=09? =09=09Woodside Investing On An Upswing Despite Market Woes =09=09 mail? top =09=09 =09=09 REDWOOD SHORES, Calif. (VENTUREWIRE) -- At a time when many venture = firms=20 are slowing the pace of investing, Redwood Shores, Calif.-based Woodside Fu= nd=20 is looking to invest more aggressively. According to Woodside Fund principa= l=20 Daniel H. Ahn, the firm is shooting for eight new deals this year, two more= =20 than usual. "We're investing like gangbusters," Mr. Ahn said. While many= =20 firms have hit the brakes when it comes to new deals, in part because they'= re=20 busy mending weak investments, Mr. Ahn believes now is the best time to buy= =20 because fewer investors means lower valuations. "When everyone is buying,= =20 everyone bids up prices and that's not the time to make deals," he said.=20 Woodside, which has made four new investments this year, is close to closin= g=20 on two new deals, and is in the process of examining two others. Mr. Ahn=20 would not comment on the new investments, only to say they involved compani= es=20 in the semiconductor and networking spaces. The companies Woodside has=20 invested in this year include TrueSAN Networks, a San Jose, Calif.-based=20 provider of enterprise storage network services; Milpitas, Calif.-based=20 General Nutronics, a developer of multi-petabit optical switches; and San= =20 Francisco-based Intelligent Markets, a maker of trading platforms for=20 financial institutions. In other developments at Woodside, Mr. Ahn said all= =20 the firm's limited partners have agreed to reinvest in its next fund, which= =20 Woodside expects to raise early next year. "They're all re-upping between o= ne=20 and two times as much," he said. Woodside raised a $135 million fund in Apr= il=20 2000 and has about one-third remaining, Mr. Ahn said.=20 =09=09http://www.woodsidefund.com =09=09 =09=09 =09=09Pakistani Firm KASB TechVentures to Close Down in June =09=09 mail? top =09=09 =09=09 LAHORE, Pakistan (VENTUREWIRE) -- KASB TechVentures, an incubator an= d=20 early-stage venture capital unit, will close its doors next month, accordin= g=20 to the venture fund's chief executive officer, Altaf Khan. The company was= =20 started by Pakistani investment firm Khadim Ali Shah Buhari & Co. this past= =20 autumn. In a company statement Mr. Khan said that its investor has=20 "terminated the money supply" rather than waiting for returns from an IT=20 remote access initiative. The incubator had planned to focus on Pakistani= =20 businesses in the infrastructure, networking, software, hardware, Internet,= =20 telecommunications, and financial service sectors, with investments of=20 between $100,000 and $1 million in portfolio companies. Khadim Ali Shah=20 Buhari & Co. could not be reached for comment. =09=09http://www.kasbtv.com =09=09 =09=09 =09=09Southern Capitol Partners with State-Funded Biotech Center =09=09 mail? top =09=09 =09=09 RESEARCH TRIANGLE PARK, N.C. (VENTUREWIRE) -- Southern Capitol Ventu= res, a=20 Research Triangle Park, N.C.-based venture capital firm, said it has formed= a=20 partnership with North Carolina Biotechnology Center, a state-funded=20 biotechnology research and development center. Ben Brooks, the founder and= =20 managing director of Southern Capitol, said his firm will have access to NC= =20 Biotechnology Center's resources, including its management expertise. Throu= gh=20 the partnership, Southern Capitol will receive $100,000 towards a $20 milli= on=20 fund it is planning to close by November. Southern Capitol, which was forme= d=20 in December of 2000, invests in early-stage companies, focusing 60% of its= =20 investments on information technology companies and 40% on biotechnology. T= he=20 company has invested in branded e-mail technology firm FullSeven=20 Technologies, its first and only investment to date. Southern Capitol is al= so=20 an investor in The Atlantis Group, an early-stage venture capital firm.=20 =09=09http://www.southcapitalventures.com =09=09 =09=09 =09=09 vc personnel=20 =09=09? =09=09Ex-Pequot Capital VP Joins Partech as Portfolio Manager =09=09 mail? top =09=09 =09=09 SAN FRANCISCO (VENTUREWIRE) -- Partech International, a venture capi= tal=20 firm, announced that Kevin Carrington has joined the firm as a portfolio=20 manager for its $130 million AXA U.S. Growth Fund. Prior to joining Partech= ,=20 Mr. Carrington was a vice president at Pequot Capital Management, where he= =20 focused on enterprise software and technology services. Partech focuses on= =20 expansion and later-stage investments in Web services, e-business=20 infrastructure software and services, communications software and services,= =20 and collaborative vertical services and products. =09=09http://www.partechvc.com =09=09 =09=09 =09=09company index =09=09top =09=09 =09=09Asimba, Asimba, Axerra Networks, Bernina Biosystems, Bernina Biosyste= ms,=20 BitFlash, Boxerjam, ChipData.com, Chordiant Software, CommerceFlow, Converg= e,=20 Core Networks, Core SDI, Core SDI, Corechange, Corechange, cPower, cPower,= =20 CryoCor, Delphi Communication Systems, DigitalMoJo, eKit.com, Elagent,=20 Encelle, Esterel Technologies, Esterel Technologies, Exteriority, focusCORE= ,=20 focusCORE, Gluon Networks, Gluon Networks, Gluon Networks, Hookt.com,=20 Hookt.com, InfoImage, InfoImage, InfoTalk, InfoTalk, iSovia, IT Factory, IT= =20 Factory, KASB TechVentures, Koch Ventures Group, Metastorm, Metastorm,=20 Nallatech, Nerve Wireless, NetByTel, NETdelivery, NetSales, Newtek Capital,= =20 Newtek Capital, NotifyMe Networks, octopus.com, Optimight Communications,= =20 Outstart, Partech International, Partech International, Partech=20 International, Pelago Networks, Platform.net, Platform.net, Proteus,=20 PurpleYogi, QED Solutions, QED Solutions, Real Media, Real Media, Real Medi= a,=20 Riptech, Seek Communications, Seek Communications, Solsoft, Solsoft, Solsof= t,=20 Sonik Technologies, South Capital Ventures, South Capital Ventures, Spotwav= e=20 Wireless, Spotwave Wireless, StarCite, StockHouse Media, Trendium, vSimplif= y,=20 vSimplify, Vytek Wireless, Woodside Fund, World Wide Packets=20 =09=09 =09=09 =09=09Around-the-clock global trading is almost here. =09=09New access to the reinsurance market is needed. =09=09Corporations must better manage their credit departments. =09=09 =09=09At Financial Services Outlook, you'll meet the people =09=09running the companies that are taking these challenges =09=09head on. =09=09 =09=09Financial Services Outlook =09=09July 31 =09=09The Marriott World Trade Center =09=09 =09=09Register before June 19 and SAVE=20 $100:http://www.financialservicesoutlook.com/register.asp =09=09 =09=09 =09=09 =09=09investor index =09=09top =09=09 =09=09Accenture Technology Ventures, Accenture Technology Ventures, Acer Te= chnology=20 Ventures, Acer Technology Ventures, Advanced Capital Europe, Advanced Capit= al=20 Europe, Allen & Buckeridge, AMCF, AMCF, Amwin Management, Amwin Management,= =20 Belgian Fonds Rendex, Belgian Fonds Rendex, BioM, BioM, CDC Innovation, CDC= =20 Innovation, Child Health Investment, Coastal Growth Partners, Connecticut= =20 Innovations, Connecticut Innovations, Cordova Ventures, Earlybird, Earlybir= d,=20 Eno River Capital, Galileo Partners, Galileo Partners, Hibernia Capital=20 Partners, High Tech Beteiligungen, High Tech Beteiligungen, HSBC Private=20 Equity Asia, HSBC Private Equity Asia, imGO, imGO, Intel Capital, Intel=20 Capital, Intel Capital, Intel Capital, Intersouth Partners, Koerner Capital= ,=20 Lexam Capital, Lexam Capital, Macquarie Technology Ventures, Macquarie=20 Technology Ventures, North Carolina BioScience Fund, North Carolina=20 Enterprise Fund, Pegasus Venture Capital, Pegasus Venture Capital, Royal Ba= nk=20 of Canada Capital Partners, Skandia Innovation U.S., Skandia Innovation U.S= .,=20 Walden International Investment Group, Walden International Investment Grou= p,=20 Yahoo!, Yahoo! =09=09 =09=09 =09=09your account =09=09 =09=09click on the following links to: =09=09=01=07 Switch to the plain-text version =09=09=01=07 Change your e-mail address =09=09=01=07 Cancel your subscription =09=09=01=07 Thoughts, suggestions, commentary =09=09=01=07 This newsletter was mailed to you at: [email protected] =09=09 =09=09contact =09=09 =09=09Send news items to [email protected] =09=09Send questions, complaints, or service queries to venturewire@venture= wire.com =09=09Send advertising inquiries to [email protected] =09=09 =09=09 =09=09legal =09=09 =09=09This copy of VentureWire and the information within it may not be rep= roduced,=20 saved, or otherwise copied into a database without the prior written consen= t=20 of Technologic Partners. =09=09 =09=09VentureWire is a service mark of Technologic Partners =09=09,2001 Technologic Partners =09=09=09?

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WGA Weekly Schedules for the Week of July 16 - 20

Western Government Affairs WEEKLY SCHEDULES For the Week of July 16 - 20, 2001 Paul Kaufman Mon 7/16 Vacation Tue 7/17 Vacation Wed 7/18 Vacation Thu 7/19 Vacation Fri 7/20 Vacation Sue Mara Mon 7/16 Houston TX Tue 7/17 San Francisco CA office Wed 7/18 San Francisco CA office Thu 7/19 San Francisco CA office Fri 7/20 San Francisco CA office Jeff Dasovich Mon 7/16 Sacramento CA Tue 7/17 Sacramento/San Francisco CA office [TBD] Wed 7/18 Sacramento/San Francisco CA office [TBD] Thu 7/19 Sacramento/San Francisco CA office [TBD] Fri 7/20 Sacramento/San Francisco CA office [TBD] Mona Petrochko Mon 7/16 San Francisco CA office Tue 7/17 San Francisco CA office Wed 7/18 San Francisco CA office Thu 7/19 San Francisco CA office Fri 7/20 San Francisco CA office Alan Comnes Mon 7/16 Houston TX Tue 7/17 Houston TX Wed 7/18 Portland OR office Thu 7/19 Portland OR office Fri 7/20 Portland OR office

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WGA's WEEKLY SCHEDULES for the Week of July 30 - August 3

Western Government Affairs WEEKLY SCHEDULES For the Week of July 30 =01) August 3, 2001 Paul Kaufman Mon 7/30 Portland OR office, a.m.; Helena MT, p.m. Tue 7/31 Helena MT Wed 8/01 Portland OR office Thu 8/02 Houston TX Fri 8/03 Houston TX Sue Mara Mon 7/30 San Francisco CA office Tue 7/31 San Francisco CA office Wed 8/01 San Francisco CA office Thu 8/02 San Francisco CA office Fri 8/03 San Francisco CA office Jeff Dasovich Mon 7/30 San Francisco CA office Tue 7/31 San Francisco CA office Wed 8/01 Portland OR office Thu 8/02 NYC Fri 8/03 NYC Mona Petrochko Mon 7/30 San Francisco CA office Tue 7/31=20 Wed 8/01 San Francisco CA office Thu 8/02 San Francisco CA office Fri 8/03 San Francisco CA office Alan Comnes Mon 7/30 Portland OR office Tue 7/31 Portland OR office Wed 8/01 Portland OR office Thu 8/02 Portland OR office Fri 8/03 Portland OR office

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Energy Issues

Please see the following articles: Sac Bee, Wed, 5/16: "Double power punch: Rate hikes set; blackout blues=20 ahead" Sac Bee, Wed, 5/16: "An energy council expects five times the outages=20 forecast" Sac Bee, Wed, 5/16: "Generator, environmental groups strike deal " Sac Bee, Wed, 5/16: "Blackouts may create shortage of water: State officia= ls=20 warn that supplies for drinking and fire hydrants are vulnerable because=20 pumps can fail during power outages" Sac Bee, Wed, 5/16: "Dan Walters: Rate raise -- Genuine conflict or tightl= y=20 scripted political melodrama?" Sac Bee, Wed, 5/16: "Budget reserve plan stirs up a fight: Gov. Davis back= s=20 drawing down the emergency fund. Others say it could lead to tax hikes or= =20 massive cuts" Sac Bee, Wed, 5/16: "Democrats lay out energy plan: Leaders call for caps = on=20 wholesale prices and tax breaks for oil and gas production" Sac Bee, Wed, 5/16: "Judge names panel in PG&E case" SD Union, Wed, 5/16: "SDG&E area spared for now by big rate hikes" SD Union, Wed, 5/16: "State credit rating takes another hit over energy=20 crisis" SD Union, Wed, 5/16: "House Democratic plan calls for power price caps" SD Union (AP), Tues, 5/15: "Southern California Gas plans pipeline expansi= on" SD Union (AP), Tues, 5/15: "Cheney's energy plan will offer no quick fixes= =20 on gasoline prices" LA Times, Wed, 5/16: "$5.7-Billion Energy Rate Hike Is OKd" LA Times, Wed, 5/16: "State Has Lost Global Lead in 'Green' Power" LA Times, Wed, 5/16: "All-Out Attack on Bush Energy Plan Is Readied" LA Times, Wed, 5/16: "A One-Two Punch in the Budget" LA Times, Wed, 5/16: "260 Hours of Summer Blackouts Predicted" LA Times, Wed, 5/16: "Your new electric bill" (Graphic) LA Times, Wed, 5/16: "Just Not Enough Electricity" (Audio from Gil=20 Alexander, Calif. Edison) http://www.latimes.com/business/reports/power/gr_bill010516.htm# SF Chron, Wed, 5/16: "The power behind the POWER=20 Business as usual for PG&E's well-connected board" SF Chron, Wed, 5/16: "The Power behind the POWER=20 PG&E board doesn't suffer from energy crisis " SF Chron (AP), Wed, 5/16: "California electric rates jump to second highes= t=20 in country" SF Chron (AP), Wed, 5/16: "Industry sees worse-than-expected summer power= =20 shortages" SF Chron, Wed, 5/16: "Contra Costa acts on energy=20 Hiring freeze, lawsuits planned by supervisors" SF Chron, Wed, 5/16: "Memo suggests Texas firm manipulated gas market " SF Chron, Wed, 5/16: "Bush follows stump script on energy=20 Policy announcement today was presaged in Michigan talk" SF Chron, Wed, 5/16: "PUC tags consumers with huge rate boost=20 ELECTRICITY BILLS: Burden shifts from business to heavy residential users" SF Chron, Wed, 5/16: "Davis finds his ramrod for risky energy bill " SF Chron, Wed, 5/16: "Energy at a Glance" SF Chron, Wed, 5/16: "PUC tags consumers with huge rate boost=20 NEWS ANALYSIS=20 Politicians see no need to promote urge to conserve" SF Chron, Wed, 5/16: "SAN JOSE=20 County conserving its air conditioning" Mercury News, Wed, 5/16: "California rate hike hits homes, businesses" Mercury News, Wed, 5/16: "Electricity users struggle to meet savings targe= t" Mercury News, Wed, 5/16: "What is the baseline on electricity bills, and w= hy=20 has it become so important?" Mercury News, Wed, 5/16: "California PUC approves power rate hike plan" Mercury News, Wed, 5/16: "Energy report may lead to new battle on drilling= =20 along California's coast" Mercury News, Wed, 5/16: "Energy plan gives GOP the jitters" =20 (Commentary) OC Register, Wed, 5/16: "Biggest rate hike in state history" OC Register (AP), Wed, 5/16: "Democrats want energy price limits" OC Register, Wed, 5/16: "Energy notebook Electricity-bond delay lowers state credit standing" OC Register, Wed, 5/16: "Burden falls on residents" OC Register, Wed, 5/16: "Anaheim Mills runs out of gas" OC Register (AP), Wed, 5/16: "Judge: Memo hints at gas market abuse" Energy Insight, Wed, 5/16: "Power in the Northeast thinking locally, actin= g=20 locally" Individual.com (AP), Wed, 5/16: "PG&E, State Regulators Spar in Court" NY Times, Wed, 5/16: "Bush Task Force on Energy Worked in Mysterious Ways" WSJ, Wed, 5/16: "California Could Face Cash Crunch Soon --- Spending on=20 Power Worries Treasurer, and Moody's Cuts State Bond Ratings" ---------------------------------------------------------------------------= --- --------------------------------------------------- Double power punch: Rate hikes set; blackout blues ahead By Carrie Peyton Bee Staff Writer (Published May 16, 2001)=20 The shouts and chants, boos and catcalls were the sound of the other shoe= =20 dropping.=20 Seven weeks after state regulators voted to raise electric rates for=20 customers of Pacific Gas and Electric Co. and Southern California Edison by= =20 $5 billion annually, Tuesday they sorted out just who will pay and just how= =20 much.=20 Some of the state's biggest industries will have to spend 50 percent more f= or=20 their electricity, starting June 1.=20 Even so, their cost per kilowatt-hour will be about half that paid by the= =20 most electricity-guzzling homeowners and renters. Their bills, overall, wou= ld=20 increase 37 percent under a complex, five-step rate scale.=20 The decision dismayed representatives of small consumers and big businesses= =20 alike, and triggered an outpouring of rage from those who said the state=20 instead should seize power plants from owners who have jacked up wholesale= =20 prices.=20 "Shame, shame, shame, shame," protesters chanted after the 3-2 vote by the= =20 state Public Utilities Commission before a packed auditorium in San=20 Francisco.=20 "This is a cave-in to the big industrial lobby and the big agricultural lob= by=20 that's been on the warpath for the last week," said Mike Florio, an attorne= y=20 with The Utility Reform Network, a Bay Area consumer group.=20 For weeks, the commission has been backing away from ideas floated by PUC= =20 President Loretta Lynch, who argued that substantially lower charges paid b= y=20 big businesses for decades need to be leveled out, to come closer to=20 residential and small-business rates.=20 A proposal she outlined in March would have raised some business rates at= =20 some hours up to sixfold. But by last week, the largest business increases = in=20 two different proposals had come down to no more than 55 percent. On Tuesda= y,=20 that was lowered again to 49 percent.=20 Even so, the decision was criticized by commissioner Richard Bilas as a=20 "disastrous rate design ... (that) will send the California economy into a= =20 recessionary death spiral."=20 He warned that businesses will shut down or flee the state, with consequenc= es=20 that will ripple through the economy as jobs and taxes are lost. Bilas and= =20 Henry Duque, the two remaining Republican appointees on the five-member=20 commission, voted against the rate design proposed by Lynch. It was support= ed=20 by commissioners Geoffrey Brown and Carl Wood, who, like Lynch were appoint= ed=20 by Gov. Gray Davis.=20 "Every consumer in California is justified in feeling outrage at the rates = we=20 approve today and the bills they will have to pay tomorrow," Lynch wrote in= =20 her 69-page decision, blaming the increases on "wholesale price gouging" an= d=20 inaction by federal regulators.=20 Lynch said the new rates will fuel conservation, but business interests hav= e=20 argued that so many power users are fully or partly shielded that it will= =20 blunt the conservation signal that could be sent by even higher rates.=20 Under Tuesday's decision, agricultural rate hikes were capped at 15 percent= =20 to 20 percent, partly in response to Davis' urgings.=20 The governor, who had urged the commission to go easier on agriculture and= =20 enact a lower overall increase, said in a statement that the rate hikes mad= e=20 "modest improvements" over earlier proposals but "my plan represented a mor= e=20 balanced approach."=20 The rate hikes also spare households that use less than 130 percent of a=20 minimal "baseline" amount to comply with a state law passed this year.=20 Pacific Gas and Electric's baseline varies depending on the region and the= =20 season.=20 Households that qualify for special low-income rates or special medical rat= es=20 also won't face increases.=20 For other residential power users, electricity will get progressively more= =20 expensive, but only above 130 percent of baseline, so overall bills won't= =20 rise as sharply.=20 Under the five new residential rate tiers, a PG&E customer whose use tops o= ut=20 in the third tier would pay an additional $6 a month, increasing an average= =20 $76 bill about 5 percent to $81, the PUC calculated.=20 Those whose usage rises into the fourth tier would pay about 18 percent mor= e=20 per month, seeing their bills rise from $122 to $143, and those whose usage= =20 creeps into the fifth tier would pay an extra $85, or 37 percent of their= =20 total bill, which would increase from an average of $232 to $317, the=20 commission said.=20 Small businesses would face increases ranging from 34 percent to 45 percent= .=20 While the percentage increases would seem to favor smaller consumers, the= =20 underlying rates are highest for residential customers.=20 Households with usage above 130 percent of baseline will now pay PG&E an=20 average of 22 cents per kilowatt-hour for the additional power, Lynch=20 calculated. That compares with 16.7 cents for small businesses, 14.2 cents= =20 for agriculture, 15.4 cents for large commercial users and 12.2 cents for= =20 industrial users, she wrote.=20 It was the comparatively lower rates for the biggest users that angered=20 advocates for residential consumers.=20 "I don't know why they feel compelled to give those guys a break when they'= re=20 the ones who wanted us to get into this deregulation mess in the first=20 place," said TURN's Florio.=20 But Bill Booth, who represents the California Large Energy Consumers=20 Association, said the decision is "a horrible result for business. This is= =20 going to have a really negative effect on the economy."=20 Agricultural interests were more upbeat, with Ron Liebert, an attorney for= =20 the California Farm Bureau Federation, praising the decision for recognizin= g=20 "the unique difficulties agriculture faces," including dwindling water=20 supplies, higher pumping costs and higher fuel costs for farm equipment.=20 The rate hikes allow PG&E and Edison to collect an additional $700 million= =20 over the next year. That amount represents revenue that the utilities would= =20 have collected if they had been able to immediately impose the rate hike=20 March 27, the day the increase was approved.=20 The rate hikes affect customers of PG&E and Southern California Edison, the= =20 state's two largest investor-owned utilities. They don't affect customers o= f=20 ratepayer-owned systems such as the Sacramento Municipal Utility District,= =20 where locally elected officials set rates. SMUD raises its rates an average= =20 of 22 percent this month, driven partly by the same turbulence in wholesale= =20 electricity markets that has sent PG&E into bankruptcy.=20 The Bee's Carrie Peyton can be reached at (916) 321-1086 or=20 [email protected]. An energy council expects five times the outages forecast By Dale Kasler Bee Staff Writer (Published May 16, 2001)=20 In the bleakest assessment yet of California's summertime energy shortage, = an=20 industry association Tuesday predicted the state will suffer five times as= =20 many rolling blackouts as previously forecast.=20 Moreover, the group said the blackouts will be twice as widespread --=20 affecting twice as many Californians at a time -- as any the state has=20 experienced this year.=20 The North American Electric Reliability Council predicted 15 hours of=20 blackouts a week through September, vs. about three hours under assumptions= =20 released by the Independent System Operator, which runs California's power= =20 grid. The council's prediction sharply contrasted with predictions by Gov.= =20 Gray Davis, who has said the state will avoid major problems this summer.= =20 "All indications are, there are going to be chronic problems this summer,"= =20 said Tim Gallagher, manager of technical services at the reliability counci= l.=20 He said Californians for the first time can expect blackouts during odd hou= rs=20 and on weekends, instead of just the late-afternoon hours when electricity= =20 consumption usually peaks.=20 A Princeton, N.J., nonprofit group funded by the energy industry and=20 dedicated to monitoring the nation's power supplies, the reliability counci= l=20 said electricity supplies may be iffy this summer in the Pacific Northwest,= =20 New York, New England and Texas. The only state where it predicted blackout= s=20 was California.=20 Taking note of the ISO's study, the council was far more pessimistic about= =20 the levels of available power this summer from California's existing=20 hydroelectric, nuclear and natural gas-fired generating plants. It also=20 predicted fewer imports from out of state and said California will get less= =20 power than expected from the host of new power plants scheduled to begin=20 operation over the summer.=20 The council did say the demand for power is likely to be less than the ISO= =20 estimated, thanks to the impact of conservation programs and a hefty rate= =20 increase approved by the Public Utilities Commission. But the council said= =20 conservation programs are likely to generate only a third of the savings=20 predicted by state officials.=20 California has experienced six days of rolling blackouts this year, includi= ng=20 two last week, the result of hydropower shortages, unexpected plant shutdow= ns=20 and the financial crisis facing the state's two main utilities, Pacific Gas= =20 and Electric Co. and Southern California Edison.=20 The second blackout, on Jan. 18, was the most widespread, cutting power to= =20 750,000 homes at a time.=20 The reliability council said the average blackout this summer will be twice= =20 as bad, taking down 1.6 million homes at a time.=20 Predicting the impact of summertime blackouts has become something of a=20 cottage industry, with various independent consultants forecasting billions= =20 in economic losses. Recently a consultant hired by top business lobbyists= =20 said the state will lose 135,000 jobs if it suffers 110 hours of blackouts = --=20 less than half as many hours as predicted by the reliability council, which= =20 is owned by 10 Regional Reliability Councils whose members come from all=20 segments of the electric industry.=20 The effect on the business climate remains to be seen. "We really have no= =20 experience with this," said chief economist Ted Gibson of the California=20 Department of Finance.=20 Various industry analysts have predicted anywhere from 20 to 36 days of=20 rolling blackouts this summer. The ISO has said the state could face=20 blackouts any day when total demand exceeds 40,000 megawatts, which happene= d=20 34 times last summer.=20 The ISO, which is scheduled to update its summer forecast next week, didn't= =20 predict the number of hours of blackouts. But the reliability council fed= =20 ISO's assumptions into its computer model and came up with 55 hours of=20 blackouts this summer. Using its own, more pessimistic assumptions, the=20 council estimated 260 hours, or about 15 hours a week.=20 "It wouldn't shock me," said Severin Borenstein of the University of=20 California Energy Institute. "It's a little high, compared to the other=20 estimates, but there's a lot of uncertainty about what's going to be=20 available in state and out of state."=20 The ISO had no comment on the council's projections, but Davis' office said= =20 the forecast is overly pessimistic.=20 "Their calculations are based on the worst conditions occurring all day,=20 every day," said Davis spokesman Steve Maviglio.=20 He said the council overlooks the expected supplies from new "peaker" power= =20 plants and two Orange County plants that will fire up this summer after fiv= e=20 years in mothballs. The report also underestimates the level of power that= =20 neighboring states will sell to California, he said.=20 "They assume it's going to be blazing hot in Phoenix, Portland and San=20 Francisco all on the same day (drastically reducing imports), and that neve= r=20 happens," Maviglio said.=20 Davis has tried recently to minimize the impact of blackouts, saying: "We'l= l=20 get through the summer without major disruptions. A couple of difficult day= s,=20 but no major disruptions."=20 The council and the ISO are far apart in their assessment of supplies. The= =20 ISO, for instance, predicted that the state will get nearly 2,600 additiona= l=20 megawatts of power by July from new plants under construction, enough=20 electricity for nearly 2 million homes. The council said new plants typical= ly=20 don't operate at full efficiency when they're starting up. Its prediction:= =20 500 megawatts, or enough for only 375,000 homes.=20 Similarly, the ISO said the drought will curtail hydro supplies by 1,000=20 megawatts. The council said the shortfall will reach 2,400 megawatts by=20 August.=20 And while the ISO figured unexpected plant shutdowns will erase 2,500=20 megawatts of power, the council predicted the damage will be more than 4,50= 0=20 megawatts.=20 The Bee's Dale Kasler can be reached at (916) 321-1066 or [email protected]= m. Generator, environmental groups strike deal=20 By Tom Knudson Bee Staff Writer (Published May 16, 2001)=20 Days after state regulators gave Duke Energy the go-ahead to expand its Mos= s=20 Landing Power Plant near Monterey Bay last fall, documents show four=20 environmental groups made their own deal with the utility giant.=20 The four signed an agreement not to "participate in any lawsuit (or)=20 regulatory challenge" that might slow or stop the project in exchange for a= =20 financial concession: $1 million from Duke for environmental "monitoring an= d=20 research."=20 Balancing power generation and environmental protection always has been=20 difficult. But today, as power-starved California scrambles to find and=20 permit new energy sources, some fear the Moss Landing agreement shows that= =20 money can sway even environmentalists -- and tip the scales too far in favo= r=20 of economic development.=20 Environmentalists who signed the agreement, though, said that despite their= =20 concerns about the plant expansion, they had little chance of stopping it,= =20 especially after it was approved by the California Energy Commission and=20 Central Coast Regional Water Quality Control Board.=20 So they took the potentially controversial step: entering into an agreement= =20 with Duke for financial resources to pay for studies of the plant's impact = on=20 the marine environment.=20 Other environmentalists, though, criticized that approach.=20 Mitigation payments Duke Energy's efforts to modernize the Moss Landing Power Plant resulted in= =20 mitigation payments to environmental and other groups, including:=20 $7 million to the Elkhorn Slough Foundation to mitigate the plant's use of= =20 seawater.=20 $425,000 to the Monterey Bay Sanctuary Foundation over three years to monit= or=20 heated seawater discharge in the ocean.=20 $1 million to the Monterey Bay Sanctuary Foundation over five years to=20 monitor water quality through a program sponsored by Save Our Shores, the= =20 Center for Marine Conservation, the Friends of the Sea Otter and the Otter= =20 Project.=20 $100,000 to the Marine Mammal Center to relocate its triage center for=20 injured animals onto power plant property.=20 $3.4 million to the Moss Landing Chamber of Commerce over 20 years for=20 infrastructure improvements in the Moss Landing community.=20 $100,000 to design and construct a boardwalk for additional beach access in= =20 Moss Landing.=20 $60,000 for an environmental assessment for a proposed Elkhorn Slough Circl= e=20 Trail. If approved, Duke would provide an additional $250,000 endowment to= =20 maintain the trail.=20 Source: Duke Energy, North America=20 "It is very disheartening," said Carolyn Nielson, a retired teacher who alo= ng=20 with some other local residents is waging a battle against what they consid= er=20 an environmentally harmful power plant cooling system.=20 "These environmental groups have the expertise, the biologists, the=20 attorneys," said Nielson, who has taken her case to the State Water Resourc= es=20 Control Board. "We could have been much more successful with their help. Bu= t=20 there wouldn't have been any financial reward in it for them."=20 Such criticisms are off-base, according to Warner Chabot, regional director= =20 for the Center for Marine Conservation, a national environmental group that= =20 was among those to sign the deal. He said environmentalists got the best de= al=20 possible in the current energy climate.=20 "Look at what's happening with power plant approvals in California right=20 now," said Chabot, referring to the state's push to bring new energy source= s=20 on line.=20 The Moss Landing project -- which is scheduled to add 1,060 megawatts in=20 2002, enough to serve one million homes -- is a key part of that energy=20 expansion plan.=20 No money will go to the four environmental groups -- the Center for Marine= =20 Conservation, along with Save Our Shores, Friends of the Sea Otter and the= =20 Otter Project. It will be routed, in five yearly installments of $200,000= =20 each, to the Monterey Bay Sanctuary Foundation, a nonprofit organization th= at=20 helps support sanctuary programs, including scientific research.=20 Chabot helped found the sanctuary foundation and sits on its board. He said= =20 the money will be used to monitor the health of Elkhorn Slough, a=20 biologically rich estuary that borders the plant and is linked to Monterey= =20 Bay.=20 "Not a dime comes to the Center for Marine Conservation," he said. "Not a= =20 penny comes to me."=20 Duke representatives said the controversy about the arrangement has been=20 stirred by a handful of people.=20 "It's a million dollars worth of water quality studies," said Duke spokesma= n=20 Tom Williams. "Our whole effort wasn't to try to buy anybody off. It was=20 designed to help increase people's comfort level where there wasn't a comfo= rt=20 level."=20 The $1 million agreement signed in November is part of a package of more th= an=20 $12 million in Duke payments to civil, government and environmental groups = in=20 connection with the plant modernization.=20 The heftiest award -- $7 million to the Elkhorn Slough Foundation, a=20 nonprofit environmental organization -- was negotiated by state agencies to= =20 "mitigate" environmental impacts of the plant.=20 Formed in 1982, the slough foundation exists to promote "the wise use and= =20 conservation of Elkhorn Slough and surrounding wetlands," its Web site says= .=20 However, some environmentalists say the state-approved mitigation plan is= =20 inadequate.=20 "If you want to say, 'Who did Duke roll with a big chunk of money?' I would= =20 say they rolled the California Energy Commission and the Regional Water Boa= rd=20 for the price of mitigation," Chabot said. "The agencies got bought off=20 cheap. And the environment got taken to the cleaners."=20 Duke's Williams strongly disagreed. Environmental mitigation "must be based= =20 on science, not on buying anybody off," he said. "That is inappropriate, an= d=20 we would not participate in that.=20 "That suggestion is offensive to us. And it should be offensive to any=20 environmentalist."=20 Bob Haussler, head of the Energy Commission's environmental protection=20 office, said the mitigation plan is biologically sound. "We are confident i= t=20 will improve the slough ecosystem," he said.=20 Madeline Clark, a local businesswoman and founder of Monterey Parkway -- a= =20 citizens group that scrutinizes local public works projects -- called the= =20 recipients of Duke's payments a "shopping list" of government agencies,=20 environmental groups and civic organizations. She was particularly critical= =20 of the $1 million deal with environmental groups.=20 "You know what bothers me?" Clark said. "Environmental groups get tons of= =20 donations. Their purpose is to protect and defend the environment. If a big= =20 corporation like Duke can come in and buy them off, I have a real problem= =20 with that."=20 Construction began in November on Duke's project to add 1,060 megawatts of= =20 natural gas-fired electrical capacity to the Moss Landing plant, purchased= =20 from PG&E in 1998.=20 If the expansion is finished next year, as scheduled, it would account for= =20 more than 30 percent of all new generation in California in 2002.=20 "This is a big deal," said Williams, the Duke spokesman. "It will be the=20 largest plant in California. If that plant is delayed a month or two, we lo= se=20 the summer of 2002. And that affects not only Duke Energy, but the state of= =20 California."=20 Opponents say it's not the power they oppose, but the plant's cooling syste= m,=20 which will pump about 1.2 billion gallons of seawater each day from Moss=20 Landing Harbor. Such pumping, they say, will degrade Elkhorn Slough. They= =20 argue for an alternative cooling system, such as towers that recirculate=20 water.=20 "Basically, what that plant will do is take 25 percent of the volume of the= =20 harbor and slough, run it through a pipe and dump it back into the ocean wi= th=20 much of the marine life cooked and dead," said Steve Shimek, executive=20 director of the Otter Project.=20 For Shimek and other environmentalists, scientific studies commissioned by= =20 Duke during the permitting process left key questions unanswered about the= =20 plant's impact on the environment.=20 "There was no scientific evidence that would literally point to Duke causin= g=20 harm to the environment," said Vicki Nichols, executive director of Save Ou= r=20 Shores. "We felt we didn't have strong standing to sue."=20 Instead, the environmentalists began negotiating with Duke for financial=20 payments for studies of environmental impacts of the modernization project.= =20 The process "gave me tremendous pause and great concern," Nichols said. "I= =20 knew there was going to be some perception that we were doing the wrong=20 thing."=20 She was right.=20 "As far as I'm concerned, with the price-gouging going on by the energy=20 wholesalers, they are just receiving stolen goods," said Clark, of the=20 citizens group.=20 Her skepticism was sharpened by the recent disclosure that Duke Energy=20 approached Gov. Gray Davis with a secret deal offering financial concession= s=20 if the state dropped lawsuits and investigations into the power generator.= =20 Chabot, with the Center for Marine Conservation, discouraged any comparison= =20 between the two offers, calling it "grossly unfair and inaccurate."=20 Regardless of what was intended with the payments, Nielson said they stain= =20 the process. "It is so destructive in terms of making everyone cynical," sh= e=20 said.=20 Shimek took a different view. "We convinced Duke to spend $1 million toward= =20 monitoring that, frankly, five years from now could very well come back to= =20 haunt them," he said.=20 "Did we do the right thing? I have no idea. Did we try our best? Yes, we=20 did."=20 The Bee's Tom Knudson can be reached at [email protected]. Blackouts may create shortage of water: State officials warn that supplies= =20 for drinking and fire hydrants are vulnerable because pumps can fail during= =20 power outages. By Chris Bowman Bee Staff Writer (Published May 16, 2001)=20 State health authorities are notifying public water utilities to secure=20 emergency water and backup power so fire hydrants won't run dry and drinkin= g=20 water remains safe during blackouts.=20 The notice, which is being issued this week to all 8,700 public water syste= ms=20 in the state, also advises utilities to warn the public that tap water coul= d=20 turn cloudy or contaminated during a prolonged power outage at the utilitie= s'=20 well pumps.=20 The Department of Health Services also suggested alerting consumers to=20 "immediately discontinue any non-essential water usage" during water outage= s=20 or low water pressure.=20 Clamping down on water use, particularly outdoor irrigation and car washing= ,=20 reduces the chances of water systems losing pressure or running dry, state= =20 officials said.=20 Loss of pressure can introduce bacterial contamination into the=20 drinking-water supply. Water pipes inevitably leak, and the leakage that=20 mixes with soil can get sucked back into the system through cracks in the= =20 underground delivery network. The effect, called back-siphonage, is similar= =20 to sipping water through a straw.=20 As a precaution, the state health notice advises water utilities to increas= e=20 monitoring for harmful microbes in areas that lose power.=20 Changes in water pressure also can churn up sediment settled in pipes,=20 causing tap water to turn brown or cloudy. Consumers are advised to open ho= t-=20 and cold-water faucets when normal water service is restored to flush the= =20 lines until the water turns clear.=20 The state health advisory comes at the beginning of air-conditioning season= =20 that threatens to drain California's power-short supplies on hot days.=20 The Association of California Water Agencies is telling its members to=20 "prepare for multiple, multi-hour power outages: 80-100 hours of power=20 outages (during the summer) based on average assumptions, up to 1,000 hours= =20 if things get worse."=20 At issue are the electrical pumps that extract water from wells and keep=20 supplies flowing at a constant rate through underground networks of municip= al=20 water mains and pipes.=20 The state Public Utilities Commission has exempted services "necessary to= =20 protect public health and safety" from planned blackouts that power manager= s=20 impose to avert a collapse of the state's electricity grid.=20 The exemption, however, does not apply to water-supply or sewage-treatment= =20 systems, which rely on electric pumps to keep raw wastewater from spilling= =20 out of utility holes.=20 As a result, water-supply systems are at risk, even for firefighting=20 agencies, which are exempt from the blackouts.=20 "Those who provide the necessary water for those services should likewise b= e=20 exempted," said the water-utilities association, which is pressing the PUC= =20 for an exemption from blackouts.=20 PUC officials said that most water utilities have adequate backup generator= s,=20 though they have agreed to further consider the utilities' case. Many of th= e=20 generators were bought in anticipation of the Y2K computer havoc that large= ly=20 failed to materialize.=20 State health and local utility officials said those generators would prove= =20 critical if the power outages became more frequent and prolonged as expecte= d=20 this summer.=20 In its notice to utilities this week, the state health department says it= =20 "encourages all utilities to secure backup power capabilities and to=20 routinely test their emergency power generating equipment. ... In addition,= =20 storage should be maintained as full as possible."=20 The advisory also asks utilities to update their "disaster response plans" = so=20 the state can better help utilities in emergencies.=20 Cliff Sharpe, chief of the health department's drinking-water enforcement f= or=20 Northern California, said small community water systems are at greatest ris= k=20 because they lack adequate water storage.=20 But larger systems such as those in the Sacramento area could have delivery= =20 breakdowns if the outages at the well pumps last more than two hours, he=20 said.=20 Officials at Citizens Water Resources, which serves 180,000 residents in th= e=20 unincorporated areas of metropolitan Sacramento, said it has water-sharing= =20 arrangements with the city of Sacramento and other suppliers in the event o= f=20 a water outage.=20 Having enough power to deliver the water, however, is an open question, sai= d=20 Herb Niederberger, Citizens operations manager. The utility has several=20 portable generators and many more on order to install at its wellheads.=20 Still, officials said they would need the help of residents to make sure th= e=20 system gets by. They are asking residents to confine outdoor watering from= =20 midnight to 10 a.m.=20 "If the blackouts occur during peak hours of energy use and many customers= =20 are using their sprinklers, we'll lose pressure immediately," Niederberger= =20 said.=20 The Bee's Chris Bowman can be reached at (916) 321-1069 or [email protected]= om . Dan Walters: Rate raise -- Genuine conflict or tightly scripted political= =20 melodrama? (Published May 16, 2001)=20 California's historic -- and terribly flawed -- experiment in the generatio= n,=20 transmission and pricing of electric energy began as a drive by big=20 industrial and commercial power customers to reduce their costs.=20 At the time, California was mired in the worst recession since the Great=20 Depression, hundreds of thousands of jobs had disappeared and business=20 executives were complaining about the high costs of operating in the state.= =20 Improving the "business climate" had become an oft-chanted political mantra= ,=20 and executives wanted power supplies by competitive bid outside the regulat= ed=20 utility grid.=20 The demands of business for "direct access" to competitive power morphed,= =20 thanks to an unfortunate meeting of minds between academic theorists and=20 vote-hungry politicians, into a broad scheme that was called "deregulation"= =20 but was really a hybrid shaped by powerful interest groups.=20 Among the many ironies that attach themselves like lamprey eels to the=20 state's energy crisis is that the big users that wanted to reduce their cos= ts=20 now are being saddled with sharp spikes in power rates to ease the immense= =20 debts the utilities and the state have amassed. And that irony comes with a= =20 tale of political intrigue.=20 During late 2000 and early 2001, business leaders, worried that the utiliti= es=20 were being driven into bankruptcy and power supplies could be interrupted,= =20 repeatedly urged Gov. Gray Davis to allow utility rates to rise. The=20 Democratic governor rebuffed the pleas for months, agreeing only to a token= =20 and supposedly temporary increase in January. But in April, with the state'= s=20 own treasury being hammered by power purchases, Davis relented and agreed t= o=20 allow rates to rise by around one-third.=20 How that came about is still a bit mysterious. Davis acted after the state= =20 Public Utilities Commission, controlled by his appointees and headed by a= =20 former political adviser, unveiled its own rate increase scheme, one heavil= y=20 oriented toward imposing most of the burden on business rather than=20 residential customers. Davis insisted that the PUC had acted on its own,=20 which produced nothing but guffaws in the Capitol.=20 PUC President Loretta Lynch plowed ahead with her $5 billion plan, business= =20 executives howled and on Sunday, just as the commission was poised to act,= =20 Davis publicly rejected it. "My plan raises sufficient revenues to deal wit= h=20 the problem without putting an undue burden on California consumers and=20 business that might hurt the economy," Davis said. The next day, Lynch=20 postponed adoption of her plan, saying it was undergoing revisions, and on= =20 Tuesday a new version, somewhat closer to the governor's and less onerous t= o=20 business, was unveiled. Davis, it became apparent, had interceded with othe= r=20 commissioners, including newly appointed Jeff Brown, to lessen the impact o= n=20 agriculture and business.=20 Consumer groups howled about what they characterized as a sellout to=20 business, arguing that the executives who pressed for deregulation in the= =20 mid-1990s should swallow the rate increases that result from the failure of= =20 the scheme to increase competition and lower power costs. But during a PUC= =20 meeting disrupted by anti-rate increase protesters, the scheme was approved= =20 on a 3-2 vote.=20 What no one outside Davis' immediate circle knows is whether all of this wa= s=20 a genuine conflict between the governor and Lynch, the one-time political= =20 strategist he chose to head the PUC, or whether it was a setup to make Davi= s=20 appear to be a moderate who saved business from killer utility rates. Davis= =20 is certainly no stranger to the triangulation approach to political issues;= =20 he has often positioned himself as the protector of business, and collected= =20 huge amounts of campaign cash from business groups. And the situation is mo= re=20 than faintly reminiscent of several incidents that occurred during the Jerr= y=20 Brown governorship, when Davis was Brown's chief of staff.=20 Perhaps it was a genuine conflict, but it certainly has all the earmarks of= a=20 scripted melodrama, with Davis casting himself as the rescuer of business= =20 damsels in distress.=20 The Bee's Dan Walters can be reached at (916) 321-1195 or [email protected]= om . Budget reserve plan stirs up a fight: Gov. Davis backs drawing down the=20 emergency fund. Others say it could lead to tax hikes or massive cuts. By John Hill Bee Capitol Bureau (Published May 16, 2001)=20 Budget reserves are for a rainy day, Gov. Gray Davis says -- and it's=20 starting to rain.=20 But what if the rain keeps falling and turns into a deluge?=20 That was one of the questions being asked at the Capitol the day after the= =20 Democratic governor released his revised budget proposal for the fiscal yea= r=20 that begins July 1.=20 Among an array of cuts and transfers, Davis proposes to draw down the state= 's=20 reserve by $900 million -- from $1.9 billion to $1 billion.=20 Davis says the reserve was meant to get the state through times such as thi= s,=20 when a sudden drop in the stock market takes a chunk out of state revenues.= =20 But others, including some Democrats, question whether Davis' plan leaves= =20 enough of a reserve to avoid the need for taxes or massive budget cuts a ye= ar=20 from now.=20 "The thing we find most egregious is the reduction in surplus," said Assemb= ly=20 Republican leader Dave Cox of Fair Oaks. The Republicans have advocated a= =20 reserve of $4 billion just for the state's future electricity purchases, in= =20 addition to a reserve for other contingencies.=20 Wall Street seemed to take notice as well. On Tuesday, Moody's, one of the= =20 three leading credit rating agencies, lowered its rating for California's= =20 general obligation bonds from Aa3 to Aa2.=20 Moody's cited the failure of the Legislature to approve a bill that would= =20 have allowed the immediate sale of bonds to repay the state treasury for=20 electricity purchases the state has been making since January. The bill,=20 which required a two-thirds majority, was blocked by Assembly Republicans,= =20 forcing a 90-day wait for the massive bond sale.=20 But Moody's also cited Davis' budget proposal, which it said "leaves little= =20 cushion for additional bad news." Moody's downgrade follows a similar move= =20 last month by Standard & Poor's and will increase the state's costs of=20 borrowing.=20 Sen. Steve Peace, D-El Cajon, agreed that the state could find itself in di= re=20 straits next year without a big enough reserve. Peace, chairman of the stat= e=20 Senate Budget Committee, said a $4 billion reserve "is on the low end of=20 where we ought to be."=20 Peace said the state may be headed into a period similar to the budget=20 disarray of the recession of the early 1990s.=20 "Having lived through the early '90s experience and having less confidence = in=20 the institutional ability to deal with a crisis environment, I think it wou= ld=20 be wiser to operate on more conservative expectations," he said.=20 But Ted Gibson, chief economist at the state Department of Finance, said th= e=20 early '90s "was a once-in-the-past-century event" that occurred largely=20 because the state's economy was so dependent on the aerospace industry. Hig= h=20 technology, while suffering a slowdown, "is more diverse in what they do an= d=20 where they sell," he said, and can be expected to bounce back.=20 The state budget increasingly lives and dies with the stock market. The=20 income tax on stock options and capital gains has grown as a percentage of= =20 general fund revenues from 5.6 percent in the mid-1990s to nearly one-quart= er=20 in the current fiscal year. That number drops to 16 percent in Davis' revis= ed=20 budget proposal.=20 But while the sudden drop of the stock market dealt the state a severe blow= ,=20 Gibson said, the pain is unlikely to last because stock prices historically= =20 rise.=20 "I would argue that the big drop in stock market income has to be considere= d=20 a one-time affair, and is not going to provide a huge drag," Gibson said.= =20 Gibson and other economists believe the economy will lag the rest of this= =20 year, but gradually improve in 2002 and 2003, avoiding full-blown recession= .=20 Gibson said the administration prepared for the sudden downturn by using=20 stock market windfalls for one-time expenditures that didn't have to be kep= t=20 year after year.=20 But Republicans say Davis has not done enough in his new proposal to cut=20 year-to-year spending, relying instead on transfers between accounts and=20 using the reserve to make ends meet.=20 "If we do not make good decisions this year, we absolutely are putting=20 ourselves in some very challenging territory for next year's budget," said= =20 Assemblyman George Runner, R-Lancaster.=20 Runner questioned Davis' claim that he had kept a lid on spending.=20 "It's interesting to say that and have government grow by a third in the=20 three years you've been in office," he said.=20 The Bee's John Hill can be reached at (916) 326-5543 or [email protected]. Democrats lay out energy plan: Leaders call for caps on wholesale prices an= d=20 tax breaks for oil and gas production. By David Whitney Bee Washington Bureau (Published May 16, 2001)=20 WASHINGTON -- House Democrats called for price controls on wholesale=20 electricity rates and for tax incentives to spur oil and gas production=20 Tuesday, but emphasized they are not asking Americans to trim their=20 lifestyles or stop driving gas-guzzling cars to cut energy consumption.=20 The Democrats' initiative is an effort to take the steam out of the energy= =20 strategy President Bush will unveil Thursday. That proposal is expected to= =20 emphasize opening new areas to oil and gas exploration and building hundred= s=20 of new power plants, but will not include temporary price caps on=20 electricity. Many in California and the West regard caps as crucial to curb= =20 runaway prices.=20 California Democrats also expect that the Bush administration will call for= =20 reopening areas off the California coast to oil and gas leasing, and they= =20 will announce today a resolution in opposition to any such proposal.=20 At a luncheon with reporters, House Democratic Leader Dick Gephardt said he= =20 thinks the energy crisis can be solved without "sacrificing" the environmen= t.=20 "Most people want an energy policy that is consistent with the Clean Air an= d=20 Clean Water acts," Gephardt said.=20 Gephardt criticized the administration for pressing to open the coast of=20 Alaska's Arctic National Wildlife Refuge to oil drilling, saying it would= =20 take too long and produce too little oil to help the current crisis. But=20 Gephardt said the government should approve tax incentives to hasten=20 construction of a natural gas pipeline from the North Slope because those= =20 reserves could be a great help for electricity generation.=20 Gephardt released a 19-page report by the House Democratic Caucus' energy= =20 task force that calls for various tax incentives to promote conservation,= =20 sales of new energy-saving cars and appliances, and home and office=20 weatherization.=20 Gephardt said Democrats favor such incentives over mandatory measures to=20 lower fuel consumption in cars and trucks -- ideas that in the past have be= en=20 traditional rallying cries among Democratic representatives.=20 The task force report, titled "Principles for Energy Prosperity," includes = a=20 cover photograph of a family washing a sport-utility vehicle next to a=20 wilderness photo of a snow-capped mountain.=20 Gephardt said he believes that government incentives will work to bring=20 energy supply and demand into balance without infringing on lifestyle=20 choices.=20 "We need to spawn efficiency so that Americans can get what they want -- lo= w=20 (energy) prices and a clean environment," he said.=20 The Bee's David Whitney can be reached at (202) 383-0004 or=20 [email protected]. Judge names panel in PG&E case=20 By Claire Cooper Bee Legal Affairs Writer (Published May 16, 2001)=20 SAN FRANCISCO -- The federal bankruptcy administrator Tuesday defended her= =20 appointment of an unusual committee of ratepayers in the Pacific Gas and=20 Electric Co. case, saying it's the only way to protect the public.=20 Ratepayers are entitled to a place at the table, said U.S. Trustee Linda=20 Ekstrom Stanley, because of "the possibility they will be asked to fund a= =20 plan that pays PG&E's creditors and shareholders."=20 PG&E has challenged Stanley's legal authority in naming the committee, whic= h=20 would have broad powers to investigate and negotiate alongside the utility= =20 and its creditors. Judge Dennis Montali will hear oral arguments on the=20 matter Friday.=20 "It could be argued the state of California has abandoned ratepayers in the= =20 bankruptcy case," Stanley said in a brief filed with Montali on Tuesday. "A= s=20 an alternative to the state's appearance, a committee broadly representativ= e=20 of virtually all ratepayer constituences is essential to assure the=20 ratepayers' interests are protected."=20 PG&E contends that only the state could represent ratepayers. The state has= =20 bowed out, citing its 11th Amendment right of sovereign immunity.=20 Stanley said the creditors' committee, a standard participant in bankruptcy= =20 proceedings, also cannot speak for consumers in this case because the=20 creditors may lack a strong interest in pursuing claims against power=20 generators and the utility's parent company, PG&E Corp.=20 In asking Montali to disband the committee, PG&E objected particularly to t= he=20 inclusion of leaders of Consumers Union and The Utility Reform Network,=20 groups that sometimes have thwarted PG&E in state regulatory hearings. Othe= rs=20 on the ratepayers' committee represent a diverse mix of organizations,=20 ranging from the California School Boards Association to the California=20 Manufacturers & Technology Association.=20 Two organizations -- the Greenlining Institute and Latino Issues Forum --= =20 have criticized Stanley for not making the committee more inclusive.=20 The Bee's Claire Cooper can be reached at (415) 551-7701 or=20 [email protected]. SDG&E area spared for now by big rate hikes=20 Edison, PG&E customers hit hard by state action By Craig D. Rose? UNION-TRIBUNE STAFF WRITER=20 May 16, 2001=20 In the preview of a movie SDG&E customers don't want to see, the state Publ= ic=20 Utilities Commission walloped customers of California's other major utiliti= es=20 with electricity rate increases as high as 50 percent yesterday.=20 The historic increases follow a PUC decision in March to raise electricity= =20 bills for Pacific Gas and Electric and Southern California Edison customers= =20 by a total $5.2 billion annually.=20 That decision, however, did not specify how the increase would be allocated= .=20 Yesterday's vote ordered rate increases of up to 37 percent for residential= =20 customers and up to 49.5 percent for business customers. The 3-2 vote drew= =20 howls of protest from demonstrators at the commission's San Francisco=20 meeting.=20 Similar increases are expected for San Diego Gas and Electric's 1.2 million= =20 customers in coming months. Public hearings for the SDG&E raises are expect= ed=20 next month.=20 Although yesterday's rate increase allocation was stunning, commission=20 President Loretta Lynch warned of worse increases ahead unless the Federal= =20 Regulatory Energy Commission caps wholesale power costs.=20 "Unless and until the FERC decides to enforce the law, even these=20 astronomical new average rates may prove inadequate to cover exorbitant=20 wholesale electricity prices in the California market," Lynch wrote in the= =20 approved rate increase decision.=20 The PUC was pressed to raise rates in order to cover California's cost of= =20 purchasing electricity. The state took over purchasing power earlier this= =20 year as utilities moved toward insolvency.=20 The utilities said that with customer payments frozen under terms of the=20 state's deregulation law, they were unable to pay the soaring cost of=20 wholesale power. Critics noted the same utilities transferred billions in= =20 payments to parent companies and shareholders during the first years of=20 deregulation.=20 The new increases for the 9 million customers of PG&E and Edison will begin= =20 appearing in June bills but will be retroactive to March, when the rate=20 adjustment was approved.=20 Consumer groups said yesterday's vote was delayed by a day because of frant= ic=20 lobbying by business interests seeking to shift a greater share of the new= =20 costs onto residential ratepayers.=20 Mike Florio, senior attorney for The Utility Reform Network, the San=20 Francisco-based consumer group, calculated that last-minute lobbying by=20 businesses advocates pushed about $105 million more of the increase onto=20 residential customers, compared to an earlier version of the rate increase= =20 allocation, which was also written by Lynch.=20 "This decision shows how desperately we need control over our electric syst= em=20 and how costly deregulation has become for California," Florio said.=20 Demonstrators at the PUC session yesterday suggested the commission is=20 failing to protect the public and should henceforth be called the "Private= =20 Utilities Commission." Others issued calls for seizing power plants.=20 Commissioner Geoffrey Brown shouted back at protesters that rate increases= =20 were necessary.=20 Under the rate design approved yesterday, homeowners able to keep electrici= ty=20 use within 130 percent of the so-called baseline allowance will be spared= =20 increases, as will the lowest-income customers and those with certain medic= al=20 conditions. The baseline is a minimum level of electricity, and it varies b= y=20 location. The baseline amount, measured in kilowatt-hours, is printed on=20 electricity bills.=20 The Office of Ratepayer Advocates within the commission estimates these=20 exemptions will shield more than 60 percent of all residential consumers.= =20 Others will pay progressively more as their use rises, with the highest=20 increases of 37 percent for those consuming more than 300 percent of baseli= ne=20 allowances.=20 Average industrial rates will increase about 49 percent, while agricultural= =20 rates could rise as much as 20 percent for customers of PG&E and Edison.=20 The California Manufacturers and Technology Association warned of layoffs i= f=20 businesses are forced to pay a disproportionate share. But consumer advocat= es=20 said it was large-business interests that pressed for deregulation in the= =20 first place.=20 "Once again residential and small-business ratepayers, the innocent victims= =20 of deregulation, are being forced to pay for the debacle," said Doug Heller= =20 of the Foundation for Taxpayer and Consumer Rights in Santa Monica.=20 Gov. Gray Davis, who resisted rate increases through the first months of th= e=20 power crisis, recently offered a proposal of his own to boost rates.=20 "While the PUC's revised rate increase made some modest improvements, my pl= an=20 represented a more balanced approach," Davis said.=20 All three commissioners appointed by Davis voted for the increase, while th= e=20 two commissioners appointed by former Gov. Pete Wilson were opposed.=20 Commissioner Richard Bilas, who voted against the increase, said it would= =20 push the state into recession and was a "grave mistake." Henry Duque, the= =20 other dissenter, objected to slapping customers who use more power with=20 higher percentage rate increases and urged more equal treatment. Both said= =20 the increases would fail to encourage needed conservation.=20 But Commissioner Carl Wood said the increases were made necessary by FERC's= =20 failure to cap wholesale power prices.=20 "Every consumer in California is justified in feeling outraged," Wood said.= =20 "They are facing an unlawful price regime for a fundamental necessity. We= =20 continue to look to the federal government to moderate prices."=20 Bilas, Duque and Lynch were not present in San Francisco for the vote but= =20 participated in the meeting via telephone. State credit rating takes another hit over energy crisis=20 Move should add to cost of bonds By Craig D. Rose and Karen Kucher=20 UNION-TRIBUNE STAFF WRITERS=20 May 16, 2001=20 On the same day that the Federal Reserve lowered interest rates, a Wall=20 Street rating firm raised the cost of borrowing for California because of= =20 deepening concerns about the electricity crisis.=20 Moody's Investors Service downgraded California's credit yesterday, pushing= =20 it into a group of 12 states that has the firm's lowest rating.=20 That is still better than the Standard & Poor's rating for the state, which= =20 last month downgraded California to among the three lowest rated states.=20 Lenders demand higher interest rates for loans to lower-rated borrowers.=20 The state treasurer's office was unable yesterday to quantify how much the= =20 downgrades could cost California as it approaches a record $13 billion bond= =20 sale this summer. The bonds are needed to pay for the soaring cost of=20 electricity.=20 In other energy developments:=20 ?Federal regulators determined this week that no refunds will be ordered fo= r=20 April's energy bills in California because the state's grid managers did no= t=20 declare any Stage 3 emergencies during the month.=20 In March, the Federal Energy Regulatory Commission decided refunds would on= ly=20 apply to charges for power during the most dire shortages, when wholesale= =20 electricity costs are highest. Critics have argued that power prices have= =20 been far from "just and reasonable" during other periods as well.=20 The agency also has dismissed a request to reconsider the refund amounts it= =20 directed power providers to pay for alleged overcharges made in January.=20 Southern California Edison and Pacific Gas and Electric had wanted provider= s=20 who allegedly overcharged for wholesale electricity to pay much larger=20 refunds than federal regulators envisioned. The commission has ordered powe= r=20 providers to refund $124 million if they can't justify their prices.=20 FERC said its action is not subject to requests for rehearings at this poin= t,=20 although such a request may be refiled when the commission issues its forma= l=20 order in the case.=20 ?A FERC judge said yesterday that a memo in a case he is hearing implies th= e=20 natural gas market was abused to drive up California energy costs last year= .=20 The memo "certainly has statements in it that could lead one to believe the= re=20 was an abuse" of the gas market, Curtis Wagner, the Federal Energy Regulato= ry=20 Commission's chief administrative law judge, said in a hearing in Washingto= n.=20 California regulators have pointed to the memo to accuse Houston-based El= =20 Paso Corp. of using its market power to inflate the price of natural gas so= ld=20 in California last year by as much as $3.7 billion.=20 El Paso Corp. owns a gas marketing company, El Paso Merchant, and one of th= e=20 largest pipelines connecting Southwest gas fields to California. The compan= y=20 has denied the allegations.=20 Wagner wouldn't release the memo, dated Feb. 14, 2000, and attorneys wouldn= 't=20 discuss the contents.=20 The New York Times has reported that El Paso Merchant said in a Feb. 14,=20 2000, memo that it would have "more control" of gas markets because of a de= al=20 it made with El Paso Natural Gas that gave it the right to ship 1.2 billion= =20 cubic feet of gas a day on El Paso's pipeline.=20 Wagner's ruling is expected next month. The full Federal Energy Regulatory= =20 Commission can accept or reject his ruling. The hearing began Monday and=20 should continue through next week.=20 ?Southern California Gas Co., a division of San Diego-based Sempra Energy,= =20 announced yesterday that it plans to add a 32-mile pipeline to its=20 transmission system to help it keep pace with growing demand.=20 The additional 6 percent of capacity would allow the company to deliver an= =20 additional 200 million cubic feet of natural gas per day.=20 Natural gas fuels most of the plants that generate electricity in the state= ,=20 and demand increased dramatically as the electricity crisis worsened. The g= as=20 company said the expansion is enough to fuel three 500-megawatt power plant= s.=20 The pipeline is expected to cost $40 million and to be completed by the end= =20 of the year. It will extend from a company compressor station in Adelanto t= o=20 the Kern-Mojave Pipeline near Kramer Junction. El Paso Corp. and the Willia= ms=20 Cos. own the Kern-Mojave Pipeline.=20 ?The power crunch this summer may be worse than earlier estimates, with=20 California suffering blackouts on an average of 20 hours a week and possibl= e=20 power disruptions in the Northeast if hot weather persists, an=20 industry-sponsored group reported yesterday.=20 The North American Electric Reliability Council said there may be as many a= s=20 260 hours of rolling blackouts in California during the summer months.=20 The Associated Press contributed to this report.=20 House Democratic plan calls for power price caps=20 By Finlay Lewis? COPLEY NEWS SERVICE=20 May 16, 2001=20 WASHINGTON -- House Democratic leaders yesterday unveiled a plan for coping= =20 with the nation's energy crisis that includes caps on wholesale electricity= =20 prices in California and across the West.=20 The plan mixes other short-term approaches such as emergency energy funds f= or=20 schools with long-range conservation measures that would improve automobile= =20 gas mileage and provide tax credits for energy-efficient homes and cars.=20 At a news conference outside a Capitol Hill gas station, House Minority=20 Leader Dick Gephardt and several colleagues scolded the Bush administration= =20 for crafting its own energy plan in secret with energy industry executives.= =20 They also chided President Bush for ignoring his own campaign rhetoric abou= t=20 pressuring OPEC to lower the price of imported crude oil.=20 The president tomorrow will travel to Minnesota and Iowa to announce the=20 administration's energy plan, created by a task force headed by Vice=20 President Dick Cheney. The administration plan is expected to focus on=20 developing new-energy resources, but will not include price caps.=20 Gephardt said, "We do not accept the belief that this administration=20 apparently has, that we have to drill our way out of this problem, that we= =20 basically have to sacrifice our environment to solve the problem."=20 In California, Gov. Gray Davis praised the plan from fellow Democrats for= =20 recognizing that the state's "electricity problem is a national issue that= =20 demands immediate federal action."=20 The governor added, "No comprehensive federal energy policy should exclude= =20 immediate and meaningful wholesale price relief in the West."=20 Following the Democratic news conference, White House press secretary Ari= =20 Fleischer reiterated the Republican administration's opposition to price=20 caps.=20 "Price controls will cause more harm than good in the economy in terms of= =20 people's ability to get energy," Fleischer said. "They will drive supply=20 down, they will create more demand."=20 Strategists for both political parties say that the political stakes posed = by=20 the energy crisis could be substantial.=20 Democrats continued to link the administration with the oil industry, notin= g=20 that private energy corporation executives participated in the drafting of= =20 the administration plan. Bush's and Cheney's backgrounds as energy company= =20 executives have also been a point of contention for their critics.=20 Rep. Edward Markey, D-Mass., told reporters that the administration would= =20 produce "a policy written by energy companies who want to use the Bush-Chen= ey=20 plan as a Trojan horse to take environmental and health laws off the books.= "=20 Democrats also quoted candidate Bush as last year demanding the Clinton=20 administration pressure the foreign oil cartel "to open (its) spigots."=20 "Today when crude oil prices stand at $28 a barrel, this White House is=20 silent," said Rep. Rosa L. DeLauro, D-Conn.=20 Fleischer shrugged off questions about the influence of American oil=20 executives on Cheney's task force. He also said the president is engaged in= =20 "quiet" diplomacy with OPEC leaders.=20 In their plan, the Democrats are demanding a federal crackdown on "price=20 gouging" by the energy industry and call for limiting wholesale power price= s=20 until March 2003.=20 They also urge Bush to keep open the option of drawing on the Strategic=20 Petroleum Reserve to counter future oil market disruptions, a policy the=20 administration rejected.=20 The Democratic plan outlines an array of tax credits, including up to $4,00= 0=20 to encourage energy conservation with more efficient homes and vehicles.=20 Also proposed are short-term steps to help the poor and elderly with energy= =20 bills, to encourage the use of mass-transit systems and car pools, and to= =20 provide $200 million this year in emergency assistance to Western schools= =20 staggered by energy costs.=20 For the longer term, the Democrats want more money for a low-income housing= =20 weatherizing program, and efforts to boost domestic energy production.=20 The latter step calls for increased production on federal lands already ope= n=20 for drilling and that account for 89 percent of the nation's proven oil and= =20 gas reserves.=20 The proposals include tax incentives for domestic production of crude oil,= =20 natural gas and "clean" coal.=20 The plan also calls for expedited pipeline construction, bolstered safety a= t=20 nuclear power plants, improved electricity transmission grids, expanded=20 refining capacity and encourages the development of renewable energy source= s.=20 Fleischer noted that the Democrats had offered "some areas of overlapping= =20 commonality" with the administration's plan.=20 However, Democrats spotlighted their opposition to the administration's cal= l=20 for drilling in a small portion of Alaska's Arctic National Wildlife Refuge= =20 and Bush's decision not to clamp down on carbon dioxide emissions from powe= r=20 plants as he had promised during the campaign.=20 "I would note that their idea seems to be to drill, to dig and to detonate= =20 our way out of this mess, and to throw away environmental protections," sai= d=20 Rep. John Dingell, D-Mich.=20 Southern California Gas plans pipeline expansion=20 By Seth Hettena ASSOCIATED PRESS=20 May 15, 2001=20 SAN DIEGO =01) Southern California Gas Co., the nation's largest gas utilit= y,=20 announced plans Tuesday for a $40 million expansion to keep pace with the= =20 state's growing demand for electricity and ease the strains on its=20 transmission system.=20 Analysts say California's electricity crisis is threatening to exhaust the= =20 state's supplies of natural gas, which fuels most electric generating plant= s.=20 A drought in the Pacific Northwest has cut hydroelectric power supplies,=20 putting pressure on natural gas-fired plants to make up the shortfall.=20 Southern California Gas, a unit of San Diego-based Sempra Energy, will add= =20 capacity for enough gas to power three 500-megawatt power plants that could= =20 provide enough electricity for 1.5 million homes. The expansion, combined= =20 with $15 million in improvements to the transmission system announced in=20 March, will boost SoCal Gas' capacity by 11 percent.=20 Both projects are expected to be completed by the end of the year.=20 Two-thirds of SoCal Gas' natural gas is sold to power plants and industrial= =20 users and demand from power plants has pushed the utilization of the=20 company's transmission system to 95 percent, up from historic levels of abo= ut=20 75 percent.=20 While Southern California Gas said it expects to meet its obligations to it= s=20 5 million residential and small business meters this winter, company=20 spokeswoman Denise King said the expansion "gives a little extra margin, a= =20 little space on our system."=20 "This is kind of an assurance that we'll be able to provide reliable servic= e=20 to all of our customers as we have in the past," she said.=20 But Mark Bernstein, an energy analyst with RAND Corp., a think-tank in Sant= a=20 Monica, said the expansion is "an insurance policy they'll cash in on."=20 "It's to make sure we don't have a gas crisis like we have an electric=20 crisis," he said.=20 "If you plan for the average they'll be just fine," Bernstein said. "But=20 there could be situations weather-wise or if things get worse on the electr= ic=20 side, where they could begin to have supply problems."=20 Southern California Gas will build a 32-mile pipeline from near the town of= =20 Victorville north through the Mojave Desert to the large Kern-Mojave=20 pipeline, which is owned by Williams Co. and El Paso Corp.=20 State regulators have alleged that the El Paso Corp., which controls more= =20 than 40 percent of the natural gas capacity entering California, conspired = to=20 drive up prices by curtailing supply. The cost of wholesale gas on the spot= =20 market at the California border rose to as much as $14 per thousand cubic= =20 feet, nearly three times the price elsewhere.=20 The Houston-based company blames the high prices on demand exceeding supply= .=20 The accusations are the subject of hearings this week before the Federal=20 Energy Regulatory Commission.=20 King declined to address the allegations against El Paso.=20 "Our focus is to encourage the Federal Energy Regulatory Commission to put= =20 temporary caps on natural gas coming across the interstate pipeline to help= =20 in the solution toward natural gas prices," she said.=20 Cheney's energy plan will offer no quick fixes on gasoline prices=20 By Sandra Sobieraj ASSOCIATED PRESS=20 May 15, 2001=20 WASHINGTON =01) The energy plan that Vice President Dick Cheney hands off t= o=20 President Bush this week will offer no immediate relief for high gasoline= =20 prices and no immediate answers to two of the politically trickiest issues= =20 that Cheney's task force looked at =01) nuclear waste and gas mileage stand= ards.=20 In an interview with The Associated Press three days before the president= =20 unveils his national energy strategy, Cheney did signal some distaste for= =20 tightening gas mileage requirements, referring to them generally as a=20 "command-and-control approach."=20 The vice president, whose task force report already has been printed, said= =20 Monday that the Transportation Department will be ordered to study so-calle= d=20 corporate average fuel economy =01) or CAFE standards =01) after the Nation= al=20 Academy of Sciences releases its findings on the CAFE standards in July.=20 The standards have, to the automobile industry's satisfaction, remained=20 unchanged since 1975 despite the proliferation of gas-guzzling sport utilit= y=20 vehicles, vans and pickup trucks.=20 Acknowledging that such standards "have made a contribution in the past" by= =20 promoting fuel-efficient vehicles, Cheney added:=20 "Whether or not there are changes that are warranted, whether or not CAFE= =20 standards or the command-and-control approach is the right way to go in all= =20 of that =01) we're going to look to the Department of Transportation for so= me=20 guidance."=20 The product of three months of Cabinet-level study and dozens of=20 consultations with interest groups, Cheney's energy recommendations will=20 center on increasing the nation's energy supplies though expanded nuclear= =20 power, increased domestic oil drilling and more efficient movement of energ= y,=20 including electricity, natural gas and petroleum.=20 Bush, armed with polls showing conservation is popular, also will discuss= =20 alternative energy sources when he releases the report Thursday during a tr= ip=20 to Minnesota and Iowa.=20 On Tuesday, Cheney previewed the plan for advocates for solar, wind and oth= er=20 renewable energy, who emerged from the private meeting and told reporters= =20 that Cheney promised that his recommendations include:=20 =01)An extension of the wind energy production tax credit.=20 =01)A 15 percent residential tax credit for users of solar power.=20 =01)An order for the Interior Department to address permitting delays in=20 geothermal plants.=20 Cheney won unlikely =01) but not unconditional =01) support during a simila= r=20 private meeting Monday with labor leaders from the Teamsters and big buildi= ng=20 trade unions who like what Teamsters president James Hoffa called "the=20 amazing hundreds of thousands of jobs" that new drilling and new pipelines= =20 could create.=20 But, participants in the meeting said, Cheney would not guarantee that the= =20 jobs would be union jobs or, in response to a question from the Steelworker= s=20 union, that new pipelines would be made from U.S. steel rather than cheaper= =20 imports.=20 "We still have to look at the details," Hoffa said.=20 In Monday's interview, Cheney bristled at suggestions that the administrati= on=20 should be doing more to bring gasoline prices down. But he did leave open t= he=20 possibility of Bush backing a reduction of the 18.4 cent-a-gallon federal= =20 gasoline tax, which is being proposed by GOP lawmakers fearing their party= =20 will be blamed in the 2002 congressional elections if energy prices soar.= =20 "It might help temporarily," Cheney said.=20 A letter signed by nearly 70 Democratic lawmakers Monday urged Bush to dema= nd=20 relief from the OPEC oil-producing cartel and order a Federal Trade=20 Commission inquiry into potential price gouging.=20 "Your administration has done little at this late date to address the comin= g=20 crisis in gasoline prices," the Democrats' letter read.=20 Democrats and environmentalists have accused Bush and Cheney, both former= =20 oilmen, of catering to the energy industry here at home.=20 Cheney said jawboning OPEC may bring America the "momentary joy" of lower= =20 prices but the market would quickly respond with increases. The remarks wer= e=20 in contrast to Bush, who promised during his presidential campaign that if= =20 elected he would use his influence to tell OPEC, "Open your spigots!" White= =20 House press secretary Ari Fleischer said Tuesday that the administration is= =20 quietly and diplomatically talking with OPEC leaders.=20 On the Democrats' other request, Cheney said, "There's no reason to believe= =20 there's price gouging." The only reason to order up an FTC investigation no= w=20 would be to give the appearance of having a solution, he said.=20 On nuclear power, Cheney wants to give utilities incentives to build more= =20 nuclear plants, which would force the nation to deal with the problem of=20 nuclear waste.=20 Nevada's Yucca Mountain is the "furthest along and most advanced" high-leve= l=20 nuclear waste repository, Cheney said. But, he added, "even there we're not= =20 to the point yet where we can make a final decision."=20 $5.7-Billion Energy Rate Hike Is OKd=20 Power: PUC shifts some of the increase away from businesses and farms to=20 residential users. The rates, designed to reward those who conserve, are=20 retroactive to March 27.=20 By TIM REITERMAN and NANCY RIVERA BROOKS, Times Staff Writers=20 ?????SAN FRANCISCO--Voicing fears for the health of California's economy, t= he=20 state's chief utility regulator Tuesday shifted some of a $5.7-billion rate= =20 increase away from agricultural and industrial customers and placed it on= =20 millions of residential customers, whose bills will rise $4 to $85 a month. ?????A sharply divided California Public Utilities Commission voted 3 to 2 = to=20 approve a plan that will fundamentally change how customers of the state's= =20 biggest utilities will pay for power. The rates are designed to reward thos= e=20 who conserve and to punish those who don't. ?????The rate increase will begin appearing in June bills and is retroactiv= e=20 to March 27, when the commission approved an average hike of 3 cents a=20 kilowatt-hour. ?????"Every consumer in California is justified in feeling outrage at the= =20 rates we approve today and the bills they will have to pay tomorrow," said= =20 the commission decision. "We share the sense of outrage." ?????Consumer groups accused the PUC of bowing to political pressure from= =20 business interests. And business groups, which lobbied hard in recent days = to=20 soften the hit to industry, said the PUC did not go far enough to protect t= he=20 state's economy. ?????The plan by PUC President Loretta Lynch was revised after the governor= =20 openly criticized it and industry leaders mounted a fierce public relations= =20 attack. ?????The final version covering 9 million Southern California Edison and=20 Pacific Gas & Electric Co. customers called for the following: ?????* Average residential rates will rise by 47% for Edison customers who= =20 use more than 130% of their baseline, the amount deemed necessary to meet t= he=20 needs of a typical household. PG&E customers will experience a 55% increase= .=20 The top rate for the heaviest users will rise 71% for Edison customers and= =20 80% for those of PG&E. The two companies together have nearly 751,000 such= =20 customers. ?????* A new five-tier system will be instituted for residential customers,= =20 with rates rising as usage rises. The average bills rise less than the=20 average rates because the new rates affect only a portion of the bill. ?????* Industrial customers will see an average rate increase of 49%, which= =20 is only slightly lower than Lynch's original proposal. But the PUC capped t= he=20 average rates at 12.9 cents per kilowatt-hour for industrial customers of= =20 Edison and 12.3 cents for PG&E. The cap would limit increases for some=20 industrial customers, but it was unclear Tuesday how it would be applied. ?????* In response to Democratic Gov. Gray Davis' urgings, rate increases f= or=20 agricultural interests were capped at 15% to 20%, the smallest overall=20 increase among the customer groups. ?????* Small-business customers will see their rates rise by about 35%. ?????* Customers who use less than 130% of baseline, low-income customers a= nd=20 people with special medical needs will have no increase. ?????The commission acted to help the state pay for the soaring price of=20 wholesale electricity. Under the deregulation of California's electricity= =20 industry, the utilities were barred from passing along high electricity cos= ts=20 charged by independent generators. In the process, PG&E and Edison were=20 pounded by debt, and the state was forced in mid-January to buy electricity= =20 on their behalf. ?????The commission acknowledged that more rate increases may be necessary= =20 unless federal regulators find a way to control the wholesale electricity= =20 market. ?????In the six weeks after the rate increase was approved, the panel held= =20 hearings and designed the rate structure--a process that normally takes at= =20 least six months. A vote on the rate design was scheduled for Monday, but i= t=20 was postponed for a day to allow commissioners to review revisions that Lyn= ch=20 made to her proposal over the weekend. ?????By approving Lynch's plan, the commission rejected one proposed by a P= UC=20 administrative law judge who conducted the hearings. That proposal would ha= ve=20 resulted in lower rates for residential customers and higher rates for all= =20 classes of business than the Lynch version. ?????The two dissenting votes were cast by Commissioners Edward Bilas and= =20 Henry Duque, both appointees of former Republican Gov. Pete Wilson. ?????Duque criticized the plan for "favoring some customers while punishing= =20 others. . . . Today's decision asks small businesses and some residential= =20 customers to subsidize others. Subsidized consumption leads to more=20 consumption, not conservation." ?????Bilas said: "This crippling rate increase would have a ripple effect"= =20 through California's economy and could drive out business. ?????"What we have here is an economic recipe for disaster," said Bilas. ?????Commissioner Geoffrey F. Brown, a Davis appointee, tried to negotiate= =20 more favorable treatment of industry after recently speaking with Bilas and= =20 the governor's office. Lynch made some changes that reduced the rate increa= se=20 for industry slightly, to about 49% on average. Brown had hoped to lower th= e=20 increase to about 43%. ?????At the meeting Brown said he had "great hesitancy" about some of the= =20 rates in Lynch's proposal but would back it. ?????"At the end of the day we need to raise the money to meet the electric= al=20 needs of California," he said. "We cannot walk away from it. We cannot put= =20 our heads in the sand. ?????"California now has the opportunity in this time of crisis to conserve= ,=20 to break the fever, to beat back the looters." ?????Protesters interrupted Brown and Commissioner Carl Wood, crying, "Seiz= e=20 the plants! The governor has the power." One demonstrator was ejected by=20 California Highway Patrol officers. ?????The Utility Reform Network accused the commission of caving in to=20 business interests and said the revisions in Lynch's plan added more than= =20 $100 million to the amount to be paid by residential customers. ?????"They put too much of the increase on the residential customers," said= =20 Mike Florio, senior attorney for the group. ?????After the hearing, Brown went face-to-face with Florio in the building= =20 courtyard. He said the amount shifted from industry to residential customer= s=20 was closer to $40 million and he angrily denied that industry influenced hi= s=20 vote. ?????Edison is still assessing how the rates would affect customer bills,= =20 said Akbar Jazayeri, director of revenue and tariffs. He noted that the new= =20 rates will apply only to the usage in each tier, not to the entire bill. ?????"It doesn't mean because your usage is 1,000 kilowatt-hours that your= =20 entire bill will be charged at the highest rate," Jazayeri said. ?????The PUC estimated that the average monthly Edison residential bill wil= l=20 rise between $4, or 6%, and $71, or 37%, depending on usage. The average=20 monthly PG&E residential bill will increase between $5 and $85, the PUC sai= d. ?????The Foundation for Taxpayer and Consumer Rights estimated that the=20 average monthly household electricity bill will increase by $36 in Edison= =20 territory and $39 in PG&E territory. ?????"Once again, residential and small-business ratepayers, the innocent= =20 victims of deregulation, are being forced to pay the price for the=20 deregulation debacle, while the special interests that foisted deregulation= =20 upon us get off easy," said Doug Heller, consumer advocate for the Santa=20 Monica-based group. ?????But business interests also were unhappy with the PUC rate decision. ?????"We're still up in the 50% range for industrial users," said Jack=20 Stewart, head of the California Manufacturers and Technology Assn. "It is= =20 going to make it very difficult for many companies to stay in business in= =20 California. Many companies who are large energy users will not be able to= =20 sell products profitably." ?????The manufacturers along with such influential organizations as the=20 California Chamber of Commerce and California Business Roundtable led an=20 intense lobbying and public relations effort aimed at reducing rate hikes f= or=20 commercial and industrial users. ?????"There is no issue that I have hit on harder with the governor's offic= e=20 over the past year," Stewart said, contending that rate increases should be= =20 spread evenly among residential, commercial, agricultural and industrial=20 users. "It is critical for California business." ?????Stewart met with Commissioner Brown last Thursday. But although he=20 thought he had made headway, the increase approved Tuesday, though modified= =20 somewhat, falls heaviest on big industrial and commercial users. ?????Agricultural interests fared better than commercial and industrial=20 users, receiving a maximum 20% increase, pared down from the original=20 proposal of about 25%. ?????"We're clearly happy," said Michael Boccadoro, a lobbyist for the=20 Dolphin Group, which represents major farming interests such as Gallo,=20 Boswell Land and Paramount Farms. ?????With a lighter than normal snowpack, farmers will receive less water= =20 from reservoirs this summer. As a result, farmers will be forced to use mor= e=20 electricity as they run pumps to draw on ground water for irrigation. ?????"The agriculture industry has put on a very strong and collective=20 effort," Boccadoro said. "The point that the commission picked up is that= =20 agriculture is one of the few industries that will be forced to use more=20 power this summer." ---=20 ?????Reiterman reported from San Francisco; Rivera Brooks from Los Angeles.= =20 Times staff writers Dan Morain in Sacramento and Marla Dickerson in Los=20 Angeles contributed to this story. Copyright 2001 Los Angeles Times=20 State Has Lost Global Lead in 'Green' Power=20 Electricity: As the crisis worsens, California has been overtaken on solar= =20 and wind energy. Still, alternative producers remain key players.=20 By MITCHELL LANDSBERG, Times Staff Writer=20 ?????A quarter of a century ago, California stood at the vanguard in the=20 development of alternative energy worldwide. With Gov. Jerry Brown lighting= =20 the way--and enduring no small measure of ridicule for doing so--the state= =20 took the lead in finding ways to coax electricity from the sun and wind,=20 underground steam and agricultural waste. ?????Today, as the state struggles with the worst electricity crisis in its= =20 history, it is no longer the global leader in exploiting what loosely falls= =20 under the rubric of "green" energy. ?????Japan now generates more than 15 times as much electricity from solar= =20 energy as does California, despite having about half the usable sunlight.= =20 Germany produces more than triple the wind energy. ?????And although California remains the undisputed U.S. leader in=20 alternative energy production, Texas, home of the American oil industry, is= =20 among several states threatening to supplant its leadership by mandating th= e=20 rapid growth of renewable power generation over the next decade. ?????Not that renewable energy has become irrelevant in California. ?????The state, in its moment of crisis, is counting on alternative=20 power--the most reliable and cheapest source of power--as never before.=20 Without the megawatts these producers pump into the grid, the odds of=20 blackouts would be even higher and the pressure to raise rates even greater= . ?????Moreover, renewable energy producers now hold immense financial power= =20 over the fate of the state's second-largest utility, Southern California=20 Edison. At any time, they could drag Edison into Bankruptcy Court--and have= =20 threatened to do so--if it doesn't pay them the $500 million it owes for pa= st=20 deliveries of electricity. ?????With their costs vastly surpassing their income, some producers have= =20 simply shut down, draining precious megawatts from the grid. A spokeswoman= =20 for the California Independent System Operator, which oversees the state's= =20 power network, pegged the reduction in output by small producers Tuesday at= =20 1,400 megawatts. About half that shortfall, she said, was due to payment=20 problems. ?????The situation has grown so severe that today the Federal Energy=20 Regulatory Commission is holding a hearing on whether to order the renewabl= e=20 power generators back on line. ?????Leaders in the alternative energy industry--which has grown from its= =20 techno-hippie roots to become the province of large, mainstream=20 corporations--say they are optimistic that their future will be brighter.= =20 Eventually, they are certain, renewable energy sources will become=20 mainstream; fossil fuels--oil, coal and natural gas--will become, once agai= n,=20 fossils. ?????And yet, for all that, here's the harsh reality: For the past decade,= =20 alternative energy has played a shrinking role in the state's overall=20 electricity mix, and that is almost certain to accelerate as the state=20 rebounds from its crisis the old-fashioned way, by building more power plan= ts=20 that convert fossil fuels into electricity. ?????Many in the utility industry argue that there is no choice. Most=20 alternative energy sources remain too expensive or inconvenient to play a= =20 major role in the state's power mix now, they say. ?????In fact, leaving aside hydroelectric power, which fluctuates widely=20 during drought and flood cycles, the production of renewable energy in=20 California actually declined slightly between 1990 and 1999. During the sam= e=20 period, the use of fossil fuels for electricity increased substantially. ?????With 13 new, conventional power plants licensed but not yet completed,= =20 it seems certain that renewable sources of energy will provide a still=20 smaller percentage of the state's power in the next few years. ?????Those who have championed alternative energy for the past three decade= s=20 rue the opportunity that could be lost. ?????"This state and its ratepayers invested heavily in renewable energy=20 technologies," said Hal Harvey, president of the Energy Foundation, a=20 nonprofit organization dedicated to encouraging sustainable energy. ?????"We paid a premium for that, but we succeeded in making these=20 technologies five, six, 10 times cheaper than they were. . . . Ironically,= =20 this state paid for that revolution but is not taking advantage of it." ?????If anyone needed a reminder of how far California has come in its=20 development of alternative power--and the consequences of failing to keep u= p=20 that investment--it came in March, when alternative energy generators began= =20 to close their plants after enduring months of missed payments by the=20 financially strapped utility companies. ?????Although the state government had spent billions picking up the=20 utilities' tab for conventional power, it too had balked at paying the smal= l=20 alternative producers. ?????The result: the first deliberate statewide blackouts since World War I= I. ?????A Small Step Taken in 1976 ?????On May 21, 1976, a small item appeared on the back pages of the Los=20 Angeles Times. ?????"Homeowners and businesses can earn state tax credits of up to $1,000= =20 for purchases of solar energy equipment under a bill signed by Gov. Brown,"= =20 it said. It went on to quote the governor as saying: "It was a small step,= =20 but it was an important step." ?????He might have added that it would be little noted nor long remembered. ?????Yet that small step helped nurture a budding interest in alternative= =20 energy in California, whose native tinkerers were just then exploring ways = of=20 reducing their reliance on the traditional electricity grid, then powered= =20 primarily by oil, large hydroelectric plants and nuclear power. ?????Ross Burkhardt was typical. An electrician by training and a hippie by= =20 inclination, he was living in a tepee in the hills of Mendocino County in t= he=20 late 1970s when he and many of his friends began looking for cleaner forms = of=20 power. Burkhardt was among those who had migrated to the rural counties nor= th=20 of San Francisco in the hope of living a simpler, more independent=20 life--which meant, for a time, life without electricity. ?????Life without power turned out to be a bit of a drag. For one thing, it= =20 meant life without a stereo. Burkhardt and others began stringing wires to= =20 the batteries of their cars, trucks and vans to power their tunes and light= s.=20 That worked for a while, until people started getting up in the morning to= =20 find their car batteries stone dead. ?????In about 1978, Burkhardt had had enough. "I decided to make a windmill= =20 one day," he recalled. He bought an old computer tape drive motor for $20 a= t=20 a junk shop and turned it into a generator. He used a knife to carve a=20 42-inch-long 2-by-4 into a blade, then mounted the blade and motor on a pol= e.=20 Then he hooked up the whole mess to a truck battery. ?????Eureka! When the wind blew, the windmill turned, generating electricit= y=20 that was fed into the battery. He was creating enough power to keep his tep= ee=20 lighted and his stereo cranking, and he wasn't damming any rivers or=20 splitting any atoms or polluting the air. And there was a bonus, Burkhardt= =20 said: "It was all free!" ?????Burkhardt would later move into a somewhat more permanent home and tak= e=20 advantage of Brown-era tax credits to buy solar panels that he is still=20 using. Others were doing the same thing and creating ever more sophisticate= d=20 technology to maintain life off the electrical grid. ?????And the state itself was investing heavily in alternative energy. In= =20 Brown's first term, California allocated $23.7 million to demonstrate the= =20 efficiency of solar, wind, geothermal, cogeneration and small hydroelectric= =20 generation. By 1980, renewable and alternative sources made up 5% of the=20 state's electricity generation. ?????At the same time, the federal government, still reeling from the Arab= =20 oil embargo, was developing its own alternative energy policies. A federal= =20 law passed in 1978 required utilities to buy energy from any qualified=20 alternative producer. ?????How much to pay for alternative energy has always been an issue. Becau= se=20 the "fuel"--the sun, wind, geothermal springs--is essentially free, most or= =20 all the expense is in upfront equipment purchases, which can vary based on= =20 the method of financing. ?????"You're basically prepaying your utility bill for 25 years," said Kevi= n=20 Best, director of sales and marketing for RealEnergy, a company that develo= ps=20 electricity generation plants--renewable and conventional--for large real= =20 estate developments. ?????The 1978 law got around the problem by declaring that utilities wouldn= 't=20 pay for alternative energy based on the actual cost, but based on the=20 utility's avoided cost--in other words, the money the utility would have=20 spent had it bought the energy from conventional sources. ?????In 1980, Ronald Reagan was elected president. In 1982, George Deukmeji= an=20 was elected governor of California. Their Republican administrations were= =20 considerably less enamored of alternative energy than those of their=20 Democratic predecessors. ?????About the same time, the price of oil and natural gas began to drop.= =20 Interest in energy alternatives sank with it. Natural gas was not only much= =20 cleaner than coal, it was practically cheaper than air. Why mess with=20 alternatives? ?????"All of those energy concerns just dropped off the radar screens," sai= d=20 Richard Worthington, a professor of politics at Pomona College who follows= =20 energy policy. ?????9% Comes From 'Green' Sources ?????Twenty years later, California has nevertheless made major strides in= =20 developing alternative energy. The state now obtains about 9% of its power= =20 from "green" sources, not counting the 15% that comes from hydroelectric=20 plants. Taken together, they account for about one-quarter of the state's= =20 power. ?????Yet advocates of renewable power say California could have done much= =20 more. In a state blessed with abundant sun, wind and geothermal resources,= =20 they say, the current crisis could have been avoided altogether with smart= =20 green development. ?????The Japanese, Germans and Danes, among others, have vastly increased= =20 their use of renewable energy by heavily subsidizing solar and wind energy= =20 production, and by taxing fossil fuel plants on the theory that the polluti= on=20 they emit carries a cost to society. ?????Americans tend to view such policies as heavy-handed--even antithetica= l=20 to a free market economy. But some also argue that there has been a bias=20 within the utility industry against small, clean energy systems. ?????"I think engineers like to build big, complicated power plants," said= =20 Angelina Galiteva, director of strategic planning for the Los Angeles=20 Department of Water and Power. ?????It's also true that even as the prices of alternative forms of=20 electricity dropped, they remained well above the cost of burning natural g= as. ?????Until last year. ?????In January 2000, wholesale electricity was averaging about 3 cents a= =20 kilowatt-hour. By January 2001, soaring natural gas costs had sent those=20 prices up to more than 30 cents a kilowatt-hour. ?????There is general agreement that wind power now costs about 5 cents a= =20 kilowatt-hour--and will continue to drop. Estimates of geothermal costs ran= ge=20 from less than 5 cents to 7 to 10 cents a kilowatt-hour. Biomass--the burni= ng=20 of wood chips, agricultural waste and the like--is probably about 8 to 10= =20 cents a kilowatt-hour, and solar thermal energy--which uses mirrors to=20 concentrate the sun's heat to drive turbines--costs 10 to 15 cents. ?????Even the most expensive form of renewable energy, that produced by=20 rooftop panels of photovoltaic solar cells, has suddenly become competitive= .=20 Estimates of the cost of photovoltaic energy range the widest--from as high= =20 as 30 cents or more per kilowatt-hour to 10 cents or less after available= =20 state and local subsidies. ?????But only in the worst-case scenario--someone buys the Cadillac of sola= r=20 systems, takes out a high-interest loan and mounts the panels in a fogbound= =20 district of San Francisco--does solar energy exceed the current price of=20 off-the-grid, gas-fired electricity. ?????Most energy experts expect that to change. Natural gas prices, they sa= y,=20 can't stay at their current levels. Still, most renewable producers say the= =20 future looks rosy--if they can survive their months of nonpayment by the=20 utilities. The price of solar and wind energy, in particular, is dropping= =20 every year, and could remain competitive even if natural gas prices do fall= . ?????Galiteva, among others, sees solar energy as a future mainstay. The DW= P=20 has been aggressively promoting solar power, offering to heavily subsidize= =20 the cost of residential solar units and generating its own solar electricit= y=20 from collectors throughout the city. ?????"It's the technology of the future," Galiteva said. "I like to think= =20 we're sitting on the cusp of a revolution and we just don't know it yet." Copyright 2001 Los Angeles Times=20 All-Out Attack on Bush Energy Plan Is Readied=20 By ELIZABETH SHOGREN and GREG MILLER, Times Staff Writers=20 ?????WASHINGTON--Minnesota environmentalists will taunt and jeer from a blo= ck=20 away when President Bush unveils his national energy strategy in St. Paul. = A=20 coalition of green groups is expected to purchase TV time to attack the=20 administration manifesto in key markets. Congressional Democrats temporaril= y=20 commandeered a Capitol Hill gas station to plug their competing energy=20 initiative. ?????For the environmental community--and the Democrats in Congress who=20 support their causes--Thursday's roll-out of the Bush administration's=20 comprehensive energy plan will be the political equivalent of D-day. ?????"The environmental community is going to put more money into this than= =20 any other campaign in its history because there is so much at stake," said= =20 Phil Clapp, president of the National Environmental Trust. "What they are= =20 assembling is an all-out attack on environmental protections." ?????Opponents of the administration's energy policies say they are prepari= ng=20 to wage a ferocious battle with the energy industry and its congressional= =20 allies to prevent what they fear could be the potential reversal of decades= =20 of hard-won gains. ?????Even before it has been released, Sen. Harry Reid (D-Nev.) called the= =20 Bush energy plan a "recipe for disaster" and stressed that "Democrats will= =20 throw themselves on the train tracks" to stop it. ?????The energy policy showdown is shaping up as a critical test of the=20 political muscle and marketing savvy of environmental lobbyists. The outcom= e=20 will depend in large part on their ability to maintain alliances with Capit= ol=20 Hill Democrats--and some Republicans who face tough reelection battles--who= =20 can help them kill the provisions they consider most harmful. ?????House and Senate Democrats have already produced alternate energy plan= s=20 that place more emphasis on protecting the environment and promoting energy= =20 efficiency. That contrasts with an administration plan that is expected to= =20 emphasize increased production of energy. ?????"We're not willing to kick the environment over, as the Bush=20 administration seems willing to do, to get more supply," said House Minorit= y=20 Leader Richard A. Gephardt (D-Mo.). ?????Groups Coalesce in Opposition ?????Environmental groups, which are presenting a united front against the= =20 administration plan, oppose many of its basic elements, including: ?????* Drilling for oil and gas on public land where extraction is now=20 prohibited or discouraged, such as on the coastal plain of the Arctic=20 National Wildlife Refuge in northeastern Alaska. ?????* Expanding electricity production from coal-fired plants, which=20 environmentalists argue will increase emission of harmful pollutants and=20 carbon dioxide, a contributor to global warming. ?????* Increasing electricity production by nuclear plants, an unacceptable= =20 option to environmentalists, who generally consider the prospect of more=20 nuclear waste a risk too big to take. ?????Environmental activists also expect the administration to provide few= =20 incentives to increase the use of renewable energy sources, such as wind=20 power and fuel cells, or to set out a clear plan for reducing emission of= =20 carbon dioxide. ?????"When you're talking about constructing new power-generating sources,= =20 you're talking about an infrastructure that will last for many years to com= e.=20 If we don't do it right, our grandchildren will suffer," said Scott Elkins,= =20 Minnesota state director of the Sierra Club. ?????The Sierra Club and other environmental groups are organizing a protes= t=20 near the energy-efficient power plant that Bush plans to use as a backdrop= =20 when he presents his energy plan to the nation Thursday. ?????Elkins said he was surprised by the scores of calls his office has=20 received from people who want to let Bush know they oppose his plan. Althou= gh=20 the 100-page document has not been released, its key principles have been= =20 described by Vice President Dick Cheney, who headed the task force that=20 drafted it. ?????The callers expressed concern about the administration's expected=20 emphasis on fossil fuels and nuclear power to expand electricity supplies,= =20 and its less aggressive embrace of efficiency improvements and energy=20 conservation, Elkins said. ?????"People are very disappointed. They didn't expect this out of Bush," h= e=20 said. ?????TV Ads Targeted to Certain Areas ?????It is those kinds of sentiments that environmentalists hope to encoura= ge=20 with their multifaceted attack on the Bush energy plan. They intend to pool= =20 funds to run television commercials "in places where people are undecided a= s=20 to what they think and where we think we can influence the debate," said Da= n=20 Becker, an energy specialist at the Sierra Club. The groups with large=20 memberships, such as the 650,000-member Sierra Club, will mobilize members = to=20 call, write and e-mail key lawmakers to urge them to oppose the=20 administration plan. ?????The business community in general and energy industry in particular ar= e=20 backing Bush's plan. But recent polls have convinced them that=20 environmentalists may have the edge in public opinion, making them formidab= le=20 opponents. ?????"They're very good at casting a message," said William Kovacs, who=20 focuses on energy and environmental issues at the U.S. Chamber of Commerce. ?????Hundreds of local chambers and trade associations have formed the=20 Alliance for Energy and Economic Growth to press the business community to= =20 counteract the grass-roots efforts of environmentalists. ?????"It's up to [the] American business community to educate the public=20 about the need for additional energy resources and the adverse impacts on o= ur=20 quality of life and our economy if we don't get the additional resources,"= =20 Kovacs said. ?????Environmentalists will have ready allies on Capitol Hill, where=20 Democrats have come to see battling the White House on green issues as one = of=20 their most effective political strategies heading into the 2002 congression= al=20 races. ?????House Democrats are planning to set up a "war room" Thursday to serve = as=20 a command center for their attacks on the Bush plan. They launched a=20 preemptive strike Tuesday, unveiling a more conservation-focused proposal. ?????The House Democrats go head-to-head with the Bush team on several=20 issues. They oppose construction of new nuclear plants, relaxation of=20 environmental regulations and new drilling in Alaska. They are promoting a= =20 number of short-term measures opposed by the White House, including the=20 release of crude oil from U.S. strategic reserves and the imposition of=20 temporary price controls on wholesale electricity supplies to California. ?????The Democratic plan calls for the government to impose "maximum feasib= le=20 fuel economy" standards for light trucks and sportutility vehicles. It woul= d=20 increase funding for research into fuel cells and other alternative energy= =20 technologies. ?????Consumers who buy energy efficient cars and homes would get tax breaks= ,=20 as would companies that embrace renewable fuels and reduce emissions. There= =20 would also be a tax break to encourage construction of a natural gas pipeli= ne=20 from Alaska to the Lower 48 states. ?????There are a few areas of agreement between Democrats and the White=20 House, including support of tax breaks for development of alternative energ= y=20 sources and weatherization of homes. ?????And like the White House, Democrats are being careful not to call for= =20 consumer sacrifices to reduce energy consumption. Democrats "do not advocat= e=20 energy policies that will require rationing or reductions in our standard o= f=20 living," the plan states on its first page. Indeed, the cover of the docume= nt=20 features a photo of a happy family washing their sport-utility vehicle. ?????Reid, ranking Democrat on the Senate Environment and Public Works=20 Committee, predicted that Bush's plan will draw opposition even within=20 Republican ranks. ?????"I don't think [the battle] will be as big as people think because I= =20 don't think he has the support of many Republicans," Reid said. "I think=20 he'll be brought back to the reality of what the nation needs and wants." Copyright 2001 Los Angeles Times=20 A One-Two Punch in the Budget=20 Economy: Tech dive and energy crisis hurt bond ratings again. Analysts say= =20 it's likely to get worse.=20 By MIGUEL BUSTILLO and DEBORA VRANA, Times Staff Writers=20 ?????A perfect storm is brewing over California: A downturn in the state's= =20 prized high-tech economy has coincided with a costly energy crisis, leaving= a=20 once-bountiful state budget a shambles. ?????The cascade of tax revenues from stock options that caused the budget = to=20 balloon in recent years has begun to dry up as the New Economy falters. At= =20 the same time, the energy crisis is forcing the state to spend billions=20 buying electricity to avoid crippling mass blackouts. ?????The latest bad news came Tuesday, when Moody's Investors Service becam= e=20 the second major credit rating firm to downgrade $25 billion in state bonds= ,=20 sounding an alarm over the "increasing financial risks associated with the= =20 continuing energy crisis." ?????The downgrades not only add millions to the state's borrowing costs,= =20 including projects in the next state budget, they further complicate a=20 troubled plan to float a record $13.4 billion in bonds to repay state coffe= rs=20 for electricity purchases. ?????The move by Moody's came one day after Gov. Gray Davis announced that = he=20 was dipping into the state's emergency reserve fund to finance a pared-down= =20 budget for the fiscal year that begins in July. Already, a statewide sales= =20 tax holiday has been canceled and $300 million in aid to local governments= =20 has been deleted from the budget. ?????The spiraling events contributed to a financial picture that looks=20 increasingly bleak, according to analysts. With the long, hot summer loomin= g,=20 it only figures to get worse, potentially developing into the worst fiscal= =20 crisis the state has faced since the economic recession of the early 1990s. ?????"It's almost a Kafkaesque situation we find ourselves in," said state= =20 Treasurer Phil Angelides. "California is the leading edge of the national= =20 economy, which is the leading world economy. We have to take these current= =20 problems with a grain of salt. But without a doubt, these downgrades are a= =20 black mark that threatens to harm the state's reputation." ?????After years of worrying about little more than how best to spend surpl= us=20 billions, Gov. Gray Davis is now faced with his first tough budget battle.= =20 And his initial response--draining emergency reserves rather than slashing= =20 government spending--has raised eyebrows in Sacramento and on Wall Street. ?????Despite a pervasive aura of negativity, however, veteran state budget= =20 officials profess optimism. ?????"Clearly, the revenue outlook has deteriorated," said Elizabeth Hill,= =20 the state's nonpartisan legislative analyst. But compared to the budget=20 deficits of the past decade, Hill said, the current situation is still with= in=20 control. ?????"Most of us have lived though the $14-billion budget shortfall," she= =20 said, referring to the 1990-91 budget season, when then-Gov. Pete Wilson wa= s=20 forced to slash programs. "So we have seen us overcome serious economic=20 problems in the past." ?????Experts on the outside, however, were taking a more negative view. In= =20 explaining its downgrade, Moody's said it was particularly concerned that= =20 California had recently backed out on a $4-billion loan to reimburse the=20 budget for electricity purchases until bonds could be floated, and that the= =20 bond sale had been delayed until August. ?????It was also concerned about the general decline in the state and=20 national economies, and Davis' plan to maintain only a minimal $1-billion= =20 reserve, the firm said. Moody's action came less than a month after Standar= d=20 & Poor's lowered its rating on California bonds two notches. ?????The downgrade registered virtually no response on Wall Street on=20 Tuesday, in part because many bond traders and analysts have already reacte= d=20 to California's energy woes and actually expected a harsher action from=20 Moody's. The firm lowered the rating on $19.8 billion of general obligation= =20 bonds from AA2 to AA3. The ratings on $5.7 billion in lease revenue bonds w= as=20 dropped from AA3 to A1. ?????In general, the lower the rating, the higher the interest the state mu= st=20 pay those who buy its bonds. Thus, the downgrade threatens to increase the= =20 price tag for state projects, such as $400 million in higher education bond= s=20 Davis had proposed in his new budget. ?????"If anything, the market was surprised that Moody's was so kind," said= =20 Bob Gore, a managing director and bond trader at Crowell Weedon & Co. in Lo= s=20 Angeles. "I thought they'd take [the state] down to at least a single-A." ?????But it sparked a heated round of finger-pointing in Sacramento, with= =20 Davis and other Democrats accusing Republicans of causing the state's credi= t=20 rating to slip by blocking the loan deal last week. ?????The GOP legislators attempted to force Davis into a new strategy on th= e=20 energy crisis by holding up a bill needed to secure the loan and sell the= =20 bonds. But Davis refused and the Democratic-led Legislature passed a=20 majority-only bill instead. ?????"Last week, when Republican legislators decided to play politics and= =20 block a vote on revenue bonds, I warned that their actions could have serio= us=20 consequences," Davis said in a statement Tuesday. "Today, the seeds of=20 Republican obstructionism are bearing their ugly fruit." ?????Republicans, in turn, blamed the downgrade on Davis, calling it a=20 denunciation of his entire plan to finance a way out of the energy crisis. ?????"Last I heard we were the minority here," said Assemblyman George Runn= er=20 (R-Lancaster), the GOP's budget point man in the lower house. "He's holding= =20 us awfully accountable for what I believe he has gotten the state into." ?????Political differences over how to overcome California's financial=20 problems are sure to color debate over the next budget. But Angelides and= =20 others hold out hope for a bipartisan solution. Angelides said he spoke wit= h=20 Runner on Tuesday and left encouraged. But the current climate is ugly, he= =20 conceded.=20 ?????"We're at a place now where we've had a great thing going for a decade= .=20 The mark of a great team is one that comes together when times are tough.= =20 Unfortunately, we are showing some of the characteristics of a losing team.= " ?????Already, there are signs lawmakers plan to do what Davis did=20 not--further pare down the budget to meet the state's unpleasant new econom= ic=20 realities. Hill, a respected voice among leaders in both parties, has alrea= dy=20 written legislators suggesting they take an ax to Davis' spending plan. ?????But others maintain that the outlook isn't as bleak as Wall Street=20 credit rating agencies and other critics believe. Ted Gibson, the state's= =20 chief economist, acknowledged that the state is in a precarious position, b= ut=20 said it still boasts m one of the nation's highest rates of growth and=20 employment. ?????"The situation is manageable," Gibson said. "None of these things=20 help--the delay in the bonds is going to cost us money. But the state is in= a=20 strong cash position. The economy, in the context of the rest of the United= =20 States, is still doing pretty darn well. Once we get these [energy] bonds= =20 sold, the picture will be considerably brighter." ---=20 ?????Times staff writer Julie Tamaki contributed to this story. Copyright 2001 Los Angeles Times=20 260 Hours of Summer Blackouts Predicted=20 Forecasts: Industry group says assumptions made by Cal-ISO are overly=20 optimistic.=20 By RICHARD SIMON, Times Staff Writer=20 ?????WASHINGTON--California will experience up to 260 hours of electrical= =20 blackouts this summer, an industry group predicted Tuesday in one of the=20 gloomiest assessments of the state's energy crisis. ?????In announcing its bleak calculations, the North American Electric=20 Reliability Council said that many of the assumptions made by the agency th= at=20 runs California's electrical transmission system appear overly optimistic. ?????That agency, the California Independent System Operator, has not made= =20 any projections of the number of hours of blackouts. But it has said the=20 state could face 34 days this summer in which blackouts are possible,=20 assuming Californians use the same amount of electricity as they did last= =20 summer. ?????The Princeton, N.J.-based reliability council said California is likel= y=20 to fall 4,500 to 5,500 megawatts short of peak demand each month this summe= r.=20 In other words, at the time of day when energy use is at its highest, the= =20 state might not be able to serve the equivalent of about 3.75 million homes= . ?????That is consistent with Cal-ISO's calculations of what could happen in= =20 the worst of three possible scenarios for the summer but about 1,500=20 megawatts more than the agency's most likely scenario. ?????The newest projections are far more pessimistic than those issued=20 earlier this year by Cambridge Energy Research Associates, a=20 Massachusetts-based firm that predicted about 20 hours of blackouts this=20 summer. On the other end of the spectrum, Reliant Energy, a major owner of= =20 power plants, has quoted consultants' projections that the state faces 1,10= 0=20 hours of blackouts during all of 2001. ?????The reliability council said the state could experience power=20 emergencies during non-peak periods as well as those of peak electricity us= e.=20 The nonprofit corporation was formed after the 1965 blackouts in the=20 Northeast to promote electricity reliability. ?????In its 64-page assessment, the group questioned several assumptions ma= de=20 by Cal-ISO and other analysts, including whether all of the anticipated new= =20 electric generators will come into service in time. ?????"Since new generation requires a shakedown period during initial=20 start-up," the industry group said in its report, "it is unlikely that all = of=20 the new generation will be on schedule and 100% available." ?????The council also projects that Californians will conserve less=20 electricity than state regulators hope--in part because of the newness of= =20 rate increases and incentives designed to curb usage--and that the summer m= ay=20 be warmer than normal. ?????A spokesman for Gov. Gray Davis disputed the forecast, saying it assum= es=20 the worst. ?????"We are preparing for the worst and hoping for the best," said the=20 spokesman, Steve Maviglio. ?????He contended that the industry group underestimates the amount of=20 electricity expected to be available for purchase from the Northwest. ?????Cal-ISO spokeswoman Lorie O'Donley did not criticize the report=20 directly, saying that she did not know how its authors arrived at their=20 underlying assumptions. But she questioned the notion of forecasting=20 blackouts: "We don't think that's possible to do, given the variables that= =20 are in play." ?????The report cautions that New York City and New England should be close= ly=20 watched, despite having adequate resources to meet demand, noting that they= =20 are sensitive to long-term heat waves or higher than anticipated outages of= =20 generating units. ---=20 ?????Times staff writer Mitchell Landsberg contributed to this story. Copyright 2001 Los Angeles Times=20 The power behind the POWER=20 Business as usual for PG&E's well-connected board=20 Matthew Yi, Chronicle Staff Writer Wednesday, May 16, 2001=20 ,2001 San Francisco Chronicle=20 URL: http://www.sfgate.com/cgi-bin/article.cgi?f=3D/c/a/2001/05/16/BU199770= .DTL=20 While Pacific Gas and Electric Co. was heading down the road to bankruptcy,= =20 its board of directors was running to the bank with 36 percent salary hikes= ,=20 routine meeting bonuses and potentially lucrative stock options.=20 In 1997, a year after energy deregulation in California, PG&E's directors -= -=20 16 at the time but since whittled to 10 -- gave themselves $8,000 pay hikes= =20 even as the utility's finances began to spiral out of control.=20 The company's proxy statements show that the directors' $30,000 base salary= =20 has stayed the same since, but the financial benefits of taking a seat in= =20 PG&E's board room don't end there.=20 For each board or committee meeting, the directors get $1,000 bonuses just= =20 for showing up -- and there have been as many as 29 meetings in a single=20 year.=20 In 1997 the amount of stock options available to each director was tripled,= =20 from a limit of $10,000 to $30,000 per year.=20 It's all part of doing business in corporate America, experts say, especial= ly=20 as a growing number of companies are governed by an ever-shrinking group of= =20 people.=20 "You can make a career out of (being on boards)," said Paul Tiffany,=20 professor at Haas School of Business at the University of California at=20 Berkeley. "At an average of $50,000 per year (for each board position), you= =20 can make a decent amount of money."=20 PG&E directors are no exception -- most of them also sit on boards of other= =20 companies.=20 Eight of them also represent 30 different companies or organizations.=20 Many are San Francisco or Bay Area companies that have deep roots in the=20 region's economy.=20 "It is the secret geography of power in downtown San Francisco," said Gray= =20 Brechin, an adjunct professor at UC-Berkeley who published a book on the=20 subject two years ago.=20 "These networks of power are like the roots of a forest that you walk over= =20 every day. They are tangled together. . . . That's just how the financial= =20 institutions work. And central to that is water and power," he said.=20 So it's not unusual to see overlap in executives or directors, he said.=20 According to PG&E records, lucrative contracts or money were given in 1996= =20 and 1997 to Kaiser Permanente, $45.3 million; AirTouch Cellular, $2.5=20 million; Bank of America, $3.1 million; and Joint Venture: Silicon Valley= =20 Network, which promotes South Bay businesses, $200,000.=20 PG&E director David Lawrence is chairman and chief executive officer of=20 Kaiser, while director C. Lee Cox was an executive at AirTouch at the time.= =20 Director David Coulter was chairman and CEO of BofA. Rebecca Morgan was=20 president and CEO of Joint Venture while serving on the utility board in 19= 96=20 and 1997. She's not on the board now.=20 San Francisco law firm McCutchen, Doyle, Brown & Enersen also had a PG&E=20 contract; firm partner David Andrews joined the PG&E board last year.=20 None of the directors would comment, though PG&E spokesman Brian Hertzog sa= id=20 the company has high standards for independence when it comes to board=20 members.=20 "These are relationships that are managed and formed as part of a regular= =20 business at PG&E," he said. "They never reach the board level."=20 For example, the Kaiser contract is just one of several other health plan= =20 options offered to PG&E employees, Hertzog said.=20 But a look at other companies that the directors represent reveals a who's= =20 who of the region's powerful elite.=20 Andrews, 59, is also a board member at Union Bank.=20 Coulter, 53, is vice chairman of J.P. Morgan Chase & Co., but more notably = is=20 the former chairman and CEO of BofA, which merged with NationsBank in 1998.= =20 The bank's headquarters was moved to Charlotte, N.C., and Coulter was later= =20 axed.=20 Cox, 59, is a longtime communications business executive who retired from= =20 AirTouch.=20 William Davila, 69, is the former president and the familiar TV face for=20 supermarket chain Vons, which was sold to Safeway for $2.5 billion in 1997.= =20 He also sits on the boards of Home Depot and Hormel Foods.=20 Besides his Kaiser position, Lawrence, 60, also is a director at Agilent=20 Technologies, a Hewlett-Packard spin-off.=20 Mary Metz, 63, is president of the nonprofit S.H. Cowell Foundation, named= =20 after a San Francisco family.=20 Carl Reichardt, 69, is the retired chairman and CEO of Wells Fargo Bank.=20 Barry Lawson Williams, 56, is president of Williams Ventures in San Bruno.= =20 Gordon Smith, 53, is PG&E's chairman and CEO. Robert Glynn Jr., 58, holds t= he=20 same posts for the utility's parent company, PG&E Corp. All of them sit on= =20 the board for PG&E, which is the utility. All but Smith are on the board fo= r=20 the parent company.=20 PG&E Corp. trades on the New York Stock Exchange.=20 In most cases, both boards meet concurrently. Last year, there were 13=20 corporation board meetings and 10 utility board meetings.=20 Directors' terms are for one year, and shareholders can re-elect them at=20 their annual meeting.=20 The fact that directors belong to multiple boards means that they essential= ly=20 work as the glue that binds the institutions together, experts say.=20 "It's all part of the modern corporate strategy," said Richard Walker,=20 regional economics professor at UC-Berkeley. "It cements relationships. . .= .=20 It ties the key businesses, which represents the guts of the (region's)=20 industries."=20 However, those ties could also be the companies' greatest weakness, he said= .=20 It's a problem of like-minded people telling each other that all is well,= =20 which can make some companies vulnerable to failure, Walker noted.=20 Also, today's corporate boards have a difficult time really knowing the=20 details of the business because their attention is divided among several=20 companies.=20 "Implicitly, you have some powerful people . . . you have people with acces= s=20 . . . and power," Berkeley's Tiffany said. "But 10 people meeting so=20 infrequently, you couldn't possibly manage PG&E. That's the structure that = we=20 have, and it's not unique to PG&E."=20 E-mail Matthew Yi at [email protected].=20 ,2001 San Francisco Chronicle ? Page?C - 1=20 The Power behind the POWER=20 PG&E board doesn't suffer from energy crisis=20 David Lazarus, Chronicle Staff Writer Wednesday, May 16, 2001=20 ,2001 San Francisco Chronicle=20 URL: http://www.sfgate.com/cgi-bin/article.cgi?f=3D/c/a/2001/05/16/BU95336.= DTL=20 When PG&E Corp. Chairman Robert Glynn takes the stage at San Francisco's=20 Masonic Auditorium today for the company's annual shareholder meeting, the= =20 first thing he will do is wipe some egg off his face.=20 In his address to shareholders at the Masonic in 1998, Glynn had good news = to=20 report about California's burgeoning efforts to deregulate the state's=20 electricity market.=20 "Electricity rates are down 10 percent from where they were a year ago," he= =20 declared. "And they are going to stay down for several years, and then they= =20 will go down again.=20 "There is no product bought on a daily basis that has such a predictable=20 downward price trajectory," Glynn said.=20 Today, three years after that disastrously wrong forecast, PG&E's utility= =20 subsidiary, Pacific Gas and Electric Co., is in bankruptcy court attempting= =20 to crawl out from beneath more than $9 billion in debt -- the result of=20 soaring power prices stemming from the same deregulation scheme Glynn had= =20 once championed.=20 Still, it's a fairly safe bet that he won't beg shareholders for their=20 forgiveness.=20 "I am not uncomfortable looking back on the positions we took," Glynn told= =20 Chronicle editors and writers recently when asked about his company's role = in=20 drafting California's 1996 deregulation law.=20 He said PG&E placed its considerable weight behind deregulation efforts=20 because it was what customers wanted, and "we didn't want to be on the othe= r=20 side of our customers."=20 In fact, few if any PG&E customers fully understood=20 the highly complex legislation that ultimately would make California's=20 electricity market the most dysfunctional in the nation.=20 Rather, as a close reading of Glynn's speeches in recent years reveals, he= =20 viewed deregulation as a prime business opportunity that would allow PG&E t= o=20 pay off past debts and expand its operations nationwide.=20 "In effect, we are trading our monopoly in half of one state for a wide- op= en=20 market opportunity in all 50 states," he told the San Francisco Commonwealt= h=20 Club in late 1997.=20 And in his address at PG&E's 1999 shareholder meeting, Glynn said he backed= =20 deregulation "so that we could be solidly positioned to capture the economi= c=20 benefits of this gigantic opening of the North American marketplace."=20 All that changed, of course, when California's wholesale electricity prices= =20 spiked sharply higher last summer and the state's two largest utilities, PG= &E=20 and Southern California Edison, rapidly found themselves teetering on the= =20 brink of financial ruin.=20 Since then, numerous other states have halted or reversed their own=20 deregulation plans, and California's experiment -- in which PG&E was "a=20 leading force," according to Glynn -- is now universally held up as an obje= ct=20 lesson in how not to restructure an electricity market.=20 To be sure, Glynn and PG&E are not solely to blame for California's current= =20 troubles, and neither they nor anyone else could have anticipated the surge= =20 in wholesale prices charged by out-of-state power companies.=20 "The whole structure of deregulation was put together poorly," said Douglas= =20 Christopher, an energy-industry analyst at investment bank Crowell, Weedon = &=20 Co. in Los Angeles. "People worked with what they could, but the whole thin= g=20 was a mess."=20 At the same time, he said PG&E's management exacerbated the utility's=20 problems by not taking sufficient countermeasures until last December --=20 almost half a year after California's energy woes surfaced. "That's just=20 amazing," Christopher said.=20 In hindsight, it has become clear that Glynn and PG&E made a series of=20 missteps that ultimately would result in the third-largest bankruptcy in U.= S.=20 history.=20 Yet the man at PG&E's helm remains largely unknown to the millions of=20 Northern California ratepayers who write his company a check each month. An= d=20 that's just how Glynn prefers it.=20 His own public relations people say their boss does not like to be the=20 subject of "personality-oriented stories" and tends not to agree to=20 interviews for profiles.=20 In his meeting at The Chronicle, Glynn, 58, shed his suit jacket and spoke= =20 confidently about his company's bankruptcy prospects and California's energ= y=20 problems.=20 But he declined further interviews, saying he would be too busy preparing f= or=20 today's shareholder meeting.=20 PG&E compensated by faxing over a one-page biography of Glynn that a compan= y=20 spokesman said was the extent of what the chairman wants known about himsel= f.=20 Among the tidbits:=20 -- Glynn is a native of Orange, N.J.=20 -- He worked for Long Island Lighting Co. before joining PG&E in 1984.=20 -- He was named president and chief operating officer of the utility in 199= 5=20 and president of the parent company in 1997. He became chairman of the boar= d=20 in January 1998.=20 -- He sits on the board of governors of the San Francisco Symphony.=20 Glynn's own PR staffers profess ignorance when asked whether their leader h= as=20 a hobby, plays any musical instruments or even owns a pet.=20 "He likes to remain private," one official explained, in the next breath=20 requesting anonymity lest Glynn take umbrage with even that degree of=20 scrutiny of his personal life.=20 Other PG&E insiders described Glynn as a smart and savvy manager, a man who= =20 prides himself on his quick mastery of complex issues. At the same time, th= ey=20 said he easily loses patience with those who fail to do their own homework.= =20 In business meetings, Glynn is said to have a laserlike focus on whatever= =20 subject is at hand. An engineer by training, he approaches problems with a= =20 tinkerer's mentality, seeking out ways a matter can be taken apart to find= =20 its core components.=20 Glynn's detractors -- primarily consumer activists -- say that even if he i= s=20 not personally responsible for California's current energy difficulties, he= =20 only has made things worse by so zealously seeking to safeguard PG&E's=20 interests.=20 "PG&E has not been a good corporate citizen," said Dan Jacobson, consumer= =20 program director for the California Public Interest Research Group in=20 Sacramento. "It has put its own shareholders so far beyond anyone else that= =20 the company is jeopardizing the entire state economy."=20 Others expressed astonishment that PG&E has gone bankrupt on Glynn's watch= =20 and that, to date, he has weathered the storm virtually unscathed.=20 "Glynn is steering the ship and the ship's going down," said Medea Benjamin= ,=20 head of Global Exchange, a San Francisco grassroots organization. "It's=20 unbelievable how he's gotten away with running his company into the ground.= "=20 Glynn, needless to say, doesn't see things the same way.=20 In his meeting at The Chronicle, he said bankruptcy was the only option for= =20 PG&E after a series of "negative decisions" made by state regulators and th= e=20 collapse of bailout talks with Gov. Gray Davis.=20 "By going to bankruptcy court, we decided we were moving to a venue where t= he=20 rules are better understood," he said.=20 It could take years for the court to work out a restructuring plan that wil= l=20 placate PG&E's thousands of creditors and remedy the utility's financial=20 meltdown.=20 Glynn will attempt to explain in detail today why his decision to file for= =20 Chapter 11 protection was a good one.=20 In light of his past pronouncements at PG&E's annual get-togethers, it=20 remains to be seen whether, this time, the company's shareholders will take= =20 the boss at his word.=20 E-mail David Lazarus at [email protected].=20 ,2001 San Francisco Chronicle ? Page?C - 1=20 California electric rates jump to second highest in country=20 KAREN GAUDETTE, Associated Press Writer Wednesday, May 16, 2001=20 ,2001 Associated Press=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2001/05/16/s= tate0 252EDT7185.DTL&type=3Dnews=20 (05-16) 06:29 PDT SAN FRANCISCO (AP) --=20 Beginning in June, residential customers of California's two largest=20 utilities will pay the second highest electric rates in the country to help= =20 the state recoup roughly $6 billion it has spent buying power to keep the= =20 lights on.=20 And members of the state Public Utilities Commission said after Tuesday's 3= -2=20 decision, which forced commissioners to shout their votes over the din of= =20 jeering protesters, that even more rate hikes could come by summer's end.= =20 "When you look down the road we're going to have to go through this exercis= e=20 again sometime in the next three months," said PUC Commissioner Richard=20 Bilas, who argued the allocations were too hard on businesses and voted no.= =20 "We have not solved the problem today."=20 Tuesday's vote allocates a 3 cent rate hike the PUC approved March 27, the= =20 largest in California history. The hike raises residential rates to an=20 average of 15.6 cents per kilowatt -- just behind the nation's highest rate= =20 of 16.4 in Hawaii.=20 The three cents, on top of a 1 cent rate increase from January made permane= nt=20 March 27, was spread over the 9 million customers of Pacific Gas and Electr= ic=20 Co. and Southern California Edison Co. in dramatically different ways.=20 The PUC says residential customers who use the most electricity could face = 71=20 to 80 percent increases, though at least half will see no rate hike at all;= =20 rates for industrial customers could rise as high as 49 percent; agricultur= al=20 customer hikes as high as 15 to 20 percent; increases for commercial=20 ratepayers, such as banks, hospitals and restaurants, were not immediately= =20 clear due to conflicting numbers.=20 The PUC crammed a year's worth of rate design into seven frenetic weeks in= =20 its race to hikes rates just the right amount on each group of ratepayers t= o=20 simultaneously trigger vital conservation to help fend off summer blackouts= =20 while not breaking anyone's bank.=20 That haste led to repeated delays on allocation proposals and a flurry of= =20 contradictory numbers from the allocation architects -- PUC President Loret= ta=20 Lynch and PUC Energy Division Director Paul Clanon -- including three=20 separate sets Tuesday.=20 Lynch also postponed Monday's scheduled vote, saying she needed more time t= o=20 consider feedback from all ratepayers before she revised of her earlier=20 proposal.=20 The delay also followed pressure from fellow commissioners, an outcry from= =20 business groups saying the rate hikes would doom California's economy and= =20 criticisms from Gov. Gray Davis that her proposal placed too high a=20 percentage of hikes onto commercial ratepayers.=20 Mike Florio, senior attorney for The Utility Reform Network, said that extr= a=20 day resulted in a shift of at least $100 million in rate hikes from=20 businesses onto residential customers.=20 "They put too much of it on residential," Florio said, adding that the mone= y=20 would have to come from ratepayers or else taken away from funding for stat= e=20 programs such as transportation and education. "The state's going broke and= =20 we've got to get the money from somewhere."=20 Jason Zeller, an analyst with the Office of Ratepayer Advocates, a consumer= =20 arm of the PUC, also characterized the shift as placing more of the burden = on=20 residential customers.=20 Spokesmen for both PG&E and Edison said it will take at least a day of numb= er=20 crunching to know precisely how the rate hikes will affect the dozens of=20 different customer classes.=20 At least half of residential customers will not see their bills go up if th= ey=20 don't increase their use, and others can evade the hikes by conserving more= .=20 Low-income customers who sign up for the California Alternate Rates for=20 Electricity program are exempt, as well as many customers who need=20 electricity to run life-sustaining medical equipment.=20 Also, state law shields electricity use within 130 percent of a residential= =20 customer's "baseline" amount from the rate hikes for all residential=20 ratepayers, regardless of how much they use in total.=20 Baseline is a percentage of the average amount of electricity used in an ar= ea=20 based on climate, geography and season. The most recent numbers released by= =20 Clanon show an average 60 percent rate hike on all electricity use beyond 1= 30=20 percent of baseline.=20 Non-residential customers, such as computer chip makers, grocery stores and= =20 fruit growers, say it's unfair they must pay more for every kilowatt of=20 electricity.=20 "This is probably the worst economic calamity the state has ever seen," sai= d=20 David Marshall, chief financial officer at Gregg Industries, a 400-person= =20 iron foundry in El Monte. "It has got ramifications well beyond anything th= at=20 we can begin to understand."=20 Gregg already has switched its production cycle from during the day to a=20 night shift to save electricity, Marshall said, but he expects the rate hik= e=20 plan approved Tuesday to cost Gregg at least $1 million this year.=20 Pacific Gas and Electric Co. customers who consume the most will see their= =20 rates jump from 14.3 cents per kilowatt hour to 25.8 cents per kilowatt hou= r,=20 which translates into an average increase of $85 per month for electricity= =20 according to a PUC chart.=20 Residential power use is divided into five tiers, and electricity used with= in=20 PG&E's top tier will jump by 80 percent. About 9 percent of PG&E's househol= ds=20 fall in that top tier.=20 Those hikes for the top tier translate into an average increase of $85 --= =20 from $232 to $317, or 37 percent -- on monthly bills for such customers.=20 For Edison's heaviest residential users, the rate hike in the top tier is 7= 1=20 percent -- or an average increase from $194 to $265 on monthly bills. The= =20 actual dollar increase is 37 percent.=20 The rate hikes will be retroactive to March 27, though those retroactive=20 charges will be spread over a 12-month period. They do not affect customers= =20 of San Diego Gas and Electric Co. and Californians who buy electricity=20 directly from energy wholesalers, such as the California university system.= =20 Tuesday's meeting was eerily quiet as observers strained to hear three=20 commissioners speak their pieces via speakerphone. Protesters at the meetin= g=20 wore tombstone-shaped placards that read "R.I.P. Affordable Energy," and=20 loudly told the two commissioners present, Jeff Brown and Carl Wood, they= =20 should be ashamed of themselves.=20 Brown bellowed back at protesters: "We cannot walk away from it. We cannot= =20 pretend that this is some sort of problem that we can walk away from."=20 Industry sees worse-than-expected summer power shortages=20 H. JOSEF HEBERT, Associated Press Writer Wednesday, May 16, 2001=20 ,2001 Associated Press=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2001/05/16/n= ation al1008EDT0545.DTL&type=3Dnews=20 (05-16) 07:08 PDT WASHINGTON (AP) --=20 Power problems could spread into the Northeast this summer, electricity gri= ds=20 in Texas and the Pacific Northwest are being watched closely, and Californi= a=20 could average 20 hours of blackouts a week, electricity industry experts sa= y.=20 The gloomy forecast comes just as President Bush prepares this week to=20 release a sweeping energy policy that is expected to focus heavily on=20 long-term solutions and not this summer's power concerns or high gasoline= =20 prices.=20 Under pressure from Democrats and many Republicans to offer voters a quick= =20 fix, White House press secretary Ari Fleischer told reporters Wednesday, "T= he=20 president's proposal will help in the short term."=20 Fleischer, who previously had maintained that there are no short-term answe= rs=20 to the nation's energy woes, said the promise of future supplies would driv= e=20 down prices among investors who speculate on short-term oil price trends.= =20 Among the recommendations that will be made by the president's energy task= =20 force is a call for more transmission lines and power plants to address=20 future electricity needs and changes in air pollution rules to improve the= =20 production and distribution of gasoline, according to government sources.= =20 But none of these proposals will help this summer, officials acknowledge.= =20 The North American Electric Reliability Council, an industry-sponsored=20 watchdog organization, said in a report Tuesday that California's power=20 problems this summer are likely to be worse than even state officials have= =20 predicted, with 260 hours of rolling blackouts -- an average of 20 hours a= =20 week -- likely because of a power shortfall that could be as much as 5,000= =20 megawatts during peak demand periods.=20 A megawatt is enough power to serve 1,000 homes.=20 While most of the country will have enough electricity, the council's repor= t=20 also warned of potential problems in the Northeast, with possible power=20 disruptions if there is a persistent heat wave, and in the Pacific Northwes= t=20 as well as possibly in Texas. The New York City area could have blackouts i= f=20 there are transmission problems on lines into the region, the report said.= =20 While Texas has plenty of electricity, it "should be closely watched" becau= se=20 the state is shifting into a retail competitive market in June and=20 consolidating some grid management activities, David Cook, the reliability= =20 council's general counsel, said.=20 "There is no magic bullet, no single thing to be done that will solve the= =20 challenges we face" in trying to assure electricity reliability, Cook said = in=20 testimony before the Senate Energy and Natural Resources Committee.=20 In the Pacific Northwest, there is expected to be enough power to meet summ= er=20 demand despite low hydroelectric generation as a result of a severe drought= .=20 But, the report said, if the region's drought continues, there could be=20 rolling blackouts next winter.=20 In other developments Tuesday:=20 * The Energy Department said there were some signs that gasoline prices may= =20 ease around Memorial Day as refiners have revved up production and=20 inventories were beginning to build.=20 But John Cook, director of the Energy Information Administration's petroleu= m=20 division, cautioned any refinery disruption or pipeline problem could cause= =20 prices to soar again. "Today, little cushion exists," he said at a House=20 hearing.=20 * The Senate Finance Committee by an 18-2 vote rejected a proposal by Sen.= =20 Jay Rockefeller, D-W.Va., for a windfall profits tax on energy company=20 earnings above a 20 percent rate of return. Critics said the proposal would= =20 stifle energy investment.=20 * Vice President Dick Cheney, briefing GOP lawmakers privately, dismissed= =20 concern about high oil company profits, declaring the oil business "is a=20 lousy cyclical business," according to several people present. Sen. Susan= =20 Collins, R-Maine, reportedly told Cheney that Republicans were ignoring the= =20 oil industry profit numbers "at our peril."=20 The White House, meanwhile, sought to garner political support for its ener= gy=20 package and counter Democratic criticism that it focuses too heavily on=20 production and not enough on getting people to conserve energy.=20 After courting labor leaders earlier in the week, the White House briefed= =20 executives representing renewable energy industries -- from solar and wind= =20 power to producers of ethanol and organic waste energy plants -- on parts o= f=20 the energy package.=20 The executives were pleased with some proposals of tax breaks for renewable= s,=20 but, said Jaime Steve of the American Wind Energy Association, "other items= =20 need to be included."=20 In Congress, Republicans promised to move swiftly on energy legislation onc= e=20 the Bush proposals are announced. Democrats, however, announced their own= =20 proposals in the House on Tuesday and promised a fight unless more emphasis= =20 is put on energy conservation and protection of the environment.=20 "We can have adequate supplies of energy and save our environment at the sa= me=20 time," said House Minority Leader Dick Gephardt, D-Mo., adding that "we don= 't=20 have to just drill our way out of this problem."=20 Republicans said they expect the president to propose conservation measures= =20 as well as proposals to spur new energy development such as opening=20 additional public lands for oil and gas drilling and easing regulatory=20 barriers to building power plants, electric transmission lines, and promote= =20 nuclear power.=20 Contra Costa acts on energy=20 Hiring freeze, lawsuits planned by supervisors=20 Jason B. Johnson, Chronicle Staff Writer Wednesday, May 16, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/05= /16/M NW30608.DTL&type=3Dnews=20 Contra Costa County supervisors attacked the state's energy problem on two= =20 fronts yesterday, voting to freeze hiring of new county employees and to=20 pursue joining state lawsuits against power generators and regulators.=20 The Board of Supervisors passed both measures by unanimous vote.=20 The county -- which expects to see a $2 million increase in energy costs ne= xt=20 year -- has about 8,000 employees. The freeze would leave about 1,000 open= =20 jobs unfilled to save money to fund county programs and services next year.= =20 "We have projected a budget shortfall next year," said County Administrator= =20 John Sweeten. "Energy costs have been escalating."=20 The directive covers new hires, rehires, temporary appointments and increas= es=20 in hours. County departments must also plan their staffing coverage for=20 vacation, sick leave and other vacancies to avoid incurring overtime=20 obligations.=20 Sweeten said it is not clear exactly how much money the freeze will save th= e=20 county.=20 Members of the staff will also review how best the county could take part i= n=20 state lawsuits against five out of state power generators for price-gouging= =20 and against federal regulators failing to do their job.=20 Supervisors John Gioia and Mark DeSaulnier, who introduced the measure, say= =20 counties are losing out on millions in state funds spent each day to buy=20 power on the spot market.=20 The latest estimate is that the state is spending $70 million a day to buy= =20 power.=20 "The state budget surplus is being used up to pay the out-of-state=20 generators," Gioia said. "The less money in the surplus, the less money for= =20 local government. So local government does have an interest in state energy= =20 policy."=20 A civil lawsuit by Lt. Gov. Cruz Bustamante against five out-of-state power= =20 generators accuses them of conspiring to fix prices in California's energy= =20 market.=20 The companies named are Dynegy Inc., Duke Energy, Mirant Inc., Reliant Ener= gy=20 Inc. and Williams Energy Services.=20 A federal lawsuit by the California Legislature against the Federal Energy= =20 Regulatory Commission accuses it of refusing to prevent price-gouging by=20 power generators.=20 It says the regulatory commission has abdicated its responsibility to assur= e=20 that power generators charge just and reasonable rates for electricity.=20 The suit attempts to require energy regulators to limit the prices charged = by=20 generators, and it also calls for establishing a refund program to recover= =20 what it says are excess profits that generators have already received becau= se=20 of the commission's inaction.=20 In a report last December, the regulatory commission acknowledged that flaw= s=20 in the wholesale power market were allowing for unjust and unreasonable=20 prices. But commission members have resisted putting tight energy limits on= =20 the market.=20 Gioia and DeSaulnier said they would like to see other counties throughout= =20 the state join in the lawsuits.=20 "I think it's bringing more resources, and more political and moral=20 authority, to the issue," said DeSaulnier. "It behooves us to partner with= =20 the state. A lot of for-profit corporations are benefiting from the sufferi= ng=20 of Contra Costans and Californians."=20 DeSaulnier said his office has had some preliminary contact with the office= =20 of Senate President pro Tem John Burton, D-San Francisco, about joining in= =20 the suits, but wants the county counsel to engage in more detailed=20 discussions on the issue.=20 "I'm very frustrated about our inability to have any kind of say in the=20 situation," DeSaulnier said.=20 e-mail Jason B. Johnson at [email protected].=20 ,2001 San Francisco Chronicle ? Page?A - 22=20 Memo suggests Texas firm manipulated gas market=20 Bernadette Tansey, Chronicle Staff Writer Wednesday, May 16, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/05= /16/M N5921.DTL&type=3Dnews=20 A memo closely guarded by a Texas energy firm suggests the company=20 manipulated California's natural gas market to drive up prices, a federal= =20 administrative law judge said yesterday.=20 Curtis Wagner Jr., who is presiding over a federal investigation of=20 California's allegations against El Paso Corp., said statements in the Feb.= =20 14,=20 2000, memo could be read to support accusations that the company improperly= =20 restricted space on its Southern California pipeline to boost the price of= =20 natural gas.=20 Wagner, chief administrative law judge for the Federal Energy Regulatory=20 Commission, made the comment in Washington, D.C., as he considered argument= s=20 by the California Public Utilities Commission for public disclosure of the= =20 memo.=20 The memo "certainly has statements in it that could lead one to believe the= re=20 was an abuse" of the gas market, Wagner said, according to the Associated= =20 Press.=20 The chief lawyer for the PUC in the El Paso case, Harvey Morris, has urged= =20 the federal commission to make public the full record in a series of=20 complaints he has filed since 1998 charging El Paso with managing pipeline= =20 contracts to inflate energy costs in California.=20 The evidence, Morris has said, includes documents he describes as "smoking= =20 guns."=20 The New York Times has reported that in the sealed memo, officials of an El= =20 Paso marketing affiliate said it would gain "more control" of gas markets= =20 under a contract it was seeking for space on El Paso's pipeline.=20 Bill Scherman, a lawyer for El Paso's marketing arm, said the memo Morris= =20 wants released proves nothing about the company's handling of the pipeline= =20 contract it signed several weeks later.=20 "(Morris) wants to try the case in the media," Scherman said.=20 As for Wagner's comments, Scherman said, "I'm not losing sleep over it."=20 Scherman said Wagner acknowledged shortly after he made the statement that = he=20 had not yet read El Paso's briefs in the case.=20 Scherman said he urged Wagner to keep the memo sealed until El Paso puts it= s=20 case before the judge. That could happen as early as tomorrow. El Paso agre= ed=20 that the memo could be released when Wagner issues his recommendations to t= he=20 federal commission, which set a June 30 deadline.=20 California regulators, along with Pacific Gas and Electric Co. and Southern= =20 California Edison, accuse El Paso affiliates of designing a strategy to boo= st=20 natural gas prices by restricting access to space on the company pipeline= =20 into Southern California.=20 On March 1, 2000, El Paso Merchant Energy took over=20 1.2 billion cubic feet of space on the pipeline, which imports natural gas= =20 from Texas and New Mexico. The pipeline supplies about half of California's= =20 gas.=20 The state accuses El Paso Merchant Energy of withholding its unused share o= f=20 that capacity to reduce supplies and drive up prices. California's natural= =20 gas costs have ranged from two to 10 times the rate in other states over th= e=20 past year.=20 Scherman said El Paso will present evidence that those price increases=20 resulted from soaring demand for natural gas starting in mid-2000, as gas-= =20 fueled power plants geared up to replace the electricity that could not be= =20 generated by hydroelectric plants.=20 He said the PUC's documents show the agency knew that dry weather and a=20 resulting low output by the hydro plants were pushing prices up.=20 E-mail Bernadette Tansey at [email protected].=20 ,2001 San Francisco Chronicle ? Page?A - 3=20 Bush follows stump script on energy=20 Policy announcement today was presaged in Michigan talk=20 Carolyn Lochhead, Chronicle Washington Bureau Wednesday, May 16, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/05= /16/M N53504.DTL&type=3Dnews=20 Washington -- In a speech nearly seven months ago, George W. Bush revealed= =20 the outline of the energy plan he will roll out tomorrow.=20 Bush has followed that script so closely since then that there can be few= =20 surprises in his plan, which favors increased production of fossil fuels,= =20 opposes wholesale electricity price caps and offers little short-term relie= f=20 from California's deepening energy crunch.=20 Despite the White House fanfare surrounding the proposal and the months of= =20 closed-door meetings that went into its creation, Bush mapped out the plan= =20 during an Oct. 13 campaign speech in Michigan.=20 The outline he presented back then meshes so closely with what is known of= =20 the new plan that it begs the question: Why did the White House go to the= =20 trouble of creating the task force that ultimately drafted it?=20 Bush "talked about ideas and principles and goals throughout the course of= =20 the campaign," said White House spokesman Ken Lisaius. The task force, head= ed=20 by Vice President Dick Cheney, he said, "is taking the theme and the broad= =20 picture of the directions we want to go into, and putting that into the=20 context of how do we do that."=20 In his October speech, delivered to autoworkers in Pontiac, Mich., Bush sai= d,=20 "America runs on the oil and gas and coal we gain from the Earth, and from= =20 water held behind our dams. No matter how advanced our economy might be, no= =20 matter how sophisticated our equipment becomes -- for the foreseeable futur= e,=20 we will still depend on fossil fuels."=20 To a remarkable degree, the speech foreshadowed nearly everything the=20 administration has been saying ever since about its forthcoming energy=20 policy. Even its political approach -- courting Michigan autoworkers --=20 dovetails with the new administration's courtship of unions this week to ba= ck=20 his energy plan.=20 Accompanying the speech was a detailed outline, still available on the=20 campaign Web site, of a "comprehensive national energy policy" with more th= an=20 20 initiatives to improve U.S. "energy independence."=20 It covers nearly every subject that has been mentioned by the White House= =20 Energy Policy Task Force for the past four months. It specifically recommen= ds=20 not only Bush's controversial proposal to drill in part of the Arctic=20 National Wildlife Refuge, but also, as Bush suggested Friday, to support ne= w=20 hybrid- fuel automobiles. And it talks of encouraging more energy purchases= =20 from Mexico and Canada, an idea Bush and Energy Secretary Spencer Abraham= =20 have been promoting ever since.=20 Indeed, Bush's consistency -- which has repeatedly surprised Washington's= =20 political establishment -- is nowhere more apparent than on energy policy.= =20 That consistency has generated criticism, even from moderate Republicans,= =20 that the new administration has turned a deaf ear to environmental concerns= =20 and conservation, sending the White House scrambling to offset its anti-=20 environment image.=20 CALIFORNIA CRISIS It has also opened the administration to charges that it is ignoring=20 California's worsening electricity crisis. The task force energy plan is=20 expected to focus, as Bush promised, on the long term and to contain little= =20 that will directly address the state's blackouts.=20 Rep. Chris Cox, a Newport Beach Republican who with other California=20 Republicans was extensively briefed by Cheney on the new plan, said critics= =20 who charge that the report is skewed too heavily toward increasing supply a= nd=20 too little toward conservation will be surprised.=20 "I think I have as much access to it as the people who are saying those=20 things," Cox said, "and I can guarantee you they haven't read it."=20 Cox said Cheney "has emphasized that conservation and alternative fuels are= =20 essential elements of our 20-year strategy" and that Bush is likely to call= =20 for "a tripling of reliance on on alternative fuels. So I think both the=20 criticism and the response will be improved by actually reviewing the=20 administration plan when it's released, and everything else is just=20 anticipatory."=20 OPPOSITION TO PRICE CONTROLS Cox also cited the administration's continuing, and apparently firm,=20 opposition to the price controls on wholesale electricity that California= =20 Democrats, from Gov. Gray Davis on down, are asking for.=20 "On the conservation side, there is no better means of sending a strong=20 conservation signal than through the price mechanism," Cox said. "I think= =20 that precisely because conservation must be an essential element of the=20 overall solution, price controls are viewed with great skepticism."=20 The administration said Saturday that the plan would contain tax credits fo= r=20 "hybrid" automobiles that run on gasoline and electricity. Last October, Bu= sh=20 told the autoworkers, "I am confident that you -- some of the best engineer= s=20 in the world -- can develop cars and trucks that will meet consumer demand= =20 and keep our environment cleaner."=20 Bush energy plan President Bush's campaign promises on energy, outlined in = a=20 major speech to autoworkers in Pontiac, Mich., on Oct. 13, dovetail with th= e=20 key proposals that the administration says will be in Bush's new energy pla= n,=20 which is due tomorrow:=20 -- Streamline regulations to encourage oil refineries to produce more=20 gasoline.=20 -- Spend $2 billion on "clean coal" technologies to encourage electric=20 utilities to use abundant supplies of coal -- an item already included in= =20 Bush's budget;=20 -- "Establish clear rules" for nuclear power to encourage utilities to buy= =20 nuclear plants.=20 -- Streamline regulations for approval of natural gas pipelines.=20 -- Support $1.4 billion in tax credits for electricity produced from=20 renewable and alternative fuels.=20 -- Open 8 percent of the Arctic National Wildlife Refuge to "environmentall= y=20 responsible exploration, which could replace the oil that the U.S. now=20 imports from Iraq."=20 -- Support new "cars and trucks that will meet consumer demand and keep our= =20 environment cleaner." On Saturday, the administration announced that the=20 energy plan will propose an income-tax credit for the purchase of "hybrid"= =20 cars that run on a combination of gasoline and electricity or fuel cells.= =20 -- Work closely with Mexico and Canada to create a "North American Energy= =20 Policy" to encourage cross-border sales of oil, gas and electricity. In=20 Quebec City last month, Bush announced that the United States, Canada and= =20 Mexico had established a working group to accomplish this.=20 -- Examine opening federal lands to "environmentally responsible and=20 regulated exploration." The administration has surveyed natural gas and oil= =20 potential on public land, including 58 million acres of Forest Service land= =20 closed off under President Clinton's "roadless" designation. An inventory b= y=20 the Clinton administration found a mean estimate of more than 170 trillion= =20 cubic feet of natural gas and 20 billion barrels of oil on lands containing= =20 roadless areas.=20 -- Increase funding for federal weatherization programs, which help low-=20 income households increase the energy efficiency of their homes. Bush=20 included the item in his budget.=20 Source: Bush-Cheney 2000 campaign=20 Democrats' alternative House Democrats proposed their own energy plan=20 yesterday, calling for the government to lower electricity prices and=20 increase conservation. Highlights of the plan:=20 PRICES -- Price caps on wholesale electricity prices.=20 -- Use of the Strategic Petroleum Reserve to stabilize market.=20 -- Call on OPEC to increase production.=20 PRODUCTION -- Tax incentives for domestic crude oil production.=20 -- Tax credits to promote a new Trans-Alaskan natural gas pipeline.=20 -- Tax credits for the development and installation of wind, solar,=20 geothermal and other renewable energy sources.=20 CONSERVATION -- A tax credit up to $4,000 for home improvements aimed at conservation an= d=20 for the purchase of vehicles using alternative fuel engines.=20 -- Additional funds for mass transit.=20 ASSISTANCE -- More money for low income heating aid.=20 -- $200 million for Western schools hit by energy shortages.=20 Source: House Democratic caucus=20 E-mail Carolyn Lochhead at [email protected].=20 ,2001 San Francisco Chronicle ? Page?A - 3=20 PUC tags consumers with huge rate boost=20 ELECTRICITY BILLS: Burden shifts from business to heavy residential users= =20 David Lazarus, Chronicle Staff Writer Wednesday, May 16, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/05= /16/M N236839.DTL&type=3Dnews=20 San Francisco -- The largest electricity rate increase in California histor= y=20 was adopted yesterday by state regulators after a one-day delay in which th= e=20 burden on residential consumers was raised by more than $100 million.=20 The Public Utilities Commission split along party lines, the three Democrat= ic=20 appointees backing the increase and the two Republicans voting against.=20 "We cannot put our heads in the sand," said Democratic commissioner Jeff=20 Brown amid jeers from protesters in the PUC's San Francisco meeting hall. "= We=20 cannot pretend that this is a problem we can walk away from."=20 The PUC had been scheduled to vote on the increase Monday but postponed a= =20 decision because of concerns that businesses would pay a disproportionately= =20 large share of the nearly $6 billion to be raised from higher bills.=20 The revised measure adopted yesterday shifted about $106 million from=20 businesses and placed it squarely on the shoulders of residential consumers= .=20 In the case of Pacific Gas and Electric Co., residential customers will see= =20 electricity rates soar by almost 55 percent, to 22.1 cents per kilowatt hou= r=20 from 14.3 cents.=20 But electricity rates are different from bills. Because about half of all= =20 residential ratepayers are exempt from higher charges, overall monthly bill= s=20 will increase by lower amounts.=20 Consumers who can stay within 130 percent of predetermined usage limits wil= l=20 experience no increase at all.=20 Other residential customers, including most families and multiperson=20 households, will see their average monthly electricity bills rise by betwee= n=20 6 percent and 37 percent, depending on the amount of power used.=20 The effect of higher electricity rates is mitigated somewhat because other= =20 charges on PG&E residential bills will not change.=20 "These are the largest rate increases that I know of," said Paul Clanon, he= ad=20 of the PUC's energy division and chief architect of California's new rate= =20 structure.=20 The higher rates will take effect as of customers' June 1 power bills but= =20 will not be fully reflected in monthly charges until July 1.=20 Consumer advocates adopted a fatalistic attitude to the rate increase, whic= h=20 regulators fast-tracked over recent weeks as state coffers have been rapidl= y=20 depleted from daily power purchases.=20 The state Department of Water Resources has spent more than $6 billion sinc= e=20 January buying electricity on behalf of California's cash-strapped utilitie= s.=20 "The state is going broke," said Mike Florio, senior attorney for The Utili= ty=20 Reform Network in San Francisco. "We have to get the money from somewhere.= =20 Bankrupting the state is not an alternative."=20 However, he said, it would have been preferable for consumers if the PUC ha= d=20 adopted an alternative rate structure that would have cost residential=20 customers about $400 million less.=20 That alternative was never given serious consideration by the commissioners= ,=20 who focused instead on a rival proposal submitted by PUC President Loretta= =20 Lynch.=20 Although the commissioners were acting on a rate increase of historic=20 proportions, the meeting hall took on a surreal air yesterday because three= =20 of the five members chose to be elsewhere for the occasion. They spoke and= =20 voted via speakerphone.=20 Lynch, who was at the Millbrae City Hall, called the rate increase=20 "unfortunate" but said higher bills will address the state's financial=20 troubles and promote conservation.=20 She wrote in her proposal that "every consumer in California is justified i= n=20 feeling outrage at the rates we approve today and the bills they will have = to=20 pay tomorrow."=20 But Republican Commissioner Richard Bilas, speaking from the Mendocino Art= =20 Center, said the PUC was moving too quickly in enacting rate increases that= =20 had not been fully analyzed.=20 Warning that the rate increase will lead to "a recessionary death spiral," = he=20 said, "Many businesses will flee the state or shut down entirely."=20 Bilas' Republican colleague, Henry Duque, speaking from a Texas hotel, said= =20 the rate plan was "incoherent" and "misguided" and will do nothing to promo= te=20 construction of much-needed new power plants.=20 PROTESTERS' TAUNTS The only two commissioners present for yesterday's vote were Brown and his= =20 Democratic colleague Carl Wood. They were forced to bear the brunt of taunt= s=20 from protesters in the audience.=20 One protester, Susan Rodriguez of Oakland, was escorted from the hall by=20 California Highway Patrol officers after loudly attempting to place Brown a= nd=20 Wood under citizen's arrest.=20 "Do the right thing," other protesters shouted. But Brown countered that=20 "mature people must bite the bullet" and accept the necessity of higher=20 rates.=20 Industrial power users, including many Silicon Valley stalwarts, had lobbie= d=20 aggressively for lower rates, arguing that they were being asked to bear an= =20 unfairly heavy burden from the proposed rate structure.=20 Under yesterday's revised measure, industrial electricity rates and average= =20 monthly bills will increase by 49 percent, compared with more than 50 perce= nt=20 under the original proposal.=20 'FIG LEAF'=20 The California Alliance for Energy and Economic Stability, a coalition of= =20 some of the largest business groups in the state, said in a statement that= =20 the final rate structure "is little more than a fig leaf for what remains a= =20 terribly disproportionate rate increase allocation."=20 The alliance's members include the California Chamber of Commerce, the=20 California Business Round Table and the California Retailers Association.= =20 Doug Heller, a spokesman for the Foundation for Taxpayer and Consumer Right= s=20 in Santa Monica, said residential ratepayers and small businesses are being= =20 hit hardest by the rate increases.=20 "The special interests that foisted deregulation upon us get off easy." he= =20 said. "This unforgivable betrayal by the governor will not be forgotten."= =20 Gov. Gray Davis had no immediate response yesterday to the PUC's action.=20 COMMERCIAL RATES Electricity rates were increased 37 percent for PG&E's small commercial=20 customers, 41 percent for large commercial customers and just over 19 perce= nt=20 for agricultural customers.=20 Southern California Edison residential customers saw their power rates jump= =20 47 percent, to 22.4 cents per kilowatt hour from 15.2 cents. Average monthl= y=20 bills will rise by between 6 percent and 37 percent.=20 "We are now in a position to pay the electricity bills in California," the= =20 PUC's Brown said. "But it will not be easy."=20 E-mail David Lazarus at [email protected].=20 Plan punishes heaviest users Under the plan adopted by the PUC, the heaviest residential users would bea= r=20 the brunt of increases. Here is how residential PG&E bills would be affecte= d=20 under the proposal: Baseline Monthly Current New % usage level usage monthly bill monthly bill change Up to 130% 378 kWh $36 $36 0% 130% to 200% 715 kWh $76 $81 6% 200% to 300% 1,069 kWh $122 $143 18% Over 300% 1,429 kWh $232 $317 37% Source: Public Utilities Commission Chronicle Graphic CHART 2: PUC INCREASE The PUC adopted across-the-board rate increases yesterday, which will le= ad=20 to higher bills. The increases for various customers (prices in cents per= =20 kilowatt-hour): . -- Residential Users: (above 130% of baseline) Current Users 14.3 cents New Rates 22.1 cents Increase: 55% . -- Small Commercial Current Users 14.3 cents New Rates 22.1 cents Increase: 55% Source: PUC ,2001 San Francisco Chronicle ? Page?A - 1=20 Davis finds his ramrod for risky energy bill=20 Chronicle Sacramento Bureau Wednesday, May 16, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/05= /16/M N226968.DTL&type=3Dnews=20 Gov. Gray Davis finally found a captain to steer his leaking ship -- the=20 complicated and politically risky plan to save Southern California Edison -= -=20 through uncharted legislative waters.=20 Until this week, nobody in the Legislature wanted to touch Davis' secretly= =20 negotiated agreement with Edison, which needs lawmakers' approval. It's not= =20 that nobody cared -- almost every player in the Capitol now has an idea on= =20 how to infuse the utility with cash, bargain down anxious creditors and avo= id=20 the drawn-out hassles of debtors court.=20 Democratic Sen. Richard Polanco of Los Angeles, who is termed out next year= ,=20 agreed this week to carry the governor's bill, which has met with almost no= =20 support. At least three other major proposals are circulating in the Assemb= ly=20 and Senate, along with a desire by some lawmakers to simply let Edison go= =20 bankrupt like Pacific Gas & Electric.=20 "There is a great sense of urgency here," said Brian Bennett, a spokesman f= or=20 Edison, which supports the governor's original idea to buy the transmission= =20 lines and infuse the company with cash. "We can't escape the fact that we c= an=20 be dragged into involuntary bankruptcy at any time."=20 The outcome could determine if the energy crisis ends in months or years. I= f=20 the Legislature and Davis can help bring financial stability to Edison, the= n=20 the price of energy will likely fall, easing financial pressure on PG&E and= =20 its creditors. The bankruptcy judge in the PG&E case may also scrutinize th= e=20 Edison deal for clues.=20 "It's something that's not only important for keeping Edison out of=20 bankruptcy, but it's also an important framework and model for PG&E to get = it=20 back on its feet," said Assemblyman Keith Richman, R-Northridge, who is=20 helping the GOP negotiate the Edison agreement.=20 Edison is constantly negotiating with its creditors over the huge debts it= =20 owes to power generators that charged inflated prices last year. The state= =20 finally took over the job of buying power in January, and has spent more th= an=20 $6 billion so far -- money it expects to get back from a bond sale financed= =20 by ratepayers.=20 It seems clear Davis' draft agreement with Edison is doomed as written in t= he=20 Legislature. The governor's plan would require the state to sell more bonds= =20 and give Edison $2.76 billion. In exchange, the state gets Edison's power= =20 lines. The company would get a guaranteed profit of 11 percent for a decade= =20 in order to pay off its debt, reportedly at $3.5 billion.=20 Most lawmakers hate the idea of purchasing the Edison power lines, in part= =20 because then California would have to maintain and repair them. PG&E actual= ly=20 has the biggest bottleneck in the power grid, so purchasing the Edison line= s=20 would do nothing to solve that problem, Richman noted.=20 "The grid is an asset that essentially has no value to the people of=20 California or to the ratepayers," Richman said, "and does nothing to bring= =20 more electrons to the state."=20 Other revisions are circulating:=20 -- Senate leader John Burton, D-San Francisco, and others don't like Davis'= =20 plan to give out-of-state power generators full credit for all the money th= ey=20 are owed by Edison. The generators, which face investigations for price=20 gouging, may be forced to reduce their bills by 30 percent if they want to= =20 get paid.=20 -- A"Plan B" group formed by Assembly Speaker Bob Hertzberg, D-Sherman Oaks= ,=20 and which includes Assembly Republicans is looking at, among other things,= =20 building more energy plants instead of purchasing the transmission lines.= =20 They believe they could build enough plants to power between 2 million and = 3=20 million homes, using money dedicated from Edison ratepayers.=20 -- A plan by Assembly members Joe Nation, D-San Rafael, and John Dutra, D-= =20 Fremont, would simply give the state an option of buying the transmission= =20 lines, for $1.2 billion instead of $2.76 billion. Edison's parent company= =20 would be required to contribute $400 million to the utility.=20 The Nation-Dutra plan would dedicate a larger share of each bill to paying= =20 off debt, allowing Edison to more quickly begin buying power. "We're trying= =20 to find a way for the utilities to get credit worthy sooner rather than=20 later," Nation said. "That will allow the state to exit the power buying=20 business."=20 -- Some Republicans are pushing for businesses to be able to contract=20 directly for their power without going through the current state-run grid.= =20 Businesses like the idea because they pay less for power, but Democrats say= =20 it puts the burden on residents who don't have the clout to write their own= =20 contracts.=20 Davis may be willing to consider this as part of a deal that would get the= =20 Edison agreement through the Legislature. He and his staff have been=20 negotiating nonstop with lawmakers in an attempt to win any support.=20 Edison is keeping close tabs on the developments in the Capitol, meeting wi= th=20 lawmakers to discuss the deal and the ramifications if it does not win=20 approval.=20 While the deal agreed to by the governor gives the Legislature until August= =20 15 to approve the deal, Bennett said he hopes to have it completed long=20 before that.=20 E-mail the reporters at [email protected] and=20 [email protected].=20 ,2001 San Francisco Chronicle ? Page?A - 3=20 Energy at a glance=20 Chuck Squatriglia, Chronicle Staff Writer Wednesday, May 16, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/05= /16/M N226409.DTL&type=3Dnews=20 Energy-related developments yesterday:=20 RATE INCREASE APPROVED Electricity rates for PG&E customers will jump almost 55 percent, from 14.3= =20 cents per kilowatt hour to 22.1 cents, under a rate increase plan narrowly= =20 approved by the Public Utilities Commission.=20 MOUNTING EVIDENCE OF PRICE MANIPULATION A Federal Energy Regulatory Commission administrative law judge said an El= =20 Paso Corp. memorandum suggests that the Houston company inflated the price = of=20 natural gas.=20 The New York Times has reported that an El Paso affiliate said in the memo= =20 that it would have "more control" of gas markets because of a deal it made= =20 with El Paso for space on the pipeline.=20 COMPETING ENERGY PLANS IN WASHINGTON Beating President Bush to the punch, congressional Democrats released an=20 energy plan featuring price limits, tax credits and no new oil drilling in= =20 Alaska. Bush is expected to disclose his plan -- which will be heavy on=20 production incentives -- tomorrow.=20 DAVIS FINALLY FINDS SPONSOR FOR EDISON BAILOUT State Sen. Richard Polanco, D-Los Angeles, agreed to introduce Gov. Gray=20 Davis' plan to bail out Southern California Edison. The plan, which faces a= n=20 uphill fight, requires selling more bonds and giving Edison $2.76 billion f= or=20 the company's power transmission lines.=20 STATE CREDIT RATING SLIDES Moody's Investors Services downgraded the credit rating on California's=20 general obligation bonds from Aa3 to Aa2, citing the increasing drain the= =20 energy crisis is placing on the state's finances.=20 EASING GAS PRICES EXPECTED A Bush administration energy official told lawmakers that gasoline prices= =20 will rise about a nickel a gallon during the next two weeks but begin falli= ng=20 around Memorial Day.=20 ,2001 San Francisco Chronicle ? Page?A - 12=20 PUC tags consumers with huge rate boost=20 NEWS ANALYSIS=20 Politicians see no need to promote urge to conserve=20 Marc Sandalow, Washington Bureau Chief Wednesday, May 16, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/05= /16/M N106676.DTL&type=3Dnews=20 Washington -- As the White House and Democrats battle over rolling blackout= s,=20 high gas prices and insufficient supplies, there is one area on which they= =20 agree: America need not give up its energy-rich lifestyle.=20 In stark contrast to the late 1970s, when President Jimmy Carter urged=20 Americans to curb their consumption, energy plans being released by both=20 parties this week offer hardly the faintest hint of sacrifice.=20 The problem is well known: The price of gasoline and electricity has climbe= d=20 sharply as demand has risen in a nation that already consumes a quarter of= =20 the world's energy. Reliance on foreign energy is greater than it was befor= e=20 the oil embargoes nearly three decades ago.=20 President Bush sees salvation in more supplies. Democrats see an answer in= =20 capping the profits of energy conglomerates. Neither is asking Americans to= =20 get out of their SUVs, log off their computers or make more than the most= =20 superficial lifestyle changes.=20 "That's a big no," White House press secretary Ari Fleisher said last week= =20 when asked whether Americans need to curb their voracious appetites for=20 energy to overcome the current crisis.=20 "The president believes that it's an American way of life, and that it shou= ld=20 be the goal of policy makers to protect the American way of life. The=20 American way of life is a blessed one. And we have a bounty of resources in= =20 this country."=20 Even when Bush addressed conservation -- under pressure from California=20 Republicans who feared a backlash -- he called for modest steps from=20 California's federal workers that are only half as ambitious as those being= =20 asked of state employees.=20 The administration's refusal to embrace conservation may stem from Bush's= =20 belief in America's boundless limits. It could be his grounding in the oil= =20 business, where more energy consumption is good business. Or it could be a= =20 political calculation that Americans will more easily tolerate a rough summ= er=20 in California and $3-a-gallon gasoline in the Midwest than a sober lecture = on=20 limits.=20 Strategists figure that in the first year of his term, Bush can weather=20 criticism from motorists who are paying high gas prices, environmentalists= =20 who worry about spoiling the wilderness and Californians who believe the ne= w=20 supplies will come too late to ease their crunch.=20 But the minute he starts talking about calling off summer vacations, bravin= g=20 the heat without air conditioners or buying gas on alternate days, he's in= =20 deep political trouble.=20 "It's not what people want to hear," said Bruce Schulman, a professor of=20 history and American studies at Boston University and the author of a book= =20 entitled, "The Seventies: The Great Shift in American Culture, Politics, an= d=20 Society."=20 "One of the big political lessons they learned from Carter is that any talk= =20 of a need for limits . . . is political suicide," Schulman said.=20 This helps to explain why the White House's 100-page energy report, set for= =20 release tomorrow, is expected to emphasize finding new supplies over=20 curtailing current use.=20 "Conservation may be a sign of personal virtue," Vice President Dick Cheney= =20 said two weeks ago, "but it is not a sufficient basis for a sound,=20 comprehensive energy policy."=20 Democrats support conservation so long as tax dollars are spent to take the= =20 sting out of it.=20 Their energy proposal calls for billions of dollars in tax credits to allow= =20 families and business to take steps to "maximize energy efficiency and=20 conservation without having to make large and painful lifestyle changes."= =20 "We have a society, like it or not, where gas and electricity is like air o= r=20 water," said House Democratic Leader Richard Gephardt of Missouri.=20 Not that Gephardt believes that is a bad thing.=20 "We think there are effective, intelligent ways to work through these=20 problems so that we don't suffer in terms of price, we don't suffer in term= s=20 of supply, and we don't suffer in terms of the environment," Gephardt told= =20 California reporters yesterday.=20 "People want plentiful energy at a low cost, and they want to save the=20 environment," Gephardt said. "I don't think the Bush plan will accomplish= =20 that.=20 I think our plan will."=20 Democrats well remember Carter donning a cardigan sweater and urging=20 Americans to curb their appetites, declaring that: "our great nation has it= s=20 recognized limits."=20 Carter was the party's last one-term president.=20 "The Democratic party and its leadership is dominated by elitists who belie= ve=20 that the rest of us should carpool, while they drive their Chevy suburbans = to=20 the lake house for the weekend," said GOP consultant Ed Gillespie,=20 outlining precisely the line of attack that Democrats want to avoid. "They= =20 blame us for our use of SUVs, having our air conditioners set too low and= =20 eating microwave popcorn."=20 E-mail Marc Sandalow at [email protected]=20 ,2001 San Francisco Chronicle ? Page?A - 1=20 SAN JOSE=20 County conserving its air conditioning=20 Wednesday, May 16, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/05= /16/M N184284.DTL&type=3Dnews=20 Santa Clara County employees will be feeling the heat this summer as they d= o=20 their part to help conserve energy.=20 County supervisors hoping to slash energy use by 20 percent said yesterday= =20 that air conditioning in county offices will not kick on this summer until= =20 the thermostat hits 78 degrees -- six degrees higher than the previous=20 threshold.=20 "And this winter the heat will not kick on until the thermostat drops to 68= =20 degrees," said Tony Winnicker, chief of staff for Supervisor Liz Kniss.=20 The heating changes were part of a package of energy conservation measures= =20 approved unanimously yesterday by the Board of Supervisors.=20 Other measures include the installation of motion detectors to turn lights= =20 off, replacement of large appliances with energy efficient models, and a ba= n=20 on personal fans, heaters, coffee makers and decorative lighting.=20 ,2001 San Francisco Chronicle ? Page?A - 16=20 California rate hike hits homes, businesses=20 Posted at 10:50 p.m. PDT Tuesday, May 15, 2001=20 MICHAEL=20 Millions of Californians opening their electric bills next month will see t= he=20 biggest increase ever in residential electric rates as regulators try to=20 shore up the state's failing energy system.=20 After several delays this month, a divided California Public Utilities=20 Commission voted 3-2 to raise rates across the board, saying it was necessa= ry=20 to keep the lights on in California. The increase follows a 10 percent hike= =20 approved in January.=20 Residential customers will see their bills rise an average of 7 percent to = 37=20 percent, depending upon their usage, while small commercial users will see= =20 their bills climb an average of about 37 percent.=20 The new rate plan, which goes into effect June 1, was the result of=20 last-minute jockeying by commissioners and staffers in Gov. Gray Davis'=20 office to try to bring down rates for industrial and agricultural users.=20 In the end, no one came away happy. The commission lowered agricultural rat= es=20 before the vote, but farmers will still pay rates that are 15 to 20 percent= =20 higher. Industrial and large commercial users got almost no last-minute=20 reprieve and will see bills spike an average of about 49 percent.=20 Residential users saw their rates jump at the last minute. They are now=20 divided into two camps: those who can keep usage at or near baseline levels= =20 and those who cannot. Energy misers and small households will get no=20 increase. But homes where usage soars past the baseline could see their bil= ls=20 climb by 37 percent.=20 ``This is a sad day for 34 million Californians and the California economy,= ''=20 said Carl Guardino of the Silicon Valley Manufacturing Group. ``The PUC has= =20 basically strangled the goose that laid the golden egg.''=20 Some residential customers are worried.=20 Fremont resident Michael McCrary said the new rate structure penalizes larg= e=20 families and spares apartment dwellers and small households. The father of= =20 five said he expects his electric bill to jump at least 20 percent next mon= th=20 when the increase shows up in bills.=20 ``I don't think that's fair,'' said McCrary. ``Between this and the natural= =20 gas increases, I'm looking at a PG&E bill that is double overall, which is = 50=20 percent of my mortgage. That's not equitable.''=20 9 million customers=20 The plan affects about 9?million customers of the state's two largest=20 utilities, Pacific Gas & Electric and Southern California Edison.=20 The rate increase will generate more than $5 billion for the utilities.=20 Regulators will decide in the coming weeks whether all of that money should= =20 go to the state -- which has been buying power for the financially troubled= =20 utilities -- or whether some should go to the utilities to help pay bills.= =20 The commission vote fell along party lines, with Democrats Loretta Lynch,= =20 Jeff Brown and Carl Wood voting for the new rate structure, and Republicans= =20 Henry Duque and Richard Bilas voting against it.=20 Wood said he regretted having to raise rates at all. But the increased cost= =20 of wholesale electricity left the commission with no alternative, he said.= =20 ``There is no justice in any decision we can come up with because the=20 underpinnings -- the paying of these wholesale prices -- are unjust,'' Wood= =20 said.=20 The vote came amid jeers from protesters, who wore black to mourn the death= =20 of the California economy.=20 As Wood did, Brown blamed the higher prices on energy wholesalers, who he= =20 said are gouging Californians.=20 ``I hear you when you say there will be pain and suffering,'' Brown said.= =20 ``But unfortunately, the wholesale prices have put us in an untenable=20 situation. We cannot put our head in the sand.''=20 Duque and Bilas were harshly critical of the rate plan, saying it placed to= o=20 big a burden on businesses. Bilas said the residential increases were not b= ig=20 enough and would do little to help the commission achieve its stated goal o= f=20 encouraging conservation. At the same time, he argued, the higher rates wou= ld=20 send the state's economy into a ``recessionary death spiral.''=20 ``We risk plunging the state back into the same recessionary conditions wit= h=20 high commercial rates that set the stage for electric restructuring in the= =20 first place,'' Bilas said. ``History will repeat itself. Businesses will fl= ee=20 the state or shut down entirely. This means jobs and taxes are lost.''=20 Duque said he was troubled by the ``moral'' implications of the new rate=20 structure and the way that it penalizes heavy energy users.=20 ``In my view, the new rate design assumes that the consumption of energy is= a=20 moral decision between good and bad,'' Duque said. ``The decision has a cle= ar=20 morality. All businesses and residential customers who consume more=20 electricity are bad.''=20 Last-minute lobbying by business interests appeared to have little effect.= =20 Davis, who had been lobbied heavily by business groups, called upon Brown t= o=20 try to bring down rates for industrial users.=20 But Brown said he could not find a way to do that without penalizing other= =20 users.=20 Davis disappointed=20 Davis, who presented his own plan to the commission, offered a tempered=20 response. But he indicated that he was disappointed with the commission's= =20 vote.=20 ``While the PUC's revised rate increase made some modest improvements, my= =20 plan represented a more balanced approach,'' Davis said in a statement.=20 Tensions surrounding the rate hike had been building up to Tuesday's vote.= =20 After the vote, emotions spilled over into the plaza outside the commission= 's=20 meeting room in San Francisco.=20 There, Brown confronted Michael Florio, an attorney with The Utility Reform= =20 Network, to deny that he'd been influenced by big business. Florio had been= =20 telling reporters that the commission had sold out to big business at the= =20 expense of residential users.=20 ``There's plenty of outrage to go around,'' said Florio. ``The commission= =20 bent over backward to give a break to the people who pushed for=20 deregulation.''=20 But Brown, his face inches from Florio's nose, said he was never lobbied by= =20 any business representatives. ``I made my own decision based on what I=20 thought was good or bad economics,'' said Brown, thrusting his finger towar= d=20 Florio's chest.=20 ``I guess he's feeling a little touchy after today,' Florio said.=20 Contact Michael Bazeley at [email protected] or (415) 434-1018.=20 Electricity users struggle to meet savings target=20 Posted at 10:45 p.m. PDT Tuesday, May 15, 2001=20 BY JOHN WOOLFOLK=20 Mercury News=20 Mindful of California's energy crisis, Heather LaBonte has turned off=20 everything she can. Her San Jose home is now dim and stuffy, laundry and=20 dishes pile up, and she wheezes from allergies without her air filters.=20 But even all those sacrifices won't spare the 27-year-old receptionist from= a=20 higher electric bill.=20 Like many utility customers, LaBonte is frustrated that no matter what she= =20 unplugs, she can't get her power use below 130 percent of the baseline leve= l,=20 the limit state officials set for avoiding a massive rate increase.=20 ``I can't figure out how to cut down any more,'' said LaBonte, whose most= =20 recent bill of $107 would go up about $6.50 under the rate plan approved=20 Tuesday. ``This is all very frustrating.''=20 Tracey Salbacka of Seaside shares her pain.=20 ``We practically live in the dark,'' said Salbacka, 39, who used 165 percen= t=20 of her baseline despite cutting back so much that even Wulfgar, her family'= s=20 pet hermit crab, is without his heat lamp. ``It is difficult to imagine how= =20 we will get through the energy crisis.''=20 State officials approved California's biggest rate increase to cover soarin= g=20 wholesale power prices that have drained the state's budget surplus and=20 bankrupted its largest utility.=20 The new rate system charges customers progressively higher prices as their= =20 power use increases, a stick aimed at spurring conservation. The state also= =20 dangled a carrot, sparing customers from higher rates if they don't exceed= =20 their baseline, or average minimum, by more than 30 percent.=20 But it's unclear how many customers will meet that target. State officials= =20 expect it will be more than half, while utilities say it could be as few as= a=20 third. But many families large and small can't figure out how it's possible= .=20 LaBonte lives in a three-bedroom home with her boyfriend, James, her dogs= =20 Molly and Austin, and a few cats. She's cut laundry and dishwashing in half= ,=20 to about a load of wash every other day and eight loads of dishes a month.= =20 Like many in Silicon Valley, she'd normally spend a couple of hours a night= =20 on her computer. She's now down to three hours a week.=20 LaBonte put her bedroom air conditioner in storage. She's using ceiling and= =20 window fans instead, set on low.=20 The 19 light bulbs in LaBonte's home, all 40 to 60 watts, are seldom on any= =20 more, just a couple at a time at night so she can read and move around.=20 The biggest sacrifice was cutting back on the three air filters LaBonte use= s=20 to combat allergies. She used to run them around the clock, but now they're= =20 only on half the day, allowing her allergies to get so bad that she had to= =20 see a doctor.=20 ``I don't know how long I can keep that up,'' said LaBonte, whose latest bi= ll=20 showed she was still nearly 40 percent over her baseline. ``I can't cut=20 anymore unless I sit in total darkness and do nothing, which, by the way, i= s=20 insane!=20 ``We hardly ever cook, even in the microwave, so we can't cut down in that= =20 area. I barely use my stereo anymore. We sit in the dark a lot. The 60-watt= =20 bulbs I do have are for reading, and I can't read with less without hurting= =20 my eyes. I hate having to do last-minute laundry because everything has pil= ed=20 up.''=20 Confusing matters for consumers, the conservation tips they're hearing most= =20 -- turning off lights and air conditioners -- produce vastly different=20 results. A room air conditioner uses 10 times more power than a single,=20 100-watt bulb.=20 At LaBonte's home, cutting back on laundry saved about 15 kilowatt-hours,= =20 dishes saved about nine kilowatt-hours, lighting saved about 10=20 kilowatt-hours, and computing saved about five kilowatt-hours. But the=20 biggest gain was the most painful -- cutting back on the three air cleaners= ,=20 which together use about a kilowatt each hour, saved about 380=20 kilowatt-hours.=20 Seaside resident Salbacka is equally frustrated and says the baseline syste= m=20 unfairly punishes renters and large families.=20 She, her husband, Walter, and their four children, ages 4 through 15, have= =20 cut back television to two hours a day and computer time to an hour a day.= =20 They've stopped blow-drying their hair, and they dry their clothes on a lin= e=20 instead of in the electric dryer. They unplugged the extra freezer in the= =20 garage.=20 The Salbackas have turned off just about every light in their three-bedroom= =20 house. Their children's lights are on timers, just to make sure they don't= =20 leave them on. Wulfgar, the pet hermit crab, has gone solar -- he's now by= =20 the window.=20 Those and other steps have cut her daily power usage from 20 to 15=20 kilowatt-hours, Salbacka said. But it's not enough. The Salbackas were stil= l=20 65 percent over their baseline on their last bill, which would go up about = $6=20 to nearly $100 under the new rate plan.=20 ``We're trying to cut down,'' Salbacka said. ``It's not like we live=20 frivolously. I don't know what else they think we can do.''=20 Like many renters, Salbacka said she's been stuck with the old and=20 inefficient appliances that came with her home. The refrigerator is at leas= t=20 a decade old; it wasn't even new when they moved in 10 years ago. Salbacka= =20 would like to replace the electric dryer with a gas model. But the landlord= ,=20 despite raising the rent, won't put in the gas hookups.=20 ``Landlords don't care,'' Salbacka said. ``They don't pay the energy bill.'= '=20 Contact John Woolfolk at [email protected] or (408) 278-3410=20 What is the baseline on electricity bills, and why has it become so=20 important?=20 Posted at 11:12 p.m. PDT Tuesday, May 15, 2001=20 BY DANA HULL=20 Mercury News=20 The electrical rate hike plan approved Tuesday by the PUC is designed to=20 reward conservation and punish heavy users. The new rate plan, which goes= =20 into effect June 1, creates five levels, or tiers, of billing. Households= =20 that stay within 130 percent of their ``baseline'' level of use will face n= o=20 increase at all.=20 What is the baseline?=20 The baseline is considered a minimum level of use based on regional and=20 seasonal averages. It was set up to make sure that residential consumers we= re=20 provided the minimum amount of electricity necessary at the lowest possible= =20 price. Customers are charged one price for baseline use and a higher price= =20 for electricity that is over the baseline amount.=20 Is the baseline the same for everyone?=20 No. PG&E's residential customers are assigned different baselines because t= he=20 climate and elevation of Northern California vary so widely. The Bay Area i= s=20 roughly divided into three climatic territories: the coastal areas includin= g=20 San Francisco and the Peninsula; the East Bay and the South Bay; and the=20 Santa Cruz Mountains. You can best determine your baseline by checking your= =20 bill, but this is an estimate for those areas:=20 ?Coastal areas: 234 kwh per month (30 days). 130 percent: 304.2=20 ?Parts of East and South Bay: 324 kwh per month. 130 percent: 421.2=20 ?Santa Cruz Mountains: 234 kwh per month. 130 percent: 304.2=20 Climate zones often cut through counties: In Santa Clara County, the=20 mountainous area that fronts Skyline Boulevard, Summit Road and Loma Prieta= =20 Road has a lower baseline than the rest of the county. The coast and Santa= =20 Cruz Mountains have the same baseline in the summer and different baselines= =20 in the winter.=20 In Alameda County, the Central Valley portion east of the Altamont Pass has= a=20 higher baseline.=20 So do people who live in hot places like Fresno or Bakersfield get a higher= =20 baseline than someone who lives in San Jose?=20 Yes. San Jose's electricity baseline is 324 kilowatt-hours per 30 days in t= he=20 summer. In the foothills of the Sierra Nevada, where it is much cooler, the= =20 summer baseline is 192. The warmer Merced and Fresno area is 468, while=20 Bakersfield has the highest baseline at 498.=20 Is the baseline the same all year?=20 No. There is a winter baseline and a summer baseline. The summer baseline= =20 went into effect May?1, and the winter baseline goes into effect Nov.?1. .= =20 How can I find my baseline on my bill?=20 The electric portion of your bill shows the baseline amount in kilowatt-hou= rs=20 and the rate you are billed for that amount.=20 It also shows how much power you used over the baseline and the rate you we= re=20 billed for it.=20 I try to conserve, but I'm always over my baseline. Are the baselines set l= ow=20 on purpose? Does anybody stay below their baseline?=20 PG&E estimates that about 35 percent of their customers will not have to pa= y=20 higher rates because they always stay within 130 percent of their baseline.= =20 I am in poor health and need to use a lot of electricity for my medical=20 device. Is there any kind of medical exemption?=20 Yes. PG&E says that 48,000 customers are on Medical Baseline Service. These= =20 customers receive an extra amount of electricity in addition to their=20 baseline each month, but pay for it at baseline rates. Customers with great= er=20 needs can negotiate for extra electricity with the utility. Call PG&E at=20 (800)-743-5000 and ask for a Medical Baseline application.=20 I work at home. Can I call PG&E and ask for a bigger baseline?=20 No. Though many consumers who have home offices find it hard to stay within= =20 their baseline, the law does not currently allow home offices to be exempt.= =20 Contact Dana Hull at (510) 790-7311 or at [email protected]=20 California PUC approves power rate hike plan=20 Posted at 8:48 p.m. PDT Tuesday, May 15, 2001=20 BY KAREN GAUDETTE=20 Associated Press=20 SAN FRANCISCO -- State power regulators finally decided Tuesday how to spre= ad=20 the pain of the biggest electric rate hikes in California history, boosting= =20 rates by as much as 80 percent for residential customers who use the most= =20 power.=20 More than half of the residential ratepayers served by the state's two=20 largest utilities will see no increase at all in their rates if they don't= =20 increase their use.=20 But Pacific Gas and Electric Co. customers who consume the most will see=20 their rates jump from 14.3 cents per kilowatt hour to 25.8 cents per kilowa= tt=20 hour, which translates into an average increase of $85 per month for=20 electricity.=20 The plan, approved 3-2 by the state Public Utilities Commission, affects=20 about 9 million customers of PG&E and Southern California Edison Co.=20 Even after the vote, there was confusion within the PUC over the new rates.= =20 The commission released three sets of figures throughout the day, each with= =20 dramatically different rate hikes. Spokesmen for both PG&E and Edison said = it=20 will take at least a day of number crunching to know precisely how the rate= =20 hikes will affect the dozens of different customer classes.=20 The new rates, which will appear on June bills, were approved nearly seven= =20 weeks after the PUC mandated a $5 billion rate hike. The split vote came=20 after a week of intense lobbying by industrial, commercial, agricultural an= d=20 residential groups -- all hoping to shift more of the increases onto each= =20 other.=20 ``This is probably the worst economic calamity the state has ever seen,''= =20 said David Marshall, chief financial officer at Gregg Industries, a=20 400-person iron foundry in El Monte. ``It has got ramifications well beyond= =20 anything that we can begin to understand.''=20 Gregg already has switched its production cycle from during the day to a=20 night shift to save electricity, Marshall said, but he expects the rate hik= e=20 plan approved Tuesday to cost Gregg at least $1 million this year.=20 Paul Clanon, director of the PUC's energy division, said rate hikes on=20 industrial customers would be capped at 49 percent. Rate hikes for=20 agricultural customers are capped at 25 to 30 percent. Rate hikes for=20 commercial ratepayers, such as banks, hospitals and restaurants, were not= =20 immediately clear due to conflicting numbers.=20 Commissioner Richard Bilas said too high a percent of the hikes had been=20 shifted onto commercial ratepayers.=20 ``While something has been done to tone down the impact on industrial=20 customers, it appears to have been done at the expense of small and medium= =20 businesses, which make up the majority of businesses in this state,'' Bilas= =20 said as he urged his fellow commissioners to vote against the proposal.=20 The 80 percent figure for the biggest electricity users came from a chart= =20 released by Clanon after the vote.=20 Under state law, a portion of every residential customer's electric use --= =20 called baseline, a percentage of the average amount of electricity use in a= n=20 area based on climate, geography and season -- is shielded from rate hikes.= =20 The PUC could only raise rates on power use beyond 130 percent of baseline.= =20 Clanon's chart shows an average 60 percent rate hike on all electricity use= =20 that exceeds 130 percent of baseline.=20 The biggest losers are the biggest users.=20 Residential power use is divided into five tiers, and electricity used with= in=20 PG&E's top tier will jump by 80 percent. About 9 percent of PG&E's househol= ds=20 fall in that top tier.=20 Those hikes for the top tier translate into an average increase of $85 --= =20 from $232 to $317 -- on monthly bills for such customers.=20 For Edison's heaviest residential users, the rate hike in the top tier is 7= 1=20 percent -- or an average increase from $194 to $265 on monthly bills.=20 Even top-tier customers will not pay more for electricity use that falls=20 within that first 130 percent of baseline.=20 However, commercial, industrial and agricultural customers will have to pay= =20 their rate hikes on every kilowatt.=20 Steve Strong, a plum and nectarine grower in Visalia, was optimistic the ra= te=20 hikes won't bruise his business. But with unstable weather, fluctuating cos= ts=20 and now the potential for blackouts that could hit refrigerated packing=20 houses and shut down water pumps, agriculture is becoming an even riskier= =20 business.=20 ``I don't have to go to Vegas or Tahoe, I've got enough gambling going on= =20 here,'' he said.=20 The rate hikes, which will begin appearing on June bills, will be retroacti= ve=20 to March 27 -- the day the record rate hikes were approved -- though those= =20 retroactive charges will be spread over a 12-month period.=20 Commissioners were forced to shout their votes over the din of jeering=20 protesters, who wore tombstone-shaped placards that read: ``R.I.P. Affordab= le=20 Energy.''=20 PUC Commissioner Jeff Brown bellowed back at protesters: ``We cannot walk= =20 away from it. We cannot pretend that this is some sort of problem that we c= an=20 walk away from.''=20 The final rates were a revised version of a proposal released by PUC=20 President Loretta Lynch last week. Lynch postponed a scheduled Monday vote = to=20 rework her plan after a massive outcry from businesses proclaiming the=20 proposed rate hikes would doom California's economy, a critical statement= =20 from Gov. Gray Davis and pressure from fellow commissioners to lessen the= =20 impact on businesses.=20 Since it unanimously approved the rate hikes in March, the PUC has crammed = a=20 year's worth of work into six weeks, struggling to fashion rates that=20 simultaneously recoup the $5.2 billion the state has spent buying power for= =20 the customers of the state's two largest utilities and trigger enough=20 conservation to help fend off some of this summer's expected rolling=20 blackouts.=20 Customers of San Diego Gas and Electric Co. and those who buy electricity= =20 directly from energy wholesalers, such as the California university system,= =20 are shielded from rate hikes. Energy report may lead to new battle on drilling along California's coast= =20 Posted at 10:17 p.m. PDT Tuesday, May 15, 2001=20 BY PAUL ROGERS AND JIM PUZZANGHERA=20 Mercury News=20 WASHINGTON -- California battles over offshore oil drilling that raged=20 through the 1980s may be heating up again.=20 Environmental groups and members of Congress from coastal areas scrambled= =20 Tuesday amid two key events:=20 ?The Bush administration's scheduled release Thursday of a new national=20 energy policy. Bush is expected to call for new drilling in the Arctic=20 National Wildlife Refuge and along Montana's Rocky Mountain Front, but it i= s=20 unclear whether he will support new ocean drilling.=20 ?A report from a Department of Interior advisory group recommending that fi= ve=20 ocean areas currently off limits to all drilling be opened up for natural-g= as=20 production.=20 Presidential protection=20 The five areas were not spelled out in the report. But it noted that=20 California, Oregon and Washington, along with the entire Atlantic seaboard,= =20 have large reserves of offshore natural gas that cannot be drilled because = of=20 bans put in place by former President George Bush in 1990, and then extende= d=20 to 2012 by former President Clinton. Those bans, however, are executive=20 orders and could be overturned by President Bush.=20 ``Our concern is to get out in front of this right off the bat,'' said Rep.= =20 Lois Capps, D-Santa Barbara. ``We don't want any more oil and gas drilling= =20 off California's coastline.''=20 Capps said she and roughly a dozen other members of Congress would introduc= e=20 a resolution Wednesday calling for the national moratorium to remain in pla= ce=20 until 2012.=20 Bush promised during the campaign to honor the existing moratorium.=20 ``If he sticks with it, I'll be the first to salute,'' said Rep. Anna Eshoo= ,=20 D-Palo Alto. ``But if he goes back on it he's got a battle royal on his=20 hands.''=20 Most U.S. offshore oil drilling is in the Gulf of Mexico.=20 In California, there are 27 offshore oil platforms, mainly off Long Beach a= nd=20 Santa Barbara. Most produce oil and natural gas.=20 The draft report, written last month by the Department of Interior's=20 Subcommittee on Natural Gas on the U.S. Outer Continental Shelf, notes that= =20 California, Oregon and Washington have roughly 19 trillion cubic feet of=20 natural gas offshore -- a year's U.S. supply.=20 It recommends the Bush administration come up with a list of ``five top=20 geologic plays'' nationwide for a pilot drilling project. The committee's= =20 final recommendations are due May 23.=20 ``This is an advisory committee looking at options. Nothing has been=20 decided,'' said Dian Lawhon, a representative of the Department of the=20 Interior's Minerals Management Service, which manages offshore oil and gas= =20 drilling.=20 But critics sounded alarms.=20 New drilling feared=20 ``They are trying to get a foot in the door,'' said Warner Chabot, Pacific= =20 director of the Center for Marine Conservation, an environmental group in S= an=20 Francisco. ``It is laying the groundwork for new offshore drilling.''=20 Rep. Sam Farr, D-Salinas, said the administration should be focusing on=20 inland gas and oil production, energy efficiency and renewable fuels.=20 ``The ghost of James Watt seems to be lurking in the halls of power again,'= '=20 said Farr. ``That scares people.''=20 The oil industry, however, said more oil and gas is needed to meet growing= =20 demand.=20 ``We are currently in an electricity crisis,'' said Jeff Wilson, a=20 representative of the Western States Petroleum Association. ``When is `not = in=20 my back yard' no longer an acceptable answer?''=20 Contact Paul Rogers at [email protected] or (408) 920-5045.=20 Energy plan gives GOP the jitters=20 Published Wednesday, May 16, 2001, in the San Jose Mercury News=20 BY DAVID S. BRODER=20 PRESIDENT Bush may not be a scholar, but he is an avid student of politics.= =20 For understandable reasons, he has given especially close scrutiny to the= =20 lessons of his father's presidency -- and what went wrong to deny him a=20 second term in 1992.=20 The results can be seen in the current chief executive's adamant support of= =20 the large tax cut on which he campaigned; he knows that his dad's retreat= =20 from his ``no new taxes'' pledge cost him vital conservative support. The= =20 younger Bush is also the opposite of the elder in emphasizing education. Bu= sh=20 I did little or nothing to change the schools; Bush II put them at the top = of=20 his agenda, just as the voters persistently do.=20 But the most costly error -- in political terms -- that Bush I made was=20 refusing to consider any short-term fixes for the economic slump that began= =20 in the third year of his presidency. When the jobless rate began to edge up= ,=20 Treasury Secretary Nicholas Brady counseled Bush against any stimulus=20 measures, saying that market forces would be enough by themselves to keep t= he=20 recession short.=20 Brady's advice brought no comfort to the Republican politicians on Capitol= =20 Hill, who were picking up bad vibes from their constituents. Vice President= =20 Dan Quayle, who was on the GOP fund-raising circuit in 1991, expressed his= =20 frustration that Brady was blocking even modest short-term measures. Histor= y=20 has recorded that Brady was right. The recession was short and recovery -- = as=20 measured by the statisticians -- actually began before the 1992 election. B= ut=20 that did not spare the incumbent president from charges of indifference to= =20 persisting unemployment, and Bill Clinton was elected on a promise to pep u= p=20 the economy.=20 The current Bush has accepted congressional changes in his tax plan that wi= ll=20 apply short-term stimulus to a sluggish economy. But on the energy problems= =20 that began on the West Coast and have swept across the country, Bush II is = as=20 scornful of short-term fixes as his father was a decade ago.=20 This week the administration is releasing its energy plan -- crafted by a= =20 task force under Vice President Dick Cheney -- in an atmosphere of growing= =20 crisis. Even before summer has arrived, California is experiencing rolling= =20 blackouts. Oregon and Washington have sacrificed the salmon runs to save=20 river water for hydroelectric power. Midwest gasoline prices have surged pa= st=20 $2 a gallon. And natural gas prices are sky-high everywhere.=20 When I spent a weekend at Rocky Mountain College in Montana earlier this=20 month, I was astonished to learn that even in that energy-exporting state,= =20 the first phase of deregulation has sent prices soaring and made energy the= =20 hottest issue.=20 In the face of all this, Cheney and Bush have refused to consider temporary= =20 price caps on electric power or any other short-term ``fix'' that violates= =20 free-market principles. The complex of production incentives and conservati= on=20 measures that make up the energy strategy are designed to bring supply and= =20 demand into balance over the next several years, not to provide immediate= =20 relief.=20 That may be sound economics, but it leaves congressional Republicans as=20 nervous as their counterparts were 10 years ago. Rep. Tom Davis, the able= =20 Virginian who heads the National Republican Congressional Committee, told m= e=20 last week that he is hearing more worries from his colleagues about energy= =20 prices than about the overall economy.=20 ``We can stand one bad summer,'' Davis said, ``but if we're facing the same= =20 thing next summer, we've got problems.''=20 DAVIS said he had communicated his party's concerns to the White House. ``D= o=20 they get the message?'' I asked.=20 ``No,'' he said. ``They think in four-year terms; we think in two.''=20 That comment reflects a reality that few politicians are as candid as Davis= =20 in acknowledging. Much as the members of one party's congressional wing may= =20 hope for a president of their own party, who will sign the bills they pass= =20 and help them raise money for their own campaigns, owning the White House= =20 creates dilemmas.=20 The basic political strategy is always set by the president's men, and=20 naturally enough, they think about creating favorable conditions for the ye= ar=20 in which he will run for re-election. They can be more patient, and more=20 oblivious to short-term problems, than those who are focused on the battle= =20 for the House and Senate.=20 Republicans like Tom Davis remember that eight years ago, when the Democrat= s=20 controlled both the White House and Congress, it was Clinton's policy=20 decisions on taxes, trade, guns and health care which left his party so=20 vulnerable that Democrats lost both the House and Senate in 1994. That's th= e=20 risk Republicans are facing now. And that's why they're nervous. David S. Broder is a columnist for the Washington Post.=20 Biggest rate hike in state history=20 Regulators OK increases of as much as 47 percent for some residential users= =20 as the state tries to cope with energy demand.=20 May 16, 2001=20 By KATE BERRY The Orange County Register=20 Juan Infante, an employee at Prehistoric Pets in Fountain Valley, changes a= =20 heat lamp in the cage of a green iguana. Higher electricity rates, as=20 approved Tuesday by the state Public Utilities Commission, may put the heat= =20 on many businesses. Photo: Chas Metivier / The Register ? ? State regulators adopted the largest electricity rate hike in California's= =20 history Tuesday, with Southern California Edison's residential customers=20 facing increases of as much as 47 percent in their monthly bills.=20 The California Public Utilities Commission actually cleared the way for the= =20 increases in March. But it took six weeks for the commission to decide how = to=20 divvy up the hikes among users. The increases are retroactive to March 27 a= nd=20 will appear on electricity bills in June.=20 Though half of all residential customers will pay no increase at all, Ediso= n=20 customers who use more than 130 percent of their "baseline" allocation face= =20 rate hikes of 6 percent to 47 percent. The percentage increases get even=20 higher for energy guzzlers. The baseline allocation is a subsistence level = of=20 electricity use that varies around the state, depending on region and=20 climate.=20 The rate increases became a foregone conclusion after the state began=20 spending as much as $100 million a day buying power for customers Edison an= d=20 Pacific Gas & Electric. But the rate increase was not without its dissenter= s.=20 "What we have here is an economic recipe for disaster," said Commissioner= =20 Richard Bilas, one of two PUC commissioners who voted against the rate plan= .=20 Customers of San Diego Gas & Electric and Anaheim Public Utilities aren't= =20 included in the rate increases. Democrats want energy price limits=20 Lawmakers counter Bush plans with monetary incentives and conservation.=20 May 16, 2001=20 By DAVID ESPO The Associated Press=20 WASHINGTON - Eager to draw a contrast with President George W. Bush, House= =20 Democrats are unveiling an energy blueprint that calls for the government t= o=20 hold down price increases for electric power while sparing environmentally= =20 sensitive areas from oil and gas exploration.=20 The plan also includes proposed tax credits of up to $4,000 for the purchas= e=20 of energy-efficient homes and cars and additional tax incentives for=20 businesses to invest in energy-efficient technologies or vehicles.=20 "Democrats believe in a balanced national energy policy that helps consumer= s=20 by both increasing energy production and reducing energy demand," they said= =20 in an energy blueprint drafted for unveiling by House Minority Leader Dick= =20 Gephardt, D-Mo., and other lawmakers.=20 "The Bush administration is merely following the same tired old Republican= =20 playbook: cast blame, insist on extreme anti-environmental proposals, and= =20 provide American families with no real help now or very little in the=20 future."=20 The White House embraced portions of the Democratic plan, singling out=20 provisions that would encourage residential weatherproofing, conservation a= nd=20 renewable fuels.=20 "The energy plan offered by the Democrats on the Hill has some areas of=20 overlapping commonality with the plan that the president is about to propos= e=20 and the president looks forward to working with Congress on those areas,"= =20 spokesman Ari Fleischer said.=20 But he cited other provisions that "do not go in the right direction,"=20 including the electricity price caps and Democrats' call that Bush show=20 willingness to tap the nation's Strategic Petroleum Reserve.=20 Gephardt, Rep. Martin Frost of Texas, Rep. Bob Filner of San Diego and othe= rs=20 arranged to release the proposal at a service station a few blocks from the= =20 Capitol where gas lines formed during the energy crisis of the late 1970s.= =20 Democratic sources, who spoke on condition of anonymity, described the plan= =20 in advance.=20 The Democrats drew up their proposal as a contrast to the policy that the= =20 president is expected to release Thursday.=20 Political leaders in both parties say rising energy costs are becoming a mo= re=20 significant concern of average Americans, in part because of higher fuel=20 prices and in part because of the potential for a return to rolling blackou= ts=20 in California.=20 Democrats intend to propose a blend of government intervention, tax breaks= =20 and additional federal funding to hold down prices and encourage energy=20 efficiency in the short-term, and to increase domestic supplies in the=20 future.=20 House Democrats offer their own energy proposals=20 House Democrats unveiled their own energy plan Tuesday in advance of=20 Thursday's release of the Bush administration's strategy to combat high=20 electricity and gasoline prices:=20 Highlights include:=20 Support for California Democratic Sen. Dianne Feinstein's bill to allow=20 cost-based price controls in Western states.=20 Call on OPEC and other oil producers, including Mexico, to increase=20 production.=20 President George W. Bush should be willing to release crude oil from the=20 Strategic Petroleum Reserve.=20 Congress should hold hearings on the energy industry's pricing practices to= =20 see if price gouging has occurred.=20 Tax credits for energy efficiency, including up to $4,000 toward the purcha= se=20 of energy-efficient homes, retrofitting existing homes for energy efficienc= y,=20 and the purchase of vehicles with new fuel-saving technology.=20 Up to a 30 percent investment tax credit for business investment in renewab= le=20 energy generation.=20 Add money to LIHEAP, the program to assist the low income with high energy= =20 costs.=20 Federal government facilities should match California's 20 percent=20 conservation goal during serious power alerts.=20 $200 million to help federal facilities and public schools make their=20 buildings more energy-efficient.=20 Increase funding for research and development of alternative fuels and othe= r=20 technologies that would reduce U.S. reliance on imported fossil fuels. Energy notebook=20 Electricity-bond delay lowers state credit standing.=20 May 16, 2001=20 NEW YORK - California's credit ratings were lowered one notch by Moody's=20 Investors Service after the state said that a $13.4 billion bond sale neede= d=20 to cover the cost of buying electricity would be delayed until August.=20 Moody's lowered its rating on $19.8 billion of California general-obligatio= n=20 bonds to "Aa3" from "Aa2."=20 Moody's also lowered its rating from "Aa3" to "A1" on $5.7 billion of lease= =20 bonds backed by the state's general fund.=20 In other news:=20 California may see blackouts this summer almost five times more often than= =20 the state's power officials had estimated, according to a national group th= at=20 monitors and coordinates U.S. power supplies.=20 The state will be 4,500 to 5,500 megawatts short of power during peak summe= r=20 demand times, resulting in about 15 hours of blackouts a week, the North=20 American Electric Reliability Council said.=20 The California Independent System Operator, which runs the power grid, had= =20 expected a shortfall of 2,000 to 4,000 megawatts.=20 Southern California Gas Co., the nation's largest gas utility, announced=20 plans Tuesday for a $40 million expansion to keep pace with the state's=20 growing demand for electricity.=20 SoCal Gas, a unit of San Diego-based Sempra Energy, will add capacity for= =20 enough gas to power three 500-megawatt power plants that could provide enou= gh=20 electricity for 1.5 million homes.=20 Burden falls on residents=20 Heeding business arguments, the PUC approves electricity-rate increases tha= t=20 will make those who use more pay more.=20 May 16, 2001=20 By KATE BERRY The Orange County Register=20 The state's Public Utilities Commission made last-minute changes to an=20 electricity rate increase Tuesday that shift some of the higher burden to= =20 residential customers while giving businesses that operate during peak hour= s=20 a break.=20 The commission came under intense pressure from business groups, who said i= t=20 was unfair to exempt nearly half of the 9 million customers of Southern=20 California Edison and Pacific Gas & Electric from the tiered rate hikes.=20 Customers with low incomes, those on medical assistance and those who use a= =20 relatively small amount of power are exempt by law from higher rates.=20 "We believe the rate increases should be distributed in equal percentages= =20 across all customers," said Lisa Briggs, a spokeswoman for Conexant System= =20 Inc., a Newport Beach maker of telecommunications chips.=20 Jack Stewart, president of the California Manufacturers and Technology=20 Association, said residents should bear the brunt of the rate increases.=20 "It costs less to deliver power to a large user than a residential user," h= e=20 said.=20 Under the plan adopted Tuesday, residential consumers who use the most=20 electricity will see their bills rise an average of 37 percent, compared wi= th=20 the average of 34 percent that was proposed a week ago. Those residential= =20 customers covered by the increases will pay average rates of 22.4 cents a= =20 kilowatt-hour, up from 15.2 cents.=20 The PUC cut the increase in rates for large business customers during peak= =20 summer hours from what was proposed earlier. And it expanded the increase f= or=20 nonpeak usage.=20 "Every consumer in California is justified in feeling outrage at the rates = we=20 approve today and the bills they will have to pay tomorrow," said Loretta= =20 Lynch, the president of the PUC. "These choices please no one, least of all= =20 ourselves."=20 The $5 billion raised by the rate increases will be used to repay the state= =20 for power purchases.=20 THE MORE YOU USE, THE MORE YOU PAY=20 Under the tiered rate structure for residential customers, the increases ar= e=20 larger for heavy power users. Edison's residential customers who use the mo= st=20 power will pay 71 percent more for the last kilowatt-hours they use each=20 month, or a maximum rate of 25.94 cents a kilowatt-hour for usage above 300= =20 percent of their "baseline" allocation. The baseline allocation is a=20 subsistence level of energy use that varies around the state depending on= =20 climate and region.=20 David LaPlante, manager at Prehistoric Pets, an exotic pet shop in Fountain= =20 Valley, said small businesses will be hit hard by the rate increases.=20 At his 10,000-square-foot retail store, a 15-foot python lounged under=20 fluorescent lights while small reptiles lazed under heating lamps.=20 "I think it's a joke - they want to keep big companies like Edison from=20 failing, but they don't think about the little companies like ours," LaPlan= te=20 said.=20 His shop houses 2,000 lizards, turtles, snakes and other reptiles, and=20 doesn't have many options when it comes to conserving energy.=20 "In this type of business we have huge overhead with animals to feed and ta= ke=20 care of," he said. "This is not like a diamond ring you put in the cupboard= ."=20 'We have a ton of Laundry'=20 Cathy Ciuffetelli, an Irvine mother of three, could see her monthly=20 electricity bill jump to more than $110, from $80.67 last month. She said t= he=20 rate increase will hit families extremely hard.=20 "It's kind of scary," she said. "During the summer months, we're home all= =20 day, so I have to use air conditioning.=20 "I work from home, so I'm on the computer all day long, and we have a ton o= f=20 laundry," she added. Electric utility rates are extraordinarily complex, wi= th=20 14 different customer classes depending on the level of energy use.=20 Farmers face average rate increases of 18 percent, down from an earlier=20 proposed jump of 23 percent.=20 The plan, proposed by Lynch, caps rates for Edison's industrial customers a= t=20 12.9 cents a kilowatt-hour, a 50 percent increase. It also requires federal= =20 buildings to become part of a pilot program in which they would pay market= =20 pricesfor wholesale electricity.=20 Several commissioners, including two who voted for the rate plan, voiced=20 strong reservations.=20 All of the commissioners conceded that the rate increases could have a=20 crippling effect on the California economy. But the two commissioners=20 appointed by former Gov. Pete Wilson, who spearheaded the state's adoption = of=20 electricity deregulation in 1996, attacked what they saw as a politically= =20 driven assault on businesses and big residential users.=20 "This is political and social policy, masquerading as economics," said=20 Commissioner Richard Bilas, who dissented with Commissioner Henry L. Duque = on=20 the rate plan, which passed by a 3-2 vote. "We risk plunging the state back= =20 into the same recessionary conditions that set the stage for electricity=20 restructuring in the first place," Bilas said.=20 BITING THE BULLET ON HIGHER BILLS=20 Business executives expressed concern that the rate hikes came at an=20 inopportune time as the economy slows.=20 "We're anticipating a 42 percent to 46 percent increase," or an extra=20 $300,000 a year, said George Harwood, vice president of Printronix Inc., an= =20 industrial-printer maker in Irvine. The company plans to install a=20 1,500-kilowatt generator this summer and is waiting for the PUC to approve = a=20 program that would allow businesses to resell excess generation back to the= =20 state's utilities.=20 High-tech companies weren't looking forward to the rate hike, but saw few= =20 alternatives Tuesday.=20 "We can't not pay the bill," said Linda St. Clair, facilities manager at=20 FileNet, a software developer with seven office buildings in Costa Mesa.=20 Gary Parkinson, the owner of the Summit House restaurant in Fullerton and t= he=20 president of the California Restaurant Association's Orange County chapter,= =20 said he has raised menu prices twice this year and will have to find other= =20 ways to absorb the new electricity expenses.=20 "We're just going to have to reduce costs and be frugal," Parkinson said.= =20 "Why would anyone look to California to build new restaurants?"=20 Register staff writers Elizabeth Aguilera, Andrew Bluth, Chris Farnsworth a= nd=20 Tamara Chuang contributed to this report.=20 Anaheim Mills runs out of gas=20 Energy =01=07 The fabric-dyeing business shuts down after its monthly natur= al-gas=20 bills rise five-fold in the past year.=20 May 16, 2001=20 By DANIELLE HERUBIN The Orange County Register=20 Anaheim - Anaheim Mills Corp., a fabric dyer, has closed its doors, saying = it=20 can no longer afford to pay rising natural-gas prices.=20 The closure, completed Friday, puts about 120 workers out of work.=20 "Our (gas) bills used to average $30,000 to $40,000 a month, now $150,000 t= o=20 $200,000 a month has been the average," said Steven Lieberman, vice preside= nt=20 of Anaheim Mills.=20 Lieberman said the company, which has annual revenue of more than $6 millio= n,=20 is trying to find an alternative source of natural gas. If it can't find an= =20 alternative, Anaheim Mills will declare bankruptcy, he said. Most of Anahei= m=20 Mills' customers have moved their business to East Coast companies.=20 Like other dyeing companies in Southern California, Anaheim Mills had been= =20 buying natural gas on the spot market and having it piped directly from a= =20 Texas supplier.=20 Southern California Gas, the company's old supplier, discourages larger use= rs=20 such as Anaheim Mills from buying directly from them, Lieberman said.=20 For more than a year, the price of natural gas supplied to Southern=20 California users has been climbing.=20 Lieberman said the company was able to absorb the early cost, even finishin= g=20 2000 in the black. But the company has been losing money steadily each mont= h=20 this year as the gas needed to run fabric dryers and ovens skyrocketed.=20 Anaheim Mills isn't alone.=20 U.S. Dyeing and Finishing in Garden Grove closed its Vernon fabric-dyeing= =20 facility recently, laying off about 80 people. The Garden Grove plant also= =20 laid off about 50 workers.=20 And Pico Rivera-based L.A. Dye & Print Works Inc. is also closing its doors= ,=20 laying off about 1,500 people.=20 Scott Edwards, president of the Association of Textile Dyers Printers and= =20 Finishers of Southern California, said gas prices for textile companies hav= e=20 gone up eight-fold in the past year. He said although prices have risen=20 elsewhere in the nation, California is the worst.=20 "What has been hurting us is the unprecedented rise in transporting gas to= =20 the California border," Edwards said.=20 The textile industry, which includes dyeing, printing, cutting and sewing,= =20 was once nearly nonexistent in Southern California. The entire textile=20 industry has grown to about 115,000 people.=20 There were about 15,000 textile dyers and printers employed in the area at= =20 the beginning of the year. The sector serves Southern California's burgeoni= ng=20 fashion-design industry. Judge: Memo hints at gas market abuse=20 FERC official comments on El Paso Corp.'s actions that affected California= =20 prices.=20 May 16, 2001=20 By SUZANNE GAMBOA The Associated Press=20 WASHINGTON - A federal regulatory judge said Tuesday that a memo in a natur= al=20 gas supply case implies the market was abused to drive up California energy= =20 costs last year.=20 The memo "certainly has statements in it that could lead one to believe the= re=20 was an abuse" of the gas market, Curtis Wagner, the Federal Energy Regulato= ry=20 Commission's chief administrative law judge, said in a hearing.=20 California regulators have pointed to the memo to accuse Houston-based El= =20 Paso Corp. of using its market power to inflate the price of natural gas so= ld=20 in California last year by as much as $3.7 billion.=20 El Paso Corp. owns a gas marketing company, El Paso Merchant, and one of th= e=20 largest pipelines connecting Southwest gas fields to California. The compan= y=20 has denied the allegations.=20 Wagner wouldn't release the memo, dated Feb. 14, 2000, and attorneys wouldn= 't=20 discuss the contents.=20 The New York Times has reported that El Paso Merchant said in a Feb. 14,=20 2000, memo that it would have "more control" of gas markets because of a de= al=20 it made with El Paso Natural Gas that gave it the right to ship 1.2 billion= =20 cubic feet of gas a day on El Paso's pipeline.=20 The deal accounted for about 30 percent of the pipeline's capacity and abou= t=20 one-sixth of California's daily demand.=20 El Paso Merchant attorney Bill Scherman dismissed the significance of the= =20 memo during a hearing break.=20 "When those documents are revealed, we believe it will show those documents= =20 are consistent with the position we've taken in this case, that we did not= =20 exercise market power," Scherman said.=20 The regulators have alleged that the El Paso Corp. subsidiary kept other=20 natural gas suppliers from using its pipeline by offering use of unused=20 pipeline capacity at unreasonable prices and terms.=20 Natural gas prices have soared in the California market and remain=20 substantially higher than prices in other parts of the country. While=20 wholesale gas has been selling in the range of $5 per thousand cubic feet a= t=20 most trading points, it has been as much as $14 at the California border.= =20 Wagner's ruling is expected in June. The full Federal Energy Regulatory=20 Commission can accept or reject his ruling.=20 The hearing began Monday and should continue through next week. By David Wagman [email protected] This is the first in a three-part series examining the Northeast's debate= =20 over three key issues: generation, transmission and environment. How the=20 region deals with these issues could become a model for the rest of the=20 country. All politics are local. That's what the late Speaker of the U.S. House of= =20 Representatives Thomas P. "Tip" O'Neill liked to say. Given recent energy= =20 industry events in his native Northeast, O'Neill would probably see little= =20 reason to say otherwise. So when the Bush administration's national energy policy is released, it wi= ll=20 face its first trial in the court of local opinion. Recent debate in the=20 Northeast on three key issues of local and national importance=01*generatio= n,=20 transmission and the environment=01*may suggest how the wider discussion ma= y=20 unfold across the U.S.=20 On these three issues local politics in the Northeast are driving decisions= =20 having broad regional implications. Local politics also are evident as=20 nascent wholesale power markets challenge the way states deal with common= =20 issues.=20 Political strains may soon show through if power shortages hit parts of the= =20 Northeast this summer. A relatively benign summer power outlook issued=20 earlier this month by the Northeast Power Coordinating Council (NPCC) may= =20 mask larger issues. In its assessment, NPCC said the region=01*which stretc= hes=20 from New York City through Boston and into northern Canada=01*should have= =20 surplus capacity during the peak week for demand, expected around July 15.= =20 EXPECTED LOAD AND CAPACITY FORECASTS=20 SPREADSHEEThttp://public.resdata.com/ei_departments/lead/load_forecast.xls However, the details show a less certain picture. NPCC forecasts 4,900 MW o= f=20 excess capacity, but says 4,000 MW of that is locked up in Quebec and the= =20 Canadian Maritime provinces where transmission bottlenecks will block most = of=20 that extra power from reaching U.S. markets. The U.S. portion of NPCC could= =20 end up with no more than 1,000 MW of reserve capacity at a time when peak= =20 demand is expected to reach 54,000 MW.=20 Existing transmission lines across parts of New York state are all but maxe= d=20 out and can't be relied on to deliver much additional power to New York Cit= y.=20 Transmission constraints mean that some 80% of New York City's power needs= =20 (and 98% of Long Island's) must be met through local generation. In testimo= ny=20 before a legislative panel in March, New York Public Utility Commission Cha= ir=20 Maureen O. Helmer said that if summer temperatures reach levels hit in July= =20 1999, demand in New York City alone could top 11,000 MW and outstrip=20 available supplies by more than 850 MW.=20 Unlike California, where little generating capacity was added during the=20 1990s, new power plants are being built in the Northeast. But new plants ar= e=20 only part of the equation. Transmission line owners say they lack financial= =20 incentives to upgrade connections to help ensure that newly built, low-cost= =20 plants are dispatched. Transmission congestion in New England has risen=20 sharply since 1999 and is expected to double in and around Boston by 2005.= =20 "If there's a bottleneck, then the cheapest power plant may not be=20 dispatched," said Ian Davis, vice president of transmission for National Gr= id=20 USA, which controls roughly 30% of New England's transmission network.=20 These issues and others will resonate across the U.S. and Canada as=20 politicians, utility executives, special interest groups and consumers look= =20 for a balance among rising electric demand, environmental and lifestyle=20 protection and the need to make a buck.=20 Binary world Here's the irony: In its simplest form, today's digital economy relies on= =20 binary computer code to either turn a system "on" or "off." As demand for= =20 power grows, the options for electric power appear increasingly binary, too= .=20 "You can build a transmission line and a power plant, or sweat in the dark,= "=20 said Doug Logan, principal with RDI Consulting. "Take your pick."=20 Energy's current calculus values local opinion greatly when it comes to pow= er=20 plant and transmission line siting, and on issues related to the environmen= t.=20 That makes it tough for regional and national points of view to be heard.= =20 This, in turn, affects efforts to set up regional energy markets and=20 reinforce the grid, among other things.=20 Local groups vowing "not in my back yard" have scuttled power plant and=20 transmission line plans, including Cisco Systems' successful effort to bloc= k=20 a power plant proposed for its Silicon Valley corporate park. On the=20 environmental front, states appear willing to adopt strict measures, even i= f=20 they risk part of their generating capacity. Recent rules in Massachusetts= =20 targeted six in-state power plants, whose output accounts for fully 40% of= =20 the state's electric generation.=20 "Siting always comes down to very local issues," said National Grid's Davis= .=20 "These projects move from bad news to worse news to slightly better news."= =20 In late March, the Connecticut Siting Board voted 7-1 to reject TransEnergi= e=20 U.S. Ltd.'s proposal to build a $125 million, 330-MW transmission cable=20 beneath the waters of Long Island Sound to Long Island, N.Y. Though the Lon= g=20 Island Power Authority had identified the project as critical to improving= =20 its access to off-island power supplies, the Connecticut Board said the lin= e=20 would have little, if any, direct benefit to Connecticut and rejected it.= =20 "It's hard to imagine a decision more parochial," said Ashley Brown,=20 executive director of the Harvard Electricity Policy Group. The siting boar= d=20 "didn't look at the benefits to New York or the region."=20 In April, Massachusetts Gov. Jane Swift announced new power plant emission= =20 rules to curb nitrogen oxide, sulfur dioxide, mercury and=01*for the first = time=20 at the state level=01*carbon dioxide. One source said the rules move away f= rom a=20 decade of work on regional air quality solutions and toward more local=20 assertiveness. "It's incongruous," the source said. "As we're getting large= r=20 competitive markets, we see legislatures becoming more specific" in writing= =20 emission control rules.=20 Also in April, a report by New York State Electric & Gas Corp. (NYSEG)=20 criticized a statewide assessment by the New York Independent System Operat= or=20 (ISO) on issues including power plant siting. The plant permitting process= =20 has not worked, NYSEG said. "Delayed in-service dates for new generation ar= e=20 the rule for power plants in New York," the report said. NYSEG cited flaws= =20 including lengthy project reviews and local lawsuits designed to block=20 projects.=20 No doubt, introducing competition, establishing new political orders and=20 restructuring markets are proving to be tough. And the process still has a= =20 long way to go.=20 Frontier politics But if power politics in the Northeast appears confused and unsettled,=20 consider that the region's history of cooperation on energy issues is uniqu= e=20 in the U.S., a legacy of its tight power pool structure. On this score the= =20 region may stand a better chance than elsewhere of working out compromises.= =20 In Mississippi and Wisconsin, one source said, transmission lines march to= =20 the state line and stop, their step across the frontier blocked by politica= l=20 decisions on the other side.=20 One sticking point in the Northeast, and elsewhere, has been the slow pace = at=20 which competitive markets appear to be evolving, particularly in terms of= =20 adopting new approaches to help markets operate smoothly.=20 For example, transmission systems were designed to move power from one=20 utility's power plants to its load center, a straightforward and largely=20 local function. The rise of wholesale power markets strains this model by= =20 adding expectations that the lines will also carry power from independent= =20 power producers to more distant load centers.=20 This new use taxes existing lines and complicates the issue of who gets=20 transmission access when. It also raises local bugaboos over sacrificing=20 Farmer Jones' cornfield for a new transmission line, which may have little = if=20 any tangible local benefit. Just this sort of local environmental issue san= k=20 TransEnergie's Long Island Sound proposal in March when environmentalists= =20 pointed to potential risks to local shellfish beds.=20 "A significant need exists to reinforce the grid to keep up with wholesale= =20 sales as well as local load growth," said Joseph S. Graves, a member of=20 Washington, D.C.-based PA Consulting's management group. In a paper publish= ed=20 earlier this year, the company concluded transmission is the industry's=20 weakest link, having changed the least relative to the rest of the industry= .=20 The report also called for a series of investment incentives to encourage= =20 more investment in transmission infrastructure.=20 "Until the health of the transmission sector is improved, the entire electr= ic=20 power industry will underperform," the report said.=20 Underperformance could extend to generating assets, which should have ranke= d=20 among the Northeast's shining accomplishments. After all, the region is one= =20 of the few places building toward a capacity surplus, and surplus is viewed= =20 by many as the key to achieving workable wholesale power markets.=20 Incremental change But transmission constraints and a lack of incentives to expand the grid ma= y=20 hurt power plant developers' efforts to provide new, low-cost,=20 environmentally friendly capacity.=20 "Our strategy is to find financial incentives to deliver additional value t= o=20 customers and our shareholders," said National Grid's Davis. "Competitive= =20 markets mean greater uncertainty. The incentives encourage us to look for= =20 incremental changes that deliver value quickly, rather than build grand=20 schemes that rely on paybacks over 40 years."=20 Since wholesale markets opened in 1999, Davis has seen high levels of=20 transmission congestion in New England, which he says deter efforts to get= =20 the most economical power to customers. Congestion affects Boston and=20 northeastern Massachusetts in particular. There, incumbent power generators= =20 have a competitive advantage as a result, and perhaps an unwillingness to s= ee=20 competitors enter the constrained market, Davis said. Even so, getting new= =20 capacity sited can be a problem, whether in Massachusetts or elsewhere.=20 Choke point In its report last month complaining about local permitting regulations bas= ed=20 on a recent market assessment by the New York ISO, NYSEG said the ISO=20 "unrealistically" assumed 8,600 MW of new generation could be built in the= =20 state by 2005. "Actual experience has shown it can take this long to work= =20 through the ineffective and inefficient licensing process."=20 The siting problem may not be entirely local. A power developer active in t= he=20 region said federal agencies present more of a choke point. In proposing th= e=20 now hotly contested 1,080-MW Athens generating station near the Hudson Rive= r=20 in New York state, PG&E National Energy Group needed approval from the=20 state's siting board, as well as from the Federal Energy Regulatory=20 Commission, the U.S. Environmental Protection Agency, the Army Corps of=20 Engineers, the Federal Aviation Administration, the U.S. Fish & Wildlife=20 Service and the Coast Guard.=20 "There's no one-stop shopping" and time limitations do not exist at the=20 federal level, said Dan Whyte, director of permitting for the Bethesda,=20 Md.-based developer. The developer applied for a permit from the Corps of= =20 Engineers in February 1999 and, as of early May, was still waiting. "That= =20 could not happen at the state level" where permits were issued a year ago,= =20 Whyte said.=20 Indeed, New York state's system gives its siting board 12 months to reach a= =20 yea or nay decision; 18 months if circumstances warrant more deliberation.= =20 Plus, the New York system has strict rules of evidence and tight requiremen= ts=20 to determine who can intervene, standards that don't exist at the federal= =20 level.=20 "We have 31 plants in 19 states and each of those states has a defined=20 process for power plant siting," Whyte said. The federal government "does n= ot=20 have a coordinated process."=20 That may change under the Bush administration's proposed energy policy. Par= t=20 of the proposed policy may include legislation extending federal eminent=20 domain powers to transmission lines as well as natural gas pipelines. Wheth= er=20 a coordinated approach results from the administration's energy policy=20 remains to be seen. What is clear, however, is that state governments and= =20 local ad hoc groups feel little need to wait before acting.=20 All politics are local, Tip O'Neill used to say. Energy only proves his=20 point.=20 PG&E, State Regulators Spar in Court By MICHAEL LIEDTKE AP Business Writer SAN FRANCISCO (AP) _ Contending California regulators are illegally seeking billions of dollars that should be paid to its creditors, Pacific Gas and Electric Co. urged a federal bankruptcy judge to dismantle the accounting framework insulating the utility's customers from additional electricity price increases. Looking to guard its turf, the California Public Utilities Commission portrayed its actions as legal maneuvers protected from federal government interference under the U.S. Constitution. The 2{-hour bout of arguments Monday before U.S. Bankruptcy Judge Dennis Montali represented the first major legal showdown in PG&amp;E's bankruptcy case _ the largest ever filed by a utility. After peppering attorneys from both sides with tough questions, Montali took the matter under submission without providing a timetable for issuing a decision. The complex issue centers on arcane sections of the U.S. bankruptcy code that could sway the balance of power in PG&amp;E's case and determine whether the utility's 4.6 million customers _ or more than 150,000 creditors _ absorb the costs underlying an estimated $13 billion in wholesale electricity purchases made from June 2000 through March 2002. As part of the 1998 deregulation of California's electricity market, PG&amp;E's retail rates were to remain frozen through March 2002 or whenever the utility pooled enough money from above-market rates and asset sales to pay for unprofitable investments made during its long history as a regulated utility. PG&amp;E says it cleared the hurdle for lifting the rate freeze sometime between May 2000 and August 2000 _ around the same time the utility's costs for wholesale electricity began to soar far above the frozen rate charged to its customers. Between January 1998 and May 2000, PG&amp;E accumulated a $2.75 billion operating profit from a favorable gap between its wholesale costs and retail rates for electricity. The utility said it could have proved its case for lifting the rate freeze and passing on its electricity costs if the PUC hadn't adopted new accounting guidelines March 27 _ 10 days before PG&amp;E filed for bankruptcy. Besides changing the accounting rules governing the rate freeze, the PUC's March 27 order also authorized average price increases of up to 40 percent for households and up to 52 percent for businesses. PG&amp;E says those increases _ expected to begin showing up in June electricity bills _ still aren't enough to recoup its costs. National Desk; Section A=20 Bush Task Force on Energy Worked in Mysterious Ways=20 By KATHARINE Q. SEELYE=20 ?=20 05/16/2001=20 The New York Times=20 Page 1, Column 4=20 c. 2001 New York Times Company=20 WASHINGTON, May 15 -- The tiny staff of the Bush administration's Energy=20 Development Task Force is led by two former aides to Senator Frank H.=20 Murkowski, the Alaska Republican who is the chairman of the Senate Energy= =20 Committee. The aides jokingly call themselves the Alaska jihad.=20 But Mr. Murkowksi, when asked recently about the role his former aides,=20 Andrew Lundquist and Karen Knutson, have played in the task force's=20 much-anticipated report, which will be released on Thursday, replied, ''The= y=20 don't tell me anything.''=20 On the eve of the release of the 170-page report, the broad outlines are=20 fairly well known. The plan encourages the production of oil, gas, coal and= =20 nuclear power and calls for some tax credits for renewable energy resources= =20 and a push for conservation. But since the task force's work began in=20 February, most of Washington has remained in the dark about how it operated= ,=20 which arguments it embraced and how it reached decisions on some of the=20 nation's thorniest energy issues.=20 Individuals from the task force have met with more than 400 people from mor= e=20 than 150 groups over the last three months. Mr. Lundquist said today that h= e=20 could not provide a list of all the groups he had spoken with. ''I can't=20 really tell you who, because there are hundreds I've met with,'' he said.= =20 Administration officials also said that they wanted to keep private the lis= t=20 of those they met with to encourage the free flow of ideas. Still, they sai= d=20 that they had talked with a broad range of interested parties.=20 In a recent interview, Vice President Dick Cheney said: ''The staff of our= =20 energy task force has spent time with folks from various pieces, parts, of= =20 the industry. We've also spent time with the environmentalists. I spent a l= ot=20 of time with members of Congress, listening to them, both parties, on energ= y.=20 So the idea that somehow only the energy industry has access just simply=20 isn't true.''=20 But last month, two Democrats on Capitol Hill challenged the secrecy of the= =20 process surrounding the task force, which has met eight times in the last 9= 0=20 days. David S. Addington, counsel to the vice president, responded that it= =20 did not have to provide information about the process because all of the=20 staff members are federal employees. In addition, environmental groups have= =20 requested documentation about task force meetings under the Freedom of=20 Information Act, but so far those have been denied.=20 Democrats and environmentalists say the process was tilted heavily toward t= he=20 coal, gas and oil industries and point out that the energy industry is one = of=20 the biggest contributors to political campaigns, giving $64 million last=20 year, three-fourths of it to Republicans.=20 Among those who said they felt shut out was the Consumer Federation of=20 America, the nation's largest consumer-advocacy group. Howard Metzenbaum, a= =20 Democrat and former senator from Ohio who is now chairman of the group, sai= d,=20 ''The energy crisis is first and foremost a price crisis affecting consumer= s.=20 ''It's an incredible insult to the consumers of this country that, to the= =20 best of my knowledge, none of the consumer organizations were invited to th= e=20 meetings or otherwise participated,'' he said.=20 Juleanna Glover Weiss, Mr. Cheney's spokeswoman, said no invitations were= =20 issued and groups had to request meetings. ''We didn't invite anybody to me= et=20 with us,'' she said.=20 The leaders of about two dozen environmental groups had asked to see Mr.=20 Cheney, whose office turned down their requests. Instead, midlevel staff=20 members from the groups met with Mr. Lundquist and Ms. Knutson.=20 Alys Campaigne, legislative director of the National Resources Defense=20 Council, said that that meeting lasted about 40 minutes but that the size o= f=20 the group inhibited substantive policy discussion.=20 ''We asked who the deputies were on different issues so we could have more= =20 in-depth conversations, and they wouldn't tell us,'' she said. ''They said,= =20 'Just send us paper, we'll take a look at it.' The meeting felt like window= =20 dressing for us, but they got to check off the box that they consulted with= =20 stake-holders.''=20 Mr. Lundquist said he viewed his meeting with the environmental groups as '= 'a=20 good conversation.''=20 Some of the industry representatives who did get audiences with the vice=20 president said the task force's deliberations seemed a mystery to them, too= .=20 John Grasser, a spokesman for the National Mining Association, said: ''We'v= e=20 probably had as much input as anybody else in town.'' But, he added, ''All = we=20 know is what we read in the paper. This is a tight-lipped process. I have t= o=20 take my hats off to them -- they've been able to keep a lid on it.''=20 Richard S. Shapiro, senior vice president of the Enron Corporation, a major= =20 Republican contributor and the nation's largest trader of wholesale=20 electricity and natural gas, said top executives from his firm spent half a= n=20 hour with Mr. Cheney, but he could not tell how much this may have influenc= ed=20 the final report.=20 ''Energy issues are a very high priority, and we've had the opportunity to= =20 provide some input into the process,'' Mr. Shapiro said. ''But it's been=20 difficult to get input in the task force. Other consumer groups have been= =20 weighing in with perspectives. It's not an open-hearing setting.''=20 Tom Kuhn, head of the Edison Electric Institute, the utility lobbying group= ,=20 and a friend of the president's since they were classmates at Yale, saw the= =20 process as relatively open.=20 ''The task force put out the word they were open to input,'' he said in an= =20 interview. He said that his group sent them reports and that some executive= s=20 met briefly with Mr. Cheney.=20 Given all of their interaction with so many groups, Mr. Lundquist denied th= at=20 the process had been secretive. ''I don't think that's fair,'' he said.=20 ''There's been no attempt to make it a secret process. All it's been is an= =20 effort to work on and put out good policy.''=20 California Could Face Cash Crunch Soon --- Spending on Power Worries=20 Treasurer, and Moody's Cuts State Bond Ratings By Rebecca Smith Staff Reporter of The Wall Street Journal 05/16/2001 The Wall Street Journal A2 (Copyright (c) 2001, Dow Jones & Company, Inc.) California's mounting electricity expenditures are putting the state on a= =20 slippery slope that could lead to a cash crunch later this year.=20 And even if the nation's most economically important state is able to arres= t=20 the slide by raising billions of dollars in bonds as it currently=20 anticipates, residents will still face spiraling electricity rates and a=20 mountain of state debt that will affect them for years to come. That is the grim assessment of credit analysts and even the state treasurer= ,=20 who is attempting to assess the long-term costs of a three-year-old=20 experiment in electricity deregulation that has gone badly awry. Sums up Ri= ch=20 Raphael, a credit analyst at Fitch: "The situation is serious, and the stat= e=20 is taking on more and more risk."=20 Yesterday, Moody's Investors Service Inc. lowered its ratings on $25.5=20 billion of state of California bonds, citing "substantial revenue=20 deterioration" caused by the state's slowing economy and "financial risks"= =20 posed by state electricity woes. Last month, Standard & Poor's Ratings Grou= p=20 took a similar step, shortly after the state's biggest investor-owned=20 utility, Pacific Gas & Electric Co. sought bankruptcy-court protection.=20 Moody's action lowered the rating on $19.8 billion worth of general=20 obligation bonds to Aa3 from Aa2 and $5.7 billion in lease revenue bonds to= =20 A1 from Aa3.=20 Moody's says it believes that by August the state treasury will have spent= =20 $10 billion for power, but it conceded that a blackout on pricing informati= on=20 imposed by state officials means estimates are partly guesswork. Raymond=20 Murphy, an analyst in Moody's public-finance group, said "not very much"=20 information has been given to his unit detailing state expenditures for=20 electricity. This is unusual, both because the state is a public entity and= =20 because credit-rating agencies usually are given full access to internal da= ta=20 by clients.=20 The state has been the largest buyer of electricity in the nation since=20 January, when runaway wholesale power costs outstripped the purchasing=20 ability of the state's biggest investor-owned utilities, Edison=20 International's Southern California Edison unit and PG&E Corp.'s Pacific Ga= s=20 & Electric unit. To date, the state has allocated $6.8 billion for=20 electricity purchases.=20 How much the state is paying daily for electricity isn't clear. Since April= ,=20 the state Department of Water Resources, which is purchasing power on behal= f=20 of the utilities, has enforced a ban on the public release of cost=20 information.=20 It pressured the California Independent System Operator to suspend posting = of=20 that information on the ISO's Web site. In a letter sent to the ISO, Water= =20 Resources Deputy Director Ray Hart said "premature disclosure" of price dat= a=20 "disadvantages" the state in its quest to buy electricity at the lowest cos= t.=20 At the time, out-of-state generators were being paid an average of $520 per= =20 megawatt hour for power supplied to the state grid operator.=20 In a Sunday television interview, Mr. Davis said the state last week paid a= s=20 much as $1,900 per megawatt hour for power.=20 If California is paying that kind of price very often, it spells big troubl= e=20 for the state's ability to replenish its coffers. Last week, the state=20 Legislature approved a plan to issue a record $13.4 billion in revenue bond= s,=20 but they can't be issued before mid-August. If there is further delay, says= =20 State Treasurer Philip Angelides, the state will have "significantly=20 depleted" the funds it can tap internally.=20 Indeed, Mr. Angelides says the state will have enough internal resources to= =20 meet its power-purchase obligations through the fall only if average spot= =20 prices are no higher than $195 per megawatt hour during the critical=20 July-through-September time period. If daily prices are substantially highe= r=20 than that, "they will bust the plan," he says. The result, credit analysts= =20 fear, would be a liquidity crisis. The state would have essentially run out= =20 of money before receiving bond proceeds needed to repay the general fund.= =20 Complicating matters is an expected sharp drop in tax receipts. The state= =20 said it expects annual revenue to decline by $3.2 billion for fiscal 2002,= =20 the first drop since 1992.=20 Some people disagree that the state is substantially at risk. S. David=20 Freeman, an energy adviser to Mr. Davis, says the state is following a=20 "sensible plan" to stretch out power costs into future years, when they are= =20 expected to drop substantially. Mr. Freeman argues that higher rates will= =20 prompt greater conservation, reducing the amount of money the state has to= =20 spend. "All this stuff about the economy going under is a bunch of hogwash,= "=20 Mr. Freeman says. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved.

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Energy Issues

Please see the attached articles: SD Union, Sun, 6/3: Poor find more red tape than federal energy aid SD Union, Sun, 6/3: Top energy adviser confident of gaining pact for L.A.= =20 surplus SD Union, Sun, 6/3: Energy firm ties enriched top advisers to president=20 SD Union, Sun, 6/3: Report: State may have little money left to head of=20 blackouts SD Union, Sat, 6/2: San Onofre reactor back on line, sending power to state= =20 grid SD Union, Sat, 6/2: State files to manage energy on its own SD Union, Sat, 6/2: Escondido not running power plant process, ex-official= =20 says=20 SD Union, Sat, 6/2: PG&E bankruptcy judge won't challenge state regulation SD Union, Sat, 6/2: New majority leader says nay to electricity price caps LA Times, Sun, 6/3: Watchdogs Take a Hit in State's Power Ills LA Times, Sat, 6/2: Duke Charged Record Price for Electricity=20 LA Times, Sat, 6/2: Incoming Senate Leader Daschle Lukewarm on Power Price= =20 Caps LA Times, Sat, 6/2: PUC May Trip Bailout of Edison LA Times, Mon, 6/4: Better Than Bankruptcy (Commentary) SF Chron, Mon, 6/4: Electricity usage shrinks by 11%=20 State's consumers beat goal set by governor SF Chron, Mon, 6/4: Enron is my spiritual teacher (Commentary) SF Chron, Mon, 6/4: Change in Senate control slows Bush's energy plan SF Chron, Mon, 6/4: Developments in California's energy crisis SF Chron, Mon, 6/4: Electricity usage shrinks by 11%=20 State's consumers beat goal set by governor SF Chron, Mon, 6/4: Gov. Davis -- please act SF Chron, Mon, 6/4: Power buying by cities gets Assembly OK=20 S.F. could contract for cheaper electricity if bill becomes law SF Chron, Sun, 6/3: Critics say FERC ignored California's deregulation fla= ws=20 Mercury News, Mon, 6/4: New market overwhelms U.S. agency=20 Mercury News, Mon, 6/4: U.S. agency's actions invited power disaster=20 Mercury News, Mon, 6/4: Gov. Davis, by failing to act, is to blame for ener= gy=20 crisis (Commentary) OC Register, Mon, 6/4: Conservation paying off OC Register, Mon, 6/4: O.C. firms' energy-saving moves Individual.com (Businesswire), Mon, 6/4: Pacific Gas and Electric Company= =20 Launches=20 Campaign to Enhance Outage Preparedness; State Predicts More Power Shortage= s=20 In Coming Weeks And Months=20 Individual.com (Businesswire), Mon, 6/4: PG&E Issues Statement After Court= =20 Decision=20 On Its Request for Stay=20 WSJ, Mon, 6/4: The Pros and Cons of Power Price Caps=20 ---------------------------------------------------------------------------= --- ---------------------------------------- Poor find more red tape than federal energy aid=20 By Jeff McDonald? UNION-TRIBUNE STAFF WRITER=20 June 3, 2001=20 When George W. Bush arrived in California last week for the first time as= =20 president, he quickly reaffirmed his belief that temporary price caps would= =20 do nothing to reverse the runaway energy costs plaguing the Golden State.= =20 Bush did, however, offer to stir an extra $150 million into the pot of=20 government money doled out each year to help poor families pay their utilit= y=20 bills.=20 If lawmakers approve that gesture, a share of those proceeds could end up a= t=20 Metropolitan Area Advisory Committee, known as MAAC, and Campesinos Unidos= =20 Inc., the only agencies through which federal energy-assistance dollars=20 headed into San Diego County may pass. For some, that is a worrisome prospect.=20 The two nonprofit organizations oversee millions of dollars in government= =20 assistance to low-income San Diego-area families that need help meeting the= ir=20 energy payments and weather-proofing their homes.=20 For hundreds of senior citizens on fixed incomes and cash-strapped househol= ds=20 struggling to stay afloat, applying for the Low-Income Home Energy Assistan= ce=20 Program can be an impossible task.=20 Office hours can be sketchy. Telephone messages often go unanswered.=20 Applications by mail are returned for minor omissions, pushing back relief= =20 for desperate people with overwhelming debt or pending shut-off notices.=20 "I've been on the phone for two solid weeks and nobody tells me anything,"= =20 said Brenda Hunt, a crossing guard from Santee who has been trying to secur= e=20 help paying down a $1,500 utility bill racked up by her elderly parents.=20 "It's frustrating."=20 The federal program started in the 1970s as a modest effort to help poor=20 families. At the time, it was minuscule by Washington standards. The energy= =20 assistance program since has ballooned into a $1.8 billion appropriation.= =20 The cost of administering the block grants and complying with onerous=20 reporting rules often diverts resources from their primary purpose.=20 Huge chunks of money intended for social services and energy assistance=20 instead pay for salaries, lawyers, accountants, travel bills and a range of= =20 unspecified expenses, a review by the Union-Tribune has found.=20 "The irony is the government demands a high level of reporting, but doesn't= =20 want to look at it very closely," said Peter Manzo, who directs the Center= =20 for Nonprofit Management in Los Angeles. "It's a real administrative burden= ."=20 Last year, with special emergency allocations, MAAC and Campesinos Unidos= =20 received more than twice the federal money for low-income energy assistance= =20 -- and aided more than twice as many clients -- than they had in each of th= e=20 two previous years.=20 Campesinos Unidos, Spanish for "united farm workers," is an Imperial=20 County-based social service agency that received more than $4 million last= =20 year to help needy families with utility bills, and millions more to run=20 preschool and other programs. It provided energy assistance to 11,500 clien= ts=20 in 2000.=20 According to tax records required to be made public, the agency spent $4.5= =20 million on salary and benefits for 220 employees, $260,000 on attorneys and= =20 $178,000 on travel, among other expenses, on 1999 income of $7.2 million.= =20 Overhead costs at MAAC also eat up 65 percent of the money taken in by the= =20 National City-based social service agency. MAAC provides energy and housing= =20 assistance, a preschool, and drug-and alcohol-abuse programs.=20 MAAC received more than $2.2 million in energy assistance grants and assist= ed=20 6,000 people in 2000.=20 From a total revenue of $11.1 million, MAAC paid more than $6.1 million in= =20 salary and benefits to its 275 workers, an additional $1 million in=20 professional fees and almost $170,000 for phone service, recent IRS filings= =20 show.=20 In outside audits required by the state, both organizations were cited for= =20 lax records or internal financial controls. Two years ago, Campesinos Unido= s=20 emerged from Chapter 11 bankruptcy, which it sought after paying a $600,000= =20 judgment in a sexual harassment case.=20 Officials from the nonprofits say the cost of running the variety of progra= ms=20 is in line with what other agencies spend. They said they meet all=20 restrictions attached to the money.=20 "We can only spend X-number of dollars on administration," said Campesinos= =20 Unidos director Jose M. Lopez, who reports to a board made up entirely of= =20 Imperial County residents. "We cannot spend more than the formula tells us= =20 to."=20 Modest beginnings Federal energy-assistance began as a 1974 pilot project in Maine with a=20 $478,000 grant. Aid expanded through the years and by 1982, the Low-Income= =20 Home Energy Assistance Program received $1.8 billion a year.=20 The 2002 budget plan pitched by Bush includes $1.7 billion in=20 energy-assistance spending released to states in grants by the U.S.=20 Department of Health and Human Services. Other money is awarded by the=20 federal Department of Energy.=20 State governments disperse the funds locally, either directly to counties o= r=20 to nonprofits such as MAAC and Campesinos Unidos. Much of the money goes to= =20 the densely populated Northeastern states to help reduce home heating costs= .=20 In California, which ranked sixth among the 50 states with $83 million in= =20 energy-assistance funding, the cash is distributed by the little-known stat= e=20 Department of Community Services and Development.=20 Eleven field monitors oversee the 44 local agencies that hand out relief=20 dollars, and inspections are few. Four staff auditors review financial=20 reports filed by the agencies receiving the federal grants. No suspensions = or=20 disciplinary action has been taken against any of the contractors, official= s=20 say.=20 "We try to get out to each agency at least once every two years," said Toni= =20 Curtis, chief deputy of the Department of Community Services and Developmen= t.=20 "In the interim, we do what's called a desk-monitoring evaluation."=20 Those reports are written by state monitors based on telephone calls to the= =20 agencies. All agencies that give out federal money and weather-proof homes= =20 must file bi-monthly work summaries in Sacramento.=20 The law requires participating agencies to spend no more than 8 percent of= =20 the energy assistance grant money on administration. To meet that standard,= =20 the cost of offices, staff, phone service and other needs typically is spre= ad=20 around other budgets within the nonprofit structure.=20 Rules specify that energy assistance applications be prioritized in favor o= f=20 disabled people, seniors and families with young children. There are far mo= re=20 eligible households than can be served before the money runs out.=20 Best-kept secret Help for underprivileged families dealing with rising energy costs extends= =20 beyond the federal assistance. San Diego Gas and Electric steers needy=20 customers to other programs funded by ratepayers, donors and state tax=20 dollars.=20 Gov. Gray Davis signed legislation last month requiring utilities to enroll= =20 more customers in the CARE program, an under-used effort that discounts rat= es=20 for low-income customers with money paid by utility customers.=20 Less than 60 percent of the 225,000 households eligible for that program si= gn=20 up, a ratio that SDG&E was told to improve.=20 The overwhelming leader in energy subsidies is the federal low-income=20 assistance plan. Many San Diego County residents worry that too little of= =20 that money makes its way to needy families.=20 "It's not a fair and equitable distribution of government money," said Dean= =20 Russo, a disabled Point Loma man who qualified for a $200 credit on his SDG= &E=20 bill after writing dozens of letters to state officials.=20 "It's the best-kept secret in government: that there's money available but = no=20 outreach to tell people about it. They give out a phone number, but there's= =20 nobody there to answer the phone."=20 MAAC and Campesinos Unidos set aside just a few hours a week to schedule=20 appointments. Because of the volume of calls they receive, getting through= =20 can be like winning the lottery. Critics say the agencies do too little=20 outreach, and that they can be slow to respond to pleas for help.=20 Jill Van Cleve, a 61-year-old Ramona woman who gets by on disability, maile= d=20 what she thought was a completed application for SDG&E credit early this=20 year. Campesinos Unidos returned the paperwork weeks later, saying it was= =20 missing details that Van Cleve said she could have provided by telephone.= =20 "I felt they were playing a shell game as to which documents I needed to=20 provide them with to establish my eligibility," she said.=20 Long before electricity rates spiraled out of control in San Diego County= =20 last year, MAAC program manager Sandra Cordova heard such complaints. There= =20 may never be enough money to help everyone who qualifies, Cordova said.=20 "Even when we got $2.6 million in emergency relief from President Clinton= =20 last July, it was still not enough," Cordova said.=20 Questions raised There is no general standard among charities for how much money should be= =20 spent on administration and overhead vs. how many dollars are directed to t= he=20 cause, nonprofit consultants say.=20 Guidelines from the Council of Better Business Bureaus suggest that=20 fund-raising and administrative expenses be kept below 50 percent of the=20 organization's total income.=20 The appropriateness of nonprofit spending can be affected by a variety of= =20 factors, but most important is the specific mission of any particular=20 charity, said Manzo, the Los Angeles management consultant.=20 "But if people aren't getting service, that's an issue," he said. "There ma= y=20 be things they could be doing differently."=20 The paperwork can be daunting.=20 Tax statements filed by MAAC and Campesinos Unidos contain apparent=20 oversights. For the year ending June 1999, Campesinos Unidos failed to deta= il=20 the number of clients served, and reportedly paid no contractor more than= =20 $50,000 even though it spent more than $1 million on lawyers, travel and=20 other services or supplies.=20 MAAC reported in 1999 that it paid $5.3 million to its officers and=20 directors, when it should have attributed that sum to all employees.=20 Both groups spent little or nothing on fund raising -- a management policy= =20 that may work against the charities' missions, Manzo said. Soliciting priva= te=20 donors could raise unrestricted money for additional projects.=20 Roger Caldwell, MAAC senior vice president, is aware of past bookkeeping=20 problems and said new computer software to improve the system already is on= =20 order. Board members are weighing whether to expand fund raising, but they= =20 worry about diverting resources from existing programs.=20 "We do the best we can with what we have," Caldwell said. "We're trying to= =20 address the needs of clients. That's where we've been directing our service= s." =20 Top energy adviser confident of gaining pact for L.A. surplus=20 By Danny Pollock=20 ASSOCIATED PRESS=20 June 3, 2001=20 CALIFORNIA'S POWER CRISIS=20 LOS ANGELES -- California's top energy adviser vowed yesterday that the sta= te=20 will get a guarantee from its biggest municipal supplier to provide power= =20 through the summer.=20 "We will get (a contract) in the next few days, one way or another" from th= e=20 Los Angeles Department of Water and Power, S. David Freeman told an energy= =20 summit in Studio City.=20 "We want a contract for all its surplus over the summer," he said.=20 Freeman, former head of the department, did not provide details. But his=20 remark follows recent warnings by Gov. Gray Davis that he was prepared to u= se=20 executive authority, if necessary, to obtain power from municipal utilities= =20 and other providers at lower rates.=20 The governor has accused city utilities of gouging the state.=20 Freeman said the department, the state's largest municipal utility, has mad= e=20 $300 million in profits by selling its excess power to the state's energy= =20 grid.=20 During a panel discussion, department assistant general manager Henry=20 Martinez said the agency is continuing contract negotiations with the state= .=20 "We're willing to negotiate .?.?. to make excess power available, but we ha= ve=20 to make sure the city is taken care of first," Martinez said.=20 Los Angeles wants to ensure it won't face blackouts or big rate increases i= f=20 it makes a long-term deal to sell some of its power, he said.=20 Californians are facing rolling blackouts this summer, even though Davis ha= s=20 expedited the building of more than a dozen new power plants.=20 Freeman said new plants would ease the energy crunch, and California should= =20 be able to meet its demand by next year. The state could begin producing=20 surplus power within two years, he said.=20 "By 2003, we will have the problem behind us," Freeman said. "We are not=20 fighting the war on drugs. We are breaking the back of the problem one powe= r=20 plant, one efficient refrigerator and one wind plant at a time."=20 There were no power alerts yesterday as electricity reserves stayed above 7= =20 percent because of lower temperatures and more power plants back on-line.= =20 A nuclear reactor at the San Onofre Nuclear Generating Station that was shu= t=20 down in the wake of a February fire was restarted Friday. The reactor was= =20 expected to be running at full capacity by today, cranking out enough power= =20 for 840,000 homes.=20 Freeman, in his keynote speech to the summit, praised Californians for=20 conserving energy, noting that 9 percent less electricity in May was used= =20 than during the same month last year.=20 "Our huge weapon is the market power of the people of California cutting=20 back," Freeman said.=20 He also took aim at President Bush's energy plan, which calls for oil=20 drilling in Alaska but offers little in the way of short-term help for=20 California.=20 "We do not need to drill in the Arctic or slash and burn what's left of=20 America the beautiful," Freeman told the 300 people attending the summit,= =20 which was sponsored by Los Angeles radio station KFWB-AM.=20 The summit also featured Stephen Frank, chairman and CEO of Southern=20 California Edison, and John Stout, senior vice president of Reliant Energy.= =20 Reliant, a Houston-based power generator, outraged state government officia= ls=20 last month when it charged California $1,900 per megawatt hour of=20 electricity.=20 Another generator, Duke Energy Co. of North Carolina, confirmed Friday that= =20 it sold electricity in California for as much as $3,880 per megawatt hour.= =20 During the panel discussion, Stout blamed high costs on a reduction of as= =20 much as 25 percent in hydroelectric power from the Pacific Northwest becaus= e=20 of a drought, and a sevenfold rise in the past year for natural gas, which= =20 fuels generating plants.=20 Energy firm ties enriched top advisers to president=20 Enron made big push to shape Bush's policy By Joseph Kahn=20 NEW YORK TIMES NEWS SERVICE=20 June 3, 2001=20 WASHINGTON -- At least three top White House advisers involved in drafting= =20 President Bush's energy strategy held stock in Enron Corp. or earned fees= =20 from the large, Texas-based power trading company, which lobbied aggressive= ly=20 to shape the administration's approach to energy issues.=20 Karl Rove, Bush's chief political strategist; Lawrence Lindsey, the top=20 economic coordinator; and I. Lewis Libby, Vice President Dick Cheney's chie= f=20 of staff, all said in financial disclosure statements released Friday that= =20 they had divested or intended to divest themselves of holdings in Enron, th= e=20 nation's leading trader and marketer of electricity and natural gas, as wel= l=20 as holdings in other energy companies.=20 Lindsey received $50,000 last year from Enron for consulting. Rove's=20 statement said he intended to sell stock holdings in Enron valued at $100,0= 00=20 to $250,000, though the statement does not make clear if he has completed t= he=20 sale. Libby sold his stake in the company.=20 The financial disclosures for senior White House aides show that many of=20 Bush's top advisers are millionaires. Among the wealthiest are Rove, Lindse= y,=20 Libby and Andrew Card, the chief of staff, who earned $479,138.77 as chief= =20 lobbyist for General Motors and reported assets of $810,000 to $2.1 million= .=20 Mary Matalin, Cheney's senior counselor and a former political commentator,= =20 reported income of more than $1.5 million last year from speaking fees and= =20 television appearances. Her husband, James Carville, a Democratic commentat= or=20 and political adviser, made $2.1 million last year on the speaking circuit,= =20 Matalin's financial disclosure shows.=20 Enron was one of the largest contributors to Bush's presidential campaign.= =20 Kenneth Lay, the chairman, has close ties to the president, as he did to=20 Bush's father, and he has had considerable access to the Bush White House.= =20 The administration's energy strategy issued last month recommended opening= =20 protected lands to oil and gas drillers, building hundreds of power plants= =20 and easing some environmental controls, measures strongly favored by the=20 industry. It suggested that the federal government exercise more authority= =20 over electricity transmission networks, a longtime Enron goal.=20 Lay and other Enron officials interviewed several candidates to fill=20 vacancies on the Federal Energy Regulatory Commission, which regulates=20 Enron's main markets. Bush selected two people for the panel who were favor= ed=20 by Enron and some other energy companies.=20 White House officials have said that Enron's views were not crucial to thei= r=20 selections. Report: State may have little money left to head of blackouts=20 ASSOCIATED PRESS=20 June 3, 2001=20 SANTA ANA =01) If California keeps buying high-priced power at its current = pace,=20 the $12.5 billion Gov. Gray Davis hopes to borrow to head off summer=20 blackouts will soon be gone, a newspaper reported Sunday.=20 According to a projection of the state's numbers by The Orange County=20 Register, the state is currently spending 66-point-nine million dollars a d= ay=20 on electricity. And if it continues at this pace, it will have spent $10.4= =20 billion =01) or 83 percent =01) of what it plans to borrow through a bond s= ale by=20 mid-August.=20 That leaves only $2.1 billion to buy future energy; and according to the=20 state's own estimates, its needs at least $2.7 billion to pay for such=20 contracts just through June 2002.=20 But Davis' energy team says not to worry. The outlook is brightening for th= e=20 energy supply because of new energy contracts =01) some taking effect this = month=20 =01) continued conservation and new power plants, administration officials = told=20 the Register. The increased supply should drive down prices, thus reducing= =20 the average amount the state is spending each day on energy.=20 "We'll have room to spare," said Davis spokesman Steve Maviglio.=20 However, Brad Williams, chief economist in the nonpartisan Legislative=20 Analyst's Office, is concerned that the governor is relying on theories.=20 "There's certainly a vulnerability to these assumptions," Williams said. "T= he=20 administration assumption that prices will fall is very risky."=20 State Controller Kathleen Connell, a Democrat, also has her doubts.=20 "We don't know whether the governor's estimates are correct. They haven't= =20 been correct to date. ... I have always argued that $12.5 billion is not=20 going to be enough."=20 According to the Davis administration, it will need to repay itself only $7= .9=20 billion of the bonds it plans to issue Aug. 14, leaving $4.6 billion =01)= =20 presumably enough to buy an adequate supply of relatively cheap electricity= =20 on long-term contracts.=20 San Onofre reactor back on line, sending power to state grid=20 UNION-TRIBUNE=20 June 2, 2001=20 SAN ONOFRE -- After four months of repairs, the nuclear power plant's Unit = 3=20 reactor began sending electricity to the state's power grid early yesterday= ,=20 officials said.=20 Operators at San Onofre Nuclear Generating Station connected the reactor to= =20 the grid at 2:30 a.m., said Ray Golden, a plant spokesman.=20 Twelve hours later, the reactor was running at 42.5 percent of full power a= nd=20 sending 350 megawatts of electricity to the grid, Golden said.=20 The reactor, which generates 1,120 megawatts at full power -- enough=20 electricity for at least 1 million households -- is expected to be running = at=20 capacity by tomorrow morning.=20 San Onofre's Unit 3 reactor was shut down Feb. 3 after an electrical fire= =20 ignited in a switching room outside the reactor's containment dome.=20 The fire didn't result in any release of radiation, but it did cause major= =20 damage to the reactor's steam turbines and electrical generator.=20 State files to manage energy on its own=20 By Ed Mendel=20 UNION-TRIBUNE STAFF WRITER and Toby Eckert=20 COPLEY NEWS SERVICE=20 June 2, 2001=20 CALIFORNIA'S POWER CRISIS SACRAMENTO -- State officials and two utilities proposed yesterday that=20 California establish itself as a regional power grid, grudgingly making the= =20 offer so that federal limits on the cost of emergency power will stay in=20 place.=20 Federal regulators threatened to lift the price limits if California failed= =20 to make a proposal to join what is known as a regional transmission=20 organization. But California suggested that it form its own organization an= d=20 not join with other states.=20 Under the federal vision, the regional grids are steps toward an interstate= =20 highway for electricity that could one day let power flow efficiently in th= e=20 West as more states move toward deregulation and a free market.=20 Filing under protest, California said it meets the criteria for a regional= =20 transmission organization and proposed that it be designated as such, while= =20 working with other states to improve the flow of power in the region.=20 An official of California's power grid operator, the Independent System=20 Operator, said the state needs to correct its own problems of soaring price= s=20 and transmission congestion before joining a regional power network.=20 Charles Robinson, ISO general counsel, said California has moved further=20 toward a free market than states in two other organizations, RTO West and= =20 Desert Star, which mainly have "vertically integrated" utilities that still= =20 provide most of the generation, transmission and distribution.=20 "While they are working out their issues, I think it would be prudent for u= s=20 to work out ours before we bite off more than perhaps we can chew," Robinso= n=20 said.=20 California officials began pleading with the Federal Energy Regulatory=20 Commission last year to impose regional price caps on power. But the order= =20 the FERC finally issued April 25 only limits prices when power reserves dro= p=20 to an emergency level.=20 State officials said most power is not bought during an emergency and that= =20 FERC limits will do little to control price gouging. The cost of power in= =20 California is expected to grow to about $50 billion this year from $9 billi= on=20 in 1999.=20 Gov. Gray Davis remains closemouthed on specific details of the state's pow= er=20 purchases, but Duke Energy revealed that it sold power during the first=20 quarter for an average price of $136 per megawatt-hour, or more than triple= =20 last year's typical rates during the same period.=20 Duke also sold power to California for $3,880 per megawatt-hour, which=20 translates to a retail rate of $3.80 per kilowatt-hour, or nearly 100 times= =20 the typical consumer rates at this time last year.=20 The North Carolina company said less than 1 percent of its electricity sale= s=20 to California were at this price. Duke officials said the $3,880 price=20 reflected credit surcharges the company applied because it feared nonpaymen= t=20 or partial payment of its charges because of financial problems at Pacific= =20 Gas and Electric Co. and Southern California Edison Co.=20 Last month, Davis blasted Reliant Energy for selling power to the state for= =20 $1,900 per megawatt-hour.=20 Duke also said it charged the state an average $76 per megawatt-hour for=20 power last year, or nearly double the average rate paid before California's= =20 deregulated market began spiraling out of control in June 2000.=20 Meanwhile, a Superior Court judge said yesterday that she will hold a heari= ng=20 Wednesday on a demand from several newspapers in the state, including The S= an=20 Diego Union-Tribune,? and a state assemblyman for specific details about=20 long-term power contracts the state has signed.=20 The new federal price controls were in place on two days this week when the= =20 state made emergency power purchases. ISO officials said yesterday they wil= l=20 not be able to say until next week if FERC limits kept prices down.=20 "We are not confident that the benefits will necessarily prove out to be=20 worthwhile," said Michael Kahn, ISO board chairman.=20 The FERC approved the creation last month of RTO West, which involves nine= =20 utilities in eight states stretching from the Canadian border to Nevada. A= =20 second RTO, Desert Star, covers the Southwest and sprawls from Arizona to= =20 western Texas and eastern Wyoming.=20 FERC member Linda Breathitt said she was not surprised by the limited=20 California proposal, but added that she expects California to join a=20 multistate RTO eventually.=20 "RTOs are evolving," Breathitt said. "While our goal may be for there to be= =20 large ones, I realize that may take some time."=20 She said it will take the FERC staff "some time to go through the filing" t= o=20 determine whether it meets the RTO standards laid out by the commission.=20 The proposal for a California-only RTO filed with the FERC yesterday came= =20 from the ISO, San Diego Gas & Electric Co. and Edison. PG&E, the largest=20 California utility, made a separate filing proposing that California join a= =20 multistate RTO.=20 "We feel that there are primarily reliability and efficiency reasons that a= =20 regional RTO in the long run makes more sense than trying to go it alone,"= =20 said John Nelson, a spokesman for PG&E, which filed for bankruptcy two mont= hs=20 ago.=20 Staff writer Craig D. Rose contributed to this report.=20 Escondido not running power plant process, ex-official says=20 By Jonathan Heller=20 UNION-TRIBUNE STAFF WRITER=20 June 2, 2001=20 ESCONDIDO -- A former planning commissioner says the city's failure to set= =20 standards for proposed power plants has eroded its control of the planning= =20 process.=20 "The city has taken a very inadequate position in maintaining high=20 standards," James Di Luca said.=20 Di Luca, who served on the commission for 31/2 years, resigned last week so= =20 he could devote more time to a new job with a Carlsbad startup company, whi= ch=20 he declined to name. He is an engineer who works in fiber optics and=20 telecommunications.=20 In his last few months as a commissioner, Di Luca urged that Escondido form= a=20 special committee of city officials and residents that would determine=20 standards -- on such things as air pollution, noise and appearance -- for= =20 proposed power plants.=20 Instead, city officials have tried to frame the standards by taking input= =20 from various sources, including the volunteer Environmental Advisory Board,= =20 the Planning Commission and residents.=20 Thus far, the City Council has yet to adopt any power plant guidelines,=20 although it recently approved a new policy requiring all power plant=20 proposals to qualify for a special zoning permit known as a conditional-use= =20 permit. That will require a more rigorous review.=20 Karen Allgeier, Planning Commission chairwoman, agreed with Di Luca. She sa= id=20 the city's focus on small "peaker" plants, designed to provide power during= =20 peak demand times, has been shortsighted.=20 "We need to set the standards, and the power plants need to meet those=20 standards," Allgeier said. "I realize there's a crisis, but peaker plants a= re=20 just a Band-Aid on a bigger problem."=20 Escondido should be in a favorable position when it comes to power plants= =20 because high-voltage lines and a natural-gas transmission pipeline run=20 through it, and it has an electricity substation, Di Luca said. The city is= =20 also retrofitting its sewage plant to produce reclaimed water that can be= =20 sold to power plants for cooling purposes.=20 "I feel the city is in a position to be very selective in who and what we= =20 choose for a power plant," he said.=20 At one point, three peaker plants and a much larger, 500-megawatt plant wer= e=20 in the city's planning pipeline. The city already has approved a 44-megawat= t=20 plant by Ramco Inc. and is awaiting plans from Sempra Energy Resources for= =20 the 500-megawatt plant.=20 Hanover Co. of Houston, however, has pulled out of a potential deal to buil= d=20 a peaker plant at a city public works yard on Washington Avenue, city=20 officials say. The two sides had been locked in secret negotiations for=20 months but were unable to strike a deal.=20 The city may have lost any say in a plant proposed by CalPeak Power of San= =20 Diego. CalPeak withdrew its application with Escondido for a 49-megawatt=20 peaker plant in April after it grew impatient with the city's approval=20 process. The California Energy Commission has taken over the proposal and h= as=20 asserted exclusive jurisdiction over it.=20 City Attorney Jeffrey Epp has said that under the law, CalPeak must also=20 apply for a local permit.=20 Donna Jones, a San Diego attorney representing CalPeak, said the city's=20 position is "contrary to common sense." In a letter to Epp, Jones said Gov.= =20 Gray Davis' executive order granting the commission broad powers in approvi= ng=20 power plants was intended to streamline the permitting process.=20 Davis' order allowed the commission to use an expedited, 21-day approval=20 process so that more power plants could be brought online swiftly to deal= =20 with the power crisis. To require an applicant to go through both the local= =20 and state bureaucracies would be pointless, Jones wrote. PG&E bankruptcy judge won't challenge state regulation=20 By Karen Gaudette ASSOCIATED PRESS=20 June 2, 2001=20 SAN FRANCISCO =01) California power regulators can still order the state's= =20 largest utility to perform an accounting change the company claims will end= =20 its chance to recover billions in undercollected electric rates from its=20 customers, a federal bankruptcy judge ruled Friday.=20 In his decision, U.S. Bankruptcy Judge Dennis Montali dismissed Pacific Gas= =20 and Electric Co.'s complaint against the Public Utilities Commission, sayin= g=20 the bankrupt utility must defer to the PUC's regulation.=20 "The public interest is better served by deference to the regulatory scheme= =20 and leaving the entire regulatory function to the regulator, rather than=20 selectively enjoining the specific aspects of one regulatory decision that= =20 PG&E disputes," Montali wrote in his decision.=20 The decision settles weeks of speculation over whether PG&E could=20 successfully avoid what it considered an illegal order from the PUC by aski= ng=20 Montali to halt the request, hence, potentially pitting the federal=20 bankruptcy court against a state regulatory agency.=20 The dispute emerged after the cash-starved utility filed for federal=20 bankruptcy protection April 6, unable to collect enough money from ratepaye= rs=20 to pay its expenses due to a rate freeze and soaring wholesale power prices= .=20 The PUC had ordered PG&E, as well as fellow financially floundering utility= =20 Southern California Edison Co., to rebalance their accounts to better refle= ct=20 how much money they earned selling off power plants under the state's 1996= =20 deregulation law against how much money they lost being unable to charge th= e=20 full cost of electricity.=20 The accounting change order emerged from a request by San Francisco-based= =20 consumer group The Utility Reform Network. The group told the PUC that=20 without the change, ratepayers would be forced unfairly to empty their=20 pockets to rescue the utility from its debt.=20 PG&E has repeatedly called the change illegal, and one of its first motions= =20 after bankruptcy was to ask Montali on April 9 to block the PUC's March 27= =20 order.=20 In a printed statement Friday, PG&E said it was "disappointed that the cour= t=20 did not grant immediate relief from the unlawful and retroactive CPUC order= .=20 However, today's decision was not on the overall merits of the CPUC action.= "=20 The utility "will continue to pursue all legal challenges to this unlawful= =20 CPUC decision," the statement said.=20 In its own printed statement, the PUC said it was pleased by Montali's=20 decision to dismiss PG&E's complaint against the commission.=20 "The Commission is pleased, but not surprised, that Judge Montali has ruled= =20 that PG&E cannot evade proper state regulation by choosing to file for=20 bankruptcy and seeking protection from Bankruptcy Court," said PUC Presiden= t=20 Loretta Lynch.=20 New majority leader says nay to electricity price caps=20 ASSOCIATED PRESS=20 June 2, 2001=20 LOS ANGELES =01) A Senate controlled by Democrats will hold hearings on=20 California's energy crisis, says incoming Majority Leader Tom Daschle, but= =20 isn't likely to cap power costs as California wants.=20 The South Dakota Democrat told the Los Angeles Times on Friday it will be= =20 difficult to pass wholesale price controls with a Republican president and= =20 the leadership of the Republican party still in control of the House of=20 Representatives.=20 "We've got an uphill battle," he said, adding that not even all Democrats i= n=20 Congress believe price controls are needed.=20 President Bush has come out against price caps, saying they neither promote= =20 conservation nor increase supplies.=20 Daschle didn't go into detail about the possible hearings but said an=20 announcement would probably come next week. Democratic legislators have=20 already said they plan to investigate oil companies and their role in risin= g=20 natural gas prices.=20 He said he believes the best avenue toward granting California relief may b= e=20 legislation ordering the Federal Energy Regulatory Commission to use its=20 existing powers to protect consumers from price gouging by suppliers.=20 "The possibility of passing price caps is not as great as other options tha= t=20 we could choose," he said, "especially the one forcing FERC to do its job."= =20 A spokesman for Gov. Gray Davis said Congress may change its mind this summ= er=20 if increased power use extends the energy crisis beyond California.=20 "I think as summer goes on and more and more states are affected in the=20 Midwest and New England and New York, you'll hear hue and cry for the caps,= "=20 said Steve Maviglio.=20 Watchdogs Take a Hit in State's Power Ills Energy: Ex-federal officials say oversight of California's deregulation=20 suffered due to a push for free-market competition. By JUDY PASTERNAK and ALAN C. MILLER, Times Staff Writers ?????WASHINGTON--California was the first test, and right from the start=20 economists at the Federal Energy Regulatory Commission saw trouble coming.= =20 Their bosses were worried too. In hindsight, some admit they could have don= e=20 better. ?????But five years ago, when California officials were rushing to deregula= te=20 electricity, the federal watchdog charged by law with overseeing the proces= s=20 and guarding against runaway prices decided not to bark. ?????In their zeal for free-market competition and their ideological=20 commitment to shifting authority away from Washington to the states, FERC's= =20 commissioners brushed aside their qualms and let the process roll forward. ?????"There were a lot of issues that got swept under the rug," said=20 economist Carolyn A. Berry, who headed FERC's analysis of the California=20 plan. "We were trying to point out the ugly warts, but it wasn't our job to= =20 set policy." ?????Former FERC Chairman James J. Hoecker, who presided over the approval,= =20 said the agency "should have been far less deferential." John Rozsa, a stat= e=20 legislative analyst who played a key role in the deregulation law, laughed= =20 when he heard that. "FERC wanted it badly," he said. ?????Today, FERC stands accused of failing to exercise its oversight,=20 enforcement and political muscle just when they were needed most. The agenc= y,=20 critics on the inside and outside agree, helped launch a radical economics= =20 experiment without sufficient preparation, adequate staff or a clear sense = of=20 how to carry out its mission. ?????With fully half the states considering deregulation, the story of what= a=20 previously obscure federal agency did not do has become more than a case=20 study in regulatory shortcomings. It has become a warning shot across the b= ow=20 of the whole country. ?????FERC has approved deregulation plans in New England, New York and the= =20 mid-Atlantic states. At stake is a reliable supply of a commodity that fuel= s=20 virtually every home and workplace in America. California's example is hard= ly=20 encouraging: months of blackouts and an electric bill that has rocketed fro= m=20 $7 billion in 1999 to as much as $50 billion this year. ?????Now the commission is caught in what some see as an identity crisis,= =20 divided and uncertain as politicians in California and Washington call for= =20 mutually contradictory action. ?????"I think the commission needs to decide what it wants to do when it=20 grows up," said Hoecker, who headed the agency during a critical period=20 ending in January. His own leadership, he concedes, was not always all it= =20 might have been. ?????Without question, there is ample blame for everyone, not just FERC.=20 Certainly in California, state officials devised a flawed deregulation sche= me=20 and then insisted on carrying it out. Some power company executives have=20 extracted windfall profits. Politicians have wilted when things went awry. ?????And, as FERC officials continually point out, its authority is limited= =20 to wholesale markets. State officials are responsible for the local utiliti= es=20 and other retailers selling power to consumers. ?????Nonetheless, it is FERC that Congress charged with overseeing=20 electricity markets and assuring "just and reasonable" prices. ?????How did FERC choose the course it took? What factors influenced its=20 decisions? ?????Certainly energy companies, consumer advocates, lawmakers and others= =20 lobbied the agency. ?????Yet even FERC critics say such influence was not dominant. FERC is not= =20 insulated from lobbying, but David Nemtzow, president of the Alliance to Sa= ve=20 Energy, a coalition of business, consumer and environmental leaders, said:= =20 "They are less sensitive to those forces than a lot of other players." ?????Rather, this seems to have been a case of government decisions driven = by=20 ideology. The commissioners, both Republicans and Democrats, were wedded to= =20 the idea that deregulation at the wholesale level would lead to lower retai= l=20 bills. The market, they believed, would inexorably produce greater=20 competition, greater efficiency and falling prices. ?????To Mark Cooper of the Consumer Federation of America, the primary=20 problem was "their excessive faith in the market." ?????Even after price spikes occurred across the Midwest and in California = as=20 early as 1998, FERC officials dismissed suggestions the surges might reflec= t=20 market instability or manipulation. ?????And as California's situation worsened, FERC's response was shaped by = a=20 continuing commitment to market forces with a minimum of government=20 intervention--witness its April order allowing temporary price caps but onl= y=20 in narrowly defined emergencies. ?????In the last few months, under enormous pressure, FERC has ordered a=20 dozen companies to justify high prices or refund $124.5 million to Californ= ia=20 utilities for January and February. It won an $8-million settlement from=20 Williams Cos. of Tulsa, Okla., which it had accused of shutting power plant= s=20 last spring to drive up prices. Williams did not admit guilt. ?????Detractors, including California officials, howl that FERC's actions a= re=20 too little too late. They have called for a range of solutions, from flat-o= ut=20 price caps, as in the old days of full regulation, to much higher rebates= =20 from generators caught price-gouging, to retractions of individual firms'= =20 permission to charge market-based rates. ?????If the agency chose to wield all of its authority, it also could force= =20 witnesses to testify under oath and subpoena tapes of phone calls among pow= er=20 traders, and even force the state to change the way the market operates. ?????Curtis L. Hebert Jr., the free-market champion who succeeded Hoecker a= s=20 chairman, insisted "FERC is being vigilant in its efforts to ensure just an= d=20 reasonable rates, while at the same time ensuring" that it fosters new ener= gy=20 supplies. ?????"I would vehemently disagree with anyone who says otherwise," he added= ,=20 noting he transferred 75 attorneys--half of the agency's litigators--into= =20 market oversight. ?????Still, a consensus that it's time for aggressive action seems to be=20 forming among commissioners, including two nominees confirmed by the Senate= =20 last month: Patrick H. Wood III and Nora M. Brownell. ?????Wood, a Texas utility regulator nominated by Bush and probably FERC's= =20 next chairman, said the agency needs to evolve into a "market cop with a=20 great big old stick," adding: "There is a role that only the federal=20 government can take. . . . The free market ain't a free and full market yet= ." ?????Already named FERC's special liaison for California, Wood remains=20 dedicated to market principles but vows to take a fresh look.=20 ?????Commissioner Linda Breathitt, a Democrat, also talks of change. And=20 commissioner William L. Massey describes agency officials as naive in their= =20 past actions, in contrast to what he calls the "very sophisticated players"= =20 on the industry side. ?????If some commissioners are starting to sound more like watchdogs, that'= s=20 partly because they feel the tug of two conflicting ideas in their mandate = to=20 open markets while assuring fair prices. ?????Americans have always loved the way capitalism gives opportunities to= =20 the shrewd and energetic. At the same time, the country has repeatedly turn= ed=20 to government regulation when it thought particular industries, such as the= =20 railroads, waxed too powerful. ?????How well FERC deals with this intrinsic conflict and meets its=20 challenges may have a sizable effect on the country's energy future. ?????Frightened by events on the West Coast, some states have slowed their= =20 progress toward deregulation. Others have decided not to try at all, at lea= st=20 for now. ?????"If the commission wants to have competitive markets," Hoecker said,= =20 "it's going to have to pull the bacon out of the fire." ?????Though it traces roots back to the Federal Power Commission and=20 development of hydroelectric power in the 1920s, FERC began its present=20 incarnation in the 1980s, with the Reagan administration's deregulation=20 campaign. ?????FERC undertook to deregulate natural gas, then, spurred by a Democrati= c=20 Congress and the first President Bush, it moved on to electricity. ?????The problem is that electricity and its markets differ significantly= =20 from natural gas. Electric power cannot be stored to meet future shortages,= =20 as gas can. Its markets are more volatile. And the effect of shortages or= =20 price spikes cascades through the economy much faster. ?????Without anyone quite realizing it, FERC was sailing into uncharted=20 waters. ?????Moreover, as FERC's staff took up the original California deregulation= =20 plan, it faced a significant constraint: The commissioners had made a=20 conscious call to let the state have its way most of the time. ?????As state officials saw it, so much power was available for the Western= =20 electrical grid that prices would surely come down. FERC economists, on the= =20 other hand, saw myriad problems. ?????For example, the state's scheme called for generators to submit blind= =20 bids with a separate quote for each hour of the coming day. With any power= =20 plant, the unit cost is highest when a generator is started up and declines= =20 as it runs. So the price charged for later hours should be lower than for t= he=20 first--but only if the operator can sell both the beginning and the later= =20 hours. ?????Under the California blueprint, though, bidders could not be sure whic= h=20 hours the purchaser might buy. That meant bidders would have to load the=20 higher start-up costs into each hour throughout the cycle to make sure thos= e=20 costs were recovered. By contrast, the mid-Atlantic market requires the pow= er=20 purchaser to add separate payments to cover start-up costs. ?????Other issues were deferred rather than solved before FERC granted=20 approval, including such questions as how to manage congestion on the grid= =20 and what the transmission rights should be for municipalities that generate= d=20 and sold power. ?????State legislative aide Rozsa argues that such matters were not crucial= =20 and that the biggest flaw in the plan--the insistence that the system=20 operator not have any generators of its own--was conceived with FERC=20 guidance. Both FERC and the state, he said, had "an exaggerated sense of=20 their knowledge and ability." ?????As the California launch, originally scheduled for January 1998, drew= =20 near, FERC's nervousness increased. As late as the Christmas holidays, the= =20 state was still tinkering. The agency ordered the state to provide two week= s'=20 written notice before taking the final step, even though FERC had already= =20 approved the plan. ?????When California finally "went to market," FERC analysts snickered at t= he=20 timing: The first electricity auction was held March 31 for power to be=20 delivered the next day--April Fool's Day. ?????As for the commissioners, "We were somewhat naive," Massey said. "The= =20 commission believed there was so much inefficiency built into the=20 old-fashioned . . . regime that any new market would be better." ?????With the nation's largest state deregulating, FERC began blessing plan= s=20 on the East Coast. Hundreds of companies lined up for permission to charge= =20 market rates in various open trade zones. ?????FERC, according to its rules, was supposed to reject any firm that hel= d=20 a big enough share in a market--generally defined as about 20%--to influenc= e=20 prices for a sustained period. But doing the necessary market analyses prov= ed=20 impractical. ?????For one thing, the rising workload was overwhelming the staff, which h= ad=20 shrunk by more than 25% from its 1980 high of 1,600 employees. The agency, = as=20 critics see it, simply buckled. ?????"Once it got going, it took over," Berry said of the momentum behind= =20 deregulation. "FERC was handing out [permission] to anybody who walked in." ?????FERC economist Steven A. Stoft was infuriated. He wanted to start=20 cautiously, opening one small market, testing before expanding nationally. ?????"To put in markets everywhere, to affect a lot of people, to just wait= =20 and see how it turns out, that's completely irresponsible," said Stoft, who= =20 now lives in California and is writing a book for regulators about how to= =20 design markets. ?????At first, the staff Cassandras seemed wrong. Prices generally headed= =20 down. ?????But during the summer of 1998, prices spiked twice--once in the Midwes= t,=20 once in California. ?????In the Midwest, several aging nuclear plants shut down for maintenance= =20 just as a heat wave sent air conditioners into overdrive. Wholesale=20 electricity rose past $7,000 per megawatt-hour, 100 times normal. Consumers= =20 and politicians screamed.=20 ?????The weather cooled and new supply came in fast. Prices ebbed. ?????To consumer groups and several FERC economists, the sudden increase=20 suggested the worst can happen. Hoecker and FERC member Vicky Bailey drew a= =20 different lesson, as did a staff investigation: The market worked to correc= t=20 an unusual confluence of events that was unlikely to recur.=20 ?????About the same time, a strange thing happened in California's reserve= =20 market, where the state's independent system operator pays generators with= =20 extra capacity to stand ready to meet unexpected surges in demand. ?????So few companies offered to sign such contracts that the ISO sometimes= =20 had little choice but to accept whatever bid came in. It was just a matter = of=20 time before someone took advantage. One day in that summer of 1998 someone= =20 did: The only offer to provide reserve power was an astronomical $9,999 per= =20 megawatt-hour. ?????To some, it was proof that the California market could--and would--be= =20 manipulated. "I was horrified," Berry said. ?????FERC quickly granted California's request for permission to cap prices= =20 in the reserve. The authority quietly expired in November. There was no=20 outcry about this spike because reserve costs are spread around to the=20 states' utilities, thus diffusing their effect. ?????"Of course, it should have been a warning that the sellers were severa= l=20 steps ahead of us," commissioner Massey says.=20 ?????In a memo last June, Ron Rattey, a senior FERC economist who has been= =20 with FERC since 1975, complained that the staff was "impotent in our abilit= y=20 to monitor, foster and ensure competitive electric power markets." He added= =20 in an interview: "FERC doesn't want to discover that the policy changes it'= s=20 making aren't working." ?????Commissioners at the quasi-judicial agency are forbidden by law from= =20 privately discussing pending cases. So companies and Congress must official= ly=20 content themselves with filing briefs, writing letters and testifying at=20 hearings. ?????No such restraints apply to the issue of who sits on the commission.= =20 There, the jockeying for influence can be intense. ?????Commissioners are appointed by the president and confirmed by the Sena= te=20 to staggered five-year terms, with a limit of three members of a political= =20 party on the panel. The president can also designate at any time which=20 commissioner serves as chairman, a position that bestows broad authority ov= er=20 the FERC's agenda and staff. ?????When Bush took office, he picked Hebert, then the lone Republican on t= he=20 commission, to the chairmanship and named his choices for the two vacancies= .=20 It was unclear whether Hebert would keep the chair once Bush's nominees wer= e=20 confirmed. ?????Soon afterward, Hebert talked by telephone with Kenneth L. Lay, who=20 heads Enron Corp., a Houston-based energy marketing giant that recently saw= =20 its profits triple in a year. FERC policy decisions could have a huge=20 influence on its future. ?????Enron spokesman Mark Palmer says Lay, whose friendship with Bush is we= ll=20 known, was returning a call from Hebert. Palmer says Hebert wanted Lay's=20 support for remaining chairman. ?????Hebert told a FERC official, who heard the new chairman's end of the= =20 conversation, that Lay offered support but only if the chairman changed his= =20 views in ways that would aid Enron. The official says he heard Hebert decli= ne=20 and characterizes him as offended. The discussion was first reported in the= =20 New York Times. ?????Lay has never been shy about offering advice, nor about courting=20 political access. He golfed with President Clinton, and Palmer wrote a lett= er=20 to Clinton's personnel chief touting Hoecker for chairman. The Enron=20 executive's ties with Bush bind especially tight; Lay raised and donated=20 hundreds of thousands of dollars to Bush's campaigns and related efforts. ?????Power companies also scouted candidates for the two slots. Enron went = so=20 far as to send the White House a list of a dozen people Lay considered=20 qualified (the two new commissioners were on it). ?????In the end, however, the evidence suggests that such lobbying mattered= =20 less than the faith in free markets and less federal intervention shared by= =20 two presidents and just about every recent FERC member. "FERC is filled wit= h=20 true believers," Rozsa said. ?????The agency's recent California orders underline the point. In December= ,=20 FERC concluded the market was dysfunctional and ordered a limited version o= f=20 the price caps that free marketers abhor. ?????Still, prices remained above $300 a megawatt-hour--10 times the=20 pre-crisis average. So in April, FERC concluded it had to take further acti= on. ?????But the new version of price caps, approved 2 to 1, actually narrowed= =20 the circumstances under which they could be imposed, though it gave the sta= te=20 more flexibility. Even temporarily, the commission would not abandon its=20 market principles. ?????"I was reluctant to stop in my tracks," said Breathitt, the swing vote= .=20 She didn't want "to go back to a form of regulation that this commission an= d=20 I had departed from five or six years ago." Copyright 2001 Los Angeles Times=20 Duke Charged Record Price for Electricity Crisis: But energy firm agrees to waive 80% of its $3,880-per-megawatt-hour= =20 tab, if it gets paid.=20 By THOMAS S. MULLIGAN and NANCY RIVERA BROOKS, Times Staff Writers ?????Duke Energy Corp., one of the power wholesalers that the state has=20 accused of price gouging, charged $3,880 per megawatt-hour for electricity= =20 during a brief period last winter--by far the highest price yet disclosed f= or=20 emergency power. ?????The price was more than double the $1,900 that Gov. Gray Davis=20 excoriated Texas wholesaler Reliant Energy Inc. for charging during an=20 emergency last month. ?????Spokespeople for Davis and Duke agreed Friday--but for entirely=20 different reasons--that the case illustrates nearly everything that has gon= e=20 wrong with California's power market. ?????From the governor's perspective, the Duke sales represent a clear-cut= =20 case of gouging. He has cited the opportunism of such out-of-state energy= =20 merchants as a major cause of the ongoing energy crisis. ?????"It's obscene," Davis spokesman Steven Maviglio said. "The state is on= =20 its knees, and they're out to get every last dime from us." ?????But Duke, based in Charlotte, N.C., said that it hasn't yet received a= =20 dime for the power and that if it ever does get paid, it will gladly waive= =20 the "credit premiums" that made up 80% of the $3,880. ?????Moreover, Duke said it made the sales in question only because it was= =20 ordered to do so by the California Independent System Operator, the private= =20 agency that runs 75% of the state's power grid. To provide the power, Duke= =20 had to start up an idle generating unit at its Chula Vista station--the=20 dirtiest and least efficient of the four units at that former San Diego Gas= &=20 Electric Co. plant, spokeswoman Cathy S. Roche said. ?????"We tried to convince ISO that this was not a good unit to run in=20 January--that the power would be more needed in the summer," Roche said. ?????ISO declined to comment on the sales, citing a policy of confidentiali= ty=20 regarding its transactions, spokesman Gregg Fishman said. ?????The sales, first reported Friday by the Charlotte (N.C.) Observer, too= k=20 place over eight or nine days beginning Jan. 17 and continuing into early= =20 February, Roche said. Each sale occurred after ISO had declared a Stage=20 3--highest level--emergency, and two of the sales took place on days when= =20 there were rolling blackouts. ?????In all, Duke said it sold 5,000 megawatt-hours at $3,880 each, for a= =20 total of $19.4 million. The sales represent less than one-tenth of 1% of th= e=20 power Duke sold in California during the first three months of this year, t= he=20 company said. A megawatt-hour is enough power to serve about 750 homes for = an=20 hour. ?????Duke's average price in California over that span was $136 per=20 megawatt-hour, up from $76 per megawatt-hour during all of 2000, the compan= y=20 said Friday. ?????Duke, like other wholesalers, tacks on credit premiums as a kind of=20 insurance to reflect the financial condition of its buyers. ?????In this case, though ISO ordered the sales, the actual buyers were=20 SDG&E, Southern California Edison and Pacific Gas & Electric Co. Edison and= =20 PG&E were on the brink of insolvency and discussing bankruptcy at the time,= =20 though it was not until April 6 that PG&E filed for bankruptcy protection.= =20 Their shaky finances justified the big surcharges, Roche said. ?????By imposing an 80% credit premium, Duke indicated it wouldn't expect t= o=20 get more than 20 cents on the dollar in a bankruptcy. ?????However, Maviglio and Joe Newlin, consumer advocate at the Foundation= =20 for Taxpayer and Consumer Rights in Santa Monica, both called the surcharge= s=20 excessive. ?????"It's greed on top of greed," Newlin said. ?????Subtracting the 80% premium leaves a price of $776 per megawatt-hour,= =20 which Newlin said is still unjustifiably high. ?????But Tom Williams, another Duke spokesman, explained it this way: To=20 start up a generator that it hadn't planned on operating, Duke had to buy= =20 natural gas on the spot market at a stratospheric $30 to $40 per million=20 British thermal units (BTUs), which meant it cost $450 per megawatt-hour fo= r=20 fuel alone. ?????The balance of the price included operating and maintenance costs, a= =20 large fee for emissions credits to run the environmentally costly plant, pl= us=20 a reasonable profit, Williams said. ?????The Duke sales were different from Reliant's; Reliant sold its=20 $1,900-per-megawatt-hour electricity to the state Department of Water=20 Resources, which has become the emergency purchaser of power. ?????"The difference is, Reliant got paid," Roche said. ?????In any case, consumers do not pay these market prices. Instead, their= =20 power rates are set by the state Public Utilities Commission. ?????But if residential customers were on the hook for Duke's $3,880 per=20 megawatt-hour on a regular basis, it would translate into $3.88 per=20 kilowatt-hour on a household's bill. ?????That compares to the 7.5 cents per kilowatt-hour that Southern=20 California Edison customers have paid for electricity since January, with= =20 another 5.5 cents per kilowatt-hour going to such services as transmission= =20 and distribution. In March, the PUC added another 3 cents per kilowatt-hour= =20 on average to electricity rates. ?????If the average household in Edison territory paid that $3.88 for each = of=20 the roughly 500 kilowatt-hours used each month, the electricity portion alo= ne=20 of the monthly bill would reach $1,940. Copyright 2001 Los Angeles Times=20 Incoming Senate Leader Daschle Lukewarm on Power Price Caps Capitol: Ordering FERC to rein in electricity costs is a more likely=20 strategy, the Democrat says. By MARK Z. BARABAK, Times Political Writer Sen. Tom Daschle Meets With Times Editors Audio of Full Interview Broadband Video: =01=07 National impact of Calif. power crisis =01=07 An emphasis on conservation =01=07 Forcing FERC to lower prices =01=07 Prospects for an investigation ?????Dashing California's hopes for relief from a reconstituted U.S. Senate= ,=20 incoming Majority Leader Tom Daschle on Friday all but ruled out passage of= =20 federal price controls on soaring electricity costs. ?????But Daschle indicated that Democrats will hold hearings into the cause= =20 of the energy crunch, which has bankrupted California's biggest private=20 utility, PG&E, and cost state taxpayers billions of dollars. ?????"We may have a multitiered, multicommittee analysis of the circumstanc= es=20 through hearings that I think will be very instructive and helpful," the=20 South Dakota Democrat said in an interview. ?????The remarks signaled the shifting dynamic in Washington as Democrats= =20 prepare to assume control of the Senate for the first time in six years,=20 thanks to the party switch of Sen. James M. Jeffords of Vermont. A=20 Republican, Jeffords will formally switch to independent next week, which= =20 will give Democrats a 50-49 advantage over Republicans in the Senate. ?????One of the most important powers Democrats will assume is the Senate's= =20 investigative function. ?????In theory, the Senate Democrats would have the power to grill energy= =20 executives in much the same fashion that House Democrats years ago browbeat= =20 representatives of big tobacco companies. ?????Democratic lawmakers already plan to investigate the role of oil=20 companies in the nation's rising gas prices, and Daschle said the probe of= =20 the electricity industry could be folded into those hearings.=20 ?????At the same time, however, Daschle's pessimism about the chances of=20 imposing wholesale price controls indicates the limits newly empowered=20 Democrats face dealing with a Republican president and a GOP-run House.=20 President Bush and key Republican lawmakers have been adamant in opposing= =20 price controls, saying they would only worsen the country's energy problems= . ?????"We've got an uphill battle," Daschle said. ?????Even in Democratic ranks, "there are differences of opinion . . . abou= t=20 price caps," he said. ?????For now, he added, the swiftest and most likely course of action would= =20 be passing legislation ordering the Federal Energy Regulatory Commission to= =20 more aggressively rein in electricity costs.=20 ?????"The possibility of passing price caps is not as great as other option= s=20 that we could choose," Daschle said, "especially the one forcing FERC to do= =20 its job." ?????His remarks are likely to disappoint price-cap advocates who expected = a=20 more sympathetic hearing once Democrats took control of the U.S. Senate. ?????After meeting with Bush on Tuesday and pleading the case for caps, Gov= .=20 Gray Davis pointedly told reporters he "looked forward to working with the= =20 newly constituted U.S. Senate" to win price relief for California consumers= . ?????Informed of Daschle's remarks, a Davis spokesman suggested that the=20 incoming Democratic leader could change his assessment, especially given th= e=20 push for price caps by Sens. Dianne Feinstein (D-Calif.) and Jeff Bingaman= =20 (D-N.M.), the incoming head of the Senate Energy and Natural Resources=20 Committee. Feinstein has introduced a price cap bill, which is co-sponsored= =20 by Sen. Gordon Smith (R-Ore.). ?????The bill, which also has the backing of fellow California Democrat=20 Barbara Boxer, would direct FERC to establish rates based on "cost of=20 service" when the agency finds that "unjust and unreasonable" wholesale=20 prices are being charged. ?????Davis spokesman Steve Maviglio cited the support of Democrats Feinstei= n=20 and Bingaman and Republican Smith in predicting that support for price=20 controls would multiply.=20 ?????"I think as summer goes on and more and more states are affected in th= e=20 Midwest and New England and New York, you'll hear hue and cry for the caps,= "=20 he said. ?????For her part, Feinstein insisted that she would "go to the wall" in=20 fighting for price caps. After learning of Daschle's comments, she called t= he=20 senator and secured a promise that he will make her bill a priority when=20 lawmakers return to Washington next week after their Memorial Day break, sh= e=20 said, adding that he even agreed to sign on as a co-sponsor. ?????Earlier in the day, however, Daschle had sounded tepid toward the=20 concept of price controls. "I don't agree with the notion of price caps as= =20 the panacea or necessarily as even the first option available to us," he sa= id. ?????Rather, Daschle said, it might be preferable to pass legislation forci= ng=20 federal regulators to use their existing power to protect consumers from=20 price gouging and ensure "just and reasonable prices." ?????"I don't think Congress should dictate what 'just and reasonable' is,"= =20 he added. "That's not our responsibility. That's their responsibility." Copyright 2001 Los Angeles Times=20 PUC May Trip Bailout of Edison By JERRY HIRSCH and STUART SILVERSTEIN, Times Staff Writers ?????In a development analysts fear could push Southern California Edison= =20 closer to bankruptcy, the Public Utilities Commission is expected to miss a= =20 deadline to complete a set of regulatory changes required in a bailout plan= =20 with Gov. Gray Davis. ?????Under the rescue agreement worked out between the utility and the=20 governor, the PUC was required to implement six regulatory changes--mostly= =20 dealing with rate making, nuclear power sales and energy procurement--by Ju= ne=20 8. ?????But in a conference call with creditors Friday, worried Edison officia= ls=20 noted that none of the changes are on the agenda for the next PUC meeting= =20 Thursday. ?????The PUC agenda represents a "disturbing void" that could endanger the= =20 entire agreement, said Theodore Craver Jr., chief financial officer of the= =20 utility's parent, Rosemead-based Edison International. ?????Analysts said the lack of PUC action probably signals that the Davis= =20 plan, which has little legislative support, also may be in trouble with the= =20 state's chief regulatory agency. ?????Gary Cohen, PUC general counsel, said the commission's staff is workin= g=20 on the regulatory changes, but that "everybody knew that June 8 deadline wa= s=20 optimistic." ?????"We are not trying to kill the deal. It's just that there is a huge=20 amount of work to be done," he said. ?????But some legislators are pressuring the PUC not to move ahead. ?????"I am asking them not to do anything until the Legislature acts," said= =20 Senate leader John Burton (D-San Francisco). "Why give regulatory relief to= =20 Edison until we know what the people of California are going to get in=20 return?" ?????In objecting to the PUC taking action, Burton is bucking Davis, who=20 still supports the agreement he reached with Edison. ?????"We would like to see the PUC consider the items as quickly as they=20 can," said Steve Maviglio, a spokesman for the governor. ?????Craver said that without PUC action by the deadline, Edison would feel= =20 free to walk away from the agreement, though it is not clear what other=20 options the utility has. Various state lawmakers are exploring rescue plans= =20 ranging from the state purchasing the company to having ratepayers pay for= =20 the rescue. None of the plans appear to have a consensus. ?????One option would be for Edison "to stick with the program as long as w= e=20 were seeing some hard evidence as to what the PUC was doing and what would = be=20 on their next agenda," said Stephen E. Pickett, vice president and general= =20 counsel at the utility. ?????Creditors listening to the conference call clearly were disturbed by t= he=20 turn of events and immediately peppered Edison executives with questions=20 about whether this development would push the utility closer to bankruptcy. ?????"We are not really in a position to speculate on that at this time,"= =20 Craver said. "We will have to see what takes place," he added. ?????Nellwyn Voorhies, a San Diego lawyer who represents Edison bondholders= ,=20 said she had not seen the PUC agenda, but held out hope that there still=20 would be a way for the rescue plan to move forward. Still, she said she was= =20 concerned by Friday's news, as well as the $9-million lien the city of Long= =20 Beach recently won to attach Edison assets. ?????"Anything that leads us to believe that the memorandum of understandin= g=20 won't be implemented is an incremental step that makes it more likely that= =20 someone will file for bankruptcy, either the debtor or a creditor," Voorhie= s=20 said. ?????Voorhies said the legal move by Long Beach was worrisome because it=20 could keep the $9 million in assets away from other Edison creditors. As a= =20 result, she said, the attachment raises the likelihood of a creditor making= =20 an involuntary bankruptcy filing. ?????With a bankruptcy filing, the $9 million in assets "could be distribut= ed=20 to all creditors, rather than just the one who attached them," she said. ?????Edison officials have maintained that they would do everything possibl= e=20 to avoid following the footsteps of the Northern California utility Pacific= =20 Gas & Electric, which filed for bankruptcy court protection in April. ?????Both companies have come to the brink of financial ruin from soaring= =20 power costs and regulatory limits on the expenses they could pass on to=20 customers. ?????Though PG&E chose to file for bankruptcy protection, Edison reached a= =20 "memorandum of understanding" with the governor that could bail out the=20 utility. It calls for Edison to sell its transmission lines to the state fo= r=20 $2.8 billion. The utility also would be able to issue ratepayer-secured bon= ds=20 to pay off $3.5 billion of debt piled up from purchasing electricity at=20 prices above what regulators would allow Edison to charge its customers. ?????Power generators owed money by Edison generally have been patient,=20 hoping the state could work out a rescue allowing them to recoup most or al= l=20 of their money, said Brian Youngberg, an analyst at Edward Jones in St. Lou= is. ?????"Now, creditors will have to take a harder look at whether they should= =20 force Edison into Bankruptcy Court or wait and see if something still can= =20 happen," Youngberg said. ?????In the conference call, Craver intimated that Edison officials were=20 concerned about an involuntary bankruptcy filing. ?????"If somebody files a petition, we are starting down a very slippery=20 slope," Craver said. ?????Craver and other executives said there was still a chance that the PUC= =20 would take up the regulatory actions required by the agreement. ?????Also, Southern California Edison defaulted Friday on the principal=20 payments on $200 million in debt, bringing the total default on notes and= =20 other debt this year to $931 million. The utility plans to continue to make= =20 interest payments. ?????Times staff writer Walter Hamilton contributed to this report. Copyright 2001 Los Angeles Times=20 Monday, June 4, 2001=20 Better Than Bankruptcy=20 ?????Southern California Edison will slip inexorably toward bankruptcy unle= ss=20 Gov. Gray Davis and the California Legislature stir themselves to action=20 soon. Davis' $2.76-billion plan to rescue the utility is dead in the=20 Legislature, shunned as overly generous to both Edison and the private powe= r=20 generators. Possible alternatives are being discussed in legislative back= =20 rooms, but there is no visible sense of urgency about the fate of the=20 utility, which provides electric power to 4.2 million customers.=20 ?????Doing nothing is the worst option. The goal of both the governor and t= he=20 Legislature should be to get the utilities back into the business of buying= =20 electric power as soon as possible.=20 ?????True, Pacific Gas & Electric Co., supplier to the northern part of the= =20 state, went into bankruptcy two months ago and the sky didn't fall. With=20 that, the political will to restore Edison to fiscal solvency seems to have= =20 evaporated. Some argue that Edison's problems might get worked out just as= =20 quickly in Bankruptcy Court, but history suggests that this option would ta= ke=20 years longer than a political solution crafted by the Legislature.=20 ?????The state is spending $50 million a day or more to buy power, at up to= =20 nearly $4,000 a megawatt-hour, more than 100 times the average price two=20 years ago. This will go on until the utilities are again able to buy their= =20 own power, possibly in 2003, perhaps later. Each extra day increases the=20 potential of fiscal calamity for state government.=20 ?????A legislative solution stands a better chance of putting California ba= ck=20 in charge of its own energy destiny. Lawmakers, smarting from the=20 deregulation boondoggle of 1996, are wary of voting for a complex measure= =20 that is difficult for anyone but an expert to understand. But the elements = of=20 a fair and workable solution are available. They include:=20 ?????* Dedication of a portion of existing rates to pay off the utility's= =20 debts. Edison would sell power from its remaining plants in the state at a= =20 minimal profit for at least 10 years. Both Edison's parent firm and the=20 generators, to which it owes more than $3 billion, would have to absorb=20 substantial parts of the utility's debt.=20 ?????* Maintain Public Utility Commission regulation of Edison, something= =20 that would have been dramatically eased under the Davis-Edison plan.=20 ?????* Give the state a five-year option to buy Edison's power transmission= =20 system--this rather than the Davis plan to pay $2.8 billion outright, which= =20 is far above book value. Lawmakers understandably want something tangible i= n=20 return, but obtaining Edison's part of the system does not get the state mu= ch=20 if it doesn't gain control of PG&E's share too.=20 ?????Legislative leaders would like to present some alternative to the Davi= s=20 plan. But with an election year approaching, many lawmakers are loath to op= en=20 themselves to charges they bailed out a private utility company with a=20 sweetheart deal. However, to sit idle would bleed away state funds, and in= =20 the end there would be nothing to show for it.=20 ?????One late-blooming proposal for which there is little enthusiasm in the= =20 Legislature calls for the state to simply buy Edison lock, stock and barrel= .=20 Bad idea. California needs to work itself out of the power business, not=20 further into it. Copyright 2001 Los Angeles Times=20 Electricity usage shrinks by 11%=20 State's consumers beat goal set by governor=20 Keay Davidson, Chronicle Staff Writer Monday, June 4, 2001=20 ,2001 San Francisco Chronicle=20 URL: http://www.sfgate.com/cgi-bin/article.cgi?f=3D/c/a/2001/06/04/MN183543= .DTL=20 By turning off lamps, turning up thermostats and buying energy-efficient=20 light bulbs, the people of California helped reduce the state's electricity= =20 consumption last month 11 percent below the May 2000 level, more than was= =20 expected, Davis administration officials said yesterday.=20 The "fairly remarkable" response to the governor's appeal for energy=20 conservation came not only from business but from ordinary electric=20 customers: "If you go into any hardware store, people are buying new lighti= ng=20 facilities. . . . It's truly a tribute to the people of California who are= =20 doing this," said Steve Larson, executive director of the California Energy= =20 Commission, in a conference call with news reporters.=20 In May, the state consumed 18,616,485 megawatt hours of electricity, a drop= =20 of 2,289,362 megawatt hours or 11 percent from May 2000, said Gov. Davis'= =20 press secretary, Steve Maviglio.=20 The governor called for a 10 percent reduction in May, whereas his energy= =20 advisers forecast that only 7 would be achieved, Maviglio noted.=20 In the news conference, officials also said:=20 -- The state signed nine new contracts in May with out-of-state power sourc= es=20 to boost Caliornia's available megawattage by 900 megawatts. Presently,=20 that makes a total of 36 contracts with out-of-state energy sources.=20 -- The price of electric power in May was 45 percent below the January=20 amount, thanks to market fluctuations.=20 Prices "are much more stable today -- things are really coming together,"= =20 said Ray Hart of the Department of Water Resources.=20 -- An unknown number of rolling blackouts are ahead as the state enters=20 energy-hungry summertime. "Who knows?" Larson replied when asked by a=20 reporter to forecast the likely number of blackouts.=20 "It's the job of the state to look under every rock for every megawatt=20 possible," Larson said. "During the month of May, we did a pretty good job.= "=20 All in all, Maviglio concurred, it's "very good news for this month."=20 "Californians exceeded the governor's expectations," Maviglio added in a=20 post-conference interview with The Chronicle, "and it's critical to note al= l=20 this (energy conservation) was voluntary. . . . If this is a harbinger of t= he=20 summer, it's good news."=20 During the news conference, a reporter from another publication asked for= =20 comment on Chronicle reports that certain energy providers deliberately=20 throttled their available supply early in the crisis.=20 While declining to discuss the newspaper's charge in detail, Hart replied:= =20 "What we do know -- I do not have specific information -- (is) the amount o= f=20 forced outages were more than double the norm, and that's never happened=20 (before). And (the forced outages were) up to four times (normal) some days= .=20 That is extraordinary, in itself, (and) that really makes you wonder whethe= r=20 there was (power) idling that was intentional."=20 Officials also discussed the Davis administration's push to negotiate power= =20 purchases at reasonable prices from municipal utilities. They vaguely hinte= d=20 at legal action if the state doesn't get what it wants, namely reasonably= =20 priced power from such sources.=20 Negotiations with the utilities are continuing, said Dick Sklar, energy=20 adviser to the governor. "I think the first step is to see if we can get=20 people (at the municipalities) to act in a reasonable way before (we start)= =20 talking about punitive action. . . . The state has weapons I hope we never= =20 have to go (toward using)."=20 E-mail Keay Davidson at [email protected]=20 ,2001 San Francisco Chronicle ? Page?A - 1=20 Enron is my spiritual teacher=20 Jon Carroll Monday, June 4, 2001=20 ,2001 San Francisco Chronicle=20 URL: http://www.sfgate.com/cgi-bin/article.cgi?f=3D/c/a/2001/06/04/DD139381= .DTL=20 THE BUDDHA SAYS that we take wisdom where we find it. Perhaps the Buddha do= es=20 not say that, but it's not a bad idea anyway. The Buddha would have said it= ,=20 maybe, had he not been saying the other things.=20 Our enemies can teach us lessons. Our adversaries can make us stronger. The= y=20 can be consumed with greed and contempt, their very breath can be toxic, an= d=20 yet their actions can open upward-flowing paths.=20 Take Enron, the energy company, or Chevron, another energy company, or El= =20 Paso Natural Gas, yet another energy company. These organizations are the= =20 minions of Satan. They pillage and they profit. They are in the ascendant.= =20 Their enemies fall before them like cordwood. Ordinary citizens cower and= =20 meekly hand over tribute.=20 And yet we thank them. We send our investigators after them and we pray tha= t=20 their executives land in jail, but we thank them. They have shown us the=20 nature of our enslavement. They have defined the nature of our sloth.=20 We have believed the Big Lie. We have believed in the free lunch. We have= =20 trusted those who would pander to us. We have eaten energy in great drippin= g=20 gobs. Did we know it was not infinitely renewable? Oh yes. Did we understan= d=20 that energy companies could create "shortages" whenever they wanted merely = by=20 closing plants for "maintenance"? You bet we did. And did we confuse the=20 energy companies with charitable organizations and/or alchemists able to=20 repeal the laws of nature? We did not.=20 But it was more convenient to forget those things, and so we did. We have= =20 busy lives. We must do the things we must do. The infrastructure is=20 everywhere crumbling, and we are patching it up ourselves. We are paying=20 bureaucrats with taxes, but the bureaucrats are inadequate, so now the spir= it=20 of volunteerism is much praised.=20 Volunteers are people who do jobs that other people are being paid to do bu= t=20 don't.=20 AND SOMEHOW, EVEN in a society as relentlessly materialistic as this one, w= e=20 forgot about our own checking accounts. Already seduced by the idea that=20 credit card debt is good clean fun, we decided to waste a lot of money usin= g=20 energy we didn't need.=20 I'm not talking about using a washing machine instead of going down to the= =20 river and beating your clothes with small stones -- I'm talking about washi= ng=20 machines with quarter-full loads and settings far too powerful for the task= =20 at hand. Right? Lights burning in unoccupied rooms. Appliances plugged in b= ut=20 never used.=20 We pay for it. We send our wonderful money straight to the largest villains= =20 in American commerce because we are too stupid to do anything else. You=20 wonder why they have contempt for us. You wonder why Dick Cheney believes h= e=20 can fool all of the people all of the time. Because he has.=20 Look: Last week the secretary of commerce suggested means-testing Social=20 Security -- that is, means-testing a pension plan. You gave us the money, w= e=20 kept it for 40 years, now -- prove that you need it!=20 Why did he suggest that? Because he can! Why did PG&E demand additional=20 compensation for its executives, who are moral dimbulbs and social criminal= s=20 under any fair definition? Because they can get away with it! They will get= =20 away with it! You watch!=20 I AM NOT saying that we have no one to blame but ourselves. There are activ= e=20 villains, and there are people who allow villainy to occur. Everyone in a= =20 corrupt system is corrupt. The fools are the ones who don't end up with any= =20 extra money.=20 We are the fools. If we understand our foolishness, we begin to be wise. We= =20 send lovely bread-and-butter notes to Enron -- once we were blind, but now = we=20 see. And we await developments, or create them.=20 It would be foolish to mention SUVs. When the brain is ready, the ear will= =20 hear.=20 Restless by day, and by night, rants and rages at the stars; God help the= =20 beast in [email protected].=20 ,2001 San Francisco Chronicle ? Page?E - 10=20 Change in Senate control slows Bush's energy plan=20 H. JOSEF HEBERT, Associated Press Writer Monday, June 4, 2001=20 ,2001 Associated Press=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2001/06/04/s= tate0 301EDT0101.DTL=20 (06-04) 00:01 PDT WASHINGTON (AP) --=20 The shift to a Democratic majority in the Senate has put the brakes on=20 President Bush's hopes for quick action on his energy proposals as Democrat= s=20 revamp the Republican bill that was racing toward a Senate vote this summer= .=20 With soaring gasoline prices and a West Coast wrestling with blackouts and= =20 record high electricity costs, energy remains a top priority on Capitol Hil= l.=20 But with Democrats now holding a 50-49 majority and control of the Senate's= =20 agenda with a senator's resignation from the GOP, the Republican bill is=20 being overhauled with less emphasis on production and more on ways to boost= =20 conservation and energy efficiency.=20 Democrats plan to press for more short-term measures, such as dramatically= =20 boosting money to help low-income families pay their electricity and natura= l=20 gas bills.=20 They have called for $2 billion more this year and $3.4 billion next year f= or=20 the low-income energy assistance fund. In contrast, the administration last= =20 week proposed $150 million more now and $1.4 billion in next year's budget= =20 for the program.=20 "People are feeling the pinch. ... We ought to be acting on short-term=20 solutions," said Sen. Jeff Bingaman, D-N.M., incoming chairman of the Senat= e=20 Energy and Natural Resources Committee, which will handle the legislation.= =20 At the same time, a Republican proposal backed by Bush to drill for oil in= =20 the Arctic National Wildlife Refuge is given virtually no chance with the= =20 change in party control.=20 "This is no solution," said incoming Senate Majority Leader Tom Daschle,=20 D-S.D.=20 Democrats have complained that the GOP bill and Bush's energy blueprint had= =20 "a lack of balance," with too much emphasis on production and not enough on= =20 promoting conservation, energy efficiency and development of renewable wind= ,=20 solar and geothermal energy sources.=20 Now Republicans, thrust into the minority by Vermont Sen. James Jeffords'= =20 decision to quit the GOP and organize with the Democrats as an independent,= =20 are complaining that Democrats will blunt the drive to develop such=20 traditional energy sources as coal, oil and nuclear.=20 "Senator Daschle wants to return to the failed energy policies of the past,= "=20 said Sen. Frank Murkowski, R-Alaska, outgoing chairman of the energy=20 committee. He accused the Democratic leader of pursing an "agenda of no" wh= en=20 it comes to energy production, including drilling in the Arctic refuge.=20 Only a few weeks ago, Senate Majority Leader Trent Lott, R-Miss., promised = a=20 vote on energy legislation before the July 4 recess. Murkowski was set to= =20 move quickly to mesh the GOP legislation with Bush's recently unveiled ener= gy=20 plan.=20 Now, as members of Congress return from their Memorial Day recess, the Sena= te=20 is immersed in reorganization and debate is focusing over the partisan line= up=20 in committees, instead of legislation.=20 Once reorganized, the Senate is expected to spend the rest of June finishin= g=20 an education bill and acting on patients' rights legislation written by Sen= s.=20 Edward M. Kennedy, D-Mass., and John McCain, R-Ariz., and opposed by the=20 White House.=20 On energy legislation, Democrats maintain that Lott's prediction of a vote= =20 before July 4 was always unrealistic given the complexity and controversial= =20 nature of the subject.=20 While the tone of the new energy package will be different from that of the= =20 GOP bill, Democrats say they will not ignore supply and production.=20 A Democratic package proposed several weeks ago includes:=20 * Tax incentives for building a pipeline to move natural gas from Alaska's= =20 North Slope.=20 * Reauthorization of a law providing the nuclear industry with special=20 liability protection. The GOP legislation does the same.=20 * A proposal to approve a disputed oil lease in the eastern Gulf of Mexico,= =20 which is strongly opposed by Florida Gov. Jeb Bush, the president's brother= .=20 * Tax incentives for clean coal technology.=20 The Democrats also plan to pursue measures included in Bush's energy plan t= o=20 reduce the number of different blends of gasoline that refiners now must=20 produce.=20 But their legislation will call for more emphasis on energy efficiency than= =20 advocated by Republicans. It includes a measure to boost motor vehicle fuel= =20 efficiency, an item the Bush plan pushed off into the future.=20 In addition, there will be increased pressure on the Federal Energy=20 Regulatory Commission to intervene with price controls to stem the soaring= =20 wholesale electricity costs in California and other Western states.=20 Legislation to require FERC to impose temporary price caps, based on the co= st=20 of power production, for wholesale electricity in the West is almost certai= n=20 to be brought up for a vote. It was doomed under the Republicans.=20 At the same time, the Senate Government Affairs Committee, to be chaired by= =20 Sen. Joseph Lieberman, D-Conn., is considering hearings on both FERC's=20 refusal to more aggressively intervene in the California power market and= =20 circumstances surrounding the surge in gasoline prices.=20 ,2001 Associated Press ?=20 Developments in California's energy crisis=20 Monday, June 4, 2001=20 ,2001 Associated Press=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2001/06/04/s= tate1 022EDT0151.DTL=20 (06-04) 07:22 PDT (AP) --=20 Developments in California's energy crisis:=20 MONDAY: * No power alerts Monday as electricity reserves stay above 7 percent.=20 SUNDAY: * The state energy commission announces that Californians sliced their=20 electricity use in May by 11 percent compared to the same month last year.= =20 Residents and businesses cut their electricity demand by 3,595 megawatts in= =20 May compared to last year. One megawatt is enough to power about 750 homes.= =20 Energy use during peak demand hours decreased in May by about 10 percent ov= er=20 the same period last year. In April this year, monthly electricity use was= =20 down by 7 percent over the previous year.=20 * More than 6,500 businesses -- from pet cemeteries to bakeries to tattoo= =20 parlors -- have applied with the state Public Utilities Commission in hopes= =20 of being spared during rolling blackouts. The high demand prompted the PUC = to=20 extend the deadline from Friday to Monday. Thousands of institutions, such = as=20 fire and police stations, military bases and hospitals, are already exempte= d=20 from rolling blackouts because the PUC considers their services essential t= o=20 public health and safety.=20 * The federal agency in charge of monitoring and policing California's powe= r=20 system was warned by experts both inside the agency and out of potential=20 deregulation flaws such as the price gouging that now fuels the state's pow= er=20 crisis, the Los Angeles Times and the San Jose Mercury News both report.=20 Though the Federal Energy Regulatory Commission is charged with ensuring th= e=20 price of energy is "just and reasonable," just three months into the 1998= =20 launch of California's deregulation experiment, energy traders tested their= =20 ability to manipulate the market by offering a megawatt-hour of electricity= =20 for $9,999 -- the highest price they thought trading computers could accept= .=20 Electricity had been trading below $100 per megawatt-hour.=20 * California will blow through most of the $12.5 billion Gov. Gray Davis=20 hopes to borrow to head off summer blackouts over the next two months, the= =20 Orange County Register reports. The state currently spends $66.9 million a= =20 day on electricity. If it continues at this pace, it will have spent $10.4= =20 billion -- or 83 percent -- of what it plans to borrow through a bond sale = by=20 mid-August. That leaves only $2.1 billion to buy future energy. The state= =20 estimates it needs at least $2.7 billion to pay for such contracts just=20 through June 2002. Davis' energy team says dropping energy prices and=20 long-term contracts will help stretch the money.=20 WHAT'S NEXT: * Davis' representatives continue negotiating with Sempra, the parent compa= ny=20 of San Diego Gas and Electric Co., to buy the utility's transmission lines.= =20 * In federal bankruptcy court Monday, Calpine Corp. asks U.S. Bankruptcy=20 Judge Dennis Montali to order Pacific Gas and Electric to free Calpine's=20 small power plants from contracts to provide the bankrupt utility with=20 electricity or else let them stop producing electricity. PG&E will also ask= =20 Montali to stop the manager of the state's power grid from buying future=20 electricity for PG&E or charging it for any electricity bought after the=20 utility filed for bankruptcy April 6.=20 THE PROBLEM: High demand, high wholesale energy costs, transmission glitches and a tight= =20 supply worsened by scarce hydroelectric power in the Northwest and=20 maintenance at aging California power plants are all factors in California'= s=20 electricity crisis.=20 Edison and PG&E say they've lost nearly $14 billion since June to high=20 wholesale prices the state's electricity deregulation law bars them from=20 passing on to consumers. PG&E, saying it hasn't received the help it needs= =20 from regulators or state lawmakers, filed for federal bankruptcy protection= =20 April 6.=20 Electricity and natural gas suppliers, scared off by the two companies' poo= r=20 credit ratings, are refusing to sell to them, leading the state in January = to=20 start buying power for the utilities' nearly 9 million residential and=20 business customers. The state is also buying power for a third investor-own= ed=20 utility, San Diego Gas & Electric, which is in better financial shape than= =20 much larger Edison and PG&E but also struggling with high wholesale power= =20 costs.=20 The Public Utilities Commission has approved average rate increases of 37= =20 percent for the heaviest residential customers and 38 percent for commercia= l=20 customers, and hikes of up to 49 percent for industrial customers and 15=20 percent or 20 percent for agricultural customers to help finance the state'= s=20 multibillion-dollar power buys.=20 ,2001 Associated Press ?=20 Electricity usage shrinks by 11%=20 State's consumers beat goal set by governor=20 Keay Davidson, Chronicle Staff Writer Monday, June 4, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/06= /04/M N183543.DTL=20 By turning off lamps, turning up thermostats and buying energy-efficient=20 light bulbs, the people of California helped reduce the state's electricity= =20 consumption last month 11 percent below the May 2000 level, more than was= =20 expected, Davis administration officials said yesterday.=20 The "fairly remarkable" response to the governor's appeal for energy=20 conservation came not only from business but from ordinary electric=20 customers: "If you go into any hardware store, people are buying new lighti= ng=20 facilities. . . . It's truly a tribute to the people of California who are= =20 doing this," said Steve Larson, executive director of the California Energy= =20 Commission, in a conference call with news reporters.=20 In May, the state consumed 18,616,485 megawatt hours of electricity, a drop= =20 of 2,289,362 megawatt hours or 11 percent from May 2000, said Gov. Davis'= =20 press secretary, Steve Maviglio.=20 The governor called for a 10 percent reduction in May, whereas his energy= =20 advisers forecast that only 7 would be achieved, Maviglio noted.=20 In the news conference, officials also said:=20 -- The state signed nine new contracts in May with out-of-state power sourc= es=20 to boost Caliornia's available megawattage by 900 megawatts. Presently,=20 that makes a total of 36 contracts with out-of-state energy sources.=20 -- The price of electric power in May was 45 percent below the January=20 amount, thanks to market fluctuations.=20 Prices "are much more stable today -- things are really coming together,"= =20 said Ray Hart of the Department of Water Resources.=20 -- An unknown number of rolling blackouts are ahead as the state enters=20 energy-hungry summertime. "Who knows?" Larson replied when asked by a=20 reporter to forecast the likely number of blackouts.=20 "It's the job of the state to look under every rock for every megawatt=20 possible," Larson said. "During the month of May, we did a pretty good job.= "=20 All in all, Maviglio concurred, it's "very good news for this month."=20 "Californians exceeded the governor's expectations," Maviglio added in a=20 post-conference interview with The Chronicle, "and it's critical to note al= l=20 this (energy conservation) was voluntary. . . . If this is a harbinger of t= he=20 summer, it's good news."=20 During the news conference, a reporter from another publication asked for= =20 comment on Chronicle reports that certain energy providers deliberately=20 throttled their available supply early in the crisis.=20 While declining to discuss the newspaper's charge in detail, Hart replied:= =20 "What we do know -- I do not have specific information -- (is) the amount o= f=20 forced outages were more than double the norm, and that's never happened=20 (before). And (the forced outages were) up to four times (normal) some days= .=20 That is extraordinary, in itself, (and) that really makes you wonder whethe= r=20 there was (power) idling that was intentional."=20 Officials also discussed the Davis administration's push to negotiate power= =20 purchases at reasonable prices from municipal utilities. They vaguely hinte= d=20 at legal action if the state doesn't get what it wants, namely reasonably= =20 priced power from such sources.=20 Negotiations with the utilities are continuing, said Dick Sklar, energy=20 adviser to the governor. "I think the first step is to see if we can get=20 people (at the municipalities) to act in a reasonable way before (we start)= =20 talking about punitive action. . . . The state has weapons I hope we never= =20 have to go (toward using)."=20 E-mail Keay Davidson at [email protected]=20 ,2001 San Francisco Chronicle ? Page?A - 1=20 Gov. Davis -- please act=20 Monday, June 4, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/06= /04/E D237071.DTL=20 IF PRESIDENT Bush had hired a skywriter, it couldn't be any plainer. The=20 White House isn't planning on giving Gov. Gray Davis the price caps on powe= r=20 he wants to ease the state's energy crisis.=20 It's time for Davis to plot a new strategy for handling the energy crisis= =20 this summer. It's not enough to blame Washington and the power generators. = A=20 convincing blueprint needs to be spelled out -- and fast.=20 For now, none of the options appeal to Davis' cautious nature. But the stat= e=20 has spent $8 billion this year buying high-priced power. Tough, sweeping=20 proposals are piling up on the governor's desk.=20 The major choices include a takeover of private generating plants, a windfa= ll=20 profits tax to recoup the state's huge losses, or scheduled blackouts to=20 ration power and possibly cut costs. A year ago, such choices were=20 inconceivable, but not now.=20 There are already signs that Davis may be dumping his legendary caution in= =20 favor of a breakout move. His threat last week to seize surplus power sold = by=20 publicly-owned power systems -- such as Los Angeles, Palo Alto and Alameda = --=20 suggests a new brashness.=20 The pressure is clearly building for new solutions. Waiting for more plants= =20 to open, as the Bush administration advocates, won't stave off the damaging= =20 shortage expected this summer. Davis must choose a plan that moderates the= =20 looming blackouts, and the havoc they bring to residents and business,=20 without deepening the crisis.=20 As much as Davis has tried to manage the crisis, it remains beyond his=20 individual control. It's time for him to improve his dismal relations with= =20 the Legislature and widen the circle of advisers. Any new plans to bring=20 political pain -- power company takeovers or enforced blackouts -- will nee= d=20 broad support, not just the say-so of one political leader.=20 A political gift could save Davis. Though Bush and his advisers have=20 repeatedly ruled out price caps, the new, Democratic-controlled U.S. Senate= =20 could approve a plan such as one being pushed by Sen. Dianne Feinstein.=20 The idea is a nonstarter in the GOP-ruled House as well as the White House.= =20 But a compromise might emerge, and the money-eating crisis could subside if= =20 wholesale power costs are brought down temporarily.=20 But nothing is guaranteed. Waiting for Washington to act isn't enough. It's= =20 time for Davis to set aside rhetoric and devise hard-edged plans to contain= =20 the damage.=20 ,2001 San Francisco Chronicle ? Page?A - 18=20 Power buying by cities gets Assembly OK=20 S.F. could contract for cheaper electricity if bill becomes law=20 Lynda Gledhill, Chronicle Sacramento Bureau Monday, June 4, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/06= /04/M N50251.DTL=20 The city of San Francisco would be able to contract for its own power --=20 presumably at lower rates -- under a bill moving through the Legislature.= =20 The idea would be to allow San Francisco and other cities to contract for= =20 cheaper power based on the cities' own needs. Assemblywoman Carole Migden, = D-=20 San Francisco, said residents by the bay should be able to benefit from the= =20 climate.=20 "Preparing for summer in San Francisco means piling on the sweaters," said= =20 Migden, who is carrying the bill. "This would allow customers to agree to= =20 long- term contracts for cheaper power."=20 Currently, residents pay a blended rate that is charged to power users=20 throughout Pacific Gas and Electric Co.'s territory, which includes regions= =20 of the Central Valley that normally swelter through the summer months.=20 "San Francisco pays more than it ought to," Migden said.=20 The bill would not create a municipal utility because the city would not=20 control the generation or distribution of the power.=20 Cities that already have municipal utilities would not be eligible. The=20 cities of Oakland and Berkeley along with Marin County have all signed on i= n=20 support of the bill.=20 Migden also argues that cities can use more alternative sources of power=20 under this system.=20 "I think we can do better on our own," she said. "Our citizens are ultra-= =20 committed to conservation."=20 San Francisco, whose city Public Utilities Commission has traditionally mad= e=20 millions of dollars in profit annually from selling power generated at its= =20 Hetch Hetchy hydroelectric dams, has found itself losing millions in the pa= st=20 year. The PUC is locked into long-term, low-price contracts with Modesto an= d=20 Turlock that started in the late 1980s.=20 To try to curb those losses, the city has signed a long-term pact to buy 50= =20 megawatts of power daily over five years from Calpine Energy Services at an= =20 average price of $80 a megawatt.=20 In November, San Francisco voters will decide on at least one ballot measur= e=20 that calls for the creation of a municipal utilities district.=20 Some supervisors and Mayor Willie Brown are talking about competing measure= s=20 that would create a power authority that would make it easier for the city = to=20 build more power plants and take over PG&E's grid.=20 Brown has also hired Edward Smeloff, a leading public power executive, to t= ry=20 to jump-start the city PUC's power operations.=20 Smeloff is an advocate of alternative power sources. When buying for=20 municipal facilities, California cities currently purchase more than half o= f=20 all of the cleaner sources of power, such as solar and wind, that is=20 available,=20 Migden said.=20 Under this bill, cities would be able to purchase as much "green" power as= =20 they would like in their contracts.=20 Utility companies support the idea of the bill but object to a provision th= at=20 allows the cities to run their own energy-efficiency programs.=20 "We support the concept of giving municipalities the ability to contract=20 directly for power," said Ron Low, a spokesman for PG&E. "San Francisco cou= ld=20 contract with power generators for energy needed, and we would be the=20 delivery and distribution company."=20 But Low said the company's experience in running efficiency programs should= =20 not be dismissed.=20 "We have years of experience in operating energy-efficiency programs," he= =20 said. "We don't think that we should try to change course in the middle of= =20 the race."=20 The bill passed the Assembly last week with one dissenting vote and now mov= es=20 to the Senate.=20 E-mail Lynda Gledhill at [email protected].=20 ,2001 San Francisco Chronicle ? Page?A - 11=20 Critics say FERC ignored California's deregulation flaws=20 Sunday, June 3, 2001=20 ,2001 Associated Press=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2001/06/03/s= tate1 918EDT0172.DTL=20 (06-03) 16:18 PDT FOLSOM, Calif. (AP) --=20 The federal agency in charge of monitoring and policing California's power= =20 system was warned by experts both inside the agency and out of potential=20 deregulation flaws such as the price gouging that now fuels the state's pow= er=20 crisis.=20 The Federal Energy Regulatory Commission has a legal obligation to ensure= =20 "just and reasonable" prices, and is meant to operate as an oversight agenc= y,=20 similar to the Federal Securities Commission that oversees Wall Street.=20 However, just three months into the 1998 launch California's deregulation= =20 experiment, energy traders tested their ability to manipulate the market by= =20 offering a megawatt-hour of electricity for $9,999 -- the highest price the= y=20 thought trading computers could accept. Electricity had been trading below= =20 $100 per megawatt-hour.=20 FERC may have set itself up for problems by eagerly promoting deregulation,= =20 despite red flags from one of the nation's top deregulation experts and the= =20 agency's own staff members, including its economists, according to intervie= ws=20 and a review of hundreds of documents published Sunday by the San Jose=20 Mercury News and the Los Angeles Times.=20 "There were a lot of issues that got swept under the rug," said economist= =20 Carolyn A. Berry, who headed FERC's analysis of the California plan. "We we= re=20 trying to point out the ugly warts, but it wasn't our job to set policy."= =20 But Curtis Hebert Jr., who took over as FERC's chairman in January, insists= =20 the agency isn't failing to investigate the energy industry. FERC's job is = to=20 make the market competitive, which will bring lower prices, he said.=20 "We do have enough resources, and we are handling it in a way that's=20 appropriate," Hebert said of California's energy crisis.=20 Before deregulation began, FERC commissioners, generating companies,=20 utilities and politicians argued that a deregulated market for electricity = --=20 as was done with natural gas -- would reduce prices and increase competitio= n.=20 In 1992, Congress passed a law encouraging open access, and in the mid-1990= s,=20 a draft plan was started for the California Public Utilities Commission.=20 Bill Hogan, a deregulation expert from Harvard University, said he was hire= d=20 to analyze the state's plan for San Diego Gas & Electric Co. He wrote a=20 71-page report citing potential price spikes and other problems to be=20 presented at FERC's deregulation hearings in the summer of 1996.=20 That report was eventually withdrawn after the utility was pressured to joi= n=20 the deregulation bandwagon if it wanted to have a say in the final plan, sa= id=20 Bill Reed, chief regulatory officer for the utility's parent company.=20 Once the California Legislature passed the bill in 1996, it essentially gav= e=20 FERC the sole authority to intervene when wholesale power prices soar.=20 But FERC also had the final say on each part of the plan before it was=20 implemented. Some say the agency did not promote internal debate, and add= =20 that the plan was already charging forward and would have been politically= =20 difficult to stop.=20 "There was great resistance on the part of many people at the commission to= =20 undo the process that California sent in," Berry said. "There was a=20 reluctance to start pulling at the threads for fear that the whole package= =20 might fall apart."=20 At that same time, FERC officials also were working on a $12.7 million plan= =20 reorganize the agency's staff and upgrade computers.=20 Then came the hot July day in 1998 when energy traders charged nearly $10,0= 00=20 for a megawatt-hour of electricity to test the waters. The Independent Syst= em=20 Operator, manager of California's power grid, was forced to buy the power t= o=20 keep the grid from crashing.=20 The ISO then requested that FERC grant an emergency price cap, which it did= .=20 But ISO officials continued to warn the federal agency that this was just t= he=20 beginning.=20 "I don't think they had any thought of what the potential was," said Anjali= =20 Sheffrin, the ISO's market surveillance director who visited the agency twi= ce=20 in the fall of 1999 in an effort to convince FERC officials of potential=20 dangers.=20 James Hoecker, who served as FERC's chairman during the transition to=20 deregulation, now disagrees with the way in which deregulation was pushed= =20 through in California. He says more attention should have been given to=20 critical analysis.=20 "I would have liked for the commission to be more prepared for California,"= =20 he said.=20 FERC has approved deregulation plans in New England, New York and the=20 mid-Atlantic states. But FERC officials point out they only oversee wholesa= le=20 energy prices, while state officials are responsible for the local utilitie= s=20 and other retailers selling power to customers.=20 Over the past few months, FERC has ordered a dozen companies to justify the= ir=20 high prices or pay $124.5 million to California utilities for January and= =20 February. Williams Cos. of Tulsa, Okla., also settled for $8 million after= =20 being accused of shutting down power plants last spring to spike prices.=20 New market overwhelms U.S. agency=20 Posted at 10:18 p.m. PDT Sunday, June 3, 2001=20 Part=20 1: U.S. agency's actions invited power disaster=20 BY ERIC=20 NALDER AND=20 MARK GLADSTONE=20 Mercury News=20 Last August, more than two dozen employees at the Federal Energy Regulatory= =20 Commission were summoned to a conference room and told to find the cause of= a=20 dramatic run-up in electricity prices plaguing California and threatening= =20 other states.=20 For California, the stakes could not have been higher.=20 Its utilities were amassing huge debts. Horrified consumers in San Diego sa= w=20 their power bills triple. And in the Bay Area, a June scorcher brought the= =20 first blackouts.=20 Ron Rattey, a respected FERC economist, scanned the room skeptically. With = a=20 knot in his stomach, he realized he was one of just a few employees=20 experienced at in-depth market analysis -- and the group was being given ju= st=20 three months.=20 ``It was ludicrous,'' he said.=20 In the end, the group's Nov.?1 report largely detailed the well-known cause= s=20 of the high prices -- a hot summer, more demand, less power available from= =20 other states -- without answering the most sensational question: Were energ= y=20 traders manipulating the state's newly deregulated market?=20 And FERC's commissioners, reviewing the report, turned down California's pl= ea=20 for a cap on Western electricity prices.=20 The probe underscored the limitations of FERC, a little-known agency charge= d=20 with regulating wholesale electricity prices.=20 Through interviews with FERC employees and reviews of documents, the Mercur= y=20 News found:=20 ?FERC lacks enough qualified employees to make sure that the savvy players = in=20 the nation's highly complex, new electricity markets are not artificially= =20 driving up prices.=20 ?The agency's collegial relationship with companies it regulates makes it= =20 reluctant to demand crucial market data. It shuns the use of subpoenas and= =20 did not back up California when the state issued subpoenas.=20 ?Energy companies have derailed probes with a phone call, but when one=20 complained about a document leaked to the media, FERC interrogated 40=20 employees about it.=20 FERC's former chairman, James Hoecker, and its current chairman, Curtis=20 H,bert Jr., both say FERC does a good job with the powers and resources it= =20 has. And Joe Bob Perkins, CEO of Reliant Energy Wholesale Group, said=20 generators are ``absolutely not'' receiving favorable treatment from FERC.= =20 But Hoecker believes the agency needs more power. ``It can't be in a=20 situation where it is begging the industry for information,'' he said.=20 Rattey, a 26-year veteran, argues that FERC is not taking advantage of the= =20 powers it has. At the request of senior FERC staff members, he wrote a=20 postmortem report on the market investigation and concluded: ``The=20 investigation was not well thought out, poorly designed and lacked a sense = of=20 urgency and direction until its last few weeks.''=20 Not until January, more than two years after warnings that the markets were= =20 vulnerable to manipulation, did FERC acquire the computers they needed to= =20 track energy trading.=20 ``This is a difficult time,'' said Daniel Larcamp, the FERC official charge= d=20 with watching the markets. ``It's not going to happen overnight. We are=20 moving in the right direction.''=20 Order to investigate=20 The investigation began with a July 26 order from the commissioners to=20 uncover what caused prices to leap to record levels in California and to lo= ok=20 at problems nationwide. Last June, prices hit $750 per megawatt-hour for=20 three days straight. The year before, electricity prices in the West averag= ed=20 about $28 and had spiked higher than $100 only once.=20 FERC chose two people to lead the investigation: Andrea Wolfman, a longtime= =20 lawyer at the agency, and W. Scott Miller, a former industry executive. Eac= h=20 brought strengths to the probe, but each also illustrated some of FERC's=20 vulnerabilities in its attempts to grapple with a complex market.=20 Wolfman is highly respected within the agency, but her expertise is not=20 electricity markets. She has spent much of her career dealing with natural= =20 gas issues.=20 Miller brought expertise. He had just left a $230,000-a-year job with one o= f=20 the prime players in the electricity market, the power-generating subsidiar= y=20 of PG&E Corp.=20 ``Who better to look than someone who knows what is happening in the=20 marketplace?'' asked Larcamp, Miller's boss. Miller heads a key FERC office= =20 when it comes to monitoring the market and investigating abuses.=20 But utility officials were suspicious that he would favor generating=20 companies.=20 Both Miller and Wolfman declined to comment on their investigation.=20 As the probe started, Miller and others met with utility representatives,= =20 including Southern California Edison's Gary Stern, who wrote an 11-page roa= d=20 map for how to investigate generators. He described ways to game the market= ,=20 including: overloading transmission lines, filing false power schedules,=20 shutting down plants and demanding top dollar for emergency power. And he= =20 advised FERC on how to track them.=20 But FERC did not follow this blueprint, according to Stern and Rattey.=20 Stern said that when he talked to Miller about companies with sufficient=20 market power to affect prices, Miller used a definition of market power tha= t=20 generators prefer, which limits it to companies that can affect prices for = an=20 extended period of time.=20 ``That sort of gave me a clue as to where he is heading on this,'' Stern=20 said. ``He's trying to find ways not to find market power.''=20 Team lacked key members=20 Market investigations cannot be done without a team of economists trained t= o=20 understand the voluminous data that could reveal manipulation, unfair=20 advantages and what economists call ``imperfect competition,'' said Paul=20 Joscow, an economics professor at the Massachusetts Institute of Technology= =20 who is widely recognized as one of the top experts in the field.=20 But no such team was assembled for FERC's probe.=20 ``The FERC staff is very well-intentioned and they work hard. But I think= =20 they are understaffed in the way of economic analysis,'' Joscow said.=20 Larcamp said FERC has a hard time competing for the talent it needs when=20 energy companies pay much higher salaries. Traders can make up to $130,000.= =20 FERC salaries have gone up 21 percent since 1997, but they still average=20 about $80,000.=20 In the closing weeks of the investigation, FERC did add three senior=20 economists to the team. Recognizing that the report was thin on expert=20 analysis, one of the new economists tried to keep his name off the report,= =20 and another was uncomfortable having his name on it, according to Rattey an= d=20 another FERC source.=20 All three economists declined to be interviewed.=20 Data requests fall short=20 Even if FERC had put together a team of crackerjack economists, it would ha= ve=20 needed comprehensive market data and ample time to discover whether traders= =20 were exploiting the market.=20 In his postmortem report, Rattey complained that the agency's requests for= =20 data were unclear. And he said FERC failed to collect data on specific=20 transactions and detailed supply-and-demand data.=20 FERC also chose to request data from just a dozen major firms, rather than= =20 the scores of companies Rattey hoped to review.=20 The results, Rattey wrote, were ``superficial analyses.''=20 What little he did find, though, intrigued him. Prices in California were= =20 much higher -- 65 percent higher in June -- than expected under normal=20 competitive conditions. The average cost of electricity on the spot market = in=20 June, $324 a megawatt-hour, was twice the cost to produce it.=20 ``If we had the data and the staff to evaluate the data,'' Rattey said, ``I= =20 think we would have found that the players in the market -- the generators= =20 and power marketers -- were able to game the system. And we'd see the games= =20 they were playing.''=20 Generating companies have repeatedly denied that they manipulate the market= s.=20 This wasn't the first time Rattey had run into this problem. The agency has= a=20 poor track record of demanding trading data -- the EKG of a commodities=20 market -- from companies it regulates.=20 When price spikes occurred in the Midwest in summer 1998 and in the Midwest= =20 and Northeast in summer 1999, Rattey investigated. In both cases, he lost= =20 battles to get the data he needed because energy companies bucked him, and= =20 his bosses were reluctant to press the issue.=20 Last June, before the California investigation, an exasperated Rattey=20 e-mailed the entire FERC staff.=20 ``The commission appears to have taken the tact (sic) (consciously or=20 unconsciously) that industry should police itself,'' he wrote. ``If FERC=20 staff has no ability to ferret out wrongdoing .?.?. how can FERC expect=20 market participants to undertake the effort?''=20 Former FERC engineer Judy Cardell confirmed that there are at least five=20 instances she knows of, or was involved in, where senior staff members=20 derailed requests for data after company officials complained. An associate= =20 still at the agency confirmed her account.=20 ``A number of people in FERC did not want to overburden the utilities or th= e=20 people in the industry with these requests,'' Cardell said.=20 H,bert, the chairman, said he has started to negotiate with an industry=20 organization, the North American Electric Reliability Council, to get=20 detailed data on electricity transactions. But the talks -- recommended by= =20 FERC staff members for three years -- could take time. Gene Gorzelnik, the= =20 group's spokesman, said members want their names kept confidential. That=20 could hamper FERC's ability to use the data for enforcement.=20 Getting information=20 The industry has resisted efforts to collect data, arguing that leaks of=20 competitive information could hurt companies in a business based on thin=20 differences in prices.=20 FERC can subpoena data, but a spokesman said the last time it used a subpoe= na=20 in a non-judicial investigation was 1985. In fact, FERC officials could=20 recall only four investigations where subpoenas had been used since 1980.= =20 Documents are regularly subpoenaed during the trials and hearings run by=20 FERC's administrative law judges. Why not in other cases?=20 ``I asked that question early on when I first came to the commission,'' sai= d=20 William L. Massey, who became a commissioner in 1993. ``I was basically tol= d=20 that it's a weapon that we keep in reserve, but that generally speaking we'= ve=20 got to deal with all these market participants in an ongoing basis. We'd=20 rather persuade them to give us this information.''=20 The Securities and Exchange Commission, which oversees the nation's financi= al=20 markets, subpoenas documents so frequently no one keeps track of the number= .=20 FERC General Counsel Kevin Madden said his agency might yet subpoena data i= n=20 its investigations of alleged price-gouging in California, but only if=20 companies don't cooperate.=20 FERC has sat on a request from California's Public Utilities Commission=20 seeking help with its subpoenas. In August, the PUC subpoenaed pricing data= =20 from generators. It sent a second round of subpoenas a month later. In=20 November, the PUC asked FERC to force six major generators to turn over the= =20 information. The matter is still pending.=20 In documents filed with FERC, the PUC said that without this data, ``there= =20 will be no way that the CPUC can present any evidence to the FERC that will= =20 `substantiate any charges of market power abuse.'?''=20 Agency officials say the requests are overly broad. ``The CPUC was on a wit= ch=20 hunt and it was the commission's decision not to participate in it,'' Hoeck= er=20 said.=20 Besides resorting to subpoenas, the commissioners can also ask the agency's= =20 Office of Administrative Law Judges to investigate market abuse, but they= =20 haven't done so in the past two decades, according to Chief Judge Curtis L.= =20 Wagner Jr., a 27-year veteran.=20 Steps approved by agency=20 The commissioners did recently order Wagner to launch a time-consuming prob= e.=20 Wagner spent a month and took 40 sworn depositions trying to figure out whi= ch=20 employee leaked documents about El Paso Merchant Energy's ability to=20 influence natural gas markets.=20 ``The El Paso folks were upset,'' he said. ``Any leak of protected material= =20 is of great concern to us. When something like that gets out, it hurts our= =20 procedures. It makes people reluctant to supply confidential business=20 matters.''=20 FERC issued its report on the California investigation Nov.?1, along with a= =20 proposed order that found the market ``dysfunctional'' but included no=20 regional price cap, disappointing California leaders. The commissioners=20 finalized the order Dec.?15.=20 Since then, FERC has taken some steps to monitor the market more closely.= =20 H,bert just reassigned 150 employees. Some will go to a beefed-up enforceme= nt=20 division. The agency is seeking $125 million in refunds from generators and= =20 recently reached an $8 million settlement with one company. The state,=20 however, has told FERC that it has found $6 billion in excess charges.=20 And on April 26, the commissioners emerged from closed-door negotiations to= =20 issue an order that set complex limits on wholesale power bids in Californi= a=20 during power emergencies, a plan quickly rejected by state officials as=20 inadequate.=20 H,bert, in an interview, defended FERC's actions so far under his reign,=20 saying FERC's latest effort will reduce prices where others failed.=20 ``I don't think the people of California are fooled by any of their leaders= =20 telling them that an agency is not doing anything, when the only thing they= =20 can point out that the agency has not done is a price cap,'' he said.=20 But two new FERC commissioners -- Patrick Wood and Nora Brownell -- could= =20 reshape how the agency handles enforcement. Both are free-market advocates= =20 who also say they want to do more to oversee the markets. Wood, who could= =20 become the next chairman, said he wants to see ``a vigilant market cop=20 walking the beat.''=20 Contact Eric Nalder at [email protected] or (206) 729-5161 and Mark=20 Gladstone at [email protected] or (916) 441-4601.=20 U.S. agency's actions invited power disaster=20 Posted at 8:27 p.m. PDT Saturday, June 2, 2001=20 BY ERIC NALDER AND MARK GLADSTONE=20 Mercury News=20 The federal agency charged with ensuring the stability of the nation's powe= r=20 system gave California the go-ahead to deregulate its electric utilities=20 despite critical flaws evident to its own experts. And once deregulation wa= s=20 under way in 1998, the agency did little to police the state's market, even= =20 though it has a legal obligation to ensure that prices are ``just and=20 reasonable.''=20 Far from being the innocent bystander that top federal officials portray, t= he=20 Federal Energy Regulatory Commission has played a central role in=20 California's deregulation disaster, weighing in more than 80 separate times= =20 with orders approving, revising or rejecting parts of the plan.=20 To examine the role this small agency has played in California's=20 deregulation, the Mercury News reviewed hundreds of documents and interview= ed=20 energy experts and FERC employees, some of whom talked publicly for the fir= st=20 time.=20 The review found that FERC, eager to promote deregulation and reluctant to= =20 cross California politicians, generating companies and utilities pushing th= e=20 state's groundbreaking plan, ignored detailed criticism from one of the=20 nation's top deregulation experts and its own staff members, including its= =20 chief economist.=20 More important, the review reveals the most critical mistake federal=20 regulators made in ushering in electricity deregulation: They set the stage= =20 for a new energy-trading market every bit as complicated as Wall Street but= =20 failed to monitor it. With California ceding its regulatory role, FERC had= =20 the critical responsibility to stop market abuses, but it failed to hire=20 enough experts, obtain the data or install the computers needed to keep the= =20 market honest.=20 Subpoenas rare=20 In contrast to the Securities and Exchange Commission, which frequently tak= es=20 aggressive action to enforce stock-market rules, FERC almost never uses=20 subpoenas in staff investigations to acquire data on electricity trading th= at=20 could include evidence of anti-competitive practices that boost prices.=20 Curtis H,bert Jr., a confident 38-year-old Mississippi lawyer who became=20 FERC's chairman in January, dismisses claims that the agency does not gathe= r=20 enough data on prices or investigate the energy industry thoroughly.=20 ``We do have enough resources, and we are handling it in a way that's=20 appropriate,'' he said of the agency's role in California's crisis. An arde= nt=20 supporter of free markets, he said FERC's primary job is to create a=20 competitive market for electricity and keep the lights on. Low prices will= =20 follow, he promised.=20 But James Hoecker, FERC's chairman when California adopted its plan, has=20 become more critical of the decisions the agency made under his leadership= =20 and now says FERC should have more aggressively scrutinized the plan rather= =20 than moving it along.=20 ``I would very much have liked for the commission to be more prepared for= =20 California,'' he said.=20 FERC has a responsibility to rule on deregulation plans because, under a=20 66-year-old federal law, it regulates wholesale electricity. The law says t= he=20 agency must ensure that wholesale prices are ``just and reasonable,'' thoug= h=20 neither Congress nor the courts have made clear what that means in a=20 deregulated market.=20 For decades, FERC's responsibilities were much simpler. The agency set rate= s=20 for wholesale electricity using a formula based on generating costs plus a= =20 fair profit.=20 But the agency took steps to change its role in the early '80s, when it=20 helped set into motion the forces that would lead to California's=20 deregulation. In 1982, two years after President Reagan's election, a FERC= =20 lawyer named Robert Angyal wrote an internal memo assuring commissioners th= at=20 the ambiguity of ``just and reasonable'' gave them ample room to experiment= =20 with free-market sales of electricity.=20 ``We thought we were the good guys then,'' said Steve Greenleaf, who joined= =20 the agency in 1986 as a regulatory specialist. Greenleaf, who now works for= =20 California's power grid operator, said recent events ``certainly make me go= =20 back and consider what we did.''=20 What he and others did was clear a path for the deregulation bandwagon. FER= C=20 commissioners, generating companies, utilities and politicians -- both=20 Democrats and Republicans -- all argued that competition could both reduce= =20 rates and boost profits, just as it had for natural gas, airlines and other= =20 markets.=20 In 1992, Congress passed a law encouraging open access. FERC took the next= =20 key step when Chairwoman Betsy Moler, a free-market Democrat, sat down at h= er=20 kitchen table one morning to begin drafting Order 888, named after the=20 agency's address in Washington, D.C.=20 The order, finalized in April 1996, encouraged the emergence of free market= s=20 by requiring utilities to open their transmission lines to competing power= =20 companies, but it did little to prepare the agency to monitor the markets a= nd=20 make sure companies competed fairly.=20 Daniel Fessler, a former University of California-Davis law professor=20 appointed to the state Public Utilities Commission by Republican Gov. Pete= =20 Wilson, drafted California's deregulation plan in the mid-'90s. In a brief= =20 and reluctant interview -- the first he has granted since the energy crisis= =20 began -- Fessler said that he consulted with FERC officials while he worked= =20 on the plan and testified several times before the commission.=20 ``Our dialogue was extremely public,'' he said.=20 But FERC officials say the agency took a hands-off approach, despite=20 conducting hearings and receiving thousands of documents.=20 Hoecker, who took over from Moler in June 1997, said the agency viewed=20 California's plan as an experiment that raised questions that could not be= =20 answered until it was in place. ``Fundamentally, the commission took the=20 stance that no one had experience in the United States anyway with this=20 comprehensive restructuring,'' he said.=20 At several crucial junctures, the agency's commissioners passed on the chan= ce=20 to explore the advice of critics, both academic and in-house, that could ha= ve=20 helped shape California's plan.=20 One of the nation's top experts on electricity deregulation, Bill Hogan of= =20 Harvard University, witnessed how commissioners let a detailed critique of= =20 California's plan slip by them at FERC's summer 1996 hearings.=20 San Diego Gas & Electric, the state's third-largest investor-owned utility,= =20 had hired Hogan to analyze the plan, which the utility opposed. His 71-page= =20 report offers a blueprint for some of what eventually would go wrong.=20 Flaws in the plan=20 Hogan did not predict the disaster -- nobody did -- but he criticized key= =20 aspects of the plan: a market structure that made it possible for companies= =20 to boost prices, and a complex power auction that opened the door for gamin= g.=20 At a hearing, the San Diego utility's chairman presented Hogan's paper to t= he=20 commission. San Diego's opposition was the last major obstacle the plan=20 faced, and the utility says it came under pressure to get in line so=20 California could meet a start-up date of January 1998.=20 State lawmakers and other energy executives told San Diego to get on board = if=20 it wanted to have a ``meaningful role'' when the Legislature wrote the fina= l=20 plan, said Bill Reed, chief regulatory officer for the utility's parent=20 company.=20 ``I believed, naively as it turned out, that FERC would exercise the ultima= te=20 judgment as to what needed to be done,'' Reed said. ``Unfortunately, FERC h= as=20 taken deference to an extreme that I never considered.''=20 The San Diego utility withdrew Hogan's report, and the commissioners signed= =20 off on the deregulation plan.=20 ``San Diego stopped talking,'' Hogan said. ``I wasn't invited to speak.''= =20 After the San Diego utility dropped its opposition, Steve Peace, a loquacio= us=20 Democrat from San Diego, led legislators on 18 days of hearings to craft th= e=20 final details of California's plan.=20 The Legislature passed the bill unanimously, and Wilson signed it Sept. 23,= =20 1996, hailing it as ``a major step in our efforts to guarantee lower rates.= ''=20 To a degree that few seemed to grasp at the time, it was an unprecedented= =20 transfer of power from the state to the federal government. Prior to the=20 bill's passage, state regulators had control over most of the power generat= ed=20 in California, setting prices and making sure enough electricity was=20 available. Now much of the power is generated by private companies -- not= =20 state-regulated utilities -- and only FERC has the authority to step in whe= n=20 wholesale prices climb.=20 FERC also continued to rule on each additional step in the state's=20 complicated deregulation plan as it was implemented. Again, the agency miss= ed=20 chances to overhaul the plan, this time based on flaws pointed out by its o= wn=20 experts.=20 Rube Goldberg=20 FERC's chief economist, Richard O'Neill, openly called the California plan = a=20 Rube Goldberg contraption in conversations with colleagues and California= =20 officials, according to sources inside and outside the agency.=20 Carolyn Berry, a FERC economist who has since left the agency, also reviewe= d=20 the plan. She, too, saw flaws -- and worried especially that the odd market= =20 structure might encourage companies to manipulate prices.=20 ``There was great resistance on the part of many people at the commission t= o=20 undo the process that California sent in,'' Berry said. ``There was a=20 reluctance to start pulling at the threads for fear that the whole package= =20 might fall apart.''=20 The flaws the two cited, including some of the same ones Hogan flagged, are= =20 now widely acknowledged as contributing to the collapse of California's=20 scheme.=20 The deep concerns of the staff members, however, were never impressed on th= e=20 commissioners. FERC does not foster a culture of internal debate, insiders= =20 say.=20 Hoecker said the agency made few changes in the plan because ``the commissi= on=20 was too highly deferential'' to California's industry leaders and=20 politicians.=20 In addition, he said, the agency simply did not have the clout to stop a pl= an=20 hurtling along on a political fast track.=20 The agency, like others in Washington, is highly political and, acutely awa= re=20 of what industry leaders want, often delivers. As far back as 1960, a=20 presidential commission labeled the agency's predecessor ``a virtual Chambe= r=20 of Commerce for the oil and gas companies.''=20 Corporate executives have considerable sway over the agency, to the point o= f=20 helping the White House decide who is appointed to the five-member commissi= on=20 and who becomes chairman.=20 And there is an active revolving door. Hoecker was an industry lawyer befor= e=20 he was a commissioner, and now he is again. Former Chairwoman Moler consult= ed=20 for Enron and other energy companies after leaving the agency, and now she = is=20 a utility executive.=20 Industry leaders wanted deregulation, and they pressed hard for California'= s=20 plan, which they thought would open the door for unfettered markets=20 nationwide.=20 Several other factors kept FERC from playing a stronger oversight role. Whi= le=20 the California plan was being put into effect, many FERC officials were=20 focused on a $12.7 million plan to reorganize their staff and upgrade=20 computers. Hoecker was so proud of the result, he spent $100,000 to have a= =20 historian write a book about it.=20 But key employees say they were distracted by the reorganization for months= .=20 More important, a half-dozen employees who were versed in deregulation issu= es=20 left, leaving FERC handicapped in its ability to police the new market it h= ad=20 created.=20 Some staff members sought a single, larger enforcement division resembling= =20 the one at the Securities and Exchange Commission, where 900 people, half o= f=20 the agency, handle market investigations and enforcement. But FERC decided = to=20 keep its enforcement split between two offices that had a total of about 75= =20 employees at the time -- a fraction of its 1,200 employees.=20 Warning came soon=20 The agency was confronted with its first clear warning of the coming disast= er=20 soon after California's deregulation took effect.=20 On a hot day in July 1998, three months after the market opened, energy=20 traders whose names state officials have refused to release decided to test= =20 whether the new market could be manipulated. Although electricity had been= =20 trading well below $100 a megawatt-hour, they offered a megawatt-hour at=20 $9,999 -- the highest number the traders thought the computer system would= =20 accept, they later told regulators.=20 Desperate for power to keep the grid from crashing, the Independent System= =20 Operator -- which monitors the system and buys some power -- paid it. The I= SO=20 then made an emergency request for a price cap, and FERC granted it.=20 Worried that federal regulators were not alert to the potential for market= =20 shenanigans, the grid operator repeatedly warned FERC that trouble was ahea= d.=20 The ISO's market surveillance director, Anjali Sheffrin, was so concerned= =20 that she visited the agency twice in the fall of 1999 to try to explain to= =20 FERC officials that California's fledgling market needed the protection. ``= I=20 don't think they had any thought of what the potential was,'' Sheffrin said= .=20 But at least one FERC economist did.=20 Ron Rattey, one of the agency's most experienced analysts, made a=20 presentation to his colleagues in March 2000, shortly before the California= =20 crisis began. He noted an increase in price spikes nationwide from 1997=20 through 1999. Among other factors, he blamed regulatory policies and market= =20 abuses.=20 His conclusion: ``We should expect another tumultuous summer in 2000.''=20 Contact Eric Nalder at [email protected] or (206) 729-5161 and Mark=20 Gladstone at [email protected] or (916) 441-4601.=20 Gov. Davis, by failing to act, is to blame for energy crisis=20 Published Monday, June 4, 2001, in the San Jose Mercury News=20 BY PETE WILSON=20 Five years ago, when electricity deregulation was passed by unanimous vote = of=20 both houses of the Legislature (and without a murmur of dissent from any=20 Democratic constitutional officer, including then-Lt. Gov. Gray Davis),=20 California enjoyed an excess of supply over demand amounting to some 30=20 percent.=20 Deregulation was enacted to create free market competition; first, to drive= =20 down what were then among the very highest power costs in the nation and,= =20 second, to attract private power providers to invest in the creation of new= =20 generating capacity to meet the exploding power needs of the New Economy an= d=20 keep in California all the jobs that it would produce.=20 And deregulation did succeed in stimulating a significant increase in=20 applications to build power plants, especially after the effective date of= =20 the legislation in 1998 and the defeat that year by California voters of=20 Prop. 9 (which unwisely sought to repeal deregulation). The total megawatta= ge=20 of the filings for 1998 doubled that for 1997. After the effective date=20 (March 1998) of the deregulation legislation, AB 1890, and the defeat of=20 Proposition 9 (November 1998), removing the threat of repeal, the total for= =20 1999 was double that of 1998 -- exceeding the 5,000 megawatt mark in '99=20 alone.=20 Far from causing the problem of energy shortage, as the Davis administratio= n=20 charges, deregulation caused providers to file -- by mid-2000 -- applicatio= ns=20 to build new power plants that promised to add 10,000 megawatts to=20 California's power supply.=20 That's why I signed it.=20 I did so even though I disagreed with two of the provisions of AB 1890 --= =20 just as I (and every other governor in history) signed other bills which,= =20 though imperfect, promised significant and needed beneficial change from th= e=20 status quo, which was certainly true of deregulation.=20 The reason we will suffer power blackouts this summer is because the Davis= =20 administration has by inaction allowed a problem to become a crisis. Now th= e=20 power crisis threatens to become a state fiscal crisis.=20 Gov. Davis has been quoted as saying, ``If I wanted to raise rates, I could= =20 have solved this problem in 20 minutes.'' Sadly, by temporizing on needed= =20 actions to raise rates and other steps required to avert crisis, he made=20 crisis inevitable. As a result, California bonds have suffered two downgrad= es=20 by Wall Street rating agencies, and he has put in jeopardy state spending f= or=20 parks, schools, transportation and other capital needs. He has been warned = by=20 the state legislative analyst to sharply reduce the state budget.=20 The administration failed to monitor either the explosive growth in=20 electricity consumption by the New Economy in the last five years, which=20 gobbled up the energy surplus that existed at the time of deregulation, or= =20 the curtailment of production of natural gas, which led to price spikes in= =20 recent years. It failed also to heed early warnings from weather forecastin= g=20 agencies that the summers ahead would be among the hottest in a century.=20 It ignored a 1998 warning by the California Energy Commission of possible= =20 energy shortages by as early as 2000. And when possibility became hard, hot= =20 reality in San Diego in 2000, the Davis administration continued to ignore= =20 it, putting in place a political, palliative rate cap instead of dealing wi= th=20 the problem.=20 Fully a year ago, or earlier had he chosen to do so, Gov. Davis could have= =20 invoked the almost unlimited powers conferred upon the governor of Californ= ia=20 by the State Government Code to deal with an emergency, including explicitl= y=20 the sudden and severe shortage of electrical energy. These powers include t= he=20 suspension of statute and regulation. It was this power that I used after t= he=20 Northridge earthquake in 1994 to rebuild and reopen Los Angeles' shattered= =20 freeways -- just 64 days after their destruction, instead of taking the 2 1= /2=20 years that would otherwise have been required by law.=20 Fully a year ago, Davis could have acted unilaterally, without the=20 Legislature, to suspend operation of the rate cap that the investor-owned= =20 utilities (PG&E, SCE and SDG&E) recently complain of but eagerly requested = at=20 the time of enactment.=20 He could have, by decree, suspended the provision that prohibited the=20 utilities from forward contracting with power wholesalers.=20 He could have, by executive order, suspended and truncated the nightmarish= =20 process required by state law for approval of siting. Had he done so early= =20 enough, when he might even have made a difference this summer, and done so= =20 not just with peaker plants but also with large plants, he might have great= ly=20 accelerated construction of the power plants that will be required to allow= =20 us to escape from blackouts, power price spikes and the severe job loss and= =20 economic injury certain to result from a power supply that is neither=20 reliable nor affordable.=20 All these actions, Gov. Davis could have taken a year ago -- or earlier. A= =20 governor can foresee the emergency and exercise his extraordinary powers to= =20 prevent it. He is not required to wait and compel California to suffer it.= =20 Had the governor heeded the early warnings -- about hot weather, or the=20 threat of insolvency to the utilities -- and had he acted, using the full= =20 range of his extraordinary emergency powers when he should have, he could= =20 have prevented the problem from becoming the crisis it has become.=20 We might have given power providers incentives to build enough new plants= =20 fast enough to avoid blackouts this summer.=20 PG&E would not have been compelled to declare bankruptcy and Southern=20 California Edison would not be teetering on the brink.=20 Energy costs would not have spiked to the present outrageous levels.=20 The state would not have burned through billions of taxpayers' dollars.=20 And California's jobs would not be threatened, as they are, by raiders from= =20 other state governments who are aggressively seeking to lure California=20 employers to their states and steal our jobs.=20 The blame game waged by the governor's office adds insult to injury. It wil= l=20 provide no comfort to Californians sweltering in darkness this summer. But = it=20 does do a serious disservice to ratepayers and taxpayers by seeking to=20 mislead those who are not aware of the real, unhappy facts of California's= =20 present crisis.=20 The honest explanation for it is simple, not rocket science: State governme= nt=20 cannot ignore the law of supply and demand. It is not the state's=20 responsibility to build power plants. But it is its responsibility to creat= e=20 a regulatory environment that will give incentives to private sector=20 providers to do so. Deregulation, even with imperfections that the governor= =20 could have cured by fiat if the need arose, was a significant advance in=20 achieving that incentive as subsequent filings by providers attest.=20 The problem grew into a crisis not because of deregulation but because of= =20 Gov. Davis' failure to act. That is the plain, unhappy truth of the matter.= I=20 take no joy in saying so. I have been prepared to be helpful to the governo= r=20 during this very serious challenge to our state's well-being, just as when = I=20 responded to his request for my assistance in passing Proposition 39 (the= =20 school bond issue) in the most recent election.=20 Just as my perception of what was best for California caused me to help him= =20 then, I am compelled now to speak out to prevent the rewriting of history a= nd=20 a deliberate effort to mislead the public and to discredit deregulation in= =20 order to shift the blame for his own inaction.=20 Pete Wilson is the former governor of California. He wrote this column for= =20 the Sacramento Bee.=20 Conservation paying off=20 Californians cut back use by 11% in May, and continuing efforts could help= =20 avert blackouts.=20 June 4, 2001=20 By KATE BERRY The Orange County Register=20 Electricity consumption in California fell a dramatic 11 percent last month= -=20 a drop hailed by state energy officials as so significant that rolling=20 blackouts could be averted this summer by conservation efforts.=20 Californians used 3,595 fewer megawatts last month -- and a significant 10.= 4=20 percent less energy during peak hours -- compared with the same month a yea= r=20 ago, according to figures released jointly by the California Energy=20 Commission and the governor's administration.=20 "It's been fairly remarkable," said Steve Larson, executive director of the= =20 energy commission. Larson said several initiatives, including a "20/20 reba= te=20 program," have not yet gone into effect, so more conservation can be=20 expected. "We believe conservation played an important role in avoiding=20 blackouts during the month of May."=20 Daily temperatures in Santa Ana averaged a high of 76 degrees in May -- 2.4= =20 degrees above normal, according to the National Weather Service.=20 "We believe conservation will really help us get through this summer," said= =20 Stephanie McCorkle, a spokeswoman for the California Independent System=20 Operator, which manages the state's electric grid.=20 In addition, wholesale electricity prices are dropping, state energy=20 officials reported.=20 "The market has definitely been moving down through May," said Ray Hart,=20 deputy director of the Department of Water Resources, the agency that has= =20 been buying power since January for customers of Southern California Edison= =20 and Pacific Gas & Electric.=20 Hart said the agency signed nine long-term energy contracts in May, for a= =20 total of 900 megawatts. With a total of 36 long-term contracts, California= =20 has slowly been able to move out of the expensive spot market for=20 electricity, securing lower power prices that are locked in for up to 10=20 years.=20 The state is now purchasing 25 percent of wholesale power on the spot marke= t,=20 down from 90 percent in Jan uary. The agency also is negotiating with the L= os=20 Angeles Department of Water and Power, a large municipal utility, to buy it= s=20 excess electricity at cost-based rates.=20 But energy officials could not explain why municipal agencies like LADWP ha= ve=20 charged California exorbitant prices for wholesale electricity and, at the= =20 same time, have come under less scrutiny or public pressure from politician= s.=20 "The governor made clear that public agencies financed by taxpayers were=20 engaging in higher-than-normal pricing," said Hart.=20 For all the negotiations, California is bracing for a brutal summer. As man= y=20 as 260 hours of rolling blackouts could hit the state during hot summer=20 months, according to the North American Electric Reliability Council.=20 But no one knows exactly how much conservation will materialize, or whether= =20 it will be enough to keep blackouts at bay.=20 Californians' energy use has been in decline all year, falling 7 percent in= =20 April, 9 percent in March, 7 percent in February, and 5 percent in Jan uary= .=20 On the hottest days, typically from June to September, electricity demand i= s=20 forecast to hit 47,500 megawatts.=20 Demand in May has averaged about 34,000 megawatts, and a significant amount= =20 of generation - or more than 10,000 megawatts of power - has been offline f= or=20 unexpected repairs.=20 O.C. firms' energy-saving moves=20 June 4, 2001=20 By JAN NORMAN The Orange County Register=20 The prospect of a long summer and short electricity supplies has many local= =20 companies taking action to reduce electricity use. For example:=20 3M ESPE, Irvine=20 3M ESPE, a dental-products manufacturer, tries to wring out every watt of= =20 savings. (See story on Page 11).=20 It not only uses motion sensors on lighting, many rooms have programmable= =20 thermostats and twist timers that can be set to turn off after a specific= =20 length of time.=20 Savings vary by usage. But some thermostats qualify for a rebate.=20 Check with Southern California Edison.=20 Kistler's Hair & Nail Mall, Orange=20 The interior of this hair salon was designed in 1983 to fit in with Old Tow= ne=20 Orange's rustic look, right down to the light fixtures. Recently owners Tim= =20 and Toni Kistler realized that the lights not only consumed large amounts o= f=20 electricity, but they made the room hotter, so the air conditioner consumed= =20 even more electricity to cool the salon.=20 In May, the Kistlers replaced 30 100-watt incandescent bulbs with eight=20 fluorescent fixtures at the styling stations and six condensed fluorescent= =20 bulbs in other areas.=20 The Kistlers say that the project cost $600 for new fixtures and bulbs and = 10=20 hours of installation work. They reduced electricity use by 1,652 watts.=20 Boyle Engineering Corp., Newport Beach=20 Boyle must be mindful of electricity conservation. Energy efficiency is par= t=20 of the consulting work it does for clients.=20 Among the firm's actions since 1993 in its own 50,000-square-foot building:= =20 Installed light sensors in every room to turn off lights automatically when= =20 no one is present. Cost: $22,000. Annual savings (before this year's rate= =20 hikes) $4,400;=20 Added reflective solar film on east and west sides of building. Cost $6,000= .=20 Annual savings $6,000;=20 Added insulation under the floor above the parking area. Cost: $21,000.=20 Annual savings: $9,000.=20 Since 1993, Boyle has spent $99,000 to increase energy efficiency. Its ener= gy=20 use increased 15 percent even though it has grown from no computers or=20 printers to 160 computers.=20 "A few years ago, we also wanted to install a heat-pump system that would= =20 chill at night and circulate during the day, but the city turned down our= =20 request because it would have taken out one - yes, only one - parking space= ,"=20 said Vice President Victor Opincar.=20 Kentec Medical Inc., Irvine=20 Kentec, a medical-products distributor, replaced its seven old air=20 conditioners (6 SEER - seasonal energy efficiency ratio) with more-efficien= t=20 units (13 SEER). The new units will use about half the electricity and Kent= ec=20 gets a $300-per-unit rebate, said owner Kent Wilken.=20 The company also installed solar-tube lighting in the warehouse roof. Each= =20 Solatube, $460 installed, reflects enough natural light to illuminate up to= =20 400 square feet, according to Sola Lite in Santa Ana, which sells the=20 product.=20 Pacific Gas and Electric Company Launches Campaign to Enhance Outage=20 Preparedness; State Predicts More Power Shortages In Coming Weeks And Month= s=20 June 4, 2001=20 SAN FRANCISCO--(BUSINESS WIRE)--June 1, 2001 via NewsEdge Corporation -=20 As California barely avoided its seventh day of rotating outages this year,= =20 Pacific Gas and Electric Company ratcheted up its outage preparedness=20 campaign.=20 The California Independent System Operator (CAISO), which runs the state's= =20 electric grid, is forecasting more electricity shortages - ranging from 600= =20 to 3,700 megawatts on any given day between now and the end of September -= =20 which will likely result in blackouts for millions of Californians.=20 "We know that state officials are doing everything they can to purchase=20 enough power to meet the needs of all our customers, but we also recognize= =20 that they may not be successful every day," said Dan Quigley, Pacific Gas a= nd=20 Electric Company's outage communications coordinator. "When statewide energ= y=20 supplies are short, blackouts are ordered by the California Independent=20 System Operator, and that presents challenges for thousands of our customer= s.=20 So, we're working for the best, but doing everything we can to help our=20 customers prepare for the worst."=20 In preparation for a worst-case scenario, Pacific Gas and Electric Company= =20 has been blanketing its service area - through the media, with paid=20 advertising, the Internet and other tools - with tips on how the public can= =20 prepare for outages and be safe when they hit.=20 The company's latest effort involves working with United Way, the Red Cross= =20 and other organizations to reach out to nonprofits who assist customers=20 particularly vulnerable during outages - seniors, the disabled and the very= =20 young. The utility is hosting several seminars throughout its service area= =20 for community-based organizations to learn about the energy crisis so they= =20 can help their clients prepare for blackouts.=20 Following are some additional outreach efforts the utility is undertaking:= =20 -- Briefing emergency service organizations on the blackout=20 process so they can take precautions in their communities to=20 ensure public safety.=20 -- Hosting seminars for large industrial and commercial customers=20 whose equipment is especially sensitive to power outages.=20 -- Educating local and state government officials so they can=20 keep their constituents informed.=20 -- Producing collateral materials in four languages on outage=20 safety and conservation tips for distribution at public=20 meetings, customer service centers and by service=20 representatives who visit customers' homes. Items include:=20 brochures, fact sheets and magnets.=20 -- Launching paid advertising in four languages on outage=20 preparedness that builds on previous ads highlighting the need=20 for conservation and how Pacific Gas and Electric Company can=20 help consumers conserve.=20 -- Producing Public Service Announcements in English and other=20 languages for distribution to radio and television stations.=20 -- Including customers' block information on the utility's=20 website at www.pge.com. Pacific Gas and Electric Company will=20 continue to print block numbers on customers' bills, as it has=20 done for more than 20 years.=20 -- Enhancing outage notification systems by automating the=20 process and offering customers more flexibility in how they=20 receive information.=20 The outage preparedness effort is part of Pacific Gas and Electric Company'= s=20 customer education campaign called "The More You Know About Conserving=20 Energy, the Less Energy You Need." In addition to outage safety, the utilit= y=20 is helping customers learn how to conserve energy and providing rebates to= =20 help them purchase energy efficient appliances and equipment.=20 For more energy saving tips, please visit our website at www.pge.com/123 or= =20 contact the Smarter Energy Line at 1-800-933-9555.=20 CONTACT: PG&E | News Department, 415/973-5930 PG&E Issues Statement After Court Decision On Its Request for Stay=20 June 4, 2001 SAN FRANCISCO--(BUSINESS WIRE)--June 1, 2001 via NewsEdge Corporation -=20 Pacific Gas and Electric Company today released the following statement aft= er=20 the U.S. Bankruptcy Court issued its decision denying the utility's request= =20 for a stay and an injunction on the TURN accounting proposal. On March 27,= =20 the California Public Utilities Commission (CPUC) issued an order that=20 attempts to force the company to restate all its regulatory books and=20 accounts retroactively back to January 1, 1998. On April 9, the company had= =20 asked the court to stay the CPUC's order, under the automatic stay provisio= n=20 of the Bankruptcy Code. The court did not grant this request, citing certai= n=20 exceptions to the automatic stay:=20 "Pacific Gas and Electric Company is disappointed that the court did not=20 grant immediate relief from the unlawful and retroactive CPUC order. Howeve= r,=20 today's decision was not on the overall merits of the CPUC action.=20 "Pacific Gas and Electric Company will continue to pursue all legal=20 challenges to this unlawful CPUC decision."=20 CONTACT: Pacific Gas and Electric Company | News Department, 415/973-5930 The Outlook=20 The Pros and Cons Of Power Price Caps=20 By Jon E. Hilsenrath=20 =20 06/04/2001=20 The Wall Street Journal=20 Page A1=20 (Copyright (c) 2001, Dow Jones & Company, Inc.)=20 New York -- Alfred Kahn, a Cornell University economics professor, is seen = by=20 many in his field as the father of cheap airfares. As chairman of the Civil= =20 Aeronautics Board under President Carter during the 1970s, Mr. Kahn led the= =20 nation's drive to deregulate the airline industry.=20 By allowing airlines to set their own prices and pick their own routes,=20 practices previously regulated by the government, competition among airline= s=20 drove ticket prices lower on many popular routes. By some accounts,=20 deregulation has saved travelers about $19 billion a year. Letting the mark= et=20 dictate prices "is the best way of bringing customers low prices and improv= ed=20 service," Mr. Kahn says.=20 Yet when it comes to allowing the market to set prices for California's=20 wholesale electricity, Mr. Kahn is singing a different tune. "The=20 circumstances in electricity are unusual," he says.=20 Mr. Kahn was one of 10 economists who stepped into the middle of a battle= =20 last week between President Bush and California Gov. Gray Davis about the= =20 state's energy crisis. Mr. Davis, and the economists like Mr. Kahn who=20 support him, want the federal government to impose caps on wholesale=20 electricity prices in California. California's total electricity bill jumpe= d=20 to more than $27 billion for 2000 from $7.4 billion for 1999, and state=20 officials expect it to reach $50 billion or more this year. The soaring cos= ts=20 have led to a budget crisis for the nation's largest state economy and have= =20 prompted the utility unit of PG&E Corp. to file for bankruptcy-court=20 protection. By capping the wholesale price of electricity, Mr. Davis says h= e=20 can stave off further damage to the California economy.=20 Mr. Bush, however, says such caps will only make the state's energy problem= s=20 worse. "Price caps do nothing to reduce demand, and they do nothing to=20 increase supply," Mr. Bush said last week. If anything, say economists who= =20 are opposed to price caps, controls will lead to worse shortages. The logic= =20 for this is simple: If power companies can't earn a decent return on their= =20 investment, they'll redirect their production and cut back future=20 investments, exacerbating the very problem price controls are supposed to= =20 fix.=20 Indeed, government efforts to cap prices have a long history of failure. As= =20 early as 301 A.D., Roman Emperor Diocletian imposed economywide price=20 controls. The move led to mass shortages and he ended up abdicating four=20 years later.=20 A more recent -- and far more vivid -- example of how price controls can=20 backfire occurred during the 1970s when the federal government limited the= =20 price that oil companies could charge for gasoline and dictated where it=20 could be distributed. Unable to sell their wares at market-clearing prices,= =20 oil companies ended up rationing supplies. Motorists had to wait for hours = in=20 long lines at gasoline stations just to buy a few gallons of fuel.=20 "Price controls are in and of themselves very, very bad," Glenn Hubbard,=20 chairman of President Bush's Council of Economic Advisers, says. "It is in= =20 every freshman textbook on economics."=20 But Mr. Kahn and other pro-control economists say California's problems are= =20 unique. In a normally functioning competitive market, price shocks have an= =20 immediate impact on supply and demand. Producers respond to higher prices b= y=20 boosting supply immediately, and consumers respond by cutting back purchase= s.=20 But that is not happening in California's wholesale electricity market for= =20 several reasons. First, it takes nearly two years for new power plants to= =20 come on line, so energy supplies remain constrained. Meanwhile, consumers= =20 aren't cutting back their electricity use, because their rates are capped.= =20 That has led to a price squeeze and shortages.=20 Pro-control economists say the small group of power producers who run the= =20 plants that supply California with energy are exacerbating the problem by= =20 deliberately holding power off the market, forcing prices -- and their=20 profits -- even higher. "They're exercising unilateral market power," says= =20 Frank Wolak, a professor at Stanford University. (The power producers dispu= te=20 this argument. They say they have taken power off the market only when they= =20 have had to service old plants that are being overworked.)=20 Temporary price caps, Mr. Kahn and other pro-cap economists say, would soft= en=20 the increasing burden on California's state coffers until new power plants= =20 come online, easing the supply crunch. The state already has spent $7.7=20 billion to acquire energy for distressed utilities. To help cover the costs= ,=20 it is planning to issue a $13.4 billion bond, which taxpayers will have to= =20 pay back eventually in the form of high electricity prices.=20 These economists add that they can avoid the pitfalls of the past by settin= g=20 price caps at a level that still allows energy producers to earn a strong= =20 return on their investments. Several producers say such a move will constra= in=20 their investments going forward.=20 The idea sits well with at least one power producer. Calpine Corp. is=20 planning to invest about $6 billion in new capacity during the next four=20 years, including three new plants that will be up and running this summer. = "I=20 don't see anything right now that would dissuade us," Calpine Chairman Pete= r=20 Cartwright says.

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Energy Issues

Please see the following articles: Sac Bee, Mon, 6/11: Who'll pay billions in PG&E debt? Consumers, taxpayers and asset sales are among the options Sac Bee, Mon, 6/11: Dan Walters: Record undercuts governor's message on=20 handling energy crisis SD Union, Sun, 6/10: Plan to pay businesses not to use power OK'd=20 SD Union, Sat, 6/9: Sempra may drop project in Escondido LA Times, Sat, 6/9: Hackers Victimize Cal-ISO LA Times, Sat, 6/9: State Asks Pricing Curbs on 4 Firms LA Times, Sat, 6/9: After-School Programs Threatened LA Times, Sat, 6/9: Drop in Gas Price Raises Questions in Probe LA Times, Sat, 6/9: New Power Plant Proposed for Riverside County SD Union, Sat, 6/9: ISO seeks to pull rate authority from 4 firms SD Union, Sat, 6/9: Short-circuited by the `so-called' electricity crisis = =20 (Editorial) LA Times, Mon, 6/11: Ventura County Businesses Sweat Out Power Crisis LA Times, Mon, 6/11: The State PG&E Plan to Fell Oaks Fuels Anger Energy:= =20 The utility contends the trees pose a fire threat to power lines. Critics= =20 claim the firm wants to cut costs LA Times, Mon, 6/11: The State Gov. Davis Feisty About Gaining Leverage Ove= r=20 the 'Cowboys'=20 SF Chron, Mon, 6/11: Davis adds major ally in bid for price caps / Lieberma= n=20 invites governor to testify SF Chron, Mon, 6/11: Bay residents tired of state crisis decrees / Conservi= ng=20 or not, they ignore Davis SF Chron, Mon, 6/11: Bay residents tired of state crisis decrees=20 Conserving or not, they ignore Davis SF Chron, Mon, 6/11: Developments in California's energy crisis Mercury News, Mon, 6/11: Electricity traders' tech habits get scrutiny=20 Mercury News, Mon, 6/11: Davis is down, but history and politics are on his= =20 side (Commentary) OC Register, Mon, 6/11: Senate panel eyes price caps for power=20 OC Register, Sun, 6/10: New program will pay businesses to conserve OC Register, Sun. 6/10: Davis' crisis management on upswing OC Register, Sat, 6/9: Electricity notebook Officials: Suppliers should refund excess charges Individual.com (PRnewswire), Mon, 6/11: Calpine Announces 600-MW Inland=20 Empire Energy Center Project Will Offer Electricity to One of California's Fastest Growin= g=20 Regions=20 Individual.com (PRnewswire), Mon, 6/11: SDG&E Applauds Expansion of=20 Assistance For Low-Income Customers; CPUC Changes Mean More Eligible Customers, Increased Discounts= =20 NY Times, Mon, 6/11: California Gets a Reprieve As Natural Gas Prices Drop ---------------------------------------------------------------------------= --- -------------------------------------------------- Who'll pay billions in PG&E debt? Consumers, taxpayers and asset sales are= =20 among the options. By Claire Cooper Bee Legal Affairs Writer (Published June 11, 2001)=20 A judge's decision not to meddle with electric rates has left open the=20 biggest question in the Pacific Gas and Electric Co. bankruptcy case: Who= =20 will pay the utility's nearly $10 billion in bills?=20 Ratepayers? Last week's decision by U.S. Bankruptcy Judge Dennis Montali le= ft=20 rate-setting to the state Public Utilities Commission. But experts aren't= =20 ruling out PUC approval of major increases in the prices charged to PG&E's= =20 customers.=20 Taxpayers? They'd foot the bill if the state bailed out the utility, anothe= r=20 reportedly live option.=20 Creditors? They could, as one consumer advocate says, "cannibalize" each=20 other in competing for PG&E's assets. Though PG&E says creditors will all b= e=20 paid in full, it hasn't said how long that will take.=20 PG&E Corp., the utility's parent? It might be forced to infuse the utility= =20 with cash. PG&E also could sue energy wholesalers to recoup overcharges or= =20 could sell off its own power generators to raise cash.=20 Until last week, when Montali made it known that he won't raise retail rate= s,=20 the two major players in the bankruptcy proceedings -- the utility and the= =20 official creditors committee -- had agreed on most matters that came up in= =20 court, including the need for a rate increase.=20 "Now, it's going to get maybe a little uglier and less friendly," predicts= =20 Jesse Fried, a bankruptcy law professor at the University of California,=20 Berkeley. "It looks like they're just going to have to sit down and decide= =20 who's going to eat the loss."=20 Fried says the "right answer" should be PG&E Corp., which requested=20 deregulation of the energy market and profited from it until soaring=20 wholesale prices left the utility subsidiary with massive debt, in part=20 because retail rates were frozen.=20 Between the time deregulation was passed and the end of 2000, the utility= =20 transferred $3.9 billion to its parent corporation before filing for=20 bankruptcy protection April 6, according to a state-ordered audit.=20 To force the corporation to repay the money, says Sacramento bankruptcy=20 lawyer W. Austin Cooper, Montali would have to conclude that the transfer= =20 defrauded the utility's creditors.=20 Montali has the power "to pierce the corporate veil" to find the answer, sa= ys=20 Harvey Rosenfield, president of the Foundation for Taxpayer and Consumer=20 Rights.=20 But Cooper predicted a different scenario: sale of significant portions of= =20 PG&E assets -- such as generators or transmission lines -- to pay creditors= =20 and repay the state for electricity it has purchased on the wholesale marke= t.=20 At a meeting Thursday between the utility and some of its creditors, PG&E= =20 chief financial officer Kent Harvey said the utility's hydroelectric=20 facilities are worth between $3.9 billion and $4.2 billion. James Lopes, th= e=20 utility's bankruptcy lawyer, declared the subject of a possible sale off=20 limits at the meeting.=20 Rosenfield predicts it will remain off limits because, he says, the state= =20 would begin talking about seizing the generators rather than risk a sale to= =20 an out-of-state buyer.=20 He favors another option: suing the out-of-state companies that have been= =20 charging the highest wholesale energy rates.=20 "If I were the small business that supplies pencils and paper clips to PG&E= ,=20 I would want to collect some money from the energy companies that overcharg= ed=20 PG&E for power until the state stepped in to buy the power in the utility's= =20 place," he said.=20 If PG&E filed an antitrust case against those companies, it could be tried = in=20 Bankruptcy Court, according to Cooper.=20 Discussion on that subject also was ruled off limits by Lopes.=20 However, Harvey said the utility has requested a probe by the Federal Energ= y=20 Regulatory Commission.=20 And PG&E has been providing information to state agencies probing the=20 out-of-state firms, spokesman Ron Low said.=20 Rosenfield predicts growing pressure for a state-sponsored PG&E bailout lik= e=20 the $2.76 billion plan proposed by Gov. Gray Davis to keep Southern=20 California Edison out of bankruptcy.=20 Under the Davis proposal, the state would have spent $2.76 billion to buy= =20 that utility's power transmission lines. But the Legislature shelved Davis'= =20 plan, and Rosenfield warned that any such bailout would be forced to a publ= ic=20 referendum, "along with any politicians who supported it."=20 Stanford University bankruptcy law professor Marcus Cole says the long-rang= e=20 success of any plan for PG&E "depends entirely on the prospects for=20 profitability" -- that is, pegging retail energy rates to wholesale costs.= =20 "PG&E is not a charity," Cole says. "It's there to provide a service. The= =20 only way it's going to do that is if it can generate profits."=20 The Bee's Claire Cooper can be reached at (415) 551-7701 or=20 [email protected].=20 Dan Walters: Record undercuts governor's message on handling energy crisis (Published June 11, 2001)=20 Gov. Gray Davis spoke to a small business conference in Sacramento on May 3= 0=20 and reminded attendees that "I'm a pro-business Democrat." He then launched= =20 into a recitation of his standard pitch on the state's energy crisis -- tha= t=20 it's being caused by "greedy energy companies" and that he's working hard t= o=20 solve it with far-reaching conservation programs and a massive power plant= =20 construction program.=20 "For 12 years, California did not build one major power plant," he said,=20 adding that since he became governor, 15 have been approved, 10 are under= =20 construction, and by 2003 "we will have more capacity than demand."=20 Davis is a politician who's renowned for staying, in the jargon of politica= l=20 consultants, "on message." And what he told the business conference about= =20 building power plants replicated what he had said dozens of times in=20 preceding weeks. During his April 5 televised speech on the crisis, for=20 example, Davis claimed, "In the 12 years before I took office, not a single= =20 major power plant was built in California. Not one."=20 Clearly, Davis' message to Californians is that the state wasn't building= =20 power plants before he began his governorship in January 1999, but that he = is=20 moving, as he often says, "at warp speed" to license and build new plants a= nd=20 close the supply-demand gap. There are two things wrong with that message:= =20 His account of the pre-Davis record is not accurate, and his assertion that= =20 huge amounts of new power generation are coming soon is, to say the least,= =20 questionable.=20 First, the past. In the 12 years prior to his becoming governor, the=20 California Energy Commission licensed 17 power plants with a generating=20 capacity of about 1,900 megawatts. Twenty-one plants totaling 3,100 megawat= ts=20 began producing power during the period, including two considered "major" b= y=20 the usual definition of being 300 megawatts or more: the 300-megawatt=20 Sycamore plant in Kern County and the 385-megawatt Watson cogeneration plan= t=20 in Los Angeles County. Two more plants that started production during the= =20 period were more than 200 megawatts.=20 After Davis became governor, but while the Energy Commission was still=20 controlled by appointees of his predecessor, Pete Wilson, the commission=20 licensed an additional 5,800 megawatts of generation, including nine major= =20 plants.=20 Plant licensing has been speeded up in the last six months, but the total o= f=20 plants licensed by the Davis-controlled commission is less than 4,000=20 megawatts and none of those facilities has gone into production.=20 New plants are under construction, according to progress reports prepared b= y=20 the Energy Commission, but wheth- er all the recently licensed facilities= =20 will be built, at least in the near future, is questionable. There is, powe= r=20 industry sources say, an increasing reluctance by energy companies to commi= t=20 hundreds of millions of dollars to con- struct licensed plants (about=20 $750,000 per megawatt for new facilities) while Davis continues to denounce= =20 them as greedy exploiters and hints he may seize plants under an emergency= =20 declaration. Another factor is uncertainty over whether the state or=20 utilities will be financially able to buy the power.=20 One hint of that attitude has already surfaced publicly. Mirant Corp.=20 announced June 1 that it was delaying construction of a 530-megawatt=20 expansion of its Contra Costa County generation complex "because of=20 uncertainty about California energy market rules." Randy Harrison, head of= =20 Mirant's Western operations, said, "We have to be able to determine that th= is=20 will be a viable investment before we can put a quarter of a billion dollar= s'=20 worth of steel on the ground."=20 Work on much smaller cogeneration and "peaker" plants has begun, but many o= f=20 the big ones apparently are being put on hold. Indeed, there's a secondary= =20 market developing for selling licensed projects that could be built in the= =20 future. Energy executives may be greedy, but they're not stupid and it woul= d=20 be foolhardy to make multimillion-dollar commitments in a state that still= =20 doesn't know where it's going in energy policy.=20 The Bee's Dan Walters can be reached at (916) 321-1195 or [email protected]= om .=20 Plan to pay businesses not to use power OK'd=20 State program in effect when reserves are low By Jennifer Coleman=20 ASSOCIATED PRESS=20 June 10, 2001=20 SACRAMENTO -- Gov. Gray Davis signed an executive order yesterday creating = a=20 voluntary program that will use up to $100 million in state money to pay=20 businesses not to use electricity when reserves are low.=20 Davis said that since nearly 70 percent of energy use in California is by= =20 commercial users, the program will "help mitigate and even avoid blackouts.= "=20 Participants, mostly large commercial users, will submit bids for reducing= =20 their power. Grid operators will then compare those prices with the going= =20 price for power and choose the cheapest option, said S. David Freeman, the= =20 governor's senior energy adviser.=20 "We'd rather pay people in California to cut back than pay out-of-state=20 generators," he said.=20 The Independent System Operator, manager of the state's power grid, will=20 operate the program, and the state Department of Water Resources will back = it=20 financially.=20 The program is the first of its kind paid for by the state. The Public=20 Utilities Commission, the Independent System Operator, and the state's=20 utilities have similar programs.=20 Kellan Fluckiger, Davis' energy adviser, said the size of the new program= =20 would depend on how many participants the ISO can recruit.=20 The ISO releases information on bids for energy after a period of time, and= =20 will probably treat bids for cutting power the same way, he said.=20 Sempra may drop project in Escondido=20 Dispute over power plant threatens industrial park By Jonathan Heller=20 UNION-TRIBUNE STAFF WRITER=20 June 9, 2001=20 ESCONDIDO -- Officials of Sempra Energy Resources are considering pulling t= he=20 plug on a planned high-tech industrial park in the city because of conflict= s=20 with a small power plant that would be built near the park's entrance.=20 Sempra executives will meet Monday to discuss the issue, a source familiar= =20 with the project said late yesterday. If they decide to cancel plans for th= e=20 business park, Sempra still would move forward with its 500-megawatt plant = on=20 the site in southwest Escondido, the source said. The 200-acre industrial= =20 park was supposed to be built around the power plant, in the Quail Hills ar= ea=20 of the city.=20 Without the park, Sempra would not have to go through the city's permit=20 process, since the power plant would fall under the jurisdiction of the=20 California Energy Commission. If that happened, the city would have lost no= t=20 only the industrial park, but also the opportunity to have any say over the= =20 Sempra project, such as setting conditions on it or requiring environmental= =20 reviews.=20 Sempra's concern stems from a 49-megawatt plant that would be built at the= =20 entrance to its business park by a company called CalPeak. The city no long= er=20 has any say about that plant, however.=20 CalPeak, impatient with the city's permit process, opted to bypass the city= =20 and go through a new expedited 21-day approval process with the state Energ= y=20 Commission, which approved the plant this week. That angered some city=20 officials, who said their land-use authority had been usurped.=20 Sempra wanted the commission to require that the CalPeak plant be shut down= =20 in about two years, when its business park was ready to be marketed to=20 prospective tenants, the source said. The commission did not incorporate th= at=20 provision in its approval.=20 Officials from Sempra and some city officials fear the CalPeak plant would= =20 not fit the upscale image envisioned for the park, and could hinder its=20 ability to attract high-end tenants.=20 On Wednesday, the City Council met in closed session to consider a court=20 challenge to the Energy Commission's approval of the CalPeak project, City= =20 Attorney Jeffrey Epp said yesterday. "As of now I don't have any direction = to=20 pursue litigation," Epp said.=20 Two city officials who asked not to be named said council members June Rady= =20 and Tom D'Agosta voted in favor of suing to block the plant. Ed Gallo, Mari= e=20 Waldron and Mayor Lori Holt Pfeiler stayed silent. The lack of a majority= =20 meant litigation could not move forward.=20 Sempra officials in charge of developing the industrial park and power plan= t=20 could not be reached for comment yesterday. But the source familiar with th= e=20 project said they were disappointed that the City Council decided not to=20 challenge the CalPeak plant in court.=20 The commission did approve several city suggestions regarding landscaping f= or=20 the CalPeak plant, and placing power lines underground, to help shield it= =20 from the business park. But Sempra officials are not convinced that's enoug= h.=20 "The city has basically decided to do nothing," the source said. "Obviously= =20 that will hurt marketing efforts at the business park."=20 Pfeiler said late yesterday she was not aware of Sempra's request to the=20 commission to have the CalPeak plant shut down in two years.=20 "As far as I'm concerned the conditions Sempra and the city asked for were= =20 met," Pfeiler said. "So Sempra should be ready to go full speed ahead on th= e=20 industrial park. For Sempra to even think about not building the industrial= =20 park is very frustrating to the community."=20 City officials desperately want the business park to be built. They see the= =20 Quail Hills parcel as the last best hope to have a large, high-tech=20 industrial park in Escondido that would provide thousands of high-paying=20 jobs.=20 Hackers Victimize Cal-ISO=20 By DAN MORAIN, Times Staff Writer=20 ?????SACRAMENTO--For at least 17 days at the height of the energy crisis,= =20 hackers mounted an attack on a computer system that is integral to the=20 movement of electricity throughout California, a confidential report obtain= ed=20 by The Times shows. ?????The hackers' success, though apparently limited, brought to light laps= es=20 in computer security at the target of the cyber-attack, the California=20 Independent System Operator, which oversees most of the state's massive=20 electricity transmission grid. ?????Officials at Cal-ISO say that the lapses have been corrected and that= =20 there was no threat to the grid. But others familiar with the attack say=20 hackers came close to gaining access to key parts of the system, and could= =20 have seriously disrupted the movement of electricity across the state. ?????Democratic and Republican lawmakers were angered by the security breac= h=20 at an entity that is such a basic part of California's power system, given= =20 its fragility during the state's continuing energy crisis. One called the= =20 attack "ominous." ?????An internal agency report, stamped "restricted," shows that the attack= =20 began as early as April 25 and was not detected until May 11. The report sa= ys=20 the main attack was routed through China Telecom from someone in Guangdong= =20 province in China. ?????In addition to using China Telecom, hackers entered the system by usin= g=20 Internet servers based in Santa Clara in Northern California and Tulsa,=20 Okla., the report says. James Sample, the computer security specialist at= =20 Cal-ISO who wrote the report, said he could not tell for certain where the= =20 attackers were located. ?????"You don't know where people are really from," Sample said. "The only= =20 reason China stuck out is because of the recent political agenda China had= =20 with the U.S. . . . An ambitious U.S. hacker could have posed as a Chinese= =20 hacker." ?????The breach occurred amid heightened Sino-American tensions after the= =20 collision between a Chinese military jet and a U.S. spy plane. In early May= ,=20 there were hundreds of publicly reported computer attacks apparently=20 originating from China. Most of those incidents involved mischief;=20 anti-American slogans were scrawled on government Web sites. ?????The attack on the Cal-ISO computer system apparently had the potential= =20 for more serious consequences, given that the hackers managed to worm their= =20 way into the computers at the agency's headquarters in Folsom, east of=20 Sacramento, that were linked to a system that controls the flow of=20 electricity across California. The state system is tied into the transmissi= on=20 grid for the Western United States. ?????"This was very close to being a catastrophic breach," said a source=20 familiar with the attack and CalISO's internal investigation of the inciden= t. ?????On May 7 and 8, as the infiltration was occurring, California suffered= =20 widespread rolling blackouts, but Cal-ISO officials said Friday that there= =20 was no connection between the hacking and the outages, which affected more= =20 than 400,000 utility customers. ?????"It did not affect markets or reliability," said Stephanie McCorkle, a= =20 spokeswoman for Cal-ISO. ?????Officials of the agency made no public acknowledgment of the attack=20 until Friday when contacted by The Times. The agency did, however, call the= =20 FBI, which is investigating. ?????McCorkle said Cal-ISO did not make a public disclosure about the hacki= ng=20 "because it didn't impact the reliability of any of our internal networks." ?????"It didn't have a negative consequence and would not have impacted the= =20 public or market participants," McCorkle said. ?????After the attack was discovered, the report says, investigators found= =20 evidence that the hackers apparently were trying to "compile" or write=20 software that might have allowed them to get past so-called firewalls=20 protecting far more sensitive parts of the computer system. ?????The attackers focused on parts of the grid agency's computer system th= at=20 are under development. In what may have been the most significant lapse, th= e=20 system being developed was not behind a firewall, a security element design= ed=20 to keep out those who are not entitled to access. ?????Additionally, so-called tripwires that might have alerted agency=20 security personnel to the unauthorized entry were nonexistent. Nor were the= re=20 logs within the system that might have identified users entering the system= =20 as the infiltration was occurring, the report notes. ?????What's more, dozens of ports into the computer system were open, when= =20 only a handful should have been available. ?????"All servers should be hardened regardless of their role or location i= n=20 the network," the report says. "Only ports that are required to be open=20 should be opened; all others should be disabled." ?????Complicating the investigation, workers at Cal-ISO rebooted their=20 computers when the machines balked, apparently in response to the=20 infiltration. ?????"This action limited our ability to discover all files and activity th= at=20 may be related to this compromise," the report says. ?????Sample, the security engineer who wrote the report, downplayed the=20 potential threat and said the attack was "something that we've been=20 anticipating." ?????"It was a compromise, not really an attack," he said. ?????State legislators were not comforted by such distinctions. ?????"That's really amazing on two counts: that there were computers not=20 behind a firewall and it took 17 days to discover," said state Sen. Debra= =20 Bowen (D-Marina del Rey), who chairs her chamber's Energy Committee. ?????Bowen, who was informed of the breach by The Times, called it a "serio= us=20 matter" and said she was "very concerned to learn about this from the L.A.= =20 Times, rather than from the ISO itself." The lack of official notification,= =20 she said, adds to her skepticism about whether the agency has been=20 forthcoming. ?????"It is embarrassing, so I can understand they would not want to talk= =20 about it," Bowen said. "We're going to ask some questions." ?????The Independent System Operator, established in 1998 when the state=20 opened the newly deregulated electricity market to competition, is an=20 essential component of the state's electricity system. ?????The purpose of the nonprofit entity is to balance the flow of=20 electricity across the state and make last-minute power purchases to match= =20 demand and avoid blackouts. The Legislature reconfigured the agency earlier= =20 this year, giving Gov. Gray Davis the power to appoint the five-member boar= d=20 that oversees it. ?????"It is troubling that it happened," said Sen. Tom McClintock (R-Thousa= nd=20 Oaks). "It is disturbing that it took so long to be corrected. And it is=20 galling that it was not reported to the Legislature." ?????McClintock labeled as "ominous" the possibility that the attack came= =20 from China. He said he is preparing a request for all documents related to= =20 the breach and is considering requesting a formal legislative inquiry. ?????ISO board member Mike Florio, who represents consumers, said he had a= =20 vague recollection that the board was informed of the attack. But he also w= as=20 surprised to learn some of the details. ?????"We hire people to deal with this stuff," he said, "and they said they= =20 dealt with it." Copyright 2001 Los Angeles Times=20 State Asks Pricing Curbs on 4 Firms Energy: Cal-ISO wants U.S. action to bar alleged gouging by power plant=20 operators. The companies deny market manipulation.=20 By NANCY VOGEL, Times Staff Writer=20 ?????SACRAMENTO--State officials intensified their assault on power plant= =20 owners in California on Friday by asking the federal government to ban four= =20 large companies from selling power at whatever prices the market will bear. ?????Mirant Corp., Duke Energy, Dynegy Corp. and Reliant Energy--owners of= =20 more than a dozen power plants in California--have charged excessive prices= =20 and manipulated the state's market, the California Independent System=20 Operator in alleges formal petitions to the Federal Energy Regulatory=20 Commission. ?????Given evidence of abuse, Cal-ISO argues in its filings, federal=20 regulators cannot legally allow the companies to continue selling electrici= ty=20 in California at market-based rates. FERC granted that privilege to the=20 companies three years ago, when California opened its power industry to=20 competition. That privilege is now coming up for renewal. ?????By refusing to renew and setting prices instead by how much it costs t= he=20 companies to produce electricity, FERC could quickly control the high=20 wholesale electricity prices that have plagued California for the last year= ,=20 state officials say. ?????Cal-ISO, the Folsom-based agency that manages much of the state's=20 transmission grid, submitted a similar emergency motion to FERC on May 25,= =20 urging a revocation of the rights of AES Corp. and Williams Cos. to sell=20 electricity at market rates. Together, the six companies that are the subje= ct=20 of Cal-ISO's filings have the capacity to generate at least 17,000=20 megawatts--half of what California needs to meet peak summer demand. ?????In the flurry of petitions filed late Thursday and Friday, grid manage= rs=20 also asked federal regulators to force the six companies to refund money th= ey=20 have charged beyond the costs of operating their power plants since May 200= 0.=20 Cal-ISO did not specify a refund figure, but an earlier report by the agenc= y=20 concluded that power sellers had overcharged the state by $6.7 billion=20 between May 2000 and March 2001. ?????"I'm optimistic that in one form or another we'll be able to get the= =20 relief we're seeking," said Cal-ISO general counsel Charles Robinson. He sa= id=20 his agency may go to court if FERC does not act by June 28. ?????Some company officials characterized the move as political. ?????"Obviously the filing is about the inference of market manipulation an= d=20 we haven't manipulated any markets," said Thomas J. Allen, a vice president= =20 with Mirant, which owns three power plants in the San Francisco Bay Area an= d=20 recently signed a 19-month contract to provide the state with power. ?????"Just when we've started to work more closely with the state," he said= ,=20 "we hate to see this whole thing continue to be politicized." ?????Other generators pointed to a recent drop in wholesale power prices as= a=20 sign that the market works and that California suffers mostly from a gap=20 between supply and demand. Power traders say prices are easing largely=20 because of cool weather across the West and snowmelt swelling Pacific=20 Northwest rivers that drive hydroelectric generators. ?????"We're gratified that market forces are clearly at work," said Tom=20 Williams, spokesman for Duke Energy, which owns major power plants on the= =20 central coast. ?????FERC spokeswoman Celeste Miller said the agency will not comment on th= e=20 Cal-ISO filings. ?????To continue selling electricity at market prices, the energy companies= =20 must show FERC that they each control less than 20% of California's market.= =20 Critics argue that FERC's standard is too simplistic to prevent manipulatio= n=20 of an electricity market where demand at times exceeds supply. ?????Robinson said Cal-ISO may file similar petitions with FERC to revoke t= he=20 market-based rate authority of energy traders--who act as middlemen--and=20 out-of-state companies that sell into California. Copyright 2001 Los Angeles Times=20 After-School Programs Threatened=20 Finance: Budget plan kills funds for a project that includes efforts to boo= st=20 family-school ties and help single mothers keep sons out of gangs.=20 By CARLA RIVERA, Times Staff Writer=20 ?????Nine-year-old Oscar Fuentes has run smack up against California's=20 slowing economy and high energy costs. ?????He and his playmates at Rosemont Elementary School in the Echo Park ar= ea=20 of Los Angeles were told this week that the highly praised after-school=20 program in which they are enrolled will get no more money from the state to= =20 keep it going. ?????The implications are easy enough for even a fourth-grader to understan= d:=20 By the end of the month he may have no one to help him do his homework, and= =20 the volunteer instructor may not come anymore to teach his friends how to= =20 dance. ?????"We get to do fun activities and we get free snacks," said the=20 round-faced, dark-eyed Oscar, who was hard at work on math assignments afte= r=20 school. "It's sad the program might be cut."=20 ?????More than 36,000 youngsters and parents in Los Angeles, Ventura, Santa= =20 Barbara and other counties could be affected by the demise of the Juvenile= =20 Crime Prevention Program, begun in 1996 as a pilot project to provide=20 constructive activities for low-income children and their families. ?????About $9.7 million was included in the governor's January budget=20 proposal to keep the 12 centers operating for two more years. But in the=20 April budget revision, that funding was eliminated. ?????California's suddenly weaker financial health, affected by a combinati= on=20 of surging energy expenses and softening revenue, is beginning to be felt= =20 even on playgrounds, said legislators and other state officials. ?????"There had to be some hard choices," said Blanca Barna, a spokeswoman= =20 for the California Department of Social Services. "It was important that=20 resources be focused on programs that are currently a priority." Those=20 priorities for the department include child welfare, adoptions, foster care= =20 and independent living, she said. ?????Supporters are mounting a vigorous effort to have state funding restor= ed=20 to juvenile program. ?????"It's a tough year," acknowledged Assemblyman Tony Cardenas (D-Sylmar)= ,=20 chairman of the Assembly Budget Committee, which is considering such a=20 restoration proposal. "The economy nationally and in the state has shifted= =20 now. But I'm personally pushing for [the program] and trying my best to=20 protect it throughout the entire process." ?????The committee's vice chairman, Assemblyman George Runner (R-Lancaster)= ,=20 however, noted that the Legislature has already approved a separate=20 $121-million juvenile crime prevention package to be funneled through the= =20 state Department of Corrections and that the threatened program could be=20 included in it. ?????"If other funding is available, I'd like to see why it can't be folded= =20 in," Runner said. ?????Supporters laud the program for its focus on strengthening the=20 community. In addition to the after-school activities, it includes efforts = to=20 improve the bonds between families and schools, help single mothers keep=20 their 10- to 14-year-old sons out of gangs, and counsel families with=20 youngsters already in the juvenile justice system. ?????In Long Beach, more than 200 people rallied at City Hall recently as t= he=20 City Council unanimously passed a resolution urging the governor to save th= at=20 city's program, which serves 3,000 people each year and is run by the YMCA. ?????"It has brought families together, kids, moms and dads, to take contro= l=20 of their lives and be participants in their community," said Councilwoman= =20 Bonnie Lowenthal. ?????She cited an example of participants drawing up a petition for a stop= =20 sign at a dangerous intersection near a park as something "that had not=20 really occurred before in neighborhoods where so many of the families are= =20 immigrants and non-English-speaking." ?????An independent evaluation by Philliber Research Associates of a sample= =20 of families enrolled in the program found that it helped to significantly= =20 decrease delinquent behavior, substance abuse, arrests and citations and=20 improve family cohesion, social adjustment and school achievement. ?????"If you start taking away programs that have proven to curb juvenile= =20 crime just to save energy, all you're doing is moving one problem and addin= g=20 another," said Daniel Perez, who is in charge of the Ventura County program= ,=20 run by Interface Children Family Services. Until the state cutback was=20 proposed, it was expected to receive an $800,0000 grant to maintain tutorin= g=20 and counseling programs previously funded by the county. ?????About 450 people have been served by the Santa Paula center in the las= t=20 three years, and many in this low-income community--victims of domestic=20 violence, single working mothers, first-time juvenile offenders and at-risk= =20 elementary school students--depend on the free services. ?????"If this funding goes, it eliminates our whole center," Perez said.=20 "It's very disheartening." ?????Such a prospect is indeed disheartening for Ana Romero, a 28-year-old= =20 Echo Park mother of three. ?????For three years her daughter Jamillet, 11, has been enrolled in the=20 Juvenile Crime Prevention Program at Rosemont, run by the nonprofit communi= ty=20 group Para los Ni=0Fos, and has made steady improvement in her school score= s=20 and her self-esteem. ?????Romero's husband, Hector, works in construction, and Romero is about t= o=20 start a new job as a grocery store cashier. But without the after-school=20 program, she is not sure what the family will do. ?????"What my daughter learns here, she teaches to her brother and sister a= nd=20 to me and my husband too," Romero said, waiting to pick up Jamillet from th= e=20 Rosemont program, which runs from 2 to 6 p.m. ?????Jamillet is enthusiastic, too. ?????"I feel like a teacher for the family," the dark-eyed little girl said= =20 proudly. "I especially like going on the field trips, and it's sad if my=20 little brother won't be able to go to the program." --- ?????Times staff writer Jenifer Ragland contributed to this story. Copyright 2001 Los Angeles Times=20 Drop in Gas Price Raises Questions in Probe=20 Regulation: Cost has fallen 96% since May 31, stirring accusations of an=20 artificial shortage.=20 By RICARDO ALONSO-ZALDIVAR, Times Staff Writer=20 ?????WASHINGTON--As the price of natural gas destined for California power= =20 plants continued to collapse Friday, new questions were being raised about = a=20 controversial shipping deal between two offshoots of a Texas energy=20 conglomerate. ?????State officials and utilities have complained to the Federal Energy=20 Regulatory Commission that subsidiaries of Houston-based El Paso Corp.=20 restricted gas supplies on a major pipeline system last year, creating an= =20 artificial shortage that sent energy costs soaring. The company has=20 steadfastly denied the allegations, which are the focus of a trial-like=20 hearing stretching into its fifth week at FERC. ?????But in a development that had the courtroom abuzz Friday, the markup f= or=20 natural gas shipped from producing basins in Texas to the Southern Californ= ia=20 border has plunged by 96% since May 31, when the contract between the El Pa= so=20 subsidiaries expired and about 30 competitors entered the market. ?????According to data from Natural Gas Week, the markup between Texas and = a=20 major California-border pipeline junction served by El Paso fell from $6.32= =20 per million British thermal units on May 31--the last day of the=20 controversial deal--to only 23 cents Friday. A million BTU is about what a= =20 typical Southern California household consumes in five or six days. ?????That put Southern California natural gas prices in line with the rest = of=20 the country for the first time since last July.=20 ?????State officials and California utilities said the price collapse=20 bolstered their case that the El Paso companies had been exercising market= =20 power--engaging in monopolistic behavior. ?????"You can't help but think that the market is reacting to the differenc= e=20 between having many shippers instead of one," said Kevin Lipson, a lawyer= =20 representing Southern California Edison in the proceedings against El Paso.= =20 "The market knows the difference between competition and monopoly." ?????Under the deal that just expired, one subsidiary of El Paso had obtain= ed=20 the shipping rights for up to 17% of California's daily gas consumption=20 through a pipeline system owned by another subsidiary. ?????"We don't have an 800-pound gorilla any more," said Harvey Morris, a= =20 lawyer for the California Public Utilities Commission. "We have a chimpanze= e." ?????But Peggy Heeg, deputy general counsel for El Paso Corp., said other= =20 factors--such as mild weather and increased storage levels of gas in=20 California--are behind the dramatic price swing. ?????"We are glad to see prices coming down and to see some relief for=20 Californians," Heeg said. "The price movement is consistent with what we ar= e=20 saying, which is that supply and demand are driving prices." ?????The swift reversal in prices has raised suspicions at FERC. ?????"It's not enough to convict El Paso and send them to jail, but this=20 piece of information is certainly consistent with the idea that there was= =20 market power," said an agency official. ?????"Prices had been dropping a little, but since June 1, it's become very= =20 noticeable," said another agency official. "Obviously, one of the reasons h= as=20 to be that the capacity changed hands." ?????FERC's governing board can order El Paso to refund profits if it finds= =20 that the subsidiaries tried to manipulate the California market. ?????One independent economist cautioned against a rush to judgment. "There= =20 are a lot of things going on which in and of themselves could account for a= =20 significant price decline," said Bruce Henning of Energy and Environmental= =20 Analysis Inc. in Arlington, Va. "I would be unwilling to draw a causal link= ." ?????In addition to the weather and fuller storage cited by El Paso's Heeg,= =20 increased conservation by Californians has reduced demand for electricity.= =20 That, in turn, has dampened the market for natural gas, the fuel most=20 commonly used by the state's power plants. ?????But the industry also has come under strong political pressure in rece= nt=20 weeks. In hearings before Congress and the California Legislature, lawmaker= s=20 spoke out against natural gas prices that were much higher than elsewhere i= n=20 the nation. California Atty. Gen. Bill Lockyer launched an investigation. A= nd=20 FERC, in addition to the El Paso hearing, called an industry conference. ?????Plaintiffs' lawyers in the El Paso case say they believe the pressure= =20 led El Paso Merchant Energy--which sells natural gas--to pass up an option = to=20 renew its contract with El Paso Natural Gas Co., which owns the pipeline=20 system. Instead, El Paso Merchant settled for a much smaller chunk of=20 capacity on its sister company's system. El Paso says the decision was made= =20 for business reasons, not in response to pressure from regulators. Copyright 2001 Los Angeles Times=20 New Power Plant Proposed for Riverside County By MITCHELL LANDSBERG, Times Staff Writer=20 ?????Calpine Corp., on a breakneck pace to boost the amount of electricity = it=20 produces in California, announced plans Friday to build a major power plant= =20 in western Riverside County near the terminus of a hotly contested=20 transmission line. ?????The plant, the 10th the company has proposed constructing in Californi= a,=20 would be in the unincorporated Romoland area between Hemet and Perris, and= =20 would supply enough power for about 450,000 homes. ?????"As a California-based company, we are extremely pleased to, yet again= ,=20 move forward on a project such as this," said John King, senior vice=20 president of business development for Calpine, which is based in San Jose.= =20 The company has been eager to distance itself from the out-of-state energy= =20 suppliers whom Gov. Gray Davis has portrayed as public enemies for their ro= le=20 in California's energy crisis. ?????State officials greeted the announcement somewhat warily, noting that= =20 Calpine has announced plans before that didn't pan out. Until the company= =20 formally applies for licensing, the California Energy Commission will reser= ve=20 comment on the plans, spokesman Rob Schlichting said. ?????"It's basically a trial balloon," he said of the announcement. ?????Calpine officials said they intend to file an application for licensin= g=20 with the commission in July and to begin construction of the $325-million= =20 plant sometime in the middle of next year. They said the plant could be=20 running by 2004. ?????Greg Lamberg, Calpine's director of business development, said the=20 company has already held extensive discussions with local officials in=20 Riverside County and has encountered no community opposition. ?????"We're finding just the reverse--we're finding a tremendous level of= =20 support in the community," Lamberg said. ?????Local officials could not immediately be reached for comment. There ha= s=20 been substantial opposition to another electrical project in the same=20 vicinity, a proposed 500,000-volt transmission line that San Diego Gas &=20 Electric wants to build through southwestern Riverside County. ?????The line would end at Southern California Edison's Valley substation i= n=20 Romoland. Calpine's proposed Inland Empire Energy Center would be built abo= ut=20 half a mile from the substation, on vacant land along California 74 near=20 Interstate 215. ?????Proximity to the Edison substation--and to a nearby natural gas=20 pipeline--make the location ideal, Lamberg said. Calpine officials said the= y=20 don't expect opposition to the SDG&E transmission line to translate into=20 opposition to their project. ?????"The reason folks are opposed to that line is that it's a means for Sa= n=20 Diego to import power," said Calpine spokesman Kent Robertson. "What we're= =20 doing is, we're building projects to serve the local community. We think it= 's=20 kind of an apples-and-oranges comparison." ?????The area immediately surrounding the site is industrial, and Lamberg= =20 said the company believes the plant will not cast a large "footprint" on th= e=20 environment. Calpine's plans call for a 600-megawatt combined cycle plant= =20 that burns natural gas to generate electricity. Combined cycle plants, whic= h=20 recycle their heat to make electricity a second time, are considered=20 extremely efficient and far cleaner than older, single cycle plants. ?????If the plant is licensed and built, it will help cement Calpine's=20 position as a major player in the California energy market. The company now= =20 owns 11 mostly small, geothermal power plants in the state but has plans=20 underway for nine gas-fired plants that would add more than 5,000 megawatts= =20 of power, enough to supply about 4 million homes. Three major plants are=20 already under construction in Northern California. ?????The Southland plant would be the third new generator in Riverside=20 County. Wisvest is building a 520-megawatt plant in Blythe, and there are= =20 plans for a smaller, "peaker" plant in that city. Copyright 2001 Los Angeles Times=20 NEWS=20 CALIFORNIA POWER CRISIS=20 ISO seeks to pull rate authority from 4 firms Jennifer Coleman ?=20 06/09/2001=20 The San Diego Union-Tribune=20 1,2,6,7=20 Page A-3=20 (Copyright 2001)=20 SACRAMENTO -- Four major power suppliers to California have shown they can= =20 control prices in the wholesale electricity market and should have to refun= d=20 excess charges, possibly up to billions of dollars, state grid officials sa= id=20 yesterday.=20 The Independent System Operator, keeper of the state's power grid, also ask= ed=20 the Federal Energy Regulatory Commission to revoke the market-based rate=20 authority for four generators: Duke Energy, Mirant, Dynegy and Reliant=20 Energy.=20 ISO analysts have estimated the state was overcharged about $6.7 billion=20 between May 2000 and March 2001.=20 That includes charges by generators other than the four in these filings, a= nd=20 ISO officials didn't have an estimate on how much they were seeking from=20 Duke, Reliant, Mirant and Dynegy.=20 In order to continue charging market-based rates, generators must prove to= =20 FERC that they don't have what is known as market power -- the ability to= =20 charge whatever price they want without consequence.=20 Suppliers have to have that authority renewed by FERC every three years, an= d=20 most are up for review this summer.=20 Robinson said the companies have exhibited they have market power and the= =20 ability to charge market-based rates should be revoked. The ISO asked FERC = to=20 act on their request by June 28.=20 Tom Williams, spokesman for Duke Energy, said company officials were=20 reviewing the filing. Duke operates the South Bay Power Plant in Chula Vist= a=20 for its owner, the San Diego Unified Port District, under a long-term lease= .=20 Richard Wheatley of Reliant Energy said the ISO order was "nothing but a=20 rehashing of previous allegations that have been repeatedly rejected by=20 FERC."=20 If FERC finds the companies do have market power, they could order them to= =20 use cost-based rates, which limit company profits to a percentage above the= =20 costs to produce power.=20 The ISO already has made similar requests regarding two other energy=20 companies, Williams and AES.=20 If the companies are found to have charged excessive rates, FERC can order= =20 refunds.=20 Though ISO estimates $6.7 billion has been overcharged, some of that comes= =20 from companies not under FERC's jurisdiction, such as Canadian firms or=20 municipal districts.=20 FERC has ordered $125 million in refunds, saying it can only examine prices= =20 for power sold during Stage 3 emergencies, when reserves drop to below 1.5= =20 percent. OPINION=20 CALIFORNIA POWER CRISIS | LETTERS TO THE EDITOR=20 Short-circuited by the `so-called' electricity crisis ?=20 06/09/2001=20 The San Diego Union-Tribune=20 1,2,6,7=20 Page B-9:2,7; B-7:1; B-11:6=20 (Copyright 2001)=20 Re: "Is trading an insider's game" (A-1, June 6):=20 Does anyone actually doubt that the latest so-called "energy shortage" is= =20 anything other than a case of those in position to do so racking up profits= =20 at the expense of those unprepared to deal with the situation?=20 With profligate usage on the one hand and unmitigated greed on the other,= =20 this showdown has all the makings of front page and prime time news blurbs,= =20 but little more. One shouldn't assume from the hoopla that significant=20 improvements are coming.=20 We are told that more power plants and more oil and gas are on the way,=20 presumably to remedy the sort of "shortages" we now experience. Meanwhile,= =20 elected officials still tout the free market as the answer to all our=20 problems.=20 In fact, energy markets are anything but free as they require endless publi= c=20 and political largess in the form of rights of way and the financing of=20 staggering sums for infrastructure. All these costs are ultimately borne by= =20 consumers in addition to "whatever-the- market-will-bear" energy costs.=20 Natural resources, including energy, should be public domain, along with=20 education, transportation and communication. PAUL STANGELAND Encinitas=20 As a native Californian, I have said for the last 40 years that the=20 environmentalists would destroy our good life.=20 I worked hard to build two new power plants in the early '70s, one being=20 Sundesert. The power company, SDG&E, said we would be short of power in ear= ly=20 2000, depending on the population explosion; this, plus new transmission=20 lines, were all abandoned because of lawsuits to protect "rocks and other= =20 desert animals."=20 California has a master plan for roads and highways. Many cannot be built o= r=20 finished because of lawsuits protecting birds, snail darters and mesa mint,= =20 so we have daily gridlock.=20 We do not need any more environmentalists in our government. This is why we= =20 are where we are now. We need people who have an understanding of the "big= =20 picture." They need to make better decisions and not hold up projects that= =20 will benefit and improve the communities of San Diego. RUTH JOHNSON=20 Clairemont=20 Your editorial, ("Nuclear comeback," May 30), is a sign of the times. Still= ,=20 nuclear power has a unique problem which prevents it from being put into ma= ss=20 production.=20 The problem is not a technical one. Those types of problems were solved lon= g=20 ago. Nuclear power's unique deterrent is called "what if."=20 If "what ifs" were applied to other industries, no airplane would ever fly,= =20 no bridge would ever be built and the space program would not exist.=20 California needs more nuclear power and less "what ifs." DOUGLAS C. SMITHDE= AL=20 San Diego=20 So our utility is at it again, asking for an 18 percent rate hike. How abou= t=20 an 18 percent payroll cut across the board for all those overpaid SDG&E=20 overpaid executives?=20 They have to be the most overcompensated group west of Congress. I don't ow= n=20 any of the company's stock but I'd sure raise cain if I did. AL DORSETT San= =20 Diego=20 Jim Goldsborough's column, ("An energy plan sponsored by Enron," June 4), i= s=20 full of misinformation.=20 California 's energy problem is blamed on Enron and the Bush administration= .=20 The truth is, California has itself to blame, caused by passage of=20 electricity decontrol by the Democratic Legislature under the leadership of= =20 Steve Peace.=20 Further, due to strong environmentalist influence, California has not been= =20 able to build power plants or drill for oil or natural gas in the last 10 t= o=20 20 years. During this time, the population has grown by 50 percent.=20 Thus, California must import 20 percent of its electricity and has a shorta= ge=20 of natural gas. Blaming Enron and the U.S. oil industry for high oil and=20 gasoline prices also is ridiculous.=20 The United States has to import 57 percent of its oil needs, so that oil=20 prices obviously are under the control of OPEC and other foreign producers.= =20 President Jimmy Carter canceled our nuclear power program, apparently for= =20 environmental reasons. This is the main reason that electricity supply is= =20 short on both the West and East coasts.=20 Goldsborough is incorrect in stating that nuclear electricity is not=20 competitive.=20 Under Gov. Gray Davis, a gas-fired, electricity -generation program is boun= d=20 to fail due to the natural gas shortage. I predict continuing California=20 electricity blackouts for at least the next five years under the present=20 program promoted by Davis. One hopes the electorate will recognize that the= =20 governor only is interested in the 2002 election and will defeat him.=20 President Bush and Vice President Dick Cheney are fundamentally correct in= =20 stating that establishing price controls for California electricity purchas= es=20 would be counter-productive. Higher electricity prices not only would=20 decrease consumption but also would make it more attractive to build more= =20 supply. J.W. BISHIP Olivenhain=20 President Bush campaigned on a compassionate conservative platform that has= =20 morphed into the embodiment of crass commercialism.=20 While Cheney is the presumed shadow president, it looks more and more like = he=20 has a powerful shadow in Kenneth Lay, chairman of Enron, the marketer of=20 energy products. Not only was Lay a prime mover in developing the so-called= =20 "Bush Energy Policy," he recently hosted a secret meeting in San Francisco.= =20 Its purpose was to urge influential Californians to push for deregulation a= nd=20 stop investigations that "obstruct the process."=20 Now we know Lay has interviewed, "vetted," candidates for the Federal Energ= y=20 Regulatory Commission, a supposedly independent body whose purpose is to be= a=20 watchdog on energy policy. The fox is clearly guarding the chickens. And th= is=20 scenario was arranged for, or at least permitted by, the same president who= =20 decided that the Bar Association would no longer be involved in "vetting"= =20 candidates for judgeships. MARILYN MILLER Carlsbad=20 Let's see if I have this correct. Gov. Davis has a plan to fix our energy= =20 problems.=20 First, place the blame on our president not putting on price caps, which=20 would only increase energy use and blackouts.=20 Next, threaten the owners of power plants with a windfall tax or better yet= ,=20 hint that the National Guard will come and take over their plants. And the= =20 companies must charge only what we want, which, for sure, will discourage= =20 other companies from coming to our state and building plants to increase=20 production, that being the only real solution to the problem.=20 Well listen, Gov. Davis, I'm tired of paying so much for a pair of Levis; h= ow=20 about a windfall tax on Mervyns or Sears, or let's just take them over and= =20 get those prices down.=20 By the way, just a question for Democrats, Davis and Bob Filner, to name a= =20 couple. This energy crisis did not just come about in the few months that= =20 President Bush has been in office. What energy policy did the Clinton/Gore= =20 team have?=20 Oh, that's right, they didn't have one for eight years, so perhaps instead = of=20 pointing fingers, it's time to work together and get these new plants on=20 line. PHIL TORRE Mira Mesa=20 Prior to deregulation, we were all used to our electric bills which showed= =20 our cost for electric power was from 10 to 11 cents per kilowatt hour. This= =20 rate was roughly divided between the cost of power generation which was 2 o= r=20 3 cents and the remaining 7 cents for transmission and distribution.=20 Distribution costs have remained the same but power generation charges are= =20 out of this world.=20 The state power authority has paid $348, and in an extreme case, $1,900, fo= r=20 a megawatt-hour of electricity . Those figures convert to 34 cents and $1.9= 0=20 for a kilowatth-hour for your home.=20 If journalists would start using kilowatt-hour prices when writing about ou= r=20 power problems, I am sure the public would make stronger demands on the sta= te=20 and federal governments to solve this problem.=20 Even President Bush would agree that $1.90 per kilowatt-hour for electric= =20 power generation is not a fair and reasonable charge for something it took = 3=20 cents to produce. L.K. McNEIL San Diego=20 The last few months have seen a flurry of news stories about California 's= =20 energy shortage, but almost everyone has ignored our greatest energy=20 resource. The sun delivers an average of 6 kilowatt- hours of energy per=20 square meter per day in our desert areas. And solar plants can use mirrors = to=20 concentrate the light intensity hundreds or thousands of times. This can be= =20 used to spin turbines or drive Sterling engines.=20 Even 1995 technology could supply every single watt of electricity that=20 California consumed in 1999, using the sunlight that falls on just a 14-mil= e=20 square of otherwise useless desert land. Such a "combined cycle solar=20 concentrator" system can be built at less than one-third the cost of solar= =20 photovoltaic panels, and could produce power for less than 7 cents per=20 kilowatt-hour.=20 No pollution would be released by such a system, not even thermal pollution= ,=20 so it would not contribute to global warming in any way.=20 Another advantage of solar-based power generation is that most of the power= =20 is available when California needs it, during summer afternoons. And best o= f=20 all, we could bankrupt all of those energy gougers. GUY GROTKE Vista=20 My thermostat is turned down to near freezing; we don't use the dishwasher,= =20 we use low energy bulbs and do the laundry after 7 p.m. - - so I guess it's= =20 time to ask.=20 "Ask not what I can do for the city . . . but what can the city do for me? = It=20 can, over time, save the taxpayer a bundle. It can do as Florida and severa= l=20 other Sun Belt states have done and install solar- powered traffic lights.= =20 If the entire state does it, we might dispense with the need for a generato= r=20 or two, and at the same time, hit a few Texans where it hurts most -- in th= e=20 pocketbook.=20 Come to think of it, a few locals with stock in those companies will shed a= =20 tear or two -- how else to explain a few of the letters I've been reading?= =20 MICHAEL R. ALBINO San Diego=20 California ; Zones Desk=20 Ventura County Businesses Sweat Out Power Crisis CATHERINE SAILLANT ?=20 06/11/2001=20 Los Angeles Times=20 Ventura County Edition=20 Page B-1=20 Copyright 2001 / The Times Mirror Company=20 In the rush to save kilowatts, here is what it has come down to for one of= =20 California 's small businesses: ketchup stains are detectable under=20 energy-efficient fluorescent bulbs but butter smears are not.=20 That's what the owners of Unique Cleaners in Ventura found before switching= =20 to a specially installed light bank that saves energy but still casts enoug= h=20 light to find spots.=20 Susan and Suk Cho then passed the information along to other cleaners,=20 joining an informal and growing network of small-business owners who are=20 sharing ways to sweat out a summer of predicted rolling blackouts and=20 spiraling electricity prices.=20 Unable to tap options available to bigger firms, small, energy-sucking=20 cleaners, ice shops, bakeries, restaurants and the like are turning to each= =20 other for help.=20 "I'm sure we will be sweating more, working harder and getting less=20 accomplished," said Ken Ackerman, owner of ABC Ice House in Laguna Niguel,= =20 who plans to shut off his air conditioner. "Whether we will end up better o= ff=20 doesn't look likely."=20 They are getting a boost from the National Federation of Independent=20 Business, which is setting up councils around the state to come up with=20 conservation solutions for small-business owners.=20 "Small businesses are operating on very narrow margins," said Martyn Hopper= ,=20 state director of the agency. "Energy is a bottom-line cost that affects=20 their ability to pay salaries and benefits and their ability to exist. So= =20 anything they can do to shave costs will help."=20 Projections of 30-plus days of summer blackouts could cost California=20 businesses an estimated $21.8 billion, a study by a California business=20 consortium found. Paired with electricity rate hikes of about 35% for=20 small-business customers, merchants have been forced to think hard about wa= ys=20 to conserve and prepare for hourlong outages.=20 Although industrial users of electricity are seeing even higher price=20 increases, the burden falls heavily on small businesses because they have= =20 fewer options, said Jack Kyser, chief economist for the Los Angeles County= =20 Economic Development Corp.=20 Big companies with facilities in another state can switch production to tha= t=20 state and get by, Kyser said. But mom-and-pop outlets are stuck here.=20 Many merchants can't just raise prices, because of fierce competition. And= =20 reducing costs by trimming a bloated work force does not come into play whe= n=20 there's no bloat, Kyser said.=20 Even business owners in Los Angeles, which has its own stable source of pow= er=20 generation, are worried. Out-of-state customers, alarmed by reports of=20 California 's crisis, are getting jumpy about Los Angeles firms' ability to= =20 fill contracts, regardless of the facts, Kyser said.=20 All this means that small businesses are barreling into uncharted territory= .=20 "What we are finding is that small business, no matter where it is located,= =20 is sort of scared silly," Kyser said.=20 A Kilowatt Here, a Kilowatt There=20 Many shop owners are just now getting down to the nitty-gritty details of h= ow=20 to shave a kilowatt here and there.=20 The first thing Susan Cho did was remove every other bank of overhead=20 fluorescent bulbs at her 4,000-square-foot cleaners in Ventura. Then, she a= nd=20 her husband, Suk, purchased a new industrial dryer and shirt presser that= =20 operate on less energy.=20 She turned off an illuminated sign outside and unplugged a soda machine,=20 replacing it with a water cooler. Cho's 14 employees are instructed to turn= =20 off lights whenever they are not in use and to completely fill dryers befor= e=20 running them.=20 "I'd walk by and there would be two or three blouses in a machine," Cho sai= d.=20 "No more."=20 These small steps added up to big savings. Cho estimates she spends $300 to= =20 $400 less each month on electricity than she did a year ago. She told a=20 friend who also owns a dry cleaning shop what she had done, Cho said, and= =20 also shared tips with her Korean business association.=20 Trimming energy usage is trickier for Ackerman. The Orange County ice=20 distributor can't just turn down the temperature on his 18-by-22-foot walk-= in=20 freezer.=20 But he does plan to turn off the air conditioning elsewhere and use=20 lower-energy fans near the freezer during summer months.=20 Ackerman also checked out the possibility of buying a gas-powered generator= =20 to run his compressor during hot afternoons. When he learned that he would= =20 not receive a rate break for voluntarily taking his freezer offline, he=20 dropped the plan.=20 "I'm too small of a business to fall under any of the [rate-reduction]=20 programs available," Ackerman said. "So I'll just suffer through the summer= ."=20 At Print Masters in Long Beach, Dody Lopez runs jobs on the main copier onl= y=20 during morning and late-afternoon hours. That way, power usage--and the hea= t=20 the energy-hungry machine generates--are idled during peak energy hours fro= m=20 noon to 4 p.m.=20 All four copying machines are equipped with a device that switches to a=20 power-saving mode when not in use. Lights are dimmed wherever possible and= =20 the air conditioning has been replaced by fans and fresh air from open door= s.=20 "People are complaining about the heat, but we explain to them that we are= =20 trying to be good citizens and trying to get through this crisis without=20 getting completely shut down," Lopez said. "Most people are understanding."= =20 Shop Owners Cross Fingers=20 Conservation, of course, is not on the minds of everyone. Several merchants= =20 report that they haven't given it a thought or have adopted a "whatever=20 happens, happens" approach.=20 And anger over the continuing crisis simmers, especially with those who hav= e=20 done nothing to prepare.=20 "What can I do? Tell me what I can do," said an annoyed Vassil Perpchinkov,= =20 owner of Guido's, an Italian restaurant in Malibu. "This problem should be= =20 solved by those higher up--it better be."=20 Kerry Nelson, a Granada Hills print shop owner, doesn't have to worry about= =20 blackouts. Like other businesses in Los Angeles served by the Department of= =20 Water and Power, there is enough voltage to go around.=20 Because of that, Nelson said he has not attempted to cut back on usage.=20 Still, he has sympathy for other small-business owners.=20 "I deal with some people out there who have had some problems. I really fee= l=20 for them," he said. "But there's nothing I can do right now except be=20 grateful that I am not facing the same thing."=20 Small business can also help itself by collecting and distributing=20 conservation information in an organized fashion, said Hopper of the Nation= al=20 Federal of Independent Business.=20 The first of 10 local councils that will be created across the state met la= st=20 month in West Los Angeles to talk about ways to cut energy costs, he said.= =20 Other groups will be formed in East Los Angeles, Orange County, the=20 Ventura-Santa Barbara region, San Diego, Sacramento and the Bay Area, Hoppe= r=20 said.=20 Suggestions at the West Los Angeles gathering ranged from adding a temporar= y=20 energy surcharge to installing fluorescent bulbs that save energy.=20 "What business owners need right now is practical information on how to=20 reduce costs," Hopper said. "That's what these councils can offer."=20 The councils will encourage the federation's 38,000 California members to f= an=20 out at the local level to make sure that the effect on small business is=20 taken into consideration when new energy-related laws are passed, he said.= =20 That kind of lobbying is important amid all the commotion, Kyser said.=20 "It's going to be a very unsettling period for a lot of these small=20 businesses," he said. California ; Metro Desk=20 The State PG&E Plan to Fell Oaks Fuels Anger Energy: The utility contends t= he=20 trees pose a fire threat to power lines. Critics claim the firm wants to cu= t=20 costs. JOHN JOHNSON ?=20 06/11/2001=20 Los Angeles Times=20 Home Edition=20 Page B-6=20 Copyright 2001 / The Times Mirror Company=20 ARROYO GRANDE, Calif. -- Plans to cut down hundreds of oak trees to make su= re=20 the power stays on this summer are generating a high-voltage protest in thi= s=20 usually quiet retirement mecca on the Central Coast.=20 Pacific Gas & Electric Co. says it must remove trees under its power lines = to=20 prevent fire from knocking out the Diablo Canyon nuclear plant at a time wh= en=20 the state will need every watt it can get.=20 Critics say the utility just wants to save gardening costs.=20 "The bottom line is the dollar," said Jim Johandes, 51, whose avocado ranch= =20 backs up to PG&E property in a rural canyon. He drove his vehicle to the to= p=20 of a hill one day last week and parked under giant towers bearing power lin= es=20 that carry 500,000 volts of electricity .=20 "Everything you see under these lines will be history," he said, pointing t= o=20 a thick canopy of oaks straddling the rolling brown hills.=20 The controversy over the oaks has not helped the battered reputation of the= =20 utility.=20 Johandes, a big, white-bearded man who owned a Whittier company that=20 installed burglar and fire alarm systems until moving to the Central Coast= =20 eight years ago, has opened his property to demonstrators.=20 Some sign-carrying activists pressed their case before the San Luis Obispo= =20 County Board of Supervisors last week. One supervisor, Khatchik Achadjian,= =20 called on PG&E to put the tree-chopping project "on hold until a compromise= =20 can be developed."=20 So far, PG&E has shown no indication of scaling back plans to begin clearin= g=20 away undergrowth this month. Utility officials say protesters overstate the= =20 damage, as well as the project's intent.=20 "Trees and the environment are very important to everyone, including PG&E,"= =20 said Bill Roake, a spokesman for the company.=20 If PG&E has done anything to be ashamed of, he said, it is failing to=20 communicate effectively with the public. "We did not do a good job," Roake= =20 said.=20 Some have accused PG&E of planning to clear-cut 15 miles of right-of-way fr= om=20 the bluff on the coast where Diablo is located. Utility officials say fewer= =20 than half the trees will be removed from a swath of brushland less than two= =20 miles long between Carpenter and Price canyons. That is about 104 acres=20 altogether.=20 The goal, Roake said, is to open up the canopy so that fire cannot race alo= ng=20 the tops of the trees and threaten the power lines.=20 "The lines are right above a very, very heavy [wood and brush] fuel load,"= =20 said Roake. "If there is a fire, you could have lines disrupted coming out = of=20 Diablo."=20 Diablo Canyon is PG&E's single largest producer of power. Even if the flame= s=20 did not reach the overhead lines themselves, smoke from a fire could put=20 particulates in the air causing an arc, or crossover between adjacent lines= .=20 Known as "phasing," that would essentially short-circuit the transmission= =20 lines. Last year, Roake said, a small brush fire in the area knocked out th= e=20 lines for more than six hours, though part of that problem was an unrelated= =20 equipment failure.=20 A worst case scenario, however, could knock out Diablo Canyon for three to= =20 four days, Roake said.=20 PG&E said the cutting is being done to satisfy the state's Independent Syst= em=20 Operator, a nonprofit corporation whose job is to ensure the safety and=20 reliability of the state's energy grid.=20 Stephanie McCorkle, a spokeswoman, said the ISO did not order PG&E to remov= e=20 trees. "PG&E's preference was to remove trees rather than trim them," she= =20 said in an e-mail response to The Times.=20 Roake acknowledged that the ISO didn't tell the utility to remove the trees= .=20 "We felt this was the best way to keep the [grid system] safe and reliable,= "=20 he said.=20 As for allegations that PG&E is cutting down trees to save money on=20 maintenance, Roake acknowledged that safeguarding 108,000 miles of=20 transmission lines is a big job. The utility spends $138 million annually t= o=20 trim or remove trees and brush.=20 But the tree project has nothing to do with its cash crunch, according to= =20 PG&E. The Carpenter Canyon project was planned two years ago.=20 Johandes doesn't believe it. "They are doing it so they don't have to do=20 routine maintenance," he said.=20 PG&E has not made the argument, but conceivably could say it's not anybody'= s=20 business what it does with vegetation on its property. Oaks are not=20 endangered. There are 11 million acres of oak woodlands in California ,=20 according to the California Oak Foundation.=20 On the other hand, the oak looms large in the California myth. "It is kind = of=20 our signature tree," said Janet Cobb, president of the foundation.=20 The state has lost 1.5 million acres of oaks since 1945, according to Cobb.= =20 The PG&E plan, she said, is "a travesty. I can't imagine what they're=20 thinking. Yes, some trees need to be thinned out, but this is butchering."= =20 Roake denied that. PG&E said it is approaching the project cautiously. The= =20 first thing that will be done when work begins next week will be mowing dow= n=20 the grassy underbrush known as ladder fuel. That could be an ignition point= =20 for fire. After that, dead and diseased trees will be taken out.=20 "Then we'll see what that does for the canopy," he said. California ; Metro Desk=20 CAPITOL JOURNAL=20 The State Gov. Davis Feisty About Gaining Leverage Over the 'Cowboys' GEORGE SKELTON ?=20 06/11/2001=20 Los Angeles Times=20 Home Edition=20 Page B-6=20 Copyright 2001 / The Times Mirror Company=20 SACRAMENTO -- The phone rang and it was the governor. "Just wanted to talk = a=20 little bit about electricity ," he said. "I think we're on the verge of=20 breaking the exorbitant spot market. . . .=20 "Believe me, we're still in for a volatile summer. But our plans are=20 beginning to fall into place, and we finally have some leverage. The only= =20 thing these greedy out-of-state generators respond to is leverage. . . .=20 "The point is, we're turning the corner."=20 Gov. Gray Davis was feeling good--about plunging wholesale electricity pric= es=20 (lowest since April 2000), about conservation (Californians used 11% fewer= =20 kilowatts last month than in May 2000), about more supply (one major Kern= =20 County power plant is about to go online two months early) and about new po= ll=20 numbers.=20 Davis believes his "summit" with President Bush two weeks ago in L.A.=20 burnished his image. His pollster, Paul Maslin, found that the governor's j= ob=20 approval rating rose from 46% in early April to 52% after the Bush meeting.= =20 The president's job rating in California , meanwhile, fell from 56% to 43%.= =20 Bush handed Davis a microphone to shout his message: that he's building=20 plants and conserving electricity --but only federal regulators can order= =20 price relief, and they've refused. That word finally got through to people,= =20 the governor thinks.=20 And this was why Davis had phoned--to stress that he does have a plan, an= =20 endgame, and it's working. Critics to the contrary.=20 "It's premature to declare victory. It's not the time to pop champagne=20 corks," he said. "But we're turning the corner."=20 Davis must have said "turning the corner" and attributed it to "leverage" 2= 0=20 times in our 30-minute conversation. And the anti-generator rhetoric rolled= =20 naturally off his tongue, having by now become integral to his everyday=20 speech.=20 "The name of this game is leverage," he said. "If you don't have leverage= =20 over these cowboys, they will steal you blind. They'll take every dime you= =20 have, all the clothes you own, and be laughing all the way to the bank."=20 These cowboys, of course, are mostly Texans. Critics have protested that a= =20 governor cannot keep calling people names and still expect to do business= =20 with them.=20 "That's the only thing that gets their attention," Davis asserted. "They're= =20 embarrassed as sin. The last thing they want is any attention. They're luck= y=20 they're not in jail. I mean, this is highway robbery. . . . They've been=20 selling us back our own electrons at 800% more than we paid for them two=20 years ago at a time we're conserving. . . ."=20 A confluence of events has provided the leverage, Davis said:=20 * His administration has locked up 43% of the state's electricity needs wit= h=20 long-term deals at reasonable prices, reducing dependence on the sky-high= =20 spot market.=20 * California has become the nation's No. 1 electricity conserver.=20 * The U.S. Senate has turned Democrat and is pressuring federal regulators.= =20 * Bush has named two new members to the Federal Energy Regulatory Commissio= n=20 who, unlike the chairman, don't seem like power company toadies. Indeed, th= e=20 FERC is probing predatory price gouging by El Paso natural gas.=20 "And then you have a governor who's quick to get in the face of greedy=20 out-of-state generators," Davis continued. "Shame them for being the highly= =20 irresponsible citizens they are. . . . Naming names and holding people=20 accountable. Exposing their willingness to bleed California dry. . . . Taki= ng=20 no prisoners."=20 A governor also threatening to tax windfall profits and seize power plants.= =20 Davis recently went after municipal utilities, as well, after learning they= =20 occasionally had been gouging the state even worse than the private=20 profiteers. The governor warned he'd seize their excess power unless they= =20 agreed to sell it at a small profit, maybe 15%.=20 He was especially irked at the L.A. DWP, and told both Mayor Richard Riorda= n=20 and Mayor-elect James K. Hahn.=20 "They didn't like it," Davis recalled. "They said it sounds like a threat. = I=20 said it is a threat. You've made a fortune off us. You should be embarrasse= d=20 to be taking advantage of the state during its time of need. We certainly= =20 came to your aid after the 1994 earthquake."=20 I reminded Davis that critics fault him for not acting more quickly a year= =20 ago. They complain he should have pressed for long-term contracts then and= =20 pushed for consumer rate hikes to salvage private utilities. Does he=20 acknowledge he could have moved faster?=20 "No, I don't concede one iota," he replied. "That's just all armchair=20 quarterbacking. I mean, I've taken on the biggest challenge this state has= =20 faced in 50 years. We're turning the corner. . . ."=20 Could be. But this summer will be a tricky corner to turn. Davis still coul= d=20 be run down by rolling blackouts and Texas cowboys.=20 NEWS=20 Davis adds major ally in bid for price caps / Lieberman invites governor to= =20 testify Rick DelVecchio ?=20 06/11/2001=20 The San Francisco Chronicle=20 FINAL=20 Page A.1=20 (Copyright 2001)=20 Gov. Gray Davis picked up another powerful ally yesterday in his plea for= =20 federal aid for California 's crippling power bills: Sen. Joseph Lieberman,= =20 who has named Davis to go head-to-head with federal energy regulators at a= =20 Senate hearing on the crisis.=20 Davis said yesterday he was thrilled that the Connecticut Democrat would=20 shine a light on the Federal Energy Regulatory Commission, which refuses to= =20 fully cap wholesale electricity prices even though critics contend it has a= =20 legal duty to prevent price gouging.=20 "I believe (FERC) is on a sit-down strike," Davis said in a joint phone=20 conference with Lieberman. "The result has been skyrocketing prices in=20 California and a recession, which does not bode well for the American=20 economy."=20 California has been looking to President Bush for help in the energy crisis= ,=20 but the White House has steadfastly refused to endorse price caps, saying= =20 they do nothing to increase supply or promote conservation.=20 "The president will continue to work with California to address their growi= ng=20 energy needs, but does not want to take action that will make the problem= =20 worse, such as price controls," White House spokeswoman Anne Womack said=20 yesterday.=20 Lieberman's Governmental Affairs Committee, which he took over in the=20 partisan shift that followed Vermont Sen. Jim Jeffords' switch from=20 Republican to independent, will take up the power crisis on Wednesday with = a=20 hearing on the effects of deregulation on the energy and natural gas=20 industries. It will hold a second session on June 20 to explore whether FER= C=20 is doing its job to ensure reasonable energy prices.=20 Lieberman said Davis would appear on June 20 as the key witness. The event= =20 will put Davis, a Democrat, in the same room with FERC members, three of wh= om=20 are Republicans and two are Democrats.=20 Lieberman said Davis' appearance would enable the committee to take what he= =20 called a balanced look at the crisis, which has been riven by partisan and= =20 ideological differences over the federal government's role in the energy=20 markets.=20 "We have a market in California that has not really been a free market,"=20 Lieberman said. "Therefore, we have to use whatever methods we have . . . t= o=20 get those selling electricity to act more reasonably."=20 Lieberman is the latest high-profile Washington figure to join Davis' plea= =20 that the law demands price controls by FERC while California works on=20 long-term fixes for the flawed deregulation scheme put in place five years= =20 ago.=20 Lieberman said he was not advocating arbitrary price caps but rather price= =20 relief that would guarantee power producers a reasonable profit.=20 "I'm not deluding myself," he said. "This is going to be a battle."=20 He said he hoped the hearings would compel the commission to "do what the l= aw=20 says they should be doing."=20 "Hopefully, through hearings and direct dialogue, and perhaps debate, we ca= n=20 get the commission to fulfill its statutory responsibility," Lieberman said= .=20 Davis said he believed the energy industry would respond to political and= =20 legal pressure, and noted that recent price drops in California showed that= =20 the campaign already was having an impact.=20 "The last few days of price relief is solely the result of extreme pressure= =20 from Washington and from Sacramento," Davis said. ". . . We finally have a= =20 little leverage, and we can't let up."=20 In an interview yesterday on NBC's "Meet the Press," Lieberman criticized t= he=20 president's plan to generate more energy through drilling and argued that t= he=20 nation's energy policy should center on conservation, with some production= =20 and new technologies such as fuel cells.=20 But Republican Sen. Mitch McConnell of Kentucky said on the program that=20 conservation was not enough.=20 "Everyone knows that conservation is important," he said. "The president=20 knows that. But you can't conserve our way out of this problem." NEWS=20 Bay residents tired of state crisis decrees / Conserving or not, they ignor= e=20 Davis Meredith May ?=20 06/11/2001=20 The San Francisco Chronicle=20 FINAL=20 Page A.1=20 (Copyright 2001)=20 Now that the California governor has declared victory in the energy wars,= =20 many Bay Area residents are vowing to wear their low- watt fluorescent halo= es=20 and continue conserving power this summer.=20 But others said there never was a war to begin with, and one of them, a=20 Berkeley psychotherapist, declared she would continue to commit that=20 California sin of all sins -- she will not unplug her hot tub.=20 Around the Bay Area, people say it doesn't matter what Gov. Gray Davis says= =20 about turning the lights off or about power companies, they're sick of the= =20 whole thing and just want to live their lives.=20 Some will keep the conservation changes they made so they can save more mon= ey=20 on future energy bills, while others secretly admit they didn't change much= =20 anyway so the latest news isn't really news.=20 Last week, the governor announced that the state had "basically won the war= "=20 on high energy prices, after wholesale electricity prices dropped to their= =20 lowest level in a year, and natural gas prices fell as well.=20 Davis said prices had plunged after 38 long-term power contracts signed by= =20 the state forced power companies to compete for buyers, helping push=20 electricity prices lower.=20 Despite the dropping prices, Davis warned Californians to keep their power= =20 use in check.=20 "I'm a new conserver now," said Nouvella Lumford of Oakland, who came to=20 Albany Bowl Friday to knock some pins with her East Bay senior citizens'=20 league, Young At Heart.=20 To save money during the energy crisis, Lumford replaced her electrical wal= l=20 heaters with central heat and trained herself to unplug all her appliances= =20 before she left the house.=20 Soaring energy prices meant her bill kept going up anyway, and even hit the= =20 $500 mark. But she's going to stick to her new habits.=20 "Now if prices go down, and I continue to conserve, I might be able to save= a=20 little money so I can travel on the train -- I love to travel, honey!" she= =20 said.=20 BOWLING ALLEY CONSERVES=20 While Lumford bowled under a well-lit lane, the back half of the bowling=20 alley was in the dark. When there aren't enough people to fill all the lane= s,=20 the managers now shut down the lights to save money, said assistant manager= =20 Debbie Fairhurst. "We also turn off the ceiling lights at night, which is= =20 new, and we turned the air down. Customers didn't seem to mind, so why not= =20 keep it up if it can help lower our bills?"=20 For windsurfer Brett Staib, who was getting ready to jump into the water of= f=20 Point Isabel in Richmond, the possible end of the state's power problems is= =20 not that exciting. His whole approach to the energy crisis was to keep=20 looking on the bright side.=20 "Rolling blackouts aren't so bad," he said. "So what if you have to stop wh= at=20 you're doing for an hour and go take a walk?"=20 Staib's contribution to the energy crunch was to turn off his front door=20 light at night. Not much, he admitted, but he already used fluorescent bulb= s=20 inside before the crisis because they use less power.=20 "I don't think I'll need to use much air conditioning this summer because i= t=20 stays pretty cool around here," he said.=20 But for others who live in the land of no mercy, like Sandra Golightly of= =20 Antioch, keeping the air conditioning off this summer is not going to happe= n.=20 Golightly said she and her family were going to keep living like they alway= s=20 did in a home they equipped for energy efficiency a decade before it was=20 trendy.=20 ARIZONA EXPERTISE=20 A Phoenix transplant, Golightly knows some tricks: double insulation, ceili= ng=20 fans in every room, honeycomb blinds and wooden plantation shutters for the= =20 windows, and timers on the heat and air conditioning.=20 "We didn't change much during the crisis because we're already doing so=20 much," she said. "We even landscaped the backyard so it would shield the=20 sun."=20 If the energy woes do indeed fade away, people will probably keep conservin= g=20 for a little while, but eventually slip back to their old habits, Berkeley= =20 author Elayne Savage said as she relaxed in the sunshine in Berkeley's Four= th=20 Street shopping district.=20 "It's just like the water crisis, when we were being so good and planting= =20 these succulent and cactus gardens," she said. "Eventually that faded away.= "=20 But Richard Rivas of El Sobrante said he was a changed man. A drummer in a= =20 Motown band by night, he washes delivery trucks in Oakland's warehouse=20 district by day.=20 "I stopped turning on the heat and built fires, or put on a hooded=20 sweatshirt," he said. "It's not that bad, really, and I think we all got a= =20 little too used to being comfortable. We should all conserve this summer so= =20 there's enough for everybody."=20 Bay residents tired of state crisis decrees=20 Conserving or not, they ignore Davis=20 Meredith May, Chronicle Staff Writer Monday, June 11, 2001=20 ,2001 San Francisco Chronicle=20 URL: http://www.sfgate.com/cgi-bin/article.cgi?f=3D/c/a/2001/06/11/MN238305= .DTL=20 Now that the California governor has declared victory in the energy wars,= =20 many Bay Area residents are vowing to wear their low-watt fluorescent haloe= s=20 and continue conserving power this summer.=20 But others said there never was a war to begin with, and one of them, a=20 Berkeley psychotherapist, declared she would continue to commit that=20 California sin of all sins -- she will not unplug her hot tub.=20 Around the Bay Area, people say it doesn't matter what Gov. Gray Davis says= =20 about turning the lights off or about power companies, they're sick of the= =20 whole thing and just want to live their lives.=20 Some will keep the conservation changes they made so they can save more mon= ey=20 on future energy bills, while others secretly admit they didn't change much= =20 anyway so the latest news isn't really news.=20 Last week, the governor announced that the state had "basically won the war= "=20 on high energy prices, after wholesale electricity prices dropped to their= =20 lowest level in a year, and natural gas prices fell as well.=20 Davis said prices had plunged after 38 long-term power contracts signed by= =20 the state forced power companies to compete for buyers, helping push=20 electricity prices lower.=20 Despite the dropping prices, Davis warned Californians to keep their power= =20 use in check.=20 "I'm a new conserver now," said Nouvella Lumford of Oakland, who came to=20 Albany Bowl Friday to knock some pins with her East Bay senior citizens'=20 league, Young At Heart.=20 To save money during the energy crisis, Lumford replaced her electrical wal= l=20 heaters with central heat and trained herself to unplug all her appliances= =20 before she left the house.=20 Soaring energy prices meant her bill kept going up anyway, and even hit the= =20 $500 mark. But she's going to stick to her new habits.=20 "Now if prices go down, and I continue to conserve, I might be able to save= a=20 little money so I can travel on the train -- I love to travel, honey!" she= =20 said.=20 BOWLING ALLEY CONSERVES While Lumford bowled under a well-lit lane, the back half of the bowling=20 alley was in the dark. When there aren't enough people to fill all the lane= s,=20 the managers now shut down the lights to save money, said assistant manager= =20 Debbie Fairhurst. "We also turn off the ceiling lights at night, which is= =20 new, and we turned the air down. Customers didn't seem to mind, so why not= =20 keep it up if it can help lower our bills?"=20 For windsurfer Brett Staib, who was getting ready to jump into the water of= f=20 Point Isabel in Richmond, the possible end of the state's power problems is= =20 not that exciting. His whole approach to the energy crisis was to keep=20 looking on the bright side.=20 "Rolling blackouts aren't so bad," he said. "So what if you have to stop wh= at=20 you're doing for an hour and go take a walk?"=20 Staib's contribution to the energy crunch was to turn off his front door=20 light at night. Not much, he admitted, but he already used fluorescent bulb= s=20 inside before the crisis because they use less power.=20 "I don't think I'll need to use much air conditioning this summer because i= t=20 stays pretty cool around here," he said.=20 But for others who live in the land of no mercy, like Sandra Golightly of= =20 Antioch, keeping the air conditioning off this summer is not going to happe= n.=20 Golightly said she and her family were going to keep living like they alway= s=20 did in a home they equipped for energy efficiency a decade before it was=20 trendy.=20 ARIZONA EXPERTISE A Phoenix transplant, Golightly knows some tricks: double insulation, ceili= ng=20 fans in every room, honeycomb blinds and wooden plantation shutters for the= =20 windows, and timers on the heat and air conditioning.=20 "We didn't change much during the crisis because we're already doing so=20 much," she said. "We even landscaped the backyard so it would shield the=20 sun."=20 If the energy woes do indeed fade away, people will probably keep conservin= g=20 for a little while, but eventually slip back to their old habits, Berkeley= =20 author Elayne Savage said as she relaxed in the sunshine in Berkeley's Four= th=20 Street shopping district.=20 "It's just like the water crisis, when we were being so good and planting= =20 these succulent and cactus gardens," she said. "Eventually that faded away.= "=20 But Richard Rivas of El Sobrante said he was a changed man. A drummer in a= =20 Motown band by night, he washes delivery trucks in Oakland's warehouse=20 district by day.=20 "I stopped turning on the heat and built fires, or put on a hooded=20 sweatshirt," he said. "It's not that bad, really, and I think we all got a= =20 little too used to being comfortable. We should all conserve this summer so= =20 there's enough for everybody."=20 E-mail Meredith May at [email protected].=20 ,2001 San Francisco Chronicle ? Page?A - 1=20 Developments in California's energy crisis=20 The Associated Press Monday, June 11, 2001=20 ,2001 Associated Press=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2001/06/11/s= tate1 050EDT0154.DTL=20 (06-11) 07:50 PDT (AP) --=20 Developments in California's energy crisis:=20 MONDAY: * No power alerts as reserves stay above 7 percent.=20 SUNDAY: * In a conference call with reporters, Gov. Gray Davis and Sen. Joseph=20 Lieberman, D-Conn., again call on the Federal Energy Regulatory Commission = to=20 cap wholesale electricity prices.=20 * No power alerts as electricity reserves stay above 7 percent.=20 WHAT'S NEXT: * Davis' representatives continue negotiating with Sempra, the parent compa= ny=20 of San Diego Gas and Electric Co., to buy the utility's transmission lines.= =20 * The Department of Water Resources and Los Angeles Department of Water and= =20 Power have until Monday evening to turn over documents requested by the sta= te=20 Senate committee investigating market manipulation.=20 * A state Assembly committee considers a bill Monday that would have=20 utilities schedule blackouts up to a month ahead.=20 * The Senate Governmental Affairs Committee, which Lieberman chairs, holds= =20 hearings June 13 and June 20 on the power crisis.=20 THE PROBLEM: High demand, high wholesale energy costs, transmission glitches and a tight= =20 supply worsened by scarce hydroelectric power in the Northwest and=20 maintenance at aging California power plants are all factors in California'= s=20 electricity crisis.=20 Southern California Edison and Pacific Gas and Electric say they've lost=20 nearly $14 billion since June to high wholesale prices the state's=20 electricity deregulation law bars them from passing on to consumers. PG&E,= =20 saying it hasn't received the help it needs from regulators or state=20 lawmakers, filed for federal bankruptcy protection April 6.=20 Electricity and natural gas suppliers, scared off by the companies' poor=20 credit ratings, are refusing to sell to them, leading the state in January = to=20 start buying power for the utilities' nearly 9 million residential and=20 business customers. The state is also buying power for a third investor-own= ed=20 utility, San Diego Gas & Electric, which is in better financial shape than= =20 much larger Edison and PG&E but also struggling with high wholesale power= =20 costs.=20 The Public Utilities Commission has approved average rate increases of 37= =20 percent for the heaviest residential customers and 38 percent for commercia= l=20 customers, and hikes of up to 49 percent for industrial customers and 15=20 percent or 20 percent for agricultural customers to help finance the state'= s=20 multibillion-dollar power buys.=20 ,2001 Associated Press ?=20 Electricity traders' tech habits get scrutiny=20 Posted at 10:23 p.m. PDT Sunday, June 10, 2001=20 BY JENNIFER BJORHUS=20 Mercury News=20 State officials investigating California's extraordinary energy prices are= =20 zeroing in on how energy traders use the technology tools of their professi= on=20 -- from e-mail and specialized software to Internet energy data sites and= =20 online trading floors.=20 This technology may be key, they say, to helping traders acquire the intima= te=20 knowledge needed to manipulate California's troubled energy market. With=20 minute-to-minute knowledge of market conditions, some traders went even=20 further, two lawsuits charge, illegally coordinating bids and sending=20 electricity prices to record-breaking levels.=20 The state Attorney General's Office has subpoenaed from power generators=20 software used to formulate bidding strategies, names of employees providing= =20 computer support, communications with a prominent industry Web site and the= =20 name of firms that handle computer networks.=20 And a state Senate committee has hired an information technology consultant= =20 to help them look into how traders tracked patterns on the state's=20 Internet-based spot market, among other things.=20 ``Once you were knowledgeable about its operations, the opportunity to game= =20 it became pretty obvious,'' said Sen. Joe Dunn, D-Garden Grove, who chairs= =20 the committee.=20 Anti-trust laws=20 Working together, or colluding, to fix prices is illegal and violates state= =20 and federal anti-trust laws.=20 Sharing sensitive industry data, if it involved financial markets, would be= =20 considered insider trading and would be treated far differently, said Anjal= i=20 Sheffrin, head of market analysis for the Independent System Operator, whic= h=20 manages the state's power grid.=20 The Securities and Exchange Commission polices the nation's stock markets,= =20 but wholesale energy trading goes largely unwatched by federal regulators.= =20 San Diego attorney Mike Aguirre agreed with Sheffrin. Aguirre is part of a= =20 team of lawyers who have filed two lawsuits against leading power generator= s=20 such as Dynegy, Duke Energy and Williams Energy Services.=20 ``It's basically an embryonic kind of trading market that involves the=20 sharing of inside information, and the only reason they're getting away wit= h=20 it is there's no SEC cop,'' he said.=20 Energy companies dismiss these charges as speculation.=20 ``All of these `What ifs?'?'' said Dynegy spokesman Steve Stengel. ``The fa= ct=20 of the matter is we've played by the rules, we've acted ethically, we haven= 't=20 done anything wrong.''=20 Energy companies say the way they use technology is all above board.=20 ``That's something that we're proud of, that we have all of the tools to do= =20 the best possible job in the trading,'' said Paula Hall-Collins, spokeswoma= n=20 for Tulsa-based Williams Co.=20 Not everyone is persuaded that energy companies actually conspired to hike= =20 prices.=20 Some public officials and energy industry players call the technology focus= a=20 red herring. California's energy problems are far more fundamental, they sa= y,=20 than click-happy energy traders with spreadsheets. The now-defunct Californ= ia=20 Power Exchange, for example, was something of a sitting duck, unable to=20 freely shop around for the best electricity prices.=20 Wealth of data=20 Other experts believe the sheer wealth of data floating around -- from rive= r=20 flows to 30-day forecasts of power line outages -- gives traders an unfair= =20 advantage. ``That's exactly the issue,'' said Severin Borenstein, director = of=20 the University of California Energy Institute. ``The issue is whether all= =20 this information is actually doing more harm to competition than benefit to= =20 the efficiency of procuring and selling power.''=20 The best illustration of this is a somewhat legendary Web site blunder.=20 In that incident, an energy industry association called the Western Systems= =20 Coordinating Council posted highly sensitive real-time data about=20 transmission of extra-high voltage electricity in California.=20 Alarmed that such information could be used to game the market, the state's= =20 grid operator last October demanded that the trade group take the informati= on=20 off the site, which it did.=20 A former energy trader who spoke to the Mercury News on the condition that = he=20 not be identified, said: ``When you can calculate exactly what a market nee= ds=20 and where its surplus is going to come from, then you have the ability to= =20 essentially fix prices. It's like a linear equation. You know exactly what= =20 the end equation is going to be.''=20 At issue are how traders employ the tools that, like the telephone and fax= =20 machine, are standard in trading electricity: software, data Web sites and= =20 Internet energy exchanges.=20 Dunn and other public officials acknowledge that it isn't clear how=20 technology was used in suspected abuses. And no one has turned up slam-dunk= =20 evidence of collusion.=20 The ISO has done extensive studies that conclude traders drove up prices=20 through gaming. The high prices have cost the state at least $6.7 billion= =20 since May 2000.=20 ``Energy traders trade information among themselves,'' the ISO's Sheffrin= =20 charged, comparing it to insider-trading. ``These traders are calling each= =20 other up all the time.''=20 The former energy trader who talked to the Mercury News agreed energy trade= rs=20 as a very incestuous group.=20 They talk and e-mail every day. ``Sometimes many, many, many times a day,''= =20 he said. ``Some of them have instant messaging.'' He said he believes it=20 could amount to ``de facto collusion.''=20 But proving collusion in court is extremely difficult.=20 The sticking point, said UC's Borenstein, is showing exactly what energy=20 traders did with the information.=20 ``These guys aren't actually sitting down in a room together,'' Borenstein= =20 said. ``They sort of watched each other and said, `Well, other firms are=20 keeping capacity out and we will too.'?''=20 The former energy trader said he doubted that investigators would prove=20 collusion because traders will cover their tracks. ``They're expunging=20 hard-drive data as we speak,'' he said. ``The documents are long gone.''=20 Lawsuits=20 Two class-action lawsuits, filed on behalf of taxpayers by San Francisco an= d=20 by Lt. Gov. Cruz Bustamante, accuse the energy companies of colluding to=20 drive up prices. Neither lawsuit clearly documents how the energy companies= =20 engaged in secretive data-sharing.=20 The Bustamante suit, however, targets a new Internet site for wholesale=20 energy trading launched last fall by heavy-hitter energy companies such as= =20 Duke and Reliant. The Atlanta-based Web site, IntercontinentalExchange, is= =20 one of at least a dozen such electronic trading floors that have popped up = on=20 the Internet in the last four years. None of these trading exchanges -- whi= ch=20 analysts say are the wave of the future -- are regulated.=20 IntercontinentalExchange declined to comment since it is not a party to the= =20 suit.=20 The lawsuit charges the site ``has several features that support collusive= =20 behavior amongst market participants.''=20 One is that only approved traders have access to IntercontinentalExchange a= nd=20 those traders can pick who they want to trade with and shut other traders= =20 out. And more importantly, Aguirre said, the energy companies who own many = of=20 these Web exchanges get the tremendous benefit of having a record of all th= e=20 trades.=20 ``It gives them an enormous amount of market data that no one else has acce= ss=20 to,'' he said. ``It's a conduit for collusion.''=20 Contact Jennifer Bjorhus at [email protected] or (408) 920-5660.=20 Davis is down, but history and politics are on his side=20 Published Monday, June 11, 2001, in the San Jose Mercury News=20 BY PHIL YOST=20 THE next time Gray Davis faces the voters is less than nine months away.=20 Before the March 5 primary election, blackouts could blight the summer,=20 generators could loot the state, utilities could sink into the ocean, and= =20 Home Depot could run out of batteries.=20 Already, the energy crisis has made voters crabby. In the latest Field Poll= ,=20 49 percent had an unfavorable impression of Davis, as opposed to 44 percent= =20 favorable.=20 Here, perhaps, is where the battered Republican Party, pinned against its o= wn=20 goal line, can regain some of the ground lost in the 1998 and 2000 election= s.=20 Perhaps Davis will even be weakened by a challenge from within his own=20 Democratic Party.=20 Don't be too hasty.=20 From January to June, the GOP's prospects undoubtedly thawed. Two candidate= s=20 are already looking to take advantage: Bill Jones, California's secretary o= f=20 state, and Bill Simon, a Los Angeles businessman and philanthropist.=20 But here's a bit of history discouraging for the Bills, neither of whom is= =20 recognized by even half the voters in the state. The last California govern= or=20 to be denied a second term by the voters was Culbert Olson, in 1943.=20 Davis will not answer to all the voters in March, only Democratic ones. Cou= rt=20 rulings have eliminated California's short-lived blanket primaries and=20 restored the partisan contests. So he has two summers before the November= =20 2002 election to get the power puzzle solved.=20 All the same, politics is an arena in which anything can happen. (Your hono= r,=20 I call Jesse Ventura to the stand.) And what Republicans more and more are= =20 hoping will happen is that Los Angeles will send to the governor's office i= ts=20 departing mayor, Richard Riordan. Riordan says he's thinking about running.= =20 A Field Poll in late May showed Riordan even with Davis in voter preference= ,=20 while Jones and Simon trailed by double digits. President Bush has called o= n=20 Riordan to run. Last week, 14 Republican legislators, of the 44 in the=20 Assembly and Senate, and 16 of California's 20 Republican members of Congre= ss=20 signed a letter urging Riordan to be a candidate.=20 Given the beaten down state of the Republican party in California, one of= =20 Riordan's advantages for the general election is that he is thought of firs= t=20 as the mayor of Los Angeles, and only second as a Republican. It's an=20 accurate picture. He opposed the immigrant-bashing Proposition 187. He=20 supports gay rights and is generally pro-choice. He has endorsed Democratic= =20 Sen. Dianne Feinstein in the past.=20 Plenty of Republicans will find plenty to dislike there. But they should ge= t=20 realistic about what sort of candidate is electable. Socially conservative= =20 Dan Lungren, the GOP candidate in 1998, got pounded. The 2000 election=20 offered no suggestion that California voters were moving rightward.=20 Riordan, a very wealthy man, could put $30 million or more of his own money= =20 into the campaign, which is what Davis already has collected. Yet Riordan's= =20 performance as L.A. mayor insulates him from the charge that he is a rich m= an=20 playing at politics.=20 Jones, who is from Fresno, has done a commendable job in his eight years as= =20 secretary of state. But he offended many Republicans by the way in which he= =20 switched from supporting George W. Bush to John McCain in last year's=20 presidential race. Simon has the money to make himself and his message know= n,=20 but right now both are unknown.=20 Maybe Jones and Simon can make the cases for themselves over the summer and= =20 fall. But Riordan would enter the race with a huge head start.=20 As for a challenger to Davis from within the party, everything depends on= =20 this summer. Only if it is an ordeal of blackouts and staggering state=20 electricity bills is Davis in danger. The political taboo against striking = at=20 an incumbent is powerful.=20 Further, those most likely and able to mount a palace coup -- Attorney=20 General Bill Lockyer and Treasurer Phil Angelides, to pick two -- would be= =20 the most viable candidates to succeed Davis four years from now. Why would= =20 they risk a suicide mission instead of waiting?=20 The first half of 2001 damaged Davis's political standing. But in politics,= =20 being down is a long way from being out. And despite the polls, Republicans= =20 should strategize as if they are a long way from the governor's office.=20 Phil Yost is chief editorial writer of the Mercury News.=20 Senate panel eyes price caps for power=20 Lieberman will hold hearings that will include Gov. Davis and U.S.=20 regulators.=20 June 11, 2001=20 By KATE BERRY The Orange County Register=20 U.S. Sen. Joseph Lieberman announced Sunday that he will hold hearings=20 beginning this week on California's electricity crisis aimed at forcing=20 federal energy regulators to cap power prices in California and throughout= =20 the West.=20 Gov. Gray Davis will testify before a Senate committee and square off with= =20 Federal Energy Regulatory Commission members at a hearing June 20, Lieberma= n=20 said.=20 Lieberman, who became chairman of the Senate Government Affairs Committee= =20 last week, said he expects federal regulators to agree to impose price caps= =20 under the auspices of a new commission chairman.But if regulators fail to= =20 rein in prices, he is girding for a fight in a divided Congress to pass=20 legislation that protects California.=20 "This is going to be a battle, but it's a battle worth fighting," he said.= =20 "President Bush is setting a tone here, a tone of empathy for California's= =20 plight - but inaction."=20 Davis joined Lieberman on a conference call Sunday and repeated his mantra= =20 that regulators of the Federal Energy Commission have failed to rein in=20 skyrocketing wholesale prices by imposing a temporary 18-month price cap.= =20 Davis said generators could make a profit of between 30 percent and 50=20 percent even with the cap in place.=20 Davis said a temporary price cap would save the state billions. He said 16= =20 new power plants are expected to come online by 2003, when prices are=20 expected to stabilize. Davis continued to put blame for the crisis on his= =20 Republican predecessor, Pete Wilson, who pushed for the 1996 law that=20 deregulated wholesale - but not retail - prices in California.=20 Lieberman, D-Conn., will hold two days of hearings, beginning this week, to= =20 determine if FERC is upholding a 1932 law that ensures wholesale electricit= y=20 prices are "just and reasonable."=20 Lieberman said several economists will testify Wednesday at the first heari= ng=20 on California's energy market.=20 The five members of the Federal Energy Regulatory Commission will testify a= t=20 the second hearing June 20 and respond to questions from Davis.=20 Lieberman ascended to the chairmanship of the Senate Government Affairs=20 Committee last week, when Sen. James M. Jeffords quit the Republican Party = to=20 become an independent, and control of the Senate switched to the Democrats.= =20 With that change, legislation by Sen. Dianne Feinstein, D-Calif., to force= =20 federal regulators to set price limits will now move forward, Davis said.= =20 U.S. Senate Majority Leader Tom Daschle said Sunday that he also favors pri= ce=20 caps to rein in skyrocketing wholesale power prices in California. Daschle,= =20 who took over as majority leader last week, also said FERC has not lived up= =20 to its responsibility.=20 FERC Chairman Curt Hebert and President George W. Bush are against such pri= ce=20 caps, arguing they would discourage firms from building new power plants an= d=20 do nothing to encourage consumers to use less electricity.=20 But Hebert is expected to be replaced shortly by Pat Wood, a Republican and= =20 former chairman of the Texas Public Utilities Commission. Wood has said he= =20 will come to California and work with state officials on the crisis, leadin= g=20 some to believe he may be more likely to favor price caps than his=20 predecessor.=20 The chairmanship of the oversight committee gives Lieberman broad power to= =20 subpoena witnesses and records while overseeing the actions of nearly every= =20 government agency.=20 The hearings also will highlight the difference between Democrats and=20 Republicans at a time when national polls have shown Bush is vulnerable on= =20 the energy issue.=20 "If we have to, we'll go forward with the legislation and try to force FERC= =20 to enforce the law, if it's necessary," Lieberman said.=20 Lieberman warned that California represents 15 percent of the American=20 economy, and any major downturn in the state would have rippling effects=20 across the country.=20 The Associated Press contributed to this report. New program will pay businesses to conserve=20 The incentives could save hundreds of megawatts, the governor's staff says.= =20 June 10, 2001=20 By JOHN HOWARD The Orange County Register=20 SACRAMENTO California will pay businesses to conserve if that costs less th= an=20 buying power on the open market, under an executive order signed Saturday b= y=20 Gov. Gray Davis.=20 The governor's staff said the new program could save hundreds of megawatts= =20 and cost $50 million to $100 million.=20 The companies would submit bids to the state, estimating how much it costs= =20 them to reduce their energy consumption. If those amounts are less than the= =20 state would pay for power, the state will pay the companies instead.=20 The state "would rather pay people in California money to cut back than pay= =20 out-of-state generators," said S. David Freeman, the governor's top energy= =20 adviser.=20 Perhaps 500 to 900 megawatts could be saved, said Davis adviser Kellan=20 Fluckiger. He did not say whether the payments would be in cash, credits or= =20 reductions on future bills.=20 The program will continue through this year and into 2002.=20 It also was uncertain whether information about the companies' payments wou= ld=20 be available to the public, an issue that is the subject of a legal dispute= .=20 Partial information about the state's energy purchases currently is being= =20 disclosed six months after the fact.=20 The program will be administered by the Independent System Operator, the=20 private manager of the state's electricity grid. The money will come from t= he=20 state budget through the Department of Water Resources, which has been buyi= ng=20 power for California's credit-lacking utilities since January.=20 Thus far, the state has set aside about $8.2 billion for electricity=20 purchases.=20 A number of other business conservation programs already exist, including o= ne=20 in which companies enjoy lower rates for agreeing in advance to cut=20 consumption during peak periods. The latest executive order enhances that= =20 program, Freeman said. "It creates a whole new dynamic," he added.=20 Other conservation efforts include reductions in outdoor commercial lightin= g,=20 and incentives to use energy-efficient appliances and reduce residential=20 consumption this summer by 20 percent. Capitol Report=20 Davis' crisis management on upswing.=20 June 10, 2001=20 What electricity crisis?=20 Gray Davis' public relations juggernaut is cranked up and roaring, spinning= =20 the governor's message that California has "basically won the war" against= =20 tight supplies, spiraling prices and rapacious power companies. Through sou= nd=20 bites, selective leaks and even more selective financial data, Davis is=20 driving home the message that lower electricity prices stem from the state'= s=20 ability to lock up cheaper energy with long-term contracts.=20 This is only partly true - all good PR has a kernel of truth - but it's=20 welcome news indeed for consumers fed up with California's electricity mess= .=20 Cooler weather, conservation, more power plants back in service after repai= rs=20 and a drop in natural-gas prices are soothing the market. Those factors, al= l=20 temporary, may be as important as the contracts, or even more so.=20 But it is instructive to watch the governor's newly aggressive, organized= =20 communications strategy. For the first time since his election, the=20 governor's PR apparatus is efficient and effective. Somebody has been givin= g=20 him good advice lately, and he seems to be taking it.=20 He's everywhere. He pops up repeatedly on network TV news programs, where h= e=20 depicts California as the innocent victim of federal inaction. He looks=20 better on the tube than in person, although he needs to change his clothes = -=20 that red tie and blue shirt are getting old.=20 He appears in front of power plants, announcing a new initiative amid the= =20 roar of generation. He's more accessible, fields more questions and appears= =20 at more editorial boards. He's gotten away from blaming former Gov. Pete=20 Wilson for the current mess. His office e-mails favorable news articles to= =20 the press, with a tag saying "in case you missed it." There's no chance=20 anyone missed it. Reporters are getting four or five copies of the same=20 release.=20 But glossed over in the image-polishing of fearless energy crusader are the= =20 double-digit rate hikes that hit consumers this month and the stresses=20 California's power grid is likely to face with the onset of hot weather. Th= e=20 public relations machine hasn't quite figured out how to handle those yet.= =20 THE WEEK TO COME=20 Fighting over money is a hallowed Capitol tradition. The question of what t= o=20 spend, and when, is the crux of the budget battle. But this year's $102.9= =20 billion budget war is oddly different.=20 The Legislature's budget writers are fighting over what not to spend. They= =20 are wrangling over how much to hold back, rather than how much to commit.= =20 The governor wants a razor-thin, $1 billion rainy-day fund, because he need= s=20 as much cash as possible to balance the state's books. But that reserve is= =20 too small, some on the budget committee believe, and should be doubled or= =20 even tripled.=20 Until the reserve is established, it's hard to decide the rest of the=20 spending. That hasn't stopped the budget committee, which is pressing on ev= en=20 though the rainy-day fund is a mystery. "This is a departure from tradition= ,"=20 said an exasperated Sen. Steve Peace, D-El Cajon.=20 He's right. Energy notebook=20 Officials: Suppliers should refund excess charges=20 June 9, 2001=20 From Register news services=20 SACRAMENTO Four major power suppliers to California have shown they can=20 control prices in the wholesale electricity market and should have to refun= d=20 excess charges, possibly up to billions of dollars, state grid officials sa= id=20 Friday.=20 The Independent System Operator, keeper of the state's power grid, also ask= ed=20 the Federal Energy Regulatory Commission to revoke the market-based rate=20 authority for four generators -- Duke Energy, Mirant, Dynegy and Reliant=20 Energy.=20 ISO analysts have estimated the state was overcharged about $6.7 billion=20 between May 2000 and March 2001. That includes charges by generators other= =20 than the four in these filings, and ISO officials didn't have an estimate o= n=20 how much they were seeking from Duke, Reliant, Mirant and Dynegy.=20 In order to escape charging cost-based rates, generators must prove to FERC= =20 that they don't have market power -- the ability to charge whatever price= =20 they want without consequence. Suppliers have to have that authority renewe= d=20 by FERC every three years, and most are up for review this summer.=20 The ISO last month made a similar request of FERC for power sold by William= s=20 Cos. and AES Corp.=20 Utilities may lower voltage provided to homes, firms=20 SAN FRANCISCO California utilities are considering lowering the voltage of= =20 electricity delivered to businesses and homes in order to save megawatts.= =20 If successful, such a program could save the state millions of dollars and= =20 lower power demand, possibly avoiding some rolling blackouts, energy expert= s=20 said.=20 The sticking points for state power regulators are potential damage to=20 appliances and the loss of some profit to utilities, which would sell less= =20 electricity.=20 Home appliances, computers and other equipment are normally rated to run be= st=20 at about 115 volts. If voltage is dropped too low - experts say lower than= =20 110 volts - motors can overheat, damaging appliances.=20 Under the plan, the three utilities would reduce the voltage delivered to= =20 businesses and homes from the present level of 120 volts to 118 or 116 volt= s.=20 A drop so slight would not damage appliances and could dim some lights, but= =20 it could cut power usage between 400 and 1,000 megawatts of electricity.=20 That's enough electricity to power up to 750,000 homes - or the equivalent = of=20 building a new power plant.=20 Edison 'disappointed' with lack of progress on bailout=20 ROSEMEAD Southern California Edison officials are "frankly disappointed" wi= th=20 the lack of progress state regulators have made on the utility's bailout=20 package, an Edison International executive said.=20 Friday was the deadline for the California Public Utilities Commission to a= ct=20 on five elements of the bailout pact Edison made with Gov. Gray Davis two= =20 months ago. The agency put some of the items on its agenda for next=20 Thursday's meeting.=20 The longer Edison goes without a financial rescue, the greater the risk tha= t=20 creditors will lose patience and force the parent or its utility into=20 bankruptcy. Despite the commission's failure to act, Edison officials aren'= t=20 planning to exercise their option to terminate the rescue, said Ted Craver,= =20 Edison's chief financial officer. The governor has the same option.=20 In other news:=20 Gov. Gray Davis asked state regulators to exempt oil refineries from=20 electricity blackouts, saying the threat of power outages may lead to=20 production cuts and higher energy prices. Chevron Corp., the largest suppli= er=20 of California's unique blend of gasoline, told Davis this week it would be= =20 forced to reduce refinery output without guarantees of uninterrupted power,= =20 causing fuel shortages. A drop in supplies may boost gasoline-pump prices i= n=20 California, which already are more than $2 per gallon.=20 Calpine Corp., a U.S. electricity generator and power-plant developer, plan= s=20 to build a $325 million power plant in southwest Riverside County able to= =20 produce enough power to light about 450,000 California homes. The project,= =20 Calpine's 10th major power development for the California market, is=20 scheduled to begin construction in mid-2002 and open in late 2004. The=20 proposed Inland Empire Energy Center will produce about 600 megawatts of=20 power that will go to the power grid of Southern California Edison. The=20 gas-powered plant will serve the growing suburban areas of Riverside and Sa= n=20 Bernardino counties.=20 Bloomberg News and the Associated Press contributed to this report.=20 Calpine Announces 600-MW Inland Empire Energy Center Project Will Offer=20 Electricity to One of California's Fastest Growing Regions=20 June 11, 2001=20 Project Will Offer Electricity to One of California's Fastest Growing Regio= ns=20 SAN JOSE, Calif., June 8 /PRNewswire/ -- Calpine Corporation (NYSE: CPN), a= =20 leading independent power producer, announced plans to build, own, and=20 operate a 600-megawatt electric generating facility to be located in=20 southwestern Riverside County, California. The proposed Inland Empire Energ= y=20 Center will feed directly into Southern California Edison's power grid and = is=20 intended to serve the rapidly growing counties of Riverside and San=20 Bernardino. Construction of the $325 million facility is scheduled to begin= =20 in mid-2002, with commercial operation targeted for late 2004.=20 The facility will use two advanced technology General Electric combustion= =20 turbines in combined-cycle with a single steam turbine and will be fueled b= y=20 natural gas. With its advanced emissions control system and configuration,= =20 the Inland Empire Energy Center will be significantly cleaner and more fuel= =20 efficient than the typical natural gas-fired power plant operating today.= =20 "As a California-based company, we are extremely pleased to, yet again, mov= e=20 forward on a project such as this," said Calpine's Senior Vice President of= =20 Business Development, John King. "To date, Calpine has committed=20 approximately $6 billion to the California energy market. With this=20 industry-leading initiative to bring more than 12,000 megawatts of new=20 generation to California, we believe Calpine has taken a significant step= =20 towards helping put an end to the 'energy crisis.'"=20 Calpine will manage all aspects of project development for the Inland Empir= e=20 Energy Center, including engineering and design, construction, and=20 operations. The project will interconnect to the local power grid via=20 existing transmission lines adjacent to the site and will be fueled by a=20 major gas line already serving the region.=20 "This project represents a cost-effective, near-term means for the Inland= =20 Empire to satisfy part of its power needs with locally produced electricity= ,"=20 added King. "The facility's location and design provides not only heightene= d=20 energy independence and diversity for the region, but reliable access to th= e=20 clean and affordable electricity we all require."=20 Construction of the Inland Empire Energy Center will require as many as 300= =20 workers. Upon completion, 20 to 25 skilled power professionals with a=20 combined annual payroll in excess of $1 million will operate the facility. = In=20 addition to providing a clean, affordable, and reliable source of new, loca= l=20 power generation and a means for accelerating regional economic development= ,=20 the facility also will emerge as one of the leading sources of tax revenue= =20 for Riverside County.=20 The Inland Empire Energy Center is Calpine's tenth announced major power=20 project being developed specifically for the California market. Already,=20 Calpine has three California projects under construction, with the Sutter a= nd=20 Los Medanos Energy Centers scheduled to begin operation this month. The two= =20 projects' combined 1,100-plus megawatt output represents the only large-sca= le=20 power facilities coming online this summer in the state. The third Calpine= =20 project under construction, the 880-megawatt Delta Energy Center, is slated= =20 to be complete within a year. In total, Calpine has more than 8,100 megawat= ts=20 of generation already in operation, construction, or announced development = in=20 California.=20 Based in San Jose, Calif., Calpine Corporation is dedicated to providing=20 customers with reliable and competitively priced electricity. Calpine is=20 focused on clean, efficient, natural gas-fired generation and is the world'= s=20 largest producer of renewable geothermal energy. Calpine has launched the= =20 largest power development program in North America. To date, the company ha= s=20 approximately 32,600 megawatts of base load capacity and 7,200 megawatts of= =20 peaking capacity in operation, under construction and in announced=20 development in 29 states and Canada. The company was founded in 1984 and is= =20 publicly traded on the New York Stock Exchange under the symbol CPN. For mo= re=20 information about Calpine, visit its Website at www.calpine.com.=20 This news release discusses certain matters that may be considered=20 "forward-looking" statements within the meaning of Section 27A of the=20 Securities Act of 1933, as amended, and Section 21E of the Securities=20 Exchange Act of 1934, as amended, including statements regarding the intent= ,=20 belief or current expectations of Calpine Corporation ("the Company") and i= ts=20 management. Prospective investors are cautioned that any such forward-looki= ng=20 statements are not guarantees of future performance and involve a number of= =20 risks and uncertainties that could materially affect actual results such as= ,=20 but not limited to, (i) changes in government regulations, including pendin= g=20 changes in California, and anticipated deregulation of the electric energy= =20 industry, (ii) commercial operations of new plants that may be delayed or= =20 prevented because of various development and construction risks, such as a= =20 failure to obtain financing and the necessary permits to operate or the=20 failure of third-party contractors to perform their contractual obligations= ,=20 (iii) cost estimates are preliminary and actual cost may be higher than=20 estimated, (iv) the assurance that the Company will develop additional=20 plants, (v) a competitor's development of a lower-cost generating gas-fired= =20 power plant, and (vi) the risks associated with marketing and selling power= =20 from power plants in the newly competitive energy market. Prospective=20 investors are also cautioned that the California energy environment remains= =20 uncertain. The Company's management is working closely with a number of=20 parties to resolve the current uncertainty, while protecting the Company's= =20 interests. Management believes that a final resolution will not have a=20 material adverse impact on the Company. Prospective investors are also=20 referred to the other risks identified from time to time in the Company's= =20 reports and registration statements filed with the Securities and Exchange= =20 Commission.=20 MAKE YOUR OPINION COUNT - Click Here=20 http://tbutton.prnewswire.com/prn/11690X23853586=20 SOURCE Calpine Corporation=20 CONTACT: media, Kent Robertson, 925-600-2317, or investors, Rick Barraza,= =20 408-995-5115, ext. 1125, both of Calpine Corporation=20 Web site: http://www.calpine.com (CPN)=20 SDG&E Applauds Expansion of Assistance For Low-Income Customers; CPUC Chang= es=20 Mean More Eligible Customers, Increased Discounts=20 June 11, 2001=20 SAN DIEGO, June 8 /PRNewswire/ via NewsEdge Corporation -=20 San Diego Gas & Electric (SDG&E) officials today applauded actions by the= =20 California Public Utilities Commission (CPUC) to increase discounts and=20 expand eligibility standards for the limited-income utility customers to=20 participate in the California Alternate Rates for Energy (CARE) rate-discou= nt=20 program.=20 The new standard will make an additional 70,000 customers eligible for the= =20 program and will increase the discount on customers' bills to 20 percent fr= om=20 15 percent. Approximately 147,000 SDG&E customers currently are enrolled in= =20 the CARE program.=20 "We support the CPUC's actions to increase the availability of assistance= =20 through the CARE program, because we are concerned about the impact of high= er=20 electricity costs on our community, especially on our low-income customers,= "=20 said Pamela J. Fair, vice president of customer services for SDG&E. "The=20 increased availability and enhanced benefit of the CARE program, in additio= n=20 to our more aggressive outreach programs, will bring welcome financial help= =20 to many more customers."=20 The CPUC yesterday also increased the eligibility guidelines to include=20 customers with income at or less than 175 percent of federal poverty=20 guidelines.=20 The new annual limits are:=20 Household of 1 or 2 $22,000=20 Household of 3 $25,900=20 Household of 4 $31,100=20 Each additional person Add $5,200=20 Fair said that, over the past several months, SDG&E has significantly=20 increased its outreach efforts to lower-income customers, including:=20 -- The free exchange of more than 9,000 lightbulbs for more=20 energy-efficient bulbs at some 30 events held for seniors and=20 low-income customers this year.=20 -- Increased communications to customers concerning low-income=20 assistance, including billing informational inserts, advertising, news=20 releases and kiosk displays in shopping malls.=20 -- More aggressive outreach through SDG&E's low-income energy efficiency=20 programs, which will provide free education and energy-efficiency=20 measures to an estimated 40,000 customers this year. SDG&E also=20 recently expanded its notification system concerning the availability=20 of low-income assistance to include 5,600 mobile-home-park operators.=20 -- Partnerships with community-based organizations to conduct a series of= =20 presentations throughout the region on low-income assistance and=20 energy-efficiency programs in Spanish, Vietnamese, Laotian, Russian=20 and several Middle Eastern, African and Eastern European languages.=20 The company expects to reach an additional 30,000 customers through=20 this program in 2001, up from 20,000 last year.=20 "We want our customers in need to be aware of the help that's available to= =20 them in the form of direct assistance, energy-efficiency upgrades and=20 flexible payment options," Fair said. "We are spreading the word about thes= e=20 options through a broad range of channels."=20 SDG&E resumed collection activities earlier this year after a six-month=20 moratorium, and its disconnection activities are now approaching its averag= e=20 historical levels, Fair said. For the first five months of 2001, there were= =20 5,582 disconnections, compared to 9,290 during the same period last year an= d=20 11,583 in the first five months of 1999. The total disconnection rate for= =20 2001 represents less than one-half of 1 percent of SDG&E's 1.2 million=20 customers.=20 SDG&E is encouraging any customers who receive late-payment notices to call= =20 SDG&E at (800) 411-SDGE to set up payment arrangements. SDG&E has in place = a=20 successful program of working with customers to set up flexible payment pla= ns=20 and to refer qualified customers to bill-assistance resources, Fair said.= =20 San Diego Gas & Electric is a regulated utility that provides service to 3= =20 million consumers through 1.2 million electric meters and 740,000 natural g= as=20 meters in San Diego and southern Orange counties. SDG&E is a subsidiary of= =20 Sempra Energy (NYSE: SRE), a Fortune 500 energy services holding company=20 based in San Diego.=20 MAKE YOUR OPINION COUNT - Click Here=20 http://tbutton.prnewswire.com/prn/11690X72482778=20 SOURCE San Diego Gas & Electric=20 CONTACT: Ed Van Herik of San Diego Gas & Electric, 877-866-2066=20 Web site: http://www.sdge.com (SRE)=20 Business/Financial Desk; Section C=20 California Gets a Reprieve As Natural Gas Prices Drop By RICHARD A. OPPEL Jr. ?=20 06/11/2001=20 The New York Times=20 Page 2, Column 5=20 c. 2001 New York Times Company=20 DALLAS, June 10 -- The price of natural gas sold into Southern California h= as=20 fallen sharply the last week after both the free fall in electricity prices= =20 and the expiration of a pipeline contract held by the El Paso Corporation= =20 that is the subject of an inquiry by federal regulators.=20 The change in prices has prompted critics of El Paso to suggest that the dr= op=20 shows how much effect the company's contract had in keeping natural gas=20 prices high.=20 But a lawyer for the company says that while gas prices in Southern=20 California are lower than in recent months, they are mostly still higher th= an=20 in other parts of the country. And he said the decline that has taken place= =20 was largely because of the factors that have caused California electricity= =20 prices to plunge unexpectedly since late last month.=20 Whatever the reason, lower gas prices, if they continue, bode well for=20 California electricity rate payers because gas is a crucial fuel for=20 generating electricity . But California officials have said the drop in gas= =20 prices may prove short-lived, just as many experts think the state's lower= =20 electricity prices may be temporary.=20 Analysts have said the steep run-up in gas prices that began last year was= =20 caused by factors like soaring demand from electricity generators, a shorta= ge=20 of pipeline capacity and market rules in California that did not require=20 companies to store enough gas for winter.=20 The California Public Utilities Commission and Southern California Edison= =20 have also contended that El Paso used its contractual control of a large=20 amount of pipeline space into California to curtail gas flows so it could= =20 drive prices higher. El Paso denies that, saying California is trying to ma= ke=20 the company a scapegoat for its failed energy policies. An administrative= =20 judge is hearing the accusations at the Federal Energy Regulatory Commissio= n=20 in Washington.=20 The contract at issue expired May 31, and control of the pipeline space was= =20 then transferred to 30 different companies. According to Natural Gas=20 Intelligence, an industry publication, the average price for gas in Souther= n=20 California during ''bidweek'' -- the process in the last seven days of the= =20 month that determines the price for much of the gas sold the next month --= =20 was $11.70 per million British thermal units, or nearly triple the prices i= n=20 the rest of the nation. But by late last week, daily prices for gas had=20 dropped to about $4 to some Southern California destinations.=20 ''It reflects that the market's recognition that the capacity is no longer= =20 held by one major player, and I think the market knows the difference betwe= en=20 competition and a monopoly,'' said Kevin J. Lipson, a lawyer for Southern= =20 California Edison. ''It reflects the benefits of competition.''=20 But, a lawyer for El Paso, William S. Scherman, said the expiration of the= =20 contract has not affected prices.=20 ''Looking at prices on a daily basis is invalid,'' Mr. Scherman said, becau= se=20 most gas sold is priced on a month-to-month basis.=20 ''Prices may be coming down because of supply and demand and other=20 conditions, but they are still showing a significant scarcity rent,'' he=20 said, meaning that the cost for transporting gas is still higher in Souther= n=20 California than in other places.=20

dasovich-j/all_documents/27751.

dasovich-j

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Enron Mentions - 02/15/2001

Daily Briefing The Atlanta Constitution, 02/15/2001 State Sees $2.3 Billion Tab for Emergency Buys San Diego Union-Tribune, 02/15/2001 Deals & Deal Makers: First Boston's `Son of Tyco' Deal Goes Sour ---=20 Underwriter Left Holding A Bagful of Unsold Bonds The Wall Street Journal, 02/15/2001 Envera Becomes Preferred Settlement Network for Enron Global Markets'=20 Petrochemical Transactions PR Newswire, 02/15/2001 LME to Continue with Longer Open-outcry Hours Reuters, 02/15/2001 Nigeria Races Against Time to End Power Outages Reuters, 02/15/2001 Team Canada Assists China's Power Monopolists=20 Financial Post - Canada, 02/15/2001 US Marathon Oil Mum On Reported Enron India Assets Buy Dow Jones, 02/15/2001 State Agrees to Widen Scope of Enron Review Committee The Economic Times, 02/15/2001 Indian Newspaper Highlights=20 Asia Pulse, 02/15/2001 India: For a Dabhol Relief Fund? Business Line (The Hindu), 02/15/2001 Enron Saga: Power of Political Will on Test The Times of India, 02/15/2001 Making the Power Sector Viable The Hindu, 02/15/2001 Prabhu Stresses Supply Reforms Business Standard, 02/15/2001 =20 Apps off the Shack Computers Today, 02/15/2001 =20 National Award From The Points of Light Foundation Honors Six Companies=20 Dedicated to Community Service PR Newswire, 02/15/2001 Lawsuits Pending in the Wake of State's Energy Crisis Associated Press Newswires, 02/14/2001 =20 Power Crisis Was Long in the Making: California Deregulation Just Hastened= =20 Reckoning Seattle Post-Intelligencer, 02/14/2001 =20 Letters Page Denver Rocky Mountain News, 02/14/2001 =20 Catholic Health East signs energy supply contract Times Union Albany, 02/14/2001 =20 Rentable Storage: Efficient But Risky CMP TechWeb, 02/14/2001 3 Members Keep Off First Enron Panel Meet The Indian Express, 02/14/2001 Letters to the Editor: A Contradiction? The Statesman, 02/14/2001 Letters to the Editor: A test of principles and being practical The Statesman, 02/14/2001 Regulator Authorizes Enron and British Gas to Use Brazil-Bolivia Gas Pipeli= ne=20 Gazeta Mercantil, 02/14/2001 Studios Release Movies for Internet Reuters, 02/14/2001 Video Store No More? TheStandard.com, 02/14/2001 Stonepath Group to Sell Interest in Intermodal Business To Enron Global=20 Markets PR Newswire, 02/14/2001 ---------------------------------------------------------------------------= --- -------------------------------------- Business DAILY BRIEFING STAFF REPORTS AND NEWS SERVICES 02/15/2001 The Atlanta Constitution=20 Home G; 2 (Copyright, The Atlanta Journal and Constitution - 2001)=20 UTILITIES/ENERGY: Enron says it can help California power woes=20 Enron, the largest energy trader, has turbines that could be used in new=20 California power plants if the state gives generators incentives to relieve= =20 an electricity shortage there, Chairman Kenneth Lay said. California Gov.= =20 Gray Davis wants to boost the state's generating capacity by 5,000 megawatt= s,=20 enough to light 5 million homes, by July.=20 =20 --- Staff, Associated Press, Bloomberg News, Dow Jones News Service, Wall= =20 Street Journal State sees $2.3 billion tab for emergency buys San Diego Union-Tribune=20 By Ed Mendel=20 UNION-TRIBUNE STAFF WRITER=20 February 15, 2001=20 SACRAMENTO -- The amount the state expects to spend on emergency power has= =20 soared to $2.3 billion and may continue to grow for weeks or months.=20 A request for an additional $500 million last week was quickly followed by = a=20 request for another $500 million this week, in part because the state has= =20 begun buying power for San Diego Gas & Electric.=20 The emergency purchases began Jan. 17 when Gov. Gray Davis declared an=20 emergency because suppliers would no longer sell power to two nearly bankru= pt=20 utilities, Pacific Gas and Electric and Southern California Edison.=20 The state is buying power on the expensive spot market while struggling to= =20 negotiate a portfolio of long-term contracts that are expected to sharply= =20 reduce costs.=20 Davis said yesterday that more long-term contracts could be announced this= =20 week. But the state does not want to obtain all of its long-term contracts= =20 immediately, because prices could go down later.=20 Meanwhile, the governor said he hopes that an agreement on a plan to begin= =20 paying off the $13 billion debt of the utilities, in exchange for their=20 transmission systems and other assets, will calm the market.=20 The governor intends to reach an agreement with legislative leaders on a=20 debt-relief plan that can be presented to the utilities tomorrow, setting t= he=20 stage for several weeks of negotiations.=20 "As soon as the utilities indicate their assent to this plan -- or some=20 modified version we can assent to -- everything will begin to stabilize and= =20 calm down," Davis said.=20 "There is no question when there is uncertainty it affects prices, and we= =20 want to create the opposite -- some certainty, predictability -- in what I= =20 like to call a challenge," Davis told reporters, "and you guys call a=20 crisis."=20 The governor said that state purchase of the transmission systems will be t= he=20 biggest part of the proposal tomorrow. Other assets that have been mentione= d=20 are stock options, scenic land around hydroelectric facilities, and payment= s=20 from utility parent firms.=20 The state is not revealing the price of its power purchases, arguing that= =20 would prevent lower-priced bids from suppliers in the future. Davis said he= =20 hopes to have a secrecy period of less than six months and may announce a= =20 schedule in two or three weeks.=20 "But I definitely do not want to jeopardize the integrity of the secret bid= =20 prices," he said. "Because if we do that, we are just going to force=20 Californians to pay more for power than they would otherwise."=20 An official of the state Department of Water Resources, which owns=20 hydroelectric facilities and is purchasing power for the state, estimated= =20 last month that the state was paying $45 million a day for power.=20 The governor's emergency order last month authorized the state to dip into= =20 $440 million in Water Resources funds. The Legislature quickly appropriated= =20 $400 million for additional power purchases, and included $500 million in t= he=20 bill authorizing long-term contracts.=20 But Feb. 5, the state Department of Finance sent the Legislature a=20 "deficiency"=20 notice saying it intended to begin spending an additional $500 million to b= uy=20 power in 10 days, unless the Legislature objected.=20 The department issued another notice this week saying yet another $500=20 million will be required because all of the previous funding is expected to= =20 be exhausted by Feb. 23.=20 "This is somewhat sooner than had earlier been anticipated due to colder=20 weather and the inclusion of electricity purchases for the San Diego Gas &= =20 Electric service area," said the notice issued Tuesday.=20 The long-term contracting legislation signed early this month by Davis made= =20 SDG&E eligible for the state purchases. SDG&E is in better financial=20 condition than PG&E and Edison, but has a debt of more than $500 million.= =20 All three utilities are the victims of a failed deregulation plan: The rate= s=20 they can charge customers are capped (in SDG&E's case by legislation after= =20 bills doubled last summer) while the wholesale cost of power soared,=20 producing huge debts.=20 The long-term contracting legislation authorizes the state to issue $10=20 billion or more in bonds to spread the cost of the power purchases over a= =20 period of years in an attempt to avoid a rate increase.=20 The bonds will be paid off by ratepayers through a monthly charge on their= =20 bill. Money from the bonds also will be used to repay Water Resources and t= he=20 state general fund for the purchases made on the spot market.=20 In comparison, the $2.3 billion that the state expects to spend on power=20 purchases so far is equal to the reserve in the $104.7 billion state budget= =20 proposed for next fiscal year. It is more than the total amount of money=20 earmarked for the state's mental health programs.=20 State Treasurer Phil Angelides told reporters last week that the $10 billio= n=20 bond issue will not be ready until May. He said if interim financing throug= h=20 short-term notes is too expensive, the state has $9 billion in cash reserve= s.=20 Angelides said that the long-term contracts must be obtained before the bon= ds=20 can be issued. He said the average price of the contracts will determine th= e=20 total amount needed for the bond issue, which could exceed $10 billion.=20 The governor spoke yesterday while revealing more details of his plan to=20 boost power generation in California by 5,000 megawatts to avoid blackouts= =20 this summer, when air-conditioning drives up the demand for electricity.=20 He is proposing legislation that would provide rebates to companies that=20 install small business generators of less than 10 kilowatts, a 50 percent t= ax=20 credit for generators between 10 and 200 kilowatts, and $50 million for=20 co-generation, wind and solar programs.=20 "We are in for a struggle this summer," Davis said. "It will test our=20 resolve. But I am convinced if we all do our part, we will get through this= =20 summer without major disruptions."=20 Jeffrey Skilling, chief executive officer of Enron, the nation's largest=20 electricity trader, said electricity costs would go down when significant= =20 progress occurs in planning power plants.=20 "Faster siting will cause the forward price of electricity to drop below $5= 0=20 a megawatt," Skilling said yesterday at an electric industry conference in= =20 Houston. In retail terms, that is 5 cents a kilowatt.=20 Yesterday was California's 30th straight day in a Stage 3 power alert. Grid= =20 operators struggled to meet demand by making last-minute power purchases fr= om=20 the Northwest.=20 "We came close this morning (to blackouts) but it got better by the hour,"= =20 said Patrick Dorinson, spokesman for the state Independent System Operator.= =20 "It was touch and go."=20 ISO managers had worried they might not meet demand because of the forced= =20 shutdown of power plants capable of producing 10,400 megawatts -- 400=20 megawatts more than the day before. Officials said the plants were taken of= f=20 line for repair work.=20 Dorinson said he could not predict how long the state would remain on Stage= 3=20 alert.=20 "It is the same situation. I feel like Bill Murray," he said, referring to= =20 the star of the movie "Groundhog Day," whose character keeps reliving the= =20 same day.=20 Deals & Deal Makers: First Boston's `Son of Tyco' Deal Goes Sour ---=20 Underwriter Left Holding A Bagful of Unsold Bonds By Suzanne McGee Staff Reporter of The Wall Street Journal 02/15/2001 The Wall Street Journal C1 (Copyright (c) 2001, Dow Jones & Company, Inc.) Credit Suisse First Boston is finding there may be too much of a good thing= .=20 The big New York investment bank apparently scored a coup last week when it= =20 was chosen as underwriter to sell $2.25 billion of convertible bonds for=20 conglomerate Tyco International, a deal that CSFB might have expected to=20 produce big fees and give the firm a leg up on the widely watched "league= =20 tables" that rank Wall Street underwriters. . . . "The market has been flooded with these deals, even as the frustration on t= he=20 part of investors has grown," Mr. Cunningham says. "And the new issue marke= t=20 has been so, so active that everyone's trying to digest what's out there."= =20 --- Hitting the Rocks? Rumors swirl that underwriters of several big convertible issues weren't ab= le=20 to sell everything, and still carry some of the securities on their books. . . . Underwriter: Salomon Smith Barney Company: Enron Size: $1.25 billion Date: Feb. 5 Took the still-unusual step of buying some of the issue in the aftermarket = as=20 "stabilization", sparking rumors it still owned the issue. Source: WSJ Research Envera Becomes Preferred Settlement Network for Enron Global Markets'=20 Petrochemical Transactions 02/15/2001 PR Newswire (Copyright (c) 2001, PR Newswire) RICHMOND, Va., Feb. 15 /PRNewswire/ -- Envera(TM) announced today that Enro= n=20 Global Markets LLC has become its newest equity participant and trading=20 member. Envera is a leading global electronic network for chemical and=20 petrochemical industry B2B transactions and services.=20 Enron Global Markets will connect its petrochemicals, natural gas liquids a= nd=20 plastics systems to the Envera network. Additionally, Envera will become th= e=20 Preferred Settlement Network for members' petrochemical transactions with= =20 Enron Global Markets. Envera members also will have access to Enron's world= -=20 class product and service offerings. "We welcome Enron as a member of Envera," stated Bob Mooney, Envera's CEO.= =20 "As our newest member, Enron extends Envera's value proposition by opening = up=20 to Enron's trading verticals, including new industries such as oil and gas,= =20 petrochemicals and plastics to Envera's trading members. Furthermore, our= =20 members have enhanced access to Enron's many services, continuing Envera's= =20 "Business FOR Business" (eB4B)(TM) strengths."=20 ABOUT ENVERA=20 Envera is a trusted e-business solutions provider that improves members'=20 supply-chain communications and fosters business growth in the chemical and= =20 petroleum industries. Envera's initial equity and trading partners include:= =20 Albemarle Corporation (NYSE: ALB); Borden Chemical, Inc; Enron Global Marke= ts=20 group of Enron (NYSE: ENE) Equistar; Ethyl Corporation (NYSE: EY); Lubrizol= =20 (NYSE: LZ); Lyondell Chemical Co. (NYSE: LYO); Mays Chemical; Occidental=20 Chemical Corporation (NYSE: OXY); Phenolchemie; and Solutia (NYSE: SOI).=20 Visit Envera via its Web site at www.envera.com or call 1-888-ENVERA1. /CONTACT: Richard J. Chvala of Envera, 804-788-5667 or [email protected] o= r=20 Douglas Friedman of Enron, 713-853-7377 or [email protected]/=20 06:01 EST=20 LME to continue with longer open-outcry hours By Martin Hayes=20 LONDON, Feb 15 (Reuters) - The London Metal Exchange (LME), the world's=20 largest non-ferrous metals market, said on Thursday an experimental extensi= on=20 to its open-outcry hours would continue.=20 ``The board looked at a whole range of issues at its (February) meeting...I= t=20 decided that this aspect should continue, but will be kept under review,''= =20 LME Director of Corporate Affairs Jonathan Haslam said.=20 In a move that bucked the inexorable trend in European markets away from=20 floors and towards electronic trading platforms, the LME last October=20 introduced a trial 1330-1510 GMT extension to its open-outcry trading hours= .=20 Before then, there had been a break at the end of the morning session when= =20 the floor was closed. Now LME open-outcry trading hours run from 1140 to 17= 00=20 continously.=20 LME Select, the exchange's screen trading system which was launched on=20 February 9, operates from 0730 to 1930, with the exception of a 45-minute= =20 closure between 1230 and 1315, when the second official rings take place.= =20 Traders from the LME's 12 ring-dealing members (RDMs), who are entitled to= =20 trade during the open-outcry sessions, said more activity has been seen=20 during the first part of the extended period.=20 ``The guys on the floor have got accustomed to it now, and are doing more= =20 business than they previously would have,'' one floor trader said.=20 Others said the bulk of trade was seen after 1330, with business slackening= =20 after some 45 minutes, only to pick up from 1510 onwards when the customary= =20 afternoon rings take place.=20 ``There is a bit of a dead zone between 1415 and 1515...but the longer it= =20 (the floor) is open, the better it is for the survival of the ring,'' anoth= er=20 senior trader said.=20 EVEN LONGER HOURS UNLIKELY=20 Last month traders from the RDMs mooted the idea of even longer trading hou= rs=20 -- with some seeking to begin daily floor trading from as early as 0900 GMT= ,=20 ending as now at 1700 GMT.=20 ``It (the board) looked at this situation in the light of a great deal of= =20 change that is taking place....We continue to review the whole of the=20 operation,'' Haslam said.=20 As well as introducing an electronic trading platform to run alongside but= =20 not replace open-outcry trading and the inter-office telephone market, the= =20 LME also demutualised late in 2000 and reconstituted its board.=20 Traders said another extension was unlikely as there was no unanimity among= =20 the 12 RDMs. Also, such a move would meet opposition from the LME's 27=20 associate broker clearing members (ABCMs). These companies have all the=20 rights of LME membership, but cannot trade during the open-outcry sessions.= =20 Then they largely become customers of the market and trade through the RDMs= .=20 ``The current extension means that they (ABCMs) have lost a lot of their=20 pricing power over lunch,'' one said.=20 The RDMs are fighting the advance of electronic trading to maintain=20 traditional open-outcry trade, which has all but disappeared from European= =20 markets -- only London's International Petroleum Exchange (IPE) still=20 operates a floor.=20 As well as LME Select, rival systems managed by Spectron Metals and Enron Online, part of Enron Corp (NYSE:ENE - news), also operate and capture=20 business.=20 Nigeria races against time to end power outages By Mike Oduniyi=20 EGBIN, Nigeria, Feb 15 (Reuters) - The rumble of pneumatic drills echoes=20 through the jungle surrounding this rustic village on the outskirts of=20 Nigeria's biggest city, Lagos.=20 Scores of workmen in orange overalls and youths from villages close to=20 Nigeria's power complex at Egbin dig frantically in a race against time to= =20 complete the country's most eagerly awaited electricity project.=20 After prolonged squabbling between Lagos State and the federal authorities= =20 over regulatory issues, the U.S. energy group Enron (NYSE:ENE - news) is=20 finally pushing ahead with the first major private initiative to help end= =20 Nigeria's chronic energy crisis.=20 Enron has the task of providing 270 megawatts (MW) of emergency electricity= =20 to Lagos by the end of February after a botched earlier plan to start=20 producing from last December.=20 ``We are working hard to meet the February deadline,'' said Adeola Taiwo, a= =20 worker at the site.=20 Decades of mismanagement by military rulers have left Nigeria, Africa's top= =20 crude oil producer, with a long running scarcity of both electricity and=20 refined petroleum products that has paralysed everything from private homes= =20 to industry.=20 ``The economy is at the mercy of the erratic electricity supply,'' said=20 Adekunle Olumide, head of the Lagos Chamber of Commerce and Industry.=20 Production costs had soared by 25 percent because companies needed to insta= ll=20 their own generating plants, he told Reuters.=20 El-Tayeb Ibrahim, an official of the Nigerian Manufacturers Association, sa= id=20 the energy problem had forced the closure of about 130 companies in norther= n=20 Kano State in the past six months.=20 STATE MONOPOLY A FAILURE=20 The state power monopoly, the National Electric Power Authority (NEPA) has= =20 become a by-word for inefficiency in Nigeria where some households can be= =20 without electricity for months.=20 The $800 million Enron project is the initiative of Governor Bola Tinubu,= =20 whose territory covers the sprawling metropolis of Lagos, with a population= =20 of more than 10 million inhabitants.=20 NEPA now produces just over half the 4,000 MW which it estimates is the=20 minimum Nigeria needs. Some 40 percent of that is consumed by Lagos, the=20 country's industrial hub in the southwest.=20 The most visible part of the work involves laying a 10-km (six-mile) stretc= h=20 of pipeline that will collect natural gas from a station in the Ikorodu=20 district of Lagos state to fire Enron's barge-mounted electricity generatin= g=20 plants anchored at a small jetty near Egbin.=20 Also in full steam are contracts awarded by the federal government to fulfi= l=20 President Olusegun Obasanjo's pledge to end power outages nationwide by=20 December this year.=20 After two countrywide blackouts early last year, an angry Obasanjo went on= =20 state television to apologise to the nation. He sacked NEPA's management an= d=20 took direct charge of plans to boost electricity supply.=20 Obasanjo, who was elected in May 1999 at the end of 15 years of military=20 rule, faces re-election in 2003. Many Nigerians believe his chances depend= =20 largely on how he delivers on his promise of uninterrupted power supply.=20 Close to the Enron site lies Nigeria's biggest power station, the Lagos=20 Thermal Power Station at Egbin. NEPA workers have been clearing sites there= =20 for equipment due to be shipped in by the Japanese engineering firm Maruben= i.=20 The company won the federal contract to overhaul two Egbin generating units= =20 of 220 MW capacity each in the thermal plant.=20 Similar projects are in progress to refurbish rusty generating plants=20 neglected by ruling generals.=20 TOUGH TASK=20 Obasanjo has set NEPA the tough target of raising electricity output to 4,0= 00=20 MW by the end of this year.=20 ``It is not going to be easy, but we are achieving this target by end of th= is=20 year,'' said NEPA spokesman Mohammed Mousa-Booth.=20 Electricity generation reached a new record peak of 2,600 MW in the first= =20 week of January, he said. The previous highest level of 2,460 MW was last= =20 attained in 1996.=20 Other international companies involved in Nigeria's electricity programme= =20 include Germany's Siemens , which is constructing a 276 MW thermal power=20 plant, and Italy's oil giant Agip which is to build and operate a 450 MW=20 gas-fired power plant.=20 The government has also given its approval in principle for the U.S. oil=20 major ExxonMobil (NYSE:XOM - news) to build and operate a 350 MW thermal=20 plant.=20 While the ExxonMobil and Agip projects are long-term, NEPA is hoping to=20 quickly add 1,226 MW to its present output by September this year.=20 The government has backed the power programme with a massive 51 billion nai= ra=20 ($460 million) allocation in the 2001 budget which helped push up the overa= ll=20 capital budget significantly.=20 ($ equals 110.8 naira)=20 Team Canada assists China's power monopolists=20 Financial Post - Canada; Feb 15, 2001 BY GRAINNE RYDER Team Canada's host in China, Premier Zhu Rongji, has performed miracles in= =20 restructuring much of China's debt-ridden state sector. Burdened with=20 hundreds of thousands of decrepit state companies that could neither repay= =20 their debts nor create new jobs, Mr. Zhu shut down thousands of money-losin= g=20 coal mines, textile factories, and steel works, slashing 12 million jobs in= =20 the last three years. He gave the military five months to divest its busine= ss=20 empire of trading companies, luxury hotels, and nightclubs. He granted citi= es=20 greater autonomy to run their own affairs -- a move credited with improving= =20 the country's investment climate and providing new incentives for=20 environmental cleanup. The Far Eastern Economic Review describes his reform= s=20 as "the largest transfer of industrial property since Mao Zedong nationaliz= ed=20 industry in the 1950s."=20 But Mr. Zhu's plans to bring competition to the last big holdout of the=20 monopolists -- China's power industry -- have stalled. China's old guard ha= s=20 decided to make its stand for central rule in the power sector and it has= =20 found an important Western ally: Canada.=20 Under Mr. Zhu's plans, the power industry would no longer be run as a=20 monopoly. State power companies operating hydro dams and nuclear stations= =20 would have to compete with private power companies for access to customers.= =20 Consumers would need to pay for transmission costs as well as generation=20 costs, giving local power producers -- who don't need to ship power a great= =20 distance -- a major cost advantage over distant suppliers.=20 If Mr. Zhu and his reformers succeed in implementing this plan, China's=20 multi-billion dollar hydro and nuclear empires -- long subsidized by Canadi= an=20 taxpayers -- could face bankruptcy. Even without these reforms being fully= =20 implemented, the state power industry, a bastion of central planning, knows= =20 that it cannot find willing customers for power from its hydro dams and=20 nuclear plants.=20 Chinese officials now openly doubt whether the Three Gorges dam, backed by= =20 Canada's Export Development Corporation, will be able to sell all its outpu= t=20 when it starts generating power in 2003. The provinces and cities slated to= =20 buy its power either already have enough power, or they prefer to have the= =20 private sector build local power plants to meet future demand.=20 Other large government-run hydro projects face the same predicament. The=20 US$3.5-billion Ertan dam, built with Canadian grants and World Bank loans,= =20 has run at an annual loss of US$120-million since it came online in 1998. I= t,=20 too, can't find enough customers. Its largest prospective customer, Chongqi= ng=20 municipality, balked at buying its overpriced power. The newly built=20 US$4-billion Xiaolangdi dam, again backed by Canada and the World Bank, can= 't=20 find customers either. As the retired deputy general manager of the Three= =20 Gorges Project Corporation recently explained to China Business Times,=20 provincial governments and municipalities favour local power plants over th= e=20 central government's distant hydro dams because local plants produce=20 lower-cost power and, when they're privately owned, generate local tax=20 revenue.=20 Under pressure from residents who are tasting democracy and making=20 environmental demands, cities are also switching from coal to cleaner-burni= ng=20 gas -- but rarely with the help of Canada. The city of Lanzhou, on the Worl= d=20 Health Organization's list of the world's 10 worst-polluted cities, is=20 working with Siemens of Germany to co-finance and retrofit its existing coa= l=20 plant with gas turbines and to build a new gas-fired plant. Hangzhou city,= =20 with Japanese financing, is building a 100-megawatt, gas-fired co-generatio= n=20 plant that will save 200,000 tons of coal a year and eliminate dozens of th= e=20 city's inefficient industrial boilers. Already, five major Chinese cities= =20 have built their own natural gas networks to promote private investment in= =20 gas-fired power plants.=20 While Canada partners with China's aging monopolists to push outdated,=20 money-losing technologies -- Team Canada is expected to announce another=20 Three Gorges Dam contract today -- China's newly privatized power companies= =20 are mostly turning to U.S. and European energy know-how.=20 "Gas is the quickest way to get a turnaround in pollution levels," says Bri= an=20 Anderson, chairman of Shell Companies, Northeast Asia, who saw China's citi= es=20 begin the switch from coal to gas in 1998. With only 2% of China's energy= =20 needs currently met by gas (coal still provides 70%), there is plenty of ro= om=20 for growth. Last year, China's State Council approved construction of a=20 US$12-billion, 4,200-kilometre gas pipeline from Xinjiang to Shanghai,=20 expected to be built in partnership with Enron and BP Amoco. Royal=20 Dutch/Shell Group is investing US$3-billion in gas pipelines and power plan= ts=20 to serve Beijing and neighboring cities.=20 In the coastal province of Guangdong, where electricity demand has grown=20 rapidly over the last decade, Swiss-giant ABB has built several=20 combined-cycle plants, running them on alternate fuels (diesel, blast furna= ce=20 gas) until natural gas comes online. An advanced ABB combined-cycle plant= =20 supplies electricity and steam to China's largest steelmaker, the=20 newly-privatized Bao Shan Steel Corporation. Shakou Power Plant Company now= =20 supplies electricity to Foshan city using a 280-megawatt oil-fired=20 combined-cycle plant financed by Hong Kong banks.=20 Knowing that large hydro, coal and nuclear cannot compete with this new bre= ed=20 of cleaner and lower-cost power producer, the central monopolists are=20 fighting back. To prop up the uneconomic nuclear plants that Canada and=20 China's domestic nuclear industry are providing, China's State Council not= =20 only provides a host of subsidies, it wants to force large power consumers = to=20 buy nuclear power. To prop up the Three Gorges project -- a pariah that no= =20 western government would touch before Canada endorsed it with subsidies on = a=20 previous Team Canada mission -- the State Economic and Trade Commission=20 announced that provincial and city authorities will have to buy electricity= =20 from the Three Gorges dam once it starts generating electricity in 2003. At= =20 the same time, the government is shutting down small power plants, ostensib= ly=20 for environmental reasons, and forbidding electricity distribution=20 authorities in areas served by large hydro dams to buy power from private= =20 suppliers.=20 But these successes by the old guard at subverting markets are exceptions.= =20 Apart from Canada, the power monopolists have few friends. Should the power= =20 monopolists lose their grip to Mr. Zhu -- as have other monopolists in=20 China's economy -- Canada's power industry may find it has few friends in= =20 China.=20 Thursday, February 15=20 US Marathon Oil Mum On Reported Enron India Assets Buy SINGAPORE (Dow Jones)--U.S.-based Marathon Oil & Gas Co. declined to commen= t=20 late Wednesday on Indian press reports saying it has submitted a bid for=20 Enron Corp.'s (ENE) upstream Indian oil and gas assets.=20 Quoting unnamed industry sources, the Financial Express reported Tuesday th= at=20 Marathon had emerged as one of the strong contenders for picking up Enron's= =20 30% stake in the Mukta, Panna and Tapti oil and gas fields.=20 "Top industry sources disclosed that Marathon has also been shortlisted in= =20 the first round of bidding along with Reliance (Reliance Petroleum Ltd.=20 (R.RPT)) and ONGC (Oil & Natural Gas Co. (P.ONG)) for buying Enron's stake = in=20 these fields," the Financial Express reported.=20 Asked to comment on the report, Roger Holliday, Marathon's director of publ= ic=20 affairs told Dow Jones Newswires that "it is not company practice to respon= d=20 to speculation in the media."=20 Enron said last year it was considering selling its oil and gas assets=20 located in the Mukta, Panna and Tapti oil and gas fields. Reliance Petroleu= m=20 and ONGC, Enron's joint ventures partners, have expressed an interest in=20 bidding for the stake.=20 Enron India operates three offshore oil and gas fields in a joint venture= =20 with ONGC and Reliance Petroleum. The Tapti, Panna and Mukta fields are=20 located off the coast of Gujarat and Maharastra.=20 It holds a 30% stake in each field, while ONGC and Reliance hold 40% and 30= %=20 stakes respectively.=20 Analysts said Enron may be seeking to divest its oil and gas assets to focu= s=20 instead on "new economy" sectors such as telecommunications.=20 State agrees to widen scope of Enron review committee Our Bureau 02/15/2001 The Economic Times Copyright (C) 2001 The Economic Times; Source: World Reporter (TM) MUMBAI=20 IN RESPONSE to persistent demands from the anti-Enron section of the ruling= =20 alliance, the Maharashtra government on Wednesday agreed to widen the terms= =20 and references of the high-powered Enron review committee. The state government has instituted the review committee to look into the= =20 states energy scenario, with special reference to the US energy giant Enron= =01,s=20 Dabhol Power Company.=20 The terms and references of the review committee will be extended as=20 suggested by the allies of the ruling Democratic Front and whatever documen= ts=20 are sought by the committee will be provided to it including the power=20 purchase agreement, chief minister Vilasrao Deshmukh said on Wednesday.=20 He, however, refused to go into details of the extended scope of the review= =20 panel saying, all issues raised by the DF constituents will be studied.=20 The DF co-ordination committee convenor, N D Patil had earlier disapproved= =20 the terms and references of the Madhav Godbole-led panel saying, the=20 committee should look not only into the PPA but also the Enron project in= =20 totality. He had written to the chief minister asking him to widen the revi= ew=20 committees scope.=20 The review committee will be submitting its interim report about the PPA=20 signed between the Maharashtra State Electricity Board and Enron=01,s DPC,= =20 within a month, said the chief minister.=20 It could take another month or so to submit its report concerning issues=20 raised by the DF splinter groups, Deshmukh said, adding, there are no=20 differences in the ruling alliance over the matter.=20 When asked about the state governments Rs 74-crore payment to MSEB to clear= =20 the last installment of DPCs November bill of Rs 148 crore, Deshmukh said,= =20 The amount was not paid to clear DPCs dues. It is the amount payable to MSE= B=20 from the budgetary allocation. It is purely at the discretion of the board = as=20 how to use its funds, he clarified.=20 To a query, he said, we have not asked the MSEB to put a stop to DPCs=20 payments.=20 Deshmukh reiterated that the Centre should take over DPCs project and said,= =20 the state government was yet to receive any communication in this regard.= =20 Asked about renegotiations with DPC, Deshmukh said, let the review committe= e=20 submit its report first.=20 Meanwhile Kirit Parikh, a prominent member of the review committee, has=20 expressed his inability to attend some of the committee meetings. The=20 anti-Enron section of the DF allies had expressed displeasure at Parikhs=20 inclusion in the committee, citing his pro-Enron stance in the past.=20 Parikh is not withdrawing from the committee, said Deshmukh, while confirmi= ng=20 the development. It might not be possible for a member to attend each and= =20 every meeting of the committee, he said. INDIAN NEWSPAPER HIGHLIGHTS - FEB 15, 2001 02/15/2001 Asia Pulse (c) Copyright 2001 Asia Pulse PTE Ltd. NEW DELHI, Feb 15 Asia Pulse - Highlights of today's newspapers:=20 =20 THE FINANCIAL EXPRESS=20 - Maharashtra (western India state) government has agreed to widen the term= s=20 and references of the high-powered committee, instituted to look into the= =20 state's energy scenario with special reference to US energy major Enron=20 promoted Dabhol Power Company.=20 India: For a Dabhol relief fund? 02/15/2001 Business Line (The Hindu) Copyright (C) 2001 Kasturi & Sons Ltd (KSL); Source: World Reporter (TM) -= =20 Asia Intelligence Wire IMAGINE this. You are running a company and sign a long-term contract with = a=20 supplier. You guarantee the supplier you will buy at least 90 per cent of= =20 everything he produces. In case you fail to buy up to 90 per cent of the=20 supplier's plant capacity then you agree to pay a penalty to the supplier.= =20 The absolute quantum you have to pay is determined, among other factors, by= =20 the rupee-dollar rate as well as the prices of certain commodities in the= =20 international market. Under the terms of the contract, you agree to shoulde= r=20 both these risks. In case you fail to pay your supplier who, incidentally, is supplying only= =20 about a fifth of your total requirements, the contract mortgages all your= =20 assets as well the assets of your parent company. The contract also=20 guarantees that in case you fail to pay the supplier, your parent company= =20 will be forced to pay the supplier and then deduct it from the revenues due= =20 to your company.=20 As if all this is not enough, the contract also stipulates that it is not= =20 governed by Indian laws and that the parent company will continue to pay th= e=20 supplier even if the contract is termed illegal, invalid or unenforceable.= =20 The supplier starts his operations and given the nature of the contract, th= e=20 product is extremely high-priced and your company is not in a position to= =20 pay. What would you do?=20 "Are you stupid? I would never sign a contract like that." "If my company= =20 even got a hint that I was contemplating signing a contract like this, I=20 would be sacked and legal proceedings initiated against me," were some of t= he=20 reactions I got when I put this proposal to some of my friends from the=20 corporate circles.=20 Why is it then that the Maharashtra State Electricity Board, the Maharashtr= a=20 Government as well as the Union Government have got into such an agreement= =20 with the Enron-promoted Dabhol Power Corporation? Were they all really=20 concerned about the power situation in Maharashtra or were there other unsa= id=20 imperatives?=20 We will perhaps never get the answers to these questions, but as DPC evoked= =20 the Central counter-guarantee for its payment, the controversial project ha= s=20 once again become the focus of media attention.=20 Last week was full of stories and discussions on the controversy from=20 day-to-day news reports, to a lengthy feature in the India Business Report.= =20 But the most interesting one was on India Talks on CNBC and featured Mr Har= ry=20 Dhaul, Director-General of the Independent Power Producers' Association, an= d=20 Mr Abhay Mehta, activist and author of Power Play, an "expose" of the Enron= =20 project.=20 Anchored by Mr Paranjoy Guha Thakurta, the discussion kicked off by talking= =20 about the options open to the various parties involved. Mr Dhaul,=20 understandably considering his constituency, was of the opinion that the=20 first thing to do is honour the contract. He believed it was possible for a= ll=20 parties concerned to come to some kind of an amicable solution. Mr Guha=20 Thakurta interrupted to ask him whether the Maharashtra Government going=20 bankrupt by honouring the contract was an amicable solution. Mr Dhaul's=20 answer was a classic case of using numbers to confuse the issue. "I do not= =20 know whether by adding five per cent of the capacity the Maharashtra=20 government will go bankrupt," he said.=20 Reacting to this, Mr Mehta pointed out that for this additional five per ce= nt=20 capacity that Mr Dhaul talked about, the MSEB would be shelling out about 3= 0=20 per cent of its revenues and once the second phase of DPC came on stream, t= he=20 MSEB would be paying out close to 70 per cent of its total revenues. "There= =20 is no set of conceivable economic parameters which can allow payments of th= is=20 magnitude," he said.=20 Mr Mehta pointed out that what has never been appreciated is the sheer amou= nt=20 of money involved. The total contract with DPC is worth $35 billion, "the= =20 single-largest commercial contract in the history of this country," as Mr= =20 Mehta described it and went on to say that if one assumed a 6.5 per cent=20 annual depreciation of the rupee against the dollar, as it has happened ove= r=20 the last 50 years, it meant a total outlay of - hold your breath - Rs 400,0= 00=20 crore.=20 When Mr Dhaul started to ask whether it meant that the country was not in a= =20 position to accept foreign investment of $2- 3 billion, Mr Guha Thakurta,= =20 again to his credit, interrupted to say the issue was not really the quantu= m=20 of foreign investment as the terms at which it has been contracted.=20 Mr Mehta disputed the claim that DPC has invested $3 billion or about Rs=20 15,000 crore for a 2,000 MW project. "Are they out of their minds?=20 Who has checked these figures," he asked, pointing out that internationally= ,=20 the norm for power projects was Rs 2 crore per MW. "There is no way they ha= ve=20 invested more than $1.5 billion," he said. Mr Thakurta, with a wicked grin = on=20 his face, interrupted to ask him whether he was including the $20 million= =20 that Ms Linda Powers of Enron had said been spent on educating Indian=20 authorities. Second, Mr Mehta said that almost 60 per cent of the investmen= ts=20 has come from India from institutions such as the IDBI, SBI, etc.=20 "We have an absurd situation when a country like Mozambique orders equipmen= t=20 from the US and the US EXIM bank gives a loan for it without any guarantees= .=20 But the US EXIM Bank's loans to Enron have been guaranteed by Indian=20 institutions," Mr Mehta said.=20 Mr Dhaul, while eventually agreeing that power from DPC was more expensive,= =20 said that the regulator in Maharashtra has made certain observations about= =20 it. He said he was not worried about the merit or dispatch aspect of the=20 issue. Mr Dhaul was, of course, referring to the Maharashtra Electricity=20 Regulatory Commission's direction to the MSEB to buy power from the cheapes= t=20 available sources. But the problem is that, irrespective of whether the MSE= B=20 buys power from Enron or not, the PPA stipulates that it still has to=20 continue paying. A point that maybe not Mr Dhaul, but all citizens of=20 Maharashtra should be worried about.=20 Mr Dhaul went on say that he shared Mr Mehta's concerns about the cost of= =20 electricity, and felt that some sort of solution could be found. But he lef= t=20 the critical issue unsaid. Where is the money?=20 How is the Maharashtra Government going to pay the absurd amounts of money= =20 that it has contracted for?=20 May be as a wag suggested, trifle cynically, it is time we set up a Dabhol= =20 Relief Fund.=20 Menka Shivdasani Enron Saga: Power of political will on test Rajesh Ramachandran 02/15/2001 The Times of India Copyright (C) 2001 The Times of India; Source: World Reporter (TM) NEW DELHI: Is there a way out of the Enron imbroglio? Contrary to what=20 `experts' and the government say, there seem several options available to t= he=20 government. But to avail them would require some political will.=20 S N Roy, former chairman of the Central Electricity Authority, points out= =20 that just as Pakistan got a US power company to reduce its tariff by half,= =20 India too should get the Enron tariff reduced. When asked whether it is ready to re-negotiate the power purchase agreement= =20 (PPA) and bring down the tariff, Enron did not respond. Instead, a public= =20 relations agency replied that ``tariffs are not high''.=20 Observers assert that even after ensuring a reasonable profit for Enron, th= e=20 tariffs can be cut. K K Govil, director projects, Power Finance Corporation= =20 insists, ``The present PPA is heavily in favour of Enron. The PPA should be= =20 re-negotiated to get capital costs and rate of return calculated in rupees= =20 and not dollars.''=20 According to Govil, pegging the costs and tariffs to foreign exchange is=20 unheard of. ``The capacity related incentive should also go. Ideally, the= =20 cost of a gas-based plant should be half that of a coal-fired plant.=20 But in Enron's case it is not so. This too has to be rectified,'' said Govi= l.=20 The government is tight-lipped, but sources say the government may palm off= =20 the burden to utlilities like National Thermal Power Corporation, Power=20 Trading Corporation or Power Grid Corporation. That will end the public=20 scrutiny of the project, contrary to what is happening in Maharashtra now,= =20 and the account will be shared by central utilities, state electricity boar= ds=20 and others. Also making the round is a politically powerful industrial=20 house's name, which might broker the deal.=20 But will all this help? Roy feels it would be a disaster: ``Impossible. How= =20 can the government force NTPC or PTC, a commercial enterprise, to buy power= =20 at Rs 5 a unit and sell it at Rs 2?'' Even at full capacity, Enron's power = is=20 expected to cost around Rs 5 a unit, much higher than the NTPC's selling ra= te=20 of about Rs 2 per unit.=20 Prasant Bhushan, fighting a public interest litigation in the Supreme Court= ,=20 has another set of solutions: Nationalise the project by an Act of=20 Parliament, paying Enron a token or fair amount as in the case of bank=20 nationalisation. Or, the Maharashtra Electricity Regulatory Commission's=20 statutory power should be invoked to override the PPA and regulate the=20 tariffs.=20 The Supreme Court had earlier limited the petition's scope to accountabilit= y=20 of the public servants. ``If the SC gives full leave, the project will be= =20 voided since there was much illegality involved. Most importantly, if a=20 criminal investigation into the bribes is initiated, enough evidence could = be=20 unearthed in three months,'' said Bhushan.=20 Will all this deter foreign investment in India? Ashok Rao, convenor of=20 national working group for power, feels the bogey of foreign investment=20 fleeing is a blackmail tactic. He points out that India is a bigger power= =20 industry market than most of Europe, West Asia or Latin America. ``There is= a=20 global recession in power industry. So, most private power companies are ju= st=20 a front for power equipment manufacturers who have to sell their equipment = in=20 India. That is why they insist there should be no competitive bidding for= =20 equipment.'' Would it hurt much if the government synchronised people's nee= ds=20 with investor priorities? Making the power sector viable Prem Shankar Jha 02/15/2001 The Hindu Copyright (C) 2001 Kasturi & Sons Ltd (KSL); Source: World Reporter (TM) -= =20 Asia Intelligence Wire The fact that Enron had to invoke the Central government's guarantee before= =20 the Maharashtra State Electricity Board finally paid its dues till November= =20 shows that both the MSEB and the Maharashtra government are comprehensively= =20 bankrupt. The MSEB paid because the Maharashtra government realised that=20 pushing the burden onto New Delhi would not get it off the hook. The=20 counterguarantee ensured that the Centre would pay Enron and deduct the mon= ey=20 from Maharashtra's annual plan allocation. So why did Mumbai create the=20 confrontation?=20 If one were to go by the ranting of Maharashtra politicians , it was to mak= e=20 sure that there would be `no more Enrons', that is, no more corrupt deals= =20 with rapacious foreign investors, bent upon robbing the poor people of Indi= a=20 by forcing them to pay seven rupees a unit for power. But the true reason i= s=20 that the Maharashtra government was trying to shift the blame for its own= =20 lack of courage. Like virtually every other State government, Maharashtra= =20 lacks the courage to stop giving electricity free, or nearly free, to more= =20 than three quarters of its consumers. This has plunged the MSEB deep into t= he=20 red, because there is an obvious limit to how far the remaining paying=20 consumers can subsidise the rest. The CEO of Enron in India put this in a nutshell a few days ago when he=20 pointed out that the MSEB's problems arose from the fact that it was=20 subsidising 90 per cent of its consumers and allowing transmission and=20 distribution losses - an euphemism for power theft - of fully one third of= =20 the power it generated. As if this was not bad enough, the Government=20 repeatedly declared an amnesty for consumers who had not paid their bills.= =20 The MSEB has therefore sunk deeper and deeper into the red. To cut its cost= s=20 it has bought as little as possible from Enron, and that has pushed the per= =20 unit cost of Dabhol power into the stratosphere. Enron's argument is=20 unassailable. Every single power utility in the world follows one basic rul= e=20 in power pricing. This is to set a tariff that covers the average cost of= =20 generation for all the stations that are on line at the time. When a new=20 power plant is added, or an old one replaced, the much higher cost of=20 generation from the new plant (the marginal cost to the utility) is absorbe= d=20 by raising the average tariff just enough to absorb the increased cost at t= he=20 margin. In the case of Maharashtra, since the Dabhol plant added 6 per cent= =20 to the State's total generating capacity and amounted to about 8 per cent o= f=20 MSEB's capacity, an 8 per cent increase in average tariff or in the=20 realisation of unpaid dues, would have sufficed. But although the MSEB had= =20 been increasing its average tariffs in earlier years, it did not do so=20 between 1997-98 and 1998-99, that is, when Dabhol was commissioned. Add to= =20 this a rise in T&D losses, and MSEB's average realisation actually fell aft= er=20 Dabhol came on line.=20 If Maharashtra does not want to buy Dabhol's power, why does it not sell th= e=20 surplus to a neighbouring State or to the National Thermal Power Corporatio= n=20 in the public sector? The answer is that none of them has kept its average= =20 tariff realisation above the average cost of generation. They too will add = to=20 their losses by buying Dabhol power, and therefore prefer load shedding=20 instead.=20 The difficulty that Enron is experiencing in recovering its dues has=20 delivered the coup de grace not just to foreign, but to all private=20 investment in power projects. For if it takes a dentist's tongs to extract= =20 money secured by a formal central counterguarantee, what will happen to=20 projects that do not enjoy that safeguard? Since public investment is capab= le=20 of adding at most 3000 MW of generating capacity a year when the country=20 needs three times that capacity, economic growth will soon slow to a snail'= s=20 pace for want of power.=20 The Central government knows this. Since 1996 it has been prodding the Stat= e=20 governments towards breaking up the State electricity boards into separate= =20 generation, transmission and distribution companies, and then privatising= =20 them. But so far only one State - Orissa - has gone the whole way. The cris= is=20 that the country therefore faces is that while at the present pace the=20 privatisation of distribution could take as long as ten years, the power=20 crisis is already here. What the country needs is a means to make the State= =20 electricity boards viable today, before they are privatised. So far, apart= =20 from making the States bind themselves to various financial reforms in the= =20 memoranda of understanding that they have signed with the Centre as they as= k=20 for doles to tide them over their financial woes, the Central Government ha= s=20 done nothing.=20 There is, however, a way to do this almost immediately. This is to end the= =20 theft of power that is taking place in the country in the name of the farme= r.=20 In sharp contrast to the privatisation of the SEBs, this can be accomplishe= d=20 in at most two years.=20 While everyone knows that some of the electricity supposedly consumed by th= e=20 farmer is actually diverted to other uses, most people have assumed that th= e=20 proportion diverted is relatively small. This is because the rise in the=20 share of electricity consumed by the rural sector, from 14 per cent in 1978= =20 to 31 per cent in 1995, seems on the face of it reasonable.=20 Not everyone has realised that in absolute terms, farm consumption increase= d=20 by 8.3 times. And this happened when the number of electrified tubewells ha= d=20 only doubled from 3.3 million to 6.3 million and the land under irrigation= =20 had increased by only 48 per cent. In absolute terms therefore electricity= =20 consumption for agriculture should not have risen by more than three times.= =20 The balance, amounting to 90 billion units in 1998- 99, was in effect stole= n.=20 Had the States realised only Rs. 2 per unit for this electricity, it would= =20 have increased the revenue of the SEBs by Rs. 18,000 crores, and made them= =20 solvent overnight. State governments have been unwilling to raise tariffs f= or=20 agriculture for fear of hurting the farmers. But the Central Government can= =20 show them a simple way of continuing to subsidise irrigation, which is=20 overwhelmingly the main consumer of electricity on the farm, without=20 encouraging wholesale diversion and theft. This is to issue registration=20 papers for every electrified pumpset in the country, stating its horsepower= =20 and the land cultivated by the farmer, raise the rural tariff to a flat Rs.= 2=20 per unit, or whatever the SEBs deem appropriate, and offer a rebate of Rs.= =20 1.75 (the going rate of subsidy) on the estimated maximum consumption of=20 power per tubewell. Farmers need only bring their bills to a local bank wit= h=20 which they have opened an account, show their registration papers, and pay= =20 the rebated amount. The bill will be paid by the bank (as urban electricity= =20 and telephone bills are paid today) and the rebate collected by it from the= =20 government authority concerned.=20 This scheme has the added advantage that to avail themselves of the subsidy= ,=20 the farmers will have to install electricity meters. State governments have= =20 accepted the need to do this in principle but have so far been unable to=20 speed up its implementation. Prabhu stresses supply reforms Our Economy Bureau NEW DELHI 02/15/2001 Business Standard 2 Copyright (c) Business Standard Union power minister Suresh Prabhu has called for the need to shift focus= =20 from power generation to the upgradation of the distribution system, so tha= t=20 generation of power becomes a more paying proposition. We have decided to= =20 constitute a committee to look into the upgradation of the distribution=20 mechanism in the country, as the pilferages in the distribution procedures= =20 and poor collection mechanisms have been found to be the main constraining= =20 factors in the development of the sector, Prabhu said here today. Reforms have to be undertaken in the distribution front and the central=20 government will finance states which are willing to undertake reforms, he= =20 said at the summit, `India Can Make It', organised by Assocham. "An MoU has= =20 already been signed between the Centre and the Haryana government yesterday= =20 for cooperation in the field of power reforms, while more agreements will b= e=20 signed with other states in the near future," he said. The Union Cabinet ha= d=20 held a special meeting on the power situation in the country yesterday, wit= h=20 the minister giving a detailed presentation on the prospects for reform in= =20 the sector.=20 The country has already faced a major power breakdown on January 1, while t= he=20 invoking of the counter-guarantee by Enron has put both the Centre and the= =20 Maharashtra government in a piquant situation. The MoUs specify clear=20 milestones which state governments have to achieve, following which central= =20 assistance will be provided, he said. On the transmission front, the=20 government has decided to create a national grid for effective management o= f=20 power. MASTER FILE APPS OFF THE SHACK K. JAYADEV WITH INDRAJIT BASU AND SRINIVAS R. 02/15/2001 Computers Today 32 Copyright 2001 Living Media India Ltd Much saged, are you finally planning to start a dotcom venture? Planning to= =20 use the Internet as a new tool of doing business? Or want to have a virtual= =20 private network to get not only your various business processes=20 interconnected, but also net in the suppliers and partners? Sign up with an= =20 Internet data centre (IDC), and your requirements will be taken care of.=20 Earlier described mostly as Web hosting companies, IDCs offer a host of=20 facilities for organisations to face the Internet economy. It is a facility= =20 designed specifically to provide organisations with specialised=20 infrastructure and support required to optimise the security and availabili= ty=20 of the firms' Internet-related activities and initiatives. And as E-busines= s=20 demands continue to surge and grow in complexity, companies are looking at= =20 fully managed application hosting. Even companies which till now could not= =20 afford applications like enterprise resource planning (ERP) and customer=20 relationship management (CRM) are on the look out for accessing these key= =20 applications remotely without having to invest in the infrastructure build-= up. What do IDCs Offer?=20 Data centres are considered to be a critical component of Internet=20 infrastructure as they contain the servers on which reside the Web sites of= =20 various companies and businesses. They ensure that the data is available an= d=20 the integrity is maintained without the customer having to employ and train= =20 someone in-house. It also frees the client of obtaining, maintaining and=20 upgrading the required hardware/software.=20 Says Jasjit Sawhney, CEO of Net4India, "Data centres can manage bandwidth i= n=20 a very efficient manner which cannot be achieved using leased lines. For=20 instance, a small company may not require a full-fledged leased line or it= =20 might not want to tie itself down to one office/location. Hence, the compan= y=20 can place its server at a data centre. Also bandwidth can be increased as a= nd=20 when the company desires."=20 Explaining the functions of IDCs, Amar Babu, national channel sales manager= =20 of Intel India, adds, "Data centres provide plain hosting services wherein= =20 space, security and infrastructure is offered to clients. As they progress = on=20 the value chain, they will provide value-added services depending on the ne= ed=20 of their clients, which could range from bandwidth management to various=20 applications. This would enable them, and in turn their clients, to define= =20 QOS (quality of service) and SLAs (service level agreements) across the=20 clients' E-business requirements."=20 Major Players=20 Industry analysts in India expect investments to the tune of Rs 500 crore= =20 being made in the next 18 months into the data centre business. Starting fr= om=20 Sify, major players in India include Enron, Reliance, Asianfrontiers,=20 Net4India and Mantra Online. International giants like Cisco, Microsoft,=20 Intel, IBM, Sun Microsystems and Compaq are helping organisations build the= =20 data centres.=20 The investment depends on the number of servers and the space they occupy a= nd=20 generally range between Rs 3 crore for a small centre and Rs 50 crore for a= =20 big IDC. Standard benchmark developed by international players hovers aroun= d=20 $450 per square feet for a world-class organisation, which is called a leve= l=20 4 data centre.=20 IDCs, like other segment of the IT industry, are now looking at how to=20 differentiate themselves. In addition to focusing on delivering services,= =20 they are also trying to provide carrier neutral facilities and=20 platform/network independent solutions to customers. This approach offers= =20 customers the maximum flexibility in that they can engineer the solution th= at=20 best fits their needs without constriction. It also provides redundancy and= =20 reliability. "IDCs make data a reliable management tool to run a firm with.= =20 You have the holy trinity of data-manageability, reliability and security.= =20 This is ultimately what defines a data centre," observes Parind Parekh of= =20 Exatt Communications.=20 With Indrajit Basu in Kolkata and Srinivas R. in Bangalore=20 National Award From The Points of Light Foundation Honors Six Companies=20 Dedicated to Community Service 02/15/2001 PR Newswire (Copyright (c) 2001, PR Newswire) Ongoing employee volunteer programs benefit companies and their communities= =20 WASHINGTON, Feb. 15 /PRNewswire/ -- The Points of Light Foundation is=20 presenting an national community service award to six companies for their= =20 contributions and commitment to developing and managing effective employee= =20 volunteering programs. The award is part of an ongoing effort by the Foundation to encourage every= =20 company to get involved in volunteering and make a difference.=20 "In industries as diverse as aerospace and e-commerce to the legal professi= on=20 and electric utilities, companies are discovering how ongoing community=20 service programs can deliver real-world results," says Robert K. Goodwin,= =20 president and CEO of the Foundation. "We are excited to have this chance to= =20 honor their accomplishments as former President George Bush presents them= =20 with the 2000 Award for Excellence in Corporate Community Service."=20 This year's winners include Alibris, an e-commerce company that specializes= =20 in hard-to-find books; the Boeing Co., the largest aerospace company in the= =20 world; Capital One, a financial service provider; Holland & Knight, a law= =20 firm with offices in 21 cities across the United States, as well as several= =20 international locations; Petroleos de Venezuela, an energy company with=20 40,000 employees based in Caracas, Venezuela; and Salt River Project, an=20 electric and water utility in Phoenix.=20 The awards will be presented Feb. 23 at the George Bush Presidential Librar= y=20 and Museum in College Station, Texas.=20 The Points of Light Foundation, the nation's leading volunteer resource,=20 provides a full range of services to help businesses develop and manage=20 workplace volunteer programs. For more information, visit=20 www.pointsoflight.org .=20 Sponsors of the 2000 Awards for Excellence in Corporate Community Service= =20 include Bank of America, BP, Compaq Computer Corp., CVS, Enron Corp.,=20 Prudential, Roy Ryu, and the Washington Times Foundation & Atlantic Video.= =20 CONTACT: Kimberli Meadows of The Points of Light Foundation, 301-318-9277,= =20 e-mail, [email protected]=20 Lawsuits pending in the wake of state's energy crisis By The Associated Press 02/14/2001 Associated Press Newswires=20 Copyright 2001. The Associated Press. All Rights Reserved.=20 Here are some of the lawsuits stemming from California's power crisis and= =20 hearing dates, if known:=20 -Duke Energy vs. California Independent System Operator. Duke is seeking to= =20 force the state to back purchases of expensive emergency power bought by th= e=20 ISO. The California Department of Water Resources has said it will only pay= =20 for less expensive energy bought on the day-ahead market. No court date set= . -Duke Energy vs. Gray Davis. Duke claims that Davis' decision to commandeer= =20 long-term power contracts owned by Edison and PG&E violated the supremacy= =20 clause of the U.S. Constitution. The lawsuit claims the emergency power=20 granted to Davis under state law does not extend to the power contracts,=20 which are under "exclusive federal jurisdiction." Hearing Feb. 15.=20 -Enron and Avista vs. California Power Exchange. Three power wholesalers wa= nt=20 to prevent the power exchange from forcing them to pay for nearly $1 billio= n=20 owed by Southern California Edison and Pacific Gas and Electric. Under a=20 federal tariff that governs the exchange, if a buyer of power defaults on= =20 payments, every member of the exchange - including power sellers - must pay= a=20 portion of the debt. hearing Feb. 15.=20 -Southern California Edison vs. Loretta M. Lynch, et al. Edison wants a=20 federal court to allow it to pass on the wholesale cost of power to=20 ratepayers. A judge rejected an attempt earlier this week to force the Publ= ic=20 Utilities Commission to raise rates immediately. Lynch is president of the= =20 PUC. Next hearing is March 5.=20 -Pacific Gas and Electric vs. Loretta M. Lynch et al. Similar to the suit= =20 filed by Edison. It has been transferred to federal court in Los Angeles an= d=20 may be consolidated with the Edison claim. No court date has been set. News POWER CRISIS WAS LONG IN THE MAKINGCALIFORNIA DEREGULATION JUST HASTENED=20 RECKONING MIKE LEWIS P-I reporter 02/14/2001 Seattle Post-Intelligencer=20 FINAL A1 (Copyright 2001)=20 A decade ago, it seemed like a great idea: Lift regulations on electrical= =20 utilities so that competition could drive down prices.=20 Deregulating the generation and distribution of power, the theory went, wou= ld=20 create competition among a new breed of power companies that would lower=20 costs to consumers and unleash creativity, just as deregulation of the=20 telephone utilities did a decade before. California and more than dozen other states jumped in; Oregon made a small= =20 step in that direction. Washington took a pass. But now, all three states= =20 share the burden of out-of-control energy costs and the specter of blackout= s.=20 Legislators from Sacramento to Olympia are scrambling to rein in a full-blo= wn=20 power crisis even as consumers scramble to pay ballooning power bills.=20 There's little argument that existing deregulation has not only failed, but= =20 has failed so profoundly that politicians and regulators are not talking as= =20 much about fixing it as scuttling it whole.=20 "Deregulation has gotten to be such a bad word," said state Sen. Bill=20 Finkbeiner a Kirkland Republican who in 1996 chaired the Legislature's Ener= gy=20 Committee, which rejected deregulation. "It's never going to happen now, at= =20 least not in the Western U.S."=20 How bad has the situation become? Over two weeks in late November and early= =20 December, the market price for a megawatt of power jumped five-fold, forcin= g=20 King County to briefly shut down one of its two sewage treatment plants.=20 Some cities are turning off streetlights, and the state's multibillion-doll= ar=20 aluminum industry has idled some plants - sometimes to sell power - leaving= =20 hundreds of workers idle. In Seattle, the average monthly City Light bill h= as=20 jumped 20 percent, to $45.=20 For all of us, the power crisis has become a lesson in how policies of=20 individual states can be rendered meaningless when it comes to interstate a= nd=20 international commerce. Washington didn't deregulate. California did. Both= =20 states pay the price. As one Northwest corporate lobbyist put it dryly, the= =20 next time his company needs economic protection in Olympia, he'll contact= =20 Sacramento.=20 "Here's how it is," said Ed Mosey, a Bonneville Power Administration=20 spokesman. "Everyone else is the tail; California is the dog."=20 Gov. Gary Locke, who is often reluctant to publicly criticize allies such a= s=20 California Gov. Gray Davis, acknowledged in a recent interview that he find= s=20 it frustrating that his state decided against deregulation but still finds= =20 itself in a mess.=20 "We didn't make the same decision they did," Locke said. "But California's= =20 effect is impossible to avoid."=20 But blaming California isn't just simplistic, it also isn't entirely=20 accurate. Those who buy, sell and move electricity and natural gas and the= =20 politicians who attempt to control the markets agree that Washington's risi= ng=20 power costs are a culmination of events that began to unfold a lifetime ago= ,=20 in the depths of the=20 Great Depression.=20 President Franklin D. Roosevelt's New Deal gave the Northwest the bargain o= f=20 a lifetime. Hoping to lift the nation out of the Depression, the Roosevelt= =20 administration arranged an unprecedented series of public works projects,= =20 providing jobs building roads, bridges and dams, among other things, across= =20 the nation.=20 The Works Progress Administration built the Bonneville and Grand Coulee dam= s=20 on the Columbia River, the vanguard of the 29 federal hydroelectric dams th= at=20 now feed power to the Bonneville Power Administration, a self-supporting=20 federal authority with headquarters near Portland.=20 The BPA is the powerhouse of a region the size of Texas, providing half of= =20 all electricity used in the Northwest. The remainder comes from a network o= f=20 public and private utilities, including giants like Seattle City Light that= =20 pre-date Bonneville by decades.=20 All told, there are about 250 big and small hydroelectric dams in the=20 Northwest, and a far smaller number of coal and gas-fired plants.=20 In the early days, the BPA dams generated so much more power than the=20 Northwest could use that congressmen joked that even the jackrabbits could = be=20 wired up. During World War II, the government took advantage of the plentif= ul=20 power by building aluminum production plants in Tacoma, Spokane and Vancouv= er=20 to supply the needs of aircraft makers and shipbuilders such as The Boeing= =20 Co. in Seattle and Henry Kaiser's shipyard in Portland.=20 After the war, BPA officials and local politicians persuaded the aluminum= =20 producers to stay put, promising continued low-cost, subsidized power -=20 contracts recently renewed to run through 2006.=20 For local industry, cheap power has always been a selling point. No raw=20 materials used in making aluminum are found in the Northwest, but shipping= =20 them here is cost-effective because smelting the ore takes a lot of juice.= =20 One aluminum plant consumes as much electricity as a small city.=20 In the 1960s, this newly powerful local industry secured its first major=20 coup: a federal mandate that public utilities in the region, such as Seattl= e=20 City Light, could buy power at the subsidized cost of production. Sixty=20 percent of that "preference power" stays in Washington state. Oregon=20 generally takes 25 percent. The balance goes to Idaho and Montana, and any= =20 surplus can be sold at market rate.=20 This combination of natural resources, federal investment and populist=20 politics has allowed the Northwest to enjoy some of the cheapest electricit= y=20 in the nation. A 1998 BPA survey showed that the average residential cost f= or=20 power in the region was 5.4 cents per kilowatt hour, compared with a=20 nationwide average of 8.3 cents, a rate that - at least until now - has=20 continued to attract industry to the region. In 1999, when Seattle resident= s=20 were paying $10 monthly electricity bills, the same amount of power on the= =20 East Coast sometimes cost as much as $40.=20 "Much of the high-tech relocation up here directly was linked to cheap=20 power," said Intel's director of governmental relations, Richard Hall. Inte= l=20 employs 2,000 people at its plant in DuPont.=20 While rates have gone up recently, power in the Northwest remains a good=20 deal. City Light residential customers, for example, pay 3.23 cents per=20 kilowatt hour for the first 16 kilowatt hours they use in a day, and 7.56= =20 cents for each kilowatt hour afterward.=20 In 1968 and 1969, the BPA completed an 846-mile line called an intertie=20 between The Dalles, Ore., and Los Angeles, allowing it to market what seeme= d=20 like a never-ending surplus of power to utilities in fast-growing Californi= a.=20 In 1996, BPA sold about 127,000 megawatt-hours for use in California, or=20 about 12 percent of all BPA power sales that year - the most recent year=20 Bonneville reported those numbers. It takes about 1,000 megawatts of=20 generating capacity to serve 1 million homes.=20 Public utilities in California are small, but two giant private,=20 investor-owned companies rival Bonneville in size. Monopolies regulated by= =20 the state, California giants Pacific Gas & Electric (PG&E) and Southern=20 California Edison (CalEd) eventually grew to serve a combined 20 million=20 customers, making them the nation's two largest private utilities.=20 During the summer, when air conditioners cause California power use to peak= ,=20 utilities there supplement their needs by turning to the Northwest, which= =20 usually has electricity to spare. In winter, when furnaces cause demand to= =20 peak in the Northwest, California plants ship surplus power north. The=20 relationship worked flawlessly for decades. In fact, it worked too well.=20 With the West Coast tied into one grid, the easy flow of power between=20 regions allowed the states to avoid the politically difficult chore of siti= ng=20 and building new power plants that would allow each to become=20 self-sufficient, even as the total population in the three states blossomed= =20 from 25.5 million in 1970 to 43.2 million today.=20 In the mid-1990s, California began climbing out of a recession brought on b= y=20 deep defense cuts, high unemployment and energy prices that were among the= =20 highest in the nation, inadvertently driven up by state and federal=20 regulators who feared that oil and natural gas prices would soar. These=20 officials had pushed the utilities to diversify their generation methods. T= he=20 Federal Energy Regulatory Commission required that they buy a portion of=20 their power from what were then expensive alternative sources, such as wind= =20 and geothermal plants. CalEd estimates that the order has cost its customer= s=20 $25 billion over two decades.=20 California business interests began to pressure their lawmakers to deregula= te=20 the power industry, allowing them to buy electricity on the open market and= =20 to force PG&E and CalEd to cut rates. Congress wrote the law in 1992, and t= he=20 energy commission pressured the utilities to get moving in 1994.=20 In December 1995, the California Public Utilities Commission voted to open= =20 the state's electricity industry to competition. The Legislature followed= =20 with a law based on an agreement brokered with CalEd, its biggest industria= l=20 customers and an association of independent power producers.=20 But the deal was based on four colossal miscalculations. And those led to t= he=20 current crisis:=20 No one foresaw that California's economy would come roaring back from=20 recession so strongly or so quickly, or that so much of the new economy wou= ld=20 depend on energy-hungry computers and the plants that produce them. Both=20 factors over-taxed a system that hadn't seen a new power plant come online= =20 for nearly a decade.=20 California generates about 75 percent of the electricity it uses, relying o= n=20 imports from the Southwest and the Northwest for the rest. Officials=20 acknowledge that California has not added enough power plants to accommodat= e=20 the roughly 2 percent annual growth in its demand for electricity. To meet= =20 that each year, the state has to add either 1,000 megawatts of generating= =20 capacity or conserve an equal amount.=20 Regulators forced California utilities to sell their generation divisions= =20 without also requiring them to sign long-term power contracts at fixed - an= d=20 presumably lower - rates. This put the utilities at a disadvantage, because= =20 they had to buy power on the open or "spot" market from operators such as= =20 Houston-based as Enron and Dynegy, which have reportedly seen revenues clim= b=20 by 400 percent in the past two years while the utilities spiraled into debt= .=20 A combination of factors cut into the amount of power available on the spot= =20 market. Less power has been flowing into the grid because several major=20 California power plants have been off-line for needed repairs; Northwest=20 hydroelectric dams have been operating at lower capacity as they try to avo= id=20 draining reservoirs during the drought; and a failure to upgrade California= 's=20 distribution system makes it hard to move surplus power to where it is=20 needed.=20 In fact that failure to upgrade the transmission system has proven to be a= =20 problem of the same scale as the lack of new power plants. California's fir= st=20 rolling blackout was caused not by a lack of power but by a lack of free=20 lines to move it. Washington has missed blackouts because it has enough=20 capacity to move power when needed.=20 While attorneys general in all three states are investigating accusations= =20 that some power sellers have been withholding electricity to drive up price= s,=20 it's unclear whether they did, or whether any laws were broken.=20 With deregulation, the spot market has taken on the trappings of a desperat= e=20 auction. Every morning, the power marketers pay what they must for whatever= =20 surplus power they can find. Wholesale prices can swing wildly, climbing an= d=20 falling hundreds of dollars per megawatt- hour over a day of trading.=20 When California's demand began to outstrip its supply last summer, San Dieg= o=20 was hit first. The Northwest barely noticed. But as the problem spread, the= =20 power that Bonneville and Puget Sound Energy once bought for winter coverag= e=20 wasn't there. Local prices began inching up.=20 Finally, and some would say most important, California's deregulation schem= e=20 included a cap on rates for consumers. In fact, the Legislature there force= d=20 a 10 percent retail rate cut as part of the deal to win passage of=20 deregulation. These errors and circumstances, combined with some corporate= =20 restructuring that shifted resources away from traditional lines of busines= s,=20 forced California's big utilities to amass a combined debt of $12.7 billion= ,=20 severely limiting their ability to buy power and prompting the recent round= =20 of blackouts in Northern California.=20 "Do you see the problem there?" asked Mosey, the BPA spokesman. "It didn't= =20 allow the market to function. It gave consumers zero incentive to conserve.= =20 If you had to devise a method whereby you shot yourself in both feet, you= =20 couldn't do a better job."=20 California lawmakers are trying to undo the damage. They have appropriated= =20 billions of dollars in emergency funding to keep the utilities afloat while= =20 they consider a more expensive bailout and re- regulation scheme that might= =20 involve turning PG&E and CalEd into public utilities - exactly the opposite= =20 of the intent of deregulation.=20 Deregulation was initially popular in Washington state, but it never had th= e=20 same attraction in a region where most voters enjoyed cheap power, thanks t= o=20 Bonneville and public utilities.=20 "At the time, most people wanted it," Finkbeiner recalled. "And I'd like to= =20 say we had the great foresight to pass on it, but that isn't true. We just= =20 couldn't agree on what to do, and it didn't go anywhere."=20 After two years of debate, Washington lawmakers saw there was no groundswel= l=20 of support for deregulation, and they did what politicians do in such cases= :=20 They dropped it in 1997, moving on to the next big issue.=20 "Now, obviously I'm glad," Finkbeiner said.=20 But Finkbeiner is once again dealing with deregulation, this time as sponso= r=20 of pending legislation that asks California to drop its power rate cap - a= =20 source of irritation for Northwesterners who have seen their bills zoom up= =20 while Californians' have not.=20 "I don't know how (Governor Davis) will react, but it is something they hav= e=20 to do," Finkbeiner said of his bill, which is an entirely symbolic act -=20 Washington cannot force California to do anything, even though it shares=20 California's pain. Color Photo, Photos, Map, Chart; Caption: (1) THE ASSOCIATED PRESS: Jamie= =20 Lubbar, a grid resource coordinator for the California Independent System= =20 Operator, looks at a computer screen while lining up electricity for the=20 state. (2) THE ASSOCIATED PRESS: Arthur Osha replaces burned-out light bulb= s=20 with energy-efficient models in the business district in Solvang, Calif.=20 Aside from its Danish influences, Solvang's trademark is the decorative=20 lighting on the city's businesses. (3) AP/1939: The Grand Coulee Dam on the= =20 Columbia River in Washington is a legacy of the Works Progress=20 Administration. (4) SEATTLE POST-INTELLIGENCER: DEREGULATING ELECTRIC POWER= =20 (5) KELLI R. PARKER AND JIM WOOLACE/SEATTLE POST-INTELLIGENCER: POWERING TH= E=20 WEST COAST (Available only on microfilm) Editorial LETTERS PAGE 02/14/2001 Denver Rocky Mountain News=20 FINAL 43A (Copyright 2001)=20 =20 Mike Rosen's `lesson' leaves great deal unsaid=20 Mike Rosen's latest effort at providing an economics lesson to the great=20 unwashed masses is typical of his previous efforts - it is rife with errors= .=20 Rosen states that there is no conspiracy of oil and gas companies at work.= =20 Rosen must have forgotten about OPEC, a conspiracy to maximize profits for= =20 oil producers. Rosen must also have forgotten that last year Vice President= =20 Cheney, who at the time was head of Haliburton Oil, praised OPEC for reduci= ng=20 production.=20 Rosen must not be aware that California has sued energy companies, includin= g=20 Enron and Duke Energy, both of which are large contributors to President Bu= sh=20 and other conservatives, for unfair business practices.=20 Rosen also blames the California electrical shortage on legislators who fix= ed=20 the price of retail electricity and limited the abilities of companies to= =20 build new power plants. What he fails to state is that retail electricity= =20 prices were fixed at the request of power companies at 150 percent of the= =20 national retail electricity price so that power companies could gouge=20 consumers and receive a $28 billion bailout for their "stranded costs" -=20 losses that power companies had suffered due to bad investments in nuclear= =20 power plants.=20 Since 1996, California private power companies had made $20 billion from=20 those excess prices that were charged to consumers and had used that money = to=20 provide dividends to their shareholders and purchase other power companies.= =20 Further, Southern California Edison (SCE), one of the largest private power= =20 companies in California, lobbied to stop a large energy project because the= =20 project would have reduced SCE's profits.=20 Rosen infers that there is an electricity shortage in California because it= =20 does not have adequate electrical capacity for its users. What Rosen fails = to=20 mention is that peak usage of electricity in California was higher in both= =20 1998 and 1999 than it was in 2000 and that 25 percent more electricity is= =20 used during the summer when air conditioners are running than during the=20 winter. Because of those facts, the only reasonable explanation for the=20 current shortage of electricity is the unrestricted greed of power supplier= s=20 who find it more important to maximize the returns to their shareholders by= =20 restricting supplies and raising profits than to supply necessary power to= =20 the citizens who need it.=20 Steve Waldmann=20 Colorado Springs BUSINESS; Catholic Health East signs energy supply contract -- Staff report 02/14/2001 Times Union Albany, NY THREE STAR E4 (Copyright 2001) Enron Energy Services of Houston has signed a 5-year contract to sell=20 electricity to Catholic Health East, a health care system that includes St.= =20 Peter's Health Care Services in Albany.=20 The deal covers 20 Catholic Health institutions in New York, New Jersey,=20 Massachusetts, Maine, Florida and Pennsylvania. "Our agreement with Enron enables Catholic Health East to manage volatile= =20 energy costs associated with deregulating markets and ultimately avoid=20 fluctuating market prices," said Tom Gruber, Catholic Health East's vice=20 president of materials management.=20 The energy provider does not generate electricity itself, but buys it from = a=20 supplier and re-sells it to customers. Another company -- in this area,=20 Niagara Mohawk Power Corp. -- actually delivers the electricity to customer= s.=20 St. Peter's Health Care includes St. Peter's Hospital, St. Peter's Addictio= n=20 Recovery Center and Villa Mary Immaculate nursing home in Albany; The=20 Community Hospice in Rensselaer; and Our Lady of Mercy Life Center in=20 Guilderland.=20 Enron Energy Services is a subsidiary of Enron Corp., which posted revenue = of=20 $101 billion in 2000. Rentable Storage: Efficient But Risky Michael Alexander 02/14/2001 CMP TechWeb Copyright 2001 CMP Media Inc. EMC, Enron, Exodus, Sun, and other big companies are throwing their weight= =20 behind storage services, promising to help deliver storage capacity much li= ke=20 utilities furnish electricity.=20 But a looming market shakeout makes it more vital than ever for companies t= o=20 scrutinize providers before committing to a contract. Some customers already are seeking to protect their data with service-level= =20 agreements (SLAs) that compensate them when their storage service provider= =20 fails to deliver as promised. Experts also recommend examining a provider's= =20 market capitalization, expertise, reference accounts, and all the other=20 attributes a company would typically consider when choosing a strategic IT= =20 partner.=20 Storage service providers, or SSPs, claim to remove many headaches of=20 managing storage. Customers don't have to invest in their own storage=20 infrastructure and personnel, so SSPs can be a cheaper and faster way to ge= t=20 started. Customers buy only as much capacity as they need.=20 The cost of buying and managing a storage system was so prohibitive that=20 Verilytics Inc. signed on with StorageNetworks, which charges the Web porta= l=20 builder about $12,500 per month for 200 Gbytes of storage.=20 "Because they have a pay-as-you-go model, it allowed us to get in at a fair= ly=20 low entry point," said Mike Harvey, head of operations at Verilytics. "As o= ur=20 needs require, we can add additional capacity."=20 Verilytics signed an SLA with StorageNetworks that specifies financial=20 penalties for unplanned downtime based on the length of an outage. In fact,= =20 nearly half of 297 companies surveyed by Dataquest say they're willing to p= ay=20 SSPs extra for agreements that compensate them for lost revenue due to=20 downtime or service problems.=20 Increasing numbers of customers are even demanding SLAs per application typ= e.=20 "Unless these storage companies are making appropriate investments so they= =20 can guarantee per-application SLAs, they're going to meet some resistance= =20 from potential customers," said Sage Research president Kathryn Korostoff.= =20 The range of SSP options varies widely. For example, to keep data in-house= =20 because of security or privacy concerns, a company may elect to have the=20 vendor provide remote storage management.=20 Companies pay about $20,000 per month per terabyte for basic=20 storage-on-demand. Additional features=01*such as scheduled backup and rest= ore,=20 real-time data replication and SLAs guaranteeing 99.99 percent uptime=01*ca= n=20 push costs to more than $80,000 per month per terabyte. That figure include= s=20 equipment, maintenance, floor space and personnel costs. StorageNetworks=20 quotes fees of $25,000 to $125,000 per month per terabyte, said John Clavin= ,=20 executive vice president of marketing.=20 A downside to outsourcing storage is that an organization is putting valuab= le=20 digital assets into someone else's hands. The data may not be adequately=20 protected from snoops or secured against loss. And what happens to the data= =20 if the SSP should suddenly go out of business? No one really knows.=20 "We tell our end-user clients to be very selective who they choose, and we= =20 tell them to make sure they have very concrete, very well defined escape=20 clauses," said Arun Taneja, an analyst at the Enterprise Storage Group.=20 Brokerage firm Charles Schwab & Co. prefers to maintain control of its huge= =20 repository of customer data, said David Sherr, vice president of architectu= re=20 and planning. Sherr questions the wisdom of trusting customer data to a thi= rd=20 party. "It would be problematic," he said. "You need to protect the privacy= =20 of your customers' data."=20 The initial SSP customers were mostly dot-coms, but in recent months more= =20 Global 2000 enterprises have signed up, according to a recent survey by Sag= e=20 Research. The survey found that 3 percent of businesses with fewer than 500= =20 employees and 6 percent of larger enterprises outsource storage. "While tho= se=20 numbers are small, they are significant because the category is still so=20 new," Korostoff said.=20 More than half of the 175 companies with which StorageNetworks has contract= s=20 are large enterprises, Clavin said.=20 Several companies have jumped into storage services in recent months. Exodu= s=20 Communications (stock: EXDS), Sun Microsystems (stock: SUNW), and=20 StorageNetworks (stock: STOR) said they plan to co-market managed storage= =20 services delivered and hosted by Exodus. Pure SSPs include ManagedStorage,= =20 Storability, and StorageWay.=20 Among application service providers that also host data are Conxion, Digex,= =20 PSINet (stock: PSIX), and USInternetworking (stock: USIX). Storage vendors= =20 such as Compaq (stock: CPQ), EMC (stock: EMC), IBM (stock: IBM), and Sun ha= ve=20 storage services alliances with ASPs and other providers.=20 Even energy company Enron is getting into the business. Its Broadband=20 Services unit launched a B-to-B exchange on Jan. 31 that matches excess=20 capacity owned by SSPs with corporate storage buyers.=20 Enron has signed a deal with StorageNetworks and is negotiating similar=20 agreements with at least six other providers, said Ravi Thuraisingham, Enro= n 's lead storage trader.=20 Many analysts see a massive consolidation on the horizon. "A lot of compani= es=20 have gone into this business thinking that it's an easy business," Taneja= =20 said. The economics of running an SSP profitably aren't well defined, Tanej= a=20 said, and the long-term cost of building and regularly upgrading a=20 best-of-class storage infrastructure may be too onerous for many.=20 Meanwhile, the amount of data that companies amass is increasing=20 exponentially. Forrester Research predicts that companies will increase the= ir=20 average online storage capacities by a factor of 10 over the next five year= s.=20 That means storage and associated administration will grow from 5 percent o= f=20 current information systems budgets to 17 percent in 2003, the firm=20 estimates.=20 And the business outlook for SSPs is rosy. North American businesses will= =20 spend $6 billion on storage utilities by 2003, according to Dataquest.=20 Enterprise Storage forecasts a $11.2 billion market in 2004. 3 Members Keep Off First Enron Panel Meet The Indian Express MUMBAI, FEB 14: The much-awaited first meeting of the Madhav Godbole review= =20 comittee on Enron held today against the backdrop of protests over its=20 composition, was attended by only two members of the committee, member=20 secretary V M Lal and Godbole himself.=20 Three other members of the six-member committee, Kirit Parikh, Deepak Parik= h,=20 R K Pachauri and E A S Sarma did not attend the meeting.=20 Anti-Enron activists have strongly opposed the induction of Kirit Parikh an= d=20 R.K. Pachauri on the committee. But Chief Minister Vilasrao Deshmukh today= =20 firmly indicated that there would be no change in the choice of members=20 appointed on the panel. Kirit Parikh and Pachauri would stay on the=20 committee, he said.=20 ``We have appointed the committee. Let it take the decision now,''he said. = On=20 the absence of members, Deshmukh said Parikh had told him that he would be= =20 unable to attend all meetings of the committee.=20 He also said that the letter handed over to him by PWP leader N.D. Patil on= =20 amending the terms of reference of the committee had been passed on to the= =20 review committee.=20 Sources said Godbole and VM Lal were briefed by MSEB chairman Vinay Bansal,= =20 secretary N Sainath and other officials today at the review meeting on the= =20 electricity board's stand on the controversy. Godbole refused to speak to= =20 reporters waiting for him outside the hall after the meeting.=20 A senior MSEB official said the absent members will attend the meeting of t= he=20 committee on Thursday.=20 Letters to the Editor: A Contradiction? 02/14/2001 The Statesman Copyright (C) 2001 The Statesman Ltd.; Source: World Reporter (TM) - Asia= =20 Intelligence Wire Sir, - Enron's Dabhol Power Company has invoked the counter-guarantee claus= e=20 and sent a bill for Rs 79 crores to the Government of India. Enron got=20 guarantees from the Maharashtra State Electricity Board and the Maharashtra= =20 Government. But it is on record that it got counter-guarantees from the=20 Government of India and the Reserve Bank of India even though it had not=20 asked for them.=20 Two questions arise: who in the then Government of India gave them the=20 counter-guarantee - and why? Secondly, MNCs claim to believe in free=20 enterprise. That being so, they should face the market: why should they ask= =20 for any guarantee - with regard to purchase of power, or its price? Yours, etc.,=20 KR MALKANI. New Delhi, 7 February. Letters to the Editor: A test of principles and being practical 02/14/2001 The Statesman Copyright (C) 2001 The Statesman Ltd.; Source: World Reporter (TM) - Asia= =20 Intelligence Wire SIR, - Two issues, namely the Dabhol power project agreement with the=20 Maharashtra State Electricity Board and the World Bank's annoyance with=20 Gridco, are matters of serious concern in view of their likely impact on th= e=20 momentum of reform in the power sector initiated after nearly a decade of= =20 planning, privatization and unbundling of SEBs and distribution systems.=20 The attitude of the Maharashtra Government towards an agreement on Dabhol= =20 does not inspire confidence in our honesty of purpose. Failure to obey the= =20 contract displays frustration, lack of integrity and the untrustworthiness = of=20 the Government. The Government of Maharashtra knew their contractual=20 obligations beforehand and should have started negotiations with Enron in= =20 order to find a solution. The fact that it. has taken two months to appoint= a=20 committee only indicates the lack of seriousness on its part. Again the=20 formation of a committee may be rightly or wrongly construed as an attempt = to=20 delay the matter. On the other hand, Enron also should not ignore the power= =20 tariff structure in this country and the rate at which other public=20 undertakings are selling power from similar naphtha-based power plants, the= =20 capital cost and plant load factor based on demand, etc. Mr. Sharad Pawar, the architect of the project (and whose party is part of= =20 the present Government), should have been more proactive in resolving the= =20 present issue so that the situation does not deteriorate any further.=20 There are suggestions for Enron to go in for direct selling, bring in the= =20 Power Trading Corporation (PTC) to deal with the Dabhol power company as an= =20 intermediary and for the NTPC to dilute the price for a large number of=20 consumers, including those outside Maharastra. None of these are indicative= =20 of any effort to find a compromise between Enron and the Government of=20 Maharashtra over the present problem or those likely to surface in future.= =20 If the power from Dabhol phase II is not going to be absorbed by Maharashtr= a,=20 the PTC, in view of the overall power shortage in the country, should, in= =20 keeping with its mandate, appear on the scene to trade in deficit areas. Th= e=20 fact remains that deficit is in peak time power supply. Selling power in=20 off-peak time will not be an easy task for them.=20 Yours etc.,=20 CR BHATTACHARJEE. Kolkata, 11 February. Regulator authorizes Enron and British Gas to use Brazil-Bolivia gas pipeli= ne=20 Gazeta Mercantil (Brazil) Rio de Janeiro, 02/14/01 - Energy and gas companies Enron and British Gas a= re=20 now finally able to import Bolivian gas into Brazil through the=20 Brazil-Bolivia gas pipeline. The petroleum sector regulator ANP rejected an= =20 appeal by the pipeline's operator Transportadora Brasileira do Gasoduto=20 Brasil-Bol?via (TBG) against the authorization for the two companies to use= =20 the pipeline. Enron and British Gas are expected to sign contracts to use the pipeline=20 before the end of this week and the first cubic meter of gas to be imported= =20 into Brazil by a private company is expected to arrive in April.The gas wil= l=20 be imported by British Gas, which will bring in 1 million cubic meters per= =20 day to eight distribution points in S?o Paulo state.=20 The gas will be sold to one of the three S?o Paulo gas distributors Comg?s= =20 (which distributes gas in metropolitan S?o Paulo). Enron has yet to seal=20 contracts to sell the gas it plans to import. It is currently negotiating= =20 with another of S?o Paulo's distributors Gas Brasiliano (which distributes = in=20 northern S?o Paulo state). (Nicola Pamplona, Gazeta Mercantil - Translated by Barney Whiteoak)=20 Studios release movies for Internet By Sue Zeidler 02/14/2001 Reuters English News Service=20 (C) Reuters Limited 2001.=20 LOS ANGELES, Feb 14 (Reuters) - The Internet is putting a whole new twist o= n=20 box office receipts as Hollywood gears up to beam movies directly to "boxes= "=20 in people's homes.=20 Movie fans too lazy to run to the nearest video store or the theater, will = be=20 able to watch films when they want rather than on cable channels' schedules= ,=20 provided they get a high-speed Internet connection. Fearing a Napster-like service for swapping movies on the Web may emerge,= =20 studios like Sony Corp.'s Sony Pictures Entertainment and Walt Disney Co. a= nd=20 other big moviemakers are ramping up plans to distribute movies online.=20 Napster, developed by a 19-year-old college dropout, shook the world's musi= c=20 industry with its wildly popular service that lets fans swap songs for free= =20 by trading MP3 files.=20 "The movie studios want to make their films available on the Web, but they= =20 don't want to give them away," said Chuck Sims, a lawyer at Proskauer & Ros= e,=20 who is defending the movie industry in a high-profile DVD hacking case.=20 On Wednesday, Vivendi Universal's Universal Studios said it signed a=20 multiyear deal with broadband network Intertainer, to deliver such as the= =20 Robert DeNiro's hit "Meet the Parents" over Intertainer's digital cable=20 platform, starting this month.=20 Universal joins Miramax Films, which announced a deal with SightSound=20 Technologies to release 12 films for download over the Internet.=20 "We're in the very early stages of video on demand. All the players are=20 evaluating where they fit into this landscape," said Mark Sonnenberg,=20 executive vice president of marketing for Intertainer.=20 Web security experts estimate that about 400,000 bootlegged films a day are= =20 swapped on the Net on services such as Freenet, Filetopia and the Internet= =20 Relay Chat.=20 HOLLYWOOD MOVING QUICKLY, BUT CAREFULLY=20 While Hollywood moves quickly to embrace the Internet, they have to be=20 careful not to endanger important relationships with cable companies,=20 pay-per-view channels or video chains, which are big revenue streams.=20 Studios will also need higher penetration of broadband, or high speed=20 Internet connections like cable modem or DSL phone lines to make downloadin= g=20 films bearable, experts said.=20 Sony Pictures is planning to launch in the spring its own online movie=20 service, MovieFly, which will rent hundreds of films from Sony, Universal= =20 Studios - and possibly News Corp.'s Twentieth Century Fox, sources said.=20 Sony's video on demand model allows users to download movies from its Web= =20 site to their personal computers where they can be viewed for a fee.=20 Users may then burn the film to a CD and give it to a friend, who can also= =20 watch it for a fee. People can also watch these films on television if they= =20 plug their TV into their computers with a special cable, sources said.=20 "We believe there is an online market for entertainment, which will prove t= o=20 be an important channel for consumers to access entertainment media," a Son= y=20 spokesman said, but declined to comment on specifics about MovieFly.=20 Alternatively, Walt Disney is said to be studying delivering films via the= =20 Internet on a wireless set-top box.=20 At a recent meeting with analysts and reporters, Peter Murphy, chief=20 strategic officer for Disney, said the company was exploring ways to=20 broadcast video services to a "box" in the home.=20 Murphy said that while Disney had not yet decided to move forward with this= =20 product, it was an excellent example of the new business models enabled by= =20 digital technologies.=20 Meanwhile, Blockbuster Inc., the nation's largest video rental chain has al= so=20 launched a service in a partnership with Houston energy giant Enron to=20 deliver on-demand movies over high-speed telephone lines.=20 The Blockbuster service charges $4.99 for pay-per-view movies selected from= =20 almost 200 titles listed electronically.=20 Blockbuster is currently carrying content from MGM, Artistan and Lion's Gat= e=20 and other independent studios.=20 And on Tuesday it said it reached a verbal understanding with Universal=20 Studios to carry its films.=20 "In my opinion, Enron and Disney are going in the right direction,=20 television. Sony has done it quicker and more efficiently in terms of=20 selection, but it will have to migrate the model to television eventually,"= =20 said one source familiar with the different projects.=20 Reuters/Variety. Video Store No More? Wednesday February 14,=20 TheStandard.com By Laura Rich=20 We're inching closer to the day when we won't have to go to the video-renta= l=20 store again. Universal Studios announced on Wednesday that it will distribute new releas= es=20 and extensive film archives through video-on-demand service Intertainer.=20 Subscribers to the digital cable channel will be able to choose among 300= =20 movies from eight major movie studios at any time. The addition of Universa= l=20 gives Intertainer the broadest selection of major motion pictures among=20 video-on-demand, or VOD, players, which include Blockbuster, CinemaNow and= =20 SightSound, and which is rolling out a service in partnership with Enron=20 Broadband. "Intertainer is a terrific partner for our ongoing VOD efforts because of i= ts=20 experience in the category," Holly Leff-Pressman, senior VP at Universal=20 Television & Networks Group, said in a statement. Intertainer's deal with Universal comes as Hollywood mulls the digital futu= re=20 for film. Most studios are digitizing their films and drawing up plans to= =20 deliver their libraries over the Internet to consumers and movie theaters.= =20 Sony's Web-based MovieFly system is gearing up for a spring launch, and=20 Disney also is said to have a VOD system in the works. The rest of the=20 studios are said to be in varying stages of talks with Sony or Disney. Intertainer continues to make strides even though studios have a history of= =20 despising the middleman. Blockbuster has long locked horns with the studios= ,=20 which have complained that the chain was reaping ancillary film revenues th= ey=20 should have controlled. By aligning with Intertainer, the studios are supporting a new middleman by= =20 bolstering it with a larger selection of movies than their own services=20 likely will have. Antitrust concerns prevent the studios from grouping all= =20 their content in a single jointly owned channel. But they also are better o= ff=20 distributing their films to as many outlets as possible. "It's never been t= he=20 studios' way to just sell movies to their own channels," said Jonathan=20 Taplin, president and CEO of Intertainer. Intertainer is a relatively small competitor from an audience standpoint. T= he=20 company was formed in 1997 and just launched its VOD service last spring. T= he=20 service is currently available in Cincinnati and Willow Grove, Pa., and wil= l=20 be rolled out in seven more cities by the end of summer. Intertainer is offered as a service to digital cable subscribers in those= =20 markets. Currently, there are fewer than 10,000 subscribers to Intertainer. The deal was Universal's second VOD pact in as many days. On Tuesday,=20 Universal agreed to add its movies to Blockbuster's VOD service. Stonepath Group to Sell Interest in Intermodal Business To Enron Global=20 Markets 02/14/2001 PR Newswire=20 (Copyright (c) 2001, PR Newswire) PHILADELPHIA, Feb. 14 /PRNewswire/ -- Stonepath Group (Amex: STG) today announced the signing of a definitive merger agreement between Webmodal, a Stonepath partner company, and Enron Global Markets, LLC, a subsidiary of Enron Corporation (NYSE: ENE), one of the world's leading energy companies. Webmodal, an Illinois-based technology and logistics services business, has been a Stonepath company since October 1999. The closing is anticipated to occur on March 2, 2001. Upon closing, Stonepath is to receive approximately $6 million in cash from Enron Global Markets for its stake in Webmodal plus a $1 million loan repayment. Closing remains subject to Webmodal shareholder approval, as we= ll as to the satisfaction of customary and standard closing conditions. "We're extremely pleased that Enron recognizes Webmodal's value and potential," said Andrew Panzo, Chairman and CEO of Stonepath Group." About Stonepath Group Founded in 1998, Stonepath Group (Amex: STG) currently holds interests in nine technology companies in various stages of development. Stonepath Grou= p (http://www.stonepath.com) is headquartered in Philadelphia, PA. /CONTACT: John Brine of Stonepath Group, Inc., 646-486-6000/ 17:28 EST

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Enron Mentions - 08/13/01

Winds May Be Shifting For Big Turbine Makers --- Renewable-Energy Use Is Poised to Spread --- But the Most Lucrative Markets Have Little Breathing Room The Wall Street Journal Europe, 08/13/01 Bush stance on greenhouse gases prods interest in state controls Houston Chronicle, 08/13/01 UK: Enron says still undecided on Teesside power plant. Reuters English News Service, 08/13/01 India ONGC Offers $400M For Enron's Oilfield Stake-Report Dow Jones International News, 08/13/01 BHP Billiton To Form Singapore Energy Trading Unit-Report Dow Jones International News, 08/13/01 INDIA PRESS: Enron To Exit Dabhol Pwr Project From Nov 19 Dow Jones Asian Equities Report, 08/13/01 INDIA'S ONGC BIDS FOR ENRON'S 30 PCT STAKE IN PANNA-MUKTA Asia Pulse, 08/13/01 INDIAN GOVT NOT TO ASK NTPC TO BUY ENRON STATE IN DABHOL Asia Pulse, 08/13/01 INDIA'S TATA POWER TO BUY ENRON STAKE IN DPC 'IF IT MAKES SENSE' Asia Pulse, 08/13/01 POWER PRIVATISATION: REFORM UNPLUGGED India Today, 08/13/01 Winds May Be Shifting For Big Turbine Makers --- Renewable-Energy Use Is Poised to Spread --- But the Most Lucrative Markets Have Little Breathing Room By Keith Johnson Staff Reporter 08/13/2001 The Wall Street Journal Europe 9 (Copyright (c) 2001, Dow Jones & Company, Inc.) Wind energy is hardly back in the doldrums that nearly devastated the sector in the middle of the 1980s. Most of the world has agreed in principle to a version of the Kyoto climate accords, and the European Union has approved its long-awaited directive, albeit in a watered-down form, aiming to double the use of renewable energy. Meanwhile, growth rates in the industry continue above 20%, and even laggard countries from England to Brazil to India say they will step up investment in new wind farms. So why isn't the outlook for Europe's big wind turbine makers rosier? Dresdner Kleinwort Wasserstein last week downgraded Vestas Wind Systems, the world's leading turbine maker, citing slower growth rates next year, even as Morgan Stanley Dean Witter got bullish, upgrading its recommendation on Denmark-based Vestas. Meanwhile, despite good first-half results for Gamesa SA, Credit Suisse First Boston trimmed the target price for the Spanish company to 28 euros from 30 euros. (The stock finished last week at 24.66 euros) Who's right? "They all are, in a way," says Robin Batchelor, who heads a renewable-energy fund for Merrill Lynch. A short-term slowdown looks inevitable, but "things are looking quite favorable for the group, especially with some version of Kyoto and the EU directive," he says. In part, the three leading turbine makers -- NEG Micon of Denmark is No. 3 -- are victims of the bursting technology bubble. Valuations that looked conservative in the middle of the technology craze now seem expensive. Vestas, at last week's closing price of 359 Danish kroner (48.24 euros), trades at a ratio of 48 times its projected earnings for 2002, more than double the average ratio of stocks included in the Euro Stoxx 50. Even Gamesa, which trades at a discount due to its lower-margin aeronautical business and more limited international presence, wields a 2002 price-to-earnings ratio of 26, higher than that of most companies included in Madrid's IBEX-35 blue-chip index. The stocks are paying the price, even if they have weathered the storm better than most telecommunications or technology companies. Over the past three months, shares in Vestas have slipped 3.7%, Gamesa stock is down 2.2%, and NEG Micon shares, at 353 Danish kroner (47.43 euros), are up 3.6% though they were battered in July. "The outlook's not negative, but it's not fantastic, either," says Adrian Coxson, a London-based analyst with Credit Suisse First Boston. "The share prices imply growth rates that simply aren't there." Growth rates in the industry had topped 30% annually since 1999 as wind power made a comeback, driven by a renewal of government subsidies, from its near-death experience the decade before. Vestas, which makes about 30% of all wind turbines sold world-wide, saw its sales rise fivefold between 1997 and 2001, while bottom-line profit rose 20-fold. Gamesa went public last fall with Spain's most successful initial offering in the past two years; Vestas holds 40% of its wind power division. And even Nordex, a German manufacturer, has rebounded from a dismal April debut on the Neuer Markt to post one of the year's biggest turnarounds. But now, it seems, the glory days may be past. Saturation in such key markets as Denmark and Germany has limited growth forecasts and prompted regulators to take a closer look at wind power's subsidies. It also has helped spur an ecological backlash -- environmental groups oppose wind power, arguing it kills migrating birds and spoils the landscape -- already familiar in England, Ireland and Spain, and compelled the industry to start building offshore wind farms, which are still unproven and more expensive than the onshore installations. Meanwhile, in the U.S., the world's second-biggest wind market, after Germany, question marks still surround the renewal of the Production Tax Credit for wind farms. Analysts expect wind power to take a breather next year in the U.S. after a record-setting 2001, when about 2,000 megawatts of capacity are due to be installed, as much as in the previous 20 years combined. Add to the mix growing competition from Enron Corp.'s wind division and hints that big electrical engineering firms like ABB and General Electric Corp. are poised to start making turbines themselves, and it is no wonder that Europe's turbine makers are desperate to find a new growth recipe. Analysts expect the industry to grow between 20% and 25% annually over the next five years, bringing world-wide capacity from about 17,700 megawatts at the end of 2000 to around 53,450 megawatts by 2005. But few think France, Italy or other countries newly won over to wind power will take up the slack from the coming slowdown in Spain, Germany and the U.S. Which puts the onus on the likes of Brazil, North Africa, India and China -- all of which need new sources of electricity. Bu unlike Western Europeans, these countries aren't prepared to offer generous subsidies to promote clean generation. "We're moving from environmentally driven markets to electricity-driven markets," says James Stettler, a renewables industry analyst with Dresdner Kleinwort Wasserstein in London. "That's the kind of landscape you want to see, without government subsidies." Those subsidies have created juicy returns (between 15% and 20%) for wind-farm operators. In large part, that spurred an excess of wind turbine installation in Germany and encouraged a storm of proposed new wind farms in Spain. But operating margins for wind power will be cut to the bone as the technology is forced to compete on equal terms with natural gas and coal-fired plants. And that in turn requires larger, more efficient turbines that can operate at full capacity even in areas with lower wind speeds. That's bad news for NEG Micon, once the world leader and still recovering from a bankruptcy scare that followed troubles with its products' gear boxes and a series of poorly digested acquisitions in 1999. For starters, the company won't have ready until the end of next year a turbine using pitch technology, which maximizes efficiency by adjusting blade angle depending on wind conditions. And the fastest-growing segment of the market is for turbines between 1.5 megawatts and two megawatts, which aren't NEG Micon's strong suit. Gamesa won't be selling a 1.75-megawatt turbine until next year, but for the windy and wide-open Spanish plains, that isn't a problem over the short term. Gamesa's biggest headache is its relationship with Vestas, which provides it with crucial technology but severely limits its international expansion. Recent contracts in Greece and China -- outside of Gamesa's original deal with Vestas -- may have been one-time deals, and analysts fear Gamesa will have trouble compensating for the industry's slowdown in Spain with aggressive international expansion unless the agreement is renegotiated. Vestas looks well positioned to take advantage of a move into new markets. It has been using pitch technology for 15 years, and has a two-megawatt machine in production. Last year, a quarter of its 870 million euros in sales came outside the core markets of Scandinavia, Germany, Spain, and the U.S. But analysts are afraid next year's dip in the U.S. market will slow sales growth at Vesta to 8% or 9%, after revenue grew an estimated 48% this year and 37% last year. And its market-leading position has given Vestas a premium valuation, which could work against the stock in the medium term. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Aug. 12, 2001, 10:55PM Houston Chronicle Bush stance on greenhouse gases prods interest in state controls By BILL DAWSON Copyright 2001 Houston Chronicle Environment Writer If Texas ends up with state regulations to curb emissions blamed for global warming, President Bush will be partly responsible. Bush's opposition to the Kyoto Protocol's international mandates for reducing carbon dioxide and other greenhouse gases is being credited with renewing interest in cutting emissions -- not just among environmentalists but also in Congress and some U.S. corporations. Meanwhile, a study that Bush's state appointees ordered last year, while he was governor, promises to stir debate over the need for a Texas greenhouse-gas plan. This analysis is to be completed at the Texas Natural Resource Conservation Commission in December. "Hopefully, we'll present meaningful options of how the state could move forward," said TNRCC Executive Director Jeff Saitas. The state's engagement with the issue has far-reaching implications. Oil and other fossil fuels produce carbon dioxide. Environmentalists say energy-dependent Texas would rank as the seventh-largest producer of greenhouse gases if it were an independent nation. Tentatively, officials working on the TNRCC study have calculated that about 80 percent of the state's greenhouse emissions come from power plants, other industrial plants and transportation activities. The three Bush-appointed TNRCC commissioners decided to undertake the study because Texas environmental groups petitioned them for a plan to cut greenhouse gases. The environmentalists timed the request so state law would require a response during last year's presidential campaign, when Bush's environmental record was being criticized. Instead of introducing a plan, however, the commissioners asked for recommendations about how Texas could help fight global warming. Saitas said TNRCC officials may conclude that new state actions specifically targeting greenhouse emissions are not warranted, because pollution-cutting efforts already under way are also eliminating a large volume of these gases. In any event, environmentalists are planning to campaign for a formal state program, complete with new regulations, to achieve extra cuts in greenhouse emissions. The Legislature authorized such rules in 1991. Environmentalists will team up this fall with religious and other groups to sponsor public meetings where citizens can present ideas for a Texas greenhouse-gas plan, said Tom "Smitty" Smith, state director of Public Citizen. "There are clearly a number of things the state could do by rules," he said, "and hopefully we want this to become an issue in the next governor's race." The Sierra Club's state director, Ken Kramer, said Bush's stance on the Kyoto pact, and the absence of an alternative proposal by his administration so far, appears to be backfiring. Despite U.S. opposition, the treaty was endorsed by 178 nations last month in Bonn, Germany. "An ironic aspect of President Bush's failure to come to grips with the global warming issue is that other people, who definitely see this is something that can't be ignored, are rising to the occasion and putting in extra effort because they can't rely on the present administration for leadership," Kramer said. Others see evidence that this reaction is emerging nationally -- and in some unexpected quarters. One is Eileen Claussen, president of the Pew Center on Global Climate Change, which sponsors a coalition of major businesses. The group, which includes Houston-based Enron as well as oil giants Shell and BP, calls the Kyoto pact "a first step" in acting against global warming. Claussen said she was afraid the administration's hard-line opposition to the Kyoto treaty might encourage some companies to pull out of the Pew Center's Business Environmental Leadership Council, but it seems to have had the opposite effect. The Bush team's stance not only helped catalyze the agreement on the treaty, but it is now inspiring wider U.S. congressional and corporate interest in limiting greenhouse gases, she said. "We really do have the president to thank for that," Claussen said. Last month, for instance, Republicans and Democrats on the Senate Foreign Relations Committee voted 19-0 for a resolution that called on Bush to develop specific ideas for a binding climate treaty when negotiators revisit the issue this fall. It said the United States should act "to ensure significant and meaningful reductions in emissions of greenhouse gases from all sectors." This latest chapter in the U.S. debate over global warming has again exposed the divisions among leading energy companies on the subject, many of which are based in Texas or have extensive operations here. "It's definitely a live issue," said Jeffrey Keeler, director of environmental strategies for Enron, a natural-gas and electric-power company that is also involved in renewable energy sources like wind power. The Bush administration, he said, will "have to get a plan together and really have some details." Natural gas produces less carbon dioxide than oil or coal, and Enron regards efforts to reduce greenhouse gases as a business opportunity. In contrast, Exxon Mobil's outspoken opposition to the Kyoto accord is often seen as a reflection of its self-described position as "the world's premier petroleum and petrochemical company." In 1997, Exxon's chairman told leaders from developing nations they should not worry too much about global warming and increase use of fossil fuels. But one top official said the company now believes "there is a substantial risk of climate change having adverse results, and we very much favor strong action to address those risks." The "most appropriate actions" are technology improvements and other energy-saving measures, like Exxon Mobil's cogeneration projects, said Frank Sprow, the company's vice president for safety, health and environment. While there are clearly "practical issues" at stake for different energy companies -- with some believing they can benefit from mandated cutbacks in greenhouse gases -- their differences on the issue "are more philosophical than anything else," the Pew Center's Claussen said. "You ask (energy industry) people off the record if the world is going to end up addressing the issue and constraining carbon," she said, "and most say yes." The TNRCC study will estimate the reductions in greenhouse gases that will occur because of pollution cuts Texas has already ordered. They mainly include new TNRCC rules to reduce smog in Houston, Dallas and other cities, as well as associated emission limits the Legislature set in 1999 and 2001. Carbon dioxide is not a smog-forming gas itself, but it can be reduced as a result of some actions taken to lessen pollutants that do form smog -- switching to fuels that emit less carbon dioxide or increasing energy efficiency. Texans should focus on the economic benefits of energy efficiency, said Jurgen Schmandt, director of The Woodlands-based Mitchell Center for Sustainable Development, a research organization founded by oilman and developer George Mitchell. Energy-saving measures will be especially important in this state if a U.S. "carbon tax" is ever enacted to reduce carbon dioxide emissions, Schmandt said. "I believe an argument can be made that a place like Houston, with its heavy concentration of refineries, needs to be better prepared than the rest of the country." UK: Enron says still undecided on Teesside power plant. 08/13/2001 Reuters English News Service (C) Reuters Limited 2001. LONDON, Aug 13 - U.S. energy company Enron said on Monday it had not yet decided when its fire-hit UK power plant at Teesside would resume electricity generation. The 1,875 megawatt plant in the Grangetown district of Middlesbrough, northern England was shut after an explosion on Wednesday in which three people died. "The majority of the plant has now been handed back to operators Enron by the Health and Safety Inspectorate," the company said in a press release. "No decision has yet been made on when power generation will begin," it added. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. India ONGC Offers $400M For Enron's Oilfield Stake-Report 08/13/2001 Dow Jones International News (Copyright (c) 2001, Dow Jones & Company, Inc.) NEW DELHI -(Dow Jones)- India's state-owned Oil & Natural Gas Corp. (P.ONG) has put in a $400 million bid for acquiring U.S. energy major Enron Corp.'s (ENE) 30% stake in the Panna-Mukta and Tapti oil and natural gas fields, the Press Trust of India news agency reported Monday. Enron is unlikely to settle for anything less than $600 million for its stake in the venture, the report said. India's privately-owned Reliance Industries Ltd. (P.REL) had quoted about $350 million for Enron's stake in the $900 million exploration venture, the PTI quoted its sources as saying. The spokesmen of both Reliance Industries and ONGC said their companies had expressed interest in buying out Enron in the Panna-Mukta and Tapti oil and gas fields, but refused to give details about the price they were willing to pay, the report added. The U.S. energy firm Marathon Oil Co. is also keen on acquiring Enron's stake in the two oil and gas fields, the report said. ONGC holds 40% stake in the fields, which currently produce around 29,000 barrels of crude oil a day. The remaining 30% is owned by Reliance, the report added. Enron declined to comment, the PTI said. -By Himendra Kumar, Dow Jones Newswires; 91-11-461-9426; [email protected] Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. BHP Billiton To Form Singapore Energy Trading Unit-Report 08/13/2001 Dow Jones International News (Copyright (c) 2001, Dow Jones & Company, Inc.) LONDON -(Dow Jones)- Australia's BHP Billiton Ltd. (BHP) is setting up an energy trading business in Singapore, U.K. daily The Times reported Monday. The move signals BHP Billiton's commitment to its oil and gas assets, the newspaper reported, adding that the trading unit will seek to balance the company's exposure to energy markets across its oil, gas and mining businesses. BHP Billiton's strategy is to emulate U.S. power giant Enron (ENE), which used its long position in electricity to sell hedging and derivative products to energy users, the report said. -By Jim Efstathiou, Dow Jones Newswires; 44-20-7842-9250; [email protected] Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. INDIA PRESS: Enron To Exit Dabhol Pwr Project From Nov 19 08/13/2001 Dow Jones Asian Equities Report (Copyright (c) 2001, Dow Jones & Company, Inc.) NEW DELHI -(Dow Jones)- U.S. energy company Enron Corp. (ENE) may formally exit the Indian market from Nov. 19, and serve a termination notice to the Maharashtra State Electricity Board if a buyer isn't found for the $2.9 billion power project in the western Indian state of Maharashtra, reports the Business Standard. "We are not in the business of litigation but of selling energy worldwide. Nov. 19 is our exit path..." the newspaper quoted Enron India Managing Director K. Wade Cline as saying. Cline said that after terminating its power purchase agreement with MSEB, Dabhol will take the arbitration route to realize $48 million owed by MSEB for electricity it supplied. "My options are very clear - either the center (federal government) finds a buyer for the project or we renegotiate or terminate the PPA," Cline said. As reported, Dabhol, the operator of a 740-megawatt power plant, is embroiled in a long-standing payment dispute with its sole buyer, the MSEB. MSEB stopped drawing power from the naphtha-fired DPC plant May 29, saying the "DPC tariffs were unaffordable." The DPC-MSEB dispute is in court. Dabhol Power Co. is the single largest foreign investment in India to date. Web site: www.business-standard.com -By Himendra Kumar; Dow Jones Newswires; 91-11-461-9426; [email protected] Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. INDIA'S ONGC BIDS FOR ENRON'S 30 PCT STAKE IN PANNA-MUKTA 08/13/2001 Asia Pulse (c) Copyright 2001 Asia Pulse PTE Ltd. NEW DELHI, Aug 13 Asia Pulse - Oil and Natural Gas Corporation (ONGC) has put in a US$400 million price bid for acquiring Enron's 30 per cent stake in Panna-Mukta and Tapti oil and gas fields even as the US company is believed to have decided not to settle for anything less than US$600 million. Reliance Industries has quoted about US$350 million for Enron's stake in the US$900 million venture, sources familiar with the divestiture said. When contacted both Reliance Industries and ONGC spokespersons said their companies expressed interest in buying out Enron in Panna-Mukta and Tapti oil and gas fields, but refused to give details about the price they were willing to pay. Besides ONGC and RIL, who are partners with Enron in Panna-Mukta and Tapti fields, US energy giant Marathon Oil is the other company in running for acquiring Enron's stake. ONGC holds 40 per cent stake in the fields, which produce around 300 million cubic meters of gas and 29,000 barrels of oil per day, while the remaining 30 per cent is with Reliance. Enron officials are tight-lipped about the whole process saying "it is not the company's policy to comment on divestiture proceedings." Earlier, state-owned Indian Oil Corporation and Hindustan Petroleum Corporation Ltd also expressed interest in stepping into Enron's shoes but their bids were rejected by the Huston-based company during the preliminary round itself, sources said. (PTI) 13-08 2015 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. INDIAN GOVT NOT TO ASK NTPC TO BUY ENRON STATE IN DABHOL 08/13/2001 Asia Pulse (c) Copyright 2001 Asia Pulse PTE Ltd. NEW DELHI, Aug 13 Asia Pulse - Centreon Sunday said that it would not ask National Thermal Power Corporation (NTPC) to buy stake of US energy major Enron in the US$3 billion Dabhol power project, which is in the midst of a legal battle over cost of power and payment of bills. The Centre's rejection comes within a day of Tata Power Chairman Ratan Tata evincing interest in the Enron's stake, reported to be around US$1 billion. "NTPC's hands are full. It has its own commitments of adding 20,000 mw capacity by 2012. We are now asking it to hike the target to 30,000 mw," Power Ministry Suresh Prabhu told PTI when asked about Enron's offer to the Centre. "There are reports of some private companies showing interest in Dabhol project. Other foreign companies could also come forward," Prabhu said while terming Enron's offer as part of its 'global strategy'. Prabhu emphasised that the Enron imbroglio did not demonstrate disenchantment of foreign investors with India and said "only Enron has decided to withdraw from India. Even AES which wants to opt out of its tie-up in Orissa is keen to enter distribution and privatisation process in the country." Besides, the government would offer transmission projects totalling upto four billion dollar for private participation at a transmission conference to be held in Mumbai next week. (PTI) 13-08 1604 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. INDIA'S TATA POWER TO BUY ENRON STAKE IN DPC 'IF IT MAKES SENSE' 08/13/2001 Asia Pulse (c) Copyright 2001 Asia Pulse PTE Ltd. MUMBAI, Aug 13 Asia Pulse - City-based power utility Tata Power Company (TPC) (BSE:TTPW) said Saturday it will be interested in buying US energy major Enron's stake in the US$3 billion Dabhol Power Company (DPC) 'if it makes sense for the company to buy'. "We are watching Dabhol developments very closely and will concievably think of buying it, if it makes sense for us", chairman Ratan Tata informed the shareholders at TPC's 82nd annual general meeting here on Friday. He said DPC's 2,184 mw was a liquified natural gas based with costly tariff and that somebody had to buy the project, if its promoters were getting out of it. Tata was answering shareholders' persistent queries and suggestions that TPC should take up the energy major's US$1 billion 'at cost' offer and buy out the power plant which was ideally located near Mumbai. Later, while speaking to reporters TPC managing director Adi Engineer said the power utility was "waiting in the wings" for a proper opportunity after which the company "will definitely look into buying the Enron stake in DPC". He said TPC would involve itself in this matter only afte the imbroglio over payment of USD 48 million between DPC and its estranged partner Maharashtra State Electricity Board were sorted out. "DPC's asset is good. It is in fact a national asset which cannot be wished away", Engineer said. (PTI) 13-08 1029 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. BUSINESS POWER PRIVATISATION: REFORM UNPLUGGED RUBEN BANERJEE 08/13/2001 India Today 42 Copyright 2001 Living Media India Ltd All's not well and it is going to get worse. The much-admired power reforms in Orissa have come unstuck barely six years after they were hailed as a beacon for the rest of the country. Instead of bringing light and prosperity, the reforms have spelt gloom, bitterness and uncertainty. Privatisation was supposed to end the subsidy regime and stem transmission losses. So far it has resulted only in heavy losses, unhappy consumers and acrimony among the players. Matters came to a head last week when AES Corporation, the US power major that has a 49 per cent stake in the Orissa Power Generation Company (OPGC) and a 51 per cent stake in CESCO, the distribution company for central Orissa, threatened to pull out. Dennis Bakke, AES president and CEO, in a terse press statement, warned of drastic measures. The message "enough is enough" sent Orissa in a tizzy. This is not the first time that the private sector players have pulled the plug. In May this year, the managing director of a power generation company switched off its generating stations to pressurise the government-owned GRIDCO into clearing its dues. The Government in desperation sought to bring about order by threatening to arrest the managing director. The bad blood continues to linger. Foreign power companies locking horns with state governments is nothing new. Enron's Dabhol Power Company feud with the Maharashtra government has run on for years. But the hostility and distrust among Orissa's power players go a step further. The AES has initiated arbitration proceedings against GRIDCO for non-payment of dues and has threatened to pull out of CESCO if tariffs are not increased. With CESCO losing several crores every month in high costs and low tariffs, the implicit message is loud and clear: AES is not into charity and it cannot be expected to lose perennially. The fact that the power corporations are still in the red after six years bodes ill for the privatisation process. Orissa was the only state to privatise distribution. Generation was partly privatised with AES picking up a stake in OPGC. The four distribution companies-the AES-owned CESCO and the BSEs-owned NESCO, WESCO and SOUTHCO for different zones of the state-were to buy power from GRIDCO, collect tariffs from the consumer and pay GRIDCO, which in turn had to pay the generating companies, including the OPGC. All this and more was envisaged by the Orissa Electricity Reforms Act of 1995 that saw the unbundling of the government-owned state electricity board. But the ground situation now presents an entirely different picture. Instead of a chain of supply and payment, it has become a series of losses and non-payment. The distribution companies have begun to crack the whip on consumers, disconnecting power lines in case of non-payment. But these distribution companies themselves owe GRIDCO around Rs 800 crore. They claim they are still in the red. AES's CESCO owes Rs 250 crore but that has not deterred AES from initiating legal proceedings against GRIDCO for the Rs 160 crore it owes OPGC. "When CESCO pays us, we would square up with OPGC the next day," says GRIDCO Chairman Priyabrata Patnaik. While the war of attrition is on among the players in power sector, the public is ready to retreat. The general feeling is that the reforms have failed. "Enough is enough. It's time that the reforms process is rolled back," declares Janardhan Pati of the CPI(M). Angry consumers ransacked the CESCO office on learning that it is still to pay its dues to GRIDCO despite charging higher tariffs. With reforms making a bigger hole in the consumers pockets, the reformists are on the defensive. Breaking away from the subsidy regime was bound to be painful. The Rs 250-crore annual subsidy was supposed to be offset by cutting down on distribution losses and improving collections. But it's not going as per plan. The private companies are defaulting on payments to GRIDCO, which as a result is reeling under liabilities of over Rs 2,700 crore. "The power business here has grown into a very complicated affair," admits R. Mishra, finance director of GRIDCO. " The whole episode puts the reforms in a quandary. If AES walks out, it will be difficult to find someone to fill the breach in CESCO. While monthly power bills amount to Rs 52 crore, CESCO manages to collect only Rs 40 crore. And if salaries and other administrative costs are added, its losses mount to more than Rs 12 crore. Privatisation, however, has not been a total loss. The reforms have already yielded results: Andhra Pradesh pays over Rs 1,500 crore annually to prop up its power sector, while the Orissa Government pays not even a rupee. Revenues also flowed in when the companies paid several hundred crores of rupees to get licences. The stumbling block which threatens to overturn the reforms is that the distribution companies are unable to cover their costs. Reformists say that it would balance out eventually when transmission losses are minimised and the collection goes up. The immediate need is that the private players like AES must keep their commitment of bringing in capital. Recent developments have put a question mark on AES's role. Even the World Bank that goaded the state onto the reforms track has not delivered on its promise. It had foreseen a 5 per cent reduction in transmission losses every year, but after six years losses are still high at 43 per cent. From being a model in power sector reforms, Orissa's experience is now a lesson on how not to go about privatising the core sector. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

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Article: CABLE, BROADCAST, DBS, CE, PHONE PLAYERS DUEL OVER ITV

CABLE, BROADCAST, DBS, CE, PHONE PLAYERS DUEL OVER ITV POLICY 04/06/2001 Public Broadcasting Report (c) Copyright 2001 Warren Communications News, Inc. All Rights Reserved. Cable operators, programming networks, broadcasters, DBS providers, consumer electronics interests, Bell companies, ISPs, sports leagues, software developers, electronic program guide creators, personal video recording firms and consumer groups all battled over possible interactive TV (ITV) regulations at FCC. In comments filed in response to Commission's ITV inquiry, 28 entities debated whether federal govt. should regulate nascent interactive market in wake of AOL's takeover of Time Warner (TW) earlier this year. They also feuded over how govt. should define interactive services if it chose to regulate them. Pushing for "technologically neutral nondiscrimination safeguards" on such vertically integrated MSOs as AOL TW, group of major programmers urged FCC to mandate that all broadband distributors carrying any ITV signals forward signals for all programmers on their cable systems. Group, consisting of Disney, Univision, USA Networks and Viacom/CBS, also called on Commission to ban discriminatory routing or caching practices that would permit cable operators to send their affiliated programming at faster speeds than rival networks. Programmers contended that consumers shouldn't have to buy additional set-top box to receive unaffiliated ITV services. "It is far easier and requires far less intrusive government regulation to prevent monopoly power from distorting a relatively new market than it is to combat monopoly power already unleashed in a more developed market," group said. Public interest groups, ALTV, APTS, BellSouth, EarthLink, Gemstar-TV Guide International, MSTV, NAB, PBS (PBR March 23 p3) and SBC Communications all made similar arguments in favor of FCC's adopting ITV rules. For instance, joint filing by Media Access Project, Consumers Union, Consumer Federation of America and Center for Media Education called on Commission "to move expeditiously to begin a rulemaking establishing open access for providers of enhancements on all platforms, whether cable, DBS, DTV or new technologies yet unknown." They contended that agency's failure to act would allow cable MSOs to "become the gatekeepers of what has thus far been a gateless online community" and devastate independent content providers. Without safeguards, they said, "ITV is likely to become a digital mirror image of the current closed multichannel cable model." Regulatory opponents countered that imposing ITV restrictions on cable systems would discourage them from starting new services, hampering development of emerging industry. Opponents, including AOL TW, AT&T, Cablevision Systems, Charter, Canal Plus Technologies, Comcast, NCTA, NFL, OpenTV, Progress&Freedom Foundation and group of 4 programmers, declared it was too early to impose obligations on ITV providers. They said early regulation would be unworkable, creating administrative nightmare. Calling even "the threat of regulation" of ITV market "a major mistake," NCTA, for example, argued that "there is simply no basis for assuming a problem and proposing regulatory solutions." Saying FCC deliberately had refrained from imposing similar rules on cable high-speed data services, which are much further along in development, NCTA said Commission should refrain from regulating ITV services for same reason. It also warned that agency had very limited authority to regulate ITV services under Communications Act and easily could violate First Amendment rights of cable operators if it tried to do so. Calling inquiry "a peculiar and misguided proceeding," NCTA said First Amendment "would seem to preclude the very regulations suggested by the notice which would interfere with cable operators' constitutionally protected editorial judgments." Taking different tacks, DBS providers EchoStar and DirecTV said in separate filings that they wanted FCC to keep close tabs on cable operators so they wouldn't use their market power to keep interactive TV services from other multichannel operators, including satellite TV companies. DBS companies said they were concerned that cable companies might have unfair advantage in marketplace if both industries were regulated in same way by Commission. DirecTV said it was "premature" for agency to fully regulate ITV services, but it favored "continued monitoring by the FCC of the potential for anticompetitive behavior by cable operators." "Regulatory intervention at this nascent stage of ITV development makes little sense," DirecTV said: "There are as yet no dominant providers of ITV services, and the marketplace is still in the process of sorting out the technological standards" that it will follow during future delivery. EchoStar said there was "absolutely no basis for imposing" ITV carriage obligations on distributors lacking market power in any relevant market such as itself. Such action would penalize new entrants and favor incumbent cable operators, filing said. FCC/CAPITOL HILL In action that will significantly limit number of low-power FM (LPFM) stations to be licensed, FCC released decision April 2 saying LPFM stations must meet same 3rd adjacent channel interference protection requirement as full-power stations. Order implements requirements of rider on FCC appropriations bill signed into law in Dec. Commission expects to complete action on its LPFM licensing window in few months, it said in order, and then will direct Mass Media Bureau to open window to allow LPFM applicants that didn't meet 3rd channel requirements to try to come into compliance. FCC Chmn. Powell said action allowed Commission to begin granting construction permits for at least some LPFM stations, and agency had begun independent testing to determine impact of LPFM stations on full-power FM stations and translators. As part of order, FCC also implemented congressional mandate that denies LPFM license to former pirate radio operators. FCC Comr. Furchtgott-Roth issued separate statement saying he supported move to implement congressional mandate but believed FCC should have delayed LPFM licensing while it went through rulemaking process in order to comply with Administrative Procedure Act. ------ Sen. Cochran (R-Miss.) introduced S-604 to reauthorize PTV's Ready to Learn and Ready to Teach programs. Bill also would graduate Mathline, a component of programs providing professional development models for teachers of mathematics, to TeacherLine, more comprehensive professional development tool for K-12 teachers. Citing research by U. of Ala. and U. of Kan., Cochran said Ready to Learn was having positive impact on children and their parents. Studies showed that Ready to Learn families read books together more often and for longer periods than nonparticipants. Surprisingly, studies said Ready to Learn children watched 40% less TV and were more likely to choose educational programs when they did watch, he said. Advent of digital broadcasting, which allows broadcast of multiple video channels and data simultaneously, will make it possible for instructional materials to be distributed on full-time, continuous channels when teachers and students need it, Cochran said. ------ FCC regulatory fees would increase average of 7.75% for FY 2001, agency said in proposed rulemaking released March 29. Fees generally followed previous 2 years' practice of across-board increase to meet congressional mandate for FCC to recoup larger portion of its operating budget through regulatory fees. Congress required Commission to collect $200.1 million in regulatory fees this year, up $14.4 million from FY 2000. In early years, FCC attempted to base regulatory fees on actual cost of regulation, but it generally has used across-board increases since FY 1999. It said it hoped to have new cost accounting system in place in time for setting fees for FY 2002. Comments on fees are due April 27, replies May 7 (MD 01-76). ------ Heads of 4 national public broadcasting organizations and many local PTV station managers expressed appreciation at April 3 gathering in Washington to Public Broadcasting Caucus in House which now has 70 members. Saying public broadcasting always had enjoyed strong support in Congress, CPB Pres. Robert Coonrod said new group would be asset in furthering that support "for our mission of providing valuable education services to the American people." NPR Pres. Kevin Klose said he hoped caucus would serve as effective forum for discussion of complex policy issues facing public radio. Pres. Pat Mitchell said "PBS looks forward to working with the caucus to strengthen the unique and important role that public television plays in providing nonviolent and educational programs and services to America's children and their families." New APTS Pres. John Lawson said caucus came at "critical" time, when PTV stations were bracing for transition to DTV. ------ If FCC reallocates any part of Instructional TV Fixed Service (ITFS) spectrum or 3G mobile device service, "the capacity, usefulness and value of ITFS would be significantly reduced," Miss. Humanities Council said in ex parte filing on notice of proposed rulemaking on 3G spectrum allocations. Even if only part of spectrum is taken away, many educational institutions would either lose their ITFS service altogether or face new equipment costs, service disruption, cutbacks, lower quality of service and signal interference, council said. "In either scenario, the ITFS community would be incapable of supporting advanced wireless services and promoting the development of broadband services to the educational community and to underserved communities nationwide," it said. ------ FCC Chmn. Powell called on Congress to bolster agency's enforcement powers, measure he said was necessary to protect consumers as Commission executed streamlined business plan that's "aligned with the realities of a dynamic and converging marketplace." He also told House Telecom Subcommittee at hearing March 29 that legislative approval was necessary to carry out his bureau restructuring plan, which still was being formulated, and his "policy vision" of making FCC more "efficient, effective and responsive." Powell said FCC, if given sufficient enforcement capabilities, would guarantee "fairness to all, and allegiance to none," but warned potential regulatory violators that Commission likewise would levy severe penalties. "If you cheat, I'm going to hurt you, and hurt you hard," he said. Ability to impose heavier fines and having fewer time constraints to carry out enforcement action via changes in statute of limitations are 2 tools Congress could give FCC, Powell said. If Commission can fine a company only $15,000 when companies earn millions or even billions of dollars annually, then they will view fines "just as the cost of business" and have less incentive to comply, he said. Commerce Committee Chmn. Tauzin (R-La.) said Powell spent 3 years as commissioner "watching how not to run the FCC" and expressed confidence that under his leadership it "would become an agency that fosters innovation and investment rather than one that inhibits the deployment of new services." He told Powell he would work with him to "rationalize the structure" of agency so services, rather than service providers, are subject to regulatory or deregulatory framework. ------ Communications lawyers on Washington Legal Foundation panel on FCC and Communications Policy split 2-2 on whether major revamp of FCC was needed immediately. "It's hard to disagree about the need to overhaul the FCC," said attorney Nick Allard of Latham&Watkins. Moderator and former FCC Chmn. Richard Wiley did disagree, sharply, with Allard -- who called for abolishing 4 of 5 commission seats and actively involving Commerce Dept. and NTIA in regulation of various communications industries. What FCC needs, countered Wiley, is more delegation of authority to staff and more rapid decisions -- something that can be accomplished with present structure -- and "Chmn. Powell can get it done." Because of congressional respect for Powell, any agency reform "is going to come first from the FCC itself," rather than from Hill, Wiley predicted. Panelist Charles Kennedy of Morrison&Foerster generally agreed with Allard, while David Poe of LeBoeuf, Lamb, Greene&MacRae partly sided with Wiley. Commission doesn't need revamping for short term, Poe said, but major overhaul may be necessary in long term. Kennedy said FCC operations were "outmoded... We are going to have to make some fundamental changes... if things don't turn around." Allard listed 10 questions that must be answered on FCC's future, including whether competition was prerequisite for deregulation or was it other way around and did Commission's current organizational structure make sense. Poe said Powell had shown "he's not afraid to grapple" with tough issues and that there were many "ambiguities and contradictions" in 1996 Telecom Act. "Statutory reform" of FCC is needed, he said, but it will be very hard to get Congress to pass legislation on issue. On digital TV, Poe said FCC had tried to push broadcasters into new technology but "you can't make a market if the market isn't there." ------ FCC set deadlines March 28 for comment on its proposed rulemaking on DTV must-carry issue following publication of notice in Federal Register. Commission tentatively concluded in Jan. against imposing dual-carriage obligations on cable operators during current digital broadcasting transition but left issue open for final determination. Comments are due May 10, replies June 25. ------ Rep. Boucher (D-Va.) challenged TV copyright owners concerned about piracy from digital set-top boxes to "present a united front" on what home copying they would accept in exchange for encryption technologies. At kickoff of American U. Washington College of Law's new Glushko-Samuelson Intellectual Property (IP) Clinic, he said he hoped Congress would approve measure akin to Sec. 1201(k) of Digital Millennium Copyright Act. That Act requires VCRs to respond to technologies encoded on videocassettes to stop people from copying films where there's no reasonable expectation of being allowed to do so (as, for example, when movies are rented from video store). Folder Name: Cable Open Access Relevance Score on Scale of 100: 79 ______________________________________________________________________ To review or revise your folder, visit Dow Jones CustomClips or contact Dow Jones Customer Service by e-mail at [email protected] or by phone at 800-369-7466. (Outside the U.S. and Canada, call 609-452-1511 or contact your local sales representative.) ______________________________________________________________________ Copyright (c) 2001 Dow Jones & Company, Inc. All Rights Reserved

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Energy Issues

Please see the following articles: Sac Bee, Fri, 5/11: "Davis signs bonds-sale bill, blasts GOP " Sac Bee, Fri, 5/11: "Senators push administration for more help on energy= =20 crisis " Sac Bee, Fri, 5/11: "Energy Digest: Company will expand plant, sell power = to=20 state " Sac Bee, Fri, 5/11: "Spreading the pain" (Editorial) SD Union, Thurs, 5/10: "Oceanside seeks ally in building power plant" SD Union (AP), Thurs, 5/10: "Davis signs bill authorizing $13.4 in bonds to repay treasury for power buying" SD Union, Thurs, 5/10: "GOP defeats first attempt to cap power prices" SD Union (AP), Thurs, 5/10: "Energy task force expected to recommend tax breaks" LA Times, Fri, 5/11: "Power Rescue Plan Rests on Many 'Ifs' " LA Times, Fri, 5/11: "Bush, Rivals Don't Dare Ask Public to Make Sacrifice= s=20 in Energy Crunch" LA Times, Fri, 5/11: "House Committe Rejects Electricity Price Controls" LA Times, Fri, 5/11: "Nonprofit Shrugs at Pleas to Conserve" LA Times, Fri, 5/11: "Restarting of Generators in O.C. Approved" LA Times, Fri, 5/11: "Discovery Has City Flying High" LA Times, Fri, 5/11: "Don't write off Davis energy plan" (Commentary) SF Chron, Fri, 5/11: "High bills may not spur conservation=20 PG&E, critics agree increases are too small to change habits " SF Chron, Fri, 5/11: "Power plant owners want end to PG&E contracts " SF Chron (AP), Fri, 5/11: "Developments in California's energy crisis" SF Chron, Fri, 5/11: "GOP members of House oppose price cap plan=20 Three from Southern California vote against Feinstein on electricity " SF Chron, Fri, 5/11: "PUC chief's proposal called petulant=20 Federal agencies would pay full tab for power " SF Chron, Fri, 5/11: "Sacramento decisions in state's power crisis " Mercury News, Fri, 5/11: "State leaders consider scheduled power blackouts= " Mercury News, Fri, 5/11: "Davis plan to help utility faces fight in=20 Legislature" Mercury News (AP), Fri, 5/11: "Power plant owners want end to PG&E contrac= ts" Mercury News, Fri, 5/11: "Businesses blast electricity rate-hike proposal" Mercury News, Fri, 5/11: "Households must share power costs" (Editorial) Mercury News, Fri, 5/11: "Failure to conserve fueled energy woes" =20 (Commentary) OC Register, Fri, 5/11: "Generators win 10-year revival" OC Register, Fri, 5/11: "Energy notebook Davis signs bill to sell $13.4 billion in bonds for power" OC Register, Fri, 5/11: "Not saving for a sultry day" OC Register, Fri, 5/11: "Despite opposition, AES has the power" NY Times, Fri, 5/11: "Many Utilities Call Conserving Good Business" Individual.com(Businesswire), Fri, 5/11: "PG&E Files Opposition to=20 Ratepayers'=20 Committee" Individual.com (PRnewswire), Fri, 5/11: "SCE to Curtail 'Load' for Some=20 Customers=20 Following Stage 2 Electrical Emergency Declaration" Individual.com (AP), Fri, 5/11: "For many Californians, fear of high electricity bills is a bigger threat than blackouts" ---------------------------------------------------------------------------= --- ----------------------------------------- Davis signs bonds-sale bill, blasts GOP=20 By Emily Bazar Bee Capitol Bureau (Published May 11, 2001)=20 Accusing Republicans of "playing with fire" and jeopardizing the economy,= =20 Gov. Gray Davis on Thursday signed a bill allowing the state to sell a=20 record-setting $13.4 billion revenue bond package to finance its past and= =20 future electricity purchases.=20 The Democratic governor's harsh words capped a tense partisan standoff in t= he=20 Legislature that forced a delay in the bond sale until August.=20 Davis warned that the delay, which he blamed on GOP lawmakers, could hurt= =20 Californians if state programs are cut to pay for electricity until the bon= ds=20 are sold.=20 "They should know that their constituents may well be hurt if, as a result = of=20 their actions, cuts have to be made in law enforcement, transportation,=20 health care, education and programs for seniors," Davis said. "If I have to= =20 go into every district occupied by a member who voted against (the bill) an= d=20 make a case about why this measure is necessary, that is what I will do."= =20 Davis commended the only Republican to vote for the measure, Assemblyman=20 Anthony Pescetti of Rancho Cordova, calling his a "courageous vote in the= =20 face of blind opposition."=20 Since mid-January, the state has committed $6.7 billion from its budget to= =20 last-minute electricity purchases.=20 In order to pay that back, and to pay for power the state has lined up=20 through long-term contracts, Davis asked the Legislature to approve a bill= =20 authorizing the sale of $13.4 billion in bonds. The bonds will be repaid wi= th=20 higher customer rates over the next 15 years.=20 Assembly Republicans balked, saying the ratepayers would be saddled with de= bt=20 for too long. They proposed an $8 billion bond package instead, and suggest= ed=20 using a one-time allocation from the state budget to make up the difference= .=20 But Monday, Assembly Democrats pressed forward with the $13.4 billion figur= e.=20 Because they could not muster enough Republicans for a two-thirds vote, the= y=20 passed the measure, SB 31x, with a simple majority, requiring a 90-day wait= =20 for the bill to become law.=20 Assembly Republican leader Dave Cox of Fair Oaks said Democrats could have= =20 won Republican support if they had seriously considered the GOP proposal an= d=20 actually negotiated.=20 He accused Davis of engaging in "fear politics."=20 "We didn't hear from the governor. It kind of leaves you with the impressio= n=20 that maybe there was never any intention of negotiating," Cox said. "It was= =20 either their way or forget it."=20 The state's blueprint calls for the $13.4 billion to last until Jan. 1, 200= 3,=20 by which time wholesale electricity prices are expected to have fallen, new= =20 power plants added and debt-ridden private utilities stabilized.=20 But the plan rests on numerous assumptions beyond the state's control,=20 including the price of electricity, extent of conservation, quantity of pow= er=20 available from the Pacific Northwest and production by alternative energy= =20 suppliers.=20 Under a worst-case scenario, critics say, the state could spend the bond=20 funds within several months and be left holding the bag for $50 million or= =20 more per day in electricity bills.=20 Also Thursday, the Senate sent Davis emergency legislation that expedites= =20 power plant construction in California, two weeks after a controversial lab= or=20 amendment hung up the bill, SB 28x.=20 Lawmakers removed the amendment after Davis enacted its provisions in an=20 executive order Tuesday. He is expected to sign the bill early next week.= =20 The Bee's Emily Bazar can be reached at (916) 326-5540 or [email protected]= .=20 Jim Sanders and Kevin Yamamura of The Bee Capitol Bureau contributed to thi= s=20 report.=20 Senators push administration for more help on energy crisis=20 By James Rosen Bee Washington Bureau (Published May 11, 2001)=20 WASHINGTON -- Western senators from both parties criticized Energy Secretar= y=20 Spencer Abraham on Thursday, telling him that President Bush must respond= =20 with more urgency to rising gasoline prices and power shortages.=20 At a Senate Energy Committee hearing, Abraham also faced tough questions ov= er=20 his department's proposed $19.2 billion budget and plans to slash funding f= or=20 the development of alternative energy and more energy-efficient vehicles.= =20 "We have a pretty good plan for the long range, but we've got some problems= =20 right now, and we're going to hear more and more about it -- whether it's= =20 gasoline, whether it's electricity, whether it's the prices," said Sen. Cra= ig=20 Thomas, a Wyoming Republican. "How are you going to react to this summer's= =20 prices? And I'm not for price controls, but we need to have some reaction t= o=20 what's happening now."=20 Republican Sen. Gordon Smith of Oregon urged Abraham to push the Federal=20 Energy Regulatory Commission to control wholesale energy prices.=20 "We've never had a free market in energy, and people are truly going to wan= t=20 to see this administration appearing more engaged than it appears to be,"= =20 Smith said. "We have a crisis here, and I think it would behoove the=20 president -- it would behoove all of us -- to figure out a way to relieve= =20 this in a very aggressive way."=20 Abraham told the senators that a comprehensive energy plan, which a task=20 force headed by Vice President Dick Cheney is expected to release next week= ,=20 will provide short-term and long-term solutions to the country's=20 energy-supply problems.=20 After the hearing, Abraham vehemently denied that either he or Bush has bee= n=20 complacent about the crisis.=20 "I take a little bit of umbrage, whether it's from Republicans or Democrats= ,=20 at the suggestion ... that we're not moving with sufficient urgency," Abrah= am=20 said. "We've moved as fast as we can in the short period of time we've been= =20 in office."=20 Abraham said the Bush administration has been especially responsive to the= =20 problems in California.=20 "From the very first day that I was secretary, I was on the phone with=20 (California Gov.) Gray Davis, finding out what challenges he had and how we= =20 could help," Abraham said. "Within three days of taking office, we supporte= d=20 his call for emergency orders to provide natural gas and electricity to=20 California.=20 "We have subsequently responded favorably to virtually every request he has= =20 made, from expediting permits that relate to new generation to helping with= =20 respect to his desire to move forward with the acquisition of the=20 transmission system to last week's conservation measures. The only thing we= =20 haven't done is agree to what we consider an unwise decision to impose pric= e=20 caps. And that, I think, would only make the conditions more severe."=20 Sen. Dianne Feinstein, a California Democrat, said the federal government= =20 should probe widespread signs that power suppliers have created artificial= =20 shortages in the state.=20 The Bee's James Rosen can be reached at (202) 383-0014 or=20 [email protected].=20 Energy Digest: Company will expand plant, sell power to state=20 (Published May 11, 2001)=20 A Huntington Beach power plant will be required to sell its increased outpu= t=20 in California in exchange for speeded-up approval of an expansion project,= =20 the state Energy Commission agreed Thursday in a 4-0 vote.=20 The decision comes after some commission lawyers and Gov. Gray Davis' offic= e=20 initially had said they were concerned that such a requirement might violat= e=20 the U.S. Constitution.=20 But the plant's owner, AES Huntington Beach, eventually agreed to the=20 California-sales provision for the electricity it will produce by reviving= =20 two mothballed steam turbines, commission Administrative Judge Garret Shean= =20 said.=20 The commission granted the project licensing approval Thursday, and AES wil= l=20 contract with the state for 450 megawatts, the expansion project's full=20 output, according to Davis' office. The expansion should be completed by la= te=20 summer.=20 --Carrie Peyton=20 Panel rejects price controls WASHINGTON -- California Republicans led a successful effort Thursday to=20 defeat an amendment that would have imposed price controls on wholesale pow= er=20 rates in an effort to lower the state's $1.5 billion monthly tab for=20 electricity purchases.=20 Thursday's vote was the first test in a drive by Western lawmakers to put t= he=20 brakes on skyrocketing power rates which, in California, have zoomed tenfol= d=20 over past year.=20 By a 20-12 vote, the House Energy and Commerce Committee's energy and air= =20 quality subcommittee rejected a price controls amendment to an emergency=20 electricity package offered by Rep. Henry Waxman, D-Los Angeles.=20 "What the Republican-dominated committee has said is, 'California, drop=20 dead,' " Waxman said after the vote.=20 Patterned after legislation introduced in the Senate by Dianne Feinstein,= =20 D-Calif., and Gordon Smith, R-Ore., the Waxman amendment would require=20 wholesale rates to be pegged at the price of production, plus a profit=20 margin.=20 --David Whitney=20 Small generators' claims aired SAN FRANCISCO -- U.S. Bankruptcy Judge Dennis Montali on Thursday wrestled= =20 with but did not come close to solving the problems of 300 small energy=20 generators, including many who claim they're on the verge of collapse becau= se=20 Pacific Gas and Electric Co. has not paid them a total of about $1 billion.= =20 They supply about 15 percent of PG&E's electricity, according to the=20 utility's figures. James Lopes, PG&E's bankruptcy lawyer, said all but eigh= t=20 of the facilities now are operating.=20 But so far, more than two dozen producers of solar and wind power, biomass= =20 and cogeneration have asked the judge to order PG&E to pay them or release= =20 them from their contracts. Voiding the contracts would drive up the prices= =20 they could charge but might keep them from going off line before summer, wh= en=20 they're most needed.=20 Montali set a May 24 hearing to assess the immediate harm facing four=20 cogeneration companies whose combined motion for relief came up first in th= e=20 PG&E Chapter 11 bankruptcy proceedings.=20 He was unsympathetic during Thursday's hearing to arguments that PG&E, even= =20 when it pays at the contracted rate, doesn't pay enough to keep the small= =20 generators in business. But he gave no indication of his ultimate ruling.= =20 --Claire Cooper=20 Spreading the pain=20 (Published May 11, 2001)=20 Monday the California Public Utilities Commission faces a $4.8 billion=20 question: How should regulators divvy up the electricity rate increase they= =20 approved in March between residential customers and businesses?=20 All customer classes of the private utilities must bear some of the burden = of=20 the higher costs for the electricity the state is now purchasing for Pacifi= c=20 Gas and Electric and Southern California Edison (this rate increase does no= t=20 pertain to municipal power agencies such as SMUD).=20 The right way to do that is to spread the higher electricity costs between= =20 residences and businesses in proportion to their use of power. This princip= le=20 will result in a higher average percentage increase for manufacturers and= =20 commercial businesses because they now have lower per-kilowatt rates than= =20 residences, but a rate structure that reflects their power usage.=20 But businesses shouldn't get saddled with some of the burden that belongs t= o=20 residential customers, as two of the plans before the PUC propose.=20 A new law prohibits the PUC from increasing the rates on residential=20 electricity consumption below 130 percent of "baseline." Depending on wheth= er=20 one believes the PUC or PG&E, the law exempts anywhere from one-third to=20 one-half of residential customers from any rate hikes.=20 Had they not been exempted, however, their proportional share of the=20 necessary rate increase would have been $1.1 billion. The Legislature=20 exempted these customers as a way to protect lower-income consumers as well= =20 as those who conserve. Lawmakers didn't say, however, who should pay for th= is=20 $1.1 billion in their place.=20 This thankless task now falls to the PUC. Two proposals -- one by PUC=20 President Loretta Lynch, another by an administrative law judge -- answer t= he=20 $1.1 billion question in the wrong way. Both proposals seek to shift most o= f=20 this $1.1 billion burden from the residential class onto manufacturers and= =20 businesses.=20 That's both unfair and bad for the economy. This burden belongs solely to t= he=20 residential class. Because the PUC cannot impose it on usage below 130=20 percent of baseline, regulators must impose it on the other residential=20 customers who are using the most electricity.=20 Yes, this would increase their rates even more steeply than Lynch is alread= y=20 proposing. But it sends the right signal to large users of electricity to= =20 turn down the air conditioner and turn off unneeded appliances and lighting= .=20 The alternative is to subsidize their excesses through higher bills on=20 businesses, as Lynch and the judge are proposing. Many manufacturers in=20 California will struggle to stay afloat as they cope with their own fair=20 share of the costs. Making them take part of the residential share of the= =20 rate increase will deepen their distress and hurt the state's economy. It= =20 does residential ratepayers no good to have protection for their electricit= y=20 bills if the protection costs them their jobs.=20 Oceanside seeks ally in building power plant=20 By Lola Sherman=20 UNION-TRIBUNE STAFF WRITER=20 May 10, 2001=20 OCEANSIDE -- The City Council wants to generate electricity any way it can,= =20 including possibly building a power plant jointly with Camp Pendleton.=20 It also may partner with a nearby city or the county.=20 And it hopes at least to get some power from its green waste and its sewage= =20 plant.=20 A council majority informally decided last night to pursue a joint project= =20 with Camp Pendleton even after an energy consultant advised against trying = to=20 work with the military.=20 Al Figueroa of San Diego, the consultant, said the Marines' needs always wi= ll=20 come before the city's.=20 "For a large system and long-term commitments, the Pentagon will be=20 involved," he said. "The U.S. government will not give an inch but will tak= e=20 a mile. If you want full rein over your own destiny, look elsewhere."=20 Former Councilman Sam Williamson, the only person to speak from the audienc= e=20 on the issue, said it isn't true that the military won't cooperate. He cite= d=20 its help in creating Oceanside Harbor and in moving the massive Sterling=20 Homes Marine housing project out of the city.=20 Williamson also suggested working with neighboring cities to find a site fo= r=20 a plant. "We do not want to depend on these gas companies any more," he sai= d.=20 Councilman Jack Feller agreed with Figueroa about avoiding the military. "I= =20 just cannot get behind Camp Pendleton. I think we're spinning our wheels," = he=20 said.=20 Councilwoman Esther Sanchez said Oceanside is uniquely situated next to the= =20 base. "We would let our residents down if we did not at least take a look a= t=20 it," Sanchez said. "Some people might think it's pie in the sky, but it=20 actually might work."=20 Except for Feller, the council members agreed it's worth a try to approach= =20 Camp Pendleton.=20 Deputy City Manager/Fire Chief Dale Geldert was given that task.=20 Councilwoman Betty Harding said the city isn't looking for its own power=20 plant simply to ease municipal electricity costs, which are running $800,00= 0=20 a year over budget, but to do something to help reduce residents' soaring= =20 power bills.=20 Councilwoman Carol McCauley said: "Maybe there's a silver lining behind thi= s=20 cloud. Maybe we can become self-sufficient, whether at Camp Pendleton or wi= th=20 other cities."=20 "Explore every avenue, every direction," McCauley urged Geldert. Davis signs bill authorizing $13.4 in bonds to repay treasury for power=20 buying=20 By Don Thompson ASSOCIATED PRESS=20 May 10, 2001=20 SACRAMENTO =01) Gov. Gray Davis signed a law Thursday letting the state bor= row=20 $13.4 billion to pay for electricity for three cash-starved utilities.=20 Davis couldn't guarantee the 15-year bond will be enough to cover the state= 's=20 electricity purchases. But he said the $13.4 billion price tag represents= =20 "the best thinking of our financial analysts," and includes a reserve in ca= se=20 electricity prices remain higher than expected.=20 The state spent $1,900 per megawatt hour Wednesday as state grid operators= =20 narrowly avoided a third consecutive day of blackouts, Davis said,=20 reiterating his call for federal price caps. Cooler weather helped the stat= e=20 avoid blackouts Thursday.=20 Wednesday's costs were a record or near-record since the state purchases=20 began in January, said Oscar Hidalgo, a spokesman for the power-buying=20 Department of Water Resources.=20 Davis said he hopes the state can stop buying power for Pacific Gas and=20 Electric, Southern California Edison and San Diego Gas and Electric by the= =20 end of next year.=20 Davis accused Assembly Republicans of putting their political opposition=20 above the state's welfare by refusing to support the bond bill. That means= =20 the bonds can't be issued for three months, which Davis said will drive up= =20 the interest ratepayers will be charged for the bond.=20 "This measure is a lifeboat that allows us to stay afloat," he said.=20 In a statement, Assembly GOP Leader Dave Cox called the bond bill "a=20 dangerous gamble for California =01) a gamble Republicans couldn't support= =20 without a clear endgame ... The governor obviously believes that history wi= ll=20 judge that his was the right decision. He had better be right."=20 Also Thursday, a federal bankruptcy judge considered ordering PG&E to make= =20 millions of dollars in back payments to small power plant owners that provi= de=20 nearly a third of California's electricity.=20 And California power regulators continued struggling over how to divide=20 record electric rate increases among the 9 million customers of the state's= =20 two largest utilities, Edison and PG&E. The Public Utilities Commission is= =20 rushing to adopt the higher rates Monday.=20 GOP defeats first attempt to cap power prices=20 By Toby Eckert COPLEY NEWS SERVICE=20 May 10, 2001=20 WASHINGTON =01) Republican lawmakers on Thursday slapped down an effort to= =20 impose price controls on wholesale power sold in California and 10 other=20 Western states.=20 In the first test of congressional resolve on the issue, Republicans on the= =20 House energy and air quality subcommittee, including three from California,= =20 voted unanimously against the temporary price limits, while most Democrats = on=20 the panel backed the move. The issue will now come before the full House=20 Energy and Commerce Committee.=20 The subcommittee vote dramatized the deep partisan divisions that have=20 developed, even within California's congressional delegation, over how the= =20 federal government should respond to the crisis. While Democrats argue that= =20 price controls would bring stability to the state's chaotic power market,= =20 most Republicans =01) including President Bush =01) counter that they would= =20 aggravate electricity shortages by discouraging needed power generation and= =20 sales.=20 After two days of rolling blackouts in California, a preview of what could = be=20 in store for the state all summer, the subcommittee vote was being watched= =20 closely for any signs of wavering on the issue by Republicans worried about= =20 the political fallout.=20 California Democrats vowed to continue pushing the measure and predicted=20 their Republican colleagues would pay a price for opposing it.=20 "Republican ratepayers are going to have to pay the same exorbitant prices = as=20 Democratic ratepayers," said Rep. Jane Harman, D-Redondo Beach, a member of= =20 the full committee. "As ... the blackouts increase over the next two months= ,=20 those folks who voted 'No' in this subcommittee are going to face very toug= h=20 questions. I wouldn't be surprised if they try a bit later to get on board.= "=20 But Rep. George Radonovich, R-Mariposa, said he was feeling little pressure= =20 from his constituents to support price controls.=20 "All they care about is politics," he said of the Democrats who criticized= =20 his vote against the controls. "What we're concerned about are some real=20 solutions to the problems, which they don't offer."=20 Republican Reps. Christopher Cox of Newport Beach and Mary Bono of Palm=20 Springs also voted against the measure.=20 Rep. Henry Waxman, D-Los Angeles, offered it as an amendment to a=20 Republican-crafted bill that contains several measures aimed at boosting=20 electricity production and encouraging energy conservation in the West. The= =20 amendment would require federal regulators to impose either "just and=20 reasonable" rates for wholesale power that fluctuate with demand or rates= =20 tied to the cost of producing the power, plus a "reasonable" profit.=20 Electricity generated at new power plants would be exempt from the limits t= o=20 encourage their construction.=20 Sen. Dianne Feinstein, D-Calif., is pushing a similar measure in the Senate= ,=20 so far without success.=20 Wholesale electricity prices in California have soared in the past year, a= =20 side-effect of deregulation of the state's power market and increased price= s=20 for natural gas, which fuels most of the power plants. Utilities have been= =20 unable to pass on the full cost of the power to customers, threatening thei= r=20 financial stability and driving one, Pacific Gas & Electric, into bankruptc= y.=20 Waxman argued that price controls would discourage power sellers from=20 withholding power from the market to drive up prices.=20 "The only way that we'll get some relief in California is to put some limit= =20 on the gouging that has taken place," he said. "...The rest of this bill do= es=20 not do much of anything for the state of California and the West during thi= s=20 crisis."=20 But Republicans said price controls would have the exact opposite effect:= =20 discouraging power providers from generating and selling electricity in the= =20 region.=20 "It simply is a guarantee for more blackouts," said Rep. Billy Tauzin, R-La= .,=20 the chairman of the full committee.=20 The amendment was defeated 20-12. Two Democrats =01) Reps. Ralph Hall of Te= xas=20 and Christopher John of Louisiana =01) voted against the measure.=20 The underlying bill passed on a party-line vote of 17-13.=20 It would allow the California governor to temporarily waive some=20 air-pollution limits to increase power production in the state when blackou= ts=20 are imminent; provide federal funding to fix a major power transmission=20 bottleneck in the Central Valley; require federal facilities in power-starv= ed=20 states to cut their energy use by 20 percent; allow California, Nevada,=20 Oregon and Washington to adjust daylight savings time; and allow small,=20 independent power generators to escape exclusive contracts with utilities i= f,=20 in the future, they are not paid by the utilities.=20 While Democrats complained the bill would do little to provide immediate=20 relief to California and other Western states, subcommittee Chairman Joe=20 Barton, R-Tex., said, "it's the only game in town that will help."=20 "We can reduce the number of blackouts, we can minimize the time of the=20 blackouts if we pass this measure...," he said.=20 Energy task force expected to recommend tax breaks=20 By H. Josef Hebert ASSOCIATED PRESS=20 May 10, 2001=20 WASHINGTON =01) The Bush administration's energy task force will urge relax= ing=20 clean air requirements to help refiners meet gasoline demand, and call for= =20 tax breaks for some renewable energy such as wind and solar panels, accordi= ng=20 to government sources.=20 The refinery proposal is aimed at addressing a petroleum industry complaint= =20 that federal and local air quality rules often require production of slight= ly=20 different blends of gasoline, putting added strain on the supply and=20 distribution systems.=20 The so-called boutique blends of gasoline have been the subject of vigorous= =20 complaints from refiners, who argue that they are not needed to meet federa= l=20 air quality goals, but prevent shifting of gasoline supplies where they are= =20 most needed.=20 It was not clear Thursday whether the proposal would assume a waiver in som= e=20 cases of reformulated gasoline, which accounts for about a third of the=20 gasoline sold nationwide. This cleaner gasoline contains an oxygen additive= =20 and is required in areas with serious pollution problems.=20 The energy task force is headed by Vice President Dick Cheney.=20 Separately, the House took its first action Thursday to try to ease=20 California's power problems this summer, but in a subcommittee vote rejecte= d=20 Democratic demands for price controls on Western wholesale electricity.=20 The bill, approved by an Energy and Commerce subcommittee by a 17-13=20 party-line vote, "will not stop blackouts," said Rep. Joe Barton, R-Texas,= =20 its chief sponsor, but give California some additional tools to boost=20 supplies this summer.=20 In a letter to Barton, California Gov. Gray Davis said the measure "will do= =20 little to address our current situation." He urged approval of price caps o= n=20 soaring wholesale electricity prices. Caps were rejected by a 20-12 vote wi= th=20 solid GOP opposition including the three California Republicans on the=20 subcommittee.=20 The Cheney task force, which will present its report to President Bush next= =20 week, also will propose regulatory relief for construction of nuclear power= =20 plants and tax incentives for development of technologies that make coal le= ss=20 polluting.=20 Both nuclear and coal, which together account for nearly three-fourths of t= he=20 electricity produced, are essential to meet future energy needs, the task= =20 force will declare. While urging expanded development of natural gas, the= =20 report will warn against relying too heavily on a single energy source=20 including natural gas.=20 While the energy blueprint will focus heavily on long-range plans to boost= =20 energy supplies, the administration in recent weeks has scurried to include= =20 additional conservation and energy efficiency measures.=20 Fearing a backlash from environmentalists, Republicans and Democrats in=20 Congress have urged the administration to not ignore efficiency and renewab= le=20 energy sources.=20 "We need a balanced approach. We need renewables and conservation," said Se= n.=20 Frank Murkowski, R-Alaska, chairman of the Energy and Natural Resources=20 Committee, who also is an advocate for the measures to expand supplies=20 including drilling in the Arctic National Wildlife Refuge.=20 The task force will urge Congress to approve drilling in the refuge.=20 The task force's efficiency and renewable proposals will focus heavily on= =20 providing tax incentives including tax breaks for the development and=20 purchase of more fuel efficient "hybrid" gas-electric automobiles,=20 residential solar panels, wind generation, and development of hydrogen fuel= =20 cells, according to sources who spoke on condition on anonymity.=20 In other energy-related developments Thursday:=20 =01)Senate Democrats complained that they have been "left in the dark" abou= t the=20 administration's energy plans and should have been consulted by the Cheney= =20 task force.=20 =01)Sen. Byron Dorgan, D-N.D., said he will soon introduce legislation to c= reate=20 a special House-Senate committee to investigate soaring energy prices. He= =20 said there are all the indications of price manipulation and a committee=20 "would keep the spotlight" on the electricity and gasoline markets.=20 =01)Sen. Dick Durbin, D-Ill., called for creation of a national consumer en= ergy=20 commission that would give a voice to consumers in the debate over energy= =20 shortages and rising prices.=20 NEWS ANALYSIS Power Rescue Plan Rests on Many 'Ifs'=20 By NANCY VOGEL, RICH CONNELL and ROBERT J. LOPEZ, Times Staff Writers=20 ?????The success of Gov. Gray Davis' plan to end California's energy crisis= =20 rides on assumptions that, if wrong, could lead to billions of dollars in= =20 runaway costs for taxpayers. ?????Davis, who signed a historic $13.4-billion bond measure Thursday to=20 finance the plan, has refused to release key data and presented a single=20 model for how California will buy electricity--and pay for it--over the nex= t=20 15 years. ?????If Davis and his cadre of financial advisors are right, the state will= =20 emerge from the most ominous period of the crisis in less than two years,= =20 flush with cash and the prospect of electricity rate cuts. By then, the hop= e=20 goes, the power suppliers Davis has vilified will be reined in. ?????If his predictions are off by modest margins, which even many state=20 officials and energy experts say is likely, the state may have to employ=20 tactical blackouts to control costs, siphon money that could be used for=20 other services, go deeper in debt or raise electricity rates above the reco= rd=20 increases of this year. ?????The governor's plan largely rests on these crucial assumptions: that= =20 consumers will conserve a record amount of power at peak usage times, that= =20 energy prices will drop precipitously, and that the state will lock in far= =20 more contracts for long-term power. But those three assumptions could prove= =20 faulty, according to government financial records and interviews with state= =20 officials, Wall Street analysts and energy experts. ?????Davis is banking on that troika to quickly tame the wild prices of=20 last-minute power--which hit an apparent record of $2,000 for a megawatt-ho= ur=20 Wednesday. Such purchases so far have put the state on the hook for $6=20 billion and pushed major utilities to the brink of ruin. ?????Davis' plan assumes that the state will reduce peak demand by 2,484=20 megawatts--enough to supply nearly 2 million homes--through three programs= =20 run by the California Independent System Operator, which keeps power runnin= g=20 to homes and businesses across the state. ?????But Cal-ISO managers say they will be lucky to achieve a fraction of= =20 that savings this summer. ?????They say that one of the programs listed in the governor's plan was=20 shelved because regulators had raised concerns about air pollution. Another= ,=20 aimed at businesses, is likely to yield only about half of the 600 megawatt= s=20 the governor has assumed will be saved when supplies are tight this summer,= =20 said Cal-ISO Project Manager Bill Wagner. ?????"There's a lot of 'ifs' in there," he said of the conservation program= ,=20 which would pay businesses to cut back during critical hours. He said the= =20 utilities are months behind in installing meters to measure the savings. ?????Officials at another state agency in charge of a similar conservation= =20 program, the Public Utilities Commission, also said they are not sure about= =20 hitting targets on which the bond plan is based. ?????PUC Senior Analyst Robert Strauss said he has no idea how many=20 businesses will agree to curtail electricity consumption in exchange for=20 cheaper power rates this summer. The program is only a month old, he said. ?????"We're in a new situation that we don't have good experience with,"=20 Strauss said. "Who's going to sign up for these programs? We don't really= =20 know." Another program that Davis hopes will conserve 1,600 megawatts has= =20 attracted interest from just two businesses since March. ?????"It's pretty ambitious to think we're going to get 1,600 megawatts by= =20 June in that program," said Cal-ISO's Wagner. ?????Beyond Davis' assumptions about conservation, the success of his=20 hard-fought bond measure relies heavily on how much the state will pay for= =20 electricity during the next two summers. If the price is higher than foreca= st=20 by Davis, the bond money could be consumed more quickly, potentially forcin= g=20 the state to borrow more, dip into tax funds or raise customer rates again. ?????To keep prices down, the Davis administration has struggled to lock up= =20 in contracts most of the peak-hour power needed for the next two summers to= =20 avoid premium, eleventh-hour prices. ?????In his effort to push his bond legislation through the Capitol, he has= =20 suggested that about 50 such contracts will be signed to produce half of th= e=20 peak demand the state needs. And that, his advisors say, doesn't count othe= r=20 contracts they think will materialize.=20 ?????So far, the administration has fallen far short, achieving final=20 agreements on only 28 contracts as of Thursday. ?????If that gap persists, the state will probably be forced to buy=20 electricity on the expensive spot market, which could eat into the bond mon= ey. ?????"I think the operative word is uncertainty," said Paul Patterson, an= =20 energy analyst with Credit Suisse First Boston. "There are too many pieces,= =20 [and] all you need is for one or two of those not to work out substantially= =20 and things change." ?????Patterson, who says he remains cautiously optimistic about the=20 governor's plan, was among a group of Wall Street analysts who were briefed= =20 last week by Davis' top advisors. ?????Some wondered about who would provide the additional power that Davis= =20 had incorporated into his plan. Others questioned whether investors would b= uy=20 the bonds with so many assumptions built into the measure. ?????During the briefing, the governor's advisors said one option being=20 considered is to refuse to pay the highest prices for power and "accept som= e=20 sort of rolling blackout scenario." ?????One of the governor's chief energy consultants, Joseph Fichera, told t= he=20 Wall Street analysts that if suppliers think they can profit by holding bac= k=20 power until the threshold of blackouts, the state may simply say no, leavin= g=20 them with no sale. ?????Through calculations that include contracts and conservation, Davis'= =20 advisors arrived at another assumption that has drawn skepticism. They insi= st=20 that the purchase of any power not under contract will average just $195 pe= r=20 megawatt-hour this summer--helping slash overall power costs by hundreds of= =20 millions.=20 ?????Critics say the California market is simply too volatile to forecast.= =20 Before Tuesday's blackouts, for example, prices on the last-minute market h= ad=20 been below $800 for a megawatt-hour, a considerable amount. But not as much= =20 as it was Wednesday when the state paid Houston-based Reliant Energy $2,000= ,=20 Davis said Thursday.=20 ?????A report by Republican Assembly members concluded that if Davis'=20 assumption that non-contracted power will average $195 is off by just 10%,= =20 electricity would cost an additional $250 million by September. Over two=20 years, those additional costs could soar to $1.1 billion, the GOP study fou= nd. ?????Democratic state Controller Kathleen Connell, whose staff has attempte= d=20 to analyze the governor's report, is warning that rising power costs could= =20 tear through the bond funds and possibly expose the state's general fund. ?????Connell accused the governor of tailoring his assumptions and numbers = to=20 neatly fit his goal of assuring the public--and Wall Street--that an end to= =20 the crisis is near. ?????Fichera, who helped prepare the report, insists that the=20 administration's bond plan is conservative and presents the most reasonable= =20 scenario of the converging forces of conservation and prices. ?????Even if things do not fall into place, Fichera said, there is an extra= =20 $1 billion packaged into the measure, along with an expectation of billions= =20 more in later years to cover any shortfalls. ?????"Any realistic scenario," Fichera said, "we believe we have the=20 resources to cover." ?????Fichera said he sees only a slim possibility that power costs in the= =20 next two years could outpace the available bond money, forcing the state to= =20 borrow more. He said such a loan could easily be paid back by the recent=20 utility rate increases, which would cover both dropping costs of power and= =20 the bonds within the next three years. ?????Fichera declined to provide The Times with figures showing at what poi= nt=20 higher power costs could consume the cushion he said is built into the=20 governor's plan. Public officials and newspapers, including The Times, have= =20 sued the administration for more details about the state's power costs. ?????But Davis and his consultants say key financial information must be ke= pt=20 secret to prevent energy traders from gaining more leverage in the state's= =20 power market.=20 ?????But that confidence was tempered in a state document given to Wall=20 Street analysts that recently accompanied an unrelated bond issue. ?????The document acknowledged that the assumptions underlying Davis'=20 financial plan to restore stability to the California electricity market we= re=20 "subject to many uncertainties." "There can be no assurance," the document= =20 concluded, "that there will not be future disruptions in energy supplies or= =20 related developments which could adversely affect the state's economy."=20 Copyright 2001 Los Angeles Times=20 NEWS ANALYSIS Bush, Rivals Don't Dare Ask Public to Make Sacrifices in Energy Crunch=20 By RONALD BROWNSTEIN, Times Political Writer=20 ?????WASHINGTON--Amid their looming conflicts on energy policy, President= =20 Bush and his critics appear to have reached agreement on an unlikely point:= =20 Neither side is preparing to ask for significant sacrifices from the public= =20 to respond to rising prices and squeezed supplies. ?????In the energy policy blueprint it will release next week, the=20 administration is expected to present enhanced production as the key to=20 easing the energy crunch. Democrats and environmentalists, in response, are= =20 stressing measures to prod manufacturers to design more energy-efficient=20 products, from cars to air conditioners. ?????But neither side is yet suggesting that ordinary Americans--whose=20 average energy consumption has increased steadily over the last 15 years--m= ay=20 have to scale back lifestyles that increasingly include mammoth sport-utili= ty=20 vehicles, dawn-to-dark home computer use and new houses 50% larger than a= =20 generation ago. ?????In fact, as the debate over Bush's plan approaches, both sides are=20 working overtime to insist that their solutions will allow Americans to use= =20 virtually as much energy as they want--without sacrifice. ?????In a striking declaration earlier this week, White House spokesman Ari= =20 Fleischer portrayed unconstrained energy use as virtually an American=20 birthright. "That's a big no," he answered when asked if Bush believes=20 Americans need to curtail their energy use. "The president believes that's = an=20 American way of life and that it should be the goal of policymakers to=20 protect the American way of life." ?????More surprising, environmentalists mobilizing to fight Bush's plan are= =20 sending a similar message. "We don't need to sacrifice a lifestyle in order= =20 to save energy," says Dan Becker, director of the global warming and energy= =20 program for the Sierra Club. ?????This improbable consensus reflects a deeper political calculation=20 shaping both sides' response to the energy challenge. After a decade in whi= ch=20 American life on almost every front--from energy to jobs to federal=20 revenues--has been defined by abundance, politicians have grown extremely= =20 reluctant to confront voters with hard choices and unpleasant alternatives. ?????The big question is whether either side's preferred solutions can=20 resolve the long-term energy problem without forcing Americans to face at= =20 least some of those hard choices. ?????Compared to most issues, public opinion about the energy debate is=20 unformed, analysts in both parties agree. That's largely because few=20 Americans have thought much about the problem since the last gas lines=20 disappeared 20 years ago. "People aren't settled on what are the causes of= =20 the problem, let alone what are some of the solutions," says pollster Mark= =20 Baldassare, a senior fellow at the Public Policy Institute of California. ?????As the struggle to shape public opinion begins, the central division i= s=20 likely to exist between Bush's emphasis on new production and the=20 Democratic/environmentalist push for greater reliance on renewable energy a= nd=20 conservation. But that loud dispute threatens to obscure the remarkable=20 convergence on an equally important point: To the extent either side sees= =20 conservation as part of the solution, they portray it primarily as somethin= g=20 done for consumers rather than by consumers. ?????White House aides say Bush isn't likely to completely ignore the value= =20 of individual conservation; the Democratic energy alternative includes a=20 provision that could eventually compel the government to discourage the use= =20 of vehicles with poor fuel efficiency. But overall both sides are promising= =20 minimal disruption--a stark contrast to the admission by California officia= ls=20 that higher prices are needed to deter electricity consumption. ?????Indeed, it's telling that, instead of discussing conservation, both Bu= sh=20 and his critics are increasingly talking about energy efficiency. That=20 formulation implies engineering strategies rather than lifestyle changes to= =20 reduce consumption. "With technology, there's no reason why . . . you've go= t=20 to live in the dark, turn out all the lights, don't enjoy the things that o= ur=20 modern society brings you," Vice President Dick Cheney said this week. ?????Looming over these political and rhetorical calculations is the ghost = of=20 President Carter, whose administration was plagued by repeated energy shock= s=20 in the late 1970s. When Carter unveiled his comprehensive energy plan just= =20 months after taking office in 1977, his message hit a strikingly different= =20 note: The crisis, Carter said, "will demand that we make sacrifices and=20 changes in every life." ?????Behind those words, Carter offered an agenda bristling with thorny ide= as=20 to discourage energy use: new taxes on gas-guzzling cars, automatic taxes o= n=20 gasoline triggered when consumption rose too fast, utility reforms that=20 increased costs for the heaviest users. ?????But Congress rejected almost all these ideas, focusing instead on tax= =20 incentives to encourage more efficient energy use, and Carter's efforts to= =20 encourage voluntary conservation (like turning down the heat in winter)=20 became a lasting symbol of weakness and ineffectuality. ?????Today strategists on both sides agree that the public is even less=20 inclined to sacrifice. And in that climate, neither Bush nor Democrats are= =20 focusing on a paradox central to the energy riddle: While most products hav= e=20 grown more energy efficient over the past generation, energy use per person= =20 in America is still rising. ?????In the immediate aftermath of the 1970s oil shocks, per capita U.S.=20 energy use declined by roughly 8% from 1973 through 1985. But as the memory= =20 of those disruptions faded, energy use per person increased almost 10% from= =20 1985 through 1999, according to the federal Energy Information Administrati= on. ?????On several fronts, it appears the demand for bigger energy-intensive= =20 products is offsetting the efficiency gains of improved technology. Take=20 homes. In an April study, the National Assn. of Home Builders concluded tha= t=20 because of such innovations as greater use of insulated windows and more=20 efficient furnaces, new homes today use energy twice as efficiently as they= =20 did 30 years ago. But despite those improvements, the overall trend among n= ew=20 homes is toward greater energy consumption. ?????In the first years after the 1970s oil shock, average fuel efficiency= =20 for all passenger vehicles in America steadily increased, peaking at 25.9= =20 miles per gallon in 1987. Since then average fuel efficiency has declined,= =20 dropping to 24 mpg in 2000, the lowest it has been since 1980, according to= =20 the Environmental Protection Agency. ?????Some analysts think both sides are selling the public short by exempti= ng=20 them from sacrifice in the growing energy debate. "Americans have heard=20 messages about changing their ways and have been accepting when it comes to= =20 conservation," says Baldassare. ?????But the dominant instinct is to target other causes--and solutions--fo= r=20 the challenge, with Bush blaming environmental restrictions that have block= ed=20 drilling or new power plant construction and Democrats pointing fingers at= =20 oil companies, car manufacturers and the administration's links to both. ?????"Nobody wants to be in a position of telling the American public they= =20 can't have what they want," acknowledges one top Bush political advisor. Copyright 2001 Los Angeles Times=20 House Committee Rejects Electricity Price Controls=20 Strategy: In a blow to California's governor, Congress signals it won't rei= n=20 in soaring costs.=20 By GREG MILLER and RICHARD SIMON, Times Staff Writers=20 ?????WASHINGTON--In the first test of congressional sentiment on California= 's=20 power problems, a House panel on Thursday rebuffed an effort by Democratic= =20 lawmakers to legislate price caps on wholesale electricity. ?????The proposal, voted down 20 to 12 by the House energy and air quality= =20 subcommittee, would have required the Federal Energy Regulatory Commission = to=20 impose price controls keyed to the cost of generating power. ?????The Republican-controlled panel went on to approve a bill containing a= =20 number of less aggressive energy crisis measures, such as allowing Californ= ia=20 to relax environmental restrictions on power plants and extending daylight= =20 saving time to reduce evening electricity consumption. ?????But the vote on price controls, which split largely along party lines,= =20 was the most contentious issue addressed by the subcommittee. Although pric= e=20 cap advocates are expected to press their campaign at least twice more in t= he=20 House, Thursday's vote was a significant setback. It signaled that Congress= =20 is not inclined to rein in soaring energy prices, despite repeated pleas fr= om=20 Gov. Gray Davis and other state officials to do so. ?????Rep. Henry A. Waxman (D-Los Angeles), who offered the price control=20 measure as an amendment to the energy bill, argued that it would protect=20 consumers from price gouging while preserving "reasonable" profit margins f= or=20 power suppliers. ?????Without price controls, he said, the bill "does not do for California= =20 what we need, and it does a lot of things for our state we don't want." ?????But the other three Californians on the subcommittee--all=20 Republicans--disagreed, and voted against Waxman's amendment, saying they= =20 believe price controls would exacerbate the problem by discouraging=20 investment in new sources of energy. ?????"I recognize there's tremendous political pressure on us, but do not= =20 believe it's the right thing to do," said Rep. Mary Bono (R-Palm Springs). ?????She was joined in voting against the measure by Reps. Christopher Cox= =20 (R-Newport Beach) and George P. Radanovich (R-Mariposa). The three Californ= ia=20 Republicans ensured the amendment's defeat, because one Democrat who voted= =20 against the measure, Rep. Ralph M. Hall of Texas, said he would have=20 supported it if all of the California members of the subcommittee had done = so. ?????In Sacramento, Davis lashed out at Bono, Cox and Radanovich for opposi= ng=20 price caps. ?????"I find it very surprising that people here in California experiencing= =20 this crisis can go back to Washington and vote against the best interests o= f=20 constituents of this state," Davis said. ?????Waxman indicated he would attempt to revive the price cap amendment wh= en=20 the bill is taken up by the full House Energy and Commerce Committee. ?????A final test could come later this month, when the full House is=20 expected to vote on the bill. Four California Republicans who are not on th= e=20 energy committee have already signaled they would support a price control= =20 amendment. ?????Thursday's vote was the first congressional action directed at=20 California's energy crisis, and underscored the extent to which the center = of=20 political debate on the issue is shifting from Sacramento to Washington. ?????Next week, the White House plans to unveil a comprehensive national=20 energy strategy. The plan is expected to emphasize long-term solutions,=20 ranging from new oil exploration in Alaska to construction of hundreds of n= ew=20 power plants and refineries. ?????With California experiencing rolling blackouts and gasoline prices=20 surging nationwide, the White House has become increasingly sensitive to=20 criticism that its plan won't provide much immediate help. ?????At a news conference Thursday, White House spokesman Ari Fleischer=20 stressed that "the president's focus is going to be on doing everything he= =20 can for all terms: short-term, medium-term and long-term." ?????House Republicans attending Thursday's subcommittee session were caref= ul=20 to endorse the administration's position that the federal government's=20 ability to help California in the short term is limited. ?????"We can't make it rain. We can't make it snow. We can't make it cool i= n=20 Palm Springs," said Rep. Joe Barton (R-Texas), sponsor of the emergency bil= l=20 and chairman of the subcommittee. ?????Still, he said, Congress can provide some assistance. Barton's bill,= =20 which was approved 17 to 13 by the subcommittee, contains more than a dozen= =20 provisions designed to curb consumption and enhance power supplies. ?????Some of the key provisions would:=20 ?????* Authorize California's governor to waive some emission requirements = on=20 natural gas-fired power plants on "emergency" days of high demand. Democrat= s=20 said Davis hasn't sought such discretion, and the measure is unlikely to he= lp=20 because environmental regulations have not hindered power generation. ?????* Allow energy users to resell some of the electricity they are entitl= ed=20 to consume but don't. Republicans said this would create a financial=20 incentive to conserve, but Democrats said they fear it would undercut=20 existing state programs that reward conservation. ?????* Allow some power suppliers to suspend contracts with financially=20 strapped utilities. The measure is designed to enable companies that have c= ut=20 off supplies for lack of payment to cut new deals with other utilities or= =20 users. ?????* Require federal facilities in states where electricity emergencies= =20 have been declared to curb their consumption by at least 20% compared with = a=20 year earlier. ?????* Permit California to extend daylight saving time beyond October. ---=20 ?????Times staff writers Edwin Chen in Washington and Dan Morain in=20 Sacramento contributed to this story. Copyright 2001 Los Angeles Times=20 Nonprofit Shrugs at Pleas to Conserve=20 Power: Ayn Rand Institute blasts calls to use less electricity. Utility and= =20 government officials defend conservation.=20 By BOB POOL, Times Staff Writer=20 ?????Their other electricity customers may be following the Southern=20 California Edison Co.'s plea to conserve electricity during the current=20 energy crisis. ?????But don't expect anyone to be going room-to-room flipping off lights a= nd=20 turning down air conditioning in a fourth-floor suite at one Marina del Rey= =20 office building. ?????That kind of conservation is "immoral" and "un-American," say those=20 working at the Ayn Rand Institute international headquarters on Admiralty W= ay. ?????The 15-year-old nonprofit group is run by devotees of novelist and=20 philosopher Ayn Rand, who died in 1982. It is a clearinghouse and education= al=20 center for those who embrace Rand's theories of individualism and=20 laissez-faire capitalism. ?????Her philosophy, Rand wrote, "is the concept of man as a heroic being,= =20 with his own happiness as the moral purpose of his life, with productive=20 achievement as his noblest activity." ?????Rand--whose first name rhymes with mine--is best known for the novels= =20 "The Fountainhead" and "Atlas Shrugged," which together have sold 20 millio= n=20 copies. ?????Institute leaders are blasting calls for electricity conservation and= =20 the executive order issued last week by President Bush that directs operato= rs=20 of federal buildings in California to reduce energy consumption. ?????"Expecting the American people to lower their standard of living is an= =20 immoral idea," said Yaron Brook, the institute's executive director. ?????"Conservation is not a long- or short-term solution to the energy=20 crisis. Conservation is the un-American idea of resigning oneself to doing= =20 with less--like a sick person who stops seeking a cure and resigns himself = to=20 living with his illness." Instead, he said, market forces should prevail to= =20 increase power supplies and reduce demand. ?????On Thursday, Brook's statements surprised officials pleading with=20 Californians to turn off lights and reduce air conditioning to help prevent= =20 rolling blackouts. ?????" 'Un-American?' I've never heard that before," said Tom Boyd, an Edis= on=20 spokesman. "We and other utilities are urging our customers to conserve=20 electricity and use it wisely." ?????Lori O'Donley, a spokeswoman for the California Independent System=20 Operator, the agency that monitors power consumption and orders rolling=20 blackouts when supplies run low, said that "there are times we feel=20 conservation has made a difference" in calling or not calling for blackouts= . ?????A White House spokeswoman said President Bush stands by his call for= =20 conservation. ?????"The president believes the federal government should do its part. He= =20 takes the energy crisis in California very seriously and believes it is rig= ht=20 and appropriate to explore how we can conserve energy," Claire Buchan said. ?????Brook disagrees. ?????The 40-year-old former Santa Clara University finance professor has=20 headed the institute since last August. It has 16 staffers and operates on = a=20 $3-million annual budget financed by about 4,000 contributors--all firm=20 believers in Ayn Rand's philosophy. ?????Brook said he was a teenager living in Israel when he read "Atlas=20 Shrugged" and was immediately converted from the concept of socialism to=20 capitalism. ?????By coincidence, that novel features a countrywide blackout that is the= =20 result of massive government economic regulation. Rand writes on page 1,075= =20 of towns "reduced to the life of those ages in which artificial light was a= n=20 exorbitant luxury and a sunset put an end to human activity." ?????The towns were ruined by "rations, quotas, controls and=20 power-conservation rules." ?????Brook said the institute's Marina del Rey headquarters has thus far be= en=20 spared blackouts. But at his Tustin home, he and his wife and two children= =20 turn off lights when they aren't needed. ?????"I do it because I don't want to pay higher electricity bills," he sai= d=20 with a laugh. "I don't want to pay for something I don't use." Copyright 2001 Los Angeles Times=20 Restarting of Generators in O.C. Approved=20 By JENIFER WARREN, Times Staff Writer=20 ?????SACRAMENTO--Granting the governor's wish that power plants receive=20 speedy approval, the California Energy Commission cleared the way Thursday= =20 for the restarting of two idled generators that will double the output of a= =20 plant in Huntington Beach. ?????The commission's action allows AES Corp. to run the two controversial= =20 units for at least 10 years, provided that a midterm review finds that=20 operators are taking steps to limit any harm the plant may cause to seawate= r=20 quality and marine life. ?????The commission also required the company to sell all the power generat= ed=20 by the units, enough to supply about 337,500 homes, within California--a=20 restriction unprecedented in the state. ?????Some attorneys questioned whether the panel had the legal authority to= =20 impose such a restriction. But Commissioner Robert Laurie said that althoug= h=20 the limit "may not be good long-term policy," the state's power emergency= =20 warrants it now. ?????The commission's unanimous vote capped weeks of arduous negotiations= =20 involving AES, the state and Huntington Beach officials, who called the=20 10-year permit "a major disappointment." AES officials pushed for the 10=20 years on grounds that a shorter time frame would make the economics of the= =20 project iffy. ?????City officials preferred a five-year permit, saying the company's trac= k=20 record--it once paid a $17-million fine for allowing too much pollution to= =20 spew from its Long Beach plant--raises doubts about its future performance.= =20 The commission's staff also favored five years, with the possibility of a= =20 five-year extension. ?????"They have not exactly been great corporate citizens," Matt Lamb,=20 project manager for Huntington Beach, said of AES. "This is a grossly=20 inefficient plant that has been mothballed, and they're basically=20 kick-starting it. We don't think it deserves 10 years." ?????But Gov. Gray Davis--who has publicly pushed the commission to approve= =20 plants quickly--hailed the decision. "That's good news. That's supply we're= =20 counting on," he said. ?????The two Huntington Beach units are 40 years old and have been idle sin= ce=20 1995. But the energy crisis has made the old valuable once again, and AES= =20 plans to invest $150 million to re-power the generators--once scheduled for= =20 demolition. ?????The units represent almost 10% of the 5,000 megawatts Davis has said h= e=20 will bring into service this summer to avert an electricity shortage. ?????Recent estimates, however, suggest that the governor's pledge was over= ly=20 optimistic. ?????And although Davis and the Energy Commission are expecting the=20 Huntington Beach generators to begin operating in August, AES Southland=20 President Mark Woodruff said Thursday that it is unclear whether that goal= =20 can be met. ?????The AES project is among a few receiving fast-track approval under the= =20 governor's executive order earlier this year requiring expedited review of= =20 such plants. ?????In normal times, a 450-megawatt project such as the one approved=20 Thursday might have taken a year's worth of study, public hearings and othe= r=20 scrutiny, said Claudia Chandler, a commission spokeswoman. The expedited=20 review shrinks that to just 60 days. ?????That clearly rankles some Huntington Beach residents, who, in testimon= y=20 before the commission, wondered whether emissions, ocean pollution and othe= r=20 threats had been thoroughly studied. ?????"I think it's almost outrageous what's being foisted on the public,"= =20 said Rich Lloyd, who lives about a quarter of a mile from the plant. "What= =20 relief are you going to give to all these people, all these schoolchildren,= =20 who have to breathe these emissions for 10 years?" ?????Huntington Beach Councilwoman Shirley Dettloff said she too was troubl= ed=20 by the fast-track licensing process: "We're taking a risk as a city," she= =20 said. "If a price has to be paid, our citizens will be paying that price." ?????Critics are alarmed by a UC Irvine study concluding that the=20 plant--which now uses and discharges about 300 million gallons of seawater= =20 each day as coolant--may combine with ocean currents to attract sewage=20 released miles offshore.=20 ?????Many residents suspect that the plant contributed to pollution that=20 caused repeated beach closures in 1999. ?????Acknowledging the concerns, the commission required AES to spend $1=20 million to study whether water quality is at risk. ?????The company also must spend $2.5 million to monitor fish deaths caused= =20 by its seawater intake system. If too many white croaker, queenfish and oth= er=20 species become trapped and die, AES may be required to modernize its=20 equipment, commission officials said. ?????Other complaints have focused on the noise, smoke and smells produced = by=20 the plant. ?????Jane Riley, who lives nearby, plans her outings with son Daniel, 6,=20 around the thick clouds of yellow-brown smoke that are a part of everyday= =20 life. ?????"I try to avoid it. I take a look at which direction it's going," Rile= y=20 said. With two more units fired up, a bad situation will only get worse, sh= e=20 fears. ?????In other action Thursday, the commission approved a 95-megawatt "peake= r"=20 plant in the Central Valley city of Hanford. ?????Peaker plants can produce large amounts of power in short bursts, and= =20 the governor is counting on such facilities to make up about 40% of=20 California's electricity deficit this summer. ---=20 ?????Times staff writers Seema Mehta and Dan Morain contributed to this sto= ry. Copyright 2001 Los Angeles Times=20 Discovery Has City Flying High=20 Energy: Claim of huge natural gas deposit leads Delano to dream of wealth= =20 that may result. But some are skeptical.=20 By GEOFFREY MOHAN, Times Staff Writer=20 ?????DELANO, Calif.--At the signal from oil wildcatter F. Lynn Blystone,=20 roughnecks opened the valve of a greasy well rig, and with an earsplitting= =20 screech, a fat jet of natural gas blasted plumes of dust from the fields=20 outside this San Joaquin Valley town. ?????City officials covered their ears and dropped their jaws. ?????"That's the sound of money, loud and powerful," said Delano City Manag= er=20 Adela Gonzalez. ?????Indeed, the estimated 3 trillion cubic feet of coveted and pricey=20 natural gas that Blystone, president and chief executive of Tri-Valley Corp= .=20 in Bakersfield, claims to have tapped could be the biggest natural gas=20 discovery in California since the 1930s, and might rank among the top in th= e=20 lower 48 states. ?????And although the full extent of the find remains unproven--and industr= y=20 veterans urge caution--Blystone's well has set off a frenzy in this=20 impoverished agricultural town more famous for Cesar Chavez and the pickers= =20 who touched off a national grape boycott. ?????Delano is seeing dollar signs in the dust. It's talking power plants,= =20 pipelines, big industry, and independence from the grip of the statewide=20 energy crisis. ?????Energy consultants are lining up at City Hall, where visitors are urge= d=20 to use the stairs instead of the elevators to save electricity. Ordinary=20 residents are scurrying to learn if they own mineral rights, mostly finding= =20 that their dreams of overnight riches are about as real as the fictional=20 Clampett family on TV's "The Beverly Hillbillies." ?????"Everybody is doing their research, to see if they have mineral rights= ,"=20 said Delano Mayor Art Armendares. "We're getting control of our own destiny= .=20 We can provide citizens with uninterrupted electricity and gas. Then we can= =20 put up our shingle and attract industry." ?????Beyond grapes, almonds and other crops, industry is sparse in Delano,= =20 which recently attracted a Sears distribution center for the West Coast.=20 Seasonal unemployment reaches upward of 30%, Armendares said. ?????Even if Delano is poised to reap rewards, the state in general won't s= ee=20 much effect. That's because even the optimistic estimates of daily producti= on=20 wouldn't meet more than 1% of the state's whopping 7.5 billion cubic-foot= =20 demand, according to the state Department of Conservation. ?????That hasn't stopped Delano residents from dreaming. Among those who=20 might hit it big are City Manager Gonzalez's secretary, Phyllis Kraft, who= =20 hails from one of the area's old farming families. ?????"People aren't exactly treating me differently, but they are saying,= =20 'You're not going to forget me when you get rich and famous, are you?' " sa= id=20 Kraft, who remains cautiously optimistic about the claim. "It would be=20 wonderful if it's true, but let's just wait and see." ?????For years, children here have learned that, while the soil rendered=20 their food, its hidden riches could one day change their destiny. Few sold= =20 their mineral rights, even when they let go of their land. ?????As a result, the original landowners are most likely to get any=20 royalties from leasing those rights--generally 12.5% to 25% of gross=20 production, Blystone said. ?????Revenue from the field could be $7 billion or more over a predicted=20 lifetime of 85 years, he said. ?????Among the biggest winners so far appears to be the U.S. government,=20 which operates an antenna field for the Voice of America on about 800 acres= =20 of the 6,600 that Tri-Valley believes harbor natural gas. ?????But Emeterio "Butch" Navalta, who owns the plot where Tri-Valley=20 drilled, ignored the screech of the gas well Tuesday and sullenly hoed weed= s=20 from his 20-acre plot. He bought the land for $60,000 last year but didn't= =20 get the mineral rights. Although he gets $12,000 a year leasing drilling=20 space to Tri-Valley, he is bitter. ?????"I didn't even think about it," Navalta said. "I'm trying to find=20 someone who knows what to do." ?????Ruth Hiett, 85-year-old matriarch of a farming family with several=20 hundred acres in the claim area, said she'll hold tight to her rights.=20 Surrounded by almond trees and fallow fields, she lives in an aging clapboa= rd=20 house that is part of the family's original 1906 homestead. ?????"I don't know if it'll make me rich, but it might somebody," Hiett sai= d.=20 "Anybody who knows anything at all likes to think some day we'll hit it. Bu= t=20 some company still has to come and explore and do whatever they have to do.= =20 Who knows? No telling." ?????'It's Just a Story as Far as I'm Concerned' ?????Thus far, no one knows, or no one is telling. But the prospect of 3=20 trillion cubic feet of unassociated, or "dry," gas--meaning it is not mingl= ed=20 with oil--in an area that has not shown such deposits before raises ample= =20 skepticism. ?????"It's just a story as far as I'm concerned," said Lawrence Chroman Jr.= ,=20 a third-generation farmer who kept the mineral rights to the land he sold= =20 Navalta last year. "Whenever the price of gas or oil goes up, they have mon= ey=20 to go out and do exploration. It goes through cycles. I'm not willing to go= =20 any further until I see whether this thing develops or not." ?????Experts and regulators likewise cautioned that one gushing well does n= ot=20 prove a major find. ?????"All we can say is we are rooting for him," said Don Drysdale, spokesm= an=20 for the state Conservation Department. "It would help us all out. But the= =20 statements they are making are based on one well. We don't know enough yet.= " ?????Industry experts note that with natural gas going for $12 per thousand= =20 cubic feet, plenty of wildcat drillers have been scouring overlooked or=20 unlikely places in search of El Dorado. Many find little more than, well,= =20 Delano. ?????Tri-Valley, a public company whose stock trades at about $1.80, has be= en=20 through bankruptcy protection before, fighting off a hostile takeover by a= =20 creditor. And it has made one similar claim near Fresno, which proved dry.= =20 When it announced the Delano find April 11, its stock leaped 75%, and has= =20 since hovered just under $2. ?????The company will need about $100 million to drill about 40 wells that = it=20 says could yield a total of 80 million cubic feet per day for about 85 year= s.=20 That is well over the about 50 million cubic feet a day coming from the=20 state's most productive field, Rio Vista, according to the Conservation=20 Department, but still not enough to ease the state's crisis. ?????But because of the huge amount consumed daily in California, even if= =20 optimistic estimates in Delano pan out, the production there won't help eas= e=20 the state's crisis. ?????"We're not going to be able to materially affect the power needs of=20 California," Blystone cautioned. ?????Bolstering Blystone's claim is the East Lost Hills find reported in=20 February by Berkley Petroleum 25 miles west. That discovery has shown early= =20 promise of being at least as big as the Delano find. ?????The two potential deposits were made public within six weeks of each= =20 other, and nothing has been the same since in the area. ?????"There's almost been the equivalent of a Gold Rush to lease land all= =20 around the Berkley field," Kramer said. ?????Drysdale said, however, that his department believes the two finds are= =20 separate deposits. ?????Tri-Valley has mapped out 6,600 acres, and so far a substantial wedge= =20 lies within Delano boundaries, where the city owns mineral rights. ?????Virtually everything is speculative about the claim, particularly=20 royalties. But city officials think they could make $3 million a year--in a= =20 town with an operating budget of $6 million, dismally paved roads and=20 overcrowded schools. ?????Not only are they considering forming a municipal power authority, but= =20 they say they will waive about $1,000 in fees to landowners willing to anne= x=20 to the city, which could bring tax benefits on land where the wells might b= e=20 erected. ?????"I'm going to make a one-time offer to all these farmers that the city= =20 will pick up the cost of annexation," said Matthew Alexander, community=20 development director for Delano. "I see this as a window of opportunity." ?????Alexander and others have been to Sacramento to study the pros and con= s=20 of forming a municipal utility, and are convinced that building a power=20 plant, and using gas royalties to power it, is the answer. ?????"You're looking at a totally different town," Blystone said. ?????Small players like Navalta, however, suspect that Delano will be the= =20 same town as ever for them. ?????"It's supposed to be good for the city," he said. "They're going to ge= t=20 a lot of revenue. I just wish I could get something." Copyright 2001 Los Angeles Times=20 California; Opinion Desk Commentary Don't Write Off Davis Energy Plan ALAN BLINDER Alan Blinder, a professor of economics at Princeton University, was vice=20 chairman of the Federal Reserve from 1994-96. He is the senior advisor to= =20 Saber Partners, which is advising Gov. Gray Davis on energy policy 05/11/2001 Los Angeles Times Home Edition B-17 Copyright 2001 / The Times Mirror Company Might Californians finally be seeing a dim light at the end of the energy= =20 tunnel? This spring and summer will be difficult times unless everything=20 breaks just right. But Gov. Gray Davis' recently announced energy plan offe= rs=20 at least short-run management of the crisis--and a hope for a long-run=20 solution. And that's about all anyone should ask the government to do.=20 Ignoring the history and some mind-numbingly complex details, the electrici= ty=20 problem comes down to this: Demand now outstrips supply by a wide margin ev= en=20 on a normal day, and by much more on days of peak demand. With the utilitie= s=20 no longer credit-worthy, the state must fill the gap by buying on the=20 wholesale market. These days, that means buying high and selling low. Any comprehensive attack on this problem must have three components:=20 mechanisms for reducing demand, mechanisms for increasing supply and a pile= =20 of money to cover the bills while the medicine works. The governor's plan,= =20 while not perfect, has the three elements. It also avoids the wackier=20 suggestions from both the right and the left.=20 Let's work backward through the three components. First, the state needs=20 money to keep the lights on. One naive remedy would be to raise taxes to pa= y=20 all the bills. No danger that any politician will ever latch onto that one.= =20 But a related bad idea--raising retail electricity rates to cover all the= =20 costs--does have a following. Why is that a bad idea? Because the utilities= =20 are saddled with debt from the past. And things almost certainly will be=20 brighter (pun intended) in the future.=20 Like a family, when a government is faced with a huge, one-time expense--sa= y,=20 to build a highway--it generally borrows most of the money. That's sound=20 financial practice because it spreads what otherwise would be a ruinously= =20 high cost over time. Davis wants to spread the cost of the current crisis b= y=20 issuing bonds worth about $12 billion to $13 billion, secured by future=20 payments for electricity. I do not know whether this is exactly the right= =20 number. But the principle is clear, and it's too bad the Legislature delaye= d=20 the bond issue.=20 Next comes supply. Wishful thinkers on the right have a simple solution: Ju= st=20 let retail prices rise, and more supply will come. The trouble is that it= =20 won't, at least not in the short run. Over years, greater supply is the onl= y=20 lasting solution. But to expect much supply response in the short run is=20 dreaming.=20 The left has its own favorite silly idea: The state should seize control of= =20 power plants and take over the business of supplying electricity. Seize? Ho= w=20 much good would that do to California's business climate? And does anyone= =20 really believe that the state can, over the long run, generate and supply= =20 electricity better than private business? There are, in fact, traces of=20 public ownership in the Davis plan: The state is buying transmission lines,= =20 and a new public authority would build power plants if private industry fai= ls=20 to do so. But the governor sees public ownership as a last, not a first,=20 resort.=20 Finally, we come to the demand side, where true believers offer the same=20 remedy: Just let the retail price rise enough to cut demand back to the=20 available supply. Sound harsh? It is. Higher electricity prices must be par= t=20 of the solution, at least in the short run. But relying exclusively on high= er=20 rates would be foolhardy and perhaps even ruinous to California's economy,= =20 because titanic price hikes would be needed to cut demand by enough in shor= t=20 order. So we would wind up inflicting pain on consumers without calling for= th=20 greater generating or transmission capacity.=20 The governor at first resisted the conclusion that consumer prices had to= =20 rise. But he has now embraced it. His package includes not just price hikes= =20 for big energy users, but also financial incentives for those who reduce=20 consumption. More can be done in this regard, but he is at least on the rig= ht=20 track.=20 Will these conservation measures get California through the next few months= ?=20 I wouldn't bet on it. But unless the federal government truly caps wholesal= e=20 electricity prices temporarily, demand management is about the only short-r= un=20 game in town.=20 Pray for a cool summer and for a lot more rain behind the dams in the Pacif= ic=20 Northwest. High bills may not spur conservation=20 PG&E, critics agree increases are too small to change habits=20 David Lazarus, Chronicle Staff Writer Friday, May 11, 2001=20 ,2001 San Francisco Chronicle=20 URL: http://www.sfgate.com/cgi-bin/article.cgi?f=3D/c/a/2001/05/11/MN218961= .DTL=20 Looming increases in California power bills may help replenish state coffer= s=20 but will do little to promote conservation or reduce blackouts this summer,= =20 consumer activists, environmentalists and PG&E said yesterday.=20 In a rare convergence of views, Pacific Gas and Electric Co. agreed with th= e=20 utility's sharpest critics that the pending rate increases would be=20 insufficient to discourage electricity use.=20 While the heaviest residential power customers will see their June bills so= ar=20 by as much as 40 percent, most increases will range between 7 and 15 percen= t.=20 "Based on our studies, residential customers will not respond to changes in= =20 price signals of less than 20 percent," said Michael Shames, executive=20 director of the Utility Consumers' Action Network in San Diego.=20 "Forty percent is probably enough to send a signal," he added. "A 15 percen= t=20 increase is much less likely to have an impact."=20 If so, this would undermine what state regulators say is a primary goal of= =20 the rate increases, scheduled to be adopted Monday. Higher power bills, the= y=20 say, will result in cutbacks in power usage.=20 "By promoting energy conservation during summer peak hours," said Loretta= =20 Lynch, president of the Public Utilities Commission, "we attempt to limit= =20 blackouts and service interruptions in order to preserve public health and= =20 safety."=20 Gov. Gray Davis, who supports the plan to hand out rebates to those who can= =20 reduce power use by at least 20 percent, also said higher rates would lead = to=20 conservation.=20 "He thinks that if there's a financial incentive to conserve, then clearly= =20 consumers will do it," said Steve Maviglio, a spokesman for the governor.= =20 'NOT GOING TO BE ENOUGH'=20 The question now is whether the rate increases planned for customers of PG&= E=20 and Southern California Edison will do the trick.=20 "They're not going to be enough," said Harry Snyder, senior advocate at=20 Consumers Union in San Francisco. "This amount is not going to get us the= =20 levels of conservation we need."=20 Helen Burke, who oversees energy matters at the San Francisco Bay chapter o= f=20 the Sierra Club, agreed that a long, hot summer of blackouts remained likel= y.=20 "And if we get more blackouts, I'm sure the rates will have to be ratcheted= =20 up again," she said.=20 A PUC overview of how much typical PG&E bills will rise in June supports th= e=20 idea that the impact for most consumers will be minimal.=20 For example, a PG&E customer whose electricity usage is within 200 percent = of=20 predetermined limits will see monthly bills rise 7 percent, from $95 to $10= 1.=20 A heavier user -- within 300 percent of "baseline" limits -- will see month= ly=20 bills climb 15 percent, from $163 to $187.=20 The baseline usage figure -- included near the bottom of PG&E bills --=20 represents the minimal amount of power consumers require. It includes sever= al=20 variables, such as climate and time of year.=20 Only the heaviest users -- surpassing 400 percent of baseline -- would=20 experience rate increases of as much as 40 percent.=20 State regulators say almost half of all residential utility customers stay= =20 within 130 percent of baseline usage and thus would see no change in their= =20 power bills.=20 In other words, the majority of residential customers eligible for higher= =20 rates would see bills go up by no more than 15 percent.=20 John Nelson, a PG&E spokesman, acknowledged that this amount was unlikely t= o=20 promote widespread cuts in electricity usage.=20 "Increases on the order of 7 to 15 percent probably won't accomplish much= =20 conservation," he said.=20 "The only way you're going to see significant conservation this summer is a= =20 combination of higher prices, giving people conservation tips, and raising= =20 awareness among consumers that we're in a crisis," Nelson said.=20 Shames of the Utility Consumers' Action Network said state officials were= =20 being less than honest when they insisted that the rate increases were mean= t=20 first and foremost as a conservation tool.=20 "It's to recoup costs being incurred on the wholesale power market," Shames= =20 said. "That's it."=20 California has spent more than $6 billion since January purchasing=20 electricity on behalf of cash-strapped utilities.=20 INCREASES TO GENERATE $5 BILLION The pending rate increases will raise about $5 billion in additional=20 revenues, which will be merged with proceeds from a $13.4 billion bond=20 offering approved yesterday.=20 Yet even these sums represent only a fraction of the estimated $65 billion= =20 California will spend on electricity this year.=20 "What we should be doing is raising rates a lot more," said Severin=20 Borenstein, director of the University of California Energy Institute in=20 Berkeley.=20 He advocated increasing power bills this summer by as much as 75 percent ov= er=20 levels paid a year ago.=20 "That would get you conserving," Borenstein said.=20 E-mail David Lazarus at [email protected].=20 ,2001 San Francisco Chronicle ? Page?A - 1=20 Power plant owners want end to PG&E contracts=20 KAREN GAUDETTE, Associated Press Writer Friday, May 11, 2001=20 ,2001 Associated Press=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2001/05/11/s= tate2 143EDT0313.DTL&type=3Dnews=20 (05-11) 00:40 PDT SAN FRANCISCO (AP) --=20 The owners of at least 19 small power plants scattered throughout Californi= a=20 are now asking a bankruptcy judge -- along with state and federal power=20 regulators and lawmakers -- to set them free from their contracts with=20 bankrupt Pacific Gas and Electric.=20 Attorneys for the so-called qualifying facilities said a new pricing system= =20 recently ordered by the Public Utilities Commission lowers how much the QFs= =20 can charge for their electricity. That means many actually lose money when= =20 they run their plants because of soaring natural gas prices.=20 Those losses, as well as millions of dollars owed to all the state's roughl= y=20 700 QFs for past deliveries, have forced many of those plants offline, QF= =20 owners have said.=20 But for years QFs -- which harness solar, wind, biomass or geothermal power= =20 or use natural gas to generate electricity, steam and other energy -- have= =20 benefitted from the contracts, which allowed them to charge higher prices f= or=20 their electricity.=20 The qualifying facilities say that U.S. Bankruptcy Court Judge Dennis Monta= li=20 should set them free from their contracts, allowing them to sell their=20 electricity on the wholesale market instead.=20 Critics fear that would allow the QFs to gouge California by matching high= =20 power prices that have already forced the state to spend $5.2 billion to ke= ep=20 the lights on.=20 But representatives for four QFs from the Bakersfield area at a bankruptcy= =20 hearing Thursday pointed to this week's rolling blackouts as evidence the= =20 state needs every megawatt it can get. And until they get paid a "reasonabl= e=20 rate," they can't afford to make electricity in California, they said.=20 "If we're paid a rate that doesn't cover our costs we will financially fail= ,"=20 said Bruce Leaverton, a lawyer representing the QFs.=20 Montali said he didn't think setting a new pricing system was within his jo= b=20 description as a bankruptcy judge.=20 "Even though your side doesn't like the result, a lot of time and effort ha= s=20 gone into this decision," Montali said. He gave both sides until May 24 to= =20 debate before he makes his decision.=20 PG&E said Wednesday that only eight of the 300 QFs within its territory=20 remain offline for nonpayment reasons. Others are down for maintenance. The= =20 Independent System Operator, which manages the state's power grid, said onl= y=20 1400 megawatts of QF power remain offline statewide. That's an improvement= =20 over the 3,000 megawatts down last month.=20 The state receives about 6,000 megawatts of electricity from QF, according = to=20 ISO figures. That's enough to power about 4.5 million homes.=20 QF operators say the plants may be online, but they're only generating the= =20 bare minimum of electricity to get paid.=20 On the Net:=20 www.canb.uscourts.gov=20 www.pge.com=20 ,2001 Associated Press ?=20 Developments in California's energy crisis=20 The Associated Press Friday, May 11, 2001=20 ,2001 Associated Press=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2001/05/11/s= tate1 013EDT0147.DTL&type=3Dnews=20 (05-11) 07:13 PDT (AP) --=20 Developments in California's energy crisis:=20 FRIDAY: * Consumer activists, farmers, corporations and others meet at the Public= =20 Utilities Commission in San Francisco to argue about how the PUC wants to= =20 spread around recent rate hikes.=20 * State Treasurer Phil Angelides holds briefing about the plan to issue bon= ds=20 to repay the state for power buys.=20 * Residents of Mesa Verde and Blythe say they will protest the groundbreaki= ng=20 ceremony for the Blythe Energy Project, a 520 megawatt natural gas power=20 plant in Southern California.=20 * The state remains free of power alerts in the early morning as energy=20 reserves stay above 7 percent.=20 THURSDAY: * Grid operators say cooler temperatures are helping them meet California's= =20 electricity demands. Officials at the Independent System Operator declare a= =20 Stage 2 emergency, meaning the state is within 5 percent of running out of= =20 power, but say they don't expect blackouts.=20 * The state Assembly and Senate give final approval to a bill expediting=20 power plant siting. The bill now goes to the governor for his signature.=20 * The PUC holds a public hearing on the proposed rate structure. Two=20 proposals are on the table for consideration Monday: Each would make=20 businesses and farms pay the most, while shielding most residential=20 customers.=20 * Gov. Gray Davis signs a bill authorizing $13.4 billion in revenue bonds t= o=20 pay for power for customers of the state's three largest utilities. The bon= ds=20 will repay the state general fund for $6.7 billion authorized for power buy= s=20 since January and will finance future electricity purchases.=20 * State officials reveal they spent a record or near-record $1,900 per=20 megawatt hour Wednesday to avoid a third consecutive day of rolling=20 blackouts. The $319,200 the state paid Reliant Energy for 168 megawatt hour= s=20 at that price was enough to power 168,000 homes for an hour,=20 * Owners of small power plants ask U.S. Bankruptcy Judge Dennis Montali to= =20 order PG&E to release them from contracts to provide it electricity. Montal= i=20 decides to wait until May 24 to make a decision.=20 * The California Energy Commission licenses two power plants that should be= =20 able to deliver 545 megawatts by late summer: a 450-megawatt power plant=20 retooling project in Huntington Beach and a 95-megawatt summer reliability= =20 project in Hanford.=20 * A U.S. House subcommittee votes to allow California to extend Daylight=20 Savings Time to reduce consumption, among other provisions. But it rejects= =20 Democratic demands for price controls on wholesale electricity-prices on a= =20 party-line vote.=20 * Inspectors from the PUC and Independent System Operator, which runs the= =20 state's power grid, make their first check of a reported power plant outage= =20 under a policy announced Wednesday by Davis to verify generators aren't=20 artificially withholding electricity to drive up power prices. They find th= at=20 a 750 megawatt Bay Area plant operated by Mirant Corp. is legitimately down= =20 for repairs, but is expected to return to service Sunday.=20 * Edison International stock closes at $8.91, down 3 cents. PG&E Corp. gain= ed=20 a dime to close at $9.10.=20 WHAT'S NEXT: * Davis' representatives continue negotiating with Sempra, the parent compa= ny=20 of San Diego Gas and Electric Co., to buy the utility's transmission lines.= =20 THE PROBLEM: High demand, high wholesale energy costs, transmission glitches and a tight= =20 supply worsened by scarce hydroelectric power in the Northwest and=20 maintenance at aging California power plants are all factors in California'= s=20 electricity crisis.=20 Edison and PG&E say they've lost nearly $14 billion since June to high=20 wholesale prices the state's electricity deregulation law bars them from=20 passing on to consumers. PG&E, saying it hasn't received the help it needs= =20 from regulators or state lawmakers, filed for federal bankruptcy protection= =20 April 6.=20 Electricity and natural gas suppliers, scared off by the two companies' poo= r=20 credit ratings, are refusing to sell to them, leading the state in January = to=20 start buying power for the utilities' nearly 9 million residential and=20 business customers. The state is also buying power for a third investor-own= ed=20 utility, San Diego Gas & Electric, which is in better financial shape than= =20 much larger Edison and PG&E but also struggling with high wholesale power= =20 costs.=20 The Public Utilities Commission has approved rate increases of as much as 4= 6=20 percent on average to help finance the state's multibillion-dollar power=20 buys. The PUC is still determining how those increases will be spread among= =20 utility customers.=20 ,2001 Associated Press ?=20 GOP members of House oppose price cap plan=20 Three from Southern California vote against Feinstein on electricity=20 Carolyn Lochhead, Chronicle Washington Bureau Friday, May 11, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/05= /11/M N235199.DTL&type=3Dnews=20 Washington -- Three California House Republicans voted against Sen. Dianne= =20 Feinstein's proposal to cap electricity prices yesterday, as California=20 Democrats warned the trio would pay at the polls.=20 In a test committee vote, Republicans George Radanovich of Fresno, Chris Co= x=20 of Newport Beach and Mary Bono of Palm Springs all voted against the=20 Feinstein proposal, saying it would make blackouts worse.=20 California Democrats had offered it as an amendment to a House bill aimed a= t=20 ameliorating California's electricity crisis. The amendment failed 20 to 12= =20 on a mostly party-line vote.=20 Given that there is little the federal government can do immediately to=20 increase power supplies to California, price controls have become the pivot= =20 point of the debate in Washington over how to help the state.=20 PRICE-GOUGING ALLEGATIONS Democrats, led by Feinstein, insist that federal regulators by law must=20 intervene when prices become "unjust and unreasonable." Not doing so, they= =20 contend, puts California consumers at the mercy of price gouging by=20 wholesalers.=20 Republicans argue price caps would make the situation worse by discouraging= =20 energy generators from providing power to the state.=20 The Democrats held an impromptu press conference in the hallway afterward,= =20 accusing the Republicans of abandoning their state in its darkest hour.=20 "This Republican-dominated committee said that California should drop dead,= "=20 said Rep. Henry Waxman, D-Los Angeles.=20 "I don't know about their districts, but I'll tell you one thing, my=20 constituents know that they're being screwed, and they're being screwed by= =20 the out-of-state generators, and it's up to us to stand up for our=20 constituents," said Rep. Anna Eshoo, D-Atherton. "I don't know what those= =20 Republican members are going to say when they go home."=20 ANGRY GOVERNOR Gov. Gray Davis blasted the Republicans from Sacramento.=20 "I find it very surprising that people here in California experiencing this= =20 energy crisis can go back to Washington and vote against the best interests= =20 of the constituents of the state," Davis said at a press conference.=20 The Republicans argued the Democratic plan would have hurt California.=20 "The fact of the matter is, if you put price caps on, you create a better= =20 investment climate in Uganda than California," Radanovich said, "and I won'= t=20 vote for anything that'll keep us from solving our supply problem."=20 Cox contended that price controls would do nothing to prevent blackouts=20 because they would not increase supply or reduce demand.=20 "In many ways this is for Californians simply changing the subject from our= =20 immediate problems of May, June and July," Cox said. "No one is contending= =20 that price controls will help us meet the blackout challenges."=20 He also argued that because Feinstein's plan would exempt about half of=20 California's power suppliers from the caps, it would open the door to=20 "further chaos."=20 EXEMPTIONS Feinstein's bill, co-sponsored by Sen. Gordon Smith, R-Ore., would impose= =20 temporary price controls on wholesale Western electricity sales. But it=20 exempts municipal utilities such as the Los Angeles Department of Water and= =20 Power and big federal power marketers such as the Bonneville Power=20 Administration in Oregon.=20 Like private generators, these providers have profited handsomely from=20 soaring electricity prices.=20 Radanovich said the Democratic effort to force price caps was a way to shif= t=20 the blame for the state's electricity fiasco from "a bumbling governor"=20 (Davis) to President Bush.=20 The overall bill was approved 17-13 by an Energy and Commerce subcommittee= =20 chaired by Rep. Joe Barton, R-Tex., who said it "will not stop blackouts,"= =20 but could help increase power supplies this summer.=20 Chronicle staff writer Linda Gledhill contributed to this report. / E-mail= =20 Carolyn Lochhead at [email protected]=20 ,2001 San Francisco Chronicle ? Page?A - 19=20 PUC chief's proposal called petulant=20 Federal agencies would pay full tab for power=20 Zachary Coile, Chronicle Political Writer Friday, May 11, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/05= /11/M N230049.DTL&type=3Dnews=20 The state's top energy regulator says her proposal to force federal agencie= s=20 in California to pay "real time" prices for electricity could result in maj= or=20 energy savings.=20 But critics say the proposal by Public Utilities Commission President Loret= ta=20 Lynch is nothing more than a schoolyard slap at the federal government for= =20 refusing to rein in skyrocketing wholesale energy prices.=20 "It's just saying, 'You weren't nice to us, so we're not going to be nice t= o=20 you,' " said Commissioner Richard Bilas, a Republican, who opposes the=20 measure.=20 Lynch, a Democrat and appointee of Gov. Gray Davis, introduced the proposal= =20 this week as part of package of rate increases to be voted on Monday, which= =20 could jack up monthly electricity bills on heavy residential energy users b= y=20 40 percent and heavy commercial and industrial users by 50 percent or more.= =20 Under her proposal, federal buildings, offices and military bases -- which= =20 account for 1.5 percent of the state's energy load -- would pay rates based= =20 on the fluctuating price of power on the wholesale market, probably leading= =20 to huge increases at peak times.=20 Lynch said Wednesday the plan would force federal agencies to conserve=20 energy. She said the measure was not meant to punish the federal government= =20 for not intervening in California's energy crisis.=20 "It's just an experiment," she said.=20 "I'm sure what Loretta is saying is, 'Put up or shut up,' " fellow=20 Commissioner Jeff Brown, a Democrat, who backs the idea said yesterday. "It= =20 really puts the monkey on their back."=20 Brown said federal officials had urged state regulators to raise rates,=20 especially during peak times, to help cut demand. Lynch's plan would put th= at=20 theory to the test on federal buildings, he said.=20 Federal officials say they are conserving energy. And earlier this month=20 President Bush ordered all federal agencies to cut their electricity use by= =20 10 percent.=20 In California, federal agencies have slashed energy consumption by 25 perce= nt=20 since 1992, when Congress passed a law requiring conservation. Federal=20 buildings in San Francisco, Oakland and elsewhere are already dimming light= s=20 and setting thermostats at 78 degrees during power emergencies.=20 Mary Filippini, western region spokeswoman for the General Services=20 Administration, which manages federal offices, warned that any jump in ener= gy=20 costs would have to be passed on to taxpayers.=20 Filippini also cautioned that Lynch's proposal could threaten a deal to sel= l=20 California 12 megawatts of electricity a day from the Bonneville Power=20 Administration in Washington for $55 a megawatt. The deal went into effect= =20 March 1.=20 "We would have to rethink our contract with them if we had some issues with= =20 our (energy) pricing," Filippini said.=20 Even some advocates of real-time pricing say Lynch's plan to single out=20 federal agencies is misguided.=20 "It sends the signal that real-time pricing is something to be scared of=20 rather than something to really pursue as a tool to help us get through the= =20 summer," said Jim Bushnell, director of research for the University of=20 California Energy Institute.=20 E-mail Zachary Coile at [email protected].=20 ,2001 San Francisco Chronicle ? Page?A - 19=20 Sacramento decisions in state's power crisis=20 Source: Chronicle Sacramento Bureau Friday, May 11, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/05= /11/M N116335.DTL&type=3Dnews=20 In other developments in California's energy crisis yesterday:=20 BONDS APPROVED Gov. Gray Davis signed a bill that will allow the state to issue up to $13.= 4=20 billion in bonds to repay the general fund for past energy purchases and pa= y=20 for future purchases.=20 Davis blasted Republicans, who prevented the bill from passing with a two-= =20 thirds majority, which delayed the bond issuance for 90 days and scuttled= =20 Democrats' plans to get short-term loans to quickly replenish what the stat= e=20 has already spent out of the general fund on electricity purchases.=20 MEGAWATT PRICE SETTLED State officials confirmed they had spent $1,900 per megawatt hour for a tim= e=20 Wednesday as part of the state's effort to avert rolling blackouts. Oscar= =20 Hidalgo, a spokesman for the Department of Water Resources, said the state= =20 had purchased 168 megawatts from Reliant Energy at that price over a=20 three-hour period on the volatile spot market.=20 Hidalgo said it was the highest price per megawatt hour that officials coul= d=20 recall paying. The Davis administration has refused to release detailed=20 accountings of energy purchases, but documents obtained by The Chronicle th= is=20 year indicated the price per megawatt hour averaged roughly $300 in Februar= y=20 and March.=20 The state began purchasing power Jan. 17 because the state's investor-owned= =20 utilities could no longer afford to. California has spent about $6 billion = so=20 far.=20 BILL FOR FASTER RESULTS The Legislature sent Davis a bill intended to allow the state Energy=20 Commission and the Air Resources Board to get new power plants operational= =20 faster.=20 The bill shortens the time cities and counties have to review power plant= =20 projects to 45 days for the initial review and 100 days for the final revie= w.=20 It also contains $3 million for cities and counties to defray the cost of= =20 speeding up reviews of applications for new power plants.=20 Davis is expected to sign the bill, which won unanimous approval yesterday = in=20 the Senate.=20 ,2001 San Francisco Chronicle ? Page?A - 19=20 State leaders consider scheduled power blackouts=20 Posted at 10:09 p.m. PDT Thursday, May 10, 2001=20 JOHN WOOLFOLK State leaders are considering darkening sections of California on a rotatin= g=20 schedule as one way to take the frustrating surprise out of the rolling=20 blackouts expected to be frequent this summer.=20 The proposal to turn off power to large sections of the state on a regular= =20 basis rather than wait until the last minute to call a rolling blackout dre= w=20 considerable interest among lawmakers. They met to consider the issue=20 Thursday, just days after outages swept the state with only minutes of=20 warning.=20 ``We're talking about blackouts of such magnitude we just have to find a wa= y=20 to get people better notified,'' said state Sen. Debra Bowen, D-Redondo=20 Beach. ``People want to know whether it's in our best interest to simply pl= an=20 for outages, rather than subject ourselves to an out-of-control market. We= =20 may be better off doing that.''=20 But while scheduling power outages would make blackouts more predictable, i= t=20 may also make them more frequent than necessary. Customers might find=20 themselves in the dark even if plenty of power is available.=20 But the advantage of planned outages is that by lowering power demand, the= =20 state could curb the runaway power prices draining its budget and ``break t= he=20 back'' of the energy ``cartel,'' Bowen said.=20 Currently, the state pays whatever is necessary to keep the lights on.=20 Wednesday, state officials said they paid $1,900 a megawatt-hour to avoid= =20 blackouts, the most they ever have spent.=20 Residents and businesses complain that rolling blackouts would be more=20 bearable with more warning.=20 ``The overwhelming response from our constituents is, `We want=20 notification,'?'' said Assemblywoman Jackie Goldberg, D-Los Angeles.=20 Businesses pay price=20 Carl Guardino, president of the Silicon Valley Manufacturing Group and a=20 board member of the California Independent System Operator, which runs most= =20 of the power grid, said rolling blackouts have come with just two minutes'= =20 warning. He's trying to get a notification plan in place for the summer tha= t=20 would allow at least half an hour of notice.=20 ``A two-minute warning may be appropriate for a football game, but it's=20 inadequate to protect California's citizens and economy,'' Guardino said.= =20 With at least half an hour, businesses could fire up standby generators or= =20 turn off computers, assembly lines and other equipment that could be damage= d=20 by sudden blackouts, Guardino said. That could lessen the enormous costs of= =20 the blackouts to businesses.=20 The manufacturing group estimated that the first wave of rolling blackouts,= =20 which hit the Bay Area during a heat wave June 14, cost Silicon Valley=20 companies $100 million.=20 A month's worth of blackout days this summer -- a likely possibility -- cou= ld=20 cost California $16 billion and 15,000 jobs, Guardino said, citing a Bay Ar= ea=20 Economic Forum analysis.=20 Rolling blackouts, in which utilities cut power from one group of customers= =20 to the next for an hour or so, are ordered when power demand threatens to= =20 overwhelm available supplies and crash the whole system. It could take days= =20 to restore power after a systemwide failure.=20 Summer is critical because air conditioning is California's biggest power= =20 use. Grid managers expect the state to be short some 3,700 megawatts,=20 particularly in May and June, enough for more than 3 million homes. New pow= er=20 plants may lessen the shortage in late summer, but hydroelectric power coul= d=20 be more limited then.=20 Desert residents object=20 With rolling blackouts a virtual certainty, some lawmakers suggested planni= ng=20 the entire summer's outages months in advance.=20 ``I'm interested in calendar blackouts,'' said Assemblyman Mike Briggs,=20 R-Fresno. ``I'm talking about calendaring months in advance, `These are you= r=20 potential blackout days.'?''=20 Under the current system, about half of all customers are exempt from rolli= ng=20 blackouts because they are essential services like police or hospitals or= =20 share a circuit with them. The rest are divided among outage groups or bloc= ks=20 spread throughout each utility's service area, a move intended to prevent= =20 blackouts from affecting any region disproportionately.=20 Officials from desert districts oppose planning to turn off power in their= =20 areas. But they suggested reconfiguring circuits so cool coastal areas coul= d=20 go dark while hot regions are spared.=20 ``If you want to black out other parts of the state, that's OK by me,'' sai= d=20 Sen. Jim Battin, R-Palm Desert, adding that his desert constituents have pa= id=20 taxes to help coastal residents through earthquakes and mudslides. ``Now it= 's=20 our turn.''=20 The current system for dealing with power shortages was established under t= he=20 state's 1996 deregulation plan, with three stages of emergencies declared a= s=20 demand approaches the limits of supply.=20 During Stage 2 emergencies, utilities cut off businesses that have agreed t= o=20 lose power in exchange for lower rates. Stage 3 emergencies indicate rollin= g=20 blackouts are possible.=20 But state officials never expected to put such measures in place regularly,= =20 and the system's flaws have become evident over the past year.=20 Grid officials avoid making outage predictions because they fight for every= =20 last watt, said Terry Winter, the system operator president.=20 The system operator faces shortages each morning of anywhere from 7,000 to= =20 16,000 megawatts, differences usually made up throughout the day by=20 conditions that change by the minute, Winter said.=20 Planning outages around the state could work, Winter said. But he cautioned= =20 that transmission constraints, sudden plant outages and weather could still= =20 mean unexpected outages.=20 Lawmakers said even a vague prediction, like a weather forecast, would be= =20 better than nothing.=20 ``People listen to the weather forecasters on a regular basis, even when=20 they're wrong,'' Goldberg said.=20 Winter responded: ``I can be wrong on a regular basis.''=20 Staff writer Mark Gladstone contributed to this report.=20 Davis plan to help utility faces fight in Legislature=20 Posted at 9:42 p.m. PDT Thursday, May 10, 2001=20 BY DION NISSENBAUM=20 Mercury News Sacramento Bureau=20 SACRAMENTO -- With a plan to issue $13.4 billion in bonds to buy power behi= nd=20 them, state lawmakers are confronting their next major energy crisis=20 challenge: the governor's controversial plan to bail out nearly bankrupt=20 Southern California Edison.=20 But that proposal, which has received a cool reception in the Legislature,= =20 appears all but dead. And various factions are now lining up behind their o= wn=20 alternatives.=20 ``It has a snowball's chance'' in hell, Assemblywoman Sarah Reyes, D-Fresno= ,=20 said of the governor's deal.=20 Moderate Democrats want to give Edison $1.5 billion less for its transmissi= on=20 lines than Davis offered, while liberals are calling for the outright=20 takeover of the company.=20 And some lawmakers are growing concerned that the divisions will force Edis= on=20 to follow the lead of its northern cousin, Pacific Gas & Electric Co., and= =20 declare bankruptcy.=20 Despite the hurdles, Davis remains optimistic. On Thursday, the governor sa= id=20 he still thinks a modified version of his plan will ultimately win support= =20 from lawmakers.=20 ``It's one legislator at a time, but I believe we are making progress,'' sa= id=20 Davis, who met with legislative leaders Thursday afternoon to discuss his= =20 proposal and the alternatives.=20 Davis trumpeted his deal with Edison last month just days after PG&E stunne= d=20 the governor and state by filing for bankruptcy protection. The two utiliti= es=20 amassed enormous debts buying expensive electricity, but could not pass tho= se=20 costs on to their customers because the state has capped rates.=20 Too little, too much=20 The Edison agreement has been met with a barrage of criticism from all side= s.=20 Some lawmakers think the state has offered too much -- $2.76 billion -- to= =20 buy Edison's share of the transmission system used to shuttle electricity= =20 around California. Others complain that the deal doesn't force Edison to=20 ``share the pain'' and return some of its profits from generating power.=20 Some question the agreement to protect 20,000 acres of Edison-owned=20 wilderness and think it goes too far in allowing continued logging. Others= =20 think it doesn't go far enough.=20 ``I don't know of anybody who has said, `Yeah, this is a good deal,'?'' sai= d=20 Assemblyman Joe Nation, D-San Rafael.=20 Nation sits on what Assembly Democrats have dubbed their Plan B task force,= =20 which is looking at ways to rework the Edison deal or craft a different=20 proposal.=20 Nation and Assemblyman John Dutra, D-Fremont, are shopping around a=20 slimmed-down version of the Edison deal that would give the state a three- = to=20 five-year option to buy the transmission lines for $1.2 billion -- $1.5=20 billion less than the current offer.=20 The lawmakers also want to compel power companies to write off some of thei= r=20 profits and require Edison to use $400 million from its parent company to= =20 help pay off the utility's debt.=20 Other lawmakers are floating the idea of buying the entire utility instead = of=20 just its transmission lines. Under that proposal, if Edison goes bankrupt,= =20 the state would buy its stock and take control of the utility's dams and=20 nuclear plants, as well as its debts.=20 That alternative, however, has garnered little support from moderates.=20 ``This idea that we step in and purchase the entire utility is an East Germ= an=20 model,'' Nation said.=20 Edison executives have cautioned lawmakers not to tinker too much with the= =20 deal. The company has launched a $3 million media campaign to curry public= =20 favor.=20 Brian Bennett, Edison's vice president for external affairs, said the compa= ny=20 is open to some changes -- as long as nothing throws the tenuous agreement= =20 out of whack.=20 Risk of bankruptcy=20 ``Ideally, we would hope that after all the teeth gnashing that's going on,= =20 they'll see how difficult it is to reach an agreement and that, in the end,= =20 they'll adopt it in large part the way it is now,'' Bennett said.=20 At this point, none of the options appear to have enough momentum. And this= =20 stalemate, some worry, could force Edison -- like PG&E before it -- to thro= w=20 up its hands and declare bankruptcy.=20 ``It's really bite-the-bullet time,'' said one senior Edison executive.=20 ``Come up with a plan or we go bankrupt, and they deal with the fallout.''= =20 Mercury News Staff Writer Mark Gladstone contributed to this report.=20 Power plant owners want end to PG&E contracts=20 Posted at 6:38 a.m. PDT Friday, May 11, 2001=20 BY KAREN GAUDETTE=20 Associated Press Writer=20 SAN FRANCISCO (AP) -- The owners of at least 19 small power plants scattere= d=20 throughout California are now asking a bankruptcy judge -- along with state= =20 and federal power regulators and lawmakers -- to set them free from their= =20 contracts with bankrupt Pacific Gas and Electric.=20 Attorneys for the so-called qualifying facilities said a new pricing system= =20 recently ordered by the Public Utilities Commission lowers how much the QFs= =20 can charge for their electricity. That means many actually lose money when= =20 they run their plants because of soaring natural gas prices.=20 Those losses, as well as millions of dollars owed to all the state's roughl= y=20 700 QFs for past deliveries, have forced many of those plants offline, QF= =20 owners have said.=20 But for years QFs -- which harness solar, wind, biomass or geothermal power= =20 or use natural gas to generate electricity, steam and other energy -- have= =20 benefitted from the contracts, which allowed them to charge higher prices f= or=20 their electricity.=20 The qualifying facilities say that U.S. Bankruptcy Court Judge Dennis Monta= li=20 should set them free from their contracts, allowing them to sell their=20 electricity on the wholesale market instead.=20 Critics fear that would allow the QFs to gouge California by matching high= =20 power prices that have already forced the state to spend $5.2 billion to ke= ep=20 the lights on.=20 But representatives for four QFs from the Bakersfield area at a bankruptcy= =20 hearing Thursday pointed to this week's rolling blackouts as evidence the= =20 state needs every megawatt it can get. And until they get paid a ``reasonab= le=20 rate,'' they can't afford to make electricity in California, they said.=20 ``If we're paid a rate that doesn't cover our costs we will financially=20 fail,'' said Bruce Leaverton, a lawyer representing the QFs.=20 Montali said he didn't think setting a new pricing system was within his jo= b=20 description as a bankruptcy judge.=20 ``Even though your side doesn't like the result, a lot of time and effort h= as=20 gone into this decision,'' Montali said. He gave both sides until May 24 to= =20 debate before he makes his decision.=20 PG&E said Wednesday that only eight of the 300 QFs within its territory=20 remain offline for nonpayment reasons. Others are down for maintenance. The= =20 Independent System Operator, which manages the state's power grid, said onl= y=20 1400 megawatts of QF power remain offline statewide. That's an improvement= =20 over the 3,000 megawatts down last month.=20 The state receives about 6,000 megawatts of electricity from QF, according = to=20 ISO figures. That's enough to power about 4.5 million homes.=20 QF operators say the plants may be online, but they're only generating the= =20 bare minimum of electricity to get paid. Businesses blast electricity rate-hike proposal=20 Posted at 9:59 p.m. PDT Thursday, May 10, 2001=20 BY SAM DIAZ=20 Mercury News=20 Silicon Valley businesses are crying foul at the latest rate hike proposal = by=20 the California Public Utilities Commission, arguing they are being unfairly= =20 singled out and that the ripple effect will cause long-lasting damage to th= e=20 state's economic health.=20 State regulators on Wednesday put forward a plan that would hit commercial,= =20 industrial and agricultural users with potential power bill increases of 50= =20 percent or more while leaving moderate residential users mostly shielded.= =20 The commission is expected to vote on the proposal Monday.=20 The idea that businesses would carry the expense of the energy crisis on=20 their shoulders has left some fuming and others screaming for a real-time= =20 pricing plan that would reward those who conserve during high-demand hours= =20 and penalize those who don't -- both on the residential and business levels= .=20 ``We have been in front of the PUC with court pleadings, we've filed briefs= ,=20 we've met with everyone we can meet with inside the governor's office,'' sa= id=20 Earl Bouse, a vice president with Hansen Permanente Cement, which operates = a=20 plant off Interstate 280 in Cupertino.=20 ``With this sort of rate shift, industry simply cannot operate in Californi= a.=20 I'm hoping and praying that this is all just an administrative error of=20 stupidity.''=20 The idea that businesses would flee the Golden State as fast as they flocke= d=20 to it during the dot-com boom is very real under the PUC's proposal, said= =20 Carl Guardino, president and CEO of the Silicon Valley Manufacturing Group.= =20 ``The PUC may think that by shielding residential customers from paying our= =20 proportionate share that they are doing everyone a favor yet it's pretty ha= rd=20 to pay your bills when a disproportionate plan forces your employer out of= =20 business or out of California,'' Guardino said.=20 In recent months, states such as Michigan, Tennessee and West Virginia have= =20 been courting California businesses, assuring them that the availability of= =20 power is not a problem in their states.=20 And while a move may be enticing for some businesses, others have too much= =20 invested in their Silicon Valley presence to simply up and leave.=20 Real-time pricing=20 Cisco Systems, San Jose's largest employer, won't be packing up anytime soo= n,=20 said company spokesman Steve Langdon. ``San Jose is our home, and we fully= =20 intend to stay here,'' he said.=20 But that doesn't mean the company isn't frustrated with the thought of bein= g=20 hit with exorbitant energy bills, especially when it has gone out of its wa= y=20 to conserve.=20 Cisco has installed special lighting, retrofitted windows and put usage=20 regulators on equipment motors to help reduce energy, Langdon said.=20 But it seems that it's still not enough as the state gears up for a hot=20 summer and a demand for energy that is expected to exceed the supply.=20 There's been a call to develop a real-time pricing plan that would arm=20 residents and businesses with the data -- and financial incentives -- to cu= t=20 usage during the peak afternoon hours.=20 Frank Wolak, a Stanford University economics professor and chairman of the= =20 Market Surveillance Committee for the agency that operates California's=20 electricity transmission system, said energy pricing needs to be done in re= al=20 time.=20 ``If you increase the rate I pay for power in every hour, when am I going t= o=20 reduce my consumption?'' he asked. Power users will reduce during the hours= =20 that save them the most money, he said.=20 But that involves putting users on real-time energy monitoring plans.=20 Currently, most residents and businesses are charged a monthly rate for the= ir=20 total usage, regardless of whether that usage was at 4 p.m. or 4 a.m.=20 Adjusting rates=20 By adjusting the rates for the time of day -- and monitoring usage by the= =20 hour -- customers could save money by conserving when energy costs are high= =20 and using energy when costs are low. The financial incentive would also=20 reduce the demand during those peak hours.=20 According to PG&E, only about 3,200 businesses in its operating region have= =20 real-time meters -- without real time pricing. The meters allow customers t= o=20 monitor when their heaviest usage is and adjust it accordingly. But without= =20 the financial savings, there's little incentive to do anything more with th= e=20 data except to analyze it.=20 Hansen Permanente Cement is one of those businesses with a real-time meter.= =20 ``We recommended charging us more on the peak side and in the off-peak=20 leaving the rate where it was to begin in with,'' Hansen's Bouse said. But= =20 the request fell on deaf ears, he said.=20 ``The opinion was that no one was listening,'' he said. ``There might as we= ll=20 have been no pleadings.''=20 Contact Sam Diaz at [email protected] or (408) 920-5021.=20 Households must share power costs=20 Published Friday, May 11, 2001, in the San Jose Mercury News=20 FEAR of raising rates for household use of electricity has hindered the=20 resolution of California's energy crisis since it exploded in December.=20 A rate increase that could have saved the utilities from financial=20 catastrophe, had it been approved in January, eventually was enacted March= =20 27. In the meantime, the state had to jump into the business of buying powe= r=20 when Pacific Gas & Electric and Southern California Edison ran out of money= .=20 Now, the California Public Utilities Commission looks set to stumble again= =20 for fear of consumer wrath. A proposal from Loretta Lynch, PUC president, o= n=20 which electricity users will carry the burden of the March rate increase,= =20 goes too light on residents.=20 Low-income residents should be protected, and they will be. But raising bil= ls=20 for the rest of us an average of only $6 for using twice the baseline amoun= t=20 isn't sending residents the necessary conservation message. (Baselines=20 establish minimal levels -- about two-thirds of average usage.) Many=20 households can afford an increase of more than $6 a month.=20 Since residents aren't paying, businesses will have to. The average=20 residential rate, including those who would get no increase at all, is 17= =20 percent. The average industrial increase is 52 percent.=20 The full PUC should adjust the proportions, not to let business off the hoo= k,=20 but to dial its share back as the residential share gets dialed up.=20 ``Let business pay'' goes only so far in protecting residential customers.= =20 Residents are, after all, employees too. If the companies they work for are= =20 burdened too heavily, jobs start evaporating in the summer heat.=20 Lynch's proposal does point in some positive directions. It sets prices in= =20 five tiers, meaning the price per kilowatt steps up as usage increases for= =20 residents.=20 For large customers, the proposal makes some progress toward real-time=20 pricing -- that is, charging more for power at times of peak demand to=20 reflect the greater cost of buying it then.=20 But the state should have initiated a more aggressive conservation, meterin= g=20 and real-time pricing program months ago. And it should be hastening to get= =20 residents involved in it too. Failure to conserve fueled energy woes=20 Published Friday, May 11, 2001, in the San Jose Mercury News=20 BY PAUL KRUGMAN=20 GASOLINE prices are rising again, and the administration is rushing to turn= =20 this into another argument for its drill-and-burn energy strategy. But a lo= ok=20 at the causes of the current gasoline shortage actually suggests a quite=20 different moral: namely, that conservation ought to be a major element in o= ur=20 energy strategy, and that lack of conservation is a large part of what we'v= e=20 been doing wrong.=20 First things first: This year's gasoline price spike has nothing to do with= a=20 shortage of crude oil. Even if we had already punched the Alaskan tundra an= d=20 the ocean floor off Florida full of holes, we'd still be in the same fix. T= he=20 binding constraint right now is the nation's limited capacity to refine cru= de=20 oil into gasoline.=20 Why is refining capacity inadequate? No new refineries have been built in= =20 this country for 20 years, a point emphasized with obvious relish by Dick= =20 Cheney. His implicit subtext, of course, is that it's the fault of=20 environmentalist types who stood in the oil industry's way. That must be th= e=20 story, right?=20 Wrong. It's true that environmental rules have somewhat crimped the=20 production of our existing refineries. The problem is not so much the=20 strictness of the regulations as their lack of consistency: Each region has= =20 its own rules -- like the insistence of Midwestern states that gasoline=20 include corn-derived ethanol -- fragmenting the nation's production. But th= e=20 reason the oil industry didn't build any new refineries for two decades was= =20 that they weren't needed. In fact, right up until last year oil refining wa= s=20 a persistently depressed business, plagued by overcapacity.=20 Here's what happened: In the wake of the energy crisis in the 1970s, ordina= ry=20 people in the United States began conserving energy -- not as a ``sign of= =20 personal virtue,'' as Cheney sneeringly puts it, but because they wanted to= =20 save money. Cars, in particular, became much more fuel-efficient. Meanwhile= ,=20 the oil industry was subject to ``refinery creep,'' the tendency of refinin= g=20 capacity to grow through incremental improvements even when no new refineri= es=20 are built. The result was excess capacity and squeezed margins, right up to= =20 the late 1990s.=20 What finally brought us up against capacity constraints was a surge in dema= nd=20 that was partly due to the economic boom of the later Clinton years, but=20 mainly due to the renewed enthusiasm of Americans for huge, gas-guzzling=20 vehicles -- an enthusiasm, er, fueled by cheap gas. In 1998 gasoline was=20 cheaper compared with overall consumer prices than ever before in U.S.=20 history -- 60 percent cheaper than it was in 1981. The nation rushed out to= =20 buy ever-bigger SUVs -- and then suddenly discovered that we had run out of= =20 refining capacity. Refiners weren't frustrated by rules that prevented them= =20 from building new facilities; they were simply caught by surprise.=20 You have to bear this history in mind when parsing Cheney's recent speeches= .=20 To listen to him, you would imagine that we live in a country in which=20 powerful political forces oppose energy production and preach a return to t= he=20 Dark Ages. ``To speak exclusively of conservation,'' Cheney declared in one= =20 speech, ``is to duck the tough issues .?.?. it is not a sufficient basis --= =20 all by itself -- for a sound, comprehensive energy policy.'' In another=20 speech he ridiculed unspecified types for ``saying to the American people= =20 that you have to live in the dark, turn out all of the lights.'' The story= =20 according to Cheney, in other words, is that we have an energy shortage=20 because extreme conservationists prevented us from developing the supply=20 capacity that serious people knew we needed.=20 Need I point out that this, like so much of what one hears from this=20 administration, is a cynical misrepresentation? I defy Cheney to come up wi= th=20 examples of influential people who ``speak exclusively of conservation,'' l= et=20 alone anyone who says to the American people that they have to live in the= =20 dark. In fact, hardly any important politicians have spoken about=20 conservation at all -- never mind exclusively -- this past decade.=20 We will need to build more refineries -- and more power plants, and=20 pipelines, and so on. But it is ludicrous to suggest that our current energ= y=20 woes are the result of too much emphasis on conservation. It would be close= r=20 to the truth to say that we are in trouble now because our politicians=20 haven't dared even use the word. Economist Paul Krugman writes for the New York Times.=20 Generators win 10-year revival=20 To Huntington Beach officials' dismay, AES nets a long-term permit to fire = up=20 old but refurbished units.=20 May 11, 2001=20 By KATE BERRY The Orange County Register=20 AES Corp.'s power plant in Huntington Beach will welcome two refurbished=20 generators back online in July, according to plans. Photo: Leonard Ortiz / The Register ? ? California's electricity needs trumped local environmental concerns Thursda= y=20 as AES Corp. received a 10-year permit to fire up two old generators at its= =20 Huntington Beach power plant - angering city officials who wanted to restri= ct=20 the permit to five years.=20 The California Energy Commission allowed AES to restart the 40-year-old=20 generators on the condition that the company sell all power from the units = to=20 the state.=20 "We're certainly disappointed in having a 10-year permit, not five years,''= =20 said Huntington Mayor Pam Julien-Houchen.=20 Huntington Beach is the first full-time power plant approved under a=20 fast-track permitting process ordered by Gov. Gray Davis in January. In=20 addition, seven "peaker'' plants, which operate only during hours of peak= =20 demand, have been approved since January.=20 The approval ends a contentious five-month process that pitted Huntington= =20 Beach officials against the company.=20 The city, concerned about air and water pollution, wants AES to replace the= =20 plant with a modern, cleaner one. To gain approval to restart the mothballe= d=20 generators, AES agreed to pay $2.5 million for studies of the plant's effec= t=20 on ocean bacteria that may have contributed to beach closures.=20 In order to get the units running by mid-July, AES plans to begin nearly=20 round-the-clock construction "in a matter of days,'' said Aaron Thomas, a= =20 company spokesman.=20 Energy notebook=20 Davis signs bill to sell $13.4 billion in bonds for power=20 May 11, 2001=20 From Register news services=20 SACRAMENTO Gov. Gray Davis signed a bill allowing the state to issue $13.4= =20 billion in bonds to buy electricity, the largest municipal bond offering in= =20 U.S. history.=20 The bonds will be issued as early as August and will help repay the general= =20 fund. California has spent more than $6 billion buying power for PG&E Corp.= 's=20 Pacific Gas & Electric and Edison International's Southern California Ediso= n,=20 the state's two largest utilities. California is spending more than $50=20 million a day buying power, the state Department of Finance said.=20 "This is part of the solution, but it's not going to end all the problems.= =20 It's not going to stop until we start using less power or generating more= =20 power," said Clark Stamper, head of Stamper Capital & Investments in Santa= =20 Cruz, which manages about $430 million of municipal bonds.=20 Blackouts averted -- at $1,900 per megawatt-hour=20 SACRAMENTO The state spent as much as $1,900 a megawatt-hour to buy power= =20 Wednesday as state grid operators narrowly avoided a third consecutive day = of=20 blackouts, Gov. Gray Davis said, reiterating his call for federal price cap= s.=20 The $1,900 is a record or near record since the state purchases began in=20 January, said Oscar Hidalgo, a spokesman for the power-buying Department of= =20 Water Resources. The $319,200 the department paid Reliant Energy for 168=20 megawatt hours at that price was enough to power 126,000 homes for an hour,= =20 Hidalgo said.=20 Reliant spokesmen did not return telephone messages from the Associated Pre= ss=20 Thursday.=20 Task force wants more funds to promote efficiency=20 WASHINGTON A White House task force will recommend more funding for program= s=20 that promote energy efficiency, reversing some cuts made by President Georg= e=20 W. Bush, a senior administration official said.=20 The task force on energy policy, led by Vice President Dick Cheney, wants t= o=20 review current funding for conservation and renewable sources of power and= =20 propose "appropriate" increases for those considered valuable by private=20 companies, including Alcoa Inc., Bethlehem Steel Corp. and Weyerhaeuser Co.= =20 The recommendation follows lobbying by oil, aluminum, mining, paper, metal= =20 and steel companies last month against administration efforts to cut federa= l=20 financing of energy-related research.=20 Not saving for a sultry day=20 Some officials say conservation efforts so far aren't enough. Consumers say= =20 they're trying.=20 May 11, 2001=20 By CHRIS KNAP, TOM BERG, JIM RADCLIFFE and HANH KIM QUACH The Orange County Register=20 IRMA FLORES of Santa Ana has Greg Soloman and Francisco Gomez of the=20 Appliance Recycling Center of America remove her old fridge. She is using a= n=20 Edison rebate toward an energy-efficient one. Photo: Paul E. Rodriguez / The Register ? ? If Californians had conserved just 500 more megawatts - 1.5 percent -- the= =20 rolling blackouts this week could have been prevented.=20 The state Energy Commission and the governor have been congratulating=20 consumers for slashing their energy use by 9 percent.=20 But some experts question those numbers.=20 And, even the forecaster who compiled those figures called them "squishy."= =20 Operators of the state's power grid complain each time that supplies get=20 short that Californians aren't trying hard enough to save - although they= =20 acknowledge they have no scientific way of measuring conservation.=20 "Tuesday we forecast a peak demand of 35,500 megawatts. The actual peak was= =20 35,755. You tell me: How much conservation was there?'' asked Lisa Szot,=20 senior engineer at the California Independent System Operator.=20 Interviews and records show that Californians are taking baby steps, changi= ng=20 light bulbs and shutting off appliances. But for most, conservation is not = a=20 priority. Until power bills rise dramatically and blackouts hit their homes= ,=20 it probably won't be, experts say.=20 One thing is clear: Californians are not now conserving enough to keep the= =20 lights on during hot days. And experts think it will get worse as the weath= er=20 gets hotter.=20 "Californians can conserve their way out of this crisis,'' said Severin=20 Borenstein, an energy economist at the University of California Energy=20 Institute in Berkeley.=20 "But I'm pretty skeptical of that 9 percent savings figure, given what we'r= e=20 seeing on the demand side so far."=20 Demand for power on the hottest day last month was down 5 percent from 2000= =20 -- 1,580 megawatts.=20 Factor in the higher usage expected because of warmer weather and economic= =20 percent growth, and you have the 9 percent savings calculated by the Energy= =20 Commission and touted by Gov. Gray Davis.=20 Richard Rohrer, an energy forecaster for the commission, said his numbers= =20 include an adjustment for weather. That has the effect of making demand loo= k=20 lower than what the ISO is measuring.=20 "The data are squishy, but the numbers are telling a story. Peak demands ar= e=20 lower. Monthly energy use is lower,'' Rohrer said.=20 Crisis a concern, but 'You've Got to Live'=20 From the sidewalk of a Lake Forest street, the buzz of Liz Dye's=20 air-conditioning unit broke the silence.=20 It was Tuesday at 3 p.m., and rolling blackouts were just about to begin.= =20 Dye, 40, says she waits until 1 a.m. to run her dishwasher and has taught h= er=20 children to flip off lights when no one's in the room. But the Dye family= =20 needed a little cool-down Tuesday.=20 "I'll keep it on for two hours and then turn it off,'' she said.=20 In Mission Viejo, Norma Roman was at the laundromat washing a California=20 king-size comforter that won't fit into her home machine.=20 Roman, 33, says she dresses lightly so she can keep off the air conditionin= g=20 in her home, using ceiling fans instead. But Tuesday she was taking advanta= ge=20 of a break in her schedule to wash the comforter, even as Southern Californ= ia=20 Edison cut power to nearby neighborhoods.=20 "You take it into consideration, but you've got to live,'' Roman said.=20 That's pretty much the way most folks sized it up.=20 "Energy efficiency? No factor," said Jeff Ganoe, 38, of Garden Grove, on ho= w=20 he chose the dryer he bought at Home Depot this week after his old machine= =20 conked out. Color and style were more important factors.=20 What would it take to make him conserve?=20 "More blackouts," he said. "My electricity bill's only $10. But blackouts a= re=20 a big pain. I might change."=20 If the energy crisis is a war, then it seems we haven't seen enough=20 casualties yet to pitch in and do our part.=20 The most popular energy-saving item these days is a $15 curlicue of glass= =20 called the compact fluorescent light bulb. They screw into a typical=20 incandescent socket, last 13 times longer and use one-quarter the energy.= =20 At this stage of California's energy crisis, they constitute the front line= :=20 a small investment, eventual savings, and a tinge of pride about doing the= =20 right thing.=20 "It's definitely saving me money," said John Irwin, 61, of Garden Grove. "A= nd=20 I may not have to look at blackouts."=20 That remains to be seen.=20 On the hottest days between June and September, demand for electricity on t= he=20 California grid is forecast to be 47,500 megawatts, or about one-third more= =20 than what led to this week's rolling blackouts. This week, big generating= =20 stations that could have provided more than 12,000 megawatts of power weren= 't=20 running, primarily because they were down for maintenance.=20 Plus some alternative-energy generators, which make 700 megawatts of power= =20 from the wind and the sun, were refusing to generate power because the=20 utilities owe them millions of dollars.=20 Counting on a change in behavior=20 In total the ISO has generating capacity of about 44,000 megawatts and on= =20 most days imports another 4,000 megawatts of power. That's just barely enou= gh=20 to cover the forecasted energy needs-if nothing goes wrong.=20 Davis and the Legislature have enacted new conservation programs.=20 But independent experts don't think these efforts will save enough power -= =20 and they say the increases most consumers will see on their June power bill= s=20 won't be enough to spark a change in behavior.=20 Borenstein, the Berkeley economist, said he was in the state Capitol on=20 Tuesday, just before the blackouts.=20 "It was a typical summer day, and the temperature inside was 72 or 74=20 degrees, men were wearing suits and ties, and nobody was sweating,'' said= =20 Borenstein.=20 "If you turned all the air conditioning to 80 degrees, that alone could go= =20 most of the way to avoiding blackouts,'' he said.=20 "That's not pleasant, I know. But we are going to need aggressive action.'' Despite opposition, AES has the power=20 Many in Huntington Beach want the aging plant to run for five years, not 10= .=20 May 11, 2001=20 By KATE BERRY, JIMMY CHAI and CURT SEEDEN The Orange County Register=20 California's dire need for electricity took precedence Thursday over the=20 desires of Huntington Beach residents and city officials, who had struggled= =20 to limit two 40-year-old generators at the AES Corp. power plant to a=20 five-year license.=20 Though residents and city officials recognize that California is mired in a= n=20 energy crisis, many expressed dismay that AES received a 10-year operating= =20 permit for generators, which will undergo a $130 million refurbishment. The= =20 California Energy Commission granted the permit on the condition that all t= he=20 power from the units be sold to the state.=20 "What they expressed to us is that they needed 10 years to make the plant= =20 financially viable,'' said Garret Shean, a commission hearing officer.=20 Matthew Lamb, the city's real estate service manager, who has been on the= =20 front lines of negotiations between the city, AES and the commission, said= =20 any chance for a new plant at the site will now be shelved for 10 years.=20 "We can't argue that California needs the power,'' he said. "But this=20 community wants to have a modern plant. California doesn't want 1960s=20 technology that needs to be jump-started.''=20 Though residents complain about air and water pollution, many expected the= =20 permit to be approved.=20 "If we really need the power, I don't object,'' said Don Stack, who lives= =20 near the plant at Newland Street and Pacific Coast Highway.=20 Aaron Thomas, a spokesman for Arlington, Va.-based AES, said the two units= =20 are expected to be online in July, producing 450 megawatts - enough to ligh= t=20 from 337,500 to 450,000 homes.=20 "This facility will be cleaner than any of the new facilities coming online= =20 over the next couple of years.''=20 City officials said they were led to believe that the units would receive a= =20 five-year permit and then be subject to a completely new certification=20 process. Instead, the commission granted a full 10-year permit, with an=20 interim review after five years. That review would ensure the plant is in= =20 compliance with the permit, which requires environmental studies and steps = to=20 mitigate ocean bacteria levels if studies link the plant to bacteria that= =20 have caused beach closures.=20 City officials have asked the company to build a low-profile, modern plant,= =20 similar to an AES plant under construction in Redondo Beach. A new plant=20 would replace all five units on the 53-acre site in Huntington Beach=20 overlooking the Pacific.=20 Malcolm Weiss, a lawyer for the city, said officials are considering whethe= r=20 to appeal the permit. The city also could file an appeal with the South Coa= st=20 Air Quality Management District, which is expected to issue an air-quality= =20 permit and emissions credits to the plant within days so that construction= =20 can begin, Weiss said.=20 The Huntington Beach plant's five units include one peaker unit, which=20 operates only during Stage 3 power shortages. It will be required by the=20 commission to install air pollution controls by December 2002. The plant's= =20 Units 1 and 2 currently are offline while catalytic converters that reduce= =20 pollutants are installed. Those units are expected to be on line by July.= =20 National Desk; Section A=20 Many Utilities Call Conserving Good Business=20 By TIMOTHY EGAN=20 ?=20 05/11/2001=20 The New York Times=20 Page 1, Column 6=20 c. 2001 New York Times Company=20 SEATTLE, May 10 -- More than 20 years ago, as power companies were building= =20 nuclear plants across the country to meet the need for new electricity,=20 Seattle City Light invested instead in measures to promote energy efficienc= y.=20 In the years since, some of those plants have ended up in default, while=20 Seattle has saved enough energy to power the entire city for 18 months.=20 Hundreds of miles to the south, the city-run utilities in Los Angeles and= =20 Sacramento, have generally managed to avoid the rolling blackouts of recent= =20 months by opting out of the state's deregulation experiment and promoting= =20 conservation with near-religious fervor.=20 ''Over the last ten years, we have conserved enough energy to save us the= =20 equivalent of having to build one huge new power plant,'' said Mike Weedall= ,=20 a manager at the Sacramento Municipal Utility District. ''Instead, we like = to=20 say we built the conservation power plant.''=20 When Vice President Dick Cheney said last week that conservation could not = be=20 a centerpiece of energy policy, he left some utilities -- those that have= =20 spent 20 years trying to prove just the opposite -- feeling as though their= =20 efforts had been undermined. In his speech, he said, ''Conservation may be = a=20 sign of personal virtue, but it is not a sufficient basis for a sound,=20 comprehensive energy policy.'' The nation, he said, should build a new powe= r=20 plant every week for the next 20 years.=20 In recent days, Bush Administration officials have emphasized that their=20 energy policy will include some financial incentives for alternative power= =20 and energy efficiency. But they said that the nation still needs to build= =20 thousands of new power plants, no matter how well energy is used.=20 Bob Royer, a spokesman for the municipally run Seattle City Light utility,= =20 agreed that the country needs to build more power capacity. But he said tha= t=20 conservation efforts worked because they proved more popular with his=20 utility's customers.=20 ''These guys in the Bush administration are doing this manly stuff, putting= =20 their horns on to make it sound like conservation is for sissies,'' Mr. Roy= er=20 said. ''But we know from experience that conservation equals generation. Th= ey=20 are the same.''=20 Other utilities, even some that embrace conservation, agree with the Bush= =20 administration that the nation cannot conserve its way to energy=20 independence.=20 ''Cheney is saying that conservation won't solve the energy crisis, and we= =20 agree with that,'' said Gary Swofford, a vice president for Puget Sound=20 Energy, a private utility that serves nearly a million customers in western= =20 Washington. The company has just won approval from regulators to start a=20 program that lets people play less when they use electricity during=20 low-demand times .=20 Officials at most utilities say that some new power is needed to meet growt= h.=20 But many say that up to half of it can come from conservation or reliance o= n=20 renewable resources like wind, solar or small hydroelectric plants. This do= es=20 not have to involve personal sacrifice, as the Bush administration has=20 implied, these power providers say.=20 In California, where the state is offering cash incentives for people to us= e=20 more energy-efficient appliances and lights, S. David Freeman, the man name= d=20 by Gov. Gray Davis to oversee the state's response to its power crisis, sai= d=20 that conservation remained a way not only to get through the difficult summ= er=20 ahead but also to meet long-term energy needs.=20 ''I've got a message for the vice president: conservation is not a dirty wo= rd=20 in California,'' Mr. Freeman said on Friday in addressing a gathering of=20 state business leaders.=20 And in the Northwest, conservation is not just a civic virtue, it's written= =20 in the main law governing how the region uses its power.=20 Twenty years ago, Congress ordered the Bonneville Power Administration, whi= ch=20 markets the hydroelectric energy from this region's extensive network of=20 dams, to make conservation the priority to meet future power needs.=20 Instead of building new dams or nuclear plants, the region promoted energy= =20 efficiency, in everything from residential building codes to industrial=20 plants. In normal weather years, the Northwest usually has a large surplus = of=20 electricity.=20 ''This has nothing to do with austerity or being a greenie,'' said Tom=20 Eckman, the conservation manager of the Northwest Power Planning Council,= =20 which was created by Congress to guide major power decisions in this region= .=20 ''It's common sense. If you can get something for 10 cents, why pay a dolla= r=20 for it?''=20 Officials at even some big private utilities say that choosing conservation= =20 over big new power plants has paid off for them. The Potomac Electric Power= =20 Company, which serves nearly 600,000 customers in Maryland and the District= =20 of Columbia, has invested $360 million on conservation in the last 10 years= ,=20 eliminating the need for at least two medium-sized power plants, company=20 officials said.=20 ''With conservation, we were able to avoid building those big power plants,= =20 and it was ultimately cheaper,'' said Bob Dobkin, a spokesman for the=20 company.=20 Mr. Cheney said that the Bush administration would oppose any measure based= =20 on a premise that people should do more with less. His remark was echoed th= is=20 week by Ari Fleischer, the White House spokesman.=20 Asked on Monday if Mr. Bush believed that Americans should change their=20 lifestyles in the face of a power crisis, Mr. Fleischer dismissed the idea = of=20 people using less energy as one solution.=20 ''That's a big no,'' said Mr. Fleischer. ''The president believes that it's= =20 an American way of life, and it should the goal of policy makers to protect= =20 the American way of life. The American way of life is a blessed one. And we= =20 have a bounty of resources in this country.''=20 But a number of utilities say that giving people financial incentives to us= e=20 less energy has been tremendously popular, prompting people to change some= =20 small habits of their lives.=20 ''Our phones are just ringing off the hook,'' said Mr. Weedall of Sacrament= o,=20 referring to consumer response to the utility's 20 different conservation= =20 programs. ''Mr. Cheney seems to be saying that you shouldn't have to do=20 without all the electronic toys you want. We agree. But you can do it=20 efficiently. You don't always have to build the new power plant.''=20 No matter what comes from the president's initiative, the utilities say=20 creative conservation is here to stay -- because the public wants it. In=20 Spokane, Wash., a large private power provider, Avista Utilities, has just= =20 won approval from state regulators for a plan in which they would pay=20 consumers for using less electricity. The average homeowner could get as mu= ch=20 as $10 a month by simply changing habits, utility officials said.=20 Avista has aggressively promoted conservation, dispensing coupons for=20 discounts on energy-efficient lightbulbs, and offering financial incentives= =20 for businesses and schools to change their appliances and lighting.=20 The Los Angeles city utility, which serves 3.8 million people in Los Angele= s,=20 has been offering customers cash rebates of as much as $10,000 a home to=20 convert to solar energy.=20 ''We took our cue from the Water Department, which added a million new=20 customers but its overall water use has stayed the same,'' said Angelina=20 Galiteva, an executive director with the Los Angeles utility. ''Why not try= =20 to do the same thing with power?''=20 Photo: Avista Utilities in Spokane, Wash., has several plans for promoting= =20 conservation, including discount coupons for low-energy-use lights.=20 (Avista)(pg. A30)=20 PG&E Files Opposition to Ratepayers' Committee SAN FRANCISCO--(BUSINESS WIRE)--May 9, 2001 via NewsEdge Corporation - Pacific Gas and Electric Company today filed a motion with the U.S. Bankruptcy Court asking the court to vacate the United States Trustee's (UST) appointment of the Ratepayers' Committee. The filing indicates that the creation of a Ratepayers' Committee exceeded the authority of the UST because it was inconsistent with express provisions of the federal Bankruptcy Code. Pacific Gas and Electric Company appreciates that its Chapter 11 filing and Plan of Reorganization may create concerns for the company's customers. Under the Bankruptcy Code, there are legitimate ways by which the ratepayers can be represented and heard in the process, for example, through the California Attorney General's Office. In addition, the bankruptcy code provides flexibility and discretion to the court to allow parties to intervene in the case when they have standing to do so. The utility does not object to ratepayers having a voice in the process, when issues arise where the court determines they have standing, but does object to procedures that are outside of the existing Bankruptcy Code. In its filing, Pacific Gas and Electric Company says the "organizations and individuals appointed to the Ratepayers' Committee -- and the ratepayers whose interests they supposedly represent -- are neither creditors nor equity security holders and therefore not eligible for appointment to a committee by the UST under Section 1102(a)(1). Thus, the UST's appointment of the Ratepayers' Committee was not authorized by the Bankruptcy Code and constitutes an abuse of discretion by the UST." CONTACT: Pacific Gas and Electric Company |News Department, 415/973-5930 SCE to Curtail 'Load' for Some Customers Following Stage 2 Electrical=20 Emergency Declaration ROSEMEAD, Calif., May 10 /PRNewswire/ via NewsEdge Corporation - The California Independent System Operator (Cal-ISO) again declared a Stage 2 Emergency this afternoon due to low power reserves and increased demand for power because of high temperatures. The agency called upon Southern California Edison and other investor-owned utilities to begin voluntary "load" curtailment programs for certain customers within their service areas. Cal-ISO said the Stage 2 Emergency would be in effect from 1 p.m. through midnight. Cal-ISO and SCE are making urgent appeals for all customers to immediately reduce their electricity consumption so that reserve levels do = not deteriorate further. To achieve this load reduction, at 1:48 p.m. SCE activated its voluntary load curtailment program, under which large industrial, commercial, and agricultural customers have agreed to temporarily curtail electricity usage during an electrical emergency in exchange for reduced rates. Should the situation worsen for any reason, and power reserves drop below 1.5%, Cal-ISO could declare a Stage 3 Emergency, the most critical status. Cal-ISO could direct utilities to "drop load," necessitating involuntary rolling blackouts for groups of customers across their service areas until sufficient reserve levels are achieved. SCE customers are asked to reduce power consumption by turning off any unneeded electrical appliances and lights, especially during the state's da= ily peak consumption period -- noon to 6 p.m. Following are some effective ways customers can reduce their power use and not be greatly inconvenienced: LARGE ENERGY USERS -- turn off all auxiliary or redundant machinery where possible; -- consider shifting or staggering operations outside the hours of highest electrical demand, typically noon to 6 p.m.; AIR CONDITIONERS -- set thermostats no lower than 78 degrees (F); -- use electric fans instead of air conditioning if practical; -- avoid using evaporative coolers or humidifiers at the same time an air conditioner is running; -- avoid cooling unoccupied rooms; -- open windows during evening hours to take advantage of cool breezes; APPLIANCES AND TOOLS -- delay until evening hours the optional use of appliances (dishwashers, clothes washers and dryers), chargers, power tools, and electrical equipment; REFRIGERATORS AND FREEZERS -- avoid unnecessarily opening refrigerators; -- keep your refrigerator or freezer set at the proper temperature; -- be sure to use the "power-saver" switch if your refrigerator has one; -- keep the condenser coils behind or beneath your refrigerator/freezer clean (refrigerators represent approximately 25% of the electric bill for a typical residence); ADDITIONAL TIPS -- run swimming pool equipment during early morning and evening hours; -- limit the reopening of a refrigerator, which is a major user of electricity in most homes; -- use drapes and blinds to keep out direct sunlight; -- replace incandescent light bulbs with ENERGY Star(R) qualified compact fluorescent bulbs; -- always wash a full load of clothes or use the variable water level adjustment for smaller loads; and -- be sure your home has adequate insulation. For more information about electricity conservation and SCE's energy efficiency programs, go to www.sce.com. An Edison International company, Southern California Edison is one of the nation's largest electric utilities, serving a population of more than 11 million via 4.3 million customer accounts in a 50,000-square-mile servic= e area within central, coastal and Southern California. MAKE YOUR OPINION COUNT - Click Here http://tbutton.prnewswire.com/prn/11690X65758427 SOURCE Southern California Edison CONTACT: Corporate Communications of Southern California Edison, 626-302-2255 Web site: http://www.edisonnews.com Web site: http://www.sce.com (EIX) For many Californians, fear of high electricity bills is a bigger threat th= an=20 blackouts threat than blackouts&lt; Eds: FIXES subject-verb agreement in grafs 14-15&lt; AP Photos SLC801-04&lt; Eds: Hendirx in graf 18 is correct.&lt; By SETH HETTENA=3D Associated Press Writer=3D SAN DIEGO (AP) _ Ray Marquez wonders whether he'll have to cut back on food or gas in order to pay his electricity bill. The 34-year-old Orange County maintenance man usually pays dlrs 80 a month for power during summer months. Now, he's trying to figure out how to pay an electricity bill that could push dlrs 130 come June 1. ``Since I got married and had children, you know, I've been dealing with balancing bills,'' he said Wednesday. ``But if I now have to pay more for electricity, I'm not going to have money for gas or food for the kids.'' As Californians coped with rolling blackouts that darkened thousands of businesses and homes Monday and Tuesday, many struggled with an even bigger worry: how to pay for soaring energy costs. In March, the state Public Utilities Commission approved the biggest rate increase in California history, up to 46 percent for customers of Southern California Edison and Pacific Gas &amp; Electric. Those rate hikes start hitting customers in next month's bill. Gailen Kyle, who raises alfalfa on 1,600 acres (640 hectares) in the Mojave Desert, says a 40 percent increase would put his farm out of business. ``It would end us,'' the third-generation farmer said. ``Everybody here that farms alfalfa would be out of business.'' Kyle, 46, said he has to pump water nearly around the clock from wells drilled 310 feet (93 meters) below his farm near Lancaster. A small increase in the price of energy a few months ago added dlrs 80,000 to the dlrs 400,000 annual bill he was already paying. To save money, Kyle agreed to become an ``interruptible'' customer, meaning he voluntarily allows his power to be shut off during statewide electricity shortages in exchange for reduced rates. So far this year, his power has been cut 26 times. Even before the state utilities commission raised rates, residents were paying 26 percent more for electricity than the nationwide average, according to federal statistics. Only customers in New England, New York, Alaska and Hawaii pay more. One of the problems is that the wholesale cost of electricity has risen sharply over the past year but under California's 1996 deregulation law the state's largest utilities, PG&amp;E and SoCal Edison, have been prevented from passing their costs to customers. In April, PG&amp;E declared bankruptcy. The West isn't just facing spiraling costs and a shortage of supplies, however. Its transmission system is fragmented and overworked and would take years to improve, power officials told the region's governors Wednesday. ``There is no immediate solution,'' said Idaho Gov. Dirk Kempthorne, one of four governors participating in a six-hour, round-table meeting with industry representatives. The Western Governors Association was told there is no established method for paying for transmission upgrades, and market and regulatory barriers stand in the way. It's not even clear where new power lines are most needed. The group, which included the governors of Utah, Idaho, Montana and Wyoming, has given energy experts until July 15 to recommend ways to eliminate bottlenecks. Meanwhile Californians, who've already weathered six days of rolling blackouts this year, fear they'll soon be paying more for less service. The Independent System Operator, which runs the state's power grid, has forecast more than 30 days of blackouts this summer due to severe shortages of electric supply. Dee Ann Hendirx, 53, of San Francisco, has stocked up on candles and battery-operated clocks. ``I hate to say this but it's getting to be a way of life in California,'' she said.

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Enron Mentions

Govt keen to solve Enron crisis The Statesman, 09/27/01 HIGH-LEVEL INDIAN COMMITTEE TO MONITOR ENRON IMBROGLIO Asia Pulse, 09/27/01 Panel suggests ways for tariff rationalisation Business Standard, 09/27/01 Govt may consider sops for Dabhol Business Standard, 09/27/01 USA: Enron sees new legal lever in Dabhol dispute. Reuters English News Service, 09/26/01 FERC Proposes New Rules On Energy Co Affiliate Dealings Dow Jones Energy Service, 09/26/01 India Hopes For Early Solution To Enron's Payment Dispute Dow Jones International News, 09/26/01 Cantabrico Deal Won't Spark Elec Competition In Spain Dow Jones Energy Service, 09/26/01 Govt keen to solve Enron crisis 09/27/2001 The Statesman Fin. Times Info Ltd-Asia Africa Intel Wire. The Statesman Copyright (C) 2001 The Statesman Ltd. All Rights Res'd STATESMAN NEWS SERVICE & AGENCIES NEW DELHI/MUMBAI, Sept. 26. An inter-ministerial committee of Union secretaries is monitoring the Enron crisis regularly, to facilitate some kind of early solution to the Enron imbroglio involving the Dabhol power project, the power minister, Mr Suresh Prabhu, said here today, while refusing to divulge the options being explored. An institutional framework committee, made up of the finance secretary Mr Ajit Kumar, power secretary Mr Ashok K Basu, law secretary Mr R L Meena and the petroleum secretary Mr V N Kaul, has been monitoring the developments on the project front, and regularly interacting with the parties Mr Prabhu said at a briefing. We want an early solution to the problem, but the Centre has a very restricted role, limited only to facilitate an amicable solution, he said. Mr Prabhu refused comment on Enron chairman, Mr Kenneth Lays reported letter to the Prime Minister, Mr Atal Behari Vajpayee, seeking $5 billion in damages for terminating the contract, but said if by writing letters problems can be solved, we can also write letters. He said the government and the Cabinet have been kept informed of the status of the negotiations but it would be premature to speak at this stage on the problem which has its genesis in the contract signed in 1992. DPC AGM: Notwithstanding its depleting financial conditions, Dabhol Power Company has recorded a higher net profit of Rs 208 crore for the year ended 2000-01, compared with Rs 198 crore in the previous year. Disclosing this at the annual general meeting here today, the Enron India chief, Mr Wade Cline, said that the promoters of DPC would be making efforts to fetch additional finances from the institutions to complete the remaining 10 per cent construction work of the 2,184-MW power project at Guhaghar in Ratnagiri district of Maharashtra. Godbole report: The recommendations of the Godbole Committee, that held renegotiations with Enron on the future of DPC, are likely to remain on paper. This was clear from the Maharashtra Chief Minister, Mr Vilasrao Deshmukhs post-Cabinet-meeting statement today when he said the government noted certain recommendations of the Godbole panel following several round of talks with officials of Enron-DPC over the past five months. Mr Deshmukh said these recommendations would guide the government in future while negotiating fresh projects. The fate of DPC will thus remain undecided. In the last Cabinet meeting, the Maharashtra government announced terms of reference for an inquiry commission, which would be set up to probe the entire Enron-MSEB deal ab initio. However, the government is still to name a retired Supreme Court Judge to head the commission. Mr Madhav Godbole, a former bureaucrat, had clearly suggested that the panel should call off renegotiations, since Enron had announced its desire to walk out of the DPC. He said other states such as Karnataka, Madhya Pradesh, Delhi and Rajasthan were ready to purchase Enron power, provided the rate per unit ranged between Rs 2.25 and Rs 2.40. This was rejected by Enron. Other recommendations noted by the State include: The Union Government which has given counter guarantee of Rs 2,500 crore, should raise bonds of the same amount and give them to Maharashtra as interest-free loan. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. HIGH-LEVEL INDIAN COMMITTEE TO MONITOR ENRON IMBROGLIO 09/27/2001 Asia Pulse (c) Copyright 2001 Asia Pulse PTE Ltd. NEW DELHI, Sept 27 Asia Pulse - A high-level inter-ministerial committee of secretaries is closely reviewing developments on the Enron promoted Dabhol power project front with a view to facilitate an early solution, Indian Power Minister Suresh Prabhusaid. "The institutional committee comprising Finance Secretary Ajit Kumar, Power Secretary A K Basu, Law Secretary R L Meenaand Petroleum Secretary V N Kaul would monitor the developments on the project front," Prabhu told reporters here. "We want an early solution to the problem but Centre has a very restricted role, limited only to facilitate an amicable solution," he said adding there are various options which are being worked out by the committee. Refusing to divulge details about the options being explored, Prabhu said the committee was working closely with both parties to the dispute - Maharashtra Govenment and Enronpromoted Dabhol Power Company, to find an early solution. Asked about Enron Corp. Chairman Kenneth Lay's letter to Prime Minister Atal Bihari Vajpayee claiming US$5 billion in damages for terminating the contract, Prabhu said, "if by writing letters problems can be solved, we can also write letters." "The need is to sit together and find work out a viable solution," he added. (PTI) 27-09 1646 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Panel suggests ways for tariff rationalisation Our Regional Bureau MUMBAI 09/27/2001 Business Standard 2 Copyright (c) Business Standard The Madhav Godbole-headed renegotiations committee has suggested ways and means for bringing about a tariff rationalisation of the power available from the Enron-promoted Dabhol Power Company (DPC) that includes asking the Centre to raise Rs 2,500 crore from the market and give it to Maharashtra as a loan without interest in respect of its counter-guarantee for the project and allowing the DPC customs duty and income tax exemptions. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Govt may consider sops for Dabhol Our Economy Bureau NEW DELHI 09/27/2001 Business Standard 2 Copyright (c) Business Standard The Centre is willing to give concessions to Dabhol Power Company after an agreement on the sale of foreign equity is close to finalisation. Top government officials said DPC had already held the first round of discussions with two private power companies including Tata Power. While DPC has been seeking the mega power project status for long, officials are tightlipped about the kind of concessions the Centre will be willing to make. Sources said that the power ministry had rejected the request made by the Maharashtra government and DPC for granting it the mega power project status. Another major sop sought by DPC was to offset the customs duty paid by the company on import of equipment against duty to be paid on import of fuel once the plant re-commences operations. The finance secretary, who is heading the informal committee of secretaries set up to resolve the vexed issue, held discussions with top Enron executives and other concerned parties this week. He has again called for a meeting of the stakeholders on October 4. Various scenarios to resolve the dispute have been worked out. One of the scenarios envisages that the DPC-produced power could be sold at Rs 2.70 per unit. Of 2,184 mw of power to be produced by the project, about 700 mw could be picked up by the Maharashtra State Electricity Board, another 700 mw could be purchased in bulk by the Railways and the remaining power could be allowed to be sold to a private power distributor in Maharashtra or to one of the adjoining states. Officials reiterated that the sale of foreign equity had to be directly negotiated between Enron and the prospective buyer. The financial institutions have been asked to act as the nodal agencies in resolving the spat between Enron and MSEB. While the Centre had asked Enron to take a 20 per cent hit on the foreign equity, the Indian lenders have suggested sale of foreign equity at 50 per cent discount. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. USA: Enron sees new legal lever in Dabhol dispute. By C. Bryson Hull 09/26/2001 Reuters English News Service (C) Reuters Limited 2001. HOUSTON, Sept 26 (Reuters) - A recent decision by an Indian state regulatory commission could give Enron Corp. a new legal lever to keep the panel from interfering in a long-running payment dispute over the $2.9 billion Dabhol power project, the company said Wednesday. The Maharashtra Electricity Regulatory Commission (MERC) asserted that it has jurisdiction over the fight between Enron's Dabhol Power Co. and the Maharashtra State Electricity Board (MSEB), the sole customer for the massive, now-idle 740 MW Dabhol power plant. The Bombay High Court is now considering whether MERC has the jurisdiction to intervene in the payment battle which has led Dabhol, 65-percent owned by Houston-based Enron, to shutter the plant and default on loan payments. Enron asserts that MERC has no jurisdiction and that the dispute with MSEB is best handled in international arbitration, as its power-buying contract lays out. The fight started when MSEB withheld $48 million in payments because it said Dabhol charges too high a rate for its electricity. Enron points to the MERC's Sept. 14 decision in which it said it does not have jurisdiction over power purchasing agreements (PPAs) executed before the panel's creation in 1999, unless there are changes in rates or any subsequent alterations. The Dabhol-MSEB deal was inked on Dec. 8, 1993 and amended in 1995. MERC's entry into the fight is a sign that the board is biased against Dabhol, Enron says. "The recent reports that MERC may be taking different positions on questions relating to other independent power producers are troubling and we're hoping for a just and equitable resolution," Enron spokesman John Ambler said. Along that same front, the Bombay High Court on Thursday will interview the MERC's three commissioners to determine if they are biased against Enron. Dabhol's lawyers assert that commissioner Jayant Deo has made several earlier statements exhibiting bias, including a 1994 statement in which he dubbed the Dabhol PPA "patently illegal." "We're very interested in the court's continuing consideration of questions relating to potential bias by the MERC commissioners," Ambler said. "The current disputes that are before the court are particularly significant because they'll demonstrate our ability to rely on the Indian judicial system for dispute resolution." DABHOL PREFERS ARBITRATION Enron would prefer to get its case to the International Court of Arbitration in London, which is where the contract says disputes between Dabhol and the MSEB are to be resolved. That option will lead to a faster resolution, Ambler said. Enron in May issued a preliminary contract termination notice that put in place a six-month deadline for the two to work out their differences. The cooling-off period expires November 19, and Enron would then be free to terminate the deal and trigger financial penalties against MSEB that could total between $4 billion an $6 billion. Then they would head to arbitration. The Indian national government and the Maharashtra state government would be on the hook for those penalties, since they backed the Dabhol deal, which is the largest private foreign investment in India. Enron wants out of India and has offered to sell the plant, which will eventually have another 1,444 MW of power, to the national government for cost. That would allow Enron, its fellow foreign investors and and foreign lenders to recoup their investment. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. FERC Proposes New Rules On Energy Co Affiliate Dealings 09/26/2001 Dow Jones Energy Service (Copyright (c) 2001, Dow Jones & Company, Inc.) WASHINGTON -(Dow Jones)- The U.S. Federal Energy Commission proposed Wednesday new restrictions governing natural gas pipeline and electric utility affiliate dealings. The commission unanimously agreed to initiate a rulemaking to tighten regulations prohibiting pipelines and utilities from providing market-sensitive information to their marketing affiliates. FERC rules allow monopoly pipeline and utility companies to sell natural gas and electricity at market rates, providing they adopt codes of conduct that prevent the passage of information giving a competitive advantage to their marketing affiliates. The proposed changes reflect the sweeping convergence between the natural gas and power sectors in the years since FERC deregulated the pipeline industry in the 1980s. FERC's "code-of-conduct" rules prohibit pipelines from sharing market-sensitive information with their gas-marketing affiliates. But the rules don't address the pipeline's power marketing affiliates. The commission's proposed rules would expand the code-of-conduct rules to address all marketing affiliates, including those involved in financial transactions that don't entail the physical delivery of energy. The template for the proposed changes can be found in the conditions FERC imposed in a 1999 order authorizing the acquisition of Pittsburgh-based Consolidated Natural Gas by Dominion Resources (D). The commission approved the electricity-natural gas convergence merger, contingent on Dominion agreeing to adopt codes of conduct applying equally to its gas and power marketing affiliates. FERC's rule changes would apply to other electric utilities with pipeline investments, such as CMS Energy (CMS), Duke Energy (DUK) and American Electric Power Co. (AEP). It wasn't immediately clear how the changes would affect joint operating agreements, such as the one between Entergy Corp. (ETR) and privately held Koch Industries. The largest impact will be for large pipeline companies with extensive power marketing operations and investments in power plants. For example, El Paso Corp. (EPG), Williams Cos. (WMB) and Enron Corp. (ENE), represent about 70% of the interstate pipeline industry, and are among the nation's top power marketers and merchant power plant developers. The changes under consideration stem from the commission's investigation of El Paso Natural Gas Co.'s controversial contract with a marketing affiliate for pipeline capacity into California. The affiliate transaction has been blamed for California's dramatic runup in natural gas prices over the past year, which contributed to the state's unprecedented high electricity cost last year. The commission vote to approve the new rulemaking came after it adjourned for two hours, in part to work out compromise language to satisfy concerns of Commissioner Linda Key Breathitt. The commission majority wanted the proposed rulemaking to encompass new restrictions affecting wholesale power transmission services "bundled" into retail rates regulated by the states. Breathitt said she wasn't "comfortable" with proposing that employees involved in bundled retail sales would be excluded from the utility's transmission-grid control room, citing the effect it would have on FERC's relations with state utility regulators. State regulators are already upset by FERC's recent mandate for reshaping the U.S. power grid under control of four large regional transmission organizations, or RTOs. The states view the RTO mandate as treading on their traditional regulatory turf. Breathitt questioned further encroaching on the states' regulatory arena "at a time we are trying to strengthen relationships" with state utility commissions. While she supported the concept, Breathitt suggested delaying action on wholesale transmission bundled into retail rates until "after we do a little bit more bridge-building" with state regulators. But FERC staff argued strongly in favor of the proposed change, which they said would help address concerns of power marketers and merchant generators that utilities are reserving more transmission capacity than needed to serve retail customers as a means of thwarting market entry by wholesale power market competitors. Cynthia Marlette, FERC's acting general counsel, urged the commission to propose the change to allow the industry to comment on "undue discrimination" by vertically integrated utility companies. FERC will receive many comments on the issue, she predicted. Daniel Larcamp, director of FERC's office of markets, tariffs and rates, also strongly supported the proposal. He cited "fairly steady and recurring" complaints about discriminatory uses of the interstate transmission system. FERC Chairman Pat Wood III and Commissioner William Massey argued in favor of the staff's recommended approach. "I understand the political issue here, but this is an opportunity for discrimination...to be eliminated," Massey said to Breathitt. Wood said he was surprised to learn, after joining FERC this summer, that officials involved in bundled retail sales weren't excluded from the control room. He cited the "propensity for a very unequal weighing of the scales." Breathitt eventually agreed to support including the provision in the rulemaking proposal after compromise language was worked out specifically seeking comments from state regulators on the issue. Wood said the wording of the proposed rule would make clear that, "if we don't hear from people that they really want it, we ain't going to do it." Unless comments clearly enumerate benefits from including bundled retail sales in the new affiliate rules, "I would agree to pull it down," Wood said. -By Bryan Lee, Dow Jones Newswires; 202-862-6647; [email protected] Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. India Hopes For Early Solution To Enron's Payment Dispute 09/26/2001 Dow Jones International News (Copyright (c) 2001, Dow Jones & Company, Inc.) NEW DELHI (AP)--India's government said Wednesday it was hoped to soon settle a payment dispute between U.S.-based Enron Corp. (ENE) and a state-run power utility. "The negotiations are at a very advanced stage...We will facilitate a solution as soon as possible," Power Minister Suresh Prabhu told reporters in New Delhi. The minister said there had been no deadlock in talks with the Enron officials. Enron Corp., with a 65% stake in the Dabhol Power Project, is locked in a dispute with the state-run Maharashtra State Electricity Board over nonpayment of electricity charges. Enron suspended work on the second phase of the project in May and plans to pull out from India. The latest round of talks earlier this week focused on the sale of Enron's stake in the $2.9 billion project, the Business Standard newspaper reported. Enron's equity stands at $858.6 million in the Dabhol Power Company. Prabhu refused to discuss the government proposals. "There are various options under negotiation. I can't comment on them." Enron sold electricity produced from naphtha to its sole customer, the Maharashtra State Electricity Board, which found it too expensive. The contract included a federal government guarantee to cover nonpayment of dues. Enron says the guarantee has not been met despite notice. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Cantabrico Deal Won't Spark Elec Competition In Spain By Sarah Wachter and Victoria Knight Of DOW JONES NEWSWIRES 09/26/2001 Dow Jones Energy Service (Copyright (c) 2001, Dow Jones & Company, Inc.) PARIS -(Dow Jones)- The conditions attached to the European Union Competition Authority's approval Wednesday of a takeover bid for Spain's Hidroelectrica del Cantabrico(E.HIC) aren't expected to kickstart competition in that country's electricity market. The E.U. started an in-depth probe back in June into the Electricite de France-backed(F.EDF) purchase of joint control of Spain's fourth-largest utility, by engineering group Ferroatlantica SL and Germany's Energie Baden-Wuerttemberg AG (G.ENR). The Commission was concerned over the limited import capacity between France and Spain, and EDF's stranglehold over imports into Spain. The E.U. said Wednesday a pledge by French grid operator RTE, a wholly-owned EdF unit, to raise electricity capacity with Spain to 4,000 megawatts from 1,100 MW was sufficient to alleviate its concerns the deal would strengthen the dominant positions in the Spanish market of Iberdrola(E.IBR) and Endesa(ELE). Without additional electricity capacity at the border, the Iberian peninsula risks being cut off from the single E.U. power market. Current capacity is inadequate to meet the demands brought on when E.U. electricity markets deregulated in Feb. 1999. What's more, the current method grid operator RTE uses to divvy up capacity isn't very transparent, and is currently subject of a separate E.U. investigation. But in the short run, RTE's plans to auction existing capacity available to third parties of 550 MW, and to raise capacity another 300 MW next year, won't do much to lift competition in Spain, traders say. "This should lead to an increase in competition, but not by a huge amount," said Graham Southall, a power trader for TXU Europe Energy Trading. "It's hard to calculate the effect of a few hundred megawatts on the Spanish market, when peak demand is 32,000 MW," he added. At the same time, market participants await a detailed, final plan before saying whether the auction is a boon to competition. "The devil's in the details," a French trader said. No more than three companies are awarded capacity currently, traders estimate. A Spanish Ministerial Order is expected this month to allow the auction to start. "The French and Spanish (energy) regulators should be paying close attention to what is the optimum market-based mechanism," said Peter Styles, E.U. deregulation expert for U.S. energy trader Enron. Already, there are worrying signs. One European power trader cites RTE's auction proposal to issue separate, weekly tenders for peak and base load power, in time slots which don't coincide with norms in large liquid trading markets, like Germany. "Companies which are less active in trading will find it hard to buy standard products," he said, which means few, smaller power companies will take part in the auction. In the long run, RTE's plans to double current electricity capacity by building an estimated EUR1 billion, 1200 MW electricity line, to run alongside a proposed, high-speed rail line from the French city of Perpignan to Barcelona, don't mollify the Commission's competitive concerns, because the line probably won't be operational until 2008, industry experts say. RTE said it will launch public consultations in the concerned communities in the Pyrenees this fall. But EdF's previous plans to build an electricity line across the Pyrenees between Cazaril and Aragon were scuppered in 1995 following protests by French environmentalists, analysts caution. With a big increase in cross-border capacity some way off, competition in Spain will be capped by a lack of additional power generation for new market participants, analysts say. "There's no new fundamental source of power. The Spanish incumbents represent the largest proportion," a trader said. Because it's difficult to get access to natural gas supplies, Enron is the only new market entrant scheduled to operate 1,200 MW of almost 6,000 MW of new power generation starting up in the next two years, said Antonio Cruz of Banco Espanol de Credito SA(E.BEC). -By Sarah Wachter, Dow Jones Newswires; 331-4017-1740; [email protected] and Victoria Knight in Brussels; 32-2-285-0130, [email protected] Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

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Enron Mentions

Enron's Azurix Unit May Exit $400M Argentina Concession Dow Jones International News, 09/20/01 US FERC Slates Ethics Forum As Lawmakers Voice Concerns Dow Jones Energy Service, 09/20/01 Investor Skepticism Grows Over Asia Pwr Deal Arrangements Dow Jones Energy Service, 09/20/01 Enron says judicial probe into power purchase pact will delay resolution of dispute with Indian government Associated Press Newswires, 09/20/01 Calif PUC Likely To Abandon Electricity Deregulation Dow Jones Energy Service, 09/20/01 UK PRESS: Enron Withdrawal From India Plant Faces Setback Dow Jones International News, 09/20/01 ATTACK ON AMERICA; Family, friends from far and wide feel pain of loss; Death struck victims on travels for work, play Boston Herald, 09/15/01 Enron's Azurix Unit May Exit $400M Argentina Concession By Tim Loughran Of DOW JONES NEWSWIRES 09/20/2001 Dow Jones International News (Copyright (c) 2001, Dow Jones & Company, Inc.) BUENOS AIRES -(Dow Jones)- Tired of battling local government officials over the terms of its 30-year water services concession with Buenos Aires province, Azurix Corp., a unit of the Houston, Texas-based Enron Corp.(ENE), may just pack its bags and leave, a company spokesman said. Abandoning a business it paid more than $400 million to win just two years ago "is one of many possibilities" Azurix and Enron are evaluating for their Argentina operations, said John Ambler, Enron's spokesman for its Latin American operations. At the same time, Enron remains committed to expanding its power business in Argentina and across the region, Ambler said. Earlier this month, John Garrison, the president and CEO of Azurix, flew to Buenos Aires to negotiate face-to-face with senior provincial officials in an attempt to settle a series of outstanding issues between the company and the province, Argentina's largest. After Garrison's visit, local newspapers cited provincial officials as claiming Azurix had given the province four months to meet the terms of the company's 1999 concession or face a $600 million lawsuit. Garrison was unavailable for comment on Azurix's complaints, the state of the company's current operations in Argentina or the status of its negotiations with Buenos Aires governor Carlos Ruckauf, a 2003 presidential candidate whose efforts to protect the operations of local companies during Argentina's 38-month recession have earned the enmity of several multinational companies. And Enron spokesman Ambler, aside from confirming that Azurix may abandon Argentina, said the company would not provide additional details about its negotiations for the time being. "We are continuing to talk with relevant officials in the Buenos Aires government to explore every opportunity to resolve the issues related to Azurix Buenos Aires. It's premature to discuss the details of those meetings," Ambler said. In Enron's 2000 annual report, officials said Azurix Buenos Aires lost $11.6 million on operating revenue of $89.5 million in the year ended Dec. 31, 2000. The company complained to shareholders that "Azurix Buenos Aires has not been performing to expectations," because provincial officials had not fulfilled their pre-purchase promises to complete important infrastructure projects or allow Azurix to raise prices to the levels set in the concession negotiation. In addition, provincial officials failed to deliver "complete billing and customer records" to Azurix, which has complicated the company's customer service and collection efforts, transfer important assets to Azurix Buenos Aires or pay assorted pre-takeover costs. In February, to accommodate Azurix's complaints and lower revenue, the company and provincial officials signed an agreement that would allow Azurix to raise prices and invest less than the $350 million it promised to spend when it won the water utility, according to the company. Azurix officials warned shareholders, however, that "there is no assurance...that these negotiations will result in a resolution satisfactory to Azurix or the province." Since December 2000, provincial officials have taken an equally hard line against Azurix, saying the company should lose its concession for its alleged failure to modernize and expand the province's network of water lines or improve service. Azurix owns 90% of the water company, which serves the largest and most populous of Argentina's 23 provinces. The company's employees own the rest. Last month, reports circulated that Azurix planned to sell all its Argentina operations to Societe de Amenagement Urbain et Rural, or Saur, of France, the company's partner in a 95-year concession to run Obras Sanitarias de Mendoza, a water company in the province of the same name. At the time, Ambler said he could not comment on a possible sale of Azurix assets in Argentina but did tell Dow Jones Newswires that Enron is in the process of selling Azurix assets worldwide. -By Tim Loughran, Dow Jones Newswires; 5411-4313-1918; [email protected] Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. US FERC Slates Ethics Forum As Lawmakers Voice Concerns By Bryan Lee 09/20/2001 Dow Jones Energy Service (Copyright (c) 2001, Dow Jones & Company, Inc.) OF DOW JONES NEWSWIRES WASHINGTON -(Dow Jones)- The U.S. Federal Energy Regulatory Commission has scheduled an ethics forum next month as Senate Democrats voice concerns that the agency's former chairman, Curt Hebert, improperly communicated with Enron Corp. (ENE) Chairman Kenneth Lay. In a letter Sept. 17 to current FERC Chairman Pat Wood III, Sen. Joseph Lieberman, D-Conn., and Sen. Dianne Feinstein, D-Calif., cited a recent General Accounting Office investigation and requested the commission to review its ethics procedures and record-keeping requirements. "While the GAO concluded that it found no evidence that either Mr. Hebert or Mr. Lay violated criminal statutes or ethics regulations, the fact remains that GAO confirmed that the chairman of a federal regulatory commission discussed support for his continued appointment as chairman with the senior official of a major energy company regulated by the commission," according to Lieberman and Feinstein's letter. "We believe that such behavior undermines the public's confidence in federal regulators in general and in the Federal Energy Regulatory Commission in particular," the lawmakers wrote. FERC scheduled this week a forum on ethics issues for Oct. 17. This comes after FERC, within days of Wood becoming chairman Sept. 1, previously issued a revised ethics code concerning prohibitions against discussing matters before the commission, as well as other issues such as gifts and financial holdings. Of concern to Lieberman and Feinstein is a telephone conversation in February between Hebert and Lay regarding the Lay's political support for Hebert continuing to serve as FERC chairman. The conversation, which was first reported by The New York Times in May and subsequently detailed by PBS's Frontline documentary series, came amid growing speculation that the White House intended to appoint Wood to FERC and later make him chairman. Wood, a close associate of President George W. Bush who formerly chaired the Texas Public Utility Commission, was reported to be strongly endorsed by Lay, who was a major financial contributor to Bush's presidential campaign. Hebert, then the only Republican among three sitting commissioners, had been named chairman two days after Bush took office. The phone call to Lay apparently was part of what industry and congressional sources described as a concerted campaign by Hebert to win industry and Senate support for continuing as chairman. Hebert ultimately resigned, effective Aug. 31, to become Entergy Corp.'s vice president in charge of government relations and communications. Telephone calls to Wood, Hebert and Enron weren't immediately returned Thursday. According to a letter Aug. 16 to Lieberman from Robert Hast, GAO's managing director of special investigations, Hebert and Lay offered differing accounts of the telephone conversation. But both agreed that the conversation concerned Lay's support for Hebert continuing as chairman, and that they didn't discuss any Enron regulatory matters pending before the commission, Hast wrote. Hebert repeated assertions he made in interviews with the New York Times and Frontline that Lay had suggested he must alter his position on competitive access to the power grid in order to win Enron's support. Lay told the GAO he never tied Hebert's position on electricity competition to Enron's endorsement, but said Hebert told him the Houston-based energy company would "probably be happy with the direction in which FERC was moving," Hast reported. The letter went on to review FERC ethics regulations and pertinent federal law to conclude neither Lay nor Hebert "violated criminal statutes or ethics regulations." The GAO probe of Hebert's dealings is part of a concerted Democratic effort to question Bush administration energy policies as tainted by the energy industry's political contributions. Lieberman sought the GAO probe of the Hebert-Lay conversation in May, and has held hearings and issued press statements questioning FERC's response to California's energy crisis. In the House, meanwhile, Reps. John Dingell, D-Mich., and Henry Waxman, D-Calif., have been waging a concerted campaign to force the White House to detail its private meetings held as the administration developed a national energy-policy blueprint, which was issued in May. The effort was spearheaded by Vice President Richard Cheney. The White House has refused the GAO's demands for information regarding the meetings as part of an investigation requested by Dingell and Waxman. In their Sept. 17 letter to Wood, Lieberman and Feinstein called for an ethics review and other measures "to ensure that communications between commissioners and the regulated community are conducted in a manner that leaves no question in the public's mind about the objectivity and independence of the commission." A FERC spokesperson said the revised ethics policy and the scheduling of the ethics forum were "in the works" prior to the Lieberman-Feinstein letter requesting an ethics review. "It's an effort to ensure public confidence in the commission's decision-making process," said Celeste Miller, the commission's spokeswoman. -By Bryan Lee, Dow Jones Newswires; 202-862-6647; [email protected] Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Investor Skepticism Grows Over Asia Pwr Deal Arrangements 09/20/2001 Dow Jones Energy Service (Copyright (c) 2001, Dow Jones & Company, Inc.) SINGAPORE -(Dow Jones)- Foreign power companies are growing increasingly skeptical over the worth of contractual arrangements signed in Asia, according to delegates at an industry conference in Malaysia this week. The concern has been precipitated by a raft of forced "renegotiations" of power purchase agreements, or PPAs, in several countries across the region. Both Indonesia and Thailand are renegotiating contracts with independent power producers which effectively means lowering the prices. The Philippines has stated its intention to follow suit. In India, the Maharashtra state electricity board is failing to honor its power purchase agreement with Enron. "India is off all foreign investors' radar screens at the moment" said one delegate. "There's no recourse to law... it's just not an option," said another. "Many of these contracts are worthless." However speaking at the same conference, the chef executive of Malaysia's Tenaga Nasonal Bhd. Fuad Jaafar said his company would "bite the bullet" and continue to honor its PPAs. "It proves to investors that we honor contracts" he said. Power purchase agreements are contractual obligations to purchase power for a set duration at specified prices, normally signed between state boards with responsibility for supply and independent power producers, or IPPs. The Asian financial crisis of 1997 led to a sharp fall in regional currencies against the U.S. dollar. Because most of the PPAs were denominated in U.S. dollars while revenue is in local currencies, the cost of PPAs became almost impossible for some national electricity suppliers to service. Ken Oberg, China Light and Power International's managing director, said further IPP investment in the region would require smaller plants and more domestically sourced debt. This would help reduce the currency risks in existing contracts, he said. "Investors will be far more skeptical over power purchase agreements in future... they certainly have proved not to be a guarantee of revenue" said Ken Oberg. A number of overseas companies left the region after Asia's financial crisis and some believe there will be little further IPP investment in the region for several years. "Relationships in Asia are so important... and the nature of contractual arrangements is different particularly from the U.S." said another delegate. -By Jeremy Bowden, Dow Jones Newswires; 65-415-4062; [email protected] -0- 20/09/01 11-24G Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Enron says judicial probe into power purchase pact will delay resolution of dispute with Indian government 09/20/2001 Associated Press Newswires Copyright 2001. The Associated Press. All Rights Reserved. NEW DELHI, India (AP) - U.S.-based Enron Crop.'s Dabhol Power Company said Thursday that the Maharashtra state government's order for a judicial probe into the company's power purchase pact was "inappropriate" and would delay any solution to the payment dispute between the company and the government. "This action is an unfortunate reflection of the great difficulties in progressing business in India," company spokesman Jimmy Mogal told The Associated Press. On Wednesday, Maharashtra state chief minister Vilasrao Deshmukh said that his government was setting up a commission of inquiry to probe all aspects of the power purchase pact between Houston-based Enron Corp. and the Indian government. Enron Corp., which holds 65 percent stake in Dabhol Power Project, is locked in a dispute with the government over nonpayment of electricity charges by the state-run power utility in Maharashtra state in western India. Work at the project has been suspended since May. Enron now wants to pull out of the project and expects the Indian government to facilitate its exit. Mogal said it was improper for the government to bring its executive powers to bear against Dabhol Power Co. since the company was seeking a solution through "previously agreed dispute resolution procedures." Chief Minister Deshmukh said the commission would question the government officials who had cleared the power purchase pact seven years ago. It would also investigate whether the electricity supply and demand forecasts made by Enron were consistent with the power purchase pact. The commission, to be headed by a retired judge of the Supreme Court, will give its report within six months, Deshmukh told reporters. Deshmukh's announcement follows Enron's threat to pursue claims of up to dlrs 5 billion relating to the Dabhol Power Co. dispute. In a Sept. 14 letter to Prime Minister Atal Bihari Vajpayee, Enron chairman Kenneth L. Lay had threatened legal action and questioned India's ability to honor its contracts, Dow Jones Newswires reported Wednesday. On Sept. 7, Vajpayee had said that he expected a quick settlement of the dispute, which involved the state utility's nonpayment of more than dlrs 21.7 million in electricity charges. Enron supplied electricity from naphtha, a petroleum product, for its sole customer, the government owned Maharashtra State Electricity Board, which has said it can't afford the prices negotiated in the contract. The contract included a federal government guarantee to cover any nonpayment. Enron has said that guarantee has not been met, despite two notices to the federal government. (str-rkm-kgo) Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Calif PUC Likely To Abandon Electricity Deregulation 09/20/2001 Dow Jones Energy Service (Copyright (c) 2001, Dow Jones & Company, Inc.) SACRAMENTO, Calif. (AP)--California's Public Utilities Commission is set to vote Thursday on a measure that could strip away one of the last vestiges of the state's failed experiment with energy deregulation, which was widely blamed for rolling blackouts and ballooning bills. Deregulation would be replaced with a system dominated by the governor, a new public power authority and three troubled utility companies. The vote comes as other states are backing away from the experiment that was supposed to revolutionize the energy industry. Thursday's PUC vote could wipe out consumers' ability to choose their electricity provider and buy power directly from retailers such as Green Mountain Energy or Enron Corp. About 200,000 customers had switched utilities by September. Trumpeted at its creation in 1996 as a way to stimulate competition and lower electric rates, deregulation foundered after a year of soaring wholesale electrical prices and customer bills, a utility bankruptcy and energy shortages that led to rolling blackouts. Today, California's government is more directly involved in the power business than ever before and deregulation is dead, said PUC Commissioner Carl Wood. "There's no way in the world deregulation would ever get an affirmative vote from the people or its representatives," Wood said. The expected PUC vote will continue a trend that started in January, when the Department of Water Resources started buying a third of the power needed by customers of the state's three largest private utilities - Southern California Edison, Pacific Gas and Electric Co., and San Diego Gas & Electric Co. All three utilities had faced the possibility of bankruptcy because the deregulation law didn't allow them to pass rising costs on to customers. That and the record-high wholesale prices led the three utilities to run up more than $14 billion in debt. As their debt rose, their credit ratings dropped and some wholesalers refused to sell to them. PG&E filed for Chapter 11 bankruptcy in April. Six days of rolling blackouts earlier this year cut power to more than 3 million customers and shut down refrigerators, ATMs and traffic signals. State regulators approved a rate increases of 30 percent or higher for utility customers. However, the threat eased after many residents followed recommendations to conserve, wholesale prices dropped and the state enjoyed an unseasonably cool summer. The last rolling blackouts were ordered May 8. Since January, the state has spent almost $9 billion to buy electricity and has signed at least $43 billion worth of long-term contracts that last until 2021. It also created a Consumer Power and Conservation Financing Authority, which can float $5 billion to build, buy or lease power plants. By creating the authority, consumer advocates said, the state moved even further from deregulation and created a government-run system that encourages renewable energy and stable rates. Unlike businesses, it doesn't have to answer to Wall Street. The state's decision to sign long-term contracts included an order that the PUC restrict direct access so the state wouldn't be stuck with a shrinking pool of people to pay for the energy it ordered. But by voting not to allow consumers to choose their power provider, the PUC may discourage the energy retailers that benefited from it from ever returning to the California market, said Rick Counihan, Green Mountain Energy's general manager. He said Green Mountain would "relocate to other states that are more friendly." Nevada and Oklahoma lawmakers delayed plans to deregulate their states' electricity market, citing California's troubles. Iowa, Minnesota and Wisconsin have slowed their deregulation plans. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. UK PRESS: Enron Withdrawal From India Plant Faces Setback 09/20/2001 Dow Jones International News (Copyright (c) 2001, Dow Jones & Company, Inc.) LONDON -(Dow Jones)- U.S. energy company Enron Corp.'s (ENE) proposed withdrawal from a controversial power plant was further set back after Indian authorities announced a judicial investigation into the origins and legality of the project, the Financial Times reports. The probe into the $2.8 billion project, announced Wednesday, could prove politically sensitive because the terms of reference include the examination of the circumstances and individuals involved in approving the project, India's largest foreign direct investment, the paper reports. Newspaper Web site: http://www.ft.com -London Bureau, Dow Jones Newswires; 44 20 7842 9269 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. NEWS ATTACK ON AMERICA; Family, friends from far and wide feel pain of loss; Death struck victims on travels for work, play JOSE MARTINEZ and MARK MURPHY 09/15/2001 Boston Herald All Editions 020 (Copyright 2001) American Airlines flight attendant Gretchen Sarmanian tortured herself yesterday over what to say. She had been asked to speak at a memorial service for a friend she considered one of the best in the business - Cape Codder Barbara Arestegui - and the process was wrenching. "I think God puts the words in your head at a time like this," Sarmanian said. "She was so, so special, with a smile for everyone - absolutely everyone." Arestegui, 38, of Marstons Mills, was part of the ill-fated crew on American Airlines Flight 11 out of Logan International Airport that terrorists slammed into the World Trade Center. Hijackers seized and crashed three more jetliners Tuesday, killing 266 people on board and thousands more on the ground in New York and Arlington, Va. The moment Sarmanian heard an American Airlines official read off her friend's name on the list of Flight 11's crew will not easily fade. "Her name was the fourth one read, and I just broke down, the pain was so intense," Sarmanian said. "I was a basket case on (Thursday), but friends have rallied around. I didn't want to write anything that was too long about Bobby, because I knew I would start to cry." Arestegui was, according to Sarmanian, small enough to fit into the tightest corner of the tiniest airplane galley - a must with a large crew. "Such a little bundle of energy. You'd look up, and there she'd be sitting on the counter, smiling out at everyone," Sarmanian concluded yesterday, after finally composing her testimonial in one anguished, cathartic burst. ** Mildred Naiman swam daily, drove her elderly neighbors around - often too fast, according to relatives - and insisted on flying alone to visit her sons on the West Coast twice yearly. The 81-year-old Andover woman was making the trip alone again Tuesday aboard American Airlines Flight 11. Now the very sons she meant to visit are trying to return home to Massachusetts to help deal with the widow's death. "She was 81 but you could never know. She was in better shape than I am," her granddaughter, Heather Naiman, recalled yesterday. "She always spoke exactly what she thought at that exact time. She was very open. She drove like she was 25 . . . like a NASCAR driver. She thought she was Terry Labonte or something." For years, Naiman lived next door to her granddaughters, Heather and Hope, in Methuen. She taught Heather to swim and play the organ. Naiman, born in Lawrence, is survived by her sons, Richard, William and Russell, eight grandchildren and three great- grandchildren - with another tyke on the way. ** Even the simple act of answering the telephone was difficult yesterday at Xontech Inc. - the Washington, D.C., company that employed Leonard Taylor as a technical manager. The 45-year-old Andover native was a passenger on American Airlines Flight 77, which terrorists crashed into the Pentagon Tuesday, and along with him went the spirit of an entire company. "We're just trying to deal with things, and to be honest we're having a hard time of it," said a receptionist. Taylor was known as an athletic, outdoors-oriented sort who liked long bike rides and hikes. He played hockey during his youth in Andover and at Worcester Polytechnic Institute, where he graduated in 1979. His technical ability was understandable, considering that his father, Dr. Raymond L. Taylor of Swampscott, was a scientist who owned the company RLT Inc. for many years before his retirement. Raymond Taylor was at his son's home in Reston, Va., yesterday, consoling his daughter-in-law Karyn, and his two grandchildren, 8- year-old Jessica and 5-year-old Colette. "It's been a big, big shock to all of us," he said. "We're trying to get through this as best we can." ** When weather delays meant he would be unable to make his Monday night Frontier Air connection from Denver to Los Angeles, Brian Dale decided to spend an extra night in Boston, rather than in Denver. That's what put the 43-year-old father of three young children on Flight 11 Tuesday. "Instead of being stranded in Denver, he decided he'd rather be stranded in Boston," Dale's older brother, Kevin, said from their hometown of Warren, N.J. "When all this happened, his wife (Louanne Baily) thought he was already in L.A." Dale, who graduated from Dartmouth and had a law degree from the University of Michigan, worked for the investment firm Blue Capital Management in New York and was on a New York-Boston-L.A. business trip. "That kind of randomness is a little difficult to reconcile," said Kevin Dale, a Coast Guard commander in Boston from 1983 to 1988. "The family is holding up and moving ahead. We're just totally shocked that this happened - the randomness of it all and the deliberate murder of these people." Kevin Dale last saw his brother vacationing at Lake Placid in New York over Labor Day Weekend. In addition to his wife, Brian Dale leaves 3-year-old Jacob and 18-month-old twins, Rachel and Russell. ** At just 20, Eric Hartono epitomized the American Dream, friends say. He was in the process of moving from Boston back to Portland, Ore., when he lost his life aboard Flight 175. Yesterday, Oregon friends of the Indonesian-born Hartono remembered their friend as "a very friendly, very personable, very mature" young man. "It's hitting a lot of people hard," social studies teacher Larry Lawson said after returning from a one-hour prayer service at City Christian High School in response to President Bush's nationwide plea for a day of remembrance. "It makes us empathize with what's going on in New York City. There's already been a youth service dedicated to Eric." ** Patrick Currivan, 52, left Winchester for a job in Paris last October but didn't sell his local digs. He was here visiting friends last weekend and was one of the victims of the terrorist attack on American Flight 11. Currivan, a native of Paris, lived in Winchester for five years. The answering machine at that home, with his voice on it, remained active three days after his death. ** Mary Alice Wahlstrom, 75, of Kaysville, Utah, was, according to family members, "scared to death of flying." Still, she accompanied her daughter, Carolyn Beug, to the Boston area to drop off her twin grandaughters at the Rhode Island School of Design. She called her son Monday to tell him she was homesick and never leaving home again. On Tuesday, Wahlstrom and Beug died aboard Flight 11. "You can't believe that it happened," her grandson, Nathan Wahlstrom, told the Salt Lake Tribune. "We all have to go, but not like that." Beug, 48, of Santa Monica, Calif., was a filmmaker and video producer who won an award for the 1990 Van Halen video "Right Now." She was writing a children's book that was to have been the story of Noah's Ark, written through the eyes of Noah's wife. Beug is survived by her husband John, daughters Lauren and Lindsey, and son Nicky. Wahlstrom leaves her husband of 52 years, Norman, four sons and 13 grandchildren. ** Myra Aronson, 52, of Charlestown, had worked in public relations for the Cambridge division of Compuware since May 2000. She was a passenger on Flight 11, along with co-worker Graham Berkeley, 37, of Boston. "We are devastated by this loss and our sympathies go out to the families and friends of Graham and Myra," Compuware spokeswoman Lisa Elkin told the Cambridge Chronicle. "Our thoughts and prayers are with them." ** Chelmsford-native Andrew Curry Green and his boss at eLogic, Jeffrey P. Mladenik, were headed back to the West Coast aboard American Flight 11. Green was 34. Mladenik was 43. "Everything Andrew did came straight from the heart," said Carl Midson, who took over as interim CEO after the loss of Mladenik. "His easygoing, fun loving, radiant personality touched many of his co- workers in the office. . . . He will be fondly remembered and sadly missed by us all." Green, who leaves his wife Shannon in Los Angeles, began work at Cahners Business Information family of publications and Web services in September 1999 after 11 years of directing software development elsewhere. Mladenik, of Hinsdale, Ill., joined Cahners in 1998 after working in marketing at Tripp Lite Manufacturing and Toshiba America Electronic Components. He is survived by his wife Sue and four children. ** Brother Roger Argencourt of Bishop Guertin High School had no trouble remembering Brian Kinney, 28, of Dracut, who died aboard United Flight 175. "He was not the type of kid who would be easy to forget," Argencourt said. "He was a nice kid, he never had a down day and he was always jovial. I had him in a couple of classes and he was a good student, but he had one of those amazing personalities that everybody liked." Kinney was a class officer, a member of the student council and a four-year player on the varsity baseball team. His prowess on the diamond earned him the Coaches Award for baseball. Kinney's brother, Tim, also attended Bishop Guertin. Kinney earned his bachelor of science degree at the University of Massachusetts at Lowell and he worked in the Boston office of PriceWaterhouseCoopers for the past seven years. ** Nicholas Humber, 60, of Newton was en route to Los Angeles aboard American Flight 11 to complete his consultant work for the Enron Corp.'s attempt to solve the California energy crisis. Humber owned Brae Burn Management where he worked on energy and environmental issues. He also was a member in good standing with the Environmental Business Council of New England, a diverse group of 200 companies connected through environmental issues. The council's president, Daniel K. Moon, had known Humber for more than 30 years. The two men worked together during the formative years of the Environmental Protection Agency. "I've known Nick for many years from the EPA in the early '70s when I was in Boston and Nick was in Washington," Moon said. "That was a very dynamic time and it's still a dynamic time, but we are moving in a different direction. "We accomplished a lot, that was the beginning of the movement and we got the Clean Air Act and the Clean Water Act." ** Dorothy A. Dearaujo was returning to Los Angeles on United Flight 175 after a monthlong stay with her son Tim in Bedford. Her friends in Long Beach, Calif., described the 82-year-old Dearaujo as an independent women, a world traveler and an accomplished artist that specialized in water colors. ** Maclovio "Joe" Lopez Jr. was a Los Angeles-based construction worker who was on temporary assignment in Boston. Lopez had worked throughout the United States building underground water lines. He lived in Norfolk, Calif., with his wife Rhonda, daughter Dannette, 21, and son Joseph, 18. He was returning home on United Flight 175. ** Barbara Keating was returning home to Palm Springs, Calif., after a holiday on Cape Cod and a visit with family on the New Jersey shore when she boarded Flight 11 at Logan International Airport. The 72-year-old widowed grandmother and mother of five grown children was an active member of St. Theresa's Catholic Church. For eight years, Keating had worked with the Altar Society - the "ladies guild" - while assisting the nonprofit Catholic Charities group. She volunteered every weekday morning for the past six months without fail. Tuesday night about 300 parishioners gathered at St. Theresa's to pray for Keating and the other victims. ** Alona Avraham, 30, of Israel, was making her first visit to the United States. On the 11th day of her American sojourn, she boarded United Flight 175 at Logan Airport. Avraham is a descendent of Bombay Jews who immigrated to Israel in the 1950s. ** Daniel Brandhorst, his partner of 14 years, Ronald Gamoba, and their blue eyed, 3-year-old adopted son, David Brandhorst, perished together on United Flight 175. Brandhorst was a lawyer and accountant for PriceWatherhouseCoopers. Gamboa was a Gap manager. They were returning home to LA from a vacation in Massachusetts. ** Tim Ward, 38, of San Diego was returning home to California alone after spending a working vacation in Boston with his girlfriend, Linda Brewton. Brewton, who works for Cisco Systems, was in Boston attending business meetings. Ward was an executive at Rubio's, a Carlsbad, Calif.-based restaurant chain. He worked for the company for 14 years. ** A retired chemical engineer, Gerald Hardacre, 62, was returning to his home in Carlsbad, Calif., on American Flight 11. He is survived by his wife, daughter and stepdaughter. The family, reached by phone yesterday, respectfully declined to comment. ** Jessica Sachs, 23, of Billerica, was an accountant for PriceWaterhouseCoopers on her way to Los Angeles for business aboard Flight 11. Her family lived in Rochester, Minn., for 12 years before relocating to Billerica. Sachs was the youngest of Stephen and Karen Sachs' three children. Her brother Eric lives in San Antonio, Texas. She has a sister, Kathy Brower, who lives in Burnsville, Minn. John Connolly, Steve Conroy, Gus Martins, Mike Shalin and wires contributed to this report. Caption: A FRIEND'S PRAYERS: Frank Ciampa prays at the cross atop Orient Heights yesterday. His close friend and former Winthrop resident Kathleen Nicosia was an attendant and died Tuesday on Flight 11. STAFF PHOTO BY PATRICK WHITTEMORE; CAROLYN BEUG: Filmmaker had dropped twin daughters off at Rhode Island School of Design.; MILDRED NAIMAN: Andover woman was headed to the West Coast for annual visit with her sons.; MARY ALICE WAHLSTROM: Accompanied granddaughters to RISD despite fear of flying.; DOROTHY DEARAUJO: Accomplished artist was returning from stay with son in Bedford.; LEONARD TAYLOR: Athletic Andover native worked for Washington, D.C., company.; BRIAN DALE: Last-minute change of plans put father of three on fateful Flight 11.; MACLOVIO LOPEZ JR.: California construction worker had been on temporary assignment in Boston. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

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Enron Mentions - 05/05/01 - 05/07/01

Qatar, UAE Dolphin Proj Gas Price About $1.30/M BTUs-MEES Dow Jones International News, 05/07/01 The `dis-investment' climate Business Standard, 05/07/01 Many find Lanier still making sense Houston Chronicle, 05/07/01 Pay increases for state's top CEOs Associated Press Newswires, 05/06/01 India: Why Dabhol makes sense for Reliance Business Line (The Hindu), 05/06/01 India: Agenda for fresh talks with Enron chalked out Business Line (The Hindu), 05/06/01 Darkness triumphs The Times of India, 05/06/01 Should we persuade Enron to stay on? The Times of India, 05/06/01 Irrigators say utility must provide them cheap power Associated Press Newswires, 05/05/01 Professionals' Safer Picks Paid Off Last Quarter International Herald Tribune, 05/05/01 Godbole committee meets sans DPC representation Press Trust of India Limited, 05/05/01 Energy Executives Make Millions Selling to Deregulated Market in California KRTBN Knight-Ridder Tribune Business News: The Orange County Register - California, 05/05/01 Qatar, UAE Dolphin Proj Gas Price About $1.30/M BTUs-MEES 05/07/2001 Dow Jones International News (Copyright (c) 2001, Dow Jones & Company, Inc.) DUBAI -(Dow Jones)- The fiscal price for natural gas from Qatar's North Field to be supplied on a CIF basis under the Dolphin project to Abu Dhabi is around $1.30 per million British Thermal Units, the Middle East Economic Survey reported Monday, citing sources. The price includes the basic production price agreed on by Qatar Petroleum (QP) and the UAE Offsets Group, or UOG, plus the costs of compression and transportation of the gas through a 350-kilometer pipeline along with seasonal adjustments for peak demand, MEES said. The Dolphin project is a $3.5 billion deal agreed to two years ago by UOG and QP aimed at sending 2 billion cubic feet a day of natural gas from Qatar's offshore North Field, piped by sea to Abu Dhabi and also for onward delivery to Dubai and possibly Oman. MEES said the $1.30 per million BTU price will also be subject to 2% annual escalation. Qatar had hoped for a higher basic price but instead, an agreement was reached whereby upward adjustments were made to the quantities of liquids stripped from the gas under the prospective production sharing agreement, or PSA, thereby increasing Qatar's revenue, MEES added. QP and Dolphin Energy Ltd., or DEL, a subsidiary of UOG, signed a term sheet agreement in March for the upstream section of the project. The next step will be for the two parties to sign the full PSA for the 2 billion cubic feet a day to be delivered over 25 years to the U.A.E. The term sheet specified the PSA would be signed by September at the latest, MEES said. TotalFinaElf (F.TFE) and Enron Corp. (ENE) each hold a 24.5% stake and UOG a 51% stake in DEL. TotalFinaElf is to operate the upstream phase of the project, which includes developing natural gas reserves in two blocks of Qatar's giant offshore North Field, in which the first wells are scheduled to be drilled in the second half of 2001 and come onstream in 2005. Enron will focus on gas transportation, which requires building the 350-kilometer pipeline from a processing plant in Ras Laffan, Qatar, to the Al-Taweelah terminal in Abu Dhabi and the Jebel Ali terminal in Dubai. A further phase of the Dolphin project will cover the delivery of an additional 1 billion cubic feet a day of natural gas, if it is deemed feasible. MEES said the foreign partners have yet to agree on the precise details of their working relationship and on the price of the pipeline. TotalFinaElf and DEL have said Enron's estimated price for the pipeline is too high. Sales and purchase agreements with U.A.E. customers are also not yet concluded. -By Dyala Sabbagh; Dow Jones Newswires; 9714 3314260; [email protected] Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. The `dis-investment' climate A V Rajwade 05/07/2001 Business Standard 10 Copyright (c) Business Standard In last week's article, I had expressed reservations about the 6/6.5 per cent real GDP growth projected for the current fiscal year. Recent events in the Indian political economy do impinge on the credibility of governance, and may worsen the investment climate. A few years back, central ministers were talking of a $ 10 billion inflow of foreign direct investment by the turn of the century. The century has turned but the investment flow is stagnant at a quarter of that. Consider some of the recent decisions, and their after-effects. The central government, having sold Balco to Sterlite, is unable to deliver. The strike continues and the poor chief minister of Chhattisgarh, whose wife had to apply for a petrol pump licence to keep home fires burning, remains as partisanly recalcitrant as ever. Surely future bidders for public sector assets, particularly in Chhattisgarh, will remember Balco. The very limited response to the privatisation of Indian Airlines, Air India, MTNL, VSNL, and so on could well translate into low prices. Nor would the recent controversy over WiLL (wireless in local loop)be found reassuring by intending investors, whether foreign or domestic. The telecom sector has probably attracted more foreign investment than any other, one of the biggest investors being Hutchison of Hong Kong. After the decision of the Telecom Regulatory Authority of India on the issue, Hutchison had announced that it will suspend further investment in the country. This seems unlikely to change after the more recent labours of the curiously acronymed GoT-IT. Mr Paswan's argument that WiLL is "pro poor" is difficult to swallow when the instrument reportedly costs more than a cell phone! The cellullar phone operators are obviously unhappy and have gone in appeal and Mr Sivasankaran is offering to pay Rs. 2,500 crore for a quarter of the WiLL-space offered free to basic telephone operators. What a mess! The hesitation of investors to come into the country would also get affected by the way the Enron affair gets resolved (more on this in a later article). Incidentally, on the subject of the general direction of economic policy, unions sponsored by participants in the ruling alliance were themselves part of the previous week's strike. Indeed, the BJP's own union boss has criticised the direction of government's policies, and so has the RSS. Mr Gurumurthy of the Swadeshi Jagaran Manch has termed the GoT-IT deliberations on WiLL a "fraud on (the) people". If the leading party in the ruling coalition does not enjoy the confidence of its own followers/parents (who seem closer to the Congress or the left on issues like WTO, privatisation or foreign investments), what credibility would it carry with investors, foreign or domestic? Nor does there seem to be any effort to explain the rationale underlying the policies to the people. Apart from the general climate, some specific decisions in terms of foreign investment are equally puzzling. Daewoo was denied permission to convert its dues from the Indian company into equity. Why? Would the government prefer the money to go out if and when Daewoo India regains its health? In another recent instance, four different applications of Shell, the giant oil company, were rejected on one day. From what has appeared in the press, it is difficult to appreciate the rationale. One of the more curious reasons was that one Shell application, if cleared, would have contravened a Gujarat government law the interesting part is that the seller of the equity to Shell, to buy which the investment application was made, is a Gujarat government undertaking! Frankly, the ostensible reason for rejection seems less than convincing, more so when all such approvals are in any case subject to all applicable laws! If there are question marks about the climate for direct investment, whether domestic or foreign, whether for greenfield projects or privatisation, one wonders whether the happenings in the equity market and the suddenly hyperactive Securities and Exchange Board of India (Sebi) would dampen portfolio investors' enthusiasm as well. For a student of the financial markets, Sebi's recent stance and summary punishments look to be in sharp contrast with its deafening silence when the index registered a very sharp rise up to 6,000 last year. Or is it that only sharp falls, and not sharp rises, are prima facie pointers of malpractices? All the affected parties have denied the charges and appealed to the courts. Meanwhile, the FII inflows have held up well. But for how long particularly if the action against CSFB is not backed by a transparent and convincing case? (To be sure, CSFB hardly has a lily-white reputation in the last couple of years alone, it has faced the wrath of regulators in Japan, UK, Scotland, US and Switzerland). And, with external debt flows likely to be negative in the current year, equity inflows are important to our balance of payments. Not all signs are negative, particularly in the IT sector. Conseco, the big insurance company, has announced the takeover of a major call centre and is transferring a huge amount of back office work to India at a cost saving of $30 million. (Incidentally, if workers of the world were to unite as they have nothing to lose but their chains, our trade unions should be protesting against the Conseco move in keeping with their anti-globalisation stance). Major IT companies like Microsoft, Sun, Oracle, and others have announced that the recent slowdown in the US will not affect their plans in India. Indeed, Hewlett-Packard and Lucent are adding staff here. But, even in IT, one would be foolish to ignore the potential competition from China. It is importing 20,000 English language teachers, which will negate our major competitive advantage. It is far ahead of us in hardware (exports $ 20 billion in 2000), telecommunication and other infrastructure, and catching up in software (exports $ 3.6 bn last year). As it is, we are 41st in 49 countries analysed in the recent World Competitiveness Yearbook, down two notches from the last survey. If the general climate and credibility remain where they are, we can bid goodbye to even 6.5 per cent growth did the prime minister say 9 per cent? Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. May 7, 2001 Houston Chronicle Many find Lanier still making sense By JOHN WILLIAMS It's a phrase much copied around Houston, one that tells it like it is without telling it all -- "That's my sense of it." When he was mayor, Bob Lanier repeated it so often that a passel of politicians and pundits, business leaders and bureaucrats began emulating it, at times mimicking Lanier's whispery baritone. Since then, "That's my sense of it" or "My sense is" have evolved into staples of Houston political jargon. On the surface, the phrase appears blunt, that the teller is speaking exactitudes. When Lanier used it to describe his observations, the message was straight to the point. But it's a good phrase, especially for a politician, because it provides a back door. The person using it is implicitly saying "this is true based on current information." New information can catalyze a new sense of things. Though Lanier was term-limited from office in 1998, his sense of things continues to be solicited by power brokers and wannabes. Lanier is constantly on the horn, advising those tapping his sizable knowledge base. Advice for bits of gossip In recent weeks, Lanier has offered strategy to all three major mayoral candidates -- incumbent Lee Brown and City Council members Chris Bell and Orlando Sanchez -- as well as to one who decided not to run, City Controller Sylvia Garcia. He chats with people dallying with the 2003 mayoral race, with those watching water, transportation and downtown development issues. Those who call Lanier from time to time include former President Clinton, Gov. Rick Perry and Enron Chairman Ken Lay. Sanchez calls Lanier "The Oracle," after the Greek deities who answered the questions of mortals. People call Lanier offering observations and gossip in return for advice. Ring-kissing by visiting devotees assuages his sizable ego. Lanier's unique background -- he's been a sports reporter, lawyer, developer, banker, state Highway Commission chairman and mayor -- provides different vantage points for his observations. He can think through problems on different levels, decipher problems in politics, finance, development or public policy. If knowledge is power, Lanier at times appears more the powerhouse than his successor. Brown doesn't seem to enjoy the social and intellectual gamesmanship Lanier relishes. Lanier gabs with journalists, professors, lobbyists, pollsters and others who provide a sense of the city's intricate political balance of power. "It's just not Brown's shtick," said a lobbyist close to Lanier and Brown. "Part of being a good political player is the love of talking gossip." Lanier's penthouse home atop The Huntingdon in River Oaks serves as a Tibetan mountaintop for those seeking total political consciousness. Lanier and wife Elyse throw parties for political players of all ilk who allow him to remain a clearinghouse of information. Keeping a hand in deals Lanier continues to influence local decision-making. He pieced together a downtown convention hotel deal between the city and developer Gerald Hines. The downtown rail system is going down Main and Fannin largely because of Lanier. Afraid Lanier would rise to swamp a broader rail plan for the entire region, Metro officials pared down their vision to a level Lanier would accept. Metro Chairman Robert Miller is a regular visitor at the Laniers' home. Lanier was key in developing the Greater Houston Partnership's recent comprehensive program for preserving mobility. Lanier's current sense is that Houston is healthy, striding to address transportation, water supply, air pollution and other problems. Brown should win re-election, unless continued bumbling like a recent pothole scandal create a critical mass of negative publicity. Either way, at age 76, gimpy knees, problematic heart and all, Lanier will be at the center of most civic discussion. In the end, Lanier's lasting legacy may be the knowledge and wisdom he passes to the next generation of Houstonians. At least, that's my sense of it. Pay increases for state's top CEOs 05/06/2001 Associated Press Newswires Copyright 2001. The Associated Press. All Rights Reserved. ST. PAUL (AP) - Paychecks for the highest-paid chief executives in Minnesota are on the rise, but they still lag behind those of corporate leaders elsewhere, according to a published report. In a survey of the 100 largest publicly held corporations in Minnesota, the Saint Paul Pioneer Press found the 10 highest-paid chief executives received a total of $230.1 million in 2000, the newspaper reported Sunday. That's up 71 percent from the $134.6 million the state's top 10 made two years earlier. The 1998 total was up 171 percent from 1993. William McGuire of UnitedHealth Group was the highest-paid chief executive in Minnesota, making $54.1 million in a package that included exercised stock options. The highest-paid chief executive in the country - Citigroup's John Reed - made $293 million in total pay in 2000, according to a national survey in Business Week. The lowest-paid among the magazine's top 20, Enron's Jeffrey Skilling, pulled in $72.5 million - 29 percent above McGuire's compensation. The Pioneer Press survey also found that total cash compensation, which excludes gains from stock options and other long-term pay, rose 14 percent last year. That compared with an 18 percent gain for executives in the Business Week survey. "The figures are troubling," says John Stout, an attorney with the Minneapolis law firm of Fredrikson & Byron. Stout serves on the advisory board of the National Association of Corporate Directors, and is a former president of the association's Minnesota chapter. "There is a general perception that boards of these big companies aren't doing their jobs when it comes to CEO compensation." Stout stresses that his comments apply to the overall picture. Looking at the pay alone at any single corporation is not enough, he says, noting that the performance of these companies is also a key consideration. The chief executive data breaks total pay into three categories: salary and bonus payments for 2000, long-term compensation and stock options. The Minnesota survey counts options as pay in the year that an executive exercises his or her right to buy the stock. Other surveys count options in the year that they are granted, plugging in standard formulas to estimate their future value. Long-term pay is mostly compensation in the form of "restricted stock" - outright grants of shares. Typically, these grants carry a requirement that the executive must stay with the company to receive the shares. Pay packages have rocketed in recent years, mostly because executives have won sizable stock options. As the stock market has soared, so has the value of their options. Last year's pay packages in Minnesota illustrate the importance of stock options. At UnitedHealth Group, salary and bonus payments accounted for only about a seventh of McGuire's overall package. The rest came from options exercised. Options provided an even greater portion of overall pay for other top-paid chief executives in Minnesota. The new pay survey for Minnesota shows that 13 chief executives landed sizable gains, at least 25 percent, in cash compensation - salary and bonus - last year. Meanwhile, the salary and bonus total fell significantly for just five chief executives. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. India: Why Dabhol makes sense for Reliance 05/06/2001 Business Line (The Hindu) Copyright (C) 2001 Kasturi & Sons Ltd (KSL); Source: World Reporter (TM) - Asia Intelligence Wire "ENRON will always consider a legitimate proposal to sell an asset if it makes strategic sense but we are not currently pursuing the sale of our stake in Dabhol Power Company." - A spokesperson of Enron India "Enron is still running Dabhol Power Company. They are our partners in oil exploration. We look at value propositions as and when they arise. We have an open mind" - Mr Anil Ambani to a question if Reliance was interested in taking over the Dabhol powerproject. TO BE sure, there is nothing to suggest that it could be happening yet. At least there is nothing in the public domain. But ever since word started going around that Enron may sell its stake in Dabhol Power Company (DPC) there has been intense speculation that Reliance could be among the frontline contenders. The Reliance Industries Managing Director, Mr Anil Ambani's statement is the only official comment on the subject to date. And it neither confirms nor denies the speculation in the market. It is indeed significant that Mr Anil Ambani has not categorically ruled out Reliance's interest in DPC. But why should the Reliance group be interested in DPC? How does Dabhol fit into the group's plans? In other words, how does it make sense for the oil-to-petrochemicals major to consider buying out Enron from DPC if the opportunity arises? Acquiring DPC would make eminent strategic sense for the Reliance group. The 2,184 MW power plant and the associated LNG (liquefied natural gas) import and regasification facility fit in well with its growth plans in the power sector and in petrochemicals too. Power is one of the focus areas in the Reliance group's future expansion plans. But it has not been able to make serious progress in either the mega 3,960 MW project in Hirma, Orissa, or in the 447 MW Patalganga project due to diverse reasons. While the Hirma project is bogged down in sovereign guarantee issues, the Patalganga project is held up with the Maharashtra State Electricity Board (MSEB) declining to provide escrow cover. In this backdrop, DPC's state-of-the-art, operational power plant presents a great opportunity for Reliance Power to make its mark. The project is at the right stage from an acquirer's viewpoint. One part of it is already operational while the other is set to go on-stream in a few months time. All the funds due from lenders, save a small part, have been disbursed and construction is almost completed. So no major project management problems here. The only sticky point is the dispute over the power purchase agreement (PPA). But a new promoter can facilitate a review of the PPA and its controversial terms. Besides, it may be easier for the Government to take a fresh look at the project once Enron is out of the picture and is replaced by an Indian company. LNG project, the clincher The Dabhol project assumes added strategic importance due to the associated LNG import terminal. Reliance plans to set up LNG import facilities on the Gujarat coast. The LNG business is a long-term proposition by its very nature. The key to its success lies in tying up the entire chain from the gas source and liquefaction facility to cryogenic transport, import terminals/regasification plant and, finally, finding assured buyers for the gas. The tricky part is identifying the gas supply source and a collaborator with the financial strength to set up the liquefaction and export terminals. The final challenge is to tie-up dedicated gas consumers in the vicinity of the import terminal. On all these counts the Dabhol project is the best bet. It already has an assured gas supply source in West Asia. The LNG transporting vessel is almost ready in Japan and will be delivered by November. The critical point here is that all the exploitable sources of natural gas in the West Asia are tied up by one buyer or the other and any new LNG importer on India's west coast may find it difficult to find fresh supply sources. The Dabhol LNG project assumes additional importance having tied up its supply source. Besides, DPC has installed LNG capacities much in excess of the needs of the power plant. It has close to 5 million cubic metres of capacity when all it would need is about 2.1 million cubic metres for power generation. This extra gas can be sold to industries in the Gujarat/Maharashtra belt which are hungry for energy. More important, from Reliance's viewpoint is that this gas can be used to operate its Patalganga plant where fuel cost is an issue. All it would need to do is lay pipelines from the import terminal to the hinterland. The natural gas can also be piped to its Hazira petrochemical complex where it runs a mother cracker that can operate on naphtha or natural gas. It is presently operating on naphtha, which is notorious for its volatile price swings. One of the factors behind the fall in earnings growth of Reliance Industries in the last quarter of 2000-01 was the high naphtha cost. Reliance can overcome such handicaps if it is able to shift to natural gas for the cracker. Thus, whichever way one looks at it, the Dabhol project appears an excellent strategic fit to Reliance and its business plans. Enron has denied any plans to exit from the project now but it has not ruled it out for all time. The multinational is turning its focus to energy trading and broadband businesses and its chief is on record saying that it should not be operating power plants in Third World countries. Given the troubles that it has encountered in the Dabhol project, it would not be surprising if Enron exits at some future date. But that is assuming that it gets a good price for all the assets created and the trouble endured. Therein lies the rub in the entire deal. If Reliance is able to offer that "good price" then it may land up with a strategically excellent acquisition. All these are possibilities. As of now, both Enron and Reliance would like to lie low and deny any interest in a courtship, at least in public. Raghuvir Srinivasan Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. India: Agenda for fresh talks with Enron chalked out 05/06/2001 Business Line (The Hindu) Copyright (C) 2001 Kasturi & Sons Ltd (KSL); Source: World Reporter (TM) - Asia Intelligence Wire Mumbai, May 5. OFFICIALS of the State Government, Maharashtra State Electricity Board (MSEB) and members of the Madhav Godbole committee, which recently submitted its review on the Dabhol Power project, met here on Saturday. The meeting was to "chart the agenda for renegotiation with Enron officials," a senior MSEB official said. Enron officials were scheduled to attend this meeting but backed out on May 3. Enron had informed the State Government that it would not accept the recommendations of the Godbole committee. Our Bureau Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Darkness triumphs 05/06/2001 The Times of India Copyright (C) 2001 The Times of India; Source: World Reporter (TM) MEN & IDEAS / Gurcharan DasThere is no use pretending that the departures of N.K. Singh and Montek Singh are not going to hurt. They are. The two men are very different. Montek is an elegant economist and NK is a natty networker who knows how to turn every screw in the government's machine. But both are reformers. N.K. Singh has been transferred from the Prime Minister's Office, where he coordinated the PM's economic agenda, to the Planning Commission. Montek is leaving to head the Independent Evaluator's office for the International Monetary Fund. Earlier, he was finance secretary, where he had spearheaded many an economic reform ever since the summer of 1991. Both men have fallen victim to the RSS and the swadeshi lobby. Although Muralidhar Rao and Dattopant Thengadi may have precipitated NK's recent departure, all anti-reformers are delighted. The communists, the leftists, the Samatas and the Mamatas, and the considerable forces of darkness in the Congress would rather live with inefficient and corrupt public sector monopolies than have anything to do with competitive markets. Montek's achievements are well-known, but NK too leaves a considerable record of reform, culminating in the recent path-breaking budget with dramatic reforms in labour, agriculture, and industrial policy. It contained both Vajpayee's and Sinha's reforms, and was a product of teamwork between North and South Blocks. NK's networking skills with the ministries were crucial. He has left a mark on many Vajpayee initiatives: the current momentum in building highways, the new "open skies" policy (held hostage for so long by the civil aviation ministry), the decision to lease five major airports, the new energy behind ports privatisation, the resolution of the telecom tangle via an excellent telecom policy -- the ruckus over WiLL notwithstanding, and the soon to be announced liberalisation of drugs price control. Against these successes is failure in the power sector and the Centre's inability to get the states to reform SEBs. The lack of initiative on Enron is also inexplicable. India cannot afford to let Enron blow up and destroy our credibility with the world. At one go we could lose our reputation for honouring contracts. Remember, Enron's board members, James Baker and Kenneth Lay, are George W. Bush's closest friends. Reforms don't happen without reformers. Even the most reform-minded minister needs a reforming officer to help build pro-reform coalitions in the bureaucracy, the party and in Parliament. Few realise A.N. Varma's stellar role when he was Prime Minister Narasimha Rao's secretary. His legendary Thursday meetings with economic secretaries became the crucial instrument for the blistering pace of reform between 1991 and 1993. Varma was a terror and ran his committee tightly. No one was allowed to travel on Thursdays. The committee met for only two hours, when the reform in question was openly discussed. Varma summarised and minuted the outcome and the reform proposal was taken to the cabinet for approval, and then on to Parliament. Many of us remember our excitement in those golden years as a new reform was announced every week. Just as Narasimha Rao had Varma, so Manmohan Singh had Montek. Chidambaram had Jairam Ramesh, and Vajpayee had N.K. Singh. These minister-officer partnerships have been crucial in making reforms happen. Those who criticise the PMO for becoming too powerful forget that in our political model, ministries are independent and someone has to coordinate our chaotic government. It used to be the cabinet secretary, but when you want strategic management of change, then you require initiative and pro-activity. Who knows, a powerful, hands-on secretary might have been able to prevent the Fifth Pay Commission disaster -- the lowest point in our economic history of the 1990s. To our worthy anti-reformers, who are gloating over NK's and Montek's exit, I ask: How can you oppose the work of reformers who are trying to, for example, reduce the theft of electricity by employees of the state electricity boards? If this theft is reduced from 30 per cent today to only 18 per cent, there will be enough capital to build sufficient new power capacity. But the only way to stop thievery is by privatising distribution, for no private distributor will allow his power to be stolen. Thieves don't steal power in Mumbai and Calcutta because distribution is private. Our anti-reformers retort, "Don't privatise power, just catch the thieves!" Well, for fifty years we have not been able to catch them. Should we wait another fifty? Think about this: The next time you oppose reforms and reformers you vote for public sector thieves rather than competitive markets. Liberalisation is not a matter of ideology. It is common sense to want clean, uncorrupt services. The only losers in privatisation will be thieves and lazy workers. The winners will be the Indian people. Comment: [email protected] or Post Box 3046, New Delhi 110003 Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Should we persuade Enron to stay on? 05/06/2001 The Times of India Copyright (C) 2001 The Times of India; Source: World Reporter (TM) IN BLACK & WHITE / Harry DhaulYes. Renegotiate by all means, but honour the deal If Enron is the sole evil in the power sector, I would say remove it from India. If that solves the myriad problems of our industry, farmers and consumers, go ahead and ask Enron to leave. But it won't solve the underlying problems, will it? I am not holding a brief for Enron, but suppose you ask the company to leave. What next? It is only another way of postponing decisions which electricity boards have to take anyway. Though facts and figures have been thrown around about how much India would gain if Enron were to leave, I assure you our liabilities would be much more. There would be penalties to pay for various contractual obligations. In all this talk, most people forget one thing -- the sanctity of a contract. Is there a rule of law in this land? This kind of commercial deal is done the world over. If a government can't honour a contract and that too the biggest India has got, how can you expect anybody else to do so? Okay, if the forces operating in the market have changed and the contract needs to be renegotiated, do so. But is it fair to tell a company after a few years: Sorry, please pack up and leave? Especially a company which has stuck to all the conditions of the contract. And imagine what this will do to foreign direct investment in our country. Is this the climate which foreign companies would want to be thrown into? I don't think so. Having said this, there is still ample scope for renegotiation on the commercial terms. The tariffs can be brought within reasonable limits and there are reasons for this. Firstly, gas prices are going down, so we can get a good deal out of this project. Secondly, the prices of gas turbines have also gone down and we should be able to benefit from it. Thirdly, the efficiency of gas turbines has gone up by nine per cent. This will bring down the cost of electricity. Of course, critics of Enron will say the power generated is costlier than that generated within the country. But that's natural considering the amount of power bought is less than optimal. Once this quantity goes up, the rates will come down and be on a par with government power projects based on liquid fuels like the National Thermal Power Corporation in Kerala. The tariffs, contrary to popular notion, of both are in a similar range -- Rs 4-5 per kilowatt hour. But is NTPC being paid for the power it generates? No. The basic mistake lies with our policy-makers who allowed such power projects based on liquid fuels. Even thermal power, generated by NTPC, costs Rs 1-1.50. But this is not being paid for by state governments. What's the justification for that? State electricity boards have to pay close to Rs 26,000 crore to central power-generating units -- Rs 17,000 crore has to be paid to NTPC. So how will the scrapping of the Enron project help? Despite all this, there is severe power shortage. Renegotiation would help restore some of the lost confidence among foreign investors. The deal can and should be improved in national interest. And more importantly, the government should honour it. How can you penalise a company which has brought the largest investment into the country? Also, if Enron leaves, what about its assets here? Of course, somebody could buy it but again the question arises: Will they be paid? Will asking Enron to leave help our electricity sector? This kind of mob mentality that targets Enron won't help matters. Our power utilities should be improved first. (Harry Dhaul is D-G, Independent Power Producers Association. He spoke to Shobha John) Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Irrigators say utility must provide them cheap power 05/05/2001 Associated Press Newswires Copyright 2001. The Associated Press. All Rights Reserved. IDAHO FALLS, Idaho (AP) - PacifiCorp is headed back to court with the cooperative of eastern Idaho irrigators that wants to use the utility's transmission lines to carry cheaper power bought from another company. PacifiCorp missed a May 1 deadline to appeal last October's 9th U.S Circuit Court of Appeals ruling that the utility cannot use an Idaho statute to protect itself from being sued under federal antitrust law. The appellate ruling opened the door to electric deregulation in Idaho, which has had some of the cheapest power rates in the nation. That prospect prompted a special legislative session last December to close that loophole. That action was ratified during last winter's regular legislative session. But the legislation does not affect the PacifiCorp battle with the irrigators. And the missed deadline clears the way for a jury trial in federal court to determine whether the utility and its Utah Power & Light subsidiary have been in violation of federal antitrust law in their dispute with the Snake River Valley Electric Association. The cooperative wants PacifiCorp to supply its power at the same rates the group negotiated in 1997 with Texas-based Enron. The Enron contract lapsed when it became obvious the court case would preclude any wheeling of the outside power through PacifiCorp transmission lines. Association spokesman Carl Palmer pointed to a statement made by PacifiCorp lawyer David Jordan, who at a hearing in 1997 said, "I am committing PacifiCorp to provide wholesale power at the same rates and on the same terms to Snake River as the Enron contract, the same length of time, same price." If PacifiCorp is required to meet the terms the cooperative arranged with Enron, the cooperative initially would be able to buy electricity at $18.75 per megawatt hour. The rate would rise to $25.13 per megawatt hour by the end of the five-year agreement - still about one-tenth the current wholesale market price. "As soon as the lawsuit is settled, they're bound to sell us this power," Palmer said. PacifiCorp Spokesman Dave Eskelsen said the company's position is that it is not obligated to let the association use its lines, and that the company is not violating antitrust law with its refusal. The utility has filed a petition with the Idaho Public Utilities Commission, seeking support for its stance. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. MONEY REPORT Professionals' Safer Picks Paid Off Last Quarter Anne Bagamery International Herald Tribune 05/05/2001 International Herald Tribune 15 (Copyright 2001) EAT WELL or sleep well. The process of buying stocks requires an investor to make many choices along the way, but they all boil down to that one: whether to buy shares in companies that may bring huge rewards, but at a certain risk, or to make safe, steady bets that would not keep anyone awake at night. Professional investors, however, try to have it all: They want to recommend stocks that will pay off handsomely for themselves and their clients, but they also want to narrow the odds. That is why analysts and money managers spend their days (and sometimes nights) researching the fundamentals of an industry sector, or poring over technical charts, or listening to Alan Greenspan to try to divine the next macroeconomic trend. Sometimes the market throws a curve, and all that hard work goes for naught. But sometimes it pays off. The first quarter of 2001 was one of those times. Of the 92 stocks recommended by professionals in The Money Report in the first three months of the year, 52 rose in price by the cut-off date of April 27 an astounding record, considering the carnage in world stock markets during January, February and March. Otherwise, 38 stocks fell, most of them at the high end of the technology spectrum. Among the notables, XTL Biopharmaceuticals PLC, the biggest decliner in the period, fell more than 51 percent, and Cisco Systems Inc., a bellwether for the Internet economy, tumbled 24 percent. Rounding out the picture, of the remaining two equities, Boeing Co. was unchanged from the price at which it was recommended, and Enron Corp. was mixed: Investors who bought shares in the huge engineering company on Feb. 10, when they were recommended at $80.20, would have booked a 21 percent loss by the end of April, while those who waited until March 31 to jump in at $58.10 a share would have made 9 percent. It would be tempting to conclude that the overall record shows the wisdom of choosing staid, boring old economy stocks over flighty, unprofitable new economy parvenus. It is true that in the first quarter, the safe bets usually paid off. Unilever NV, the British-Dutch consumer products giant, and Wal- Mart Stores Inc., the world's biggest retailer, rose 5 percent and 4 percent, respectively, in a quarter when neither did much of anything except take care of business. Rakuten Inc., a Japanese Internet retailer that was the darling of the market last April, had come to earth by this year: Its shares, recommended as a turnaround play in February, fell 25 percent. - Nowhere was the contrast between bricks and clicks more pronounced than in the Lehman Brothers Inc. list of "10 Uncommon Euro Values," featured in the Feb. 24 issue. Of the 10 stocks recommended, six tumbled, including such technology brand names as Alcatel SA (down 19.7 percent) and Siemens AG (down 1.5 percent). Logica PLC, a British technology-consulting concern, was the biggest loser, falling 31 percent. The four that rose are in plain-vanilla businesses such as supermarkets (Ahold NV), electricity (ENI SpA), cars (PSA Peugeot Citroen SA) and Lemsip (Reckitt Benckiser). The folks at Lehman did set a good example for individual investors by diversifying, picking stocks in a variety of sectors from six countries, and emphasizing that these were stocks to buy and hold for the year, not flashes in the pan. Speaking of good examples, special mention should go to three analysts whose astute stock-picking stood out in the first quarter: Howard Ward of Gabelli Growth Fund. With mergers and layoffs and chaos swirling all around media stocks, it takes a courageous person to recommend AOL Time Warner Inc. and Viacom Inc. But Mr. Ward, who participated in the previous quarter's investment roundtable, sifted through the industry wreckage and noted that while the stocks of AOL and Viacom had been battered, the companies' business models remained intact meaning that, fundamentally, they were still doing something right. AOL shares rose 16.6 percent; Viacom's, 4 percent. Bill Greiner of UMB Financial Corp.'s UMB Bank. Energy stocks, as a group, were some of the best performers, helped along by a rise in oil prices and the salutary effects of a wave of mergers two years ago. Mr. Greiner identified winners in a range of industry subsectors, including integrated oil (BP Amoco PLC, which rose 12 percent in the period), gas (Apache Corp., up 9 percent) and oilfield services (Halliburton Co., up 6.5 percent, and Schlumberger Ltd., up 10 percent). Richard Davidson of Morgan Stanley Dean Witter & Co. Asked to identify European stocks resistant to a slowdown, in the Feb. 17 issue he named some solid winners and refreshing logic. He recommended two cable-television companies, Sogecable SA of Spain and Telewest PLC of Britain, reasoning that people without the money to go out could always stay home; Sogecable rose 18 percent, while Telewest slipped 1.7 percent. He also suggested two tobacco stocks, Altadis SA of Spain and Swedish Match AB, reasoning that the last thing a financially struggling smoker would give up was the habit. Swedish Match rose 19 percent, while Altadis fell 8 percent. Finally, Mr. Davidson recommended a pair of security-services companies Securicor PLC of Britain and Securitas AB of Sweden because he reckoned that in tough times, people might have less wealth than before, but they would want to hang on to whatever they had. Securitas rose 4 percent, while Securicor slipped 3.6 percent. - ONE group of prognosticators that did not find fortune in the first quarter were the shorts, analysts who recommended stocks to sell or avoid. This is a high-risk game in the best of times a wrong bet can have theoretically unlimited losses but it is particularly nerve-wracking in a reluctant bear market such as the current one, when pockets of optimism keep peeking through the gloom. Of the six companies mentioned as fundamentally lacking in value or prospects, four rose: Banca di Roma SpA, Body Shop International PLC, General Electric Co. and National Express PLC. The other two, Natexis Banques Populaires and Pepsi Bottling Group Inc., had mild losses. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Godbole committee meets sans DPC representation 05/05/2001 Press Trust of India Limited (c) 2001 PTI Ltd. Mumbai, May 5 (PTI) The Godbole committee, set up for renegotiating the estranged Power Purchase Agreement (PPA) between US energy major Enron -promoted Dabhol Power Company (DPC) and the state electricity board (MSEB), Saturday held its first internal meeting sans representatives of the multinational. "It was an internal meeting to take stock of the current situation and decide on matter pertaining to the May 11 meet with officials of Enron, GE, Bechtel and DPC's foreign lenders", state government sources told PTI here. The meeting which lasted for almost four hours discussed a strategy to present the committee's recommendations made public last month, they said. Out of the nine-member committee, Saturday's meeting was attended by five members including Godbole, MSEB chairman Vinay Bansal, state energy secretary V M Lal, state finance secretary Sudhir Shrivastava and Kirit Parekh of Indira Gandhi Institute of Developmental Research. Those absent were HDFC Chairman Deepak Parekh, TERI Director R K Pachauri, former Union Energy Secretary E A S Sarma and yet to be appointed representatives of the Centre and Central Electricity Authority. The negotiating committee would suggest solutions to bring down the exorbitant power tariff, separating of the liquefied natural gas (LNG) facility, restructuring of DPC and allowing sale of excess power through central utilities mainly the National Thermal Power Corporation (NTPC), sources said. (THROUGH ASIA PULSE) 05-05 2001 Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Energy Executives Make Millions Selling to Deregulated Market in California Chris Knap 05/05/2001 KRTBN Knight-Ridder Tribune Business News: The Orange County Register - California Copyright (C) 2001 KRTBN Knight Ridder Tribune Business News; Source: World Reporter (TM) Executives at the largest energy companies selling power into California saw their compensation rise an average of 253 percent last year, with one top executive collecting more than $100 million. Call it a classic case of supply and demand: Where a commodity is scarce, money follows. Nowhere was this more evident than inside California's dysfunctional electricity market. Corporate profits for energy traders and marketers nearly tripled due in large part to the California electricity crisis, and chief executives were rewarded with compensation packages that rose as much as 600 percent, according to disclosures filed with the Securities and Exchange Commission. Energy companies say the pay packages were well-deserved and reflect the returns enjoyed by shareholders. But consumers and ratepayer groups argue that the million-dollar salaries handed executives in Houston, Arlington and Atlanta are excessive especially in the wake of charges that companies manipulated California's power markets. No energy executive made more last year than Kenneth L. Lay, chairman of Houston-based Enron Corp. Lay collected $141.6 million in salary, bonuses and stock, a 184 percent increase over 1999. Enron, the nation's largest wholesale energy marketer, sells both natural gas and electricity in California. Enron also paid CEO Jeffrey K. Skilling $72.6 million and Enron Wholesale chief Mark A. Frevert $35.8 million. "If you could spray dye on dollars and trace them through, you would see pipelines out of Houston carrying energy and pipelines coming back carrying dollars," said Graef Crystal, a former executive pay consultant to Fortune 500 companies who now writes and lectures on executive compensation. "It's an involuntary transfer of wealth from the California consumers to Ken Lay and his cohorts. There's nothing illegal about it. But it doesn't make the people of California feel very good." An Orange County Register review of recently filed SEC documents also found: Peter Cartwright, chief executive of power generator Calpine Corp., of San Jose, earned $23.9 million, up from $3.3 million in 1999. Dennis Bakke, chief executive of Virginia-based AES Corp., which owns plants in Huntington Beach and Long Beach, earned $12.8 million, up from $1.98 million. Keith E. Bailey, chief executive of electricity marketer Williams Cos., of Tulsa, earned $7.05 million, up from $1.58 million. Lay and Skilling declined through a spokesman to be interviewed, as did executives at AES and Williams. But Enron spokeswoman Karen Denne said their pay reflects their performance in 2000 and previous years. "To be honest I don't know what the point is in looking at power executives' compensation," Denne said. "Companies like Enron have been working to put solutions on the table, to help California with its energy problems." Free-market advocates defend the energy salaries. "It's pure malarkey that that's too much. That's what incentive pay is for," said William M. Cockrum, a finance professor at the UCLA Anderson School. "From the shareholders point of view, they want the stock to go up. That's why they invested." Not everyone agrees. "Outrageous. Absolutely outrageous," said Everett Bassin, 71, a retired aerospace worker from Buena Park. "Does (Lay) really need $140 million to live for a year?" asked Bob Dodson, 68, of Yorba Linda, who lives with his wife on a Social Security income of $1,100 a month. Dodson said his electricity bill rose by $30 a month this winter and his gas bill by $100. "These guys are plain, unadulterated, greedy jerks," Dodson said. Regulators too have raised questions about the energy company profits. A California Independent System Operator study said "market power" exercised by Enron and other suppliers resulted in unfair profits that contributed $6.87 billion to the cost of wholesale power last year. The Federal Energy Regulatory Commission has ordered Enron, Williams and other top suppliers to prove their prices were "just and reasonable" or refund more than $100 million. Market power is seen when firms that control a substantial supply of a commodity withhold it or use other tactics to drive up the price. Enron and the other companies named in the study have denied such tactics. But Williams Cos. agreed Tuesday to repay $8 million to settle federal charges that it shut down two generating units so it could charge higher market prices at other power plants. Williams denies any wrongdoing. In total, California paid $28 billion for electricity last year, four times the 1999 costs. Earnings statements show profits at many energy wholesalers tripled in 2000. Experts say the pay handed to these energy executives last year is higher than most other major corporations are paying. But most other corporations didn't see profits triple last year. For instance, Ford CEO Jac Nasser, whose company owns the Irvine-based Lincoln and Jaguar brands, collected $12.4 million last year, up 13 percent. But Ford's 2000 earnings declined by half in 2000. Boeing CEO Phil Condit, whose Space Division is headquartered in Seal Beach, collected $20 million, up 342 percent. Boeing's 2000 earnings were down 8.5 percent. "From what I can see they are paying themselves very well, although I wouldn't say it's excessive," Crystal said of the energy companies. But Crystal made an exception for Lay, whom he classed with a group of executives, including Disney's Michael Eisner and Citigroup's Sanford Weill, who have earned $100 million a year, even if their companies have performed poorly. Last year Eisner was paid $73 million by Disney, up 44 percent, although earnings fell 30 percent. Citigroup, the New York financial conglomerate, paid Weill $223 million, up 142 percent. The company's earnings rose 20 percent. Enron's earnings were not particularly strong last year. Profits were up only 10 percent. The company attributed that to a series of write-offs, including a $300 million loss at an Argentine water company. Excluding those one-time charges, profits were up 32 percent, Enron said, and its stock nearly doubled in value. Most of the energy companies examined by The Register did better, reporting profits, on average, up 187 percent. Now look at the numbers reported by California's two largest utilities, who are trapped between the high costs of wholesale energy and a Public Utilities Commission cap on charges to ratepayers: Edison International, parent of Southern California Edison, reported a loss of $1.9 billion. Edison cut pay for CEO John Bryson nearly 50 percent, to $1.62 million. PG&E, the Northern California utility, reported a loss of $3.4 billion last year and more than halved the pay of CEO Robert D. Glynn Jr., to $944,000. "A lot of money's been made by these (energy traders), but I wouldn't want to suggest that there is something inherently bad about doing that,"said Ted Craver, Edison's chief financial officer. "They have a role to play. If the companies do well, and their executive compensation is based on stock options, it stands to reason the executives will do well." The Federal Energy Regulatory Commission is investigating allegations of overcharging, and last week put price caps in place for California power generators. But experts say that will have little effect on the profits of firms like Williams and Enron, whose primary role is as traders. "I think profits will continue to grow for the next year or two, as long as markets are volatile. That's when traders do well," said Brian Youngberg, a senior utility analyst for Edward Jones. "It certainly looks like 2001 will be another record year for energy company prices," agreed Paul Fremont, who follows energy stocks for Jeffries & Company. Free market supporters like UCLA's Cockrum and Enron's Lay say it would be wrong to blame either energy companies or deregulation for California's high energy prices. "What has happened in California over the past four years is not deregulation. It is misguided regulation," Lay wrote in an opinion piece in the San Francisco Chronicle in March. "If done right, deregulation means choice and competition. Deregulation means lower prices. Deregulation means innovation. California has the opportunity now to get it right." Those comments infuriated consumer advocates. "It's just devastating," said Doug Heller, of the Foundation for Taxpayer and Consumer Rights. "It highlights the absurdity of deregulation in terms of the balance of power between the consumer and the corporation. It's one thing to be successful in America. It's another thing to pillage the consumers in California, and then have the gall to come back and tell us we need to let them in for more." 10 WHO MADE MILLIONS DURING CALIFORNIA'S DEREGULATION: Pay for top executives at many independent power companies increased last year. Here's a list of the top-paid energy executives with business interests in California. ENRON: Kenneth L. Lay, 58, Chairman, Enron Corp., Houston, TX 2000 compensation: $141.6 million, up 184 percent. Jeffrey K. Skilling, 46, CEO, Enron Corp. 2000 compensation $72.6 million, up 44 percent. Mark A. Frevert, CEO Enron Wholesale 2000 compensation: $35.8 million, up 289 percent. CALIFORNIA CONNECTION: Enron sold natural gas and electric power in California last year. According to a study by the California Independent System Operator, Enron earned excess profits of $28 million by exercising market power. EL PASO ENERGY GROUP: William A. Wise, chairman, and CEO, El Paso Energy Group, Houston, TX 2000 compensation: $18 million, down 62 percent CALIFORNIA CONNECTIONS: El Paso has the largest gas transmission pipeline serving Southern California, and was accused during a state Senate hearing April 19 of exercising monopoly power last year that drove Southern California gas prices 12 times higher than prices in Texas. CALPINE: Peter Cartwright, 71, CEO, president and chairman, Calpine Corp., San Jose, CA. 2000 Compensation: $23.9 million, up 624 percent. Ann B. Curtis, 50, CFO and executive vice president, Calpine Corp. 2000 Compensation: $6.85 million, up 247 percent. Robert D. Kelly, 43, President, Calpine Finance Co. 2000 compensation: $7.12 million, up 118 percent. CALIFORNIA CONNECTION: Calpine owns 2 percent of California's generation capacity, including PG&E's former geothermal plants in Sonoma and Lake counties, and is lobbying to build a new plant in San Jose. AES: Dennis W. Bakke, 55, CEO and President, AES Corp., Arlington, VA 2000 compensation: $12.8 million, up 546 percent. Barry J. Sharp, 41, CFO and executive vice president, AES Corp. 2000 compensation: $8.13 million, up 670 percent. CALIFORNIA CONNECTIONS: AES owns plants in Huntington Beach and Long Beach and currently controls 7 percent of the state's generation capacity. AES paid a record $17 million fine last year for overpolluting from its coastal plants. WILLIAMS COS: Keith E. Bailey, 58, chairman, president and CEO, The Williams Cos. Inc., Tulsa OK 2000 compensation: $7.05 million, up 346 percent. CALIFORNIA CONNECTIONS: Williams piped natural gas to California and then converted it into electric power through long-term contracts with AES. The FERC has ordered Williams to justify or refund $37.6 million in alleged overcharges in 2000 and 2001. Williams has agreed to refund $8 million. SOURCES: SEC filings, Register interviews, California Independent System Operator, Federal Energy Regulatory Commission orders. Compensation includes salary, bonuses, stock and value of shares acquired on exercise. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved.

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Energy Issues

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 [email protected]=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 [email protected]= .=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 [email protected]= 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 because Montali does not= =20 allow lawyers to evade his questions, Engel said. ?????There are few precedents to guide Montali in many of the novel legal= =20 questions he is likely to be asked to rule upon. Can he order electricity= =20 rate hikes? The law is unclear. Can he force energy suppliers to hold down= =20 their prices? Doubtful, bankruptcy lawyers said. Can he force PG&E's parent= =20 company to cough up some money? Possibly. Can he force PG&E to sell off=20 assets? Yes, but probably not in the near term. ?????"This is going to be one of these cases where the envelope is going to= =20 be pushed, and I think there is a danger in making any categorical statemen= ts=20 right now," said a bankruptcy lawyer who is involved in the case. ?????PG&E's Chapter 11 bankruptcy reorganization will be enormously complex= =20 legally, lawyers said. Montali will have to reconcile state utility law and= =20 federal energy law with bankruptcy law. Bankruptcy judges have broad=20 discretion to decide disputes, and Montali will control PG&E's purse string= s. ?????Lawyers who know Montali well say he is savvy about using the Internet= =20 to communicate court information, masters arcane legal subjects quickly, an= d=20 probably is thrilled to be making the calls in a case that will be watched= =20 nationally. ?????Some people go on the bench to retire. Montali went on in 1993 to have= =20 more fun intellectually, lawyers said. ?????Montali "tends to be very constructive," said another lawyer who asked= =20 not to be identified by name because he may represent a creditor in the PG&= E=20 case. "He wants his cases to go somewhere, and he tries to encourage people= =20 to make progress." ?????Before he was appointed to the bench, Montali had practiced bankruptcy= =20 law for more than two decades. He began representing debtors but was doing= =20 primarily creditor work in his last law firm job with the city's venerable= =20 Pillsbury, Madison & Sutro. ?????The bankruptcy bar he was a part of is relatively small, and the lawye= rs=20 who practice it know one another. Several lawyers interviewed about Montali= =20 referred to him by his first name. ?????Because these lawyers are likely to be players together in many cases= =20 over the years, trustworthiness is important, bankruptcy attorneys said.=20 Effectiveness requires that other members of the bar trust your word and=20 credibility. ?????The practice also requires knowledge of economics and economic terms,= =20 ease both with deal making and trial work, and above all else, practicality= ,=20 lawyers said. ?????Whereas a business litigator may know exactly what he or she will be= =20 doing two months from now, bankruptcy lawyers tend to operate on tight=20 deadlines with little notice. Many of these lawyers were at their desks ove= r=20 the weekend preparing for the PG&E case. ?????"There is no one in town who is not part of this case," said Engel, wh= o=20 is representing a municipal utility. "Everyone is involved." ?????Montali is tall, lanky and balding. His trademark is his handlebar=20 mustache, which he has worn for decades and which reflects his gregariousne= ss=20 and humor, other lawyers said. He cooks Italian food expertly and likes to= =20 sail around San Francisco Bay and walk his dog during his time away from=20 work. His wife, Mary, is in the real estate business, and they have three= =20 grown daughters. ?????As a lawyer, Montali was masterful at bringing about a compromise in t= he=20 bankruptcy of a major agricultural cooperative a decade ago, Engels said. A= t=20 the time the co-op went bankrupt, farmers had picked their crops, but there= =20 was no money to operate the canneries and no money to pay the growers.=20 Montali was representing a bank in the case. ?????"We could have had a disaster," Engel said. "Literally, imagine if 5,0= 00=20 farmers lost their entire crop because there was nobody to take it. Each of= =20 them would have gone into bankruptcy." ?????The parties locked themselves together in one place for a week and hal= f.=20 Montali was "at the core of it," Engel said. He persuaded all parties to=20 agree to a plan that involved selling the cooperative. "He would take someo= ne=20 who was being a problem over to the side and explain that it wasn't going t= o=20 work if they persisted that way," Engel said. ?????"He is the ultimate reasonable man who convinced them that this path i= s=20 the one they needed to be on in their own self-interest." ?????Richard Levin, a Los Angeles bankruptcy lawyer, said Montali has=20 "tremendous integrity." As a lawyer, he was cogent and forceful in argument= s=20 and would make simple, clear statements that would cause everyone in the=20 courtroom to pause and think, Levin said.?????Montali earned a bachelor's= =20 degree in English from Notre Dame University and then entered the Navy to= =20 fulfill a Reserve Officer's Training Corps commitment. ?????He served in various officer positions on two destroyers and taught=20 briefly at the United States Navy Reserve Officers Candidate School in=20 Newport, R.I., before entering law school. He obtained his law degree from = UC=20 Berkeley's Boalt Hall School of Law in 1968. ?????Montali has been elected to the National Bankruptcy Conference and the= =20 American College of Bankruptcy, both elite bodies reserved for those at the= =20 top of their field. ?????Last year, he was appointed to hear appeals in bankruptcy cases for th= e=20 U.S. 9th Circuit Court of Appeals in addition to his trial duties. ?????One of his first cases on the bench ended in disaster. Shortly after h= e=20 became a judge, he ruled in favor of a landlord who was trying to evict a= =20 tenant. The tenant had a bankruptcy case before Montali. ?????The tenant later went to the landlord's office, shot and killed him,= =20 wounded the landlord's son and tried to kill himself. ?????"I didn't have any regret about the decision," Montali told the Daily= =20 Journal, a legal newspaper, several years ago. "But it reinforced in the re= al=20 world that I'm making decisions that affect people. It put some real meanin= g=20 into things." ?????In 1997, Montali ruled that a gay man was liable for damages because h= e=20 failed to warn his former lover that he was infected with HIV before they h= ad=20 unprotected sex. ?????The case had wound up before Montali because the defendant filed for= =20 bankruptcy to avoid paying monetary damages if he lost the sexual battery= =20 lawsuit. ---------------------------------------------------------------------------= --- ---------------------------------------------------------------------------= --- -------------------------------------------- Bankruptcy Filing Threatens Tax Bases=20 PG&E: Counties, particularly small ones like Plumas, depend on revenue for= =20 schools and other services.=20 By RONE TEMPEST, Times Sacramento Bureau Chief=20 ?????QUINCY, Calif.--The PG&E bankruptcy protection filing Friday came only= =20 four days before the state's largest utility is to make $80 million in=20 property tax payments to 49 California counties. ?????In Northern California's remote Plumas County, this was especially bad= =20 news. Because of its large hydroelectric holdings, Pacific Gas & Electric i= s=20 Plumas' largest taxpayer, accounting for about 18% of the county's=20 $2.3-billion tax base. ?????Bankruptcy laws usually require that government obligations, including= =20 taxes, be paid first. But the uncertainty over financially crippled PG&E's= =20 ability to pay sent tremors through government offices in the High Sierra= =20 county south of Mt. Lassen. ?????"If we took a hit like that, we were probably looking at job layoffs a= nd=20 program curtailments," said County Assessor Chuck Leonhardt. He said things= =20 ranging from library books to police salaries could be affected. ?????The state's two biggest private utilities, PG&E and Southern Californi= a=20 Edison, annually pay more than a quarter-billion dollars in property taxes,= =20 including $70 million levied on Edison by Los Angeles, Orange, Riverside an= d=20 San Bernardino counties. Edison officials said their company intends to mee= t=20 the Tuesday property tax deadline. ?????The biggest impact of unpaid taxes falls on the state, which is legall= y=20 required to supply most uncollected money that is for schools--which is mos= t=20 of the property tax load. In smaller, rural counties like Plumas, which has= a=20 permanent population of only 22,000, a utility tax default would seriously= =20 reduce funding for other local services. PG&E pays Plumas almost $4 million= a=20 year in taxes. ?????A large county that could be seriously hurt by a PG&E default is San= =20 Luis Obispo on the central coast, where the utility's Diablo Canyon nuclear= =20 plant generates $28 million in property taxes, about 15% of the county's ta= x=20 revenue. ?????"This is not catastrophic for us, but it is significant," said county= =20 Auditor-Controller Gere Sibbach. Sibbach said one large school district, Sa= n=20 Luis Coastal, could come up $2 million short as a result of a PG&E default. ?????"That school district gets $10 million in taxes from PG&E," Sibbach=20 said, "but the state will only backfill for $8 million, so they would have = to=20 cut programs if PG&E doesn't pay." ?????Plumas County faces a double threat in the PG&E bankruptcy filing. ?????Here, beautiful Lake Almanor and other hydroelectric reservoirs are=20 strung along the north fork of the cascading Feather River. The "PG&E lakes= ,"=20 as the reservoirs are known here, are what attract retirees and=20 tourists--mainstays of the fragile local economy since the timber industry= =20 went into decline. ?????The landscape here is rich in broad, green valleys and more than 100= =20 lakes. In addition to boating and fishing, the county has 10 golf=20 courses--one for each 2,200 residents. ?????Because hydroelectricity is at such a premium this year, the utility i= s=20 expected to suck all the water it can from Lake Almanor and nearby Bucks=20 Lake, bringing potential ruin to the area's tourism and recreation industry= . ?????"They are probably going to draw every drop of water out of the lake= =20 they can," said Marvin Alexander, one of the retirees who lives on Lake=20 Almanor. "The boat ramps won't even reach the water." ?????The equation here is simple: When lake levels fall too low, the fish= =20 don't bite, the tourists don't come and the property values decline.=20 According to real estate agent Tim O'Brien, Lake Almanor homes have sold in= =20 recent years for $500,000 to $1 million. ?????These days the housing market is slow. "This community basically lives= =20 and dies by the lake levels," explained Chris Luna, a Chester civil enginee= r=20 and home builder. ?????The energy crisis is disrupting what had become a comfortable=20 relationship in recent years. For most of the last decade, Plumas County=20 homeowners and businesses have evolved a modus vivendi with PG&E. ?????With electricity in good supply, PG&E officials kept the lake high in= =20 July to keep boaters and fishermen happy. Residents agreed not to make too= =20 much fuss when the lake level declined in late August so the utilities coul= d=20 generate power. ?????But now that the specter of rotating blackouts is haunting the populou= s=20 and politically powerful California lowlands this summer, few here hold out= =20 much hope that PG&E will continue to be the benign water lord they have com= e=20 to know. ?????"I have a feeling," said Alexander, a former college administrator who= =20 is on a local committee that deals with water rights, "that this year the= =20 need for public power is going to take priority over the need for recreatio= n." ?????PG&E spokeswoman Lisa Randle would not say how much water the utility = is=20 drawing from the upper lakes. But Plumas County residents took it as an=20 ominous sign when the Buck's Creek Power House recently began gushing water= =20 from its four big turbine discharge gates late every afternoon during peak= =20 power periods. They are not accustomed to seeing that so early in the year. ?????The Buck's Creek station, amid flowering dogwood and redbud trees on= =20 California 70 in the heart of Feather River Canyon, is one of the most=20 accessible and visible PG&E facilities along the Plumas County watershed th= at=20 engineers call the "stairsteps of power." ?????When all four discharge gates are open, as they were on a recent=20 afternoon, the station generates enough electricity to light 65,000 homes.= =20 The power is produced by the force of water that falls through pipes 2,500= =20 feet from Buck's Lake to the bottom of the canyon, where it drives two huge= =20 turbines. ?????According to Plumas County Supervisor Bill Dennison, the lakes are=20 already 17 feet below normal capacity for this time of year. Even with=20 additional snowmelt, he said, the lake levels are likely to be nine feet=20 below normal. "It looks like a very bleak summer for Plumas County," Dennis= on=20 concluded. ?????When the lakes get too low, Alexander said, remembering the 1987-92=20 drought years, the sandy beaches around the Lake Almanor Country Club becom= e=20 mudholes and, as water in the shallow lake heats up, fishing becomes terrib= le. ?????"For the past seven to eight years the people up here have been lulled= =20 into complacency," said Alexander. "People were in denial. They knew that= =20 PG&E owned the lake and can do anything it wants. ?????"But the prospect of living up here is so attractive they just kind of= =20 throw caution to the wind and hope it will all work out." ---------------------------------------------------------------------------= --- ---------------------------------------------------------------------------= --- -------------------------------------------- Others Learning from California's Energy Mistakes=20 By JAMES FLANIGAN, Times Staff Writer=20 ?????For all the agony and anger about energy in California, compounded now= =20 by the bankruptcy filing of Pacific Gas & Electric, deregulation and the=20 transformation of the electric power industry is moving forward=20 nationwide--and worldwide. ?????Many electric companies elsewhere are thriving and being recommended b= y=20 investment analysts even as the regulated utility division of PG&E Corp.=20 surrenders its management to a bankruptcy court and Southern California=20 Edison, a subsidiary of Edison International, remains under heavy threat of= =20 being forced to do the same. ?????Companies and regulators everywhere cite California's troubles as=20 stemming from mistakes they will avoid.=20 ?????For example, American Electric Power, a Columbus, Ohio-based leader of= =20 the utility industry, told shareholders in its annual report that=20 California's blunders of "insufficient power supplies, total reliance on sp= ot=20 pricing and capping of rates for retail consumers even as costs of wholesal= e=20 power multiplied, are not likely to be replicated elsewhere." ?????Indeed, many of deregulation's dangers may be avoided now simply becau= se=20 California and PG&E have put everybody on their guard.=20 ?????California's horrible example has spurred recognition that power plant= s=20 need to be built. ?????And PG&E's collapse sends a message that utility companies operating= =20 partly in regulated and unregulated environments need to separate their=20 accounts so as to better understand the different businesses they are=20 managing. ?????Wall Street sees electricity as a growth industry just because power i= s=20 in relative short supply in many parts of the country. ?????"The United States has not built enough power plants over the last 10= =20 years to meet demand," says analyst Brian Youngberg of Edward Jones & Co., = a=20 St. Louis-based investment company.=20 ?????That spells opportunity for companies able to produce low-cost power a= nd=20 market it in different regions. ?????Promising Investment ?????Today's favored utilities are those moving to acquire power plants and= =20 sell power as an unregulated commodity in different areas, even as they cop= e=20 with deregulation and competition in their home territories. ?????The examples of two leading companies will explain a lot about the=20 utility business today, why investors regard it as promising and how=20 companies and state regulators elsewhere are taking steps to avoid the=20 blunders of California. ?????Utilicorp United, based in Kansas City, Mo., is the modern outgrowth o= f=20 a family-owned electric company dating to 1902. Under Richard Green, the=20 founder's great-grandson who has been chief executive since 1982, Utilicorp= =20 went eagerly into wholesale marketing and trading of electricity around the= =20 world, acquiring companies in Australia and New Zealand, even as it continu= ed=20 to operate regulated utilities in Missouri--where electricity remains=20 regulated--and six other Midwestern states. ?????Utilicorp, helped by the growth of its Aquila Energy subsidiary that= =20 trades electricity contracts, has expanded to $29 billion in revenue in 200= 0=20 from just over $1 billion a decade ago. "I've got two companies," Green say= s,=20 "one is a regulated utility, growing 3% to 5% a year and paying a dividend,= =20 and the other is Aquila, which is growing 20% a year." ?????So he is separating the two, issuing stock in 19.9% of Aquila now and= =20 intending to spin it off as an independent company within a year. "Investor= s=20 can then have their choice of growth or stability and dividends," Green say= s. ?????American Electric Power is a venerable pioneer of the utility industry= .=20 It originated the practice of siting power plants atop coal mines so the fu= el=20 could be transferred efficiently to the steam turbine boilers. ?????Now its home state of Ohio is going through a three-year process of=20 deregulating electricity. So AEP is going aggressively into wholesale=20 electricity generation and marketing. ?????Last year it acquired Dallas-based Central & Southwest Co. and now=20 markets in Texas, Louisiana and Oklahoma as well as its traditional bases i= n=20 Ohio and Michigan. ?????AEP, too, is going to separate its unregulated and regulated businesse= s. ?????It's doing this, the company told shareholders, because "it will enabl= e=20 investors to value our businesses separately and will improve our ability t= o=20 manage the realities of electric deregulation and to focus on the differing= =20 capital requirements of each business." ?????Why is that significant? Because PG&E, the holding company that owns= =20 Pacific Gas & Electric, also has thriving energy trading and out-of-state= =20 electricity operations within its corporate structure. ?????It built up the unregulated business in recent years by transferring= =20 proceeds from sales of California power plants and cash flow accruing from= =20 the state's complex deregulation scheme. ?????But PG&E didn't separate the unregulated and regulated businesses for= =20 shareholders. And now PG&E's publicly traded stock has lost 77% of its valu= e=20 and the company faces a battle in bankruptcy court to keep its unregulated= =20 assets out of the hands of creditors. ?????Avoiding Mistakes ?????As companies elsewhere try to avoid PG&E's errors, so other states tak= e=20 pains not to make California's big mistake of going into deregulation witho= ut=20 a reserve of electric generating capacity. Ohio is making sure that it has = a=20 surplus of generating capacity.=20 ?????The Northeastern states of Massachusetts, Connecticut, New Hampshire a= nd=20 Rhode Island, which have deregulated, also have plenty of spare capacity,= =20 reports Cambridge Energy Research Associates. ?????With electricity in surplus, those states and regions can encourage=20 price competition in electricity. But when there are shortages, as began to= =20 occur last year in California, desperation buying by customers and price=20 gouging by suppliers are all but inevitable. ?????A point to keep in mind in the wake of California's disaster and PG&E'= s=20 downfall is that the electric utility industry and the U.S. system are at t= he=20 outset of a long process of transformation. ?????It's not unlike the telephone business that has changed so much in the= =20 last 30 years, starting from, say, the rise of MCI in the 1970s or the=20 breakup of AT&T Corp. in 1984. ?????Yet those years also saw the rise of whole new technologies and new=20 companies, even as giants of another age faded and failed.=20 ?????California and California companies may yet find success in this new a= ge=20 of opportunity--and peril--for electricity. ---=20 ?????James Flanigan can be reached at [email protected]. ---------------------------------------------------------------------------= --- ---------------------------------------------------------------------------= --- ------------------------------------------- Generators Scrambled to End Pacts With Utilities=20 Energy: Even before PG&E filed for bankruptcy, alternative plant owners who= =20 hadn't been paid in months pursued court actions.=20 By JULIE TAMAKI, Times Staff Writer=20 ?????SACRAMENTO--In filing for federal bankruptcy protection last week,=20 Pacific Gas & Electric Co. determined what other power producers had alread= y=20 concluded: The state had failed to solve their payment problems and the tim= e=20 had come for the courts to step in. ?????In the days leading up to PG&E's Bankruptcy Court petition, a growing= =20 number of alternative energy producers had also been filing lawsuits, seeki= ng=20 to be freed from their contracts with PG&E and Southern California Edison.= =20 The litigation was triggered in part by a controversial new rate plan impos= ed=20 last month by the state Public Utilities Commission in addition to millions= =20 of dollars of debt owed to the producers by the utilities. ?????On Tuesday, Dynamis Inc. filed suit in Fresno, saying PG&E owes it $3= =20 million. ?????Carson-based Watson Cogeneration Co., one of the state's largest=20 alternative energy producers, also had filed suit to have its contract with= =20 Edison suspended. So did Delta Power, which owns five small gas-fired plant= s=20 in California. Both producers are owed tens of millions by Edison. ?????At least a dozen such suits have been filed in civil courts, and lawye= rs=20 warn that more could be on the way. ?????"Tough solutions were not being brought to the equation, which left PG= &E=20 and others feeling they were better off in the court system," said Jerry=20 Bloom, an attorney for the California Cogeneration Council. ?????The court actions come on the heels of an order by the PUC last month= =20 that Edison and PG&E begin fully paying hundreds of small alternative energ= y=20 producers. But some producers say that a new rate plan issued by the PUC=20 would force them to operate at a loss and that nothing has been done to=20 address the about $1.5 billion owed to members of the group by PG&E and=20 Edison. ?????Lawyers say other producers have served Edison with notices that they= =20 plan to cancel their contracts. ?????Gas-fired generators account for about two-thirds of the electricity= =20 produced by the alternative energy group. ?????The California Independent System Operator, keeper of the state's powe= r=20 grid, reports that there continues to be a roughly 3,000-megawatt reduction= =20 in output from the alternative energy producers. The daily sum is enough=20 power to supply 2 million to 3 million typical homes. ?????"It clearly shows the problem hasn't been fixed," said Jan Smutny-Jone= s,=20 executive director of the Independent Energy Producers. ?????California is home to nearly 700 producers of alternative and renewabl= e=20 energy, which as a group provide more than a quarter of the electricity use= d=20 by consumers. ?????Some of the producers have gone offline or reduced supplies for=20 maintenance reasons, but others have cut back because they have not been pa= id=20 by Edison since November or have received only partial payments from PG&E. ?????The drop in output has at times forced the state to purchase replaceme= nt=20 supplies on the pricey spot market for electricity and contributed to rolli= ng=20 blackouts last month. The latter event prompted Gov. Gray Davis to propose = a=20 plan to get the generators up and running again. ?????Consequently, the PUC established a new rate plan for the producers an= d=20 ordered the utilities to begin fully paying them beginning this month. The= =20 payment goal would be accomplished in part by slashing the rates that PG&E= =20 and Edison must pay the producers. ?????But the PUC action appears to have compelled a growing number of=20 gas-fired generators to file lawsuits in an effort to be released from thei= r=20 contracts with the utilities and be paid the millions they are owed. ?????Bloom contends that the new rate plan will force some producers to=20 operate at a loss because it does not adequately compensate for their gas= =20 expenses. He said he expects generators to challenge the plan in court or= =20 before the Federal Energy Regulatory Commission. ?????Smutny-Jones contends that the plan wrongly assumes that all natural g= as=20 used by his members can be piped in from the Oregon border, where the price= =20 of natural gas is cheaper. The producers, he added, are seeking assurances= =20 that they will be paid realistic rates by the utilities for future deliveri= es. ?????Utilities are scheduled to pay the first round of reduced rates, as=20 ordered by the PUC, early next week. Both utilities have indicated that the= y=20 plan to make the first round of payments. ?????Edison officials said Friday they have been served with 10 producer=20 lawsuits. They say they fear that if the generators are let out of their=20 contracts, they could sell their supplies out of state, which could in turn= =20 cause rates to rise for California consumers because it would reduce supply= . ?????PG&E spokesman John Nelson said in an interview last week before the= =20 bankruptcy filing that PG&E has been served with two such lawsuits. He said= =20 his company is also concerned about the PUC rate plan and whether it truly= =20 lowered the rates PG&E must pay the alternative producers and whether there= =20 would be enough money in the rates paid by customers to turn around and pay= =20 the producers. ?????"We're concerned that the commission decision does not solve the=20 problem," Nelson said. ?????A Davis spokesman said last week that the administration is still=20 working on the issue of money owed to the producers and that the=20 administration is continuing to work with the PUC to get more generators ba= ck=20 online. ?????Observers believe the number of producer lawsuits will grow because mo= st=20 cases to date have been aimed at Edison. The utility has not paid its=20 producers since November and has fought to have its rates slashed. ?????By comparison, PG&E has made efforts to partially pay its producers in= =20 recent months and to keep them informed of their financial situation. ?????A Bankruptcy Court is expected to decide whether to affirm the contrac= ts=20 of producers who sell to PG&E or to free them to sell their power elsewhere= . ?????An Imperial County judge has already freed CalEnergy, a small geotherm= al=20 producer, from its contract with Edison because of Edison's failure to pay= =20 the company. The court has delayed ruling on CalEnergy's request for $99=20 million in back payments until April 16--the day the utility is expected to= =20 begin paying its alternative generators. ?????Since it quit transmitting 270 megawatts to Edison last month, CalEner= gy=20 has been selling its electricity to El Paso Energy, a marketing company tha= t=20 resells power on the spot market. If other generators are able to repeat th= e=20 pattern, it could further reduce state energy supplies, particularly this= =20 summer, when every megawatt will be needed to avoid blackouts. ---------------------------------------------------------------------------= --- ---------------------------------------------------------------------------= --- ----------------------------------------- PG&E Gave Bonuses Prior to Bankruptcy=20 Before its filing, the utility also had $2.5 billion on hand and had=20 restarted services suspended earlier because of shaky finances.=20 By TIM REITERMAN, Times Staff Writer ????? SAN FRANCISCO--In the days approaching Pacific Gas & Electric Co.'s= =20 bankruptcy filing, the debt-ridden utility had more than $2.5 billion in ca= sh=20 on hand and was restarting services suspended earlier this year because of= =20 its shaky finances. ?????Then, the day before the filing, the utility awarded 6,000 managers an= d=20 other employees more than $50 million in annual bonuses and announced that= =20 long-delayed merit increases had kicked in for the same workers. ?????The timing of the bonus payments in particular raised an outcry from= =20 consumer groups and state officials. ?????"Management is suffering from two afflictions: Denial and greed," Gov.= =20 Gray Davis said in a statement. ?????"It does not look good," said state Senate President Pro Tem John=20 Burton. "They [already] have a business and a P.R. problem." ?????The bonuses and raises were announced in an e-mail sent Thursday by=20 Chief Executive Robert Glynn to employees. The payments cover about a third= =20 of the company's 19,000 workers, ranging from nonunion clerical staff to al= l=20 but the very top management. ?????On Friday, hours after PG&E had filed for reorganization of its debts= =20 under Chapter 11 bankruptcy laws, a San Francisco judge approved the=20 company's overall employee compensation plan. But PG&E officials said the= =20 ruling did not specifically cover the bonuses or merit raises. ?????Harvey Rosenfield, president of the Foundation for Taxpayer and Consum= er=20 Rights, said the bonuses should not be allowed. ?????"Talk about manipulating the corporate finances to benefit management= =20 prior to bankruptcy," he said. "It is the kind of arrogant mismanagement th= at=20 is responsible for the ruin of this company." ?????Richard Levin, a Los Angeles bankruptcy attorney, said such payments t= o=20 employees are not unusual, especially after the filing of bankruptcy. ?????"A company trying to reorganize has to take pretty strong action to ke= ep=20 employees," he said. "If they did not do it, who is going to keep the=20 electricity flowing?" ?????PG&E, the state's largest utility, declared in its filing for bankrupt= cy=20 protection that it is more than $9 billion in debt--several times more than= =20 cash on hand--and was getting nowhere in negotiations with the governor for= =20 state purchase of its power lines and other assets. The filing, which=20 includes a list of creditors, allows the company to continue to operate whi= le=20 it reorganizes its financial affairs. A judge, working under federal=20 bankruptcy law, will determine who will be paid and in what order. The firs= t=20 hearing is scheduled for Monday. ?????Company officials defended the payments, which were reported in=20 Saturday's San Francisco Chronicle, and fired back at Davis. "Instead of=20 focusing all his attention on solving the state's yearlong and ever-worseni= ng=20 energy crisis, the governor has launched a campaign-style attack on our=20 company," PG&E said in a statement Saturday. ?????The payments, officials said, are awarded each year to employees who= =20 meet the company's performance goals and objectives. "They are smaller this= =20 year because of the larger financial crisis the company is going through bu= t,=20 it is safe to say, more deserved this year than in years past because of th= e=20 challenges facing our employees this year," said PG&E spokesman John Nelson= . ?????The payments came after the company began reversing some of the=20 cost-cutting measures imposed early this year after its finances worsened,= =20 PG&E officials said. ?????PUC Orders End to Some Cutbacks ?????Among other things, PG&E had suspended projects involving the=20 underground placement of power lines, prompting cities and residents to=20 protest to state regulators. The company also eliminated about 325 jobs=20 earlier this year and was planning layoffs of almost 700 more. But the=20 California Public Utilities Commission last month blocked the layoffs and= =20 ordered the company to rescind any cutbacks affecting service. ?????Company officials said that, thanks in part to a tax refund of $1.1=20 billion, the company now has about $2.5 billion to $2.8 billion on hand. ?????"We are now in a position to start relaxing some of those=20 cash-conservation measures," Nelson said Saturday. "About a week ago we=20 started doing undergrounding again and [performing] new installations of=20 electrical service" in business parks and elsewhere. ?????"This compensation package was one of those measures reinstated," he= =20 said. ?????Officials said the payments exempted the company's 25 officers, as wel= l=20 as about 12,000 union workers who received raises in January. ?????They said the total of the bonuses, estimated roughly at more than $50= =20 million, is substantially lower than the $83 million in payments suspended = in=20 January when the utility announced cost-cutting measures. ?????That $83 million included bonuses for employee performance and a bonus= =20 based on the company's success. ?????"As we close the books for 2000, we have determined that we are unable= =20 to make [that] portion of the incentive payment due to the negative financi= al=20 impact of the ongoing California energy crisis," CEO Glynn said in his e-ma= il. ?????He said the incentive bonuses were awarded along with merit increases= =20 averaging 3% for all employees, effective April 1. Bonuses commonly are abo= ut=20 four weeks of salary, officials said, but can vary according to performance= =20 and other factors. ?????Mike Florio, senior attorney at the Utility Reform Network, said, "Tha= t=20 is going to be a little hard for the public to swallow. . . . I feel better= =20 that the 25 [top executives] are not included. Those are the people that ha= ve=20 run this company into the ground." ?????On Saturday, Davis administration negotiators redoubled efforts to kee= p=20 the same fate from befalling Southern California Edison. ?????Davis hopes for a state takeover of the massive system of electricity= =20 transmission lines owned by PG&E, Edison and San Diego Gas & Electric.=20 However, the bankruptcy complicates that effort, which already has proved t= o=20 be daunting. A federal bankruptcy judge will have to approve any deal that= =20 involves PG&E. ?????Edison executives and Davis' aides met in San Francisco in an effort t= o=20 strike a deal by which the state would purchase Edison's share of the=20 transmission system for $2.76 billion. The company would use the money to= =20 restructure its debt. ?????Edison has agreed in principle to sell the state its transmission=20 system. However, the company is seeking relief from some PUC regulations th= at=20 could later undermine aspects of the deal and could jeopardize the company'= s=20 future financial stability. ?????On Saturday, Burton reiterated his call for the governor to "commandee= r"=20 two or three power plants owned by out-of-state producers. "These people ha= ve=20 us by the throat and are making more money than God," he told a news=20 conference here. "You have to fight back." ?????Steve Maviglio, the governor's press secretary, said Davis has not rul= ed=20 out such a seizure. --- ?????Times staff writer Dan Morain in Sacramento contributed to this story. ---------------------------------------------------------------------------= --- ---------------------------------------------------------------------------= --- ------------------------------------- NEWS ANALYSIS=20 Shifting Action to Neutral Arena May Be Bankruptcy Filing's Upside=20 Court might be a forum in which the state, PG&E and creditors could break= =20 impasses. But there are many uncertainties.=20 By MICHAEL A. HILTZIK, Times Staff Writer ?????By forcing almost all the deadlocked parties in California's energy=20 crisis to meet in a neutral public forum, the bankruptcy filing by Pacific= =20 Gas & Electric Co. on Friday may actually help clear the path to a solution= ,=20 some experts say. ?????But along that path lie numerous uncertainties, including questions=20 about the powers of the Bankruptcy Court that have never been resolved in= =20 practice. Among the most serious booby-traps confronting PG&E is that its= =20 financial books will be placed under a microscope. ?????"When you initiate a bankruptcy," said Daniel J. Bussel, a bankruptcy= =20 specialist at UCLA School of Law, "you don't have compete control over what= =20 happens." ?????The bankruptcy filing removes many of the thorniest questions revolvin= g=20 around the energy crisis from an arena that has been hard-pressed to deal= =20 with them: the political. Because utility policy is important to so many=20 constituencies--including taxpayers, ratepayers, consumer activists,=20 regulators, and legislators--solving the crisis in a way that is not only= =20 equitable but meets everyone's political goals has been a daunting task. ?????That is especially so because the crisis actually encompasses two=20 separate problems. One is how to restructure the state's energy program so= =20 that deregulation can be made to work and costs and rates can be brought in= to=20 line; the second is what to do about the billions in debt PG&E and Southern= =20 California Edison accrued last year from the purchase of wholesale power at= =20 prices higher than they were permitted to pass on to customers.=20 ?????The attempt to settle both issues in concert has confounded the state'= s=20 leaders--especially since the question of whether the state should bail the= =20 utilities out of their debts at all is itself a contentious one. ?????"I've thought for quite some time that our primary focus ought to be o= n=20 how you solve the [long-term] problem, as opposed to how you adjudicate a= =20 dispute between the utilities and the generators," said state Treasurer Phi= l=20 Angelides in an interview. "Too much time in Sacramento is being spent tryi= ng=20 to figure out how to ransom the generators' bill. In some ways, the=20 [bankruptcy] filing takes those past debts off the table." ?????Angelides said the court might represent a forum where the state, the= =20 utility and its creditors could examine and challenge those generators'=20 bills. That is something that federal regulators, who have jurisdiction ove= r=20 wholesale power rates, have been loath to do, despite complaints from PG&E= =20 and Edison that they have been overcharged billions by profiteering power= =20 plant owners. ?????There is no question that the filing does complicate matters for many= =20 participants in the drama over California's energy supply. ?????PG&E's filing, in which it sought protection from creditors under=20 Chapter 11 of the federal Bankruptcy Code, could place more pressure on=20 Southern California Edison, the state's second cash-strapped utility, to=20 enter bankruptcy as well. That's because electricity generators will be mor= e=20 assured of getting paid for their post-bankruptcy sales to PG&E, for which= =20 all pre-bankruptcy debts are temporarily in abeyance. By contrast, Edison= =20 creditors have no guarantees that the utility will be able to pay them.=20 Edison executives said Friday they had no plans to file for bankruptcy=20 protection. ?????On the other hand, it might also inspire Gov. Gray Davis to rapidly=20 reach a bailout agreement with Edison, as though to prove that PG&E's move= =20 was unnecessary or premature. Davis has been hinting that a deal is near. T= he=20 state would buy Edison's electric transmission grid, providing the utility= =20 with desperately needed cash, but there have been few public signs of=20 progress. PG&E had been balking at such a resolution. ?????Among the most serious perils of the bankruptcy filing are those facin= g=20 PG&E itself. Although company executives clearly hope to limit the Bankrupt= cy=20 Court's jurisdiction to the utility alone, that may not be possible, expert= s=20 say. It is likely that the utility's creditors will insist on examining its= =20 controversial relationship with its holding company, PG&E Corp.--a scrutiny= =20 that might drive that company into bankruptcy too. ?????Although PG&E had long threatened to resort to bankruptcy, the=20 abruptness of the utility's filing at 9:04 a.m. Friday took aback almost=20 everybody involved with the energy crisis, coming as it did less than 15=20 hours after Davis delivered a statewide television and radio address=20 proposing a program to bring rates into line with wholesale energy costs. ?????Even normally well-connected professionals were caught short. The=20 research department of the investment bank Goldman Sachs told clients Frida= y=20 morning that PG&E and Edison were on the way to a "return . . . to financia= l=20 health" and hinted their parent companies' shares were poised to more than= =20 double in price. The research report was released Friday by Davis' office. ?????Instead, PG&E filed for bankruptcy. By the end of the day both compani= es=20 had lost more than 35% of their value. ?????By giving PG&E's creditors legal standing to directly scrutinize its= =20 finances, the filing leaves the utility's recent business decisions open to= =20 challenge. ?????Chief among these is the utility's record of "upstreaming" to its pare= nt=20 revenues it received from ratepayers in the first two and a half years of= =20 deregulation. Critics have argued that those payments left the utility=20 starved for cash when wholesale rates soared beginning in May 2000. ?????In announcing the bankruptcy filing Friday, PG&E Chairman Robert Glynn= =20 laid nearly all the blame for his company's perilous condition at the feet = of=20 the Public Utilities Commission, the governor and other state officials. ?????The company had been "raising the crisis flag [about high wholesale=20 power prices] since last summer," he said. ?????Yet an independent audit of PG&E commissioned by the PUC and released = in=20 January documented that the utility did not implement any cash conservation= =20 measures until December. The utility even paid a cash dividend to its paren= t=20 company for the third quarter of 2000, covering the months of July through= =20 September, of more than $200 million. ?????In all, PUC documents show, Pacific Gas & Electric disbursed $9.6=20 billion to PG&E Corp. from January 1998 through September 2000. That money= =20 benefited shareholders, from whom some $2.8 billion in shares were=20 repurchased and who received another $1.5 billion in dividends; and=20 bondholders, for whom $2.8 billion in debt was paid off.=20 ?????Glynn insisted Friday that the company has "assiduously complied" with= =20 PUC rules governing the relationship between the utility and the holding=20 company. But creditors are sure to give the transactions another look. ?????"Those transactions will now certainly be scrutinized," said Bussel.= =20 Bankruptcy court represents "a forum to bring a lawsuit to unwind those=20 transactions and get a full airing of circumstances of the transfers." ?????Filing Could Threaten Parent Company ?????While PG&E executives took pains to note that the holding company and= =20 its unregulated subsidiaries are not subject to the bankruptcy filing,=20 experts say that could change if Bankruptcy Judge Dennis Montali is persuad= ed=20 that the transactions were improper and the money should be returned to the= =20 utility. ?????"There will be a lot of sophisticated lawyers looking at this," Bussel= =20 said. "If distributions to the parent are deemed fraudulent transfers and a= re=20 voidable, the holding company would have a huge liability and would probabl= y=20 have to file" for bankruptcy. ?????A broader threat to PG&E and the state's energy future is that state= =20 regulators and Montali might be unable to agree on the rates to be charged = by=20 the utility. A provision of the bankruptcy law requires that any rates that= =20 are part of a recovery plan for a regulated utility must be approved by tha= t=20 utility's regulators. ?????Although that provision would leave rate-setting authority in the hand= s=20 of the California PUC, in practice the the commission will have to negotiat= e=20 with the judge. Any failure of those negotiations would raise issues that= =20 have never been resolved by higher courts.=20 ?????"The judge doesn't have the power to set rates [unilaterally]," said= =20 Kenneth Klee, a prominent Los Angeles bankruptcy lawyer, "but there are onl= y=20 a handful of cases on this." ---------------------------------------------------------------------------= --- ---------------------------------------------------------------------------= --- ----------------------------------------------------- Monday, April 9, 2001=20 Shock's Silver Lining=20 ?????That California's power crisis has been dealt another huge shock is no= t=20 all bad. The bankruptcy of Pacific Gas & Electric has legal scholars puzzli= ng=20 over how federal court supervision of the debt-ridden utility will affect= =20 rate-setting, sale of assets such as the transmission system and the state'= s=20 role in the crisis. And that's apart from figuring out how it affects=20 Southern California Edison, the chief private utility in the southern part = of=20 the state. Despite executives' denials of any bankruptcy plans, will Edison= =20 be forced into the same boat? Even with all these questions, a good shake c= an=20 have benefits.=20 ?????There's no doubt that a federal bankruptcy judge has the power to sort= =20 out at least some of the befuddling problems of the state's energy crisis.= =20 Few tears will be shed, for instance, if a court-ordered restructuring of= =20 PG&E's debt trimmed some of the outlandish profits reaped by private=20 generating companies that sold power to the utility over the past six month= s.=20 Federal involvement could also force the Federal Energy Regulatory Commissi= on=20 to abandon its hands-off stance on regulating wholesale prices. There is=20 bipartisan support in Congress for FERC to conduct a thorough investigation= =20 of the price spikes that pushed the utilities into default and forced the= =20 state to spend billions as the power purchaser of last resort.=20 ?????And what of the utilities themselves? PG&E's award of more than $50=20 million in employee bonuses the day before it filed for bankruptcy was a=20 terrible political move, but it is not the jackpot issue. The utility's=20 transfer of billions of dollars to its parent company even as cash flow=20 problems worsened will be a more likely and fitting target of scrutiny by= =20 bankruptcy overseers.=20 ?????Not least, the shock of the bankruptcy may also convince Californians = to=20 take urgent conservation action before the hot summer months. The state mus= t=20 also expedite a $1-billion conservation program passed by the Legislature= =20 late last week. No matter who is at fault, summer blackouts are a certainty= =20 unless both business and residential customers take energy savings much mor= e=20 seriously.=20 ?????The bankruptcy certainly pulled the rug out from under Gov. Gray Davis= ,=20 who had been trying without success to make a deal with PG&E, Southern=20 California Edison and San Diego Gas and Electric to buy their transmission= =20 systems in exchange for state assistance with debts. Just Thursday night,= =20 Davis had bowed, in a television address, to the necessity for big rate=20 increases. He no doubt meant to assure Californians that he was taking stro= ng=20 action to solve the crisis and keep the utilities from bankruptcy, but he= =20 disappointingly offered no new initiatives. In the clearest possible slap a= t=20 Davis, PG&E was at the steps of the Bankruptcy Court the next morning.=20 ?????However embarrassed Davis must have been by the sideswipe, he should n= ot=20 allow anger to dictate his response. He needs to demonstrate he's above suc= h=20 pettiness and perhaps even acknowledge that his snail's-pace progress was= =20 part of the problem. Davis redoubled efforts over the weekend to strike a= =20 deal with Edison for its part of the transmission system, but PG&E's=20 bankruptcy certainly complicates the transaction.=20 ?????Perhaps it was never possible to deal with the utilities' past debts a= nd=20 restructure the state's power at the same time. Bankruptcy is a rough but= =20 effective tool for dealing with debt, one that might help legislators and t= he=20 governor focus more sharply on future reforms.=20 ?????Much now depends on the federal bankruptcy judge, Dennis Montali, who = is=20 known as an effective mediator able to persuade reluctant parties to settle= .=20 California's economy has survived the power crisis so far, but it is not=20 endlessly resilient. If PG&E's bankruptcy speeds debt resolution and focuse= s=20 the governor and Legislature on reforming the state's power generation,=20 transmission and pricing systems, business will welcome any increase in=20 predictability.=20 ?????Californians are starved for answers. The federal court's involvement,= =20 despite the grave circumstances, could provide some.=20 ---------------------------------------------------------------------------= --- ---------------------------------------------------------------------------= --- ------------------------------------------- Monday, April 9, 2001=20 Use Eminent Domain as a Power Tool=20 By MICHAEL J. AGUIRRE ?????Gov. Gray Davis should follow Pacific Gas & Electric's example and adm= it=20 that his electricity program is also bankrupt. The governor's primary=20 objective was to keep the utilities from bankruptcy. He has failed. He shou= ld=20 admit his failure and reformulate his policy. Whatever he does must be base= d=20 on a clear understanding of the problem.=20 ?????The people of California have a right to buy electricity at fair price= s.=20 Producers of electricity are entitled to a fair return on their investment.= =20 Before 1998, a balance between these two points was struck by the Public=20 Utilities Commission using cost-of-service pricing. Utilities presented the= ir=20 production bills, the PUC reviewed them, determined a reasonable rate of=20 return and set a rate high enough to cover both. California became the seco= nd=20 most efficient user of electricity in the country under this system, and it= s=20 utilities prospered.=20 ?????In 1996, the electric power industry, with promises of lower prices,= =20 induced Gov. Pete Wilson, the PUC and the Legislature to reduce the=20 commission's power to ensure just and reasonable electricity prices. Under= =20 the power industry's system competition, not regulation, would set prices,= =20 and prices would go down. PG&E head Robert Glynn represented it to be a "hu= ge=20 opportunity for consumers to lower their energy costs." PG&E, San Diego Gas= &=20 Electric and Southern California Edison, with PUC approval, then sold=20 California's most significant generation plants, its gas-fired units, to fi= ve=20 multinational corporations.=20 ?????These five companies led the onslaught on California consumers, raisin= g=20 electricity prices from $7 billion in 1999 to a projected $70 billion in=20 2001. California authorities have determined that 98% of the price bids=20 submitted by these five companies--some 25,000--were based on monopoly, not= =20 competitive, pricing. Gov. Davis is right: "California's deregulation schem= e=20 is a colossal and dangerous failure."=20 ?????No one--not Wilson, the PUC or the Legislature--provided an exit=20 strategy if deregulation did not work. Davis has been unable or unwilling t= o=20 come up with one. He failed to get on top of the problem when he took offic= e,=20 despite clear warning signs. He failed to see that he cannot finance ever= =20 higher prices with public funds, and he lacks the resolve to do what he mus= t=20 to stop them. His one effort to use tax funds to keep the utilities out of= =20 formal bankruptcy has failed, with PG&E's filing for Chapter 11 last week.= =20 ?????There are no good choices now. However, we cannot continue down the ro= ad=20 Davis has chosen. It leads to financial ruin. We cannot rely on private=20 companies building new generation plants because the same price gougers wil= l=20 control how the new electricity gets priced. We cannot rely on the Federal= =20 Energy Regulatory Commission or President Bush. California can only rely on= =20 California to solve this problem.=20 ?????As a first step, Gov. Davis should do what he threatened to do in his= =20 State of the State address: use the power of eminent domain to recover the= =20 gas-fired generation plants that the price manipulators are using to set=20 monopoly prices. He can pay "just compensation" to the owners but not one= =20 dime more.=20 ?????The governor should now recognize California's vital interest in=20 protecting itself from these prices. Eminent domain is a reasonable tool to= =20 use to achieve that goal. It has been used in less compelling circumstances= .=20 For example, eminent domain was used in the early 1980s for George W. Bush'= s=20 investment team to assemble the land on which the Texas Rangers' stadium is= =20 built, from which he and his partners profited handsomely. If eminent domai= n=20 can be used for private profit, it can be used to protect the vital interes= ts=20 of the state of California. The plants should be divested to private=20 ownership, but only to companies that are under PUC jurisdiction.=20 ?????The PUC also should be used to plan how California can move forward to= =20 an improved cost-based system of regulation. What we cannot do is to contin= ue=20 on with the current plan, which is to have the governor set electricity=20 prices behind closed doors, working with the very people who are suspected = of=20 unlawful price fixing. PG&E's bankruptcy provides the governor with a new= =20 opportunity to move to a more effective program.=20 ?????The governor should now stop using public funds to buy electricity. He= =20 should urge Edison to join PG&E in reorganizing under bankruptcy court=20 protection. This will allow all parties to contest the unpaid billions of= =20 dollars of receivables owed to the power producers and their associates. Th= is=20 will send a message to Wall Street to stop funding such outrageous and=20 predatory practices because they don't pay.=20 ?????The state attorney general should conduct a criminal grand jury=20 investigation into the alleged wrongdoing by the power generators. He shoul= d=20 also join in the private litigation that asserts that the power producers= =20 violated the state's antitrust laws. He should follow the investigative tra= il=20 to Houston, Tulsa, Atlanta and wherever else it leads.=20 ?????Finally, Californians are going to have to make a short-term sacrifice= =20 to get a long-term gain. The governor's call last week for conservation doe= s=20 not go far enough. Each city council and mayor and all boards of supervisor= s=20 should be required to come up with an emergency conservation plan. We need = to=20 cut consumption to the point where we can meet it with current supply. We= =20 cannot put an unfair burden on business because this will cost jobs. People= =20 with lower incomes and fixed incomes need to be protected.=20 ?????PG&E's bankruptcy filing removes the foundation of the governor's plan= .=20 He should remember the example of FDR, who likened himself to a football=20 quarterback who tries one play and, if it did not work, then tries another.= =20 But for heaven's sake, try something. We must show our fellow citizens that= =20 we know how to act effectively in solving this crisis.=20 - - - Michael J. Aguirre Has Filed a Private Attorney General's Lawsuit Against t= he=20 Major Power Producers ---------------------------------------------------------------------------= --- ---------------------------------------------------------------------------= --- ------------------------------------------------------- Governor, Utility In War Of Words=20 Davis furious as PG&E defends bankruptcy filing=20 David Lazarus, Chronicle Staff Writer Monday, April 9, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/04= /09/M N223519.DTL=20 California's energy mess took an ugly turn yesterday as Gov. Gray Davis and= =20 Pacific Gas and Electric Co. traded barbs over who is to blame for the=20 bankruptcy of the state's largest utility.=20 In a series of tit-for-tat statements, each side laid claim to the moral hi= gh=20 ground while insisting that the other had been dealing in bad faith.=20 The governor spent part of his time yesterday giving television interviews = in=20 response to The Chronicle's report Saturday that PG&E awarded $50 million i= n=20 bonuses and raises to 6,000 employees just hours before Friday's bankruptcy= =20 filing.=20 "PG&E's management is suffering from two afflictions: denial and greed,"=20 Davis said in a brief statement Saturday night.=20 In a testy reply, PG&E countered that "instead of focusing all his attentio= n=20 on solving the state's yearlong and ever-worsening energy crisis, the=20 governor has launched a campaign-style attack on our company."=20 PG&E said Davis was criticizing "thousands of men and women who have worked= =20 tirelessly and professionally through this crisis" and concluded that=20 "California would be far better served if the governor turned his attention= =20 to the crisis at hand."=20 Steve Maviglio, a spokesman for the governor, fired back yesterday: "PG&E= =20 waged a public relations war on Friday. If they're looking for somebody to= =20 blame, they should look in the mirror."=20 Maviglio also said the governor was concentrating on reaching a final accor= d=20 with Southern California Edison Co. for the state to purchase the cash-=20 strapped company's power lines for nearly $2.8 billion.=20 A last round of talks was scheduled to be held last night.=20 "There are a few remaining details to be worked out, but it seems pretty=20 close," Maviglio said, adding that an announcement of the deal could come a= s=20 early as today.=20 "The governor is spending his time negotiating with a responsible utility,"= =20 he said.=20 Along with the Edison deal, Davis spent the weekend huddling with energy=20 advisers and lawyers trying to come up with an appropriate response to PG&E= 's=20 bankruptcy bombshell.=20 Efforts to stabilize California's dysfunctional electricity market suddenly= =20 have become much more complex.=20 NOT MUCH CHANGED Nevertheless, while PG&E's bankruptcy is by far the most sensational aspect= =20 of California's long-drawn-out energy mess, at the end of the day, it doesn= 't=20 really change a thing.=20 Consider:=20 -- PG&E's financial woes stem from a rate freeze that prevented the utility= =20 from passing along to customers runaway wholesale power costs. That rate=20 freeze and sky-high electricity prices remain in place.=20 -- California's energy shortage is primarily the result of the state not=20 having built any major power plants for the past 12 years. PG&E's bankruptc= y=20 does nothing to affect that precarious situation.=20 -- PG&E's foray into bankruptcy court does not alter the fact that=20 electricity demand is outpacing available supply. California consumers stil= l=20 face a threat of daily blackouts when power usage spikes this summer.=20 "The crux of the problem is still the same," said Loretta Lynch, president = of=20 the state Public Utilities Commission. "We face the same challenges we did= =20 before PG&E filed for bankruptcy."=20 She added, however, that PG&E's bankruptcy "increases the uncertainty."=20 The utility doesn't see it that way.=20 PG&E spokesman Ron Low said California's energy woes are no more uncertain= =20 now than they were when the company ostensibly was negotiating with Davis t= o=20 find an equitable solution to the state's troubles.=20 "California remains in an energy crisis," he said. "As we head toward summe= r,=20 resources are going to be very tight."=20 WHAT COULD HAPPEN In the short run, consumers will notice no change whatsoever. Bankruptcy=20 protection will allow PG&E to continue operating as usual while the company= 's=20 creditors line up to receive at least partial payment of outstanding bills.= =20 Longer term, there is a very real possibility that electricity rates will= =20 soar if the bankruptcy judge agrees with PG&E that conditions for lifting t= he=20 rate freeze were met a year ago and that $9 billion in subsequent expenses= =20 must be borne by consumers.=20 How much people's bills would rise depends on how the rate increase is=20 structured. It would probably come in the form of a surcharge on existing= =20 fees,=20 but the monthly hit to consumers could be limited by spreading the total co= st=20 over a number of years.=20 The big question mark now is how PG&E's bankruptcy will affect various=20 political and legislative measures intended to keep California's lights on.= =20 The state's attempt to purchase PG&E's power lines is obviously finished,= =20 although a new deal could be negotiated in bankruptcy court.=20 Meanwhile, the governor is pressing ahead with plans to purchase the=20 transmission systems of Edison and Sempra Energy's San Diego utility --=20 although what the state would do with only a partial power grid has yet to = be=20 determined.=20 "Does it make any sense to have the transmission lines of Edison and Sempra= =20 and not PG&E?" asked state Senate President Pro Tem John Burton, D-San=20 Francisco. "I don't know the answer to that."=20 A final accord with Edison this week would validate PG&E's apparent concern= s=20 that it would have had a harder time limiting backlash to its bankruptcy=20 filing if the utility had acted after a breakthrough with Edison was=20 unveiled.=20 The Chronicle quoted PG&E insiders yesterday as saying that the decision to= =20 file for bankruptcy had been made early last week, even though senior compa= ny=20 officials said the move followed the governor's Thursday night speech on=20 solving California's energy issues.=20 One reason PG&E opted to file on Friday morning was because a final deal wi= th=20 Edison was expected at any time, observers said.=20 Paul Patterson, an analyst at Credit Suisse First Boston, noted that if PG&= E=20 had filed for bankruptcy after Edison came to terms with the state, "they= =20 would be seen as a spoiler."=20 ENSUING CONFUSION In any case, PG&E's surprise filing has left all concerned scrambling for= =20 footing in the changed political landscape.=20 Consumer advocates watched with dismay yesterday as the state's political a= nd=20 corporate powers slugged it out for supremacy.=20 Nettie Hoge, executive director of The Utility Reform Network in San=20 Francisco, said all this finger-pointing will do nothing to ensure that=20 Californians have ample supplies of electricity this summer.=20 "These guys should grow up and come up with a situation that works for the= =20 public," she said.=20 E-mail David Lazarus at [email protected].=20 ,2001 San Francisco Chronicle ? Page?A - 1=20 ---------------------------------------------------------------------------= --- ---------------------------------------------------------------------------= --- ----------- Power Grab -- Some Democrats Favor Seizing Plants=20 Bernadette Tansey, Chronicle Staff Writer Monday, April 9, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/04= /09/M N122655.DTL=20 With the prospect that state power buyers could burn through more than $2= =20 billion a month this summer, some state Democratic leaders are pushing for = a=20 takeover of private power plants to get soaring prices under control.=20 Lawmakers concede that sending state agents to grab the keys of power=20 generating plants would be an extraordinary measure.=20 But now that Pacific Gas and Electric Co. has limited the state's options= =20 with Friday's bankruptcy filing and with little hope for stronger federal= =20 price controls, state Senate leader John Burton and others say seizing powe= r=20 plants makes financial and political sense.=20 They say they've done the math: Since January, California has spent more th= an=20 $4 billion buying power. That's about $1 billion more than private energy= =20 firms paid for the power plants PG&E and California's two other=20 investor-owned utilities were=20 forced to sell under California's botched deregulation plan. At those rates= ,=20 California could soon look like a renter paying the full value of the house= =20 several times a year.=20 Profits of 300 percent are not uncommon for large private generators, which= =20 provide about 40 percent of the state's power needs. The state could seize= =20 the assets, compensate the companies and then sell the electricity to=20 consumers at cost, advocates of the plan say.=20 "We have to do something," said Burton, D-San Francisco, one of a group of= =20 legislators who urged Davis at a meeting last week to condemn some of the= =20 plants. "These people have got us by the throat. They're making more money= =20 than God, and we've got to fight back -- not with words, but with actions."= =20 Davis himself raised the specter of using his emergency powers to take over= =20 power plants with a fiery flourish during his State of the State address=20 earlier this year.=20 "If I have to use the power of eminent domain to prevent generators from=20 driving consumers into the dark and utilities into bankruptcy, then that's= =20 what I will do," he said in January.=20 Davis still hasn't ruled out the possibility, but he says it's not high on= =20 his list of tactics.=20 Generators say they would fight tooth and nail against such a grab, and sta= te=20 GOP lawmakers oppose condemnation, saying it smacks of underdeveloped=20 countries' nationalizing key industries.=20 But Burton and other Democrats, including state Senators Don Perata, D-=20 Oakland, and Jackie Speier, D-Hillsborough, say the governor's strategy so= =20 far has left giant energy firms holding all the cards -- and a mounting pil= e=20 of the state's cash.=20 Davis had been trying to restore the financial stability of PG&E and Southe= rn=20 California Edison after their combined $14 billion debt for electricity=20 purchases so damaged their creditworthiness that the state had to take over= =20 buying power.=20 But now that PG&E has sought bankruptcy protection rather than accept Davis= '=20 plan to buy its transmission lines, the state may be stuck with the role of= =20 power buyer for years.=20 POWERS OF EMINENT DOMAIN Sacramento lawyer Richard Desmond, an expert on state powers of eminent=20 domain, said California could seize generating plants by demonstrating that= =20 it would put the properties to "a higher and more necessary use."=20 "The government has almost unlimited power of eminent domain to acquire=20 property," Desmond said. "The only thing the state has to do is pay 'just= =20 compensation,' as defined under the constitution."=20 The state could file a formal suit for eminent domain, a time-consuming=20 procedure if the owner mounts a fierce resistance over the transfer price,= =20 Desmond said. If the state wants to take immediate possession, it can depos= it=20 an estimate of the just compensation and fight it out later in court. But i= f=20 the state loses, it could be stuck for interest, litigation costs and=20 damages.=20 Condemnation of power plants would raise a number of unknowns, such as=20 figuring out who would manage and operate the facilities. The state might= =20 also be put into the position of having to seize contracts between the=20 generators and natural gas providers.=20 Davis spokesman Roger Salazar said the governor's first priority was buildi= ng=20 new plants to increase supply, rather than condemning existing plants.=20 State Sen. Jim Battin, R-Palm Desert, said he thought seizing plants was a= =20 horrible idea.=20 "We would become a third world country and start nationalizing things,"=20 Battin said. "Nobody would ever build a power plant in California again. I= =20 think that would be a really bad play."=20 COMPANY WOULD FIGHT Tom Williams, a spokesman for Duke Energy, said the company would fight=20 vigorously to protect its multimillion-dollar investment in four California= =20 plants, including Morro Bay and Moss Landing.=20 "We would defend our interest and seek a fair market value," Williams said.= =20 Duke spent $611 million to buy or lease the four plants since 1998, and has= =20 embarked on a $1.6 billion program to upgrade and expand them.=20 Some power companies, however, may find their claims for the fair market=20 value of their plants undercut by their own tax filings. Energy firms,=20 including Duke, told county assessors last year that the utility plants the= y=20 bought were worth hundreds of millions of dollars less than they paid for= =20 them.=20 Private companies including Duke, Dynegy, Southern Energy, AES Corp and=20 Calpine spent a total of $3.2 billion to buy divested utility power plants= =20 that can produce as much as 20,000 megawatts.=20 UNDERLYING PROBLEM UNSOLVED Williams said taking over the property of private companies would not solve= =20 the underlying problem behind California's high energy prices: rising deman= d=20 and an inadequate supply of energy to fill it.=20 Even if Davis seized only one plant, the move might spur other power=20 generators to drop their prices, said Doug Heller of the Foundation for=20 Taxpayer and Consumer Rights.=20 "As soon as the generators recognize we're ready to go to a public power=20 system and take their plants, they may start selling power at reasonable=20 rates,=20 and we won't have to go down that road," Heller said.=20 Chronicle staff writers Tyche Hendricks, Patrick Hoge and Greg Lucas=20 contributed to this report. / E-mail Bernadette Tansey at=20 [email protected].=20 ,2001 San Francisco Chronicle ? Page?A - 1=20 ---------------------------------------------------------------------------= --- ---------------------------------------------------------------------------= --- ----------- Davis Could Still Show Courage=20 ROB MORSE Monday, April 9, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/04= /09/M N61997.DTL=20 This is Gray Davis' last chance. He can be remembered for something other= =20 than his vows that there would be no electricity rate hikes and no=20 bankruptcies. But he has to show some guts, take his finger out of the wind= ,=20 form it into a fist and stand up to PG&E.=20 Go for it, Gray. Seize a power plant.=20 That may discourage private investment in new plants, but if the state can= =20 build those institutions of darkness called prisons, it can build=20 institutions that create light.=20 PG&E Corp. Chairman Robert Glynn slapped Davis and all Californians in the= =20 face by saying Friday that PG&E would file for bankruptcy protection. Glynn= =20 supposedly took it personally a couple of weeks ago when the governor calle= d=20 his company "immoral."=20 So he went out and proved he wasn't immoral by giving bonuses to 6,000=20 employees, mostly managers, just before he made the bankruptcy announcement= .=20 Glynn probably considers that loyalty. But unlike many of the great men who= =20 guided PG&E in the past, he has shown no loyalty to California or its=20 citizens.=20 Compare Glynn's behavior with that of Frank G. Drum, who was president of= =20 PG&E during the company's great financial crisis of 1907, when San Francisc= o=20 was in ruins and PG&E was millions in debt. Lawyers told Drum that PG&E=20 needed time to recover and should ask for the protection of the courts by= =20 being put in receivership.=20 "There will be no receiver," said Drum. He then pulled PG&E through its=20 financial crisis by levying a $10 assessment on each share of the company's= =20 stock, issuing bonds and using every means he could to keep the company=20 afloat.=20 Unfortunately, times are different and definitions of honor, morality and= =20 loyalty have changed. Is Glynn immoral? I don't know. But he isn't a worthy= =20 successor to Frank G. Drum.=20 GROSS & Egregious: Chris Burns says that he remember's Herb Caen calling PG= &E=20 "Pigs, Greed and Extortion." Burns and others wrote their checks that way,= =20 and they all cleared.=20 Patrick Driscoll says that during the '80s he paid his PG&E bills with chec= ks=20 made out to "Piggy." Says Driscoll, "They kept my power turned on anyway."= =20 You can call them anything, just don't call them to fix a gas leak.=20 dept.: Karyn Hunt says that after hearing tirades about all the things peop= le=20 do while driving their cars, she's seen the ultimate. "I actually saw a wom= an=20 adjusting her tongue piercing while driving down Folsom near Seventh Street= ,"=20 she says. "Ick."=20 here: A biker parked his Harley outside the venerable Western Saloon in Poi= nt=20 Reyes Station. Barroom conversation ensued. The biker complained about all= =20 the numbers in his life: his Social Security number, phone number, license= =20 number, e-mail address and passwords. "You can't have just one password,"= =20 said the biker, "because some passwords require four numbers and some requi= re=20 five."=20 Ah, for the days when the only password you needed was on the back of a=20 sleeveless denim jacket.=20 tunes: Maggie Lynch, magnificent Muni spokeswoman, was on the scene when an= =20 M-line car derailed last week. She heard one of the unsung heroes of the=20 Metro Rail track crew say to another: "If you can drive that train back ont= o=20 the tracks right away, I will kiss your (butt) right here in St. Francis=20 Circle." Train back on tracks, but no busses on backside.=20 Cool car: The Peter Witt Italian streetcar has a platform in the rear that= =20 really deserves a bar, and all the car's signs are still in 1920s Italian.= =20 The other day a young Italian marveled at "Vietato Fumare," "Vietato Sputar= e"=20 and "Fermata Prenotata." He said the latter had something to do with "a bus= =20 stop and trying to make a reservation at a restaurant."=20 success: Success magazine presents "Success 2001" at the Cow Palace in June= .=20 Among the successful speakers will be Larry King (numerous successful=20 marriages) and Jeff Garcia (successful nonembarrassment to humankind). Bill= =20 Clinton also will appear, on tape, I presume from the low admission fee.=20 "Reg. $225, now only $39." Includes pardon.=20 Newspaper recounts are in, and hang the chads. Bush won and there's no chan= ce=20 of bringing in Al Gore to negotiate with the Chinese in a language they=20 understand, English. You can get rid of those bumper stickers that say "Re-= =20 elect Gore."=20 up: Last week I mentioned former San Francisco school board president JoAnn= e=20 Miller, who was helping her friend Carol Schilling try to get her son Jeffr= ey=20 Schilling released by terrorists in the Philippines.=20 Miller called to say that Sen. Dianne Feinstein rose to the occasion, putti= ng=20 Carol in touch with the secretary of defense, helping her make a radio appe= al=20 to the young man's captors and arranging a conference call with the preside= nt=20 of the Philippines.=20 "We're keeping our fingers crossed," said Miller.=20 Rob Morse's column appears Mondays, Wednesdays, Fridays and Sundays. His=20 e-mail address is [email protected].=20 ,2001 San Francisco Chronicle ? Page?A - 2=20 ---------------------------------------------------------------------------= --- ---------------------------------------------------------------------------= --- ----------- Governor, bankrupt utility blame each other for power woes=20 GARY GENTILE, AP Business Writer Monday, April 9, 2001=20 ,2001 Associated Press=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2001/04/09/n= ation al0504EDT0447.DTL=20 (04-09) 02:04 PDT LOS ANGELES (AP) -- Gov. Gray Davis and Pacific Gas &=20 Electric executives traded acrimonious barbs -- but no solutions -- as the= =20 state's largest utility headed into bankruptcy court claiming $9 billion in= =20 debts.=20 On Sunday, Davis appeared on two nationally televised news programs to bera= te=20 PG&E for awarding an estimated $50 million in bonuses and raises to about= =20 6,000 midlevel managers and support staff on the eve of its filing for=20 bankruptcy protection Friday.=20 ``Management at PG&E is just focused upon padding their own pockets, not in= =20 discharging their duty to serve their many customers in California,'' Davis= =20 said on ABC's ''World News Tonight.''=20 Earlier, Davis had issued a statement saying PG&E ``management is suffering= =20 from two afflictions: Denial and greed.''=20 In response, PG&E defended their employee bonus package and took a swipe at= =20 the governor.=20 ``Instead of focusing all his attention on solving the state's yearlong and= =20 ever-worsening energy crisis, the governor has launched a campaign-style=20 attack on our company,'' a PG&E statement read.=20 The rancor came at the start of a hectic week. A San Francisco bankruptcy= =20 judge was to hold PG&E's first bankruptcy hearing Monday or Tuesday to=20 determine, among other priorities, which creditors will be paid and in what= =20 order.=20 Davis, meanwhile, was still locked in faltering negotiations with Southern= =20 California Edison, the state's second-largest utility, which also claims th= e=20 state's flawed 1996 deregulation law is the cause of its financial woes.=20 Davis is hoping to strike a deal to buy Edison's share of the power=20 transmission system for $2.76 billion, which would provide Edison with a=20 much-needed cash-flow to restructure its debt.=20 SoCal Edison executives have said they would continue negotiations with=20 Davis, but weekend talks in San Francisco failed to resolve any of the=20 outstanding issues on the table, said Davis' spokesman Steven Maviglio.=20 Edison was to file an update on its financial condition with the Securities= =20 and Exchange Commission on Monday.=20 ---------------------------------------------------------------------------= --- --------------------------------- Negotiations continue between state and SoCal Edison=20 GARY GENTILE, AP Business Writer Monday, April 9, 2001=20 ,2001 Associated Press=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2001/04/09/f= inanc ial0008EDT0200.DTL=20 (04-09) 06:44 PDT LOS ANGELES (AP) -- California failed to keep its largest= =20 utility from bankruptcy but the state isn't giving up efforts to keep the= =20 second-biggest afloat.=20 Talks were scheduled to resume Monday on California's bid to buy Southern= =20 California Edison's share of the power transmission system for $2.76 billio= n.=20 That would provide the company with a much-needed cash-flow to restructure= =20 its debt.=20 Weekend negotiations in San Francisco failed to resolve the ``few remaining= =20 issues,'' according to Steven Maviglio, a spokesman for Gov. Gray Davis.=20 Edison also was expected to file an update on its financial condition with= =20 the Securities and Exchange Commission.=20 Gov. Gray Davis' administration also had intended to buy power lines from= =20 Pacific Gas & Electric.=20 The companies say they have lost more than $13 billion since June because o= f=20 skyrocketing wholesale power prices they cannot pass on to customers under= =20 the state's 1996 deregulation law.=20 On Friday -- in a political embarrassment to the governor -- PG&E filed for= =20 Chapter 11 federal bankruptcy protection from creditors. The company said t= he=20 move wouldn't disrupt power for its 13 million customers.=20 A San Francisco bankruptcy judge was to hold PG&E's first bankruptcy hearin= g=20 Monday or Tuesday to determine, among other priorities, which creditors wil= l=20 be paid and in what order.=20 PG&E has other legal challenges. Companies who sold electricity to the=20 utility have filed at least a dozen lawsuits, seeking to be released from= =20 contracts so they can sell power elsewhere.=20 The bankruptcy also may have an impact on the state's tax base. It wasn't= =20 immediately clear whether PG&E would meet its Tuesday deadline to pay $80= =20 million in property tax payments to 49 counties. PG&E and Edison annually p= ay=20 more than a quarter-billion dollars in taxes. Edison has said it intends to= =20 meet the deadline.=20 Meanwhile, the governor and PG&E traded barbs over the utility's decision t= o=20 award more than $50 million in bonuses and merit raises to about 6,000=20 midlevel managers and other workers the day before filing for bankruptcy=20 protection.=20 Davis issued a statement Saturday saying PG&E's management suffered from=20 ``denial and greed,'' and the company replied in kind.=20 ``Instead of focusing all his attention on solving the state's yearlong and= =20 ever-worsening energy crisis, the governor has launched a campaign-style=20 attack on our company,'' a company statement read. ``Unfortunately, he has= =20 chosen to aim at the thousands of men and women who have worked tirelessly= =20 and professionally through this crisis to deliver gas and electric service = to=20 our millions of customers.''=20 Davis then went on two nationally televised news programs to blast the=20 utility.=20 ``Management at PG&E is just focused upon padding their own pockets, not in= =20 discharging their duty to serve their many customers in California,'' Davis= =20 said Sunday on ABC World News Tonight.=20 The rancor comes at the start of a busy week, as federal and state official= s=20 plan hearings on the California's growing power crisis.=20 Representatives of 11 Western states will gather in Boise, Idaho on Tuesday= =20 to discuss regional energy issues. The gathering is sponsored by the Federa= l=20 Energy Regulatory Commission.=20 In Sacramento on Wednesday, the state Senate starts hearings in its inquiry= =20 into allegations that electricity suppliers illegally withheld power to dri= ve=20 up California's wholesale prices. Wholesalers deny such accusations.=20 Meanwhile, no power alerts were in effect Monday morning as power reserves= =20 stayed above 7 percent.=20 ---------------------------------------------------------------------------= --- --------------------------------- SAN FRANCISCO=20 PUC General Manager To Leave S.F. Post=20 Monday, April 9, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/04= /09/M N1054417.DTL=20 John Mullane, general manager of the San Francisco Public Utilities=20 Commission for the past 15 months, has told Mayor Willie Brown he is=20 retiring, even though Brown hasn't yet named a successor to lead the agency= =20 that could play a vital role in helping the city through the energy crisis.= =20 Mullane, a 37-year city employee, was director of the Water Department befo= re=20 he took the post at the PUC, which runs the city's vast Hetch Hetchy water= =20 and electric power system. He initially agreed to serve as acting general= =20 manager for only six months, succeeding Anson Moran, who also retired.=20 But the PUC has not identified a candidate for the general manager's post w= ho=20 is acceptable to Brown. The mayor has said he wants to use the PUC's=20 hydroelectric dams and vast land holdings as a basis for building more powe= r-=20 generating capacity and creating a regional power authority.=20 ,2001 San Francisco Chronicle ? Page?A - 12=20 ---------------------------------------------------------------------------= --- ---------------------------------------------------------------------------= --- ----------- Gov. Davis, bankrupt utility blame each other for power woes=20 Posted at 6:38 a.m. PDT Monday, April 9, 2001=20 BY GARY GENTILE=20 AP Business Writer=20 LOS ANGELES (AP) -- Gov. Gray Davis and Pacific Gas & Electric executives= =20 traded acrimonious barbs -- but no solutions -- as the state's largest=20 utility headed into bankruptcy court claiming $9 billion in debts.=20 On Sunday, Davis appeared on two nationally televised news programs to bera= te=20 PG&E for awarding an estimated $50 million in bonuses and raises to about= =20 6,000 midlevel managers and support staff on the eve of its filing for=20 bankruptcy protection Friday.=20 ``Management at PG&E is just focused upon padding their own pockets, not in= =20 discharging their duty to serve their many customers in California,'' Davis= =20 said on ABC's ''World News Tonight.''=20 Earlier, Davis had issued a statement saying PG&E ``management is suffering= =20 from two afflictions: Denial and greed.''=20 In response, PG&E defended their employee bonus package and took a swipe at= =20 the governor.=20 ``Instead of focusing all his attention on solving the state's yearlong and= =20 ever-worsening energy crisis, the governor has launched a campaign-style=20 attack on our company,'' a PG&E statement read.=20 The rancor came at the start of a hectic week. A San Francisco bankruptcy= =20 judge was to hold PG&E's first bankruptcy hearing Monday or Tuesday to=20 determine, among other priorities, which creditors will be paid and in what= =20 order.=20 Davis, meanwhile, was still locked in faltering negotiations with Southern= =20 California Edison, the state's second-largest utility, which also claims th= e=20 state's flawed 1996 deregulation law is the cause of its financial woes.=20 Davis is hoping to strike a deal to buy Edison's share of the power=20 transmission system for $2.76 billion, which would provide Edison with a=20 much-needed cash-flow to restructure its debt.=20 SoCal Edison executives have said they would continue negotiations with=20 Davis, but weekend talks in San Francisco failed to resolve any of the=20 outstanding issues on the table, said Davis' spokesman Steven Maviglio.=20 Edison was to file an update on its financial condition with the Securities= =20 and Exchange Commission on Monday. ---------------------------------------------------------------------------= --- ---------------------------------------------------------------------------= --- ------------------- Cheap, abundant coal eyed with new interest=20 Published Monday, April 9, 2001, in the San Jose Mercury News=20 BY JIM PUZZANGHERA=20 Mercury News Washington Bureau=20 WASHINGTON -- The skyrocketing price of natural gas, a major factor in=20 California's electricity problems, is sparking renewed national interest in= =20 coal -- and the Golden State has a major stake in its potential comeback.= =20 Although California's small, coal-fired power plants account for less than = 1=20 percent of its electricity production, about 20 percent of the state's tota= l=20 power comes from coal-burning plants, mostly elsewhere in the West.=20 More coal plants are on the drawing board in the region as abundant and=20 inexpensive coal has become increasingly enticing when compared with natura= l=20 gas. Gas burns cleaner but is more than four times as expensive and is in= =20 short supply.=20 The nation is hungry for options as the energy crisis threatens to spread.= =20 But coal's potential to produce more and cheaper power is offset by the=20 impact that increased coal burning could have on the environment, from=20 thicker haze to more mercury emissions to accelerated global warming.=20 Coal, the fuel that powered the Industrial Revolution, fell out of favor ov= er=20 the past 30 years because of those environmental concerns. But President Bu= sh=20 has touted it as a key to solving the nation's energy woes. In the budget h= e=20 sends to Congress today, Bush is expected to propose spending more money to= =20 research cleaner-burning coal. Some of the money for the 10-year, $2 billio= n=20 program will come at the expense of research into renewable energy and ener= gy=20 efficiency.=20 Optimism about the new administration and the high prices of other fossil= =20 fuels has led companies to announce plans for 23 new coal-fired power plant= s=20 across the nation in recent months. That's more than were proposed in the= =20 past decade. The announcements, along with a more than doubling of coal=20 prices, has fed surging stock valuations of coal companies. One of the=20 leading producers, Peabody Group, is planning an initial public offering ne= xt=20 month.=20 None of the new plants are in California, although 10 are in the West. Thos= e=20 plants would add at least 4,800 megawatts of electricity to the Western pow= er=20 network in the next four years, enough to power 3.6 million homes.=20 ``To the extent that they expand capacity anywhere in the Western grid righ= t=20 now, it's going to help,'' said Severin Borenstein, director of the Energy= =20 Institute at the University of California-Berkeley. ``But before coal can= =20 make a claim that it can be the energy source we can depend on, it's going = to=20 have to prove that it can be more environmentally friendly.''=20 Pollution concerns=20 Environmentalists are highly skeptical. They, along with some taxpayer grou= ps=20 and the U.S. General Accounting Office, have criticized the Department of= =20 Energy's existing Clean Coal Technology Program as ineffective and wasteful= .=20 Although technological advances have nearly eliminated the characteristic= =20 black smoke of coal, burning it still releases large amounts of carbon=20 dioxide, which contributes to global warming, and other chemicals that=20 pollute air and water, environmental groups say.=20 ``Coal is not part of our long-term future, unless our long-term future has= =20 San Jose underwater,'' said Carl Pope, executive director of the Sierra Clu= b,=20 alluding to the rising oceans predicted if global warming continues. Pope= =20 added that truly clean-burning coal ``is about as likely as cold fusion.''= =20 Although there is much debate about the environmental ramifications of=20 burning coal, there is no debate about one thing: The United States is the= =20 coal capital of the world.=20 Coal is the nation's most abundant fossil fuel. There are about 250 billion= =20 tons of recoverable coal in the country's soil, a figure equal to the entir= e=20 reserve of oil in the world. At the present rate of consumption -- coal=20 supplies about 51 percent of U.S. electricity today -- there's enough coal = in=20 the country to last 250 years.=20 Backing from Bush=20 ``For the United States to ignore coal as an integral part of its energy=20 policy is the equivalent of OPEC ignoring oil,'' said Jack Gerard, presiden= t=20 of the National Mining Association, which represents the coal industry.=20 The Bush administration doesn't plan on ignoring it.=20 ``My job and the job of others will be to convince many in the country who= =20 don't believe we can have a clean air policy and burn coal at the same time= .=20 I believe we can,'' Bush said in a February speech in the coal country of= =20 West Virginia.=20 Critics charge Bush is selling out to the coal industry. It contributed $3.= 8=20 million to federal candidates in the 2000 election cycle, with 88 percent o= f=20 that for Republicans. The industry flexed its muscle last month when it=20 pushed Bush to revoke a campaign promise to support requiring power plants = to=20 reduce carbon dioxide emissions.=20 ``They seem to have the ear of important people in the White House and the= =20 Energy Department. It remains to be seen whether they're going to be able t= o=20 fool the public,'' said David Hawkins, director of the air and energy progr= am=20 at the National Resources Defense Council and a former environmental offici= al=20 in the Carter administration.=20 California's stricter air-quality laws have made building coal plants in th= e=20 state unfeasible, industry officials said. Instead, California has looked t= o=20 coal plants outside the state for power. Los Angeles officials last month= =20 urged that between 500 and 1,000 megawatts of generating capacity be added = to=20 the coal-fired Intermountain Power Plant in Utah, which already provides th= e=20 city with a third of its power.=20 No in-state supply=20 Utah has an in-state supply of coal, as do Arizona and several other Wester= n=20 states. Lack of such a supply in California has made coal-fired plants a le= ss=20 enticing option here, said California Energy Commissioner Suzanne Garfield.= =20 Coal industry officials counter that their product is shipped across the=20 country. About 3.3 million tons of coal travels by rail each year to Los=20 Angeles, where it is shipped to Asia and other foreign destinations.=20 A coal-fired power plant would face great opposition in California, even=20 during this energy crisis, coal industry officials concede. But coal does= =20 have the potential to help solve the country's energy problems, Borenstein= =20 said.=20 ``Coal, if it can be burned cleanly, is a very abundant source of power,'' = he=20 said. ``I hope that they can come up with a clean coal technology.'' Contact Jim Puzzanghera at jpuzzanghera@ ---------------------------------------------------------------------------= --- ---------------------------------------------------------------------------= --- -------------------- Leaders threaten to seize power contracts, plants=20 Published Monday, April 9, 2001, in the San Jose Mercury News=20 BY BRANDON BAILEY=20 Mercury News=20 While the governor's office continued talks aimed at preventing a second=20 major utility from going into bankruptcy, other California political leader= s=20 said Sunday that it's time for drastic action to bring wholesale power pric= es=20 down.=20 With little prospect for federal price caps, some state officials are sayin= g=20 California must seriously consider such steps as seizing power contracts or= =20 even taking over the generating plants themselves.=20 ``To this date, we haven't done enough'' to persuade suppliers that they ne= ed=20 to lower their prices, Democratic state Treasurer Phil Angelides said Sunda= y.=20 State Senate President Pro Tem John Burton, D-San Francisco, suggested=20 seizing two or three power plants to ``send a shot across their bows.''=20 Angelides agreed it may be time to slap wholesale power providers with a=20 windfall profits tax -- ``or take a couple of their plants, to give them a= =20 little dose of reality.''=20 Legislative leaders are also discussing a proposal for the governor to seiz= e=20 wholesale electricity contracts if federal regulators refuse to impose a=20 regional price cap on power trading in the West.=20 In effect, that would let the state buy some lower-priced power that=20 generators had already promised to energy traders, who would otherwise rese= ll=20 the same juice on the spot market for higher prices.=20 Shift in focus=20 If the state goes forward with any of those efforts, analysts said it would= =20 mark a shift in focus. Rather than concentrating on bailing out the=20 cash-strapped utilities, officials would be addressing the larger issues of= =20 what many consider to be a dysfunctional power market in which a handful of= =20 large, independent companies have earned huge profits by selling power to t= he=20 utilities that provide energy to individual consumers.=20 Attorneys for the state's largest utility, Pacific Gas & Electric Co., and= =20 its creditors are expected to appear in a federal courtroom in San Francisc= o=20 this morning for a hearing on the bankruptcy petition that PG&E filed Frida= y.=20 It is the third largest bankruptcy filing in U.S. history.=20 PG&E says it has amassed $9 billion in debt, primarily because of a rate=20 freeze that has prevented utilities from passing their wholesale costs on t= o=20 California energy consumers.=20 PG&E bonuses=20 A spokesman, meanwhile, defended PG&E's decision to pay out millions of=20 dollars in performance bonuses to about 6,000 non-union employees last week= ,=20 before the bankruptcy petition was filed. Though critics said the utility= =20 shouldn't be making such payments at a time when it is crying poverty, PG&E= =20 spokesman John Nelson said the bonuses went to workers who weren't eligible= =20 for a pay increase that other workers received earlier this year under thei= r=20 union contract.=20 The company had planned to award about $80 million in bonuses, but Nelson= =20 said that was reduced by an unspecified amount in part because PG&E decided= =20 not to include its top officers in the group receiving the awards.=20 Also over the weekend, aides to Gov. Gray Davis continued negotiating detai= ls=20 of a bailout plan for the state's other major utility, Southern California= =20 Edison. Under a tentative agreement announced a few weeks ago, the state=20 would give Edison nearly $3 billion. In exchange, California would take ove= r=20 Edison's portion of the transmission grid.=20 The governor had hoped to acquire both Edison's and PG&E's share of the=20 statewide grid.=20 ``It would be much easier if we could get the whole system, clearly,'' said= =20 Steve Maviglio, the governor's press secretary. But he said the state could= =20 still submit a proposal to acquire PG&E's portion as part of a court-approv= ed=20 plan to reorganize the utility's debts.=20 Power producers have criticized the state's effort to acquire the=20 transmission grid, and argue that raising taxes or seizing power plants wou= ld=20 only discourage new plant construction. Spokesmen for several major=20 generators have argued that the state should concentrate on reducing barrie= rs=20 to new plants or allowing utilities to raise their rates so they can pay of= f=20 their debts.=20 But adding to the calls for strong action, Assembly Speaker Pro Tem Fred=20 Keeley, D-Santa Cruz, said Sunday that he doesn't believe the state's econo= my=20 can survive what he called ``an undisciplined wholesale energy market'' for= =20 much longer.=20 Contact Brandon Bailey at [email protected] or (408) 920-5022.=20 ---------------------------------------------------------------------------= --- ---------------------------------------------------------------------------= --- ----------------- Monday, April 9, 2001=20 Blackouts this summer?=20 Perhaps the timing was coincidental, but Friday's announcement by Pacific G= as=20 & Electric that it will seek Chapter 11 bankruptcy protection served as a d= im=20 comment on the industry's confidence that California Gov. Gray Davis really= =20 has a handle on the state's looming electricity crisis. Unfortunately, Gov.= =20 Davis' speech Thursday evening, while a bit more realistic than previous=20 statements in that he acknowledged the need for rate increases, suggests th= e=20 governor is not considering a sensible way out of the problem. In a conference call with journalists Friday morning the governor fleshed o= ut=20 some of the bare bones he offered the public the night before. His proposed= =20 rate increase is slightly smaller than one the Public Utility Commission=20 proposed last week and will hit heavy users harder. He promised that a=20 revenue bond his office is still assembling would repay the general fund=20 money the state government has spent and pay some utility debts too. He=20 emphasized that increasing supply is the only long-term answer and said his= =20 office is working "at warp speed" to get permits for new plants approved.= =20 Four small ones should be online this summer.=20 But he still sees state control rather than a freer market as the proper=20 approach. He said the state would stop buying electricity directly in 2003= =20 but would set up a new regulatory structure to supervise those who do. He= =20 acknowledged the need for rate increases but wants rates set by regulators= =20 rather than by buyers and sellers.=20 We might eventually get stability under such a system. But it would be a=20 needlessly expensive stability.=20 Looming over all is the near-certainty of summer blackouts.=20 The latest summer projections by California's Independent System Operator,= =20 the bureaucratic agency through which most energy transactions in the state= =20 are funneled, are more pessimistic and more realistic than previous=20 estimates. But even these latest projections might understate the severity.= =20 The 2001 CAISO summer assessment forecasts resource deficiencies for June= =20 through September ranging from almost 3,700 megawatts in June down to about= a=20 600 MW shortfall in September. The cover memo notes that "Given this=20 forecast, the CAISO expects that load curtailments (blackouts) will occur= =20 this summer." Republican state Sen. Tom McClintock pointed out to us, however, that the= =20 governor took over the ISO board with a flurry of new appointments. Sen.=20 McClintock says his staff has heard rumblings of political pressures to=20 minimize doom-and-gloom projections.=20 Last December the ISO estimated a different "peak power demand" (what's=20 demanded with millions of air conditioners running) for each summer month -= =20 49,462 MW for June, 48,759 for July, 50,829 for August and 47,047 for=20 September.=20 The March 22 report applies the same maximum peak load to every month "sinc= e=20 the CAISO cannot accurately forecast when the system summer peak will occur= ."=20 And the figure is at the low end of the previous estimates at 47,703 MW. The ISO says that "potential demand reductions and possible new supply=20 resources are not considered," so conservation measures and price increases= =20 haven't been included. The report expects the new plants Gov. Davis mention= ed=20 to come online in June and later. Robert Michaels, the Cal State Fullerton energy economist, told us there ar= e=20 so many variables and so many reasonably valid forecasting models that the= =20 variances between the two reports might not be all that significant. "In an= y=20 event, this report is plenty scary. Consumers, especially large industrial= =20 operations, are going to have to make big adjustments in how they use=20 energy," he told us. A report from the respected consulting firm Cambridge Energy Research=20 Associates (CERA), headed by author Daniel Yergin, estimat es 20=20 blackout-hours during the summer. Only four such blackouts have happened so= =20 far.=20 A newspaper article by Mr. Yergin and Lawrence Markovich, after analyzing= =20 flaws in the misnamed 1996 "deregulation" scheme says, "Instead of fixing= =20 these flaws, the current policies from Sacramento are moving California dow= n=20 the road to an expensive public power setup and higher prices for consumers= =20 and businesses." Robert Michaels thinks industries are already making adjustments and will= =20 make more when they see the bills they get in May. By now almost all the reputed experts say there are likely to be significan= t=20 power shortfalls and rolling blackouts this summer. Businesses that don't= =20 already have backup generators might do well to get them, and to adjust the= =20 hours in which they use power most intensively. This could be, as Mr.=20 Michaels put it, "a summer like we've never seen before." CERA thinks it will take California two or three years to re-establish=20 something resembling reliable energy. It just might take suffering in the= =20 summer to get state officials to revise their statist plans.=20 Nobody welcomes suffering. But at this point it's prudent to expect the=20 electricity situation to be worse rather than better this summer. ---------------------------------------------------------------------------= --- ---------------------------------------------------------------------------= --- ------------------------ Pacific Gas Files for Chapter 11 By MICHAEL LIEDTKE AP Business Writer SAN FRANCISCO (AP) via NewsEdge Corporation - Pacific Gas and Electric, California's largest utility, filed for Chapter 11 bankruptcy protection Friday despite months of efforts by state officials to bail out the cash-starved company. The utility's 13 million customers probably will be among the least affected, since bankruptcy proceedings allow companies to continue operating while trying to dig out of their financial hole. But lenders, bondholders and power generators may have to write off billions advanced to the utility as losses. And the company's financial reputation could be damaged for years, making it more difficult to raise money to upgrade transmission lines and plants. ``The regulatory and political processes have failed us, and now we are turning to the court,'' company chairman Robert D. Glynn Jr. said. ``We expect the court will provide the venue needed to reach a solution, which thus far the state and the state's regulators have been unable to achieve.'' The company, a subsidiary of PG&amp;E Corp., had run up an $8.9 billion deficit buying electricity as of Feb. 28. Like other California utilities, it has been pinched by skyrocketing wholesale power costs and the state's 1996 deregulation law barring rate increases. As of March 29, the utility had $2.6 billion in cash and outstanding bills of $4.4 billion. Shares of PG&amp;E Corp. were halted on the New York Stock Exchange, where they last traded at $11.36, down 2 cents. The company provides natural gas and electric service across Northern and Central California. It has 21,500 employees. The bankruptcy filing came one day after Gov. Gray Davis, in a statewide address, proposed relieving utilities' debts by giving them a share of a record rate increase approved last week and by continuing to negotiate the state's purchase of their transmission lines. PG&amp;E Corp., however, said those negotiations were ``going nowhere.'' Davis spokesman Steve Maviglio said the bankruptcy filing was a complete surprise. He said aides were meeting with the attorney general's office and bankruptcy lawyers to discuss the implications. Consumer activists were quick to pounce on the news as more evidence that the utility is not getting enough help from its parent company, which has profited during California's energy crisis. ``The parent company has $30 billion, much of which it has siphoned out of the utility coffers. It would have bailed the utility out,'' said Harvey Rosenfield of the Foundation for Taxpayer and Consumer Rights. PG&amp;E Corp. said its subsidiary was forced into bankruptcy because of ``unreimbursed energy costs, which are now increasing by more than $300 million per month,'' state regulatory decisions that are hurting the company and ``the now unmistakable fact that negotiations with Gov. Gray Davis and his representatives are going nowhere.'' Southern California Edison, the state's second-largest utility, was not affected by the filing. Officials at parent Edison International were meeting Friday to discuss the situation. Edison International's stock was down $3.63, or 29 percent, to $9.01 in trading on the New York Stock Exchange. The stock of Sempra Energy, the parent company of San Diego Gas &amp; Electric that serves 3 million customers in the San Diego area, was down $2.17, or 9 percent, to $21.98 per share. The three utilities say they have lost more than $14 billion since June because of soaring wholesale costs. SoCal Edison and Pacific Gas &amp; Electric are barred under the state's deregulation law from raising rates to recover the costs and are having trouble buying power and natural gas because of poor credit. In his five-minute televised speech Thursday evening, Davis said rate increases are needed to help pay for power purchased by the state on behalf of the utilities. The purchases have cost taxpayers $4.7 billion since January. Davis said his tiered rate plan would mean no increase for most residents and an average increase of 26.5 percent for the rest. The Public Utilities Commission has already approved rate increases of up to 46 percent for customers of SoCal Edison and Pacific Gas &amp; Electric. The power crisis led to rolling blackouts in January and earlier this month as electricity supplies dwindled to nearly nothing. On Thursday, state power grid managers said California will see more than a month of rolling blackouts for as many as 5 million people at a time if residents use as much power this summer as last summer. The crisis is blamed a number of factors, including high demand, high wholesale costs and a tight supply worsened by scarce hydroelectric power in the Northwest and maintenance of aging California power plants. The governor has signed contracts and agreements in principle to secure the state's long-term power needs, committing $53 billion that eventually must be paid back by taxpayers and utility customers. ---------------------------------------------------------------------------= --- --------------------------------------------------------------------------- Davis endorses rate hikes, defends handling of energy crisis By JENNIFER COLEMAN Associated Press Writer SACRAMENTO (AP) via NewsEdge Corporation - Gov. Gray Davis for the first time endorsed rate increases for customers of two strapped utilities, while urging conservation and defending his handling of the state's energy crisis. Davis, addressing Californians in a televised speech Thursday, also lashed out at federal regulators for refusing to cap soaring wholesale electricity prices that have pushed the state's two largest utilities toward bankruptcy. ``In January, with the feds still refusing to do their job, California stepped in to purchase the power the utilities could no longer afford to buy,'' Davis said. ``We didn't take over to save the utilities. We took over to keep the power on and the economy strong.'' California has been hit by severe electricity shortages and rolling blackouts the past few months. The problem is blamed on a variety of factors, including deregulation of California's electric industry which does not allow utilities to pass on to customers sharply increased costs. Davis, who repeatedly has said the state can resolve the power problems without rate hikes, told viewers he now thinks rate increases are necessary. His new stance comes after the state Public Utilities Commission last week approved rate increases of up to 46 percent for customers of Southern California Edison and Pacific Gas &amp; Electric Co. Davis said he will propose a tiered rate plan that will mean a 26.5 percent rate increase for the average Edison or PG&amp;E customer. Under the governor's plan, the heaviest power users would see an average 34.5 percent rate increase. ``The more you use, the more you pay,'' he said. ``Conservation is our best short-term weapon against blackouts and price gouging.'' Davis said the state's power crunch and high wholesale costs are the result of a ``flawed deregulation scheme'' signed into law in 1996 by then-Republican Gov. Pete Wilson. Davis urged Californians to help cut power use 10 percent to fend off rolling blackouts this summer, when residents will turn on their air conditioners and demand will rise sharply. The Legislature on Thursday afternoon sent Davis proposals that would spend dlrs 1.1 billion on conservation programs for consumers and businesses. Davis said he plans to sign the measures. ---------------------------------------------------------------------------= --- -------------------------------------------------------------------------- Sempra Energy And SDG&E Reaffirm Strong Financial Position in Response to= =20 PG&E Bankruptcy SAN DIEGO--(BUSINESS WIRE)--April 6, 2001 via NewsEdge Corporation - Sempra Energy and San Diego Gas &amp; Electric (SDG&amp;E) officials took the opportunity of toda= y's Chapter 11 bankruptcy announcement by Pacific Gas &amp; Electric (PG&amp;E)= to reaffirm their companies' strong financial position and the significant regulatory and legislative differences between SDG&amp;E and PG&amp;E. "We want to reassure our customers and shareholders that Sempra Energy and SDG&amp;E remain very strong and financially viable companies," said Stephen L. Baum, chairman, president and chief executive officer of Sempra Energy, the parent company of SDG&amp;E. "SDG&amp;E is continuing its record of providing safe and reliable gas and electric service for our 1.2 million customers today, tomorrow and for years to come. There are several significant financial, legislative and regulatory differences that distinguish Sempra Energy and SDG&amp;E from PG&amp;E." SDG&amp;E is covered under Assembly Bill 265, a law signed by the Governor last September which guaranteed that SDG&amp;E will be able to collect the difference between the capped price of electricity and the wholesale cost of power, providing the power was prudently purchased. PG&amp;E is not covered by AB 265 and that guarantee. At the end of February, the under-collection in the balancing account was $681 million. Since the state's power procurement agency, the California Department of Water Resources (DWR), has been purchasing power for SDG&amp;E, the growth of the company's balancing account has slowed significantly. Unlike PG&amp;E, SDG&amp;E has been able to pay its wholesale electric bills to the DWR, the California Independent System Operator, the California Power Exchange and Qualifying Facilities that cogenerate power for the utility. Additionally, the Sempra Energy companies have no significant credit exposure to PG&amp;E. "Sempra Energy and SDG&amp;E have long advocated that the Federal Energy Regulatory Commission institute temporary regional wholesale price caps to help stem the financial problems such as those experienced by PG&amp;E," Baum added. "We are also committed to promoting and instituting comprehensive energy conservation programs for all customers to help control bills and decrease the chances of rotating outages this summer." Sempra Energy (NYSE: SRE), based in San Diego, is a Fortune 500 energy services holding company with 12,000 employees and annual revenues of $5.4 billion. Through its eight principal subsidiaries -- SoCalGas, SDG&amp;E, Sempra Energy Solutions, Sempra Energy Trading, Sempra Energy International, Sempra Energy Resources, Sempra Communications and Sempra Energy Financial -- Sempra Energy serves more than 9 million customers in the United States, Europe, Canada, Mexico and South America.

kean-s/all_documents/5275.

kean-s

['[email protected]']

Stag's Leap Wine Cellars on wine.com

In This Email: Don't Miss the Super Sale Stag's Leap Wine Cellars on wine.com Great Wines Wine Team Picks: Laina Brown on Wines Worth Schlepping In The Incredible Expanding Tasting: The View from ZAP Watch wine.com TV Don't Miss the Super Sale We're featuring tons of wines at up to 40 percent off -- and we're adding new ones all the time. This is a great opportunity to stock your cellar, fill your closet, throw a huge party, or start your Christmas shopping WAY early. Stag's Leap Wine Cellars on wine.com Few California wineries enjoy the sort of status associated with Stag's Leap Wine Cellars. When its Cabernet Sauvignon won first place at a famous Paris tasting over several top French Bordeaux in 1976, it signaled to the rest of the wine world that Napa Valley had not only arrived, but had taken a place at the head of the table. Since that time, Stag's Leap's uncompromising and meticulous standards have bolstered its position among wine's most respected names. In addition to its prized Cabernets -- the seductive and voluptuous Fay, the classically structured SLV, and the legendary Cask 23, made only in the very best vintages -- the company now offers a wide range of wines including a highly regarded reserve Chardonnay, Merlot, Sauvignon Blanc, and an assortment of accessible bottlings under the Hawk Crest label. Bearing all that in mind, wine.com is honored and privileged to announce that the wines of Stag's Leap Wine Cellars are now available through our site. Click here to survey the selections, but a word to the wise: We're talking about Napa royalty, so don't tarry. To learn more about each item listed below, simply click on its name. _____________________________________________________________________ Great Wines 1997 Dominique Lafon Macon-Villages Petit Chapeau, Burgundy, France, $9.99 A new wine at a great price from Lafon, a legend in Burgundy. 1997 deLorimier Merlot, Alexander Valley, California, $15.99 Get immediate gratification with this seductive Merlot. Virtual Vineyards Duet, $25.00 Double your pleasure with two bottles of Virtual Vineyards wines. 1999 d'Arenberg Chardonnay The Olive Grove, McLaren Vale, South Australia, Australia, $9.99 Emphasis on purity of the fruit and minimal winemaking intervention. Club California The spirit of California wine country delivered to your door monthly. 1998 Punters Corner Chardonnay, Coonawarra, Australia, $19.95 Coonawarra Chard that's crisp, chewy, and chock-full of the tropics. _____________________________________________________________________ Wine Team Picks: Laina Brown on Wines Worth Schlepping In Some people are more comfortable than others plopping down their own bottle of wine on a restaurant table, but a certain amount of "wine snob" labeling always bolsters the rationale. Still, if the only bottle you can imagine bringing is a 1947 Chateau Margaux, might I suggest a few gems with attributes worthy of schlepping in: they're unlikely to be found on a restaurant wine list, but they're guaranteed to enhance your dining experience. 1999 Archery Summit Winery Vireton, Willamette Valley, Oregon, $26.00 1998 Baileyana Pinot Noir, San Luis Obispo County, California, $22.00 1999 Pfeffingen Gewurztraminer Spatlese Ungsteiner Honigsackel, Pfalz, Germany, $22.00 1996 Val Ribeno Crianza, Ribera del Duero, Spain, $29.95 1997 Wightman Winery Cabernet Sauvignon, Napa Valley, California, $49.95 _____________________________________________________________________ The Incredible Expanding Tasting: The View from ZAP A recurring pattern characterizes the annual ZAP (Zinfandel Advocates and Producers) tasting in San Francisco. Every year the "people's grape" (aka "mystery grape" and "California grape") becomes more popular, and the tasting boasts more producers and consumers than ever before. The number of wines being poured, and the number of people waving glasses, seems to reach critical mass, swelling with such huge and boisterous crowds that it can't possibly get any bigger. The following year it increases by 50 percent. This was what happened again on the Saturday before the Super Bowl, the customary date of the tasting. A year ago, 6,000 tasters had flooded the Festival Pavilion at Fort Mason Center; this January (ZAP's 10th anniversary), the number was 9,200. For the first time ever, the event required two different buildings, where a total of 500 wines were poured by 255 wineries. Where will it all end? Well, it finished off the 1990s by showcasing what many were calling the best Zinfandel wines of the decade -- a "spectacular" vintage in the words of Ravenswood's Joel Peterson, who went on to call it "the best-balanced, most complex vintage we've had. The wines have some of the fruit complexity of '91 and some of the strength and power of '95; they're aren't over-the-top killers in terms of alcohol, but they have stuffing underneath." Michael Dashe of Dashe Cellars agreed that '99 constitutes "manna from heaven. The wines are lush, concentrated, and intense, but balanced." Donn Reisen of Ridge Vineyards called them "awesome -- full of rich, ripe, beautiful fruit." Bill Easton, whose '98 Easton Estate was one of the best Zinfandels of that year, felt that the '99s have "a better fruit-tannin relationship," while David Noyes of Kunde Estate found them "surprisingly ready to drink -- I mean, they're big wines." Of course winemakers are going to say things like that -- but the tasting seemed to bear out their claims. In terms of quality, the 1999 Zinfandel vintage surpasses even the vaunted 1997, delivering a panoply of balanced wines with full, approachable flavors that don't taste particularly alcoholic despite their ripeness. To Reisen this is evidence that "Zinfandel winemaking is improving along with the quality of the fruit. Obviously, people are respecting the grape." Perhaps too much so abroad, if you paid attention to some of the backstage scuttlebutt. Other than the beauty of '99, the talk among insiders at the tasting concerned a recent decision by the European Union (and expected agreement by the U.S. Bureau of Alcohol, Tobacco, and Firearms) to allow Italian winemakers to label wines made from the Primitivo grape as Zinfandel. ZAP has supported research into Zinfandel's European origins, resulting (among other things) in the scientific conclusion that it and the Primitivo di Puglia are the same grape. "The Italians called it Primitivo for a hundred years," noted Reisen. "But now that Zinfandel is so popular, they're trying to steal the brand." "All [the research] really means is that Primitivo is a clone of Zinfandel," said Ridge's president and winemaker, Paul Draper. "The Italian move is purely commercial. It's like what happened in the old days with Champagne and Burgundy and Chablis -- Americans tried to capitalize on names that the French had taken years to build. ZAP was created to promote Zinfandel, not Primitivo -- but when you get down to it, who really cares? If, with its climate and soil, Puglia thinks it can compete with the best Zinfandel in the world, more power to them." Leon Sobon of Sobon Estates is going the opposite way. In Amador County in the Sierra Nevada foothills, he's making "Primitivo" from a clone imported from Italy. Sobon reported that Primitivo is easier to grow than Zinfandel, resulting in "more of a claret wine with less berry character." If you want to find out for yourself, try the Sobon Estates Primitivo. In any case, ZAP is going on the offensive -- not with legal action against the Italians, but with "EuroZAP," its first international tour. As you read this, a series of dinners, tastings, workshops, and seminars featuring Zinfandel wines and winemakers is now taking place in England, Germany, and other European countries. The aim, explained ZAP Executive Director Rebecca Robinson, is "to educate the world that Zinfandel is grown in California and that it's America's Heritage Wine." To check out wine.com's entire Zinfandel selection, click here. _____________________________________________________________________ Watch wine.com TV Join us on the next "Wine for Everyone" show on Wednesday, March 7, from 10 p.m. to midnight EST. Hosts Joleen Benoit and (wine.com founder) Peter Granoff will present a mix of wines and other features "Celebrating Spring." The program will also feature a guest appearance by Andrea Immer, author of "Great Wine Made Simple." Tune in on the ValueVision Television Network on DirecTV channel 370, Dish Network channel 228, or call your local cable operator for the channel in your area. _____________________________________________________________________ TO UNSUBSCRIBE FROM THIS NEWSLETTER, go to: http://wine1.m0.net/m/u/vin/vv.asp?e=jdasovic%40enron.com

dasovich-j/all_documents/9556.

dasovich-j

['[email protected]', '[email protected]', '[email protected]', '[email protected]', '[email protected]']

Knowledge Forum

Dear Haas Students, Tomorrow the Haas School will hold the 5th Annual Knowledge Forum in Andersen Auditorium 9:00 am - 3:30 pm You are invited to drop in at any time during the day. Attached is the program listing speakers and their bios. David Teece Director, Institute of Management, Innovation & Organization

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California/National Power Issues

US Utilities Are Slow To Make Life Harder For Enron Dow Jones Interactive November 1, 2001 Generators say state manipulating power market - They accuse the IPO of sharing inside information with the water agency. The Orange County Register November 1, 2001 ISO officials go public with testimony The Sacramento Bee November 1, 2001 $1 million to fight S.F. public power / PG&E Corp. against city ballot measures Dow Jones Interactive November 1, 2001 US Utilities Are Slow To Make Life Harder For Enron SCOTTSDALE, Ariz. -(Dow Jones)- U.S. utilities are in no hurry to impose strict credit restrictions on future deals with troubled energy trading giant Enron Corp. (ENE), according to utility executives gathered for a national power conference here this week. Even as they nervously tracked Enron's stock plunge during coffee breaks Tuesday on their Internet-enabled wireless devices, and lunchtime chat Wednesday turned to the prospects for additional downgrades of the company's debt, executives mostly said they're merely evaluating their relationships with Enron at his point, while hoping for the best. After losing more than two-thirds of their value over the past two weeks and falling to their lowest level in a decade, Enron shares rose Wednesday for the first time since Oct. 16, gaining $2.74 to $13.90. "We're very interested in their recovery," said David Rozier, senior vice president at Mirant Corp.'s (MIR) Mirant Americas Inc., noting that the demise of such a large player could have a ripple effect on markets. "We're looking at that situation very carefully." Aquila Inc. (ILA), which does a significant amount of trading with Enron, likewise "would be reluctant to make changes" to that relationship, said Steve Magness, executive vice president in charge of strategic partnerships. "We would not change due to perception, only for financial reasons." "We are constantly monitoring and evaluating the creditworthiness of counterparties (in trading)," added Aquila Senior Vice President and General Manager Brad Nordholm. Should Enron lose its investment-grade rating status, that would affect Aquila's continued willingness to trade with Enron, he said. Moody's Investors Service Inc. on Monday downgraded its rating on Enron's senior unsecured debt to Baa2 from Baa1, placing its rating two levels above noninvestment grade, and kept the company under review for a possible further downgrade. Moody's said the downgrade was based on deterioration in the company's financial flexibility following an announced large quarterly loss and reduction of shareholder equity. Additional unease has been created by reports about a Securities and Exchange Commission inquiry into certain financial transactions involving Enron. European trading partners reportedly are taking a harder line with Enron than U.S. companies, which some here said could be due to foreign companies having less interest in the strength of markets here. "Still, we want to trade in stable markets. We don't want to see any major long-term problems," said Trevor Pethick, director of trading with Powergen PLC's (PWG) Energy Trading unit. His company, like its U.S. counterparts, is "reviewing our situation with Enron," he said. Coral Energy, a unit of Royal Dutch/Shell, continues to trade with Enron, although debt downgrades do lead Coral Energy to make changes to their business relationships with any trading partner, said Jeff Beicker, senior vice president of trading. "I'm not seeing people saying, 'Let's save Enron' or 'Let's pounce on Enron.' It's business as usual," said Beicker. "The market capitalization is where they're getting hammered." He and Aquila's Magness, answering questions from conference goers following a presentation on risk management, downplayed the possible impact of such a large trading company as Enron going out of business. Both said they would expect more alternative trading platforms to EnronOnline to emerge quickly and fill any trading voids. Beicker further predicted that should Enron go under, trading margins would grow and companies would have to pay more going forward "for warehousing their risk." The Worldwide Business Research Power 2001 conference continues Thursday at the Camelback Inn resort in Scottsdale, Ariz. Generators say state manipulating power market - They accuse the IPO of sharing inside information with the water agency. SACRAMENTO -- The state Department of Water Resources is demanding and getting privileged information from the state's electricity grid operator that, power generators say, is being used to illegally manipulate the energy market. The role reversal - in which power generators are now accusing the state of violating federal laws to manipulate the market - was at the center of two depositions taken Wednesday by a Senate committee investigating the California energy crisis. The Department of Water Resources in January started buying energy for the state because the private utilities weren't able to pay their bills and lawmakers feared rolling blackouts would ensue. On Wednesday, officers with the Independent System Operator - which schedules electricity onto the state's power grid - told the special Senate committee that the Department of Water Resources buyers have been threatening since spring to stop buying unless they are provided with exclusive information about the grid. "We have heard indications that if we failed to provide information, we may not have the backing,'' an ISO vice president, Jim Detmers, said. He said the information includes the amount of electricity the ISO is short in what is called the hour-ahead market. The sharing of this same type of information among private generators last year led to accusations of gouging from state officials. Water Resources spokesman Oscar Hildago said the information is only used to ensure the buys are a justifiable use of taxpayer money. "We have to stand behind those purchases, and the law, AB1X, did not give us the authority to write a blank check to (the ISO),'' he said, referring to the bill that put the state in the power business. State Sen. Joe Dunn, D-Santa Ana, who chairs the special committee, said the state is now being accused of using privileged information to schedule controversial, high-priced long-term energy contracts the state secured in the early days of the crisis. "The allegations from the generator community have been that DWR has wrested control of the wholesale market from ISO and they did so for purposes of dumping the long-term contracts into the market when there is lower-priced electricity available,'' said Dunn. In an Oct. 18 filing with the Federal Energy Regulatory Commission, power generators say that this is a violation of the regulations with which the operators must comply. "Acting on behalf of the State ... the highly politicized (ISO) is engaged in an organized, deliberate effort to subvert the market mechanisms established by the commission,'' the filing reads. Hildago countered: "Quite frankly ... the louder they scream that something is unfair (that) is a measure of the success we have." ISO officials go public with testimony Two members of the state's electric grid operator chose to give depositions to a Senate committee in public Wednesday despite a Senate resolution calling for them to be kept secret. The committee wanted the secrecy to prevent unfounded rumors from becoming public, according to its chairman, Sen. Joe Dunn, D-Santa Ana. But Dunn said recently that those subpoenaed to testify could choose to do so in public. On Wednesday, two officials from the California Independent System Operator took him up on the offer - Elena Schmid, vice president of communications and strategic development, and Jim Detmers, vice president of operations. "We're an organization that's all about openness," said ISO spokeswoman Stephanie McCorkle. "It's part of our culture to want to open things up." The testimony, she said, "served the purpose of going back in time and looking at the many factors that contributed to the crisis." Other energy officials will also ask the committee for public depositions, she said, including the president and chief executive officer, Terry Winter, who is scheduled to appear Tuesday. The Senate Select Committee to Investigate Price Manipulation of the Wholesale Energy Market issued 16 subpoenas to current and former board members and staff of the grid operator. But Winter's testimony will be of particular interest. The actions he took Dec. 8 to lift a price cap on wholesale energy cost is at the heart of the committee's investigation. Dunn says Winter failed to tell the ISO board or other state officials about his request to the Federal Energy Regulatory Commission to lift the $250-per-megawatt hour cap. It was replaced with a soft cap requiring generators to justify their costs above $250. A Senate resolution approved in July spelled out the ground rules for the depositions, saying no one could be present except members and staff of Dunn's committee, the person taking the deposition, an official report, the person being deposed and accompanying counsel. But some have questioned the secrecy, saying it could make the testimony prone to manipulation. In response to questions from the committee's special counsel, Laurence Drivon, Detmers testified Wednesday about the unraveling of the electricity market in the days leading up to Dec. 8, with dispatchers scrambling every hour to find enough power to keep the lights on. $1 million to fight S.F. public power / PG&E Corp. against city ballot measures The corporate parent of PG&E, the bankrupt California utility fighting for financial recovery, has pumped more than $1 million into a campaign to defeat a pair of public power measures on Tuesday's ballot in San Francisco. Company representatives say they want to protect their assets in the city, where there are 365,000 Pacific Gas and Electric Co. customers. Independent experts say more is at stake. "I'm sure they don't want to see a snowball effect where other cities try to turn them out," said Severin Borenstein, director of the University of California 's Energy Institute. Borenstein noted that Los Angeles, the state's largest city, had long been in the public power business. So has Sacramento and a number of smaller cities, such as Alameda and Palo Alto. PG&E serves 4.7 million customers in the state. "If you're looking at a major movement, San Francisco is the biggest location where this is being discussed now," Borenstein said yesterday. San Diego and San Jose also have been looking at putting their electrical system under public control, but have yet to take action. In San Francisco, two measures on the ballot would pave the way for a publicly owned electricity system. Measure I would set up an independent municipal utility district for San Francisco and neighboring Brisbane, governed by state law. Proposition F would create a Water and Power Agency in San Francisco only and retain ties to City Hall. In both cases, elected directors would decide whether to seize PG&E's transmission and distribution lines. PG&E has said it isn't interested in selling, and for decades has fought at City Hall and in court to derail such efforts in San Francisco. But last winter's energy crisis shifted public attitudes and a more liberal Board of Supervisors pushed the public power proposals forward. Still, PG&E vigorously opposes the effort. Campaign finance reports show PG&E spent $1,023,289 through Oct. 20 to defeat the measures. How much more money the company has poured into the campaign since then will not be made public until after the election. Other business interests gave nearly $400,000 more through Oct. 20 to fight the ballot measures. The contributors include Pacific Telesis Group ($100,000) and AT&T ($150,000). The companies fear the creation of a MUD would lead the new agency's directors to try to take over the phone and communications operations, too. The Committee on Jobs, a big business group funded in part by PG&E, gave $110,500. The money has paid for campaign consultants, mailers, slate cards, polls, phone banks and TV ads. PG&E spokeswoman Jennifer Ramp said the spending was warranted. "It's perfectly natural that any company -- bankrupt or not -- facing a hostile takeover would fight the measures and get the word out to people that this is not going to solve the energy crisis," Ramp said. She added the money used in the campaign did not come from the utility but from its corporate parent company. Ross Mirkarimi, who runs the public power campaigns, was more blunt in his assessment of PG&E's campaign contributions. "They are going to do everything they can to preserve their monopoly and greed," he said. The campaigns in favor of Proposition F and Measure I raised a little more than $90,000 through Oct. 20. Bay Guardian newspaper publisher Bruce Brugmann and his wife, Jean, gave $10,500. The weekly paper, which has long crusaded for public power, provided an additional $38,000 in free advertising. The Vanguard Public Foundation donated another $10,000.

dasovich-j/deleted_items/1995.

dasovich-j

['[email protected]', '[email protected]', '[email protected]', '[email protected]']

Energy Issues

Please see the following articles: Sac Bee, Thurs, 7/19: Energy buyers ordered to divest=20 Sac Bee, Thurs, 7/19: Another contempt action=20 Sac Bee, Thurs, 7/19: PUC paves way for power rate increases SD Union, Thurs, 7/19: California selling surplus power at fraction of cost= =20 it paid=20 SD Union, Thurs, 7/19: PUC reveals plan to transfer much of watchdog role= =20 SD Union, Thurs, 7/19: Variety of plans to help Edison find friends, foes= =20 SD Union, Thurs, 7/19: Baja is hoping energy squeeze can spark boom=20 SD Union, Wed, 7/18: State deal lets SDG&E turn large profit=20 SD Union, Wed, 7/18: Davis: Legislature will save Edison from bankruptcy=20 LA Times, Thurs, 7/19: PUC May Cede Control Over Electricity Rates LA Times, Thurs, 7/19: Power Firm Is Held in Contempt by State Panel SF Chron, Thurs, 7/19: Electricity cost tops Californians' concerns=20 SURVEY: Governor now getting some credit for improving the situation=20 SF Chron, Thurs, 7/19: PG&E rebates snub longtime watt watchers=20 WHO WINS?: Reward is easier for those unaccustomed to power scrimping=20 SF Chron, Thurs, 7/19: Assembly panel OKs two bills to help Southern=20 California Edison=20 SF Chron, Thurs, 7/19: Cool weather brings California energy glut, causing= =20 state to sell surplus power at a loss=20 SF Chron, Thurs, 7/19: Investigative arm of Congress issues demand letter f= or=20 energy meetings=20 Mercury News, Thurs, 7/19: Poll: Legislators, Davis blamed more than seller= s=20 Mercury News, Thurs, 7/19: Consumers to bear costs of state's power purchas= es=20 OC Register, Thurs, 7/19: Conservation is cutting edge of power crisis =20 (Commentary) =20 NY Times, Thurs, 7/19: California's New Problem: Sudden Surplus of Energy= =20 ---------------------------------------------------------------------------= --- ------------------------------------------------------ Energy buyers ordered to divest=20 By Amy Chance Bee Political Editor (Published July 19, 2001)=20 The Davis administration on Wednesday told consultants buying electricity f= or=20 the state to sell their stock holdings in energy companies immediately or= =20 leave their jobs.=20 Nine consultants divested by a noon deadline, but critics said Gov. Gray=20 Davis acted months too late to protect the public's interest.=20 The order, issued at Davis' direction, was contained in a memo to Tom=20 Hannigan, director of the state Department of Water Resources. Legal Affair= s=20 Secretary Barry Goode wrote that it was "imperative that you give this=20 instruction immediately" to those concerned.=20 "We expect, and have always expected, the state's consultants to uphold the= =20 highest ethical standards," the memo states. "That standard is not met by= =20 those who hold a financial interest in one or more energy companies while= =20 trading on behalf of the state on energy related matters."=20 Under pressure from Secretary of State Bill Jones, a Republican who hopes t= o=20 challenge Democrat Davis for re-election next year, the administration move= d=20 last week to obtain statements of economic interest from the energy=20 consultants. The consultants were brought on earlier this year to help the= =20 Department of Water Resources buy electricity on behalf of California's=20 financially strapped utilities.=20 The economic statements revealed that several consultants held stock in=20 energy generators, including Calpine Corp. and Enron. One consultant report= ed=20 that he sold stock holdings in Edison International and Dynegy when he bega= n=20 work for the state.=20 Administration officials initially said they would review the reports for a= ny=20 conflicts, considering whether the consultants traded with companies in whi= ch=20 they held stock.=20 But Goode's memo, dated Wednesday, said each of the consultants should dive= st=20 by noon that day or "the state will sever its contract with that person." T= he=20 notice was given to the 34 people who had disclosed their interests as=20 required, nine of whom reported a current financial interest in an energy= =20 company, according to the administration. A governor's spokesman said all o= f=20 them divested by the deadline.=20 State Attorney General Bill Lockyer, whom Jones had asked to investigate,= =20 told Jones in a letter Tuesday that most of Jones' allegations, including= =20 whether the statements of economic interest were filed on time, should be= =20 dealt with first by the state Fair Political Practices Commission.=20 He noted that one section of applicable state law sets a high threshold for= =20 conflict of interest: It provides that someone holding less than 3 percent = of=20 the shares of a corporation does not have a conflict unless his or her tota= l=20 yearly income from dividends or other payments exceeds 5 percent of his or= =20 her annual income.=20 But he said he would review the statements to see whether a=20 conflict-of-interest investigation is warranted "in light of the legitimate= =20 and important public interest in the employment of public servants who are= =20 free of conflicting interests. ... "=20 Lockyer spokesman Nathan Barankin pointed out that Jones had called into=20 question the validity of state electricity contracts negotiated by the=20 buyers.=20 "What we're saying is that there's a public interest in getting to the bott= om=20 of it as quickly as possible, so there's some certainty," he said.=20 Jones said simply selling the stock doesn't solve the problem.=20 "Just divesting themselves of the stock, or even letting them go, doesn't= =20 change the conflict that's been inherent for the last five months," Jones= =20 said. "If someone who has a proven conflict of interest has negotiated=20 contracts on behalf of the state, there is no contract."=20 Jones also noted that the Davis administration says an additional 20 or mor= e=20 people it has brought on board to cope with the energy crisis have not been= =20 required to file disclosure statements. He said Lockyer should investigate= =20 whether the administration has abided by disclosure law in those cases.=20 "(Davis') record is not very good when you look at the fact that I had to= =20 make the case to even get these statements of conflict of interest filed,"= =20 Jones said. "It's up to the attorney general to be the judge, but the publi= c=20 has to have the information."=20 The Bee's Amy Chance can be reached at (916) 326-5535 or [email protected]= =20 <mailto:[email protected]>.=20 Another contempt action=20 By Kevin Yamamura Bee Capitol Bureau (Published July 19, 2001)=20 A state Senate committee held another energy generator in contempt Wednesda= y=20 and may recommend today that Enron Corp. either pay fines or be removed fro= m=20 California's marketplace if it continues to withhold documents.=20 Meanwhile, lawmakers in both houses spent Wednesday night debating three=20 plans to prevent Southern California Edison from going into bankruptcy,=20 though no one idea had broad support.=20 The committee's action against Reliant Energy marked the third contempt=20 finding in as many weeks by the special Senate committee investigating ener= gy=20 market manipulation. After reaching a legal disagreement over whether trade= =20 secrets would be protected, lawmakers voted 6-0 to push Reliant, a=20 Houston-based generator, into contempt proceedings.=20 The panel found five other generators in compliance with subpoenas after th= ey=20 signed confidentiality agreements earlier this week and promised to ship=20 thousands of files to depositories.=20 Three weeks ago, the committee found Enron and another generator, Mirant, i= n=20 contempt. Mirant has since cooperated and escaped the committee's finding,= =20 but Enron filed a lawsuit in Sacramento Superior Court seeking judicial=20 intervention.=20 Despite ongoing discussions between the committee and Enron representatives= ,=20 they have reached no deal to end the lawsuit or the contempt finding.=20 Lawmakers therefore intend to issue a report today leading to a later Senat= e=20 vote on contempt and subsequent penalties.=20 The committee was considering two possibilities late Wednesday, said its=20 chairman, Sen. Joe Dunn, D-Santa Ana. The first would impose fines that=20 compound each successive day Enron remains in contempt. The second would=20 exclude the Houston-based marketer from selling energy in California until = it=20 hands over documents.=20 "We're reviewing the (legal) basis for such a recommendation," Dunn said.= =20 Enron spokesman Mark Palmer said he had no response to the potential=20 penalties but stressed that his company is still discussing the contempt=20 matter with lawmakers.=20 In Reliant's case, lawmakers and the company disagreed Wednesday over wheth= er=20 the committee's own confidentiality agreement affords enough protection of= =20 trade secrets.=20 Reliant attorney Charles Stevens said his company would rather have a court= =20 order to ensure that its proprietary information would be safe. But committ= ee=20 members objected to involving the state's judicial branch, charging that it= =20 would disrupt the separation of powers.=20 Several times during the hearing, Dunn conceded that Reliant, like Enron, m= ay=20 ultimately resort to a lawsuit to resolve its disagreement with the=20 committee.=20 "We have not made that decision at this time," said Stevens, the Reliant=20 attorney. "We've always preferred to resolve the dispute with the committee= =20 informally, and we continue to look for ways to do that."=20 Should Reliant work out an agreement with lawmakers by cooperating with the= =20 document requests, the contempt vote would be purged, Dunn said.=20 The Legislature last held someone in contempt in 1929, when concrete compan= y=20 officials did not comply with subpoenas in a price-fixing case.=20 In a vote late Wednesday, meanwhile, the Senate's energy committee voted do= wn=20 one Edison proposal. It will be reconsidered this morning.=20 Two competing Assembly proposals to keep Edison from bankruptcy were narrow= ly=20 approved by the Energy Costs and Availability Committee. One of the=20 proposals, by Assembly Speaker Robert Hertzberg and Assemblymen Fred Keeley= =20 and John Dutra, is scheduled for a floor vote today.=20 The Bee's Kevin Yamamura can be reached at (916) 326-5542 or=20 [email protected] <mailto:[email protected]>.=20 PUC paves way for power rate increases=20 By Dale Kasler Bee Staff Writer (Published July 19, 2001)=20 Sparking accusations that it's abandoning its watchdog role, the Public=20 Utilities Commission took the first step Wednesday toward promising to rais= e=20 rates as much as necessary to pay the state's electricity bills.=20 PUC President Loretta Lynch released a proposed version of the promise -- a= =20 legally binding document known as a rate agreement. Although the agreement= =20 doesn't say there will be more rate hikes, it does commit the PUC to raisin= g=20 rates when requested by the state Department of Water Resources.=20 The agreement is essential to the state's plan to sell $13.4 billion in bon= ds=20 in September to cover the water department's power purchases. The departmen= t=20 has been buying electricity for California's three troubled investor-owned= =20 utilities.=20 The bonds are to be repaid with money from customers of the three utilities= .=20 Investors would shy away from buying the bonds unless the PUC adopted the= =20 rate agreement, said Zane Mann, editor of the California Municipal Bond=20 Advisor newsletter.=20 "Everyone's been kind of waiting for it," he said of the agreement.=20 State Treasurer Phil Angelides, who is in charge of marketing the bonds, sa= id=20 in a prepared statement Wednesday that the rate agreement "must be adopted = so=20 that the (state's) general fund can be repaid, and to protect the state's= =20 fiscal solvency." Angelides has been promising potential bond buyers that t= he=20 rate agreement would be adopted.=20 The full PUC is scheduled to vote on the agreement Aug. 23.=20 It's unclear whether the agreement will lead to a rate increase any time=20 soon. The water department, which will release updated revenue requirements= =20 this week, says it doesn't think the new numbers will generate another rate= =20 hike beyond the 30 percent increase the PUC approved in March for Southern= =20 California Edison and Pacific Gas and Electric Co.=20 Still, consumer advocates said the rate agreement would represent a surrend= er=20 of the PUC's traditional job of protecting ratepayers.=20 The agreement would permit "an unaccountable state agency, riddled with=20 conflicts of interest, to unilaterally order rate hikes," said Harvey=20 Rosenfield, president of the Foundation for Taxpayer and Consumer Rights in= =20 Santa Monica.=20 The water department has been accused of conflicts of interest because some= =20 of its consultants and energy traders own stock in energy companies.=20 Rosenfield said the PUC should reject the rate agreement and "preserve thei= r=20 historic role and responsibility to protect ratepayers."=20 Geoff Dryvynsyde, Lynch's legal adviser, said the "consumer groups are=20 raising some good policy issues," but the commission's hands are effectivel= y=20 tied by legislation that put the state in the power-buying business and set= =20 in motion the bond sale.=20 "The bonds are really driving this," he said. "The bonds need to be sold."= =20 Nevertheless, Eric Woychik, a consumer advocate with the Oakland-based grou= p=20 Strategy Integration, said ratepayers shouldn't be held responsible for=20 high-priced power bought by the water department.=20 "They shouldn't pay for poorly negotiated contracts and market power abuses= ,"=20 Woychik said. State officials contend they were gouged by wholesale=20 generators, while consumer groups have criticized the water department for= =20 entering into long-term purchase contracts at prices that exceed current=20 spot-market prices. Woychik noted that the state is pursuing billions in=20 refunds from the power generators.=20 The state has committed more than $8 billion from the treasury for power=20 purchases, causing Wall Street to downgrade the state's credit rating. The= =20 bond offering -- the largest government bond sale in U.S. history -- is=20 designed to replenish the treasury and finance future purchases.=20 Despite some uncertainty about the state's finances and the effects of the= =20 energy crisis, the bonds should sell well, Mann said.=20 "Mutual funds have been accumulating money to buy the bonds," the newslette= r=20 editor said.=20 The Bee's Dale Kasler can be reached at (916) 321-1066 or [email protected]= m=20 <mailto:[email protected]>.=20 California selling surplus power at fraction of cost it paid =20 \ objattph=20 By Karen Gaudette ASSOCIATED PRESS July 19, 2001 SAN FRANCISCO =01) Calif= ornia=20 has begun selling power for a fraction of its purchase price as cool weathe= r=20 creates an abundance of electricity, spending that has been criticized by= =20 some watching the state's power crisis closely. Power the state bought at = an=20 average of $138 per megawatt is being sold for as little as $1, energy=20 traders say, though the price is disputed by state officials. The state=20 acknowleges the power sales, but says the surplus represented only a blip i= n=20 an otherwise typical scorching summer and that blackouts still could roll i= f=20 temperatures increase again.=20 However, the surplus power selloff could encourage criticism that the state= =20 bought too much power at too high a price in its haste to fend off rolling= =20 blackouts and power prices 10 times higher than the year before. "If the= =20 price is $138 on average for a month and you have to turn around and sell a= =20 chunk of it for a dollar, you're not going to look real good to a number of= =20 people," said Gary Ackerman, executive director of the Western Power Tradin= g=20 Forum in San Jose. "I just don't think many people in California truly=20 understood what their state did when they stepped into this business." =20 Unlike natural gas, extra electricity cannot be stored away for a later day= .=20 Since Californians haven't been running their air conditioners as often as= =20 expected over the past week, the state hasn't needed the entire 38,000=20 megawatts it had figured it would need. The state Department of Water=20 Resources, in charge of buying power for three financially ailing utilities= ,=20 has spent the past few months arming the state with long-term energy=20 contracts while weaning itself away from buying the highest-priced power on= =20 the last-minute electricity market. Those contracts, along with last month= 's=20 20 percent boost in energy conservation and the temperate weather, mean=20 there's suddenly more power than Californians can use. Energy traders say= =20 the state has tried to sell as much as 6,000 megawatts at one time, Ackerma= n=20 said. That's around 16 percent of the 38,000 megawatts the state estimated= =20 it would use around this time of year, Ackerman said. A megawatt is enough= =20 electricity to power roughly 750 homes. "We know from traders who have=20 bought that it's gone as low as a dollar and last week we know it was as lo= w=20 as $5," Ackerman said. "When a seller shows up with an enormous amount of= =20 power for sale and the market knows it, it has a depressing effect on=20 prices." California Energy Markets, a trade weekly, said the state sold=20 power last Thursday at $25 per megawatt =01) a price that Steve Maviglio, a= =20 spokesman for Gov. Gray Davis, said was "much closer to reality." The stat= e=20 "never sold anything more than 1,000 megawatts on any single day," Maviglio= =20 said. "(Ackerman) has no evidence" of California selling power for $1,=20 Maviglio said. "California Energy Markets is much closer to reality." Osca= r=20 Hidalgo, a DWR spokesman, acknowledged the state has been trying to sell as= =20 much as 20 percent of its daily megawatts, though he would not say at what= =20 price. That could put the state at a disadvantage in the market if=20 competitors knew how much it was paying, Hidalgo said. "This is unusual, b= ut=20 it was anticipated, it is typical in the power buying operation," Hidalgo= =20 said. "It's better than doing nothing with surplus power," Hidalgo said.= =20 "Scheduling energy is a balancing act because you can't store the item." = =20 Hidalgo said the state is sending some of the extra electricity up to the= =20 Bonneville Power Administration to repay it for power it had loaned=20 California earlier this year. "This is not a bad position for us to be in= =20 every once in a while," Hidalgo said. "If someone were to make these=20 long-term contracts go away, we would fall off a cliff and be back where we= =20 were in January."=20 PUC reveals plan to transfer much of watchdog role =20 \ objattph=20 By Craig D. Rose UNION-TRIBUNE STAFF WRITER July 19, 2001 The California= =20 Public Utilities Commission laid out a framework yesterday for transferring= =20 much of its watchdog role in ensuring fair electricity rates to the state= =20 Department of Water Resources. The controversial proposal is in response t= o=20 legislation earlier this year that puts the water department in charge of= =20 state power purchases. Utilities commission action is needed to ensure that= =20 the water department has enough revenue to make the purchases and to clarif= y=20 areas of responsibility, including oversight of power rates. Under the dra= ft=20 agreement made public yesterday, the commission would guarantee that=20 consumers pay enough to cover interest payments on a planned $13.4 billion= =20 bond sale later this year. The guarantee is considered an essential element= =20 for completing the bond sale. The bonds' proceeds are needed to repay some= =20 $8 billion the water department already has spent to purchase electricity a= nd=20 to cover future payments. California began buying electricity through the= =20 water department earlier this year after the state's utilities were unable = to=20 make purchases because of credit problems brought on by the state's failed= =20 deregulation plan. No mention was made in the draft agreement of the=20 possibility of further rate increases to cover electricity purchases. Some= =20 observers have speculated that the current rate structure, even after two= =20 rounds of rate increases, may not cover all costs. On the other hand, the= =20 draft agreement states that the water department itself will determine if t= he=20 prices it pays for electricity meet the legal test of being just and=20 reasonable, a determination heretofore made by the utilities commission. = =20 Under the utilities commission's procedure, the public is invited to commen= t=20 on the draft. An administrative law judge for the commission will consider= =20 the draft before issuing a proposed decision. A full commission vote is=20 expected Aug. 23, a deadline that would have to be met if the bond offering= =20 is to proceed as planned later this year. Harvey Rosenfield, president of= =20 the Foundation for Taxpayer and Consumer Rights, said the utilities=20 commission's draft agreement would allow a "secretive agency of dubious=20 competence controlled by the governor and completely unaccountable to the= =20 public" to unilaterally order rate increases. "It was deregulation which g= ot=20 us into the mess we are in today," Rosenfield said. "Now Wall Street is=20 demanding that the (utilities commission) be forced to surrender its=20 authority and legal responsibility." He urged the commission to reject the= =20 draft proposal. Carl Wood, one of five members of the Public Utilities=20 Commission, said the draft agreement was driven largely by legislation=20 empowering the water department as an electricity purchaser. With a state= =20 department buying power, Wood said, oversight shifts to the governor and th= e=20 Legislature. Commissioner Richard Bilas said he saw the agreement as=20 empowering the water department as "prosecutor, judge and jury" in matters = of=20 electricity purchasing. "The argument is that it's better off this way tha= n=20 the way we were," Bilas said. "And that's true in the short run. But what= =20 about in the long term?"=20 Variety of plans to help Edison find friends, foes =20 \ objattph=20 Agreement in Legislature doesn't seem likely soon By Ed Mendel UNION-TRIBU= NE=20 STAFF WRITER July 19, 2001 SACRAMENTO -- Plans to aid Southern California= =20 Edison met mixed fates in legislative committees yesterday amid opposition= =20 from business, consumers and Edison itself, which said one of the plans wou= ld=20 not restore its ability to borrow money. The Senate energy committee=20 rejected a plan that is tough on Edison, but the committee plans to conside= r=20 it again today. In the Assembly, a committee approved two plans. One has t= he=20 support of Democratic leaders, is viewed more favorably by Gov. Gray Davis= =20 and has not drawn opposition from Edison. The other, crafted by the committ= ee=20 chairman, Rod Wright, D-Los Angeles, and Republicans, is supported by=20 businesses and Edison. Senate President Pro Tempore John Burton, D-San=20 Francisco, told an Edison official during a committee hearing that financia= l=20 experts have told him repeatedly that bankruptcy is the logical course for= =20 Edison. "They keep saying they don't understand why a business in your=20 situation does not avail themselves of that," Burton said. The Senate lead= er=20 told the Edison official not to expect the usual legislative compromises th= at=20 would give the utility most of what it is seeking in a rescue plan. "I wan= t=20 to disabuse you of the fact that somehow you are going to get some great bi= g=20 deal at the end of the rainbow," Burton said. "Because you are not going=20 to." The Senate and Assembly Democratic leadership plans require businesse= s=20 to pay off most or all of Edison's debt, while also preventing businesses= =20 from shopping around for cheaper power. Business groups oppose the plans=20 because of those provisions. Davis is pushing for a legislative plan that= =20 would keep Edison from joining Pacific Gas and Electric in bankruptcy. He= =20 wants an Edison rescue plan that could become a model for getting PG&E out = of=20 bankruptcy. Once their financial health is restored, the utilities could= =20 resume buying power for their customers, allowing the state to get out of t= he=20 power-buying business it entered in January, when the utilities were crippl= ed=20 by a failed deregulation plan and no longer able to borrow money. But the= =20 lengthy and sometimes emotional debates in legislative committees yesterday= =20 made it clear that reaching an agreement on an Edison rescue plan in the ne= xt=20 few days will not be easy. A plan that Davis negotiated with Edison in ear= ly=20 April found little support in the Legislature and is not being considered.= =20 Opponents said the plan was too generous to Edison. But the alternative=20 rescue plans prepared in the Legislature also are called too generous to=20 Edison by a consumer group, the Foundation for Consumer and Taxpayer Rights= ,=20 which is threatening to put an initiative on the ballot to repeal any Ediso= n=20 "bailout." Edison, on the other hand, fears that it will be saddled with t= oo=20 much debt and placed under a regulatory system that does not assure lenders= =20 that the utility will be able to pay costs for operating and buying equipme= nt=20 and power. "We don't believe this bill in its present form would restore u= s=20 to creditworthiness," Bob Foster, an Edison vice president, told a committe= e=20 hearing the Senate plan. The plan by Wright and Republicans was supported = by=20 business groups and Edison but opposed by consumers. All ratepayers would p= ay=20 off the Edison debt and businesses would be allowed to shop for cheaper pow= er=20 as state long-term contracts expire. "What will come out of the mix is har= d=20 to tell," said Steve Maviglio, Davis' press secretary. "Everyone is working= =20 feverishly to get something passed in the next few days."=20 Baja is hoping energy squeeze can spark boom =20 \ objattph=20 New electricity, gas plants seen spurring a fresh wave of growth By Diane= =20 Lindquist UNION-TRIBUNE STAFF WRITER July 19, 2001 Energy shortages in= =20 California and Mexico are firing hopes for a new wave of industrial=20 development in Baja California, where a maquiladora slowdown has cut=20 thousands of jobs. The power squeeze has triggered a rush to build=20 electricity and natural gas projects in Baja California. Once those plants= =20 are up and running, energy experts and Tijuana boosters say, the state will= =20 be able to make an unusual pitch to global manufacturers: Come to Baja=20 California, where power is plentiful, reliable and relatively cheap. "It's= a=20 new frontier for Baja California," said Institute of the Americas president= =20 Paul Boeker, a frontier that "opens up investment opportunities that aren't= =20 possible at the moment." To seize the possibilities, Tijuana's Economic=20 Development Corp. is pushing the Baja California government to fund a study= =20 to identify the United States' biggest electricity and natural gas users. = =20 "When we saw the price of energy going up so high in California, we thought= =20 we might be able to use this as a marketing tool," said David Mayagoitia, a= =20 director of the development group. The hope is that an influx of big-energ= y=20 users, such as high-tech firms that operate clean rooms, will offset seriou= s=20 problems in the region's sputtering maquiladora industry. Since October,= =20 Baja California has lost 11,700 maquiladora jobs, 4 percent of the sector's= =20 total. In Tijuana alone, 7,600 positions have disappeared. "I've never see= n=20 so many large and small and medium companies narrow their operations in suc= h=20 a short amount of time," said Deloitte & Touche accountant Mauricio Munroy.= =20 Maquiladora insiders like Munroy blame the U.S. economic downturn, rising= =20 costs, a strong peso and a new Mexican regulatory regime for reining in the= =20 operations. Mayagoitia calls it a crisis. "Our labor costs are going up.= =20 We're not as competitive as other places in the world. We have to look for= =20 other angles." Over the past three decades, the arrival of foreign-owned= =20 maquiladoras has pushed Baja California's population to 2.5 million and=20 transformed the state into one of the world's manufacturing hot spots. The= =20 region now ranks as a top producer of televisions and other consumer=20 electronic products, and many other goods. There are 1,287 factories in th= e=20 state, employing 278,900 workers. New operators continue to come. Since=20 October, when employment began dropping, 33 companies have established=20 factories in the state. Other companies, including Korean electronics giant= =20 Samsung, the state's largest operator, are expanding. But in the past nine= =20 months, the sector's growth has dropped below its routine double-digit rate= . =20 Some companies, such as Sanyo and Day Runner, have shut factories. Others a= re=20 threatening to. And so many have trimmed operations that Munroy said, "I=20 don't think we can feel comfortable the industry's going to recover." But= =20 now, California's energy crisis and cross-border power demands could alter= =20 that picture. A natural gas pipeline and three power plants in the works wi= ll=20 boost the state's electricity output by 2,200 megawatts. As much as 1,500= =20 megawatts could flow to California consumers. Additional plants are=20 anticipated. Mexican Energy Secretary Ernesto Martens has said there's no= =20 limit to the number that could be built in Baja California. And California= =20 and Mexican officials are considering recruiting energy companies to start= =20 projects in Baja California. Meanwhile, numerous companies -- El Paso and= =20 Phillips, Sempra, Chevron and Chiyoda among them -- have expressed interest= =20 in building liquid natural gas facilities near Rosarito and Ensenada. The= =20 operations would convert into vapor form liquified natural gas imported fro= m=20 other regions for use in Mexico and the United States. Such projects could= =20 give Baja California billions of dollars in investment, thousands of=20 construction and operating jobs, and a reputation as an energy-abundant pla= ce=20 to do business. "Large energy consumers could come down here, set up=20 operations and get a big break on their utilities," Mayagoitia said. =20 Previously, such operators have shunned Baja California. "They've always= =20 said electricity down here is not constant. There are too many fluctuations= =20 on the line," Mayagoitia said. While a bigger supply would overcome that= =20 obstacle, other challenges must be met before the region can use energy as = a=20 marketing tool. At a San Diego Dialogue forum on energy last week, Boeker= =20 listed the key elements needed to attract the next wave of industrial=20 development to Baja California. As he sees it, they need at least one liqui= d=20 natural gas import facility, to allow power generators to export to=20 California and sell directly to companies in Baja California, and to upgrad= e=20 the cross-border gas and electricity transmission infrastructure. Mexico= =20 also needs to make sure its business laws and regulations, which in the pas= t=20 have restricted the energy sector, allow corporations to get the supplies a= nd=20 prices they need to be competitive, Mayagoitia said. "We think if the=20 numbers make sense, and they have confidence that Mexico can deliver what= =20 they need, then we'll have the market niche."=20 State deal lets SDG&E turn large profit =20 \ objattph=20 By Craig D. Rose UNION-TRIBUNE STAFF WRITER July 18, 2001 When Gov. Gray= =20 Davis and SDG&E officials hailed an agreement last month to clear a $750=20 million debt owed to the utility, they neglected to publicize a key element= :=20 The deal allows San Diego Gas & Electric to earn $120 million from the sale= =20 of electricity to California. At the time the deal was announced, SDG&E sa= id=20 it was making a major concession by agreeing to refund $219 million in=20 profits from several disputed power contracts. The utility also said futur= e=20 power sales to the state from those contracts would be at a discount. SDG&E= =20 has repeatedly asserted that it earns no profit from the acquisition and sa= le=20 of electricity, only from its delivery to customers.=20 But in subsequent filings to the U.S. Securities and Exchange Commission,= =20 SDG&E said it will earn $120 million from the contracts. News of the=20 earnings brought a sharp response from Michael Shames, executive director o= f=20 the Utility Consumers' Action Network, a San Diego-based group. "What real= ly=20 irks me is that the public was told SDG&E would make a $219 million=20 concession," Shames said. "It turns out that concession was less than $100= =20 million, or less than half of what was advertised. "What we have found is= =20 that the deeper you dig into this deal, the worse it looks. It's beginning = to=20 be pattern." Casey Gwinn, the San Diego city attorney, also criticized the= =20 belated revelation that SDG&E stands to earn substantial sums under the=20 contracts. Gwinn had said that SDG&E's customers should receive the benefit= s=20 from the deals. "All of this should have been disclosed," said Gwinn, who= =20 added that it was impossible to determine the full profit SDG&E had made fr= om=20 certain power purchase agreements. Ed Van Herik, a spokesman for SDG&E,=20 reiterated the position yesterday that profit from the contracts belongs to= =20 the company's shareholders. Van Herik declined to comment about terms of th= e=20 power sales to the state. The contracts, which were signed several years= =20 ago, allow SDG&E to buy relatively low-priced power. The utility has made= =20 money by reselling that power at a higher price. The deal to clear the $75= 0=20 million debt was announced in June along with Gov. Gray Davis' plan to=20 purchase SDG&E's transmission lines for about $1 billion. The Office of=20 Ratepayer Advocates, a watchdog agency within the California Public Utiliti= es=20 Commission, said yesterday the purchase price for the transmission lines wa= s=20 "clearly excessive" and said the money might be better spent acquiring or= =20 building new power plants. Steve Linsay, a program and project supervisor = in=20 the Office of Ratepayer Advocates, said revelation of the $120 million in= =20 profits SDG&E expects to earn from the sale of power heightened "pre-existi= ng=20 concerns" about the deal to settle the $750 million account. While the=20 transmission line deal will be considered by the Legislature, the Public=20 Utilities Commission will rule on the separate debt agreement. A spokesman= =20 for the commission said yesterday the vote on the settlement is scheduled f= or=20 Aug. 2, but the issue is on hold until the commission receives more=20 information from SDG&E. The local utility says the $750 million debt=20 represents the difference between what it has paid for power and what it ha= s=20 been allowed to collect from ratepayers since last fall, when the state=20 imposed a cap on customer payments. Some feared the so-called=20 undercollection would become a balloon payment, payable by local customers= =20 when the rate cap ended next year. At a news conference last month, the=20 governor and officials of Sempra Energy -- parent company of SDG&E --=20 described an agreement to eliminate the $750 million debt. Consumer=20 advocates raised questions about whether the proposed resolution would be a= s=20 costly to consumers as the debt itself. Under the state deregulation plan,= =20 SDG&E's profit-making business is restricted to the distribution of power.= =20 The Public Utilities Commission initially ruled that the profits from the= =20 disputed contracts should be returned to customers but SDG&E had sought to= =20 overturn the ruling in court. In another key element of the deal to resolv= e=20 the debt, SDG&E agreed to pay $100 million to end an investigation into its= =20 power purchasing practices. A spokesman for the governor defended the=20 agreement despite the revelation of future SDG&E profits. "We forced them = to=20 return about 70 percent of the profits (from the contracts)," said Steve=20 Maviglio. "And if you look at the whole picture, it is a good deal." While= =20 SDG&E had said it earned no money from the sale of power, other units of=20 Sempra Energy have acknowledged selling power to the state for profit. The= =20 California Department of Water Resources said it paid Sempra some of the=20 highest prices it paid for power through the first five months of this year= ,=20 when Sempra sold $429 million worth of electricity to the state.=20 Davis: Legislature will save Edison from bankruptcy =20 \ objattph=20 Time running out for bailout bills By Ed Mendel UNION-TRIBUNE STAFF WRITER= =20 July 18, 2001 SACRAMENTO -- Gov. Gray Davis, hoping for one of his biggest= =20 legislative victories, predicted yesterday that the Legislature will send h= im=20 a plan to keep Southern California Edison out of bankruptcy. But the=20 governor's own plan, introduced more than three months ago, is not among tw= o=20 Edison rescue proposals being considered in the Assembly and a different on= e=20 is under review in the Senate. All may come up for votes in committees=20 today. The Legislature is scheduled to leave Friday for its annual monthlo= ng=20 summer recess. Davis suggested that he may try to keep the lawmakers at the= =20 Capitol by calling a special session if the Edison issue is not resolved.= =20 "We have been working with members of both houses," Davis said. "I am=20 determined to get a bill passed this week, if at all possible, to allow=20 Edison to go back into business." The state began buying power for utility= =20 customers in January after Edison and Pacific Gas and Electric were cripple= d=20 by a failed deregulation plan. Davis wants the Legislature to pass an Ediso= n=20 plan that could also be a model for PG&E, which filed for bankruptcy in ear= ly=20 April. "It's very important to get Edison and then PG&E creditworthy and= =20 back in the business of buying power," Davis said, "so the administration c= an=20 focus on the more important things it was elected to do." But the two plan= s=20 supported by Democratic leaders in both houses raise questions about whethe= r=20 they would keep Edison out of bankruptcy. The plans also are opposed by=20 businesses, which would pay higher rates. A third plan proposed by the=20 Democratic chairman of the Assembly utilities committee, Rod Wright, and by= a=20 Republican, Keith Richman of Northridge, is likely to draw support from=20 Edison and business groups but opposition from many legislators who say it = is=20 too generous to Edison. Working out a compromise by Friday will be=20 difficult. If negotiations continue during the recess, Davis would have the= =20 option of asking legislators to return for a day to vote on any proposal th= at=20 might emerge. The middle of August is regarded as a deadline. A memorandum= =20 of understanding that Davis negotiated with Edison can be waived by either= =20 side after Aug. 15. And the state Public Utilities Commission is scheduled= =20 to take rate action a few days later in support of a $13.4 billion=20 power-purchasing bond that could limit options for an Edison rescue. In th= e=20 Senate, the governor's plan, which was criticized for being too generous to= =20 Edison, was stripped from a bill and replaced with a tough plan that would= =20 allow Edison to issue a $2.5 billion bond to pay off its debt. Edison woul= d=20 have to agree to a number of things, including selling power from its=20 generators at cost-based rates, giving the state all of the output from a n= ew=20 power plant near Bakersfield at low rates for a decade and applying a $400= =20 million tax refund to its back debt. A $1 billion debt that Edison owes=20 generators, who are accused of overcharging, would be left unpaid. The Edis= on=20 bond would be paid off not by residential customers but by businesses and= =20 other large users, who would not be allowed to shop around for cheaper=20 power. In the Assembly, Wright got agreement from an Edison official when = he=20 told a hearing that a plan backed by Assembly Democratic leaders would not= =20 keep Edison out of bankruptcy. Edison would be billed for $300 million wort= h=20 of power purchased by the Independent System Operator and other obligations= =20 not specificed in the bill.=20 PUC May Cede Control Over Electricity Rates Energy: Chief says letting the state water agency set prices would ensure= =20 that ratepayers cover costs. Others say plan would leave public unprotected= .=20 By TIM REITERMAN and NANCY VOGEL Times Staff Writers=20 July 19 2001 SAN FRANCISCO -- California's chief utility regulator proposed Wednesday to= =20 provide rubber-stamp approvals of any future electricity rate increases tha= t=20 state power buyers find necessary. This fundamental shift in the state's regulatory structure would bypass=20 procedures that currently protect the interests of consumers. The proposed agreement between the state Public Utilities Commission and th= e=20 state Department of Water Resources is designed to guarantee that consumers= =20 pay enough to cover the purchase by the state of electricity for the 27=20 million people served by three financially troubled utilities. Consumer payments will be used to repay bonds the state plans to float late= r=20 this year. The bonds will be used to reimburse the state treasury for money= =20 spent on electricity. The PUC is expected to formally ratify the agreement= =20 Aug. 23. A spokesman for the water department said that a historic rate increase in= =20 March is expected to cover all of the agency's costs and that no new hikes= =20 will be necessary. But under the terms of the proposed agreement, if that expectation proves= =20 incorrect and future hikes are needed, the PUC promises to adjust electrici= ty=20 rates to meet the department's need for revenue within 90 days, or 30 days = in=20 emergency situations. "The ruling gives carte blanche to [the department] to do whatever they wan= t=20 to do," said Richard Bilas, a PUC member appointed by former Gov. Pete=20 Wilson. "We don't have much control over them. I am uncomfortable with it." If approved, the agreement would shift the oversight of electricity rates= =20 from the PUC, an independent regulatory body whose members are appointed by= =20 the governor, to a state administrative agency that is under the governor's= =20 direct control. S. David Freeman, Gov. Gray Davis' chief energy advisor, said the agreement= =20 would essentially transform the state water department into "the equivalent= =20 of a municipal utility" that has sole discretion to raise revenue from its= =20 customers. The PUC would only have the authority to "make sure that our math is OK, an= d=20 we haven't gone out and bought the Brooklyn Bridge," Freeman said. Already, however, the state's judgment in buying power has been questioned.= =20 The Department of Water Resources has signed long-term contracts designed t= o=20 ensure stable supplies. But critics have charged that those contracts have= =20 locked the state into prices that are too high. Indeed, because of cool=20 weather and reduced demand by consumers, the state--at least temporarily--i= s=20 buying more power than California needs and has begun reselling some of it= =20 for considerably less than it costs. In another energy-related development, a top executive of Southern Californ= ia=20 Edison Co., one of the three utilities that has been flirting with=20 insolvency, criticized as inadequate a state Senate bailout bill. The bill is a thoroughly rewritten version of a highly publicized deal Davi= s=20 and Edison officials fashioned in April to restore the company's financial= =20 health. That deal called for the state to buy the utility's transmission=20 lines for $2.76 billion. At a hearing of the Senate Energy Committee, Bob Foster, an Edison vice=20 president, testified that the Senate version, which is expected to be voted= =20 on this week, would leave Edison $1 billion short of meeting its financial= =20 needs. The problems of Edison, Pacific Gas & Electric Co. and San Diego Gas &=20 Electric Co. triggered the need for the deal between the PUC and the water= =20 department. That agreement was hammered out in high-pressure negotiations= =20 that involved dozens of state officials and bonding experts. It is viewed b= y=20 state officials and bond analysts as critical to the sale this summer of th= e=20 $13.4-billion bond issue. But Harvey Rosenfield, president of the Foundation for Taxpayer and Consume= r=20 Rights in Santa Monica, said the agreement would strip away the PUC's=20 constitutional obligation to protect consumers from unreasonable rate hikes= . "This is a power play by the Davis administration, the energy companies and= =20 Wall Street to eliminate any public scrutiny over their conduct and the pri= ce=20 of electricity for the next 10 to 15 years," he said. The agreement is the latest step in implementing emergency legislation pass= ed=20 this year to allow the water department to buy power. The agency stepped in= to=20 the market after the three utilities said that rates frozen under the state= 's=20 deregulation plan were preventing them from recovering their costs and were= =20 threatening their solvency. Assembly Bill 1X, signed into law by Davis in February, provided that the= =20 water department would be able to recover its costs and directed the PUC to= =20 implement an agreement to accomplish that. The agreement also would provide assurance to Wall Street that electric rat= es=20 would provide a reliable flow of funds that could be used to pay off the=20 bonds. The state hopes to use the bonds to create a revolving fund that wou= ld=20 pay for $8 billion in current and future power costs. State Treasurer Phil Angelides said the rate agreement "must be adopted so= =20 that the general fund can be repaid, and to protect the state's fiscal=20 solvency. . . . This agreement provides the assurance that, for the term of= =20 the bonds, the law will be honored so that bonds can be sold and bondholder= s=20 repaid." Equally important is the water department's projection of how much revenue= =20 the agency needs for everything from spot market power purchases and the co= st=20 of long-term contracts to administrative costs and debt service. That=20 detailed assessment will indicate whether the increase approved in March--a= n=20 average hike of 3 cents per kilowatt/hour--will be enough to cover the=20 department's costs for the two-year period ending Dec. 31, 2002. Officials = at=20 the PUC and the department said the projection could be submitted as soon a= s=20 Friday. "We do not anticipate that [the department] will be seeking any further=20 increase beyond the increase announced by the PUC last spring," said=20 department spokesman Oscar Hidalgo. "We're well within the 3-cent increase.= " The department's statement of its revenue needs has ramifications not only= =20 for consumers, but also for utilities. Utility officials fear that their ow= n=20 costs might not be covered after the department takes its share of the=20 revenue from monthly bills. PG&E spokesman Ron Low said the company's lawyers are assessing the propose= d=20 agreement but would have no comment on it until they can see the water=20 department's revenue requirement. He said the company hopes there will be= =20 enough left "to ensure our customers are treated fairly" and to cover the= =20 company's costs, including payments for the power it produces and purchases= =20 through contracts. Edison officials said they would not comment until they received more=20 information. The proposed agreement, though not unanticipated, would reduce the role of= =20 the PUC in one of the most pivotal chapters of the energy crisis. Normally, the PUC holds hearings and conducts "prudency" reviews before=20 making decisions on rate increases, but the water department would not be= =20 subject to the same procedures. "It will not be a review where we say you were imprudent, you goofed up and= =20 will have to eat the cost, or you badly negotiated these contracts," said= =20 Commissioner Jeff Brown, who was part of the negotiations. Brown said the two agencies had differences over issues such as whether the= =20 water department's administrative costs should be covered by the rate=20 agreement and the extent of the PUC's review. But he said the overriding=20 concern was that the state's bond sale not be delayed or otherwise=20 jeopardized by uncertainty about the water department's ability to meet its= =20 financial obligations. "I wish we were not in this situation," he said. "But when we started doing= =20 purchases, the state was the only credit-worthy entity. We're swimming=20 upstream." Commissioner Bilas said that although the bond sale is highly important, he= =20 is concerned that the water department will not be subject to governmental= =20 checks and balances because the department head reports directly to Davis. "If the governor believes the director of [the department] is doing a bad= =20 job, he can be removed," Bilas said. "But it is a matter of how much faith= =20 you have in individuals rather than faith in a system." Commissioner Carl Wood, one of Davis' three appointees on the five-member= =20 commission, pointed out that the PUC was set up to protect the interests of= =20 the customers of private utility companies with a monopoly. "When a public= =20 agency takes over [the purchase of power], things like a prudency review do= =20 not have the same meaning," he said. PUC President Loretta Lynch, who published the proposed agreement and=20 solicited comment on it, could not be reached Wednesday. Her legal advisor, Geoff Dryvynsyde, said the commission has to make a publ= ic=20 policy choice that weighs the need to sell the bonds against its own=20 authority to set rates. "There is lots to balance here," he said. "A really important consideration= =20 is the bond deal, and the rate agreement is important to getting that done.= "=20 ---=20 Reiterman reported from San Francisco, Vogel from Sacramento. Times staff= =20 writer Carl Ingram contributed to this story.=20 Copyright 2001, Los Angeles Times <http://www.latimes.com>=20 IN BRIEF / SACRAMENTO Power Firm Is Held in Contempt by State Panel From Times Staff, Wire Reports July 19 2001 A state Senate committee voted unanimously Wednesday to hold Texas-based=20 Reliant Energy Inc. in contempt for failing to comply with a demand to=20 produce secret business records. Reliant is one of seven power generators under investigation by the Senate= =20 committee for failing to obey a subpoena for documents the companies consid= er=20 to be trade secrets or proprietary information. Reliant attorney Charles J. Stevens said that compliance with the committee= 's=20 demands potentially would expose the company's most secret information to i= ts=20 competitors.=20 Copyright 2001, Los Angeles Times <http://www.latimes.com>=20 Electricity cost tops Californians' concerns=20 SURVEY: Governor now getting some credit for improving the situation=20 John Wildermuth, Chronicle Political Writer=20 <mailto:[email protected]> Thursday, July 19, 2001=20 ,2001 San Francisco Chronicle </chronicle/info/copyright>=20 URL:=20 <http://www.sfgate.com/cgi-bin/article.cgi?f=3D/c/a/2001/07/19/MN199435.DTL= > =20 </cgi-bin/object.cgi?object=3D/chronicle/pictures/2001/07/19/mn_chronsurvey= .jpg& paper=3Dchronicle&file=3DMN199435.DTL&directory=3D/c/a/2001/07/19&type=3Dpr= intable>=20 </cgi-bin/object.cgi?object=3D/chronicle/pictures/2001/07/19/mn_chronsurvey= .jpg& paper=3Dchronicle&file=3DMN199435.DTL&directory=3D/c/a/2001/07/19&type=3Dpr= intable> The lights have stayed on this summer, but California residents are more=20 anxious than ever about the state's energy crunch, according to a survey=20 released today.=20 "People are still very worried," said Marc Baldassare, who directed the pol= l=20 for the Public Policy Institute of California. "They're not convinced we're= =20 totally out of danger."=20 While a record number of residents list electricity prices as the state's t= op=20 problem, Gov. Gray Davis seems to be getting some credit for improving a ba= d=20 situation.=20 The poll found only 39 percent of those surveyed approve of the way Davis i= s=20 dealing with the power problems, but that's a steady increase from the 29= =20 percent mark he had in a similar survey two months ago.=20 "As time goes by without any significant new problems, people realize that = an=20 effort has been made," Baldassare said. "If things aren't normal, they don'= t=20 seem to be getting any worse."=20 More than half those surveyed list electricity prices as the state's top=20 concern, with all other worries paling by comparison. Education, the leadin= g=20 issue just last year, was listed as the state's most important issue by onl= y=20 9 percent of those surveyed, with jobs and the economy third with 5 percent= .=20 "People need to realize that there's not an endless supply of power and oil= ,=20 " said Austin Eddy of San Francisco, one of those surveyed. "Maybe these=20 problems can serve as a wake-up call."=20 The poll of 2,007 Californians, conducted July 1 to July 10, has a margin o= f=20 error of plus or minus 2 percentage points.=20 The overall news for the governor in the survey isn't good despite the uptu= rn=20 in numbers for his attempt to ease the power crunch. Davis is still getting= =20 his share of blame, and it is showing in his approval ratings. Only 44=20 percent like the job he is doing as governor, while 45 percent are unhappy= =20 with his performance. That's down slightly from his 46 percent approval=20 rating in May and far below the 63 percent mark Davis had in a January=20 survey.=20 APPORTIONING THE BLAME Those polled still give utility companies, such as Pacific Gas and Electric= =20 Co., and former Gov. Pete Wilson and the legislators who approved utility= =20 deregulation much of the blame for the current crisis, but they are=20 increasingly calling Davis and the current Legislature to account. The=20 percentage of people who blame Davis for the power problems jumped from 10= =20 percent in May to 16 percent in the new survey.=20 "People are less likely to look in the past for blame and more willing to= =20 look at the current situation," Baldassare said. "They are moving toward=20 blaming the people in charge now."=20 But Davis seems to be winning the high-stakes public relations battle he's= =20 having with President Bush over the energy crisis. Bush saw his approval=20 rating in the state skid from 57 percent in May to 47 percent today while t= he=20 proportion of people who disapprove of the way he's handled the power woes= =20 jumped from 56 percent to 63 percent.=20 When asked who is more to blame for the state's electricity problems, 26=20 percent of those surveyed chose Davis to 12 percent who chose Bush.=20 But when asked who is providing better solutions to the problem, 34 percent= =20 chose the governor compared with 8 percent who give Bush the nod.=20 BAD MARKS FOR BUSH "The energy problem has hurt Bush," Baldassare said. "Very few people think= =20 he's come up with good solutions."=20 Much of Bush's proposed energy plan runs contrary to California's=20 preferences. The president's program backs oil drilling in environmentally= =20 sensitive areas, calls for the possibility of more nuclear plants and oppos= es=20 oil price controls.=20 "I don't think Bush has his priorities straight," Eddy said. "He's not=20 concerned about finding alternative ways of doing things and changing the w= ay=20 things are done."=20 The new poll shows 56 percent of those surveyed favoring price controls, 57= =20 percent opposed to nuclear power plants in their region and 71 percent=20 against oil exploration in federally protected areas.=20 More than two-thirds of those surveyed, including half the Republicans,=20 believe that the environment must be protected, even if it means higher=20 prices for gas and electricity.=20 "Bush has talked about the need to increase the energy supply, but his idea= s=20 have not gained any traction in California," Baldassare said. "A lot of=20 people here oppose a trade-off with energy and the environment."=20 CHART 1: E-mail John Wildermuth at [email protected]=20 <mailto:[email protected]>.=20 Worried Top three concerns of Californians, according to a new poll: Electricity prices, deregulation 56% Schools, education 9% Jobs, economy, unemployment 5% Source: Public Policy Institute of California CHART 2: Approval ratings For the first time, a majority of state residents view the energy crunch= =20 as=20 California's No. 1 problem, according to a Public Policy Institute of=20 California poll. At the same time, the public's view of Gov. Gray Davis'=20 handling of the energy crisis has improved since May while residents are mo= re=20 critical of President Bush's actions than they were two months ago. -- Do you approve or disapprove of the way that Gray Davis is handling t= he=20 issue of the electricity problem in California? May 2001=20 Approve 29% Disapprove 60% Don't know 11% July 2001=20 Approve 39% Disapprove 51% Don't know 10% CHART 3 -- Do you approve or disapprove of the way that President Bush is handli= ng=20 the issue of the electricity problem in California? May 2001=20 Approve 33% Disapprove 56% Don't know 11% =20 July 2001 Approve 28% Disapprove 63% Don't know 9% The survey of 2,007 California residents was conducted July 1-10. It has= a=20 margin of error of plus or minus 2 percentage points. =20 Source: Public Policy Institute of California=20 Chronicle Graphic ,2001 San Francisco Chronicle </chronicle/info/copyright> Page A - 1=20 PG&E rebates snub longtime watt watchers=20 WHO WINS?: Reward is easier for those unaccustomed to power scrimping=20 Joe Garofoli, Chronicle Staff Writer <mailto:[email protected]> Thursday, July 19, 2001=20 ,2001 San Francisco Chronicle </chronicle/info/copyright>=20 URL:=20 <http://www.sfgate.com/cgi-bin/article.cgi?f=3D/c/a/2001/07/19/MN144662.DTL= > If you've spent months squinting through dimly lit nights and still didn't= =20 get a 20 percent rebate on your most recent utility bill, you're going to= =20 hate hearing about Anne Crawford.=20 Conserving enough electricity to get a refund from Pacific Gas and Electric= =20 Co. was "too easy" for the resident of San Francisco's Noe Valley. She mere= ly=20 replaced a handful of high-wattage bulbs, turned off her computer, and voil= a=20 --=20 her electricity usage dropped 29 percent over last year.=20 That makes Crawford a winner in Gov. Gray Davis' new program that cuts 20= =20 percent off the bills of customers who reduce their usage 20 percent.=20 Crawford's payoff: $6.09, less than the average residential rebate of $10.7= 8.=20 Like most winners, Crawford endured little hardship to receive a credit on= =20 her bill.=20 "I hear all these stories about all these heroic things people did," Crawfo= rd=20 said, "but I didn't really do anything special."=20 If only it were that easy. Nearly a third of PG&E customers have opened the= ir=20 bills this month to find a credit for conserving, but many of the 71 percen= t=20 who didn't are ticked. They complain that the program rewards watt hogs who= =20 needed to conserve instead of the conservationists who have been doing the= =20 right thing for years.=20 But that is of little consequence to the 510,000 PG&E residential customers= =20 who have received $5.5 million in rebates so far. (The utility is nine days= =20 through its 21-day billing cycle.)=20 Chip Gibbons knows how he's going to spend the $4.03 burning a hole in his= =20 pocket.=20 "It's not enough to buy a bargain movie ticket, so I think I'm going to get= a=20 10-pound bag of Kitty Litter," said Gibbons, who cut his electricity=20 consumption at his Castro apartment by half.=20 Gibbons' secret: "My roommate moved out."=20 NO REWARD TOO SMALL Some rebate winners were glad to see huge conservation investments pay off.= =20 Robyn Simonett dropped $700 on a new energy-efficient refrigerator to repla= ce=20 the 15-year-old model in her Berkeley bungalow. That, combined with keeping= =20 the thermostat at 62 degrees, made all those days of typing in gloves with= =20 the fingertips removed and doing jumping jacks on the hour worth the strugg= le=20 once she opened her PG&E bill.=20 Her cash reward: $3.=20 "I went, 'Woo-hoo, yeah,' " Simonett said. "Hey, it's something."=20 Psychically, it's good to get cash back from PG&E after months of soaring= =20 rates, agreed Leonard Graff, winner of a $7 rebate for conservation at his= =20 San Francisco home. And while it may look like he's in the hole after=20 spending $150 on fluorescent bulbs and a new lamp to replace a watt-sucking= =20 torchere, "those bulbs will pay for themselves soon. I'll have them for 10= =20 years."=20 If only Gretchen Beck had rebate cash to spend on cat box filler. She saved= =20 19 percent -- just missing the rebate threshold. She couldn't have done muc= h=20 more. She didn't watch TV for three months, used only the lights she needed= ,=20 turned off all the right things. Maybe if she unplugged her electric mattre= ss=20 warmer, she might have. . . .=20 "No way," said the resident of San Francisco's Bernal Heights. "I'd unplug = my=20 refrigerator first."=20 WATT WASTERS CASHING IN Beck wasn't bitter about not getting a rebate. Some also-rans, however,=20 complained about the unfairness of rewarding watt hogs while overlooking=20 PG&E's good energy citizens.=20 Privately, one PG&E official said, "We tried to tell the governor's office= =20 that when they came up with this program."=20 "It's unfair to people who have been efficient all along," said Marc Acheso= n,=20 an Oakland resident who bundled up, bought energy-efficient bulbs and did a= ll=20 the right things long before there was an energy crisis. The downside to=20 doing the right thing: Acheson doesn't think he'll get a rebate when his bi= ll=20 arrives.=20 "There should be something for people like my wife and I, who won't get a= =20 refund. But I guess this program is meeting its target: people who were=20 wasting a lot."=20 A PAT ON THE BACK Don't look to the governor's office for a reward for longtime=20 conservationists. Davis feels they've already received one.=20 "Their reward is the years of savings they've had for doing the right thing= ,=20 " said Davis spokesman Roger Salazar. "The governor considers them the real= =20 heroes of this crisis."=20 Being called a hero is nice, but many customers said they would prefer cold= =20 hard cash.=20 The program had to make targets of watt hogs, as Salazar said, because that= 's=20 where the most waste was. Besides, he said, the hogs will be hit by the new= =20 rate increases approved by the state Public Utilities Commission.=20 PG&E estimated that 65 percent of its residential customers would be paying= =20 higher rates for their June bills. Only customers who stay within 130 perce= nt=20 of their baselines will be immune from further rate increases.=20 For those who didn't get a rebate in this billing cycle, they'll get anothe= r=20 shot in July, August and September usage. But Beck still won't unplug her= =20 mattress warmer for a rebate.=20 "At this point, I'm going to say screw it," Beck said. "I'm already a low= =20 user, and I've got more important things going on in my life."=20 E-mail Joe Garofoli at [email protected]=20 <mailto:[email protected]>.=20 ,2001 San Francisco Chronicle </chronicle/info/copyright> Page A - 1=20 Assembly panel OKs two bills to help Southern California Edison=20 Lynda Gledhill, Chronicle Sacramento Bureau <mailto:[email protected]= om> Thursday, July 19, 2001=20 ,2001 San Francisco Chronicle </chronicle/info/copyright>=20 URL:=20 <http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/0= 7/19/ MN186516.DTL> Sacramento -- Two sharply contrasting plans to prevent debt-ridden Southern= =20 California Edison from being dragged into bankruptcy cleared a key Assembly= =20 committee last night, but a third measure stalled in the Senate.=20 The first bill approved by the Assembly Energy Cost and Availability=20 Committee calls for the state to purchase Edison's transmission lines for= =20 $2.4 billion as a way to help the utility out of its estimated $3.5 billion= =20 in debt.=20 The plan drew criticism from business and consumer groups, and many lawmake= rs=20 who said other aspects of the rescue plan are too complicated wondered open= ly=20 if it wouldn't be better to let the utility to go bankrupt.=20 But Assemblyman Fred Keeley, D-Boulder Creek, an author of the bill, said= =20 before the 11-to-9 vote that lawmakers have to work with legislation that i= s=20 complicated and not entirely pleasing.=20 "If this was easy, or if this was simple, we wouldn't call it a crisis," he= =20 said. "This is far beyond a problem or a policy that we can debate and as a= =20 consequence the solutions are neither simple or easy."=20 After a day of furious activity, the close vote -- with some Democrats=20 joining Republicans in opposition -- may spell trouble when it reaches the= =20 floor of the Assembly.=20 The Assembly Appropriations Committee approved the plan 12 to 6 late last= =20 night, setting up a floor vote for today.=20 The second plan that cleared the Assembly committee would be a "straight=20 bailout," said its author, Assemblyman Rod Wright, D-Los Angeles. It was=20 approved 12 to 3. The Appropriations Committee did not take up Wright's bil= l.=20 The state would back $3.5 billion in bonds issued by the utility and then b= e=20 repaid through a $2-a-month charge for Edison ratepayers.=20 The Edison deal is considered a linchpin to getting the state out of the=20 power-buying business, something that is costing taxpayers upward of $50=20 million a day. If Edison joins Pacific Gas and Electric Co. in Bankruptcy= =20 Court, there is no clear way out of the electricity-buying business for the= =20 state.=20 Gov. Gray Davis has said that he hopes any rescue plan for Edison would be= =20 used as a model for PG&E to get out of court and back into the power-buying= =20 business.=20 Also, a Senate committee defeated another proposal after the company said i= t=20 would not work. The bill would let the utility issue $2.5 billion in revenu= e=20 bonds, to be repaid by ratepayers.=20 The Senate Energy Utilities and Communications Committee's 4-to-3 vote came= =20 as lawmakers struggle to approve some kind of rescue plan before the end of= =20 the week, when they are scheduled to start a monthlong recess. The bill=20 needed five votes to pass and the chairwoman of the panel said another vote= =20 would be taken today.=20 Sen. Jackie Speier, D-Hillsborough, who abstained from voting in the=20 committee, said the bill was defeated because senators weren't prepared to= =20 send it to the floor yet.=20 "The bill does not have broad support in the Democratic caucus," said Speie= r,=20 who opposes the bill.=20 Edison objects to the bill by Sen. Byron Sher, D-Palo Alto, because it=20 contains no way for the company to pay back the other $1 billion it owes=20 generators. Bob Foster, an Edison vice president, said the goal of a rescue= =20 plan is to remove the state from the electricity business and restore the= =20 utility to creditworthiness.=20 "This bill can't do that," he said in a Senate hearing.=20 Sher's proposal would also give the state a five-year option to purchase th= e=20 transition lines and would make the largest commercial businesses pay for a= ll=20 of the debt.=20 Business groups and consumer organizations blasted the measure.=20 "We think you should spread the cost proportionally to all ratepayers," sai= d=20 Dominic DiMare of the California Chamber of Commerce. "This is businesses= =20 subsidizing residents. Everyone used energy during this time period that th= e=20 debt was accrued, and everyone should pay their share."=20 Doug Heller of the Foundation for Taxpayer and Consumer Rights said consume= rs=20 will see the cost in the end through higher prices passed on by businesses.= =20 But Senate leader John Burton said the proposal by Sher was the only one th= at=20 might be approved by the Senate.=20 "It's a fair, just and equitable offer," he said. "It puts the burden on=20 those who can most afford it, and it doesn't overpay for the transmission= =20 lines.=20 Many lawmakers say letting Edison go into bankruptcy may be better than=20 rushing through a rescue plan.=20 With each house likely to pass different versions of a rescue plan, it is= =20 unclear if the difference will be resolved before the break, or if lawmaker= s=20 will be called back to vote on a final plan during their vacation.=20 An agreement between Gov. Davis and Edison, which has been all but dismisse= d=20 by lawmakers who say it is too generous to the utility, contains an Aug. 15= =20 deadline.=20 Saving Edison=20 A comparison of three bills that attempt to rescue financially troubled=20 Southern California Edison: .=20 AB82xx by Assemblyman Fred Keeley, D-Boulder Creek (Santa Cruz) and Assembl= y=20 Speaker Robert Hertzberg, D-Sherman Oaks (Los Angeles County)=20 TRANSMISSION LINES Proposes spending $2.4 billion for transmission lines to help cover the=20 utility's estimated $3.5 billion in debt.=20 BACK DEBT (All of the plans allow the utility to issue bonds to repay the= =20 debt, but each has it repaid by customers in a different way) Debt not=20 covered by the sale of transmission lines will be paid back by all ratepaye= rs=20 for two years, then fall exclusively on the shoulders of large commercial= =20 customers. Money raised will be placed in a trust account of an amount equa= l=20 to 70 percent of the utility's back debt. Generators owed money can either= =20 accept partial payment or fight the trust in court.=20 DIRECT ACCESS Phases in the ability of consumers to bypass the utility and contract=20 directly for power. As the state's obligation to purchase power is reduced,= =20 customers may opt for direct access during specified open enrollment period= s,=20 to occur at least twice a year. .=20 AB83xx by Assemblyman Rod Wright, D-Los Angeles=20 TRANSMISSION LINES No purchase of transmission lines.=20 BACK DEBT All of the debt will be paid for by all customers with a $2-per-month charg= e.=20 DIRECT ACCESS Same .=20 SB78xx by Senator Byron Sher, D-Palo Alto, and Richard Polanco, D-Los Angel= es=20 TRANSMISSION LINES Includes a 5-year option for the state to purchase the lines for $1.2=20 billion.=20 BACK DEBT It would only allow $2.5 billion to be paid to alternative power generators= =20 and banks and does not deal with the $1 billion owed to generators. All of= =20 the $2.5 billion would be paid by large commercial customers.=20 DIRECT ACCESS Does not address the issue.=20 Chronicle Graphic=20 E-mail Lynda Gledhill at [email protected]=20 <mailto:[email protected]>.=20 ,2001 San Francisco Chronicle </chronicle/info/copyright> Page A - 14=20 Cool weather brings California energy glut, causing state to sell surplus= =20 power at a loss=20 KAREN GAUDETTE, Associated Press Writer Thursday, July 19, 2001=20 ,2001 Associated Press=20 URL:=20 <http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2001/07/19/= finan cial0358EDT0024.DTL> (07-19) 00:58 PDT SAN FRANCISCO (AP) --=20 Unseasonably cool weather has turned the California power crisis on its hea= d,=20 with recent energy shortages giving way to a glut that's prompted the state= =20 to sell excess power at a loss.=20 In some cases, traders say, energy bought at an average of $138 per megawat= t=20 is being sold for as little as $1 per megawatt.=20 State officials acknowledged selling excess power over the past week, but= =20 disputed the prices. They said the sales are a blip during a long, hot summ= er=20 and blackouts are still possible if the mercury soars.=20 "This is unusual, but it was anticipated, it is typical in the power buying= =20 operation," said Oscar Hidalgo, a spokesman for the Department of Water=20 Resources, which is in charge of buying power for three financially ailing= =20 utilities. "It's better than doing nothing with surplus power."=20 The agency has spent the past few months arming the state with long-term=20 energy contracts while weaning itself away from buying high-priced power on= =20 the last-minute electricity market.=20 Those contracts, along with the temperate weather and a boost in energy=20 conservation, mean there's suddenly more power than Californians can use.= =20 Hidalgo acknowledged the state has been trying to sell as much as 20 percen= t=20 of its daily megawatts, though he would not say at what price.=20 "We know from traders who have bought that it's gone as low as a dollar and= =20 last week we know it was as low as $5," said Gary Ackerman, executive=20 director of the Western Power Trading Forum in San Jose.=20 Unlike natural gas, extra electricity cannot be stored and used later. Sinc= e=20 Californians haven't been running their air conditioners as often as expect= ed=20 over the past week, the state hasn't needed the entire 38,000 megawatts it= =20 had figured it would need. A megawatt is enough electricity to power roughl= y=20 750 homes.=20 The surplus power sell-off could encourage criticism that the state bought= =20 too much power at too high a price in its haste to fend off blackouts.=20 "If the price is $138 on average for a month and you have to turn around an= d=20 sell a chunk of it for a dollar, you're not going to look real good to a=20 number of people," Ackerman said. "I just don't think many people in=20 California truly understood what their state did when they stepped into thi= s=20 business."=20 Steve Maviglio, a spokesman for Gov. Gray Davis, said Ackerman has no=20 evidence of California selling power for $1 a megawatt. He said a=20 $25-per-megawatt price mentioned by California Energy Markets, a trade=20 weekly, was "much closer to reality."=20 Some of the extra electricity is being sent to the Bonneville Power=20 Administration, a power supplier in the Pacific Northwest, to repay it for= =20 power it loaned California earlier this year, Hidalgo said.=20 Investigative arm of Congress issues demand letter for energy meetings=20 PETE YOST, Associated Press Writer Thursday, July 19, 2001=20 ,2001 Associated Press=20 URL:=20 <http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2001/07/19/= natio nal0311EDT0466.DTL> (07-19) 00:11 PDT WASHINGTON (AP) --=20 The investigative arm of Congress demanded Wednesday that Vice President Di= ck=20 Cheney identify all the industry leaders who helped formulate the Bush=20 administration's energy policy. Refusal could lead to a court fight.=20 The White House, which is reviewing the request, said it would work with th= e=20 General Accounting Office to resolve the issue.=20 The GAO letter follows repeated refusals by the vice president's office to= =20 provide names and titles of participants who met with the energy task force= =20 chaired by Cheney.=20 Under the law, the GAO could sue if the Bush administration fails to supply= =20 the data within 20 days.=20 This is the first demand letter ever issued by the GAO to the vice presiden= t=20 of the United States, said Democratic Reps. John Dingell and Henry Waxman,= =20 who directed the agency to review the task force's work nearly three months= =20 ago.=20 The vice president's lawyer has told the GAO there were nine meetings of th= e=20 task force and that staffers also met with many people to gather informatio= n.=20 The result was an energy policy, announced May 17, that is aimed at=20 increasing the nation's supply of energy. It includes expanded oil and gas= =20 drilling on public land and a rejuvenated nuclear power system.=20 White House spokeswoman Anne Womack said the letter is under review, and "w= e=20 will continue to work with the GAO to resolve this issue."=20 The vice president's office "has continued on its course of secrecy and=20 obstinance," Dingell said in a statement.=20 "The White House should simply try telling the truth ... and stop hiding=20 information that Congress and the public have a right to see," said Waxman.= =20 A top Cheney aide, Mary Matalin, said Waxman and Dingell should "stop wasti= ng=20 taxpayers' money" with their confrontation with the vice president. "If the= y=20 want to know what happened in the energy task force meetings, they need loo= k=20 no further than the policy we sent to the Hill," she said.=20 The White House's position is that the GAO is entitled to information on th= e=20 task force's costs, but that the congressional watchdog agency doesn't have= =20 authority to ask for lists of those with whom the task force met.=20 Waxman is also pressing for a Justice Department investigation of Karl Rove= =20 over the Bush political strategist's energy-related meetings.=20 The White House has acknowledged that Rove participated in meetings on the= =20 administration's energy policy while he owned stock in energy companies suc= h=20 as Texas-based Enron Corp. The White House has supplied no details on Rove'= s=20 meetings.=20 Poll: Legislators, Davis blamed more than sellers=20 Posted at 10:08 p.m. PDT Wednesday, July 18, 2001=20 BY STEVE=20 JOHNSON=20 Mercury News=20 Despite months of loudly accusing electricity suppliers of price gouging an= d=20 leaving the state in a terrible mess, Gov. Gray Davis and legislative leade= rs=20 haven't convinced most Californians, a new poll suggests.=20 When the Public Policy Institute of California asked 2,007 adults this mont= h=20 who was mostly responsible for the energy crisis, Davis and lawmakers were= =20 blamed more than private power sellers.=20 Moreover, most of those surveyed said they preferred having businesses in= =20 charge of producing and distributing electricity in California and that it= =20 would be a bad idea for state government to take over that role.=20 ``It means that the efforts to single out the power generators has really n= ot=20 been very effective on the part of the governor or the Legislature,'' said= =20 Mark Baldassare, who directed the non-profit research group's poll released= =20 today. ``Californians look to a whole group of actors in this crisis as=20 playing major parts in the problem.''=20 The poll was conducted before the Mercury News reported Wednesday that the= =20 state was selling costly surplus power at bargain prices, a move that had o= ne=20 lawmaker calling for more details from the governor. It was one of a number= =20 of recent instances in which state officials had to defend their own energy= =20 dealings. And as they have done in the past, they responded by blaming=20 generators for most of the state's problems.=20 But today's poll heartened some electricity suppliers, who say they are tir= ed=20 of the barrage of price-gouging allegations being leveled at them.=20 ``Wow, maybe the public understands that this problem is a lot more complex= ,=20 which is what we've been saying all along,'' said Patrick Dorinson, of Mira= nt=20 Corp., which has several major power plants in the Bay Area and is among th= e=20 nation's biggest electricity suppliers. ``Maybe it also indicates that the= =20 public is getting tired of the blame game.''=20 But some experts said the poll may simply underscore a misunderstanding abo= ut=20 the difference between utilities and other electricity sellers.=20 Asked who ``is most to blame for the current electricity situation in=20 California,'' 22 percent picked the former governor and Legislature, 16=20 percent picked the current governor and Legislature, and 10 percent listed= =20 power generators.=20 However, electric utilities companies were picked by 23 percent, even thoug= h=20 they've given up much of their electricity-producing responsibilities to=20 private firms under the state's 1996 energy deregulation law.=20 Davis and other state officials have repeatedly accused private electricity= =20 sellers of overcharging the state and helping drive Pacific Gas & Electric= =20 Co. into bankruptcy. Still, ``most consumers don't know the difference''=20 between utilities and the firms that supply power to the utilities, said=20 Steve Maviglio, Davis' chief spokesman.=20 Even some experts hired by the energy industry say it's easy for the public= =20 to be confused.=20 The way power is bought and sold in this deregulated energy marketplace=20 probably mystifies many, said Marty Wilson, who has polled about 6,000=20 Californians this year for Reliant Energy of Houston.=20 Nevertheless, Wilson added that his polling also finds little support for t= he=20 notion that power suppliers are primarily to blame. About 40 percent of tho= se=20 he has questioned attribute the state's energy problems to the 1996 law. By= =20 contrast, the percent of people who blamed private power suppliers was less= =20 than half that, he said, adding, ``they clearly see this as a failure of=20 government.''=20 Still, Davis isn't likely to ease up on his criticism of private power=20 suppliers. ``The governor will continue to point the finger at whoever he= =20 sees as causing prices to rise,'' Maviglio said, ``and the No. 1 villain is= =20 generators.''=20 S. David Freeman, Davis' chief energy adviser, reiterated that point during= a=20 meeting Wednesday with the Mercury News editorial board. He defended the=20 state's attacks on energy companies and credited the relentless pressure fo= r=20 forcing federal regulators recently to consider ordering significant refund= s=20 from the firms.=20 ``We did some things right, and one of them was calling attention to the fa= ct=20 that we were being robbed,'' Freeman said.=20 Consumers were given the least amount of blame for the state's energy=20 problems in the Public Policy Institute survey.=20 More than four out of five -- 81 percent -- said they were closely watching= =20 news reports about the energy crisis, and 56 percent said the biggest singl= e=20 issue facing California was the price and availability of electricity. That= =20 was the first time in the survey's three-year history that a majority of=20 respondents had named the same issue as the most important problem.=20 Most of those questioned also said they were trying hard to conserve. ``Six= =20 in 10 residents say they have done `a lot'' to reduce their use of=20 electricity and appliances at home during peak hours,'' the survey found.= =20 Belief in the importance of conservation was equally strong among Democrats= =20 and Republicans. But the survey found significant differences among ethnic= =20 and income groups.=20 ``Public support for conservation is strongest among younger, less educated= =20 and lower-income residents,'' it concluded. Moreover, by a ratio of 25=20 percent to 16 percent, it said, ``Latinos are more likely than non-Hispanic= =20 whites to favor conservation as the solution to today's electricity=20 problems.''=20 Mercury News Staff Writer John Wolfolk contributed to this report.=20 Contact Steve Johnson at [email protected]=20 <mailto:[email protected]> or (408) 920-5043.=20 Consumers to bear costs of state's power purchases=20 Posted at 10:30 p.m. PDT Wednesday, July 18, 2001=20 BY MICHAEL BAZELEY=20 Mercury News=20 State energy regulators have reluctantly signed away one of their most=20 fundamental consumer protection roles: the right to question and reject=20 requests for higher power rates.=20 Under a proposed rate agreement with the state Department of Water Resource= s=20 released Wednesday, the Public Utilities Commission promises to pass all th= e=20 state's power-buying costs directly to consumers.=20 Unlike its relationship with utilities such as Pacific Gas & Electric, the= =20 utilities commission will not be able to audit the department's books or=20 question its expenses. And it will have just 90 days to raise rates if the= =20 state concludes it needs more money.=20 ``Previously, we had discretion to raise rates or not raise rates,'' said= =20 Commissioner Jeff Brown. ``Here, we're in a situation where it's a bill --= =20 pay it.''=20 The rate agreement, which the commission is expected to approve next month,= =20 marks a sea change for the agency.=20 The commission has acted as a check against exorbitant energy rates by=20 reviewing utility costs and setting rates it deemed reasonable.=20 But now the state has stepped into the power-buying business, purchasing a= =20 third or more of the energy used statewide. The state wants to finance its= =20 costs with $13.4 billion in bonds but says it needs to guarantee investors= =20 that consumers will repay them.=20 The agreement comes as no surprise. A state law passed in January says the= =20 commission must set rates to cover the water resources agency's bills.=20 Nonetheless, some consumer groups are fuming.=20 ``It is effectively a blank check for the state,'' said Doug Heller, of the= =20 Foundation for Taxpayer and Consumer Rights. ``Any costs the state incurs -= -=20 whether it be consultants for Gray Davis or trips to Texas -- anything they= =20 pass on is considered just and reasonable. That's deregulation on crack.''= =20 Under the 17-page agreement, the Department of Water Resources will=20 periodically send a ``revenue requirement'' to state utilities regulators.= =20 The regulators will use the document to set rates within the 90-day time=20 frame.=20 If the department starts to run short of cash -- because of dramatic spikes= =20 in the price of power, for instance -- the commission could be forced to=20 adjust rates within 30 days.=20 The commission would have minimal discretion to challenge the state's reven= ue=20 requests, according to the agreement, beyond pointing out ``arithmetic=20 error'' or costs not related to paying off the bonds or buying power.=20 State officials said they cannot sell the bonds if investors believe the=20 commission might reject any of the state's power-buying costs.=20 At the same time, they said, officials are scrutinizing every contract they= =20 negotiate with power generators to make sure consumers are getting the best= =20 deal.=20 ``Every contract is critiqued within our department,'' said Oscar Hidalgo,= =20 spokesman for the water resources department. ``And a lot of the=20 administrative costs are handled the same way.''=20 Under the new arrangement, utilities would still have to justify their cost= s=20 when asking for a rate increase, but the state would not.=20 Whether rates will need to go up again soon is not clear. The commission ha= s=20 already voted in two big rate increases this year, one in January and anoth= er=20 in March. The state is expected to give the commission its latest revenue= =20 requirement Friday. State officials say that, with falling power prices, th= ey=20 do not see a need for higher rates.=20 Contact Michael Bazeley at [email protected]=20 <mailto:[email protected]> or (415) 434-1018.=20 Conservation is cutting edge of power crisis=20 July 19, 2001=20 By Jonathan Lansner The Orange County Register=20 The Edison bill has arrived. It was almost as exciting a mailbox event as t= he=20 seemingly regular arrival of a sweepstakes envelope.=20 Best of all, the bill said, "You won!" Well, it really didn't say that. But= =20 it might as well have.=20 The family's electric bill did note that we sliced our electricity use by a= =20 third from a year ago. Whoopee!=20 Because we conserved so well, we got a 16-buck rebate. Now, for full=20 disclosure, we sort of cheated. Thanks to a remodeling job in progress, we= =20 have no air conditioner to abuse. But we weren't the only ones cashing in o= n=20 conservation, so to speak.=20 According to Edison, 31percent of its residential customers in June took th= e=20 conservation bait: Cut electricity usage by 20 percent, get a state-funded = 20=20 percent rebate.=20 For the month, 287,224 families in these parts got $2.5 million in rebates = -=20 or nearly nine bucks a household. That's state taxpayer money at work.=20 Now that sum's no grand windfall. Nor does it fully negate the year's rate= =20 hikes. But it generates spendable cash. And it's an important conservation= =20 message.=20 Those 287,224 families earning a June rebate saved what seems at first glan= ce=20 to be a smidgen of the state's monthly energy usage. You know, $2.5million= =20 looks like pocket change when headlines talk of billion-dollar deals and/or= =20 overcharges.=20 However, consider this math: That $2.5million would buy roughly 24,000=20 megawatts of electricity, using Edison's average cost of power this year.= =20 Believe it or not, 24,000 megawatts is more than a half-day of typical=20 statewide use. Not bad conservation by customers of just one of three major= =20 utilities in the state.=20 Then roughly double that figure because the state handed out nearly $3milli= on=20 in June rebates to commercial users for their savings.=20 You know, this conservation thing is more than a sound bite. One reason the= =20 lights have stayed on this summer in California to date is that demand is= =20 down by as much as 12 percent.=20 Sure, the weather's unseasonably pleasant, keeping many air conditioners of= f.=20 And a painful technology slump shuttered some energy-guzzling factories.=20 Nevertheless, the populace also is well aware of the higher energy costs.= =20 Average Joes and Janes appear very willing to play the money-saving game.= =20 Compact fluorescent light bulbs, ceiling or attic fans, and double-pane gla= ss=20 aren't just home-improvement hype.=20 Forget politics. Forget finger-pointing. Please remember basic economics.= =20 Price motivates consumers to action. Discounts typically lure crowds.=20 Surcharges usually scare off buyers.=20 The fact that nearly one-third of Edison's residential customers slashed=20 energy use in the face of nearly 40 percent rate hikes and a 20 percent=20 rebate carrot clearly proves that point.=20 Whine all you want about what caused the energy mess. Blame the incompetent= =20 Sacramento crowd. Blame the bungling utilities. Blame the shady out-of town= =20 generators. Heck, blame L.A.'s stealthy Department of Water and Power.=20 Nevertheless, when you talk solutions, conservation is the most logical=20 choice.=20 National Desk; Section A=20 California's New Problem: Sudden Surplus of Energy=20 By JAMES STERNGOLD=20 07/19/2001=20 The New York Times=20 Page 1, Column 1=20 c. 2001 New York Times Company=20 LOS ANGELES, July 18 -- After months of warnings about power shortages and= =20 forced blackouts, an unusually cool July and surprisingly effective=20 conservation efforts have put California in a stunning position: it has so= =20 much electricity on its hands that it is selling its surplus into a glutted= =20 market.=20 In fact, state officials said today, after spending much of the winter and= =20 spring scrambling to line up new supplies of electricity at a cost of tens = of=20 billions of dollars, the agency that is in charge of buying power has=20 actually been selling some back at a loss this week.=20 Oscar Hidalgo, the spokesman for the Department of Water Resources, which= =20 became the state's main buyer of power after soaring wholesale prices pushe= d=20 private utilities toward bankruptcy this year, would not provide exact=20 figures on how much the state was selling or how much money it was losing.= =20 But the department has said it was paying on average $133 per megawatt-hour= =20 this month, much of which it is obliged to buy whether it needs it or not,= =20 under long-term contracts signed in recent months. By contrast, officials= =20 say, the department at times has sold some of that power back into the mark= et=20 at prices as low as $15 per megawatt-hour.=20 Mr. Hidalgo insisted that the surplus power could quickly vanish if=20 temperatures soar as expected in August.=20 Some consumer groups, which have bitterly criticized the state's energy=20 policies in the crisis, seized on the sales as evidence of what they said w= as=20 a poorly thought-out plan that had left the state at the mercy of a mercile= ss=20 market.=20 ''This state agency has no expertise in trading,'' said Harvey Rosenfield, = an=20 official at the Foundation for Taxpayer and Consumer Rights. ''It is=20 amateurish at best and sometimes incompetent, negotiating with a bunch of= =20 M.B.A.'s whose goal is to soak California. The state was panicked into=20 leaping into this business, and it is being outwitted.''=20 But a spokesman for Gov. Gray Davis defended the state's purchases, saying= =20 its response to an emergency has produced greater reliability and, in the= =20 long term, a greater supply of power.=20 ''Like we said all along, we're doing everything within our power to contro= l=20 the situation and stabilize things,'' said Steve Maviglio, the governor's= =20 spokesman. ''But the weather is not within our control. When the utilities= =20 were in this business, they ran into this situation routinely.''=20 On Monday, for example, the high temperature in San Diego was 70 degrees,= =20 compared with an average of 77 degrees. In San Francisco, the high was 66,= =20 compared with an average of 72, and in Fresno it was 87, down from the=20 average of 99. That meant that air-conditioners across the state were turne= d=20 down.=20 But officials said that the weather was not the only factor in relieving th= e=20 sense of crisis in California and that the state's conservation program had= =20 produced a significant reduction in demand.=20 The state energy commission has said that total demand was down 12 percent= =20 this June from June 2000, adjusted for the weather and economic growth.=20 The conservation program provides rebates for buying certain energy-efficie= nt=20 appliances and special discounts for large consumers that reduce their powe= r=20 needs sharply from previous years.=20 In addition, state and federal office buildings have instituted conservatio= n=20 measures, including turning off lights and computers at night and adjusting= =20 thermostats.=20 Also, big rate increases, of as much as 40 percent in certain instances,=20 kicked in this June, encouraging consumers to cut electricity use further.= =20 Some experts have warned that while a sense of crisis has helped produce th= e=20 big reductions in demand, as soon as people feel that the emergency has=20 passed at least some will return to their old ways and demand may rise agai= n.=20 According to the California Independent System Operator, which manages the= =20 power system, peak demand today was expected to be 32,651 megawatts, and th= e=20 available supply was slightly above 40,000 megawatts.=20 In January, the state suffered several power emergencies in which it was=20 forced to pay more than $1,000 a megawatt at times of critical shortages.= =20 But even with those purchases, utilities were forced to cut power in some= =20 places when the demand exceeded the supply. The last time the state had to= =20 resort to blackouts was on May 8.=20 After the emergencies in the winter, the state frantically lined up power= =20 purchases on contracts ranging from a few months to 10 years and more.=20 The state tried to put together a diverse portfolio of contracts that would= =20 ease the shortages but not lock the government into paying too much if pric= es=20 declined in the future. Energy experts expected some declines in prices but= =20 not this quickly.=20 The Department of Water Resources paid an average of $243 per megawatt in= =20 May, but the price has now dropped to $133 per megawatt on average this=20 month, some of that in the form of spot purchases and some under the=20 long-term contracts. Mr. Hidalgo said the department's sales of power back = to=20 the market had been at $15 to $30 per megawatt.=20 Some energy traders said the state was just paying the price any market=20 participant must accept.=20 ''They're not doing anything imprudent,'' said Patrick Dorinson, a spokesma= n=20 for the Mirant Corporation, a large power generator and trader. ''They're= =20 just finding out how the markets work. Everything is built on forecasting,= =20 and sometimes the forecasts are wrong.''=20 Mr. Maviglio, the governor's spokesman, said the state's planning was built= =20 on forecasts of a harsher summer and less conservation. ''The forecasts hav= e=20 turned out to be far more conservative than the reality,'' he said.=20 Mr. Rosenfield countered: ''We've been outwitted. They goofed, and it looks= =20 like taxpayer money is being thrown down the toilet.''=20 In May, the amount of power the state needed to buy on the so-called spot= =20 market, which means purchases in which the electricity would be supplied=20 immediately, accounted for close to 45 percent of the total purchases.=20 Typically, longer-term contracts are at fixed prices, while spot purchases= =20 can be enormously volatile.=20 But because of the reduced demand in July, spot purchases have made up just= 5=20 percent or so of the Department of Water Resource's total purchases, and at= =20 the times of lowest demand, like this week, officials have decided to get= =20 what they can by reselling excess power.=20 ''This is a normal business practice,'' Mr. Hidalgo said. ''We can buy powe= r=20 and we can sell power. I don't think anyone would have predicted that we=20 would have found ourselves in this position in July. But we're not out of t= he=20 woods. August could be raging hot.''=20 Photo: Cecelia Paez sorted customer bills yesterday at Southern California= =20 Edison's office in Rosemead, Calif. After months of blackouts, the power=20 situation took an unexpected turn this month, leaving the state with a=20 surplus. (Associated Press)(pg. A20)

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['[email protected]', '[email protected]', '[email protected]']

CA Energy Issues

Judge says Enron has to give up documents By Emily Bazar Bee Capitol Bureau (Published Sept. 7, 2001) Enron Corp. must turn over sensitive internal documents to state legislators, a Sacramento judge ruled Thursday, but only after the two sides agree to a court-approved confidentiality agreement. For months, a special Senate committee investigating electricity price manipulation has been issuing subpoenas and gathering documents from power generators and marketers. During the process, the committee has found three companies in contempt for resisting the subpoenas, including Enron, which fought back with a lawsuit asking the court to intervene on its behalf. In his ruling stemming from the suit, Sacramento Superior Court Judge Charles Kobayashi said he wasn't convinced that "the Senate committee will be able to maintain the petitioner's right to confidentiality." As a result, he ruled, those documents handed over by Enron that contain legitimate trade secrets must be protected by a confidentiality agreement. In his ruling on another Enron motion, however, he denied the company's request to quash the committee's subpoena. Still, Enron officials considered the judge's findings on the whole a victory. "We had no certainty that anything we handed over to the Senate would remain confidential," said Enron spokeswoman Karen Denne. "We were not receiving due process from Senator (Joe) Dunn's committee. They were acting as judge and jury on this issue." Dunn, D-Santa Ana, who is the committee chairman, said he "respectfully disagrees" with the judge's decision on the confidentiality agreement, which he said will be reviewed in the next few days by the Legislature's lawyers to determine whether an appeal should be pursued. Another Enron motion seeking an injunction against the committee will be heard in court next week. Enron is one of three companies that have been found in contempt by the committee. However, the committee purged its contempt finding against Mirant in July after the company complied with the committee's requests. The committee was poised to expunge its contempt finding against Reliant Energy Inc. on Thursday as well but couldn't draw enough senators for a vote. Dunn delayed the action until the next meeting. As for the contempt charge facing Enron, the Senate Rules Committee is scheduled to review the findings Monday and possibly make a recommendation to the full Senate. Should the full Senate also find Enron in contempt, it would determine what punishments, if any, would be levied. Dunn said he believes fines would be the most appropriate punishment.

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Enron Mentions

Calif Senate Committee Pushes Enron Contempt Cite Forward Dow Jones Energy Service, 07/11/01 Enron Sues To Block Calif From Forcing Document Release Dow Jones Energy Service, 07/11/01 Enron Corp. sues to block Senate from forcing document release Associated Press Newswires, 07/11/01 USA: Enron sues Calif. to block subpoena in price probe. Reuters English News Service, 07/11/01 Enron Sues California Senate; Panel Urges Contempt (Update2) Bloomberg, 07/11/01 CSU, UC reach tentative agreement with Enron to deliver electricity Associated Press Newswires, 07/11/01 Indian state orders probe into Enron's power dispute with government Associated Press Newswires, 07/11/01 Enron's Lay keen on speedy solution to Dabhol Power issue AFX News, 07/11/01 Enron Won't Rule Out Sale of Dabhol Gas Unit, Spokesman Says Bloomberg, 07/11/01 Calif Senate Committee Pushes Enron Contempt Cite Forward 07/11/2001 Dow Jones Energy Service (Copyright (c) 2001, Dow Jones & Company, Inc.) LOS ANGELES -(Dow Jones)- A California Senate committee Wednesday voted to forward to the full Senate a contempt charge against Enron Corp (ENE) becuase the company refuses to provide certain financial documents for an investigation into wholesale power prices in the state. If Enron is deemed to be in contempt by the full Senate, the legislators will vote on punishments that could include fines against the company or incarceration for company executives. "When Enron decides it is so important to keep its information private, I can only assume there is much more there to find than I can imagine," said Sen. Steve Peace, D-El Cajon, a member of the Senate Select Committee to Investigate Market Manipulation. Enron filed a lawsuit Tuesday to stop the Senate's subpoena of financial records, saying the documents were outside of California's jurisdiction. The company is also likely to legally contest the contempt charge, an Enron attorney said during Wednesday's hearings. The market manipulation committee will forward its contempt report to the full Senate by early next week, at the earliest, said Sen. Joe Dunn, D-Santa Ana, chair of the committee. If at any point between now and then Enron decides to comply with the committee's requests, the contempt charge will be dropped, Dunn said. The committee also voted not to recommend a contempt charge for Mirant Corp (MIR), which agreed to provide financial documents Wednesday morning shortly before the hearing. The documents sought by Dunn's committee include information on bidding and pricing behavior in the state's electricity markets. The committee originally was poised to cite eight electricity generators for contempt, but all except Enron have since agreed to provide the requested information. -By Jessica Berthold, Dow Jones Newswires; 323-658-3872; [email protected] Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Enron Sues To Block Calif From Forcing Document Release 07/11/2001 Dow Jones Energy Service (Copyright (c) 2001, Dow Jones & Company, Inc.) SACRAMENTO (AP)--Enron Corp. (ENE) is suing California officials to stop a Senate subpoena of its financial records in a dispute over alleged overcharges for its electricity sales to California. "They've sent two things to Texas - our money and these documents, and they saying we can't get either one back," said Laurence Drivon, special legal counsel to the California Senate Select Committee to Investigate Market Manipulation. The suit came hours before the committee will consider asking the full Senate to cite the Houston-based company for contempt Wednesday. The other subject of possible sanctions, Atlanta-based Mirant Inc., appears to be cooperating, Drivon said. Committee chairman Joe Dunn, a Santa Ana Democrat, said the committee's investigation will continue despite Enron's "pure act of intimidation. We're not going to back down." Enron's suit said the company's financial papers are outside the committee's jurisdiction because most of its operations and paperwork are outside California. That shouldn't matter, Drivon said, citing last year's successful of out-of-state documents during the investigation into the activities of former Insurance Commissioner Chuck Quackenbush. Previous investigations have included documents subpoenaed from other nations, he said. Companies doing business in California cannot claim immunity from its laws or oversight, Drivon and Dunn said. Houston-based Reliant Energy made the same argument but then agreed to turn over 1,800 documents. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Enron Corp. sues to block Senate from forcing document release By DON THOMPSON Associated Press Writer 07/11/2001 Associated Press Newswires Copyright 2001. The Associated Press. All Rights Reserved. SACRAMENTO (AP) - Enron Corp. is suing state officials to stop a Senate subpoena of its financial records in a dispute over alleged overcharges for its electricity sales to California. "They've sent two things to Texas - our money and these documents, and they're saying we can't get either one back," said Laurence Drivon, special legal counsel to the Senate Select Committee to Investigate Market Manipulation. The suit came hours before the committee will consider asking the full Senate to cite the Houston-based company for contempt Wednesday. The other subject of possible sanctions, Atlanta-based Mirant Inc., is cooperating, Drivon said. Mirant spokesman Pat Dorinson said the company has turned over 159,000 pages of documents that were being transferred to a repository in Sacramento to comply with the subpoena. The company and the committee reached an agreement last night on the confidentiality concerns, Dorinson said. Committee chairman Joe Dunn, a Santa Ana Democrat, said the committee's investigation will continue despite Enron's "pure act of intimidation. We're not going to back down." Enron's suit, filed in Sacramento Superior Court, said the company's financial papers are outside the committee's jurisdiction because most of its operations and paperwork are outside California. That shouldn't matter, Drivon said, citing last year's successful subpoena of out-of-state documents during the investigation into the activities of former Insurance Commissioner Chuck Quackenbush. Previous investigations have included documents subpoenaed from other nations, he said. Companies doing business in California cannot claim immunity from its laws or oversight, Drivon and Dunn said. Houston-based Reliant Energy made the same argument but then agreed to turn over 1,800 documents. Enron's suit also says Dunn's committee has not given the company a fair hearing, and the committee has not followed due-process protections before seeking sanctions. Not so, said Dunn and Drivon, adding that they negotiated with generators to give them time to comply with the subpoenas. Proof of that, they said, comes in the decision to give Williams, AES, Reliant, Dynegy, Duke and NRG an extra week past Tuesday's deadline to turn over documents subpoenaed last month. In a letter to Dunn, Steven J. Kean, an Enron executive vice president, said several municipal districts were profiting from the power crisis. "Yet, remarkably, the committee has inexplicably chosen not to include these market participants in its investigations." Enron officials are concerned the purpose of the investigation, Kean said, is to "create a convenient political scapegoat to shoulder the blame for California's policy mistakes and changes in market fundamentals." However, Enron has agreed to turn over some "non-confidential" documents at the Wednesday hearing, Kean said. The committee is on the verge of asking the full Senate to impose sanctions for the first time since 1929, when the Senate briefly jailed a reluctant witness during a committee investigation of price fixing and price gouging allegations involving cement sales to the state. There are no set penalties, Drivon said - by law, "the Senate can take such action as it deems necessary and appropriate." Enron is one of the world's leading electricity, natural gas and communications companies, with $101 billion in revenues in 2000. It owns 30,000 miles of pipeline, has 20,000 employees and is active in 40 countries. During the first quarter of this year, Enron's revenues increased 281 percent to $50.1 billion. It is well connected politically. It has supported both President Bush and his father, President George H.W. Bush. Last month the firm was a corporate sponsor at a congressional fund-raiser featuring the president, where contributors in tuxedos and gowns dined and drank around a giant gold "W" that reached to the rafters at the Washington Convention Center ballroom. Enron has also been tied to President Bush's approach to the energy crisis. Company chairman Kenneth Lay is a friend and one of the largest campaign contributors to Bush and the GOP. Several prominent members of the Bush administration hold stock in the company. The company is one of several major GOP donors accused of meeting secretly with Vice President Dick Cheney as he drafted the Bush administration's energy plan. ---- On the Net: http://www.enron.com Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. USA: Enron sues Calif. to block subpoena in price probe. 07/11/2001 Reuters English News Service (C) Reuters Limited 2001. SACRAMENTO, Calif., July 11 (Reuters) - Energy giant Enron Corp. filed a lawsuit on Wednesday against a California legislative committee investigating it for possible price gouging in the state's volatile power market. The Senate Select Committee, leading the probe, last month found Enron and fellow energy merchant Mirant Corp. in contempt for refusing to hand over papers documenting their wholesale power sales. "Today Enron has filed suit against the Select Committee seeking to have an impartial neutral court determine Enron's rights and obligations under the Select Committee subpoena," Enron said in a statement after filing its suit in Sacramento Superior Court. While agreeing to provide "certain information and documents sought in the Committee's subpoena", the Houston-based company again refused to hand over confidential business documents. Enron argued the committee has no legal jurisdiction over wholesale electricity prices, which are regulated by the Federal Energy Regulatory Committee (FERC), and that the committee's proceedings violate the company's legal rights. The company also questioned whether the committee's actions "are designed to uncover the facts underlying the price spikes in California's...power market, or to create a convenient political scapegoat to shoulder the blame for California's policy mistakes and changes in market fundamentals." Enron's tough stand against the committee's subpoena prompted a contempt ruling on June 28, the first time in 72 years California has cited a company for contempt. Enron's lawsuit landed while the committee was gathered to vote on whether the contempt ruling should be reported to the full state senate, which has the power to slap sanctions on the company and can even fine or imprison its officers. In addition to Enron and Mirant, state officials have accused Reliant Energy Inc. , Duke Energy Corp. , Williams Cos. , and Dynegy Inc. of overcharging California power agencies and utilities some $8.9 billion for wholesale electricity over the past 14 months. Power prices in the state soared tenfold over the past year, prompting warnings from California Governor Gray Davis that the state is on track to spend $46 billion for electricity this year compared with $7 billion in 1999. Davis has blasted FERC commissioners for failing to ensure just and reasonable power prices in California and threatened to take the matter to federal court unless it is awarded refunds for the full $8.9 billion at stake. Independent energy merchants have blamed the price spike on the state's poorly designed electricity deregulation law and a failure to build enough power plants to meet the growing needs of its residents and industries. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Enron Sues California Senate; Panel Urges Contempt (Update2) 2001-07-11 17:26 (New York) Enron Sues California Senate; Panel Urges Contempt (Update2) (Adds committee vote in 2nd paragraph, lawmaker comment in 7th paragraph.) Sacramento, California, July 11 (Bloomberg) -- Enron Corp., the world's largest energy trader, sued a California state Senate committee to quash a subpoena for internal documents, accusing the panel of trying to blame the company for the state's power woes. The Senate panel responded by voting for a second time to recommend the full state Senate hold Enron in contempt and impose fines or other punishments if the company refuses to turn over the documents. The vote was 6-0. Enron is fighting a committee subpoena issued last month demanding thousands of pages of documents relating to the company's energy trading in California. The panel is probing whether generators manipulated the power market. Soaring wholesale prices last year left utilities unable to buy power, and the state began purchasing energy on their behalf. ``It is exceedingly difficult to discern whether the committee's actions are designed to uncover the facts underlying the price spikes in California's wholesale market, or to create a convenient political scapegoat,'' Enron Executive Vice President Steven Kean wrote in a letter to the committee. The full Senate won't receive the committee's recommendation until next week, giving Enron time to turn over the documents, said Committee Chairman Senator Joseph Dunn, a Democrat. ``The next move is now up to Enron,'' Dunn said. The Lawsuit Enron's suit claims that federal regulators have sole jurisdiction over wholesale energy trading and that the Senate subpoena is too broad, according to a copy of the suit released by Enron. Enron also accused the committee of singling it out for blame when dozens of companies sold power to the state. The Senate Select Committee to Investigate Price Manipulation in the Wholesale Energy Market voted last month to hold Enron Corp. and Mirant Corp. in contempt after they refused to turn over documents the committee was seeking. The committee gave the companies until today to comply. Mirant has already turned over 160,000 pages of documents, said Larry Drivon, special counsel to the committee. The committee voted to nullify the contempt charge against the company. California claims energy generators and traders overcharged the state by $8.9 billion. Talks ordered by the Federal Energy Regulatory Commission to settle those allegations broke down earlier this week without an agreement. Energy generators and traders had offered California a total of $716 million in refunds. FERC Administrative Law Judge Curtis Wagner asked federal regulators to determine appropriate refunds, if any. California Governor Gray Davis said that if the state isn't awarded the full $8.9 billion in refunds, it would file suit against the energy companies. ``If you think California is going to settle for $1 billion in refunds, we will see you in court,'' Davis said yesterday. CSU, UC reach tentative agreement with Enron to deliver electricity By CHELSEA J. CARTER Associated Press Writer 07/11/2001 Associated Press Newswires Copyright 2001. The Associated Press. All Rights Reserved. LONG BEACH, Calif. (AP) - California's two public university systems have reached a tentative settlement with Enron Energy Systems Inc. to buy cheap power, bringing to an end a federal lawsuit accusing the Houston company of wanting to sell the electricity at a higher cost. Enron has tentatively agreed to extend its contract with California State University and the University of California for two years, Chancellor Charles B. Reed told CSU's board of trustees Wednesday. The agreement means the university systems will continue receiving electricity directly from Enron rather than from Southern California Edison and Pacific Gas & Electric. "The agreement means considerable savings for the universities and allows us to continue with our energy conservation efforts," said Richard West, CSU's executive vice chancellor and chief financial officer. In a prepared statement, Enron confirmed the tentative agreement. "Enron has always been a strong advocate of the benefits of direct access, and we are pleased to be able to extend our contract for two years with UC/CSU," said Marty Sunde, vice chairman of Enron Energy Services, said in a written statement. Although a tentative agreement has been reached, West said the university systems were continuing to negotiate price and other terms of the contract extension. The agreement is expected to be finalized by December. Executives of Enron were attempting to get out of delivering power for the final year of a four-year deal with CSU and UC. Enron, which buys power from producers and sells it on the market, said the contract would cost the energy company $12 million a month because of skyrocketing wholesale power prices. Enron said the state should free it from its obligation and taxpayers should pick up the tab. The state argued the company wanted to increase its profit. A federal judge ordered Enron to continue supplying power to the two university systems in April. Enron appealed the ruling to the 9th U.S. Circuit Court of Appeals in San Francisco. UC's annual electric bill is about $87 million and its natural gas bill is about $26 million. CSU annually pays about $40 million for electricity and $20 million for natural gas. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Indian state orders probe into Enron's power dispute with government By KUMUDINI SALYANKAR Associated Press Writer 07/11/2001 Associated Press Newswires Copyright 2001. The Associated Press. All Rights Reserved. BOMBAY, India (AP) - An Indian state ordered an investigation Wednesday into a dispute between the state's utility company and U.S. power supplier Enron Corp. over the purchase of electricity, news reports said. A judge will investigate various aspects of the agreement between a subsidiary of Enron and the Maharashtra State Electricity Board, Press Trust of India quoted state Chief Minister Vilasrao Deshmukh as saying. He said the terms of the probe would be decided within a month. Hours earlier, Enron Corp. Chairman Kenneth Lay said he was hopeful of a solution to the dispute, in which Enron accuses the state-run power utility of defaulting on payments. The utility denies that it defaulted and accuses Dabhol Power Company, Enron's Indian unit, of charging exorbitant prices. Indian politicians have called for renegotiating the 1995 purchase agreement. Federal and Maharashtra state officials are holding talks with Enron and the state utility to resolve the dispute. "I am hopeful there will be some solution to the problem," Lay told reporters after meeting political leaders in Bombay at the end of his three-day stay in India. "The federal government has a very large role to play," said Lay. "The government listened to my points but it's not for me to say what they will decide." He said he met lenders, government officials and political leaders in New Delhi, India's capital, and Bombay. Enron in mid-May issued a notice to the state utility, warning it to stop defaulting on payments and threatening to halt work on a new dlrs 3 billion power plant, the biggest-ever foreign investment in India. The utility countered by demanding that Enron offset overdue December and January bills of dlrs 48 million with a dlrs 85.31 million fine it levied on the power company for not being able to supply power when required. The second phase of Enron's liquefied natural gas power plant was scheduled for completion at the end of the year at Dabhol, 335 kilometers (210 miles) south of Bombay. "The whole idea is to resolve the problem," Lay said. "It's a very large project and the country badly needs power. Once the LNG project comes up, power will be much cheaper." (str/rtb, nnm/lak-ss) Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Enron's Lay keen on speedy solution to Dabhol Power issue 07/11/2001 AFX News (c) 2001 by AFP-Extel News Ltd BOMBAY (AFX) - Enron Corp chairman Kenneth Lay said he is keen for a speedy solution to the ongoing challenges surrounding the Dabhol power project. Enron, Maharashtra State Electricity Board, General Electric Co and Bechtel are the joint venture partners in Dabhol Power Co Ltd, which is setting up the power project in Maharashtra. Media reports indicate that Lay is in India to discuss various options for the project, including a possible takeover of Dabhol Power by the government. Lay said: "I did not want to leave the country this time without reaffirming my interest in and support for India. I hope that we will be able to find a resolution to this problem that allows us all to move forward." The project faced hurdles due to MSEB's inability to pay dues for power purchased from Dabhol Power. The state government has also asked for a reduction in the tariff on power sold by Dabhol Power. jd/jkm/ For more information and to contact AFX: www.afxnews.com and www.afxpress.com Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Enron Won't Rule Out Sale of Dabhol Gas Unit, Spokesman Says 2001-07-11 15:48 (New York) Enron Won't Rule Out Sale of Dabhol Gas Unit, Spokesman Says Houston, July 11 (Bloomberg) -- Enron Corp., which is seeking a way to resolve a dispute over a $3 billion Indian power project, hasn't ruled out selling its liquefied natural gas operations there to government-owned Gas Authority of India Ltd., spokesman John Ambler said. Enron is building liquefied gas facilities to process fuel for Dabhol Power Co., the Enron unit that owns the power project in Maharashtra state. Enron and the Indian government have discussed a sale of the gas facilities, the Business Standard newspaper reported on its Web site, citing unidentified people. The report followed a visit to India by Enron Chairman Kenneth Lay, who has been holding talks with officials in New Delhi. ``In the discussions we had with the central government, a whole range of possibilities was discussed,'' Ambler said. ``We're definitely not on any kind of single track.'' The Business Standard report also said the government and Lay discussed the possibility of India's National Thermal Power Corp. taking over Dabhol. India National Thermal would get a 16 billion rupee ($339 million) tax break because it's a local company, allowing it to sell power at lower rates, the paper said. Enron owns 65 percent of Dabhol Power, India's largest private foreign investment. The utility and its sole customer, the state-owned Maharashtra State Electricity Board, are in the midst of a 7-month-old dispute over 3 billion rupees ($64 million) in unpaid bills by the board, and the price Dabhol charges for power. The gas terminal is part of a $2 billion expansion of the Dabhol plant. Some contractors, saying they haven't been paid since April, halted work on the power plant. Construction of liquefied gas facilities wasn't affected because another crew is handling that work. The Dabhol plant now burns naphtha, a chemical refined from crude oil. Switching to natural gas will lower power prices, Ambler said. High prices are the crux of the Maharashtra board's dispute with the utility. The board says Dabhol charges more than double the rates of other Indian generators. Dabhol has long-term liquefied gas contracts totaling 2 million metric tons a year with Oman Liquefied Natural Gas Co., Oman's state owned gas company, and Abu Dhabi Gas Liquefaction Ltd., a unit of state-owned Abu Dhabi National Oil Co. of the United Arab Emirates. In a statement issued as he was leaving India today, Lay said Enron had been ``involved in a range of meetings with political leaders, government officials, business leaders and other interested parties'' designed to resolve the Dabhol dispute. General Electric Co. and private construction company Bechtel Group are partners in the Dabhol project, which is being financed by loans backed the U.S. and Japanese governments, as well as Indian lenders, Lay said. Forty ``of the world's top corporations'' are involved in the project, he said. Shares of Houston-based Enron fell 22 cents to $49 in late trading.

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Enron Mentions

Enron Taps $3 Billion From Bank Lines In Pre-Emptive Move to Ensure Liquidi= ty --- Firm Will Pay Debt, Keep Cash Cushion The Wall Street Journal, 10/26/01 Deals & Deal Makers: Enron Officials Sell Shares Amid Stock-Price Slump The Wall Street Journal, 10/26/01 Enron's Financial Troubles Reverberate to Bonds With Poor Liquidity and Cre= dit-Rating Concerns The Wall Street Journal, 10/26/01 Most Analysts Remain Plugged In to Enron The Wall Street Journal, 10/26/01 Enron Draws Down $3 Bln in Credit to Boost Investor Confidence Bloomberg, 10/26/01 Enron Liked By Analysts Despite Complicated Dealings, WSJ Says Bloomberg, 10/26/01 Enron Draws Down $3 Billion From Its Credit Lines, WSJ Reports Bloomberg, 10/26/01 Action by Enron halts stock's fall Houston Chronicle, 10/26/01 Corporate US on track for bailout The Guardian, 10/26/01 Harvey Pitt's S.E.C.: From Guard Dog to Friendly Puppy? The New York Times, 10/26/01 Enron draws down at least 1 bln usd from credit lines to boost mkt confiden= ce AFX News, 10/26/01 The Five Dumbest Things on Wall Street This Week TheStreet.com, 10/26/01 Stocks Post Gains After A Rough Morning The Washington Post, 10/26/01 Sudhakar will head Enron probe panel The Times of India, 10/26/01 Enron Taps $3 Billion From Bank Lines in Pre-Emptive Move to Ensure Liquidi= ty Dow Jones Business News, 10/25/01 Enron chief executive resigns from board of i2 Technologies Associated Press Newswires, 10/25/01 As Enron's woes unnerve investors about energy sector, analysts say its pro= blems are isolated Associated Press Newswires, 10/25/01 Enron's Credit Outlook Downgraded to Negative by S&P (Update1) Bloomberg, 10/25/01 Enron's Trading Partners Say It's Business as Usual (Update2) Bloomberg, 10/25/01 Enron Broadband Begins Closing London, Singapore Offices Dow Jones Energy Service, 10/25/01 Calpine:No Exposure To Enron; No Calif Pwr Contract Talks Dow Jones Energy Service, 10/25/01 Spector, Roseman & Kodroff, P.C. Files Class Action Suit Against Enron Corp= oration PR Newswire, 10/25/01 TGS Q3 net profit up 22 pct yr-on-yr on higher NGL sales, transport revenue= s AFX News, 10/25/01 Enron Draws Down Credit Facility Dow Jones News Service, 10/25/01 Enron Employees Watch Options Devalue as Shares Fall (Correct) Bloomberg, 10/25/01 Enron Taps $3 Billion From Bank Lines In Pre-Emptive Move to Ensure Liquidi= ty --- Firm Will Pay Debt, Keep Cash Cushion By Wall Street Journal staff reporters John R. Emshwiller, Rebecca Smith an= d Jathon Sapsford 10/26/2001 The Wall Street Journal C1 (Copyright (c) 2001, Dow Jones & Company, Inc.) Enron Corp. drew down about $3 billion, the bulk of its available bank cred= it lines, in a bid to restore confidence in its financial strength and liqu= idity.=20 Enron will use part of the money to offer to redeem about $1.85 billion of = outstanding commercial paper -- short-term corporate IOUs -- according to a= person familiar with the matter, with the remainder providing the energy c= oncern with a cash cushion. Some observers believe the move is a pre-emptiv= e step by Enron to ensure that it had adequate liquidity should its access = to bank lines be interrupted. The person also said Enron was talking to its= banks about a new, multibillion-dollar credit line. Enron insists its business operation and financial condition remain strong.= But, "when the market is reacting as irrationally as it has been the last = few days, we thought that cash was better than a commitment from a bank," s= aid an Enron spokesman. In a statement, the company's new chief financial o= fficer, Jeff McMahon, said that by drawing down the bank lines, "we are mak= ing it clear that Enron has the support of its banks and more than adequate= liquidity to assure our customers that we can fulfill our commitments."=20 The move underscored the tumultuous conditions that have been sweeping over= the Houston energy-trading concern in the past 10 days. Enron is the natio= n's largest energy trader and is a principal in nearly one-quarter of all e= lectricity and natural-gas trades. Yesterday, for example, Enron was involv= ed in about $4 billion of deals through its EnronOnline unit.=20 Since early last week, Enron's share price has plummeted 50%. Last week, it= reported a $618 million third-quarter loss and a reduction in shareholder = equity of $1.2 billion. It also disclosed that the Securities and Exchange = Commission is conducting an inquiry into billions of dollars of transaction= s it did with entities connected to its former chief financial officer, And= rew S. Fastow, who was replaced Wednesday.=20 The draw-down of the credit facilities came as one rating agency, Fitch, pu= t Enron on review for a possible downgrade, while another, Standard & Poor'= s, changed Enron's credit outlook to negative from stable. Moody's Investor= s Service already has said it is looking at a possible downgrade of Enron. = In order to fall below investment grade, Enron's credit rating would have t= o fall several notches.=20 If that were to happen, however, a host of bad consequences could follow. T= ogether with the sharp decline in its stock price, a noninvestment-grade ra= ting would throw the company into default on obligations involving billions= of dollars of borrowings. In that event, Enron could be forced to issue mi= llions of shares of stock to holders of that debt, diluting the value of ex= isting shares. At 4 p.m. in New York Stock Exchange composite trading, Enro= n was down six cents at $16.35.=20 Liquidity is a key issue for Enron, which handles energy-trading volumes mo= re than triple its next-biggest competitor, American Electric Power Co. Enr= on's EnronOnline Internet-based trading platform has transacted more than $= 884 billion of trades since it was created in November 1999.=20 The company's wildly successful wholesale unit has been dragged down by und= erperforming assets elsewhere in the company, chiefly the approximately $6.= 5 billion of international assets such as its Dabhol power project in India= . Raising cash and retiring debt largely is a timing issue. The cash needs = of its trading operation are immediate; it takes time to sell assets, parti= cularly in today's slower economy.=20 The company also is suffering from a string of disclosure controversies tha= t have damaged its credibility, particularly in connection with its dealing= s with Mr. Fastow, the former chief financial officer. Internal documents r= elated to one of the Fastow partnerships disclose that Enron also did as mu= ch as hundreds of millions of dollars of business with an entity connected = to another company official, who has since left Enron. While Enron disclose= d its Fastow-related transactions in SEC filings, a computerized search of = the SEC's database of public filings produced no reference to this other em= ployee-related entity known as Chewco.=20 Chewco was established in 1997 "with approximately $400 million in capital = commitments" to buy an interest in Enron assets, according to one of the pa= rtnerships documents. The document didn't further specify what assets were = purchased, and it didn't disclose the financial impact of the transactions = for either Chewco or Enron. Chewco was being run by Michael Kopper, a manag= ing director in Enron's Global Equity Markets Group, according to the docum= ent.=20 Enron, which has maintained that its complex financial transactions with em= ployee-related entities were legal and properly disclosed, didn't have any = comment regarding its dealings with Chewco.=20 Mr. Kopper, who Enron says left the company this year to focus on helping t= o run the Fastow-related partnerships, didn't return phone calls. A person = at his office in Houston yesterday said Mr. Kopper was traveling. In respon= se to questions about Chewco, an Enron spokesman would say only that "Micha= el Kopper was never an executive officer of Enron." Mr. Fastow repeatedly h= as declined interview requests. He severed his relationships with the partn= erships in July.=20 This statement is an apparent reference to SEC disclosure regulations regar= ding related-party transactions. Under SEC rule S-K, a company has to repor= t any transaction that exceeds $60,000 and involves "any director or execut= ive officer." By contrast, Mr. Fastow, as CFO, would have fallen into that = category, but Mr. Kopper, as managing director of a business unit, presumab= ly wouldn't have.=20 However, reporting guidance issued by the Financial Accounting Standards Bo= ard seems to have a broader definition, one that might include Mr. Kopper. = According to FAS Statement 57, a related-party transaction involves a "mate= rial" piece of business between the company and a member of management. The= statement defines management as directors, top officers, vice presidents i= n charge of major business units and "other persons who perform similar pol= icy-making functions. Persons without formal titles may also be members of = management." Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Deals & Deal Makers: Enron Officials Sell Shares Amid Stock-Price Slump By Theo Francis and Cassell Bryan-Low Staff Reporters of The Wall Street Journal 10/26/2001 The Wall Street Journal C14 (Copyright (c) 2001, Dow Jones & Company, Inc.) Officials at Enron Corp., whose unusual transactions with its chief financi= al officer are under regulatory scrutiny, have steadily sold sizable amount= s of their holdings of company stock as the share price has fallen this yea= r.=20 Corporate officials had sold 1.8 million shares valued at about $106 millio= n through July, as the stock fell to less than $45 a share from $83 at the = start of the year. Since July, the stock has plummeted an additional 63% to= $16.35, including a 50% plunge since the beginning of last week. Kenneth Lay, chief executive of the Houston energy-trading company, cashed = in shares for $25.7 million so far this year, usually in transactions paire= d with options exercises. He sold 429,614 shares, leaving him with some 2.8= million shares as of July, the latest data available on his sales, accordi= ng to Thomson Financial/Lancer Analytics.=20 The dollar amount for his 2001 sales is approaching the total for all Mr. L= ay's sales of Enron shares for 2000, which reached $30.7 million. In 1999, = he sold shares for a total of $26 million.=20 In Houston, an Enron spokeswoman declined to comment on the figures, saying= the company doesn't keep a running tally of stockholdings by corporate off= icials. Enron also wouldn't comment on the number of options held by compan= y insiders and called the sales "a personal decision." Many sales by Enron = insiders were concurrent with options exercises or sales followed soon afte= r option exercises.=20 Strong selling by company officers and directors amid share-price declines = should raise red flags for investors, says Jonathan Moreland, research dire= ctor of InsiderInsights.com, who uses insider-trading data to zero in on in= vestment ideas.=20 Among other insiders selling during the year, Kenneth Rice, former chairman= and CEO of Enron's broadband unit, sold shares for $23.7 million. Mr. Rice= has sold 456,966 shares of the 1.5 million shares he was listed as owning = in Enron's March proxy filing. Former Enron Chief Executive Jeffrey Skillin= g -- who resigned in August -- sold 160,000 shares for $9.8 million during = the year. In March, Mr. Skilling owned 1.9 million shares.=20 Messrs. Rice and Skilling couldn't be reached to comment.=20 Overall, Enron's insiders were busier selling shares last year, when they s= old 5.8 million shares for about $449 million. During 1999, insiders sold 3= .4 million shares for $123.1 million.=20 Since December 1999, only one Enron executive has reported buying company s= hares. The buyer was Andrew Fastow, who was ousted during the week as Enron= 's chief financial officer after the company disclosed it was under a Secur= ities and Exchange Commission investigation into financial ties between the= company and Mr. Fastow.=20 Mr. Fastow reported purchasing 10,000 Enron shares in August at $36.98 each= , or a total of $369,800. Today, those shares are valued at $163,500, based= on Enron's stock price of $16.35 in 4 p.m. New York Stock Exchange composi= te trading. After the purchase, Mr. Fastow owned 110,586 shares, Thomson Fi= nancial/Lancer Analytics says.=20 Enron said Mr. Fastow wasn't available to comment.=20 On Monday, a New York law firm filed suit in U.S. District Court in Houston= , alleging that Enron misrepresented its performance by failing to disclose= problems with its broadband division and failing to properly write down th= e value of investments in limited partnerships managed by Mr. Fastow. The s= uit, which seeks class-action status, also says Enron insiders sold $73 mil= lion of their own Enron holdings during parts of 2000 and 2001. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Credit Markets Enron's Financial Troubles Reverberate to Bonds With Poor Liquidity and Cre= dit-Rating Concerns By Jathon Sapsford and Suzanne McGee Staff Reporters of The Wall Street Journal 10/26/2001 The Wall Street Journal C15 (Copyright (c) 2001, Dow Jones & Company, Inc.) NEW YORK -- Enron Corp.'s bonds have held up better than its battered stock= amid escalating financial woes at the energy-trading powerhouse.=20 Not for long, some bond traders say. In trading yesterday, the Houston company's five-year bond, a $250 million = issue due in July 2006 carrying a coupon of 6.4%, was quoted at 82 cents on= the dollar, down from a bid of 88 late Wednesday, and representing a 16% d= rop during the past two weeks.=20 That is far less than the 50% decline in Enron's stock price since the Oct.= 16 disclosure of a $1.01 billion charge linked to soured investments, resu= lting in a $618 million third-quarter loss. But the fall in the bond's pric= e translates to a yield of 7.7 percentage points above bellwether U.S. gove= rnment bonds, which is a widening from about three percentage points two we= eks ago. Although Enron still is an investment-grade credit, that kind of "= spread" is more characteristic of a junk bond with a credit rating of singl= e B or lower.=20 Enron sought to assure the markets that its finances were sound, disclosing= late yesterday that it drew down more than $1 billion on its bank credit l= ines to shore up its finances. Yet even as Enron was tapping its lifeline, = investors were finding it difficult to trade big blocks of Enron bonds. Yes= terday's 82 bid, for instance, was for a block of less than $2 million in b= onds, a small percentage of a typical trade.=20 Fueling the uncertainty surrounding Enron were fears that credit-rating con= cerns will lower ratings on Enron debt after it recently conceded a slew of= troubles, including losses, a Securities and Exchange Commission investiga= tion, and the sudden resignation of its chief financial officer.=20 "Even at these levels, there's very little buying interest," said Harold Ri= vkin, a principal at distressed-debt trader H. Rivkin & Co. in Princeton, N= .J.=20 In one sign of the ripple effects, the price investors pay to protect thems= elves from losses on Enron debt was surging. The cost of a "default swap" -= - in which an investor pays another investor to take a chunk of debt at fac= e value in the event of default -- rose to 10% of the size of the credit be= ing insured. That was up from 8% a day earlier, and more than holders of Lu= cent Technologies Inc. debt had to pay at the height of that technology com= pany's troubles earlier during the year.=20 Even with its woes, Enron remains an investment-grade company. Most credit-= rating agencies rate Enron's senior unsecured debt at several notches above= the noninvestment-grade level.=20 Yet Fitch said yesterday it put Enron's credit rating on watch for a possib= le downgrade, following a similar move by Moody's Investors Service last we= ek. (Standard & Poor's, a division of McGraw Hill Cos., stopped short of pu= tting the company on its Creditwatch list, opting instead to revise its lon= g-term ratings outlook to "negative," citing concerns about the company's f= inancial flexibility.)=20 Meanwhile, the weak bond prices are a sign that the markets are bracing for= the worst. "These are investment-grade bonds that are migrating toward dis= tressed levels," said Glenn Reynolds, an analyst at Credit Sights Inc., an = independent fixed-income research firm in New York. "They aren't distressed= yet, but they are headed in that direction."=20 If Enron's credit ratings fall, it would have implications far beyond the c= ompany's ability to raise money. For an energy trader, a credit downgrade s= ends a signal to other participants in crucial markets about its ability to= make good on its commitments.=20 Enron makes markets in a variety of commodities. Though it is best known fo= r trading electricity and natural gas, the company also is a huge force in = the markets for other commodities such as lumber, metals, bandwidth capacit= y and steel. As a market maker matching buyers and sellers, Enron handles a= bout a quarter of all the trading in the nation's energy and gas markets.= =20 Enron's credit-worthiness is hugely important. The better its credit rating= , the cheaper it can hedge, or offset, its positions in all these commoditi= es markets through derivatives and pass on savings to customers. Without th= at credit rating, the cost of this high-margin, high-volume business starts= to rise. A derivative is an instrument whose value is linked to, or derive= d from, that of an underlying security or asset, such as a stock, bond or c= ommodity.=20 "Even if the company does retain its investment-grade rating, the perceptio= n that this might be at risk will start to affect their core businesses," s= aid Mr. Reynolds at Credit Sights Inc. "Any prudent risk [manager] at Enron= 's counterparties" -- any institution on the other end of a financial agree= ment with Enron -- "is going to be examining their exposure to Enron, and l= ooking for ways to minimize it or offset it," Mr. Reynolds said.=20 To be sure, Enron, despite its recent woes, remains a strong company, credi= t analysts said. "I don't think anyone's seriously thinking that this is a = company that would ever default," Mr. Reynolds said.=20 "So far, our research shows that their counterparties and their banks are s= ticking with them," said Ron Barone, managing director of Standard & Poor's= utility energy project finance group. "No one has cut credit lines or aske= d for additional collateral that we have identified. And customers have pub= licly stated that it's business as usual."=20 Yet analysts say the arrival of distressed-debt traders on the scene could = make life more difficult for Enron and its management. Traders expect Enron= 's new Chief Financial Officer Jeffrey McMahon and Chairman Kenneth Lay to = make the rounds of Wall Street next week, meeting with rating agencies, deb= t-trading desks, big bond holders and banks, including J.P. Morgan Chase & = Co. and Citigroup Inc.=20 Treasurys=20 Treasurys rallied on optimism that the Federal Reserve may cut interest rat= es more than previously expected after a spate of economic reports that doc= umented how weak the economy was after the Sept. 11 terrorist attacks.=20 Prices also gained as the market finished digesting the week's flood of Tre= asury, corporate and agency debt issues.=20 At 4 p.m. EDT, the benchmark 10-year Treasury note was up 13/32 point, or $= 4.0625 per $1,000 face value, at 103 20/32. Its yield fell to 4.537% from 4= .588% Wednesday, as yields move inversely to prices.=20 The 30-year Treasury bond's price was up 22/32 point at 101 11/32 to yield = 5.284%, down from 5.330% Wednesday.=20 Fed policy makers are slated to meet on Nov. 6. Also providing support for = longer maturities, the Treasury Department made another repurchase of issue= s outstanding. It received offers for $5.04 billion in callable 30-year bon= ds, of which it accepted $1 billion. The offer-to-cover ratio, an indicatio= n of demand, was 5.04.=20 TREASURY BUYBACK Par Par High Wtd Avg Coupon Mat Amt Amt Accept Accept % Date Offer Accept Price Price 7.125 02/23 807 0 N/A N/A 11.750 02/10 235 0 N/A N/A 10.000 05/10 490 0 N/A N/A 12.750 11/10 471 0 N/A N/A 13.875 05/11 104 0 N/A N/A 14.000 11/11 203 0 N/A N/A 10.375 11/12 587 0 N/A N/A 12.000 08/13 974 0 N/A N/A 13.250 05/14 473 0 N/A N/A 12.500 08/14 725 39 3152.20 152.19 11.750 11/14 7826 0 7148.25 148.13 Amounts in millions, prices in decimals. *Amount outstanding after operation. Calculated using amounts reported on announcement.=20 Corporate Bonds=20 Motorola Inc.'s offering of three-year mandatory convertible securities, ex= pected late yesterday was boosted from a planned $875 million and could tot= al as much as $1.15 billion (proceeds) if investors exercise their overallo= tment option.=20 The securities were expected to have a dividend of between 6.75% and 7% and= a conversion premium of 20% to 22%. Earlier indications were a dividend of= 7% to 7.5% and a conversion premium of 18% to 22%. The deal was to come th= rough Goldman Sachs, J.P. Morgan Chase and Salomon Smith Barney.=20 Separately, LSI Logic Corp. repriced an offering of $450 million of five-ye= ar convertible subordinated notes, lowering the price to 99 from par, peopl= e familiar with the Rule 144a private placement said.=20 The notes have a 4% coupon and a 41% conversion premium and now offer a yie= ld-to-maturity of 4.22%. They were quoted lower at 98 1/2 early yesterday, = a sign that the deal wasn't well-received after being brought overnight by = Lehman Brothers.=20 ---=20 John Parry and Tom Barkley contributed to this article. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Heard on the Street Most Analysts Remain Plugged In to Enron By Susanne Craig and Jonathan Weil Staff Reporters of The Wall Street Journal 10/26/2001 The Wall Street Journal C1 (Copyright (c) 2001, Dow Jones & Company, Inc.) Enron: Rarely have so many analysts liked a stock they concede they know so= little about.=20 In recent years, Wall Street researchers have been overwhelmingly -- critic= s would say blindly -- enthusiastic about Enron, even as they acknowledge n= ot always understanding the complex financial transactions that accounted f= or its soaring profits. Now, Enron is reporting steep losses from some of i= ts most complicated transactions, which many on Wall Street still can't fig= ure out. In a research note Wednesday, Goldman Sachs analyst David Fleischer concede= d that scant corporate disclosure at the Houston energy trader makes it dif= ficult to value the company. The company's "lack of disclosure and transpar= ency," he says, is "a longstanding Enron hallmark."=20 So is this a stock to avoid, in his view? Hardly. Goldman on Wednesday did = bump Enron off its "U.S. Select List," which consists of a few dozen top st= ock picks -- but Mr. Fleischer continued to keep the stock on the firm's la= rger but prestigious "Recommended List" of 200 or so favored stocks, where = it has been since he joined Goldman in 1993.=20 "Just because I can't be specific in being able to create a simple model . = . . doesn't mean that you write off that industry and say `I can't analyze = it' or `I can't figure it out,' " says Mr. Fleischer, who owns an undisclos= ed number of Enron shares. "If that were the case, there would be an awful = lot of industries we couldn't follow."=20 Enron's shares have dropped about 50% since last week.=20 "Every sell-side analyst we spoke to early in 2001 admitted that this was a= black box," says Jim Chanos, principal of Kynikos Associates in New York, = who has been selling Enron stock short -- trading it with an eye to profiti= ng from its fall -- throughout this year. "It was really a trust-me story, = when all the evidence was mounting that there was reason to question that l= evel of trust."=20 True, no stock picker is immune from bad calls. And Wall Street analysts lo= ng have been criticized for their overwhelmingly bullish bias, particularly= on stocks in hot sectors with lots of investment-banking deals to be had.= =20 But Enron stands apart, precisely because so many of the analysts still rec= ommending the stock have acknowledged that the company's disclosure practic= es are lacking. Which raises the question: How can an analyst recommend tha= t others purchase a stock when key information about the company's operatio= ns is so often either unavailable or indecipherable?=20 Concerns about the way that Enron runs its business aren't new. Many of the= issues now plaguing Enron's stock were first raised more than a year ago b= y bearish hedge-fund managers and independent accounting experts. Yet time = and again, Wall Street analysts dismissed as unimportant many of the linger= ing questions about the company's various partnership transactions.=20 Besides those partnerships, Enron also has been dogged by concerns about th= e secretive valuation techniques it uses to record its assets and earnings.= =20 Through it all, most analysts have stuck by this onetime stock-market darli= ng, publicly dismissing questions about the firm's accounting practices and= level of disclosure. As of yesterday, of the 17 analysts who following the= stock, 10 had a "strong buy" or equivalent rating on the stock, according = to Thomson Financial/First Call. Five others rated the stock a "buy," thoug= h not strongly.=20 Only Prudential Securities, which downgraded the stock this week, has a "se= ll" rating on Enron.=20 The bullish treatment is the latest and one of the most high-profile exampl= es of Wall Street taking a glass half-full stance, despite what in retrospe= ct seems to be ample warning that a less-enthusiastic approach was warrante= d.=20 Over the past year in the wake of the Nasdaq Composite Index's general coll= apse, analysts have been widely assailed for a lack of independence -- part= icularly those who, like Goldman's Mr. Fleischer, own shares in the compani= es they cover. Regulators have raised concerns that analysts have compromis= ed themselves to help their firms land lucrative investment-banking fees an= d other revenue.=20 Enron has spread the wealth across many Wall Street firms. For instance, fo= r one $865 million equity offering in 1999 led by `Credit Suisse First Bost= on, Enron retained seven co-managers, including Donaldson Lufkin & Jenrette= , Lehman Brothers and Merrill Lynch.=20 "Enron is a big company, and I don't think you're going to find a firm that= hasn't been involved," says Credit Suisse First Boston analyst Curt Launer= , who still rates the stock a "strong buy" with a $40 price target. "They p= ay a lot of investment-banking fees to Wall Street."=20 He adds, "We do our analysis every day based on the information we have. Ar= e we here strictly to defend companies? That's ludicrous. We're here to pro= vide information to investors. . . . Yes, I have the wrong recommendation o= n the stock. I don't think my analysis has been as wrong as the stock has p= erformed."=20 Mr. Fleischer, whose firm also has served as an investment banker to Enron,= calls his holding "a meaningful investment" that is "not small." But he di= sputes any suggestion that his objectivity is compromised. Mr. Fleischer sa= ys his clients "are happy to know" he has a stake in Enron, because it show= s he puts his money where his mouth is.=20 In his research note Wednesday, Mr. Fleischer called for complete disclosur= es of Enron's off-balance sheet partnerships. Despite the resulting difficu= lty he acknowledged facing in developing financial models for the company, = he wrote that he and many other investors historically "have given Enron th= e benefit of doubt because of its strong growth in earnings" and position a= s an industry leader.=20 "There's not information to really model this and be able to predict accura= tely where revenues are going to come from and where they're going to make = their money, but every quarter they do," he says. "It's hard to get inside = to know all the transactions, but they do deliver."=20 CSFB's Mr. Launer also has been a longtime defender of the company, occasio= nally issuing research reports to rebut critical stories about Enron in the= financial press. On Monday, he wrote that he expects questions about Enron= 's partnerships and accounting disclosures to continue, but that he remains= "confident in the businesses and operating growth prospects for [Enron] an= d an ultimate recovery in the share price."=20 "I know I'm wrong on the stock," Mr. Launer says. But he says that at these= prices, he isn't ready to throw in the towel because he figures that even = in a worst-case scenario -- under which he envisions Enron having to issue = as much as $2 billion worth of shares, diluting current holders -- the stoc= k doesn't have much further to fall.=20 Clearly, Messrs. Launer and Flesicher aren't alone. "Even in relative terms= , analysts remain very bullish on this stock," says Chuck Hill, director of= research at Thomson Financial/First Call. The average rating for a stock o= n Wall Street is 2.2, or slightly shy of a "buy" rating. Enron scores a 1.6= . "This may turn into a classic case of locking the barn door after the bad= news is out," Mr. Hill says.=20 In downgrading the stock this week, Prudential analyst Carol Coale bumped i= t to "sell" from "buy," with a brief stop at "hold." While she is the only = analyst to recommend investors sell the stock, she openly concedes her rece= nt downgrades come "too little, too late."=20 Ms. Coale says Enron has been difficult to cover for years. She says the co= mpany's disclosure practices fall far short of ideal, and senior executives= are often evasive, even when presented with direct questions. For instance= , she says three weeks ago she asked Enron management if the company was un= der investigation by the Securities and Exchange Commission. They said "no,= " she says.=20 In light of the company's acknowledgment this week of an SEC "inquiry," she= asked Enron about the previous denial. "They told me it is an inquiry, not= an investigation," she says. An Enron spokeswoman says the company learned= of the SEC's inquiry only last Wednesday. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Enron Draws Down $3 Bln in Credit to Boost Investor Confidence 2001-10-26 08:52 (New York) Enron Draws Down $3 Bln in Credit to Boost Investor Confidence Houston, Oct. 26 (Bloomberg) -- Enron Corp., whose stock has fallen on concern about the largest energy trader's transactions with affiliates, drew down $3 billion in credit to restore confidence in its financial strength. The Houston-based company will use about $2.2 billion to pay off commercial paper obligations and keep the rest as cash, spokesman Mark Palmer said. ``Nothing instils confidence like cash,'' he said. Enron's shares have dropped 52 percent in the past 10 days as investors worry that the company's credit rating will be cut after $1.01 billion in third-quarter losses from failed investments. Enron needs good credit to raise cash daily to keep trading partners from demanding collateral and to settle transactions. Investors say they are worried about $3.3 billion in liabilities from affiliates formed to buy and sell Enron assets. Enron ousted Chief Financial Officer Andrew Fastow on Wednesday amid a Securities and Exchange Commission inquiry into partnerships he ran that cost the company $35 million. Jeff McMahon, head of Enron's industrial markets group, was named CFO in a bid to restore investor confidence, Chairman and Chief Executive Officer Kenneth Lay said in a statement. Enron shares fell 6 cents to $16.35 yesterday. --Mark Johnson in the Princeton newsroom (609) 750-4662, or at Enron Liked By Analysts Despite Complicated Dealings, WSJ Says 2001-10-26 06:12 (New York) Houston, Oct. 26 (Bloomberg) -- Enron Corp. is liked by many Wall Street analysts despite lingering questions about the power trading company's complicated partnership transactions and the techniques used to record earnings, the Wall Street Journal reported in its ``Heard on the Street'' column. Goldman Sachs Group Inc. analyst David Fleischer, who owns an undisclosed number of Enron shares, said that even though inadequate corporate disclosure makes it difficult to value the company, that doesn't mean he will write off the industry or not analyze Enron. Of the 17 analysts who follow the stock, 10 had a ``strong buy'' or equivalent rating, according to Thomson Financial/First Call, the paper said. Five rated it ``buy'' and one had a ``sell'' on Enron. Most analysts have stuck by the company, publicly dismissing questions about Enron's accounting practices and level of disclosure, the Journal said. The Securities and Exchange Commission is inquiring about partnerships run by former Chief Financial Officer Andrew Fastow. Enron Draws Down $3 Billion From Its Credit Lines, WSJ Reports 2001-10-26 00:28 (New York) New York, Oct. 26 (Bloomberg) -- Enron Corp. drew down about $3 billion of its available credit, the bulk of its bank credit lines, to restore confidence in the financial strength of the company, the Wall Street Journal reported. The energy trading company, whose shares have fallen 52 percent since Oct. 16, will use part of the money to redeem about $1.85 billion short-term commercial debt, the Wall Street Journal reported, citing an unidentified person familiar with the matter. Enron is talking to banks about a new, multi-billion line of credit, the paper reported, citing the unidentified person. The steps are seen as an effort by the energy trader to ensure that it has adequate liquidity in case its access to bank credit is disrupted, the paper said. Enron said in a statement distributed by PR Newswire that it drew on its credit lines to provide more than $1 billion in cash liquidity. The steps come a day after Chief Financial Officer Andrew Fastow resigned amid a Securities and Exchange Commission probe of partnerships he ran. --William Selway in the San Francisco newsroom at (415) 743-3511, Oct. 25, 2001, 11:22PM Houston Chronicle Action by Enron halts stock's fall=20 But credit ratings are being reviewed=20 By LAURA GOLDBERG=20 Copyright 2001 Houston Chronicle=20 The recent freefall of Enron Corp.'s stock price stabilized Thursday, a day= after the world's largest energy trader replaced its chief financial offic= er.=20 Enron, under a cloud for a number of reasons, including an Securities and E= xchange Commission inquiry, also made two announcements Thursday night aime= d at reassuring the financial community.=20 In the announcements, Enron said it had drawn more than $1 billion from its= lines of credit and said that energy-trading business done through EnronOn= line on Thursday was above average levels.=20 Houston-based Enron banked the money and has no plans to spend it, a spokes= woman said.=20 "We are making it clear that Enron has the full support of its banks and mo= re than adequate liquidity to assure our customers that we can fulfill our = commitments in the ordinary course of business," Jeff McMahon, who took ove= r Wednesday as chief financial officer, said in a written statement.=20 Enron said it recorded more than 8,300 transactions through EnronOnline on = Thursday.=20 Ken Lay, chairman and chief executive officer, said: "Enron continues to be= the market-maker of choice in wholesale and gas power markets, our custome= rs continue to put their confidence in us, and our core businesses are stro= ng and performing well."=20 Earlier Thursday, two credit rating agencies took actions regarding Enron's= ratings, which J.P. Morgan Securities analyst Anatol Feygin described as "= just more negative sentiment."=20 At one point in Thursday morning trading on the New York Stock Exchange, sh= ares in Enron were up more than $1.50, but they closed down 6 cents at $16.= 35. As recently as Oct. 16, the stock closed at $33.84.=20 Before the market closed, international credit-rating agency Fitch put Enro= n, which currently holds investment-grade credit ratings, on review for a p= ossible downgrade. Then after the market closed, Standard & Poor's took two= steps: It affirmed Enron's current ratings, but it also revised its long-t= erm ratings outlook to negative.=20 Moody's Investors Service put all of Enron's long-term debt on review for p= otential downgrade last week.=20 Enron, which noted that losing its investment-grade rating would take downg= rades of three notches, said Thursday it will do everything in its power to= defend its current rating.=20 In the SEC inquiry, federal securities regulators are reviewing transaction= s between Enron and two private investment partnerships formerly run by And= rew Fastow, who was removed as Enron's chief financial officer Wednesday. E= nron removed Fastow as part of its bid to repair its damaged credibility.= =20 Wall Street is also questioning certain of Enron's financing vehicles and i= s wondering whether the company will face hits to its balance sheet in the = months ahead.=20 S&P said it was concerned that the sizable drop in Enron's market capitaliz= ation has negatively affected its financial flexibility and could hurt the = company's plans to rebuild its balance sheet.=20 But it also noted that the "fundamental strength" of Enron's energy marketi= ng and trading business has remained steady.=20 Unless Enron's rebuilds confidence among investors and business partners, F= itch said, it could "impair Enron's financial flexibility and access to cap= ital markets," which would hurt its ability to conduct business.=20 Carol Coale, an analyst at Prudential Securities in Houston, said the actio= ns by S&P and Fitch might make some of Enron's energy customers skittish.= =20 Corporate US on track for bailout DAVID GOW IN NEW YORK 10/26/2001 The Guardian Copyright (C) 2001 The Guardian; Source: World Reporter (TM) Battered corporate America will receive an immediate Dollars 25bn (pounds 1= 8bn) tax rebate under a Dollars 100bn eocnomic stimulation package just app= roved by the Republican-controlled House of Representatives.=20 The controversial package, worth an estimated Dollars 212bn over three year= s, includes Dollars 70bn for companies next year alone. It was approved by = the House late on Wednesday by 216 votes to 214, but faces significant amen= dment in the Senate, which is now under Democrat control. It has reopened a wide ideological rift between Republicans, who favour cor= porate and individual tax cuts to reboot an economy mired in recession, and= Democrats - who, in a reprise of the Roosevelt "new deal", prefer to see i= ncreased public spending on unemployment and infrastructure projects.=20 Liberal lobby groups such as the Citizens for Tax Justice and the Center on= Budget and Policy Priorities claim the bill would hand back Dollars 6.3bn = to the 14 biggest corporations - which, they say, are renowned for paying l= ittle or no tax.=20 The most hotly contested measure is the repeal of the corporate alternative= minimum tax, or AMT, introduced in 1986 to make sure firms could not avoid= all tax payments. This, strongly supported by President Bush, would be mad= e retroactive so that all AMT payments would be refunded.=20 The lobby groups and the non-partisan Congressional Research Service calcul= ate that this would give a Dollars 1.4bn boost to computer group IBM alone,= while General Motors would get back Dollars 833m and General Electric Doll= ars 671m.=20 Others to benefit include TXU, the Texas-based utility that is the US's thi= rd largest energy supplier, which would would be given Dollars 608m. United= Airlines, the US's second largest carrier - which is warning of bankruptcy= - would receive Dollars 371m, and Enron, the energy trading group forced t= o sack its finance director this week, would be given Dollars 254m.=20 Democrat leaders in the Senate are determined to erase this measure and dis= like other proposals to boost firms, which include a 30% tax break for capi= tal investment over three years worth Dollars 39.3bn this year alone. They = say these amount to a "giant corporate giveaway".=20 Mr Bush and other Republican leaders argue these fiscal concessions would h= elp companies making hundreds of thousands redundant avoid further lay-offs= and invest more, prompting an economic recovery that, at best, is likely t= o start in the new year.=20 "Businesses are America's employers. They're the hardware store, the diner = down the street, the gas station on the corner. They're not the enemy of wo= rking families," the author of the plan, Representative Bill Thomas of Cali= fornia, said.=20 Democrats are especially incensed with the alleged paucity of the package's= provisions for the growing numbers of jobless, arguing that much of the Do= llars 12bn foreseen would not go to individuals but into the reserves of st= ates.=20 * A fresh round of global trade talks is essential to revitalise the world = economy after the terrorist attacks on the US, trade secretary Patricia Hew= itt said yesterday, writes Charlotte Denny=20 As a new report predicted that global trade growth will collapse this year,= Ms Hewitt warned that the world must not retreat into protectionism or iso= lationism in the wake of the attacks. WTO trade ministers are gathering in = Doha, Qatar, in two weeks' time to discuss launching a new round of talks, = the first since the collapse of their meeting in Seattle, nearly two years = ago.=20 Full coverage of the downturn at www.guardian.co.uk/recession/ Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Business/Financial Desk; Section C Harvey Pitt's S.E.C.: From Guard Dog to Friendly Puppy? By FLOYD NORRIS 10/26/2001 The New York Times Page 1, Column 2 c. 2001 New York Times Company CAN the new, friendlier Securities and Exchange Commission enforce the laws= and assure investors that corporate financial reports are trustworthy?=20 Harvey L. Pitt, the new S.E.C. chairman, set out this week to show that he = is not like his predecessor, Arthur Levitt. In a speech to the American Ins= titute of Certified Public Accountants -- an organization whose senior lead= ership led a bitter and ultimately unsuccessful fight against Mr. Levitt's = reform efforts -- Mr. Pitt praised his listeners and took a few swipes at h= is predecessor.=20 From now on, he promised, ''the commission will make sound decisions, in a = respectful, affirmative way, not in a demeaning, demanding or demonizing wa= y.'' He spoke favorably of ''pro forma'' earnings reports, in ways that no = doubt heartened accountants who have worked so hard to find ways to make ev= en the worst profit figures look pretty. There was no mention of Mr. Levitt= 's concerns about improper management of earnings. On the heels of Mr. Pitt's speech, the S.E.C. used a minor enforcement acti= on to herald a policy of not cracking down on companies that come forward t= o report their own errors. The decision itself was reasonable, although one= could wonder if top management did something wrong in failing to detect a = fraud that went on for years. But the way the S.E.C. trumpeted it raised qu= estions about whether the agency is turning into a friendly puppy rather th= an a guard dog. ''Is this amnesty for financial fraud?'' Jane Adams, the ac= counting analyst at Credit Suisse First Boston and a former S.E.C. staff me= mber, asked in a report to clients. She was not sure of the answer.=20 In an interview yesterday, Mr. Pitt dismissed such worries. ''No one is goi= ng to get away with anything,'' he said. ''What we are trying to do is crea= te an environment where people feel comfortable'' and can talk to the S.E.C= . ''without feeling we are looking for a big splash.''=20 A major embarrassment for accountants is having the S.E.C. force a client t= o restate its numbers. Mr. Pitt and his chief accountant, Robert Herdman, a= re sending signals that fewer such demands will be made. ''I am very much i= n favor of a vigorous enforcement program,'' Mr. Pitt said in the interview= , ''but I am not in favor of having investors barraged by conflicting state= ments and restatements.''=20 Mr. Pitt talks of companies ''getting it right the first time,'' which woul= d certainly be nice. But there is a risk that companies will become more ag= gressive in their accounting, figuring there will be no real penalty, like = a restatement, if they are caught. That would make life harder for auditors= who try to resist misleading accounting.=20 In trying to sound comforting to the accountants' group -- an organization = that, as he noted, he had represented as a lawyer for two decades -- Mr. Pi= tt has done little to reassure investors of his independence.=20 The proof, of course, will come in the performance. Fortunately, the mess a= t Enron gives the S.E.C. a golden opportunity to counter the puppy image. I= t will take time for the commission to determine if the company's accountin= g was proper. But there need be no delay in forcing Enron to clearly explai= n -- rather than obfuscate as it has so far -- the strange deals it made wi= th partnerships run by the executive just ousted as chief financial officer= .=20 ''This could,'' a former S.E.C. staff member said, ''focus the issue on whe= ther companies can make completely correct but totally misleading disclosur= es.'' And it would indicate that this watchdog still has a bite. Photo: Harvey L. Pitt=20 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Enron draws down at least 1 bln usd from credit lines to boost mkt confiden= ce 10/26/2001 AFX News (c) 2001 by AFP-Extel News Ltd HOUSTON (AFX) - Enron Corp said it drew on committed lines of credit to pro= vide cash liquidity in excess of 1 bln usd as part of moves to restore mark= et confidence in the company.=20 "We are making it clear that Enron has the support of its banks and more th= an adequate liquidity to assure our customers that we can fulfill our commi= tments in the ordinary course of business," said newly appointed Chief Fina= ncial Officer Jeff McMahon. "This is an important step in our plan to restore investor confidence in En= ron. Additionally, we will update investors over the next several days rega= rding our plans to maintain our long-term credit rating."=20 According to the Wall Street Journal, Enron drew down about 3 bln usd and w= ill use part of the money to offer to redeem about 1.85 bln usd of outstand= ing commercial paper, with the remainder providing the energy concern with = a cash cushion. The newspaper cited a person familiar with the matter.=20 It quoted observers as saying the move may be is a pre-emptive step by Enro= n to ensure that it had adequate liquidity should its access to bank lines = be interrupted.=20 The source also said Enron is talking to its banks about a new, multi-billi= on-dollar credit line.=20 jms For more information and to contact AFX: www.afxnews.com and www.afxpre= ss.com Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 The Five Dumbest Things on Wall Street This Week By K.C. Swanson <mailto:[email protected]> Staff Reporter 10/26/2001 07:08 AM EDT URL: <http://www.thestreet.com/markets/dumbest/10003035.html> TheStreet.com 1. United Airlines Just a Little Too Honest Rule No. 1 in CEO school: Never say that your company may soon collapse.=20 Seems kind of obvious, but that rule was flouted by United Airlines chief J= ames Goodwin, who warned in a letter to employees that the company "will pe= rish" next year unless it can stanch its tremendous losses, which have wors= ened since the terrorist attacks. "Today, we are literally hemorrhaging mon= ey," he wrote.=20 In raising concerns about the financial viability of United, a unit of UAL = (UAL:NYSE - news - commentary) , Goodwin only put into words what outsiders= have speculated about. Since Sept. 11, the airline has laid off about 20,0= 00 of its 100,000 employees and cut flights by as much as 25%. It's expecte= d to announce massive losses when it reports third-quarter earnings.=20 But in response to the disclosure, Goodwin has been roundly attacked. Feeli= ng that he had been all too honest, investors have knocked an additional 24= % off the stock's value. The shares are down 54% since Sept 11. Meanwhile, = UAL union leaders reportedly say Goodwin has exaggerated company difficulti= es to gain bargaining leverage in union negotiations. The leaders of one un= ion have petitioned the company's board of directors to have him sacked.=20 Bottom line: CEOs may get pilloried when they try to dodge the truth, but s= ometimes it doesn't pay to be too candid about worst-case scenarios, either= . Especially when that scenario is the company's own demise.=20 2. Forget the Victory Gardens; Let's Have a Comfortable War=20 Sure, we're at war with a band of cave-dwelling outlaws hell bent on our an= nihilation. But would all freedom-loving Americans please go out and buy so= me DVD players? Maybe even a nice new car?=20 That was basically the message from the Treasury Department, on news that C= ongress had voted for the creation of war bonds to finance antiterrorism ef= forts and rebuilding following the attacks. Officials at Treasury applauded= the sentiment, then politely suggested it would be even better for the eco= nomy if Americans just went to stores and bought stuff. "The economy is per= haps our greatest asset as we move forward in these efforts to fight the wa= r on global terrorists," says Betsy Holahan, a department spokesperson. "Wa= r bonds are an additional way for Americans to show their patriotism."=20 For the record, we don't think an issue of war bonds would be dumb, just su= perfluous. After all, nothing's stopped Americans from buying generic savin= gs bonds -- or better yet, Treasuries -- all of which finance spending by t= he federal government.=20 In the meantime, it's a little dislocating to hear politicians talk up war = bonds -- which most people associate with hardship and sacrifice -- at the = same time top economic gurus are practically begging people to shop. War bo= nds notwithstanding, we're a long way off from the era of ration books.=20 3. Enron Again Last week, we noted the extent of alarm about Enron's (ENE:NYSE - news - co= mmentary) revelation that its shareholder equity had dropped $1.2 billion, = following some unusual and possibly inappropriate high-level transactions. = Following that disclosure, besieged CFO Andrew Fastow has finally left the = company on what's delicately termed a "leave of absence."=20 In July, Fastow exited a limited partnership, from which he had reportedly = reaped large profits, after shareholders and analysts objected to his invol= vement. Concerns about those dealings and others had increased in the wake = of the disclosure about the charge to equity until even management acknowle= dged Fastow would have to go as a prerequisite to restoring investor confid= ence.=20 But that won't be an easy task, given the resentment about Enron's disincli= nation to explain its problems. One analyst called Fastow's departure "unse= ttling," noting that management had given the CFO its endorsement only the = day before. Sounding a note of exasperation, analysts at J.P. Morgan Chase,= Banc of America Securities and Prudential all downgraded the stock. And th= ere could be more trouble to come: The Securities and Exchange Commission h= as issued Enron a letter of inquiry related to some of its transactions.=20 4. Gold Diggers=20 It's understandable that investors felt panicky in September. Unfortunately= , some reacted by shoving their hard-earned money into gold funds. Accordin= g to Financial Research Corp., which tracks fund flows, the specialty preci= ous-metals category was the best-selling equity category during September, = with net inflows of $101 million.=20 Granted, that's not a huge sum in the mutual fund world. By comparison, dur= ing the same month, large growth funds saw net redemptions of $7.4 billion.= But the fact that so many people are jumping into precious metals is notew= orthy, given that gold funds have performed so badly for so long.=20 Sure, under the bizarre circumstances of late, they've enjoyed somewhat of = a pop. According to Morningstar, the average precious-metals fund is up 10.= 08% year to date. But over the past five years, the same category lost an e= mbarrassing 14.68%. By comparison, even large-cap growth funds -- everybody= 's favorite whipping boy -- managed to post a positive return. In the same = period, they were up 7.13%.=20 Moreover, circumstances that would seem to be the most favorable in decades= -- a combination of attacks on the U.S. government and war -- still don't = seem to have boosted gold prices significantly. Despite an initial surge in= prices after the terrorist attacks, they're again approaching their pre-Se= pt. 11 levels. It's too early to say, but it's likely the gold bugs will co= nfront disappointment once again.=20 5. Amazon Amazes Once Again Amazon (AMZN:Nasdaq - news - commentary) still maintains it will become pro= fitable by the fourth quarter. Well, at least it will post a pro forma oper= ating profit.=20 OK, so maybe that wouldn't include Amazon's service on $2.17 billion in lon= g-term debt or extraordinary charges. In fact, a pro forma operating profit= is basically just an accounting concept that would lend a fuzzy, meaningle= ss aura of minor triumph. The company still hasn't said when it will turn a= n economic profit.=20 For that matter, even the fourth-quarter prediction is iffy. After announci= ng the company expected to turn the pro forma operating profit, CFO Warren = Jenson added the humble qualifier, "There are no guarantees." Amazon simult= aneously lowered its forecast for fourth-quarter revenue, predicting that s= ales would be somewhere between flat and up by 10% compared with a year ago= .=20 Third-quarter trends weren't encouraging. Though sales overall were up slig= htly in the third quarter from a year ago, revenue from the company's core = books and music business actually fell 12%. At least the company has made p= rogress in cutting costs: A spokesperson says pro forma operating expenses = have decreased by 20% over the past year.=20 Incidentally, in the wake of Amazon's earnings report, two analysts made th= e belated decision to cut their ratings on the stock, which has fallen 93% = from its high back in December 1999. Merrill Lynch analyst Henry Blodget an= d SG Cowen analyst Scott Reamer downgraded the stock to "neutral" from prev= ious buy ratings. "We thought there might be upside to our estimates," note= d Blodget. "There wasn't."=20 Financial Stocks Post Gains After A Rough Morning Associated Press 10/26/2001 The Washington Post FINAL E03 Copyright 2001, The Washington Post Co. All Rights Reserved NEW YORK, Oct. 25 -- Selected buying of technology and energy shares pulled= the stock market higher today, reversing a morning slide triggered by a pa= ir of grim economic reports.=20 Shares of semiconductor makers and equipment manufacturers did particularly= well, as did energy traders, led by a surprisingly strong performance from= Williams Cos., a Tulsa-based energy firm that had an 83 percent jump in th= ird-quarter net earnings. The Dow Jones industrial average closed rose at 9448.78, up 103.16, reversi= ng an earlier deficit of 167 points. The Nasdaq composite index rose 36.29,= to 1767.83, and the Standard & Poor's 500 index was rose 12.79, to 1097.99= .=20 Earlier, a pair of dismal economic reports had compounded worries about the= fallout from last month's terrorist attacks to send stocks lower. As in re= cent sessions, however, investors absorbed the bad news and focused on good= news regarding individual companies.=20 Williams Cos. surpassed analysts' estimates for the third quarter and raise= d its forecasts for full-year earnings for 2001 and 2002. Investors rewarde= d the company by driving its shares up $1.42, to $27.32, bringing several o= ther parts of the energy sector along with it.=20 Even the shares of Enron rose, a day after the embattled company dismissed = its chief financial officer and replaced him with an another executive from= within the company. Enron rose 28 cents, to $16.69.=20 Semiconductor shares also rebounded, led by industry bellwether Intel, up 4= 4 cents at $25.92, and Applied Materials, up $1.35 at 36.69. Leading data-s= torage maker EMC rose $1.06, to $13.54.=20 Traders said the Senate's passage this afternoon of an anti-terrorism measu= re also helped lift investor sentiment. Late Wednesday, the House passed a = $100 billion economic stimulus package to combat the effects of the terrori= st attacks on the economy.=20 A surprisingly large drop in orders for durable goods had weighed heavily o= n the market in the morning, as did poor earnings results from American Int= ernational Group and WorldCom.=20 The Commerce Department reported orders plunged in September for the fourth= consecutive month. The 8.5 percent decline was far worse than the 1.3 perc= ent dip many analysts had forecast.=20 The Labor Department also reported that the number of newly laid-off Americ= ans filing for unemployment benefits rose by 8,000 last week, to 504,000, t= he second-highest figure in nearly a decade and a level that is generally a= ssociated with recessions.=20 Other Indicators=20 * The New York Stock Exchange composite index rose 5.88, to 562.96; the Ame= rican Stock Exchange index rose 5.10, to 828.67; and the Russell index of 2= ,000 small stocks rose 8.31, to 435.96.=20 * Advancing issues outnumbered declining ones by 9 to 7 on the NYSE, where = trading volume rose to 1.38 billion shares, from 1.35 billion on Wednesday.= On the Nasdaq, advancers outnumbered decliners by more than 3 to 2 and vol= ume totaled 2.2 billion, up from 1.84 billion.=20 * The price of the Treasury's 10-year note rose $4.38 per $1,000 invested, = and its yield fell to 4.54 percent, from 4.59 percent late Wednesday.=20 * The dollar rose against the Japanese yen and the euro. In late New York t= rading, a dollar bought 122.87 yen, up from 122.76 yen late Wednesday, and = a euro bought 89.25 cents, down from 89.42 cents.=20 * Light, sweet crude oil for December delivery settled at $22.01 a barrel, = up 32 cents, on the New York Mercantile Exchange.=20 * Gold for current delivery rose to $277.80 a troy ounce, from $275.90 on W= ednesday, on the New York Mercantile Exchange's Commodity Exchange. http://www.washingtonpost.com=20 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Sudhakar will head Enron probe panel 10/26/2001 The Times of India Copyright (C) 2001 The Times of India; Source: World Reporter (TM) MUMBAI: Retired supreme court judge Sudhakar Kurdukar will head the judicia= l panel set up by the Maharashtra government to investigate into the contro= versial Enron deal.=20 An announcement in this regard was made by chief minister Vilasrao Deshmukh= at a press conference held at Mantralaya on Wednesday. The ruling Democratic Front (DF) coalition had differences over the appoint= ment of the judge, with the Nationalist Congress Party (NCP) demanding that= a retired judge of the Bombay high court head the judicial panel. The Cong= ress and the Left Front partners in the DF, however, insisted on a supreme = court judge.=20 The issue was hotly debated in the coordination committee of the DF. The NC= P members in the DF finally left the decision to Mr Deshmukh. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Enron Taps $3 Billion From Bank Lines in Pre-Emptive Move to Ensure Liquidi= ty 10/25/2001 Dow Jones Business News (Copyright (c) 2001, Dow Jones & Company, Inc.) Embattled Enron Corp. drew down about $3 billion, the bulk of its available= bank credit lines, in a bid to restore confidence in its financial strengt= h and liquidity, Friday's Wall Street Journal reported.=20 Enron (ENE) will use part of the money to offer to redeem around $1.85 bill= ion in outstanding commercial paper -- short-term corporate IOUs -- accordi= ng to a person familiar with the matter, with the remainder used to provide= a cash cushion. This person also said that Enron was talking to its banks = about a new multibillion-dollar credit line. Some observers thought the mov= es were a pre-emptive step by Enron to ensure that it had adequate liquidit= y should its access to bank lines be interrupted. Enron insists its business operation and financial condition remain strong.= But "when the market is reacting as irrationally as it has been the last f= ew days, we thought that cash was better than a commitment from a bank," sa= id an Enron spokesman. In a prepared statement, the company's new chief fin= ancial officer, Jeff McMahon, said that by drawing down the bank lines, "we= are making it clear that Enron has the support of its banks and more than = adequate liquidity to assure our customers that we can fulfill our commitme= nts."=20 The move underscored the tumultuous conditions that have been sweeping over= the Houston energy-trading firm in the past 10 days. Enron is the nation's= largest energy trader and is a principal in nearly one-quarter of all elec= tricity and natural-gas trades. Thursday, for example, Enron was involved i= n about $4 billion worth of deals through its EnronOnline unit.=20 Since early last week, Enron's share price has plummeted 50%. It has report= ed a $618 million third-quarter loss and a reduction in shareholder equity = of $1.2 billion. It also disclosed that the Securities and Exchange Commiss= ion is conducting an inquiry into billions of dollars of transactions it di= d with entities run by its former chief financial officer, Andrew S. Fastow= , who was replaced Wednesday.=20 The draw-down of the credit facilities came as a major rating agency, Fitch= , put Enron on review for a possible downgrade while Standard & Poors chang= ed Enron's credit outlook to negative from stable. Moody's Investors Servic= e has already said it is looking at a possible downgrade. In order to fall = below investment grade, Enron's credit rating would have to fall several no= tches.=20 If that were to happen, however, a host of bad consequences could follow. T= ogether with the sharp decline in its stock price, a noninvestment grade ra= ting would throw the company into default on obligations involving billions= of dollars of borrowings. In that event, Enron could be forced to issue mi= llions of shares of stock to holders of that debt, diluting the value of ex= isting shares. As of 4 p.m. in New York Stock Exchange composite trading, E= nron shares were down six cents at $16.35.=20 Copyright (c) 2001 Dow Jones & Company, Inc.=20 All Rights Reserved. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Enron chief executive resigns from board of i2 Technologies 10/25/2001 Associated Press Newswires Copyright 2001. The Associated Press. All Rights Reserved. DALLAS (AP) - Kenneth Lay, the chairman and chief executive of embattled En= ron Corp., has resigned from the board of software company i2 Technologies.= =20 "This is a very painful decision," Lay said in a statement issued Thursday = by Dallas-based i2 Technologies. "But now that I am again taking on the CEO= responsibilities at Enron, I must reduce my outside activities." Lay resumed the chief executive's job at Enron in August after Jeff Skillin= g surprised investors by leaving the Houston-based energy company.=20 Enron officials did not immediately return calls from The Associated Press.= =20 In the past week, Enron has been rocked by questions surrounding partnershi= ps that did business with Enron while they were managed by the company's ch= ief financial officer. The official was replaced on Tuesday.=20 Enron's stock price has fallen nearly 50 percent since interest in the part= nerships intensified, and the company acknowledged that the U.S. Securities= and Exchange Commission was investigating the arrangements=20 I2 makes software to help companies manage their supply chains, and its cli= ents include Texas Instruments, Ford Motor Co. and Dell Computer Corp.=20 I2 stock plunged nearly 25 percent on Oct. 17 after the company reported a = $5.53 billion third-quarter loss and said it would cut 1,000 jobs, about on= e-fifth of the work force.=20 Lay joined the board in October 2000. No replacement was announced.=20 In trading Thursday, i2 shares rose 24 cents to $4.95, and Enron shares fel= l 6 cents to $16.35. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 As Enron's woes unnerve investors about energy sector, analysts say its pro= blems are isolated By BRAD FOSS AP Business Writer 10/25/2001 Associated Press Newswires Copyright 2001. The Associated Press. All Rights Reserved. NEW YORK (AP) - As it grew over the past decade into the country's largest = natural gas and power marketing company, Enron Corp. became the de facto ba= rometer of health within the energy trading sector.=20 Wall Street buoyed the stock prices of Enron's competitors based in part on= the huge success of the Houston-based company's business model. Now, execu= tives and industry analysts hope to prevent Enron's internal tumult and fre= e-falling stock price from undermining investors' confidence in the sector.= They say the Houston-based company's problems should be viewed in isolatio= n and not as a broader indicator of the marketplace. "The marketplace for natural gas and power trading is as vibrant as it was = yesterday, a week ago or a month ago," said Jim Donnell, president of Duke = Energy North America, a division of Duke Energy Corp. that generates and tr= ades power.=20 That opinion appeared to gain acceptance on Thursday as shares of Dynegy In= c., El Paso Corp. and Duke Energy Corp. rebounded from losses on Wednesday,= when Enron's latest woes appeared to spill over into the stock prices of i= ts rivals.=20 Enron's stock has fallen about 50 percent in the past week (and nearly 80 p= ercent since January) and analysts said its recovery is not expected anytim= e soon.=20 The latest troubles began Oct. 16 when Enron reported third quarter earning= s, and a longtime concern among Wall Street analysts that executives were n= ot entirely forthcoming only got worse.=20 First came reports that some of the company's losses stemmed from partnersh= ips managed by Enron's chief financial officer at the time, Andrew Fastow. = That raised concerns about a potential conflict of interest and touched off= an inquiry by the Securities and Exchange Commission.=20 Then on Wednesday, one day after Enron Chairman Kenneth Lay defended Fastow= , the company ousted him and said he would take a leave of absence.=20 "They created an environment in which their credibility was put to the test= and they didn't come through with flying colors," said Christopher Ellingh= aus, an analyst at Williams Capital Group in New York.=20 Enron shares have been falling all year for reasons new and old, which have= little to do with the company's wholesale energy business, which accounts = for roughly 80 percent of profits.=20 Analysts insist wholesale energy marketing can be profitable even in the fa= ce of an economic downturn and falling natural gas and electricity prices.= =20 "Even though (Enron) shot themselves in the foot, the basic business is sti= ll sound and not likely to disappear," Ellinghaus said.=20 UBS Warburg analyst Ronald Barone echoed that sentiment.=20 "The collateral damage to the rest of the space - Dynegy and El Paso - is o= verdone," Barone said.=20 On Thursday, Williams Companies Inc. of Tulsa, Okla., reported net income o= f $760 million and Reliant Resources Inc. of Houston reported $133 million = in profits.=20 "It's business as usual," said Dynegy spokesman Steve Stengel.=20 Not for Enron, whose stock price began a steady descent 10 months ago when = its nascent high-speed Internet unit failed to live up to the hype. The dow= nward momentum was further propelled by difficulties collecting money from = power customers in India and the surprise departure in August of then-chief= executive Jeff Skilling was considered another bad sign.=20 On Oct. 16, Enron reported a net loss of $638 million in the third quarter,= taking a one-time charge of $1.01 billion attributed to investment losses,= troubled assets and unit restructurings. Excluding the charge, Enron earne= d $393 million on $47.6 billion in revenues for the three months ending Sep= t. 30.=20 Ellinghaus said the stocks of Enron's competitors were brought down Wednesd= ay because of "dire" speculation that Enron's troubles might be so bad that= it could have difficulty paying hundreds of millions of dollars worth of r= eceivables to companies such as Duke and Dynegy.=20 "All I'm hearing is doomsday type stuff and doomsday is not reality," Ellin= ghaus said.=20 Enron did not return calls seeking comment Thursday.=20 Donnell of Duke Energy said the Charlotte, N.C.-based company is paying clo= se attention to the Enron situation and that there has been no indication o= f receivables not being paid.=20 "They continue to be one of the best functioning companies as it relates to= credit," he said. "They've never missed a deadline." AP Graphic ENERGY STOCKS=20 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Enron's Credit Outlook Downgraded to Negative by S&P (Update1) 2001-10-25 18:59 (New York) Enron's Credit Outlook Downgraded to Negative by S&P (Update1) (Adds analyst comment in fourth paragraph.) Houston, Oct. 25 (Bloomberg) -- Enron Corp.'s long-term credit ratings outlook was changed to negative from stable by Standard & Poor's after the largest energy trader's shares fell 49 percent in the past week. S&P affirmed the Houston-based company's ratings of ``BBB+/A2,'' which are investment grade. The ratings company cited lost market capitalization and the possibility that Enron won't generate enough money from selling assets outside the main trading business to repay debt. S&P did say that ``the strategic direction of the company is likely to become more credit-positive in the wake of recent management changes.'' Enron reported $1.01 billion in losses from investments outside the principal business of trading commodities such as electricity and natural gas. Chief Financial Officer Andrew Fastow resigned yesterday as the U.S. Securities and Exchange Commission asks for information about related-party transactions he conducted. ``The S&P write up was very positive,'' said Dorothea Matthews, an analyst at CreditSights Inc., a research firm. ``It seems that the ratings company went out of its way to tray and calm things down.'' Shares of Enron fell 6 cents to $16.35. --Russell Hubbard in the Princeton newsroom, 609-750-4651 or Enron's Trading Partners Say It's Business as Usual (Update2) 2001-10-25 19:38 (New York) Enron's Trading Partners Say It's Business as Usual (Update2) (Adds new Enron CFO in 14th paragraph.) Houston, Oct. 25 (Bloomberg) -- Concerns Enron Corp. will run short on cash haven't prevented commodities traders from doing business with the largest energy broker, customers say. The company handles about 25 percent of U.S. power and natural-gas trading, said John Kilduff, vice president of energy risk management for Fimat USA. It's also a leader in complex derivatives that allow others to hedge against the risk of fluctuating commodities prices. Enron's credit rating is on watch for possible downgrade at Moody's Investors Service, and Standard & Poor's lowered Enron's long-term credit outlook to negative after $1.01 billion in third- quarter losses from some soured investments. The company needs good credit to raise cash every day to keep trading partners from demanding collateral and to settle transactions. So far, there are no signs that Houston-based Enron is handling less business, Kilduff said. ``If they were unable to perform, it would be a major problem,'' he said. ``It could get like Long-Term Capital if things really broke down because the numbers are that big.'' Long-Term Capital Management, a private investment fund for the wealthy, incurred massive losses making bond trades during the 1998 Russian currency crisis. The fund's portfolio plunged. More than a dozen banks bailed out the fund at a cost of $3.6 billion to avoid a collapse. Needs Cash Daily Enron trades electricity, natural gas, coal and other commodities worldwide, as well as complex financial instruments to hedge against price swings in the goods. ``As of now, Enron is active in the markets,'' Kilduff said. ``No one is cutting trading lines that I can see, or demanding different terms than before.'' Companies that trade as heavily as Enron require cash every day to settle positions, said Kilduff, whose company swaps natural gas and other energy investments with Enron. Some days, Fimat will bet that natural-gas prices will fall, while Enron bets that they will rise. Natural gas usually does one or the other every day, and someone pays the difference. ``The liquidity of your trading partners is a risk factor,'' Kilduff said. ``Someone is paying someone else every day.'' Enron said on a conference call Tuesday that it has enough money to operate normally, and can fall back on $3.4 billion in bank credit lines if necessary. The company is determined to protect the credit rating, Enron has said. ``We aren't even going to entertain worst-case scenarios at this point,'' said Enron spokeswoman Karen Denne. Investor Questions Enron, based in Houston, ousted Chief Financial Officer Andrew Fastow yesterday, two days after the U.S. Securities and Exchange Commission began asking questions about partnerships he ran that invested in company shares. Those trades cost Enron $35 million. Jeff McMahon, head of Enron's industrial markets unit, replaced Fastow, who went on leave of absence. Enron shares have fallen 49 percent in the past week. They fell 6 cents to $16.35 today. Based on Bloomberg composite ratings, most of Enron's long- term debt is rated at BBB2 and BBB1, two or three levels above investment grade. Fitch, Standard & Poor's and Moody's all rate the company's debt at investment grade. The company also faces questions from investors about $3.3 billion in potential liabilities from affiliated companies formed to buy and sell Enron assets such as power plants. The affiliates owe payments to bond investors and plan to meet them by selling assets. Enron doesn't know if the sale proceeds will cover the debt. The company would have to make good on any shortfall. Little Time Enron asked Citicorp Inc. on Tuesday to arrange a $750 million loan to ensure access to credit if the company gets shut out of the money markets. Enron had about $1.85 billion of commercial paper, or short- term unsecured debt, outstanding as of Tuesday, traders said. The company, which has a $3 billion program, has had difficulty finding buyers for new commercial paper sales since the SEC investigation was announced, the traders said. Today, Enron offered two-week commercial paper at a 3 percent yield, 10 to 15 basis points above comparably rated companies. ``There appears to be enough liquidity to give them enough time to get their house in order,'' said Jon Kyle Cartwright, senior energy credit analyst at Raymond James & Associates. ``There's a point where a credibility crisis becomes a self- fulfilling prophecy, so they have less time than they think to pacify the market.'' Ripple Effect Some investors are concerned that Enron's complex book of hedges, swaps, options and other derivative contracts involves so many partners, participants and companies that a failure would pose a risk to the economy, and force a bailout like Long-Term Capital Management's. ``The talk in the financial markets is that some counter party to Enron could fail if Enron can't perform,'' said Jeff Caughron, manager of $400 million in investments for Tinker Federal Credit Union in Oklahoma City. ``If it goes down, there could be a big ripple effect.'' The effect has already spread as investors worry Enron won't be able to pay bills owed to power producers such as Calpine Corp., Dynegy Inc., Mirant Corp. and NRG Inc., said Chris Ellinghaus, an analyst at Williams Capital Group. As a group, shares of the four have fallen 11 percent in the past week. ``Rumors that these companies have receivables with Enron are fueling a sell-off,'' he said. ``Both traders and companies selling power to Enron are suffering.'' All four companies said they're trading with Enron as they have in the past. Market Maker Enron supplies services some customers consider irreplaceable. The Sacramento Municipal Utilities District hedges weather risk through Enron, said risk manager Jim Tracy. The district entered into an agreement that forces it to pay Enron if rainfall is abundant and hydroelectric dams can operate at peak efficiency and capacity; in dry seasons, when the dams can't operate as well, Enron pays the district. ``If Enron's credit went bad, or they folded up, that agreement wouldn't get picked up by someone else,'' Tracy said. Enron also helps many U.S. utilities protect themselves from electricity and natural gas price fluctuations in the same way it helps the Sacramento utility district hedge against too little rainfall. Any impairment on Enron's part to continue doing so would trickle down to Main Street utilities, Tracy said. ``Utilities would start reserving more on their balance sheets for price swings,'' Tracy said. --Russell Hubbard in the Princeton newsroom at 609-750-4651, or at Enron Broadband Begins Closing London, Singapore Offices By Erwin Seba Of DOW JONES NEWSWIRES 10/25/2001 Dow Jones Energy Service (Copyright (c) 2001, Dow Jones & Company, Inc.) HOUSTON -(Dow Jones)- Enron Corp.'s (ENE) telecommunications unit will clos= e down its trading offices in London and Singapore over the next six months= .=20 Enron Broadband Services executives have quietly begun to inform employees = overseas and haven't made a public announcement of plans to consolidate Asi= an and European bandwidth trading operations at the company's Houston headq= uarters. "It's a way to structure the business to fit the opportunities that are out= there in the market now," Enron Broadband Services spokeswoman Terrie Jame= s said in response to questions from Dow Jones Newswires.=20 The London office has 20 or fewer employees, James told Dow Jones. The Sing= apore office has 15 or fewer employees.=20 Americans working in the offices would probably choose to relocate in the U= .S., James said. She didn't know how many of the employees are U.S. citizen= s. She didn't know what options might be offered to the non-American employ= ees.=20 James didn't know how much money Enron might save by closing the offices.= =20 The decision by Enron, the leading bandwidth market-maker, shows that inter= national bandwidth markets are having tough times like the U.S. market.=20 Earlier this year, as the U.S. market went sour, Enron executives had said = that European and Asian telecommunications carriers might be more open to b= andwidth trading, making the markets in those regions ripe for growth.=20 -By Erwin Seba, Dow Jones Newswires; 713-547-9214; [email protected] Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Calpine:No Exposure To Enron; No Calif Pwr Contract Talks 10/25/2001 Dow Jones Energy Service (Copyright (c) 2001, Dow Jones & Company, Inc.) NEW YORK -(Dow Jones)- Calpine Corp. (CPN) has no credit exposure to tradin= g partner Enron Corp. (ENE), Calpine said Thursday in an earnings conferenc= e call. And the company hasn't been contacted by the state of California ab= out renegotiating the billions of dollars in long-term supply contracts the= company signed with the state earlier this year.=20 Calpine's diluted net earnings for the third quarter were 88 cents a share = compared with 48 cents for the same quarter last year. Setting Calpine's co= nsistent earnings growth aside, Wall Street analysts in Thursday's conferen= ce call focused their questions on trouble spots in the energy industry, li= ke Enron, California, and whether the U.S. will have a surplus of electric = power stations in a few years. Moody's has put Enron's credit on watch for possible downgrade, and some of= the company's debt is trading like junk bonds in the secondary market this= week. Trading partners like Calpine have been asked about their exposure t= o Enron.=20 "We continue to assess the situation, but right now don't have any net expo= sure to Enron," said Calpine's vice president of corporate risk management,= Paul Pasoli. "We continue to trade with them. We will adjust our credit th= reshold based on how their bonds are trading and their credit rating."=20 When asked if there would be any exposure to Enron if trading were to be ha= lted immediately, Pasoli said that, in fact, Calpine would owe Enron a litt= le money.=20 In another energy industry area of concern, Calpine was asked about the sta= te of California's stated desire to renegotiate tens of billions of dollars= of long-term power contracts. Calpine is by far the biggest supplier under= those contracts, which on a mark-to-market basis are worth far less now th= an when California bought this past winter and spring.=20 "Nobody has come to us directly or indirectly with regard to the Calif cont= racts. In general, we respect our contracts and expect our counterparties t= o do so as well," said Calpine cheif executive, Peter Cartwright. "If there= are any contract renegotiations that can result in a win-win, we would be = happy to look at that, if California asks. We've done that many times."=20 As for future power prices, Calpine said that it's going forward with its p= rogram to build a portfolio of 70,000 megawatts of generation, which is abo= ut three times its current capacity and would be about 7% of all U.S. capac= ity. The critical determinant of profitability in power generation is the d= ifference between natural gas prices and power prices, and Calpine said tha= t difference, or "spark spread," has grown the past few months. Furthermore= , the company executives said they are holding to a requirement that all pr= ojects generate an after-tax return of 18% on the investment.=20 As a result, the company expects earnings to grow at least 40% annually thr= ough 2005. Calpine will fund near-term cash needs in the debt markets and w= on't issue new stock until its stock price rises substantially.=20 -By Mark Golden, Dow Jones Newswires; 201-938-4604; [email protected]= m Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Spector, Roseman & Kodroff, P.C. Files Class Action Suit Against Enron Corp= oration 10/25/2001 PR Newswire (Copyright (c) 2001, PR Newswire) PHILADELPHIA, Oct. 25 /PRNewswire/ -- The law firm of Spector, Roseman & Ko= droff, P.C. announces that a class action lawsuit has been commenced in the= United States District Court for the Southern District of Texas, Houston D= ivision, against defendants Enron Corporation ("Enron" or the "Company") (N= YSE: ENE), Kenneth L. Lay, Jeffrey K. Skilling, and Andrew Fastow, on behal= f of purchasers of the common stock of Enron during the period between Janu= ary 18, 2000 and October 17, 2001, inclusive (the "Class Period").=20 The Complaint alleges that defendants violated Sections 10(b) and 20(a) of = the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder,= by issuing a series of material misrepresentations to the market between J= anuary 18, 2000 and October 17, 2001, thereby artificially inflating the pr= ice of Enron common stock. Specifically, the complaint alleges that Enron i= ssued a series of statements concerning its business, financial results and= operations which failed to disclose (i) that the Company's Broadband Servi= ces Division was experiencing declining demand for bandwidth and the Compan= y's efforts to create a trading market for bandwidth were not meeting with = success as many of the market participants were not creditworthy; (ii) that= the Company's operating results were materially overstated as result of th= e Company failing to timely write-down the value of its investments with ce= rtain limited partnerships which were managed by the Company's chief financ= ial officer; and (iii) that Enron was failing to write-down impaired assets= on a timely basis in accordance with GAAP. On October 16, 2001, Enron surp= rised the market by announcing that the Company was taking non-recurring ch= arges of $1.01 billion after-tax, or ($1.11) loss per diluted share, in the= third quarter of 2001, the period ending September 30, 2001. Subsequently,= Enron revealed that a material portion of the charge related to the unwind= ing of investments with certain limited partnerships which were controlled = by Enron's chief financial officer and that the Company would be eliminatin= g more than $1 billion in shareholder equity as a result of its unwinding o= f the investments. As this news began to be assimilated by the market, the = price of Enron common stock dropped significantly. During the Class Period,= Enron insiders disposed of over $73 million of their personally held Enron= common stock to unsuspecting investors. If you purchased Enron securities during the Class Period, you may, no late= r than December 21, 2001, move to be appointed as a Lead Plaintiff in this = class action. A Lead Plaintiff is a representative, chosen by the Court, th= at acts on behalf of other class members in directing the litigation. The P= rivate Securities Litigation Reform Act of 1995 directs Courts to assume th= at the class member(s) with the "largest financial interest" in the outcome= of the case will best serve the class in this capacity. Courts have discre= tion in determining which class member(s) have the "largest financial inter= est," and have appointed Lead Plaintiffs with substantial losses in both ab= solute terms and as a percentage of their net worth. If you have sustained = substantial losses in Enron securities during the Class Period, please cont= act Spector, Roseman & Kodroff, P.C. at [email protected] for a more = thorough explanation of the Lead Plaintiff selection process. If you have r= elatively small losses, your ability to participate in any recovery will be= protected by the Lead Plaintiff(s), and you need take no affirmative steps= at this time.=20 If you wish to discuss this action or have any questions concerning this no= tice or your rights or interests, please contact plaintiff's counsel Robert= M. Roseman toll-free at 888-844-5862 or via E-mail at classaction@srk-law.= com. For more detailed information about the firm please visit its website = at http://www.spectorandroseman.com.=20 Spector, Roseman & Kodroff, P.C., located in Philadelphia, Pennsylvania and= San Diego, California, concentrates its practice in complex litigation inc= luding actions dealing with securities laws, antitrust, contract and commer= cial claims. The firm is active in major litigation pending in federal and = state courts throughout the United States. The firm's reputation for excell= ence has been recognized on repeated occasions by courts which have appoint= ed the firm as lead counsel in numerous major class actions involving viola= tions of the federal securities laws and the federal antitrust laws, and co= nsumer fraud. As a result of the efforts of the firm, and its members, hund= reds of millions of dollars have been recovered on behalf of thousands of d= efrauded shareholders and companies.=20 MAKE YOUR OPINION COUNT - Click Here=20 http://tbutton.prnewswire.com/prn/11690X17742762 /CONTACT: Robert Roseman of Spector, Roseman & Kodroff, P.C., +1-888-844-58= 62/ 19:00 EDT=20 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 TGS Q3 net profit up 22 pct yr-on-yr on higher NGL sales, transport revenue= s 10/25/2001 AFX News (c) 2001 by AFP-Extel News Ltd BUENOS AIRES (AFX) - Perez Companc SA and Enron Corp pipeline joint venture= , Transportadora de Gas del Sur SA, said its net profit in the three months= to September rose 22 pct year-on-year to 37 mln pesos on the back of stron= g growth in sales of natural gas liquids (NGL) and increased revenue from t= ransport.=20 Total revenue grew 24 pct year-on-year to 147 mln pesos, as "TGS continues = to grow its revenues in all of its business segments," CEO Eduardo Ojea Qui= ntana said. NGL sales surged 86 pct year-on-year to 31.1 mln pesos, after a partial tak= eover of the Cerri complex's production at Bahia Blanca, although volumes d= eclined as a result of the start-up of the Mega project at the beginning of= 2001, Ojea Quintana said.=20 Gas transport revenue rose 11 pct year-on-year to 109.6 mln pesos as averag= e gas transportation contracted capacity rose 6 pct to 62.5 mln cubic metre= s daily, following a capacity expansion completed in June.=20 However, he also noted "important challenges, mostly associated with the re= levant regulatory issues that remain unresolved, as well as the deep econom= ic crisis that Argentina is currently undergoing."=20 "These negative factors have adversely affected our investment plans for th= e current year and for 2002," Ojea Quintana added.=20 lac/zr For more information and to contact AFX: www.afxnews.com and www.afx= press.com Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Enron Draws Down Credit Facility 10/25/2001 Dow Jones News Service (Copyright (c) 2001, Dow Jones & Company, Inc.) HOUSTON -(Dow Jones)- Enron Corp. (ENE) drew on committed lines of credit t= o provide cash liquidity of more than $1 billion.=20 In a press release Thursday, the energy company said it has "more than adeq= uate" liquidity to fulfill business commitments. Enron said the credit action is a step to restore investor confidence, and = it plans to update investors in several days regarding plans to maintain it= s long-term credit rating.=20 Earlier Thursday, Standard & Poor's revised its long-term ratings outlook f= or Enron to negative due to concerns that the company's significant drop in= market capitalization has hurt the company's flexibility and could impair = plans to rebuild the balance sheet.=20 Over the past week, Enron's shares have fallen more than 40% amid negative = news from the company.=20 The company's New York Stock Exchange-listed shares closed Thursday at $16.= 35, down 6 cents, or 0.4%, on composite volume of 39,212,300 shares. Averag= e daily volume is 7,832,606 shares.=20 Early last week, the company reported a $618 million third quarter loss, re= sulting from $1.01 billion in write-offs. Enron also disclosed a $1.2 billi= on reduction in shareholder equity for the quarter as a result of terminati= ng certain transactions related to a partnership that for a time was headed= by Chief Financial Officer Andrew Fastow.=20 On Wednesday, Enron replaced Fastow with Jeff McMahon, effective immediatel= y.=20 The Wall Street Journal reported Thursday that some bond traders believe En= ron's bonds won't continue to hold up better the company's stock.=20 The company's five-year bond has decreased about 16% in the past two weeks,= much less than the 50% decline in Enron's stock price since the Oct. 16 di= sclosure of the $1.01 billion charges.=20 But the fall in the bond's price translates to a yield of 7.7 percentage po= ints above bellwether U.S. government bonds, which is widening from about 3= percentage points two weeks ago. Although Enron is still an investment-gra= de credit, that kind of "spread" is more characteristic of a junk bond with= a credit rating of single B or lower, the Journal said.=20 On Wednesday, Fitch put Enron's credit rating on watch for a possible downg= rade, following a similar move by Moody's Investor Service earlier this wee= k.=20 Several energy trading companies said Thursday that although they have conc= erns about Enron's credit quality, they have made almost no changes in poli= cy concerning the company.=20 Dynegy Inc. (DYN), Williams Cos. (WMB) and Aquila Inc. (ILA) said they have= n't changed their credit policy concerning Enron, which accounts for about = a quarter of the trade in U.S. power and gas markets.=20 The Journal reported that bond traders expect Enron executives to meet with= rating agencies, debt-trading desks, big bond holders and banks next week.= =20 Company Web site: http://www.enron.com=20 -Susan Willetts; Dow Jones Newswires; 201-938-5388 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Enron Employees Watch Options Devalue as Shares Fall (Correct) 2001-10-25 18:41 (New York) Enron Employees Watch Options Devalue as Shares Fall (Correct) (Company corrects structure of standard compensation package in second paragraph.) Houston, Oct. 25 (Bloomberg) -- Enron Corp. prided itself on sharing the wealth with employees when the company was posting record profits last year. Now, from the boardroom to the mailroom, employees are sharing the pain. Enron, the largest energy trader, grants stock options to the bulk of its 20,000 employees. Under Enron's standard compensation package, most employees get stock options equal to 5 percent of their annual base salary, spokeswoman Meredith Philipp said. Employees held 46.8 million exercisable options as of the end of 2000, all at average prices above the company's current share price. The stock has dropped 80 percent this year. ``Virtually every option is under water right now,'' Enron spokeswoman Karen Denne said. Enron's board sets the strike price for the options in December or January. Employees can't cash the options in and make a profit unless the stock is trading above the strike price. At the end of 2000, Enron shares were trading at $83.13. In December, the board set a strike price of about $80. Shares of Houston-based Enron fell 6 cents to $16.35 today. They have lost 37 percent of their value so far this week. Enron said Monday that the Securities and Exchange Commission was asking questions about partnerships run by Andrew Fastow, who was ousted as Enron's chief financial officer yesterday. One partnership cost the company $35 million, and Enron bought back 62 million shares from a partnership at a cost of $1.2 billion. Enron named Jeff McMahon, head of its industrial markets group, as CFO late yesterday. Unvested Options Another 96.1 million options granted to Enron employees hadn't vested as of the end of last year. About 15.4 million of them, or 16 percent, were at prices ranging from $6.88 to $20 a share. The rest vest at levels well above the current share price. Experts who have watched the devaluation of stock options in other industries, such as technology and telecommunications, say it becomes demoralizing for workers to watch share prices fall below their options. ``It looks bad,'' said Mark Edwards, chairman of IQuantic Buck, a Mellon Financial Corp. unit that provides compensation consulting. ``Employees look at (the stock price) every day, and it's a continued disincentive to them.'' While Denne said Enron doesn't have any plans to reprice its employees' options, the company did issue a one-time stock option grant at $36.88 in August, when Ken Lay resumed his former role as the company's chief executive. Lay, who had held the job for 15 years, turned the position over to Jeffrey Skilling in February. Skilling quit in August, citing family reasons. The August grant, which was equivalent to 5 percent of employees' base salary, didn't require a vesting period, but was exercisable immediately. Enron's shares haven't closed above $36.88 since Aug. 29. --Margot Habiby in the Dallas newsroom (214) 954-9452, or

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A Dynegy-Enron Deal Faces Significant Regulatory Review Dow Jones Energy Service, 11/08/01 US Physical Gas Prices Mostly Down; No Demand Dow Jones Energy Service, 11/08/01 USA: NewPower shares advance on revised guidance. Reuters English News Service, 11/08/01 Enron Investors Still Perplexed - And Stock Shows It Dow Jones News Service, 11/08/01 USA: UPDATE 1-FirstEnergy sells $4.0 bln in 3-part debt sale. Reuters English News Service, 11/08/01 USA: WRAPUP 1-Enron, Dynegy confirm possible merger talks. Reuters English News Service, 11/08/01 IN THE MONEY: Enron Transparency Not Transparent Enough Dow Jones News Service, 11/08/01 S&P Lowers Rating on Yosemite Securities Trust I; On Watch Negative PR Newswire, 11/08/01 RPT Dynergy sharply higher, Enron lower on merger talks AFX News, 11/08/01 US Spot Coal: Prices Weaken As Buying For 2002 Slows Dow Jones Energy Service, 11/08/01 STOCKWATCH Dynergy sharply higher, Enron flat on merger talks AFX News, 11/08/01 UK: Rivals eye Enron's metals trading business. Reuters English News Service, 11/08/01 WRAP: Enron To Restate Results; Confirms Dynegy Talks Dow Jones News Service, 11/08/01 USA: Enron fires two employees linked to partnerships. Reuters English News Service, 11/08/01 Enron restates net income for periods from 1997 to Q3 2001 AFX News, 11/08/01 Enron restates earnings as company confirms talks with Dynegy Associated Press Newswires, 11/08/01 USA: UPDATE 1-Enron provides financing data, restates earnings. Reuters English News Service, 11/08/01 Is Enron Too Big To Fail? Bailout Seen Unlikely Dow Jones Energy Service, 11/08/01 Enron Bonds Give Back Gains as Firm Restates Profit (Update3) Bloomberg, 11/08/01 Apache to Cut 2002 Drilling Budget 70% on Gas Prices (Update1) Bloomberg, 11/08/01 Enron Fires Treasurer, Alleges Improper Investment (Update2) Bloomberg, 11/08/01 Dynegy Rises on Optimism It May Get Enron for Bargain (Update2) Bloomberg, 11/08/01 NewPower 3rd-Qtr Loss Narrows After Adding Customers (Update4) Bloomberg, 11/08/01 Enron Restates Years of Profits, in Talks With Dynegy (Update4) Bloomberg, 11/08/01 DJ FABER REPORT: More On Enron/Dynegy >ENE Bloomberg, 11/08/01 Dynegy, Enron negotiating merger Enron fires two officers; financial results to be restated CBSMarketWatch.com, 11/08/01 A Dynegy-Enron Deal Faces Significant Regulatory Review By Bryan Lee 11/08/2001 Dow Jones Energy Service (Copyright (c) 2001, Dow Jones & Company, Inc.) OF DOW JONES NEWSWIRES WASHINGTON -(Dow Jones)- Any merger deal that may emerge between Dynegy Inc. (DYN) and Enron Corp. (ENE) will face a complicated and time-consuming regulatory-review process, legal experts said Thursday. Any equity deal would require approvals from numerous U.S. federal regulatory agencies and state utility regulators, as well as survive Canadian and European antitrust reviews, energy attorneys contacted by Dow Jones Newswires said. A merger would require approvals from the Federal Energy Regulatory Commission, Securities and Exchange Commission, Department of Justice and Federal Trade Commission. And the Illinois Commerce Commission likely would weigh into the mix, since Dynegy owns Illinova's Illinois Power Co. Any effort to strike a deal quickly also could be complicated by Enron's ownership of Portland General Electric Co. While Enron has entered into an agreement to sell the utility to Northwest Natural Gas Co. (NWN), a previous attempt to sell the company fell through because of regulatory complications. A key issue for federal regulators scrutinizing a potential Enron-Dynegy merger will be the degree of electricity market concentration such a transaction would entail, the attorneys said. Financially wounded Enron is the nation's largest electricity and natural gas trader with an extensive network of gas pipelines. Dynegy is ranked sixth nationally in both electricity and natural gas marketing. The transaction would receive the greatest scrutiny at FERC, where the merger application would challenge the commission's merger-review policy, attorneys said. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. US Physical Gas Prices Mostly Down; No Demand 11/08/2001 Dow Jones Energy Service (Copyright (c) 2001, Dow Jones & Company, Inc.) HOUSTON -(Dow Jones)- U.S. natural gas physical prices mostly fell Thursday, dipping on low demand and a shorter-than-usual trading session as Enron's online trading service went off the board, traders said. With Dynegy and Enron Corp. talking takeover matters, traders felt Enron's gas traders simply covered positions and got out of the market quickly. Marketers felt Enron's trading positions have eased in the last two weeks as the company reported a $1.2 billion erosion of investor equity related to questionable partnerships. Also, traders pointed to no incremental or storage demand and a lack of weather-driving prices downward. Fundamentals for the market remain bearish: Storage is near all-time highs, and injection season ended with Wednesday's 10 billion cubic feet build. Otherwise, some floor traders said gas marketers were shying away from trading with giant Enron Corp. December settled Thursday at $2.960 per million British thermal units, up 9.0 cents. Traders are looking ahead hopefully to colder weather at the end of the month, in time for the Thanksgiving holiday. At the benchmark Henry Hub in south Louisiana, traders paid $2.60-$2.77/MMBtu, down 1 cent-8 cents. First-of-month November index is $3.16/MMBtu, traders said. Deals at Transcontinental Gas Pipe Line Station No. 65 were done at $2.60-$2.74/MMBtu, down 5 cents-8 cdents. November first-of-month index is $3.19/MMBtu, a trader said. At the Arizona-California Border, where gas from El Paso's pipeline begins delivery to Southern California, buyers paid $2.54-$2.65/MMBtu, up 1 cent on the bid, down 2 cents on the offer as traders feared curtailments on the pipeline. November first-of-month index is $2.95/MMBtu. At the Katy hub in East Texas, buyers paid $2.56-$2.74/MMBtu, down 7 cents on the bid, up 3 cents on the offer. November index is $3.01/MMBtu, a trader said Thursday. At Waha in West Texas, buyers paid $2.44-$2.57/MMBtu, down 3 cents on the bid, up 1 cent on the offer. November index is $2.86/MMBtu. -By John Edmiston, Dow Jones Newswires,713-547-9209; [email protected] Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. USA: NewPower shares advance on revised guidance. 11/08/2001 Reuters English News Service (C) Reuters Limited 2001. NEW YORK, Nov 8 (Reuters) - National power and gas marketer NewPower Holdings Inc. revised its 2001 loss guidance downward on Thursday and saw its stock post its best one-day gain in two months. The projection came in NewPower's report of a third quarter net loss of $67.1 million, or $1.15 per share, compared to a net loss of $69.9 million, or $2.96 per share for the third quarter of 2000. Analysts had expected a per-share loss of $1.15 to $1.18, according to research firm Thomson Financial/First Call, which put the consensus at $1.16. Purchase, New York-based NewPower is the parent of The New Power Co., which says it is the first national provider of electricity and natural gas to residential and small commercial customers in the United States. It said total customers increased 155 percent to 805,000 compared to the third quarter of 2000. Revenues were $54.7 million in the latest quarter, an increase of 201 percent from the third quarter of 2000. During the third quarter, NewPower said, it gained about 80,000 new customers through the company's marketing efforts, primarily in the residential sector. NewPower recently increased its emphasis on small business customers and at the end of September had over 25,000 small business accounts. NewPower expects this to increase to more than 35,000 by the end of the year. Providing revised guidance for the rest of the year, the company said it expects a net loss of $41 million to $46 million or a loss per share of 65 cents to 73 cents for the fourth quarter. The full year net loss is estimated to be between $210 million and $215 million, or $3.55 to $3.63 per share. Analysts' estimates of the year per share loss range from $3.68 to $3.74, resulting in a consensus per share loss projection of $3.71. NewPower said it projects the year-end customer count will be between 840,000 and 860,000, of which the fourth-quarter increase is expected to be achieved entirely through marketing. It said the revised forecast reflects a reduction in the number of customers the company expects to acquire through portfolio acquisitions and the impact of delays in switching Texas customers to NewPower, partly offset by the company's modified marketing strategies and continued cost reductions. NewPower shares reached a high of $1.25 in Thursday afternoon trading and were still up 48.15 percent, or 39 cents, at $1.20 in the final half hour of trading. The company is 44 percent owned by Enron Corp. , NewPower's largest provider of electricity and natural gas. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Enron Investors Still Perplexed - And Stock Shows It By Christina Cheddar Of DOW JONES NEWSWIRES 11/08/2001 Dow Jones News Service (Copyright (c) 2001, Dow Jones & Company, Inc.) NEW YORK -(Dow Jones)- Even as more facts are revealed regarding Enron Corp.'s (ENE) financial dealings, investors can agree: Things remain as clear as mud. Earlier Thursday, Enron and Dynegy Inc. (DYN) confirmed the neighboring rivals were talks for a potential "business combination." An agreement hasn't been reached yet, and neither company will make any further comment until a contract is signed or the talks end. Separately, Enron restated its earnings from 1997 through the second quarter of 2001. As the news hit the tape, Enron shares, after being briefly halted, seemed to hunt for a direction. The stock traded as high as $10, and as low as $8.40. Currently, the shares were at $8.67, down 38 cents, or 4.2%. Wednesday, the shares zigzagged. Meanwhile, Dynegy shares, which had fallen Wednesday as news of the talks began to leak out, regained lost ground and then added some. Dynegy shares were recently trading up $4.54, or 13.8%, at $37.54. "There's a lot of news to digest," said Glen Hilton, a portfolio manager at San Francisco-based Montgomery Asset Management. Enron shares have been in a downward spiral since it revealed last month that the unwinding of off-balance sheet transaction with a partnership run by its chief financial officer, Andrew Fastow, had resulted in the loss of $1.2 billion in shareholder equity. That bad news led to more bad news, including the downgrades of its credit ratings, which are essential to the health of its core wholesale energy marketing and trading business. Meanwhile, investor confidence eroded as market watchers asked Enron to come clean. The move in Enron and Dynegy shares Thursday was unusual for companies considering a merger. Typically, shares of the acquirer will fall, while shares of the target climb. Investors explained the move several ways. Some said it was a reflection of the lack of a premium Enron shareholders will be paid. Their views were based on a report in The Wall Street Journal, which cited a source familiar with the matter who said Dynegy is considering paying $7 billion to $8 billion in stock, or about one-tenth of what Enron was worth 15 months ago. Others agreed, and said given recent events they're being cautious. Larry Alberts, a buy-side analyst at American Express Financial Advisors, said he was questioning how serious Dynegy is about the transaction. He also said there is still the possibility of more bad news to come from Enron. As for the restatement of earnings going back to 1997, investors said it was clearly having a negative impact on Enron's stock even though some had been expecting it. John Waterman, of Rittenhouse Financial Services, said the information Enron disclosed in a filing with the Securities and Exchange Commission was "hard to sort through." Waterman said he was encouraged that the restatement didn't reflect any revenue recognition issues, and it still showed that there was growth in the business - albeit not as much as previously reported. Enron had to restate the earnings because it should have included three of its off-balance sheet financing vehicles - Chewco Investments LP, Joint Energy Development Investments LP, or JEDI, and a unit of LJM Cayman LP - in its consolidated financial statements under the guidelines of generally accepted accounting principles. Revelations about the involvement of Enron's Fastow in LJM are at the center of an investigation by the Securities and Exchange Commission, and led to demands from the financial community that he be terminated. On Wednesday, Enron disclosed it has fired its treasurer, Ben Glisan, and its general counsel, Kristina Mordaunt, as well. Gilsan, Mordaunt, and two former Enron employees were partners of LJM while serving at Enron. Enron continues to say it had controls in place relating to Fastow's involvement with the partnerships. The board required review and approval of each transaction by the office of the chairman, the chief accounting officer and the chief risk officer. Whether these controls and procedures were followed will be investigated by a special committee Enron has named. Many expect that if Enron remains independent, more executive departures could be in store. "The bottom line from my perspective is that Ken Lay, Jeff Skilling, and the board seemed to be aware (of Fastow's dealings with the LJM partnerships)," said Andre Meade, an analyst at Commerzebanc Securities. "Everyone's hands are dirty, including Ken Lay. ... The firing the CFO and treasurer are not going to single-handedly solve the problems at Enron," he continued. Others also are questioning the role of Arthur Andersen LLP, Enron's independent auditor. "People like us have to rely on people like them," said Rittenhouse's Waterman. According to its restated financial information, Enron had close to $13 billion in debt at Sept. 30. Liquidity issues remain the chief concern among investors, who continue to fret that the latest disclosure will result in a further deterioration of Enron's credit rating. "The clock is ticking on Enron," said Montgomery's Hilton. "Each day brings a new piece of incremental news." Following the release of Enron's earnings last month, Hilton had a hunch the company would likely write off additional investments as it had in the third quarter. However, he was committed to the stock, and at the time he didn't plan to sell his stake, which accounted for 2% of the close to $100 million in assets he manages. Since that time, Hilton has sold his Enron stock. He said he began selling after news of the SEC probe broke. "It just got too scary to hold," he said. Still, Hilton, who owns shares of Dynegy as well, isn't concerned about the possibility of a merger of the two Houston energy traders. "It's David taking Goliath," he said, adding that he is convinced that Dynegy's management will not enter into a transaction that will threaten the company's stability. Several Dynegy investors echoed Hilton's sentiment with their own expressions of confidence in Dynegy's management. However, at times these convictions were almost betrayed by a nervousness brought on by the sense that what one doesn't know could be hurtful. Some investors remain concerned by Dynegy's motivation. According to Hilton, investors don't know what would happen to the market - and as a result, to Dynegy - if Enron fails. So, what reason truly is motivating Dynegy? "It's probably both," Hilton speculated. -By Christina Cheddar, Dow Jones Newswires; 201-938-5166; [email protected] Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. USA: UPDATE 1-FirstEnergy sells $4.0 bln in 3-part debt sale. By Dena Aubin 11/08/2001 Reuters English News Service (C) Reuters Limited 2001. NEW YORK, Nov 8 (Reuters) - Utility holding company FirstEnergy Corp. sold $4 billion of five-, 10-and 30-year debt on Thursday, helped by investors' preference for defensive sectors as the U.S. economy stalls. FirstEnergy was able to lower its borrowing costs, trimming yields from initial indications. The sale originally was expected to offer generous yields as heavy bond issuance, weak wholesale power prices and investor jitters over the troubles of energy trading firm Enron Corp. weighed on the utility sector. Akron, Ohio-based FirstEnergy will use proceeds for corporate purposes and to help pay for its recent purchase of Morristown, New Jersey-based GPU Inc. . FirstEnergy purchased GPU for about $4.5 billion in cash and stock, plus the assumption of about $7.2 billion in debt. The sale closed on Tuesday. Utility bonds are typically viewed as a conservative investments because of the industry's stable income during uncertain economic times. The sector has been under a cloud, though, as Houston-based Enron has struggled with a cash squeeze and writedowns from off-balance-sheet transactions. "Enron was held up as a model, growing extremely quickly, and the recent financial disclosures are just a shock," said Kelly Perl, a project director at New York utility consulting firm Applied Economic Research. Spreads, or the yield gaps between utility bonds and U.S. Treasuries, have widened about 0.15 to 0.20 percentage point over the past two weeks, while spreads on gas and pipeline companies have widened about 0.30 percentage points, strategists said. SALE TERMS FirstEnergy sold $1 billion of 5.5 percent five-year notes at 99.888 cents on the dollar, yielding 5.526 percent or 1.98 percentage points more than similar-maturity U.S. Treasuries. It also sold $1.5 billion of 6.45 percent 10-year notes at 99.651 cents on the dollar, yielding 6.498 percent or 2.25 percentage points more than Treasuries, and $1.5 billion of 7.375 percent 30-year bonds, yielding 7.389 percent or 2.45 percentage points more than the old long Treasury bond. Initial price guidance had called for spreads as high as 2.20, 2.35 and 2.60 percentage points more than Treasuries for the five-, 10-and 30-year debt. FirstEnergy's sale was helped by a 0.50 percentage point interest rate cut by the U.S. Federal Reserve on Tuesday and signs that the Fed could cut rates again. "There is the perception that the Fed is going to aggressively ease and err on the side of caution," said Peter Palfrey, portfolio manager for Loomis Sayles & Co. in Boston. Investors are betting that the Fed will engineer an economic recovery, helping corporate profits and spurring price gains in corporate bonds, Palfrey said. Analysts said FirstEnergy's acquisition of GPU should benefit its credit quality. "It adds further diversity to their cash flow from regulated distribution companies," said Fitch analyst Robert Hornick. Falling wholesale power prices also should benefit FirstEnergy, Hornick said. "They're not a big seller of wholesale energy at this point," Hornick said. "They don't own generation facilities and need to buy (electricity) in the market, so to the extent wholesale prices are lower, they can benefit," he said. Standard & Poor's rates FirstEnergy's senior unsecured notes "BBB-minus," its lowest investment grade. Moody's Investors Service rates FirstEnergy's long-term debt "Baa2," roughly one notch higher, while Fitch rates them "BBB." Salomon Smith Barney, Barclays Capital and Morgan Stanley arranged the sale. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. USA: WRAPUP 1-Enron, Dynegy confirm possible merger talks. By Jeff Franks 11/08/2001 Reuters English News Service (C) Reuters Limited 2001. HOUSTON, Nov 8 (Reuters) - Enron Corp., plagued by investor doubts and under the gun to shore up its crumbling finances, said on Thursday it was talking with power trading rival Dynegy Inc. about a possible merger. The company, whose stock and credit ratings have plummeted amid an uproar about questionable business transactions, admitted it made bookkeeping errors and restated earnings for the last four years. It also said former Chief Financial Officer Andrew Fastow, who abruptly left the company last month, had made $30 million managing partnerships linked to the deals. The deals, which were off the balance sheet, are now under investigation by the U.S. Securities and Exchange Commission for possible conflict of interest. Two other executives, managing director and treasurer Ben Glisan and Enron division general counsel Kristina Mordaunt, were both believed to have links to the Fastow-led partnerships and have been fired, the company disclosed. The announcements threw a spotlight on Enron's stark situation, in which the nation's top energy trader has gone from Wall Street darling to pariah in a few weeks and now faces a cash crunch so dire it is seeking a merger with the much-smaller Dynegy. Its credit ratings have fallen to near-junk levels in recent weeks, making it difficult to get money to boost investor confidence and back the trading operations that provide 90 percent of Enron's income. The company reportedly has been seeking investors to provide a cash infusion for an equity stake. MODERATE PREMIUM Word about a possible Dynegy-Enron deal leaked out on Wednesday, and on Thursday the two companies confirmed talks about a possible "business combination" were underway, but said no agreement had been reached. Sources told Reuters that the two Texas rivals, whose headquarters are a few blocks apart in downtown Houston, were talking about a stock swap with a moderate premium for shareholders and a $1.5 billion capital infusion from ChevronTexaco Corp., which owns 26.5 percent of Dynegy. The stock swap is valued at about $8 billion, or about $10 a share, The New York Times reported on Thursday. A merger would catapult Dynegy to the top of the energy trading industry now dominated by Enron. Last year, the company had $29 billion in revenues, compared to $100 billion for Enron. For Enron, it would cap an astonishingly rapid fall from grace. Enron stock has lost $19 billion in market value since its crisis began in mid-October and was down another 45 cents to $8.60 in Thursday trading. Dynegy shares rose $3.87 to $36.87. Enron restated its earnings going back to 1997, saying its auditors advised that the off-the-balance sheet deals in question should have been included in the company's financial statements. The restated results reduced Enron's net income by $591 million, or 22 percent, from 1997 to 2000, and increased its debt by $628 million, or 6 percent, after two of the partnership's financial statements were consolidated into Enron's earnings. Enron said the restatement reflects a $1.2 billion reduction to shareholders' equity that touched off the current controversy when the company offhandedly disclosed it last month. Angry shareholders suddenly worried that Enron was hiding other liabilities in its complex financial statements and began demanding more information. In a statement, Enron chief executive Ken Lay said the company hoped it had allayed Wall Street fears with Thursday's announcements. "We believe that the information we have made available addresses a number of the concerns that have been raised by our shareholders and the SEC about these matters," he said. Analysts, wary after last month's surprise revelations, said Enron may have more to release, but they were pleased it was finally coming forth with information. "It's an attempt to come clean," said Raymond Moore, an analyst with Weatherly Securities. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. IN THE MONEY: Enron Transparency Not Transparent Enough By Michael Rapoport 11/08/2001 Dow Jones News Service (Copyright (c) 2001, Dow Jones & Company, Inc.) A Dow Jones Newswires Column NEW YORK -(Dow Jones)- So Enron Corp. (ENE) says it wants to be more transparent - to make its impenetrable financial results and corporate structure easier for investors and analysts to understand. Based on its announcements Thursday, however, it still has a heck of a long way to go. With Enron's restatement Thursday of nearly five years' worth of earnings and additional information about the maze of off-balance-sheet deals related to it, we now have a lot more information about the mess at Enron than we had 24 hours ago. But we're not much closer to understanding just what HAPPENED to leave Enron in such a mess - and that's because the company's explanations of all this continue to be dense, confusing and next to impossible to grasp. Try this tidbit, from the Form 8-K Enron filed about the restatements Thursday with the Securities and Exchange Commission: "In addition, Enron's net income is reduced for specific JEDI revenues previously allocated to Chewco, relating to the appreciation in value of Enron stock, which eliminate upon consolidation. This, in effect, reduces Enron's share of JEDI's earnings." Huh? And no, it doesn't help you to know that "Chewco" is an entity that wasn't included in Enron's financial results but which Enron now admits should have been. Or that "JEDI" isn't a "Star Wars" reference but a limited partnership in which both Enron and Chewco had invested. It's still impenetrable. Then there are the times when Enron just plain doesn't give enough information. The company says its decision that Chewco should be included in its results after all "is based on current information that Chewco did not meet the accounting criteria to qualify as ... unconsolidated..." Uh - okay. WHY didn't it meet the criteria, and why did Enron previously believe that it did? Enron doesn't say. Finally, Enron makes some assertions that just make you scratch your head. The company says part of the restatement of its earnings stems from unspecified "prior-year proposed audit adjustments and reclassifications which were determined to be immaterial in the year originally proposed." Hmmm. Beyond the fact that Enron doesn't elaborate on the nature of these "audit adjustments and reclassifications," or why they were originally considered immaterial, consider that according to Enron's own figures in the 8-K, they add up to a negative earnings impact of $87 million since 1997. That amount doesn't sound like any definition of "immaterial" I've ever heard. An Enron spokesman couldn't immediately be reached for comment. In fairness, this lack of clarity may be all but inevitable given Enron's Byzantine structure, which involves dealings with outside but related entities that also have third parties involved, which in one case have a subsidiary that allowed Enron to hedge the risks of an investment, and in another case is selling assets purchased from Enron to OTHER entities in order to finish paying Enron for the original transaction, and ... you get the idea. It's next to impossible to make clear because Enron's structure is just too baroque to understand in the first place. The market is plenty puzzled by all this, even in the wake of Enron's attempt to clarify things. Take a look at the company's drunken-sailor stock chart from Thursday. After news of the restatements hit, Enron stock first jumped higher, going as high as $10 a share, then soon dropped back, to as low as $8.40, as investors started to digest the details of the news. Then up again to about $9.25, then down again to its current level of around $8.50. There's no reason investors should be confused like this. There is absolutely no reason that a reasonably intelligent layman, with an elementary working knowledge of corporate finance, should be unable to understand the regulatory filings, structure, earnings and balance sheet of any public company. If that happens, it's the company's fault, not the investor's - either because the company hasn't explained things well enough or because its structure is needlessly complicated to begin with. If Enron wants to get back the market's confidence, fixing that problem, one way or the other, would be a good place to start. -By Michael Rapoport, Dow Jones Newswires; 201-938-5976; [email protected] Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. S&P Lowers Rating on Yosemite Securities Trust I; On Watch Negative 11/08/2001 PR Newswire (Copyright (c) 2001, PR Newswire) NEW YORK, Nov. 8 /PRNewswire/ -- Standard & Poor's today lowered its rating on Yosemite Securities Trust I to triple-'B' from triple-'B'-plus and placed it on CreditWatch with negative implications (see list). The lowered rating and CreditWatch placement reflects the Nov. 1, 2001 rating action taken on Enron Corp., which was based on Standard & Poor's belief that Enron Corp.'s plan to employ asset sales and other means to repair its damaged balance sheet will be insufficient to restore its long-term credit quality to the historical triple-'B'-plus level. Also, the CreditWatch placement reflects the uncertainties surrounding the company and its credit quality in the short run due to the possibility of further unanticipated developments in the capital markets. Yosemite Securities Trust I is a synthetic issue that utilizes a credit default swap referencing Enron Corp. The rating on the credit-linked notes reflects the current senior unsecured rating of Enron Corp. Yosemite Securities Trust I $750 Million credit linked notes Rating To From BBB/Watch Neg BBB+ /CONTACT: Mary Ryan, +1-212-438-2090, or Frank J Trick, +1-212-438-1108, both of Standard & Poor's/ 13:26 EST Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. RPT Dynergy sharply higher, Enron lower on merger talks 11/08/2001 AFX News (c) 2001 by AFP-Extel News Ltd (Repeating to show in headline, lead that Enron is trading lower) NEW YORK (AFX) - Shares of Dynergy Inc were sharply higher, while Enron Corp lost ground in midsession trading after the two companies confirmed that they are holding merger talks. At 12.25 pm, Dynergy was up 3.17 usd, or 9.6 pct, at 36.17, Enron fell 0.34 usd, or 3.7 pct, to 8.71 usd and ChevronTexaco dropped 0.18 usd to 87.10. The DJIA was up 110.22 points at 9,664.59, the S&P 500 index gained 12.88 points to 1,128.68 and the Nasdaq composite rose 34.35 points to 1,871.88. Enron share price today was hurt after the company announced a restatement of its net income from 1997 to the third quarter of 2001. The revisions were, for the most part, reductions in the bottom-line figure. The 8 bln usd tie-up talks, which come at a time when Enron is being investigated by the US Securities and Exchange Commission and the markets are losing faith in the energy trader, are seen as particularly positive for Dynergy. Analysts see a tie-up as highly accretive for Dynergy, which is 26 pct owned by ChevronTexaco, with many synergies also possible. Banc of America analyst William Maze, who rates Dynergy 'Strong Buy', said: "If this transaction comes to fruition, we would be aggressive buyers of Dynergy given its accretive nature as well as the lifting of Enron's credibility issues that has been plaguing the entire industry." CIBC World Markets analyst William Hyler, who rates Enron 'Buy', added: "The move would also catapult (Dynergy) into a leadership role at what could prove near the bottom of the gas/power pricing cycle." On the other hand, Enron's position would improve as its credibility within the trading world and in the face of its trading counterparties would recover somewhat. To that end, Dynergy would provide a yet unspecified cash injection, believed to be approximately 1.5-2.0 bln usd, to improve Enron's standing and shore up its finances. ChevronTexaco, which is expected to provide a substantial part of the financing needed for the merger, also stands to gain from the situation as it would retain effective control of the combined company. rdc/lj For more information and to contact AFX: www.afxnews.com and www.afxpress.com Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. US Spot Coal: Prices Weaken As Buying For 2002 Slows 11/08/2001 Dow Jones Energy Service (Copyright (c) 2001, Dow Jones & Company, Inc.) NEW YORK -(Dow Jones)- Coal prices slumped in physical markets last week, as mild weather in the East, a slowing economy and high utility inventories undercut demand, sources said Wednesday. Over-the-counter prices for Central Appalachian barges for calendar year 2002 slid $1.75 from last week to $32.00 a ton on Tuesday, trading several times at that level, people in the market said. With major coal producers sold out for the remainder of this year and most of next year, traders said, prices could move higher if there were a sudden rise in demand. "Utilities are comfortable in their stockpiles, a trader said. "The only thing that would make this market bounce a little bit would be some cold weather in the East." The cut in Enron Corp's (ENE) credit rating and a Security and Exchange Commission investigation into its transactions with off-balance-sheet partnerships was making the energy giant's coal customers anxious about getting paid, people in the market said. A coal broker said counterparties were watching Enron's credit and limiting longer-term business with the company. "Everyone is nervous," a buyer at a Midwestern utility said. Major coal producers and coal-burning utilities interviewed by Dow Jones Newswires on Wednesday said they hadn't suspended trading with Enron. Physical prices were largely unaffected by the turmoil in the trading business and continued the downward trend that began in mid-October. In the East, where prices softened in light trade, Central Appalachian barge deals for November delivery to the Big Sandy River were done in late October as low as $30.75 free on board, down from $33.50 a ton. December and the first quarter of 2002 traded several times Tuesday at $32.00 and $32.25 a ton, down $1.50 since late October. Rail deliveries were pegged between $36.00 and $38.00 a ton FOB. No deals were confirmed. In the West, Powder River Basin coal with a heat rate of 8,800 British thermal units slipped to $7.55 a ton for November, down a nickel since late October. Deals for calendar year 2002 were done at $8.10 and $8.15 a ton, down about 10 cents. PRB 8,400 Btu coal traded very little, sources said. November deliveries deals were done at $5.90 a ton, down from $6.25 a ton at the end of October. Calendar year 2002 was pegged between $6.35 and $6.45 a ton, down 10 cents. According to the Energy Information Agency, total U.S. coal production through Oct. 27, the latest date for which figures were available, ticked upward by 445,000 short tons to 21.8 million tons. Appalachian coal production, year to date, was 2% ahead of last year. Total Appalachian production in 2001 is 356,557 tons, up from 349,711 tons in the same period last year. U.S. Western coal production year to date remains steady at 6.4% ahead of 2000 figures. EIA reports total western coal production through Oct. 27 at 447,308 tons, up from 420,353 tons in the year-earlier period. Railcar loadings through the end of October were 5% higher than comparable 2000 figures, according the EIA. Activity on the New York Mercantile Exchange, which came to virtual standstill last week, picked up on Tuesday. On Tuesday, open interest for the December coal contract was at 217. The December contract, which expires Nov. 27, settled Tuesday at $31.75 a ton, down $2 from Oct. 30. U.S. Spot Coal Prices Deals done in Nov Dollars/ton;Averages not Volume Weighted 4Q'01 1Q'02 CAL 2002 Central Appalachia Low Sulfur F.O.B. Barge $31.75-32.00 $32.00-32.25 $32.00-33.00 Average/Change 31.90/-1.85 32.12/-1.63 32.50/-1.00 F.O.B. Rail $36.00-38.00 N/A $36.00-38.00 Average/Change 37.00/-1.25 N/A 37.00/-0.75 Powder River Basin 8400 B.T.U. $5.75-6.00 $6.45-6.60 $6.35-6.45 Average/Change 5.85/-0.15 6.50/ 0.00 6.40/-0.10 8800 B.T.U. $7.25-7.75 $8.10-8.40 $8.10-8.20 Average/Change 7.50/-0.10 ' 8.25/ 0.00 8.15/-0.15 Note to U.S. spot coal prices: Prices are dollars per short ton, based on actual deals done during the month for the delivery period indicated. Averages are straight mathematical averages and aren't volume weighted. Change is from the average of deals done in the previous month. The Central Appalachian low-sulfur category uses benchmark of 12,000 British thermal units per pound. Barge delivery is to the Big Sandy River. Rail delivery is to the Norfolk Southern. For Central Appalachian coal, prices are accepted for coal within 500 Btu of the benchmark Btu and standardized adjustments are made. Powder River Basin categories are quoted FOB mine. -By Jennifer Morrow, Dow Jones Newswires; 201-938-4377; [email protected] Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. STOCKWATCH Dynergy sharply higher, Enron flat on merger talks 11/08/2001 AFX News (c) 2001 by AFP-Extel News Ltd NEW YORK (AFX) - Shares of Dynergy Inc were sharply higher, while Enron Corp continued to lose ground, in midsession trading after the two companies confirmed that they are holding merger talks. At 12.25 pm, Dynergy was up 3.17 usd, or 9.6 pct, at 36.17, Enron fell 0.34 usd, or 3.7 pct, to 8.71 usd and ChevronTexaco dropped 0.18 usd to 87.10. The DJIA was up 110.22 points at 9,664.59, the S&P 500 index gained 12.88 points to 1,128.68 and the Nasdaq composite rose 34.35 points to 1,871.88. Enron share price today was hurt after the company announced a restatement of its net income from 1997 to the third quarter of 2001. The revisions were, for the most part, reductions in the bottom-line figure. The 8 bln usd tie-up talks, which come at a time when Enron is being investigated by the US Securities and Exchange Commission and the markets are losing faith in the energy trader, are seen as particularly positive for Dynergy. Analysts see a tie-up as highly accretive for Dynergy, which is 26 pct owned by ChevronTexaco, with many synergies also possible. Banc of America analyst William Maze, who rates Dynergy 'Strong Buy', said: "If this transaction comes to fruition, we would be aggressive buyers of Dynergy given its accretive nature as well as the lifting of Enron's credibility issues that has been plaguing the entire industry." CIBC World Markets analyst William Hyler, who rates Enron 'Buy', added: "The move would also catapult (Dynergy) into a leadership role at what could prove near the bottom of the gas/power pricing cycle." On the other hand, Enron's position would improve as its credibility within the trading world and in the face of its trading counterparties would recover somewhat. To that end, Dynergy would provide a yet unspecified cash injection, believed to be approximately 1.5-2.0 bln usd, to improve Enron's standing and shore up its finances. ChevronTexaco, which is expected to provide a substantial part of the financing needed for the merger, also stands to gain from the situation as it would retain effective control of the combined company. rdc/lj For more information and to contact AFX: www.afxnews.com and www.afxpress.com Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. UK: Rivals eye Enron's metals trading business. By Andy Blamey 11/08/2001 Reuters English News Service (C) Reuters Limited 2001. LONDON, Nov 9 (Reuters) - U.S. energy trading giant Enron Corp. , whose shares have tumbled amid a regulatory probe and doubts about its ability to raise cash, may lose or offload its metals business, senior industry sources said on Thursday. In the wings are several interested parties looking to snap up the company's metals customer base. "There are people out there with the experience and the contacts who see this time as a good opportunity to get into the market," a senior metals market source told Reuters on Thursday. Such a move for Enron's metals portfolio would involve the acquisition of an existing organisation as a vehicle, the source added. "We do not comment on rumours," an Enron spokeswoman said, declining further comment. Other Enron Metals assets were also said to be in play, including the Henry Bath warehousing company, which operates LME-registered warehouses in the UK, the Netherlands, Singapore and the United States. MAJOR PLAYER Houston-based Enron became a major player in the metals trade in May last year when it acquired MG plc, a leading independent international metals dealing firm in London, in a deal worth around 300 million pounds. The company is a ring-dealing member of the London Metal Exchange (LME), able to participate in open-outcry floor trade, and is active in screen-based metals trade via its EnronOnline platform (www.enrononline.com). The company no longer has a stake in online metals trading platform EMETRA (www.emetra.com), having sold its holding to other EMETRA shareholders this summer. But while Enron may be a heavy hitter in the metals sector, base metals trading could hardly be regarded as one of its core businesses. The company's third-quarter 2001 results statement shows income before interest, minority interests and taxes (IBIT) from "Europe and other commodity markets" - which includes metals and steel alongside European gas and power, among others - of $53 million, unchanged from the year-earlier period. This compares with IBIT from Enron's gas and power market-making operations and merchant energy activities in North and South America of $710 million over the same period. But the third-quarter figure that has slashed the value of the company's shares is a $1.2 billion write-down of shareholder equity related to off-balance sheet transactions. On Thursday the company said it would restate its earnings for 1997 to 2001 to reflect the transactions - a move which wipes $613 million of the company's reported net income from 1997 through the first half of this year. The company's stock has dropped by almost 78 percent since Enron released its earnings results on October 16, falling to nine-year lows amid concerns about the company's ability to raise cash. The story added an extra twist on Wednesday as news broke that U.S.-based energy trading and marketing firm Dynegy Inc. was in talks to buy out Enron. Against this background speculation is rife about the future of the metals operation, fuelled by the company's decision last month to trim between 10 and 20 percent of its metals workforce as part of a wider staff reduction by Enron Europe. UNLIKELY TO REMAIN INTACT Any decision by Enron or a possible future purchaser to offload its metals operations would be unlikely to see Enron Metals remain intact, traders said. "They paid $450 million for MG. Would they get $450 million for Enron Metals? I don't think so," said one. "Why buy the whole concern when you can cherry-pick the best traders and the clients will follow?" added another. An increasing emphasis on screen trading at the expense of personal contacts may already have persuaded some Enron clients to jump ship. "We've picked up a fair amount of small and mid-sized trade-type business in Europe from people who've said 'I'm not going to be told just to trade on a screen,'" said one trader. Another trader said: "A lot of this business revolves around who you've been trading with and talking to over a period of time. It's about individuals," he said. "Enron Online...should be seen as an 'added value' product, not as the only way of trading. Customers still want to talk to their broker, and are willing to pay commission for the service," the senior source said. Enron's financial position could also prompt customers to consider other options, the first trader said. "As a customer, you want to place your business where there's financial stability. If a company isn't financially stable, you'll move elsewhere." Enron's trade counterparties are also keeping a close eye on the company's financial situation, said a trader at one LME brokerage. "People aren't particularly concerned about short-term trading (with Enron), but when it comes to OTC business done outside the clearing market they're backing off a bit," he said. (Additional reporting by Martin Hayes). Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. WRAP: Enron To Restate Results; Confirms Dynegy Talks 11/08/2001 Dow Jones News Service (Copyright (c) 2001, Dow Jones & Company, Inc.) HOUSTON -(Dow Jones)- Enron Corp. (ENE) said it will restate its financial results from 1997 through the second quarter of 2001, as the embattled energy company and Dynegy Inc. both confirmed they are in talks on a possible business combination. In a filing Thursday with the Securities and Exchange Commission, Enron said its financial and audit reports are unreliable for those periods. Enron said that three "unconsolidated entities should have been included in its consolidated financial statements," based on generally accepted accounting principles. These entities are Chewco Investments LP, Joint Energy Development Investments LP and a wholly owned unit of LJM Cayman LP. Enron said it has established a special committee to review all transactions. The committee will specifically review all "economic results" related to transactions between Enron and LJM. Last month Enron took a $1.01 billion charge in the third quarter related to write-downs of investments. Of this, $35 million was attributed to partnerships run until recently by Chief Financial Officer Andrew Fastow, who has since been replaced. Enron also disclosed it shrank shareholder equity by $1.2 billion, as a result of several transactions including ones undertaken with Fastow's investment vehicle. Later, Enron said the SEC would investigate the company's "related party transactions," including those with the Fastow partnerships. The restatement will reflect the $1.2 billion reduction in shareholders' equity, as well as various income-statement and balance-sheet adjustments determined by Enron and its auditors. "We believe that the information we have made available addresses a number of the concerns that have been raised by our shareholders and the SEC about these matters," said Chairman and Chief Executive Kenneth Lay Over the past couple of days, Enron has been scrambling to line up quick financing from a prominent outside investor and has been in discussions with private-equity firms and power-trading companies. Earlier, The Wall Street Journal reported that Dynegy was trying to buy Enron for $7 billion to $8 billion in stock. Both are Houston-based energy-trading and power companies. Because any combination of the two would likely be scrutinized for many months, and Enron needs to shore up its finances now, Dynegy reportedly is expected to inject $1.5 billion into Enron immediately, people familiar with the matter said. ChevronTexaco Corp. (CVX), which owns a 26% stake in Dynegy, is expected to provide Dynegy with the funds for the cash infusion and is playing a significant role in the negotiations, the Journal said. The boards of Dynegy, Chevron and Enron reportedly met Wednesday to discuss a potential deal. Enron's stock has plunged since Oct. 16, when the company posted a $618 million third-quarter loss and revealed that its shareholder equity had been reduced. The talks between Enron and Dynegy follow a sharp decline in Enron's stock over the past several weeks. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. USA: Enron fires two employees linked to partnerships. 11/08/2001 Reuters English News Service (C) Reuters Limited 2001. NEW YORK, Nov 8 (Reuters) - Enron Corp. , the embattled energy trader, said on Thursday fired its treasurer and a counsel who the company said were part-owners of one of its off-balance sheet partnerships now under investigation by U.S. regulators. Enron said it was terminating the employment of Ben Glisan, managing director and treasurer of Enron Corp., and Kristina Mordaunt, a managing director and counsel of an Enron division. Enron said it believes that these two employees, along with four other former Enron employees, were involved as partners in a limited partnership called the LJM1 that had dealings with Enron. Shares of Enron were trading down 5 cents or .55 percent at $9 on the New York Stock Exchange. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Enron restates net income for periods from 1997 to Q3 2001 11/08/2001 AFX News (c) 2001 by AFP-Extel News Ltd HOUSTON (AFX) - Enron Corp announced it is restating its net results for 1997 to 2000 and for the first three quarters of 2001 to take account of various related party and off-balance sheet transactions in which the company was involved. The restatement have no effect on Enron's current financial position, it said. In its restated figures, Enron posted reductions to net income of 96 mln usd in 1997, 113 mln usd in 1998, 250 mln in 1999 and 132 mln in 2000, as well as increases of 17 mln usd for the first quarter of 2001 and 5 mln for the second, but reduced the third quarter figure by 17 mln usd. The restatement will have no negative impact on the company's reported earnings for the nine month period ending Sept 2001, however, it said. The company said its changes to net income are the result of the retroactive consolidation of Joint Energy Development Investments LP and Chewco Investments LP beginning in November 1997, the consolidation of the LJM1 subsidiary for 1999 and 2000 and prior year proposed audit adjustments. The JEDI and Chewco consolidations will increase Enron's debt by about 711 mln usd in 1997, 561 mln in 1998, 685 mln in 1999 and 628 mln in 2000, the company said. kgd/jkm/ For more information and to contact AFX: www.afxnews.com and www.afxpress.com Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Enron restates earnings as company confirms talks with Dynegy By BRAD FOSS AP Business Writer 11/08/2001 Associated Press Newswires Copyright 2001. The Associated Press. All Rights Reserved. NEW YORK (AP) - Beleaguered energy trading giant Enron Corp. announced Thursday it would restate its earnings since 1997, in part to reflect a controversial dlrs 1.2 billion reduction in shareholder equity that has sparked a Securities and Exchange Commission investigation. Enron, whose stock price has fallen roughly 80 percent in the past three weeks, also said it was holding talks with Dynegy Inc. relating to some form of business transaction. The New York Times reported that Dynegy was considering buying Enron, its larger hometown rival for dlrs 8 billion. In a filing with the SEC, Enron said financial statements from 1997 through the first half of 2001 "should not be relied upon" and that partnerships run by Enron officials during that period should have been consolidated into the financial results of the Houston-based energy trading giant. These partnerships are Chewco Investments L.P., Joint Energy Development Investments L.P., and a wholly owned unit of LJM Cayman L.P. "We believe that the information we have made available addresses a number of the concerns that have been raised by our shareholders and the SEC about these matters," said Kenneth Lay, Enron's chairman and chief executive. By its own assessment, Enron's restatement reduces previously reported net income by roughly dlrs 586 million and increases its debt by dlrs 2.59 billion. The change reflects the financial impact of retroactively consolidating the partnerships. The company also fired two executives on Thursday: Ben Glisan, its treasurer, and Kristina Mordaunt, general counsel for one of its divisions. Previously, Enron had ousted chief financial officer Andrew Fastow, who was in charge of some of the partnerships. Shares of Enron were off 10 cents to dlrs 8.95 in heavy trading on the New York Stock Exchange. Enron said it believes the restatement will include a reduction to net income of about dlrs 96 million in 1997, dlrs 113 million in 1998, dlrs 250 million in 1999 and dlrs 132 million in 2000, increases of dlrs 17 million for the first quarter of 2001 and dlrs 5 million for the second quarter and a reduction of dlrs 17 million for the third quarter of 2001. Enron, the top buyer and seller of natural gas and the top wholesale marketer in the United States, had become one of the nation's 10 largest companies, recording revenue of dlrs 100.8 billion in 2000. But the company has been beset by huge investment losses and questions about its financial stability. In particular, its stock has plunged since Oct. 16, when the company posted a dlrs 618 million third quarter loss and revealed that its shareholder equity had been reduced. Enron's woes have prompted considerable speculation about a possible takeover of the company. Besides Dynegy, companies mentioned as possible suitors included General Electric's GE Capital unit and Royal Dutch/Shell Group. On Thursday, both Dynegy and Enron released statements confirming they were in talks, but declined to provide any details. The New York Times reported earlier that Dynegy is considering paying about dlrs 8 billion in stock, or roughly dlrs 10 per share. Under the terms of the deal, Enron would receive an immediate dlrs 1.5 billion cash infusion from oil giant Chevron Texaco, which holds a 27 percent stake in Dynegy, the Times said, citing executives close to the discusssion. Chevron Texaco would provide an additional dlrs 1 billion injection at a later date, the Times reported, while Dynegy would assume dlrs 12.8 billion in Enron debt, plus billions of dollars in other debt that has been kept off the beleaguered company's balance sheet and has been a significant contributor to its current problems. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. USA: UPDATE 1-Enron provides financing data, restates earnings. 11/08/2001 Reuters English News Service (C) Reuters Limited 2001. HOUSTON, Nov 8 (Reuters) - Enron Corp. said on Thursday it provided U.S. regulators with more information about off-balance sheet deals, and other transactions that led to a shattering of the company's credibility and to an investigation by the U.S. Securities and Exchange Commission. Enron, the once high-flying Houston-based energy trading company, also confirmed it was in talks with its hometown rival Dynegy Inc. over a possible business combination. Terms of any deal have not been agreed on, the two companies said. Enron said that it will restate its earnings from 1997 to 2000 and the first two quarters of 2001 as the company addresses concerns raised by the SEC and shareholders. Shares of Enron dropped 20 cents, or 2.2 percent, to $8.85 in Thursday morning trading on the New York Stock Exchange. Enron, the largest trader of electricity and natural gas in North America, said the required restatement reflects the surprising - and controversial - $1.2 billion reduction to shareholders' equity the company recently disclosed. The restatement also reflects adjustments to the company's income statement and balance sheet, now that Enron has decided that the financial activities of Chewco Investments, L.P., Joint Energy Development Investments Limited Partnership (JEDI) and a wholly-owned subsidiary of LJM1 should indeed have been included in the company's consolidated financial statements. As a result of the restatement, Enron is reducing its 1997 net income by about $96 million, 1998 net income by $113 million, 1999 net income by $250 million and 2000 net income by $132 million. It is also restating first quarter 2001 results with a $17 million net income increase, second quarter 2001 results with a $5 million increase and third quarter 2001 results with a $17 million net income decrease. Consolidating Chewco and JEDI also increases Enron's debt by about $711 million in 1997, $561 million in 1998, $685 million in 1999 and $628 million in 2000. "We believe that the information we have made available addresses a number of the concerns that have been raised by our shareholders and the SEC about these matters," said Chairman and Chief Executive Ken Lay in a statement. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Is Enron Too Big To Fail? Bailout Seen Unlikely By Jason Leopold 11/08/2001 Dow Jones Energy Service (Copyright (c) 2001, Dow Jones & Company, Inc.) OF DOW JONES NEWSWIRES (This story initially ran late Wednesday.) LOS ANGELES (Dow Jones)--Maybe Enron Corp. (ENE) is just too big to fail. Maybe not. Is the embattled energy trading company important enough to qualify for a federal bailout? Not likely, according to a number of analysts who believe that there are enough big energy companies in the U.S. to keep markets liquid if Enron goes under. For that reason, a federal bailout is probably not in the cards, even though Enron controls about 25% of U.S. natural gas and electricity markets, they added. "A bailout would only occur if needed to maintain liquidity in the energy markets in order to avoid potential for skyrocketing prices and avoid reliability risks," said Merrill Lynch & Co. (MER) analyst Steven Fleishman. "In the end, government is most interested in keeping the lights and the heat on at a reasonable price." Once a Wall Street darling, Enron's stock has fallen about by 75% in a mere three weeks, and the company is now the subject of a U.S. Securities and Exchange Commission investigation. Because it's so big, energy companies have watched Enron's troubles closely, and speculated about what they could mean for energy markets overall. A number have said they've started to cut back on their exposure to the company. Enron's stock has been falling all year, but it plunged several weeks ago after it disclosed a $1.2 billion writedown of shareholder equity. The SEC subsequently launched an investigation into Enron partnerships associated with the writedown. Enron spokesperson Karen Denne said the company wouldn't speculate on the idea of a bailout. "First of all I can't speculate, and second of all we're not even going to entertain worst case scenarios," Denne said. "As far as I know no one has approached Washington about a federal bailout." But one source inside Enron said the company isn't ruling out the possibility of approaching Washington if "things get really bad." A bailout would require federal legislation. To qualify, Enron would have to argue that a bailout is an economic necessity, according to Christine Uspenski, an analyst at Schwab Capital Markets (SCH). Quite Different Cup Of Tea From Chrysler Unlike the situation that led to a $1.2 billion federal bailout of Chrysler Corp. in 1980, hundreds of thousands of jobs aren't now at risk. Enron is nowhere near the size of Chrysler. "When Chrysler was bailed out there were senators and congressman who were going to have unemployed constituents so they proposed federal legislation to give the company a $1.2 billion loan," Uspenski said. "A bailout would need federal legislation proposed by Texas delegation. It would be hard because Enron is not the size of an employer like Chrysler. The one caveat is bailouts happen to be the fashion of the moment. Enron would have to make a compelling case that this is an economic necessity. They would have to quantify the risk to the energy market and there's such bad karma around the energy market right now." Robert Christensen, an analyst with FAC Equities in New York, agreed. "I can't even imagine something like that happening," Christensen said. "It's so far-fetched." A merger, on the other hand, would funnel billions of dollars into Enron, keep the company afloat and might help the company's stock recover, analysts said. On Wednesday, the Wall Street Journal reported that Enron is in talks for a capital infusion and possible acquisition by Dynegy Inc. (DYN). Also, Enron said Thursday it will restate its financial statements from 1997 through the second quarter of 2001, saying its financial and audit reports are unreliable for all those periods. The company fired its treasurer and general counsel. Andrew Meade, an analyst with Commerzbank in New York, said a bailout would likely never materialize because there are other large traders of energy commodities in the marketplace, such as Duke Energy (DUK), Dynegy, Reliant Energy Inc. (REI) and Williams Cos. (WMB), that can provide liquidity to the market. A merger would be a better route for the company, but would pose its own set of problems, Meade added. "With a merger or an equity infusion, Enron can certainly survive," Meade said. "Enron has a lot of nice attributes, it is a great trading and marketing platform and companies are certainly smart to take a look at it. But merging with or buying Enron is not an easy thing to do because of troublesome issues like a federal investigation and a range of assets that would be pretty tough to sell." Enron's best assets "get up and go home everyday," Meade said, referring to energy traders at the company. If Enron were to get into a friendly merger or buyout, he added, the company should lock in its top 50 or 100 traders with non-compete clauses. It would be much easier for Dynegy or other Houston energy companies to simply hire Enron employees rather than buy the company. Other analysts also pointed to risks in a merger with Enron. "A merger is certainly an option, but it gives you pause if it asks you to be the white knight," Uspenski said. A proposed merger could turn out to be a "minefield and there would certainly be a pretty sizable exposure. It would definitely make shareholders nervous." Gerald Keenan, a partner in PWC Consulting in Chicago, was skeptical about the proposed reports of a merger between Dynegy and Enron. "Dynegy is not that big a company," Keenan said. "It has a market cap of about $14 billion. What Enron needs is someone to carry it. How is an entity like Dynegy going to carry Enron? Enron has a small market cap but a huge balance sheet." Keenan also said Enron wouldn't be likely to secure a federal bailout. "The only caveat would be if the bailout would have some kind of significant effect on energy commodity markets," Keenan said. "Other than that, it's unlikely the federal government will bail Enron out." -By Jason Leopold, Dow Jones Newswires; 323-658-3874; [email protected] Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Enron Bonds Give Back Gains as Firm Restates Profit (Update3) 2001-11-08 16:40 (New York) Enron Bonds Give Back Gains as Firm Restates Profit (Update3) (Updates bond and stock prices.) New York, Nov. 8 (Bloomberg) -- Enron Corp. bonds pared earlier gains as the biggest energy trader said it restated earnings for more than four years, increasing concern that Dynegy Inc. won't buy out the company. Enron's 7.88 percent coupon notes due in 2003 traded at 77 cents on the dollar to yield 27 percent, down from a bid of 82 cents this morning, traders said. The debt, which was trading near 100 last month, was bid at 77 cents yesterday. Enron shares, down 75 percent in the last month, fell 64 cents to $8.41 today. Dynegy said today it's in talks to acquire Enron in what people familiar with the situation said would likely be a stock transaction worth $8 billion. An acquisition would bolster Enron's credit rating, which was recently lowered, traders said. ``Enron bonds justifiably rallied on the good news of Dynegy. They naturally settled back down as the market assesses the significance of the restatement,'' said Glenn Reynolds, an analyst at CreditSights Inc. ``The whole problem goes away and sighs of relief all around if they come to terms with Dynegy.'' Enron's 6.4 percent notes due in 2006 were bid at around 70 cents, down from this morning when the debt traded at 84 cents. Yesterday, the notes were priced between 72 cents and 74 cents. The difference between bid and ask prices for Enron debt widened to about 4 cents to 5 cents -- ``monster'' spreads, Reynolds said -- from 2 cents this morning, indicating few investors are willing to buy or sell the bonds without more news. While Moody's Investors Service rates Enron's credit as ``Baa2'', one rung higher than its ``Baa3'' grade for Dynegy, other ratings companies including Standard & Poor's and Fitch Inc. have assigned Dynegy a higher rating. Also, Enron's ratings have been cut in recent weeks and face further reduction, while Dynegy's credit outlook is stable. Enron bonds and shares have tumbled in recent weeks on concern about partnerships run by the company's former chief financial officer and concerns the company's trading business will be hurt by the credit downgrades. Enron and Dynegy are both based in Houston. Enron has $15.8 billion of bonds outstanding, more than double the $6.8 billion market value of its stock, according to Bloomberg data. Apache to Cut 2002 Drilling Budget 70% on Gas Prices (Update1) 2001-11-08 16:34 (New York) Apache to Cut 2002 Drilling Budget 70% on Gas Prices (Update1) (Updates with closing share price in fifth paragraph and closing Nymex gas price in last paragraph.) Houston, Nov. 8 (Bloomberg) -- Apache Corp., an oil and natural-gas producer, plans to cut spending on drilling next year by 70 percent, blaming wide swings in gas prices caused by traders such as Enron Corp. and Dynegy Inc. The company will trim spending to $300 million from $1 billion this year, Chief Executive Officer Raymond Plank said in an interview. Gas on the New York Mercantile Exchange reached $10.10 per million British thermal units in late December and touched $1.76 per million British thermal units in September. The market for gas derivatives is 15 times the cash market for delivery to customers, and broad price changes make it difficult for oil and gas companies to set budgets, Plank said. ``You've got a 150-pound tail wagging a 10-pound dog,'' Plank said. ``You can't predict what your cash flow may be. Therefore, your budgeting is difficult.'' Shares of Apache were unchanged at $50.73. They have fallen 28 percent this year. Apache, Dynegy and Enron, the biggest energy trader, are based in Houston. ``We can always go back and take another look at (spending) later,'' Apache spokesman Tony Lentini said. ``We look at our (budget) regularly, and we're known for moving pretty quickly.'' Enron, whose plunging stock price forced it to begin merger talks with rival Dynegy, today restated earnings for more than four years because of losses from partnerships under investigation by the Securities and Exchange Commission. Fearing an Enron collapse might cripple the gas-derivatives market, Apache said yesterday it traded out of most of its gas hedges, making $70 million so far. ``Apache is trying to conserve cash and retain the maximum amount of flexibility,'' said Irene Haas, an analyst at Sanders Morris Harris Inc. ``Apache has been traditionally very nimble in responding to these cycles. There's something to be said for being cautious and conservative when the visibility is bad.'' Haas rates Apache ``accumulate'' and doesn't own its shares. Nymex gas has averaged $2.7 per million British thermal units so far this quarter, down almost half from the same time a year earlier. It rose 9 cents to $2.96 per million British thermal units today. Enron Fires Treasurer, Alleges Improper Investment (Update2) 2001-11-08 16:31 (New York) Enron Fires Treasurer, Alleges Improper Investment (Update2) (Updates with closing share prices in ninth paragraph and information on board approval starting in 17th paragraph.) Houston, Nov. 8 (Bloomberg) -- Enron Corp., which today reduced its earnings for the last four years by $552 million because of accounting errors involving affiliates, also said it fired its treasurer and a corporate attorney for making improper investments in one of the affiliates. Enron fired Treasurer Ben Glisan and Kristina Mordaunt, the general counsel of an unspecified Enron division. The two invested in an affiliate created by Enron to buy and sell the company's assets, the Houston-based company said in filings with the Securities and Exchange Commission. The transactions also involved two former Enron employees and former Enron Chief Financial Officer Andrew Fastow, who was replaced two weeks ago, the filing said. The former employees were Kathy Lynn, vice president of an unnamed Enron division, and Anne Yaeger, identified by Enron as a non-officer employee. Lea Fastow, Andrew Fastow's wife, referred all questions to her husband's attorney, who couldn't immediately be reached for comment. Glisan wouldn't comment. Attempts to reach Mordaunt weren't successful. $30 Million Profit Fastow made more than $30 million by managing and investing in two private limited partnerships called LJM Cayman LP, known as LJM1, and LJM2 Co-Investment LP. Enron said on Oct. 24 that Fastow had been replaced as CFO and put on leave. The filing said he is no longer with the company. Enron said it believes Lynn and Yaeger remain associated with LJM2. The SEC began a formal investigation into some of Enron's partnerships last month, causing the stock price to plummet from already low levels. Shares of Enron had fallen 89 percent this year, as of the close of trading yesterday. Enron, short on cash, began merger talks with Dynegy Inc. Yesterday, it failed to reach an agreement with Dynegy to sell itself for about $8 billion in stock. ChevronTexaco Corp., which owns 27 percent of Dynegy, is also involved in the talks. Dynegy is concerned credit rating companies may downgrade Enron's debt, people familiar with the situation said. Enron shares fell 64 cents, or 7.1 percent, $8.41. Shares of Dynegy, which is also based in Houston, rose $3.50, or 11 percent, to $36.50. ChevronTexaco rose 31 cents to $87.59. Restatement Enron restated its earnings for the past four years and the first three quarters of 2001 to incorporate the first LJM partnership, as well as Chewco Investments LP and Joint Energy Development Investments LP, known as JEDI. Enron calls them special purpose entities, or SPEs. They are vehicles for getting access to capital or hedging risk that can be moved off the books under some circumstances. Enron established more than 30 SPEs. The company reported that Enron and ``Enron-related entities'' participated in 24 ``business relationships'' in which LJM1 or LJM2 participated. They included the sale of asset such as unused fiber optic cable, the purchase of debt or equity interests in Enron affiliates, and the sale by LJM2 of a call and a put option on some assets. In addition to Chewco and JEDI, a wholly owned subsidiary of LMJ1 that ``engaged in derivative transactions with Enron to permit Enron to hedge market risks of an equity investment in Rhythms NetConnections, Inc.,'' which provides high-speed networking to businesses. Enron said in the SEC filing that those hedging transactions should have been consolidated into its 1999 and 2000 results because the LJM1 subsidiary was inadequately capitalized. Enron did not specify why transactions by Chewco and JEDI should have been included on its balance sheet. Enron said it believes that Michael J. Kopper, a former company employee, managed a Chewco general partner and invested in it. The company said it also believes that Kopper was the controlling partner of a limited partnership that (through another limited partnership) in March 2000 purchased interests in affiliated subsidiaries of LJM1.'' The company said that it believes the limited partners in that deal also included Glisan, Mordaunt, Lynn and Yaeger. An ``entity associated with'' Fastow was also a limited partner, Enron said. Enron said that its board approved Fastow's initial transaction with LJM1 and put controls in place that required the review and approval of each transaction by the office of the chairman, the chief accounting officer and the chief risk officer. Lay and Skilling were for many years the only members of the office of the chairman. After Skilling's resignation in August, Enron promoted Greg Whalley to president and chief operating officer and Mark Frevert to vice chairman. Both became members of the office of the chairman. Lay, as chairman, also had the authority to require Fastow to resign from the partnerships at any time. The board also directed that its Audit and Compliance Committee conduct annual reviews of transactions between Enron and LJM1 and LJM2 completed during the previous year, the filing said. Dynegy Rises on Optimism It May Get Enron for Bargain (Update2) 2001-11-08 16:28 (New York) Dynegy Rises on Optimism It May Get Enron for Bargain (Update2) (Updates with closing share prices.) Houston, Nov. 8 (Bloomberg) -- Dynegy Inc. shares rose 11 percent on speculation that the company may be able to buy Enron Corp., the biggest energy trader, at a bargain price. Dynegy said today it's in talks to buy Enron. Dynegy, a rival Houston-based energy trader, is considering an acquisition of Enron for stock valued at almost $8 billion, people familiar with the situation said. With 850 million shares outstanding, Enron has a market value of about $7.7 billion. Enron was forced to consider a sale after its stock plunged this year and its credit ratings were cut amid a Securities and Exchange Commission investigation into partnerships run by a former executive. Enron shares yesterday touched $7 a share, their lowest level in more than a decade. A year ago, the stock traded at more than $80 a share. ``If Dynegy can get Enron for $10 or $11 a share, it's a heck of a good deal,'' said Sanders Morris Harris analyst John Olson, who owns Enron shares. ``That's why the shares are up.'' Dynegy rose $3.50 a share to $36.50. Enron fell 64 cents, or 7.1 percent, to $8.41. Enron failed yesterday to reach an agreement with Dynegy, which is concerned that credit-rating agencies may reduce Enron's debt to junk status, people familiar with the situation said. Enron today restated earnings for more than four years to include losses from investment partnerships. ``The lack of (Enron) investor confidence at this point makes it likely that Dynegy could buy Enron and pay little or no premium,'' said Commerzbank Securities analyst Andre Meade. Dynegy ``is unlikely to pay significantly more than Enron's current share price if it does make a bid,'' he said. An acquisition of Enron would make Dynegy the biggest energy trader, eliminating its largest rival, analysts said. Dynegy also would get the leading energy manager for commercial and small- industrial customers, and an Internet energy-trading operation many times larger than its own, analysts said. ``People are betting for or against a deal with Enron,'' said Meade, who rates Enron shares ``accumulate'' and doesn't own them. NewPower 3rd-Qtr Loss Narrows After Adding Customers (Update4) 2001-11-08 16:08 (New York) NewPower 3rd-Qtr Loss Narrows After Adding Customers (Update4) (Updates with closing share price in sixth paragraph. Updates Enron's share decline in fifth paragraph.) Purchase, New York, Nov. 8 (Bloomberg) -- NewPower Holdings Inc., a venture formed by Enron Corp. to compete with traditional gas and electric utilities, said its third-quarter loss narrowed after cutting costs and adding customers. The loss was $67.1 million, or $1.15 a share, compared with a loss of $69.9 million, or $2.96, a year earlier. Revenue tripled to $54.7 million from $18.2 million, the company said. NewPower was forecast to have a loss of $1.16 a share, the average estimate of three analysts polled by Thomson Financial/First Call. NewPower added 80,000 customers in the third quarter and expects to have 840,000 to 860,000 customers by the end of the year. The company, based in Purchase, New York, reduced sales, general and administrative costs by 41 percent, primarily by cutting systems-development and professional expenses. The company is eliminating 40 jobs, or 22 percent of its workforce, to cut costs, Chief Financial Officer William Jacobs said on a conference call. NewPower expects costs of $16 million in the fourth quarter for severance and to end a business alliance with AOL Time Warner Inc., spokeswoman Gael Doar said. Enron, the largest energy trader, owns about 44 percent of NewPower. Houston-based Enron, whose shares have fallen 75 percent since Oct. 16 amid concern over affiliated partnerships run by its former chief financial officer, said it had $544 million in losses on investments including NewPower in the third quarter. Shares of NewPower rose 42 cents to $1.23. The company first sold shares to the public in October 2000 for $21 a share. The offering increased the number of shares outstanding to about 58 million from 23 million. Fourth Quarter Excluding costs for severance and to end the AOL agreement, NewPower expects a fourth-quarter loss of $41 million to $46 million, or 65 cents to 73 cents a share, and a full-year loss of $210 million to $215 million, or $3.55 to $3.63. The company was expected to lose 74 cents in the fourth quarter, according to First Call's average of three analysts' estimates. The full-year's loss was expected to be $3.71, the average of four analysts' estimates. In 2002, NewPower expects to have a loss of $100 million to $125 million, or $1.59 to $1.99 a share. The average estimate of four analysts polled by First Call was $2.26. NewPower expects to be profitable in 2003 with 1.5 million customers. The company is focusing more on small businesses. It now has 25,000 small-business customers and expects to have more than 35,000 by the end of the year. International Business Machines Corp. owns 1.5 million shares of NewPower, less than 5 percent of the company. Enron Restates Years of Profits, in Talks With Dynegy (Update4) 2001-11-08 15:41 (New York) Enron Restates Years of Profits, in Talks With Dynegy (Update4) (Adds Dynegy share price in sixth paragraph.) Houston, Nov. 8 (Bloomberg) -- Enron Corp., which began merger talks with Dynegy Inc. after its stock plunged, restated earnings for more than four years to include losses from investment partnerships arranged by senior executives. The largest energy trader failed yesterday to reach an agreement with Dynegy to sell itself for about $8 billion in stock. Dynegy is concerned credit rating companies may downgrade Enron's debt, people familiar with the situation said. A reduction to junk status would precipitate a cash crisis by requiring Enron to repay early $3.3 billion of bonds. ``Restating earnings for the past five years is suggestive of fraud, which in itself is justification for a downgrade,'' said Donald Coxe, who manages 78,000 Enron shares as part of the Harris Insight Equity Fund. ``I'd be surprised if they're not downgraded.'' The decision by Chairman and Chief Executive Officer Kenneth Lay to reduce earnings by $586 million since 1997 is part of Enron's efforts to regain confidence among investors stung by the 89 percent plunge in the stock this year and a Securities and Exchange Commission investigation into how the company accounted for partnerships it sponsored. Enron fired Treasurer Ben Glisan and Kristina Mourdant, a lawyer for an Enron division. The company ``now believes'' Glisan, Mourdant and two other employees no longer working for Enron bought interests in subsidiaries of a partnership run by former Chief Financial Officer Andrew Fastow. Dynegy's shares rose as much as 14 percent on speculation that it may decide not to buy cash-strapped Enron, or, if it did, wouldn't pay much of a premium. ``People are betting for or against a deal with Enron,'' said Andre Meade, an analyst with Commerzbank AG who rates Enron ``accumulate.'' Dynegy ``is unlikely to pay significantly more than Enron's current share price if it does make a bid,'' he said. Shares Decline Enron shares declined 40 cents to $8.65 after the company determined it violated generally accepted accounting rules when it failed to consolidate results for three so-called special purpose entities, vehicles for getting access to capital or hedging risk that can be moved off the books under some circumstances. Enron ousted Fastow last month after revealing an accounting error for transactions with a group of the partnerships resulted in a $1.2 billion reduction in shareholder equity in the third quarter. Arthur Andersen LLP was Enron's independent auditor. The company today reduced 1997 net income by $96 million, 1998 earnings by $113 million, 1999 results by $250 million, and 2000 earnings by $132 million. In 2001, the changes resulted in an increase to net income of $17 million in the first quarter and $5 million in the second quarter, and a reduction of $17 million for the third quarter. Enron bonds pared gains after the earnings were restated, as the threat of a credit downgrade dimmed a rally sparked by the Dynegy talks. Enron's debt doubled in the past four years to $13 billion at the end of the third quarter. Both Standard & Poor's and Moody's Investors Service are considering lowering their ratings, which are two levels above junk. ``Enron is running out of time and that's what's pushing them to the bargaining table,'' said Zach Wagner, an analyst with Edward Jones & Co., who cut his recommendation on Enron to ``reduce'' from ``accumulate'' on Oct. 23. Securities regulators are investigating Enron's web of more than 30 partnerships, including two in which Fastow served as general partner: LJM Cayman LP, known as LJM1, and LJM2 Co- Investment LP, known as LJM2. Fastow received more than $30 million from LJM investments and management fees, Enron said. Labyrinth The company reported that Enron and ``Enron-related entities'' participated in 24 ``business relationships'' in which LJM1 or LJM2 participated. They included the sale of assets, such as unused fiber optic cable, the purchase of debt or equity interests in Enron affiliates, and the sale by LJM2 of a call and a put option on assets. The partnerships involved in the restatement are Chewco Investments LP; Joint Energy Development Investments, known as JEDI; and a wholly owned subsidiary of LJM1 that ``engaged in derivative transactions with Enron to permit Enron to hedge market risks of an equity investment in Rhythms NetConnections Inc.,'' which provides high-speed networking to businesses. Some companies that trade natural gas, electricity and other commodities with Enron may pull back if Enron's finances deteriorate to the point that it loses its investment-grade credit rating, investors say. Atlanta-based Mirant Corp., a top U.S. energy trader, has moved most of its trades away from Enron to other exchanges, such as Intercontinenal Exchange, a venture it formed in March 2000 with other partners including BP Plc and Goldman, Sachs & Co., Mirant spokesman James Peters said. ``We are still trading with them, but on a very limited basis,'' said Peters. ``Dynegy has to act fast,'' said Roger Hamilton, a money manager with John Hancock Advisers Inc., which sold its Enron shares in recent weeks. ``If Enron can't get financing and its bonds go to junk, they lose counterparties and their marvelous business vanishes.'' Dynegy would gain a wholesale energy business, the leading energy manager for commercial and small-industrial customers, and an Internet energy trading operation many times larger than its own, said UBS Warburg LLC analyst James Yanello. ``If history is any guide, Dynegy is stingy when it comes to acquisitions, so I don't expect them to do anything stupid'' such as overpaying for Enron, said Yanello. ``A deal could provide Dynegy with tremendous opportunity.'' He rates Dynegy ``strong buy'' and doesn't own shares of either company. ChevronTexaco Corp., which owns about 27 percent of Dynegy, is considering adding $1.5 billion to the transaction to help Enron. It would provide another $1 billion when the purchase is closed, the New York Times and Wall Street Journal reported. Breakup Fee The companies agreed on a breakup fee providing Dynegy with about $400 million if Enron accepts a higher offer, people familiar with the talks said. Dynegy's shares rose as much as $4.30, or 13 percent, to $37.30. The stock had dropped $3 yesterday when news of the Enron talks was first reported. Dynegy spokesman Steve Stengel, Enron spokesman Mark Palmer and ChevronTexaco spokesman Fred Gorell declined to comment. Enron plans to meet with J.P. Morgan Chase & Co., Citigroup Inc. and other lenders tomorrow to discuss the merger plans and a possible increase in the amount the company pays for existing credit lines, according to bankers familiar with the matter. The company has invited more than 300 creditors to its offices in Houston to listen to presentations by Enron's financial team, led by its new chief financial officer, Jeffrey McMahon, the bankers said. Dynegy began in 1985 as Natural Gas Clearinghouse, a gas- trading company. In 1998, the company took the name Dynegy -- a combination of the words dynamic and energy -- to reflect its expansion beyond natural gas. Chuck Watson, the company's president from 1985, became chairman and chief executive in 1989. Watson is an investor with Enron CEO Lay in the Houston Texans, who begin playing in the National Football League next year, and is a board member at Baker Hughes Inc. As of an April filing with the SEC, Watson owned 12.3 million Dynegy shares, or about 5.1 percent of the common stock. DJ FABER REPORT: More On Enron/Dynegy >ENE 2001-11-08 16:00 (New York) (The following is a portion of a report aired at 3 p.m. Thursday by CNBC reporter David Faber). Enron and Dynegy are still talking about a deal that would result in Enron's purchase by Dynegy. And they would like to either announce a transaction or the lack of one, in the near term. It's still unclear at what price Enron would be purchased, or if the deal will end up as a large investment. People close to the talks do not expect a large premium. A key challenge at present for Dynegy is whether it can conduct enough due diligence of an incredibly complex financial structure to feel comfortable with a takeover. That point was made clear today given Enron just released restated financial results for the last four years of operations. Its peak earnings in 2000 had been $1.12 a share. Now those earnings have been restated to 97 cents. The key to Enron's restatement is the treatment of three off balance sheet partnerships whose debt is guaranteed by Enron. Given that guarantee, Enron's auditors have now concluded the partnerships should have been included on Enron's books. The debt from the partnership has been included in recent quarters, but not for years previous. And if it had been, Enron might not have been able to employ as much leverage in running its business and supercharge the returns on some of its trades. While Dynegy understands Enron's trading business as well as any company could, it still would seem to need time to review its trading book. With the restatement, Enron's return on capital and return on equity is in the mid-single digits. That's well below the ROEs of banks and brokers which Enron most closely resembles in its trading activities. Other issues are also sure to be explored. For example, why did Enron have to extend deposits to counter parties during the June 2001 quarter if business was so good, as would appear to have been the case given the company's strong earnings? And what about Enron's use of derivatives for these relatively new type trades? All these are questions that Dynegy may not have time to answer and so instead may be seeking an expansive material adverse change clause in any merger agreement which will give it wide latitude to exit a deal should it discover things it doesn't like in the future. Dynegy, Enron negotiating merger Enron fires two officers; financial results to be restated CBSMarketWatch.com Lisa Sanders NEW YORK (CBS.MW) -- Enron's troubles deepened Thursday as the energy merchant confirmed it's in merger talks with Dynegy and announced, in a Securities and Exchange Commission filing, that it fired two officers and is restating financial results for four years and two quarters. Both Dynegy and Enron confirmed Thursday that they're in negotiations following a published report that an $8 billion deal was close to being finalized. The New York Times reported that Dynegy's board approved a stock offer worth $10 a share for Enron. While confirming the talks, the companies released no further details. Dynegy had no additional comment. An Enron spokeswoman stonewalled reporters Thursday by saying the company was requiring all questions to be submitted in writing. Enron did not respond to the questions. Shares of Enron (ENE ) initially rallied but closed at $8.41, down 64 cents, or 7.1 percent, while Dynegy (DYN ) tacked on $3.50 to close at $36.50. ChevronTexaco (CVX ), which owns 27 percent of Dynegy, will contribute $2.5 billion to the deal, the Times reported. ChevronTexaco, which added 31 cents to close at $87.59, declined to comment. Also Thursday, Enron in an SEC filing said it has fired its treasurer, Ben Glisan, and the general counsel of an Enron division, Kristina Mordaunt. Earlier in the month, Enron fired chief financial officer Andy Fastow for his role in limited partnerships that are now under investigation by the SEC. Enron restated its financial results for the years 1997 through 2000 and the first two quarters of 2001. Enron has lost most of its market value over the past month after the SEC launched a probe of some transactions by company executives. Enron would bring huge debt A merger of Dynegy and Enron would require the smaller company to take on the $12.8 billion in debt that's now on Enron's books. The acquisition would likely lead to the sale of additional Enron assets to pay down the debts, the Times reported. Boards of both companies were meeting in Houston on Wednesday night, according to the paper. "If you look at the balance sheets of Dynegy and Enron, (a merger) would be a tough deal," Jeff Dietert of Simmons & Co. He noted that Dynegy (DYN ) has $3 billion worth of debt and a market capitalization of $11.7 billion. "Enron's debt load is likely to be too significant for Dynegy to step up and swallow," Dietert said. For Dynegy to make the deal, it would have to issue equity, he added. It would make more sense for Dynegy to consider buying some Enron assets, Dietert said. That would also help Enron clean up its balance sheet. Chris Ellinghaus of Williams Capital Group said that ChevronTexaco's involvement would make a Dynegy-Enron combination more realistic. "We would view this transaction favorably assuming Dynegy intends to dispose of Enron's myriad of non-core businesses," Ellinghaus said. Dynegy and Enron together would dwarf other natural gas and power marketers in the U.S. Ellinghaus said the possibility that Dynegy would buy Enron is "staggering." "However, the failure of Enron to procure an outside equity infusion has apparently severely limited Enron's options," he said. "We do not believe the potential demise of Enron invalidates the merchant energy model or suggest deeper problems within the wholesale energy markets." Gregory Phelps, vice president and portfolio manager of John Hancock's Patriot Group of closed-end income funds, said Enron, even in its current state, retains some intrinsic value. "Enron still has an incredible number of contractual trading arrangements out there that can't be allowed to crumble and fall," he added. "I think that a firm like Dynegy with a firm like ChevronTexaco as partner adds the credibility that Enron needs." Dynegy gets to buy "assets on the cheap" that it can tie into its own growth-oriented operations, he said. Phelps has never owned Enron stock in his funds because he says it's too volatile and the company makes it too hard to understand how it generates revenue. Bush ties Enron's Chairman and CEO Kenneth Lay stepped back into the CEO spot following the abrupt departure of Jeffrey K. Skilling, who left after just six months on the job for "personal reasons." Skilling was called to testify in Washington, D.C., this week, though the SEC would not confirm whether it was before their agency. In a conference call with investors Wednesday, El Paso Energy Chairman and Chief Executive William Wise said his company would consider buying some of Enron's assets, though he declined to specify which ones. "We are an asset-oriented company, and we would look at their assets," Wise said. "Rather than list any of them for you, you can make your own judgments." Wednesday, A.G. Edwards cut its rating on Enron to "sell" from "hold," saying the only reason to own the stock now would be to bet that some company would bid for Enron or a large part of its wholesale trading operations. Azurix divestiture Also Thursday, Azurix Corp., an affiliate of Enron, said it sold its Azurix North America and Azurix Industrial to American Water Works for $141.5 million in cash and the assumption of $6.1 million of debt. Azurix is a water and wastewater company. In the third quarter, Enron took a $1 billion charge, which included $287 million for asset impairments at Azurix. Lisa Sanders is a Dallas-based reporter for CBS.MarketWatch.com.

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VentureWire, Wednesday, October 25, 2000

====================================================== VENTUREWIRE --- Wednesday, October 25, 2000 ====================================================== Private Company Business News ------ Published Daily by Technologic Partners ------- http://technologicpartners.com ====================================================== Top Stories: o Schroder Ventures Closes Second European Fund At $3 Billion o Construction Services Firm BuildNet Pulls $230 Million IPO o Early Stage VC Fund Diamondhead Launches with $135 Million o HealthCentral Acquires Assets of Troubled More.com |||||||||||||||||||| Advertisement |||||||||||||||||||| ONLINE EXCHANGES 2000 CHICAGO CONFERENCE AND FREE TRADE SHOW 4 - 6 December 2000, Sheraton Chicago Hotel & Towers Don't miss your place at the premier B2B exchanges event - more than 120 high profile industry leaders to speak about the latest developments in the fast-moving B2B rollercoaster Hear the word on current business strategies and challenges See solutions from trail-blazing companies at the tradeshow Book now or find out more at http://www.marketsandexchanges.com/ ||||||||||||||||||||||||||||||||||||||||||||||||||||||| Also in This Issue: New Money: o Mobile Info Access Tech Firm Raises $15 Million in Series A o Net Security Firm Securify Raises $20 Million in Series A o Optical Networking Firm Raises $40 Million in Series A & B o e-Commerce Tech Firm AristoCart Lands $4.5 Million Round One o Net Infrastructure Firm Lightspeed Has $11 Million Round One o Optical Services Firm Optidtech Gets $250,000 in First Round o Supply Chain Service ecIndx Adds $7.5 Million to Round One o Web Developer Angel Engineers Raises $6.11 Million Series A o Wireless Services Firm Incurrent Has $3 Million Round One o Critical Care Tech Firm Visicu Lands $15 Million Round Two o Groove Networks Closes Round Three With $41 million o Web App. Management Firm Aptegrity Has $30 Million Round Two o Wireless Tech Firm LinkAir Secures $20 Million Second Round o Image Monitoring Firm LookThatUp Gets $4.1 Million Round Two o Marketplace Enabling Software Developer Raises $33.5 Million o Mobile Tech Firm Portelco Gets $9.4 Million Second Round o Laser and Optic Amplifier Manufacturer Raises $15 Million o College Marketer AroundCampus Lands $3 Million Third Round o Job Interview Firm Fitability Gets $1.5 Million Second Round o Mobile ASP Wapmagic Raises Additional $10 million o Internet Infrastructure Firm eMikolo Secures $4.5 Million o Motorola Invests in Phone-to-Web Application Firm Lineabox o e-Commerce Solutions Raises $4 Million Fourth Round New Products: o Beacon Photonics Launches Operating Company Beacon Telco o Investors Form Online European Construction Market Asite o Network Service Firm Yo.net Launches First Product o Outsourcer HeyMax Interactive Launches Product Line M&A: o ICG-Backed B2B Market IndustrialAmerica and eCatalogs Merge o MobileLogic Acquires Wireless Platform Eyeshake with Stock New Directors: o Hockey 's Bourque Joins Board of Retailer 1800FaceOff.com o PrintCafe Adds G4 Managing Partner to Board of Directors o Broadband Firm Cambridge Adds Analysys Founder to Board o Content Translator, Localization Firm Uniscape Adds to Board o Netkey Adds Bankers Trust Executive to Board of Directors New People: o Former iXL Chief to Head Web Content Delivery Firm Avienda o Hosted Applications Firm Eality Appoints New CEO o Convenience Store Marketplace RMX Names First President, COO o Former AirTouch Exec Joins CreSenda Wireless As President o Loan Processing Firm Keystroke Names New President & CEO o Construction Industry Rental Service RentOntheDot Names Head o Digital Imaging Firm Altamira Replaces President, Names CEO o Merchandise Application Tech Firm Mercari Names President VC Fund News: o GKM Launches First Venture Fund with $60 Million o OffRoad Forms Joint Ventures to Expand into Europe and Korea VC Personnel: o CMEA Ventures Adds Former Sun Microsystems Exec as Partner o Labrador Ventures Adds New Director, Opens New York Office |||||||||||||||||||| Advertisement |||||||||||||||||||| P2P OR NOT P2P? We've heard distributed computing and peer-to-peer networks will change computing. But how? Dozens of companies are making bids for pieces of the P2P pie. Some of them will succeed, but many will fail. Industry Futures,one of five expert panels at Technology Outlook 2000, will examine the business plans and challenges in distributed computing: David P. Anderson, CTO, United Devices Shishir Mehrotra, President & CEO, Centrata Andreas Stavropoulos, Director, Draper Fisher Jurvetson Steve Stephansen, President & CEO, WebV2 Only at Technology Outlook 2000: The Future of Pervasive Computing December 4 and 5, San Francisco A VentureWire investment conference. http://www.tpsite.com/tp/conf/to2000/?vw=200010252 ||||||||||||||||||||||||||||||||||||||||||||||||||||||| ======= Top Stories ======= o Schroder Ventures Closes Second European Fund At $3 Billion LONDON -- Schroder Ventures, which provides venture capital services internationally, said it closed its second European fund with EUR 3.5 billion ($3 billion) in capital holdings. The fund announced its first close at EUR 3 billion in May. The fund is already 25% invested in 5 portfolio companies, including several management buyouts. The fund focuses on global acquisitions and investments in developing technologies and the new economy. http://www.schroders.com/ _____________________________________________ o Construction Services Firm BuildNet Pulls $230 Million IPO RESEARCH TRIANGLE PARK, N.C. -- BuildNet, which provides online business, technology, and project management systems for the home building industry, withdrew its planned $230 million initial public offering. The company, which originally filed for its IPO in March, cited unfavorable market conditions in a filing with the SEC. The move comes one week after company president Bayard M. Atwood left the company to pursue other opportunities. BuildNet is backed by BancBoston Ventures, Barnard & Co., Encore Venture Partners, GE Appliances, GE Capital, Global Technology Investors Fund at Bessemer Trust, Halifax BuildNet Investors, John Hancock Global Technology Fund, J. & W. Seligman, Piedmont Venture Partners, SG Capital Partners, South East Interactive Technology Fund, and The CIT Group/Equity Investments. http://www.buildnet.com/ _____________________________________________ o Early Stage VC Fund Diamondhead Launches with $135 Million MENLO PARK, Calif. -- Diamondhead Ventures, and early-stage venture capital fund that specializes in information technology and Internet infrastructure companies, said it launched with $135 million. The firm will make initial investments of between $1 million and $5 million and invest a total of $8 million to $10 million in each portfolio company. The firm's portfolio companies will be related to Internet and business-to-business infrastructure technology and primarily come from research laboratories at educational institutions including Stanford University, Cal Tech, and Carnegie Mellon. Diamondhead Ventures was founded by managing directors Raman Khanna, who was until recently chief information officer at Stanford University, and David A. Lane, co-founder of Alpine Technology Partners and former investment officer at Harvard Management Co. Diamondhead Ventures' corporate partners includeFoxconn, Fujitsu, HCL Technologies, Oracle Systems, Sonera, and Sun Microsystems. The firm's fund was raised from corporate backers, other financial institutions such as American Family Insurance and Moore Capital, and individual investors. http://www.dhven.com/ _____________________________________________ o HealthCentral Acquires Assets of Troubled More.com EMERYVILLE, Calif. -- Publicly traded HealthCentral.com, a provider of online healthcare commerce, said it acquired assets of online health and beauty retailer more.com. The acquisition was made with 5 million shares of HealthCentral.com common stock, which is valued at approximately $6.5 million, according to Tuesday's closing price. HealthCentral.com acquired more.com's Web site, trademarked names, and customer lists, and also acquired more.com's subisidiary Comfort Living. The company will retain all of Comfort Living's approximately 27 employees, but none of more.com's remaining 20 employees. More.com cut its staff this summer by 20% after pulling its planned IPO in May. More.com's backers include Bain Capital, Boston Millennia Partners, Galen Partners, Health Business Partners, HealthCare Ventures, J&W Seligman & Co., Rho Management, Star Ventures, Swander Pace Capital, Softbank Technology Ventures, and 21st Century Internet Venture Partners. http://www.healthcentral.com/ http://www.more.com/ ======= New Money ======= o Mobile Info Access Tech Firm Raises $15 Million in Series A AUSTIN, Texas. -- Austin Ventures said it has invested $15 million in Exelano, which provides end-to-end mobile information access technology, as part of the startup's Series A funding round. Ross Cockrell, a partner at Austin, will take a seat on the Exelano's board of directors. Austin Ventures previously provided Exelano with seed financing. http://www.exelano.com/ _____________________________________________ o Net Security Firm Securify Raises $20 Million in Series A PALO ALTO, Calif. -- Securify, which provides Internet security technology, said it has raised $34 million in its Series A round of funding led by Spectrum Equity Investors, which provided $20 million. Pequot Capital, GemVentures, the venture arm of Gemplus, and Bayview Investors, an affiliate of Robertson Stephens, also participated in the round. The company said it will use the funds to expand its sales and marketing and for the further development of its Internet security protocol. Benjamin Coughlin, principal at Spectrum, and Karen White, principal at Pequot Capital, will join Securify's board of directors. http://www.securify.com/ _____________________________________________ o Optical Networking Firm Raises $40 Million in Series A & B WALTHAM, Mass. -- GiantLoop Network, which provides optical networking services for large businesses, said it raised a total of $40 million in two rounds of funding. GiantLoop secured $20 million in both its Series A and Series B financings. The funds were provided by Greylock, Roger Marino, co-founder of EMC, and Optical Ventures. In addition to the funding, Giantloop announced its management team, which is led by company co-founders Harry Dixon, chairman and CEO, Mark Ward, president and COO, Chris Riley, executive vice president of sales and marketing,and Randy Seidl, managing director. http://www.giantloop.com/ _____________________________________________ o e-Commerce Tech Firm AristoCart Lands $4.5 Million Round One WILMINGTON, Del. -- AristoCart, which designs and develops e-commerce technology for online shopping companies, said it raised $4.5 million in its first round of financing. AIG Orion led the round with participation from eXseed Technology Investments. The company will use the funds for product development, hiring additional staff, and marketing. http://www.aristocart.com/ _____________________________________________ o Net Infrastructure Firm Lightspeed Has $11 Million Round One PLEASANTON, Calif. -- Lightspeed Interactive, which provides Internet infrastructure software, said it has secured $11 million in its first round of funding from Ticonderoga Capital and Millenium Technology Ventures. The company said it will use the funding to support its business growth, product development, and marketing. http://www.lspeed.com/ _____________________________________________ o Optical Services Firm Optidtech Gets $250,000 in First Round BOSTON -- GenuOne, a provider of brand protection programs, said it invested $250,000 in Optidtech, a provider of optical services for identification systems, as part of its first round of funding. Optidtech's first product is Conacs, a contactless access control system which provides control of fast-flowing traffic and can operate covertly. Optidtech is also backed by J.C. Technologies, an Israeli venture capital firm, and its incubator, Patir R&D. GenuOne co-founder and CEO, Jeffrey Unger, will take a seat on Optidtech's board of directors. http://www.genuone.com/ _____________________________________________ o Supply Chain Service ecIndx Adds $7.5 Million to Round One ATLANTA -- ecIndx, a provider of supply chain services to the hardware and electronic industries, said it received an additional $7.5 million from Vector Development as part of its first round of financing. The company announced a $2 million investment from Optio Software in August. Vector will have two representatives on the board. http://www.ecindx.com/ _____________________________________________ o Web Developer Angel Engineers Raises $6.11 Million Series A SUNNYVALE, Calif. -- Angel Engineers, which builds custom Web applications for startups, spin-offs, and established enterprises looking to conduct business via the Internet, said it received $6.11 million in its Series A round of funding led by Global Internet Ventures. InveStar Capital, Pac-Link Management, and technology entrepreneur Ken Leonard also participated in the round. Angel Engineers will use the financing to further expand its sales and marketing and to continue to develop its technology infrastructure. The company previously received seed funding of $800,000. http://www.angelengineers.com/ _____________________________________________ o Wireless Services Firm Incurrent Has $3 Million Round One PARSIPPANY, N.J. -- Incurrent Solutions, a provider of Internet and wireless services to card-issuing banks and transaction processors, said it received $3 million in its first round of financing from the Edison Venture Fund and individual investors. Bruce Luehrs, a general partner at Edison, will be taking a seat on Incurrent's board. Incurrent said the funds will allow it to accelerate its acquisitions and expand product development. http://www.incurrent.com/ _____________________________________________ o Critical Care Tech Firm Visicu Lands $15 Million Round Two BALTIMORE -- Visicu, provider of a network monitoring system that aims to give hospitals constant physician oversight of critical care, completed its second round of financing for a total of $15 million. The second round, led by Pacific Venture Group, included Series A investors Abell Foundation and Cardinal Health Partners and also included Partech International, Sterling Venture Partners, Pacific Life, and Envest Ventures. Michael Bronfein, managing partner of Sterling Venture Partners, will join Visicu's board of directors. Visicu's system provides direct video and audio links, and enhances the capture, analysis, and presentation of patient data. The company will use the financing for sales and marketing, research and development, and operations. The company has raised $18 million to date. http://www.visicu.com/ _____________________________________________ o Groove Networks Closes Round Three With $41 million BEVERLY, Mass. -- Groove Networks, which provides an interactive peer-to-peer platform for networking small groups of personal computers, said it closed $41 million in its third round of financing. The company officially launched earlier this week. Financing for this round included investments from Accel Partners, Intel Capital, and private investors, bringing the total raised to date to over $60 million. The company was founded in October 1997 by Ray Ozzie, the creator of Lotus Notes. http://www.groovenetworks.com/ _____________________________________________ o Web App. Management Firm Aptegrity Has $30 Million Round Two FAIRFIELD, N.J. -- Aptegrity, which provides Web application management services, said it has secured $30 million in its second round of funding led by ABS Capital. GE Equity, the Hearst Corp., and Trident Capital also participated in the round. The company said it will use the new capital to help fund international expansion, and to support strategic investments in operation, business development, and marketing. Ian MacLeod and Tim Weglicki of ABS Capital will join Aptegrity's board of directors. http://www.aptegrity.com/ _____________________________________________ o Wireless Tech Firm LinkAir Secures $20 Million Second Round SAN JOSE -- LinkAir Communications, which develops wireless technology designed to advance the performance and capacity of wireless telecommunications, said it has secured $20 million in its second round of funding from The Carlyle Group's Asia Technology Venture Fund, and previous investors, IDG Technology Venture Investment, Intel Capital, and New World Infrastructure. The company said it will use the funding to continue its development and testing of its technology and to fund resources needed to complete user trials around the world. http://www.linkair.com/ _____________________________________________ o Image Monitoring Firm LookThatUp Gets $4.1 Million Round Two PARIS -- LookThatUp, a European Internet infrastructure provider, said it secured $4.1 million in a second round of financing from Galileo Partners and Mars Capital. The company plans to use the financing to increase its business development efforts and establish offices in the US. This investment follows an $800,000 first round from Mars Capital last November, which the company used to complete the engineering of its technology. LookThatUp's image-recognition technology platform aims to give Web sites the ability to analyze an image from any source, recognize what's in the image, and act on it. The company's products include Image-Filter, for detecting and filtering objectionable images, Image-Shopper, for simplifying purchases, and Image-Seeker, for image-based searches. http://www.lookthatup.com/ _____________________________________________ o Marketplace Enabling Software Developer Raises $33.5 Million BRUSSELS -- Reef, which provides software for the development of online business portals, intranets, and extranets, said it raised EUR 40 million ($33.5 million) in its second round of funding. Investors in the round include Goldman Sachs, 3i, and Vivientures. The company, founded by the former president of Cisco's European, Middle Eastern, and African operations, raised $10 million in its first round of funding from Viventures, Cisco Systems, Net Fund Europe, and other private and individual investors. http://www.reef.com/ _____________________________________________ o Mobile Tech Firm Portelco Gets $9.4 Million Second Round HONG KONG -- Portelco, which provides technology that enables consumers to receive personalized information, and conduct electronic commerce transactions on mobile devices, said it has raised $9.4 million in its second round of funding led by ChinaVest, a new investor in the company. HSBC Private Equity, part of HSBC Holdings, and AsiaTech Ventures, both new investors, also participated. The company said it will use the funding for product development and sales and marketing. Portelco also named its board, which includes Eduard Mayer, the vice president of Strategic Alliance for Z-Tel Technologies; Michael Latimer, chief operating officer and group director of international operations at Orange Plc; Patrick Keen, managing director and chief financial officer of ChinaVest; and Marcus Thompson, chief investment officer of HSBC Private Equity (Asia). http://www.portelco.com/ _____________________________________________ o Laser and Optic Amplifier Manufacturer Raises $15 Million LONDON -- IPG Photonics, which develops and manufactures fiber optic amplifiers and lasers, said it raised $15 million in its latest round of funding. Apax Partners was the sole investor in the round. The company said it will use the funding for its planned European expansion. IPG has four product groups high-power amplifiers for telecommunications, high-power fiber lasers for marking, the printing industry, and material processing, high-power fiver lasers for free space communication, and fiber lasers for laboratory and medical applications, test instruments, and other industrial applications. Telephone +44-207-872-6495 _____________________________________________ o College Marketer AroundCampus Lands $3 Million Third Round CONSHOHOCKEN, Pa. -- AroundCampus, which provides local merchants with integrated offline and online marketing resources and distribution channels to reach college communities, said it secured $3 million in its third round of funding from H.F. (Gerry) Lenfest, founder of the former Suburban Cable T.V. Company, which was acquired by Comcast earlier this year. AroundCampus will use the funds to expand its local merchant services and grow its distribution channels. AroundCampus consists of two wholly-owned subsidiaries: College Directory Publishing, a publisher of campus telephone directories, and Aroundcampus.com, which provides Web-publishing tools for faculty and student organizations, information management tools for students, and local yellow page search engine technology. Mr. Lenfest will receive a seat on the company's board of directors. Previous investors include Harron Capital, Gamma Investors, RG Internet Partners V, and Kimmelcorp. AroundCampus has raised $10 million to date. http://www.aroundcampus.com/ _____________________________________________ o Job Interview Firm Fitability Gets $1.5 Million Second Round ATLANTA -- Fitability Systems, a provider of online interviewing and assessment services, said it completed a $1.5 million second round of financing. New investor Southeastern Technology Fund, which led the round, was joined by Orchard Capital, also a new investor, and previous individual investors. The money will be used to complete an acquisition that has not yet been announced, to accelerate sales and marketing, and to launch a new interview module that assesses values, integrity, and ethics at work. Fitability provides a remotely administered online interview system that delivers detailed reports on job candidates prior to the first face-to-face interview. This round adds to the $1.3 million first round of seed funding from individual investors including Cam Lanier and Bill Scott of ITC Holding Company. Other individual investors, all of whom participated in both first and second rounds, include Don Burton of South Atlantic Capital, Don Weber, former CEO of Contel, T. Forcht Dagi, chairman of Cordova Ventures, Charlie Paparelli of Paparelli Ventures, James Davis, the former president of Harbinger, Rod Knowles, the former CEO of Chattahoochee Bank, and Tom Wylly, executive vice president of SmallBusiness.com. http://www.fitability.com/ _____________________________________________ o Mobile ASP Wapmagic Raises Additional $10 million AMSTERDAM -- Wapmagic, a wireless application service provider, said it received $10 million in additional financing from ABN AMRO Corporate Investments, Advent International, and previous investor Glide IT Fund. The company will use the funds to expand its staff and technology. The company has raised $12.5 million to date. http://www.wapmagic.com/ _____________________________________________ o Internet Infrastructure Firm eMikolo Secures $4.5 Million NEW YORK -- eMikolo, an Internet infrastructure provider that offiers end-to-end network services, said it has secured $4.5 million from Israel Seed Partners and previous individual investors. Craig Donato, the former senior vice president at Excite@Home, participated in the round, as did other individuals. Israel Seed Partners' Michael Eisenberg has joined eMikolo's board of directors. The company said the funds will help to accelerate the deployment of its point-to-point networks. http://www.emikolo.com/ _____________________________________________ o Motorola Invests in Phone-to-Web Application Firm Lineabox MIAMI -- Dorado Investments, the Latin American branch of One Motorola Ventures, the venture capital arm of Motorola, said it made an undisclosed equity investment in Lineabox, a voice-to-Web access provider aimed at the Hispanic community. Lineabox will use the funds for product development. Lineabox is developed by Fonbox, a Spanish-and Portuguese-language unified messaging system backed by eVentures Group. http://www.lineabox.com/ _____________________________________________ o e-Commerce Solutions Raises $4 Million Fourth Round NEW YORK -- e-Commerce Solutions (ECS), which develops and manages outsourced e-commerce applications and systems, has received $4 million in its fourth round of financing led by Connecticut Innovations with a $2 million investment. Previous investor Davenport Capital Ventures provided the rest of the funding. Landmark Capital Ventures arranged the financing. ECS develops and manages outsourced e-commerce applications and systems. The company said it will use the funding to expand its existing product line, staffing, business development, marketing, acquisitions, and to improve its technology. ECS is also backed by Growth Capital Partners. http://www.ecsnetwork.com/ ======= New Products ======= o Beacon Photonics Launches Operating Company Beacon Telco BOSTON -- Beacon Photonics, a holding company that creates venture capital development companies for photonics related markets, said it launched Beacon Telco, which will create or invest in optical and broadband networking companies. Beacon Telco will also provide venture capital and accelerator support to early-stage companies. Beacon Photonics is a joint venture between Boston University's photonics center and Globalvest Management Co. http://www.beacontelco.com/ _____________________________________________ o Investors Form Online European Construction Market Asite LONDON -- Asite, a consortium that provides an online European construction marketplace, announced itself. Property companies Stanhope and Rotch and technology companies Microsoft and Commerce One led the investment in the new venture. The company is also backed by Aurora, a Kohlberg Kravis Roberts & Co. fund, as well as Aspect Internet, Attenda, Compaq Computer, and Intel. Stanhope director Peter Rogers serves as chairman of Asite. PremiSys Group began developing the site in March. The site is scheduled to launch in early 2001. http://www.asite.com/ _____________________________________________ o Network Service Firm Yo.net Launches First Product NEW YORK -- Yo.net, a provider of network services infrastructure technology, announced the launch of its company and first product, Persista, an Internet service delivery platform. Persista enables Internet service providers to deliver context-sensitive services that are integrated within persistent and familiar applications on desktops and other connected devices. Yo.net is funded by Canadian Internet incubator Itemus. http://www.yo.net/ _____________________________________________ o Outsourcer HeyMax Interactive Launches Product Line HERNDON, Va. -- HeyMax Interactive, which provides outsourced applications and management services said it launched its first product line. The company said its suite consisted of online community tools and services aimed at customer support and retention. HeyMax is backed by company founder and CEO Eric Carbone, founder of Realfans.com, which was acquired by America Online.The company said it is raising a round of between $3 million and $5 million that it expects to close in the next three to six months. HeyMax Interactive products and services include chat and message boards, administrative tools, custom design, and integration services. http://www.heymax.com/ ======= M&A ======= o ICG-Backed B2B Market IndustrialAmerica and eCatalogs Merge RESTON, Va. -- IndustrialAmerica, a business-to-businesss marketplace for industrial supplies, and eCatalogs, a catalog service provider, said the two companies have merged to form MROLink. President and chief executive officer of IndustrialAmerica, Chuck Sheridan, will head the newly merged company. Ariel Hazi, the co-founder and chief technology officer of eCatalogs, will become the CTO. Both eCatalogs and IndustrialAmerica have received funding from Internet Capital Group, which maintains a majority stake in MROLink. MSC Industrial Direct and VerticalNet have also invested in MROLink. http://www.mrolink.com/ _____________________________________________ o MobileLogic Acquires Wireless Platform Eyeshake with Stock NEW YORK -- MobileLogic, a provider of services that enable secure wireless access to corporate data, said it acquired Eyeshake, a Boston-based developer of a wireless application development and delivery platform for mostly stock and some cash. The stock constitutes between 10% and 15% of MoblileLogic, which will completely absorb Eyeshake. All of Eyeshake's employees have been retained and will remain in Boston. MobileLogic raised $25 million this past March and is backed by Allen & Co., Apollo Management, CMGI @Ventures, Hikari Tsushin, Investcorp, and Odyssey Investment Partners. http://www.mobilelogic.com/ http://www.eyeshake.com/ ======= New Directors ======= o Hockey 's Bourque Joins Board of Retailer 1800FaceOff.com DENVER -- 1800FaceOff.com, a consumer and wholesale marketer of hockey equipment, said renowned hockey player Raymond Bourque joined the company as an investor and a board member. Mr. Bourque will also participate in promotional appearances and charity work with the company. Rollingsford, New Hampshire-based 1800FaceOff.com is backed by United Investors Group and has raised a Series A round of funding. http://www.1800faceoff.com/ _____________________________________________ o PrintCafe Adds G4 Managing Partner to Board of Directors PITTSBURGH -- PrintCafe, a provider of Internet-based, business-to-business products and services for the printing and publishing industry, said it will add the managing partner of G4 Partners, Thomas Gill, to its board of directors. PrintCafe is backed by Mellon Ventures, Menlo Ventures, Olympic Venture Partners, Key Principal Partners, BancBoston Capital, and CreoScitex. http://www.printcafe.com/ _____________________________________________ o Broadband Firm Cambridge Adds Analysys Founder to Board CAMBRIDGE, U.K. -- Cambridge Broadband, a developer of broadband wireless technology, said David Cleevely joined the five-member board of directors. Mr. Cleevely is founder of Analysys, a U.K.-based telecom and new media advising firm, and managing director of Analysys Group, the venture capital arm of Analysys. Cambridge is backed by Amadeus Capital Partners, Pino Ventures, and Adaptive Broadband. http://www.cambridgebroadband.com/ _____________________________________________ o Content Translator, Localization Firm Uniscape Adds to Board SUNNYVALE, Calif. -- Uniscape, a provider of translation and localization of Web content for international markets, said it named Silicon Valley executive Gayle Crowell and Joe Prang, former president and COO of Aspect Development, to its board of directors. Ms. Crowell is also on the boards of E.piphany, eGroups, Outcome.com, and EchoPass. Uniscape's backers include Acer, Taiwan-based Jin Sun Securities, Sequoia Capital, and Singapore's Technology Development Fund. http://www.uniscape.com/ _____________________________________________ o Netkey Adds Bankers Trust Executive to Board of Directors BRANFORD, Conn. -- Netkey, an end-to-end software provider for Internet kiosks, said Bankers Trust chairman emeritus Frank Newman will join its board of directors. The addition of Mr. Newman raises board membership to seven. Netkey is backed by Atlanta-based incubator Cyberstarts, iXL Ventures, and ZeroStage Capital. http://www.netkey.com/ ======= New People ======= o Former iXL Chief to Head Web Content Delivery Firm Avienda ATLANTA -- Avienda Technologies, a point-to-point Web content delivery company, said it appointed Bill Nussey to president and CEO. Mr. Nussey previously served as president and CEO of iXL, a publicly traded Internet business consulting firm. He is already a member of Avienda's board of directors and was one of the initial investors in the company. Current CEO Aaron Shapiro, Avienda's co-founder and chairman, will assume the role of chief strategy officer. President David Bloom, also a co-founder, will become senior vice president of corporate development. The company is backed by Draper Fisher Jurvetson, Neocarta Ventures, ePlanet Partners, Labrador Ventures, Gray Ventures, and Imlay Investments. http://www.avienda.com/ _____________________________________________ o Hosted Applications Firm Eality Appoints New CEO FOSTER CITY, Calif. -- Eality, which provides hosted business applications to small and medium-sized businesses, said it named Gary Roberts as the company's president and chief executive officer. Mr. Roberts has served as interim CEO after former CEO James Buckley left the company in February. Before joining the company, Mr. Roberts was senior director of customer service for the Palm computing division at 3COM. Eality is backed by Foundation Capital, Bessemer Venture Partners, and Sequoia Capital. http://www.eality.com/ _____________________________________________ o Convenience Store Marketplace RMX Names First President, COO WALNUT CREEK, Calif. -- RetailersMarketXchange, an online marketplace for convenience store owners and suppliers, said it appointed its first president and chief operating officer Nancy D. Reyda. Prior to joining the company, Ms. Reyda was manager of the brand development center at Chevron. RMX is funded by Phillip Morris, Chevron, Oracle, and McLane Co. http://www.rmx.com/ _____________________________________________ o Former AirTouch Exec Joins CreSenda Wireless As President LOS ANGELES -- CreSenda Wireless, which delivers business information to handheld devices, said it has appointed Douglas Dobie, the former group director of strategy and product development for AirTouch/Vodafone (now Verizon Wireless) as the company's new president. He joined CreSenda last year, as vice president of sales and marketing. Company founder Jonathan H. Siegler, who was serving as president, has been appointed vice chairman of the company's board of directors. Cresenda, which is raising Series C funding, is backed by Pointwest Capital, Triumph Holdings, and Chase H & Q. http://www.cresenda.com/ _____________________________________________ o Loan Processing Firm Keystroke Names New President & CEO SEATTLE -- Keystroke.com, a provider of online loan-processing software for the financial services industry, said it named Michael W. Hart to the position of president and chief executive officer. Mr. Hart was previously the vice president of product marketing at BGS Systems. Keystroke.com has received backing from CSFB Private Equity, Encompass Ventures, Cascadia Capital Partners, Madrona Venture Group, Seattle Northwest Securities, and Washington Mutual. http://www.keystroke.com/ _____________________________________________ o Construction Industry Rental Service RentOntheDot Names Head ATLANTA -- RentOnTheDot, a company which provides the construction industry with a real-time rental reservation system, said it named William D. Swisher as its first president and chief customer officer. Prior to joining RentOnTheDot, Swisher was division vice president of sales and marketing, North America, for the Hertz Equipment Rental Corporation. The company offers a Web site and a toll-free number which contractors can use to access a network of available equipment from national equipment rental companies. RentOnTheDot is backed by Discovery Capital. http://www.rentonthedot.com/ _____________________________________________ o Digital Imaging Firm Altamira Replaces President, Names CEO BURBANK, Calif. -- Altamira Group, a provider of digital imaging software, said it named a new chief executive officer and president. Charles Mauzy, formerly the company's executive vice president of business development, is now the company's CEO. Prior to joining Altamira, Mr. Mauzy was vice president of business development at EyeWire, a stock image Web site. Bob Goldstein, also formerly VP of business development, was promoted to president, replacing Martin Silverman, who left the company. Mr. Goldstein was president and founder of ZZYZX Visual Systems, an imaging service firm. Altamira is funded by East West Venture Group and Wasserstein Perella. http://www.altamira-group.com/ _____________________________________________ o Merchandise Application Tech Firm Mercari Names President WASHINGTON -- Mercari Technologies, a merchandise application technology provider, said it promoted Stephen J. Wain to president. Mr. Wain will also continue to serve as chief operating officer. The title of president was previously held by D. Randy Laney, who will remain company chairman and CEO. The company's backers include ABS Ventures, the venture capital arm of DB Alex Brown, North Bridge Venture Partners, Southeast Interactive Technology Funds, Diamond State Ventures, New Meadows Capital, Westwood Ventures, United Capital Group, and individual investors including David Peterschmidt, president and CEO Inktomi. http://www.mercaritech.com/ ======= VC Fund News ======= o GKM Launches First Venture Fund with $60 Million LOS ANGELES -- Gerard Klauer Mattison & Co. (GKM), an institutional research and investment banking firm, said it has launched its first venture capital fund with $60 million. GKM said it will invest in and help to develop start-up and early-stage growth companies. Already, the company has invested in HealthTrio, an interactive, Web-based health management firm, and Hello Networks, a streaming media firm. The company said it will make typical investments of between $2 million and $4 million, and will seek to assemble a portfolio of approximately 20 companies. The company said Lance Horn, former European director of broadcast services at Yahoo, has joined GKM as a managing partner of the fund. He joins Jonathan R. Bloch, who has been managing partner at GKM Los Angeles since Janaury. http://www.gkm.com/ _____________________________________________ o OffRoad Forms Joint Ventures to Expand into Europe and Korea NEW YORK -- OffRoad Capital, which operates a network of high-net-worth individuals for later-stage private investment, said it formed joint ventures with European and Korean firms in order to expand into those markets. OffRoad formed a joint venture with Partners Group, a European private equity investment manager based in Zug, Switzerland and with Samjong Consulting Group, a Seoul, Korea-based professional services provider. The firm's Partners Group partnership enables OffRoad's U.S.-based investors to fund startups in Germany and Switzerland with the possibility of expansion to other countries in Europe. The Samjong joint venture enables OffRoad to invest in Korean companies. European and Korean investors will also have access to U.S. investment through OffRoad. OffRoad has formed partnerships with Charles Schwab, the Mayfield Fund, and Robertson Stephens. http://www.offroadcapital.com/ ======= VC Personnel ======= o CMEA Ventures Adds Former Sun Microsystems Exec as Partner SAN FRANCISCO -- CMEA Ventures, which focuses on early-stage high-tech companies in the information technology and life science fields, said Vlad G. Dabija joined the firm as a partner. Mr. Dabija formerly worked for Sun Microsystems for five years in IT product development management, software architecture and corporate development. Mr. Dabija is also the co-author of a book on artificial intelligence, "Planning for Real Time Event Response Mangagement." CMEA has more than $310 million in capital under management. http://www.cmeaventures.com/ _____________________________________________ o Labrador Ventures Adds New Director, Opens New York Office REDWOOD CITY, Calif. -- Labrador Ventures said it opened an office in New York that will be run by Polly Schneck, a new director. Ms. Schneck was most recently with Scripps Ventures and has been involved in co-investments with Labrador. She has also served as a consultant with PricewaterhouseCoopers and worked with Comcast Cellular Communications in new business development. Ms. Schneck will direct East Coast operations for the firm. Labrador usually invests between $1.5 million and $2 million in information technology companies. The firm is currently raising a fifth fund for $180 million. Labrador Ventures portfolio companies include Digital Impact and iSyndicate. http://www.labrador.com/ |||||||||||||||||||| Advertisement |||||||||||||||||||| I WANT MY PTV! No one wants more television. We all want better television. And "better" is the television we want, when we want it. That's PTV--personal television--coming to the consumer from TiVo, makers of digital television recorders, and from Gemstar, owner of TV Guide and its onscreen listings. It's all part of pervasive computing, as you'll hear from TiVo CEO Michael Ramsay and Gemstar CEO Henry Yuen at Technology Outlook 2000: The Future of Pervasive Computing December 4 and 5, San Francisco A VentureWire investment conference. http://www.tpsite.com/tp/conf/to2000/?vw=200010252 ||||||||||||||||||||||||||||||||||||||||||||||||||||||| SEND TO A FRIEND To subscribe to VentureWire, tell your friends and colleagues to go to: http://venturewire.net/ This copy of VentureWire may be distributed freely, provided that the distribution is without charge, that the issue is distributed complete and unaltered, and that all copies retain the Technologic copyright notice. Nothing that appears in VentureWire, however, may be reproduced, saved, or stored in a retrieval system without the prior written consent of Technologic Partners. _____________________________________________ TO SUBSCRIBE go to: http://venturewire.net/ To CHANGE your address, send your old and new e-mail address to: [email protected] To UNSUBSCRIBE, send e-mail to: [email protected] Send COMMENTS, QUESTIONS, or NEWS ITEMS to: [email protected] Entire Contents Copyright 2000 by Technologic Partners VentureWire is a Service Mark of Technologic Partners =====================================

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VentureWire, Friday, September 15, 2000

====================================================== VENTUREWIRE --- Friday, September 15, 2000 ====================================================== Private Company Business News ------ Published Daily by Technologic Partners ------- http://technologicpartners.com ====================================================== Top Stories: o Baltimore Acquires Content Technologies For $992 Million o Pseudo Programs in Search of Funding or a Buyer o Birchmere Closes $75 Million IT Fund with $50 Million o eStyle Bucks Anti E-tailer Trend with $25 Million Financing o Convergent Investors Closes $64 Million High-Tech Fund o Former 49er Footballer Jones Joins ASP WebAgencies' Board |||||||||||||||||||| Advertisement |||||||||||||||||||| Find talent, capital, jobs, & drinks under one roof-at NYNMA's SUPER CYBERSUDS? 2000-THE Trade Show & Networking Event for New Media in New York! Thurs. 9/28. 12-9 pm, Hilton New York RUB ELBOWS WITH NEW MEDIA TRAILBLAZERS: See the latest from the best of Silicon Alley. ENHANCE YOUR JOB SEARCH: Enter the Recruiting Pavilion armed with resumes and learn about opportunities with top companies. GET THE SCOOP ON ALLEY CAREERS: Hear Alley leaders spill their secrets for success. EAT, DRINK, BE MERRY: Free food & drink from the best E-Bars in town! Sold out 5 years in a row! Register now at http://www.supercybersuds.org ||||||||||||||||||||||||||||||||||||||||||||||||||||||| Also in This Issue: New Money: o Launch, $3 Million Seed Funding for Semiconductor Firm Quake o Mobile Device Software Firm Mobli Has $2 Million First Round o Online Bond Marketplace eBond Raises $1 Million Seed Round o SIP Software Firm Indigo Software Gets $4 Million Round One o Software Developer For Internet Protocol Raises $1.5 Million o Swedish Arm of eWork Exchange Gets First Round Funding o Waveguide Developer Teem Photonics Gets $31 Million o Cogency Semiconductor Takes $20 Million in Round Two o Content Site InvestorForce.com Raises $52 Million Series D o Strategic Management Group Raises $50 Million Second Round o $9.6 Million Round Two for Disk Storage Firm NanoMagnetics o Cube8.com To Invest Up To $7 Million in Telecom Firm Corex o IT Training Firm IQdestination Raises $7 Million Series B o Net Forms Developer Cardiff Raises $10 Million o Nutripeak.com Gets $5 Million Series B, Acquires eNutrition o Orsus Solutions Raises $20 Million in Strategic Third Round o Partner Manager Allegis Gets $26 Million in Mezzanine Funds o TelePacific Communications Adds $19 Million To Third Round o Web Enabler ChinaCast Technology Gains $28.6 Million o E-Business Resource India.com Raises $11 Million Round o Security Provider Amsec Raises $3 Million in Series C o Wireless Entertainment Firm Digital Bridges Gets $14 Million o Education E-Transaction Firm KawamaCommerce Gets Funds o VentureWorx Takes 3% Stake in Management Firm Vertical Think New Products: o Digital Delivery Provider Etems Networks Launches o ASP Provider OnShare Launches File Sharing Service o Direct Marketing Management Firm Screen4me Announces Launch o Steel Industry Trading Platform FerrousExchange Launches M&A: o SOC Producer Cygnal Acquires IP Core Provider SiLogiX o Chinese Internet Portal Sohu.com to Acquire ChinaRen.com o Elderly Care Manager CareGuide Buys Senior Care Review New Directors: o Redback Vice Chairman Named Chairman of Telenisus o Education Service Provider LearnSomething Adds Two to Board o Two Board Members Join Directory Assistance Firm, infoUSA o Sci-Fi, Fantasy, Horror Fan Site Fandom Elects Board Member New People: o Wireless Multimedia Firm ShareWave Names CEO and President o E-Commerce Company MarketMile Hires New President and CEO o Former CFO of Buystream Joins Linux IT Firm Nitrosoft as CEO VC Fund News: o Consultant Summa Technologies Forms Summa VentureWorks o Lattitude Partners Closes $60 Million Technology Fund VC Personnel: o Former Lucent Optical Group Head Joins Clarity Partners VW Corrections: o Daedalus Venture Group o MinorityInterest Network |||||||||||||||||||| Advertisement |||||||||||||||||||| Event: B2B AND THE FORTUNE 1000 - THE REALITY BEHIND THE HYPE Tuesday, October 3, 2000 - 6:00pm - 8:30pm - Palo Alto, CA An interactive forum designed for B2B investors, executives and entrepreneurs who want the latest information on how B2B E-commerce will evolve as Fortune 1000 organizations come online. PANELISTS INCLUDE: Morgan Harting - Manager, KPMG Consulting Bobby Lent, Co-founder, Ariba - Dave Cardinal, CTO, Calico Commerce Steve Foster, Partner, Crosspoint Venture Partners Mark Holman, President, e2open - Jeff Kleck, Co-founder, Neoforma Charles Duff, Chief Procurement Officer, AMES/NASA Mark Klopp, Director Digital Business Ventures, Eastman Chemicals Register at: http://www.tsunami-group.com ||||||||||||||||||||||||||||||||||||||||||||||||||||||| ======= Top Stories ======= o Baltimore Acquires Content Technologies For $992 Million LONDON -- Baltimore Technologies, a publicly traded online security company, said it acquired Content Technologies Holdings, developer of MIMEsweeper network security products. Baltimore is offering 91 million of its shares in the all-stock transaction. The acquisition is valued at $992 million. Content Technologies products enable organizations to implement policies protecting them against confidentiality breaches, exposure to e-mail legal liability, junk e-mail, e-mail borne viruses, and misuse of e-mail. Profitable since its inception, Content Technologies raised a single $13 million round of funding from private investors for expanded sales and marketing. Investors in the round included Chase H&Q, Goldman Sachs, a New York Teacher's Fund, PSINet, Advent Venture Partners, and Rana. http://www.baltimore.com/ http://www.contenttechnologies.com/ _____________________________________________ o Pseudo Programs in Search of Funding or a Buyer NEW YORK -- Struggling Internet television network Pseudo Programs is in need of cash and has been seeking a buyer. David Bohrman, who joined the company as chief executive officer early this year, said Pseudo has spent the last month and a half trying to raise funding and has been exploring the possibility of being acquired. In June, Pseudo eliminated 16% of its workforce, about 58 jobs, and reassigned 30 others to new production positions in a bid to create a continuous live broadcast network. In May, the company raised a $14 million round of funding led by Defosses International, a media unit backed by LVMH Luis Vuitton Moet Hennesy. Intel Capital participated along with FD5 S.A., Prospect Street Ventures, and Tribune Ventures. Pseudo has received additional backing from investors including Sycamore Ventures, Big Wave Ventures, and Winfield Capital. http://www.pseudo.com/ _____________________________________________ o Birchmere Closes $75 Million IT Fund with $50 Million PITTSBURGH -- Birchmere Ventures II, a venture capital fund focused on companies based in western Pennsylvania and the rest of the Mid-Atlantic region, said it closed on $50 million to complete its $75 million fundraising. The fund will be used for investment in seed and early-stage information technology companies. Birchmere Ventures II has invested in Internet business software infrastructure firm Cerelbellum Software; Lightningcast, a streaming media market firm; and ServiceWare Technologies, a provider of an Internet-based service platform that went public in August. The fund is managed by Sean D.S. Sebastian, Gary G. Glausser, and Ned Renzi. http://www.birchmerevc.com/ _____________________________________________ o eStyle Bucks Anti E-tailer Trend with $25 Million Financing LOS ANGELES -- eStyle, an online retailer of maternity clothing, nursery furnishings, baby gear, and other gifts and products related to maternity and childraising, said it raised $25 million in fourth-round funding. The funding comes at a time when many private equity investors have shied away from online retail businesses because of questions concerning their business models. The round was led by Primedia, with participation from eStyles prior investors, which include Zone Ventures, Oak Investment Partners, Vulcan Ventures, and Goldman Sachs. The company has raised approximately $85 million to date and may raise additional funds from a yet-to-be-named strategic partner in the months ahead. http://www.estyle.com/ _____________________________________________ o Convergent Investors Closes $64 Million High-Tech Fund AUSTIN, Texas -- Convergent Investors, a Texas-based venture capital investment group, said it has closed a $64 million fund, Convergent Investors VI. The company said it will invest in early stage high-tech, telecommunications, e-commerce, and transaction oriented businesses. Typical investment size will be between $1 million and $5 million. The managing partners are: Jimmy Mansour, Brian Smith, Willard Hanzlik, John Chaney, Robert Gauntt, Steve Shaper and Henry James. Convergent participated in Isochron Data's $12 million first round in August. http://www.convergentinvestors.com/ _____________________________________________ o Former 49er Footballer Jones Joins ASP WebAgencies' Board SAN JOSE, Calif. -- WebAgencies.com, an application service provider serving the insurance agent community, said Brent Jones, a former member of the San Francisco 49ers football team, has joined its board of directors. Mr. Jones is an investor in the company. Since retiring from professional sports, Mr. Jones has founded University Technology Ventures, a venture capital firm that works with venture capital firms and universities. WebAgencies is backed by individual investors. http://www.webagencies.com/ ======= New Money ======= o Launch, $3 Million Seed Funding for Semiconductor Firm Quake OTTAWA, Canada -- Quake Technologies, a semiconductor start-up, said it launched with $3 million in seed round funding from Brian Protiva, chief executive officer of ADVA Optical, JDS Uniphase and other undisclosed individual investors. The company said it will use the funds to expand its engineering team and for overall expansion. http://www.quaketech.com/ _____________________________________________ o Mobile Device Software Firm Mobli Has $2 Million First Round COPENHAGEN -- Mobli, a Los Angeles-based publisher of software for mobile devices, said it raised approximately $2 million in its first round of funding. BHS Holding and the Kampsax group of companies funded the round along with individual investors including Heather Hazard, a business professor at the Copenhagen School of Management; Hiroshi Mikitani, founder and CEO of Rakuten; and Oliwer Samwer, co-founder of of Alando. The company plans to expand its operations into Germany and Japan. http://www.mobli.com/ _____________________________________________ o Online Bond Marketplace eBond Raises $1 Million Seed Round NEW YORK -- eBond Securities, which provides individual and small institutional investors with proprietary methods to trade fixed income securities online, said it has secured $1 million in funding from individual investors. The company said proceeds of the round will be used for the launch of additional products. http://www.ebond.com/ _____________________________________________ o SIP Software Firm Indigo Software Gets $4 Million Round One ATLANTA -- Indigo Software, which develops software based on session initiation protocol (SIP), said it raised $4 million in its first round of funding. The round was led by Sofinnova Ventures and included an investment from Belgian investor GIMV. The company intends the resulting alliance to reinforce its position on both sides of the Atlantic. The company said the funding will be used for continued product development. Sofinnova said the funding is its first investment in a company focused on session initiation protocols. http://www.indigosw.com/ http://www.sofinnova.com/ http://www.gimv.com/ _____________________________________________ o Software Developer For Internet Protocol Raises $1.5 Million COIMBATORE, India -- Amoeba Telecom, a telecommunications software company developing management solutions for data, voice, and video protocols, said it raised $1.5 million in its first round of funding. Investors in the round included GE Equity and Intel Capital. The company said it will use the funding for product development, global marketing, and office expansion. As a result of the investment, Punit Bhatia, head of GE Capital India, will take a seat on the board of directors for Amoeba Capital. http://www.amoebatel.com/ _____________________________________________ o Swedish Arm of eWork Exchange Gets First Round Funding SAN FRANCISCO -- eWork Exchange said its Swedish operation, also called eWork Exchange, received an undisclosed amount of funding from new investor Telia Business Innovation, a venture capital firm in the Swedish telecommunications group Telia. Telia Business Innovation now holds a 20% stake in the company, which operates an online service that pairs companies and high-level project workers. The U.S.-based eWork Exchange is backed by eCompanies Venture Group, ETF Group, Storie Partners, and funds associated with DeutscheBanc Alex. Brown. In November, the company plans to open a U.K. branch. http://www.ework.se/ _____________________________________________ o Waveguide Developer Teem Photonics Gets $31 Million GRENOBLE, France -- Teem Photonics, a developer and manufacturer of active and passive optical waveguide components, said it received $31 million in funding from Baker Capital and Weiss, Peck & Greer Venture Partners. The company plans to use the funds for product development and to open a U.S. subsidiary by the end of the year. Previous investors are Banexi, Innovacom, Sudinnova, Schneider Electric, Radiall, and National Polytechnic Institute of Grenoble. http://www.teemphotonics.com/ _____________________________________________ o Cogency Semiconductor Takes $20 Million in Round Two OTTAWA -- Cogency Semiconductor, a provider of semiconductors for the home networking market, said it raised $20 million in its second round of funding. Celtic House International, VenGrowth, and Working Ventures Canadian Fund invested in the round. The company will use the funding for research and development, recruiting additional staff, and for sales and marketing. Cogency's products enable high-speed digital data transmission. http://www.cogency.com/ _____________________________________________ o Content Site InvestorForce.com Raises $52 Million Series D WAYNE, Pa. -- InvestorForce.com, which provides content to the institutional investment industry, said it secured $52 million in a Series D funding co-led by new investors California Public Employees' Retirement System (CalPERS) and Thomas Weisel Capital Partners. Previous investors Internet Capital Group, Mellon Ventures, and Merrill Lynch also contributed to the round. Derek Lemke, a partner at Thomas Weisel Capital Partners, was added to the company's board of directors, which now stands at 15. The funds will be used for product development. http://www.investorforce.com/ _____________________________________________ o Strategic Management Group Raises $50 Million Second Round PHILADELPHIA -- Strategic Management Group (SMG) and its online division, SMGnet, a provider of consulting, instructional design, business simulations, and content services for technology-based companies, said it raised $50 million in its second round of funding from previous investor Behrman Capital. SMG was founded in 1981. The company said the funds will be used for product development and for expanding its sales force. http://www.smginc.com/ _____________________________________________ o $9.6 Million Round Two for Disk Storage Firm NanoMagnetics BATH, England -- NanoMagnetics, which develops storage capacity technologies for disks using protein coating for magnetic nanoparticles, said it raised GBP 6.7 million ($9.6 million) in its second round of funding. The round was co-led by new investors UBS Capital, Formula Ventures, and BankAtlantic Financial Ventures. Interregnum, another new investor, joined previous investors Prelude Trust, Amadeus Capital, and Cambridge Research and Innovation in completing the funding. The company said it will use the funding for the development of a new research and development facility and to bring the company's technology to market. Greg Lockwood of UBS Capital, and John Abob of BankAtlantic Financial Ventures will take seats on the NanoMagnetics board of directors. http://www.nanomagnetics.com/ _____________________________________________ o Cube8.com To Invest Up To $7 Million in Telecom Firm Corex LONDON -- Cube8.com, a technology, media, and telecommunications incubator, said it will invest up to GBP 4.9 million ($7 million) in Corex Networks, a provider of Internet protocol technology aimed at reducing cost and enhancing functionality for call centers. The company is currently negotiating an agreement with British Telecom. Cube8.com will make an initial investment of $700,000 for a 14% equity stake in the company. Cube8.com has the option to increase its holdings to 20% over a two year period with a mixture of cash and stock. The company said it will use the funding to develop the product for a commercial launch. John Winfield, finance director of Cube8, will take a seat on the Corex Networks board of directors as a result of the investment. http://www.corexnetworks.com/ http://www.cube8.com/ _____________________________________________ o IT Training Firm IQdestination Raises $7 Million Series B DENVER -- IQdestination.com, which offers both online and classroom-based information technology training, said it closed a $7 million Series B round of funding. The round was led by Access Partners and included additional investments from meVC Draper Fisher Advisors, Quest Capital Partnership, SV Equity Growth Fund, and Raeder Venture Fund. The company said it will use the funding to increase its sales force, continue to develop its product, and to expand the company's technology infrastructure. Frank Mendicino of Access Partners, and David Link of Quest Capital Partnership, will both take seats on the IQdestination.com board of directors. http://www.iqdestination.com/ _____________________________________________ o Net Forms Developer Cardiff Raises $10 Million SAN DIEGO -- Cardiff Software, a creator of online electronic forms and personalized interaction products, said it has raised $10 million in an investment round led by Dicom Group, a supplier of software and consulting services. Joining Dicom were Adobe Ventures and HarbourVest Partners, a private investment organization that has previously invested in Cardiff. The company said it would use the funds for late stage development and to grow sales of its new online products. http://www.cardiff.com/ _____________________________________________ o Nutripeak.com Gets $5 Million Series B, Acquires eNutrition LOS ANGELES, Calif. -- Nutripeak.com, a storefront and Internet retailer of branded nutritional supplement products based in Culver City, Calif., said it raised $5 million in its Series B round of financing. Lead investors in the financing include Brentwood Associates IX LP, idealab! Capital Partners II-B and Entertainment Media Ventures, LLC. The company said the funds will be used to accelerate the roll-out of additional retail stores. Along with the funding announcement, Nutripeak.com said it has acquired Woodland Hills, Calif.-based eNutrition, an online retailer of nutritional supplements, vitamins, minerals, herbs, sports nutrients, and a variety of natural body care products, in a stock-for-stock transaction. Financial terms of the agreement were not disclosed. As a result of the acquisition, Barry D. Blake, chairman and CEO of Nutripeak, will be chairman and CEO of the combined company, Nutripeak. Alex Lasbroas, president of Nutripeak, will be president of the combined company. Three eNutrition directors - Brian Atwood of Brentwood Associates; Randolph Gale, former chairman and CEO of eNutrition; and Eric Weider, president of Weider Health and Fitness - will join Nutripeak's seven-member board of directors. http://www.nutripeak.com/ _____________________________________________ o Orsus Solutions Raises $20 Million in Strategic Third Round SUNNYVALE, Calif. -- Orsus Solutions, which develops and markets integration software and services for electronic and mobile business, said it raised $20 million in a third round of strategic funding. The round came from corporate investors including SingTel, which provided $3 million for the round. The company said it will use the funding for increased marketing and the development of new products through expanded research and development. Its first $8 million round of investment was completed in 1999, followed by a $40 million private placement in April 2000. The company is based in Sunnyvale, Ca. with a research and development center in Israel and an office in London. Previous investors in the company include Mogdal Technologies, Cedar Fund, Clal Industries, and Koor Industries, along with individual investors and other corporate entities. http://www.orsus.com/ _____________________________________________ o Partner Manager Allegis Gets $26 Million in Mezzanine Funds SAN FRANCISCO -- Allegis, a partner relationship management company that enables firms to integrate indirect sales and distribution channels, said it raised $26 million in its mezzanine round of funding. New investor J & W Seligman led the round, which included new investor Amerindo Investment Advisors and previous investors Benchmark Capital, Brinson Partners, Charter Growth Capital, Chase Capital, Credit Suisse First Boston, Integral Capital, Intel 64 Fund, and Pivotal Asset Management. The company will use the funding to further develop its services. Allegis also has backing from Chase Hambrecht & Quist, Deutsche Banc Alex Brown, MSD Capital, Plantir Capital, and Staenberg Ventures. http://www.allegis.com/ _____________________________________________ o TelePacific Communications Adds $19 Million To Third Round LOS ANGELES, Calif. -- TelePacific Communications, a broadband telecommunications provider, said it has raised an additional $19 million in its third round, bringing total funding for the round to $144 million. The earlier portion of the round was raised in April, with Investcorp as the sole investor. New investors Hillman Co., which provided $10 million, and Arena Capital Partners, which contributed $4 million, provided add-on funds, as did previous investor GE Capital, which contributed $5 million to this round. GE Capital had provided TelePacific with a $50 million credit facility and a $10 million equity investment in September of last year. To date, TelePacific has raised more than $225 million. The new investment will support expansion of the company's network infrastructure and service areas to several additional major U.S. metropolitan markets through 2001. The investment will also fund expansion of TelePacific's customer-support organization, development and implementation of back-office systems, and product development. The company also received a $15 million investment in April of 1999 from Rader Reinfrank & Co. http://www.telepacific.com/ _____________________________________________ o Web Enabler ChinaCast Technology Gains $28.6 Million HONG KONG -- ChinaCast Technology, an Internet infrastructure enabler, said it raised $28.6 million from investors Hughes Network Systems, Intel Capital and SUNeVision. The company said it will use the funds to develop and deploy its services. SUNeVision partner Daniel Tseung has been appointed to the board of directors. http://www.chinacast.com.hk/ _____________________________________________ o E-Business Resource India.com Raises $11 Million Round NEW YORK -- India.com, which supplies Internet and business-to-business information and services for Indians in India and abroad, completed an $11 million round of funding. Sycamore Ventures' AsiaStar IT Fund led the round, along with the Kaufmann Fund and funds affiliated with Primus Venture Partners. The company said the financing will be used for growth in its marketing and sales initiatives. India.com is a subsidiary of World.com, an incubator that is itself a wholly owned subsidiary of publicly traded messaging provider Mail.com. http://www.mail.com/ _____________________________________________ o Security Provider Amsec Raises $3 Million in Series C MCLEAN, Va. -- Winston Partners, a private investment firm, announced that Amsec International, which provides security services to Fortune 1000 companies, has closed a $3 million Series C funding round. Winston said it joined with Arthur J. Gallagher, an insurance brokerage firm, to lead the round of funding as Amsec's primary institutional equity investors. Amsec will use the proceeds to purchase Validata, a pre-employment screening services firm, and for working capital. Stephen Frey, a principal at Winston, will join Scott Andrews, Winston's managing director, on Amsec's board of directors. http://www.amsecsolutions.com/ _____________________________________________ o Wireless Entertainment Firm Digital Bridges Gets $14 Million FIFE, Scotland -- Digital Bridges, which develops multimedia entertainment for wireless devices, said it raised GBP 10 million ($14 million) in its most recent round of funding. Apax Partners Funds and Argo Global Capital financed the round. The company said it will use the funds for its planned global expansion. Digital Bridges has existing partnerships with One2One and Vodafone in the U.K., France Telecom Mobile, Omnitel in Italy, Telfort in the Netherlands, Orange Switzerland, and others. As a result of the investment, Stephen Grabiner of Apax Partners, and Alan MacIntosh of Argo Capital have joined the company's board of directors. http://www.digitalbridges.com/ _____________________________________________ o Education E-Transaction Firm KawamaCommerce Gets Funds SANTA ANA, Calif. -- KawamaCommerce, which provides online business transaction services for school districts, service agencies, and purchasing cooperatives, said it has secured an undisclosed amount of funding from Sylvan Ventures. The Sylvan investment follows the company's $6 million Series A round of funding. The company said it will use the funds for working capital and growth. KawamaCorporation is also backed by Ridgewood Capital and Ebyz. http://www.kawamacommerce.com/ _____________________________________________ o VentureWorx Takes 3% Stake in Management Firm Vertical Think CHARLOTTE, N.C. -- VentureWorx, an incubator company, said it acquired a 3% equity stake in Vertical Think, a consultation firm that helps businesses design and launch Web sites, through the purchase of 25 million shares of common stock for an undisclosed amount. VentureWorx said it will assist the company with expansion, recruiting advisory and management personnel, and marketing. http://www.verticalthink.com/ http://www.ventureworx.com/ ======= New Products ======= o Digital Delivery Provider Etems Networks Launches BOSTON -- Etems Networks, a global networking infrastructure provider, said it has launched. The firm will provide a service in which content can be delivered universally in electronic/digital form, with instant digital delivery, installation, storage, and retrieval. The firm is currently seeking a $70 million dollar round of funding. The company is backed by individual investors. http://www.etems.com/ _____________________________________________ o ASP Provider OnShare Launches File Sharing Service ITHACA, N.Y. -- OnShare, an application services and technology provider of business-to-business file sharing services, said its OnShare File Management service application has launched. Onshare has developed a technology that enables users to share files on their hard drives with other users whom they specify in an organized and secure way. OnShare said it modeled the technology after file swapping applications such as Napster. OnShare is backed by individual investors and is currently raising its first round of funding. http://www.onsharenetworks.com/ _____________________________________________ o Direct Marketing Management Firm Screen4me Announces Launch ATLANTA -- Screen4me, the creator of permission marketing and privacy tools that aim to help consumers control the direct marketing they receive, said it launched. The company said its first product guards users from unsolicited telemarketing, direct mail, and spam e-mail. The company also announced its board, which consists of Jim Hansberger, Sr., the founder of Hansberger Group; Eric Hartz, president of ZapMedia; J. Walker Smith, president of Yankelovich Partners; and Peter Trost, the CEO and president of Holland & Knight. Screen4me is backed by Robinson-Humphrey Co., and Intelligent Systems, as well as individual investors from Bran RMG, Yankelovich Partners, Siebel Systems, Boston Consulting Group, and Holland & Knight. The company said it is raising its first round of funding. http://www.screen4me.com/ _____________________________________________ o Steel Industry Trading Platform FerrousExchange Launches NEW YORK -- FerrousExchange, an online trading platform for the steel industry, announced its launch. The exchange allows buyers and sellers to make real-time bids for products and offers auctions and request for quotation platforms for steel products outside of the commercial grades offered on the exchange. FerrousExchange's investors include Ispat and Gilbraltar. http://www.ferrousexchange.com/ ======= M&A ======= o SOC Producer Cygnal Acquires IP Core Provider SiLogiX AUSTIN, Texas -- Cygnal Integrated Products, which designs, manufactures, and markets field-programmable mixed signal system-on-chip (SOC) products, said it acquired SiLogiX, a developer of silicon intellectual property (IP) cores for the semiconductor and electronics markets, for an undisclosed amount. Cygnal is backed with over $15 million from Austin Ventures, JatoTech Ventures, Cirrus Logic, Sanyo Semiconductor, and several individual investors. http://www.silogix.com/ http://www.cygnal.com/ _____________________________________________ o Chinese Internet Portal Sohu.com to Acquire ChinaRen.com BEIJING -- SOHU.com, a Chinese Internet portal providing e-mail, home pages, chat rooms, messaging, news, search, browsing, and shopping services, said it signed a definitive agreement to acquire ChinaRen.com, a Chinese community Web site, for an undisclosed amount. The companies said they expected to close the deal in the fourth quarter. SOHU.com said the deal will extend its reach as a pure Internet brand aimed exclusively at the Chinese market. The three founders of ChinaRen.com will join SOHU.com's management team, while the workforce of the two companies will be combined. Goldman Sachs is the lead institutional investor in ChinaRen.com. Other backers include KKR and Joho Capital. http://www.chinaren.com/ http://www.sohu.com/ _____________________________________________ o Elderly Care Manager CareGuide Buys Senior Care Review SAN FRANCISCO -- CareGuide, a provider of elderly care management services through an integrated Internet, telephony, and wireless communications platform, said it has acquired Senior Care Review, another care management company which provides assessments and quality monitoring of facilities that care for the elderly, for an undisclosed amount. The combined company will deliver services to assist family members in planing, evaluating, and selecting home care or a care facility. CareGuide recently secured $10.6 million in its third round of funding led by Pequot Capital Management and Nob Hill Capital Management. CareGuide has raised $15 million to date. http://www.careguide.com/ ======= New Directors ======= o Redback Vice Chairman Named Chairman of Telenisus CHICAGO -- Telenisus, which provides businesses with managed Internet Infrastructure services such as security, virtual private networks, and Web hosting, said it has appointed Dennis Barsema as chairman of its board of directors. Mr. Barsema was chief executive officer of Redback Networks and is presently the vice-chairman of Redback. Before joining Redback, Mr. Barsema was vice senior vice president and general manager of Centigram, a telecommunications company. Telenisus is backed by Alta Communications, Bay Partners, ABN AMRO Private Equity, BancBoston Ventures, Metropolis Venture Partners, and Maroon Bells Capital Partners. http://www.telenisus.com/ _____________________________________________ o Education Service Provider LearnSomething Adds Two to Board TALLAHASSEE, Fla. -- LearnSomething.com, an online educational services provider, said Paul D. Eurek, former founder and CEO/President of Compris Technologies, and Anne-Lee Verville, author of "What Business Wants from Higher Education" and former general manager of IBM's Global Education Industry, have joined its board. This brings the total number of directors to eight. Investors in LearnSomething.com include individual investors and Noro-Moseley Partners of Atlanta. http://www.learnsomething.com/ _____________________________________________ o Two Board Members Join Directory Assistance Firm, infoUSA FOSTER CITY, Calif. -- infoUSA.com, online provider of white and yellow page directory assistance services, said it named Robert J. Korzeniewski, chief financial officer of Network Solutions, and Larry Kramer, founder, chairman and CEO of MarketWatch.com, to its board of directors. infoUSA.com is majority owned by publicly traded infoUSA and has received backing from meVC Draper Fisher Jurvetson Fund I, GM Capital Investment Management, Trident Capital, and Yahoo. http://www.infousa.com/ _____________________________________________ o Sci-Fi, Fantasy, Horror Fan Site Fandom Elects Board Member SANTA MONICA, Calif. -- Fandom, an online site providing science fiction, fantasy, and horror entertainment content, said that Sam Fernandez, the senior vice president and general counsel for the Los Angeles Dodgers, has joined its board of directors. Mr. Fernandez also has been on the board of directors of Major League Baseball properties and Major League Baseball Enterprises. Mr. Fernandez joins current Fandom board members Jeff Sagansky of PAX TV, Brad Jones of Redpoint Ventures, James D. Robinson IV of RRE Ventures, Gary Adelson of East/West Ventures, and Fandom CEO Mark Young. http://www.fandom.com/ ======= New People ======= o Wireless Multimedia Firm ShareWave Names CEO and President EL DORADO, Calif. -- ShareWave, which provides technology for wireless multimedia home networking, said it has appointed E. Jock Ochiltree as its president and CEO. ShareWave's acting president and CEO, Bob Bennet, a co-founder of the company, will now serve as vice president of corporate marketing and business development. Before joining ShareWave Mr. Ochiltree was president and COO of Information Storage Devices (ISD), a global supplier of integrated circuits for communications and consumer applications. ShareWave is privately-held and backed by a number of investors including APV Technology Partners, Cisco Systems, Draper Richards, Intel Corporation, Kyushu Matsushita Electric, Microsoft, Philips Electronics, SBC Communications, Softbank Technology Ventures, Vulcan Ventures, and individual investors. http://www.sharewave.com/ _____________________________________________ o E-Commerce Company MarketMile Hires New President and CEO MOUNTAIN VIEW, Calif. -- MarketMile, a business-to-business e-commerce company, said it has appointed Gayle Sheppard as president and CEO. Ms. Sheppard spent the past nine years at J.D. Edwards & Company, a supplier of business software services and products, at a number of positions. Before her tenure with J.D. Edwards, Ms. Sheppard served in sales and consulting management roles in the technology industry. MarketMile is backed by American Express and Ventro Corporation. http://www.marketmile.com/ _____________________________________________ o Former CFO of Buystream Joins Linux IT Firm Nitrosoft as CEO OTTAWA -- Nitrosoft Linux, an IT Infrastructure management company, said it has appointed Mark Scott, as its chief executive officer. He will replace Larry Poirier, who has been promoted to chairman of the board. Mr. Scott was CFO and COO of Buystream and a founding partner of Non-Linear Ventures. Individual investors back Nitrosoft Linux, which raised $1 million in its first round of funding. The company said it is currently seeking institutional investments. http://www.nitrosoft.com/ ======= VC Fund News ======= o Consultant Summa Technologies Forms Summa VentureWorks PITTSBURGH -- Summa Technologies, which provides technology consulting services for companies building large-scale Internet and intranet-based applications, announced the formation of Summa VentureWorks, its venture capital investment arm. The company said it plans to invest in high-tech startups and people or companies that have an idea for a technology or product but may unsure of how to apply it. Summa said it will provide its portfolio companies with consulting services as well. Summa also announced it made its first investment for an undisclosed amount in Laminar Software, a developer of e-commerce performance monitoring tools. http://www.summa.com/ _____________________________________________ o Lattitude Partners Closes $60 Million Technology Fund TORONTO -- Latitude Partners, a financial firm focused on the technology, Internet and communications sectors, said it has closed its $60 million Longitude Fund Limited Partnership, a merchant-banking fund dedicated to the technology, Internet, and communications sectors. OMERS, the Canadian Medical Protective Association, Celtic House, and several large institutions and individuals provided funding. The fund will undertake proactive, merchant-banking style investments such as refinancings, buyouts, spinouts, privatizations, acquisition financings, and strategic investments in both private and public technology firms in Canada and the U.S. The fund will invest anywhere from $5 million to $10 million in these companies. http://www.latitudepartners.com/ ======= VC Personnel ======= o Former Lucent Optical Group Head Joins Clarity Partners LOS ANGELES -- Clarity Partners, a private equity firm, said it has named Harry Bosco as partner. Mr. Bosco was most recently the president of Lucent Technologies' optical networking group. Prior to Lucent's spinoff from AT&T, Mr. Bosco occupied a number of executive positions at Bell Labs and AT&T Networking Systems. Clarity Partners invests in communications, emerging media, and related technologies. http://www.claritypartners.net/ ======= VW Corrections ======= o Daedalus Venture Group NEW YORK -- A story in yesterday's VentureWire on the Daedalus Venture Group incorrectly listed the firm's URL. The correct URL is http://www.daedalusventuregroup.com. _____________________________________________ o MinorityInterest Network NEW YORK -- Due to incorrect information provided by the company, an item in the September 12 edition of VentureWire regarding the launch of MinorityInterest Network incorrectly cited CEA Latin America as an investor in the company. An individual from CEA Latin America, not the firm itself, made an investment in MinorityInterest Network. |||||||||||||||||||| Advertisement |||||||||||||||||||| A trove of technology trends. ComputerLetter's famously clear discussions of current trends in high technology are available online in the Technologic archives. Subscribers get free access to five years of searchable reports on hot topics from broadband communications to business-to-business commerce. To see what's available, try some no-charge searches with the "archives" button at: http://www.tpsite.com/tp/cl/default.html ||||||||||||||||||||||||||||||||||||||||||||||||||||||| SEND TO A FRIEND To subscribe to VentureWire, tell your friends and colleagues to go to: http://www.venturewire.com/register/vw This copy of VentureWire may be distributed freely, provided that the distribution is without charge, that the issue is distributed complete and unaltered, and that all copies retain the Technologic copyright notice. _____________________________________________ TO SUBSCRIBE go to: http://www.venturewire.com/register/vw To CHANGE your address, send your old and new e-mail address to: [email protected] To UNSUBSCRIBE, send e-mail to: [email protected] Send COMMENTS, QUESTIONS, or NEWS ITEMS to: [email protected] Entire Contents Copyright 2000 by Technologic Partners VentureWire is a Service Mark of Technologic Partners =====================================

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Haas MBA Students Take Top Honors at Marketing Case Competition

Haas NewsWire November 5, 2001 ---------- CONTENTS * Haas MBA Students Take Top Honors at Marketing Case Competition * Wireless at Cal: Haas Continues to Expand Wireless Coverage * The 24th Annual Real Estate & Economics Symposium: What Does the Future Hold for Real Estate? * Haas Undergraduate Students Shine at Case Competitions * Top Haas Economists Discuss the Economic Outlook for the US this Friday, Nov. 9 * Haas Does Well in Off-Beat Rankings * Arun Sarin, MBA 78, Joins the Search Committee for the New Dean * Mayfield Fellows Program Accepting Applications for Summer 2002 Internships * Alumni News * New Staff * Haas in the News * Happening at Haas * Haas Celebrations ---------- HAAS MBA STUDENTS TAKE TOP HONORS AT MARKETING CASE COMPETITION A team of five Haas MBA students won top honors this past weekend at the 2001 Elite Eight Brand Case Challenge at the Carlson School of Management at the University of Minnesota in Minneapolis. Team members Anita Akerkar, MBA 03; Dennis Cox, MBA 02; Aman Desouza, MBA 02; Nate Kraft, MBA 02; and Sherry Lin, MBA 03 competed against seven top business schools including UCLA's Anderson, Carlson, Fuqua, Kelley (Indiana), Kellogg, Michigan, and Wharton. "It was a great experience," said Sherry Lin. "This really solidifies Haas' position as a top marketing program." The teams received a marketing case on Yoplait's Go-Gurt and were given 36 hours to prepare a structured analysis and recommendations. Go-Gurt is a $135 million portable yogurt snack brand that targets kids ages 8 to 12. After a strong launch, the brand was experiencing a decline in growth and increased competition. The Haas team's suggestion included both deepening the relationship with the current target customers and expanding to a new market -- teenagers. What made the Haas solution especially appealing was the use of focus groups. The team rented a car and traveled to a local mall to conduct focus groups with teenagers to find out what would encourage them to buy Go-Gurt. Each team presented its recommendation to a panel of judges consisting of executives from sponsoring companies as well as marketing professors. In addition to Haas, other winners of the challenge included Northwestern's Kellogg School of Business (second place) and Indiana's Kelley School (third place). Winners received $10,000, $7,500, and $5,000 respectively. 3M, Fallon Worldwide, General Mills, Kimberly-Clark, and Philip Morris sponsored the event. ---------- WIRELESS AT CAL: HAAS CONTINUES TO EXPAND WIRELESS COVERAGE Wire-free connection has become reality at the Haas School. Wireless access services, such as e-mail and the web, are now available in and around select areas of the Haas School. The new service is part of UC Berkeley's pilot wireless LAN service, known as AirBears, which enables students to connect to the campus network if they have a laptop equipped with a wireless Ethernet card. So far at Haas, AirBears wireless LAN coverage is available in: the Wells Fargo Room, the Haas courtyard, Jimmie Bean's Caf?, the Bank of America Forum, the MBA lounge, the undergraduate lounge, the MFE Collaboration lab, library group study rooms, the Bakar Computer Center, C230 sloped floor classroom, and F320 classroom. According to Mike Pivonka, the plan is to extend coverage to all Haas classrooms and major conference rooms before the start of spring semester. Using the AirBears wireless LAN requires: + a laptop or other computer with 802.11b wireless ethernet card (WiFi certified). + a currently valid CalNetID and passphrase. + an SSL-enabled web browser (IE, Netscape etc.) on your computer. + an area with AirBears coverage. AirBears is also available in the Cesar E. Chavez Student Center, the Bechtel Engineering Library study area, and the Doe Library study carrels (selected areas). It will soon be available in the Mario Savio Free Speech Movement Caf?; the Northgate Lecture Hall; and the Foothill Residence Halls (selected common areas). Please check http://www.net.berkeley.edu/wireless for updates on availability. ---------- THE 24TH ANNUAL REAL ESTATE & ECONOMICS SYMPOSIUM: WHAT DOES THE FUTURE HOLD FOR REAL ESTATE? Predicting the future of the economy and the real estate market in the US has always been difficult and has become even more so after the attacks on September 11. At Haas this daunting task will be taken on by the Fisher Center for Real Estate and Urban Economics (FCREUE) at its annual conference, which brings together leading experts from academia, business, and government to discuss and offer predictions on the economy and the real estate market. The 24th annual Real Estate and Economics Symposium, "Adjusting to the New Economic and Real Estate Realities," takes place November 19 from 8:00 a.m. to 5:00 p.m. at the Fairmont Hotel in San Francisco. At this full-day program, experts will talk about various aspects of the risks in the real estate business and how real estate will adjust to the new economic environment. "The demise of the new economy and ensuing economic recession in the US and Silicon Valley, the energy crisis, and the post-September 11th uncertainties, have created an unsettled and clearly changing sea-level for real estate and other asset markets," said Bob Edlestein, symposium co-chairman and real estate development professor. "It appears in the short run that real estate is in troubled waters with its outcome depending upon how quickly we can stabilize the general economy. It is likely that there's 'worse' ahead before things turn better in the real estate market; but, ten years from now, it is likely that our economy will be faring better and real estate will be a hot asset again." An array of experts will speak about the changing social-political-economic environment and its impact on real estate. +Kenneth Rosen, the California State Professor of Real Estate and Urban Economics and chairman of the Fisher Center for Real Estate and Urban Economics, will give his annual real estate forecast. +Bob Parry, president of the Federal Reserve of San Francisco, will explain how the economy and policy are likely to fare in the near future. +Michael Nacht, dean of the Richard & Rhoda Goldman School of Public Policy and former assistant director for strategic and Eurasian affairs of the U.S. Arms Control and Disarmament Agency, will provide a political backdrop about security issues and their likely effects upon the US economy. The complete agenda and additional details can be found on the FCREUE website www.haas.berkeley.edu/realestate. All Haas faculty are invited to attend the symposium free of charge. Complimentary attendance is also available for students who volunteer to help out during the Symposium. Contact Zee Zeleski at [email protected] to register. ---------- HAAS UNDERGRADUATE STUDENTS SHINE AT CASE COMPETITIONS The undergraduate team representing Haas at the 2001 University of Texas International Business Challenge Case Competition in Austin, Texas, brought home both second place and the competition's Professional Excellence Award. The International Business Challenge is an annual undergraduate business case competition held each fall at the University of Texas at Austin. Teams come from 20 leading undergraduate business schools from the US, Canada, South America, Asia, and Europe. The first place team was from the University of Hong Kong. The teams were given a case depicting real-world problems confronted by Dell Computer Corporation and three days to prepare a solution. The teams presented their solution to the "client," a panel of distinguished judges from Dell, Solomon Smith Barney, and other members of the business community. Four teams were selected to advance to the final round. "The Haas Team approached this case as a real client case and spent time analyzing the current market and how Dell could achieve a higher revenue growth," says Annie Lai, director of admissions and operations in the Undergraduate Program. "They not only presented a great recommendation, but also demonstrated their knowledge and understanding of global business issues." The Haas team included Eurie Kim, BS 01; Parizad Olver, BS 01; Megan Schofield, BS 01; and Julie Wang, BS 02. The faculty/staff advisors to the team were George Cluff, Steve Etter, David Robinson, and Annie Lai. Haas is the first program ever to earn awards at four consecutive University of Texas International Business Challenge Case Competitions. In addition, case competition teams from the Haas Undergraduate Program have won awards in 7 of the 9 international case competitions they have entered since fall 1998. Investment Banking Case Competition Back at home, the Fourth Annual Investment Banking Case Competition presented by the Haas School of Business and Goldman Sachs & Co. took place on October 30, 2001. Each year this event showcases one of Goldman Sachs' recent high profile transactions. This year's case focused on the recent sale of Cobalt Networks to Sun Microsystems. The winning team included Joseph Spector, BS 02; Annabelle Louie, BS December 01 (business administration and mass communications); Peter Lee, BS 02 (math); and Tina Tong, BS December 01, (business administration and economics). ---------- TOP HAAS ECONOMISTS DISCUSS THE ECONOMIC OUTLOOK FOR THE US THIS FRIDAY, NOV. 9 A group of top Haas economists will give their take on where the US economy is heading this Friday, Nov. 9 in the Arthur Andersen Auditorium. The Economic Outlook Forum begins at 4:00 p.m. Tickets are available in the program offices. Standing-room tickets will be available the day of the event. The event will have two panel discussions: Overview of Domestic and Global Macroeconomic Conditions and Implications for Business. The revised agenda for the event now includes Dwight Jaffee, the Willis Booth Professor of Banking, Finance, and Real Estate, who will discuss the business implications for the insurance industry. Both Dean Tyson and Ben Hermalin, associate dean for academic affairs, will moderate discussions. After the forum, streaming video of the event will be available on the Haas web site at http://www.haas.berkeley.edu/haas/video_room/. ---------- HAAS DOES WELL IN OFF-BEAT RANKINGS As business school rankings proliferate, they highlight different strengths of MBA programs. In October, Haas was ranked well in three rankings: Beyond Grey Pinstripes' survey on social and environmental stewardship, Computer World's Techno MBA survey, and America Economia magazine's survey on global MBA programs. Beyond Grey Pinstripes The Haas School was ranked among the top 15% of business schools in the Beyond Grey Pinstripes survey released on Oct. 31. The survey was conducted jointly by the World Resources Institute and The Aspen Institute for Social Innovation Through Business in an effort to determine how well business schools teach their MBA students how to manage the social and environmental impact of business. The top five schools at the cutting edge of social impact management were those at Harvard, Loyola Marymount, Michigan - Ann Arbor, North Carolina, and York University (Canada). George Washington University, University of Jyvaeskylae (Finland), Michigan, North Carolina, and Yale were listed as the top five at the cutting edge of environmental impact management. The Haas School was listed in the second tier of ten schools having significant activities in the areas of social and environmental impact management. The survey specifically mentioned Haas for its Social Venture Competition, its participation in the Corporate Environmental Management concentration (offered by nine UC campuses), and for having an endowed professorship in the area of sustainable enterprise or sustainable management. The survey weighed student coursework (50%), institutional support (30%), and faculty research (20%) to determine its top 15% of graduate business schools teaching social and environmental responsibility. Of the 463 schools that received the extensive questionnaire, 122 schools responded. The Techno MBA Computer World magazine listed the Haas School among the top 25 technology-driven business schools in its 2001 Techno MBA survey published on Oct. 22. The purpose of the survey, according to the magazine, was to determine "which schools do the best job of combining good management techniques and technology innovation under the general heading of sound business practices." In its two-part survey, Computer World asked recruiters to nominate the best techno-MBA programs nationally based on their recruiting experiences at these schools. Computer World then asked MBA programs to nominate what they considered to be the best technology-driven programs (other than their own) and to submit information on their own programs and students. The University of California was represented in the top 25 with three campuses - Berkeley, Los Angeles, and Irvine. Other top-ranked schools included Wharton, Indiana, Northwestern, Michigan, North Carolina, and UT Austin. Computer World did not assign individual rankings to these top 25 schools. According to Computer World, Carnegie Mellon, MIT, Harvard, Duke, Stanford, and New York University were also nominated as top programs, but did not participate in the survey. America Economia The Latin American business journal America Economia ranked the Haas School #11 among global MBA programs offered in the US and Europe in its Sept. 13 issue. The top universities offering global MBAs were: 1. Harvard University 2. U. Pennsylvania (Wharton) 3. Stanford University 4. MIT (Sloan) 5. Northwestern (Kellogg) 6. INSEAD (tied) 6. London Business School (tied) 7. University of Chicago 8. Columbia University 9. UCLA (Anderson) 10. University of Texas-Austin 11. UC Berkeley (Haas) 12. Duke University (Fuqua) 13. New York University (Stern) 14. University of Michigan 15. University of Virginia (Darden) The rankings issue of America Economia examined the competition US and European business schools pose to Latin American institutions. In addition to its global MBA ranking, it ranked Latin American business schools in a separate ranking. ---------- ARUN SARIN, MBA 78, JOINS THE SEARCH COMMITTEE FOR THE NEW DEAN Arun Sarin, MBA 78, has agreed to join the search committee for the new dean of the Haas School. Sarin, CEO of Accel-KKR Telecom, has been a very active alumnus of the Haas School. In spring of 2001, he served as an alumni fellow, and he has spoken at numerous Haas events over the years. Advertisements asking for applications and nominations have appeared in the New York Times, the Chronicle of Higher Education, the Wall Street Journal, and the Economist. The deadline for submissions is January 15, 2002. Katherine Riordan, staff to the search committee, encourages the Haas community to send suggestions and potential nominations to her at [email protected]. ---------- MAYFIELD FELLOWS PROGRAM ACCEPTING APPLICATIONS FOR SUMMER 2002 INTERNSHIPS The UC Berkeley Mayfield Fellows Program is now accepting applications for Summer 2002 internships. These paid summer internships at venture capital-funded Silicon Valley high-tech startups will be made available to up to 12 graduate students at UC Berkeley. The eligibility requirements for the program are: + Enrollment as either first-year Haas MBA student or MS or Ph.D. student in engineering or SIMS. + Completion of one entrepreneurship or MOT course by May 2002. + A bachelor's degree in engineering or science. An information session will be held on November 7, at 12:00 p.m. in the Wozniak Lounge in Soda Hall. To apply, supply a one-page resume, a one-page essay stating how you feel you will benefit from the opportunity and why you are well suited for this internship, and two letters of recommendation, with at least one, if possible, from a previous employer. Applications must be submitted by 5:00 pm Wednesday, November 14, 2001, to room F 453 at Haas. The UC Berkeley Mayfield Fellows Program is funded by The Mayfield Fund, a top-tier venture capital fund based in Menlo Park, California. The Mayfield program is administered jointly by the Management of Technology Program and the Lester Center for Entrepreneurship and Innovation. ---------- ALUMNI NEWS Bengt Baron Appointed President of V&S's Brand ABSOLUT Bengt Baron, BS 85, MBA 88, has been appointed president of The Absolut Company, a business of the Swedish company V&S Vin & Sprit AB. Baron's responsibilities include the production, marketing, and sales of ABSOLUT, the world's third-best-selling premium spirits brand. Baron has held several leading positions in Swedish business life, most recently as Nordic director for the internet-based career and recruitment company StepStone. Baron assumes his new position at year-end when the current president, G?ran Lundqvist, retires. For more information visit www.vinsprit.se. ---------- NEW STAFF Dinko Lakic has joined the Undergraduate Program office as a student services coordinator. He is in charge of the undergraduate program web site and is the coordinator of the BASE program. Lakic graduated from the Haas undergraduate program in May of 2001. While he was a student, he worked for Cal and was a CalSO counselor coordinating summer orientations for incoming students. At Haas, he was a reader and a teaching assistant for lecturer Holly Schroth. Lakic's office is in S450. His e-mail address is [email protected] and his phone number is 510-642-1421. ---------- HAAS IN THE NEWS Kenneth Rosen, the California State Professor of Real Estate and Urban Economics and chairman of the Fisher Center for Real Estate and Urban Economics, was quoted in the San Francisco Chronicle on November 4 in an article titled, "Real Estate Powerhouse Added to S&P 500 Index." Read the full text at http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/11/04/RE194859.DTL. Janet Yellen, Eugene E. and Catherine M. Trefethen Professor of Business, was quoted in the Contra Costa Times on November 3 in an article titled, "State Leaders Try to Aid Economy." Read the full text at http://www.contracostatimes.com/cgi-bin/emailfriend/emailfriend.cgi?mode=print&doc=http://www.contracostatimes.com/news/california/stories/summit_20011103.htm. Severin Borenstein, the E.T. Grether Professor in Public Policy and Business Administration, was quoted in the November 12 issue of Fortune Magazine in an article about America's dependence on imported oil from OPEC. Read the article here: http://www.fortune.com/indexw.jhtml?channel=artcol.jhtml&doc_id=204854 Borenstein was also quoted in the San Francisco Chronicle on November 1, commenting on PG&E Corp.'s fight against two public power measures appearing on San Francisco ballots. Read the article at: http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/11/01/MN102970.DTL Dan Sullivan, director of student services in the MBA program, was featured in the online version of MBA Jungle on November 2, commenting on the admissions process at Haas. Read the article at: http://www.mbajungle.com/main.cfm?chid=0&schid=0&WT=00&artid=1692&inc=inc_article.cfm&template=0>http://www.mbajungle.com/main.cfm?chid=0&schid=0&WT=00&artid=1692&inc=inc_article.cfm&template=0 ---------- HAPPENING AT HAAS Brown Bag Lunch: The Rise, Fall, and Resurrection of the Merchant E-tailer Tuesday, November 6, 2001 12:30 to 1:30 p.m. Room C110 The last five years have provided a spectacular view of hope and decline for the merchant e-tailer. Join Professor Emeritus Pete Bucklin as he reviews this history and seeks to explain the hype, why we were all enthralled by it, and the dramatic fall from grace. Most importantly, we will focus on its reasons for the failures and speculate as to what will emerge from the ashes. Undergraduate Marketing Association's Ad Night Tuesday, November 6, 2001 7:00 p.m. Wells Fargo Room Representatives from marketing, advertising, and public relations firms discuss their field, company, job, and how they got where they currently are. Foote, Cone & Belding, Edelman Public Relations, Bravo! Marketing, and TBWA/Chiat/Day will be in attendance, as well as Haas Advertising Professor Trudy Kehret-Ward. All are welcome to attend. ASUC/Haas Sponsored The Fisher Center for Information Technology and Marketplace Transformation (CITM) presents eBusiness Transformation in Banking Wednesday, November 7, 2001 12:00 p.m. to 4:30 p.m. Faculty Club Management of Technology Lecture "Innovation in Silicon Valley: Retrospective and Forecast," by Sandy Robertson, founder, Robertson Stephens Wednesday, November 7, 2001 3:30 p.m. to 5:00 p.m. Wells Fargo Room For more information, contact Susan Reneau at [email protected]. Management of Technology Lecture "Challenges in Telecom Marketing," by Donald Proctor, VP, Cisco Systems Wednesday, November 14, 2001 3:30 p.m. to 5:00 p.m. Wells Fargo Room For more information, contact Susan Reneau at [email protected]. Business Faculty Research Dialogue "Adding Value with Information Technology" with Craig Barrett, president and CEO of Intel Corporation Wednesday, November 14, 2001 4:00 p.m. Arthur Andersen Auditorium There will be a reception following the lecture in the School's Bank of America Forum. Haas Technology Club Lecture Series "Building a Next Generation Wireless Services Business, " by Norihiko Hirose, VP Bus Dev & Investment, NTT DoCoMo USA Thursday, November 15, 2001 6:00 p.m. to 7:30 p.m. Wells Fargo Room Ph.D. SEMINARS ORGANIZATIONAL BEHAVIOR AND INDUSTRIAL RELATIONS "The Economic Sociology of Capitalism: Weber and Schumpeter," by Richard Swedberg, University of Stockholm, Sweden Wednesday, November 7, 2001 4:00 p.m. to 5:30 p.m. Room C110, Cheit Hall For more information, contact Deborah Houy at [email protected]. FINANCE SEMINAR "Exploring for the Determinants of Credit Risk in Credit Default Swap Transaction Data," by Didier Cossin (HEC-University of Lausanne) Thursday, November 8, 2001 4:15 p.m. to 5:45 pm Room C110, Cheit Hall For more information, contact June Wong at [email protected]. IDS270-INSTITUTIONAL ANALYSIS WORKSHOP "The Economics of Education: A New Perspective," by George Akerlof, UC Berkeley Thursday, November 8, 2001 4:00 p.m. to 6:00 p.m. Room C325, Cheit Hall For more information, contact Anita Stephens at [email protected]. BA 298-REAL ESTATE SEMINAR Edward Glaeser, Harvard University Friday, November 9, 2001 11:00 a.m. Room C250, Cheit Hall For more information, contact Lynn Lobner at [email protected]. ORGANIZATIONAL BEHAVIOR AND INDUSTRIAL RELATIONS Jack Goncalo and Alicia Boisnier, doctoral students, Haas School of Business Wednesday, November 14, 2001 4:00 p.m. to 5:30 p.m. Room C250, Cheit Hall For more information, contact Deborah Houy at [email protected]. FINANCE SEMINAR "Asset Securitization and Optimal Asset Structure of the Firm" by Jure Skarabot, UC Berkeley Thursday, November 15, 2001 4:15 p.m. to 5:45 pm Room C110 Cheit Hall For more information, contact June Wong at [email protected]. E.T. GRETHER MARKETING SEMINAR "Empirical Analysis of Dynamic Consumer Choice Behavior," by Inseong Song, University of Chicago Thursday, November 15, 2001 3:30 p.m. to 5:00 p.m. Room C330 For more information, contact Laura Gardner at [email protected]. IDS 270-INSTITUTIONAL ANALYSIS WORKSHOP Jonathan Levin, Stanford University Thursday, November 15, 2001 4:00 p.m. to 6:00 p.m. Room C325, Cheit Hall For more information, contact Anita Stephens at [email protected]. REAL ESTATE SEMINAR Christian Redfearn, University of Southern California Friday, November 16, 2001 11:00 a.m. Room C250, Cheit Hall For more information, contact Lynn Lobner at [email protected]. ACCOUNTING SEMINAR Karen Nelson, Stanford University Friday, November 16, 2001 4:00 p.m. Room C325, Cheit Hall For more information, contact Lorraine Seiji at [email protected]. ALUMNI EVENTS Big Game Tailgate CAL VS. STANFORD Saturday, November 17, 2001 Frost Amphitheater, Stanford University Join Cal alumni for a pre-game BBQ tailgate at the Frost Amphitheater, Stanford University. The event will be held two-and-a-half hours before kickoff (tentative kickoff at 12:30 p.m.). Cost TBD. For more information call the Cal Alumni Association Southern Cal office at 1-877-CAL-ALUM. ---------- HAAS CELEBRATIONS BIRTHDAYS Sojourner Blair, Nov. 7 Charles Montague, Nov. 7 Terry Yokoyama, Nov. 12 The Haas NewsWire respects the wishes of staff and faculty who would not like their birthdays announced. Please e-mail a request to have your birthday marked "do not announce" on the central birthday list to [email protected]. ---------- The Haas NewsWire is the electronic news weekly for the Haas community published every Monday by the Marketing and Communications Office at the Haas School. Send your news, feedback, and suggestions to [email protected]. Archived issues of Haas NewsWire are available online at http://www.haas.berkeley.edu/groups/newspubs/haasnews/archives/hncurrent.html. To subscribe to Haas NewsWire, address e-mail to [email protected]; in the body of the message type "subscribe haasnewswire" in the first line, and "end" in the second line. To unsubscribe to HNW, type "unsubscribe haasnewswire" in the first line, and "end" in the second line.

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Award-Winning Orpheus Chamber Orchestra to Hold Teaching Residency

Haas NewsWire November 26, 2001 ---------- ***Due to the winter holiday, the Haas NewsWire will suspend publication after the December 10, 2001 issue. Publication will resume with the January 14, 2002 issue.*** ---------- CONTENTS * Award-Winning Orpheus Chamber Orchestra to Hold Teaching Residency * Dean Tyson to Deliver Final State of the School Address on Wednesday, November 28 * Very Popular "Fundamentals of Business" Course Opens Haas to Berkeley Graduate Students * Haas Joins in Launching of National Organization to Increase Women in Business Leadership * Staff News * Haas in the News * Happening at Haas * Haas Celebrations ---------- AWARD-WINNING ORPHEUS CHAMBER ORCHESTRA TO HOLD TEACHING RESIDENCY The Grammy Award-winning Orpheus Chamber Orchestra will hold a one-day teaching residency at the Haas School on November 29th. Orpheus, the only chamber orchestra in the world that consistently rehearses, performs, and records without a conductor, has garnered attention from the corporate sector for its unique approaches to creativity, innovation, and self-management. Orpheus will showcase its innovative approach to leadership for of a group of Haas MBA students on Thursday from 1:00 p.m. to 5:00 p.m. at the International House auditorium. Tickets to the event were awarded to MBA students through a lottery process. Morgan Stanley is sponsoring the event at Haas. The firm also sponsored an Orpheus residency at Hitotsubashi University in Tokyo in June 2001. The program will include presentations by Dean Laura Tyson; Harvey Seifter, executive director of Orpheus Chamber Orchestra and author of "Leadership Ensemble"; lecturer Terry Pearce; and David Pottruck, co-CEO of Charles Schwab. John McGeehan, managing director and chief administrative officer for Morgan Stanley Japan Limited will also be in attendance. Central to the distinctive personality of Orpheus is its unusual process of sharing and rotating leadership roles. The "Orpheus Process" is built on individual responsibility, shared leadership, and workplace democracy. The process has enabled the orchestra to unleash the talent, vision, creativity, and leadership potential of each member of the group. For every work, an elected committee of musicians selects a concertmaster and each instrumental section chooses a representative. These chosen representatives (the "core group") are responsible for forming the initial concept of the piece and developing an overall interpretive approach to the music before the entire orchestra comes together to rehearse. The core also structures the rehearsal process for the entire orchestra, which provides clear leadership while insuring that every member has a real stake in the artistic outcome of every piece performed by the orchestra. The results of the process have produced 28 years of sustained excellence at the highest level of international accomplishment. The main focus of the residency at Haas will be to demonstrate the Orpheus Process in action as the orchestra rehearses the first movement of Haydn's Symphony No. 63 in C Major in "real time," showing by example their work process from core preparations to final product. The applications of the Orpheus Process to the business world will be framed in the introduction and reinforced through a question-and-answer and discussion period with the students and presenters. ---------- DEAN TYSON TO DELIVER FINAL STATE OF THE SCHOOL ADDRESS ON WEDNESDAY, NOVEMBER 28 Dean Tyson will give the final state of the school address of her tenure as dean on November 28. The speech will be given twice that day, once during the day at 12:45 p.m. and once in the evening at 7:45 p.m., in the Arthur Andersen Auditorium. Dean Tyson will take questions from the audience at the end of the speech. All students, faculty, and staff are welcome to attend. ---------- VERY POPULAR "FUNDAMENTALS OF BUSINESS" COURSE OPENS HAAS TO BERKELEY GRADUATE STUDENTS For the first time, the Haas School is offering a graduate-level business course specifically designed for non-business school students at UC Berkeley who want exposure to fundamental knowledge of management and business. "Fundamentals of Business" (BA 296-10) will introduce Berkeley graduate students to the basics of business. So far, the course appears quite popular, with almost every seat taken during the pre-enrollment process. Of the 102 students currently pre-enrolled, the largest segment (18 students) comes from the College of Engineering. The remainder come from a variety of graduate programs at Berkeley. "For years there has been high demand for Haas courses outside the school," says Andy Shogan, associate dean for instruction. "Graduate students don't have time to take several business courses to learn management, finance, and marketing. This course will satisfy that demand and expose the students to more topics." Fundamentals of Business is a broad survey course for graduate students designed to provide a comprehensive introduction to the study of business and modern management techniques such as data gathering, analysis, and decision-making. The class meets in the Arthur Andersen Auditorium on Wednesdays from 6:00 p.m. to 9:00 p.m. The format of the course is three five-week modules taught by a team of instructors with different functional areas of expertise. The modules are: "Managing People in Organizations" taught by Nancy Euske, "Accounting and Finance" taught by Victor Stanton, "Delighting Customers: Marketing and Strategy" taught by David Robinson. At the end of each of the three modules, there will be an exam on the following Monday. The course is open to graduate students only from departments other than the Haas School. No prerequisite coursework is required, but a familiarity with basic economics is helpful. For more information visit http://www.haas.berkeley.edu/~robinson/BA296/. Haas also offers an undergraduate business survey course, BA 10, which is a prerequisite for the business major. ---------- HAAS JOINS IN LAUNCHING OF NATIONAL ORGANIZATION TO INCREASE WOMEN IN BUSINESS LEADERSHIP A new national nonprofit organization designed to increase the number of women business owners and business leaders was announced on November 6 during the group's first board meeting at the University of Michigan Business School. Ilse Evans, executive director of MBA Admissions and Career Services, and David Downes, director of the Full-Time MBA program, are founding board members. The organization, whose name and headquarters have yet to be determined, is an alliance of educational institutions, businesses, and nonprofit groups. The organization will work to increase women's access to education and business networks, support women financially in their business education, raise awareness of the impact women can make on business and society, and encourage and support research on relevant topics. "One of the key barriers to access to business education is the lack of awareness and knowledge women have about the value and flexibility of business careers and education," says Jeanne M. Wilt, executive director of the new organization and assistant dean for admissions and career development at the University of Michigan Business School. Over the next three years, the organization plans to substantially expand its membership of business schools and companies, serve alumnae of member schools and develop strategic partnerships with other key organizations that work with women and girls. It aims to raise $20 million by 2004 to support its work. Business members of the new group include Dell, Deloitte Consulting, Goldman, Sachs & Co., JP Morgan Chase & Co., Kraft Foods Inc., and Procter & Gamble Co. Academic members are the business schools at Columbia University, Dartmouth (Tuck), the University of California Berkeley (Haas), the University of Chicago, the University of Michigan, the University of Pennsylvania (Wharton), the University of Texas (McCombs), and the University of Virginia (Darden). In addition, the Committee of 200 (C200), a professional organization of businesswomen, the Consortium for Graduate Study in Management, and the University of Michigan Center for the Education of Women are members of the founding board. ---------- STAFF NEWS Scheffy Wins Don Yoder Paper Prize The American Folklore Society honored Zoe Scheffy, manager of Accounting and Personnel Services, with the 2001 Don Yoder Paper Prize at its annual meeting. The AFS Folk Belief and Religious Folklife Section chose Scheffy for her paper, "S?mi Religion in Art and Museums." Scheffy's paper, which was presented at the Folklore, Religion, and Diversity Politics conference in Alta, Norway in June, 2000, has been accepted for publication in an upcoming book drawn from the conference proceedings. In the paper she shows how differing approaches to museum representation construct subjective and influential visions of S?mi culture and traditional spirituality. In particular, she focuses on the display of drums and their role in both S?mi identity and outsiders' perceptions of the S?mi people. The S?mi are the indigenous people of Scandinavia. Scheffy received an MA in Folklore from Indiana University, and is currently working toward a Ph.D. in Folklore at Indiana, with minors in Central Eurasian Studies and Museum Studies. For more information, visit http://www.afsnet.org/announcements/announce.pl?106. ---------- HAAS IN THE NEWS Severin Borenstein, the E.T. Grether Professor in Public Policy and Business Administration, was interviewed on KCBS radio on November 23. He discussed the state's long-term electricity contracts. David Vogel, the George Quist Professor of Business Ethics, was quoted in the San Francisco Chronicle on November 22 in an article on corporate responsibility. Read more here: http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/11/22/BU100478.DTL. Carl Shapiro, the Transamerica Professor of Business Strategy and director of the Institute of Business and Economics Research (IBER), was quoted in Business Line (The Hindu) on November 21 in a story about the Microsoft anti-trust case. Dean Laura Tyson appeared on CNBC's Squawk Box on November 20. She commented on the Bush administration's handling of the economy. Kenneth Rosen, the California State Professor of Real Estate and Urban Economics and chairman of the Fisher Center for Real Estate and Urban Economics, appeared on the Channel 7 News at 5:30 on November 19. He commented that he expects real estate prices to decline another ten percent in the next year. Tyson also appeared in CNN's Moneyline on November 19 commenting on tighter loan standards by banks. The 24th Annual Real Estate and Economics Symposium sponsored by the Haas School and the Fisher Center for Real Estate & Urban Economics, was announced in the San Francisco Chronicle on November 18. Tyson was interviewed in CNN's The Money Gang on November 14. She spoke about the economic stimulus package proposed by President Bush. The Contra Costa Times quoted Borenstein on November 14 in an article titled "Northern California Gas Prices Fall to Lowest Level in Nearly Two Years." Pablo Spiller was quoted in the Chilean magazine Capital on November 2. ---------- HAPPENING AT HAAS Management of Technology Lecture "IT-intensive High Tech Marketing," by Robert Worrall, vice president, Sun Microsystems Wednesday, November 28, 2001 3:30 p.m. to 5:00 p.m. Wells Fargo Room For more information, contact Susan Reneau at [email protected]. Haas Technology Club Lecture Series Interactive Digital TV -- Exploiting Rapid Market Growth Thursday, December 6, 2001 6:00 p.m. to 7:30 p.m. Wells Fargo Room PH.D. SEMINARS E.T. GRETHER MARKETING SEMINAR "Influence of Hedonic Concreteness on Mood Regulation versus Mood Congruency," Ran Kivetz, Columbia University Thursday, November 28, 2001 3:30 p.m. to 5:00 p.m. Room C135, Cheit Hall For more information, contact Laura Gardner at [email protected]. ORGANIZATIONAL BEHAVIOR AND INDUSTRIAL RELATIONS Karlene Roberts, Haas School Professor Wednesday, November 28, 2001 4:00 p.m. to 5:30 p.m. Room C110, Cheit Hall For more information, contact Deborah Houy at [email protected]. JOINT BERKELEY-STANFORD FINANCE SEMINAR (AT STANFORD) "Firm-Level Momentum: Theory and Evidence" by Mark Seasholes (Haas) and "Community Effects and Externalities in Portfolio Choice" by Ilan Kremer (Stanford) Thursday, November 29, 2001 2:30 p.m. to 5:30 p.m. Graduate School of Business, Stanford, Room S72 For more information, contact June Wong at [email protected]. E.T. GRETHER MARKETING SEMINAR Yuxin Chen, New York University Thursday, November 29, 2001 3:30 p.m. to 5:00 p.m. Room C330, Cheit Hall For more information, contact Laura Gardner at [email protected]. IDS270-INSTITUTIONAL ANALYSIS WORKSHOP "Information Technology, Organization, and Return to Skills," by Luis Garicano, University of Chicago Thursday, November 29, 2001 4:00 p.m. to 6:00 p.m. Room C325, Cheit Hall For more information, contact Anita Stephens at [email protected]. BA 298-REAL ESTATE SEMINAR Robert Edelstein and Branko Urosevic, UC Berkeley Friday, November 30, 2001 11:00 a.m. Room C250, Cheit Hall For more information, contact Lynn Lobner at [email protected]. ACCOUNTING SEMINAR Nilabhra Bhattacharya, University of Utah Friday, November 30, 2001 11:00 a.m. to 12:30 p.m. Room C135, Cheit Hall For more information, contact Lorraine Seiji at [email protected]. E.T. GRETHER MARKETING SEMINAR David Budescu, University of Illinois Thursday, December 6, 2001 3:30 p.m. to 5:00 p.m. Room C135, Cheit Hall For more information, contact Laura Gardner at [email protected]. IDS 270-INSTITUTIONAL ANALYSIS WORKSHOP Jackson Nickerson, Washington University Thursday, December 6, 2001 4:00 p.m. to 6:00 p.m. Room C325, Cheit Hall For more information, contact Anita Stephens at [email protected]. FINANCE SEMINAR "Liquidity Risk and Expected Stock Returns" by Lubos Pastor, University of Chicago Thursday, December 6, 2001 4:15 p.m. to 5:45 pm Room C110 Cheit Hall For more information, contact June Wong at [email protected]. ACCOUNTING SEMINAR Per Olsson, Duke University Friday, December 7, 2001 11:00 a.m. to 12:30 p.m. Room C135, Cheit Hall For more information, contact Lorraine Seiji at [email protected]. ALUMNI EVENTS East Bay Chapter of the Haas Alumni Network Individual Tax Planning Workshop Saturday, December 1, 2001 10:00 a.m.-1:00 p.m. Don't miss this panel discussion featuring bay area tax experts who will advise you on: **Employee stock options **Retirement: IRAs, 401Ks **Real estate: home office deduction, in-law rentals, and rental property **General tax information: tips and reminders for 2001 **Planning for 2002 Arthur Andersen Auditorium, Haas School of Business $7 per attendee through Nov. 25/ $10 after Nov. 25 and at the door Parking: Available in the Kleeberger Lot across the street from the Haas School ($5 per vehicle). Online Registration: To register online go to: http://www.acteva.com/go/eb-alumni For more information contact Satnam Nahal, MBA 96, at [email protected] or 415-533-1744. New England Chapter of the Haas Alumni Network and Battery Ventures "A Corporate Perspective: Recruiting Practices in the Post New Economy" Tuesday, December 4, 2001 6:30 p.m. to- 8:30 p.m. (cocktails and networking begin at 6:30) The panel will discuss their views, from a corporate perspective, on how the downturn and evolution of the technology economy have impacted recruiting practices. Jenny Chatman, the Harold Furst Professor of Management, Philosophy & Values, Haas School of Buiness, and visiting Professor at Harvard, will moderate the panel discussion. Harvard Club, 1 Federal Street, Boston, MA 617-426-4471 Register Online by Nov. 27: http://www.acteva.com/booking.cfm?bevaid=18089&Referrer_id=1304 For More Information: email John Howard, MBA '89, at [email protected] or call (617) 450-4263 or Lynne Levesque, MBA '77, at [email protected] or call (617) 496-8527. East Bay Chapter of the Haas Alumni Network Haas Connection December 6, 2001 7:30 p.m. For all Haas alums and Haas students Pyramid Brewery and Restaurant 901 Gilman Street For more information, contact Bill Vederman, East Bay Chapter President at [email protected]. Haas Alumni Network New York Chapter Special Farewell Luncheon with Dean Laura D'Andrea Tyson Wednesday, December 12, 2001 11:30 a.m. to 1:30 p.m. Midtown Executive and Chemists' Club 40 West 45th Street, New York City Cost: $35/per person before December 5, $45/per person after December 5. Online Registration: http://www.haas.berkeley.edu/alumni/registration For more information contact the Haas School of Business Alumni Relations Office at (510) 642-7790, [email protected]. ---------- HAAS CELEBRATIONS Birthdays Laura Pliska, Nov. 20 June Wong, Nov. 21 Nicole Lampe, Nov. 22 Marybeth Schubert, Nov. 25 Rebecca Motschall, Nov. 26 Patricia Anderson, Dec. 1 Sabine Holub, Dec. 2 The Haas NewsWire respects the wishes of staff and faculty who would not like their birthdays announced. Please e-mail a request to have your birthday marked "do not announce" on the central birthday list to [email protected]. ---------- The Haas NewsWire is the electronic news weekly for the Haas community published every Monday by the Marketing and Communications Office at the Haas School. Send your news, feedback, and suggestions to [email protected]. Archived issues of Haas NewsWire are available online at http://www.haas.berkeley.edu/groups/newspubs/haasnews/archives/hncurrent.html. To subscribe to Haas NewsWire, address e-mail to [email protected]; in the body of the message type "subscribe haasnewswire" in the first line, and "end" in the second line. To unsubscribe to sHNW, type "unsubscribe haasnewswire" in the first line, and "end" in the second line.

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Enron Mentions

Layoffs Possible As Enron Reduces Broadband Burn Rate Dow Jones Energy Service, 07/12/01 USA: Losses widen to $102 million for Enron Broadband. Reuters English News Service, 07/12/01 Enron's 2nd-Qtr Profit Rises 40% on Electricity Sales (Update5) Bloomberg, 07/12/01 Enron's Skilling Sees California Energy Crisis Easing (Update2) Bloomberg, 07/12/01 Jeff Skilling Inteview CNBC, 07/12/01 Enron Expects To Cash In On New U.S. Federal Mandate For Open Wholesale Power Markets CNNfn: Market Coverage - Morning, 07/12/01 Jeff Skilling Interview Bloomberg Information TV, 07/12/01 USA: INTERVIEW-Enron chief sees California problems fading. Reuters English News Service, 07/12/01 Enron CEO:Foreseeable Business Prospects Remain Excellent Dow Jones News Service, 07/12/01 Enron 2Q Net Rises 40% As Trading Revenue Soars Dow Jones News Service, 07/12/01 USA: UPDATE 3-Enron quarterly earnings rise, beat estimates. Reuters English News Service, 07/12/01 Enron reports earnings increase of almost 40 percent Associated Press Newswires, 07/12/01 Venture capital chasing next big - and little - thing in energy Associated Press Newswires, 07/12/01 A Volt From Blue, U.S. Grid Rules Get Power Co's Abuzz Dow Jones Energy Service, 07/12/01 Marlin Water Trust II Taps Euro And Dollar Bond Markets Capital Markets Report, 07/12/01 FERC Power Grid Orders Will Open Markets for Traders (Update2) Bloomberg, 07/12/01 Enron CEO Skilling on California Crisis, FERC Talks: Comment Bloomberg, 07/12/01 Enron Chief Executive Sees California's Energy Crisis Easing Bloomberg, 07/12/01 FERC Transmission Decision Will Open Power Markets for Traders Bloomberg, 07/12/01 California Not Due Cash Refunds for Power Purchases (Update1) Bloomberg, 07/12/01 Layoffs Possible As Enron Reduces Broadband Burn Rate By Erwin Seba Of DOW JONES NEWSWIRES 07/12/2001 Dow Jones Energy Service (Copyright (c) 2001, Dow Jones & Company, Inc.) HOUSTON -(Dow Jones)- Enron Broadband Services executives said staff redeployments, including possible layoffs and an office closure were part of the plans to reduce losses at the telecommunications unit of Enron Corp. (ENE). The news came shortly after Enron President and Chief Executive Jeffrey Skilling told an investor call Thursday morning that Broadband Services lost $102 million in the second quarter of this year. "We've got to get that burn rate down," Skilling said. "And we will get the burn rate down in the next two weeks." Broadband Services Senior Vice President Kelly Kimberly said Enron hadn't yet determined the exact number of the unit's approximately 1,000 employees to be redeployed. "We will be moving some commercial support people to corporate," Kimberly said. "There will be redeployments. There may be some severances." Commercial support employees are in departments like human resources and legal support offices. Also, the unit will close its Portland, Ore., office, but its back-up network operations center (NOC) there will remain in operation. Portland employees will be offered redeployment in Houston or other offices. Those who do not accept redeployment will be offered severance packages, Kimberly said. EBS's primary NOC is in northeast Houston, one of the areas hardest hit by Tropical Storm Allison. In spite of heavy rains and flooding last month, the Houston NOC continued functioning. However, Enron officials did activate the Portland NOC in case the Houston center could not remain open. This is the second redeployment of Broadband Services employees this year. The earlier redeployment was attributed by executives to the transition from building the EBS optical fiber network to operating the network. Revenues Victim Of Crash In Telecom Prices Skilling blamed the crash of telecommunications prices for the decline in revenues in the second quarter. "There is a meltdown out there," Skilling said during the conference call. Skilling said many potential counterparties among carriers can do only short-term deals in the bandwidth market because their creditworthiness is so weak. The company believes it will be one or two years before the bandwidth market gets to the point Enron had expected it to be this year, Skilling said. Enron is the primary market maker in the bandwidth arena. Skilling and Kimberly said the company will continue to develop the commoditized market. That leadership has left Enron feeling increasingly lonely in recent weeks, said an industry analyst. "Enron was trying to move this market fast," said William Bandt of Arthur Andersen L.L.P. "They've been working to get out at the front of this market. Sometimes that's like being at the end of the high-dive board all by yourself." Overall, Enron is in good financial shape because of its core energy industry. For the second quarter this year, Enron reported net income, excluding non-recurring items, of $404 million on revenues of $50.1 billion. In the second quarter of 2000, the company reported net income of $289 million on net revenues of $16.9 billion. The earnings per diluted share for the quarter is 45 cents compared with 34 cents a year ago. Skilling said the company expects to achieve $1.80 in recurring earnings per diluted share this year. Broadband Services reported a loss of $102 million in the second quarter on $16 million in revenues before interest and taxes. In the same period of 2000, the unit reported revenues of $151 million and a loss before interest and taxes of $8 million. EBS had 759 transactions in the second quarter 2001 compared with 23 in the second quarter of 2000. The company added 45 new customers in the second quarter, giving it a total of 165 customers, Skilling said. Carriers and network services providers made up more than 70% of Enron's broadband customers and accounted for about one-third of its transactions, he said. In the second quarter of this year, the company delivered 98,478 terabytes of data compared with 13,692 a year ago. For the year so far, EBS has delivered 141,878 terabytes of data compared with 19,697 in same period a year ago. Broadband Services has a goal of delivering 570,000 terabytes this year. Enron has signed a long-term contract with MSN to provide broadband services, Skilling said. The deal will allow MSN to provision and pay for bandwidth as it's needed. The company will give more information on that deal later, -By Erwin Seba, Dow Jones Newswires, 713-547-9214 [email protected] Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. USA: Losses widen to $102 million for Enron Broadband. By C. Bryson Hull 07/12/2001 Reuters English News Service (C) Reuters Limited 2001. HOUSTON, July 12 (Reuters) - The revenue rug got pulled out from under Enron Corp.'s broadband division in the second quarter, leading to a wider-than-expected loss inside the nascent unit, the company said on Thursday. Enron Broadband lost $102 million on revenue of $16 million in the second quarter. In the year-ago quarter, when the telecom sector was much stronger, the unit brought in $151 million in revenue and lost just $8 million. The losses and the shrinking revenue opportunities caused by severe weakness in the telecommunications market led Enron President and Chief Executive Jeff Skilling to announce a restructuring that will include an unspecified amount of job cuts within Enron Broadband Services. "This quarter was the absolute evidence that there is a serious problem in the telecom industry," Skilling told Reuters in an interview. "Revenue opportunities just dried up. People are not contracting." The telecom and Internet network carriers that are Enron Broadband's target customers are suffering from credit problems and other financial difficulties preventing them from entering into the long-term deals that are the unit's bread and butter. Enron plans to turn bandwidth into a tradeable commodity that can be sold and packaged much like natural gas. Enron believes bandwidth capacity is essentially the same as gas pipeline capacity, and can be traded the same way. Skilling said the worse-than-expected telecom weakness should push back plans for profitability inside the unit by about a year. Initially, Enron planned to turn a profit from broadband by at least 2002. But Skilling said near-term cost cutting, the company's agility and small asset position should enable it to quickly react to lower revenue targets. Workers whose jobs are removed from Enron Broadband will be redeployed to other positions within the company, Skilling said. One encouraging sign was the increase in transactions in sequential quarters, from 580 deals in the first quarter to 759 deals in the second, Salomon Smith Barney analyst Ray Niles said. "It was a little bit below our expectations, but the volumes are still up sequentially. The key metric remains growth in transactions. At the end of the day, given enough transactions, it should become a profitable business," Niles said. The flashy unit, which gave Enron a once-valuable telecom cache that drove its stock to record highs last summer, has fallen from grace recently as the telecom market tanked earlier this year. Enron Broadband cut jobs earlier this year and also reduced its capital budget by a half-billion to $250 million as the telecom market first dropped sharply. Broad telecom weakness as well as the California power crisis and a struggling power project in India combined to push the energy giant's stock down 15.7 percent in the quarter. It underperformed the broader Standard & Poor's utility index, which was down 6.32 percent in the same period. Enron shares were down 48 cents, or 1 percent, at $48.62 in afternoon trading on the NYSE. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Enron's 2nd-Qtr Profit Rises 40% on Electricity Sales (Update5) 2001-07-12 16:25 (New York) Enron's 2nd-Qtr Profit Rises 40% on Electricity Sales (Update5) (Updates shares. Adds analyst comment in fourth paragraph.) Houston, July 12 (Bloomberg) -- Enron Corp., the top energy trader, said second-quarter profit rose 40 percent as its sales of natural gas and electricity surged in the U.S. and Europe. Net income rose to $404 million, or 45 cents a share, from $289 million, or 34 cents, in the year-earlier period, Enron said. Revenue almost tripled to $50.1 billion. The Houston-based company sold almost twice as much power in North America and five times as much in Europe than in the year-earlier quarter. Though electricity and natural-gas prices surged in California, Enron Chief Executive Jeff Skilling said the state ``is just not a big factor'' in Enron's increasing profits. The Houston-based company boosts earnings by increasing sales of energy and other commodities such as lumber and steel rather than raising prices, analysts said. ``That's the nature of the commodities business,'' said Zach Wagner, an analyst with Edward Jones & Co. who has a ``buy'' rating on Enron. ``As markets open up, their volumes will grow. Their margins are basically flat.'' Enron's profit margin was less than 1 percent last year and has averaged 2.1 percent during the past five years, based on Bloomberg data. That compares to a profit margin of 6.5 percent for Exxon Mobil Corp., the largest publicly traded energy company. Shares of Enron have dropped 31 percent during the past year despite steadily increasing earnings, and sales that now rival those of Exxon Mobil. Broadband Meltdown Investors are concerned about lackluster results from the company's broadband business, which was set up to trade space on fiber-optic telecommunications networks. Enron shares surged 87 percent last year when the boom in Internet and telecommunications businesses seemed certain to increase demand for broadband capacity. Enron shares fell 40 percent this year as the boom fizzled. The broadband business had a loss before interest, minority interests and taxes of $102 million in the second quarter, compared with an $8 million loss a year earlier. Broadband revenue plunged 89 percent to $16 million from $151 million. Enron said it is firing broadband staff to reduce costs. ``There's a meltdown out there,' Skilling said. ``You have to do very short-term transactions (in broadband) because people don't have the credit to do long-term transactions.'' Investors are questioning whether Enron can continue to post huge gains in sales in its energy and commodity businesses, analysts said. The earnings news today left the stock up 45 cents, or less than 1 percent, to $49.55. ``It was telecommunications that took the stock to its lofty height . . . and disappointment with telecommunications that has held the stock back,'' Wagner said. ``What they're trading at now is purely as an energy company.'' Spokeswoman Karen Denne declined to say how many people will be fired or where the cuts would take place in the company's broadband business. Enron has broadband staff in Houston, London, Singapore and Portland, Oregon. Denne said Enron would try to find internal jobs for the broadband workers and only cut those employees it can't place. In a conference call, Skilling said the broadband business still has potential. ``We're getting a negative impact on our stock price from the broadband business, and I don't think that's right,'' Skilling said. Buyer and Seller Skilling and his predecessor, Ken Lay, have transformed a natural gas-pipeline company into the biggest competitor in the business of trading commodities such as gas and power. Enron also uses financial instruments such as futures contracts to help protect customers from swings in energy prices. Enron says it makes money regardless of whether prices go up or down in California because it is both a buyer and a seller in the markets where it operates, making much of its money from fees for arranging trades. It also profits from selling risk management contracts to utilities and other companies that want to lock in energy prices. Enron was expected to make 42 cents a share in the quarter, the average estimate of analysts polled by First Call/Thomson Financial. Enron reiterated its 2001 profit forecast of $1.80 a share and said it expects to make $2.15 in 2002. The First Call estimate for 2002 was $2.12. Enron's revenue tripled from $16.9 billion in the year- earlier quarter. Most of the gain came from Enron's Wholesale Services business, which includes commodities trading and development of energy projects such as power plants. Earlier this year, Enron estimated it was owed as much as $500 million for California energy sales. Skilling said he thinks California prices have stabilized and the state is going to get through the summer ``just fine.'' While electricity and natural gas prices in the West are up from a year ago, they are down from the first quarter. ``The financial impact on Enron is over now,'' Skilling said. European Expansion Enron had first-half revenue of $100.2 billion, almost equal its revenue for all of last year. Skilling has predicted revenue will top $200 billion this year, rivaling Exxon Mobil's $232 billion in 2000 sales. Enron is continuing to expand its trading business in Europe. The company entered Europe ahead of its competition and became the dominant trader there, said Bob Christensen, a First Albany analyst who rates Enron a ``strong buy.'' ``We have just started down the path in Europe,'' Skilling said. ``Look for great things from Europe in the future.'' In California and other parts of the U.S., Enron has a growing business in contracts that manage energy supply for big customers such as Owens-Illinois Inc. and Eli Lilly & Co. Contracts increased 89 percent to $7.2 billion in the quarter, Enron said. The energy-services unit's profit increased 30 percent to $60 million in the quarter, and the business is on track to make $225 million this year, more than double 2000's results, Enron said. Profit was little changed at Enron's pipeline and utility businesses, which are more closely regulated than the trading operations. Enron has a 25,000-mile gas pipeline system and owns Portland General, an Oregon utility. The company reported a loss of $109 million for higher ``corporate-wide expenses.'' About a quarter of that was from its Azurix water unit, Skilling said. The loss compares with profit of $17 million a year earlier. Enron's Skilling Sees California Energy Crisis Easing (Update2) 2001-07-12 16:17 (New York) Enron's Skilling Sees California Energy Crisis Easing (Update2) (Updates with closing share price.) Houston, July 12 (Bloomberg) -- Enron Corp. Chief Executive Jeffrey Skilling said higher retail prices for electricity in California has curtailed power demand and should lead to fewer blackouts than expected this summer. ``The expectation of higher retail prices has dampened demand considerably,'' Skilling said in a conference call with analysts and investors. ``I think we're going to get through the summer just fine in California. That will ultimately lead to lower wholesale prices for power.'' The state had been facing about 15 hours of blackouts a week this summer, the North American Electric Reliability Council, a national group that monitors and coordinates U.S. power supplies, said in May. California has been spared outages recently because of conservation efforts, cooler temperatures and new power plants. Prices for power and natural gas in California should stay close to current levels because of the drop in demand, Skilling said in an interview with Bloomberg Television. Power plants producing enough energy for about 1.2 million homes have opened this summer in California, California Governor Gray Davis said yesterday in a statement. ``We're not out of the woods yet, but we are making progress,'' Davis said. California is seeking $8.9 billion in refunds from generators such as Houston-based Enron, the biggest energy trader, for power bought in the last year. Under the formula used by California to derive that figure, Enron is actually owed $44 million because it bought more power than it sold since May 2000, Skilling said. Shares of Enron rose 45 cents to $49.55. The company said today second-quarter profit rose 40 percent as higher sales of electricity more than made up for a loss in its telecommunications business. Enron stock has fallen 40 percent this year. The political rhetoric surrounding the California crisis and negotiations over possible refunds has hurt Enron's stock price, Skilling said. ``All this noise from California has obscured the performance of the company,'' Skilling said. Date July 12, 2001 Time 09:00 AM - 10:00 AM Station CNBC Location Network Program The Squawk Box Mark Haines, anchor: Energy earnings: Enron reporting second quarter earnings, forty-five cents a share, beating expectations of forty-two cents a share. Surpassing last year's earnings of thirty-four cents. Net income roes forty percent to four-hundred-four million dollars. Revenue up one-hundred and ninety-five percent to fifty-billion. (Graphic: Enron (ENE): Actual $0.45, Estimate $0.42, Year Ago $0.34, Revenue up 195% to $50.06b, Net Income up 40% to $404m) Enron said revenue numbers were driven by a surge in wholesale services business. Stock is trading at a fifty-two week range, forty-two to ninety. Right now at the low end, around forty-nine yesterday. Let's take a closer look at the numbers. Joining us now is Enron CEO Jeffrey Skilling. And in the spirit of full disclosure, I have some shares of Enron in my IRA. Mr. Skilling, how does revenue go up so much and the bottom line doesn't benefit more? Jeffrey Skilling (Chairman and Chief Executive Officer, Enron): Well we had a net income increase, Mark, of over forty percent and earnings per share up thirty-two percent, so I think it was a real good quarter. Haines: Yeah, but that doesn't answer the question, well, how can revenue grow like a hundred and fifty and--and the bottom line only benefits forty--forty percent? Skilling: What--what drives our net income, Mark, is the increase in physical volumes delivered. Revenues are impacted by price levels and price levels really don't impact us because we don't own generation facilities, we don't own gas production assets. So prices move up, prices move down, that impacts our revenue. But what really matters to us is how much volume are we delivering to customers and our volumes this quarter up fifty-eight percent, which drove that increase in our wholesale income. Haines: How unusual should we consider the--the last few quarters? Skilling: I think the most lasting legacy of the problems in California may be an order that came out of the Federal Energy Regulatory Commission yesterday. And what they did is they forced open--moved to four mandatory, what they call regional transmission organizations. (Graphic: Enron (ENE) 8-Quarter Earnings History Chart) This will make the marketplace for electricity in North America open. And what that means is there is a tremendous additional amount of growth, we believe, in the electricity markets in North America as these markets open up for competition. Similarly Europe--Europe is really just starting. I don't know if you saw our numbers in Europe, but our gas volumes were up over a hundred percent. Our electricity volumes were up over four hundred percent in Europe. That market's just starting to open and has tremendous future opportunities in it. (Graphic: One of the world's leading electricity, natural gas and communications companies; Delivers physical commodities and financial & risk mgmt. services to customers around the world) Joe Rivkin (Citigroup Investments): Mr. Skilling, I--you are building a global fiber-optic network, which is in effect owning some capacity that you're going to be selling or trading. Can you help us understand the logic behind that? And, also, what will make that network different from several of the other networks that are out there or under construction? (Graphic: Has developed an intelligent network platform to facilitate online business; Divides its business into four core areas: Wholesale, Broadband, Energy and Transportation Services) Skilling: Yeah. Thanks, Jack. It's--it's a very, very different network than what you'll see anywhere else in the world. If you look at most networks, the capacity to input data and the capacity to output data is very similar to what the long-haul capacity is. In our network it's very different, the capacity input and output is enormous relative to the amount of long-haul capacity we have. That allows us to bring data into our system, move it on to other people's systems by creating a marketplace for bandwidth, to get customers lower prices. We think this is the future, particularly given the melt down in client and prices for bandwidth around the world. We think this is exactly the right strategy to have. We're focussing on those areas where we--we believe that marketplace will be good in the future. In fact, we announced in the press release this morning a contract with Microsoft. A multi-year contract to provide bandwidth services that is really geared towards providing instantaneous access to bandwidth for customers, which is really a new product which we think is going to be very important for the future. (Graphic: Formed in July 1985 as a result of the merger of Houston Natural Gas and InterNorth of Omaha, Nebraska; Headquarters in Houston, Texas; Approximately 20,000 employees; Yearly High: 90.75, Yearly Low: 42.35; Market Cap: 36.6b; Top Competitors: AEP, Duke Energy, Reliant Energy) Haines: Does this get you into the technology business? Because if you're dealing with what's coming into a pipe and what has to go out of it, there's--there's a lot of effort going into place to either compress the information or expand the information or route the information... Skilling: Right. Haines: ...how are you dealing with that? Skilling: Well, really, what we're doing in the telecommunications business is identical to what we do in the natural gas and electricity business. They're pipes, and the data moves through the pipes. If they can crush more--more data into the same amount of pipes, that's good, that opens the market, provides additional capacity. What we do is we purchase and sell that capacity and make it available through our switching capabilities to any customer that wants to get real time access to bandwidth. (Enron Corp (ENE) 3-Month Stock Chart and 6-Month Stock Chart) Haines: How much of a cloud on the horizon is this California energy situation? The--you are suing the state of California, California is asking for documents, you're refusing to provide them. The situation doesn't look too pleasant. (Graphic: Enron Corp (ENE) 1-Year Stock Chart and 3-Year Stock Chart) Skilling: Well, Mark, you know, I think--I think the entire California thing I think is past the high water mark. Prices now are moving up in California and economics 101 demand's going down. I think we're going to get through this summer all right. As Joe was saying, the weather's pretty cool out in California. I think that's going to keep the demand for electricity down. As prices come down in California, I think the whole tone of discussion in California will get better. And as I said, this whole thing with the Federal Energy Regulatory Commission--they recognize now it's important to open the grid, it is critical to create efficient markets for electricity. And the step yesterday, I think, is a landmark step in opening that market and I think that's going to reduce the problems from California. (Graphic: Enron Corp (ENE) 5-Year Stock Chart) Haines: All right, sir, thank you very much. We appreciate your bringing us up to date. Skilling: Thanks, Mark. Haines: Jeffrey Skilling, CEO of Enron. # # # Business Enron Expects To Cash In On New U.S. Federal Mandate For Open Wholesale Power Markets Rhonda Schaffler, Barry Hyman 07/12/2001 CNNfn: Market Coverage - Morning (c) Copyright Federal Document Clearing House. All Rights Reserved. RHONDA SCHAFFLER, CNNfn ANCHOR, MARKET CALL: The nation`s number one buyer and seller of energy posted strong second quarter numbers. Enron (URL: http://.www.enron.com/) earned 45 cents a share, beating estimates by 3 cents and the year-ago quarter by 11 cents. Revenue surging almost 200 percent and the company says it`s on track to meet not just expectations this year but expectations for next year. Shares, though, have been slashed in half in the past six months due mostly to the California power crisis and weakness in the broadband market, as Enron continues to build its` global fiber optic network. Joining us from Houston to talk about all this is Jeff Skilling, CEO and president at Enron. Jeff, good to have you back on "Market Call". JEFF SKILLING, CEO, PRESIDENT, ENRON: Thanks, Rhonda. Good to be here. SCHAFFLER: Congrats on the quarter. But it`s an interesting quarter for you in that, for a change, not everything`s firing on all cylinders. SKILLING: Well, you know, it`s a little bit of the tale of two cities. You know, the energy business is very strong. As you can see from our numbers, we had a great quarter-another great quarter in the energy business. Broadband business is suffering from some of the problems the broadband business has, but luckily, in Enron, it`s a very small portion of our net income. So, the real story for Enron is this strong, strong growth and strong profitability of our energy business. BARRY HYMAN, CNNfn GUEST HOST, MARKET CALL: Jeff, I just want to concentrate on the broadband part for a second. You`re significantly cutting costs there and your stock seems to have gotten hit as almost a technology stock since the beginning of this year. Where do you see the broadband part going forward? And how you can make money in that particular sector? Or is it really a viable place to be? SKILLING: Yeah. Barry, I really do believe that they`ve taken all the value of broadband business out of our stock completely. It`s gone. And we`ve also been hurt a little bit by what`s going in California, in spite of the fact that we continue to hit our numbers. We`ve hit our estimates, or exceeded estimates, very quarter for the last four years. But I think people are just a little nervous about us. As far as broadband goes, it is a tough, tough market. The revenues have dried up in that business. There are two areas where we have focused, which have been our primary area focus. One is to create a market place-a real-time market place for bandwidth. We feel very good about that. That is continuing to grow. And a content delivery service where we provide a turnkey service for customers. We just announced, in fact, in the earnings release, a new contract with MSN that really provides that dynamic provisioning of bandwidth for customers. And those are the two areas we`re focusing on. The rest of the market we are just going to eliminate our activities there and just focus on those two activities. And we see those as having enormous future potential for customers. It`s going to be tough for the next year or so as that market kind of digs itself out of a hole. But I think longer-term it`s a great place to be and we have exactly the right strategy for pursing that market. SCHAFFLER: Can you tell us a little bit about what you`re doing in Europe with the energy markets there? Because Europe`s an interesting story as well, because of concerns about the slowdown there? SKILLING: Yeah, it`s interesting, Rhonda. Our volumes in Europe were incredible. Our gas volumes were up over 100 percent. Our electricity volumes were up over 400 percent. What you`re seeing there is, in spite of the slowdown in the economy in Europe, they`re opening up their markets to competition so the non- regulated portion of the energy market, which is the only portion of the market where we compete, is just exploding. It`s growing by leaps and bounds. And so we expect Europe to be a significant contributor to future growth. Similarly, even in North America, as we`re seeing the economy here slowdown. We had a landmark decision come out of Federal Energy Regulatory Commission yesterday. They have mandated now the establishment of four regional transmission organizations. And this sounds kind of technical, but essentially what it does is it is going to force fully open-force fully the North American wholesale power markets in North American. And that, I think, will provide significant new growth opportunities for us in North America. So, I think the North America and the European gas and electric markets are really not dependent on economic activity, as far as Enron`s concerned. They`re really dependent on how quickly we move to open competitive markets and we`re seeing a very, very fast transition there-and great news out of the FERC yesterday. SCHAFFLER: Jeff Skilling, CEO of Enron. Nice to see you again. Congrats on the quarter. We`ll talk soon. SKILLING: Thanks, Rhonda. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Date July 12, 2001 Time 12:30 PM - 01:00 PM Station Bloomberg Information TV Location Network Program Newsline Suzy Assaad, anchor: There's a lot ahead for you in this next half hour. We're going to talk live with the CEO of Enron, Jeffrey Skilling. His broadband division is having some troubles and we're going to ask him why he thinks he can turn it around. * * * Assaad: Enron came out with earnings and they actually beat the Street. The energy and communications company earned forty-five cents a share from continuing operations and that was three cents better than what the Street was expecting. (Graphic: Enron (ENE) 2Q, 2001 > Actual EPS $0.45 > Estimated EPS $0.42 Earnings Alert) The news sent shares of Enron sharply higher in the early part of the session. On the day, though, they have managed to turn a little bit to the downside. (Graphic: Enron intraday stock chart) Enron, though, is having problems with its broadband division. The company is projecting lower revenues for broadband and it is going to eliminate jobs to lower costs. Now can broadband be turned around and if not, what will they do about it? Joining us live from Houston is the CEO of Enron, Jeffrey Skilling. (Graphic: Enron. Enron 2Q profit rises 40% to $404 million as higher sales of electricity more than made up for a loss in its telecommunications business) Mr. Skilling, thank you for being on the show and let's start off with that question. How do you plan to turn broadband around, if--continue to keep it or get rid of it? What are your plans for there? Jeffrey Skilling (Chief Executive Officer, Enron): Well we believe longer term the broadband business is going to be a good business. It's clear, though--absolutely clear that we're going through a meltdown in the business right now. And so what we need to do is we just need to get our cost structure in line with the current view of what revenues can be in that business and that's what we're in the process of doing. (Graphic: Enron. Net income at the top energy trader rose to $404 million, or $0.45/share from $289 million or $0.34/share a year earlier) I think, given our strategy--our strategy has not been an asset-heavy strategy--we should be able to do this pretty easily and pretty quickly. As you've seen from our numbers that we announced today, we have extremely strong growth on the energy side of our business, so we'll end up redeploying people from the broadband business back into our energy business. So we think we can move pretty quickly on it. (Graphic: Enron. Houston-based company says it sold almost twice as much power in North America and five times as much in Europe in the quarter) Assaad: That's--that's quite a drain then. I mean in a year where you're having such great numbers, to have the broadband be such a drain on your bottom line. Skilling: Well it's not that big in the grand scheme of things. You know our energy business is a big business, it's growing very quickly. Our revenues in energy this quarter were over fifty billion dollars. So that's really the big part of our business and, sure, the telecommunications business I think long term is going to be an opportunity. I wish it were an opportunity right now but I think what we need to do is just get that burn rate down, get it consistent with what the revenue opportunity is in the industry. We'll be a survivor and when this business comes back, I think it has all the promise that we all know it has, it's just going to be a little delayed from what we thought before. Assaad: Could we actually get your outlook, Mr. Skilling, on energy prices going forward? Skilling: Sure. It's--it's-- Assaad: Is it a one-way street up? Skilling: I don't think so. We've been really surprised by the decline in demand. If you look at demand for electricity and natural gas in North America, it is way down this year, almost unprecedented decline in demand for a developed economy. I've never seen anything like it before. And--and I think it's been triggered by the fact that prices went up last year and customers--sort of Economics 101--customers have decided that there are cheaper alternatives and so the demand has gone down and that has really driven down prices. You know gas prices are way off from what they were earlier this year. Power prices all across the country are way down from what they were earlier this year. And so I think it's just natural economics taking effect. But what I think it means is that the current price level that we're seeing for gas and electricity are probably likely to be the prices that we'll see for--for some time now. They're on the low side of the range that everyone was expecting but I think that's what it looks like. (Graphic: Enron. President, CEO Jeffrey Skilling has predicted that revenue will top $200 billion this year) Assaad: In terms of what's going on in California, it's--it's said that that has put some pressure on your stock price as of late. What are your predictions down that end? Skilling: Well it has put pressure on our stock price. You know we've--we've hit earnings or exceed earnings expectations every quarter for the last four years and yet our stock's down this year. I think the reason for that is that all of this noise from California has obscured the performance of the company. (Graphic: Enron. In places including CA, Enron has a growing business in contracts that manage energy supply for big clients such as Owens-Corning, Lilly) But I think we're now, because prices are dropping--wholesale prices are dropping for power, I really think we've seen the high water mark of the problems in California. (Graphic: Enron. Contracts increased 89% to $7.2 bln in the quarter, Enron says) It's been cool in California, prices are down and I think as this works its way through the system, I think a lot of the noise and a lot of the antagonism will start to go away and I think--in fact I think probably the greatest legacy of this whole California debacle will be what happened yesterday in the Federal Energy Regulatory Commission. You know they came out with an order that most people weren't really, I don't think, looking at that carefully. But this--this order requires the development of a very, very efficient marketplace for electricity in North America. (Graphic: Enron. While California power prices were double year-ago levels, Enron reiterated its 2001 profit forecast of $1.80/share and said it made no difference to Enron's bottom line) It's a huge step forward, it's very, very positive. And so while it's technical in nature, I think ultimately it will have probably the most impact going forward in time, more than this whole California things has had. Assaad: Interesting. In terms though of--of going forward from here, it's also said that a lot of your wholesale margins, a lot of certainly your volumes are going to be dependent on the development of Europe, that this is really the area of growth for you right now. Do you agree with that and where do you see Europe going for you in the next year? Skilling: Well, Europe is important and Europe is just starting the process of liberalizing markets, the continental countries. And so we think there's enormous growth opportunities there. Gas volumes were up over a hundred percent. Our power volumes were up over four hundred percent. So I think there's great opportunity there and that will be a source of growth in the future. (Graphic: Enron. That's because Enron's risk-management business makes money it expects to make $2.15 in 2002; First Call estimate for 2002 was $2.12, whether power prices rise or fall, analysts say) Assaad: Mr. Skilling, do you think there's greater opportunity for Enron in Europe than there currently is here in the U.S.? Skilling: No. And that's--I was about to say that with this change in the federal policy, this--currently only about twenty percent of the wholesale market for power is accessible. You can only get to about twenty percent of the locations in the country because of flawed regulation in North America. If these rules go through, as was dictated yesterday by the Federal Energy Regulatory Commission, the entire U.S. market opens up and so this is an enormous growth opportunity. And--and because this is our biggest business, we think it will have more effect than Europe. (Graphic: Enron. Enron's ability to boost profit and sales even as its broadband business slumped shows it can manage changing market conditions, analysts say) But longer term, Europe's a great market, great business for us. Assaad: Absolutely. Thank you very much for joining us today. Jeffrey Skilling, joining us to talk about Enron. # # # USA: INTERVIEW-Enron chief sees California problems fading. By C. Bryson Hull 07/12/2001 Reuters English News Service (C) Reuters Limited 2001. HOUSTON, July 12 (Reuters) - The thus-far cool summer in California and the emergence of specifics about Enron Corp's limited involvement in the embattled California power market should ease pressure on the energy giant's stock, the company's chief executive said on Thursday. "I think we are going to get through the summer just fine. In terms of the financial impact on Enron, it's pretty much over," Enron President and Chief Executive Officer Jeff Skilling told Reuters in an interview. The rhetorical attacks on the Houston company as an out-of-state generator ignore key facts about how much power Enron sold into California, he said. "I don't know how they can keep using us as the poster child when all of the numbers keep coming out. The poster child ought to be the Los Angeles Department of Water and Power," Skilling said. According to sales records maintained by the California Independent System Operator, which manages most of the state's power grid, Enron accounted for 0.4 percent of the alleged $9 billion in overcharges. The U.S. Federal Energy Regulatory Commission is slated to decided if there was an overcharge to California, and if so, how much should be refunded. The same records show that the L.A. municipal utility and other municipal utilities in the state overcharged PG&E Corp.'s Pacific Gas and Electric and Edison International's Southern California Edison utilities millions more than Enron did. "I believe ultimately in the longer term, as people become more knowledgeable about the data and statistics, I don't think they'll harp on Enron so much," Skilling said. Skilling has personally felt the nasty nature of the duel between California and "out-of-state power producers," the label California Gov. Gray Davis, a Democrat, has used to blast energy companies like Enron. During a June 21 speech in San Francisco, a demonstrator threw a cream pie and hit Skilling in the face. "I knew something was going to happen out there, but we wanted to get our facts out and show our commitment to getting the facts out," Skilling said of the reason for his visit. After he was hit with the pie, Skilling calmly explained his and Enron's belief for the reasons behind California's power woes. While Davis blames Enron and others for jacking up wholesale energy prices, the companies pinpoint California's flawed deregulation scheme and a rise in the price for natural gas as the main problems. The latest manifestation of the flat-out war between California politicians and Enron is a California legislative committee's finding that Enron is in contempt for refusing to hand over confidential business documents in a probe into price gouging. The California Senate believes the finding gives them the power to fine Enron and possibly jail its senior officers. But just before the Senate Select Committee to Investigate Market Manipulation voted to hold Enron in contempt on Wednesday, the Houston company sued in a California court on a claim the legislature has no jurisdiction over them. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Enron CEO:Foreseeable Business Prospects Remain Excellent By Bob Sechler Of DOW JONES NEWSWIRES 07/12/2001 Dow Jones News Service (Copyright (c) 2001, Dow Jones & Company, Inc.) AUSTIN, Texas -(Dow Jones)- Flush from reporting a 40% year-over-year increase in net income for the second quarter and substantially beating Wall Street expectations, Enron Corp. (ENE) Chief Executive Jeff Skilling said Thursday that prospects for his company remain extremely strong. "We are well-positioned for future growth," Skilling told analysts during a conference call. Skilling also downplayed ongoing controversy regarding the power crisis in California - which has contributed to a pall over Enron stock - saying he thinks the issue already has reached "a high-water mark" and should subside. California likely will make it through the summer without much additional power problems, he said, helped by lower prices and cooler weather. Enron, Houston, reported second-quarter net income Thursday of $404 million, 40% more than net income of $289 million in the year-go period. The company surpassed Wall Street expectations for the quarter, reporting earnings of 45 cents a share on revenue of $50 billion. Enron had been expected to earn 42 cents a share, according to the consensus of analysts polled by Thomson Financial/First Call. Enron earned 34 cents a share on $16.8 billion in revenue in the year-ago period. CEO Skilling also heralded the decision Wednesday by the Federal Energy Regulatory Commission ordering that four large electric-transmission organizations be formed to optimize the flow of electricity nationwide. The move will lead to a major improvement in business conditions for companies such as Enron, he said, because it will create a solid foundation for competitive power markets across the country. Enron officials estimated that they'll eventually be able to compete in more than 90% of U.S. power markets because of the commission's order, as opposed to the 20% the company forecasts now. Enron is the nation's largest electricity trader and marketer. "This is a major, major step forward," Skilling said. "All the lights are green right now" for Enron's wholesale-services division, which accounted for about 97% of Enron revenue in the second quarter. Skilling expressed confidence that Enron will meet Wall Street's full-year earnings expectations of $1.80 a share. In addition, he said the company will earn $2.15 a share in 2002, an increase from current 2002 expectations of $2.12 a share. Still, Enron's otherwise solid second-quarter results were marred by the performance of its broadband-services division, where among other activities it has been a pioneer in creating a trading market for broadband, or high-speed Internet capacity. The division lost $102 million in the quarter before interest, minority interests and taxes, compared with an $8 million loss in the year-ago period. Skilling said the division has been the victim of an overall "meltdown" in the broadband industry. "Revenue this quarter, or revenue opportunities, just dried up" in broadband, he said. The business climate eventually will rebound and bear fruit for Enron, Skilling said, but that is probably one to two years away. In the interim, Enron is planning to overhaul the broadband unit, cutting costs and narrowing its scope to focus strictly on intermediation, or trading, activities and on providing specific bandwidth to large enterprise customers. Enron didn't reveal details of the planned cuts Thursday. Still, Skilling did note that he thinks investors already have penalized Enron for the broadband unit, or at best given it no value as reflected in the stock price. He said he thinks that reaction is unwarranted and understates the future potential of the broadband unit. Later, in an interview with Dow Jones Newswires, Chief Executive Skilling reiterated that California's ongoing efforts to resolve its power crisis will have no negative impact on Enron. He also dismissed as "all politics" a move Wednesday by a California Senate committee to forward a contempt charge against Enron to the full California Senate. The committee initiated the action because Enron has refused to provide certain financial documents that the committee has requested as part of an investigation into wholesale power prices in the state. "They have no jurisdiction, and they've made it clear they won't keep confidential" the information that they have requested, Skilling said Thursday. "In the absence of that, we don't particularly want to turn over to them information." Enron shares recently traded at $48.80, down 30 cents, despite the company's strong second-quarter results. Skilling said the stock was being held back because of its tie to the energy sector, which has been struggling overall. "Give it a couple of days," he said. "I think we've hit the low-water mark on our stock price, and I think we have a lot of upside." -Bob Sechler, Dow Jones Newswires; 512-236-9637 Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Enron 2Q Net Rises 40% As Trading Revenue Soars By Bob Sechler Of DOW JONES NEWSWIRES 07/12/2001 Dow Jones News Service (Copyright (c) 2001, Dow Jones & Company, Inc.) AUSTIN, Texas -(Dow Jones)- Enron Corp.'s (ENE) second-quarter net income rose 40%, led by a huge uptick in revenue at its wholesale services division, which includes energy trading operations. "The numbers were excellent, no question about it," said John Olson, an analyst with Sanders Morris Harris. "It was a good quarter, and management has clearly raised the bar for 2001 and 2002." The company reported second-quarter net income Thursday of $404 million, or 45 cents a share, compared with year-ago net income of $289 million, or 34 cents a share. Enron had been expected to earn 42 cents a share, according to Thomson Financial/First Call. Revenue ballooned to $50.06 billion from $16.89 billion in the year-ago period. However, the strong results didn't prevent Enron stock from falling modestly in Thursday's trading. The shares traded recently at $48.80, down 0.6%. Analysts cited a host of reasons for the lack of investor response, not the least of which is lingering uncertainty regarding California's energy crisis and the outcome of energy deregulation efforts overall. Enron is the nation's largest electricity trader and marketer. "There's a perception there that's hurting Enron's stock, creating uncertainty about it," said Louis Gagliardi, of John S. Herold Inc. Enron is "still under the shadow of the California situation and deregulation." Gagliardi and others said they tend to agree with Enron Chief Executive Jeff Skilling that California's efforts to resolve its power problems won't hurt the company. But they said investors are jittery nonetheless. For his part, Skilling blamed the lack of enthusiasm in the stock market Thursday on his company's perceived tie to the overall energy sector, which is slumping after a period of strong growth. He said he expects the stock to respond over the next few days once investors "digest" the strong second-quarter results. "I think we've hit the low-water market on our stock price, and I think we have a lot of upside," he told Dow Jones Newswires in an interview. Skilling told analysts Thursday that Enron will meet full-year earnings expectations of $1.80 a share, and he also raised the forecast for 2002 earnings to $2.15 a share from $2.12 a share. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. USA: UPDATE 3-Enron quarterly earnings rise, beat estimates. By C. Bryson Hull 07/12/2001 Reuters English News Service (C) Reuters Limited 2001. HOUSTON, July 12 (Reuters) - Energy marketing and trading powerhouse Enron Corp. said on Thursday its second-quarter earnings rose almost 40 percent to beat Wall Street estimates on robust growth in its workhorse wholesale energy business. The Houston-based company, the No. 1 U.S. natural gas and electricity marketer, reported net income excluding non-recurring items of $404 million, or 45 cents a share, compared with $289 million, or 34 cents a share, in the same period a year ago. Analysts had expected earnings in the range of 40 to 44 cents a share, with an average of 42 cents, according to Thomson Financial/First Call. Enron also said it was confident it would reach its target of $1.80 for recurring earnings per diluted share for the full year 2001, while saying it expected to earn a slightly better-than-expected $2.15 per diluted share in 2002. Initially, Wall Street reacted favorably and pushed the stock up by as much as $1.70, but the stock reversed in early afternoon trading on the New York Stock Exchange, shedding 27 cents to move to $48.83. One of the only black marks in the quarterly report was widening losses - $102 million - in Enron's nascent broadband unit due to weak demand for those telecom services. Volume growth in Enron's core wholesale energy business drove all but $1.5 billion of $50.06 billion in second-quarter revenues. Revenues more than doubled from $16.88 billion in the year-ago quarter. "Our wholesale and retail energy businesses continue to dramatically expand business activity and increase profitability," Enron President and Chief Executive Officer Jeff Skilling said in a statement. Total energy volumes, including natural gas, oil and power, increased 58 percent to 74 trillion British thermal unit equivalents per day, the company said. Global power volumes led the growth as they more than doubled to 285 million megawatt-hours, with three-quarters of that coming from North America. Salomon Smith Barney analyst Ray Niles said the wholesale segment was the key earnings driver, propelled by volume growth, high trading volatility and the liquidity added by EnronOnline, the company's marquee Internet trading platform. EUROPEAN OPERATIONS Another key factor, Niles said, is the emergence of Enron's European wholesale operations, which swelled with power volumes nearly quintupling to 73 million megawatt-hours. Gas volumes doubled. "Europe is kicking butt and it's about a quarter of their activity, nearly double what it was last year. And that is a new market that is the size of the U.S.," Niles said. Growth in Europe is coming faster than expected, Skilling told analysts in a conference call. "It's surprising how quickly this thing is opening up and how the volumes are growing," he said. Enron nearly doubled new retail energy services contracts year-over-year, moving to $7.2 billion in total value from $3.8 billion. That growth accounted for $60 million in pre-tax income, up from $46 million a year ago. Skilling said the U.S. Federal Energy Regulatory Commission's order on Wednesday to create four regional power grids should help increase Enron's retail business as larger entities look for ways to package power costs. Enron's retail arm does that by managing costs and trimming usage for large retail customers. "People want direct access, and right now we are the only player that can provide it," Skilling said. On the negative side of the balance sheet, Enron reported a $109 million pre-tax, pre-interest loss attributable to unexpected expenses and the failed spinoff of water company Azurix Inc. BROADBAND BUSINESS HURTING Skilling acknowledged that Enron's budding broadband business endured a rough quarter with $102 million in losses compared to $8 million a year ago. The flashy unit, which gave Enron a once-valuable telecom cache that drove its stock to record highs last summer, has fallen from grace recently as the telecom market tanked earlier this year and revenue dried up from credit-poor customers. Broad telecom weakness, as well as the California power crisis and a struggling power project in India combined to pressure the energy giant's stock down 15.7 percent in the quarter. It underperformed the broader Standard & Poor's utility index, which was down 6.32 percent in the same period. Since the close of the quarter, the stock has been hovering near $49, just over half an all-time high of $90.25 reached last August. It had traded at more than $81 as recently as mid-February. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Enron reports earnings increase of almost 40 percent 07/12/2001 Associated Press Newswires Copyright 2001. The Associated Press. All Rights Reserved. HOUSTON (AP) - Enron Corp. reported a nearly 40 percent increase in second-quarter earnings on Thursday and beat analysts' expectations due to robust growth in its power marketing and energy management businesses in the United States and Europe. The Houston-based energy wholesaler and retailer earned $404 million for the quarter ended June 30, or 45 cents per share. That compared with $289 million, or 34 cents per share a year earlier. Analysts surveyed by Thomson Financial/First Call predicted earnings of 42 cents per share. Despite continued growth in its natural gas and electricity trading business, though, Enron's stock has faltered in the past year due to unmet expectations for its high-speed Internet business. Enron's broadband business reported a $102 million loss, compared with an $8 million loss for the same quarter a year ago. Enron President and Chief Executive Jeff Skilling said Enron would "significantly" reduce spending in its broadband unit "to match the reduced revenue opportunities currently available." Enron reported $50.1 billion in revenue for the second quarter of 2001, almost triple the $16.9 billion reported for the same quarter a year ago. Company officials expressed confidence of reaching $1.80 per share in earnings for the full year 2001 and $2.15 per share for 2002. "Our wholesale and retail energy businesses continue to dramatically expand business activity and increase profitability," said Skilling. Enron has been embroiled in the conflict over California's energy woes, with a committee of that state's Senate issuing subpoenas to the corporation and other generating companies earlier this year in connection with an investigation of possible price manipulation in energy markets. Shares of Enron were up 26 cents to $49.36 on the New York Stock Exchange on Thursday Morning. Enron's stock was trading above $70 a share at this time last year. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Venture capital chasing next big - and little - thing in energy By JUSTIN POPE AP Business Writer 07/12/2001 Associated Press Newswires Copyright 2001. The Associated Press. All Rights Reserved. BOSTON (AP) - Not so long ago, investing in the energy industry meant buying into oil wells, hydroelectric dams and the smokestacks of big, clunky utility companies straight off of a Monopoly board. No longer. Deregulation has unleashed competition, and headlines from the California power crisis have sent entrepreneurs and investors scurrying into the energy sector. While old economy energy companies have attracted much of the attention, there's growing interest in smaller companies that comprise an emerging sector called "energy technology." It encompasses everything from software to microturbines to Internet tools that manage, monitor and even trade electricity. A recent energy industry venture capital fair, which organizers said was the first of its kind, drew 75 start-up companies to Boston - an event many investors who attended said would have been unimaginable even a few years ago. The companies and VCs are after the "$300 billion jump ball" made possible by electricity deregulation, said Todd Klein, managing director of Kinetic Ventures, a Chevy Chase, Md.-based VC firm. Their monopolies gone, power companies are being forced like never before to improve productivity. Start-ups are trying to help them with a new generation of high-tech gadgets. Meanwhile, technology companies are demanding cheaper and more reliable power sources. Entrepreneurial talent also is drifting to energy. And finally, several technologies developed in government labs have recently become commercially viable. "We have been following these technologies 10 years, and they never were anything more than science experiments," said Jeff Miller of Boston's Beacon Group, which manages $1.6 billion in two energy VC funds. "Now you've got the demand coming from the marketplace and very serious managers with very focused business plans." Offsetting the flurry of enthusiasm is tighter funding from the VCs. According to research firm Venture Economics, 77 companies took in more than $1.2 billion in funding in the sector last year, but so far this year just 17 companies have raised a total of $132 million. That pales in comparison to the old economy energy companies, which have raised $7 billion in IPOs this year. David Lincoln, founder of EnerTech Capital in Wayne, Pa., told entrepreneurs at the conference that nobody is in a hurry to make deals, and the conditions that VCs impose now "were virtually unheard of 18 months ago." Still, new public energy companies accounted for a third of all IPOs in the first six months of the year. And the power crisis has caused the entire investment community to take notice. "Three or four years ago, when we were looking at certain deals, we'd go to the banks and we'd never know who to talk to," Lincoln said. "Do you talk to the utility bankers, or the technology bankers?" Now, every major investment bank has begun tracking a sector. "Everybody's backing out of the dot-coms and telecoms," said Bradley Johnson, president of Washington, D.C.-based Pepco Technologies, which was seeking funding here. "They're saying the next new thing is energy, but they haven't figured it out yet. The management groups at these energy funds are sitting back, figuring out where they want to be." They are chasing some of the relative success stories like Chatsworth, Calif.-based Capstone, which makes freestanding microturbines that allow businesses to produce their own electricity. Company shares have traded as high as $100, but have fallen under $20, and the company still hasn't turned a profit. The sector "still hasn't seen its Netscape," Klein said. The upshot - and the lesson from last month's venture capital fair - is that the next little thing is on the minds of VCs as much as the next big one. That means technologies that don't necessarily revolutionize how electricity is produced so much as help traditional companies produce it, and customers use it, even just a little bit more efficiently. "I think with the events which occurred in California and which are threatening to occur in other parts of the company, people are focused on immediate solutions to those problems," Klein said. Many companies touting those types of solutions were at the fair, such as Encinitas, Calif.-based PredictPower, which builds systems to help companies manage their electrical use. Others showed flywheels, which store electricity on site to guarantee a perfectly steady stream of power for sensitive equipment. And some are still fighting to break into the already crowded online electricity exchange market. Other companies target the power companies themselves, with everything from software to satellite meter-readers. "There's just a lot more focussing on taking away the antiquities inherent in the old utilities system," said David Smith, who follows the sector for Solomon Smith Barney. Especially at the venture capital level, where backers tend to be looking for smaller investments and quicker returns. That's meant short shrift for some early-stage "green" companies. "Everybody's supply side," lamented R.W. Cushing, an entrepreneur whose Austin, Texas, alternative energy marketing company generally got the cold shoulder from VCs. "Nobody thinks in demand terms." In fact, alternative energy firms raised $2 billion last year from IPOs and VCs, according to Clean Edge, a research firm that tracks "green" investment. But renewable energy requires deep pockets and patience, and tends to be backed by big power companies which, if they can make alternative energy work, will have the infrastructure in place to connect it to the grid. Many big power companies ensuring they get the needed technology by backing start-ups themselves. Houston-based conglomerate Enron, for instance, has invested $90 million in 12 companies it sees as strategic partners, two of which have gone public. "I don't think there is a dearth of interest or investment in renewable technologies," Lincoln said. "(But)... the reason why you see such a strong level of interest in helping the supply-side companies is, right now, that's where the capital is being spent." With AP Photo Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. A Volt From Blue, U.S. Grid Rules Get Power Co's Abuzz By Arden Dale Of DOW JONES NEWSWIRES 07/12/2001 Dow Jones Energy Service (Copyright (c) 2001, Dow Jones & Company, Inc.) NEW YORK -(Dow Jones)- Energy companies, beware. This could mean you win, and it could mean you lose. Not today, not next week, but down the road. Big changes in the way power companies control the U.S. electricity grid are looming because of orders announced by the Federal Energy Regulatory Commission on Wednesday. At stake are billions of dollars companies could make buying and selling electricity. Power companies across the U.S. scrambled Thursday to learn details of the orders, which haven't actually been issued yet. They will probably be available by Friday, FERC spokespeople said. Companies that may benefit most, including Enron Corp. (ENE), Dynegy Inc. (DYN), Duke Energy Corp.(DUK) and Williams Co. (WMB), market electricity but don't own power lines. Big transmission-owners such as Southern Co. (SO), American Electric Power Co. (AEP) and Entergy Corp. (ETR), stand to lose control over their assets, according to analysts. "This is a major, major step forward," Enron Chief Executive Officer Jeffrey Skilling said of the FERC orders in a conference call on the company's earnings Thursday. On Wednesday, the FERC said it would direct transmission owners to form huge regional power grid operators by merging groups that already operate in the Northeast and Southeast. It said it would assign judges to start mediating right away with companies over a 45-day period to work toward compliance. The new grid operating giants must be up and running by December 2001, according to FERC spokesperson Celeste Miller. The FERC is widely expected to issue similar orders for the West and Midwest. The move this week accelerates a push the FERC's been making for several years to form regional transmission operators, or RTOs. In 1999, the agency issued a rule known as Order 2000 that directed companies to come up with plans to form RTOs. Many utilities missed deadlines to file plans, and companies including Enron criticized the FERC for not giving stronger directives and setting more aggressive deadlines. California's energy crisis has also prompted harsh criticism of the FERC, and may have helped push the agency to take stronger actions, according to some observers. Energy companies and Wall Street analysts said the action this week took them by surprise, more because of how fast the agency wants change to occur than because of what it wants done. Some said they doubt change will happen that fast. "It's a departure from the slower transition to the new market, which has been supported by companies like American Electric Power Co. and Southern Co.," said Christine Uspenski, an analyst at Schwab Capital Markets L.P. (SCH) "That doesn't mean necessarily that the older companies won't survive, but clearly FERC is moving to catch up to the trailblazers in the industry." Utilities and other power companies have already formed a number of grid operating organizations. Three are up and running in the East, including one in the New England, one in New York and another in the Mid-Atlantic region. Those groups will be joined under one of the new orders. The orders are intended, in part, to address complaints by some companies that they can't move power freely around the grid to maximize their profits. They say utilities sometimes manipulate markets unfairly by claiming lines are congested and denying others access. "Clearly, there is a benefit for the marketplace," said David Clement, associate director at the Cambridge Energy Research Associates. "It simply makes it easier for wholesale power marketers to do business." Enron expects the orders will open up U.S. wholesale markets dramatically, according to spokesman Mark Palmer. Right now, the market is about 20% open to competitors: after companies comply with the order, it will be more like 90% open, Palmer said. The FERC's orders this week didn't have an impact on energy company stocks. That's partly because changes won't occur immediately, and because transmission assets aren't huge profit centers for companies, according to Steve Fleishman, an analyst at Merrill Lynch & Co. (MER). Transmission lines do offer their owners benefits, however. "They're not as sexy as growth businesses, but they're great cash generators," said Uspenski. The FERC's orders will help to stimulate sorely needed investment in power lines and power plants, said a number of analysts. The U.S. grid is straining under the weight of increased power flows due to deregulation, but investments have been stymied by uncertainty over how the grid will be run, among other factors. "We think it's important that the FERC has put a template out there that indicates what it's next steps are going to be," said Pat McMurray, a spokesperson for the Edison Electric Institute, a utility group. EEI, along with a number of utilities, couldn't comment extensively on the orders yet because it hadn't seen them. Southern Co. was among them. (Kristen McNamara contributed to this article.) - By Arden Dale, Dow Jones Newswires; 201-938-2052 Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Marlin Water Trust II Taps Euro And Dollar Bond Markets By Richard A. Bravo Of DOW JONES NEWSWIRES 07/12/2001 Capital Markets Report (Copyright (c) 2001, Dow Jones & Company, Inc.) NEW YORK -(Dow Jones)- Marlin Water Trust II tapped the investment-grade corporate bond market Thursday with a $475 million issue and a EUR515 million issue. Marlin Water is a special purposes vehicle that was created by Enron Corp. (ENE) in 1998 to finance its purchase of U.K.-based water utility Wessex Water PLC. The current issue was a refinancing of that debt transaction. All interest payments are pre-funded from Enron Credit and principal repayment is backed by Enron equity. The transaction was done through Marlin Water Trust II in order to keep the debt off Enron Corp.'s balance sheet, said syndicate officials involved with the deal. The U.S. portion of the deal was a $475 million offering of Rule 144a debt that was priced to yield 6.31%, or 2.25 percentage points over Treasurys. Gray market levels were quoted at 2.25 percentage points over Treasurys, a level that investors and traders said was a strong showing. "These levels are reasonably positive on a day when the corporate market is so jittery," said Stephen Kane, portfolio manager at Metropolitan West Asset Management. Corporate spreads to Treasurys were out five to 10 basis points on the day. Marlin Water Trust II also priced a EUR 515 million piece, which was priced to yield 6.19%. Credit Suisse First Boston Corp. and Deutsche Bank Alex. Brown were co-leads on both transactions. Enron Corp. officials weren't available for comment. -By Richard A. Bravo, Dow Jones Newswires; 201 938-2087 [email protected] Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. FERC Power Grid Orders Will Open Markets for Traders (Update2) 2001-07-12 17:03 (New York) FERC Power Grid Orders Will Open Markets for Traders (Update2) (Adds comment from utility consultant in fourth paragraph.) Washington, July 12 (Bloomberg) -- The U.S. Federal Energy Regulatory Commission's decision to restructure the U.S. electricity grid opens the country's power markets to further competition, analysts said, even as California struggles with the aftermath of its deregulation. ``The only reason for doing this is so you can have competition,'' said Christopher Ellinghaus, an analyst at Williams Capital Group LP. ``It's so you can build a transmission system that lets generators deliver power across utility boundaries without interference by the utilities themselves.'' The FERC wants four regional transmission organizations in the U.S. -- one for the Southeast, one for the Northeast, one for the Midwest and one for the West -- that would allow more trading among regions. Florida has the option not to join, and Texas is exempt from FERC jurisdiction. ``The FERC had given some hints,'' said Larry Winter, a partner at Accenture Ltd. who has consulted with utilities forming transmission organizations. ``Now they are telling the utilities, at least in the Northeast and Southeast, exactly what they want.'' Energy traders such as Enron Corp., Mirant Corp. and Aquila Inc. stand to benefit as barriers to electricity transmission fall, Enron officials said. ``We'll have the chance to match hundreds of potential supply sources with thousands of markets,'' Enron Executive Vice President Steve Kean said on a conference call with analysts and investors. ``It's a significant expansion of the market in a very short time.'' California Crisis California's two biggest utilities have racked up about $14 billion in debt because power prices surged after the state deregulated its market, and the utilities weren't allowed to pass higher prices on to customers. The state began buying power on the utilities' behalf in January. A power shortage led to blackouts for millions of Californians this year. Politics and different market rules are the major obstacles to consolidating the transmission organizations that utilities proposed, Winter said. The commission wants the transmission systems of New England, New York and the mid-Atlantic states to combine. ``New York is not on the same page'' as New England's grid operator, which based its rules on those of PJM Interconnection LLC, the grid manager for Pennsylvania, Delaware, and eastern Maryland and New Jersey, Winter said. Enron shares rose 45 cents $49.55. They have fallen 31 percent in the past year. Aquila fell 45 cents to $25.55. Mirant fell $1.20 cents to $36.58. Enron CEO Skilling on California Crisis, FERC Talks: Comment 2001-07-12 15:12 (New York) Houston, July 12 (Bloomberg) -- Enron Corp. Chief Executive Jeffrey Skilling comments on the company's ongoing dispute with the state of California about power sales and the settlement talks on the issue being led by an administrative law judge at the Federal Energy Regulatory Commission. Skilling's remarks were made in a telephone interview following the release of Enron's second-quarter earnings. Houston-based Enron's shares have fallen 41 percent this year. On the settlement talks: ``It's pretty clear that the state has no particular interest in resolving this. It makes for good political fodder, and so I think they'll spend a lot of time making a lot of noise about it, and basically nothing will happen until the judge comes in, and the judge will set some kind of conclusion.'' Skilling said the $8.9 billion in refunds California has requested from power generators and sellers ``has no relevance to any true or valid claim the state of California has. ``They want their $8.9 billion, and then they say they'll continue to sue after the fact. That's not the basis of a settlement.'' On the outlook for the California power crisis: ``If you look at the impetus for this whole thing, it was very, very high prices in the wholesale market. Those prices have abated now. They're down significantly, and I think that's going to reduce the noise level in California.'' On Enron's links to the Republican Party and its relationship with California: ``I think our connection and (Enron Chairman) Ken Lay's connection with the Republican Party has sort of set us up to be their target, but the reality is our business is based on a lot of things, and California is just one of them.'' Enron and its employees gave $113,800 to President George W. Bush's election campaign, making them jointly Bush's 12th-largest contributor, according to the Center for Responsive Politics, which tracks campaign finance. Lay gave the $2,000 maximum for an individual. Lay also gave more than $325,000 in unlimited and largely unregulated ``soft money'' to Republican committees that helped finance Bush's campaign. That was part of at least $1.6 million contributed during the election by Enron and its officers, two- thirds of which went to Republicans, according to FECInfo, which also tracks campaign finance. California Governor Gray Davis is a Democrat, and both houses of the state legislature are controlled by Democrats. Enron Chief Executive Sees California's Energy Crisis Easing 2001-07-12 12:39 (New York) Enron Chief Executive Sees California's Energy Crisis Easing Houston, July 12 (Bloomberg) -- Enron Corp. Chief Executive Jeffrey Skilling said higher retail prices for electricity in California has curtailed power demand and should lead to fewer blackouts than expected this summer. ``The expectation of higher retail prices has dampened demand considerably,'' Skilling said in a conference call with analysts and investors. ``I think we're going to get through the summer just fine in California. That will ultimately lead to lower wholesale prices for power.'' The state had been facing about 15 hours of blackouts a week this summer, the North American Electric Reliability Council, a national group that monitors and coordinates U.S. power supplies, said in May. California has been spared outages recently because of conservation efforts, cooler temperatures and more power plants starting. California Governor Gray Davis said that power plants producing enough energy for about 1.2 million homes have opened this summer in California. ``We're not out of the woods yet, but we are making progress,'' Davis said in a statement yesterday. California is seeking $8.9 billion in refunds from generators such as Houston-based Enron, the biggest energy trader, for power bought in the last year. Under the formula used by California to derive that figure, Enron is actually owed $44 million because it bought more power than it sold since May 2000, Skilling said. Shares of Enron fell 20 cents to $48.90 in early afternoon trading. The company said earlier today second-quarter profit rose 40 percent as higher sales of electricity more than made up for a loss in its telecommunications business. FERC Transmission Decision Will Open Power Markets for Traders 2001-07-12 12:20 (New York) FERC Transmission Decision Will Open Power Markets for Traders Washington, July 12 (Bloomberg) -- The Federal Energy Regulatory Commission decision to restructure the U.S. electricity grid opens the country's power markets to further competition, analysts said, even as California struggles with the aftermath of its deregulation. ``The only reason for doing this is so you can have competition,'' said Christopher Ellinghaus, an analyst at Williams Capital Group LP. ``It's so you can build a transmission system that lets generators deliver power across utility boundaries without interference by the utilities themselves.'' The FERC wants four regional transmission organizations in the nation -- one for the Southeast, one for the Northeast, one for the Midwest and one for the West -- that would allow for increased trading between different regions. Florida has the option not to join any RTO, and Texas is exempt from FERC jurisdiction. Energy traders such as Enron Corp., Mirant Corp. and Aquila Inc. stand to benefit as barriers to electric transmission fall, Enron officials said. ``We'll have the chance to match hundreds of potential supply sources with thousands of markets,'' Enron Executive Vice President Steve Kean said on a conference call with analysts and investors. ``It's a significant expansion of the market in a very short time.'' California's two biggest utilities have racked up about $14 billion in debt because power prices surged after the state deregulated its market, and the utilities weren't allowed to pass higher prices on to its customers. The state began buying power on the utilities' behalf in January. A shortage of power led to blackouts for millions of Californians this year. Shares of Enron fell 3 cents in midday trading to $49.07. They had fallen 31 percent in the past year. Aquila fell 44 cents to $25.56. Mirant fell 52 cents to $37.26. California Not Due Cash Refunds for Power Purchases (Update1) 2001-07-12 18:01 (New York) California Not Due Cash Refunds for Power Purchases (Update1) (Adds comment from judge's recommendation in third paragraph, background in fourth.) Washington, July 12 (Bloomberg) -- California should not receive any cash refund for claims it was overcharged for electricity, a federal judge overseeing settlement talks said in a report to federal regulators. California's debts to power sellers for electricity they sold in the state is higher than any refund the state can claim, Administrative Law Judge Curtis Wagner wrote in a report to the Federal Energy Regulatory Commission. ``While there are vast sums due for overcharges, there are even larger amounts owed to energy sellers'' by California and its utilities, Wagner wrote in his report. He said California is owed ``hundreds of millions of dollars, probably more than a billion dollars.'' FERC ordered Wagner to hold settlement talks on California's claim it was overcharged by $8.9 billion for electricity. The sides failed to reach an agreement and FERC ordered the judge to make a recommendation to the commission. FERC plans to decide on the size of any refunds.

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Enron Mentions

Enron Names Special Committee To Examine Transactions Dow Jones News Service, 10/31/01 Enron says SEC opens formal inquiry into related-party transactions AFX News, 10/31/01 Enron Says SEC Informal Inquiry Now a Formal Investigation Bloomberg, 10/31/01 Key Enron Employees Aren't Jumping Ship, Recruiters Say Dow Jones Energy Service, 10/31/01 Houston, We Have A Problem: How Much Is Enron Worth? Dow Jones News Service, 10/31/01 Enron's stock jumps amid takeover speculation Associated Press Newswires, 10/31/01 USA: Few signs of domino effect among Enron's peers. Reuters English News Service, 10/31/01 Waste Management Will Start Pulp And Paper Trading Tomorrow Bloomberg, 10/31/01 Enron ends 10-day skid with 25% jump CBSMarketWatch.com, 10/31/01 Enron's stock jumps amid takeover speculation Associated Press Newswires, 10/31/01 Class Action Lawsuit Commenced Against Enron Corp. By The Law Offices of Ma= rc S. Henzel PR Newswire, 10/31/01 Some Enron Trading Customers Tighten Credit Reins, Cut Trades Bloomberg, 10/31/01 USA: Enron rebounds, but investors seek more disclosure. Reuters English News Service, 10/31/01 Waiting for Balance Sheets Amid Enron's Debacle: David Wilson Bloomberg, 10/31/01 Enron Shares Rise, Rebounding From Nine-Year Low (Update3) Bloomberg, 10/31/01 Enron Names Special Committee To Examine Transactions 10/31/2001 Dow Jones News Service (Copyright (c) 2001, Dow Jones & Company, Inc.) HOUSTON -(Dow Jones)- Enron Corp. (ENE) created a Special Committee to exam= ine deals related to the Security and Exchange Commission investigation int= o transactions involving Enron's former chief financial officer, which has = now turned into a formal investigation.=20 The energy-trading company also named William Powers Jr. to its board, maki= ng him in charge of the Special Committee, the company said in a press rele= ase Wednesday. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Enron says SEC opens formal inquiry into related-party transactions 10/31/2001 AFX News (c) 2001 by AFP-Extel News Ltd HOUSTON (AFX) - Enron Corp said the Securities and Exchange Commission has = opened a formal inquiry into the company's transactions with entities conne= cted with related parties.=20 In a statement, Enron said "the SEC has opened a formal investigation into = certain of the matters that were the subject of recent press reports and th= at previously were the subject of its informal inquiry." Earlier this month, Enron announced a charge of 1.01 bln usd, or 1.11 usd p= er share, and an incremental 1.2 bln usd reduction in stockholders' equity,= related to the unwinding of investments with the related LJM partnership.= =20 The SEC requested the company provide information on these related-party tr= ansactions days later, and the company dismissed its chief financial office= r, Andrew Fastow, for his involvement in running the LJM partnerships.=20 In today's statement, the company announced the election of William Powers = Jr to the board, effective immediately.=20 Powers, who is dean of the University of Texas School of Law, will chair a = Special Committee to examine and take any appropriate actions with respect = to transactions between Enron and entities connected to related parties, it= said.=20 In addition to reviewing the transactions in question, the Special Committe= e is charged with communicating with the SEC and recommending any other act= ions it deems appropriate.=20 "I have asked the Board to take this action to address fully and forthright= ly investors' questions and concerns," said Enron chairman and chief execut= ive officer Kenneth Lay.=20 "Responding to the SEC offers us an additional opportunity to achieve this = same goal for investors, and we will cooperate fully. We will also make eve= ry appropriate public disclosure during the course of the SEC's investigati= on."=20 pav/ Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Enron Says SEC Informal Inquiry Now a Formal Investigation 2001-10-31 17:37 (New York) Enron Says SEC Informal Inquiry Now a Formal Investigation Houston, Oct. 31 (Bloomberg) -- Enron Corp. said an informal inquiry by the Securities and Exchange Commission is now a formal investigation, and the Houston-based company's board is appointing a special committee to address allegations related to partnerships run by its former chief financial officer. William Powers Jr., dean of the University of Texas law school, will chair a committee to handle the SEC's requests for information about the partnership, Enron said. --Andy Pratt in the Princeton newsroom at (609) 750-4657 or Key Enron Employees Aren't Jumping Ship, Recruiters Say By Michael Rieke Of DOW JONES NEWSWIRES 10/31/2001 Dow Jones Energy Service (Copyright (c) 2001, Dow Jones & Company, Inc.) HOUSTON -(Dow Jones)- Enron Corp.'s (ENE) current problems aren't sending i= ts key employees running for the door, according to two executive recruiter= s.=20 While employees at Enron's underperforming units are shopping around for ne= w jobs, those working for its core wholesale energy trading and retail ener= gy units seem content, the recruiters told Dow Jones Newswires. "We've been getting resumes from their international group over the last ye= ar," said Bruce Peterson, managing director for Korn Ferry in Houston. "But= its been a very well-known fact that they're getting out of those business= es."=20 Another Houston recruiter, who didn't want to be identified, said he has go= tten "a flood" of resumes from employees at Enron's natural gas and power a= ssets in South America.=20 Employees at Enron's broadband unit are also sending out resumes, said the = recruiter. That business has brought the company losses of more than $100 m= illion this year despite hundreds of layoffs. Enron continues to cut costs = in its telecom business.=20 Neither recruiter has seen many resumes from Enron's big moneymakers - the = wholesale energy trading group and the retail energy services group.=20 Some of the lower-level employees of those units have sent out resumes but = Peterson said he hasn't seen higher-level executives in the job market. How= ever, he attached a caveat to that statement.=20 "Quite a few of the senior people at Enron have left over the last 6-12 mon= ths," he said.=20 When Enron's share price was flying high last year and early this year, som= e of Enron's top executives cashed out their stock options and left the com= pany.=20 Those executives included Cliff Baxter, former vice chairman and chief stra= tegy officer; Ken Rice, former head of Enron Capital and Trade as well as f= ormer chief executive of Enron Broadband Services; Kevin Hannon, former pre= sident of Enron Broadband Services; and Lou Pai, former chairman and chief = executive of Enron Energy Services.=20 The lure of cashing out lucrative stock options won't cost Enron any more e= mployees any time soon. The company's share price has fallen too far too qu= ickly, leaving the options underwater.=20 The company's shares traded as high as $80 early this year. By July the pri= ce had dropped to around $50, leaving employees with options that were virt= ually worthless. So Enron told employees it would issue new options in Augu= st.=20 But the company's share price continued to fall as more and more bad news c= ame out. The new options issued in August, when the share prices were aroun= d $40, are now underwater also.=20 Now that the options are out of the money, Enron employees are more vulnera= ble to the lure of other companies, Peterson said.=20 Enron could face another problem in keeping key people. Its employees work = under two-year contracts. If they leave Enron before their contracts expire= s, a noncompete clause could prevent them for working for a competitor.=20 Some of those contracts will expire at the end of the year. Without the inc= entive of lucrative stock options, Enron might have a difficult time gettin= g employees to agree to new contracts with a noncompete clause, Peterson sa= id.=20 An Enron spokeswoman said the company isn't planning to issue more new opti= ons to employees.=20 -By Michael Rieke, Dow Jones Newswires; 713-547-9207; michael.rieke@dowjone= s.com Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Houston, We Have A Problem: How Much Is Enron Worth? By Christina Cheddar Of DOW JONES NEWSWIRES 10/31/2001 Dow Jones News Service (Copyright (c) 2001, Dow Jones & Company, Inc.) NEW YORK -(Dow Jones)- With billions of dollars shaved off of the market ca= pitalization of Enron Corp. (ENE) in the past two weeks, the stock is tradi= ng at about its book value, begging the question: so how much is it worth a= nyway?=20 The answer is far from easy. Ever since Enron metamorphosed from a stodgy gas pipeline company into what= was seen by many as a dynamic energy trading firm, the company has become = increasingly more difficult to understand.=20 Just a glance at the wide-range of Wall Street analysts who follow the comp= any illustrates the point. In the mix are analysts who track natural gas an= d the pipeline industry as well as those who follow electric utilities.=20 One enticing prospect is that the assets in its portfolio are valuable in a= nd of themselves and could be seen by some as worthwhile acquisition target= s.=20 By Enron's own definition, the company houses four main divisions: Enron Wh= olesale Services, Enron Energy Services, Enron Transportation Services, and= Enron Broadband Services.=20 Wholesale Services houses the company's energy marketing business and Enron= Online. This segment accounts for the bulk of Enron's profits, and has beco= me synonymous with what Enron means to most people today.=20 Not only does Enron trade gas, oil and coal, but it also trades commodities= such as pulp and paper, petrochemicals, lumber, plastics and even weather = risk.=20 Enron Energy Services is the company's retail arm. The company provides ele= ctricity, gas and commodity risk management services through this division.= =20 Enron Transportation Services operates four natural gas pipelines that span= about 25,000 miles and have a peak capacity of 9.8 billion cubic feet per = day. Through these pipelines the company says it transports about 15% of th= e natural gas the U.S. needs. The segment also includes Portland General, a= Oregon utility company Enron is selling to Northwest Natural Gas Co. (NWN)= for $1.9 billion in cash and stock.=20 In addition, the company provides bandwidth and network services through it= s Enron Broadband services division.=20 But Enron's reach is even wider than this list suggests. The company also h= as a number of other corporate investments, including its stake in the Azur= ix water business, Enron Renewable Energy Corp. as well as methanol and MTB= E plants.=20 Through Enron's unconsolidated affiliates, the company also has investments= in additional water assets, a power plant in India and a natural gas pipel= ine in Argentina among other things.=20 What makes any valuation of Enron difficult is what remains unknown about t= he company's financial structure.=20 Enron has yet to file a balance sheet for the third quarter, and doesn't ex= pect to do so until Nov. 15, when balance sheets must be filed under Securi= ties and Exchange Commission regulations.=20 Without the balance sheet, some of the details needed for calculating a com= pany's value are missing.=20 Also, much still remains unknown about the company's obligations to its off= -balance sheet financing vehicles.=20 Using what is known about Enron's finances, several analysts have arrived a= t their own conclusions about valuation.=20 Merrill Lynch & Co. analyst Donato Eassey said Wednesday he puts Enron's ne= t asset value at between $16 to $24 a share. The calculation assumes Enron = has 850 million diluted shares outstanding.=20 Eassey valued Enron's on-balance sheet assets at nearly $11 billion, and th= e off-balance sheet assets at $1.1 billion. He has valued the company's tra= ding business at between six-to-eight-times its 2001 earnings before intere= st, taxes, depreciation and amortization, or about $19 billion to $26.5 bil= lion, based on his EBITDA estimate of $3.3 billion for this year.=20 "Thus, our total asset value stands in the $32 (billion) to $38.6 billion a= rea," Eassey said.=20 The analyst then deducted $13.8 billion in total balance sheet debt, and es= timated off-balance sheet debt at about $3.4 billion. The estimates bring t= otal debt to $17.2 billion, including $1 billion in preferred stock, he sai= d.=20 Importantly, Eassey's estimate doesn't include any cash balances or the val= ue of its current trading position.=20 At the end of June, Enron had $847 million in cash and was in a net positiv= e trading position of $306 million, Eassey said.=20 Last Thursday, Dain Rauscher Wessels analyst Mark Easterbrook arrived at a = net asset valuation of between $27 to $35 a share.=20 Easterbrook's calculation assumes added writedowns and equity adjustments.= =20 The lower half of the range assumes Enron doesn't complete any asset sales,= and assumes equity funding dilutes the shares outstanding by 24%, the anal= yst said.=20 The higher end of the range assumes asset sales of $3.5 billion, debt reduc= tion of $1 billion from the Portland General sale and no equity financing, = he said.=20 The view doesn't take into consideration the short-term liquidity crunch on= going at the company, Easterbrook said. In addition, he added, the estimate= assumes all of Enron's partnerships and investments no longer have any res= idual value.=20 Early this year, John S. Herold came up with a "rough cut" valuation of Enr= on of "plus or minus something in the $30 range" using appraised net worth = methodology, said John Parry, an analyst at the firm. However, he said, the= firm never published the estimate because it felt it didn't have enough in= formation from Enron about the off-balance sheet financing vehicles to make= a complete assessment.=20 At the time, Enron's stock was trading in the $70's, Parry said. So, he cut= the stock's rating to sell.=20 "I never imaged it would fall this low," he said.=20 Enron shares closed Wednesday at $13.90, up $2.74, or 24.6%.=20 -By Christina Cheddar, Dow Jones Newswires; 201-938-5166; christina.cheddar= @dowjones.com Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Enron's stock jumps amid takeover speculation By JUAN. A. LOZANO Associated Press Writer 10/31/2001 Associated Press Newswires Copyright 2001. The Associated Press. All Rights Reserved. HOUSTON (AP) - After plummeting to a nine-year low following recent economi= c losses and an investigation by federal securities regulators, shares of E= nron Corp. jumped nearly 25 percent Wednesday amid speculation the company = was ripe for takeover.=20 Shares of Enron, the nation's largest natural gas and power marketer, rose = $2.74 to close at $13.90 Wednesday on the New York Stock Exchange. Shares t= hough are still down 69 percent since the company reported third quarter ea= rnings just over two weeks ago. Carol Coale, an analyst with Prudential Securities Inc. in Houston, said We= dnesday's surge was likely a reaction to a The Wall Street Journal report t= hat Enron's beaten-down stock price has stirred rumors of a possible takeov= er.=20 Others may be buying figuring the stock has hit bottom, she said.=20 On Tuesday, Enron's stock closed at $11.16, its lowest level since 1992.=20 Enron shares began their steady fall in the middle of October, when the com= pany reported a net loss of $638 million in the third quarter, taking a one= -time charge of $1.01 billion attributed to investment losses, troubled ass= ets and unit restructurings.=20 Some of these losses have been tied to partnerships managed by Enron's form= er chief financial officer, Andrew Fastow, who was ousted last week.=20 The potential conflict of interest has prompted an inquiry by the Securitie= s and Exchange Commission.=20 Earlier this week, Moody's Investors Service downgraded the company's long-= term debt and warned of possible further downgrades.=20 Potential buyers include General Electric's GE Capital unit, Warren Buffett= 's Berkshire Hathaway and Royal Dutch Shell, the Journal said.=20 Duane Grubert, an analyst with Sanford C. Bernstein and Co. in New York, sa= id Shell, which has a small presence in energy marketing, would be a good f= it.=20 "Shell tried to be in the merchant energy arena and didn't really succeed,"= he said. "To buy into an established franchise must be attractive to Shell= ."=20 Enron officials did not immediately return telephone calls from The Associa= ted Press on Wednesday.=20 While Enron's stock price has made it attractive, Coale said the energy mar= keter's problems present a substantial drawback.=20 "I would fault a company for acquiring Enron with all of this hanging over = it," she said. "There are too many uncertainties."=20 Grubert said he believes Enron has the ability "to weather the storm and re= store their enterprise on their own."=20 Since reporting its disappointing third quarter losses, Enron has been nego= tiating with banks to establish new credit lines. The company last week dec= ided to cash in about $3 billion in revolving credit it has with various ba= nks to shore up investor confidence.=20 ---=20 On the Net:=20 http://www.enron.com Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 USA: Few signs of domino effect among Enron's peers. By Andrew Kelly 10/31/2001 Reuters English News Service (C) Reuters Limited 2001. HOUSTON, Oct 31 (Reuters) - U.S. energy traders such as Dynegy Inc. and Aqu= ila Inc. have taken a knock as a result of Enron Corp's recent woes, but an= alysts do not expect a broad loss of investor confidence in the sector to t= rigger massive losses in stock prices like Enron has suffered.=20 "The issues impacting Enron are pretty much specific to that company," said= Credit Lyonnais Securities analyst Gordon Howald. "I don't believe that a = lot of its peers have the same type of potential negative impact," he said. Enron's widespread use of complex off-balance-sheet financing deals and its= reluctance to disclose details about them are a key reason why investors h= ave dumped the company's stock, causing it to fall more than 60 percent in = the last two weeks.=20 And while other natural gas and electricity marketers use similar technique= s to avoid overloading their balance sheets with debt, nobody does so to th= e same extent as Enron, analysts said.=20 "Enron is a unique case in the magnitude of off-balance sheet transactions,= " said Prudential Securities analyst Carole Coale.=20 UNCOMFORTABLE WITH DISCLOSURE=20 Coale said she was not comfortable with the level of disclosure provided by= many of Enron's peers about such deals, but she said this was less of a pr= oblem at other companies because they have less exposure to the risky energ= y trading and marketing business which contributes about 80 percent of Enro= n's profits.=20 El Paso Corp., for example is channeling over $1 billion in off-balance-she= et financing into its Project Electron venture which was set up to acquire = and manage power plants.=20 Analysts say they are reasonably pleased with the information that El Paso = has provided to them about Electron.=20 El Paso's stock has fallen a relatively modest 5 percent over the last two = weeks and analysts attribute this in large part to the fact that marketing = and trading operations generate only about one quarter of the company's ear= nings.=20 Dynegy's stock is down some 17 percent over the last two weeks and analysts= said this was linked to Dynegy's assumption of a leadership role among U.S= . energy marketers in many investors' eyes as Enron began to fall out of fa= vor and as Dynegy attained a correspondingly high price-earnings ratio.=20 Asked about Dynegy's use of off-balance-sheet financing, spokesman John Sou= sa drew a contrast between his own company and Enron, saying Dynegy had no = financing that was backed by issuance of stock, nor any "related party tran= sactions".=20 FORMER HIGH-FLIERS SHUNNED=20 Analysts said that in the current uncertain investment climate, investors a= re shunning trading-oriented companies' whose stocks had previously command= ed high price-earnings multiples and seeking out more modestly valued compa= nies which own physical assets such as power plants and natural gas pipelin= es.=20 In terms of recent stock price performance this trend has punished a market= er-trader like Aquila, whose shares are down 27 percent over the last two w= eeks.=20 On the other hand it has been relatively kind to companies such as Williams= Cos. and Duke Energy Corp. , which until recently were treated with scorn = by Enron executives who aggressively propounded an "asset-light" philosophy= .=20 Williams' stock has fallen about 5 percent over the last fortnight while Du= ke's shares are down less than 1 percent and have outperformed the broader = U.S. stock market.=20 J.P. Morgan analyst Anatol Feygin said Enron had fallen victim to its uniqu= e taste for sophisticated financing techniques and its failure to explain t= hem when doubts started to surface.=20 "Enron took it to an extreme in terms of financial engineering, but it didn= 't disclose enough information about what is behind all of these structures= ," he said.=20 Credit Lyonnais Securities' Howald had a simpler explanation, saying that a= s the euphoria which surrounded Enron last year subsided, people began to s= ee Enron for what it was.=20 "Trading companies have always had a history of winning big and losing big,= " he said. "I think the days of the big valuations are over," he added. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Waste Management Will Start Pulp And Paper Trading Tomorrow 2001-10-31 16:52 (New York) Waste Management Will Start Pulp And Paper Trading Tomorrow Houston, Oct. 31 (Bloomberg) -- Waste Management Inc., North America's largest trash hauler, will start trading paper and pulp tomorrow to limit the effects of price fluctuations of recycled materials and offer a service its biggest rivals don't provide. In the past three years, Waste Management has reduced its exposure to price swings by placing 75 percent of its recycled- commodity sales under long-term, fixed-price contracts. Still, the company's revenue from recycling fell 38 percent to $154 million in the second quarter. Chief Executive Officer Maurice Myers is hoping the trading business will help stabilize recycling revenue even when prices for cardboard, newspaper and aluminum cans fall. Trading allows Waste Management to further limit its own exposure to prices, as well as offer contracts to customers who want to lock in prices. ``What Waste Management is doing is going to reduce the company's risk and their customer's risk,'' said Thomas Leritz, an analyst at Banc of America Capital Management, which owns more than 1 million shares of Waste Management. ``I think it's a smart move. It's a reflection of the new management team.'' Myers joined the company in November 1999 as it struggled to track costs from acquisitions. He has put new financial-systems software in place and made other efforts to cut costs. The company has also raised prices where it's the dominant hauler. Myers's efforts, along with the sale of overseas businesses, have helped the company regain regard among investors. The shares have risen 22 percent in the past year. Pulp and Paper Most of Waste Management's solid-waste customers produce or consume pulp and paper. Waste Management collects, processes and sells more than five million tons a year of paper, plastic, glass, aluminum and other metals. Recycled-cardboard prices fell 62 percent to $48 a ton in the second quarter from $125 a year earlier, and the price for recycled newsprint fell to $55 a ton from $90, Myers said in August. Prices were little changed from the second quarter to the third quarter, said Steve Ragiel, Waste Management's vice president of recycling. Waste Management, which will report third-quarter results next week, had expected to begin trading in the third quarter. Its plans were delayed because it took longer than expected to find people to run the operation, Raigel said. Jeff Harbert, formerly of Enron Corp., is heading the operation along with two other Enron traders. Enron, also based in Houston, has created the largest business of trading commodities including electricity, natural gas, pulp and paper. Risk Management Waste Management's initial focus in the trading business will be on managing its own price risk. It probably only will complete five to 10 trades in each of the first few months, Raigel said. The company hopes to set fixed prices for the commodities it picks up, then sell those commodities to a third company, such as a paper producer, at a higher set price. ``We'll get with a counter party such as a paper mill or a consumer-products company and cut a deal,'' Raigel said. ``We can find a paper mill that wants to lock in a fixed price on what they buy and what they sell. They get a minimum return on their investment and greater control on their raw material costs.'' The company hasn't said how much it expects to make from trading. Analysts aren't expecting the business to contribute significantly to Waste Management's earnings. ``They are looking at it as a good time to get in on trading but I don't see it as a major contributor to their business,'' said Stewart Scharf, an analyst with Standard & Poor's Equity Group. He rates Waste Management ``accumulate'' and doesn't own shares. Republic Services Group Inc., the No. 3 U.S. waste company, contracts with individual mills to supply recycled commodities at fixed prices, but hasn't started a trading operation, spokesman Will Flower said. Allied Waste Industries Inc., the second-largest trash hauler in North America, said it has no plans to get into trading. ``We'll leave trading to people like Enron,'' Allied Waste spokesman Michael Burnett said. --Mark Johnson in the Princeton newsroom (609) 750-4662 Enron ends 10-day skid with 25% jump=20 Lisa Sanders CBSMarketWatch.com October 31, 2001 HOUSTON (CBS.MW) -- Shares of Enron, which had lost about 66 percent of the= ir value over the past 10 sessions, spiked Wednesday after a report that pe= gged the beleaguered company as a takeover target. Enron added 25 percent, or $2.74, to close at $13.90. More than 43 million = shares changed hands, making the stock the most actively traded on the New = York Stock Exchange. A.G. Edwards' analyst Michael Heim warned Wednesday against buying Enron sh= ares. He noted that Enron's troubles could be hurting its trading operation= s, the company's strength. "People interested in betting on ENE should ask themselves this -- If a per= son offered to double your money when a coin lands heads and take away half= your money when it is tails, would you take the bet? What if the person fl= ipping the coin is a magician you don't trust?"=20 A Wall Street Journal report Wednesday speculated on Enron's potential as a= n acquisition for a more stable company. An Enron spokesman said the compan= y doesn't comment on such matters. Enron has been under pressure for more than two weeks, beginning when the e= nergy merchant reported a $1 billion charge in its third-quarter earnings. = A Securities and Exchange Commission probe into two of the company's limite= d partnerships and a rating downgrade by Moody's Investors Service haven't = helped. John Olson, an analyst at Sanders Morris Harris, said he thought an Enron t= akeover unlikely at this point. "However, if the stock were to keep coming down, and their financial diffic= ulties were extended, the odds would increase," he said. Olson pointed out that Enron's heavy losses over the last 10 sessions partl= y reflects the end of the tax year for mutual funds. The calendar year for = funds ends at the close of business Wednesday. "Mutual funds who own Enron stock have been trying to offset other gains by= selling off Enron," he said. "Mutual funds have to register all their gain= s or losses and offset them by selling or buying stock by the close today." Taking bets Art Smith, chairman and chief executive of the research firm John S. Herold= , said he'd be surprised if Enron was not entertaining offers. "It's one of= the ways that Enron gets the genie back in the bottle." On the other hand, Smith said, it would take a potential acquirer time to b= ecome comfortable with the valuation of the business.=20 "It's doubtful that a potential acquirer can resolve all the valuation issu= es quickly," Smith said. He said it's likely that any sort of purchase agre= ement would contain what he called a "look-back provision," which would pro= tect the acquirer from being strapped to a fixed value. Smith said he could see either General Electric's GE Capital or Royal Dutch= Shell making a bid. Both were mentioned in the Journal report. "GE Capital is big enough that if it didn't work out it won't cripple GE, a= nd they've been opportunistic on things like this," Smith said. "And Shell = always keeps us guessing." Olson also included AIG and Citigroup as potential acquirers. "Enron has certainly had some appeal to people that are used to an aggressi= ve trading culture," he said. Smith said that even without Enron, the energy marketing and trading busine= ss would continue to thrive.=20 "Even if Enron went away, it would not change what has developed into a hea= lthy market for commodity forward markets and hedging," he said. Lisa Sanders is a Dallas-based reporter for CBS.MarketWatch.com. Enron's stock jumps amid takeover speculation By JUAN. A. LOZANO Associated Press Writer 10/31/2001 Associated Press Newswires Copyright 2001. The Associated Press. All Rights Reserved. HOUSTON (AP) - After plummeting to a nine-year low following recent economi= c losses and an investigation by federal securities regulators, shares of E= nron Corp. jumped nearly 25 percent Wednesday amid speculation the company = was ripe for takeover.=20 Shares of Enron, the largest U.S. natural gas and power marketer, rose dlrs= 2.74 to close at dlrs 13.90 Wednesday on the New York Stock Exchange. Thou= gh still down 69 percent since the company reported third quarter earnings = just over two weeks ago. Carol Coale, an analyst with Prudential Securities Inc. in Houston, said We= dnesday's surge was likely a reaction to a The Wall Street Journal report t= hat Enron's beaten-down stock price has stirred rumors of a possible takeov= er.=20 Others may be buying figuring the stock has hit bottom, she said.=20 On Tuesday, Enron's stock closed at dlrs 11.16, its lowest level since 1992= .=20 Enron shares began their steady fall in the middle of October, when the com= pany reported a net loss of dlrs 638 million in the third quarter, taking a= one-time charge of dlrs 1.01 billion attributed to investment losses, trou= bled assets and unit restructurings.=20 Some of these losses have been tied to partnerships managed by Enron's form= er chief financial officer, Andrew Fastow, who was ousted last week.=20 The potential conflict of interest has prompted an inquiry by the Securitie= s and Exchange Commission.=20 Earlier this week, Moody's Investors Service downgraded the company's long-= term debt and warned of possible further downgrades.=20 Potential buyers include General Electric's GE Capital unit, Warren Buffett= 's Berkshire Hathaway and Royal Dutch Shell, the Journal said.=20 Duane Grubert, an analyst with Sanford C. Bernstein and Co. in New York, sa= id Shell, which has a small presence in energy marketing, would be a good f= it.=20 "Shell tried to be in the merchant energy arena and didn't really succeed,"= he said. "To buy into an established franchise must be attractive to Shell= ."=20 While Enron's stock price has made it attractive, Coale said the energy mar= keter's problems present a substantial drawback.=20 "I would fault a company for acquiring Enron with all of this hanging over = it," she said. "There are too many uncertainties." Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Class Action Lawsuit Commenced Against Enron Corp. By The Law Offices of Ma= rc S. Henzel 10/31/2001 PR Newswire (Copyright (c) 2001, PR Newswire) BALA CYNWYD, Oct. 31 /PRNewswire/ -- A class action lawsuit was filed in th= e United States District Court for the Southern District of Texas, on behal= f of purchasers of the common stock of Enron Corp. (NYSE: ENE) between Janu= ary 18, 2000 and October 17, 2001, inclusive. The action is pending against= defendants Enron, Kenneth Lay, Jeffrey K. Skilling and Andrew Fastow.=20 The Complaint alleges that defendants violated Sections 10(b) and 20(a) of = the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder,= by issuing a series of material misrepresentations to the market between J= anuary 18, 2000 and October 17, 2001, thereby artificially inflating the pr= ice of Enron common stock. Specifically, the complaint alleges that Enron i= ssued a series of statements concerning its business, financial results and= operations which failed to disclose (i) that the Company's Broadband Servi= ces Division was experiencing declining demand for bandwidth and the Compan= y's efforts to create a trading market for bandwidth were not meeting with = success as many of the market participants were not creditworthy; (ii) that= the Company's operating results were materially overstated as result of th= e Company failing to timely write-down the value of its investments with ce= rtain limited partnerships which were managed by the Company's chief financ= ial officer; and (iii) that Enron was failing to write-down impaired assets= on a timely basis in accordance with GAAP. On October 16, 2001, Enron surp= rised the market by announcing that the Company was taking non-recurring ch= arges of $1.01 billion after-tax, or ($1.11) loss per diluted share, in the= third quarter of 2001, the period ending September 30, 2001. Subsequently,= Enron revealed that a material portion of the charge related to the unwind= ing of investments with certain limited partnerships which were controlled = by Enron's chief financial officer and that the Company would be eliminatin= g more than $1 billion in shareholder equity as a result of its unwinding o= f the investments. As this news began to be assimilated by the market, the = price of Enron common stock dropped significantly. During the Class Period,= Enron insiders disposed of over $73 million of their personally held Enron= common stock to unsuspecting investors. Plaintiff is represented by The Law Offices of Marc S. Henzel. If you are a= member of the class described above, you have until December 21, 2001, to = participate in the case and ask the Court to appoint you as one of the lead= plaintiffs for the Class. In order to serve as lead plaintiff, however, yo= u must meet certain legal requirements. You do not need to seek appointment= as a lead plaintiff in order to share in any recovery.=20 If you have any questions concerning this case or your rights or interests = with respect to these matters, please contact: Marc S. Henzel, Esq. of The = Law Offices of Marc S. Henzel, 273 Montgomery Ave, Suite 202 Bala Cynwyd, P= A 19004-2808, by telephone at (888) 643-6735 or (610) 660-8000, by facsimil= e at (610) 660-8080, by e-mail at [email protected] or visit the firm's we= bsite at http://members.aol.com/mhenzel182.=20 MAKE YOUR OPINION COUNT - Click Here=20 http://tbutton.prnewswire.com/prn/11690X40385151 /CONTACT: Marc S. Henzel, Esq. of The Law Offices of Marc S. Henzel, +1-888= -643-6735 or +1-610-660-8000, fax: +1-610-660-8080, or [email protected]/ = 16:50 EST=20 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Some Enron Trading Customers Tighten Credit Reins, Cut Trades 2001-10-31 16:05 (New York) New York, Oct. 31 (Bloomberg) -- American Electric Power Co., Exelon Corp. and Northeast Utilities are among energy companies restricting business with Enron Corp. as the largest energy trader negotiates a credit line to keep access to cash. ``We are keeping a tight dollar limit on trades,'' said John Rowe, co-chief executive officer of Exelon, the largest U.S. nuclear power producer. ``We are keeping a close eye on our exposures.'' Enron has said it is seeking new sources of credit as the company tries to assure trading partners and rating agencies that it can meet day-to-day obligations and keep its investment-grade credit rating. Enron, which handles 25 percent of the energy trading in the U.S., relies on having investment-grade credit to borrow enough to settle its transactions daily. Enron Corp. shares, down 59 percent since Oct. 16, rose 25 percent today to $13.90 from a nine-year low amid speculation the company may be a takeover target. Still, Enron stock is down 83 percent this year. Moody's Investors Service last week lowered Enron's long-term debt to two notches above junk status and placed Enron's commercial paper on review for downgrade. ``We will be tracking very closely their wholesale volumes,'' said Stephen Moore, a vice president at Moody's. ``That will be the leading indicator of where the company is going.'' Credit People Energy trading accounted for about 98 percent of Enron's $773 million in income before interest and taxes last quarter. The company last week drew down a $3 billion credit line after surprising investors by writing off $1.2 billion of shareholder equity. The company also ousted its Chief Financial Officer Andrew Fastow after it reported that a partnership he set up lost $35 million for the company. The Securities and Exchange Commission has asked the company questions about partnerships like Fastow's. Enron spokeswoman Karen Denne said the company's trades have not declined in size while natural gas trading volume has dipped consistent with monthly pattern. Some energy executives said yesterday that companies were limiting Enron trading to reduce credit risks. ``Credit people are coming to their traders and saying, `Enron is on hold for any new positions, and at some point we may need you (to) trade out of your existing positions,''' said Charlie Sanchez, an energy markets manager at Houston-based Gelber & Associates Corp., an energy trading adviser. Watching Closely Minneapolis, Minnesota-based Xcel Energy Inc., an electricity and natural-gas seller, is limiting its business to same-day and next-day delivery, Chief Executive Officer Wayne Brunetti said at an energy conference in New Orleans. American Electric Power Chief Executive Linn Draper said at the same conference that his company is also making only short-term trades. ``We are watching very closely,'' Draper said. ``We are focusing our new deals with them in the short term, November, December. We think they'll make it, but it's a serious situation.'' Northeast Utilities, based in Berlin, Connecticut, will continue to trade with Enron as long as its debt ratings remain investment grade, said Chief Financial Officer John Forsgren, also at the conference. Northeast is New England's biggest utility owner. ``Three weeks ago, we started monitoring our position with Enron,'' said Forsgren. ``Right now, we have a net payable to them, so there's no exposure on our side, and we'll probably keep it that way.'' Overblown Many companies say that Enron remains the most economical and efficient place to trade electricity, and that the company's credit woes are overblown. ``We're still actively trading with them and we believe they will work their way out of this,'' said Mike Griswold, a trader with Hafslund Trading Co., a subsidiary of Norwegian energy company Hafslund ASA. ``They have the best liquidity and the best prices. They are the premier trading market.'' --David Ward and Bradley Keoun in San Francisco=20 USA: Enron rebounds, but investors seek more disclosure. By Carolyn Koo 10/31/2001 Reuters English News Service (C) Reuters Limited 2001. NEW YORK, Oct 31 (Reuters) - Shares of Enron Corp. snapped back from 10 str= aight days of losses on Wednesday after investors said the deep plunge had = made the stock attractive.=20 Shares of Houston-based Enron, which lost more than $17 billion in market c= apitalization during the rout, surged almost 27 percent in heavy trade, mak= ing the stock second-most active on the New York Stock Exchange and third-b= iggest gainer by percentage. Despite the surge, investors and analysts said they were still dissatisfied= with Enron's failure to disclose key information and said the rebound coul= d prove short-lived for the largest trader of natural gas and power in Nort= h America.=20 "At this level the stock is attracting money. However, the near term is not= going to be good," said Tim Ghriskey, president of money managers Ghriskey= Capital Partners LLC.=20 "We don't own any Enron. We have in the past and sold a while ago. We've be= en tempted a couple of times during the slide, but the information flow is = not that strong, and there is potential for more negative surprises."=20 Enron closed up $2.74, or 24.6 percent, to $13.90 on the NYSE. The stock su= rged to an intraday high of $14.17, recouping the past two days of losses, = but is far from $33.84, the closing price for Enron on Oct. 16, the last da= y before the 10-day tumble began.=20 Enron shares have been hammered over the past two weeks amid a series of un= welcome disclosures, including murky off-balance-sheet deals with partnersh= ips once run by Chief Financial Officer Andrew Fastow.=20 The disclosures forced Fastow's ouster, led to a Securities and Exchange Co= mmission inquiry into Enron and caused at least one credit rating agency to= cut Enron's senior-debt credit status.=20 The company said Fastow's removal was aimed at assuaging investor concerns = as the almost daily disclosures forced it to draw down about $3 billion fro= m existing credit lines.=20 TRYING TO QUANTIFY 'WORST-CASE SCENARIO'=20 But that's not enough, say analysts and investors.=20 "Enron needs to substantially improve the level of disclosures," said Nitin= Khandkar, a portfolio manager with Dubai-based Al Majid Investment Co., wh= ich owns Enron stock. "The accounting policies it follows should not be mer= ely legal but should also reflect the company's true profitability."=20 As an industry heavyweight, "investors expect Enron to come clean on the co= ntroversial issues," he said.=20 One issue Enron would do well to address is its partnerships and the liabil= ities they may have.=20 "People are still struggling with trying to quantify what the worst-case sc= enario could be," said Mike Heim, an analyst with A.G. Edwards & Sons, of t= he existing partnerships.=20 "Instead of dismissing the worst-case scenario, I think it would make sense= to mathematically show that 'here's what happens under such a scenario' an= d then let analysts make their own assessments."=20 Enron's refusal to make public its finances with greater transparency is a = hallmark of arrogance, noted one academic.=20 "The lack of transparency is an arrogance that says, 'I don't have to expla= in anything because if people don't want to buy my shares, they can just si= t and spin,'" said Paul Kedrosky, a professor at the University of British = Columbia who sits on the board of Exponentia, a company dedicated to improv= ing communications with shareholders.=20 "It's an arrogance that says, 'I do not have to disclose anything until I a= m forced to,'" Kedrosky said. "The crucial thing is to disclose early and d= isclose all." Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Waiting for Balance Sheets Amid Enron's Debacle: David Wilson 2001-10-31 16:39 (New York) (Commentary. David Wilson is a columnist for Bloomberg News. The opinions expressed are his own.) Princeton, New Jersey, Oct. 31 (Bloomberg) -- International Business Machines Corp.'s press release about its third-quarter results included this statement, attributed to Louis Gerstner, chairman and chief executive officer: ``IBM's balance sheet remains among the strongest in the technology industry, or any industry.'' The largest maker of computers and provider of computer services wasn't the only company to cite its balance sheet, a statistical summary of what a company owned, what it owed, and what was left over for shareholders on a specific date. General Electric Co., the largest company by stock market value, and Citigroup Inc., the No. 1 financial-services company, made similar references in their third-quarter releases. None of the companies really showed people what they were telling them. IBM, General Electric and Citigroup are among 19 members of the Dow Jones Industrial Average whose most recent quarterly releases didn't include balance sheets. The evidence will come only when the companies submit their quarterly reports to the U.S. Securities and Exchange Commission. Balance sheets are required in the so-called 10-Q filings, along with the 10-K filings that cover the full year. Not Much Publicity By then, statistics about the companies' assets, liabilities and shareholders' equity, the accounting terms for what's owned, what's owed and what's left over, will be rather outdated. U.S. companies have 45 days from the end of a fiscal quarter to submit 10-Q reports, and 90 days from the end of a fiscal year for 10-K reports. These filings usually don't arrive until weeks after the publication of earnings releases. So it's easy to overlook the additional information they provide, especially when it doesn't receive the kind of publicity that the earnings release does. Yet the recent example of Enron Corp. -- another company that omits balance sheets from press releases -- provides evidence that investors who forgo the extra effort needed to find them do so at their own peril. Enron, the largest energy trader, reported $1.01 billion in ``non-recurring'' costs in the third quarter from an expansion into water, telecommunications and retail-energy sales. The expense contributed to a $618 million loss for the quarter. These numbers were part of the Houston-based company's income statement, a summary of sales, costs and expenses, and profits or losses during a specified time period. Income statements are the cornerstone of any company's earnings release. Billion-Dollar Numbers The release didn't even mention a larger figure that affected the balance sheet: a $1.2 billion drop in shareholders' equity during the quarter resulting from the company's repurchase of 55 million shares from two partnerships, LJM Cayman LP and LJM2 Co- Investment LP, that helped finance projects. Andrew Fastow, who ran both partnerships, was ousted from his job as chief financial officer last week. Chairman and CEO Kenneth Lay disclosed the repurchase in a subsequent conference call. Such a one-two punch dealt a blow to investors' fortunes. Since Oct. 17, the day after the earnings release, Enron's shares have fallen each day and have lost two-thirds of their value. The low of $10.90 yesterday was the lowest price since July 1992. Enron's third-quarter statement referred only to a loss on ``finance arrangements with a previously disclosed entity'' which contributed to $544 million of investment losses. The size of that item was later put at $35 million. The latter number amounts to just 3.5 percent of the overall figure for ``non-recurring'' costs, and less than 1 percent of the company's $47.6 billion in revenue for the quarter. Growing Debt Burden The $1.2 billion figure is considerably larger not only in dollars, but also in percentage terms. Enron had $11.74 billion of shareholders' equity as of June 30, according to the balance sheet in its second-quarter 10-Q filing. The reduction equaled more than 10 percent of that total. Among other things, the balance sheet also shows that the company relied more heavily on debt financing during this year's first half. Short-term debt, due in one year or less, doubled to $3.46 billion. Long-term debt, maturing in more than one year, rose 9.4 percent to $9.36 billion. There's even more to the story of Enron's indebtedness. The company guaranteed $3.3 billion in borrowing by Osprey Trust and Marlin Water Trust, which bought some of its power plants. Unless they pay off the debt by reselling the plants, the company may have to come up with the difference. Nevertheless, any summary of a company's financial position provides a more complete picture than the income statement alone. This also holds true for companies whose finances are in better shape -- IBM, General Electric and Citigroup, to name three. Knowing by Showing Other members of the Dow industrials that wait until their filings to provide balance sheets are American Express Co., AT&T Corp., Boeing Co., Caterpillar Inc., Coca-Cola Co., Walt Disney Co., DuPont Co., Eastman Kodak Co., Exxon Mobil Corp., General Motors Corp., Honeywell International Inc., Johnson & Johnson, McDonald's Corp., Merck & Co., Procter & Gamble Co. and SBC Communications Inc. Companies that include them in releases are Alcoa Inc., Hewlett-Packard Co., Home Depot Inc., Intel Corp., International Paper Co., Microsoft Corp., Minnesota Mining & Manufacturing Co., J.P. Morgan Chase & Co., Philip Morris Cos., United Technologies Corp. and Wal-Mart Stores Inc. Citigroup's third-quarter earnings release has this quote from Sandy Weill, chairman and CEO: ``We have the balance sheet strength to make timely acquisitions to expand our franchises.'' The New York-based company had more than $85 billion of ``total equity,'' Weill said in the statement. General Electric's release quoted Chairman and CEO Jeffrey Immelt as saying ``our strong balance sheet, which gives us the flexibility to pursue strategic opportunities,'' is one of the Fairfield, Connecticut-based company's ``fundamental strengths.'' Investors can only take these CEOs at their word for now. Their companies, and many others, are only telling rather than showing -- at least in their earnings releases. Enron Shares Rise, Rebounding From Nine-Year Low (Update3) 2001-10-31 16:20 (New York) Enron Shares Rise, Rebounding From Nine-Year Low (Update3) (Closes shares.) Houston, Oct. 31 (Bloomberg) -- Enron Corp. shares jumped 25 percent, one day after falling to their lowest level in more than nine years, amid speculation the company may be a takeover target. Shares of the top energy trader rose $2.74 to $13.90 in trading of 43.4 million shares, more than four times the three- month daily average of 10.4 million. The shares reached $14.20 earlier in the day. Shares of Houston-based Enron have fallen 83 percent this year. They have dropped 49 percent this month amid a U.S. Securities and Exchange Commission inquiry into partnerships headed by Andrew Fastow, Enron's former chief financial officer. Fastow was ousted last week in an attempt to restore confidence in the stock. ``There are rumors out there that they are a potential takeover target, but I think it's very unlikely that anyone will buy them out at this point,'' said Zach Wagner, an analyst at Edward Jones & Co. ``There are too many uncertainties.'' Enron is more likely to get a large cash infusion from an investor, Wagner said. Wagner has a ``reduce'' rating on Enron shares. He doesn't own the stock. The Wall Street Journal today said General Electric Co.'s GE Capital, Warren Buffett's Berkshire Hathaway Inc. and Royal Dutch Petroleum Co. are ``among the names bandied about'' as potential buyers for all or part of Enron. Merrill Lynch analyst Donato Eassey said in a report issued today that Enron has a net asset value of $16 to $24 a share. He based that on a total asset value of $32 billion to $38.6 billion and total obligations of $18.2 billion. Eassey has a ``near-term accumulate'' rating on Enron's shares. He said Enron should be considered as an investment for ``high-risk profile investors'' because of the uncertainty attached to the company. --Margot Habiby in the Dallas newsroom (214) 954-9452

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VentureWire, Thursday, September 7, 2000

====================================================== VENTUREWIRE --- Thursday, September 7, 2000 ====================================================== Private Company Business News ------ Published Daily by Technologic Partners ------- http://technologicpartners.com ====================================================== Top Stories: o Network Firm QoS Secures $100 Million in First Round o Report: Chase Raising $5 Billion For Private Equity Fund o Palm Forms Venture Unit and Earmarks $50 Million o Metawave Buys Smart Antenna Firm Adaptive for $107 Million o Sterling Venture Partners Secures $150 Million for New Fund o NBC VP Named Partner and Director of NeoCarta Ventures |||||||||||||||||||| Advertisement |||||||||||||||||||| AristaSoft is the only service provider focused exclusively on the high-tech equipment industry. The company provides integrated business process services--operations and finance, collaborative manufacturing commerce and customer service management--based on deep, industry-focused domain expertise and a portfolio of relevant enterprise-class applications delivered on a secure, scalable and reliable ASP infrastructure. Through AristaSoft's solution, emerging, hyper-growth high-tech equipment companies can grow their businesses faster. Find out more at www.aristasoft.com. ||||||||||||||||||||||||||||||||||||||||||||||||||||||| Also in This Issue: New Money: o Broadband Firm Net to Net Secures $15 Million in Round One o Property Management Firm Realeum Has $15 Million Series A o Fabless Semiconductor Firm Secures $8.2 Million in Round One o Management App Firm Gets $5 Million of $8 Million Round One o Net Insurance Firm InsuranceNoodle Gets $10 Million Series A o Net Sports Technology Firm FitSense Gets Round One Funding o Wireless Firm Vettro Raises $10 Million in First Round o Wireless Technology Developer Has $1.5 Milllion First Round o Auction Site for Travel Booking Gets $2.5 Million Round One o B2B Security Firm NetCertainty Gets $3.8 Million Series A o CRM Firm PackagingSlip.com Closes Series A Round o Education Site iKnowthat.com Closes $2 Million Round One o Efoodmanager Gets $1.3 Million More in First Round Funding o Wirless Tech Firm Equinox Raises $4.4 Million in First Round o Chip Firm SigmaTel Secures $24 Million in Funding o Software Firm Sheer Networks Has $30 Million Second Round o E-Services Firm eHotHouse Launches, Gets Over $20 Million o Israeli Optical Firm Native Networks Gets $18 Million o Mercari Technologies Closes $20 Million in Series C o Applied Biosystems Invests $3 Million in Genomica o B2B Healthcare Data Provider Raises $725,000 Mezz Round o Harmonix Secures $3.5 Million Second Round from Softbank o Internet Indirect Invests $3 Million in Broadband Firm Kast o PC Maker Acer Invests in Electronics Marketplace e2open.com o TechSys Takes Minority Stake in Technology Keiretsu o VentureWorx Takes Stake in Search Engine SearchGenie.com o Wireless Data Software Firm Netverk Scores $9.5 Million New Products: o Giga Information's French Unit Goes Private with $4 Million o Software Testing and Monitoring Firm Empirix Launches o KnowToday Becomes Clerity Knowledge Exchanges New Deals: o Pop.com Confirms Deal with Ifilm Off, Small Staff Retained M&A: o Earful of Books Takes Majority Stake In Audiobookcafe.com o BuildNet Acquires Home Plan Resource Company HomeStyles o American Greetings Buys Information-by-e-mail Service Firm o Digital Scent Developer, DigiScents, Buys SenseIT o AmeriNet Group.com To Acquire WeCU.com for $1.5 Million New Directors: o Two Ericsson Execs Join Wireless Firm TrustLink's Board o INNX Picks Media Analyst Harold Vogel To Join Company Board o Venture Capital Institution MerchantBanc Adds Three to Board o Two Join Board of Equity Execution Services Firm NeoNet o ZuluSports.com Names Former Nike Division Head to Board o Telecom Entrepreneur Joins Clearwire Technologies Board New People: o Ex-Hamilton Management Partner Now CEO & President of DIVA o Peppers and Rogers Pick Former McKinsey Partner as Leader o BenefitPort Names Healtheon/WebMD Exec To CEO Post o Digital Content Firm WAM!NET Appoints President VC Fund News: o Italian VC MyQube Opens Silicon Valley Office VC Personnel: o AV Labs Names Former onQ Technology CEO as Venture Fellow o EnerTech Capital Partners Names Ex-Varidigm CEO as Partner |||||||||||||||||||| Advertisement |||||||||||||||||||| Spend an afternoon with VC Heidi Roizen. The Montclare Web Team invites you to join us to hear SOFTBANK VC Heidi Roizen talk about the 'new' New Economy at the Montclare Speaker Series, Sept. 13. http://www.montclare.com/speakerseries Proud to be a Web developer? Want a challenge? Montclare is looking for you! http://www.montclare.com/careers ||||||||||||||||||||||||||||||||||||||||||||||||||||||| ======= Top Stories ======= o Network Firm QoS Secures $100 Million in First Round DUBLIN -- QoS Networks, which provides a network for content delivery in a native IP environment, said it raised $100 million in its first round of funding. Warburg Pincus led the round, which included GE Capital, Global Crossing, Lucent Technologies, Signal Lake Venture Fund, and Soros Private Equity. Warburg Pincus will have two seats on the company's board of directors. The company will use the funding for the further development of its network and for sales and marketing. QoS Networks has developed an Internet-enabled interface that enables users to change bandwidth and prioritization quickly through the desktop. http://www.qosnetworks.net/ _____________________________________________ o Report: Chase Raising $5 Billion For Private Equity Fund NEW YORK -- Chase Manhattan intends to raise up to $5 billion for a new private equity fund according to a report by the Wall Street Journal. The fund will invest in venture capital, buyouts, and other private equity deals in the U.S. and abroad. Earlier this year Chase raised a $1 billion fund focusing on equity investments in Asia. The new fund will seek capital from outside investors, according to the report, a departure from Chase Capital's usual practice of investing funds from its parent bank. http://www.chasecapital.com/ _____________________________________________ o Palm Forms Venture Unit and Earmarks $50 Million SANTA CLARA, Calif. -- Palm, a provider of handheld devices, said it formed Palm Ventures, which will make strategic investments in companies that support the Palm operating system and platform. Palm has earmarked $50 million for the venture. Robert Hayes has been named director of Palm Ventures, which intends to make early stage investments in companies that have completed at least one funding. Investments will range from $1 million to $5 million and will be made in a host of companies, including providers of wireless content and services, handheld ASPs, and makers of accessory devices. Companies funded by Palm Ventures will also have the opportunity to form other types of business relationships with Palm. http://www.palm.com/ _____________________________________________ o Metawave Buys Smart Antenna Firm Adaptive for $107 Million REDMOND, Wash. -- Metawave Communications, which develops antenna technology for wireless carriers, said it is acquiring Adaptive Telecom, which also develops antenna technology. Under the terms of the agreement, Adaptive Telecom shareholders will receive 5.5 million shares of Metawave common stock. On Wednesday, Metawave stock was down more than a dollar to $19.6 a share, putting the value of the acquisition at approximately $107.8 million. Adaptive Technology is backed by August Capital. http://www.metawave.com/ _____________________________________________ o Sterling Venture Partners Secures $150 Million for New Fund BALTIMORE -- Sterling Venture Partners, a venture capital affiliate of Sterling Capital, said it secured $150 million from investors for its first fund. The investors in the new fund include large U.S. public pension plans, Deutsche Bank, T. Rowe Price, and a number of chief executives from the mid-Atlantic and Midwestern U.S. The fund will make early stage investments of between $2 million and $10 million. The new fund has led a $10 million round for TidePoint and invested in Versient and Woodwind Communications. Sterling Venture Partners said it may look to raise another fund in 18 months. http://www.sterlingcap.com/ _____________________________________________ o NBC VP Named Partner and Director of NeoCarta Ventures NEW YORK -- NeoCarta Ventures said it named Peg Murphy, former NBC vice president of business development, as a partner and director of its New York office. The firm said that under her direction the office will concentrate its investments in new media, particularly in digital, broadband, and Internet infrastucture technologies and services. While at NBC Ms. Murphy was responsible for investing in Internet companies and managing its interactive TV group, investing in companies including Tivo, Net2Phone, Mail.com, Digital Island, Loudeye, Liveperson, i3 Mobile, and Wink Communications. http://www.neocarta.com/ ======= New Money ======= o Broadband Firm Net to Net Secures $15 Million in Round One PORTSMOUTH, N.H. -- Net to Net Technologies, a provider of simplified IP broadband data and voice communication technology, said it received $15 million in its first round of financing. Summit Partners was the sole investor for the round. The company will use the funding to promote its IP DSL product line and for continued expansion. http://www.nettonettech.com/ _____________________________________________ o Property Management Firm Realeum Has $15 Million Series A ALEXANDRIA, Va. -- AvalonBay Communities, United Domnion Realty Trust, and Post Properties, all publicly traded real estate firms, said they launched Realeum, an online property management service that raised $15 million in Series A funding. Realeum's investors include Carlyle Venture Partners, Cohen & Steers, through its Internet Realty Partners, Stichting Pensioenfonds, through its affiliate ABP-US Investments, and Venrock Associates. The company said it will use the funding for software engineering, platform deployment, development of customer care services, and new product development. The company had previously received $7 million in funding from its founding consortium for product design, architecture, software development, and testing. The company's initial product, Jvelon, is a Web-based leasing, property management, and asset optimization application that manages the relationship between landlord and tenant. Telephone 703-317-4736. _____________________________________________ o Fabless Semiconductor Firm Secures $8.2 Million in Round One AGOURA HILLS, Calif. -- Internet Machines, a fabless semiconductor company that develops software and services for data communications markets, said it secured $8.2 million in its first round of funding. Redpoint Ventures led the round, which included other institutional and individual investors. Redpoint Ventures founding partner John Walecka will join the company's board of directors. The company will use the funding for product development. http://www.internetmachines.com/ _____________________________________________ o Management App Firm Gets $5 Million of $8 Million Round One CAMBRIDGE, Mass. -- Bluesocket, which develops management software for Bluetooth-enabled networks, said it secured $5 million of its expected $8 million first round of funding from St. Paul Venture Capital and Osborn Capital. The round is still open and the company is speaking with several venture capital firms. Osborn Capital managing director Eric Janszen will join the company's board of directors. The company will use the funding for further product development, recruiting additional management, sales efforts for its new products, and forming partnerships. http://www.bluesocket.com/ _____________________________________________ o Net Insurance Firm InsuranceNoodle Gets $10 Million Series A CHICAGO -- InsuranceNoodle.com, an Internet-based insurance broker for small-business owners, said it closed $10 million in its first round of funding from sole investor Argonaut Private Equity Management. The financing will be used for national expansion. InsuranceNoodle.com offers comparative quotes and fulfillment from a group of insurers, including The Hartford, AIG, CNA, St. Paul, and Zurich U.S. http://www.insurancenoodle.com/ _____________________________________________ o Net Sports Technology Firm FitSense Gets Round One Funding WELLESLEY, Mass. -- FitSense Technology, a developer of internet-linked sports and fitness monitors, said it received an undisclosed amount of first-round funding from Motorola and 2M Technology Ventures. The financing will be used to launch and further develop the company's products and services. The company plans to launch its FitSense pace-distance monitor in November. http://www.fitsense.com/ _____________________________________________ o Wireless Firm Vettro Raises $10 Million in First Round NEW YORK -- Vettro, a provider of wireless services, said it has raised $10 million in its first round of funding led by GreyLock and Sigma Partners. New Things, a New York venture capital group, also participated in the round. The company also announced Bill Helman of Greylock and Bob Davoli of Sigma Partners have taken seats on Vettro's board of directors. Vettro was formerly called iQenergy. http://www.vettro.com/ _____________________________________________ o Wireless Technology Developer Has $1.5 Milllion First Round RESEARCH TRIANGLE PARK, N.C. -- Mi-Co, a developer of handwriting recognition and transmission technologies for wireless devices, said it raised $1.5 million in its initial round of funding. The round was funded by Renaissance Ventures, based in Richmond, Va., and individual investors. The company said it will use the funding for further product development and sales and marketing. http://www.mi-corporation.com/ _____________________________________________ o Auction Site for Travel Booking Gets $2.5 Million Round One BOCA RATON, Fla. -- Revelex.com, an online auction site for the travel community, said it received $2.5 million in its series A round of funding provided by undisclosed individuals and private partnerships. The funds will be used for technology development and marketing. The company's hotel booking engine will launch on September 20, with the car rentals, airlines, and event ticketing services going live by the end of the year. http://www.revelex.com/ _____________________________________________ o B2B Security Firm NetCertainty Gets $3.8 Million Series A ATLANTA -- Atlanta-based NetCertainty, which provides digital identity hosting services to individuals and organizations within the business-to-business Internet marketplace, said it closed its Series A round with a total of $3.8 million. Internet operating company itemus led the round with $3 million and individual investors provided the rest of the funding. NetCertainty is still beta testing its product, which is scheduled to launch September 20. The funding will go towards product deployment and marketing. http://www.netcertainty.com/ _____________________________________________ o CRM Firm PackagingSlip.com Closes Series A Round BETHSEDA, Md. -- PackagingSlip.com, which provides customer relationship management products and services for online and catalog merchants, said it received an undisclosed amount in its series A round of funding led by Genesis Investment Partners. Other investors remain undisclosed. The round will finance technology and infrastructure development for the company's public launch in mid-September. http://www.packagingslip.com/ _____________________________________________ o Education Site iKnowthat.com Closes $2 Million Round One PITTSBURGH -- iKnowthat.com, a children's educational site, said it has raised $2 million in its first round of funding from Draper Triangle Venture Funds and a group of individual investors based in Pittsburgh. The funding arrives in tandem with the launch of the web site. iKnowthat.com was created by a team of educators and animators led by Gary Kiliany, the co-founder and creator of DynaVox Systems. http://www.iknowthat.com/ _____________________________________________ o Efoodmanager Gets $1.3 Million More in First Round Funding NEW YORK -- Efoodmanager, a European business-to-business marketplace for the food industry, said it raised an additional $1.3 million in first-round funding from Technologie-Beteiligungs-Gesellschaft (tbg), a subsidiary of Deutsche Ausgleichsbank. The company said it will use the funding from the government-related investment firm to develop additional services. The company said it will further develop its logistics and insurance services with its business partners. Tbg will not take a seat on the company's board of directors. Tbg usually invests with a finance partner as lead investor; in this case Atlas Ventures led the first round of funding for efoodmanager with $3.6 million. http://www.efoodmanager.com/ _____________________________________________ o Wirless Tech Firm Equinox Raises $4.4 Million in First Round LEXINGTON, Mass. -- Equinox Solutions, which develops technology for wireless communications, said it raised $4.375 million in its first institutional round of funding from sole participant Meyer Duffy Ventures. Meyer Duffy co-founder Donald Duffy and partner John Mills will sit on the company's board of directors. The company will use the funding for further product development and expansion of its product suite. Equinox Solutions develops software products and services that enable users to access computing environments using wireless devices. http://www.equin.com/ _____________________________________________ o Chip Firm SigmaTel Secures $24 Million in Funding AUSTIN, Texas -- SigmaTel, an Austin-based provider of integrated circuits for digital consumer audio, broadband communications, and wireless infrared, said it secured $24 million in financing. Invesco Private Capital led the round with $10 million. Other investors in the round include Battery Ventures, TeleSoft Partners, and CTI Limited. http://www.sigmatel.com/ _____________________________________________ o Software Firm Sheer Networks Has $30 Million Second Round SUNNYVALE, Calif. -- Sheer Networks, a provider of service management software for public networks, said it received $30 million in a second round of venture capital financing from new investors JK&B Capital, Jerusalem Venture Partners, and Ray Lane, former Oracle President and COO. Previous investor Rein Capital also contributed to the round. The funds will be used for sales, marketing, and to launch its product. http://www.sheernetworks.com/ _____________________________________________ o E-Services Firm eHotHouse Launches, Gets Over $20 Million NEW YORK -- Change Technology Partners and Marc USA announced they have made a joint investment of over $20 million in cash and stock to launch eHotHouse, an interdisciplinary professional Internet services firm focusing on e-commerce strategy, application systems integration, and marketing services. Matthew Ryan, the founder of Ryan Drossman/Marc USA, a national advertising agency, will become the CEO of both Change Technology and eHotHouse. The company said it would announce several acquisitions within the month. EHotHouse board members include: William Avery, principal of FG II Ventures; Rick Kurnit, partner at Frankfurt, Kurnit & Seltz; Andrew Clark, founder of Clarknet and executive director of Verio; and Robert Nielsen, group president, Estee Lauder. Tony Bucci, the chairman and CEO of Marc USA, and Michael Gleason, the chairman of Change Technology, will also sit on the board. http://www.ehothouse.com/ _____________________________________________ o Israeli Optical Firm Native Networks Gets $18 Million PETAH TIKVA, Israel -- Native Networks, an Israel-based company that develops technology for optical access networks, said it completed a private placement of $18.2 million. Soros Private Equity Partners, Anschutz Investment, and Jerusalem Venture Partners were among the funds participating in the placement. The funding will go towards research and development and marketing in Europe and the United States. http://www.nativenetworks.com/ _____________________________________________ o Mercari Technologies Closes $20 Million in Series C WASHINGTON -- Mercari Technologies, a provider of merchandise and supply chain management technology, said it received $20 million in a Series C round of funding. The round was led by Baltimore-based ABS Ventures, the venture capital arm of DB Alex Brown, and North Bridge Venture Partners of Waltham, Mass. North Bridge Venture Partners, Southeast Interactive Technology Funds, and individual investors, including Inktomi president and CEO David Peterschmidt, also invested in the round. http://www.mercaritech.com/ _____________________________________________ o Applied Biosystems Invests $3 Million in Genomica FOSTER CITY, Calif. -- Applied Biosystems, a developer of instrument-based systems, reagents, software, and contract services for the life science and research industry said it has invested $3 million in Genomica, a genomics software company. Genomica will license its genetic-analysis object module to Applied Biosystems in a separate deal. The integration of the Genomica software with Applied Biosystems' products would enable the systems to store their genotyping results in a common Oracle database, the companies said. http://www.genomica.com/ _____________________________________________ o B2B Healthcare Data Provider Raises $725,000 Mezz Round LONDON -- IntegriSys, a provider of Internet and intranet-based decision support networks for physicians, raised $725,000 in a mezzanine round of funding from sole investor Billam. The company will use the funding for partnership agreements, customer acquisitions, and expanding its infrastructure. IntegriSys raised $1.5 million in its previous round of venture capital funding from MTI. IntegriSys trades under the name Platinum Health. http://www.platinumhealth.co.uk/ _____________________________________________ o Harmonix Secures $3.5 Million Second Round from Softbank NORTH ANDOVER, Mass. -- Harmonix, a manufacturer of wireless communication systems and components, said it raised its second round of outside funding from Softbank Networks, the Internet infrastructure unit of Softbank. Softbank will have representation on the company's board of directors. The company will use the funding for further product development and marketing. The company raised its first round of funding from Japanese company Omron and is majority-owned by its management. Harmonix manufactures antennas, oscillators, transmitters, receivers, frequency multipliers, detectors, isolators, and circulators. http://www.hxi.com/ _____________________________________________ o Internet Indirect Invests $3 Million in Broadband Firm Kast LONDON -- Internet Indirect, an early stage venture capital investor, said it invested $3 million in Kast Telecom Europe, a broadband services firm for small and medium-sized businesses. The investment was part of a $20 million round of funding. Kast Telecom will use the funding to continue the roll out of an intelligent data local exchange carrier network and to develop broadband voice, data, and application services for its customers. The company has also entered into a EUR 100 million ($88 million) debt facility agreement with J.P. Morgan. http://www.kast-telecom.fr/ _____________________________________________ o PC Maker Acer Invests in Electronics Marketplace e2open.com SAN JOSE, Calif. -- E2open.com, an Internet marketplace for the electronics industry, said PC manufacturer Acer has made an undisclosed investment in the company. The company said it has raised $200 million in venture capital from Crosspoint Venture Partners, Hitachi, IBM, LG Electronics, Lucent Technologies, Nortel Networks, Matsushita Electronic (Panasonic), Seagate Technology, Solectron and Toshiba. Acer CIO Frachard Lung will join former e2open CEO John Mumford, a founding partner of Crosspoint, and Mark Holman, the company president and CEO, on the board of directors. Also serving on the board are Steve Ward, general manager of industrial sector of IBM; Ho-Jin Hwang, vice president and chief procurement officer of LG Electronics; Jose Mejia, the vice president and chief procurement officer of Lucent Technologies; G. Andrea Botta, managing director of Morgan Stanley Dean Witter; Richard Ricks, CIO of Nortel Networks; Steve Luczo, the CEO of Seagate Technology; and Joichi Nishimura, the chairman, CEO and president of Solectron. Hitachi is also represented on the board. http://www.e2open.com/ _____________________________________________ o TechSys Takes Minority Stake in Technology Keiretsu LIVINGSTON, N.J. -- Publicly traded software and Internet services provider TechSys said it has taken a minority stake in Technology Keiretsu, a holding company that operates a network of technology companies. TechSys, the only institutional investor in the company, invested with an undisclosed amount of cash and shares of common stock. TechSys also has the right to purchase an additional interest in the company at a later date. Technology Keiretsu is still majority-owned by members of its management. Technology Keiretsu, which is also backed by outside individual investors, holds Allaint Technologies as its principal operating company. http://www.allianttech.com/ _____________________________________________ o VentureWorx Takes Stake in Search Engine SearchGenie.com EUGENE, Ore. -- Venture management consultants VentureWorx said they have taken an undisclosed equity stake in SearchGenie.com, an XML-based search engine with wireless capabilities. VentureWorx will assist SearchGenie.com with fund raising, developing business strategy, recruiting personnel, and launching a public relations campaign. SearchGenie.com's database may be accessed by standard HTML Web pages and allows companies to submit and customize information and images about their Web site or business. http://www.searchgenie.com/ _____________________________________________ o Wireless Data Software Firm Netverk Scores $9.5 Million LONDON -- Netverk, a provider of wireless data software, said it secured $9.5 million in a round of funding led by Citicorp Capital Asia Limited. WestLB Panmure, the investment banking arm of the WestLB Group, co-led the round. Other investors include A & A Actienbank and its subsidiary, the A & A Early Bird Fund. The company will use the funding for R&D, sales, and marketing. Netverk plans to expand its operations in Europe, Asia and North America. The first new offices will be in Denmark and the U.S. http://www.netverk.net/ ======= New Products ======= o Giga Information's French Unit Goes Private with $4 Million CAMBRIDGE, Mass. -- Publicly traded Giga Information, which provides research and consulting services for Internet businesses, said its French division received a $4 million investment to become a new private company, GigaGroup. BNP, Cime, ING, Natexis, Paribas, Pre IPO.net, Siparex, and Trinova invested in the company. Giga Information will own less than 20% of the new company. GigaGroup will provide IT and Internet business research, analysis and consulting services in Europe. The company is headquartered in Paris and plans to expand its offices throughout Europe. Bruno Tourme, who led Giga Information's operations in Europe, the Middle East, and Africa, is the chairman and CEO of GigaGroup. Giga Information's international vice president Jean-Michel Six is a member of the new company's board of directors. http://www.gigaweb.com/ _____________________________________________ o Software Testing and Monitoring Firm Empirix Launches WALTHAM, Mass. -- Empirix, a provider of testing and monitoring for the Internet and communications markets, announced it has launched. The company was created from technology network and software testing businesses of Teradyne- Hammer Technologies, RSW Software, and Software and Systems Test (SST). The company also said it has received significant funding from Matrix Partners. Jeff Hotchkiss, the former CFO of Teradyne, will be Empirix president and CEO, and Teradyne founder, Alex d'Arbeloff, will chair the Empirix board. http://www.empirix.com/ _____________________________________________ o KnowToday Becomes Clerity Knowledge Exchanges CINCINNATI -- KnowToday, a developer and marketer of technology that enables Internet portals to create private-labeled information exchanges on their own sites, announced it is changing its name to Clerity Knowledge Exchanges. The company also announced that its headquarters is now located here. Investors for Clerity Knowledge Exchanges include River Cities Capital and BlueStar Ventures. http://www.clerity.com/ ======= New Deals ======= o Pop.com Confirms Deal with Ifilm Off, Small Staff Retained LOS ANGELES -- Pop.com, the Internet entertainment site founded by Dreamworks SKG, Imagine Entertainment, and Vulcan Ventures, confirmed that acquisition talks with Ifilm.com, an online exchange for film fans, filmmakers, and industry professionals, ended without a deal. Pop.com, citing a downturn in the market, said it will layoff most of its employees, retaining a small staff. The company said it has not decided what it will do with the content it has already created and acquired. Pop.com, which was formed last fall, never launched its Web site. http://www.pop.com/ ======= M&A ======= o Earful of Books Takes Majority Stake In Audiobookcafe.com AUSTIN, Texas. -- Earful of Books, a national audiobooks chain, said it has purchased a 90% interest in Audiobookcafe.com, a six-month old audiobook-related content site. The terms of the investment were not disclosed. Paul Rush, president of Earful of Books, will serve on the board of Pearlman & Baine Media, the parent company of Audiobookcafe.com. In addition to the financial support from Earful of Books and Pearlman & Baine Media, its parent company, Audiobookcafe is backed by individual investors. http://www.audiobookcafe.com/ _____________________________________________ o BuildNet Acquires Home Plan Resource Company HomeStyles RESEARCH TRIANGLE PARK, N.C. -- BuildNet, which provides online business, technology, and project management systems for the home building industry, said it acquired HomeStyles, which provides pre-designed home plans for builders and consumers. BuildNet is backed by BancBoston Ventures, Barnard & Co., Encore Venture Partners, GE Appliances, GE Capital, Global Technology Investors Fund at Bessemer Trust, Halifax BuildNet Investors, John Hancock Global Technology Fund, J. & W. Seligman, Piedmont Venture Partners, SG Capital Partners, South East Interactive Technology Fund, and The CIT Group/Equity Investments. The company is in a quiet period prior to filing for an IPO. http://www.homestyles.com/ http://www.buildnet.com/ _____________________________________________ o American Greetings Buys Information-by-e-mail Service Firm CLEVELAND -- Personalized content delivery firm AmericanGreetings.com, a subsidiary of publicly traded American Greetings, said it has acquired eAgents, a firm that delivers consolidated information and entertainment from Web media brands in a single, daily e-mail. As part of the agreement, Charles Fink, the company's founder, president and CEO of eAgents.com, will become president of AmericanGreetings.com, reporting to Josef Mandelbaum, the CEO. Terms of the transaction were not disclosed. eAgents is backed by Draper Atlantic, Lazard Technology Partners, I-Hatch, and Shamrock Holdings. http://www.eagents.com/ http://www.americangreetings.com/ _____________________________________________ o Digital Scent Developer, DigiScents, Buys SenseIT OAKLAND, Calif. -- DigiScents, which is developing technology to enable companies to incorporate scent into Web sites, e-mail, online movies, music, games, and advertising, said it acquired SenseIT Technologies, a Delaware-based digital scent company. Terms of the acquisition were not disclosed. The combined entity, DigiScents, will retain headquarters in Oakland, Calif., with branch offices in New York City, and an R&D center in Israel. SenseIT Technologies was co-founded by company president Eli Fisch and two scientists from the Israeli Weizmann Institute of Science, Professors Doron Lancet and David Harel. DigiScents is backed by Pacific Century CyberWorks. http://www.digiscents.com/ _____________________________________________ o AmeriNet Group.com To Acquire WeCU.com for $1.5 Million BOCA RATON, Fla. -- Publicly-traded AmeriNet Group.com, said it signed a letter of intent to acquire WeCU.com, an international wireless television, communications and Internet services provider. All of the assets of WeCU.com. will be exchanged for approximately two million shares of Amerinet stock, valued at $1.5 million at the close of trading Wednesday. WeCU.com is backed by individual investors. http://www.wecu.com/ http://www.amerinetgroup.com/ ======= New Directors ======= o Two Ericsson Execs Join Wireless Firm TrustLink's Board STOCKHOLM -- TrustLink (UK), the holding company of wireless application developer TrustLink Group, said it appointed two representatives of communications supplier Ericsson to the company's board of directors. The appointments are a result of Ericsson's acquistion of a 25% stake in the company. Mr. Per Olof Sjoestedt, president of Ericsson Russia, and Mr. Staffan Pehrson, general manager for mobile Internet, will both assume seats on the company's board of directors. Located in Russia and Switzerland, the company is backed by Ericsson and individual investors. http://www.trustlink.com/ _____________________________________________ o INNX Picks Media Analyst Harold Vogel To Join Company Board SAN DIEGO -- INNX, a new media company specializing in targeted advertising services, said it has appointed Harold "Hal" Vogel to its board of directors. Mr. Vogel was first vice president and senior entertainment industry analyst at Merrill Lynch. He served on the New York State Governor's Advisory Board for Motion Pictures and Television, and is an adjunct professor of media economics at Columbia University's business school. Mr. Vogel is a venture capital investor in many early-stage Internet media companies. http://www.healthsurfing.com/ _____________________________________________ o Venture Capital Institution MerchantBanc Adds Three to Board MANCHESTER, N.H. -- MerchantBanc, a financial institution that provides services for private investors through an Internet-based network, said it named Jesse Devitte, William E. Wetzel Jr., and James C. Wood to its board of directors. Mr. Devitte is president of Vertical Market Ventures and Ivolution Strategies. He served in executive positions with Softdesk and Autodesk. William E. Wetzel Jr. is director emeritus of the Center for Venture Research at the Whittemore School of Business and Economics at the University of New Hampshire. He founded the Venture Capital Network in 1984. James C. Wood is president of Kana Communications. He founded and served as CEO of Silknet Software, which merged with Kana. MerchantBanc provides services that enable investors to identify worthy businesses and provides entrepreneurs with access to venture capital. http://www.merchantbanc.com/ _____________________________________________ o Two Join Board of Equity Execution Services Firm NeoNet STOCKHOLM -- NeoNet, which offers institutional investors and broker dealers anonymous electronic trading access to multiple securities markets, said it has appointed Thord Wilkne and Mats Sundstrom to its board of directors. Mr. Wilkne is chairman and co-founder of Swedish IT-supplier WM-data, a Nordic supplier of IT-related services, and Mr. Sundstrom is chairman of Swedish Enlight Interactive. NeoNet, which is planning to go public before the end of the year, is backed by ITP (Information Technology Partners). The company has also received funding from Hans Karlsson, the chairman of Swedish mobile technology firm HiBQ International. http://www.neonet.se/ _____________________________________________ o ZuluSports.com Names Former Nike Division Head to Board SAN FRANCISCO -- ZuluSports.com, an online resource for adventure and outdoor sports enthusiasts, said it has appointed Gordon McFadden, the former president of Nike's all-conditions gear division, to its board of directors. Prior to Nike, Mr. McFadden was president and CEO of Helly-Hansen, a manufacturer of outdoor clothing. ZuluSports.com is backed by Angel Investors, Fujigin Capital and Aslan Capital. http://www.zulusports.com/ _____________________________________________ o Telecom Entrepreneur Joins Clearwire Technologies Board DALLAS -- Clearwire Technologies, a provider of wireless local access solutions, said Jimmy Mansour is joining the company's board of directors. Mr. Mansour currently holds positions on several boards, including Netspeed, GroupTel, and Netpliance. Clearwire Technologies is backed by individual investors. http://www.clearwire.com/ ======= New People ======= o Ex-Hamilton Management Partner Now CEO & President of DIVA REDWOOD CITY, Calif. -- DIVA, a provider of interactive video-on-demand products and services, said it named Hendrik A. Hanselaar, formerly a general partner in Hamilton Management Partners, president and CEO. Mr. Hanselaar replaces David Zucker, who left the company to become CEO of one of Stamford, Conn.-based Walker Digital's operating units. Mr. Zucker will continue to serve as a director on DIVA's board and will work with Mr. Hanselaar over the next few months to help with the transfer of responsibilities. DIVA'S backers include publicly traded UK-based cable television provider NTL, Liberate Technologies, Open TV, and General Instrument. The company filed for an IPO last May. http://www.divatv.com/ _____________________________________________ o Peppers and Rogers Pick Former McKinsey Partner as Leader STAMFORD, Conn. -- Peppers and Rogers Group, a management consulting firm that also runs a venture capital group, 1 to 1 Ventures, said it named Steve Skinner as its new president and CEO. Mr. Skinner was most recently a partner with Atlanta-based McKinsey & Co., where he led the transportation unit of the firm's business accelerator. He also worked as a sales engineer and sales manager with Johnson Controls. Mr. Skinner succeeds company co-founder and former president and CEO Bob Dorf, who has become a managing director of company affiliate 1 to 1 Venture Partners, which the company launched last year. http://www.1to1.com/ _____________________________________________ o BenefitPort Names Healtheon/WebMD Exec To CEO Post GREENWICH, Conn. -- BenefitPort, a technology-based network for health insurance sales and employee benefits, said it has appointed Thomas P. Staudt as its CEO. Mr. Staudt was senior operating officer of Healtheon/WebMD. He has also served as chairman and CEO of Mede America. With his arrival, former CEO Andrew Sawyer will now serve as president of the Insurance division. BenefitPort has a commitment of $60 million in financial backing from the Trident Partnership, a private equity fund advised by Marsh & McLennan Capital and J.P. Morgan. http://www.benefitport.com/ _____________________________________________ o Digital Content Firm WAM!NET Appoints President EAGAN, Minn. -- WAM!NET, which provides digital content management services, said it has appointed William Sulivan as its new president. Mr. Sullivan joined WAM!NET in March as senior vice president. Prior to joining the company, he was CEO of PR21, a New York-based public relations firm. WAM!NET has received equity funding from MCI WorldCom, WindStar, Silicon Graphics, and Sumitomo. http://www.wamnet.com/ ======= VC Fund News ======= o Italian VC MyQube Opens Silicon Valley Office MILAN -- MyQube, a European early-stage venture capital firm, said it opened a new office in Silicon Valley. The new branch will concentrate on investments in California high technology companies and will draw its capital from the EUR 100 million ($88 million) EuroQube fund. Enzo Torresi, a MyQube advisor, will assume the position of managing director for the fund. Mr. Torresi was most recently a founding partner in EuroFund and previously co-founded ICAST. The firm also announced its first investment in natural language technical support software developer, noHold. The amount of capital invested was undisclosed. In addition to the new office in California and its headquarters here, the company operates from several locations in Europe including, Geneva, Munich, and London. http://www.myqube.com/ ======= VC Personnel ======= o AV Labs Names Former onQ Technology CEO as Venture Fellow AUSTIN, Texas -- AV Labs, an early stage venture fund focused on seed and first round investments, said it named Eric Loeffel as a Venture Fellow. Mr. Loeffel, who most recently served as president and CEO of onQ Technology, will provide operating executive experience to startup companies. The AV Labs portfolio includes Covasoft, InStreamTV, Terrace Mountain Systems, newgistics, onecard, and WebTaggers. http://www.avlabs.com/ _____________________________________________ o EnerTech Capital Partners Names Ex-Varidigm CEO as Partner WAYNE, Pa. -- Private equity firm EnerTech Capital Partners said it named Kenneth Kazmer a venture partner. Mr. Kazmer was recently president of DeltaDigm, a product development consulting firm. He also founded and served as director and CEO of Varidigm, a speed motor technology company. EnerTech manages $285 million and focuses on technology, service and infrastructure investment in the energy, utility, and communications markets. http://www.enertechcapital.com/ |||||||||||||||||||| Advertisement |||||||||||||||||||| Where's the money in free software? Is Linux, at last, about to become important to commercial users with IBM, Compaq, Hewlett-Packard, Sun Microsystems, and others teaming up to offer an open-software suite to compete with Windows? Or is there a lesson for us all in the disappointing stock market performance of the pure-play Linux companies? Join us for an open-software roundtable, featuring Miguel de Icaza the 27-year-old Mexican programmer who has devised alternatives to key Microsoft products. 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VentureWire People, Thursday, October 18, 2001

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<a href="#clsfd1190">VP OF SALES-SF BAY AREA</a><br>&#8226; <a href="#clsfd1191">VP OF TELECOMMUNICATIONS SALES-IRVINE, CA</a><br>&#8226; <a href="#clsfd1192">MANAGING DIRECTOR-DENVER, CO</a><br>&#8226; <a href="#clsfd1189">VP SALES - RISK MANAGEMENT-NEW YORK, NY</a><br>&#8226; <a href="#clsfd1188">VP, ENGINEERING/R&amp;D-ITHACA, NY</a><br>&#8226; <a href="#clsfd1193"> GENERAL PARTNER-SAN DIEGO</a><br></font></td></tr></table><br> <center> <table width="100%" cellpadding=5 border="0" bgcolor='#F0E68C'> <tr><td><font face="verdana, arial, helvetica" size="-1" color="#006699">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>CEO HIRES</b></font><br><a href="http://people.venturewire.com/ceowatch.asp"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<img SRC="http://208.185.40.7/charts/images/ceohiresP.jpg" border=0 align=middle alt="ceo watch"></a></td></tr> <tr><td>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td></tr> </table> </center><br> <table width="100%" cellpadding=5 border="0"> <tr><td> <font face="verdana, arial, helvetica" size="-1" color="#006699"><b> SERVICES</b></font><br> <font face="verdana, arial, helvetica" size="-2" color="#006699"> &#8226;&nbsp;<a href="http://alert.venturewire.com/index.asp">VentureWire index</a></font><br> <br> <font face="verdana, arial, helvetica" size="-1" color="#006699"><b> LINKS</b></font><br> <font face="verdana, arial, helvetica" size="-2" color="#006699"> &#8226;&nbsp;<a href="http://people.venturewire.com/adv.asp">sponsor VentureWire&nbsp;people</a><br> &#8226;&nbsp;<a href="http://people.venturewire.com/specs.asp">place a classified ad</a> <br> &#8226;&nbsp;<a HREF='http://venturewire.gazooba.com/cid3723/tellafriend.html'>refer VentureWire</a><br> <!--&#8226;&nbsp;<A HREF='http://venturewire.com/polling/survey1vwp.htm'>take our survey</A><BR>--> </font> <font face="verdana, arial, helvetica" size="-2" color=black> &#8226;&nbsp;send news, tips, releases to </font> <font face="verdana, arial, helvetica" size="-2" color="#006699"> <a href="mailto:[email protected]">[email protected]</a><br> <!--FAQ--> &#8226;&nbsp;<a href="http://people.venturewire.com/help.asp">FAQ</a> </font> <br><br> <!--ACCOUNT--> <font face="verdana, arial, helvetica" size="-1" color="#006699"><b> YOUR ACCOUNT</b></font> <br> <!--CHANGE eMail--> <font face="verdana, arial, helvetica" size="-2" color="black"> &#8226;&nbsp;<a href="http://people.venturewire.com/account.asp">change e-mail</a> <br> <!--CANCEL--> &#8226;&nbsp;<a HREF='http://people.venturewire.com/account.asp'>cancel VentureWire people</a> <br> <!--FEEDBACK--> &#8226;&nbsp;<a href="http://people.venturewire.com/account.asp">feedback</a> <br> <!--IDENTITY--> &#8226;&nbsp;this newsletter<br>&nbsp; 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<a href="#vwIJOKPIKLII"><font face="verdana, arial, geneva, helvetica" size="2">BenefitPoint Promotes John Randazzo as New CEO</font></a><br> <a name="vwLHPLHKJLIIx"></a> &#8226; <a href="#vwLHPLHKJLII"><font face="verdana, arial, geneva, helvetica" size="2">Qusion Names Emcore CEO Richards to Board; Seeks Round B </font></a><br> <a name="vwLLKIMJKLIIx"></a> &#8226; <a href="#vwLLKIMJKLII"><font face="verdana, arial, geneva, helvetica" size="2">Covalent Materials Announces New President & CEO </font></a><br> <a name="vwNOQJNHLLIIx"></a> &#8226; <a href="#vwNOQJNHLLII"><font face="verdana, arial, geneva, helvetica" size="2">AppGate Appoints Alfred Moresi President and CEO</font></a><br> <a name="vwQLPNNQILIIx"></a> &#8226; <a href="#vwQLPNNQILII"><font face="verdana, arial, geneva, helvetica" size="2">WebPutty Promotes David Chamberlain to Pres & CEO</font></a><br> <br><font face='arial,helvetica' color="#006699" size="2"><b>VC PERSONNEL</b></font><br> <a name="vwMJHJHIJLIIx"></a> &#8226; <a href="#vwMJHJHIJLII"><font face="verdana, arial, geneva, helvetica" size="2">MPM Capital Names Adds Two Partners and One EIR</font></a><br> <br><font face='arial,helvetica' color="#006699" size="2"><b>BUSINESS DEVELOPMENT</b></font><br> <a name="vwHHINIIKLIIx"></a> &#8226; <a href="#vwHHINIIKLII"><font face="verdana, arial, geneva, helvetica" size="2">Genomics Firm DGT Names Kevin Skol VP Business Development</font></a><br> <a name="vwQLJKIQJLIIx"></a> &#8226; <a href="#vwQLJKIQJLII"><font face="verdana, arial, geneva, helvetica" size="2">Timothy Brophy Joins Qusion as VP of Product Development </font></a><br> <a name="vwMJNHKILLIIx"></a> &#8226; <a href="#vwMJNHKILLII"><font face="verdana, arial, geneva, helvetica" size="2">Bluesocket Names Carol Schmitt as VP, Business Dev.</font></a><br> <br><font face='arial,helvetica' color="#006699" size="2"><b>OPERATIONS</b></font><br> <a name="vwQJKMQQKLIIx"></a> &#8226; <a href="#vwQJKMQQKLII"><font face="verdana, arial, geneva, helvetica" size="2">Seriqa Networks Names Ex-BT Executive Michael Keilty as COO</font></a><br> <br><font face='arial,helvetica' color="#006699" size="2"><b>TECHNOLOGY</b></font><br> <a name="vwLNJQQPILIIx"></a> &#8226; <a href="#vwLNJQQPILII"><font face="verdana, arial, geneva, helvetica" size="2">Optic Laser Firm Fiberspace Names New VP of Engineering</font></a><br> <br><font face='arial,helvetica' color="#006699" size="2"><b>VW PEOPLE CORRECTIONS</b></font><br> <a name="vwNINQNIJLIIx"></a> &#8226; <a href="#vwNINQNIJLII"><font face="verdana, arial, geneva, helvetica" size="2">Brience</font></a><br> <br> <font face='arial,helvetica' color="#006699" size="3"><b>TOP MANAGEMENT</b></font><br><br> <table border="0" width="100%" cellspacing=0 cellpadding=0><tr><td>&#8226; <a name="vwIJOKPIKLII"><b><font face='arial,helvetica' size="2">BenefitPoint Promotes John Randazzo as New CEO</font></b></a></td><td align="right"><a href="#vwIJOKPIKLIIx"><img src="http://venturewire.com/images/arrow.gif" border="0" height="11" width="11" alt="top"></a> &nbsp;&nbsp;<a href="http://people.venturewire.com/o_mailer.asp?sid=IJOKPIKLII" target=NEW><img src="http://venturewire.com/images/mail2.gif" border="0" height="10" width="15" alt="mail"></a>&nbsp;</td></tr> <tr><td colspan=2><font face="verdana, arial, geneva, helvetica" size="2">SAN FRANCISCO -- BenefitPoint, an employee benefits management service for the distribution of group insurance and financial products, said John Randazzo has been appointed president and CEO.<br><br>Mr. Randazzo replaces Mark Pulido, who will retire but remain as chairman. Mr. Randazzo was promoted from the position executive vice president; prior to BenefitPoint, he served as CEO at Women&#39;s Health Connecticut and Value Oncology Science, and held positions at Warburg & Pincus&#39;s private equity group.<br><br>BenefitPoint has raised $75 million in equity and $7 million in debt financing from Comdisco, First Union, Goldman Sachs Capital Partners, HarborVest Partners, Institutional Venture Partners, Marsh USA, and Sequoia Capital. </font><br> <a href="http://www.benefitpoint.com" target="_new"><font face='arial,helvetica' size='2'>http://www.benefitpoint.com</font></a> </td></tr></table><br> <table border="0" width="100%" cellspacing=0 cellpadding=0><tr><td>&#8226; <a name="vwLHPLHKJLII"><b><font face='arial,helvetica' size="2">Qusion Names Emcore CEO Richards to Board; Seeks Round B </font></b></a></td><td align="right"><a href="#vwLHPLHKJLIIx"><img src="http://venturewire.com/images/arrow.gif" border="0" height="11" width="11" alt="top"></a> &nbsp;&nbsp;<a href="http://people.venturewire.com/o_mailer.asp?sid=LHPLHKJLII" target=NEW><img src="http://venturewire.com/images/mail2.gif" border="0" height="10" width="15" alt="mail"></a>&nbsp;</td></tr> <tr><td colspan=2><font face="verdana, arial, geneva, helvetica" size="2">NORTH BRUNSWICK, N.J. -- Qusion, a maker of optical integrated circuits, said Reuben Richards, CEO of compound semiconductor product firm Emcore, will join its board of directors. The company also said it is seeking a second round of venture capital financing. <br><br>According to Qusion spokesperson, Nicholas Stuart Ludlum, the company hopes to close its Series B round by the end of the year with funds used to ramp up product development. He would not comment on the amount of money Qusion hopes to raise. <br><br>Mr. Ludlum said the firm has five people on its board at present and will add a couple more after the completion of the second round. <br><br>Qusion has received backing from Wasserstein Ventures, Vantage Point Venture Partners, and WR Hambrecht. </font><br> <a href="http://www.qusiontech.com" target="_new"><font face='arial,helvetica' size='2'>http://www.qusiontech.com</font></a> </td></tr></table><br> <table border="0" width="100%" cellspacing=0 cellpadding=0><tr><td>&#8226; <a name="vwLLKIMJKLII"><b><font face='arial,helvetica' size="2">Covalent Materials Announces New President & CEO </font></b></a></td><td align="right"><a href="#vwLLKIMJKLIIx"><img src="http://venturewire.com/images/arrow.gif" border="0" height="11" width="11" alt="top"></a> &nbsp;&nbsp;<a href="http://people.venturewire.com/o_mailer.asp?sid=LLKIMJKLII" target=NEW><img src="http://venturewire.com/images/mail2.gif" border="0" height="10" width="15" alt="mail"></a>&nbsp;</td></tr> <tr><td colspan=2><font face="verdana, arial, geneva, helvetica" size="2">EMERYVILLE, CALIF. -- Covalent Materials, a developer of nanotechnology components for electronics and energy storage applications, said it has appointed Charles Janac as president and CEO. <br><br>Mr. Janac replaces interim CEO Andrei Manoliu, who remains on the board.<br><br>Prior to Covalent Materials, Mr. Janac was entrepreneur-in-residence at Infinity Capital, general manager at Brooks Automation, and CEO of Smart Machines. <br><br>The company is backed by Alta Partners and individuals. </font><br> <a href="http://www.covalentmaterials.com" target="_new"><font face='arial,helvetica' size='2'>http://www.covalentmaterials.com</font></a> </td></tr></table><br> <table border="0" width="100%" cellspacing=0 cellpadding=0><tr><td>&#8226; <a name="vwNOQJNHLLII"><b><font face='arial,helvetica' size="2">AppGate Appoints Alfred Moresi President and CEO</font></b></a></td><td align="right"><a href="#vwNOQJNHLLIIx"><img src="http://venturewire.com/images/arrow.gif" border="0" height="11" width="11" alt="top"></a> &nbsp;&nbsp;<a href="http://people.venturewire.com/o_mailer.asp?sid=NOQJNHLLII" target=NEW><img src="http://venturewire.com/images/mail2.gif" border="0" height="10" width="15" alt="mail"></a>&nbsp;</td></tr> <tr><td colspan=2><font face="verdana, arial, geneva, helvetica" size="2">DURHAM, N.C. -- AppGate, which provides technology for virtual private networks, said it named Alfred Moresi as its president and CEO. <br><br>Mr. Moresi, who also becomes a director as a result of his appointment, previously served as chief operating officer at eNetSecure. At AppGate, where he will have offices in both its Gothenburg, Sweden and Raleigh, N.C. locations, he will lead the company in business development, engineering, sales and marketing, and research and development. <br><br>AppGate is funded by Industrifinans, Innovationskapital, Pythagoras, and T-Venture. </font><br> <a href="http://www.appgate.com" target="_new"><font face='arial,helvetica' size='2'>http://www.appgate.com</font></a> </td></tr></table><br> <table border="0" width="100%" cellspacing=0 cellpadding=0><tr><td>&#8226; <a name="vwQLPNNQILII"><b><font face='arial,helvetica' size="2">WebPutty Promotes David Chamberlain to Pres & CEO</font></b></a></td><td align="right"><a href="#vwQLPNNQILIIx"><img src="http://venturewire.com/images/arrow.gif" border="0" height="11" width="11" alt="top"></a> &nbsp;&nbsp;<a href="http://people.venturewire.com/o_mailer.asp?sid=QLPNNQILII" target=NEW><img src="http://venturewire.com/images/mail2.gif" border="0" height="10" width="15" alt="mail"></a>&nbsp;</td></tr> <tr><td colspan=2><font face="verdana, arial, geneva, helvetica" size="2">SAN JOSE, CALIF. -- WebPutty, a provider of server software, said it promoted David K. Chamberlain to president and CEO, and named James G. Beldock as chief technology officer as well as chairman.<br><br>Mr. Chamberlain, who previously served as executive vice president and general manager of field operations, will also join the company&#39;s board of directors. Prior to joining the company, Mr. Chamberlain worked at IBM where he developed the professional services organization in the West coast. Mr. Chamberlain replaces Mr. Beldock.<br><br>Mr. Beldock joined the company in 1999 as chairman of its technology advisory board and became president and CEO in 2000. Prior to joining the company, Mr. Beldock was entrepreneur in residence at SAC Captial. <br><br>WebPutty is backed by Bain Capital, S.A.C. Capital Partners, and Seneca Capital Management.</font><br> <a href="http://www.webputty.com" target="_new"><font face='arial,helvetica' size='2'>http://www.webputty.com</font></a> </td></tr></table><br> <font face='arial,helvetica' color="#006699" size="3"><b>VC PERSONNEL</b></font><br><br> <table border="0" width="100%" cellspacing=0 cellpadding=0><tr><td>&#8226; <a name="vwMJHJHIJLII"><b><font face='arial,helvetica' size="2">MPM Capital Names Adds Two Partners and One EIR</font></b></a></td><td align="right"><a href="#vwMJHJHIJLIIx"><img src="http://venturewire.com/images/arrow.gif" border="0" height="11" width="11" alt="top"></a> &nbsp;&nbsp;<a href="http://people.venturewire.com/o_mailer.asp?sid=MJHJHIJLII" target=NEW><img src="http://venturewire.com/images/mail2.gif" border="0" height="10" width="15" alt="mail"></a>&nbsp;</td></tr> <tr><td colspan=2><font face="verdana, arial, geneva, helvetica" size="2">CAMBRIDGE, MASS. -- MPM Capital, a global asset management firm focused solely on healthcare investing, said it made several new additions to its investment team. <br><br>Carl Weissman will join MPM Capital&#39;s BioVentures as venture partner while Dr. Kazumi Shiosaki will join as entrepreneur in residence. Skip Klein has been named as a venture partner with both MPM BioVentures and MPM BioEquities, which invests primarily in public healthcare companies. Mr. Klein will focus on late stage private and public market venture capital opportunities. Prior to joining MPM, Mr. Klein was an investment analyst, portfolio manager, and founder of the T. Rowe Price Health Sciences Fund.<br><br>Mr. Wesimann previously served as the founding chief operating officer for Centagenetix, an MPM portfolio company, while Dr. Kazumi served as senior vice president of drug discovery at Millennium Pharmaceuticals and at Abbott Laboratories. </font><br> <a href="http://www.mpmcapital.com" target="_new"><font face='arial,helvetica' size='2'>http://www.mpmcapital.com</font></a> </td></tr></table><br> <font face='arial,helvetica' color="#006699" size="3"><b>BUSINESS DEVELOPMENT</b></font><br><br> <table border="0" width="100%" cellspacing=0 cellpadding=0><tr><td>&#8226; <a name="vwHHINIIKLII"><b><font face='arial,helvetica' size="2">Genomics Firm DGT Names Kevin Skol VP Business Development</font></b></a></td><td align="right"><a href="#vwHHINIIKLIIx"><img src="http://venturewire.com/images/arrow.gif" border="0" height="11" width="11" alt="top"></a> &nbsp;&nbsp;<a href="http://people.venturewire.com/o_mailer.asp?sid=HHINIIKLII" target=NEW><img src="http://venturewire.com/images/mail2.gif" border="0" height="10" width="15" alt="mail"></a>&nbsp;</td></tr> <tr><td colspan=2><font face="verdana, arial, geneva, helvetica" size="2">LA JOLLA, CALIF. -- Digital Gene Technologies said it named Kevin T. Skol vice president of business development. Mr. Skol joins the company from Elan, a publicly held biopharmaceutical firm, where he served as associate director of the business development group. Digital Gene Technologies combines genomics technology with bioinformatics to identify genes expressed in any cell or tissue sample. The company received $22 million in third round funding from undisclosed investors in February 2000. </font><br> <a href="http://www.dgt.com" target="_new"><font face='arial,helvetica' size='2'>http://www.dgt.com</font></a> </td></tr></table><br> <table border="0" width="100%" cellspacing=0 cellpadding=0><tr><td>&#8226; <a name="vwQLJKIQJLII"><b><font face='arial,helvetica' size="2">Timothy Brophy Joins Qusion as VP of Product Development </font></b></a></td><td align="right"><a href="#vwQLJKIQJLIIx"><img src="http://venturewire.com/images/arrow.gif" border="0" height="11" width="11" alt="top"></a> &nbsp;&nbsp;<a href="http://people.venturewire.com/o_mailer.asp?sid=QLJKIQJLII" target=NEW><img src="http://venturewire.com/images/mail2.gif" border="0" height="10" width="15" alt="mail"></a>&nbsp;</td></tr> <tr><td colspan=2><font face="verdana, arial, geneva, helvetica" size="2">NORTH BRUNSWICK, N.J. -- Qusion Technologies, a developer of optical integrated circuits, said Timothy Brophy joined the firm as vice president of product development. Mr. Brophy comes to the firm from Motorola&#39;s Broadband Communications sector, where he served as director of advanced photonic technology. Qusion is backed by Wasserstein Ventures, Vantage Point Venture Partners, and WR Hambrecht. </font><br> <a href="http://www.qusiontech.com" target="_new"><font face='arial,helvetica' size='2'>http://www.qusiontech.com</font></a> </td></tr></table><br> <table border="0" width="100%" cellspacing=0 cellpadding=0><tr><td>&#8226; <a name="vwMJNHKILLII"><b><font face='arial,helvetica' size="2">Bluesocket Names Carol Schmitt as VP, Business Dev.</font></b></a></td><td align="right"><a href="#vwMJNHKILLIIx"><img src="http://venturewire.com/images/arrow.gif" border="0" height="11" width="11" alt="top"></a> &nbsp;&nbsp;<a href="http://people.venturewire.com/o_mailer.asp?sid=MJNHKILLII" target=NEW><img src="http://venturewire.com/images/mail2.gif" border="0" height="10" width="15" alt="mail"></a>&nbsp;</td></tr> <tr><td colspan=2><font face="verdana, arial, geneva, helvetica" size="2">BURLINGTON, MASS. -- Bluesocket, which develops security and management products for wireless local area networks, said it appointed Carol S. Schmitt as vice president of business development. Prior to joining the company, Ms. Schmitt was a business and market development consultant in Los Gatos, Calif. Bluesocket is backed by Osborn Capital and St. Paul Venture Capital. </font><br> <a href="http://www.bluesocket.com" target="_new"><font face='arial,helvetica' size='2'>http://www.bluesocket.com</font></a> </td></tr></table><br> <font face='arial,helvetica' color="#006699" size="3"><b>OPERATIONS</b></font><br><br> <table border="0" width="100%" cellspacing=0 cellpadding=0><tr><td>&#8226; <a name="vwQJKMQQKLII"><b><font face='arial,helvetica' size="2">Seriqa Networks Names Ex-BT Executive Michael Keilty as COO</font></b></a></td><td align="right"><a href="#vwQJKMQQKLIIx"><img src="http://venturewire.com/images/arrow.gif" border="0" height="11" width="11" alt="top"></a> &nbsp;&nbsp;<a href="http://people.venturewire.com/o_mailer.asp?sid=QJKMQQKLII" target=NEW><img src="http://venturewire.com/images/mail2.gif" border="0" height="10" width="15" alt="mail"></a>&nbsp;</td></tr> <tr><td colspan=2><font face="verdana, arial, geneva, helvetica" size="2">TEL AVIV, ISRAEL -- Seriqa Networks, which develops integrated traffic engineering technologies for telecommunications service providers, said Michael F. Keilty has joined the company as chief operating officer. Prior to his appointment, Mr. Keilty served as managing director of British Telecom North America. Based out of Seriqa&#39;s New York office, he will be responsible for the company&#39;s U.S. operations and for worldwide sales and marketing. Seriqa, previously called E-ntouch Networks, is backed by Shalom Equity Fund. </font><br> <a href="http://www.seriqa.com" target="_new"><font face='arial,helvetica' size='2'>http://www.seriqa.com</font></a> </td></tr></table><br> <font face='arial,helvetica' color="#006699" size="3"><b>TECHNOLOGY</b></font><br><br> <table border="0" width="100%" cellspacing=0 cellpadding=0><tr><td>&#8226; <a name="vwLNJQQPILII"><b><font face='arial,helvetica' size="2">Optic Laser Firm Fiberspace Names New VP of Engineering</font></b></a></td><td align="right"><a href="#vwLNJQQPILIIx"><img src="http://venturewire.com/images/arrow.gif" border="0" height="11" width="11" alt="top"></a> &nbsp;&nbsp;<a href="http://people.venturewire.com/o_mailer.asp?sid=LNJQQPILII" target=NEW><img src="http://venturewire.com/images/mail2.gif" border="0" height="10" width="15" alt="mail"></a>&nbsp;</td></tr> <tr><td colspan=2><font face="verdana, arial, geneva, helvetica" size="2">WOODLAND HILLS, CALIF. -- Fiberspace, a developer of laser products for fiber-optic communications systems and components, said it named Osama Bahgat as vice president of engineering. Before joining Fiberspace, Mr. Bahgat worked for CopperCom, where he led the firm&#39;s voice over broadband product development team. Fiberspace&#39;s investors include J.P. Morgan Chase Capital and Morgenthaler Ventures. </font><br> <a href="http://www.fiberspace.net" target="_new"><font face='arial,helvetica' size='2'>http://www.fiberspace.net</font></a> </td></tr></table><br> <font face='arial,helvetica' color="#006699" size="3"><b>VW PEOPLE CORRECTIONS</b></font><br><br> <table border="0" width="100%" cellspacing=0 cellpadding=0><tr><td>&#8226; <a name="vwNINQNIJLII"><b><font face='arial,helvetica' size="2">Brience</font></b></a></td><td align="right"><a href="#vwNINQNIJLIIx"><img src="http://venturewire.com/images/arrow.gif" border="0" height="11" width="11" alt="top"></a> &nbsp;&nbsp;<a href="http://people.venturewire.com/o_mailer.asp?sid=NINQNIJLII" target=NEW><img src="http://venturewire.com/images/mail2.gif" border="0" height="10" width="15" alt="mail"></a>&nbsp;</td></tr> <tr><td colspan=2><font face="verdana, arial, geneva, helvetica" size="2">NEW YORK -- A story in Wednesday&#39;s edition incorrectly identified Jim Drumright&#39;s title at Brience as president and COO. Mr. Drumright serves solely as COO. Rod McGeary is president and CEO of Brience. </font><br><br></td></tr></table><br> <br><br> <table cellPadding=5 width="100%" border="0"><tr bgcolor="#FOE68C"><td align=left vAlign=top width="100%"><font color="#006699" face="verdana, arial, helvetica" size=2><b>EXECUTIVE SEARCHES</b></font><br><br><font color=black face="verdana, arial, helvetica" size=2><b><a name=clsfd1190>VP of Sales</a>--IT services--SF Bay Area</b><br><br> Lohika Systems, Inc., a recently-funded IT services start-up headquartered in Silicon Valley, is seeking a hands-on VP of Sales to build and manage its sales organization. This person should have a proven record of generating sales and exceeding sales targets, possess excellent networking ability, be able to prospect and manage clients throughout the sales cycle, be able to develop a focused sales strategy, and have experience recruiting and managing a sales team. <br> <br>Responsibilities: <br> <br>* Manage and execute the entire sales cycle from generating prospects and cold calling to closing the sale <br>* Sell strategically to key decision-makers (CFO, COO, CIO) and tactically at the operational level <br>* Cultivate and maintain strong client relationships <br>* Build and manage a sales team <br>* Develop a well-targeted sales strategy <br>* Work closely with our IT professionals to close the sale <br> <br> <br>Requirements: <br> <br>* Minimum of 5 years of sales management experience <br>* Proven record of consistently meeting and exceeding sales quota <br>* Previous history of selling high-tech products, IT consulting services, or software <br>* Have experience selling to key decision makers <br>* Excellent networking ability <br>* Bachelor's degree or equivalent <br>* Excellent oral and written communication and presentation skills coupled with strong negotiation skills <br><br><br>e-mail: <a HREF="mailto:[email protected]">[email protected]</a><br>company: Lohika Systems, Inc.<br>[<a href="#top">top</a>]<br><br> <b><a name=clsfd1191>VP of Telecommunications Sales</a>--Wireless and Voice Applications--Irvine, CA</b><br><br> AdaptiveInfo provides state-of-the-art software infrastructure for automatically personalizing wireless and voice applications. Our products enable high-quality mobile applications that overcome the constraints of mobile devices by learning each individual?s preferences. This is a growth opportunity in privately held company located in a research park on a University of California campus. <br>VP of TELECOMMUNICATIONS SALES <br>Duties and Responsibilities: <br>* Sell to top tier Telecommunications accounts with a high degree of independence. <br>* Sell at a strategic level, developing and implementing strategic business plans. <br>* Articulate strategy, products and services to customers and prospects. <br>* Identify market segments, create and execute sales strategy. <br>* Provide feedback on an ongoing basis with market trends and customer needs <br> <br>Required Qualifications: <br>* 4+ years selling high-end software or services to the telecommunications industry. <br>* A record of sustained sales success identifying and closing new customer accounts. <br>* Start-up experience is a plus. <br>* Ability to work with other executives in a collegial, team oriented environment. <br>* Excellent negotiating, speaking, writing and listening skills. <br>* BA degree in a business/technical <br><br><br>e-mail: <a HREF="mailto:[email protected]">[email protected]</a><br>company: AdaptiveInfo <br>[<a href="#top">top</a>]<br><br> <b><a name=clsfd1192>Managing Director</a>--VENTURE CAPITAL--Denver, CO</b><br><br> Denver-based investment management company seeks managing director to lead a venture capital firm focused on early stage Colorado investments. Candidate must have at least 5 years of direct investment experience, a demonstrable track record, and actively participate in capital raising efforts. The ideal candidate will manage the investment of $30 to $50 million in early stage opportunities in the region. Competitive compensation structure including a unique opportunity for ownership and a carried interest in the fund. <br> <br>Qualifications <br> <br>* A minimum of five years experience in early-stage investing focusing on the technology, telecommunications, or life science industries <br>* Proven history of venture investing with a definitive record of returns <br>* Experience fundraising from both institutional investors and high net worth individuals <br>* Expertise managing portfolio company investments <br>* Excellent communication and presentation skills <br>* Educational qualifications important <br><br><br>e-mail: <a HREF="mailto:[email protected] ">[email protected] </a><br>company: <br>[<a href="#top">top</a>]<br><br> <b><a name=clsfd1189>VP Sales - Risk Management</a>--Technology Services--New York, NY</b><br><br> Kiodex is a technology and services company founded in February 2000 by a group of former Wall Street and energy industry traders, developers, and strategists seeking to provide quality technology products to facilitate trading and risk management in the market at large. <br> <br>Kiodex is exclusively focused on the commodity markets and enabling our customers to successfully navigate those volatile markets using our cutting-edge technology. Our flagship product, the Kiodex Risk WorkbenchSM, is one of the first risk management systems in the world to be designed and built entirely for the Internet, using only the latest in web-based technology. We've also earned validation as the company entrusted to <br>power the New York Mercantile Exchange's online trading platform, enymexSM, with our order-matching engine, the Kiodex Trade EngineTM. <br> <br>Kiodex currently has nearly 100 employees. Our headquarters are in New York City. The backgrounds of our team, like the quality of our products, speak for themselves! Be part of our leading team! <br> <br>The VP of Sales will be responsible for building out the entire Kiodex sales effort and achieving Kiodex revenue objectives. <br> <br>Responsibilities include: <br>1-Institute and maintain a proven sales methodology for complex software sales with multiple buying influences. <br>2-Recruit a sales team and implement a sales management structure that ncludes regional offices. <br>3-Provide the sales force with the product vision and execution strategy to reach each of their goals. <br>4-Coordinate the sales process to ensure that the next sales milestones (per projections) are hit. <br>5-Provide vision and make commendations on the structure of the sales team - pre sales, implementation, and product specialists. <br>6-Design and implement sales campaigns in the lead up to new releases of the Workbench. <br>7-Develop specific recommendations for business development regarding 3rd Party alliances and distribution partnerships to efficiently reach the target market for each release of the Risk Workbench. <br>8-Assist in the creation of an international expansion strategy. <br> <br>Desired Skills: <br>1. Experience in financial markets. <br>2. Experience selling into the Finance/treasury departments of the Fortune 1000. <br><br>e-mail: <a HREF="mailto:[email protected]">[email protected]</a><br>company: Kiodex Inc.<br>[<a href="#top">top</a>]<br><br> <b><a name=clsfd1188>VP, Engineering/R&amp;D</a>--Optical Components--Ithaca, NY</b><br><br> BinOptics is a pioneer in next-generation optical devices based on leading-edge semiconductor innovations. The company?s proprietary technology places it in a unique position to address the challenges facing the rapidly growing optical components industry. Founded in 2000, BinOptics is privately held and funded by renowned Silicon Valley venture firm Draper Fisher Jurvetson and Stanford University. The company is headquartered in scenic Ithaca, New York. <br> <br>VP of Engineering/R&amp;D <br>Responsibilities: <br>*Oversee research & development, design, simulation, and process of next-generation optical components <br>*Direct and lead a team of motivated optical scientists and engineers <br>*Recruit and build a productive engineering team <br>*Establish and monitor budget of engineering department <br>*Coordinate and facilitate interactions with other departments <br>*Plan and manage the deployment of resources for multiple projects <br> <br>Requirements: <br>*In depth knowledge of the optical component field <br>*Proven skills as a motivator and team builder <br>*At least 15 years of relevant technical experience including VP or Senior Director level <br>*A successful track record of leadership in a start-up environment <br>*BS in Electrical Engineering or Material Science (MS or PhD preferred) <br> <br>BinOptics is an equal opportunity employer and offers a generous benefits package and competitive salaries. All of our employees participate in the company's stock option program.<br><br>e-mail: <a HREF="mailto:[email protected]">[email protected]</a><br>company: BinOptics<br>[<a href="#top">top</a>]<br><br> <b><a name=clsfd1193> GENERAL PARTNER</a>--TECHNOLOGY--SAN DIEGO</b><br><br> Make a lifestyle change. <br>A "green grass" opportunity in an emerging technology region underserved by locally based venture capitalists. Capitalize on plentiful investment opportunities emerging from research universities and facilities serving the life sciences and technology sectors, Department of Defense (DOD) technologies and research, and next generation early stage companies evolving from existing models of success in Southern California. New venture fund with no legacy issues seeking an experienced General Partner. <br> <br> <br>PROFESSIONAL QUALIFICATIONS: <br>* Demonstrated investment results with a venture capital firm. <br>* Strong communications or semiconductor background (10+ years of relevant operating experience) that started off their career in an engineering role and was able to successfully move into a more senior Business Management role. <br>* Extensive personal and professional networks within the high tech industry <br>* PhD in EE or CS, BS/MS strongly preferred <br> <br>PERSONAL QUALIFICATIONS: <br>* A keen sense of humor <br>* Highly competitive and driven to success <br>* Proactive vs. reactive <br>* Independent thinker yet a team player <br> <br>AN EQUAL OPPORTUNITY EMPLOYER <br><br><br>e-mail: <a HREF="mailto:[email protected]">[email protected]</a><br>company: n/a<br>[<a href="#top">top</a>]<br><br> </font></td></tr></table> <br><br> <font face="arial, geneva, helvetica" size="2" color="black"> To cancel, change, or update your subscription:<br> </font> <font face="arial, geneva, helvetica" size="2" color="gray"> <a href="http://people.venturewire.com/account.asp">http://people.venturewire.com/account.asp</a> </font> </td> </tr> </table> </html>

dasovich-j/deleted_items/2.

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VentureWire, Thursday, November 9, 2000

====================================================== VENTUREWIRE --- Thursday, November 9, 2000 ====================================================== Private Company Business News ------ Published Daily by Technologic Partners ------- http://technologicpartners.com ====================================================== Top Stories: o Doll Capital Management Launches $450 Million Fund o Internet Router Firm Pluris Raises $100 Million Round o Shell Oil Launches Venture Unit, Partnerships With TCV, H&Q o Pacesetter to Raise $150 Million Fund for Minority-Led Firms |||||||||||||||||||| Advertisement |||||||||||||||||||| GroundZero4 at the Bonaventure Hotel, Los Angeles, Dec. 4-7, will set the stage for the next generation of B2B e-commerce. GZ4 will bring together e-commerce executives, Net markets, bricks-and-mortar companies, and coalition marketplaces. 80 speakers from companies including: Morgan Stanley, RightFreight, & Cargill; and coalitions, e2open & Omnexus. Attend daily sessions & evening events and visit exhibiting B2B companies to capitalize on valuable networking and deal-making opportunities...where dot com meets dot corp. Register today at http://www.nmm.com/groundzero4?id=techwire ||||||||||||||||||||||||||||||||||||||||||||||||||||||| Also in This Issue: New Money: o M&A Service Provider USBX Lands $10 Million in Seed Funding o Apps Firm Wireless Services Corp. Secures Series A Funding o Intellectual Property Firm Iddex Has $2.8 Million Round One o Virtual CEO, Performance Management Firm, Gets Series A o Web Marketplace Provider Vertac Raises $500,000 First Round o Web Site Evaluator Troba Raises $5.5 Million in Round One o Customer Care Firm vCustomer Raises $11 Million Second Round o Kagoor Networks Closes Round Two with $18 Million o Medical Software Firm Cbyon Has $11.5 Million in Round Two o Online Sports Firm Active.com Has $21 Million Second Round o Investing Site SaveDaily Closes Series B with $1.5 Million o Wireless Firm Vocera Raises $7.1 Million in Second Round o E-Business Provider eAssist Secures $27 Million in Series C Bad News: o Recently Funded B2B Market EqualFooting Cuts Staff by 15% o Streaming Media Firm Files for Chapter 11 Before Merger New Deals: o Sephora.com Buys Name and URL of Defunct Beauty Site Eve.com o ING Barings Takes Equity Stake in OffRoad Capital M&A: o New Edge Networks Acquires West-Net in Stock and Cash Deal New Directors: o B2B Firm Day Interactive Appoints Former AOL Exec to Board o ServiceMagic.com Names Qwest Dex CEO to Board o Tech Holding Firm Fenix Taps Ex-TCI Vice President for Board o Ubiquio Names CEO of Interelate to Board of Directors New People: o Former Scientific-Atlanta VP, Named President & CEO of Iolon o Data Distilleries Names Former Andersen Partner as CEO o 3Di Names Ex-Lockhead Martin Executive as President and COO o Consulting Firm Quidnunc Taps Former Consult Exec as CEO o Intellectual Property Firm uVentures Adds to Board VC Fund News: o Hicks Muse Guarantees 20% Fund Return, Backs Away from VC o e-ffinity Properties Formed to Fund Real Estate Tech Firms o Netherlands VC Firm NeSBIC Starts Support Program o Spectrum Equity Expands London Office, Fund Ready to Go o Woodside Fund Forms Strategic Partnership with Acuitive VC Personnel: o BancBoston Capital Names Two to European Investment Group o Kick-Start Ventures Names Two New Partners in London |||||||||||||||||||| Advertisement |||||||||||||||||||| COMMERCE UNPLUGGED A new breed of smart phones and connected PDAs are enabling us to shop, even long after we've dropped. But the mobile shopper is a new breed of consumer, and the mobile value chain presents a host of new issues. Mobile Services, one of five expert panels at Technology Outlook 2000, will examine the promises and pitfalls of m-commerce, wireless advertising, and the role of location-based services. Come hear from: Mark F. Bregman, CEO, AirMedia Bernard Desarnauts, CEO, ViaFone Paul Palmieri, VP & GM, Wireless Services, Advertising.com Only at Technology Outlook 2000: The Future of Pervasive Computing December 4 and 5, San Francisco A VentureWire investment conference. http://technologicpartners.com/tp/conf/to2000/?vw=20001109 ||||||||||||||||||||||||||||||||||||||||||||||||||||||| ======= Top Stories ======= o Doll Capital Management Launches $450 Million Fund MENLO PARK, Calif. -- Doll Capital Management said it launched DCM III, a $450 million fund that will focus on early stage Internet and telecommunications companies. The company said it estimates that it will invest in approximately 40 companies with an average investment of $3 million to $7 million. General managing partners Dixon Doll and David Chao will oversee the fund. The company's capital under management now reaches to more than $1 billion. http://www.dollcap.com/ _____________________________________________ o Internet Router Firm Pluris Raises $100 Million Round CUPERTINO, Calif. -- Pluris, which develops scalable routers for the Internet, said it raised $100 million in its latest round of funding. The round was led by Sands Brothers & Co. and included new investors ABN AMRO, Alliance Capital, Bank of America Securities, Credit Suisse First Boston, Dain Rauscher Wessels, Carlo de Benedetti, Stephen Garofalo, PB Ventures, PCG Ventures, Rana Investment, Samsung, Special OpportunitiesGrou, and Vulcan Ventures. Previous investors Lightspeed Venture Parters, ComVentures, Cescendo Ventures, Bay Partners, Chase Capital Partners, Worldview Technology Partners, Deutsche Bank, global Crossing Ventures, RWI Group, and Brad Peery Capital also participated in the round. The company said it will use the funding to continue to develop its technology and sales and marketing structures internationally. http://www.pluris.com/ _____________________________________________ o Shell Oil Launches Venture Unit, Partnerships With TCV, H&Q PALO ALTO, Calif. -- The Royal Dutch/Shell Group of Companies said it launched Shell Internet Ventures to invest in development stage Internet and communications companies. The venture unit will invest independently as well as in partnership with Palo Alto-based Technology Crossover Ventures (TCV) in North America and H&Q Asia Pacific in Asia. TCV and Shell will make co-investments in companies outside of Shell; TCV will also selectively invest in Internet-related companies originating within Shell. http://www.shell.com/internetventures/ http://www.tcv.com/ _____________________________________________ o Pacesetter to Raise $150 Million Fund for Minority-Led Firms RICHARDSON, Texas -- Pacesetter Growth Fund, which makes investments in firms owned or managed by minorities in the southern U.S., said it intends to raise a new fund for $150 million in the first quarter of next year. Pacesetter said the fund will provide capital at various stages in Internet infrastructure, telecom, wireless, and broadband companies, in addition to broadcast media and food processing firms. The fund will focus on companies based in Texas, Oklahoma, Arkansas, Arizona, New Mexico, Colorado, and California, but consider investments elsewhere. Pacesetter makes typical investments of between $500,000 and $5 million. The firm's previous fund closed at $46.5 million and is nearly fully committed. http://www.mvhc.com/ ======= New Money ======= o M&A Service Provider USBX Lands $10 Million in Seed Funding SANTA MONICA, Calif. -- USBX, (U.S. Business Exchange), a provider of merger and acquisition services for buyers and sellers of small to medium-sized businesses, said it raised more than $10 million in its initial seed financing and Series A round completed in September. Carlyle Venture Partners led the round. Other participating investors included eCompanies Evercore Venture Partners (EEVP II), eCompanies Venture Group (EVG), Jolson Merchant Partners, and Sunflower Capital. USBX announced the launch of its business and Web site in October. The site offers M&A information, tools, and services. http://www.usbx.com/ _____________________________________________ o Apps Firm Wireless Services Corp. Secures Series A Funding BELLEVUE, Wash. -- Wireless Services Corp., a service provider for mobile Internet applications, said it secured an undisclosed amount in its Series A round of funding from Madrona Venture Group, SeaPoint Ventures, and Northwest Venture Associates. The company said it will use the funds to accelerate development of its universal mobile applications platform and to support the expansion of engineering and corporate operations, including additions to its management team. Tom Huseby, managing partner of SeaPoint Ventures, has been appointed chairman of the board. Tom Alberg, managing director of Madrona Venture Group, and Keith Grinstein, vice chairman of Nextel International, have also been added to the board. Chris Brookfield, managing director of Northwest Venture Associates, has joined the board as an observer. http://www.wirelesscorp.com/ _____________________________________________ o Intellectual Property Firm Iddex Has $2.8 Million Round One NEW YORK -- Iddex, an intellectual property management applications firm, announced it has raised $2.8 million in its first round of financing with $1.25 million from Millennium3Capital, $1 million from Adler & Co., and the rest of the funding from Pappajohn Investments and CEO Dennis Dugan. Iddex said that there will be no changes to the board of directors and that it will use the funds to beta test and launch its product. http://www.iddex.com/ _____________________________________________ o Virtual CEO, Performance Management Firm, Gets Series A SAN JUAN CAPISTRANO, Calif. -- Virtual CEO, which provides performance management and assessment technologies, said it raised $2 million in its Series A round. Investors in the round included Odyssey Strategic Partners, GenStar, and private investors. The company said it will use the funding to hire additional staff and develop new products and technology. http://www.virtualceo.com/ _____________________________________________ o Web Marketplace Provider Vertac Raises $500,000 First Round BOSTON -- Vertac, which creates and manages Internet marketplaces for online businesses, said it has raised $500,000 in its first round of financing from IdeaWorks. David Brenner of IdeaWorks will join Vertac's board as its fourth member. Vertac said it plans to use the funds to develop its marketplace model, to increase sales, and to expand staff. The company received $300,000 in seed investment from James Investments last year. http://www.vertac.com/ _____________________________________________ o Web Site Evaluator Troba Raises $5.5 Million in Round One SAN FRANCISCO -- Troba, which provides businesses with technology that evaluates the effectiveness of their Web sites, said it raised $5.5 million in its first round. CMEA Ventures participated in this round along with other undisclosed individual investors. The company will use the funds to launch its product e-MBO, which develops, measures, and tracks customer satisfaction, and to expand its business development and sales activity. http://www.troba.com/ _____________________________________________ o Customer Care Firm vCustomer Raises $11 Million Second Round BELLEVUE, Wash. -- vCustomer, a customer support applications and outsourcing firm, raised $11 million in its second round of funding with $10 million from Warburg Pincus. The remainder came from undisclosed investors. Maya Chroengel, a vice president at Warburg Pincus, will join vCustomer's board as its second member. vCustomer said it will use the funds to open new offices and for sales and marketing. http://www.vcustomer.com/ _____________________________________________ o Kagoor Networks Closes Round Two with $18 Million SAN MATEO, Calif. -- Kagoor Networks, a developer of voice over IP technologies, said it closed its second round of funding with close to $18 million. VantagePoint Venture Partners, ComVentures, an undisclosed corporate investor, and individual investors including Ed Kozel, former Cisco Systems chief technology officer, and Raj Singh, founder of Sierra Networks, participated in the round. Kagoor has offices in Herzeliya, Israel and San Mateo, Calif. http://www.kagoor.com/ _____________________________________________ o Medical Software Firm Cbyon Has $11.5 Million in Round Two PALO ALTO, Calif -- Cbyon, a privately held medical technology company developing and marketing surgical navigation and visualization software for minimally invasive surgery, said it has raised $11.5 million in a second round of funding provided by Tredegar Investments and Mitsui Private Equity. The round also included previous investors Alloy Ventures, Asset Management, Bedrock Capital, Charter Ventures, and Nikko Synergy Ventures. Edward F. Brennan, the vice president of Tredegar, will take a seat on Cbyon's board of directors. http://www.cbyon.com/ _____________________________________________ o Online Sports Firm Active.com Has $21 Million Second Round LA JOLLA, Calif. -- Active.com, which provides online sports registry services, said it raised $21 million in its second round of funding. Deutsche Bank affiliate ABS Ventures led the round, which includes new investors Hambrecht Capital, PowerBar founders Brian and Jennifer Maxwell, and previous investors Austin Ventures, Enterprise Partners, Kettle Partners, and Ticketmaster-Online CitySearch. The company will use the funding to further develop its online registration services. Last month, Active.com merged with recreational management software developer Sierra Digital. The company, formerly ActiveUSA.com, also merged with RaceGate.com last year. Active.com is also backed by KB Partners, New World Ventures, and Tour de France cycling champion Lance Armstrong. The latest round brings the company's total funding to approximately $52 million. http://www.active.com/ _____________________________________________ o Investing Site SaveDaily Closes Series B with $1.5 Million IRVINE, Calif. -- SaveDaily, which runs an online investing service, said it has closed its Series B round of financing at $1.5 million with $1 million from the venture firm H. S. Dent Foundation and the rest from undisclosed investors. Harry S. Dent, Jr., president of the H. S. Dent Foundation, invested in SaveDaily's Series A round in April of this year and will join SaveDaily's board as its fourth member. SaveDaily said it will use the funds to increase marketing. http://www.savedaily.com/ _____________________________________________ o Wireless Firm Vocera Raises $7.1 Million in Second Round CUPERTINO, Calif. -- Vocera, a Bluetooth wireless communications applications firm, said it has raised $7.1 million in its second round of funding from lead investor Vanguard Venture Partners, previous investor RRE Ventures, and IDEO. Don Wood of Vanguard will join Vocera's board as its third member. Vocera said it will use the funds for product development and to expand staff and management. http://www.vocera.com/ _____________________________________________ o E-Business Provider eAssist Secures $27 Million in Series C SAN DIEGO -- eAssist Global Solutions, which provides electronic businesses with integrated customer relationship management software applications, said it has secured $27 million in its Series C round of funding. The investors included GRP II, CIBC Capital Partners, Trinity Ventures, Vantage Point Venture Partners, and Infinity Capital. eAssist, which has raised $67 million to date, said it will use the funds to build additional internal infrastructure and for European expansion. Steven Dietz, a partner at GRP, will take a seat on eAssist's board of directors. The company was formerly known as eAssist.com. http://www.eassist.com/ ======= Bad News ======= o Recently Funded B2B Market EqualFooting Cuts Staff by 15% DULLES, Va. -- EqualFooting.com, a business-to-business online marketplace that provides purchasing, financing, and shipping services to businesses in the manufacturing and construction industries, said it laid off 35 workers, approximately 15% of its employees. The company said the layoffs were a result of a company restructuring due to market conditions and greater demand from larger companies. EqualFooting.com originally focused mostly on serving small and medium sized companies. The company said its laid-off employees were given severance pay and continued health insurance coverage and stock options. EqualFooting.com raised a $60 million second round of funding earlier this year, bringing its total funding raised to approximately $70 million. The company is backed by Capital Investors, Draper Richards, FBR Technology Venture Partners, NationsRent, New Enterprise Assiciates, Nextel Communications, Safeguard Scientifics, Thomas Publishing, Textron, Women's Growth Capital Fund, Yahoo!, and former Federal Communications Commission chairman Reed Hundt. http://www.equalfooting.com/ _____________________________________________ o Streaming Media Firm Files for Chapter 11 Before Merger PORTLAND, Maine -- Streaming media firm BroadcastAmerica.com said it would file for Chapter 11 bankruptcy as part of its intention to reorganize and merge with SurferNetwork.com, a Mt. Olive, N.J.-based provider of Internet marketing and streaming radio services. A timeline for the deal as well as financial details are uncertain, but the companies said they expect the deal to be completed in six months. The combined company will be called BroadcastAmerica and headquartered here. Current SurferNetwork chairman and CEO Gordon J. Bridge will become the chairman and CEO of the new company. Current directors from both companies will be named as directors of the new BroadcastAmerica, as will BroadcastAmerica.com founders. SurferNetwork is backed by individual investors and incubator Geode Electronics. BroadcastAmerica.com is funded by individuals. http://www.broadcastamerica.com/ http://www.surfernetwork.com/ ======= New Deals ======= o Sephora.com Buys Name and URL of Defunct Beauty Site Eve.com SAN FRANCISCO -- Sephora.com, an online beauty retailer, said it acquired the name and Web address of failed beauty site Eve.com, as well as the rights to send two e-mails to Eve.com's customers. Eve, an online upscale beauty products retailer, closed its operations and laid off most of its employees late last month. Sephora.com is the online branch of Sephora, a fragrance and cosmetics superstore and subsidiary of LVMH Moet Hennesy Louis Vitton. The terms of the deal were not disclosed. Eve.com was backed by idealab!, Weiss, Peck & Greer Venture Partners, Charter Venture Capital, Crosslink Capital, and Menlo Ventures. http://www.sephora.com/ _____________________________________________ o ING Barings Takes Equity Stake in OffRoad Capital SAN FRANCISCO -- OffRoad Capital, an online marketplace for private companies, said it formed a strategic alliance with ING Barings under which ING intends to take an undisclosed equity stake in the company in exchange for access to OffRoad's technology platform. The alliance is designed to expand the deal flow for both companies. Richard Burrell, ING Baring's head of Internet business, will take a seat on the company's board as an observer. OffRoad currently holds partnerships with Charles Schwab, Robertson Stephens, and the Mayfield Fund. http://www.offroadcapital.com/ ======= M&A ======= o New Edge Networks Acquires West-Net in Stock and Cash Deal VANCOUVER, Wash -- New Edge Networks, a wholesale broadband DSL provider in small, midsize and semi-rural markets, said it acquired West-Net, a privately owned data communications network service provider, in a stock and cash deal. Financial terms of the deal were not disclosed. Keith Rinne, president and founder of West-Net, also based in Vancouver, Washington, will become president of the newly created WAN services group for New Edge Networks. New Edge Networks investors include Goldman Sachs partnership GS Capital Partners III, Accel Partners, Crosspoint Venture Partners, Greylock, Intel, Meritech Capital Partners, Comdisco Ventures, Morgan Stanley Dean Witter, and the company's management. http://www.newedgenetworks.com/ http://www.wni.net/ ======= New Directors ======= o B2B Firm Day Interactive Appoints Former AOL Exec to Board LOS ANGELES -- Day Interactive, a publicly traded Swiss firm that creates and manages business-to-business Web sites and Internet marketplaces, said it has appointed Mark Walsh, former senior vice president and corporate officer at America Online and founder and director of America Online's business-to-business division, AOL Enterprise, as the sixth member of its board. Mark Walsh is currently chairman and chief strategy officer at VerticalNet, a network of Web sites for the business-to-business community, and also serves on several corporate, non-profit, and advisory boards including the President's Advisory Group of the U. S. Chamber of Commerce, the Software and Information Industry Association, and the Standard for Internet Commerce group. Day Interactive said it has received institutional funding from undisclosed companies in the U.S., England, Switzerland, and other European countries. http://www.daynetwork.com/ _____________________________________________ o ServiceMagic.com Names Qwest Dex CEO to Board GOLDEN, Colo. -- ServiceMagic.com, an online marketplace that connects consumers with local home service professionals, said it named Jim Smith to its board of directors. Mr. Smith is president and CEO of Qwest Dex, a print and online directory publishing and Internet advertising division of Qwest Communications. Mr. Smith currently serves on the boards of directors for Critical Path, PointServe, University of Washington e-Business Advisory Board, the Yellow Pages Publishers Association, the Children's Hospital, and the Public Education Network. ServiceMagic's investors include CertainTeed, Maytag, US WEST, Softbank Venture Capital, Sequel Venture Partners, and Tango. http://www.servicemagic.com/ _____________________________________________ o Tech Holding Firm Fenix Taps Ex-TCI Vice President for Board DALLAS -- Fenix Enterprises, a technology holding company, said it has appointed Larry. E. Romrell, the former vice president of Tele-Communications (TCI), to its board of directors. Mr. Romrell also served as senior vice president of TCI Ventures Group. Mr. Romrell will join recent appointees Fred Vierra, former CEO of Tele-Communications International (TCI) and Terence V. Milholland, CTO of Electronic Data Systems (EDS), on Fenix's board. Fenix, which is backed Union Pacific, said it is actively seeking venture capital. http://www.fenixenterprises.com/ _____________________________________________ o Ubiquio Names CEO of Interelate to Board of Directors MINNEAPOLIS -- Ubiquio, a handheld service provider that manages mobile devices for business customers, said it named Wade Myers to its board of directors. Mr. Myers is chairman and CEO of Interelate, a customer intelligence application service provider. Ubiquio is funded by Andcor Companies, Backfin Capital, Start Up Fund I, Capitalyst Group, Intranet Solutions, Risdall Linnihan Advertising, and individual investors. http://www.ubiquio.com/ ======= New People ======= o Former Scientific-Atlanta VP, Named President & CEO of Iolon SAN JOSE, Calif. -- Iolon, which designs and develops tunable optical devices, said it named John H. Clark as president, CEO, and chairman of the board. Mr. Clark, who previously worked as an assistant professor of chemistry at the University of California at Berkeley and helped found Amoco Laser, most recently served as vice president and general manager of the opto-electronics unit at Scientific-Atlanta. Iolon is backed by investors including Kleiner Perkins Caufield & Byers, Seagate Technology, and Optical Capital Group. http://www.iolon.com/ _____________________________________________ o Data Distilleries Names Former Andersen Partner as CEO AMSTERDAM -- Data Distilleries, a European provider of analytical customer relations management (CRM) services, said it appointed Robert Baldock, former global managing partner with Andersen Consulting, as its new chief executive officer. Mr. Bladock most recently spent six months investing in Internet finance start-ups. Marcel Holsheimer, company founder, will become Data Distilleries president. Data Distilleries products enable businesses to predict customer behavior and use those predictions in real-time personalized recommendations through various channels. The company's investors include Capital Z Financial Services Fund II, efinanceworks, and Glide IT Fund. Data Distilleries was founded in 1995 as a spin-off of the Dutch National Research Center for Mathematics and Computer Science. http://www.datadistilleries.com/ _____________________________________________ o 3Di Names Ex-Lockhead Martin Executive as President and COO EASTON, Md. -- 3Di, which collects spatial data and provides companies with spatial data technology, software, and applications, said it has appointed Kevin J. Reardon, a former U. S. Navy nuclear submarine captain who also held executive positions at Lockhead Martin and Northrop Grumman managing spatial data for the U. S. military, as president and COO. 3Di said it received funding from Koch Ventures in 1998. http://www.3Di.com/ _____________________________________________ o Consulting Firm Quidnunc Taps Former Consult Exec as CEO NEW YORK -- Quidnunc, an Internet business consulting firm, announced it has appointed Bob Burke, former president of consulting firm ePresence Solutions, as the company's CEO. Co-founder Laurence Holt will remain chairman of the board. Quidnunc received $15 million in its first round of financing from Goldman Sachs Private Equity Partners and Weston Presidio Capital in October of last year. http://www.quidnunc.com/ _____________________________________________ o Intellectual Property Firm uVentures Adds to Board NEW YORK -- uVentures, an online intellectual property management and technology licensing marketplace, said it has appointed Thomas Gardner, the president, chief executive officer and director of Datamonitor, to its board of directors. Mr. Gardner was previously chairman and chief executive officer of Base Ten Systems. uVentures is backed by individual investors. http://www.uventures.com/ ======= VC Fund News ======= o Hicks Muse Guarantees 20% Fund Return, Backs Away from VC DALLAS -- Buyout and investment firm Hicks Muse Tate & Furst said it will guarantee a minimum of a 20% internal rate of return for investors on $200 million that has been invested in early-stage Internet-related companies. The $200 million, called HTMF Holdings, is part of Hicks' Fund V, which it expects to close with several billion dollars. Hicks Muse has made investments from loans and is now raising funds to cover the loans. The move to guarantee returns comes after several of its Internet investments have performed poorly. Hicks Muse partners will personally guarantee the investment return from profits of previous funds. The firm also said it would no longer be making venture capital investments in new companies and would focus on companies in the consumer branded, manufacturing, and media sectors. The firm has not ruled out making additional investments in venture-backed companies it already has in its portfolio. Hicks Muse cited market difficulty and investor reluctance as factors in its change of investment strategy. The company's venture capital portfolio includes Latin American travel site Despegar.com, Web-based community developer Ramius, online sports content provider Sports.com, data and dedicated Internet service provider Teligent, and ISP Vectrix. In September, CMGI called off plans to establish an international venture fund with Hicks Muse Tate & Furst and PCCW. Telephone 214-740-7300. _____________________________________________ o e-ffinity Properties Formed to Fund Real Estate Tech Firms NEW YORK -- Brookfield Properties, Chase Capital Partners, CIBC Capital Partners, and Trilon Capital Partners said they formed a real estate technology partnership called e-ffinity properties to provide venture capital to emerging technology companies for new telecommunication and technology-based products and services for real estate companies and their tenants. The companies have committed an initial $60 million to e-ffinity. http://www.e-ffinityproperties.com/ _____________________________________________ o Netherlands VC Firm NeSBIC Starts Support Program UTRECHT, The Netherlands -- NeSBIC CTe Fund, a venture capital fund in the Netherlands, said it started a support program called Value-Added Services Program (VASP) for its 31 portfolio companies. VASP will provide services in finance, human capital, law, business development, and operations. Portfolio companies also will have access to the CTe extranet, an online communication platform where the companies can exchange information, experience, and business opportunities, and look up information such as advice on recruiting new employees. The NeSBIC CTe fund currently has $310 under management. http://www.nesbic.com/ _____________________________________________ o Spectrum Equity Expands London Office, Fund Ready to Go LONDON -- Spectrum Equity Investors, a communications venture capital firm, said it added Michael Kennealy to its London office. Mr. Kennealy was a general partner in the Boston, Mass. office and will relocate to London as general partner. Mr. Kennealy joins Shawn Colo, who opened the London office in December 1999. The company also said it is ready to invest $500 million of its $1.75 billion Fund IV. Fund IV will invest in all stages of communications and infrastructure companies, particularly in the U.K. and Western Europe. http://www.spectrumequity.com/ _____________________________________________ o Woodside Fund Forms Strategic Partnership with Acuitive WOODSIDE, Calif. -- Early stage venture capital firm Woodside Fund formed a partnership with Acuitive, a consulting firm that provides strategic management and technical services for early stage telecommunications and networking ventures. Acuitive will be making its expertise and contacts available to Woodside and will also be joining Woodside's technical advisory board. Woodside Fund IV closed in April 2000 and invests between $5 million and $10 million in early stage IP infrastructure and e-commerce infrastructure companies located in Northern California and the West Coast. http://www.woodsidefund.com/ ======= VC Personnel ======= o BancBoston Capital Names Two to European Investment Group LONDON -- BancBoston Capital, the private equity investment arm of FleetBoston Financial, said it appointed Bernard De Backer and Scott Penwell to its European Technology and Communications Group. Mr. De Backer, who performed four years of research in electromagnetics, will develop European investment opportunities in broadband communications. Mr. Penwell, formerly employed with Robertson Stephens working on corporate finance and merger and acquisition, will focus on investments in software and information technology services. Telephone +44-207-600-2288. _____________________________________________ o Kick-Start Ventures Names Two New Partners in London LONDON -- European venture catalyst Kick-Start Ventures said it named two new partners to its London office. Alexandra Clarke, former partner at Deutsche Bank-affiliated incubator Armada Partners, will join the firm as its new finance partner. Erik Vasquez, former business development manager for Kana Communications, will assist in new venture development at the firm. Kick-Start Ventures has a European network offices in London, Paris, Munich, Frankfurt, and Amsterdam. http://www.kickstartventures.com/ |||||||||||||||||||| Advertisement |||||||||||||||||||| DODADS, GADGETS, AND GIZMOS, OH MY! Our pockets are overflowing with mobile phones, PDAs, and two-way pagers, and more products -- from Web pads to picture frames -- come with Internet connections. Consumer Devices, one of five expert panels at Technology Outlook 2000, will sort through the clutter to determine which devices have the best chances of finding mass-market audiences: Safi Qureshy, Chairman, AudioRamp Daniel H. Rimer, Partner, The Barksdale Group Kent Savage, President & CEO, Netpliance Michael Slater, President, PhotoTablet Technology Outlook 2000: The future of pervasive computing December 4 and 5, San Francisco http://www.tpsite.com/tp/conf/to2000/?vw=200011092 A VentureWire investment conference. ||||||||||||||||||||||||||||||||||||||||||||||||||||||| SEND TO A FRIEND To subscribe to VentureWire, tell your friends and colleagues to go to: http://venturewire.net/ This copy of VentureWire may be distributed freely, provided that the distribution is without charge, that the issue is distributed complete and unaltered, and that all copies retain the Technologic copyright notice. This copy of VentureWire and the information within it, however, may not be reproduced, saved, or otherwise copied into a database without the prior written consent of Technologic Partners. _____________________________________________ TO SUBSCRIBE go to: http://venturewire.net/ To CHANGE your address, send your old and new e-mail address to: [email protected] To UNSUBSCRIBE, send e-mail to: [email protected] Send COMMENTS, QUESTIONS, or NEWS ITEMS to: [email protected] Entire Contents Copyright 2000 by Technologic Partners VentureWire is a Service Mark of Technologic Partners =====================================

dasovich-j/all_documents/3261.

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Energy Issues

Please see the following articles: Sac Bee, Tues, 5/10: No deal in energy refund talks Sac Bee, Tues, 5/10: Third power plant opens: But the Los Medanos=20 facility isn't pouring out electricity yet Sac Bee, Tues, 5/10: State reveals high-priced power deals Sac Bee, Tues, 5/10: Government finds ways to conserve: The Santa Rita=20 Jail goes solar as agencies get creative to cut costs SD Union, Tues, 5/10: Energy talks reach no settlement; state threatens sui= t SD Union, Tues, 5/10: Refunds in jeopardy as talks fail SD Union, Tues, 5/10: State's massive outlays detailed SD Union, Tues, 5/10: State releases early spot market energy purchases LA Times, Mon, 5/9: FERC Judge Says State Owed No More Than $1 Billion LA Times, Tues, 5/10: Electricity Cost Data Spread the Blame LA Times, Tues, 5/10: Duke Energy Asked to Allow Release of Data LA Times, Mon, 5/9: Concern Over Price of Long-Term Power Pacts Grows SF Chron, Tues, 5/10: State's refund demand rejected=20 Judge ends rebate talks, rebukes $9 billion claim=20 SF Chron, Tues, 5/10: Davis opens another new power plant=20 Pittsburg facility will generate 555 megawatts SF Chron, Tues, 5/10: California rejects B.C. Hydro $125 million settlement SF Chron, Tues, 5/10: Davis' criticism of Texas misdirected, report finds SF Chron, Tues, 5/10: Developments in California's energy crisis SF Chron, Tues, 5/10: Energy talks reach no settlement; state threatens sui= t SF Chron, Tues, 5/10: Toxic fumes not linked to blackouts=20 Backup power OK in facilities, report says Mercury News, Tues, 5/10: Power suppliers, state fail to agree on refund to= tal Mercury News, Tues, 5/10: Power purchase bills exceed $7.5 billion Biggest suppliers are not from Texas OC Register, Tues, 5/10: Refund outlook dims OC Register, Tues, 5/10: State reveals details of power purchases OC Register, Tues, 5/10: Ghost of Bob Citron roaming halls of capital Gray Davis is following footsteps of former O.C. treasurer into fiscal=20 chaos (Commentary) Individual.com (PRnewswire), Tues, 5/10: Calpine's Los Medanos Energy Cente= r=20 Adds Needed Generation to California Second New Major Base Load Generator for=20 California=20 NY Times, Tues, 5/10: California and Generators Still Split After 2-Week Ta= lks Wash. Post, Tues, 5/10: Energy Refund Talks Fail In Calif.; Federal Agency'= s=20 Judge To Propose Settlement WSJ, Tues, 5/10: California and Energy Companies Miss Deadline ---------------------------------------------------------------------------= --- ---------------------------------------------------------------------------= --- ----------------- No deal in energy refund talks=20 By David Whitney Bee Washington Bureau (Published July 10, 2001)=20 WASHINGTON -- Negotiations to settle a tangle of issues arising out of=20 California's electricity debacle sputtered to an end Monday with the sides= =20 light-years apart on refunds for overpriced wholesale power sales.=20 The impasse raises the specter of years of litigation, with a regulatory=20 judge proposing a formula that could limit refunds to about $1 billion whil= e=20 California is seeking at least $8.9 billion and perhaps much more.=20 Federal Energy Regulatory Commission administrative judge Curtis Wagner sai= d=20 that within a week he'll urge the five FERC commissioners to begin=20 fact-finding hearings on how much is truly owed, following guidelines he=20 outlined sketchily Monday.=20 Among them would be limiting the time when refunds are allowed -- something= =20 that could reduce state claims by about one-third -- and changing the way= =20 power plant costs are calculated to a formula more favored by generators.= =20 Gov. Gray Davis said he was heartened by the judge's belief that California= =20 is due some amount of refund money, rejecting the generators' arguments for= =20 no refunds.=20 With the 15-day negotiation session nearly moribund, generators and power= =20 traders had offered up $716 million in proposed refunds in the final days.= =20 But Wagner indicated that that would have to be offset by money the state= =20 still owes power companies, meaning no cash would actually change hands.=20 The judge held out the possibility that at least two parties, including San= =20 Jose-based Calpine Corp., could reach separate agreements with the state.= =20 "From what I know, it looks like we can reach an agreement," Calpine=20 spokesman Bill Highlander confirmed Monday. But he said he could not disclo= se=20 any details under Wagner's gag order on participants in the negotiations.= =20 Enron Corp., one of the nation's highest-profile power traders, said=20 California officials killed the talks by never budging from their claims th= at=20 the state's consumers deserved at least $8.9 billion in refunds for=20 overcharges.=20 "These talks never had a chance," said Enron spokesman Mark Palmer. "Their= =20 political skins are worth more than $716 million that the taxpayers of=20 California could have used. It was about creating and maintaining a tool fo= r=20 a witch hunt."=20 Of the $716 million compromise offer, $510 million was put on the table by= =20 what Wagner called the "Big Five" generators -- Reliant, Duke, Mirant,=20 Williams and Dynegy -- some of whom are under state investigation. Another= =20 $125 million was offered by BC Hydro, British Colombia's government utility= ,=20 which is not under FERC jurisdiction, and $16.5 million was offered by six= =20 California municipal utilities.=20 The Sacramento Municipal Utility District, the state's second-largest=20 municipal utility, also declined to comment on the talks or any settlement= =20 amount it may have offered, but said it would outline its position in writi= ng=20 Thursday, the judge's deadline for comments on his proposal.=20 Consumer advocates and some industry officials said the judge's brief publi= c=20 remarks make it difficult to predict exactly what the impacts could be on t= he=20 state's troubled electric scene.=20 "If the judge is saying that the refund is topped at a billion that's=20 outrageous," said Nettie Hoge, head of The Utility Reform Network. "If=20 they're going to start doing some fact finding, hallelujah."=20 Hoge said the talks had been unrealistic from the start, because there was = no=20 effort by FERC to determine how high the overcharges had actually been and= =20 then work toward a compromise from there.=20 The state used a formula calculated by its nonprofit grid operator, the=20 Independent System Operator, which was attacked by marketers as wildly high= =20 even while the state called it conservatively low.=20 Joel Newton, representing all five of the big generators, said Monday that= =20 the ISO has consistently based its demand on "sketchy and incomplete" data.= =20 The face-off between Davis and power merchants began last fall, as wholesal= e=20 electricity costs were soaring and California utilities warned that they=20 could be driven into bankruptcy.=20 The governor said generators and traders took advantage of the state's powe= r=20 shortage to manipulate markets and gouge consumers. Generators said they=20 followed all laws and were only deriving fair profits in a scarcity=20 situation.=20 FERC, which entered the picture because by law it has to ensure that=20 electricity rates are "just and reasonable," has made repeated, unsuccessfu= l=20 efforts to craft a solution that could appease both sides.=20 State Assembly Speaker Robert Hertzberg, D-Sherman Oaks, said Monday that t= he=20 failure of the settlement talks to agree on a refund figure "comes as no=20 surprise."=20 Negotiators representing generators "refused to even acknowledge the=20 inescapable fact that they have profited enormously by exploiting a=20 dysfunctional market -- at California's expense," he said.=20 Davis, who had accused the generators of failing to negotiate in good faith= =20 with state representatives, said that although FERC commissioners have been= =20 slow to respond to his requests for refunds and for price caps on wholesale= =20 electricity, they "now have the opportunity to redeem themselves."=20 He suggested the commissioners can opt to award California more than is=20 recommended by the judge.=20 Wagner, after mediating talks that continued throughout the weekend, seemed= =20 resigned to the fact that trying to bring more than 50 government, utility= =20 and power generating entities together proved to be an exercise in futility= .=20 Michael Kahn, head of the California delegation and consultant to the=20 California ISO, nonetheless came away thinking the state had fared pretty= =20 well.=20 "We came here wanting $8.9 billion," Kahn said. "In all candor, we didn't= =20 receive any meaningful settlement offers and so the negotiations were not a= s=20 helpful as we had hoped they would be. But our positions were vindicated"= =20 because refunds were offered.=20 Meanwhile, Pacific Gas and Electric Co. and Southern California Edison=20 sounded the call for more talks.=20 "We're willing to talk to anyone, anytime about a settlement," said Steve= =20 Pickett, general counsel of Southern California Edison. PG&E said in a=20 prepared statement that the sessions "provide a solid basis for further=20 negotiations."=20 How much money the state might eventually receive remains the big question= =20 mark. Wagner said settlement offers of $716 million suggest that eventual= =20 refunds will amount to "hundreds of millions of dollars, maybe a billion."= =20 But he also stressed that he would recommend no specific figure to FERC=20 commissioners and does not know how big refunds might eventually be.=20 Other recommendations Wagner said he would make to the commission were a=20 mixed bag for the state.=20 The judge said he would recommend refunds no further back than Oct. 2, 2000= ,=20 an action that Kahn said would immediately slice $3 billion off the state's= =20 refund analysis that stretched back to May 2000.=20 But Kahn said that was no defeat for the state, which would turn to the=20 courts to recover that and any other sums excluded from a final refund orde= r.=20 "We still have a viable litigation claim for the remainder," Kahn said.=20 Brent Bailey, vice president and general counsel of Duke Energy of North=20 America, said he felt the formula laid out by Wagner would generate a refun= d=20 order in the range of $1 billion to $1.5 billion.=20 "It's a reasonable amount in the context of these settlement talks," Bailey= =20 said.=20 The Bee's David Whitney can be reached at (202) 383-0004 or=20 [email protected].=20 Staff writers Emily Bazar and Dale Kasler contributed to this report. Third power plant opens: But the Los Medanos facility isn't pouring out=20 electricity yet.=20 By Carrie Peyton Bee Staff Writer (Published July 10, 2001)=20 The flood of new electricity being welcomed by Gov. Gray Davis was only a= =20 trickle at the latest power plant that the governor opened on Monday,=20 according to sources close to California's energy crisis.=20 Heralded by Davis as part of a "powerful one-two-three punch" that will bri= ng=20 California closer to energy independence, the Los Medanos Energy Center in= =20 Pittsburg spit out no more than 20 megawatts on its opening day, they said.= =20 That is less than 5 percent of the plant's 555-megawatt operating capacity.= =20 Los Medanos could generate a couple of hundred megawatts later this week bu= t=20 is not expected to reach its full output for two to three weeks, according = to=20 knowledgable sources.=20 Representatives for Calpine and the governor's office, when pressed for=20 details, acknowledged that the plant was not running at full tilt but said= =20 they did not know how much electricity was actually produced Monday.=20 Calpine, which will bill someone for whatever electricity it sells from Los= =20 Medanos, is keeping track of the production but the figure wasn't immediate= ly=20 available for the media, spokeswoman Katherine Potter said.=20 "Even if it was two megawatts, that's two more megawatts that we didn't hav= e=20 yesterday," said Davis spokesman Steve Maviglio.=20 He said the opening was "largely ceremonial," timed for the convenience of= =20 the governor and Calpine's top executive.=20 But consumer advocate Harvey Rosenfield called the media event "a deception= ."=20 It was the third highly publicized power plant launch the governor has=20 attended in the past two weeks.=20 "It's the governor trying to convince people he's hard at work solving the= =20 problem when it's all for show," Rosenfield said. "He's governing by sound= =20 bite. He's certainly getting his money's worth from the consultants he=20 hired."=20 Davis political adviser Garry South said last week that the governor's new= =20 radio ad campaign will highlight the efforts to produce more power in=20 California.=20 "Generation comes up in our polls as being the No. 1 thing people want us t= o=20 do -- build more power plants," South said then. "People want the sense tha= t=20 progress is being made -- that this is not spiraling out of control."=20 The other two plants that Davis kicked off -- Sunrise in Kern County and=20 Sutter near Yuba City -- have since been running at maximum capacity.=20 Calpine anticipates pumping the full 550 megawatts out of Los Medanos withi= n=20 a week to 10 days, company officials said.=20 "In the first month of these new plants, there are always stops and starts,= "=20 said Calpine spokesman Bill Highlander. "Sometimes we shut down altogether.= "=20 Including the three just-opened facilities, new or expanded power plants ar= e=20 expected to add 1,500 megawatts to the state's struggling electric grid by= =20 the end of July, and 870 megawatts of that is already in place, according t= o=20 the state Independent System Operator.=20 Another 1,000 megawatts is anticipated for the end of August and 1,100 more= =20 for the end of September, under a rough timetable that is likely to see som= e=20 plants zip ahead of schedule and others fall behind.=20 The Bee's Carrie Peyton can be reached at (916) 321-1086 or=20 [email protected]. State reveals high-priced power deals=20 By Dale Kasler and Chris Bowman Bee Staff Writers (Published July 10, 2001)=20 The state Monday released details of its adventures in buying electricity o= n=20 the spot market, revealing a chaotic world in which prices fluctuate wildly= =20 within minutes.=20 The Department of Water Resources, which has been criticized for keeping it= s=20 power-purchasing practices a secret, released 1,770 pages of invoices and= =20 trade confirmations that provided the most detailed look yet of its purchas= es=20 since it jumped into the energy-buying business Jan. 17. The information wa= s=20 released a week after state Controller Kathleen Connell put out details of= =20 the state's long-term power contracts over the objections of Gov. Gray Davi= s,=20 her political nemesis.=20 The state has committed about $8.1 billion to buying power on behalf of=20 California's crippled utilities, straining the budget surplus and raising= =20 questions from lawmakers and others about Davis' policies for resolving the= =20 state's energy crisis. In turn, state officials have accused many suppliers= =20 of gouging California to the tune of several billion dollars.=20 When it came to the spot market, the water department was at the mercy of a= =20 business run amok. The state paid upward of $300 a megawatt-hour for days i= n=20 January and February -- months when electricity normally should be a lot=20 cheaper. Water officials said prices have dropped to the $100 range largely= =20 because they've signed a slew of long-term contracts, reducing their=20 dependence on spot sales.=20 "Our exposure earlier this year to the spot market was at the maximum," sai= d=20 Oscar Hidalgo, spokesman for the water department.=20 The information released Monday covered the first three months of the year= =20 and didn't include the highest price the water department has paid for=20 electricity: $1,900 a megawatt-hour in May to Reliant Energy Inc., a Texas= =20 generator that owns several plants in the state. Duke Energy Corp. of North= =20 Carolina charged even more for power in January, $3,880 a megawatt hour, bu= t=20 that sale was made to the Independent System Operator, which runs the state= 's=20 transmission grid.=20 The documents show that while the state's stricken utilities no longer buy= =20 power for themselves, their sister companies have sold expensive power.=20 Through May 31, the state paid a trading arm of Sempra Energy, the parent o= f=20 San Diego Gas & Electric, some $429 million for power. It paid PG&E Energy= =20 Trading, an unregulated sister company of Pacific Gas and Electric Co., abo= ut=20 $23.7 million.=20 Among others, the Los Angeles Department of Water and Power was paid $331= =20 million through May 31; Canadian utility BC Hydro was paid $1.05 billion;= =20 Atlanta's Mirant Corp. $1.24 billion; the federal government's Bonne=0F'vil= le=20 Power Administration $167 million; and the Sacramento Municipal Utility=20 District $80.7 million.=20 Generally, the more desperate the state was for power, the higher the price= s.=20 For instance, Oklahoma-based generator Williams Cos. commanded $565 a=20 megawatt-hour March 20, when blackouts struck more than 1 million=20 Californians.=20 Location also was critical. On March 8 the state paid the PG&E trading unit= =20 $250 but only $180 to Arizona-based Pinnacle West Capital Corp. The=20 difference was that PG&E's power was delivered to energy-starved Northern= =20 California, while Pinnacle's was sent to Southern California where energy= =20 wasn't so scarce.=20 Split-second timing was also crucial. At 9:09 a.m. Feb. 14, the state paid= =20 $400 to Mirant for power to be delivered the next day. By 10 a.m. it was=20 paying Mieco Inc., a Long Beach trading firm, $475 for the same product.=20 "That's the spot market -- it's the most volatile market in the world, and = it=20 changes on a second-by-second basis," said Enron Corp. spokesman Mark Palme= r.=20 For all the criticism leveled at Duke, Reliant and other big corporations,= =20 government-owned entities were among the most aggressive at charging high= =20 prices.=20 BC Hydro, the electric utility owned by the Canadian province of British=20 Columbia, submitted bills for up to $1,000 a megawatt-hour. The city of=20 Glendale charged $375 a megawatt-hour for power in January, while SMUD=20 charged $309 a megawatt-hour in March. The city of Eugene, Ore., averaged= =20 $450 a megawatt-hour in February.=20 "We play by the rules of the electricity trade marketplace," said BC Hydro= =20 spokesman Wayne Cousins. "Our traders worked very hard to find additional= =20 sources of electricity to keep the lights on in California. Had we not come= =20 through and stepped forward with these supplies, the consequences to=20 California customers would have been severe."=20 The state also said it has spent $14.4 million on administrative costs in= =20 buying power.=20 The Bee's Dale Kasler can be reached at (916) 321-1066 or [email protected]= m. Government finds ways to conserve: The Santa Rita Jail goes solar as agenci= es=20 get creative to cut costs. By Cheryl Miller Bee Correspondent (Published July 10, 2001)=20 To Matt Muniz, the solar panels sprouting on the rooftop of the Santa Rita= =20 Jail in Dublin aren't just energy-makers; they're money in the bank.=20 When all 4,000 panels are completely installed this month, the 500-kilowatt= =20 photovoltaic system -- the largest rooftop project ever constructed in the= =20 United States -- will cut the jail's demand on the electric grid by up to 2= 0=20 percent, according to Muniz, Alameda County's energy program manager.=20 That sun power, combined with conservation projects already completed at th= e=20 jail, will slash about $300,000 a year from the facility's energy bill. Mun= iz=20 is already scouting other county rooftops for solar potential.=20 "With the cost of electricity going up, you can start looking at it as a=20 business decision, just investing your money," said Muniz. "There's virtual= ly=20 no maintenance on this equipment. It just sits on your roof and converts=20 right into electricity that you're using as soon as you generate it. I thin= k=20 (solar) is the wave of the future, even though it's been around 30 or 40=20 years."=20 The Santa Rita Jail project is among the largest, and perhaps most=20 conspicuous, examples of steps government agencies are taking to cut=20 electricity use in response to skyrocketing power bills and Gov. Gray Davis= '=20 call for public entities to conserve.=20 Among the examples:=20 San Francisco leaders are pondering a bond measure to finance solar-powered= =20 rooftop projects around the city.=20 The Tulare County town of Lindsay will open City Hall two hours earlier -- = at=20 6 a.m.-- and close at 4:30 p.m. Monday through Thursday this summer so=20 offices can stay dark all day Friday and during peak-use afternoon hours.= =20 Sacramento County has instituted a casual dress policy so employees can=20 better withstand office temperatures that climb as high as 78 degrees.=20 Workers have also set sprinklers to run at night so that electric water pum= ps=20 operate during low demand.=20 "When you start to see the bills going up and you start to hear concerns fr= om=20 some citizens, that obviously raises the threshold of wanting to help out,"= =20 said Jolena Voorhis, an energy analyst at the California State Association = of=20 Counties. "Certainly (counties) stepped up to the plate when they were aske= d=20 to increase conservation efforts. They've done about as much as humanly=20 possible."=20 Kings County leaders thought they made a great deal in 1992 when they signe= d=20 up for Southern California Edison's interruptible load program, which=20 promises customers lower rates in exchange for agreeing to shut down=20 electrical services in times of shortage.=20 Then California's power crisis hit full-force this year. Since January,=20 Edison has called on the Central Valley county to cut electricity at its=20 Hanford government center 16 times -- for up to six hours each cycle.=20 At times that meant no lights to greet the public, no computers to process= =20 food stamp requests and during the Valley's foggy winter days, no heat to= =20 warm many of the 1,200 employees.=20 "We had one week in January when we were virtually shut down," said Chief= =20 Administrative Officer Larry Spikes. "We just decided we couldn't function= =20 that way."=20 So Kings County supervisors bought a $550,000 diesel-powered generator to= =20 match those already at the jail and juvenile center. They also decided to= =20 open and close administrative offices one hour earlier this summer so=20 buildings can power down before high demand hits the grid around 4 p.m.=20 The new hours, dimmed hallways and moments of darkness that occur when the= =20 generators kick on have become a routine part of doing government business= =20 these days, Spikes said.=20 So far, most counties have been able to absorb higher energy costs without= =20 cutting into programs because of relatively healthy budgets in recent years= ,=20 Voorhis said.=20 Public agencies' power troubles have proved a boon to some businesses.=20 Revenues at PowerLight, the Berkeley company that installed the Santa Rita= =20 Jail photovoltaic system, have tripled since last year.=20 "The last six months have been particularly intense," said Janice Lin,=20 director of business development for PowerLight. "In some ways the energy= =20 crisis in California has been a call to action."=20 The Sacramento Municipal Utility District, which already boasts the largest= =20 photovoltaic program in the country, has a 2,000-customer waiting list for= =20 solar projects and plans to bring sun power to the state Capitol, said Don= =20 Osborn, SMUD's solar program manager.=20 Back in Dublin, the 3,600 inmates at the Santa Rita Jail still receive thre= e=20 meals, air conditioning and hot showers -- powered now, in part, by the=20 plentiful sun in this relatively fog-free part of the East Bay.=20 The $4 million project, financed entirely with state and utility subsidies,= =20 should generate enough savings to pay for itself within the decade, Muniz= =20 said.=20 "It's a good investment for the money we're putting up front," he said. Energy talks reach no settlement; state threatens suit=20 By Mark Sherman ASSOCIATED PRESS=20 July 10, 2001=20 WASHINGTON =01) With talks between the state and power generators stalled,= =20 California may go to court to help win the $8.9 billion state officials=20 believe it was overcharged for electricity.=20 "I think we have demonstrated very clearly both to the FERC and to the judg= e=20 that the state is owed $8.9 billion and will settle for nothing less," said= =20 Roger Salazar, a spokesman for Gov. Gray Davis.=20 With negotiations at an impasse, the administrative law judge for the Feder= al=20 Energy Regulatory Commission said California is probably owed no more than = $1=20 billion in refunds. "The numbers were too far apart," said Curtis Wagner, the FERC chief=20 administrative law judge.=20 California, Wagner said, may receive nothing at all, because generators may= =20 be owed more than they have to return for any overcharges.=20 He placed the refunds owed the state at between $716 million and $1 billion= .=20 Power providers had offered $716 million as part of an overall settlement,= =20 while California state officials sought $8.9 billion, Wagner said.=20 He said California officials had not made the case for $8.9 billion in=20 refunds.=20 Salazar, however, said the state would go to court and may ask for $20=20 billion.=20 Separately, Wagner split off claims of overcharges from the Pacific=20 Northwest, saying he has not had time to consider those allegations under t= he=20 short timetable ordered by FERC last month.=20 Wagner served as a mediator during the 15 days of negotiations and will=20 recommend a settlement to FERC by next Monday. The commission ordered the= =20 talks last month in an effort to resolve differences between producers and= =20 the state over the breakdown of California's deregulated electricity market= .=20 Consumer advocates assailed the judge's recommendation and urged the state = to=20 continue its attempt to get refunds from what they say are profiteering pow= er=20 companies.=20 "It's like catching a bank robber, but instead of making him give back all = of=20 it, you only make him give back 5 percent of what he stole," said Douglas= =20 Heller, spokesman for the Santa Monica-based Foundation for Taxpayer and=20 Consumer Rights.=20 Power generators, however, were generally pleased with Wagner's comments.= =20 Brent Bailey, general counsel for Duke Energy, said even if the formula=20 Wagner recommends produces $1.5 billion in refunds, "that's a reasonable=20 amount in the context of these settlement talks."=20 California officials, negotiating on behalf of utilities, the Public=20 Utilities Commission and state power buyers, accused the producers of=20 manipulating supply to unfairly drive up prices.=20 The producers have acknowledged prices are high, but blame jumps in the pri= ce=20 of natural gas, which fuels many power plants, and the workings of the free= =20 market.=20 The bill for wholesale power in California soared to $27 billion last year= =20 from $7 billion the year before. Davis has estimated the state could spend = as=20 much as $50 billion this year.=20 The producers reiterated Monday that California's numbers are grossly=20 inflated. Attorneys for the five major generators =01) Duke Energy, Dynegy,= =20 Mirant, Reliant Energy and the Williams Cos. =01) said in a statement that = they=20 have made a "very substantial global settlement offer."=20 Reliant would agree to no more than $50 million in refunds as part of an=20 overall settlement that also would have to include protection from addition= al=20 legal claims, said John H. Stout, a company senior vice president.=20 But Stout also said, "Reliant's fundamental position has been and remains= =20 that no refunds are justified."=20 Refunds in jeopardy as talks fail=20 Judge sees possibility of offsets equal to the billions sought by state By Toby Eckert=20 COPLEY NEWS SERVICE=20 July 10, 2001=20 WASHINGTON -- Settlement talks between California and power providers accus= ed=20 of electricity price gouging collapsed yesterday, and the judge who will no= w=20 hand the case over to federal regulators set a course far from favorable to= =20 the state's demand for $8.9 billion in refunds.=20 "There are refunds due that total hundreds of millions of dollars and maybe= a=20 billion dollars," Curtis L. Wagner Jr., chief administrative law judge for= =20 the Federal Energy Regulatory Commission, said in previewing the=20 recommendations he will make to the commission.=20 But Wagner, who mediated the talks, also suggested that power sellers are= =20 still owed sums for electricity "that probably are higher than any=20 overcharges" for which they may have to pay refunds.=20 That opened the possibility that California could see no cash refunds, only= a=20 reduction in the billions of dollars the power generators and marketers cla= im=20 they are owed by state entities and utilities.=20 Wagner said he would recommend that FERC hold a "fast-track hearing" to try= =20 to untangle the complex financial claims and counterclaims arising from=20 California's power crisis.=20 Wagner also outlined a method that he said FERC should use for calculating= =20 refunds.=20 While his proposed formula includes part of one method the state used, it= =20 contains several elements for calculating electricity costs that were favor= ed=20 by power sellers, who maintain that California's numbers are wildly=20 exaggerated.=20 "I would suspect that would result in a number much below $8.9 billion," sa= id=20 Joe Ronan, vice president of Calpine, a San Jose-based electricity generato= r.=20 "I think (Wagner's method) reflects more accurately what actually happened"= =20 in the state's dysfunctional power market.=20 But Michael Kahn, the state's lead negotiator, said Wagner "vindicated"=20 California's core arguments.=20 "The hundreds of people who came here on the other side had argued to the= =20 mediator that there should not be any refunds, and that position was loudly= =20 rejected," said Kahn, chairman of the organization that manages most of=20 California's power grid.=20 "We think the numbers, even using the judge's formula, are going to be in t= he=20 multiple billions. Whatever amount of money .?.?. is awarded to us, we will= =20 have viable claims in state court and other jurisdictions for the remainder= .=20 So what we have here is a situation where California will get its $8.9=20 billion."=20 Power sellers acknowledged that the threat of litigation remains worrisome = to=20 them. They sought an end to investigations of their conduct, and immunity= =20 from legal action as part of their bargaining position.=20 During two weeks of negotiations ordered by FERC, the two sides came nowher= e=20 near bridging their differences. Wagner said a number of power sellers had= =20 put forward offers that totaled $716.1 million.=20 "That's a long way from splitting the difference," he said. "In 15 days, yo= u=20 can't work miracles."=20 Yesterday -- the deadline for completing the talks -- the ill will between= =20 the two sides broke into the open as Wagner allowed reporters into the=20 previously closed hearings.=20 Each side essentially accused the other of bargaining in bad faith and=20 failing to put forward realistic proposals.=20 John H. Stout, a senior vice president at Reliant Energy Wholesale Group,= =20 said the state used "biased calculations" to arrive at its $8.9 billion=20 refund demand. He also said that Reliant offered to knock $50 million off t= he=20 $300 million it claims it is still owed for power sold into the state.=20 Kahn shot back that Reliant made the offer confidentially to Wagner and nev= er=20 approached the state.=20 Figures scrutinized "This is the first time we've heard any of this information. And to give th= e=20 impression that somehow there's been cooperation or forthcomingness, I thin= k=20 is misleading," Kahn said.=20 The state's refund calculations were scrutinized repeatedly during the talk= s.=20 The $8.9 billion figure emerged from a study by the California power grid= =20 operator of charges for electricity between May 2000 and May 2001, a period= =20 when wholesale power prices soared.=20 Kahn said the figure was essentially duplicated when the state went back an= d=20 calculated what power costs would have been if a pricing method instituted = by=20 FERC last month had been in effect for the entire yearlong period.=20 FERC ordered the pricing method in a bid to tame wholesale prices in the=20 West.=20 In a partial win for the state, Wagner said he would recommend that FERC us= e=20 the order retroactively as a basis for calculating refunds, an approach=20 resisted by the power sellers.=20 But he said that FERC should only scrutinize charges going back to October= =20 2000, and should make several key changes in how power-generating costs are= =20 calculated.=20 For instance, he said, FERC should determine the actual amount of gas heat = it=20 takes to generate a megawatt of electricity and use spot market prices in= =20 Northern and Southern California to determine the cost of gas, rather than = a=20 statewide average cost, computed monthly.=20 Fewer overcharges? Those and other parts of the complex formula Wagner will recommend could=20 increase the benchmark cost of producing power and drive down the amount of= =20 overcharges.=20 Kahn said that applying FERC's pricing method only back to October would pu= t=20 about $3 billion of the state's refund claim off-limits.=20 Brent Bailey, vice president and general counsel for Duke Energy North=20 America, said, "We think (Wagner's) modifications are certainly a vast=20 improvement over FERC's June 19 order and also certainly over (the state's)= =20 model."=20 America.=20 In Sacramento, Gov. Gray Davis issued a statement characterizing the=20 electricity suppliers as pirates who refused to negotiate in good faith.=20 "While in the past the FERC has shown little, if any, interest in consumers= ,=20 they now have the opportunity to redeem themselves by returning the $8.9=20 billion California has demonstrated it is owed," Davis said.=20 Despite the harsh rhetoric, both sides indicated that they would continue= =20 trying to reach one-on-one settlements.=20 Ronan of Calpine said the generator was close to making a deal with the=20 state. Bailey said that while Duke would continue to push for a "global=20 settlement" between all the parties, "We've had serious settlement talks wi= th=20 the state over the last few days and hope to continue."=20 State's massive outlays detailed=20 Energy bill exceeded $100 million on 3 days By Jennifer Coleman=20 ASSOCIATED PRESS=20 July 10, 2001=20 SACRAMENTO -- On three days in May, California's daily power spending toppe= d=20 $100 million, according to a report released yesterday by state power=20 traders.=20 The California Department of Water Resources report, which addressed spot= =20 market electricity purchases since January, was released along with 1,770= =20 pages of documents that specifically detailed the first three months of=20 last-minute power purchases.=20 Such power buys on the spot market typically get the most expensive=20 electricity available.=20 The report details the department's electricity spending since Jan. 17, whe= n=20 the state took over electricity purchases for Pacific Gas and Electric Co.,= =20 San Diego Gas & Electric Co., and Southern California Edison.=20 The utilities had amassed billions in debts and were no longer creditworthy= =20 enough to purchase power. Since then, the state has spent nearly $8 billion= =20 to keep the lights on.=20 The state's daily spending peaked May 10 at $102.4 million. The=20 second-highest daily total was May 23, when the state spent $101.8 million.= =20 The day before, the state spent $100 million.=20 But since May, spot market prices have dropped, due in part to moderate=20 weather, lower natural gas prices, increased conservation which lowered=20 demand and because of increased scrutiny by lawmakers and investigators int= o=20 possible price manipulation. Gov. Gray Davis has said long-term contracts= =20 also drove the price down.=20 "It does look like some of the spot market prices have gone down, but it=20 looks like it's primarily due to natural gas prices," said Jamie Fisfis,=20 spokesman for Assembly Republicans.=20 The slight reduction in spot market prices "underscores questions about the= =20 strategy of locking us into long-term contracts, if natural gas prices=20 continue to drop," Fisfis said.=20 Most of the long-term contracts run for 10 years, with one lasting for 20= =20 years.=20 "It's unfortunate that it looks like we'll never get out from under these= =20 contracts," Fisfis said.=20 Davis has already released details of the state's long-term power contracts= =20 after losing a court battle with Republican legislators and several news=20 organizations, including The Associated Press and The Copley Press, which= =20 publishes The San Diego Union-Tribune.=20 Davis released copies of those contracts, but wanted to delay the release o= f=20 the spot market buys and short-term contracts. Releasing those details too= =20 soon after the purchases would reveal the state's buying strategy and could= =20 cause generators to raise their already sky-high prices, Davis said.=20 The number of spot market buys will lessen, the Davis administration says, = as=20 more long-term contracts are signed, reducing the state's exposure to the= =20 high-priced purchases.=20 The governor's office will release future short-term contracts and spot=20 market buys will be released on a quarterly basis, with a 90-day lag time.= =20 Second quarter information will be released in October and third quarter=20 documents will be available in January.=20 Davis maintains the delay is needed to protect its ability to negotiate=20 further spot-market power buys.=20 According to the water department, Canadian Powerex, the marketing arm of B= C=20 Hydro, has been paid $1.05 billion for spot market purchases as of May 31.= =20 But Atlanta-based Mirant Corp. topped that list, getting $1.24 billion as o= f=20 the end of May.=20 The newly released short-term contracts also show what the state had to pay= =20 when it needed power the most.=20 On March 19 and 20, when rolling blackouts hit California again, the state= =20 was forced into paying above-average prices in its largest short-term=20 contracts.=20 For example, Mirant sold the state 650 megawatts an hour at off-peak usage= =20 times on March 20 for $345 a megawatt hour, more than $70 above the average= =20 price of $272.96.=20 The day before, Mirant charged $343 a megawatt hour at off-peak in northern= =20 California when the average cost was $254.52.=20 Also on March 19, Mirant charged the state about $96 above the average pric= e=20 for power in Northern California on a sale of 6,400 megawatt hours during= =20 off-peak times.=20 Other top-selling generators, as of May 31:=20 ?Sempra Cos., $429 million.=20 ?Los Angeles Department of Water and Power, $331 million.=20 ?Dynegy, $296 million.=20 ?TransAlta Energy, $202 million.=20 ?Bonneville Power, $168 million.=20 ?Duke Energy, $164 million.=20 State releases early spot market energy purchases=20 By Jennifer Coleman ASSOCIATED PRESS=20 July 10, 2001=20 SACRAMENTO =01) On three days in May, California's daily power allowance to= pped=20 $100 million, according to a report released Monday by state power traders.= =20 However, the source of those high prices was from not solely from Texas, ho= me=20 to many of the power marketers and wholesalers Gov. Gray Davis has blamed f= or=20 much of California's power woes.=20 Public and private power companies such as Canada's B.C. Hydro, the Los=20 Angeles Department of Water and Power and Sacramento's public utility also= =20 were high on the list.=20 The California Department of Water Resources released the report, along wit= h=20 1,770 pages of documents that also detailed the last-minute power purchases= =20 the state made on the spot market in the first three months of the year.=20 Last-minute power buys on the spot market typically get the most expensive= =20 electricity available.=20 The report details the department's electricity spending since Jan. 17, whe= n=20 the state took over electricity purchases for Pacific Gas & Electric Co., S= an=20 Diego Gas & Electric Co., and Southern California Edison.=20 The utilities had amassed billions in debts and were no longer creditworthy= =20 enough to purchase power. Since then, the state has spent nearly $8 billion= =20 to keep the lights on.=20 The state's daily spending peaked May 10 at $102.4 million. The=20 second-highest daily total was May 23, when the state spent $101.8 million.= =20 The day before, the state spent $100 million.=20 But since May, spot market prices have dropped, due in part to moderate=20 weather, lower natural gas prices, increased conservation which lowered=20 demand and because of increased scrutiny by lawmakers and investigators int= o=20 possible price manipulation. Gov. Gray Davis has said long-term contracts= =20 also drove the price down.=20 "It does look like some of the spot market prices have gone down, but it=20 looks like it's primarily due to natural gas prices," said Jamie Fisfis,=20 spokesman for Assembly Republicans.=20 The slight reduction in spot market prices "underscores questions about the= =20 strategy of locking us into long-term contracts, if natural gas prices=20 continue to drop," Fisfis said.=20 Most of the long-term contracts run for 10 years, with one lasting for 20= =20 years.=20 "It's unfortunate that it looks like we'll never get out from under these= =20 contracts," Fisfis said.=20 Davis has already released details of the state's long-term power contracts= =20 after losing a court battle with Republican legislators and several news=20 organizations, including The Associated Press, who said keeping the contrac= ts=20 veiled violated the state's open records law.=20 Davis released copies of those contracts, but wanted to delay the release o= f=20 the spot market buys and short-term contracts. Releasing those details too= =20 soon after the purchases would reveal the state's buying strategy and could= =20 cause generators to raise their already sky-high prices, Davis said.=20 The number of spot market buys will lessen, the Davis administration says, = as=20 more long-term contracts are signed, reducing the state's exposure to the= =20 high-priced purchases.=20 The governor's office will release future short-term contracts and spot=20 market buys will be released on a quarterly basis, with a 90-day lag time.= =20 Second quarter information will be released in October and third quarter=20 documents will be available in January.=20 Davis maintains DWR needs the delay to protect its ability to negotiate=20 further spot-market power buys.=20 According to the DWR, Canadian Powerex, the marketing arm of BC Hydro, has= =20 been paid $1.05 billion for spot market purchases as of May 31.=20 But Atlanta-based Mirant Corp. topped that list, getting $1.24 billion as o= f=20 the end of May.=20 The newly released short-term contracts also show what the state had to pay= =20 when it needed power the most.=20 On March 19 and 20, when rolling blackouts hit California again, the state= =20 was forced into paying above-average prices in its largest short-term=20 contracts.=20 For example, Mirant sold the state 650 megawatts an hour at off-peak usage= =20 times on March 20 for $345 a megawatt hour, more than $70 above the average= =20 price of $272.96. The day before, Mirant charged $343 a megawatt hour at=20 off-peak in northern California when the average cost was $254.52.=20 Also on March 19, Mirant charged the state about $96 above the average pric= e=20 for power in Northern California on a sale of 6,400 megawatt hours during= =20 off-peak times.=20 Other top selling generators, as of May 31:=20 =01) Sempra Companies, $429 million.=20 =01) Los Angeles Department of Water and Power, $331 million.=20 =01) Dynegy, $296 million.=20 =01) TransAlta Energy, $202 million.=20 =01) Bonneville Power, $168 million.=20 =01) Duke Energy, $164 million.=20 FERC Judge Says State Owed No More Than $1 Billion From Associated Press July 9 2001 WASHINGTON -- California is owed no more than "a billion dollars" from powe= r=20 wholesalers, a federal regulatory judge said today at the end of 15 days of= =20 settlement talks in the state's electricity crisis. Curtis Wagner, the Federal Energy Regulatory Commission's chief=20 administrative law judge, said that at the same time the power suppliers=20 probably are owed more than that. The net effect of his preliminary recommendation is that California probabl= y=20 will receive no refunds from wholesalers. Wagner said power generators had offered $761 million in refunds. The state= =20 has asked for $8.9 billion since May 2000. Wagner said he will not recommen= d=20 refunds for power sales that occurred before Oct. 2. It was not immediately clear what impact the judge's preliminary=20 recommendation would have on efforts to settle the dispute. Both sides said before the judge's announcement that they expected a=20 protracted legal battle in the event the talks did not produce a settlement= . Michael Kahn, Gov. Gray Davis's representative in the talks, has said the= =20 state would seek more than twice the claimed overcharges if the dispute mov= ed=20 from mediated talks to a courtroom. The producers reiterated today that California's numbers are grossly=20 inflated. Attorneys for the five major generators-- Duke Energy, Dynegy,=20 Mirant, Reliant Energy and the Williams Cos.-- said in a statement that the= y=20 have made a "very substantial global settlement offer." John H. Stout, a senior vice president for Reliant Energy, said his company= =20 would agree to no more than $50 million in refunds, as part of an overall= =20 settlement that also would have to include protection from additional legal= =20 claims. But Stout also said, "Reliant's fundamental position has been and remains= =20 that no refunds are justified." FERC ordered the talks last month in an effort to resolve differences betwe= en=20 producers and the state over the breakdown of California's deregulated=20 electricity market. The state has accused the producers of manipulating supply to unfairly driv= e=20 up prices. The producers have acknowledged that prices are high, but blame= =20 jumps in the price of natural gas, which fuels many power plants, and the= =20 workings of the free market. The bill for wholesale power in California soared to $27 billion last year= =20 from $7 billion the year before. Davis has estimated that the state could= =20 spend as much as $50 billion this year. ---- On the Net: Federal Energy Regulatory Commission: http://www.ferc.fed.us/=20 Copyright 2001, Los Angeles Times=20 Electricity Cost Data Spread the Blame Power: Many suppliers charged more than the firms that Davis has pilloried,= =20 records show. RICH CONNELL and ROBERT J. LOPEZ and DOUG SMITHS TIMES STAFF WRITER July 10 2001 SACRAMENTO -- California's energy meltdown involves a far more diverse grou= p=20 of wholesale electricity merchants than suggested by Gov. Gray Davis, who h= as=20 aggressively blamed a handful of Texas companies, state records show. During the first three months of this year--one of the worst stretches of= =20 power shortages during the crisis--an assortment of public and private=20 entities charged the state prices averaging well above some of those paid t= o=20 Texas firms, according to documents released to The Times on Monday by the= =20 Department of Water Resources, which now buys power for California. Among those setting and collecting some of the highest average prices per= =20 megawatt-hour were a Canadian public utility, a subsidiary of San Diego Gas= &=20 Electric's parent company, and the Los Angeles Department of Water and Powe= r,=20 the report shows. Their average prices ranged from $498 a megawatt-hour=20 charged by Powerex, the trading arm of British Columbia's BC Hydro, to $292= =20 an hour by the DWP. In fact, some of the biggest private power companies=20 singled out for criticism by Davis and other state officials--Dynegy Inc.,= =20 Duke Energy and Mirant--charged less than the average prices the state paid= =20 for the period. Those companies' average prices ranged from $146 to $240 pe= r=20 megawatt-hour, according to an analysis of the documents. The figures cover the various types of spot and longer-term power purchased= =20 by the state during three months that included rolling blackouts and more= =20 than a month of razor-thin reserves, leading to continuous power emergencie= s. Davis spokesman Steve Maviglio said the governor has directed his sharpest= =20 barbs at private out-of-state generators because, in general, they have=20 reaped the highest profits over the longest period. "You have to look at the whole picture," Maviglio said. "The governor was expressing his displeasure with the arrogance of the=20 generators who wear cowboy hats," he said. "Their profits were 100% to 400%= =20 above last year. . . . Just because there are other entities who are chargi= ng=20 us more [per megawatt-hour] doesn't change the fact that we are getting=20 ripped off by companies from Houston, Tulsa, Atlanta or Charlotte." The report by the Department of Water Resources was provided to The Times o= n=20 the same day the state released 1,700 pages of documents on California's=20 electricity purchases on the volatile spot market for the year's first=20 quarter. The records detail how the state spent nearly $8 billion buying power in th= e=20 first five months of the year, and underscore the complexity of the state's= =20 energy problem. They also show that patterns of high prices are not limited= =20 to a few generators. Oscar Hidalgo, a spokesman for the water resources agency, said that the=20 reports together show that prices were extremely volatile early in the year= .=20 "All the prices were high," he said, noting the downward trend in costs sin= ce=20 his agency began buying power in mid-January. The average price per megawatt-hour for all state purchases went from $316 = in=20 January to $243 in May. Spot prices fell from an average of $321 per hour t= o=20 $271, the reports show. In the first quarter of the year, some public entities' prices far exceeded= =20 those of the biggest private companies. For example, Houston-based Enron, o= ne=20 of the nation's biggest power traders, charged an average of $181 per=20 megawatt-hour. And Atlanta-based Mirant, which sold the most to the state, = a=20 total of $706 million, charged an average of $225 per megawatt-hour. By contrast, a Calgary, Canada, firm, TransAlta Energy, averaged $335 a=20 megawatt-hour, and the Sacramento Municipal Utility District had average=20 charges of $330 per megawatt-hour. A spokesman for Enron, Mark Palmer, said recently that the "vilification of= =20 Enron was based on politics, not facts." Spokesmen for BC Hydro could not b= e=20 reached late Monday to comment on its huge sales to the state. In the past,= =20 the utility has defended its pricing practices, saying it has offered=20 last-minute hydroelectric power that helped keep California's lights on. A spokeswoman for Sempra, the parent company of San Diego Gas & Electric,= =20 said late Monday the company was unable to comment because it had yet to se= e=20 the figures released by the state. Officials at DWP, who could not be reach= ed=20 Monday evening, have defended their pricing, saying the costs of producing= =20 the power needed by the state were extremely high. More Power Bought Than Projected Hidalgo, of the Department of Water Resources, said his agency's efforts,= =20 coupled with conservation by business and consumers and falling natural gas= =20 prices, have begun to tame the state's market. Still, the state had to purchase $321 million in power in April and May,=20 about 10% more than Davis' analysts had projected. Hidlago said that was because of hot weather in May and other supply proble= ms=20 in April. He said reports will show that power purchases fell short of stat= e=20 projections in June and early July. The reports also will show that prices paid by the state were down in June= =20 and July, partly because spot prices have fallen sharply, often to well und= er=20 $100 a megawatt-hour. A summary Department of Water Resources report released Monday credited=20 Davis' program of nurturing new power generation and establishing long-term= =20 power contracts with with "moving the California electric energy industry= =20 closer to normalcy."=20 Copyright 2001, Los Angeles Times=20 Duke Energy Asked to Allow Release of Data Power: Senator says the generator is refusing to make public some informati= on=20 crucial to the price-gouging probe. Firm says it's complying. CARL INGRAM TIMES STAFF WRITER July 10 2001 SACRAMENTO -- The chairman of a Senate committee probing suspected price=20 gouging during the California energy crisis charged Monday that Duke Energy= =20 is refusing to allow him to make public information key to his investigatio= n. Sen. Joe Dunn (D-Santa Ana) said Duke has made the price bidding informatio= n=20 from its Chula Vista plant available to committee members and staffers. But= =20 under a federal confidentiality rule, the data cannot be made public withou= t=20 Duke's consent. The documents concern the Chula Vista plant, which former employees have=20 alleged was ramped up and down to drive up power prices during three days i= n=20 January. However, state records show that the agency overseeing the=20 electricity grid ordered those gyrations to keep the power flowing througho= ut=20 the state. Dunn said Duke's refusal thwarts the committee's investigation a= nd=20 efforts to enact possible remedial legislation because the confidential=20 information cannot be shared with others in the Legislature or the public. Dunn said Duke cited a rule of the Federal Energy Regulatory Commission tha= t=20 gives the company the authority to decide which records it makes public and= =20 which stay secret. "The only one who can release the data is Duke. We agreed to be bound by wh= at=20 is provided in the FERC tariff, nothing more or less," he said. Former Employees Tell of Maneuvers Dunn noted that the committee is considering trying to obtain the informati= on=20 elsewhere and "release it over Duke's objections." Three former workers at the Duke plant near Chula Vista testified last mont= h=20 under oath that the plant, among other things, was ramped up and down in wh= at=20 seemed to be an effort to maximize revenue during the Jan. 16-18 emergency. But Duke countered immediately that it had merely obeyed orders of the=20 California Independent System Operator, which keeps the state's electricity= =20 grid in balance. Duke later provided Cal-ISO documents backing up its=20 explanation. Duke executives insisted that the former employees failed to provide a full= =20 picture of the plant's operation during the three days. But Dunn, chairman of the select Senate committee on alleged price gouging,= =20 said Monday that by refusing to authorize release of all the subpoenaed dat= a,=20 Duke was guilty of the same tactics. "Duke is trying to draw the impression that it has [provided] the full=20 picture. But they are fully aware that we cannot draw any final conclusions= =20 until all that data has been released. That hasn't occurred," Dunn said. To make a determination whether the Chula Vista power was withheld to drive= =20 up prices, Dunn said, the committee must publicly examine "the bids Duke=20 submitted from which the ISO issued orders to the plant." They include the= =20 expensive hour-ahead and day-ahead markets, he said. Duke, a North Carolina-based wholesaler that operates several plants in=20 California, noted that it considers the information proprietary and=20 off-limits to legislators not on the committee. Duke spokesman Tom Williams insisted that the generator is attempting to=20 comply with the committee's demands. But he was unable to say whether Duke= =20 would agree to make the bidding documents public along with other records t= he=20 committee plans to turn over. "We are complying now," Williams said. "There is some suggestion that we ar= e=20 leaving stuff out when we have not had a chance to testify. . . . I don't= =20 know what we are ultimately going to do." The committee had threatened to cite eight wholesale generators unless they= =20 provide pricing and bidding documents by Wednesday. Six, including Duke, ha= ve=20 said they would comply to avoid a contempt citation. Two, Enron and Mirant,= =20 were cited. Dunn said the committee on Wednesday likely will give companies that are=20 trying to comply an extra week to do so, but others probably will be formal= ly=20 charged with contempt in a report to the full Senate. The upper house is th= e=20 final arbiter of such issues. Although there is scant precedent for levying penalties against those cited= =20 for contempt, Dunn said he favors imposing severe fines. In 1929, the most= =20 recent case, a cement company executive was sent to jail.=20 Copyright 2001, Los Angeles Times=20 NEWS ANALYSIS Concern Over Price of Long-Term Power Pacts Grows Embedded costs may yield more rate hikes, critics say, and the $43-billion= =20 total could complicate plans to rescue Edison. DAN MORAIN TIMES STAFF WRITER July 9 2001 SACRAMENTO -- Even as the summer progresses without blackouts, and Gov. Gra= y=20 Davis prepares for yet another news conference today to symbolically switch= =20 on a new power plant, the work in the Capitol has shifted to the seemingly= =20 more daunting task of balancing the books. It's a task with potentially far more long-lasting implications for state= =20 coffers, for businesses' bottom lines and for consumers' wallets. In particular, long-term power contracts trumpeted by the governor's office= =20 as helping to bring stability to California's out-of-control electricity=20 market are having the opposite effect politically. A growing concern about= =20 the $43-billion price tag of the contracts is complicating one of Davis' mo= st=20 ambitious energy initiatives: a proposed financial rescue of Southern=20 California Edison, which already faces an uncertain fate in the Legislature= .=20 Questions about the contracts come as California readies a complex=20 $13.4-billion bond sale to reimburse the state's general fund for other pow= er=20 purchases. Critics worry that costs embedded in the contracts, on top of the billions= =20 needed to pay for the Edison rescue, could lead to additional electricity= =20 rate hikes for consumers. Key lawmakers, consumer advocates and business=20 lobbyists are urging that at least some of the pacts be renegotiated. Citing a recent plunge in wholesale energy costs, these critics say the sta= te=20 should work to shorten the duration of the contracts and lower some of the= =20 prices. They argue that the state entered into the deals under duress after= =20 California's utilities neared insolvency and the state Department of Water= =20 Resources took over the purchasing of electricity for more than 25 million= =20 residents. "They are vulnerable," Senate Energy Committee Chairwoman Debra Bowen=20 (D-Marina del Rey) said of deals the state struck with independent power=20 companies when prices were at record highs. Bowen lauds Davis administration negotiators for signing "the best deals th= ey=20 could." But she said that in the crisis atmosphere in which the negotiation= s=20 took place, "the state had two cards and the generators had 50." Contracts Open to Challenges The contracts could be challenged in court or, more immediately, before the= =20 Federal Energy Regulatory Commission in Washington. There, an administrativ= e=20 law judge could direct that the pacts be reworked as part of a settlement o= f=20 allegations by Davis that generators overcharged the state for electricity = by=20 $8.9 billion. "We ought not to say, 'Fine, the contracts were the best we could do,' "=20 Bowen said. For his part, Davis says he is willing to accept partial payment of the $8.= 9=20 billion in the form of contracts with terms more favorable to the state. He= =20 attributes the recent sharp drop in wholesale electricity prices to=20 conservation, the administration's effort to increase power supply and--a= =20 major factor--the long-term contracts, which slashed the state's reliance o= n=20 the volatile daily, or spot, market. "You can see the value of these long-term contracts . . . dramatically=20 shrinking our overall price, which is what matters to Californians," Davis= =20 said, pointing out that the average cost of power plunged 30% from May to= =20 June. Davis energy advisor S. David Freeman, who helped negotiate the contracts,= =20 said they may end up costing less than $43 billion, given the recent declin= e=20 in prices for natural gas, the main fuel for California's=20 electricity-generating plants. Freeman also compared critics to someone who calls the fire department to= =20 douse a blaze. "After the fire is out," he said, "you complain about the=20 water damage." The contracts have other defenders, among them UC Berkeley economics=20 professor Severin Borenstein, who says the deals helped to tame the volatil= e=20 spot market by reducing generators' incentive to drive up prices, while=20 reducing the state's exposure to wild swings in price. "The point of signing long-term contracts is not to get a great price; it's= =20 to reduce risk," Borenstein said. Still, experts have been picking through the pacts ever since a Superior=20 Court judge in San Diego, ruling in a California Public Records Act lawsuit= =20 by news organizations and Republican lawmakers, ordered last month that Dav= is=20 unseal the contracts. An analysis done for the Assembly by three experts--one each representing= =20 Southern California Edison; the Utility Reform Network, a consumer group; a= nd=20 large electricity consumers--concluded that the about $43-billion price tag= =20 announced by the administration may not account for all the costs. When oth= er=20 expenses are factored in--ranging from environmental equipment upgrades to= =20 any new energy-related taxes--the contracts could cost an additional 10% to= =20 20%. "Once the contracts were made public," Senate Republican leader Jim Brulte = of=20 Rancho Cucamonga said, "just about anyone who can read began calling for=20 those contracts to be renegotiated." As buyers' remorse spreads through the Capitol, the contracts increasingly= =20 are seen as a hurdle--or a bargaining chip--as Davis and lawmakers confront= =20 fast-approaching deadlines in their effort to prevent the energy crisis fro= m=20 morphing into a broader financial crisis. A bill pushed by Davis to avert bankruptcy for the financially hobbled=20 Southern California Edison must be approved by Aug. 15. The deadline could = be=20 tighter, because the Legislature is scheduled to adjourn for a monthlong=20 break July 20. Davis' rescue plan, along with legislative alternatives, languishes in the= =20 Legislature. The plan, which has little apparent support, would require the= =20 state to buy Edison's system of transmission lines for $2.76 billion and=20 permit the utility to charge ratepayers for the rest of its back debt of $3= .5=20 billion. Some lobbyists and lawmakers believe that the electricity rate hike approve= d=20 in March by the California Public Utilities Commission--at 3 cents a=20 kilowatt-hour the largest in state history--may not be enough. The revenue= =20 generated under the new rate structure must cover the costs of the long-ter= m=20 power contracts and repay the planned $13.4 billion in bonds, which would b= e=20 the largest municipal deal ever. Whether there would be sufficient money left to pay for the Edison rescue= =20 remains to be seen. But some experts say the utility may need to seek a=20 separate rate hike to cover its costs. As written, the contracts have few escape clauses; Davis cannot simply walk= =20 away from them if he concludes that prices are too high. Still, criticism= =20 persists and crosses political lines. Harry Snyder, longtime Sacramento lobbyist for Consumers Union, and Jack=20 Stewart, president of the California Manufacturers and Technology Assn.,=20 rarely find themselves on the same side of a debate. But in separate=20 interviews, they sounded similar themes. "If there is a way to buy our way out of these contracts, even if we have t= o=20 pay damages, we'd be better off in the long run," Snyder said. Stewart, like other business leaders, does not advocate abrogating the=20 contracts. But like many familiar with the terms, he hopes that some deals= =20 can be renegotiated. "They are problematic," he said. In a move that critics fear could lock in high electricity prices for the= =20 next decade, the Davis administration is pushing the PUC to agree within a= =20 month to limit its authority to question costs incurred by the Department o= f=20 Water Resources as it goes about procuring power. State Treasurer Phil Angelides said the PUC must act so he can complete the= =20 $13.4-billion bond sale. A binding agreement is necessary so that Wall Stre= et=20 investors can be assured that they will be repaid. "The state will be out of cash by the end of the year without the bond sale= ,"=20 he said. "We will move toward fiscal insolvency." The so-called rate agreement, a draft of which was obtained by The Times,= =20 would bind customers of the three big regulated utilities to pay more than= =20 just the principal and interest on the $13.4 billion in bonds. Consumers=20 would have to pay for consultants, lawyers, to pay taxes, fees and other=20 as-yet-undefined charges that may be incurred by the Department of Water=20 Resources. Additionally, the PUC would be obligated to approve payments for programs b= y=20 which the state would pay large and small customers to cut electricity use,= =20 although the Legislature has not approved the programs and their details=20 remain to be worked out. The Department of Water Resources estimates the co= st=20 to be $800 million, spread over this year and next. "It is loaded up," Senate President Pro Tem John Burton (D-San Francisco)= =20 said of the proposed rate deal, adding that it would require the commission= =20 to "raise rates to cover whatever the Department of Water Resources decides= =20 to do." "That is giving a blank check to some bureaucratic office," he said. 'Dictatorial Power' Warning Stewart of the manufacturers group also is alarmed by the plan, saying it= =20 would provide the water agency with "dictatorial power." "As skeptical as we are of the PUC process, at least there is a process,"= =20 Stewart said, referring to the commission's procedures to set electricity= =20 rates. "There is no process for DWR. DWR just tells the PUC, 'This is what = we=20 need,' and the PUC must approve it." Others say the rate agreement is a standard piece of work, given the=20 extraordinary step the Legislature took in January when it authorized the= =20 Department of Water Resources to buy power for utilities that had fallen so= =20 deeply into debt that they could no longer carry out their obligation to=20 consumers. In essence, Davis energy advisor Freeman said, lawmakers in January created= =20 "the equivalent of a public power purchasing agency" beyond the jurisdictio= n=20 of the PUC. "There is no public power agency in California that is reviewed by the PUC,= "=20 said Freeman, former head of the Los Angeles Department of Water and Power. * Times staff writer Nancy Rivera Brooks in Los Angeles contributed to this= =20 story.=20 Copyright 2001, Los Angeles Times=20 State's refund demand rejected=20 Judge ends rebate talks, rebukes $9 billion claim=20 Zachary Coile, Christian Berthelsen, Chronicle Staff Writers Tuesday, July 10, 2001=20 ,2001 San Francisco Chronicle=20 URL: http://www.sfgate.com/cgi-bin/article.cgi?f=3D/c/a/2001/07/10/MN117914= .DTL=20 Washington -- An administrative law judge, delivering a powerful message to= =20 Gov. Gray Davis and California energy officials, cast aside the state's cla= im=20 that it is owed $8.9 billion in electricity overcharges by generators and= =20 called for further hearings to determine "hard numbers."=20 The judge, ending talks designed to settle the dispute between California a= nd=20 power sellers, said the state and its cash-strapped utilities may owe more = in=20 unpaid electricity bills than they are owed for overcharges by the=20 generators.=20 The comments by Federal Energy Regulatory Commission chief administrative l= aw=20 Judge Curtis L. Wagner, although a strong endorsement of the generators'=20 position, seemed to indicate that neither side wanted to settle the issue= =20 before it reached the five-member regulatory commission.=20 "There are refunds due (to California) that total hundreds of millions of= =20 dollars and maybe a billion dollars," Wagner said yesterday.=20 "At the same time, there are sums due to sellers from the California=20 Independent System Operator and the investor-owned utilities in the state o= f=20 California that probably are higher than any overcharges that (the state) m= ay=20 come up with."=20 Now, it will be up to the federal regulators to settle the case. But the=20 recommendations by Wagner, who mediated the talks, carry significant weight= =20 with the commission and cast doubt on the state's chances of collecting the= =20 full $8.9 billion it claims to be owed.=20 The judge said he will recommend that the commission order new hearings to= =20 calculate what the state and the power sellers are each owed. The hearings= =20 would be overseen by an administrative law judge and would last 45 to 60=20 days, Wagner said.=20 CLOSING SESSION Wagner made his comments in the closing session of the 15-day talks, which= =20 were ordered last month by the regulatory commission to try to defuse the= =20 dispute between power wholesalers and California officials before it reache= d=20 the courts.=20 The judge's message was a sharp rebuke to the unyielding stand by Californi= a=20 leaders -- especially Davis, who last week said he wouldn't take a dime les= s=20 than $8.9 billion for California's consumers.=20 The governor issued a statement shortly after the close of talks insisting= =20 that California had won its basic case that the state is owed refunds.=20 "I am pleased that Judge Wagner accepted our methodology for calculating=20 refunds and rejected the generators' position that no refunds are due," Dav= is=20 said.=20 The governor's chief representative at the talks, Michael Kahn, called the= =20 judge's statement a "ringing endorsement" of the state's call for refunds.= =20 Kahn said the judge's order would improve the state's legal position if it= =20 files suit against power sellers.=20 GENERATORS FAVORED But much of the judge's order seemed to favor the generators.=20 For example, state officials have made the case they should be refunded $8.= 9=20 billion for alleged overcharges from May 2000 to May 2001 -- even though th= e=20 regulatory commission has said only that the period starting Oct. 2, 2000= =20 could be considered.=20 The judge said yesterday that he would stick with the October date, meaning= =20 that more than a third of the state's claim -- at least $3 billion -- would= =20 not be refunded by the commission.=20 Brent Bailey, vice president and general counsel of Duke Energy North=20 America, said that under Wagner's guidelines, the state may be eligible for= =20 $1 billion to $1.5 billion.=20 "Certainly to the extent that it helped refute what California has been=20 saying, it's a victory," Bailey said of the judge's statement.=20 But Davis said the nation's big power sellers never came to the table with = a=20 serious offer.=20 "Not surprisingly, the energy pirates that bilked ratepayers out of billion= s=20 of dollars stonewalled and refused to negotiate in good faith," Davis said.= =20 $716 MILLION OFFER=20 Wagner disclosed yesterday that the generators had made an offer to=20 California: $716 million in refunds.=20 The judge said the figure included about $510 million from the so-called Bi= g=20 Five generators, as well as $125 million from BC Hydro's Powerex, $49.6=20 million by a group of 15 electricity marketers, $16.5 million by six=20 California municipal utilities and $25 million offered by other out-of-stat= e=20 power sellers.=20 California officials say it was not a legitimate offer because it included = no=20 cash. It was simply an agreement by the companies to wipe some of the state= 's=20 debt off the books.=20 Throughout the talks, generators complained that the California team was=20 trying to shield some California companies and government power providers= =20 from having to pay any refunds, and trying to disproportionately extract su= ms=20 from out-of-state power companies.=20 FAVORITISM CHARGED According to documents and interviews, the state attempted to remove Pacifi= c=20 Gas and Electric Co., Southern California Edison, San Diego Gas & Electric.= ,=20 the Los Angeles Department of Water and Power and other government power=20 suppliers from the group from which it was asking for refunds, even though= =20 they were paid the same high rates for power as everyone else.=20 Representatives for the power sellers said they believe that Davis made a= =20 political decision to demagogue the companies while refusing to compromise = on=20 the state's claims. They say the governor calculated that his reputation=20 would be enhanced by continuing to attack the generators.=20 "The California delegation did not come into these talks with any willingne= ss=20 to compromise," said Mark Stultz, vice president of the Electric Power Supp= ly=20 Association, a Washington, D.C., trade group. "They went in with a dollar= =20 figure and never budged on that figure. If you're looking for a settlement,= =20 you have to be willing to compromise."=20 Up next 1. The Federal Energy Regulatory Commission will consider, probably= =20 on July 25,=20 new hearings on how much, if anything, California was overcharged. 2. If=20 ordered by the commission, an administrative law judge will take testimony = on=20 how much the state says it was overcharged and how much generators say they= =20 are owed. 3. Regulators will rule based on the judge's recommendation. If t= he=20 parties disagree, they can go to court.=20 E-mail the writers at [email protected]. and [email protected]= om ., Zachary Coile reported from Washington, D.C., and Christian Berthelsen i= n=20 San Francisco.=20 ,2001 San Francisco Chronicle ? Page?A - 1=20 Davis opens another new power plant=20 Pittsburg facility will generate 555 megawatts=20 Bernadette Tansey, Chronicle Staff Writer Tuesday, July 10, 2001=20 ,2001 San Francisco Chronicle=20 URL: http://www.sfgate.com/cgi-bin/article.cgi?f=3D/c/a/2001/07/10/MN175828= .DTL=20 Pittsburg -- Workers were still scraping wet concrete on support columns as= =20 Gov. Gray Davis celebrated the startup of a new power plant in Pittsburg=20 yesterday -- the latest in a string of openings Davis hopes will help=20 California "build its way" out of the energy crisis. The state rushed to=20 throw as many megawatts on line as it could when it looked like the summer= =20 would feature regular blackouts, and yesterday the governor said it was=20 paying off.=20 "This is the third plant I've helped open in the last 13 days," Davis said,= =20 pumping his fist as the Calpine Corp. plant belched an impressive burst of= =20 steam. "In the past 13 days, we've put more power on the grid than Californ= ia=20 did throughout the 1990s."=20 The 555-megawatt Los Medanos Energy Center and the Sutter Energy Center tha= t=20 Calpine opened in Yuba City last week bring a total of 1,115 megawatts=20 online. Last month, Davis threw the switch on a Bakersfield plant that open= ed=20 more than a month ahead of schedule.=20 Davis used yesterday's event to blast out-of-state generators that he=20 maintains have gouged the state for electricity. Yet he lauded San Jose-bas= ed=20 Calpine as a sort of energy favorite son.=20 "They were the first to enter long-term contracts with us," the governor=20 said. Calpine is among the big energy firms being pressed by the state to= =20 issue refunds for what the governor insists were overcharges, but unlike th= e=20 others, Davis said, Calpine is giving ground in negotiations.=20 "They likely will be the first to enter into settlements with us," he said.= =20 Although the Los Medanos plant is one of a generation of efficient new gas-= =20 fired plants that will be as much as 40 percent cheaper to run than their= =20 forebears, the state will be paying well above current market rates for the= =20 first three months of its contract with Calpine.=20 Calpine President Peter Cartwright insisted, however, that the company is n= ot=20 making excess profits off the deal. To ensure that Calpine could provide th= e=20 electricity even if plant construction wasn't finished by its mid-July targ= et=20 date, the company bought the needed power from other energy traders at $232= a=20 megawatt hour when market rates were higher, he said.=20 In addition to the 300 megawatts it has pledged to the state, Calpine will= =20 supply electricity to the Sacramento Municipal Utility District and other= =20 power agencies.=20 In the long term, Calpine will be selling power to California at $59 a=20 megawatt hour, Cartwright said.=20 A spokesman for the state Department of Water Resources, which started buyi= ng=20 power in January after state utilities buckled under high prices, said=20 Calpine's rate is well below the $70 a megawatt hour the state is aiming fo= r=20 as an average price for the long-term contracts.=20 Cartwright said that with its recently opened plants, along with an 875-=20 megawatt facility it plans to open in Pittsburg next May, the company is=20 doing its share to ease the state's supply crunch.=20 "Ours are the lowest contracts in the state," he said. "If these plants=20 weren't online, we'd be having blackouts."=20 A spokeswoman from the state agency that manages the power grid said=20 California is skating so close to blackouts that "every megawatt counts."= =20 "It's definitely making a difference and it will continue to do so over the= =20 summer," said Lorie O'Donley, a spokeswoman for the Independent System=20 Operator.=20 E-mail Bernadette Tansey at [email protected].=20 ,2001 San Francisco Chronicle ? Page?A - 11=20 California rejects B.C. Hydro $125 million settlement=20 Tuesday, July 10, 2001=20 ,2001 Associated Press=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2001/07/10/s= tate0 321EDT0105.DTL=20 (07-10) 00:21 PDT VANCOUVER, British Columbia (AP) --=20 California has rejected an offer by B.C. Hydro's power trading subsidiary t= o=20 refund $125 million to settle the state's allegations that it was overcharg= ed=20 by the Canadian power company.=20 The dispute will now be resolved by U.S. judicial and regulatory authoritie= s.=20 The offer from Hydro's Powerex subsidiary came during 15 days of settlement= =20 talks between power generators and distributors, California and other weste= rn=20 states.=20 The talks, initiated by the Federal Energy Regulatory Commission, which=20 regulates cross-border power sales in the United States, concluded Monday= =20 evening without resolution.=20 Hydro spokeswoman Elisha Odowichuk said that under the offer, the Crown=20 corporation would have been subtracted $125 million from the $290 million= =20 California still owes British Columbia for power sales.=20 The $125 million was Powerex's first offer and it did not change through th= e=20 negotiations, she said. The company put conditions on that refund figure, b= ut=20 Odowichuk would not say what those conditions were.=20 California has charged that Powerex gouged it by more than $430 million.=20 Odowichuk said Hydro had to join the settlement talks to preserve its=20 otherwise lucrative power trading relationship with California.=20 Electricity imports and exports statistics compiled by Canada's National=20 Energy Board show Powerex exported more than $900 million worth of energy= =20 from January to April.=20 The average cost of that power was $661.56 a megawatt hour.=20 Prices have dropped to around $140 a megawatt hour since the regulatory=20 commission instituted price caps on June 19.=20 ,2001 Associated Press ?=20 Davis' criticism of Texas misdirected, report finds=20 Lynda Gledhill, Mark Martin, Chronicle Staff Writers Tuesday, July 10, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/07= /10/M N48875.DTL=20 Sacramento -- Texas-based electricity generators have received the brunt of= =20 criticism from Gov. Gray Davis for gouging California during the power=20 crisis, but financial information released yesterday shows the lion's share= =20 of the money went elsewhere.=20 Companies with headquarters in Texas garnered less than 10 percent of=20 California's multibillion-dollar energy purchases, while public and private= =20 energy companies from Canada to Georgia to California got the rest.=20 The $424 million that went to Texas companies may still be more than the=20 state should have been charged, and administration officials are attempting= =20 to get refunds from a host of companies, both in and out of Texas.=20 Earlier this year, Davis lambasted the Bush administration for not acting= =20 against power firms in his home state. "What's going on here, pure and=20 simple, is unconscionable price-gouging by the big energy producers -- most= =20 of them, incidentally, located in Texas," he said in May.=20 Yesterday, a spokesman for the governor broadened the verbal assault, sayin= g=20 the Texas firms are representative of the many other out-of-state generator= s=20 who have also gouged California.=20 "Anywhere they wear cowboy hats, they probably have handkerchiefs across=20 their face because they are robbing us blind," said Steve Maviglio, Davis'= =20 spokesman.=20 The latest financial information is contained in a report by the state=20 Department of Water Resources detailing $7.2 billion in power purchases fro= m=20 Jan. 17 through the end of May.=20 About $5.2 billion of that was spent on the spot market where power buys ar= e=20 made a day, hour or even a few minutes before the electricity is actually= =20 used.=20 Because the spot purchases are made with little notice, they are the most= =20 expensive kind of power on the market. The state was forced to step in and= =20 buy the power when the credit ratings of California's major utilities dropp= ed=20 as the energy crisis worsened. The crisis was caused by a series of events= =20 that forced the utilities to pay more for electricity than they could recov= er=20 from customers.=20 The numbers released yesterday show that Texas companies weren't alone in= =20 receiving a share of the energy crisis pie. Some $1.2 billion went to Miran= t,=20 an Atlanta-based company. Mirant has refused to turn over documents=20 subpoenaed by the state Legislature as part of its investigation into alleg= ed=20 market manipulation. Mirant could face contempt proceedings.=20 Municipal generators have also fared well during the energy crisis. Powerex= ,=20 a wholly owned power marketing subsidiary of Vancouver-based BC Hydro,=20 received $1 billion from the state for spot market electricity.=20 The Los Angeles Department of Water and Power, which Davis said charged=20 higher average spot market prices than some generators, received $331=20 million.=20 E-mail Lynda Gledhill at [email protected].=20 ,2001 San Francisco Chronicle ? Page?A - 9=20 Developments in California's energy crisis=20 The Associated Press Tuesday, July 10, 2001=20 ,2001 Associated Press=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2001/07/10/s= tate1 041EDT0134.DTL=20 (07-10) 07:41 PDT (AP) --=20 Developments in California's energy crisis:=20 TUESDAY=3D * No power alerts Tuesday as electricity reserves stay above 7 percent.=20 MONDAY=3D * A Federal Energy Regulatory Commission administrative law judge says that= =20 California is entitled to no more than $1 billion in refunds for excessive= =20 energy costs. Gov. Gray Davis had been seeking $8.9 billion for overcharges= .=20 * The Department of Water and Power releases 1,770 pages of documents=20 detailing the state's spot market power purchases in the first quarter of t= he=20 year. DWR also releases a report showing that the state's daily power buys= =20 topped $100 million on three days in May.=20 The DWR report says the energy companies that were paid the most by the sta= te=20 for last-minute power were: Mirant Corp., which was paid $1.24 billion as o= f=20 the end of May; Canada-based Powerex, $1.05 billion; and Sempra Companies,= =20 $429 million.=20 * Davis ceremonially switches on the largest licensed power plant to come= =20 online this year, Calpine's 559-megawatt Los Medanos Energy Center in=20 Pittsburg.=20 * No power alerts as electricity reserves stay above 7 percent.=20 * Shares of Edison International closed at $14, up 69 cents. PG&E Corp. ros= e=20 65 cents to close at $14.10. Sempra Energy, the parent company of San Diego= =20 Gas & Electric Co., closed at $27.52, down 21 cents.=20 WHAT'S NEXT=3D * U.S. Bankruptcy Judge Dennis Montali decides Tuesday whether millions of= =20 Pacific Gas and Electric Co. ratepayers can form their own creditors'=20 committee to represent them in the utility's bankruptcy proceeding.=20 * The Senate committee investigating possible price manipulation in=20 California's energy market meets Wednesday. The committee will vote on=20 contempt citations against generators Mirant and Enron, which failed to=20 comply with subpoenas for documents. The committee will meet again July 18 = to=20 consider compliance by six other suppliers that have until Tuesday to turn= =20 over documents.=20 THE PROBLEM: High demand, high wholesale energy costs, transmission glitches and a tight= =20 supply worsened by scarce hydroelectric power in the Northwest and=20 maintenance at aging California power plants are all factors in California'= s=20 electricity crisis.=20 Southern California Edison and Pacific Gas and Electric say they've lost=20 nearly $14 billion since June 2000 to high wholesale prices the state's=20 electricity deregulation law bars them from passing on to consumers. PG&E,= =20 saying it hasn't received the help it needs from regulators or state=20 lawmakers, filed for federal bankruptcy protection April 6. Electricity and= =20 natural gas suppliers, scared off by the companies' poor credit ratings, ar= e=20 refusing to sell to them, leading the state in January to start buying powe= r=20 for the utilities' nearly 9 million residential and business customers. The= =20 state is also buying power for a third investor-owned utility, San Diego Ga= s=20 & Electric, which is in better financial shape than much larger Edison and= =20 PG&E but is also struggling with high wholesale power costs.=20 The Public Utilities Commission has approved average rate increases of 37= =20 percent for the heaviest residential customers and 38 percent for commercia= l=20 customers, and hikes of up to 49 percent for industrial customers and 15=20 percent or 20 percent for agricultural customers to help finance the state'= s=20 multibillion-dollar power buys.=20 Track the state's blackout warnings on the Web at=20 www.caiso.com/SystemStatus.html.=20 ,2001 Associated Press ?=20 Energy talks reach no settlement; state threatens suit=20 MARK SHERMAN, Associated Press Writer Tuesday, July 10, 2001=20 ,2001 Associated Press=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2001/07/10/s= tate0 400EDT7473.DTL=20 (07-10) 01:00 PDT WASHINGTON (AP) --=20 With talks between the state and power generators stalled, California may g= o=20 to court to help win the $8.9 billion state officials believe it was=20 overcharged for electricity.=20 "I think we have demonstrated very clearly both to the FERC and to the judg= e=20 that the state is owed $8.9 billion and will settle for nothing less," said= =20 Roger Salazar, a spokesman for Gov. Gray Davis.=20 With negotiations at an impasse, the administrative law judge for the Feder= al=20 Energy Regulatory Commission said California is probably owed no more than = $1=20 billion in refunds.=20 "The numbers were too far apart," said Curtis Wagner, the FERC chief=20 administrative law judge.=20 California, Wagner said, may receive nothing at all, because generators may= =20 be owed more than they have to return for any overcharges.=20 He placed the refunds owed the state at between $716 million and $1 billion= .=20 Power providers had offered $716 million as part of an overall settlement,= =20 while California state officials sought $8.9 billion, Wagner said.=20 He said California officials had not made the case for $8.9 billion in=20 refunds.=20 Salazar, however, said the state would go to court and may ask for $20=20 billion.=20 Separately, Wagner split off claims of overcharges from the Pacific=20 Northwest, saying he has not had time to consider those allegations under t= he=20 short timetable ordered by FERC last month.=20 Wagner served as a mediator during the 15 days of negotiations and will=20 recommend a settlement to FERC by next Monday. The commission ordered the= =20 talks last month in an effort to resolve differences between producers and= =20 the state over the breakdown of California's deregulated electricity market= .=20 Consumer advocates assailed the judge's recommendation and urged the state = to=20 continue its attempt to get refunds from what they say are profiteering pow= er=20 companies.=20 "It's like catching a bank robber, but instead of making him give back all = of=20 it, you only make him give back 5 percent of what he stole," said Douglas= =20 Heller, spokesman for the Santa Monica-based Foundation for Taxpayer and=20 Consumer Rights.=20 Power generators, however, were generally pleased with Wagner's comments.= =20 Brent Bailey, general counsel for Duke Energy, said even if the formula=20 Wagner recommends produces $1.5 billion in refunds, "that's a reasonable=20 amount in the context of these settlement talks."=20 California officials, negotiating on behalf of utilities, the Public=20 Utilities Commission and state power buyers, accused the producers of=20 manipulating supply to unfairly drive up prices.=20 The producers have acknowledged prices are high, but blame jumps in the pri= ce=20 of natural gas, which fuels many power plants, and the workings of the free= =20 market.=20 The bill for wholesale power in California soared to $27 billion last year= =20 from $7 billion the year before. Davis has estimated the state could spend = as=20 much as $50 billion this year.=20 The producers reiterated Monday that California's numbers are grossly=20 inflated. Attorneys for the five major generators -- Duke Energy, Dynegy,= =20 Mirant, Reliant Energy and the Williams Cos. -- said in a statement that th= ey=20 have made a "very substantial global settlement offer."=20 Reliant would agree to no more than $50 million in refunds as part of an=20 overall settlement that also would have to include protection from addition= al=20 legal claims, said John H. Stout, a company senior vice president.=20 But Stout also said, "Reliant's fundamental position has been and remains= =20 that no refunds are justified."=20 Toxic fumes not linked to blackouts=20 Backup power OK in facilities, report says=20 Jason B. Johnson, Chronicle Staff Writer Tuesday, July 10, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/07= /10/M NC115768.DTL=20 Despite a power-related mishap that released toxic fumes from an industrial= =20 plant in May, rolling blackouts are not expected to cause dangerous release= s=20 in Contra Costa, a county study concludes.=20 The county Health Department report found that 52 industrial facilities hav= e=20 adequate backup power plans.=20 The report to be presented to the Board of Supervisors today was prompted b= y=20 a freak traffic accident that knocked out power at Richmond's General=20 Chemical Corp. plant. When the plant powered back up, a cloud of sulfur=20 trioxide and sulfur dioxide was released.=20 Contra Costa hazardous materials director Lew Pascalli said that there is= =20 always a possibility that a plant's hydraulic or mechanical systems could= =20 fail but that those chances are slight given the growing number of power=20 plants coming online and the state's successful conservation effort.=20 He also said industry has done a good job preparing for outages.=20 "The industry is doing a good-faith effort in this particular instance to= =20 make sure that nothing happens," Pascalli said.=20 County officials relied on industry records in determining the adequacy of= =20 the different plans, such as having multiple electrical leads feeding a=20 source regulating hazardous materials.=20 Denny Larson, spokesman for the group Communities for a Better Environment,= =20 said the report relied too heavily on industry self-reporting.=20 "Unfortunately, the conclusions of the report can't be backed up by the=20 facts," Larson said. "Oil and chemical plants in Contra Costa have repeated= ly=20 had toxic releases due to power failures over the years."=20 The 52 facilities include chemical plants, oil refineries and small shops= =20 that produce limited amounts of hazardous materials.=20 For many of these businesses, the loss of power would shut down their=20 operations and make it impossible for substances to be released.=20 Larger facilities, like oil refineries, have either their own backup=20 generators or contracts with cogeneration plants that could supply all or= =20 most of their power independent of the electricity power grid, according to= =20 the report.=20 Plans are also in place to conduct partial shutdowns at plants running on= =20 reserve power during a blackout.=20 General Chemical said all electrical feeds to the chamber processing=20 chemicals are automatically pulled in the event of loss of power. A backup= =20 generator will automatically come online to keep operations stable.=20 Dow Chemical has a contract with a Calpine power plant to supply it with=20 electricity. Battery backup and diesel emergency engines are also at the si= te=20 to ensure enough power to run lights, alarms, controls and emergency shutdo= wn=20 equipment.=20 e-mail Jason B. Johnson at [email protected].=20 ,2001 San Francisco Chronicle ? Page?A - 11=20 Power suppliers, state fail to agree on refund total=20 Posted at 10:41 p.m. PDT Monday, July 9, 2001=20 BY JIM PUZZANGHERA=20 Mercury News Washington Bureau=20 WASHINGTON -- California officials and power suppliers failed to agree on= =20 refunds for electricity overcharges as 15 days of contentious negotiations= =20 ended Monday, leaving the matter in the hands of a federal judge who said t= he=20 state is owed much less than the $8.9 billion it demands.=20 The judge overseeing the talks for the Federal Energy Regulatory Commission= =20 put the refunds at between several hundred million dollars and a billion=20 dollars. His estimate is closer to the $716.1 million offer made by power= =20 suppliers during negotiations. The offer was rejected by California=20 officials.=20 But it was unclear Monday which side in the bitter refund battle would=20 prevail, and California officials indicated the dispute is probably headed = to=20 court. At stake is how much the state's electricity consumers will ultimate= ly=20 have to pay for costs that skyrocketed as California's deregulation system= =20 collapsed.=20 Curtis Wagner, the commission's chief administrative law judge, will=20 recommend a formula for the commission to use to calculate a refund dating= =20 back to October. That formula -- a complex methodology that involves factor= s=20 such as daily natural gas prices -- includes many of the provisions the=20 energy suppliers had advocated during the talks.=20 Michael Kahn, who headed the California negotiating team, said the state=20 would contest some aspects of the formula. But even without changes, Kahn= =20 said he was confident the formula will result in more refunds than Wagner= =20 estimated.=20 ``We think the numbers even using the judge's formula are going to be in th= e=20 multiple billions,'' said Kahn, chairman of the state Independent System=20 Operator, which runs the electricity grid. ``California will get its $8.9= =20 billion dollars. If we don't get all of it from the commission .?.?. we'll= =20 still get the remainder of the money'' through the courts.=20 Amount in dispute=20 Power industry representatives appeared pleased with the judge's plan.=20 ``We haven't gone and run the full numbers but it's going to be nowhere nea= r=20 the $8.9 billion,''' said Brent Bailey, vice president and general counsel= =20 for Duke Energy North America. ``But let's face it, that's a pie-in-the-sky= =20 number that nobody in there believed in their right mind was a legitimate= =20 number.''=20 Wagner acknowledged he had not calculated any figures using his formula,=20 saying he arrived at his dollar estimate based on the offers made by the=20 suppliers.=20 The energy commission ordered the private settlement conference last month= =20 when it enacted new price controls to try to rein in soaring electricity=20 prices in California and throughout the West. Commissioners hoped that unde= r=20 pressure of a deadline and their looming intervention the state and the pow= er=20 suppliers could resolve the refund issue and stave off future litigation.= =20 But the suppliers and state officials never came close to a deal,=20 participants said.=20 ``The numbers were too far apart. You saw $8.9 billion on one end and you s= aw=20 $716 million on the other end, and that's a long way to splitting the=20 difference,'' Wagner said. ``I think a lot of the parties genuinely wanted = to=20 settle. Others didn't.''=20 Wagner now has until Monday to make his recommendation to the five-member= =20 commission, which will make the final ruling on refunds. To date, the=20 commission has ordered $125 million in refunds for periods since last Oct. = 2.=20 Wagner said Monday that he will ask that a special hearing be set up in the= =20 next 60 days to get the detailed information from the state and power=20 suppliers needed to determine a refund total using his formula.=20 The state may not end up with any cash, as any refund total could be applie= d=20 to the several billion dollars California and its utilities still owe many = of=20 the power suppliers.=20 Reflecting the tone of the negotiations, California Gov. Gray Davis on Mond= ay=20 blamed power suppliers for the failure of the talks and challenged the=20 commission to resolve the situation.=20 ``Not surprisingly, the energy pirates that bilked ratepayers out of billio= ns=20 of dollars stonewalled and refused to negotiate in good faith with our team= =20 in Washington, D.C.,'' Davis said. ``While in the past the FERC has shown= =20 little, if any, interest in consumers, they now have the opportunity to=20 redeem themselves by returning the $8.9 billion California has demonstrated= =20 it is owed.''=20 Davis may go to court=20 At the opening of a new power plant in Contra Costa County on Monday, Davis= =20 told reporters that he's prepared to take the power generators to court if= =20 FERC doesn't order the full refund. Davis also said the ISO's estimate of= =20 $8.9 billion doesn't represent all the overcharges. He said other estimates= =20 put the figure as high as $20 billion, although he did not elaborate about= =20 how those figures were calculated.=20 John H. Stout, senior vice president for Reliant Energy Wholesale Group, sa= id=20 the state used faulty methodology to arrive at the $8.9 billion figure.=20 California officials and several suppliers said they would continue to=20 negotiate separately, and an official with San Jose-based Calpine said his= =20 company is close to a settlement with the state.=20 Power suppliers urged Wagner not to calculate refunds by applying the energ= y=20 commissions' June price-limits plan retroactively. But that's what Wagner= =20 said he will do. It was a victory for California officials, who had pushed= =20 for it. Wagner, however, also made some changes to the price-limit plan tha= t=20 power suppliers had wanted. He applied it only back to Oct. 2, 2000. State= =20 officials wanted it to cover up to May 2000.=20 $3 billion difference=20 The state's $8.9 billion figure comes from May 2000 through May 2001.=20 Factoring refunds beginning with Oct. 2, 2000, eliminates about $3 billion = in=20 overcharges the state says occurred in the earlier period.=20 Among the changes to the commission's formula that Wagner made was to revis= e=20 the way the prevailing electricity price limit is calculated. Wagner wants= =20 the price limit determined for each hour of each day. The commission's=20 formula sets a price limit during Stage One power emergencies that remains = in=20 effect until the next emergency.=20 But in a sign of just how complex the issue is, Stanford University economi= st=20 Frank Wolak said he believes the standards described by the judge will=20 produce a much higher figure than $1 billion.=20 ``That's the methodology the state used,'' said Wolak, who advises the=20 California ISO on market issues. ``By using the marginal unit for each hour= ,=20 you'll get refund numbers on the order of what the state estimated.''=20 Mercury News Staff Writers Brandon Bailey and Dana Hull contributed to this= =20 report.=20 Contact Jim Puzzanghera at [email protected] or (202) 383-6043.= =20 Power purchase bills exceed $7.5 billion=20 Published Tuesday, July 10, 2001, in the San Jose Mercury News=20 BY MARK GLADSTONE, NOAM LEVEY AND DION NISSENBAUM=20 Mercury News Sacramento Bureau=20 SACRAMENTO -- Six months after jumping into the electricity business, the= =20 Davis administration on Monday provided the first detailed glimpse of=20 California's daily power purchases, showing more than $5 billion in payment= s,=20 much of it to government-owned utilities and private companies that state= =20 officials have branded as price gougers.=20 The state spent an additional $2.5 billion on a variety of contracts and=20 other electricity services designed to stabilize the volatile energy market= s,=20 according to documents that the state agreed to release last week amid a=20 legal dispute over public access to the data.=20 In roughly the first five months of the year, the state shelled out $1.2=20 billion to Atlanta-based Mirant, the most any company was paid for=20 electricity, followed by $1 billion to Powerex, the marketing arm of BC Hyd= ro=20 in British Columbia. It also paid $331 million to the Los Angeles Departmen= t=20 of Water and Power.=20 The documents raise questions about some of the common assumptions that hav= e=20 arisen around the electricity crisis. For instance, almost 40 percent of th= e=20 state's purchases have come from government-run power generators in=20 California and elsewhere, but not Texas; some of the biggest suppliers are= =20 from the Northwest.=20 Gov. Gray Davis, who has ambitions to run for the White House, has put much= =20 of the blame for the soaring costs of power on energy companies based in=20 President Bush's home state.=20 The figures are tucked inside 1,770 of pages of invoices that Davis has=20 resisted divulging, saying disclosure would encourage suppliers to charge= =20 more. The state, which last month released information on its long-term=20 electricity contracts worth $43 billion, agreed Thursday to release the fir= st=20 quarter details.=20 Short on explanation=20 The figures were disclosed late Monday by the California Department of Wate= r=20 Resources, which buys power for the state's financially strapped major=20 utilities, and seem to buttress the administration's contention that the=20 price of power is gradually dropping but offer little or no explanation for= =20 what prompted the decrease.=20 In January, for instance, the average price for power on the spot market wa= s=20 $321 a megawatt hour. It peaked in April at $332 and dropped to $271 in May= .=20 One megawatt powers about 750 homes.=20 Davis spokesman Steve Maviglio said the price data supports the governor's= =20 assertions that California has been gouged. ``The bad guys are clearly the= =20 out-of-state generators,'' Maviglio said. ``There has been a significant=20 shift of money out of California.''=20 But the documents fail to shed much light on whether, as the administration= =20 contends, the price drop was due to long-term power contracts negotiated by= =20 the state earlier this year. Critics contend that the Davis administration= =20 panicked and rushed into deals that commit the state to pay high prices for= =20 many years.=20 Used for support=20 Republican officials used the price information to bolster their attacks=20 against Davis, a Democrat, for signing long-term contracts with power=20 generators even as the price of power on the spot market was coming down,= =20 partly because of the declining price of natural gas used to fuel many=20 plants.=20 ``It's more clear than ever that the long-term contracts are a bad deal,''= =20 said Assemblyman Tony Strickland, R-Camarillo. ``The governor's really hurt= =20 the ratepayers for the next five or 10 years.''=20 The newly released bills highlight the volatility of California's energy=20 market, where the price per megawatt hour ranged from $70 to $1,000. On any= =20 given day, the records show, the prices from seller to seller varied widely= ,=20 with some of the highest prices being charged by public utilities and=20 companies outside Texas.=20 On one day in February, for example, San Diego-based Sempra Energy was=20 charging $165 per megawatt hour, the Eugene Water and Electric Board was=20 charging nearly $500 and Duke Energy, a North Carolina company, was chargin= g=20 up to $575.=20 The state's daily spending peaked May 10 at $102.4 million for all power,= =20 including the spot market and contracted power.=20 The state began buying power in mid-January on behalf of the state's major= =20 utilities, which were unable to borrow money to buy power after amassing=20 enormous debts for electricity.=20 San Jose-based Calpine Corp., which is building several new power plants=20 around California including one in South San Jose, did only $29 million wor= th=20 of business with the state in the first five months of the year, according = to=20 the figures.=20 The state began buying power in mid-January when Pacific Gas & Electric Co.= =20 and Southern California Edison Co. were on the ropes financially. PG&E late= r=20 went into bankruptcy.=20 On Monday, state lawmakers took another shot at trying to cobble together a= =20 plan to rescue financially ailing Edison.=20 While most concede that a rescue plan Davis worked out with Edison will not= =20 win the necessary support in the Legislature, lawmakers have created severa= l=20 working groups to come up with alternatives.=20 Compromise plan=20 On Monday, state Sen. Byron Sher, D-Redwood City, unveiled the latest=20 compromise proposal that seeks to protect average ratepayers and small=20 businesses from further rate increases and forces everyone else to help=20 finance the Edison bailout.=20 The ``shared pain'' proposal would force power producers, owed about $1=20 billion, to take a 30 percent ``haircut'' and agree to forgive about $300= =20 million in Edison debts. Edison would be asked to swallow $1.2 billion --= =20 about a third of its debt. And big users would be asked to pay off the=20 remaining $2 billion in debts, possibly by paying higher prices for power.= =20 In exchange, large companies would be given the opportunity to buy power on= =20 the open market, a system that would allow many of them to sign cheap energ= y=20 deals.=20 Sher presented the proposal to Senate Democrats Monday afternoon, but it=20 remains unclear how much support the framework will receive in the=20 Legislature.=20 Contact Mark Gladstone at [email protected] or (916) 325-4314.=20 ? Refund outlook dims=20 Talks break down; judge says state is owed much less than its $8.9 billion= =20 demand -- and unpaid bills may offset gains.=20 July 10, 2001=20 By DENA BUNIS and JOHN HOWARD The Orange County Register=20 WASHINGTON The nation's chief energy judge said Monday that California is= =20 owed maybe $1 billion in refunds from power generators, a fraction of the= =20 $8.9 billion demanded by Gov. Gray Davis.=20 And even at that, said Judge Curtis Wagner, the electricity sellers are owe= d=20 so much more in unpaid power bills that in the end California might not see= =20 one red cent.=20 Wagner announced his recommendation to the Federal Energy Regulatory=20 Commission after two weeks of fruitless negotiations between all the partie= s=20 to California's electricity crisis. With no settlement, the matter is now i= n=20 the commissioners' hands.=20 Power generators, Wagner said, had offered a combined $716 million in=20 refunds, an offer the state rejected. "I don't think it's 8.9 (billion=20 dollars)," he said afterwards, "because I haven't been shown that it was."= =20 For California consumers, every dollar the state can extract in refunds is = a=20 dollar less that ratepayers have to shell out for state-purchased power. An= d=20 the more money the state gets back, the better the chances of warding off= =20 future rate increases.=20 "California will get its $8.9 billion," insisted Michael Kahn, head of the= =20 state's delegation and the California Independent System Operator. Kahn=20 brushed off Wagner's comments, finding victory in the judge's assertion tha= t=20 the state is owed some refunds, a concept the generators have been unwillin= g=20 to embrace up to now, he said.=20 Since the talks began, some generators have made refund offers -- last week= =20 Duke Energy offered $20 million and on Monday, Reliant officials revealed= =20 their refund offer was $50 million, provided all other actions against the= =20 company were dropped.=20 But the net result of the 15- day closed-door sessions is that California i= s=20 no closer to getting repaid for what it claims was price gouging by power= =20 companies going back to May 2000 than it was the day the talks began.=20 And it means the state is in for possibly more hearings before the FERC. If= =20 unsuccessful there, the whole issue could wind up in court for years.=20 "You can take a horse to water but cannot make him drink," Wagner said duri= ng=20 an afternoon public session where he made his preliminary recommendation. H= e=20 has seven days to put his ideas in writing. At several points during the=20 often-tense talks, Wagner expressed frustration to the negotiators and trie= d=20 to get them to agree, even to the point of holding an unprecedented Sunday= =20 session.=20 "The numbers were too far apart," Wagner said.=20 While Kahn insisted the state had made progress, on hearing of the judge's= =20 comments, state Sen. John Burton, D-Francisco, called them "barely better= =20 than a jab in the eye with a sharp stick." Burton agreed with Kahn that the= =20 state has to do all it can to get more than that.=20 And Davis backed up his team.=20 "Our delegation made a clear and compelling factual argument that there wer= e=20 overcharges made because the market was broken," Davis said. "Remarkably, t= he=20 energy generators and suppliers refused to recognize their responsibility t= o=20 the people of California and own up to their profiteering."=20 Power generators seemed satisfied with the judge's views, even though John= =20 Stout, vice president of Reliant Energy, said his company's "fundamental=20 position has been and remains that no refunds are justified."=20 Brent Bailey, general counsel for Duke Energy, called the judge's=20 recommendation, "a fair one."=20 Republican lawmakers in Sacramento were quick to say it was Davis' failed= =20 energy policies that brought California to this point. They also distanced= =20 themselves from the state's refund request.=20 "I don't believe there really exists a true justification for that number,"= =20 said Assemblyman John Campbell, R-Irvine. "I've never considered that=20 anything more than a wild number to throw out there."=20 The two sides are so far apart in their estimates of overcharges because th= ey=20 are using different assumptions about how to compute the complex pricing=20 structure. And Wagner was more persuaded with the majority of the generator= s'=20 methods.=20 To start with, the state is asking for $8.9 billion, but about $3 billion o= f=20 those alleged overcharges happened between May and October 2000, a period= =20 FERC is not looking at. FERC issued two refund orders in March, finding tha= t=20 power companies had $124 million in overcharges during power alerts. But th= e=20 state is challenging that finding, saying there were overcharges beyond tho= se=20 limited times. And the state is also asking FERC to reconsider allowing=20 refunds for May to October 2000.=20 How energy panel affects California=20 Six months ago, few people had heard of FERC. Now the Federal Energy=20 Regulatory Commission, the agency charged with making sure that the nation'= s=20 power markets are running smoothly and that wholesale prices are "just and= =20 reasonable," rolls off the tongue.=20 The five commissioners who make up FERC - all of whom were members of their= =20 home state's Public Utilities Commissions - ordered the settlement talks th= at=20 concluded Monday. They had hoped all the parties involved in California's= =20 electricity crisis could reach an agreement on proposed refunds, long-term= =20 power contracts and other issues that have divided the parties for months.= =20 FERC's chief judge, Curtis Wagner, was asked to mediate the talks.=20 WHAT WAS AT STAKE?=20 For the state: $8.9 billion that Gov. Gray Davis said was the amount power= =20 companies overcharged California in the past year. Wagner's finding? There= =20 should be refunds. But more like $1 billion.=20 For the generators: More than $5 billion that they say they are owed for=20 unpaid power bills. Wagner's finding? Generators are owed more money than t= he=20 refunds they owe California. He did not specify by how much.=20 For California consumers: A stable electricity market. Until the refund iss= ue=20 is settled and power prices are stabilized long term, what the future holds= =20 for rate increase remains uncertain. Wagner's finding? No settlement.=20 Consumers still in limbo.=20 HOW DID WE GET HERE?=20 In spring 2000, wholesale power prices began to soar. The state began=20 appealing to FERC to cap wholesale prices. In the meantime the utilities we= re=20 running out of money. Generators weren't paid for all the electricity they= =20 sold. Rolling blackouts began.=20 Starting in January, the state began buying the power, replacing the=20 near-bankrupt utilities. Politicians from Sacramento to Washington increase= d=20 the pressure on FERC to cap rates. More than $27 billion was spent to buy= =20 power for California last year, compared with $7 billion the year before. T= he=20 price tag could reach $50 billion this year.=20 On June 19, FERC imposed the kind of soft price caps experts say could=20 moderate wholesale rates. Wholesale prices have come down, but the caps hav= e=20 caused confusion among generators, leading some to hold some power off the= =20 market.=20 WHAT'S NEXT?=20 The FERC commissioners will receive Wagner's report within a week. In it, h= e=20 will suggest they hold a fast-track formal hearing that would last no more= =20 than 60 days.=20 If they agree, after that hearing the commission would rule on refunds and= =20 other California market issues.=20 If either the state or the other parties to this dispute disagree, they can= =20 contest FERC's decision in court. Such legal proceedings could last many=20 years. State reveals details of power purchases=20 Report shows last-minute energy buys in first three months of 2001.=20 July 10, 2001=20 By JENNIFER COLEMAN The Associated Press=20 SACRAMENTO On three days in May, California's daily power allowance topped= =20 $100 million, according to a report released by state power traders.=20 The California Department of Water Resources released the report Monday,=20 along with 1,770 pages of documents that also detailed the last- minute pow= er=20 purchases the state made on the spot market in the first three months of th= e=20 year.=20 The report details the department's electricity spending since Jan. 17, whe= n=20 the state took over electricity purchases for Pacific Gas & Electric Co., S= an=20 Diego Gas & Electric Co., and Southern California Edison.=20 The utilities had amassed billions in debts and were no longer creditworthy= =20 enough to purchase power. Since then, the state has spent nearly $8 billion= =20 to keep the lights on.=20 The state's daily spending peaked May 10 at $102.4 million. The=20 second-highest daily total was May 23, when the state spent $101.8 million.= =20 But since May, spot-market prices have dropped, due in part to moderate=20 weather, lower natural gas prices, increased conservation that lowered dema= nd=20 and because of increased scrutiny by lawmakers and investigators into=20 possible price manipulation. Gov. Gray Davis has said long-term contracts= =20 also drove the price down.=20 "It does look like some of the spot-market prices have gone down, but it=20 looks like it's primarily due to natural gas prices," said Jamie Fisfis,=20 spokesman for Assembly Republicans.=20 The slight reduction in spot-market prices "underscores questions about the= =20 strategy of locking us into long-term contracts, if natural gas prices=20 continue to drop," Fisfis said.=20 Most of the long-term contracts run for 10 years, with one lasting for 20= =20 years.=20 Davis already has released details of the state's long-term power contracts= =20 after losing a court battle with Republican legislators and several news=20 organizations.=20 But Davis wanted to delay the release of the spot-market buys and short-ter= m=20 contracts until now to keep the state's buying strategy secret.According to= =20 the state, Atlanta-based Mirant Corp. got $1.24 billion as of May 31 for=20 spot-market purchases.=20 Canadian Powerex, the marketing arm of BC Hydro, has been paid $1.05 billio= n.=20 The newly released short-term contracts also show that on March 19-20, when= =20 the state had rolling blackouts, the state paid above-average prices in its= =20 largest short-term contracts.=20 For example, Mirant sold the state 650 megawatt-hours at off-peak usage tim= es=20 on March 20 for $345 a megawatt-hour, more than $70 above the average price= =20 of $272.96.=20 Tuesday, July 10, 2001=20 Ghost of Bob Citron roaming halls of capitol=20 Gray Davis is following footsteps of former O.C. treasurer into fiscal chao= s JOHN M.W. MOORLACH=20 Mr. Moorlach is the Orange County treasurer-tax collector.=20 A recent L.A. Times poll found that Californians still remain unconvinced= =20 that our state suffers from a shortage of energy. Perhaps the state's=20 subsidizing of the actual costs for electricity these past five months has= =20 caused us to believe that everything is fine. It is not.=20 The state has been spending an average of $57 million, a medium-sized city'= s=20 annual budget, per day for electricity. Now California is headed toward the= =20 same financial catastrophe that was imposed on its shareholder-owned=20 utilities, finding one of them in Chapter 11 bankruptcy and another on the= =20 precipice. At this pace, it will not be long before the state will be stari= ng=20 a Chapter 9 bankruptcy filing in the face.=20 That's why I'm gnawed by this "d,j. vu" sensation. The similarities and=20 parallels between California of 2001 and Orange County of 1994 are=20 frightening. Here's a refresher. In 1994 the county, through former Treasur= er=20 Robert Citron, was borrowing at variable rates and investing at fixed rates= .=20 The "experts" and the "politicos" were comfortable with the investment=20 scheme.=20 No wonder the electorate was convinced that there were no investing=20 improprieties. Even while their former treasurer was very secretive about h= ow=20 he was investing and what his "exit strategy" would be. Guess what? The=20 unexpected happened. Short-term borrowing rates doubled. The cost of=20 borrowing suddenly exceeded the revenues being generated.=20 It caused the investment pool to implode and Orange County taxpayers realiz= ed=20 a $1.64 billion loss. In spite of pleas to avoid or minimize this train wre= ck=20 the county's leadership, he ignored it. The rest is history. In a=20 half-pregnant deregulation scheme, the state capped the retail price that t= he=20 utilities can charge. It also eliminated the availability to acquire=20 electricity through the use of long-term contracts.=20 Guess what? The unexpected happened. The wholesale price for electricity=20 spiked dramatically above the inflexible retail price cap. It depleted the= =20 available funds for the utilities, and then some, and they are imploding. I= n=20 spite of pleas from the utilities imploring Gov. Gray Davis to avoid or=20 minimize this train wreck, he ignored them. The rest is also history.=20 It gets worse. Davis doesn't allow for the immediate raising of retail rate= s=20 and decides to have the state secretly purchase electricity. Guess what? Th= e=20 expected happened. He depleted our budget surplus! Our reserves! Nearly $9= =20 billion - and counting! He's a Citron, only quintupled!=20 And in the light of day, the secret purchases were not attractively priced= =20 and only compound this financial nightmare. Gov. Davis has done what no=20 Libertarian or Republican could ever dream of doing in such a short time. H= e=20 has returned the budget surplus created by taxpayers to the residents of=20 California by subsidizing their electricity bills.=20 Bravo! It may not be the most equitable way of refunding taxes, but has=20 anyone ever thought up a more efficient method? But, that's not all. He wan= ts=20 it back! Davis now wants to borrow some $13 billion to replace the spent=20 reserves and purchase even more electricity at rates in excess of the retai= l=20 prices! When does this train wreck in slow motion stop?=20 And how do we pay off these bonds? Davis did not want to raise rates last= =20 summer or this past winter. But now he will to pay off this historically=20 largest municipal bond offering with a significant utility rate increase. T= he=20 ratepayers will be reminded for 10 years after Davis is gone about his=20 expensive brilliance. And this elected official wants to purchase the power= =20 grids and bureaucratically manage the utilities? I say "no."=20 If we don't show some leadership in Sacramento soon, potential bond buyers= =20 will also say "no," unless they receive an attractive interest rate. Just a= sk=20 Edison International about attractive interest rates. It just subscribed $8= 00=20 million in bonds paying 14 percent. Tragically, Gov. Davis walked into his= =20 position with an existing budget surplus and now has no tangible legacy to= =20 show for it. No reserves. No improved highways. No new schools. No=20 infrastructure improvements. Only interest payments.=20 Wasn't that Citron's legacy? If amortized over 10 years at 6 percent, the= =20 citizens of California will pay an additional $4.4 billion in interest cost= s.=20 Over 15 years it's $6.7 billion. And therein lies the true legacy of Davis,= =20 squandering the entire budget surplus that he inherited on interest resulti= ng=20 from his indecisiveness and lack of leadership!=20 It is so tragic that the perpetrator of this colossal mess is still in deni= al=20 and continues to play the "blame game." Orange County played the "blame=20 game," too. But it had obvious perpetrators and succeeded in a court of law= =20 in securing a significant amount in retribution payments. I'm not so sure= =20 California will have a similar result.=20 Calpine's Los Medanos Energy Center Adds Needed Generation to California=20 Second New Major Base Load Generator for California=20 July 10, 2001=20 Second New Major Base Load Generator for California=20 SAN JOSE, Calif., July 9 /PRNewswire/ -- San Jose, Calif.-based Calpine=20 Corporation (NYSE: CPN) announced today that its 555-megawatt Los Medanos= =20 Energy Center in Pittsburg, Calif. is providing needed electricity to=20 California's strained power grid. Los Medanos is the second major=20 combined-cycle facility to be licensed and built in California in over a=20 decade. Fueled by natural gas, the facility is designed to add up to=20 555-megawatts of clean, reliable electricity to California on a 24 hours a= =20 day, seven days a week availability. As a cogeneration facility, the projec= t=20 also delivers electricity and steam to USS POSCO for use in industrial=20 processing.=20 Governor Gray Davis and Calpine CEO Peter Cartwright will hold a press=20 conference Monday afternoon to commission the Los Medanos Energy Center and= =20 to recognize the support of the local community, the construction and trade= s=20 people, and numerous organizations that helped develop the facility.=20 Cartwright said, "We are committed to creating innovative energy solutions= =20 for California's growing power market. Los Medanos exemplifies excellence i= n=20 power generation-ratepayers and the environment benefit as Calpine brings t= o=20 California new energy resources like Los Medanos."=20 Los Medanos is the second of eleven announced modern, fuel-efficient energy= =20 centers Calpine is building in the State as part of a $6 billion energy=20 initiative. Three additional facilities are under construction, including a= n=20 880-megawatt facility in Pittsburg at Dow Chemical's facility. By year-end= =20 2005, Calpine expects to be generating 12,000 megawatts of clean, affordabl= e=20 electricity to help repower California.=20 Calpine broke ground on the Los Medanos Energy Center in September 1999. Mo= re=20 than 600 construction and trade personnel worked on the project over a=20 20-month period. During the past several months, the project scheduled two= =20 ten-hour shifts, seven days a week to get the plant operating as soon as=20 possible in light of the energy crisis. And over the past several weeks,=20 technical teams worked round the clock to complete the facility. The total= =20 cost of construction is estimated to be approximately $350 million.=20 The Los Medanos Energy Center is located in Pittsburg, Calif., in Contra=20 Costa County adjacent to the USS POSCO plant and is operated by a 22-member= =20 staff of highly trained personnel.=20 As with all of Calpine's modern base load facilities, Los Medanos uses=20 combined-cycle design with natural gas-fired turbines in combination with a= =20 steam turbine to achieve maximum fuel efficiency. Advanced emissions contro= l=20 technology enables Calpine to reduce certain emissions by more than 90=20 percent.=20 Based in San Jose, Calif., Calpine Corporation is dedicated to providing=20 customers with reliable and competitively priced electricity. Calpine is=20 focused on clean, efficient, natural gas-fired generation and is the world'= s=20 largest producer of renewable geothermal energy. Calpine has launched the= =20 largest power development program in North America. To date, the company ha= s=20 approximately 34,000 megawatts of base load capacity and 7,200 megawatts of= =20 peaking capacity in operation, under construction, pending acquisitions and= =20 in announced development in 29 states, the United Kingdom and Canada. The= =20 company was founded in 1984 and is publicly traded on the New York Stock=20 Exchange under the symbol CPN. For more information about Calpine, visit it= s=20 Website at www.calpine.com.=20 This news release discusses certain matters that may be considered=20 "forward-looking" statements within the meaning of Section 27A of the=20 Securities Act of 1933, as amended, and Section 21E of the Securities=20 Exchange Act of 1934, as amended, including statements regarding the intent= ,=20 belief or current expectations of Calpine Corporation ("the Company") and i= ts=20 management. Prospective investors are cautioned that any such forward-looki= ng=20 statements are not guarantees of future performance and involve a number of= =20 risks and uncertainties that could materially affect actual results such as= ,=20 but not limited to, (i) changes in government regulations, including pendin= g=20 changes in California, and anticipated deregulation of the electric energy= =20 industry, (ii) commercial operations of new plants that may be delayed or= =20 prevented because of various development and construction risks, such as a= =20 failure to obtain financing and the necessary permits to operate or the=20 failure of third-party contractors to perform their contractual obligations= ,=20 (iii) cost estimates are preliminary and actual cost may be higher than=20 estimated, (iv) the assurance that the Company will develop additional=20 plants, (v) a competitor's development of a lower-cost generating gas-fired= =20 power plant, and (vi) the risks associated with marketing and selling power= =20 from power plants in the newly competitive energy market. Prospective=20 investors are also cautioned that the California energy environment remains= =20 uncertain. The Company's management is working closely with a number of=20 parties to resolve the current uncertainty, while protecting the Company's= =20 interests. Management believes that a final resolution will not have a=20 material adverse impact on the Company. Prospective investors are also=20 referred to the other risks identified from time to time in the Company's= =20 reports and registration statements filed with the Securities and Exchange= =20 Commission.=20 MAKE YOUR OPINION COUNT - Click Here=20 http://tbutton.prnewswire.com/prn/11690X52413521=20 SOURCE Calpine Corporation=20 CONTACT: media, Katherine Potter, 408-995-5115, ext. 1168, or investors, Ri= ck=20 Barraza, 408-995-5115, ext. 1125, both of Calpine Corporation=20 Web site: http://www.calpine.com (CPN)=20 National Desk; Section A=20 California and Generators Still Split After 2-Week Talks By JOSEPH KAHN ?=20 07/10/2001=20 The New York Times=20 Page 14, Column 1=20 c. 2001 New York Times Company=20 WASHINGTON, July 9 -- A federal mediator ended two weeks of negotiations=20 about California 's demands for electricity refunds today, with the state a= nd=20 power suppliers seemingly no closer to a settlement than when the talks=20 began.=20 The failure of the negotiations shifts the burden of resolving the yearlong= =20 dispute to the Federal Energy Regulatory Commission, to which the mediator= =20 may recommend a pricing formula that would mean refunds of about $1 billion= .=20 California , which wants $8.9 billion, vowed today that it would seek that= =20 much and more, through the courts if necessary.=20 Although electricity prices in the West have eased in recent weeks, the pow= er=20 crisis that has afflicted California and other Western states seems unlikel= y=20 to be resolved unless rival parties can agree on how much electricity shoul= d=20 have cost during the last 13 months.=20 The power market has been mired in an accounting gridlock. The state claims= =20 that generating companies began grossly overcharging for electricity -- wit= h=20 prices soaring by a factor of 10 or 20 over year-before levels -- beginning= =20 in late spring last year. Generators say they are prepared to pay some=20 refunds, but argue that California 's estimates of overcharges are radicall= y=20 inflated.=20 The mediator in the settlement talks was Curtis L. Wagner Jr., an=20 administrative law judge for the federal agency, who said today that the=20 negotiations had failed to reach the comprehensive voluntary settlement he= =20 had sought.=20 Mr. Wagner said he would recommend to the agency's commissioners that they= =20 convene a 60-day evidentiary hearing that would impose an administrative=20 solution. He also said he would suggest a method for determining fair price= s=20 for electricity .=20 Under federal law, the energy commission has the obligation to ensure ''jus= t=20 and reasonable'' electricity rates. Though the commission declared last yea= r=20 that California 's electricity market had broken down, it only recently beg= an=20 imposing price controls on the market and has yet to address accusations of= =20 past overcharges systematically.=20 While the scope of any refunds remains uncertain, Mr. Wagner's remarks=20 appeared more favorable for generators than for Western states, which have= =20 collectively pressed for as much as $15 billion in refunds.=20 Mr. Wagner said that to determine how much California should have paid for= =20 power since last September, when the commission began monitoring California= =20 energy prices, he would suggest that the agency retroactively apply a price= =20 control formula it adopted in June. He also indicated that he supported a w= ay=20 of calculating the costs of power generation that is closer to the method= =20 favored by power companies than to the one put forward by California=20 officials. The judge suggested that the formula he is recommending could=20 require generators to pay back hundreds of millions or ''maybe a billion''= =20 dollars.=20 California officials gave a positive cast to the judge's statements, callin= g=20 them a step forward because he formally acknowledged that companies would= =20 have to pay some refunds. They also noted that whatever the level of=20 federally mandated refunds, they would have the option of seeking more in= =20 court.=20 ''We are still going to get the $8.9 billion,'' said Michael Kahn, who=20 represented Gov. Gray Davis of California in the talks. ''If we don't get i= t=20 all from the commission, we will get the remainder in the courts.''=20 Governor Davis himself said today that if the agency did not provide refund= s=20 in the amount the state claims it is owed, it would sue generators for $18= =20 billion to $20 billion. ''We are in a war with generators, mostly out of=20 state, that are trying to bleed us dry,'' Mr. Davis said, speaking at the= =20 ceremonial opening of a power plant in Northern California .=20 Representatives of several generating companies said that during the=20 settlement talks, they collectively offered to refund California about $500= =20 million. They estimated that the calculation method suggested by the judge= =20 would result in refunds of no more than $1.5 billion -- far closer to their= =20 offer than to California 's demand.=20 Still, several executives said they now hoped to reach individual settlemen= ts=20 with the state that would end the threat of prolonged litigation and allow= =20 them to collect several billion dollars they say they are owed by the state= =20 and its leading, financially pressed utilities, which ran up huge debts to= =20 suppliers in the last year.=20 ''We remain very interested in reaching a global settlement with the state= =20 that will put this problem behind us once and for all,'' said Brent Bailey,= =20 vice president and general counsel of Duke Energy.=20 Financial=20 Energy Refund Talks Fail In Calif.; Federal Agency's Judge To Propose=20 Settlement Peter Behr ?=20 07/10/2001=20 The Washington Post=20 FINAL=20 Page E01=20 Copyright 2001, The Washington Post Co. All Rights Reserved=20 California consumers were overcharged by as much as $1 billion by electrici= ty=20 suppliers since October, a federal administrative judge said yesterday afte= r=20 state officials and power suppliers failed to reach an agreement on the=20 disputed charges.=20 Gov. Gray Davis (D) and California power officials wanted $8.9 billion in= =20 refunds dating back to May 2000, when the state's energy crisis began.=20 A group of generating companies headed by units of Duke Energy Corp., Relia= nt=20 Energy Inc. and Williams Cos. offered refunds of $716.1 million in the past= =20 week, going back to October. The companies said refunds should be offset by= =20 the larger amounts they are owed for unpaid power deliveries to the state.= =20 "The numbers were too far apart," Curtis L. Wagner Jr., chief judge of the= =20 Federal Energy Regulatory Commission, told reporters after two weeks of=20 closed negotiations ended yesterday. Wagner acknowledged that his refund=20 number was imprecise and said further hearings before FERC are needed to pi= n=20 down the figure.=20 Calpine Corp. of San Jose and possibly one other supplier are expected to= =20 reach individual settlements with the state, the judge said.=20 "A lot of the parties genuinely wanted to settle and others didn't," Wagner= =20 told reporters. "There's an old southern saying," said the 72-year-old=20 Tennessean. "You can take a horse to water, but you can't make it drink."= =20 He declined to say which side balked, but previously he had blasted=20 California officials for not modifying their initial demands.=20 Wagner said he will send his own refund formula to FERC's five commissioner= s=20 within a week. His formula essentially will reflect what he thinks reasonab= le=20 electricity prices would have been in the state at various times since=20 October, considering fuel costs and other factors. Charges over those level= s=20 would be subject to refund, if FERC agrees.=20 The judge's recommendation is likely to carry considerable weight with FERC= 's=20 commissioners, according to energy analysts. Earlier this year, FERC=20 tentatively ordered $125 million in refunds for the first three months of= =20 this year, an amount that Davis called far too low.=20 Facing increasing political pressure from Congress, FERC -- with two new=20 members appointed by President Bush -- has taken a harder line on Californi= a=20 's power prices. Last month, the commissioners imposed price restraints on= =20 wholesale power transactions in California and 10 other western states.=20 Wagner patterned his formula after FERC's ruling last month.=20 The nation's wealthiest state has been battered by an extraordinary surge i= n=20 electricity and gas prices that have pushed its electricity costs up from $= 7=20 billion in 1999 to an estimated $27 billion last year. Power prices did not= =20 retreat from record levels until last month.=20 Davis's top aides quickly claimed vindication yesterday.=20 "We think the numbers, even using the judge's formula, are going to be in t= he=20 multiple billions," said Michael Kahn, chairman of the California Independe= nt=20 System Operator, the state's power grid manager.=20 Kahn noted that the state refused to drop a growing list of legal claims=20 against the principal energy suppliers, most of them headquartered outside= =20 the state. The companies had insisted on being released from the state's=20 legal claims as part of any settlement, according to sources close to the= =20 negotiations.=20 "We will have a viable claim in state court and other jurisdictions for the= =20 remainder," Kahn said. " California will get its $8.9 billion."=20 But the state's own expert witness, economist Eric Hildebrandt, chief marke= t=20 monitor for the California grid, testified before Wagner that the=20 out-of-state generators and other nonpublic power suppliers would owe about= =20 $3.7 billion using FERC's pricing formula of last month -- less than half t= he=20 $8.9 billion goal.=20 Duke Energy is "very pleased'' by Wagner's action, said Brent Bailey, vice= =20 president and general counsel of the Charlotte-based company. The generator= s,=20 however, repeated their claims that Davis is trying to make them scapegoats= =20 for the state's failed electricity deregulation plan.=20 The major generators, in a statement yesterday, said they had delivered onl= y=20 20 million megawatt hours out of the 145 million the state power grid used= =20 from October 2000 to last May. (A megawatt supplies enough power for about= =20 750 homes.)=20 California utilities and municipal power companies also reaped large profit= s,=20 the generators said.=20 "The refunds sought by California would send a profoundly counterproductive= =20 message to suppliers: when prices are low and surpluses exist, you face a= =20 steep downside; when scarcity develops and prices rise we will take away al= l=20 upside [profit]. No one will invest [in California power facilities] in tha= t=20 climate," the generators' statement said. "The power supply shortage thus= =20 will continue without relief."=20 http://www.washingtonpost.com=20 Contact: http://www.washingtonpost.com=20 Economy=20 California and Energy Companies Miss Deadline By Richard B. Schmitt ?=20 07/10/2001=20 The Wall Street Journal=20 Page A2=20 (Copyright (c) 2001, Dow Jones & Company, Inc.)=20 WASHINGTON -- State officials and power-company executives failed to meet a= =20 federal deadline for settling $8.9 billion of disputed California electrici= ty=20 charges, as a federal mediator overseeing the talks suggested the state's= =20 demand was excessive.=20 Cautioning that he hadn't done formal calculations, Curtis L. Wagner Jr., t= he=20 chief administrative law judge of the Federal Energy Regulatory Commission,= =20 put the level of potential refunds at "hundreds of millions of dollars, may= be=20 a billion dollars." He also said any sums due the state could well be offse= t=20 by monies its insolvent utilities owe in unpaid power bills.=20 Mr. Wagner said he would recommend to the commission that any refunds be=20 calculated only from October -- the state had been seeking rebates calculat= ed=20 from May 2000 -- in line with an earlier FERC jurisdictional ruling. That= =20 decision alone would shave $3 billion from the $8.9 billion claim.=20 Mr. Wagner, who is expected to issue formal findings in the next few days,= =20 said he would recommend that the FERC hold an evidentiary hearing to assess= =20 the correct method for figuring refunds.=20 The collapse of the talks doesn't preclude individual deals later between= =20 energy companies and the state, which has accused them of overcharging for= =20 power during the past two years. Yesterday, some industry lawyers indicated= a=20 willingness to keep bargaining, and Mr. Wagner said two "partial" settlemen= ts=20 were in the works.=20 Yet, absent any such solution, the overcharge issue -- a flash point in the= =20 California power crisis -- is apt to be resolved in protracted legal and=20 regulatory proceedings, which could drag on for months or even years.=20 The negotiations began June 25, with a deadline set for midnight last night= .=20 But late yesterday, participants indicated they were billions of dollars=20 apart, with basic differences over everything from the disputed charges to= =20 doubts about whether the FERC, which ordered the talks, could enforce a dea= l=20 because of the industry's questions about the reach of the agency's=20 authority.=20 "We haven't reached a settlement. We really haven't come close," said John= =20 Stout a senior vice president of Reliant Energy Inc.'s wholesale-power grou= p.=20 Reliant had offered to pay California about $50 million to extricate itself= =20 from the fight. That is more than a third of the Houston company's operatin= g=20 profit during the relevant period, he said, although far shy of the more th= an=20 $375 million California sought from Reliant.=20 Mr. Wagner said the industry offered a total of $716 million to settle the= =20 matter.=20 The refund issue is fast becoming a test of the agency's authority and=20 credibility. The FERC, a onetime regulatory backwater, has come under inten= se=20 scrutiny of late for its largely hands-off monitoring of deregulated=20 California markets. The commission has ordered some companies to pay refund= s,=20 but they have been relatively small -- such as a $124 million rebate coveri= ng=20 wholesale electricity bills in California in January and February.=20 California Gov. Gray Davis has said he hopes two new FERC members will take= a=20 much more aggressive tack. The agency is expected to act quickly on the=20 judge's call for a hearing and other findings.=20 Yesterday, Michael Kahn, a San Francisco lawyer representing Gov. Davis at= =20 the settlement, declared he was "gratified" by Mr. Wagner's findings, sayin= g=20 they validated the state's claims to some refunds, a concept the industry h= ad=20 rejected at the talks' outset. "We've had a ringing endorsement of the idea= =20 of refunds and we'll get back lots of money," he said, adding that what the= =20 state doesn't recoup via the FERC it will pursue in court.=20 But power generators, who derided the state's request for a huge refund as= =20 "ludicrous" and "unsound," felt vindicated by yesterday's proceedings. "The= =20 state came away with far less than its expectations," said Robert Loeffler,= =20 an attorney for a unit of AES Corp. of Arlington, Va. "The common expectati= on=20 now is that any refunds will be way below this $9 billion."

dasovich-j/all_documents/28504.

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Energy Issues

Please see the following articles: Sac Bee, Wed, 7/11: Mediator talked of a bigger refund: He reportedly suggested a $4.5 billion deal midway through the failed talks Sac Bee, Wed, 7/11: Davis repeats threat to sue FERC to get full refund Sac Bee, Wed, 7/11: Dan Walters: Davis plays in a virtual world while the= =20 energy reality continues=20 Sac Bee, Wed, 7/11: Energy Digest: Ratepayer panel shot down again Sac Bee, Wed, 7/11: Missing megawatts: Conservation saving state from=20 blackouts (Editorial) SD Union, Wed, 7/11: Governor tells FERC to be fair and then some SD Union, Wed, 7/11: Calpine says deal with state close on alleged overchar= ges SD Union, Wed, 7/11: Judge refuses to let ratepayers form official committe= e=20 in utility bankruptcy case LA Times, Wed, 7/11: Judge Bars Ratepayers Panel From PG&E Case SF Chron, Wed, 7/11: Developments in California's energy crisis SF Chron, Wed, 7/11: Enron Corp. sues to block Senate from forcing document= =20 release SF Chron, Wed, 7/11: Governor threatens to sue utilities for refunds=20 Davis says California won't settle for $1 billion SF Chron, Wed, 7/11: News briefs on the California power crisis Mercury News, Wed, 7/11: White House bends under energy conservation pressu= re=20 Mercury News, Wed, 7/11: Davis ups the voltage (Editorial) OC Register, Wed, 7/11: Lights go out on Davis' power show (Commentary) ---------------------------------------------------------------------------= --- ------------------------------------------------------------------------ Mediator talked of a bigger refund: He reportedly suggested a $4.5 billion= =20 deal midway through the failed talks. By David Whitney Bee Washington Bureau (Published July 11, 2001)=20 WASHINGTON -- Midway through the negotiations between California and power= =20 sellers to settle the myriad issues arising out of the state's energy crisi= s,=20 the mediator told California's negotiating team that he thought a deal wort= h=20 more than $4.5 billion would be appropriate -- a much higher figure than he= =20 suggested after the talks ended Monday.=20 Whether the statement by Curtis Wagner, the chief administrative law judge= =20 for the Federal Energy Regulatory Commission, was a negotiating ploy or a= =20 reflection of his evolving beliefs is not clear.=20 Before the settlement talks began two weeks earlier, Wagner said he thought= =20 Gov. Gray Davis' demand for $8.9 billion in refunds was too high and that a= =20 settlement probably would be in the range of $2 billion to $2.5 billion.=20 The disclosure that Wagner had contemplated a much higher figure midway=20 through the negotiations suggests the state had more support than the judge= =20 let on Monday when he said after the talks foundered that he thought a deal= =20 should involve "hundreds of millions, maybe a billion" dollars.=20 While the state wants $8.9 billion, $3 billion of that was for overcharges= =20 during the five months preceding last October and are beyond FERC's scope o= f=20 review. Even as a starting point then, the $4.5 billion mentioned by Wagner= =20 represented 75 percent of the money the state was demanding for alleged pri= ce=20 gouging between October and May.=20 The judge's $4.5 billion figure, divided between cash payments and savings= =20 from long-term power contracts, was confirmed by three sources who asked to= =20 be identified only as "close to the negotiations" because participants had= =20 been required to sign confidentiality statements.=20 The sources gave virtually identical accounts of a July 2 meeting with Wagn= er=20 in which the judge also dismissed as "inadequate" a $670 million settlement= =20 offer made by power generators and marketers.=20 By Monday, the settlement offer had risen to $716 million. But the state=20 refused to back off its $8.9 billion demand, and there never was any seriou= s=20 back-and-forth negotiations during the 15-day period the regulatory=20 commission had given Wagner to craft a deal.=20 As a consequence of the failed talks, Wagner said Monday that within a week= =20 he will send the five-member commission his recommendations on how it might= =20 approach an order refunding power overcharges.=20 Among Wagner's suggestions is that the commission convene a hearing before = a=20 different administrative judge to take testimony from generators, marketers= =20 and the state on how to arrive at a fair settlement.=20 The options sketchily outlined by Wagner on Monday included limiting the ti= me=20 when refunds are allowed -- something that could reduce state claims by abo= ut=20 one-third -- and changing the way power plant costs are calculated to a=20 formula more favored by generators.=20 It is not clear whether Wagner, who moved from one negotiating team to=20 another during his two-week quest for a deal, ever raised the $4.5 billion= =20 settlement figure to the power marketers and generators.=20 Joel Newton, who represented Dynegy Power, Duke Energy, Reliant Energy,=20 Williams-AES and Mirant in the talks, said Tuesday he was bound by the=20 confidentiality pledge to keep silent on the internal negotiations.=20 Wagner also is refusing all media calls.=20 According to the account of the negotiations confirmed by sources Tuesday,= =20 Wagner was angry at the snail's pace of progress after the first week of th= e=20 talks.=20 On Friday, June 29, Wagner called everyone into his hearing room and scolde= d=20 them. He condemned the California team, saying they all ought to wear "clow= n=20 suits" because they were "in the pocket" of Davis and refused to show any= =20 independence.=20 He then turned to the generators and said that after a week of talks, nothi= ng=20 had been heard from them. He told them he wanted them to produce "real=20 numbers, and hard numbers" over the weekend and that if they didn't, he wou= ld=20 -- "and you're not going to like it."=20 Wagner's admonition apparently moved no one toward a deal. On Monday, in th= e=20 meeting with the California delegation, one source quoted Wagner as saying= =20 the settlement number he received from the generators and marketers "is so= =20 low I can't even present it to you."=20 "I'm not happy with the figures, they're not adequate," others quoted the= =20 judge as saying.=20 At that point, the sources said, Wagner said he was thinking of a settlemen= t=20 of $2.5 billion in cash, $2 billion in long-term contract savings and other= =20 money from out-of-state investor-owned utilities and even the federal=20 Bonneville Power Administration, which markets power from dams in the=20 Northwest.=20 But as the clock wound down on the negotiations, nothing much happened unti= l=20 Friday and Saturday, when the California team met with the five largest pow= er=20 generators.=20 It was at those meetings that the generators offered $510 million in refund= s=20 to settle their disputes with the state. But the money would have gone to= =20 reduce the tab for what they were owed by the state and California utilitie= s,=20 and it was loaded with conditions, including the state dropping all of its= =20 investigations and lawsuits.=20 Wagner declared the talks over Monday, saying he was unable to bring the=20 parties together.=20 The Bee's David Whitney can be reached at (202) 383-0004 or=20 [email protected]. Davis repeats threat to sue FERC to get full refund=20 By Emily Bazar Bee Capitol Bureau=20 (Published July 11, 2001)=20 Gov. Gray Davis shot words of caution at federal regulators Tuesday, warnin= g=20 that he will sue them if they order power companies to refund anything less= =20 than the $8.9 billion he and other state officials have demanded.=20 The Democratic governor also lobbed threats at state legislators, suggestin= g=20 that he may call a special session to prevent them from embarking upon a=20 monthlong summer break next week.=20 Instead of vacationing, Davis said, lawmakers must work to approve an=20 agreement between the state and Southern California Edison that would save= =20 the utility from bankruptcy.=20 Though the governor has indicated previously that the state may take the=20 Federal Energy Regulatory Commission to court, his announcement Tuesday mad= e=20 it clear he intends to follow through.=20 Settlement talks with power generators to determine how much, if any, the= =20 companies overcharged California for electricity concluded Monday with no= =20 resolution.=20 Now, the decision rests with the FERC's governing board, and Davis said the= =20 state won't back away from the $8.9 billion figure it demanded during talks= .=20 "You order what you think is fair," Davis said during a news conference wit= h=20 the state's top negotiators. "We'll take what you order, and we'll see you = in=20 court."=20 Davis acknowledged that a legal battle could drag out for months or years.= =20 He added that he believes the disagreement -- or even a protracted court=20 battle -- will not affect a tentative agreement between the state and Ediso= n.=20 Under terms of the deal, money to pay off the utility's debt would come fro= m=20 a state purchase of its transmission lines and from a portion of consumers'= =20 electricity rates.=20 According to the agreement, the Legislature must approve the deal by Aug. 1= 5,=20 and Davis said he intends to hold lawmakers to that date.=20 Davis said the deadline is important because creditor committees will=20 scrutinize the Legislature's every move to determine whether to force Ediso= n=20 into bankruptcy court rather than await a political deal.=20 Legislators are scheduled to leave for summer recess July 20 and return Aug= .=20 20.=20 Davis threatened to use his executive powers to force lawmakers to remain i= n=20 Sacramento and work on the Edison agreement, if necessary.=20 The Bee's Emily Bazar can be reached at (916) 326-5540 or [email protected]= . Dan Walters: Davis plays in a virtual world while the energy reality contin= ues (Published July 11, 2001)=20 California still has a very real and very severe energy crisis, to wit:=20 The state is still running up massive debts as it pays more for power than = it=20 can recover from ratepayers and is having trouble borrowing billions of=20 dollars to cover the debt.=20 There is a strong possibility, perhaps a probability, that when summer's he= at=20 truly descends, there will be severe power blackouts as air conditioners=20 demand more juice than California can generate or buy.=20 One major utility, Pacific Gas and Electric, has filed for bankruptcy=20 protection and a second, Southern California Edison, is on the brink of=20 joining it.=20 There is, however, a virtual energy crisis consisting of political spin,=20 media leaks and made-for-television buzz words -- and it is rapidly becomin= g=20 dominant, while the real situation fades into the background.=20 This week's comic opera proceedings before a Federal Energy Regulatory=20 Commission administrative judge in Washington had little to do with reality= =20 and everything to do with the virtual version.=20 Gov. Gray Davis and other officials demanded $8.9 billion in refunds from t= he=20 generators and brokers who have been selling California power for the past= =20 year, alleging that California is, in Davis' words, "being gouged and rippe= d=20 off." But the number itself was more or less plucked out of thin air -- an= =20 arithmetic exercise by the state power grid's traffic controller not intend= ed=20 for a refund proceeding. And while Judge Curtis Wagner saw it as unrealisti= c,=20 Davis and other state officials insisted on its validity.=20 "There are refunds due that total hundreds of millions of dollars and maybe= a=20 billion dollars," Wagner said as a final negotiating session collapsed. But= =20 that's a far cry from the $8.9 billion that Davis insists is due. "If you= =20 think California is going to settle for $1 billion in refunds, we will see= =20 you in court," Davis said Tuesday.=20 Why is Davis being so belligerent? Because it's good politics. Ever since h= e=20 began berating out-of-state generators and accusing them of ripping off=20 California, Davis' approval ratings have been climbing. If he settled for= =20 substantially less -- the power generators probably would agree to a couple= =20 of billion dollars to rid themselves of the matter -- Davis would be=20 embarrassed. Politically, he's served by continuing to portray himself as= =20 fighting for California and against the out-of-state generators.=20 That it's more political construct than reality is indicated by another eve= nt=20 this week, Davis' release of state power purchase data from early in the ye= ar=20 -- numbers that were made public only because a judge told him he had to do= =20 it.=20 Davis and his minions have been accusing Texas-based generators and power= =20 brokers of particularly egregious price gouging -- clearly playing on=20 Californians' instinctive mistrust of anything Texan and implying that Texa= n=20 George W. Bush is a co-conspirator. But the power purchase records -- which= =20 were released only to journalists willing to pay a stiff fee -- indicate th= at=20 less than 10 percent of California's power purchase dollars were going to= =20 Texas and the private sellers, in general, charged the state less than such= =20 publicly owned utilities as the Los Angeles Department of Water and Power.= =20 The clearly adverse position being taken by FERC and the purchase data that= =20 undercut his jingoistic sloganeering are not, however, deterring Davis from= =20 continuing to operate, at least for public consumption, in the melodramatic= =20 virtual world.=20 One cannot, however, ignore reality forever. The likelihood of a=20 pro-generator decision from FERC means that there will be no easy out for= =20 Davis, or for his pending deal to prevent Southern California Edison from= =20 slipping into bankruptcy court. The Legislature has refused to act on the= =20 Edison rescue plan while it awaited an indication of whether the utility's= =20 debts would be slimmed down by FERC.=20 This week's farcical events make it more likely that the Edison deal will= =20 stall out permanently in the Legislature and its creditors will force the= =20 utility into bankruptcy court later this summer. That's part of that nasty= =20 old reality that cannot simply be wished away.=20 The Bee's Dan Walters can be reached at (916) 321-1195 or [email protected]= om . Energy Digest: Ratepayer panel shot down again (Published July 11, 2001)=20 SAN FRANCISCO -- U.S. Bankruptcy Judge Dennis Montali on Tuesday reaffirmed= =20 his earlier decision to disband a ratepayers committee that would have give= n=20 consumers an official voice in the Pacific Gas and Electric Co. bankruptcy= =20 case.=20 The judge said bankruptcy court isn't the right forum for refunding rates o= r=20 settling potential future claims.=20 He eliminated erroneous statements from the opinion he originally issued=20 seven weeks ago. U.S. bankruptcy trustee Linda Ekstrom Stanley, who had mov= ed=20 for reconsideration, called the new version "a very careful decision" but d= id=20 not rule out an appeal.=20 Stanley on May 4 appointed an official committee of ratepayers to represent= =20 PG&E customers, saying they might be forced to pay for the utility's massiv= e=20 losses.=20 --Claire Cooper Missing megawatts: Conservation saving state from blackouts (Published July 11, 2001)=20 A public that doesn't believe that California's electricity crisis is genui= ne=20 is nonetheless acting as if it is. Experts are revising down scary=20 predictions of rolling blackout after rolling blackout as Californians have= =20 opted to conserve rather than consume.=20 During June, Californians cut back on electricity use by roughly 4,750=20 megawatts when it mattered the most, on hot afternoons. Those decisions=20 shaved about 12 percent from the expected demand. That's equivalent to the= =20 output of nine or 10 medium-size power plants. Last June, grid operators ha= d=20 to call six shortage alerts. This June, which was hotter, they called none.= =20 For a state that's been derided as selfish and wasteful, that's nothing sho= rt=20 of amazing.=20 Some of what Californians are doing now to conserve isn't likely to become= =20 habit in the long run. Businesses may want to turn back on all the banks of= =20 lights. Homeowners may decide that 82 degrees is the right temperature when= =20 power is short but too warm when California's supply emergency is over.=20 Yet there's a huge potential payoff into the future if some of these change= s=20 become permanent. It's encouraging that the most effective forms of=20 conservation -- switching to more energy-efficient appliances or=20 manufacturing techniques -- have yet to be implemented on a large scale.=20 Subsidies for these programs have yet to translate into changes in business= es=20 and in homes that will lower demand even further.=20 For a while this spring, some attempted to diminish the role of conservatio= n.=20 Conservation is a "personal virtue," said Vice President Dick Cheney. But= =20 Californians know it's become both a personal and public necessity. The=20 public may have thought the electricity shortage was an illusion, but=20 everyone knew that the higher electricity bills that began arriving in June= =20 were real. And so was the risk that the lights would go out on hot days.=20 Yes, the state needs more supply to catch up with the growth in demand. Yet= =20 long after the crisis is over, there will be plenty of potential on the=20 efficiency side of the equation as well, to protect the quality of life and= =20 reduce the high electricity costs that will likely plague the state for yea= rs. Governor tells FERC to be fair and then some=20 Davis firm on demand for $8.9 billion refund By Ed Mendel=20 UNION-TRIBUNE STAFF WRITER=20 July 11, 2001=20 SACRAMENTO -- Gov. Gray Davis had a tough message for federal regulators=20 yesterday after the failure of settlement talks in California's bid to get = an=20 $8.9 billion refund from electricity suppliers: "See you in court."=20 The governor said California will seek a full $8.9 billion refund for=20 electricity overcharges, even if federal regulators award the maximum refun= d=20 of $5.4 billion allowed under their guidelines.=20 "Our message is just order what you are going to order," Davis said of the= =20 Federal Energy Regulatory Commission. "We believe you should order $8.9=20 billion. But you order what you think is fair. We will take what you order,= =20 then we will see you in court."=20 Davis, joined by his negotiating team, made the remarks at a news conferenc= e=20 a day after two weeks of closed-door talks with suppliers in Washington=20 failed to reach an agreement.=20 An administrative law judge made a recommendation to the regulatory=20 commission that Davis' top negotiator, Michael Kahn, chairman of the=20 California Independent System Operator, expects to result in a refund of mo= re=20 than $1 billion.=20 Davis said that a revealing decision will be made by the commission, which = he=20 hopes has embarked on a "new path" with the appointment by President Bush o= f=20 two new members, Pat Wood of Texas and Nora Brownell of Pennsylvania.=20 "Are they on the side of consumers, as the federal power act envisions them= =20 being," Davis asked, "or are they just there to do the industry's bidding, = as=20 they have so often in the past?"=20 Kahn said rules adopted by FERC cut off the refund period at last October,= =20 trimming $3 billion from the $8.9 billion overcharge claimed by California= =20 dating to May 2000.=20 He said FERC has no jurisdiction over municipal utilities, such as the Los= =20 Angeles Department of Water and Power, that sold power to the state. The=20 municipal districts overcharged the state by about $600 million, according = to=20 Kahn.=20 As a result, he said, the maximum refund that FERC could order for Californ= ia=20 is about $5.4 billion.=20 "We made it clear to everyone that if we did not settle for $8.9 billion, w= e=20 would seek redress in court for the remainder of the money above $5.4=20 billion," Kahn said.=20 Calpine of San Jose and several other generators have expressed interest in= =20 the state's offer to negotiate one-on-one with the state while the federal= =20 regulators consider their decision, Kahn said. Calpine says deal with state close on alleged overcharges=20 By Don Thompson ASSOCIATED PRESS=20 July 10, 2001=20 SACRAMENTO =01) Calpine Corp. said Tuesday it is near agreement with Califo= rnia=20 officials over money the state says the company overcharged for electricity= .=20 That would make it the first company to settle a part of the $8.9 billion t= he=20 state wants in negotiations before the Federal Energy Regulatory Commission= .=20 However, San Jose-based Calpine has offered far less than the $236 million= =20 the state claims it is owed.=20 "We obviously disagree with that number, because we disagree with some of t= he=20 assumptions" used for the estimate, said Calpine spokesman Bill Highlander.= =20 "We don't think it's anywhere near that. We think it's a low number."=20 He wouldn't specify the company's counteroffer, but noted new FERC figures= =20 showing the company did $29 million in business with the state in the first= =20 five months of this year.=20 The California Independent System Operator estimated the company owed more = in=20 overcharges than it had in total sales for the period from May 2000 to May= =20 2001, a financial impossibility, Highlander said.=20 The ISO essentially multiplied what Calpine was able to produce by the amou= nt=20 it charged for electricity, Highlander said, without taking into account ho= w=20 much electricity the company actually sold.=20 ISO spokesman Michael Bustamante defended the projections by the state's gr= id=20 operator, estimates he said were validated during two weeks of FERC=20 negotiations that ended Monday. The ISO took the methodology adopted by the= =20 federal regulator in a June 19 order capping electricity rates, then worked= =20 backward to May 2000 to reach its estimate, Bustamante said.=20 Generators and state negotiators were unable to reach a settlement during t= he=20 two weeks of talks overseen by FERC chief administrative law judge Curtis L= .=20 Wagner, leaving Wagner to make his own recommendation to the commission.=20 Wagner said Monday the state may be owed perhaps $1 billion in overcharges,= =20 but said that could be offset by money the generators are owed for the powe= r=20 they sold into the state.=20 California officials believe generators owe about $4 billion in refunds usi= ng=20 the June 19 order that Wagner adopted as his benchmark, even given Wagner's= =20 determination that the commission can only consider overcharges after Oct. = 2.=20 At one point during negotiations, Wagner told California officials he thoug= ht=20 an appropriate settlement should top $4.5 billion, according to one=20 negotiator who spoke on condition he not be named. Wagner suggested=20 generators could pay $2.5 billion in cash and $2 billion in long-term=20 electricity contracts at cheaper rates, the source said.=20 That was very different from the $670 million in refunds Wagner privately= =20 said generators were offering. For instance, the source said, while Reliant= =20 Energy on Monday offered $50 million in refunds, California believes=20 Reliant's share of overcharges is closer to $1 billion.=20 Jan Smutny-Jones, executive director of the Independent Energy Producers,= =20 applauded the possibility that some generators will settle with the state= =20 without waiting for a FERC decision and likely protracted court battle.=20 "We need to solve this problem and move on," Smutny-Jones said.=20 ?? =01) Associated Press writer Mark Sherman contributed to this story from=20 Washington, D.C.=20 Judge refuses to let ratepayers form official committee in utility bankrupt= cy=20 case=20 ASSOCIATED PRESS=20 July 10, 2001=20 SAN FRANCISCO =01) The federal judge overseeing Pacific Gas and Electric Co= .'s=20 bankruptcy case ruled Tuesday the utility's ratepayers cannot form an=20 official committee to represent their interests.=20 Ratepayer advocates had sought such recognition to ensure the utility would= =20 not raise rates further as a way of paying off its debts.=20 But U.S. Bankruptcy Judge Dennis Montali agreed with PG&E and the official= =20 creditors committee and rejected the idea for the second time in two months= .=20 Montali suggested instead that ratepayers organize an informal committee to= =20 bring their concerns to the court, and said the ratepayers also could bring= =20 matters before the state Public Utilities Commission.=20 A separate committee of ratepayers would have been able to vote on the fina= l=20 reorganization of the company, a plan that could affect power service and= =20 rates.=20 PG&E filed for Chapter 11 bankruptcy April 6, and owes billions of dollars = to=20 more than 50,000 creditors. It was brought down, in part, by California's= =20 botched experiment with deregulation.=20 Judge Bars Ratepayers Panel From PG&E Case Power: Customers are not creditors in the utility's bankruptcy, ruling says= .=20 Action does not preclude refunds for consumers. TIM REITERMAN TIMES STAFF WRITER July 11 2001 SAN FRANCISCO -- A federal judge Tuesday reaffirmed his decision to bar a= =20 ratepayers committee from Pacific Gas & Electric Co.'s bankruptcy case and= =20 denounced the committee's attorney for suggesting that the action could=20 prevent PG&E customers from receiving refunds for excessive energy charges. Judge Dennis Montali ruled against a U.S. trustee and the ratepayers=20 committee in deciding that ratepayers as a group had no claims and were not= =20 creditors when PG&E filed for bankruptcy on April 6. But Montali criticized "misguided remarks" by a committee attorney on July = 5=20 and news media accounts that followed the hearing. The judge said the repor= ts=20 left the misconception that by disallowing a ratepayers committee, he would= =20 reject all claims of ratepayers and they could lose out on future refunds. The judge and PG&E officials emphasized that there are no matters involving= =20 PG&E customer refunds before the state Public Utilities Commission. State officials are seeking about $9 billion in refunds, however, from the= =20 Federal Energy Regulatory Commission for alleged overcharges to Californian= s=20 by energy companies since last year. The distribution of any ratepayer refunds would be decided by the PUC, and= =20 customers would be paid whether or not they filed Bankruptcy Court claims b= y=20 a Sept. 5 deadline, the judge and PG&E attorneys said. The judge took the highly unusual step of directing PG&E and U.S. Trustee= =20 Linda Ekstrom Stanley to consider remedies to allay any confusion among=20 PG&E's 5.5 million customers. He suggested publishing clarifications in newspapers that carried the=20 erroneous information, in PG&E customer bills and on Web sites. Stanley had formed a ratepayers committee of business, government and=20 consumer representatives, saying they will be affected by PG&E's Chapter 11= =20 reorganization. But Montali decided that ratepayers do not qualify as creditors under=20 bankruptcy law and are not entitled to official status that allows them to= =20 participate in the bankruptcy and receive funding from PG&E. Stanley said she has not yet decided whether to appeal the ruling to federa= l=20 district court.=20 Copyright 2001, Los Angeles Times=20 Developments in California's energy crisis=20 The Associated Press Wednesday, July 11, 2001=20 ,2001 Associated Press=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2001/07/11/s= tate1 036EDT0129.DTL=20 (07-11) 07:36 PDT (AP) --=20 Developments in California's energy crisis:=20 WEDNESDAY=3D * No power alerts Wednesday as electricity reserves stay above 7 percent.= =20 TUESDAY=3D * U.S. Bankruptcy Judge Dennis Montali again agreed with PG&E and the=20 official creditors committee, saying such a committee of Pacific Gas and=20 Electric Co. ratepayers has no legal standing in bankruptcy court. Ratepaye= r=20 advocates had sought the recognition to ensure the utility would not raise= =20 rates further as a way of paying off its debts.=20 * PG&E has agreed to pay $4.1 million in tax penalties to 49 counties where= =20 the utility owns property. The utility already paid $41.2 million in overdu= e=20 property taxes in May -- the additional amount covers a 10 percent fee for= =20 paying those taxes late.=20 * Calpine Corporation says it is near agreement with California officials= =20 over money the state says the company overcharged for electricity. That wou= ld=20 make it the first company to settle a portion of the $8.9 billion dollars t= he=20 state is seeking in proceedings before the Federal Energy Regulatory=20 Commission. But the San Jose-based company is offering much less than the= =20 $236 million dollars the state claims it is owed.=20 * No power alerts Tuesday as electricity reserves stay above 7 percent.=20 * Shares of Edison International closed at $14.05, up 5 cents. PG&E Corp.= =20 drop 55 cents to close at $13.55. Sempra Energy, the parent company of San= =20 Diego Gas & Electric Co., closed at $27.67, up 15 cents.=20 WHAT'S NEXT=3D * The Senate committee investigating possible price manipulation in=20 California's energy market meets Wednesday. The committee will vote on=20 contempt citations against generators Mirant and Enron, which failed to=20 comply with subpoenas for documents. The committee will meet again July 18 = to=20 consider compliance by six other suppliers that have until Tuesday to turn= =20 over documents.=20 THE PROBLEM: High demand, high wholesale energy costs, transmission glitches and a tight= =20 supply worsened by scarce hydroelectric power in the Northwest and=20 maintenance at aging California power plants are all factors in California'= s=20 electricity crisis.=20 Southern California Edison and Pacific Gas and Electric say they've lost=20 nearly $14 billion since June 2000 to high wholesale prices the state's=20 electricity deregulation law bars them from passing on to consumers. PG&E,= =20 saying it hasn't received the help it needs from regulators or state=20 lawmakers, filed for federal bankruptcy protection April 6. Electricity and= =20 natural gas suppliers, scared off by the companies' poor credit ratings, ar= e=20 refusing to sell to them, leading the state in January to start buying powe= r=20 for the utilities' nearly 9 million residential and business customers. The= =20 state is also buying power for a third investor-owned utility, San Diego Ga= s=20 & Electric, which is in better financial shape than much larger Edison and= =20 PG&E but is also struggling with high wholesale power costs.=20 The Public Utilities Commission has approved average rate increases of 37= =20 percent for the heaviest residential customers and 38 percent for commercia= l=20 customers, and hikes of up to 49 percent for industrial customers and 15=20 percent or 20 percent for agricultural customers to help finance the state'= s=20 multibillion-dollar power buys.=20 Track the state's blackout warnings on the Web at=20 www.caiso.com/SystemStatus.html.=20 ,2001 Associated Press ?=20 Enron Corp. sues to block Senate from forcing document release=20 DON THOMPSON, Associated Press Writer Wednesday, July 11, 2001=20 ,2001 Associated Press=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2001/07/11/s= tate1 212EDT0141.DTL=20 (07-11) 09:12 PDT SACRAMENTO (AP) --=20 Enron Corp. is suing state officials to stop a Senate subpoena of its=20 financial records in a dispute over alleged overcharges for its electricity= =20 sales to California.=20 "They've sent two things to Texas -- our money and these documents, and the= y=20 saying we can't get either one back," said Laurence Drivon, special legal= =20 counsel to the Senate Select Committee to Investigate Market Manipulation.= =20 The suit came hours before the committee will consider asking the full Sena= te=20 to cite the Houston-based company for contempt Wednesday. The other subject= =20 of possible sanctions, Atlanta-based Mirant Inc., appears to be cooperating= ,=20 Drivon said.=20 Committee chairman Joe Dunn, a Santa Ana Democrat, said the committee's=20 investigation will continue despite Enron's "pure act of intimidation. We'r= e=20 not going to back down."=20 Enron's suit said the company's financial papers are outside the committee'= s=20 jurisdiction because most of its operations and paperwork are outside=20 California.=20 That shouldn't matter, Drivon said, citing last year's successful of=20 out-of-state documents during the investigation into the activities of form= er=20 Insurance Commissioner Chuck Quackenbush. Previous investigations have=20 included documents subpoenaed from other nations, he said.=20 Companies doing business in California cannot claim immunity from its laws = or=20 oversight, Drivon and Dunn said. Houston-based Reliant Energy made the same= =20 argument but then agreed to turn over 1,800 documents.=20 ,2001 Associated Press ?=20 Governor threatens to sue utilities for refunds=20 Davis says California won't settle for $1 billion=20 Mark Martin, Chronicle Staff Writer Wednesday, July 11, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/07= /11/M N139275.DTL=20 Sacramento -- One day after a federal judge rebuked California's claim that= =20 energy generators owe the state $8.9 billion, Gov. Gray Davis all but vowed= =20 to sue the companies to recoup the money.=20 "If you think California will settle for $1 billion in refunds, we'll see y= ou=20 in court," Davis said yesterday.=20 Continuing his heated rhetoric on the energy crisis, Davis blasted the ener= gy=20 companies for being inflexible during a 14-day negotiation session in=20 Washington, D.C., that ended Monday. Both the state and power generators=20 argue each is owed money as a result of California's dysfunctional=20 electricity market.=20 Federal Energy Regulatory Commission chief administrative law Judge Curtis = L.=20 Wagner ended the talks by saying the state was owed far less than it claime= d,=20 but the FERC's governing board will make a final decision on who owes what = to=20 whom in the coming months.=20 Yesterday, Davis made it clear he wouldn't accept a FERC decision that=20 strayed far from the state's calculations that power companies overcharged= =20 California nearly $9 billion.=20 "The ball is in the FERC's court," he said. "They must step up and provide= =20 the refunds we've asked for."=20 While Davis said California officials had gone to Washington prepared to=20 discuss ways to reach a settlement, including renegotiating long-term=20 contracts to buy power, an energy industry official faulted the state for i= ts=20 unwillingness to compromise.=20 Generators put forward an offer even though they believe no refunds are owe= d,=20 said Jan Smutny-Jones, executive director of the Independent Energy=20 Producers.=20 Smutny-Jones said the state needed to stop thinking it would get the $8.9= =20 billion.=20 "It's clear from the way the issue was characterized by the judge that $9= =20 billion is not something the state is going to see any time in the near=20 future, " he added. "It is not based in reality."=20 Davis also took heat from Republicans yesterday.=20 "He desperately needs that refund, so he can renegotiate the dreadful=20 contracts he has entered into," said Rob Stutzman, a consultant for the=20 California Republican Party. "He's sitting at the poker table with very few= =20 chips."=20 In other energy news yesterday, a judge refused to let a committee represen= t=20 the public in the Pacific Gas & Electric Co. bankruptcy case and said a=20 consumer lawyer's "irresponsible position" at a hearing last week could=20 mislead PG&E customers into filing needless refund claims with the court.= =20 U.S. Bankruptcy Judge Dennis Montali said any refunds owed to customers wer= e=20 unrelated to the bankruptcy case and would be determined by regulators.=20 At the hearing Thursday, attorney KaarenThomas argued that unless a committ= ee=20 represented customers' interests, PG&E could try to bar all refund claims= =20 that weren't filed by Sept. 5.=20 Montali ruled in May that the committee was not authorized by federal=20 bankruptcy law, and reaffirmed his ruling yesterday.=20 Chronicle staff writers Lynda Gledhill and Robert Egelko contributed to thi= s=20 report.=20 E-mail Mark Martin at [email protected].=20 ,2001 San Francisco Chronicle ? Page?A - 3=20 News briefs on the California power crisis=20 The Associated Press Wednesday, July 11, 2001=20 ,2001 Associated Press=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2001/07/11/s= tate0 738EDT0118.DTL=20 (07-11) 04:38 PDT SAN JOSE, Calif. (AP) --=20 Energy supplier Calpine Corp. has reached a deal to purchase 236 billion=20 cubic feet of natural gas in Texas and New Mexico for $355 million plus=20 assumption of nearly $50 million of debt.=20 Company officials made the announcement Tuesday and said the purchase will= =20 increase its natural gas reserves.=20 "This transaction meets our desire to own and operate production in a=20 strategic basin," said Cathy Piece, Calpine's director of land and=20 acquisitions. "These assets significantly strengthen our reserve base and= =20 will help fuel our growing Western power program."=20 The San Jose-based company has agreed to purchase 35 wells in New Mexico th= at=20 produce 6 million cubic feet of gas per day from The Bayless Companies. The= =20 second transaction involves the acquisition of a majority interest of Micha= el=20 Petroleum of Houston. The Texas company produces about 43 million cubic fee= t=20 of gas per day.=20 Calpine officials said the agreements will allow them to meet their future= =20 capacity demands for both natural gas and electricity. The company wants to= =20 generate more than 70,000 megawatts of electricity by the end of 2005 and= =20 have natural gas reserves of 6.7 trillion cubic feet.=20 LOS ANGELES (AP) -- Newly elected Mayor James Hahn has postponed selling th= e=20 city's surplus power to the state so he can examine how it will impact=20 ratepayers.=20 Hahn's predecessor, Richard Riordan, said last month the city's Department = of=20 Water and Power would sell its extra electricity -- about 500 megawatts a= =20 day_ to the state at cost between July and September.=20 The contract was supposed to have been signed last week.=20 Steve Maviglio, a spokesman for Gov. Gray Davis, said Tuesday that the stat= e=20 is ready to sign the contract.=20 "We're ready to sign," he said. "Like most negotiations that aren't final,= =20 things go back and forth. The new (Hahn) administration wants to review the= =20 document before it."=20 Davis had threatened to seize surplus power from municipal utilities, which= =20 haven't been subjected to the California energy crisis, because he claimed= =20 they were gouging the state.=20 TEMECULA, Calif. (AP) -- State officials said they are studying alternative= =20 routes for a power transmission line proposed by San Diego Gas and Electric= =20 Co.=20 The utility wants to run a 500,000-volt power line through southwestern=20 Riverside County connecting its power grid with Southern California Edison'= s.=20 The cost of the project is estimated at $271 million and must be approved b= y=20 the state's Public Utilities Commission.=20 But state officials listed alternative routes in papers released at a publi= c=20 hearing Tuesday. Some of the other ideas include putting the transmission= =20 line around the edges of an Indian reservation or running a route through t= he=20 Cleveland National Forest.=20 Once a final selection is made, the information will be given to PUC=20 commissioners who will either approve or deny the project.=20 Many residents who live in the path of the proposed transmission line don't= =20 want the project. An attorney representing several groups that oppose SDG&E= 's=20 plans said there was no mention of alternative routes in environmental=20 documents submitted by the company.=20 "Looking at the various route segments offered by SDG&E as alternatives is= =20 like trying to arrange the deck chairs on the Titanic," said attorney Mark= =20 Mihaly.=20 ,2001 Associated Press ?=20 White House bends under energy conservation pressure=20 Posted at 6:25 a.m. PDT Wednesday, July 11, 2001=20 BY H. JOSEF HEBERT=20 Associated Press Writer=20 WASHINGTON (AP) -- Under pressure to include more conservation measures tha= t=20 reduce energy use, congressional Republicans are moving toward a compromise= =20 to increase fuel efficiency requirements for sport utility vehicles as part= =20 of an energy package.=20 Key House GOP lawmakers said Tuesday they expect some increase in fuel=20 economy requirements, especially for SUVs, in energy legislation working it= s=20 way through the House. Democrats, who have a majority in the Senate, also= =20 favor requiring improved motor vehicle fuel efficiency.=20 At the same time, the Bush administration signaled its willingness Tuesday = to=20 begin a rule-changing process that would allow the first increase in 25 yea= rs=20 in the federal corporate automobile fuel economy, or CAFE, standard.=20 Transportation Secretary Norman Mineta asked Congress to lift immediately a= =20 six-year prohibition that bans the department from consideration of fuel=20 economy increases. Lawmakers already agreed this year not to extend the ban= =20 beyond September, but Mineta said he wants to start examining possible=20 changes right away.=20 CAFE standards, which mandate fuel economy requirements for vehicle fleets,= =20 have not been increased since their introduction in 1975. That year's law,= =20 spurred by energy shortages in the early 1970s, required passengers cars to= =20 meet a fleet average of at least 27.5 miles per gallon. Light trucks -- a= =20 category that includes SUVs, vans and pickups -- have to meet a 20.7 mpg=20 fleet average.=20 With the widespread popularity of SUVs and vans in recent years, many=20 environmentalists have argued that the lower truck standard has compromised= =20 the intent of the 1975 law. SUVs and vans comprise more than 40 percent of= =20 the passenger vehicles on the road today.=20 As three committees began crafting energy legislation, lawmakers were=20 searching for a bipartisan compromise to increase fuel economy requirements= =20 for motor vehicles. Some increase in the CAFE requirement was virtually=20 assured, several GOP lawmakers said, although disagreements remain on how= =20 much of an increase, whether it should apply to automobiles as well as SUVs= ,=20 vans and small trucks, and the timetable for phasing in new requirements.= =20 Energy legislation that the House Energy and Commerce Committee was taking = up=20 later Wednesday contains no fuel economy provision.=20 But Rep. Billy Tauzin, R-La., the committee chairman, said discussions were= =20 under way to work out a compromise on a fuel economy proposal. He said he= =20 expects an amendment on CAFE to be added to the bill, either during=20 deliberations in his committee or on the House floor.=20 Rep. Joe Barton, R-Texas, chairman of the subcommittee drafting the energy= =20 package, saw a good chance the truck standards will be raised and said the= =20 automobile standard might be increased as well. Other GOP sources who talke= d=20 about the private discussions on condition of not being identified by name= =20 said a likely outcome is that the truck standard will be increased three or= =20 four mpg and the auto standard left alone.=20 Momentum for some CAFE increase has been growing in recent weeks as GOP=20 lawmakers came under increasing pressure to come up with additional=20 conservation proposals to those proposed in the White House's energy policy= .=20 It largely focuses on production, with few specific measures to dramaticall= y=20 curb energy demand.=20 Democrats have pressed for tougher automobile fuel economy standards.=20 Automakers have fought attempts to increase the standards. They say such=20 government edicts limit consumer choice and force manufacturers to build=20 smaller cars that customers don't want. Supporters of increased fuel econom= y=20 argue that new technologies are available to increase fuel efficiency witho= ut=20 decreasing vehicle size.=20 President Bush's energy blueprint would consider CAFE increases, but not=20 before a National Academy of Sciences report is issued, probably this month= ,=20 on impact of the standard on energy savings, safety and auto industry=20 competition. Davis ups the voltage=20 Published Wednesday, July 11, 2001, in the San Jose Mercury News=20 Vow to sue for refunds may be a bluff, but he should keep pushing FERC=20 THE strategic choice facing Gov. Gray Davis in the struggle over electricit= y=20 price refunds has come down to three questions: When do you negotiate, when= =20 do you demand, and when do you bluff?=20 Negotiations are over, Davis declared Tuesday. He demanded that the Federal= =20 Energy Regulatory Commission order refunds now. ``The case is nearly a year= =20 old,'' he said. ``They have to decide which side they're on.''=20 Probably no one but Davis knew to what extent he was bluffing when he also= =20 said, ``If you think California is going to settle for $1 billion in refund= s,=20 we will see you in court.''=20 A FERC administrative judge said Monday that the amount due the state may b= e=20 around $1 billion, or perhaps nothing at all, when counter-claims against t= he=20 state are subtracted.=20 Energy experts are divided about whether the state would win a suit to=20 overturn a decision by a federal commission. The federal courts have some= =20 limited jurisdiction, according to University of California Energy Institut= e=20 director Severin Borenstein, but that a court would reverse a commission in= a=20 case like this is ``extremely unlikely.''=20 Frank Wolak, a Stanford economist, had the opposite view, when asked whethe= r=20 the state has a good chance of winning: ``I think so. It happens all the=20 time.''=20 At a Sacramento press conference, Davis continued to insist that there have= =20 been overcharges of $8.9 billion. But other state officials conceded that= =20 only $5.4 billion of that is actually on the table in the FERC proceedings.= =20 Davis said he'll take what he can get there, and sue for the rest.=20 The state argues that because FERC has determined that wholesale prices hav= e=20 not met the Federal Power Act's requirement to be ``just and reasonable,''= =20 refunds are in order. But the commission has not defined what portion=20 exceeded ``just and reasonable.''=20 Throughout his press conference, Davis used the prospect of litigation like= a=20 goad to spur the federal regulators into action. But if you listened=20 carefully, he also indicated he'll give them more time to consider the case= .=20 Considering the iffy odds of winning in court, we suggest he keep goading t= he=20 federal commissioners -- while giving them all the time they need. Wednesday, July 11, 2001=20 Lights go out on Davis' power show=20 Three new developments show that some economic reality finally is being=20 applied to California's electricity crisis:=20 First, "The nation's chief energy judge said Monday that California is owed= =20 maybe $1 billion in refunds from power generators, a fraction of the $8.9= =20 billion demanded by Gov. Gray Davis," reported the Register yesterday. Even= =20 that $1 billion amount might be balanced by the amount the state still owes= =20 the power producers.=20 To suggest workable and market-oriented solutions to the California=20 electricity crisis. Judge Curtis Wagner's recommendation will be taken up by the Federal Energy= =20 Regulatory Commission, which is being petitioned for the money by the state= =20 of California.=20 Because the judge's words will bolster FERC's apparent desire not to grant= =20 the "refunds," the state probably will go to court, where the matter could = be=20 stuck for years. "In the long term, this may indicate that competitive electricity has a=20 future even in California, but not thanks to the state," Robert Michaels, a= =20 professor of economics at Cal State Fullerton, told us. He's referring to t= he=20 state's botched 1996 "deregulation" effort, which has been made worse by Go= v.=20 Gray Davis and other officials since the crisis began a year ago. "FERC since the 1980s favors competition, within the parameters of politica= l=20 reality," Mr. Michaels added. "Now we're at square one: The industry doesn'= t=20 owe $9 billion to California." As this process continues, he said, another= =20 positive aspect will be that a lot of facts will get aired. "We'll see what= =20 has been happening in the markets" in which power is bought and sold. Second, light already is shining on one area: This crisis was not "Made in= =20 Texas'' by cronies of President Bush, as Gov. Davis and other Democrats hav= e=20 been contending.=20 In May, the governor attacked the president for ignoring "the greed of thes= e=20 Texas energy companies," such as Reliant and Dynergy. In fact, according to information on state power contracts the governor=20 finally released Monday, Texas companies were way down on the list of=20 producers.=20 "In roughly the first five months of the year, the state shelled out $1.2= =20 billion to Atlanta-based Mirant, the most any company was paid for=20 electricity, followed by $1 billion to Powerex, the marketing arm of BC Hyd= ro=20 in British Columbia [in Canada]. It also paid $331 million to the Los Angel= es=20 Department of Water and Power," reported the San Jose Mercury News. Only about 10 percent of our state's power during this period came from=20 companies with headquarters in Texas. Third, and finally, a new study by the Cato Institute shows what should be= =20 done next:=20 lAbolish retail rate caps, allowing prices to be set by the market.=20 This would be a better system than the present one, where the state buys th= e=20 electricity and passes much of the cost along through the state budget (pai= d=20 by taxpayers) and bonds paid for by long-term electricity price increases.= =20 Higher immediate prices would encourage conservation and production, leadin= g=20 in time to lower prices. lMove to real-time pricing so people shift activities such as washing to=20 off-peak hours.=20 lAbolish the Independent System Operator, which moves electrons around.=20 Give this function back to the utilities, who did it far better before=20 "deregulation." Gov. Davis should set the pace by ending his Clintonian bla= me=20 shifting and embracing these realistic solutions.=20

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Fw: WPTF Principles for RTO Formation - Input Needed on WestConnect

In his email a few days ago dealing with the newly adopted WPTF principles for RTO formation, Gary Ackerman wrote that: "Dan Douglass will utilize this document to review the WestConnect filing, and in combination with members' comments on the same, prepare a briefing to the Board in a special teleconference Board Meeting that we will hold on Wednesday morning, October 31 (Halloween) at 11 a.m." So far, no members have sent me any of their comments on the filing. It would be greatly appreciated should some of you do so before next week. Thanks! Dan Law Offices of Daniel W. Douglass 5959 Topanga Canyon Blvd. Suite 244 Woodland Hills, CA 91367 Tel: (818) 596-2201 Fax: (818) 346-6502 [email protected] ----- Original Message ----- From: Gary Ackerman To: Bill Ross ; Bob Anderson ; Carolyn Baker ; CHARLES A MIESSNER ; curt hatton ; Curtis Kebler ; Greg Blue ; Jack Pigott ; Janie Mollon ; Karen Shea ; Nam Nguyen ; Randy Hickok ; Rob Nichol ; Roger Pelote ; Sue Mara ; Todd Torgerson ; George Vaughn ; Max Bulk ; Huhman, Steve ; Steve Schleimer ; Peter Blood ; Dan Douglass Sent: Wednesday, October 17, 2001 9:38 AM Subject: WPTF Principles for RTO Formation Based on the amendments and comments made at yesterday's Board meeting, the following RTO principles are hereby adopted per yesterday's vote. a.. The Western States should have a single RTO eventually, but initially there could be two entities (the California ISO and an RTO for the rest of the Region). FERC has a unique opportunity to mediate between RTO West and the newly formed WestConnect (the proposed successor agent for the now defunct Desert STAR) to form a single RTO for the non-California portion of the West. b.. The RTO Governing Board should be truly independent, and be absent of any "stakeholders". The Board should have at its disposal a meaningful stakeholder advisory committee for the purpose of airing technical issues, and identifying different viewpoints. The seats on the advisory committee should be equally split between load serving entities and suppliers 50/50. However, within each subgroup, there can be different representative classes as determined by the Board. c.. The RTO should maintain separation of the operation of any energy market from the parties that own the transmission assets. d.. The RTO should provide a real-time imbalance energy market, allow for self-provision of ancillary services, and operate a real-time market for each congestion zone within the RTO when transmission congestion is present. e.. The RTO should provide demand response mechanisms in its Tariff, and the Tariff and Operating Procedures should either promote and enable retail competition, or not discourage retail competition. If you have any editorial comments or changes, please send them to me. This is a working document. Dan Douglass will utilize this document to review the WestConnect filing, and in combination with members' comments on the same, prepare a briefing to the Board in a special teleconference Board Meeting that we will hold on Wednesday morning, October 31 (Halloween) at 11 a.m. gba

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['[email protected]', '[email protected]', '[email protected]']

Summary of the Wednesday FERC Orders

The FERC orders will not be out until sometime Thursday but here is a boile= d=20 down version of what we heard from the meeting, the press, and the press=20 release: FERC Market Monitoring and Mitigation Plan for California ? Approved 2-1 with Massey dissenting ? Imposes mitigation (caps) in R/T in California only during Stage 1/2/3=20 beginning _____ (not clear; assume immediately or soon). o Applies to all thermal generation with a PGA with ISO (even if not a FER= C=20 jurisdictional entity) o All subject generation is paid a single proxy price o Proxy price is based upon the marginal unit=01,s gas price x heat rate += =20 emission adder. (Heat rate determining cap will not longer be pegged at=20 18,000 but will change daily and posted by CAISO) o Proxy price is determined on a day-ahead basis Still not clear what ga= s=20 price will be used.=20 o Bids above the proxy are allowed but the seller must justify the cost ? Hydroelectric resources--in-state or out-of-state--are exempt. ? CAISO will still acquire resources outside of the proxy price via OOM cal= ls ? Silent on exports and expect CAISO to cut exports unless ordered to do=20 otherwise. (However, requirement for CAISO to become a part of a =01&real= =018 RTO=20 would imply that it must honor firm schedules.) ? All LSE in R/T markets to submit demand bids and to identify load that ca= n=20 be curtailed at a specified price ? Contingent on CAISO filing a plan to become part of a region wide RTO by= =20 June 1. I.e., if CAISO does not make an adequate showing, all mitigation= =20 measures are cancelled. ? Opens an investigation on a subset of transactions. According to Massey= =20 this band is very narrow. ? The $150 breakpoint and reporting requirements, which were put into effec= t=20 with the December order, will end with this order.=20 ? In all hours (not just emergencies) there is increased market monitoring = of=20 outages and bidding behavior ? Although the plan is only for California, it seeks comments on a West-wid= e=20 price mitigation plan. ? Also seeks comments on whether CAISO should impose an adder to address=20 generator unpaid bills. RTO West: ? RTO West Phase 1 filing (made back in Nov 2000) is accepted. ? TransConnect, a Transco proposed by RTO West's transmission-owning IOUs,= =20 was also accepted. =20 ? Incentive rates allowed if owner separates transmission from the generati= on. ? Phase 2 filing due December 1. This filing will require tariffs and=20 additional details including how RTO West can become part of a larger=20 West-wide RTO ? Order encourages Canadian utilities to be a part of RTO West

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[]

Telecommunications Reports -- 01/29/01

=20 Telecommunications Reports - January 29, 2001 FCC Expands ILEC Line-Sharing Mandates To Fiber Loops, Confirms=20 Line-Splitting Duty Critics Worry White House =0F`E-rate=0F' Proposal May Reduce Funding, Disco= urage=20 Participation FCC Gears Up To Enforce E-rate =0F'Net-Filter Mandate Large Carriers Want 700 MHz Auction Postponed, But Small Providers,=20 Broadcasters Oppose Delay FCC Takes Additional Steps To Help Clear 700 MHz Band The FCC=0F's Enforcement Bureau is a proposing a monetary forfeiture... Easing Spectrum Crunch Tops CTIA=0F's 2001 Lobbying Agenda Nextel Communications, Inc., has agreed to purchase specialized mobile=20 radio... Commission Examines Merits Of Lifting CMRS Spectrum Cap Bookham Technology plc, an Oxfordshire, England=0F-based... Appellate Court Upholds Nextel Tower Permit Finance Panel Senators Back Broadband Service Tax Credits Verizon Wants Law Changing Approach to Broadband Regs Utah Bill Would Halt Plan To Merge Consumer Agencies Reps. Cannon, Eshoo Unveil Internet Privacy Measure Appeals Court Says FCC Erred in Rejecting U S WEST Bid for =0F`Nondominant= =0F'=20 Regulation The FCC=0F's Enforcement Bureau has issued a monetary forfeiture... FCC Gives Bells =0F`Blueprint=0F' In OK of SWBT=0F's InterLATA Bid FCC Rethinks Limitations On Carriers=0F' Use of EELs Pole Attachment, TELRIC Rates To Be Challenged in High Court Supreme Court Again Refuses To Hear State Immunity Cases =0F'Net-Based Directory Publishers Can Access LEC Data, FCC Says Analysts See Lucent Plan Leading To Profitability, But Not Growth Court Says WorldCom Tariff Trumps Service Pact with ICOM Long Distance Revenues Head North, FCC Reports Telefonica, Portugal Telecom Foresee Brazilian Consolidation Losses in Handset Operations Spur Ericsson To Exit Business CRTC Nixes Vancouver Bid For Fiber-Deployment Fees Brazil, France Face Setback In Awarding Wireless Licenses Wireless Industry Seeks Changes In Antenna-Collocation Agreement The Telecommunications Industry Association has published... Carriers, Others See Problems In FCC=0F's ID-Number Proposal=20 Building Owners, Carriers Spar over FCC Proposal To Block Service, Extend B= an=20 on Exclusive Pacts Missouri Lawmakers Seek To Oust Three PSC Members FCC Says ATU Must Refund $2.7M For Misallocating Costs =0F`C,=0F' =0F`F,=0F' Block Reauction Nets Record $16.8B; Large Carrier Par= ticipation May=20 Be Contested Pa. ALJ Slams Verizon Plan To Avoid Full Structural Split Carriers Back Simplified Transfers Of International Authorizations Personnel Regulatory & Government Affairs Industry News Verizon=0F-Vodafone Assets DT Acquisitions What=0F's Ahead. . . Falling Credit Ratings Create Costly Obstacle for Carriers Telecom Sector=0F's Dubious Debts Create Drag on Financial Markets Conn. Draft Decision Would Let SNET Drop Cable TV Business Executive Briefings FCC Expands ILEC Line-Sharing Mandates To Fiber Loops, Confirms=20 Line-Splitting Duty The FCC has given data CLECs (competitive local exchange carriers) a major= =20 win by expanding incum-bent local exchange carriers=0F' =0F"line-sharing=0F= " and =0F" line-splitting=0F" duties. The FCC tinkered with its rules governing those= =20 duties in an order and further notice of proposed rulemaking released in=20 Common Carrier dockets 96-98 and 98-147. The order addressed petitions for= =20 reconsideration and clarification of a previous order on line sharing (TR,= =20 Nov. 22, 1999). Line sharing is the requirement that incumbent local exchange carriers=20 (ILECs) allow competitors to offer high-speed service over the high-frequen= cy=20 portion of a loop, while the ILEC continues to offer voice service over the= =20 low-frequency portion. In the order adopted Jan. 19, the FCC said ILECs must provide line sharing= =20 over the entire loop even if they=0F've deployed fiber in the loop to suppl= ement=20 or replace the original copper line. The order was one of many actions tha= t=20 the FCC took on the last day of Chairman William E. Kennard=0F's tenure but= that=20 were not immediately available, eventually trickling out of the Commission= =20 last week. Rhythms NetConnections, Inc., had filed a petition for clarification with t= he=20 FCC, complaining that some ILECs were contending they didn=0F't have to unb= undle=20 fiber portions of the loop when those portions were used to provide xDSL=20 (digital subscriber line) services. =0F"In the absence of this clarification, a competitive LEC might undertake= to=20 collocate a DSLAM [digital subscriber line access multiplexer] in an=20 incumbent=0F's central office to provide line-shared xDSL services to custo= mers,=20 only to be told by the incumbent that it was migrating those customers to= =20 fiber-fed facilities,=0F" the FCC said. In that case, the CLEC would have = to=20 collocate another DSLAM in a remote terminal to continue offering line-shar= ed=20 services to the same customers. =0F"All indications are that fiber deployment by incumbent LECs is increasi= ng=20 and that collocation by competitive LECs at remote terminals is likely to b= e=20 costly, time-consuming, and often unavailable,=0F" the FCC said. The FCC says ILECs must allow for =0F"line splitting,=0F" so competitors th= at offer=20 voice service using the unbundled network element platform can provide=0F-o= r=20 partner with another data CLEC to provide=0F-DSL service on those same line= s. =0F"Incumbent LECs are required to make all necessary network modifications= to=20 facilitate line splitting, including providing nondiscriminatory access to= =20 [operation support systems] necessary for preordering, ordering,=20 provisioning, maintenance and repair, and billing for loops used in=20 line-splitting arrangements,=0F" the FCC said. The FCC =0F"strongly urged=0F" ILECs and CLECs to =0F"work together to deve= lop=20 processes and systems to support competing carriers=0F' ordering and=20 provisioning of unbundled loops and switching necessary for line splitting.= =0F" The FCC, however, denied a related petition for clarification filed by AT&T= =20 Corp. It had asked the FCC to require ILECs to make their xDSL services=20 available to customers even if they obtain voice service from competing=20 carriers using the ILECs=0F' lines. AT&T was worried that customers wouldn= =0F't=20 switch their voice service to a competitor if that change would eliminate= =20 their ability to get DSL services. =0F"Although the line-sharing order obligates incumbent LECs to make the=20 high-frequency portion of the loop separately available to competing carrie= rs=20 on loops where incumbent LECs provide voice service, it does not require th= at=20 they provide xDSL service when they are no longer the voice provider,=0F" t= he=20 FCC said. =0F"To the extent that AT&T believes that specific incumbent behavior const= rains=20 competition in a manner inconsistent with the Commission=0F's line-sharing = rules=20 and/or the [Communications Act of 1934, as amended] itself, we encourage AT= &T=20 to pursue enforcement action,=0F" it said. The FCC also denied requests from Bell Atlantic Corp. (now Verizon=20 Communications, Inc.). It had asked the FCC to (1) reconsider the=20 requirement that ILECs refusing to condition a loop for the provision of DS= L=20 service demonstrate to the relevant state commission that conditioning that= =20 loop would degrade voice services and(2) permit a line-sharing deployment= =20 schedule other than the one it adopted. Rhythms applauded the FCC=0F's decision. =0F"By expanding the definition o= f line=20 sharing to include fiber loops and ensuring our ability to use consumers=0F= '=20 existing voice lines for data services, we can bring the benefits of the mo= st=20 robust broadband service offerings to consumers,=0F" said Jeffrey Blumenfel= d,=20 chief legal officer and general counsel for Rhythms. During a press briefing last week (see separate story), Thomas J. Tauke,=20 senior vice president-public policy and external affairs at Verizon=20 Communications, Inc., criticized the FCC=0F's decision, specifically the=20 provisions requiring line splitting. The FCC =0F"didn=0F't address how thi= s is to=20 be done,=0F" he said. Jonathan Lee, vice president-regulatory affairs at the Competitive=20 Telecommunications Association, said the order was an =0F"unmitigated win= =0F" for=20 data CLECs. But he said the FCC=0F's decision not to grant AT&T=0F's petit= ion for=20 clarification was =0F"regrettable.=0F" Residential consumers who have DSL available only from the ILEC won=0F't be= able=20 to switch their voice service without losing their DSL service, he said. M= r.=20 Lee compared the ILECs=0F' =0F"tying=0F" of voice and DSL service to Micros= oft Corp.=0F's=20 practice of linking its Internet Explorer Web browser with its Windows=20 operating system. The ILEC practice =0F"could run afoul of antitrust laws,= =0F" he=20 said. Critics Worry White House =0F`E-rate=0F' Proposal May Reduce Funding, Disco= urage=20 Participation The education reform package that President Bush sent to Congress last week= =20 is drawing criticism from policy-makers who helped draft and implement the = =0F" E-rate=0F" telecom discount program. It=0F's also sparking concern among s= chools=20 and libraries that have participated in the program and benefited from it. They=0F're worried that the president=0F's E-rate proposal, if adopted in i= ts=20 current =0F"blueprint=0F" form, would discourage certain schools from apply= ing for=20 discounts on telecom and Internet services and internal connections. In th= e=20 long run, they fear that the president=0F's proposal would lead to decrease= d=20 funding for the program, which currently stands at $2.25 billion a year. The main problem, these critics say, is that shifting administration of the= =20 program to the Department of Education, as President Bush has said he inten= ds=20 to do, would render E-rate funding dependent on congressional=20 appropriations. In its current form under the FCC=0F's oversight, the prog= ram=20 is funded by universal service contributions assessed from telecom carriers= . The technology part of the president=0F's education reform initiative unvei= led=20 last week calls for combining the E-rate with several Department of Educati= on=20 programs to form one =0F"performance-based technology grant program.=0F" T= hen, it=20 says, funding for that program would be disbursed =0F"by formula=0F" to sta= tes=20 through block grants. The aim is to streamline the many =0F"duplicative technology programs=0F" i= nto one=20 education grant plan, the Bush administration says. Such streamlining woul= d=20 go a long way toward reducing the E-rate program=0F's =0F"burdensome paperw= ork=0F"=20 requirements and adding more flexibility to those program, the proposal say= s. =0F"Flexibility will be increased by allowing funds to be used for purposes= that=20 include software purchases and development, wiring and technology=20 infrastructure, and teacher training in the use of technology,=0F" it state= s. =20 It also would permit E-rate recipients to use federal funds to pay for=20 Internet filtering software, which is being mandated for the first time thi= s=20 year by the Children=0F's Internet Protection Support Act of 2000 (TR, Jan.= 22). But key U.S. lawmakers and education officials aren=0F't prepared to embrac= e the=20 plan yet. They say more details are needed from the Bush administration on= =20 several issues, including how the E-rate program would be funded and what= =20 formula would be used to distribute money among the states. Jeff Burnett, director-government relations at the National Association of= =20 Independent Schools, says the language of the proposal is cloudy when it=20 comes to whether the program would be supported by the Universal Service=20 Fund, as it is now, or by general tax revenues. =0F"That=0F's a huge quest= ion=20 mark, and we are highly nervous about it because it does appear that it wou= ld=20 become part of the Department of Education=0F's budget,=0F" he says. Mr. Burnett says making the E-rate dependent on general tax revenues could = =0F" destabilize=0F" its funding and discourage some private and parochial schoo= ls=20 from applying for telecom discounts. =0F"It would go from where it is now,= a=20 pretty stable $2.25 billion per year, to where you would have arguments eve= ry=20 year in Congress over how much money it would get.=0F" Plus, he says, E-rate funds =0F"no longer would be string-free=0F" if they = were to=20 be allocated by the federal government. Moving the program to the Departme= nt=20 of Education could discourage religious schools from participating because = of=20 potential =0F"church-state problems,=0F" he says, referring to the First Am= endment=20 to the U.S. Constitution, which prohibits congressional establishment of an= =20 official religion. And some states may be restricted by their state=20 constitutions from providing federally funded educational services to priva= te=20 and religious schools, he adds. Former FCC Chairman Reed E. Hundt, who oversaw the implementation of the=20 E-rate program back in 1996, fears that the end result could be the =0F"kil= ling=20 of the program altogether=0F" or a =0F"chopping of it down from a significa= nt=20 program to an insignificant one.=0F" =20 Having the Education Department oversee the E-rate program would remove=20 stability from the program, Mr. Hundt stressed. =0F"Where are they going t= o=20 find 2, 3, or 4 billion dollars in the general [tax revenues] to pay for it= ?=0F"=20 he asked. =0F"The bigger [telecom service] providers probably would be hap= py,=20 but the [support] would be reduced,=0F" Mr. Hundt told TR last week. He also rejected the administration=0F's claims that consolidating the educ= ation=20 technology programs would reduce applicants=0F' paperwork and filing=20 requirements. =0F"Moving it to the Department of Education is not a way to= =20 simplify paperwork,=0F" Mr. Hundt said. =0F"Nothing is simpler than the wa= y it=0F's=20 done now. These forms don=0F't even go to the government; they go to a=20 privately run trust fund,=0F" he added. A source who works with schools on fine-tuning their E-rate applications=20 foresees a =0F"food fight at the state level=0F" if the Bush administration= =20 institutes a block-grant program. =0F"There won=0F't be the same spirit of= =20 cooperation among the schools and libraries that there is today,=0F" the so= urce=20 says. =0F"Instead, they=0F'll see each other as competition.=0F" A library official said that even if the E-rate program remained part of th= e=20 USF, expanding its scope to include software purchases and teacher training= =20 could give telecom carriers grounds for a legal challenge of the assessment= s=20 made on their revenues. =0F"If the money is to come from the service provi= der,=20 then the program must directly relate back to the services that they=20 provide. I could see someone challenging the software and teacher-training= =20 aspects,=0F" the source says. Snowe, Rockefeller Are Skeptical The program has received an icy response from two U.S. senators who were=20 among the original sponsors of the legislation that added the E-rate=20 provisions to the Telecommunications Act of 1996: Republican Olympia J.=20 Snowe (Maine) and Democrat John D. Rockefeller IV (W.Va.). In a statement issued soon after the Bush education proposal was released= =20 Jan. 23, Sen. Rockefeller vowed to =0F"aggressively fight=0F" the E-rate as= pects of=20 the proposal. It would be a =0F"grave mistake=0F" to fold the E-rate into = a block=20 grant program with the Education Department technology programs, Sen.=20 Rockefeller said. =0F"Under the Bush block-grant approach, local schools would have less=20 flexibility, not more,=0F" Sen. Rockefeller said. =0F"Private and parochia= l=20 schools would have to negotiate with state education agencies and worry abo= ut=20 entanglements of federal regulations. Most importantly, the secure funding= =20 for the E-rate and investments in technology would be jeopardized,=0F" he s= aid. Sen. Snowe also worries about turning the E-rate into a block-grant program= . =20 Among other things, she says, such a proposal could deter private and=20 parochial schools from participating in the program. =20 =0F"We plan to work with President Bush and our colleagues in the Congress = to=20 ensure that the current program is protected, as we don=0F't support any ef= forts=20 that would undermine its goals,=0F" a Snowe aide told TR. =20 New House telecommunications subcommittee Chairman Fred Upton (R., Mich.) h= as=20 told President Bush in a letter that he plans to hold several hearings this= =20 year on =0F"aspects of your proposal that fall under the subcommittee=0F's= =20 jurisdiction,=0F" including the E-rate plan. Rep. Upton has asked the Bush administration to focus on broadband service= =20 deployment, =0F"particularly as it relates to how increased access to high-= speed=20 data services in our homes and schools could vastly improve educational=20 opportunities.=0F" Numerous calls to the White House seeking comment weren= =0F't=20 returned before TR=0F's Friday afternoon news deadline. FCC Gears Up To Enforce E-rate =0F'Net-Filter Mandate The FCC wants advice on how to implement the Children=0F's Internet Protect= ion=20 Act of 2000 (CIPA), which requires schools and libraries that receive =0F" E-rate=0F" discounts for Internet services and internal connections to use = =0F" filtering=0F" technology that prevents minors from accessing =0F"harmful=0F= " material=20 over the =0F'Net. The FCC has suggested that recipients certify compliance with the CIPA on= =20 forms they must file when applying for E-rate discounts on telecom services= ,=20 Internet services, and internal connections. Under the CIPA, the =0F"Internet safety technology=0F" must filter out =0F"= visual=20 depictions=0F" of =0F"obscene=0F" material or =0F"child pornography,=0F" ev= en when adults=20 are using the computers. Schools and libraries are required to bar access = to=20 visual depictions that are =0F"harmful to minors=0F" only when minors are u= sing the=20 computers. The law requires E-rate recipients to certify each program year that they a= re=20 complying with the filtering mandate and that they monitor the operation of= =20 the filtering technology while the computers are in use. The law allows an= =20 administrator to disable the filtering technology while the computer is bei= ng=20 used by an adult =0F"for bona fide research or other lawful purpose.=0F" Schools and libraries have one year to adopt an Internet safety policy; in= =20 the first year after the effective date of the law, they either must certif= y=20 that they have such a policy or that they are developing one. The law also allows schools and libraries to seek a waiver from the FCC=20 during the law=0F's second year, if state or local procurement rules or=20 competitive bidding requirements have prevented them from implementing an= =20 Internet safety policy. The FCC=0F's further notice of proposed rulemaking released last week in Co= mmon=20 Carrier docket 96-45 proposes that E-rate recipients this year certify eith= er=20 that they have complied with all relevant provisions of the CIPA or that th= e=20 CIPA requirements don=0F't apply. The certifications would appear on their= =0F" receipt of confirmation=0F" forms (FCC Form 486). The CIPA doesn=0F't require schools and libraries that use E-rate funds onl= y for=20 telecom services=0F-and not for Internet access or internal connections=0F-= to=20 install the filtering technology. The FCC proposes that in future years recipients include their compliance= =20 certifications on FCC Form 471, which is used to describe the services to b= e=20 funded. It asks how to implement the =0F"remedial=0F" provisions of the CI= PA,=20 which detail ways an applicant can correct its noncompliance or=20 noncertification. Comments are due 15 days after publication of the=20 rulemaking notice in the Federal Register; replies are due 30 days later. The American Library Association has announced plans to challenge the=20 constitutionality of the CIPA (TR, Jan. 22), whose Internet-filtering=20 requirements extend to other federal programs that subsidize schools=0F' an= d=20 libraries=0F' purchases of computers and Internet access. The ALA, which notes that the CIPA takes effect April 20, has launched a We= b=20 site where it will post information about its activities regarding the CIPA= =20 (http://www.ala.org/cipa). Meanwhile, President Bush last week announced a proposal for modifying the= =20 E-rate program, including reducing the paperwork demands on applicants (see= =20 separate story). Large Carriers Want 700 MHz Auction Postponed, But Small Providers,=20 Broadcasters Oppose Delay Large wireless carriers are once again asking the FCC to postpone the=20 scheduled auction of licenses for the 700 megahertz band, citing a host of= =20 familiar concerns that they say could dampen enthusiasm for bidding on the= =20 frequencies. But rural carriers and TV broadcasters are urging the Commission to begin t= he=20 auction March 6, as scheduled, noting that the sale already has been=20 postponed three times. They say that large carriers have had plenty of tim= e=20 to prepare for the auction and that further delays would be unfair to them. They offered their views in comments filed with the FCC last week in respon= se=20 to a request by Verizon Wireless to delay the sale until September (TR, Jan= .=20 22). Several large carriers that supported the request asked for an even= =20 longer postponement. Supporters of postponement cited the presence of broadcasters in the spectr= um=20 and the need to negotiate band-clearing agreements as evidence to support= =20 their cause (see separate story). Most of their arguments echoed those of= =20 Verizon Wireless. TV broadcasters don=0F't have to evacuate the spectrum (channels 60=0F-69) = as part=20 of the transition to digital TV until 2006 at the earliest. But wireless= =20 carriers, citing the uncertainty about when the frequencies slated to be=20 auctioned will be available for use, have asked the FCC and Congress to for= ce=20 the broadcasters out early. In addition to the presence of the broadcasters, other reasons the large=20 carriers said the auction should be delayed included concerns that (1)a=20 reauction of =0F"C=0F" and =0F"F=0F" block PCS (personal communications ser= vice) licenses=20 hadn=0F't finished in time for carriers to assess their spectrum needs in t= he=20 700 MHz auction (see separate story), (2)companies need more time to prepar= e=20 for package bidding rules that will be used for the first time in the aucti= on=20 (TR, July 10, 2000), and (3)a high-level effort to identify and allocate=20 frequencies for third-generation (3G) services will affect carriers=0F' int= erest=20 in the 700 MHz band (see separate story). The Cellular Telecommunications & Internet Associationsaid carriers=20 interested in participating in the 700 MHz band auction wouldn=0F't have ti= me to=20 assess their bidding strategies and spectrum needs and form alliances becau= se=20 the C and F block reauction concluded last week, after the comments were=20 filed. In addition, the Commission=0F's anticollusion rules limit contact= =20 between bidders, CTIA noted. CTIA added that prospective 700 MHz band bidders wouldn=0F't have time to= =20 negotiate the band-clearing agreements the FCC is encouraging. And it cite= d=20 carriers=0F' need to prepare for package-bidding rules. In the end, the sa= me=20 factors that led the FCC to delay the auction last year still exist, CTIA= =20 said. AT&T Wireless Services, Inc.,asked the FCC to delay the auction until March= =20 2002. Such a move =0F"will give incumbents, prospective bidders, and the= =20 Commission an opportunity to resolve much of the uncertainty associated wit= h=20 this band,=0F" the carrier said. AT&T Wireless also said more time was nee= ded=20 to assess whether recent FCC actions designed to speed broadcasters=0F'=20 transition to digital TV would accomplish their goals. It suggested that the FCC schedule the auction of channels 60=0F-69 in=20 conjunction with a sale of channels 52=0F-59, which the FCC is statutorily= =20 required to license by September 2002. Cingular Wireless LLCasked the FCC to delay the auction until at least 60 t= o=20 90 days after it acts on all =0F"long form=0F" applications filed by winnin= g=20 bidders in the C and F block reauction. It also suggested that FCC=20 coordinate the timing of licensing channels 60=0F-69 and channels 52=0F-59. Nextel Communications, Inc.,wants the auction delayed until November. That= =20 move would give carriers time to assess the spectrum-allocation decisions= =20 made under the 3G initiative, Nextel said. Although the 30 MHz of commerci= al=20 spectrum in the 700 MHz band is not under consideration as part of that=20 effort, the frequencies are considered ideally suited for such advanced=20 services. Telephone and Data Systems, Inc.,filing on behalf of itself and its United= =20 States Cellular Corp.subsidiary, supported a delay until September or later= =20 if several other related proceedings aren=0F't completed. A postponement is =0F"essential=0F" for smaller and midsize companies that = need=20 time to assess 700 MHz market valuations, to locate funding sources, and to= =20 prepare for the package-bidding methodology, TDS said. =0F"In July of 2000, the Commission postponed this very auction for precise= ly=20 these same reasons, a decision strongly supported by the wireless industry,= =0F"=20 said Motorola, Inc.=0F"The logic of that postponement should apply with equ= al=20 force to the present request by Verizon.=0F" It added =0F"that forcing carriers to engage in competitive bidding for spe= ctrum=20 without adequate preparation will itself create a market distortion both in= =20 the actual process and in the rapidly evolving mobile marketplace.=0F" The Association of Public-Safety Communications Officials-Internationalsaid= =20 it backed a postponement =0F"to the extent that such a delay may facilitate= the=20 ultimate clearing of television broadcasters from the 700 MHz band. . .Any= =20 effort that facilitates band-clearing on channels 60=0F-69 is likely to ben= efit=20 public safety agencies waiting to use the 700 MHz band.=0F" Spectrum Exchange Group LLCsought a delay of two to six months, saying such= =20 an action would strike =0F"the appropriate balance between the needs of the= =20 bidders and incumbent broadcasters to establish a band-clearing agreement,= =20 and the urgency of putting this valuable spectrum to its best use.=0F" Ronald M. Harstad and Michael H. Rothkopfof Rutgers University and Aleksand= ar=20 Pekecof Duke University also argued for a delay, citing the 3G initiative,= =20 the need to negotiate band-clearing agreements, and the introduction of=20 package bidding. Rural Carriers, Broadcasters Object But a group representing rural carriers urged the FCC to hold the auction a= s=20 scheduled. =0F"The Commission should not establish auction deadlines that= =20 comport with the business plans of any private company,=0F" the Rural=20 Telecommunications Groupsaid. =0F"And, stripped to its essence, Verizon ur= ges=20 the Commission to delay the 700 MHz [band] auction merely for Verizon=0F's= =20 business convenience.=0F" Delaying the sale would benefit Verizon Wireless at the expense of=20 competitors that skipped the C and F block reauction with the expectation o= f=20 bidding in the 700 MHz band sale, the group said. It added that it opposed= =20 any linkage between the 700 MHz band auction and the initiative to allocate= =20 3G spectrum. =0F"This informal daisy chain between auctions=0F-and between auctions and = other=20 allocation proceedings=0F-can only serve to advantage the largest carriers = who=20 seek to participate seriatim in each and every auction,=0F" it said. Paxson Communications Corp.,the largest incumbent broadcaster in channels 6= 0=0F- 69, also asked the FCC to reject the postponement request. Further delay = =0F"is=20 unfair to incumbent broadcasters who are seeking to get past the auction an= d=20 determine the future availability of this spectrum for both their digital a= nd=20 analog operations,=0F" it said. The broadcaster added that wireless carriers had plenty of time to prepare= =20 for the sale. And it noted that the FCC already had missed a September 200= 0=20 statutory deadline for depositing proceeds from the sale into the U.S.=20 Treasury. Equity Broadcasting Corp.said it supported Paxson=0F's comments. =0F"Further delay will slow the digital transition, violate congressional= =20 directive, and will not benefit potential bidders for the spectrum,=0F" agr= eed=20 Shop At Home Network.=0F"Moreover, Verizon=0F's arguments that a further de= lay will=20 benefit it and other potential auction participants are specious at best.= =0F" FCC Takes Additional Steps To Help Clear 700 MHz Band The FCC has taken additional steps to help spur the relocation of incumbent= =20 TV broadcasters from the 700 megahertz band in order to make way for wirele= ss=20 carriers. But it said it wouldn=0F't force the incumbents to clear the=20 frequencies=0F-at least not yet. In a third report and order released last week, the Commission said it had= =20 decided to allow the private sector to determine what band-clearing=20 mechanisms best suited the needs of broadcasters and wireless carriers. Specifically, the FCC has decided not to impose cost-sharing rules, cost=20 caps, or cost-recovery guidelines at this time on the relocation of incumbe= nt=20 broadcasters. Last year the agency asked whether it should impose such rul= es=20 (TR, June 26 and July 10, 2000). =0F`Secondary Auctions=0F' Touted The FCC also will leave it up to industry to decide if =0F"secondary auctio= ns=0F"=20 should be organized to facilitate band-clearing agreements before the=20 auction, which is scheduled to begin March 6. The FCC earlier asked for=20 comments on whether it had the authority to conduct such auctions. In the order released last week, the FCC reiterated its view of the benefit= s=20 of such auctions, saying they =0F"have potential to offer both broadcasters= and=20 new entrants additional opportunities to reduce the potential transaction= =20 costs of negotiating with each other directly after the auction.=0F" As part of their transition to digital TV (DTV), broadcasters don=0F't have= to=20 leave the 700 MHz band (channels 60=0F-69) until 2006 at the earliest. The= y may=20 stay longer if less than 85% of households in their markets have access to= =20 DTV signals. That timetable has created uncertainty among wireless carrier= s=20 about how much to bid=0F-or whether to bid at all=0F-on the spectrum when i= t is=20 auctioned. Wireless carriers have asked the FCC to force TV broadcasters out of the=20 spectrum before they are required to leave (TR, Aug. 21, 2000). For their= =20 part, broadcasters have fought such band-clearing mandates and instead have= =20 urged the FCC to address larger issues related to the DTV transition,=20 especially digital =0F"must-carry=0F" cable TV rights. The FCC recently took several actions that it said would facilitate=20 broadcasters=0F' transition to DTV, including those dealing with must-carry= =20 rights. In its 700 MHz band order, the FCC said it wanted to give voluntary=20 mechanisms a chance in clearing the frequencies for wireless services. =0F= "We=20 believe that voluntary agreements between broadcasters and licensees should= =20 result in the effective clearing of the 700 MHz band,=0F" it said. =0F"How= ever, we=20 will revisit this issue in the future if we find it necessary.=0F" The FCC=0F's latest action builds upon the policies it adopted last year to= =20 provide guidance to broadcasters and carriers regarding the regulatory=20 treatment of private band-clearing agreements. For example, the agency extended to three-way agreements a general =0F" rebuttable presumption=0F" adopted last year for bilateral pacts. The=20 presumption is that such agreements are in the public interest. The FCC also provided guidance on interference issues arising from relocati= on=20 agreements that involve moving a broadcaster to a channel below channel 59.= =20 And it has streamlined the review of band-clearing agreements and affirmed= =20 that it expeditiously will process band-clearing agreements. It also=20 clarified that voluntary agreements to temporarily relocate licensees into= =20 channels 52=0F-58 would be permitted. Commissioner Gloria Tristani dissented in part from the report and order. = In=20 a statement, she said she opposed the decision to extend the rebuttable=20 presumption to three-way agreements. She expressed concern that such=20 agreements would result in a loss of TV service for viewers and said she=20 wanted to consider band-clearing agreements case by case. =0F"As I have stated previously, my ultimate concern is that the presumptio= n in=20 favor of band clearing reflects a diminishing regard for the public value o= f=20 free, over-the-air television services,=0F" Commissioner Tristani said. She also took exception with the FCC=0F's statement that it might revisit i= ssues=20 surrounding the mandatory relocation of broadcasters. =0F"I remain convinc= ed=20 that such action would contravene the statute=0F" establishing broadcasters= =0F' DTV=20 transition, she said. The FCC=0F's order was adopted Jan. 18 in Wireless Telecommunications docke= t=20 99-168, Cable Services docket 98-120, and Mass Media docket 00-39. A news= =20 release on the action and the text of the document were released Jan. 23. Kennard Requests Hard Stand In a related development, former FCC Chairman William E. Kennard has asked= =20 Congress to take a hard stand against broadcasters in their transition to= =20 DTV. Writing Jan. 19 to Sen. Ernest F. Hollings (D., S.C.), Mr. Kennard=20 suggested that Congress set a firm deadline of Dec. 31, 2006, for TV=20 broadcasters in channels 52=0F-69 to relocate. =20 He also proposed that broadcasters using channels 2=0F-51 after that date b= e=20 charged an escalating fee to encourage them to clear the spectrum. Writing Jan. 26 to Senate Commerce, Science, and Transportation Committee= =20 Chairman John McCain (R., Ariz.), Lyle Gallagher, president of the=20 Association of Public-Safety Communications Officials-International,=20 expressed support for Mr. Kennard=0F's proposals to help clear the 700 MHz = band. At the very least, steps should be taken to clear channels 60=0F-69, Mr.=20 Gallagher said. Public safety agencies urgently need access to 24 MHz of= =20 spectrum in the 700 MHz band that the FCC has reallocated for their use, he= =20 said, but much of it is occupied by broadcasters. =0F"By making the Dec. 31, 2006, date firm for channels 60=0F-69, state and= local=20 governments throughout the nation could plan on spectrum being available no= =20 later than Jan. 1, 2007, and could proceed with necessary funding, frequenc= y=20 planning, design, and construction for new radio systems,=0F" he added. = =0F"APCO=20 also supports adoption of legislative and regulatory provisions that may=20 allow for clearing of channels 60=0F-69 even prior to 2006.=0F" The FCC=0F's Enforcement Bureau is a proposing a monetary forfeiture... The FCC=0F's Enforcement Bureau is a proposing a monetary forfeitureof $5,0= 00=20 against Verizon Southwest, Inc., for operating a paging station in Juno,=20 Texas, without Commission authorization. Verizon told the agency that it= =20 operated the station without authorization between Nov. 1, 1998, and Feb. 7= ,=20 2000. The bureau released a notice of apparent liability for forfeiture=20 against Verizon Jan. 25 in file no. EB-00-TS-212. Easing Spectrum Crunch Tops CTIA=0F's 2001 Lobbying Agenda Spectrum issues will top the wireless industry=0F's Washington agenda for t= his=20 year, according to Cellular Telecommunications & Internet Association=20 President and Chief Executive Officer Thomas E. Wheeler. A scarcity in=20 frequencies is hurting U.S. carriers=0F' competitiveness with their foreign= =20 counterparts and thwarting development of the wireless Internet, he said. Mr. Wheeler urged the FCC to lift the cap on how much spectrum a carrier ma= y=20 hold in any one market while a high-level effort to identify and allocate= =20 frequencies for third-generation (3G) services proceeded. Such a move woul= d=20 ease the spectrum crunch, he reasoned. At a briefing for reporters last week, he said the Bush administration had= =20 its work cut out for it in collaborating with the FCC to find suitable band= s=20 for 3G use. U.S. Seen Falling Behind =0F"God bless the Clinton administration for starting the spectrum policy r= eview=20 process, but [it] couldn=0F't bring it to fruition, and it now falls to the= Bush=20 administration to deal with the really hard parts and to make decisions,=0F= " Mr.=20 Wheeler said. =0F"Those decisions will probably take time. We can=0F't afford time. It= =0F's what=20 we don=0F't have. Japan and Europe are already building the [networks whil= e] we=0F' re still trying to figure out where we should get it,=0F" he added. Then-President Clinton launched the 3G initiative by executive memorandum i= n=20 October 2000 (TR, Oct. 16, Nov. 6, and Nov. 20, 2000; and Jan. 8 and 22). = =20 The memorandum calls for the FCC to license the spectrum by Sept. 30, 2002,= =20 after a collaborative effort led by the FCC and the Commerce Department=0F'= s=20 National Telecommunications & Information Administration. But a key obstacle is that the bands being examined most closely for 3G=20 applications already are occupied by military, commercial, and educational= =20 users. Mr. Wheeler said that the time it would take to allocate 3G spectrum made i= t=20 even more important for the FCC to lift the spectrum cap immediately. The= =20 FCC asked for comments on the issue last week (see separate story). He said he had =0F"some very profitable discussions=0F" with Bush transitio= n team=20 officials on spectrum issues, although he wouldn=0F't elaborate. He also s= aid=20 he was pleased that Donald L. Evans stressed the importance of allocating 3= G=20 spectrum in his Senate confirmation hearing for secretary of commerce earli= er=20 this month (TR, Jan. 8). Mr. Wheeler said another key issue for the coming year was finding ways to= =20 use wireless technologies to bridge the =0F"digital divide.=0F" He stresse= d that=20 the gap wouldn=0F't =0F"be bridged by just pumping more money into existing= subsidy=20 programs,=0F" although he said changes in the universal service program wer= e=20 needed. On other issues, Mr. Wheeler said CTIA also hoped there would be=20 congressional or FCC action on Internet privacy, =0F"calling-party-pays=0F"= billing=20 arrangements, and reciprocal compensation. Regarding privacy, he said the= =20 trade group had gotten a positive response from members of Congress and=20 regulators to its proposed principles for location-information services (TR= ,=20 Oct. 30 and Nov. 27, 2000). Mr. Wheeler defended the industry=0F's claims regarding the safety of mobil= e=20 phones. A new book by George L. Carlo, a scientist who led a seven-year, $= 27=20 million industry-funded initiative to study the issue, says the wireless=20 industry has downplayed evidence that the phones can cause illness (TR, Dec= .=20 25, 2000). The book is particularly critical of Mr. Wheeler. The industry= =20 also has suffered recent setbacks in pending court cases that claim mobile= =20 phones are dangerous to humans (TR, Jan. 22). =0F"I don=0F't think that the issue is George Carlo or Tom Wheeler or CTIA,= =0F" Mr.=20 Wheeler said. =0F"The whole issue is, What=0F's the science? . . .We=0F've= supported=20 independent science and will continue to support independent science.=0F" As for litigation, he said that lawsuits alleging a link between exposure t= o=20 radio frequency emissions and health effects such as cancer had been=20 dismissed in the past. Nextel Communications, Inc., has agreed to purchase specialized mobile=20 radio... Nextel Communications, Inc., has agreed to purchase specialized mobile=20 radio(SMR) licenses from Arch Wireless, Inc., for $175 million and invest $= 75=20 million in the paging carrier. In exchange, Nextel will receive a new seri= es=20 of Arch preferred stock. The two companies also will explore ways to=20 collaborate on marketing. Arch said it didn=0F't expect to need the SMR=20 spectrum because of upgrades to its two-way messaging network. Nextel said= =20 the transition would give it about 20 megahertz of SMR spectrum in the 800= =20 and 900 MHz bands in 52 of the top 100 U.S. markets. Commission Examines Merits Of Lifting CMRS Spectrum Cap The FCC is reexamining whether to lift its cap on the amount of spectrum=20 wireless carriers may hold in any one market. The Commission also is=20 considering whether it should eliminate its cellular cross-interest rule. In a notice of proposed rulemaking released last week, the FCC asked for=20 comments on whether the spectrum cap should be retained, modified, or=20 eliminated to comply with the public-interest standard set forth in section= =20 11 of the Communications Act, as amended. Specifically, the agency is soliciting views on whether =0F"meaningful econ= omic=20 competition=0F" in the commercial mobile radio service (CMRS) market has=20 rendered spectrum aggregation limits, including the cellular cross-interest= =20 rule, unnecessary. Under the agency=0F's rules, carriers aren=0F't allowed to hold more than 4= 5=20 megahertz of spectrum in urban markets and 55 MHz in rural markets. The=20 cellular cross-interest rule restricts an entity=0F's ownership interest in= =20 cellular carriers operating in the same market. The FCC wants to know=20 whether those limits are still needed to prevent harmful concentration of= =20 spectrum holdings or ensure opportunities for new players to enter the mark= et. The Commission is asking for comments on what constitutes =0F"meaningful=20 economic competition=0F" under section 11 and how competitive conditions ha= ve=20 changed since it last reviewed the restrictions in 1999. In the largest metropolitan areas, where seven in 10 Americans live, at lea= st=20 five mobile telephone carriers are offering service, the agency noted last= =20 week. As a result, it said, prices are declining, coverage areas are=20 expanding, and new service packages are being offered. It wants to know if= =20 there are public-interest reasons for maintaining the cap regardless of suc= h=20 competitive developments. Large wireless carriers have lobbied the FCC to lift the cap, saying it has= =20 thwarted the U.S. wireless industry=0F's deployment of third-generation (3G= )=20 services, placing it at a disadvantage with foreign competitors. Some=20 smaller carriers, however, have asked the FCC to retain the cap, saying it= =0F's=20 needed to ensure that they remain competitive against their larger=20 counterparts. In a broad review of the cap conducted in 1999, the FCC decided to retain t= he=20 restriction, although it eased the limit in rural markets (TR, Sept. 20,=20 1999). At the time, it concluded that the cap was a safeguard against=20 excessive concentration in the CMRS market, preserving competition and the= =20 consumer benefits it had produced. It also determined in 1999 that the=20 cellular cross-interest restriction was necessary to protect competition. = =20 The agency eased the rules somewhat, however, permitting some degree of=20 cross-interest. In November 2000, the FCC denied two petitions for reconsideration of its= =20 1999 decision but said it would reexamine the cap as part of its 2000=20 biennial review (TR, Nov. 13, 2000). The notice of proposed rulemaking,=20 adopted Jan. 19 and released Jan. 23 in Wireless Telecommunications docket= =20 01-14, stems from that review. Comments are due 60 days after the notice= =0F's=20 publication in the Federal Register, and replies are due 30 days after that= . In a separate statement, Commissioner Harold W. Furchtgott-Roth said that h= e=20 supported the rulemaking notice but that he tentatively would have conclude= d=20 that the cap should be lifted. =0F"The use of a spectrum cap is a drastic regulatory remedy that continues= to=20 search for a corresponding competitive ill,=0F" he said. =0F"I have grown= =20 impatient with the Commission=0F's repeated reexaminations of these issues= =20 without substantial alterations in our policy approach.=0F" Industry Praises Review Thomas E. Wheeler, president and chief executive officer of the Cellular=20 Telecommunications & Internet Association, said that lifting the cap was=20 crucial while a high-level effort to identify and allocate 3G bands winds= =20 through the regulatory process (see separate story). Mr. Wheeler told reporters at a luncheon last week that such access to=20 additional spectrum was necessary for the U.S. to maintain its leadership i= n=20 the development of the Internet as it moves to wireless devices. Japan and European countries have moved more quickly to allocate frequencie= s=20 for 3G services, setting aside twice as much spectrum as the U.S. has, he= =20 said. The Personal Communications Industry Association, however, has said the cap= =20 is necessary to give smaller carriers a chance to enter the CMRS market. Mr. Wheeler noted that newly named FCC Chairman Michael K. Powell had said = he=20 would favor lifting the spectrum cap. =0F"Clearly in some of the opinions = that=20 he=0F's written in the spectrum proceeding, he=0F's asked the question, Why= should=20 this continue?=0F" Mr. Wheeler said. =0F"We=0F're hopeful.=0F" Then-Commissioner Powell voted to retain the cap in November 2000 but said = he=20 tended to agree with Commissioner Furchtgott-Roth=0F's conclusion that the = cap =0F" has outlived its usefulness.=0F" Notice Explores Alternatives In its rulemaking notice, the FCC seeks comments on alternatives to lifting= =20 the spectrum cap entirely or leaving it untouched. For example, it asks=20 whether it should apply the cap only to spectrum used for voice services. = It=20 also asks whether it should retain the cap in markets where there is less= =20 competition and eliminate it in other markets where more carriers are=20 offering service. The FCC also solicits opinions on whether to treat already-licensed spectru= m=20 differently from frequencies licensed in the future. =0F"As a general matt= er,=20 we believe that newly available CMRS-suitable spectrum either should be=20 excluded from the spectrum cap, or, if it is included, that the cap should = be=20 adjusted accordingly,=0F" the Commission said. The FCC also wants opinions on how eliminating or relaxing the cap would=20 affect its authority to review license-transfer requests under section 310(= d)=20 of the Act. If it makes such changes to the cap, it wants to know whether = it=20 could or should =0F"incorporate other methods=0F" into its license-transfer= review=20 to prevent consolidations =0F"that would eliminate the benefits brought by= =20 competition.=0F" It also seeks comments on whether removing the cap would place more of a=20 burden on the FCC and industry in the review of license transfers. If the Commission decides to keep the spectrum cap for now, it wants to kno= w=20 what further market developments could make the cap unnecessary and whether= =20 it should set a =0F"sunset=0F" date for the restrictions. Regarding the cellular cross-interest rule, the FCC asked whether the=20 restriction was still necessary to prevent cellular carriers from merging i= n=20 markets where there is little or no other competition. Bookham Technology plc, an Oxfordshire, England=0F-based... Bookham Technology plc, an Oxfordshire, England=0F-basedoptical=20 network-components manufacturer, has signed a =0F"multimillion-dollar=0F" c= ontract=20 to provide wavelength division multiplexing equipment to Fujitsu=20 Telecommunications Europe Ltd. Bookham agreed to deliver up to 10,000=20 bidirectional transceiver modules per month to Fujitsu Telecom, a unit of= =20 Fujitsu Ltd. Japan. Fujitsu will use the components in SONET (synchronous= =20 optical network), fiber-to-the-curb, and other telecom network-access=20 equipment deployments. =20 Appellate Court Upholds Nextel Tower Permit A Pennsylvania state court has upheld a local zoning board=0F's decision to= let=20 Nextel Communications, Inc., build a communications tower under a special= =20 exemption provision for radio transmitters. Residents opposing the tower h= ad=20 argued that the entire 150-foot structure didn=0F't qualify as a transmitte= r. The opinion, written by Commonwealth Court President Judge Joseph T. Doyle,= =20 affirmed a trial court decision that upheld the action of the Newlin Townsh= ip=20 Zoning Board. The township=0F's zoning ordinance limits the types of buildings that can b= e=20 constructed but allows the board to grant a special exemption to authorize= =20 the construction of a =0F"radio or television transmitter.=0F" But the ord= inance=20 doesn=0F't define radio transmitter. The residents asserted that the =0F"radio transmitter component of the faci= lity=20 is but a minor element=0F" and said the tower =0F"falls far outside any com= monly=20 understood definition of radio transmitter.=0F" They argued that because t= he=20 tower didn=0F't fit into that or any other category, the zoning ordinance d= idn=0F't=20 permit it to be constructed within the township. Judge Doyle ruled that the record supported the board=0F's decision. The ju= dge=20 noted that testimony by a Nextel engineer demonstrated that the tower was a= n=20 integral part of the facility. He concluded that the =0F"entire system ope= rates=20 together in order to transmit the necessary information for the cellular=20 network to function.=0F" Senior Judge William J. Lederer and Judge Bonnie B. Leadbetter joined Judge= =20 Doyle=0F's opinion in Robert and Loren Pearson v. Zoning Hearing Board of N= ewlin=20 Township and Nextel Communications of the Mid Atlantic, Inc. (case no. 3182= ). Finance Panel Senators Back Broadband Service Tax Credits Former New York Sen. Daniel Patrick Moynihan (D.) may have retired, but his= =20 push to extend tax credits to carriers that deploy high-speed Internet=20 facilities is being revived by key Democrats and Republicans who control th= e=20 congressional purse strings. Its proponents also have asked President Bush= =20 to include the measure in his initial budget submission to Congress. On Jan. 23, Sen. John D. Rockefeller IV (D., W.Va.) led a bipartisan group = of=20 more than 30 U.S. senators=0F-including freshman Hillary Rodham Clinton (D.= ,=20 N.Y.), who won the seat left vacant by Sen. Moynihan=0F-to introduce the=20 Broadband Internet Access Act (S 88). A companion bill is expected to be= =20 introduced in the House Ways and Means Committee this week by committee=20 members Philip English (R., Pa.) and Robert T. Matsui (D., Calif.) The Senate bill is a slightly altered version of Sen. Moynihan=0F's legisla= tion=20 of the same name, which almost cleared the Senate last fall as part of the = =0F" New Markets=0F" tax-break package (TR, June 12 and Oct. 2, 2000). =20 =0F"This bill represents my commitment to making sure that no community is = left=20 behind in the technology revolution,=0F" Sen. Rockefeller said in a stateme= nt. =20 The bill =0F"will ensure that communities everywhere, whether rural or urba= n,=20 will have the tools necessary to compete in the global economy,=0F" he=20 continued. Added Sen. John F. Kerry (D., Mass.), a co-sponsor: =0F"Too man= y=20 businesses are shying away from areas where broadband access is either too= =20 expensive or unavailable, and underserved areas are put at a tremendous=20 disadvantage.=0F" Like the Moynihan plan, the new bill would provide a tax credit equal to 10= %=20 of a carrier=0F's investment in equipment used to provide =0F"current-gener= ation=20 broadband=0F" services to business or residential customers in rural and=20 low-income areas. It defines current-generation broadband services as=20 services that can transmit at least 1.5 megabits per second downstream (to= =20 the subscriber) and at least 200 kilobits per second upstream (from the=20 subscriber). Carriers also could claim a tax credit equal to 20% of a carrier=0F's inves= tment=20 in equipment used to deploy =0F"next-generation=0F" broadband services to = =0F"all=20 residential customers,=0F" according to Sen. Rockefeller. His bill defines= =20 next-generation services as those able to transmit at least 22 Mbps=20 downstream and at least 5 Mbps upstream. A Rockefeller aide said the=20 upstream transmission requirements were lower than those in last year=0F's = bill=20 because lawmakers =0F"didn=0F't want to cut out any potentially good broadb= and=20 suppliers, like wireless and satellite providers.=0F" Because the measure would amend the Internal Revenue Code of 1986, it has= =20 been referred to the Senate Finance Committee, where several of its members= =20 are co-sponsors, including Sens. Rockefeller and Kerry, Minority Leader=20 Thomas A. Daschle (D., S.D.), Finance Committee ranking Democrat Max Baucus= =20 (Mont.), Orrin G. Hatch (R., Utah), Olympia J. Snowe (R., Maine), Blanche L= .=20 Lincoln (D., Ark.), and Kent Conrad (D., N.D.). =0F"It is crucial that we act quickly,=0F" the lawmakers said in a Jan. 22 = letter=20 to President Bush. =0F"A number of other nations, including China, Japan,= =20 Sweden, and Singapore, are moving aggressively to surpass the U.S. in=20 broadband infrastructure over the next five years.=0F" The proposed Broadband Internet Access Act =0F"is a truly bipartisan measur= e,=0F"=20 they told the president. =0F"Clearly, such support indicates a general=20 recognition of the need to extend a high-speed information system to all=20 Americans. This legislation provides the vehicle for delivering such a=20 system, and we hope you will support it in your upcoming budget proposal,= =0F"=20 they said. The support of Republicans Hatch and Snowe is important because they give t= he=20 bill much-needed bipartisan support on the Finance Committee, something it= =20 didn=0F't have last session, the Rockefeller aide said. =0F"We=0F're hopef= ul=0F" that=20 new Finance Committee Chairman Charles E. Grassley (R., Iowa) will allow th= e=20 measure to come up for a committee vote. Calls to Sen. Grassley=0F's offic= e=20 were not returned by TR=0F's deadline. Meanwhile, one day later, Sen. Kerry introduced a portion of the broadband= =20 tax-credit bill as a separate, stand-alone measure. His bill, S 150, would= =20 authorize a tax credit equal to 10% of a carrier=0F's investment in equipme= nt=20 used to provide current-generation broadband services to underserved areas.= =20 But it wouldn=0F't provide tax credits for investments to deliver those ser= vices=20 to rural areas, nor would it provide added tax credits for delivering=20 next-generation services. A Kerry aide said the senator crafted the separate bill to attract more=20 attention to the lack of high-speed deployment to low-income communities. = =0F" That=0F's the area he=0F's most concerned with,=0F" the aide told TR.=20 Verizon Wants Law Changing Approach to Broadband Regs The =0F"time is ripe=0F" for legislation creating a new regulatory regime f= or=20 broadband services and networks, similar to the regime that governs the=20 wireless industry, according to Verizon Communications, Inc. Such an=20 approach would entail =0F"no economic regulation and minimal rules,=0F" and= states=20 would be preempted from regulating broadband services. Meeting with reporters in Washington Jan. 25, Verizon executives said recen= t=20 court decisions had made it more important for Congress to develop a new=20 regime for such services. Thomas J. Tauke, Verizon senior vice president-federal government relations= ,=20 said representatives of incumbent telephone companies, cable TV providers,= =20 and telecom equipment providers had discussed with each other the need for= =20 new broadband legislation. =0F"There has been no organized effort=0F" by the industry segments to coor= dinate=20 lobbying efforts, Mr. Tauke said. =0F"But it=0F's fair to say there=0F's b= een a lot=20 of discussion among the players.=0F" Recent court decisions on the appropriate regulatory regime for cable modem= =20 services (TR, April 17, May 22, and June 26, 2000) have troubled the cable = TV=20 industry by suggesting that they could be considered telecom services, Mr.= =20 Tauke said. He also cited the recent federal appeals court decision overturning the FCC= =0F's=20 regime for advanced services affiliates (TR, Jan. 15). The court rejected= =20 the FCC=0F's finding that incumbent local exchange carriers could avoid=20 unbundling and resale mandates for their digital subscriber line offerings = if=20 they provided those services through a separate affiliate. =0F"This court case really highlighted the point that the FCC doesn=0F't ha= ve the=20 ability to come up with, on its own, a new regulatory structure covering=20 broadband services,=0F" Mr. Tauke said. Mr. Tauke said the Freedom and Broadband Deployment Act drafted last year b= y=20 Reps. W.J. (Billy) Tauzin (R., La.) and John Dingell (D., Mich.) would have= =20 provided a =0F"little bit=0F" of the regulatory reform sought by Verizon. = But Mr.=20 Tauke said he hoped lawmakers would =0F"look at it in somewhat broader term= s=0F"=20 this time around. Mr. Tauke suggested that this type of broadband legislation had become=20 Verizon=0F's top priority and that its push for legislation to allow Bells = to=20 offer interLATA (local access and transport area) data services was becomin= g=20 less so. Asked if interLATA data relief was still the most important legislative iss= ue=20 to Verizon, Mr. Tauke said, =0F"It certainly would have been two years ago.= Is=20 that the most important thing now? It=0F's certainly important. . .But of = equal=20 importance, if not more importance, is getting some clarity on the broadban= d=20 world.=0F" Verizon still is pushing for legislation to change the existing reciprocal= =20 compensation regime. Edward D. Young III, SVP-federal government relations= ,=20 said payments to compensate competitive local exchange carriers for=20 terminating calls to Internet service providers ran Verizon about $1 billio= n=20 a year. Although the FCC has been promising to act on the reciprocal compensation= =20 issue, Congress may need to step in, Mr. Young said. =0F"The FCC is still= =20 trying to work through the issue, but obviously it=0F's a different dynamic= =0F"=20 given the change in chairmen from William E. Kennard to Michael K. Powell, = he=20 added. Mr. Tauke said it was =0F"shameful=0F" that the FCC hadn=0F't resolved the = issue. =0F" Two years ago they knew there was a problem, but they didn=0F't have the co= urage=20 to preempt the states,=0F" he said. =0F"They could see the problems coming= , but=20 they thought it would work itself out.=0F" Joan H. Smith, chairwoman of the National Association of Regulatory Utility= =20 Commissioners=0F' telecommunications committee and a member of the Oregon P= ublic=20 Utility Commission, said she was =0F"puzzled=0F" by the bid to preempt stat= e=20 regulators in a new broadband regulatory regime. =0F"We don=0F't regulate= =20 broadband=0F" services, she told TR. =0F"Our biggest issue at the state le= vel is=20 promoting broadband [deployment], not regulating it.=0F" Utah Bill Would Halt Plan To Merge Consumer Agencies Legislators in Utah have passed a measure to repeal a year-old law that wou= ld=20 have folded together two state agencies that represent utility customer=20 interests before the Public Service Commission. Absent the repeal measure,= =20 the legislation passed in 2000 would have combined the Committee of Consume= r=20 Services and the Division of Public Utilities, effective July 1. The new= =20 entity would have been called the Office of Public Advocate. House Majority Whip David Ure (R.), who sponsored last year=0F's restructur= ing=20 legislation, also was behind the bill to repeal it. The legislative staff= =20 said he=0F'd decided that the time wasn=0F't right to overhaul the state=0F= 's utility=20 regulatory system. The repeal measure sped through the Utah Legislature la= st=20 week, progressing from its first House reading through passage by both hous= es=20 in just two days. Rep. Ure rejected alternative proposals for re-structuring the state=0F's= =20 regulatory agencies, settling for a straight repeal of last year=0F's=20 legislation. One proposal would have expanded the PSC=0F's membership, the= =20 legislative staff told TR. Another version that circulated between the end of last year=0F's legislati= ve=20 session and the beginning of this year=0F's would have merged the PSC and t= he=20 Division of Public Utilities. =20 The staff said Rep. Ure pulled those drafts after deciding that the state= =0F's=20 regulatory structure shouldn=0F't be altered in the midst of the current en= ergy=20 crisis. The Division of Public Utilities is charged with representing the public=20 interest before the PSC and ensuring that all utility customers have access= =20 to safe, reliable service at reasonable prices. The Committee of Consumer= =20 Services represents residential, small- business, and agricultural consumer= s=20 before the PSC. Some parties had expressed concern that merging the two=20 entities would decrease the amount of information available for PSC decisio= n=20 making. Consumer group opposition last year persuaded Gov. Michael O. Leavitt (R.) = to=20 call for a review of the law after the legislative session ended in March. = =20 He allowed the bill to become law last year without signing it. Reps. Cannon, Eshoo Unveil Internet Privacy Measure Reps. Chris Cannon (R., Utah) and Anna G. Eshoo (D., Calif.) have introduce= d=20 a bill to require operators of commercial Web sites that collect personally= =20 identifiable information to explain to site visitors what information is=20 collected, how it will be used, and who is collecting it. The proposed=20 Consumer Internet Privacy Act (HR 237) would authorize the Federal Trade=20 Commission to assess civil penalties of up to $22,000 per violation, or a= =20 total of $500,000 against a particular violator. Rep. Cannon said the bill was a good starting point for addressing Internet= =20 privacy, a topic that many observers see as the top Internet-related issue = in=20 the 107th Congress. =0F"We are going to rely heavily on the marketplace to help define how to= =20 implement the guidelines established in this bill=0F's language, just as th= e=20 market has commendably worked with government officials to develop other=20 standards and seals for privacy,=0F" Rep. Cannon said. Rep. Eshoo, who said consumers shouldn=0F't have to =0F"reveal their life s= tory=20 every time they surf the Web,=0F" said their privacy must be protected with= out=20 impeding the free flow of information on the Internet. =0F"This legislatio= n=20 achieves that goal=0F-the bill doesn=0F't regulate the Internet; it empower= s the=20 consumer,=0F" Silicon Valley Democrat Eshoo said last week. The measure also would require Web site operators to give users an=20 opportunity to limit the use and disclosure of their personal information f= or=20 marketing purposes in a =0F"clear,=0F" =0F"conspicuous,=0F" and easily exec= uted manner,=20 the legislators said in a press release. Appeals Court Says FCC Erred in Rejecting U S WEST Bid for =0F`Nondominant= =0F'=20 Regulation A federal appeals court agrees with former U S WEST Communications, Inc. (n= ow=20 Qwest Corp.) that the FCC erred by focusing on the company=0F's market shar= e=20 when considering its request to be freed from =0F"dominant=0F"-carrier regu= lation=20 of certain services. The U.S. Court of Appeals in Washington last week remanded to the FCC a 199= 9=20 order rejecting a U S WEST request to forbear from applying such regulation= =20 to the company=0F's special-access and high-capacity dedicated transport=20 offerings in the Phoenix and Seattle metropolitan statistical areas (MSAs).= =20 In the 1999 order, the FCC said U S WEST could refile its request for relie= f=20 under a separate deregulatory regime it had set up to allow incumbent telco= s=20 to seek pricing flexibility for some services (TR, Nov. 29, 1999). Chief Judge Harry Edwards wrote the Jan. 23 decision in AT&T Corp. v.=20 FCC(consolidated cases beginning at 99-1535). He was joined by Judges Davi= d=20 Sentelle and A. Raymond Randolph. =20 The court found that the FCC failed to conduct its review of U S WEST=0F's= =20 request in compliance with section 10 of the Telecommunications Act of 1996= ,=20 which directs the FCC to forbear from applying regulations deemed no longer= =20 necessary. The court explained that the FCC=0F's order =0F"rests solely on the view th= at,=20 because U S WEST offered no reliable data on market share, the petition for= =20 forbearance failed to make a prima facie showing that sufficient competitio= n=20 existed to satisfy section 10.=0F" But in relying so heavily on market-share data, the FCC =0F"departed from i= ts=20 traditional nondominance analysis without explanation,=0F" the court said. = The=20 FCC=0F's decision to rely on that data =0F"may well be reasonable, but unti= l the=20 Commission has adequately explained the basis for this conclusion, it has n= ot=20 discharged its statutory obligation under the Administrative Procedure Act,= =0F"=20 the court said. In the past, the FCC had =0F"gone so far as to view market share as irrelev= ant=20 where there was other evidence that a carrier lacked market power,=0F" the = court=20 said. =0F"Were this the first time the FCC was asked to consider whether a carrie= r was=20 dominant in a given market, the explanation provided by the Commission in t= he=20 forbearance order may well have been accurate,=0F" it said. =0F"But it is = not the=20 first time that the Commission has addressed this issue.=0F" The court said it might be =0F"reasonable=0F" for the FCC to demand a showi= ng on=20 market share in every inquiry on dominant regulation. But it is =0F"not=20 reasonable for the Commission to announce such a policy without providing a= =20 satisfactory explanation for embarking on this course when it has not=20 followed such a policy in the past,=0F" it said. Court Nixes IXCs=0F' Claims As was apparent during oral arguments (TR, Dec. 4, 2000), the court was=20 unconvinced by the arguments of AT&T and WorldCom, Inc., which had challeng= ed=20 the order to the extent that it granted U S WEST pricing flexibility for so= me=20 services. In the forbearance order, the FCC stated that it granted the relief request= ed=20 =0F"to the extent that the pricing flexibility order establishes a framewor= k=20 pursuant to which [Bell operating company] petitioners may obtain relief by= =20 demonstrating satisfaction of the competitive triggers adopted in that orde= r.=0F" The court rejected the AT&T and WorldCom petitions to overturn the pricing= =20 flexibility =0F"relief,=0F" saying their argument =0F"borders on being disi= ngenuous.=0F" =0F"When the forbearance order is read in its entirety, it is absolutely cl= ear=20 that U S WEST was granted no relief whatsoever,=0F" the court said. =0F"U = S WEST=20 sought forbearance, and it was categorically denied.=0F" The FCC simply = =0F" reminded=0F" U S WEST that it was eligible to apply for pricing flexibility= =20 under the regime for reviewing such requests, the court said.=20 The court added, however, that the FCC couldn=0F't use its pricing flexibil= ity=20 rules as a substitute for its statutory mandate to consider requests for=20 forbearance. =0F"Congress has established section 10 as a viable and independent means o= f=20 seeking forbearance,=0F" the court said. =0F"The Commission has no authori= ty to=20 sweep it away by mere reference to another, very different, regulatory=20 mechanism.=0F" The FCC=0F's Enforcement Bureau has issued a monetary forfeiture... The FCC=0F's Enforcement Bureau has issued a monetary forfeitureof $5,000= =20 against Carmelita T. Gossard (d/b/a AA Beep) for operating a paging system = in=20 Cudjoe Key, Fla., without Commission authorization. The forfeiture order w= as=20 released Jan. 22 in file no. EB-00-TS-044. FCC Gives Bells =0F`Blueprint=0F' In OK of SWBT=0F's InterLATA Bid The FCC=0F's authorization for Southwestern Bell Telephone Co. to offer=20 interLATA (local access and transport area) services in Kansas and Oklahoma= =20 could offer insights to other Bell companies planning their own interLATA= =20 service bids=0F-especially for rural states. In granting SWBT=0F's applica= tion,=20 the FCC marked some clear guideposts it will use for evaluating future bids= ,=20 including issues relating to late-filed data and other procedural matters. In an order adopted unanimously Jan. 19 and released Jan. 22 in Common=20 Carrier docket 00-217, the FCC doubled the number of states in which Bell= =20 companies are permitted to provide in-region interLATA services. In an=20 unprecedented move, the FCC delayed the effectiveness of its decision for 4= 3=20 days. Under section 271 of the Telecommunications Act of 1996, the FCC must=20 determine that a Bell company has met a 14-point =0F"checklist=0F" of=20 market-opening mandates in a given state before authorizing it to provide= =20 interLATA services there. The FCC must consult with the U.S. Department of= =20 Justice and the relevant state commission before granting such an applicati= on. The FCC said it imposed the 43-day delay because it had based its approval,= =20 in part, on UNE (unbundled network element) rates that SWBT changed after= =20 submitting its application. Competitors had argued that the new rates=20 shouldn=0F't be considered when evaluating SWBT=0F's application. At the t= ime, the=20 FCC said it wasn=0F't sure =0F"what reliance, if any,=0F" it would place on= the new=20 rates. In a Jan. 19 statement, then-FCC Chairman William E. Kennard said the=20 original rates were =0F"not acceptable=0F" and praised SWBT for voluntarily= =20 reducing them. But it may not be so easy in the future for Bell companies = to=20 amend their interLATA service applications. In last week=0F's order, the F= CC=20 said =0F"it would be rare for other parties to meet the high bar [for accep= ting=20 the late-filed rates] set here in other applications.=0F" Then-Commissioner Michael K. Powell objected to the 43-day delay and=20 cautioned that Bell companies =0F"risk rejection if they file evidence afte= r the=20 due date for initial comments.=0F" Mr. Kennard said the FCC =0F"must ensur= e that a=20 pattern of last-minute rate reductions or other changes in [section] 271=20 applications does not develop in the future.=0F" In justifying the inclusion of the new rates in its consideration of SWBT= =0F's=20 application, the FCC cited its authority to waive its own procedural rules = in=20 cases where doing so will serve the public interest. It said that =0F"a nu= mber=20 of circumstances=0F" supported its waiver of the =0F"complete-as-filed=0F" = doctrine,=20 including the fact that the rate changes =0F"were limited in nature.=0F" The FCC indicated it wouldn=0F't accept certain other types of data filed a= fter=20 Bell companies submit interLATA service applications, such as =0F"more comp= lex=20 rate revisions.=0F" It also indicated that it wouldn=0F't consider late-fi= led =0F" measures designed to achieve nondiscriminatory performance in the applicant= =0F's=20 provision of service to competitive [local exchange carriers], since it is= =20 difficult to determine the actual effect of such changes on performance in= =20 advance.=0F" The FCC=0F's Kansas-Oklahoma order also offers guidance for regulators in o= ther=20 rural states. It encourages rural states to =0F"pool their resources=0F" a= nd=20 conduct multistate reviews of Bell companies=0F' compliance with the sectio= n 271=20 checklist, when appropriate. It said the =0F"general approach=0F" of the K= ansas=20 and Oklahoma commissions could be =0F"used as a model=0F" for future applic= ations. Financial analysts last week saw the FCC=0F's approval as a boon for Bells = in=20 other states, particularly rural ones. =0F"While these markets are relativ= ely=20 small, Oklahoma at $220 million and Kansas at $170 million, their approval= =20 signals a positive trend for future approval, particularly with the=20 appointment of Michael Powell as the new FCC chairman,=0F" said USB Warburg= LLC. The FCC=0F's action represents the first successful multistate application= =0F-and=20 the first time a single Bell company has gained FCC approval in more than o= ne=20 state in its service territory. SBC last summer gained FCC approval to off= er=20 interLATA services in Texas (TR, July 3, 2000). Evidence from Other States Accepted The FCC also offered clues about how it would view future applications that= =20 rely on a Bell company=0F's performance in one state to show its compliance= with=20 the section 271 mandates in another state. There were no independent=20 third-party tests of SWBT=0F's operation support systems (OSSs) in Kansas a= nd=20 Oklahoma, but the company did provide third-party verification that those= =20 systems were the same as the OSSs used in Texas. The FCC said that such an approach was appropriate, given that the Texas=20 proceeding served as =0F"a precursor and a model=0F" for the proceedings in= Kansas=20 and Oklahoma. The FCC also was clear about the types of issues it would recognize in=20 opponents=0F' filings on future interLATA applications. It noted that the= =20 statutory 90-day review period was designed as a =0F"fast-track, narrowly= =20 focused adjudication=0F" process. It said that such proceedings are =0F" inappropriate forums for the consideration of industry-wide local competiti= on=20 questions of general applicability.=0F" If SWBT fails to continue to comply with any of the requirements under=20 section 271, the FCC can hold the telco liable for up to $45 million annual= ly=20 in Kansas and $44 million annually in Oklahoma. SWBT must meet a series of= =20 anti-=0F"backsliding=0F" and performance-measurement requirements or it cou= ld face=20 fines or other legal action, the FCC said. International Service OKs Granted The Telecommunications Division of the FCC=0F's International Bureau last w= eek=20 also granted SWBT authorization under section 214 of the Communications Act= =20 of 1934, as amended, to provide international services for calls originatin= g=20 in Kansas and Oklahoma. In file ITC-214-20001130-00713, the division said= =20 SWBT=0F's long-distance subsidiary, Southwestern Bell Long Distance, would = be=20 subject to =0F"international dominant carrier regulation=0F" on three route= s where=20 SWBT has an affiliation with the foreign-market carriers. The three routes are those between the U.S. and Belgium, Denmark, and South= =20 Africa. It will be subject to nondominant carrier regulation on routes=20 between the U.S. and Canada, the Czech Republic, France, Germany, Great=20 Britain, Lithuania, the Netherlands, Norway, and Switzerland. FCC Rethinks Limitations On Carriers=0F' Use of EELs As it promised to do last year, the FCC has begun reexamining its policy=20 limiting how requesting carriers can use enhanced extended links (EELs)=0F- combinations of unbundled loops and transport purchased from incumbent loca= l=20 exchange carriers. The FCC previously ruled that requesting carriers can= =0F't=20 use EELs to provide exchange access services exclusively. The FCC had imposed that prohibition in response to incumbent local exchang= e=20 carriers=0F' fears that competitors could use EELS to avoid paying special= =20 access charges (TR, Sept. 20, 1999). The Commission later extended the=20 prohibition and promised to revisit the issue early this year (TR, June 12,= =20 2000). In a Jan. 24 public notice seeking comments on the issue (Common Carrier=20 docket 96-98), the FCC asked if the exchange access and local exchange=20 markets were =0F"so interrelated from an economic and technological perspec= tive=20 that a finding that a network element meets the =0F`impair=0F' standard und= er=20 section 251(d)(2) of the [Telecommunications Act of 1996] for the local=20 exchange market would itself entitle competitors to use that network elemen= t=20 solely or primarily in the exchange access market.=0F" The =0F"impair=0F" standard requires the FCC to evaluate whether the failur= e to=20 unbundle each network element would impair competitors=0F' ability to provi= de=20 service. The FCC asked whether the local exchange and exchange access markets are = =0F" economically and technically distinct.=0F" If the markets are distinct, do= es=20 lack of access to loop-transport combinations impair requesting carriers=0F= '=20 ability to provide special access services? the FCC asked. It asked about the availability of =0F"alternative elements=0F" aside from = those=20 offered by the incumbents. It asked whether it should treat special access= =20 and private line services as a single market. The FCC also sought comment on the nature of the special access and private= =20 line markets for business and residential end-users. =0F"In some markets,= =20 particularly those markets serving high-volume business customers, it may b= e=20 practical and economical for carriers to compete using self-provisioned=20 facilities,=0F" the FCC said. But in residential and small-business market= s =0F" the delay and cost associated with self-provisioning will preclude carriers= =20 from serving that market without access to unbundled network elements.=0F" The FCC also asked whether requesting carriers should be permitted to combi= ne=20 unbundled network elements with tariffed access services purchased from=20 incumbents. That kind of commingling is now prohibited by FCC rules. =0F"Specifically, if a requesting carrier converts special access circuits = to=20 combinations of unbundled network elements, we ask parties to comment on=20 whether such circuits may remain connected to any existing access service= =20 circuits without regard to the nature of the traffic carried over the acces= s=20 circuits,=0F" it said. Comments on the public notice are due 30 days after its publication in the= =20 Federal Register; replies are due 45 days after publication. Pole Attachment, TELRIC Rates To Be Challenged in High Court The U.S. Supreme Court has agreed to hear two cases involving lengthy=20 disputes over FCC rules. One case stems from a challenge of the FCC=0F's= =20 methodology for setting rates for interconnection and unbundled network=20 elements (UNEs). In a separate case, the court will consider whether the= =20 agency has authority to regulate the rates utility companies charge wireles= s=20 and cable TV service providers for attaching equipment to their utility pol= es. Oral arguments in the cases haven=0F't been scheduled yet. As she has done= in a=20 number of other telecom-related cases, Justice Sandra Day O=0F'Connor recus= ed=20 herself from the court=0F's deliberations. In the first case, a federal appeals court had overturned the FCC=0F's use = of=20 TELRIC (total-element long-run incremental cost) pricing rules for setting= =20 rates for interconnection and UNEs (TR, July 24, 2000). The high court said it would focus on the following questions: =20 (1)Whether the TELRIC methodology is unlawful under section 252(d)(1) of th= e=20 Telecommunications Act of 1996,=20 (2)Whether the Act or the =0F"takings clause=0F" of the Fifth Amendment to = the U.S.=20 Constitution requires incorporation of an incumbent local exchange carrier= =0F's=20 (ILEC=0F's) historical costs in its UNE rates, and=20 (3)Whether section 251(c) (3) of the Act prohibits regulators from requirin= g=20 that ILECs combine certain previously uncombined network elements at the=20 request of a new market entrant.=20 The consolidated cases beginning with Verizon Communications, Inc., v. FCC = et=20 al.(no. 00-511) came from the U.S. Court of Appeals for the Eighth Circuit= =20 (St. Louis). In what many incumbent local exchange carriers (ILECs)=20 considered a victory, the Eighth Circuit last year overturned the FCC=0F's= =20 TELRIC pricing rules. But the court didn=0F't go so far as to agree with I= LECs=20 that rates for interconnection and UNEs must be based on historic costs. In the second case, the Supreme Court will consider whether the =0F"pole=20 attachment=0F" provisions of the Communications Act of 1934, as amended, ap= ply=20 to cable TV facilities that also are used to provide high-speed Internet=20 access and to equipment used to provide wireless services. The U.S. Court of Appeals for the 11th Circuit (Atlanta) had held that the= =20 FCC didn=0F't have authority to regulate the rates utilities can charge for= =20 facilities that Internet or wireless service providers attach to their pole= s=20 (TR, April 17, 2000). The pole attachment provisions apply only to cable T= V=20 and wireline telephone services, the appeals court ruled. The Supreme Cour= t=20 has consolidated the various appeals of the 11th Circuit decision under=20 National Cable TV Association, Inc., v. Gulf Power Co. et al.(case no.=20 00-832).=20 Supreme Court Again Refuses To Hear State Immunity Cases The U.S. Supreme Court has refused to review an appeals court ruling that= =20 denied state regulators=0F' claims of immunity from federal lawsuits regard= ing=20 carrier interconnection. The interconnection provisions are included in th= e=20 Telecommunications Act of 1996. The 11th Amendment to the U.S. Constitution grants states immunity from=20 federal lawsuits, but a 1908 Supreme Court decision, Ex parte Young,created= =20 an exception for lawsuits seeking to prevent an ongoing violation of federa= l=20 law by state officials. The high court=0F's action last week left in place a ruling by the U.S. Cou= rt of=20 Appeals for the Seventh Circuit (Chicago) that the Ex parte Young exception= =20 applies to lawsuits involving carrier interconnection proceedings. This isn=0F't the first time the Supreme Court has refused to take on such = a=20 case. But it is the first time it=0F's been confronted by state immunity c= laims=20 extending not just to arbitration and approval of carrier interconnection= =20 agreements but also to (1)enforcement of such pacts and (2)review of =0F" statements of generally available terms=0F" (SGATs), according to a Wiscons= in=20 Public Service Commission official. In the case the Supreme Court rejected last week, the Wisconsin PSC and the= =20 Illinois Commerce Commission separately had sought review of a decision by= =20 the Seventh Circuit (TR, July 31, 2000). The circuit court had ruled that= =20 the commissions=0F' actions regarding interconnection agreements, SGATs, an= d=20 enforcement of agreements weren=0F't immune from federal court review. Last fall the Supreme Court refused to hear a case that arose in the Sixth= =20 Circuit and involved the Michigan Public Service Commission (TR, Oct. 9,=20 2000). The Michigan case didn=0F't cover an SGAT review or enforcement of = an=20 interconnection agreement. In addition to the Sixth and Seventh circuits, the 10th and=0F-most recentl= y=0F-the=20 Fifth circuits have ruled against state immunity claims in interconnection= =20 cases (TR, June 26, 2000; and Jan. 22). The Supreme Court is less likely t= o=20 review cases when there is agreement among the various circuit courts that= =20 have dealt with the issues involved. The FCC recently stepped in to preempt the Virginia Corporation Commission= =0F's=20 authority to arbitrate and approve interconnection agreements because the= =20 state regulators had =0F"failed to act=0F" (TR, Jan. 22). The Virginia commission had cited fears that its actions would be deemed=20 subject to federal court review. In the aftermath of the Supreme Court=0F'= s=20 refusal last week to consider state claims of immunity for their=20 interconnection enforcement actions, one state commission source suggested= =20 that other states might decide to follow Virginia=0F's path. As she has done in other telecom-related cases, Supreme Court Justice Sandr= a=20 Day O=0F'Connor recused herself from deliberations in last week=0F's decisi= on not=20 to review the Seventh Circuit=0F's ruling. =0F'Net-Based Directory Publishers Can Access LEC Data, FCC Says The FCC has expanded the category of competitors entitled to access local= =20 exchange carriers=0F' (LECs=0F') subscriber listing information. LECs now = must=20 provide Internet-based directory publishers with nondiscriminatory access t= o=20 those databases. The Commission said the new rules would promote competiti= on=20 in the directory service market. The FCC declined to restrict the manner in which Internet directory=20 publishers may display and provide access to the subscriber information the= y=20 receive from LECs. Under section 222(e) of the Telecommunications Act of= =20 1996, carriers that maintain subscriber list information must provide that= =20 information on a nondiscriminatory basis to publishers of directories =0F"i= n any=20 format.=0F" =20 In an order released last week in Common Carrier docket 99-273, the FCC sai= d=20 Congress didn=0F't intend to restrict the kinds of directories that could b= e=20 published using subscriber list information obtained under section 222. =20 Internet databases =0F"clearly fall within the broad category of =0F`direct= ories in=20 any format,=0F'=0F" the FCC added. The FCC also clarified some of its rules regarding competitive local exchan= ge=20 carriers and other competing directory assistance (DA) service providers th= at=20 have nondiscriminatory access to incumbent LECs=0F' databases under section= =20 251(b)(3) of the Act. =20 It said competing DA providers must offer a telecom service=0F-which could= =20 include termination of directory assistance calls=0F-in order to qualify fo= r=20 database access under section 251. The FCC refused to limit the manner in which a DA provider may use the=20 incumbent LECs=0F' subscriber information. It said that neither competitiv= e nor=20 incumbent LECs are subject to such limits on their use of subscriber=20 information.=20 LECs aren=0F't required to provide nondiscriminatory access to their nonloc= al=20 directory listings, =0F"since third parties have the same opportunity [as t= he=20 LECs] to secure the information directly,=0F" the FCC noted. However, if a= LEC=20 is providing its national DA information to any other DA provider, it must= =20 make the same information available to competing DA providers without=20 discrimination. The FCC declined to set a pricing structure for DA information but said sta= te=20 regulators weren=0F't precluded from doing so. =0F" Analysts See Lucent Plan Leading To Profitability, But Not Growth Lucent Technologies, Inc.=0F's =0F"seven-point restructuring=0F" plan event= ually=20 should bring the company back to profitability, but some analysts doubt tha= t=20 its approach will increase growth in the remaining core businesses. =20 In the short term, however, Lucent=0F-which has posted a $1 billion operati= ng=20 loss for its 2001 first fiscal quarter that ended Dec. 31, 2000=0F-will con= tinue=20 to see additional losses, financial analysts predict. Lucent last week announced that it would cut costs by more than $2 billion= =20 and increase its working capital by about $2 billion. Additionally, J.P.= =20 Morgan Chase & Co. and Solomon Smith Barney, Inc., have arranged new $4.5= =20 billion, 365-day term credit facilities =0F"in order to ensure that Lucent= =0F's=20 cash-flow needs are adequately met,=0F" Lucent said. The bankers requested that Lucent use its assets to secure the credit=20 facilities, Moody=0F's Investors Service noted. =0F"The fact that the bank= s sought=20 security sends a signal that the bank group is concerned about credit=20 quality,=0F" Moody=0F's said in a statement. Consequently, Moody=0F's lowered Lucent=0F's long-term debt rating from =0F= "A3=0F" to =0F" Baa1.=0F" It will continue to review of Lucent=0F's long-term rating as we= ll as=20 Lucent=0F's Prime-2 short-term rating, Moody=0F's said. =0F"The downgrade of the long-term debt reflects concerns that Lucent=0F's= =20 operating problems and restructuring may go deeper than we originally=20 expected,=0F" Moody=0F's said. =0F"The review will continue to focus on the company=0F's ability to addres= s gaps=20 in its product offering, enhance its internal controls, improve its cost=20 structure and manufacturing efficiency, and accelerate revenue growth witho= ut=20 resorting to excessively aggressive vendor financing,=0F" Moody=0F's added = (TR,=20 Dec. 25, 2000). Focus Turns To Global Incumbents Henry B. Schacht, Lucent=0F's chairman and chief executive officer, told=20 investors last week that the company=0F's seven-point =0F"transition=0F" pl= an includes=20 the redeployment of resources toward incumbent and international service=20 providers and the adoption of a more =0F"targeted approach=0F" to the troub= led=20 competitive local exchange carrier (CLEC) market (TR, Oct. 16, 2000). This new approach exposes Lucent to less risk, =0F"at least from a credit p= oint=20 of view,=0F" according to one Wall Street analyst. The analyst, who reques= ted=20 anonymity to avoid conflict with clients, said Mr. Schacht=0F's targeted=20 approach to CLECs will decrease Lucent=0F's chances of getting stuck with u= npaid=20 bills from CLECs. By focusing on incumbent and international carriers, Lucent will lessen its= =20 reliance on =0F"aggressive vendor financing,=0F" the analyst said. Incumbe= nts=20 typically don=0F't need vendor financing, he said. On the other hand, Lucent=0F's decreased activity in the manufacturing sect= or=0F- through its spin-off of Avaya, Inc., and planned spin-off of Agere Systems,= =20 Inc.=0F-might decrease the company=0F's ability to pay back loans if the ma= rket for=20 its products continues to slow, the analyst said. =0F"To the degree that a company is diversified, the revenue stream of=20 profitable units helps balance the losses of less successful units,=0F" he= =20 said. Lucent will have most of its =0F"eggs in one basket,=0F" the analyst= added. Lucent immediately began laying off workers following its Jan. 24=20 restructuring announcement. It unveiled a workforce reduction of 16,000=20 employees, which includes what it described as a =0F"transfer=0F" of 6,000 = jobs to=20 outside contractors upon the sale of its Columbus, Ohio, and Oklahoma City= =20 facilities. A Lucent source has told TR, however, that the company is targeting as many= =20 as 20,000 positions for elimination this year. The 6,000 employees in=20 Oklahoma and Ohio should be included in the workforce reduction estimate, t= he=20 source said, because there=0F's no guarantee those workers will be rehired = by=20 contractors. =20 Lucent will lose another 16,500 workers when the microelectronics group is= =20 spun off into Agere, the source noted. Although the company likely will terminate more workers than it=0F's willin= g to=20 acknowledge publicly at this point, the layoffs are needed for Lucent to=20 regain its position as a top contender in global communications equipment= =20 markets, said TR=0F's source, who is familiar with Lucent personnel managem= ent=20 operations. Lucent=0F's human resources department is searching for =0F"dead weight=0F"= in its=20 workforce=0F-long-time employees who may not be suitable for Lucent=0F's ne= w focus=20 on high-growth markets, the source said. At the same time, Lucent =0F"will continue to hire people with appropriate = job=20 skills=0F" to enhance the company=0F's capabilities =0F"in profitable, high= -growth=20 markets,=0F" Mr. Schacht said. =0F"The planned reductions will cover a range of business groups and geogra= phic=20 regions,=0F" Mr. Schacht said. =0F"But the majority of them will come from= =20 eliminating duplication in marketing, sales, and corporate functions, pruni= ng=20 of the product portfolio, and reduced volume in certain manufacturing=20 locations.=0F"=20 Merrill Lynch & Co. analyst Michael E. Ching said Lucent=0F's workforce=20 reduction and restructuring charges were larger than he expected. =20 =0F"These changes should help the company return to profitability, but we= =20 believe it likely will be several quarters before we see a meaningful=20 improvement in gross margin,=0F" Mr. Ching said in a research note. =20 =0F"Also, the changes do not address the issue of weak revenue growth in [L= ucent=0F' s] core businesses,=0F" he added. =0F"With a slower improvement in gross margin, and weak revenue growth over= the=20 next several quarters, we are lowering our fiscal 2001 revenue forecast fro= m=20 $32.0 billion to $30.8 billion and increasing our loss per share estimate,= =0F"=20 Mr. Ching reported. Bear, Stearns & Co., forecast that Lucent would lose 9 cents per share in t= he=20 second quarter and 22 cents in fiscal 2001, and earn 33 cents per share in= =20 fiscal 2002. Court Says WorldCom Tariff Trumps Service Pact with ICOM The U.S. Court of Appeals for the Second Circuit (New York) has affirmed a= =20 lower court=0F's decision to dismiss a breach-of-contract lawsuit filed by = ICOM,=20 Inc., against WorldCom, Inc. In a Jan. 22 decision, the appeals court uphe= ld=20 the U.S. District Court for the Eastern District of New York=0F's ruling th= at=20 the claim was barred by the =0F"filed-rate=0F" doctrine and preempted by th= e=20 federal Communications Act of 1934. Under the filed-rate doctrine, a carrier=0F's tariffed rates take precedenc= e=20 over other agreements with customers. Section 203 of the Act states that= =20 when carriers file a tariff for a given service, they can=0F't extend any = =0F" privileges,=0F" charges, or =0F"practices affecting such charges=0F" other = than those=20 stated in the filed tariff.=20 ICOM filed a lawsuit in 1999 alleging that WorldCom had missed a contractua= l=20 deadline for installing six high-speed DS3 circuits. ICOM asserted that=20 WorldCom=0F's inaction caused ICOM to be unable to perform its obligations = under=20 contracts it had signed with third parties. ICOM said its contract with= =20 WorldCom specified damages WorldCom must pay in the event of a breach of=20 contract. In an opinion written by Judge Robert D. Sack and joined by Judges Sonia=20 Sotomayor and Robert A. Katzmann, the appeals court panel found that the=20 contract was unenforceable. =20 Enforcing the contract would =0F"impermissibly modify=0F" the terms of Worl= dCom=0F's=20 tariff for such services. The opinion was filed in ICOM Holding, Inc., v.= =20 MCI WorldCom, Inc. (case no. 00-7660). Judge Sack noted that the Supreme Court=0F's 1998 decision in American Tele= phone=20 & Telegraph Co. v. Central Office Telephone, Inc.,made it clear that the=20 filed-rate doctrine extends to tariff terms beyond the rates for the=20 services. =20 The doctrine bars not only state law claims =0F"that pertain to the price o= f=20 telecommunications services subject to an FCC filing, but also state law=20 claims that concern various nonprice aspects,=0F" Judge Sack said. Long Distance Revenues Head North, FCC Reports Revenues in the long distance industry climbed to $108 billion in 1999, up= =20 from 1998=0F's $105 billion, according to a report from the FCC last week. = The=20 report, Statistics of the Long Distance Telecommunications Industry,=20 highlights financial and market statistics in the long distance services=20 industry and provides data on residential customers=0F' long distance calli= ng=20 patterns. =20 It shows that long distance carriers accounted for more than $99 billion of= =20 the 1999 revenue total, and local telephone companies accounted for the=20 remaining $9 billion. The report is available by calling 202/857-3800 or b= y=20 visiting http://www.fcc.gov/ccb/stats. Telefonica, Portugal Telecom Foresee Brazilian Consolidation Telefonica SA and Portugal Telecom SGPS SA are determined to lead what they= =20 say is the =0F"inevitable consolidation=0F" of the Brazilian wireless indus= try. =20 The former rivals have decided to combine their Brazilian mobile telephony= =20 assets into a $10 billion joint venture that would be the country=0F's larg= est=20 wireless service provider. The companies called their joint venture =0F"the natural consolidator=0F" i= n the=20 Brazilian wireless market, suggesting that it would use its deep pockets an= d=20 strong market position to buy smaller operators. The joint venture would= =20 have 9.3 million subscribers and 94 million =0F"pops=0F" (potential custome= rs). =20 The companies didn=0F't say when they expected to complete the transaction,= =20 which requires the approval of Brazil=0F's telecom regulator, Anatel. The Portuguese and Spanish carriers would get equal ownership and control o= f=20 the unnamed venture, which would be managed by the carriers=0F' wireless=20 subsidiaries, Telefonica Moviles SA and PT Moveis. The venture would inclu= de=20 Telefonica=0F's stakes in Tele Sudeste Celular Participacoes SA, Celular CR= T=20 Participacoes SA, and Tele Leste Celular Participacoes SA. Portugal Telecom would contribute its shares of Celular CRT Participacoes a= nd=20 Telesp Celular Participacoes SA. Once Portual Telecom completed its=20 acquisition of Global Telecom SA, it would contribute those assets to the= =20 venture (TR, Jan. 22). Portugal Telecom=0F's Brazilian assets are worth $3= .8=20 billion and Telefonica=0F's are valued at $4.8 billion, Credit Suisse First= =20 Boston Corp. estimates. Because its assets are worth less, Portugal Teleco= m=20 is expected to contribute cash to the venture. As part of the arrangement, Telefonica has agreed to increase its ownership= =20 of Portugal Telecom to 10% from 5%. The companies didn=0F't say how much= =20 Telefonica would pay for the additional 5%. Brazil=0F's wireless industry is considered ripe for consolidation. Telebr= as,=20 the government-owned monopoly, was dismantled in 1998, and 16 operators=20 received wireless licenses. The government was scheduled to sell nine new= =20 licenses in three auctions starting Tuesday, Jan. 30, although a court=20 challenge may delay the bidding (see separate story). Some analysts think the Brazilian government=0F's goal is to allow enough= =20 consolidation to produce about three large telecom service providers. =0F"= This=20 should assure an economically sound environment for the survivors while at= =20 the same time making sure that consumers do not overpay for telecom=20 services,=0F" Credit Suisse First Boston said. Losses in Handset Operations Spur Ericsson To Exit Business Telefon AB L.M. Ericsson decided to exit the mobile phone manufacturing=20 business after that part of its operations reported yet another disappointi= ng=20 quarter. =0F"The results in our mobile phones business, while in line with= =20 expectations, remain unsatisfactory,=0F" said Kurt Hellstrom, president and= =20 chief executive officer of the Swedish company. Last year, Ericsson increased its handset sales 38%, to 43.3 million units,= =20 but the business unit reported a $1.7 billion loss. =0F"The losses are cau= sed=20 by delivery failure from key suppliers and an inadequate product mix in the= =20 entry-level market,=0F" Mr. Hellstrom said in a statement. Ericsson=0F's solution is to transfer the business to Singapore-based=20 Flextronics International Ltd. On April 1, Flextronics will take over=20 Ericsson handset factories in Brazil, Malaysia, Sweden, the United Kingdom,= =20 and Virginia. Ericsson=0F's China operations will be unaffected. Flextronics will manufacture Ericsson-designed handsets under a =0F"strateg= ic=20 alliance=0F" between the two companies. The workforce in Ericsson=0F's han= dset=20 division will decline from 16,800 to 7,000. Ericsson will transfer 4,200= =20 workers to Flextronics; the remainder will be laid off or transferred to=20 other units. Merrill Lynch & Co. analyst Adnaan Ahmad said he expected the outsourcing= =20 arrangement to result in a =0F"difficult transition.=0F" The arrangement i= s =0F"good=20 news from a supply-chain management perspective,=0F" Mr. Ahmad said in a re= port. =0F"However, in our view, it does not solve the underlying issues with rega= rd to=20 [Ericsson=0F's] reading the end-market segments,=0F" he said. Merrill Lync= h=20 downgraded its long-term rating on Ericsson shares from =0F"buy=0F" to =0F"= accumulate.=0F" CRTC Nixes Vancouver Bid For Fiber-Deployment Fees The Canadian Radio-television and Telecom-munications Commission has resolv= ed=20 a dispute between the city of Vancouver, British Columbia, and Ledcor=20 Industries Ltd. Vancouver claimed the company had begun deploying a fiber= =20 optic network without its permission. The commission emphasized that its= =20 decision addressed this particular dispute and didn=0F't set a precedent fo= r=20 resolving similar disputes in the future. In decision no. 2001-23, the CRTC granted Ledcor permission to =0F"construc= t,=20 maintain, and operate=0F" fiber optic transmission lines in 18 street cross= ings=20 and said that most of the compensation Vancouver had sought in connection= =20 with the project was =0F"not required or appropriate.=0F"=20 Vancouver had sought a =0F"variety of onetime and ongoing causal costs=0F" = stemming=20 from the =0F"presence or placement of telecommunications plant on its stree= ts,=0F"=20 the commission said. =0F"Vancouver proposed that it recover all costs caus= ally=20 incurred. . .as a result of the use and occupation of its public property b= y=20 carriers.=0F" =20 Ledcor in March 1999 asked the agency for relief from Vancouver=0F's =0F" unacceptable=0F" terms and conditions. It claimed that the city wouldn=0F'= t=20 approve the project, despite the Canadian Telecommunications Act=0F's=20 requirement that a municipality grant =0F"access to the street crossings an= d=20 other municipal property=0F" on terms acceptable to carriers. =20 In its 1999 filing, Ledcor asked the commission to issue an interim order s= o=20 that it, its subsidiary Worldwide Fiber Ltd., and its carrier customers cou= ld=20 continue the project pending a final decision. In October 1999, the=20 commission issued an interim order, under which Ledcor, Bell Canada, Inc.,= =20 and Call-Net Enterprises, Inc., were each to pay $1 to the city =0F"as a=20 condition of access.=0F" =20 In last week=0F's decision, the CRTC agreed with the city that Ledcor shoul= d pay=20 fees relating to =0F"plan approval and inspection=0F" and ordered the compa= ny to=20 pay $7,613 in these and related costs. However, it said that most of the= =20 other fees levied on Ledcor by Vancouver=0F-such as annual =0F"land=0F" cha= rges based=20 on the value of land adjacent to the facilities=0F-were unacceptable. It emphasized that the decision applied only to this dispute and not to=20 future cases involving similar circumstances. =0F"The Commission is not, i= n=20 this decision, prescribing terms and conditions related to the future=20 construction by Ledcor, or any other carrier, of transmission lines in=20 Vancouver or elsewhere,=0F" it said. =0F"The Commission is not persuaded t= hat it=20 is appropriate for it to adopt any particular model or standard agreement t= o=20 serve as a starting point for discussions between municipalities and=20 carriers.=0F" Brazil, France Face Setback In Awarding Wireless Licenses Telecom regulators in Brazil and France are facing setbacks in their attemp= ts=20 to award licenses for wireless services. Brazilian officials are seeking t= o=20 overturn a court challenge, while prospective licensees in France have=20 dropped out of the running. In Brazil, telecom regulator Anatel has postponed its scheduled Jan. 30=20 auction of three wireless licenses in the wake of a court injunction blocki= ng=20 the sale. Anatel said it would reschedule the auction for Feb. 5 or 6 if it could=20 persuade a court on Jan. 29 to overturn the injunction, which a Sao Paulo= =20 court issued last week. That court said the rules governing the bidding=20 process were illegal. Anatel has scheduled additional auction rounds to se= ll=20 three licenses each for Feb. 20 and March 13. In France, regulators=0F' plans to award four licenses for third-generation= (3G)=20 services ran into trouble when at least two prospective bidders, French=20 utility Suez Lyonnaise des Eaux and Telefonica SA of Spain, dropped out. = =20 There was growing speculation that French wireless carrier Bouygues Telecom= =20 also would withdraw. Bids are due Jan. 31. Also last week, Denmark awarded second-generation wireless licenses to=20 Mobilix A/S and Telia A/S. The National Telecom Agency had received=20 applications from four bidders for the 900 megahertz (MHz) band licenses,= =20 which were issued in a comparative process known as a beauty contest. Included in the binding terms of the licenses are the prices and products t= o=20 be offered, and the terms for interconnection with other carriers. Meanwhile, Dutch regulators have decided to allocate additional 3G licenses= =20 by auction, with the aim of awarding the licenses by October. The licenses= =20 will cover 3G services in the 1900=0F-1980 MHz, 2010=0F-2025 MHz, and 2110= =0F-2170 MHz=20 bands. The Dutch government raised 5.9 million Dutch guilders ($2.5 billion) last= =20 year when it auctioned five 3G licenses (TR, July 31, 2000). Wireless Industry Seeks Changes In Antenna-Collocation Agreement Two wireless industry trade groups are seeking changes in a draft agreement= =20 designed to streamline the review of antenna collocations on historic sites= . =20 The industry groups say the changes are needed to ensure that the pact=20 accomplishes its goal. But a historic preservation group says the agreemen= t=20 would result in harm to historic properties. The agreement was drafted, pursuant to the National Historic Preservation A= ct=20 (NHPA), by the FCC, the Advisory Council on Historic Preservation (ACHP), a= nd=20 a telecommunications working group that includes state historic preservatio= n=20 officers, federal officials, and wireless industry representatives (TR, Nov= .=20 27, 2000). The FCC said it expected to take action on a final agreement on= =20 or about Jan. 29. The pact restricts the conditions under which state or tribal historic=20 preservation officers would review antennas for their potential effect on= =20 historic properties or sites. Wireless industry officials say they hope 75= %=20 to 85% of new antenna applications would be freed from the review process. CTIA Attacks Agreement As drafted, the agreement =0F"does not streamline the regulatory process fo= r=20 collocations,=0F" the Cellular Telecommunications & Internet Associationsai= d in=20 comments filed at the FCC last week. Instead, it =0F"threatens to actually= =20 impede collocation.=0F" CTIA noted that under current FCC rules, licensees are responsible for=20 determining whether an antenna would affect a historic property. =0F"Howev= er,=20 under the proposed [national programmatic agreement], any person, whether= =20 qualified or not, at any time can allege at the FCC that the proposed=20 collocation has an adverse effect on historic properties,=0F" prompting a r= eview=20 before further construction can proceed, CTIA said. =0F"Such a provision undermines the FCC=0F's efforts to streamline the coll= ocation=20 process. It also fails to recognize that the effects of collocations on=20 historic properties are categorically minimal, and unlikely to raise histor= ic=20 preservation issues not already addressed in the proposed=0F" national=20 programmatic agreement. CTIA said that only in =0F"well-defined and limited circumstances,=0F" such= as a=20 substantial increase in the size of an antenna, should a collocated facilit= y=20 be subject to review. Otherwise, the burden should be on ACHP and historic= =20 preservation officers to prove that an antenna will harm a historic propert= y,=20 CTIA argued. In addition, the trade group said the FCC should ensure that future=20 environmental assessments are processed in accordance with the Commission= =0F's=20 own rules. CTIA said decisions by the Wireless Telecommunications Bureau = =0F" could be interpreted to suggest that licensees take steps required by neith= er=20 the Commission=0F's rules nor the NHPA.=0F" In its comments, the Personal Communications Industry Associationsaid that= =20 while it strongly supported the aim of the programmatic agreement, =0F"some= =20 necessary amendments=0F" would ensure that the pact would =0F"truly benefit= all=20 parties and advance the common goals of achieving the rapid build-out of th= e=20 nation=0F's indispensable telecommunications network while at the same time= =20 protecting the nation=0F's invaluable historic resources.=0F" PCIA said the draft agreement on which the FCC sought comments =0F"preserve= s=20 much of the substance=0F" of an earlier version of the pact that was approv= ed by=20 the telecom working group. But provisions added in the latest draft differ= =20 from =0F"the intent of the parties=0F' previous agreements=0F" and =0F"requ= ire=20 clarification, correction, or modification,=0F" it said. Among the amendments PCIA suggested were changing the effective date of the= =20 agreement to the date it is published; it proposed March 1 unless an earlie= r=20 date is possible. It also suggested changes in language that it says would= =20 limit which entities could mount antennas on towers. And it wants to clari= fy=20 that compliance with the agreement constitutes compliance with the NHPA=0F'= s and=20 the ACHP=0F's rules. The Jefferson County, Colo., Historical Commissionalso opposed the=20 programmatic agreement but for different reasons. It said the pact would= =20 weaken the NHPA and the National Environmental Preservation Act. It said t= he=20 collocation of antennas should not be permitted without environmental=20 assessments. The draft agreement =0F"places the wireless industry above the law that pro= tects=20 structures and American citizens that use them,=0F" the historical commissi= on=20 added. The Telecommunications Industry Association has published... The Telecommunications Industry Association has publishedan interim standar= d=20 that defines the messaging required to support Phase II =0F"enhanced 911=0F= " (E911)=20 systems. The standard is called TIA/EIA/IS-J-STD-036. Carriers, Others See Problems In FCC=0F's ID-Number Proposal=20 Carriers and broadcasters gave a lukewarm reception to the FCC=0F's plan to= =20 require each regulated entity to use a unique identifying number on certain= =20 filings. Many carriers and others said the planned system was duplicative = of=20 existing registration programs and suggested ways to simplify the FCC=0F's= =20 process for tracking regulatory filings. The FCC had proposed making mandatory a previously voluntary system under= =20 which anyone doing business with the agency would use a 10-digit FCC=20 registration number (FRN) obtained from the Commission Registration System.= =20 In a notice of proposed rulemaking released in Managing Director docket=20 00-205 last December, the FCC suggested that the FRN be required on all=20 regulatory fee payments, waiver petitions, auction payments, and other=20 filings and submissions (TR, Dec. 4, 2000). Parties would be responsible f= or=20 maintaining the accuracy of the information in the Commission Registration= =20 System database. In comments filed on the proposal last week, many carriers said they=20 supported the FCC=0F's goal of efficiently tracking filings and fees but=20 disagreed with just how the plan should be implemented. Parties already use a taxpayer identification number (TIN) on many of their= =20 FCC filings, including those on which the Commission has suggested using th= e=20 FRN, Verizon Wireless said. =0F"The need for another =0F`unique identifyin= g=20 number=0F' is unclear,=0F" it said. The confidentiality of TINs is important, Verizon said, =0F"but this factor= does=20 not appear crucial since, as the Commission says, the information in [the= =20 Commission Registration System] is for Commission use only and will not be= =20 published or distributed.=0F" Cingular Wireless LLC suggested instead that the FCC do away with its use o= f=20 TINs when it institutes the mandatory FRN system. It said that financial a= nd=20 personal information can be revealed and =0F"a person=0F's =0F`identity=0F'= can be =0F` stolen=0F' if his or her TIN=0F" is obtained. It also criticized the FCC f= or the=20 lax security it gave parties=0F' TINs. =0F"Inadvertently filed copies cont= aining=20 TIN information have been discovered in the Commission=0F's public referenc= e=20 room on more than one occasion,=0F" Cingular said. =20 It recommended that the FCC assign FRNs only to parties that request one,= =20 rather than having the Commission assign FRNs as it issues bills or other= =20 notifications. The latter approach could =0F"result in duplicative FRNs by= =20 large business entities who control numerous applicants and licensees,=0F" = it=20 added. The Walt Disney Co. had similar reservations about how the FRNs would be=20 assigned. It said that under the voluntary FRN system, when a parent compa= ny=20 made a joint filing that included regulatory fees for more than one=20 subsidiary, only the FRN of the parent company was associated with the=20 payments and the FRNs of the subsidiaries appeared to be unused by the syst= em. This can lead to the misperception that the subsidiaries still owe the fees= ,=20 Disney said. =0F"The Commission=0F's filing systems should be able to prop= erly=20 credit payments made on behalf of a licensee that is a subsidiary of anothe= r=20 entity, regardless of the source of payment,=0F" it added. Qwest Communications International, Inc., criticized the =0F"unforgiving ma= nner=20 in which the Commission proposes to implement its FRN proposal.=0F" The FC= C had=20 suggested that it would reject filings that fail to include an FRN where on= e=20 is required, which could result in the filing=0F's dismissal or the FCC=0F'= s=20 refusal to accept an application. Qwest said such an approach was =0F"overly harsh=0F" and suggested that the= FCC =0F" modify its proposed rules to allow filing parties a minimal period of time= =20 (e.g., five calendar days) to correct a filing or application that lacks an= =20 FRN.=0F"=20 The National Exchange Carrier Association, Inc., said that it submits filin= gs=20 on behalf of more than 1,200 carriers and that it was concerned about the F= CC=20 suggesting that one entity could obtain multiple FRNs. =0F"The Commission= =20 should make clear that, as authorized filing agent for its various=20 tariff-participating members, NECA will submit its own FRN with each tariff= =20 filing requiring a fee payment, but that submission of FRNs for each=20 participating carrier in NECA=0F's tariff is not necessary,=0F" NECA said. If the FCC allows single entities to obtain multiple FRNs =0F"it should, at= a=20 minimum, establish a system to link related entities,=0F" NECA said. =20 Broadcasters already are required to register separately for four different= =20 FCC systems, the National Association of Broadcasters said. The FCC should= =0F" step back and assess its electronic filing and database systems on a holist= ic=20 level,=0F" NAB said. =0F"Although each bureau has developed software progr= ams to=20 accommodate their particular needs, there is no mechanism by which the=20 systems are cross-referenced.=0F" The FCC should explore ways to =0F"centr= alize=0F"=20 its identification process, NAB concluded. Building Owners, Carriers Spar over FCC Proposal To Block Service, Extend B= an=20 on Exclusive Pacts As the FCC considers another slate of proposals designed to help carriers= =20 obtain access to multitenant structures, building owners and competitive=20 telecom service providers are escalating the battle they=0F've been fightin= g for=20 the last several years. The issue this time around is whether the FCC should take steps specificall= y=20 targeting multitenant residential buildings. The agency previously has=20 limited the scope of its actions to commercial buildings. The FCC recently adopted rules in Wireless Telecommunications docket 99-217= =20 designed to help competitive local exchange carriers (CLECs) obtain access = to=20 multitenant structures. Among other things, the Commission barred exclusiv= e=20 contracts between telecom service providers and owners of multitenant=20 commercial buildings (TR, Oct. 16, 2000). When it adopted those rules, the FCC suggested that it would need to take= =20 more steps. It issued a further notice of proposed rulemaking (NPRM) askin= g=20 whether it should (1) extend its ban on exclusive contracts to apply to=20 multitenant residential buildings and (2) bar incumbent local exchange=20 carriers (ILECs) from serving buildings where the owner prevents CLEC acces= s. In its comments filed last week, the Real Access Alliance, which represents= =20 building owners, said the FCC already had concluded that it lacked authorit= y=20 to =0F"regulate the real estate industry.=0F" But in the further NPRM, the FCC asks whether it can =0F"achieve the same g= oal=20 through the draconian measure of ordering telecommunications providers to c= ut=20 off service in buildings whose owners do not comply with the Commission=0F'= s=20 wishes,=0F" it said. =0F"Whether the Commission regulates building owners directly=0F-as propose= d in the=20 original notice of proposed rulemaking in this docket=0F-or indirectly, as= =20 proposed in the [further notice], makes no difference because the FCC lacks= =20 jurisdiction over building-access agreements,=0F" the alliance said. =0F"Agreements for building access are agreements for the use of real estat= e=20 and, therefore, outside the Commission=0F's purview, even over carriers,=0F= " it=20 said. Enforcement of =0F`Best Practices=0F' Questioned The Smart Buildings Policy Project, which represents telecom carriers and= =20 equipment manufacturers that support building-access policies, said buildin= g=20 owners continue to delay the entry of competitive telecom carriers. It=20 advised the FCC not to rely on the model agreements and =0F"best practices= =0F"=20 promoted by building owners. =0F"Reasonable access terms and conditions are meaningless if access can be= =20 denied entirely, or if access can be delayed for months or years,=0F" the= =20 project said. =0F"These model terms and conditions are entirely unenforcea= ble=20 without a Commission requirement for granting access.=0F" The group said it was particularly concerned about the =0F"increasing=20 phenomenon=0F" of building owners making direct investments in building-foc= used=20 CLECs (BLECs). =0F"The resulting symbiotic financial relationship motivate= s the=20 [multitenant building] owner to promote its affiliated BLEC within the=20 building,=0F" it said. The FCC should =0F"directly prohibit=0F" building o= wners from =0F" unreasonably discriminating among facilities-based carriers,=0F" it said. AT&T Corp. called for a nondiscriminatory access rule allowing a CLEC to = =0F" institute proceedings that, if successful, could result in an order=20 prohibiting a LEC from providing telecommunications services=0F" to any bui= lding=20 that refuses to allow =0F"reasonable, nondiscriminatory access to competing= =20 carriers.=0F" The FCC has the authority under sections 201 and 205 of the Communications= =20 Act of 1934 to stop LECs from serving buildings whose owners engage in=20 discriminatory practices, AT&T said. =0F"The fact that such regulations ha= ve an=20 indirect effect on [building] owners=0F-namely, in encouraging them to prov= ide=20 their tenants with the telephony choices they deserve=0F-does not divest th= e=20 Commission of jurisdiction,=0F" it said. In joint comments, Carolina BroadBand, Inc., RCN Telecom Services, Inc., an= d=20 Utilicom Networks LLC complained that the =0F"entrenched incumbent local=20 exchange carriers and incumbent cable [TV] providers frequently misuse thei= r=20 established positions to block competition through such means as exclusive= =20 contracts with [building] owners and managers.=0F" They noted that the FCC=0F's further rulemaking notice had said the record = didn=0F' t provide a sufficient basis upon which to decide whether barring exclusive= =20 contracts in the residential market would be beneficial or detrimental to= =20 growth. =0F"There are many competitive obstacles raised by such exclusive= =20 arrangements, not the least of which is that the ultimate captive tenant mu= st=20 wait until the expiration of the contract before obtaining the superior=20 services of another provider,=0F" they said. Cox Communications, Inc., cited barriers it encounters when trying to gain= =20 access to buildings, including =0F"monetary demands=0F" from building owner= s and =0F" onerous nonfinancial terms and conditions.=0F" It urged the FCC to adopt a= =0F" simple rule that prevents any incumbent from obtaining access to a=20 [multitenant building] on terms more favorable than those available to any= =20 other carrier.=0F" BLEC Sees Residential, Commercial Differences BLEC CoServ LLC said the FCC=0F's =0F"reservation about extending the ban o= n=20 exclusive arrangements from the commercial to the residential market is=20 warranted.=0F" Residential leases are much shorter than business leases, a= nd=20 relocation costs are lower for residences, it said. Residential customers,= =20 therefore, have a =0F"greater degree of flexibility in mitigating (or simpl= y=20 avoiding) any limits=0F" a building owner may put in place with exclusive= =20 telecom service agreements, it concluded. Cypress Communications, Inc., an Atlanta-based BLEC, said the FCC should ba= r=20 ILECs from signing discriminatory access arrangements with building owners.= =0F" Such a rule is necessary because ILECs have market power and, therefore,=20 possess an advantage over CLECs,=0F" it said. A nondiscrimination requirement applied to CLECs is =0F"unnecessary,=0F" Cy= press=20 said, because they =0F"lack market power, and building owners do not have a= n=20 incentive to discriminate on the CLECs=0F' behalf.=0F" The FCC shouldn=0F't keep LECs from serving multi-tenant buildings whose ow= ners=20 refuse to deal with other LECs on a nondiscriminatory basis, said BellSouth= =20 Corp. Such a rule would be =0F"constitutionally suspect,=0F" =0F"unnecessa= ry,=0F" and =0F" ill-considered,=0F" it said. The rule would be =0F"too severe in consequen= ce in=20 that it affects the very health, safety, and livelihood of innocent LEC=20 customers,=0F" BellSouth said. Verizon Communications, Inc.=0F's telephone companies asked the FCC to bar = all=20 exclusive access arrangements between carriers and multitenant building=20 owners. But it should not constrain =0F"exclusive or preferential marketin= g=20 arrangements, which are pro-competitive,=0F" they say. Such arrangements = =0F" afford customers an additional source of information on the availability of= =20 services and products and an additional sales outlet, without any reduction= =20 in the many outlets they already have,=0F" the Verizon telcos said. SBC Communications, Inc.=0F's telcos also backed extending the ban on exclu= sive=20 access arrangements to cover residential buildings but opposed any effort t= o=20 limit marketing agreements. They also opposed broadening the definition of= =20 right-of-way, which would be =0F"unworkable=0F" and =0F"inconsistent=0F" wi= th state law=20 and the Communications Act of 1934, they said. The Independent Cable & Telecommunications Association said =0F"limited-ter= m=20 exclusive=0F" contracts between multichannel video programming distributors= and=20 owners of residential buildings =0F"can and do function as a pro-competitiv= e=20 force in that marketplace.=0F" ICTA also opposed extending the FCC=0F's rules governing the disposition of= =20 cable TV =0F"home-run=0F" wiring to include providers of telecom services. = Those=20 rules currently cover providers of video services. In joint comments, the Edison Electric Institute and the United Telecom=20 Council disagreed with the FCC=0F's premise that utility rights-of-way coul= d be=20 construed to include =0F"in-building facilities, such as riser conduits, th= at=20 are owned or controlled by a utility.=0F" =0F"Any access right conferred upon cable and telecommunications providers = by=20 section 224 must remain subordinate to the rights held by utilities, such= =20 that a utility=0F's ability voluntarily to provide access to an area and ob= tain=20 compensation for doing so is a prerequisite to utility ownership or control= =0F"=20 under section 224, they said. The General Services Administration, commenting on behalf of the consumer= =20 interests of federal executive agencies, didn=0F't weigh in with specific= =20 recommendations. But it described problems its agencies have experienced i= n=20 trying to order service from CLECs, including problems caused by building= =20 owners and ILECs that delayed service provisioning. The Telecommunications Research and Action Center asked the FCC to prohibit= =20 telecom service providers from signing exclusive contracts with owners of= =20 multitenant residential buildings. It also asked the FCC to revise its cab= le=20 TV inside-wiring rules to give tenants a broader choice of advanced service= =20 providers. TRAC said building owners shouldn=0F't be permitted to determine which tele= com=20 carrier may acquire =0F"home-run=0F" wiring. =0F"Should the owner fail to = allow=20 alternative providers to compete for subscribers, dwellers are stuck with t= he=20 incumbent,=0F" it said. Missouri Lawmakers Seek To Oust Three PSC Members Missouri state Rep. Dennis Bonner (D.) and Sen. Ronnie DePasco (D.) are=20 trying to oust three Public Service Commissioners who voted to allow Missou= ri=20 Gas Energy to raise its rates by 44% before the PSC held a hearing on the= =20 matter. The rate change is an interim increase, subject to refunds if a PSC staff= =20 audit determines that the company made =0F"imprudent decisions=0F" in its p= urchases=20 of natural gas, the commission said in a press release announcing its Jan. = 23=20 action allowing the rate hike. The three commissioners who voted in favor of the rate increase are Connie= =20 Murray (R.), M. Dianne Drainer (R.), and Chairwoman Sheila Lumpe (D.). Rep= .=20 Bonner and Sen. DePasco aren=0F't trying to remove Commissioners Kelvin Sim= mons=20 (D.) and Robert G. Schemenauer (D.), who voted against the rate hike. Mr. Bonner filed a resolution (HCR 9) in the House of Representatives last= =20 week that would declare the commissioners=0F' seats vacant as a result of t= heir =0F" violation of state law.=0F" The resolution was introduced Jan. 24; it had = its=20 second reading in the House Jan. 25 but wasn=0F't at that time scheduled fo= r a=20 hearing or a vote. Rep. Bonner told TR that Sen. DePasco was planning to= =20 file an identical resolution in the Senate late last week. The 44% rate hike was =0F"ridiculous,=0F" Rep. Bonner said. =0F"People in = my district=20 can=0F't afford to pay that.=0F" He added, however, that he =0F"would have= been happy=20 if [the commissioners] would have held a hearing.=0F" He said he and Sen.= =20 DePasco had warned the commissioners that they would try to expel anyone wh= o=20 approved the rate hike without holding a public hearing first. FCC Says ATU Must Refund $2.7M For Misallocating Costs The FCC has ordered an Alaskan local exchange carrier to refund GCI=20 Communications, Inc., $2.7 million in damages plus interest, to make up for= =20 having improperly allocated certain costs to the interstate jurisdiction fo= r=20 separations purposes. Local exchange carriers must jurisdictionally separa= te=20 costs related to facilities that are used for both interstate and intrastat= e=20 services, so that federal and state regulators can associate the costs with= =20 revenues from the appropriate jurisdiction. The FCC said Alaska Communications Systems, Inc. (d/b/a ATU=20 Telecommunications) had wrongly allocated to the interstate jurisdiction th= e=20 traffic-sensitive costs of carrying Internet-bound calls. The FCC also sai= d=20 ATU unlawfully exceeded its allowed rate of return on its investment to=20 provide interstate access services during the 1997=0F-1998 monitoring perio= d. =20 The FCC ordered ATU to revise its tariffs and monitoring reports to reflect= =20 the fact that the FCC considers ISP-bound traffic to be intrastate in natur= e=20 for separations purposes. The FCC also found that ATU improperly calculated =0F"dial-equipment minute= s=0F"=20 (DEM) for interoffice calls during that same monitoring period. =0F"By=20 allocating ISP traffic costs to the interstate jurisdiction for separations= =20 purposes, and by counting one DEM rather than two DEMs for each minute of= =20 interoffice calls, ATU erroneously inflated its interstate cost base,=0F" t= he=20 FCC said in an order released last week in Enforcement file MD-016. GCI also had complained that (1) ATU=0F's tariffs were unjust and unreasona= ble,=20 in violation of section 201(b) of the Communications Act of 1934, because= =20 they permitted ATU to exceed its prescribed rate of return; and that (2) by= =20 assigning Internet-bound traffic costs to the interstate jurisdiction, ATU= =20 unjustly and unreasonably imposed charges on GCI for a service to which it= =20 did not subscribe. The FCC dismissed those two complaints, saying they wer= e =0F" moot=0F" and based on the same facts as the complaints on which it ruled in= GCI=0F' s favor. The FCC said that assigning the costs of Internet-bound traffic to the=20 intrastate jurisdiction for separations purposes was =0F"a legal requiremen= t=0F"=20 under rules it established in a 1983 order regarding MTS (message telephone= =20 service) and WATS market structure. It noted that it had affirmed that leg= al=20 requirement in a series of orders, most recently in its =0F"first access ch= arge=20 reform=0F" order in Common Carrier docket 99-249 (TR, June 5, 2000). ATU h= ad=20 argued that the FCC had only =0F"expressed a preference=0F" for assigning I= SP costs=20 that way. =0F`C,=0F' =0F`F,=0F' Block Reauction Nets Record $16.8B; Large Carrier Par= ticipation May=20 Be Contested The record $16.8 billion that the FCC netted in its reauction of 422 =0F"C= =0F" and =0F" F=0F" block PCS (personal communications service) licenses fell within the = range=20 most financial and industry analysts expected. But some analysts said the= =20 prices for licenses in the largest market=0F-New York City=0F-were higher t= han=20 expected. Meanwhile, with the sale now over, at least one unsuccessful participant=20 plans to challenge the results before the FCC=0F-and possibly in court. At= =20 issue are set-aside rules for small businesses that allow them to form=20 alliances with bigger carriers. =20 Another legal uncertainty involves the last remaining court challenge of=20 bankrupt NextWave Telecom, Inc., whose reclaimed licenses were among those= =20 sold at the auction. The FCC reclaimed the licenses when NextWave failed t= o=20 meet its payment obligations for them. Some analysts say they don=0F't exp= ect=20 the legal challenges to succeed. When the reauction concluded after the 101st round on Friday, Jan. 26,=20 Verizon Wireless, bidding as Cellco Partnership, finished on top, offering= =20 $8.7 billion for 113 licenses, including two in New York City and Boston an= d=20 one each in Los Angeles, Chicago, San Francisco, Philadelphia, and=20 Washington. The 113 licenses cover 150 million =0F"pops=0F" (potential cus= tomers). Finishing second was Alaska Native Wireless LLC, which is 39.9%-owned by AT= &T=20 Wireless Services, Inc. It submitted bids of $2.8 billion for 44 licenses,= =20 including one each in New York City and Los Angeles. Salmon PCS LLC=0F-in which Cingular Wireless LLC holds an 85% equity stake= =0F- finished with $2.3 billion in bids for 79 licenses, including one each in L= os=20 Angeles, Dallas, Atlanta, and Boston. DCC PCS, Inc., a subsidiary of Dobson Communications Corp., finished fourth= =20 with $545 million in bids for 14 licenses. Cook Inlet/VS GSM V P, an=20 affiliate of VoiceStream Wireless Corp., was fifth with $506 million in bid= s=20 for 22 licenses. A VoiceStream subsidiary, VoiceStream PCS BTA, finished= =20 next with $482 million in bids for 19 licenses. Among the major carriers that dropped out of the auction before it ended we= re=20 ALLTEL Communications, Inc., and subsidiaries of Nextel Communications, Inc= .,=20 and Sprint PCS. SVC BidCo L.P., however, which is 80%-owned by Sprint PCS= ,=20 won five licenses for $281 million. Thirty-five of the 87 bidders that originally qualified for the reauction= =20 were still eligible to bid in the final round. Of those 35 bidders, 32=20 qualified as entrepreneurs in the sale, which began Dec. 12, 2000. The $16= .8=20 billion raised was a record for the FCC in a single auction. The amount=20 reflects bidding credits allotted to small businesses. The previous record= =20 was the $9.2 billion netted in a C block auction (TR, May 13, 1996). DE Rules under Fire The FCC=0F's set-aside rules for small businesses, also known as =0F"design= ated=20 entities=0F" (DEs), have drawn controversy since before the reauction began= and=20 are expected to remain a contentious issue. The day before the sale began, one DE, Allegheny Communications, Inc., aske= d=20 the U.S. Court of Appeals in Washington to block the reauction, saying the= =20 FCC had failed to review the ownership of bidders classified as DEs to ensu= re=20 they were qualified entrepreneurs (TR, Dec. 18, 2000). Allegheny, which qualified as a very small business, cited AT&T Wireless=0F= '=20 interest in Alaska Native Wireless and Cingular Wireless=0F' stake in Salmo= n=20 PCS. It said that the rules allowed large corporations to bid through =0F"= shell=20 entities=0F" for licenses reserved for entrepreneurs. Of the 422 licenses = on=20 the block in the reauction, 170 were reserved for qualified DEs, while 252= =20 were open to all bidders. The 422 licenses covered 195 markets.=20 The appeals court denied Allegheny=0F's request. Allegheny ended up droppi= ng=20 out of the reauction during the bidding. The FCC defended its DE rules, saying they enable small businesses to raise= =20 enough capital to participate in spectrum auctions while ensuring they are= =20 controlled by entrepreneurs. It conducts ownership analyses of winning=20 auction bidders before granting licenses it said. Last week an attorney for Allegheny said it planned to challenge the=20 reauction results, at least at the FCC. =0F"We don=0F't think there=0F's a= ny question=20 sham bidders have hurt true entrepreneurs,=0F" attorney Dana Frix told TR. = He=20 said Allegheny was working with an economist to =0F"assess the damage and w= hat=20 the available remedies are.=0F" DEs and the big players they partnered with defended their auction alliance= s,=20 telling TR they were simply following the FCC=0F's rules. =0F"From our perspective, we have complied in every respect with these rule= s,=0F"=20 said George D. Crowley Jr., chairman and chief executive officer of Salmon= =20 PCS. While Cingular has an 85% equity stake in Salmon, Mr. Crowley stresse= d=20 that Crowley Digital Wireless LLC, which he also heads, controls Salmon=0F'= s=20 management and operations. =0F"The 79 licenses will be used by Salmon,=0F" Mr. Crowley, a cellular ind= ustry=20 veteran, said. He added, however, that Salmon would have the right to use= =20 Cingular=0F's name and might establish roaming and operations agreements wi= th=20 the large carrier. Ritch Blasi, a spokesman for AT&T Wireless, said his company believed it wa= s=20 in a strong position in the event of any legal action. =0F"We think we fol= lowed=20 the rules according to the FCC,=0F" he said. AT&T Wireless plans to contri= bute=20 $2.6 billion toward the $2.8 billion purchase price of the licenses,=20 according to a news release. In the release, Rosemarie Maher, president and CEO of Doyon Ltd., another= =20 Alaska Native Wireless partner, said the licenses won in the reauction woul= d=20 help the company provide phone service to American Indian and rural=20 communities. Officials at Leap Wireless International, Inc., another DE that had=20 criticized the alliances with large carriers, said they wanted to focus now= =20 on building out networks to use the licenses they won. Leap won 22 license= s=20 for $350 million, including those in Columbus, Ohio; Providence, R.I.; and= =20 Houston and San Antonio. =0F"Our goal now is to look at what we have and see how we can move forward= ,=0F"=20 Harvey P. White, Leap=0F's chairman and chief executive officer, told TR. Some industry observers expect regulatory or legal challenges to the auctio= n=20 results to fail. =0F"They=0F're highly likely to be challenged in court an= d [the=20 challenges are] highly unlikely to be successful,=0F" said Rudy Baca, an an= alyst=20 at The Precursor Group in Washington. The other legal cloud hanging over the licenses involves NextWave=0F's chal= lenge=20 of the cancellation of its licenses. Oral arguments on its appeal in the= =20 D.C. Circuit are scheduled for March 15. The FCC has conditioned the award= =20 of those licenses in the reauction on the outcome of NextWave=0F's court ca= se. The other licenses sold in the reauction were reclaimed from other bankrupt= =20 carriers, returned, or unsold at previous auctions. Analysts, Industry Assess Results Meanwhile, industry analysts and officials were assessing the reauction=20 results. Mr. Baca said the proceed totals were about what he expected,=20 adding that the winning bids =0F"are not out of line.=0F" Most financial a= nalysts=20 had forecast that the sale would bring in from $11 billion to $20 billion. The bids were closely watched=0F-not only to see how much would be deposite= d in=20 the U.S. Treasury but to see how the bids compared with the $4.7 billion=20 NextWave had pledged for its C block licenses in 1996. Knox Bricken, an analyst with the Yankee Group in Boston, said she was=20 surprised at the bids for the New York City licenses. =0F"We didn=0F't exp= ect=20 prices to be that high for those licenses,=0F" she said, adding Verizon Wir= eless=20 would be hard-pressed to realize a positive return on its investment in tha= t=20 market. Jeffrey Nelson, a Verizon Wireless spokesman, declined to comment on the=20 auction results, citing the Commission=0F's anticollusion rules. But David= =20 Frail, a spokesman for Verizon Wireless=0F' parent, Verizon Communications,= =20 Inc., said the parent would lend the wireless unit $8.8 billion to pay for= =20 the licenses. Verizon Wireless bid $2.0 billion for each New York City license. Alaska= =20 Native Wireless won its license there with a bid of $1.4 billion. Ms. Bricken said the New York City bids rivaled the huge bids seen in last= =20 year=0F's third-generation (3G) spectrum auctions in the United Kingdom and= =20 Germany, which raised more than $80 billion (TR, May 1, 2000; and Aug. 21 a= nd=20 28, 2000). Before the reauction began, analysts had predicted that bidding would be mo= re=20 controlled as a result of the common belief that bidders overpaid in those= =20 foreign auctions. Thomas E. Wheeler, president and CEO of the Cellular Telecommunications &= =20 Internet Association, praised congressional leaders and former FCC Chairman= =20 William E. Kennard for =0F"standing up=0F" to NextWave=0F's attempts to win= back its=20 licenses through legislative channels. =0F"This is a $16 billion victory f= or=20 taxpayers,=0F" Mr. Wheeler said. Pa. ALJ Slams Verizon Plan To Avoid Full Structural Split An administrative law judge has recommended that the Pennsylvania Public=20 Utility Commission develop its own plan for Verizon Pennsylvania, Inc., to= =20 split up its wholesale and retail operations. In his recommendation to the= =20 PUC, the ALJ criticized Verizon=0F's =0F"alternative=0F" plan for not going= far enough=20 to separate the company=0F's business functions and for being too full of h= oles=20 to implement. In 1999 the PUC ordered the retail-wholesale split as part of a =0F"global= =20 order=0F" settling a number of proceedings on issues ranging from reciproca= l=20 compensation to universal service (TR, Aug. 30, 1999). Also last year,=20 Verizon proposed a plan that would allow it to avoid a complete split of it= s=20 company by separating the business functions but keeping the company=20 structurally intact (TR, July 3, 2000). Administrative Law Judge Wayne L. Weismandel last week recommended giving= =20 Verizon a year to create separately operating retail and wholesale=20 affiliates. Under his recommendation, the two affiliates would be required= =20 to maintain separate books, records, staffs, and officers. The retail=20 affiliate would not be permitted to obtain financing =0F"that would permit = a=20 creditor, upon default, to have recourse to the assets of the Verizon=20 Pennsylvania, Inc., wholesale affiliate.=0F" Under the plan, the two affil= iates=20 would be required to conduct transactions =0F"on an arm=0F's-length basis.= =0F" The ALJ said that Verizon=0F's alternative plan didn=0F't propose a true=20 wholesale-retail separation, but rather a =0F"line-of-business split. . .th= at=20 does not mitigate the anti competitive dominant market power Verizon=20 currently exercises as a result of its base of legacy monopoly customers.= =0F" =20 He also blasted the telco for not supplying cost analysis or data to suppor= t=20 many of its conclusions. =0F"Due to Verizon=0F's failure to comply with the commission=0F's orders i= n this=20 proceeding, the commission is left with no choice but to direct structural= =20 separation of specific elements as the commission deems appropriate,=0F" A= LJ=20 Weismandel said. Competitors=0F' Plans Criticized, Too Competitors, including AT&T Corp. and WorldCom Corp., had submitted their o= wn=20 proposals on how the PUC should structure the split. Although the ALJ said= =20 he found aspects of the competitors=0F' proposals =0F"intriguing,=0F" he di= dn=0F't have=20 kind words for them. He said the competitors=0F' proposals weren=0F't bols= tered by=20 cost studies or analyses either. The judge identified several =0F"policy issues=0F" that the PUC must =0F"in= vestigate=0F"=20 as it considers how to implement the Verizon split: (1) how Verizon could= =20 continue to serve as customers=0F' =0F"carrier of last resort=0F"; (2) whet= her the=20 Verizon retail affiliate should be required to have =0F"significant=0F" ind= ependent=20 minority stakeholders, as competitors had proposed; and (3) how to conduct= =20 the =0F"migration=0F" of Verizon=0F's customers to its retail affiliate or = to=20 competitors. Carriers Back Simplified Transfers Of International Authorizations Several carriers say they generally support the FCC=0F's proposals to strea= mline=20 procedures governing pro forma assignments and transfers of international= =20 service authorizations, although they also suggest further modifications of= =20 the rules. But one major provider is asking the FCC to continue requiring foreign=20 affiliates of carriers receiving such authorizations to settle traffic with= =20 U.S. carriers at or below settlement rate =0F"benchmarks.=0F" Parties offered their views in comments filed at the FCC last week in=20 response to an International docket 00-231 notice of proposed rulemaking (T= R,=20 Dec. 4, 2000). To ease the regulatory burden on international carriers, the FCC had propos= ed=20 to make its procedures for international service authorizations granted und= er=20 section 214 of the Communications Act more like those it uses for assignmen= t=20 and transfer of control of commercial mobile radio service (CMRS) licenses. The FCC also tentatively had concluded that it no longer needed to require= =20 carriers to comply with its international settlement rate benchmarks as a= =20 condition of granting them section 214 authorizations to provide=20 facilities-based international private line services. It had proposed to stop requiring dominant international carriers to seek= =20 prior agency approval before discontinuing service on a route, =0F"except w= here=20 a carrier possesses market power for international service in the U.S.=0F" In its comments on the FCC=0F's rulemaking proposal, WorldCom, Inc., said i= t=20 supported streamlining and harmonizing the Commission=0F's rules. But it a= sked=20 the agency to retain the benchmark condition for facilities-based service t= o=20 affiliated markets until Jan. 1, 2003. =20 That=0F's the last of several deadlines for U.S. carriers to settle traffic= with=20 foreign carriers at or below the applicable benchmark rate; the FCC=0F's=20 benchmark order had set different deadlines for various groups of countries= . =0F"The incentive for unlawful one-way bypass remains a serious issue,=0F" = WorldCom=20 said. =0F"By removing this condition, the Commission would make it easier = than=20 ever for a dominant foreign carrier to circumvent unlawfully the settlement= =20 rate benchmarks.=0F" It added that it would be difficult for the Commissio= n to=20 detect evasion by carriers without the mandate. Verizon Communications, Inc.=0F's international carrier affiliates backed t= he=20 streamlining proposals. =0F"In an increasingly competitive environment,=20 simplification and streamlining of outdated rules are essential to assure= =20 that U.S. carriers are able to compete in the world market,=0F" Verizon sai= d. It suggested the FCC go further and streamline other rules affecting=20 international service authorizations as well. It urged elimination of the= =20 following requirements:=20 (1) Prior notification for affiliation with non-dominant foreign carriers,= =20 (2) Identification of interlocking directorates with foreign carriers,=20 (3) Quarterly international traffic reports required under section 43.61 of= =20 the Commission=0F's rules, and=20 (4) Amendments of international authorizations when a Bell company receives= =20 FCC authorization to provide in-region interLATA (local access and transpor= t=20 area) service in a particular state. Verizon Wireless supported changing the rules concerning pro forma=20 assignments and also asked the FCC to eliminate the quarterly reporting=20 requirements mandated by section 43.61(c). Cingular Wireless LLC also backed making section 214 application procedures= =20 more like those used for CMRS licenses. It also said the Commission should= =20 (1) authorize certain non=0F-wholly owned subsidiaries and partnerships to= =20 provide service using their parent=0F's authorization and (2) eliminate sec= tion=20 43.61 reporting requirements for CMRS providers. Personnel Newly named FCC Chairman Michael K. Powell has named Marsha J. MacBride chi= ef=20 of staff. Ms. MacBride was a legal adviser to Commissioner Powell and=20 director of the FCC=0F's task force on the year 2000 conversion before beco= ming=20 a vice president at The Walt Disney Co. Mr. Powell also named an interim= =20 transition team within the agency. Jane E. Mago, deputy chief of the=20 Enforcement Bureau, will manage the agency=0F's legal functions, overseeing= the=20 Office of General Counsel. David H. Fiske, deputy director of the FCC=0F's= =20 Office of Media Relations, will oversee that office. Paul A. Jackson,=20 special assistant to the chairman, will be responsible for overseeing the F= CC=0F' s Office of Legislative and Intergovernmental affairs. =20 Mimi Simoneaux has rejoined House Energy and Commerce Committee Chairman W.= J.=20 (Billy) Tauzin (R., La.) as the top administrative aide in his personal=20 office. She previously worked in VeriSign, Inc.=0F's government affairs=20 office. Ms. Simoneaux was legislative director to Rep. Tauzin when he was= =20 chairman of the telecommunications, trade, and consumer protection=20 subcommittee. The Louisiana Public Service Commission has elected Commissioner James M.= =20 Field (R.) its new chairman. Commissioner Jack A. (Jay) Blossman Jr. (R.)= =20 was elected vice chairman. Mr. Field joined the PSC in 1996, and his curre= nt=20 term ends Dec. 31, 2006. Mr. Blossman became a commissioner in 1997, and h= is=20 term expires Dec. 31, 2002. Gov. Michael F. Easley (D.) has appointed Lorenz Joiner to the North Caroli= na=20 Utilities Commission. He will serve the remaining six months of William=20 Pittman=0F's term; Mr. Pittman has resigned to join a law firm in Raleigh. = Mr.=20 Joyner was a special deputy attorney general at the state Department of=20 Justice. Bruce Simpson was named chief executive officer at AppGenesys, Inc., a San= =20 Jose, Calif., manufacturer of Internet infrastructure-management platforms.= =20 He was president at the Netcare Managed Services Division of Lucent=20 Technologies, Inc. Sonera Corp. of Finland reported that Bjorn Gustavsson, president and CEO o= f=20 Sonera SmartTrust Ltd., died Jan. 21 under =0F"tragic circumstances.=0F" A= ntti=20 Vasara, deputy CEO, was named acting CEO. Sonera has named Aimo Olkkonen president and chief executive officer of=20 Sonera Holding B.V. of the Netherlands. He was Sonera=0F's senior VP-corpo= rate=20 development. Etienne Fouques is the new president of Alcatel SA=0F's carrier networking= =20 group. He also was elected to the French telecom equipment manufacturer=0F= 's=20 executive committee. Mr. Fouques was president of the company=0F's switchi= ng=20 and routing division. He succeeds Pearse Flynn, who has left =0F"to pursue= =20 other opportunities,=0F" Alcatel said. QUALCOMM, Inc., has named James A. Clifford senior vice president of QUALCO= MM=20 CDMA (code-division multiple-access) Technologies, the company=0F's integra= ted=20 circuits and system software unit. He was VP. =20 The National Telephone Cooperative Association has promoted Marlee Norton= =20 from director-international and domestic program development to vice=20 president-international programs. Barbara Ritter has been promoted from=20 director-human resources to vice president-human resources. Ron Precourt,= =20 who had been manager-education, is now director-training and development. = =20 Eleanor Baird, who had been manager-meetings, is now director-meetings. An= d=20 at NTCA=0F's Foundation for Rural Service, Sara Gilligan has been promoted = from=20 project assistant to program coordinator. The Cellular Telecommunications & Internet Association has hired Bruce Cox = as=20 vice president-regulatory policy and law and promoted Robert Roche to the= =20 post of VP-policy and research. Mr. Cox was VP-congressional and regulator= y=20 affairs at AT&T Corp. Mr. Roche was CTIA=0F's assistant vice president-pol= icy=20 and research and has headed the trade group=0F's research department since = 1993. BellSouth Corp. has named Barry Boniface vice president-corporate=20 development. He was executive VP-network and product management at Cypress= =20 Communications, Inc. He succeeds Keith Cowan, who last year was named chie= f=20 planning and development officer.=20 Cortlandt L. Freeman has been named vice president-corporate communications= =20 at Touch America, the Montana Power Co.=0F's broadband telecom subsidiary. = He=20 was director of that unit.=20 LG InfoComm U.S.A., Inc., a provider of communications networks, has hired= =20 Chris Yi as vice president-marketing and product management. He was genera= l=20 manager of LGIC Korea. Jonas Neihardt, vice president-federal government affairs for QUALCOMM, Inc= .,=20 is heading the wireless technology company=0F's Washington office. Mr. Nei= hardt=20 succeeds Kevin Kelley, who is a senior advisor-commercial relationships to= =20 QUALCOMM CEO Irwin Mark Jacobs.=20 Jerome de Vitry has been named chief operating officer at Completel Europe= =20 N.V., a provider of local phone and Internet access services to businesses = in=20 western Europe. He=0F's president at Completel France. SPEEDCOM Wireless Corp., a Sarasota, Fla.=0F-based fixed wireless products= =20 maker, has named Larry Watkins chief technology officer. Mr. Watkins=20 previously was senior director-engineering at LCC International, Inc. Phil Bond is leaving the Information Technology Industry Council to be=20 director-federal public policy in Hewlett Packard Co.=0F's Washington offic= e. =20 Mr. Bond has been ITI=0F's senior vice president-government affairs for the= past=20 three years.=20 Verizon Communications, Inc., has named Wajeeha H. Aziz director-operations= =20 in the western New York region. She was senior manager-centralized=20 installation and maintenance operations. Verizon named Tarita Y. Miller=20 director-operations in the midstate New York region. She was manager-area= =20 operations in Queens, N.Y. Daniel Mattoon is joining the government affairs and public relations firm= =20 co-founded by Democratic strategists John and Anthony J. Podesta in 1988. = =20 With Mr. Mattoon=0F's arrival, the lobbying firm now headed by Tony Podesta= and=20 known as Podesta.com will become Podesta/Mattoon. Mr. Mattoon, who has bee= n=20 on a sabbatical from his post as vice president-congressional affairs at=20 BellSouth Corp., was deputy chairman of the National Republican Congression= al=20 Committee for the 2000 election cycle. More recently he was a member of th= e=20 FCC =0F"transition advisory team=0F" for the Bush administration (TR, Jan. = 15).=20 Regulatory & Government Affairs The FCC has changed the deadlines for comments on its most recent order aim= ed=20 at conserving telephone numbers (TR, Dec. 11, 2000). The new deadlines for= =20 comments and replies are Feb. 14 and March 7, respectively. They should=20 refer to Common Carrier dockets 99-200 and 96-98. In the order, the FCC=20 established the administrative procedures it would use in conducting=20 nationwide 1,000-number block pooling. It also issued a rulemaking notice= =20 proposing, among other things, to charge carriers for the numbers they use. Comments on the FCC=0F's notice of proposed rulemaking concerning the alloc= ation=20 of third-generation (3G) wireless frequencies are due Feb. 22, and replies= =20 are due March 9 in Engineering and Technology docket 00-258 (TR, Jan. 8). Comment deadlines have been set on an FCC proposal to reallocate 27 megaher= tz=20 of spectrum transferred from federal government to private use. The FCC=0F= 's=20 notice of proposed rulemaking was adopted last November in Engineering and= =20 Technology docket 00-221 (TR, Nov. 27, 2000). Comments are due Feb. 22 and= =20 replies March 26. The Land Mobile Telecommunications Council has asked for= =20 an additional 60 days for comments and 30 days to file replies. The FCC al= so=20 is encouraging interested parties to file comments in response to a notice = of=20 proposed rulemaking issued by the National Telecommunications and Informati= on=20 Administration, on reimbursement rules governing federal users that are=20 relocated to other bands (TR, Jan. 22). The FCC has set the deadlines for commenting on the MAG (multiassociation= =20 group) proposal for overhauling the interstate access and universal service= =20 support mechanisms for local exchange carriers subject to rate-of-return=20 regulation. It released a notice of proposed rulemaking on the matter=20 earlier this month in Common Carrier dockets 00-256 (MAG plan), 96-45=20 (universal service), 98-77 (access charge reform), and 98-166 (rate-of-retu= rn=20 prescription) (TR, Jan. 8, p. 25). But the comment due dates weren=0F't se= t=20 until the rulemaking notice appeared in the Federal Register last week. =20 Comments and replies are due Feb. 26 and March 12, respectively. Comments = on=20 those aspects of the proposal that would increase or modify data reporting= =20 requirements are due to the Office of Management and Budget by March 26. The FCC has set the schedule for parties wishing to comment on the=20 recommendations of a federal-state joint board regarding the Rural Task=20 Force=0F's plan for reforming the universal service support mechanism (TR, = Jan.=20 15). Comments are due Feb. 26, and replies are due March 12. They should= =20 refer to Common Carrier docket 96-45. The FCC had asked for input on wheth= er=20 and how it should implement the RTF plan, which includes continuing to use = =0F" book costs=0F" to calculate =0F"high cost=0F" support for rural telcos. The FCC has set comment deadlines for a further notice of proposed rulemaki= ng=20 related to its decision to allow terrestrial wireless systems to operate in= =20 the Ku-band (TR, Dec. 4, 2000). Comments are due March 12 and replies Marc= h=20 26 in Engineering and Technology docket 98-206. Qwest Corp. has asked the FCC for a modification of its LATA (local access= =20 and transport area) boundary definitions to enable it to provide expanded= =20 local calling services between certain exchanges in Colorado. The=20 modifications would allow it to comply with a Colorado Public Utilities=20 Commission order directing it to provide two-way, nonoptional extended area= =20 services between the Fairplay and Bailey exchanges, the Fairplay and Decker= s=20 exchanges, and the Bailey and Woodland Park exchanges. The Colorado PUC sa= id=20 that those exchanges shared government, civic, education, and health=20 resources. =20 The FCC=0F's Wireless Telecommunications Bureau says it won=0F't initiate a= =20 proceeding to amend its rules to allocate channel 200 (87.9 megahertz) for= =20 the operation of an Emergency Radio Data System (ERDS). Federal Signal Cor= p.=20 requested such action in a petition for rulemaking filed in 1999. The bure= au=20 said ERDS needs could be addressed by existing radio services. It said it= =20 would incorporate the record that had developed since Federal Signal=0F's= =20 request into a separate proceeding on Intelligent Transportation Services= =20 (ITS)/Dedicated Short Range Communications (DSRC). The Commission has=20 allocated 75 MHz of spectrum for DSRC-based ITS operations (TR, Oct. 25,=20 1999). USA Media Group LLC has withdrawn its petition asking the FCC to preempt th= e=20 Truckee Donner Public Utility District in California. The cable TV system= =20 operator had objected to the utility district=0F's refusal to let it overla= sh=20 fiber optic cable on the district=0F's utility poles (TR, Dec. 25, 2000, p.= =20 38). The company cited =0F"changed circumstances unanticipated at the time= of=20 filing.=0F" The FCC terminated the Cable Services docket 00-252 proceeding= and=20 closed the comment period, which would have ended Jan. 29 for comments and= =20 Feb. 13 for replies. The FCC has agreed to preempt the Virginia State Corporation Commission in= =20 disputes over interconnection agreements between (1) Verizon Virginia, Inc.= ,=20 and Cox Virginia Telecom, Inc., and (2) Verizon and AT&T Communications of= =20 Virginia, Inc. The FCC recently granted a similar request by WorldCom, Inc= .=20 (TR, Jan. 22, p. 39). Cox and AT&T had asked the FCC to act on the matter= =20 after the Virginia commission refused to arbitrate the terms of the parties= =0F'=20 interconnection agreements. The Virginia commission had said it was=20 concerned that arbitrating the dispute would be deemed a waiver of its=20 immunity under the 11th Amendment to the U.S. Constitution. The FCC agreed= =20 to arbitrate the disputes in orders released last week in Common Carrier=20 dockets 00-249 and 00-251. The FCC has agreed to allocate the 33=0F-36 gigahertz band on a =0F"primary= basis=0F"=20 to the federal government for the use of fixed-satellite services for=20 military purposes. The Commission said it was acting on a request from the= =20 National Telecommunications and Information Administration. The reallocati= on=20 is =0F"essential to fulfill requirements for federal government space syste= ms to=20 perform satisfactorily,=0F" the Commission said. The order was approved Fr= iday,=20 Jan. 19, and released Friday, Jan. 26. Commissioner Harold W.=20 Furchtgott-Roth dissented because the FCC did not first seek comments on NT= IA=0F' s request. The FCC had cited =0F"national security=0F" concerns. Then-Ch= airman=20 William E. Kennard didn=0F't participate in the final consideration of the = item. South Slope Cooperative Telephone Co., Amana Colonies Telephone Co., and=20 Heartland Telecommunications Co. have asked the FCC=0F's Common Carrier Bur= eau=20 for a waiver of its definition of =0F"average schedule company.=0F" The co= mpanies=20 asked for the waiver as it relates to the Commission=0F's =0F"all-or-nothin= g=0F" rules=20 in section 69.605(c). A waiver would enable South Slope to purchase 1,500= =20 access lines now operated by Amana and Heartland under a price-cap=20 mechanism. South Slope plans to operate the acquired access lines under a= n=20 average-schedule formula, as it does its other exchanges. In a petition=20 submitted in CC docket 96-45, South Slope said granting the waiver would=20 enable it to complete the acquisition of the exchanges and would result in= =20 larger local calling areas for ratepayers. =20 The Federal Trade Commission says it will change several premerger filing= =20 requirements of the Hart-Scott-Rodino (HSR) antitrust law, including=20 increasing from $15 million to $50 million the transaction value threshold= =20 for merging companies to notify the FTC. The changes, which go into effect= =20 Feb. 1, include a new tiered fee structure, which requires merging companie= s=20 to pay $45,000 for transactions valued at less than $100 million, $125,000= =20 for transactions valued between $100 million and $500 million, and $280,000= =20 for transactions valued at $500 million or more. Former President Bill=20 Clinton signed off on the changes Dec. 21, 2000. A complete listing of the= =20 new rules is available on the FTC=0F's Web site at http://www.ftc.gov.=20 The naming of Michael K. Powell to be FCC chairman drew praise from key U.S= .=20 lawmakers last week. Senate Commerce, Science, and Transportation Committe= e=20 Chairman John McCain (R., Ariz.) believes Mr. Powell will make =0F"an=20 exceptional chairman,=0F" his spokeswoman said. House Energy and Commerce= =20 Committee Chairman W.J. (Billy) Tauzin (R., La.) called the move one of=20 President Bush=0F's =0F"best and most exciting selections for his new=20 administration.=0F" And new House telecommunications subcommittee Chairman= Fred=20 Upton (R., Mich.) said Mr. Powell was his =0F"first and only choice=0F" to = be FCC=20 chairman. The Minnesota House Commerce Committee has scheduled a Jan. 29 hearing on= =20 Gov. Jesse Ventura=0F's (Ind.) telecom legislative proposals, which include= =20 imposing a telecom excise tax to subsidize service in =0F"high-cost=0F" and= =20 unserved areas of the state. Among the efforts the excise tax would fund a= re=20 the deployment of high-speed services and creation of a $100 million=20 revolving loan fund to help competitive carriers roll out services. The=20 Minnesota Association for Rural Telecommunications says Gov. Ventura=0F's= =20 proposals would lead to =0F"drastically higher rates and stalled technologi= cal=20 advancements.=0F" The group of independent telcos objects to the governor= =0F's=20 proposals for reducing intrastate access charges. They plan to work for=20 alternative legislation that they say would benefit =0F"the entire state=0F= "=20 without causing =0F"economic havoc in rural communities=0F" or =0F"rate sho= ck.=0F" Canada and Mexico have agreed to open their satellite service markets to=20 competitors from each others=0F' countries, the Canadian Embassy in Mexico = has=20 announced. The two nations recently signed protocols for mobile and fixed= =20 satellite services, which would establish technical standards and condition= s=20 for domestic satellite communications providers that want to provide servic= e=20 in the other country. Further details are not yet available. Industry News Correction: The phone number listed in the Jan. 8 edition of TR for the Fe= b.=20 4=0F-6 Emerging Issues Policy Forum in Florida was incorrect. For informat= ion=20 about the forum, call 252/394-3145 or visit http://netcommworks/events.html= . =20 The Center for Public Utilities at New Mexico State University is planning = a=20 conference covering current issues challenging the utility industry. The= =20 March 25=0F-28 event will be held in Santa Fe. Call 505/646-4876. The =0F"IntelligentCities 2001: Metropolitan Networks=0F" conference will = be held=20 April 30=0F-May 2 in Chantilly, Va. Call 781/762-6279 or visit=20 http://www.hhevents.com. The International Telecommunications Society will hold its Asia-Pacific=20 Regional Conference July 5=0F-7 in Hong Kong. Visit http://www.its2001.ust= .hk=20 for more information. Proxim, Inc., a Sunnyvale, Calif.=0F-based developer of wireless networks, = has=20 agreed to acquire Alameda, Calif.=0F-based Netopia, Inc., a developer of=20 broadband Internet equipment, for $223 million in stock. The transaction i= s=20 expected to close late in the first quarter or early in the second quarter.= =20 Under the deal, each share of Netopia common stock will be converted into 0= .3=20 shares of Proxim common stock. The Hartcourt Companies, Inc., plans to acquire a 51% stake in Elephant Tal= k=20 Network Services Ltd., a Hong Kong=0F-based long distance telecom service= =20 provider. ETNS, which also owns a 15-city fiber optic network in Eastern= =20 China through a joint venture with China Handao Group, said it will roll ou= t=20 collocation and broadband network connectivity services next month. =20 Hartcourt, a Los Angeles holding and development group, didn=0F't disclose= =20 financial terms.=20 World Wide Wireless Communications, Inc., of Oakland, Calif., says that it= =20 intends to negotiate a joint venture agreement with UBC Global Net, which= =20 holds MMDS (multipoint multichannel distribution service) licenses in the= =20 Philippines. The joint venture would use the MMDS frequencies to offer=20 wireless Internet service. 360networks, Inc., a Vancouver, Canada, =0F"carriers=0F' carrier,=0F" has f= iled a=20 shelf registration statement with the U.S. Securities and Exchange Commissi= on=20 for a potential offering of up to $3 billion in =0F"debt securities, prefer= red=20 shares, subordinate voting shares, warrants, stock purchase contracts, and= =20 stock purchase units.=0F" It said it soon would file a prospectus with=20 respective commissions in Canada. It intends to use the proceeds for gener= al=20 corporate purposes and possible acquisitions.=20 Nextel Communications, Inc., has completed the sale of $1.25 billion in=20 senior notes to private investors. Nextel, of Reston, Va., intends to use= =20 the funds for network expansion, acquisition of spectrum, strategic=20 investments, and other corporate needs. Time Warner Telecom, Inc., tested the troubled stock market by selling 6.5= =20 million new shares in a public offering. The Littleton, Colo.=0F-based=20 competitive local exchange carrier sold the shares for $74.44 each to raise= =20 $483.8 million. Time Warner Telecom also raised $400 million through the= =20 private placement of senior notes. Funds from both transactions will help= =20 repay a $700 million bridge loan that Time Warner Telecom used to buy the= =20 assets of GST Telecommunications, Inc., out of bankruptcy (TR, Sept. 18,=20 2000). QUALCOMM, Inc., is having second thoughts about plans for an initial public= =20 offering (IPO) of shares in its semiconductor business. In announcing its= =20 quarterly financial results, the San Diego=0F-based company said it was =0F= " evaluating the need for and the timing of an IPO=0F" because of =0F"uncerta= inties=20 in the financial markets.=0F" QUALCOMM has been planning to spin off its= =20 semiconductor division and sell 10% of the unit in an IPO (TR, July 31,=20 2000). Even if it doesn=0F't proceed with the IPO, QUALCOMM still intends = to=20 complete the spin-off, which is designed to eliminate conflicts of interest= =20 between the semiconductor business and other QUALCOMM operations. London-based Europe*Star, a joint venture of Alcatel Space and Loral Space = &=20 Communications, has launched satellite communications service in southern= =20 Africa. The company said it expects that =0F"ongoing deregulation of the= =20 telecommunications sector=0F" will increase demand for communications syste= ms in=20 this region. Europe*Star now provides service in Botswana, Lesotho, Namibi= a,=20 Mozambique, South Africa, and Zimbabwe. Its regional office is in Cape Tow= n,=20 South Africa. Verizon=0F-Vodafone Assets The FCC=0F's Wireless Telecommunications Bureau is seeking comments on whet= her=20 to extend the deadline for a trust that holds certain wireless assets of=20 Verizon Communications, Inc., and Vodafone AirTouch plc to divest the Chica= go=20 and Cincinnati assets. The trust was formed to dispose of overlapping asse= ts=20 when Bell Atlantic Corp. and GTE Corp. (which merged to form Verizon) and= =20 Vodafone AirTouch combined to form Verizon Wireless place the wireless asse= ts=20 =0F"in trust for the purposes of divestiture=0F" (TR, April 3, 2000; and Ju= ly 3,=20 2000, notes). Joseph J. Simons, the trustee, on Jan. 12 asked the FCC to extend the=20 divestiture deadline, which was Feb. 26, for an additional 180 days. =20 Comments are due Feb. 2, and replies are due Feb. 7. DT Acquisitions The European Union has warned the U.S. against blocking Deutsche Telekom AG= =0F's=20 planned acquisition of VoiceStream Wireless Corp. and Powertel, Inc. The EU filed documents with the FCC promising to challenge any FCC action t= o=20 block the acquisitions. An EU spokesman told TR that opponents to the=20 proposed transactions=0F-such as Sen. Ernest F. Hollings (D., S.C.) and oth= er=20 congressional leaders=0F-are leading the U.S. toward violations of the Gene= ral=20 Agreement on Tariffs and Trade and World Trade Organization obligations. What=0F's Ahead. . . JANUARY 29=0F-Feb. 1=0F-The annual COMNET conference and expo is held in Washington= . For=20 more information, go to http://www.comnetexpo.com. 30=0F-Comments are due to the FCC on Verizon New England=0F's revised appli= cation=20 to provide in-region interLATA (local access and transport area) services i= n=20 Massachusetts (TR, 1/22/01 p.12). Replies are due Feb. 28. The=20 Massachusetts Department of Telecommunications and Energy has until Feb. 6 = to=20 submit its recommendation to the FCC. The Department of Justice must file= =20 its recommendation by Feb. 21. Staff at the Common Carrier Bureau will be= =20 available for ex parte discussions about the proceeding between Jan. 30 and= =20 Feb. 23. 30=0F-AeA, the former American Electronics Association, holds a press brief= ing=20 in Washington to present its top technology priorities for 2001. For more= =20 information, go to http://www.aeanet.org. 30=0F-The initial meeting of the FCC=0F's advisory committee on the 2003 Wo= rld=20 Radiocommunication Conference is held in the Commis-sion=0F's meeting room. 31=0F-The National Telecommunications and Information Administration holds = a=20 public meeting to discuss the results of ultrawideband system testing. For= =20 more information, call Paul Roosa in NTIA=0F's Office of Spectrum Managemen= t at=20 202/482-1559. FEBRUARY 1=0F-Comments are due to the FCC=0F's Wireless Telecommunications Bureau on= two=20 requests for waivers of the FCC=0F's construction rules governing 900 megah= ertz=20 band licensees (TR, 1/22/01 p.36). Replies are due Feb. 8. Comments on FC= I=20 900, Inc.=0F's request should reference DA 01-121, and comments on Neo-worl= d=20 License Holdings, Inc.=0F's request should reference DA 01-122. 2=0F-The National Telecommunications and Information Administration holds a= =20 workshop in Washington to discuss the 2001 Technology Opportunities Program= . =20 It will hold similar workshops in Denver on Feb. 6 and in St. Louis on Feb.= =20 8. Registration information can be found on NTIA=0F's Web site: =20 http://www.ntia. doc.gov. 5=0F-The U.S. Court of Appeals in Washington will hear oral arguments in=20 National Exchange Carrier Association, Inc., v. FCC (case no. 00-1055). NE= CA=20 is challenging the FCC=0F's December 1999 decision rejecting NECA=0F's prop= osed=20 modifications to the 1999 =0F"average-schedule=0F" Universal Service Fund f= ormula=20 (TR, 10/9/00 p.36). 7=0F-UNITED KINGDOM: Comments are due to the United Kingdom=0F's Office of= =20 Telecommunications on whether to impose additional conditions on Cable &=20 Wireless plc=0F's operator license for certain international routes (TR, 1/= 15/01=20 p.32). 8=0F-The FCC holds a meeting. 8=0F-Section 275 of the Telecommunications Act prohibits Bell operating=20 companies from providing alarm monitoring services until this date (TR,=20 11/17/97 p.7). The Act grandfa-thered alarm monitoring operations existing = as=20 of Nov. 30, 1995. 13=0F-The FCC=0F's Wireless Telecommunications Bureau holds an auction of e= ight=20 700-megahertz band licenses that weren=0F't bought at the =0F"guard-band=0F= " auction=20 (TR, 10/16/00 p.38). 15=0F-NEW JERSEY: Deadline for Verizon New Jersey, Inc., to file a new=20 alternative rate regulation plan with state regulators (TR, 1/8/01 p.23). 16=0F-Comments are due to the FCC=0F's Wireless Telecommunications Bureau o= n=20 applications to transfer wireless licenses from Price Communications Corp. = to=20 Cellco Partnership (d/b/a Verizon Wireless). Replies are due Feb. 26 in=20 Wireless Telecommunications docket 01-8. Comments should reference DA 01-1= 20. 19=0F-CALIFORNIA: Comments are due to the Public Utilities Commission on C= ap=20 Gemini Ernst & Young=0F's reports on Pacific Bell=0F's operation support sy= stems=20 (OSSs). The commission plans to issue a draft decision on the reports Apri= l=20 6 and a final decision May 24 (TR, 12/25/00 p.4) 20=0F-Comments are due to the FCC=0F's Wireless Telecommunications Bureau o= n=20 applications to swap licenses filed by Cingular Wireless LLC and VoiceStrea= m=20 Wireless Corp. (TR, 1/22/01 p.36). Replies are due March 2. They should= =20 reference Wireless Telecommunications docket 01-10 and DA 01-135. 20=0F-22=0F-The Consortium for School Networking holds a tele-com and Inter= net=20 conference in Washington. For more information, call 202/624-1740 or go to= =20 http://www.k12schoolnetworking.org. 25=0F-28=0F-The National Association of Regulatory Utility Commissioners ho= lds its=20 winter committee meetings in Washington, D.C. For more information, call= =20 202/898-2214. Falling Credit Ratings Create Costly Obstacle for Carriers Many telecom companies these days are groaning under the weight of excessiv= e=20 debt they accumulated while building networks, acquiring other companies, a= nd=20 trying to enter new markets. Determining whether they can pay those and=20 future debts is the job of credit-rating agencies like Moody=0F's Investors= =20 Service. Robert Ray, a senior vice president in the telecom, technology, and media= =20 group at Moody=0F's, tells TR that some of the biggest names in telecom, li= ke=20 AT&T Corp., are in danger of losing top credit ratings and having to pay mo= re=20 interest in their next round of funding. An edited transcript of our=20 interview with Mr. Ray follows. TR: What does Moody=0F's do? What=0F's your role? Ray: I=0F'm lead analyst for a number of high-visibility companies in medi= a,=20 technology, and telecommunications. I=0F'm responsible not only for assign= ing=20 ratings to companies but also for monitoring those ratings as companies=0F'= =20 business prospects ebb and flow to make sure that our ratings, once assigne= d,=20 continue to be accurate. In case we=0F're no longer comfortable with the rating, it=0F's my responsi= bility=20 to make a recommendation to change the rating of a company. TR: The news about telecom debt levels has been gloomy [see separate=20 story]. What=0F's your perspective on the financial health of the telecom= =20 sector? Ray: There have been a number of defaults and bankruptcies, particularly= =20 among the CLECs [competitive local exchange carriers]. There are a number = of=20 companies that have tried to enter the market. Not all the business plans= =20 were fully funded. As both the equity and the debt markets have become more restricted,=20 companies that didn=0F't have a fully funded business plan=0F-that didn=0F'= t have=20 enough money on hand or committed money from their bank group to cover thei= r=20 cash needs over the next 12 to 18 months=0F-have found themselves in liquid= ity=20 crunches relatively quickly. TR: On the equity side, a lot of analysts were surprised by what happened = in=20 the telecom sector. Is there a similar sense on the credit and debt side= =20 that investors and their advisers were caught by surprise? Ray: In the high-yield area many of the companies had relatively low ratin= gs=0F- single-B or Caa. Those ratings don=0F't necessarily anticipate a certainty= of=20 default, but they do reflect a high degree of risk. Even on the investment-grade side, however, we=0F've seen some surprising= =20 developments=0F-not so much in terms of direction, but in terms of speed=0F= - primarily in the pricing environment for long distance services from=20 companies such as AT&T and WorldCom [Inc.] =20 We were aware that those prices were going to come under pressure as the Ba= by=20 Bells began to get permission to offer long distance service in their home= =20 markets, as usage moved from wireline to wireless [service], and as usage= =20 began moving from traditional circuit-switched networks to Internet-deliver= ed=20 voice. While we knew there were a lot of pressures that were going to bring pricin= g=20 down in that market, the degree of the falloff was a bit of a surprise even= =20 to us. As a result, the large long distance carriers have had to scale bac= k=20 their expectations for profitability in the voice business. TR: And as a consequence, their credit ratings have come under downward=20 pressure. Ray: Yes, AT&T has had its long-term rating lowered from A1 to A2, and tha= t=20 rating remains on review. Certainly the pressures from the voice business= =20 were part of that. But AT&T is also in the process of breaking itself up= =20 into three separate businesses. The review is not only focusing on some of= =20 the risks that we=0F've talked about, but also the financial structure that= each=20 of these businesses will have going forward. We=0F've changed the outlook on Sprint [Corp.] from stable to negative. =20 WorldCom retains an A3 rating and a stable outlook. While they=0F've had s= ome=20 pressure like the other players, they had a little more flexibility, under= =20 the current rating, to absorb some of those pressures. TR: How big a deal is it to these companies to have their credit rating go= =20 down a step? What effect does that have on their day-to-day business? Ray: On the day-to-day business it has relatively limited impact. To the= =20 extent that they would be issuing new debt, a lower credit rating normally= =20 would result in a higher interest rate. The most critical rating for AT&T is its short-term rating of Prime-1. If= =20 they didn=0F't have a Prime-1 rating, they=0F'd be severely limited in thei= r=20 ability to sell commercial paper to the money market funds. [Securities an= d=20 Exchange Commission rules limit the amount money market funds can invest in= =20 companies that don=0F't have top-tier commercial paper ratings, like Prime-= 1,=20 from at least two rating agencies. =0F-Ed.] For a company whose commercial paper outstanding has been between $15 billi= on=20 and $20 billion, that could result in a significant increase in AT&T=0F's= =20 funding costs. They would have to seek out, for the most part, a different= =20 group of investors. TR: Is AT&T=0F's Prime-1 rating under review? Ray: Yes, it is. Both the A2 long-term rating and our Prime-1 short-term= =20 rating are on review for possible downgrade. TR: Can you give me an example of what the cost of money might be to AT&T= =20 through a money market fund v. the next-best alternative? Ray: The money market funds would just be one of a number of investors who= =20 would be buying AT&T=0F's commercial paper. So don=0F't get too caught up = in their=20 being the only source. TR: Percentagewise, though, how much better is commercial paper than the= =20 next-best alternative? Ray: They would certainly have to pay higher rates. To the extent that th= ey=20 were reliant on the money market funds for a substantial part of their=20 commercial paper issuance, those funds would have to be replaced by investo= rs=20 who are less constrained by the rating. You can find those investors, but= =20 they are obviously looking at a lower rating for a higher pricing. So it= =0F's=20 hard to speculate on specifically what any one company might have to pay. TR: It depends on the day of the week, I=0F'm sure. Ray: And it also depends on the size of the program, the market=0F's view = of=20 how safe the investment is, how comfortable investors are with the company= =0F's=20 prospects, and how much similar paper there is. A telecom issuer is not only competing against a full range of issuers goin= g=20 into the market; it=0F's also competing against other telecom companies for= =20 access to the market. Most investors set limits on how much they=0F're wil= ling=20 to expose themselves to any particular industry. Once they feel they have= =20 enough exposure to the telecom industry, they=0F're going to be less intere= sted=20 in putting that next dollar into telecoms rather than some other opportunit= y. The other thing we=0F've seen in the last couple of years is there=0F's bee= n=20 tremendous need in the telecom industry for financing as companies have bui= lt=20 out their networks. CLECs have been building networks. A number of long= =20 distance networks have been built here in the United States. Wireless=20 networks are being built. There are also international networks, not only= =20 connecting countries but also within Europe and within Asia=0F-both wirelin= e and=20 wireless. In the U.S. market alone, there was over $70 billion worth of media and=20 telecom debt in the first 11 months of 2000, compared to about $55 billion = in=20 1999. That=0F's just the straight debt market, not including equities or= =20 convertible debts. TR: How do you determine a company=0F's rating? Ray: We look at the business risks of a company. We try to understand=20 exactly what business they=0F're in, their competitive position, and their= =20 strengths and weaknesses. We also try to get a good understanding of=20 management and what their appetites may be for business and financial risk. We rate virtually all major companies in virtually every industry. We also= =20 have a solid understanding of the industry broadly and where any particular= =20 company fits in terms of its cost structure, market share, management=20 direction, and strategic focus. We also, obviously, do some statistical analysis. Since we=0F're fixed-inc= ome=20 analysts, we=0F're focused more on ensuring that debt obligations get paid = and=20 trying to assess the probability that all obligations will be paid in full = in=20 a timely manner. A fixed-income investor doesn=0F't necessarily have the upside that an equi= ty=20 holder does. A fixed-income holder has one of two results if he buys a=20 security at issuance and holds it to maturity: He either gets paid or he= =20 doesn=0F't. Even if the company=0F's been fabulously successful, he just gets his inter= est=20 on a regular basis and the principal at maturity. If the company just=20 struggles through and barely makes it, he=0F's in the same situation. So t= here=0F' s not much upside on straight debt if you=0F're a buy-and-hold investor. As fixed-income analysts, our key measures are the company=0F's ability to= =20 generate free cash. That=0F's cash after meeting all fixed obligations, li= ke=20 interest and dividends. We also look at their ability to finance their=20 capital spending requirements and their cash-generating capability relative= =20 to their debt load. If you look at two companies that are basically in the same industry and th= at=20 have similar sizes and market positions=0F-with neither one possessing any= =20 particular competitive advantage in terms of new products=0F-the one that h= as=20 the stronger cash generation relative to its debt obligations would have a= =20 higher rating. Probably the most difficult part of our business is making sure that we are= =20 consistent in applying our ratings. I want to make sure my strongest compa= ny=20 has the highest rating and my weakest company has the lowest rating. It=0F's also important to make sure that what I call an A1, an A2, or a Baa= 3 is=20 equivalent to the ratings of anyone else in the corporate finance area,=20 whether they=0F're covering auto companies or coal mines. TR: How much of your time is spent talking to management and trying to=20 figure out their plans? What happens during these talks? Ray: A large part of our analytical meetings with companies is spent tryin= g=20 to understand their strategy, their philosophy, and their appetite for=20 business and financial risk, and looking at what the company has done in th= e=20 past and how successful they=0F've been in meeting goals that they=0F've se= t for=20 themselves. We look at their plans relative to others in the industry and try to make= =20 sure the strategy and the objectives they=0F've set are reasonable and=20 achievable. The discussion, quite frankly, in the average meeting tends to= =20 be more about the companies=0F' products and business mix. It=0F's often beneficial having a long-standing relationship with a company= =0F's=20 management. You develop a sense of comfort regarding management=0F's abili= ty to=20 forecast the risks they face, to come up with plans to address those risks,= =20 and to develop financial models that are achievable. TR: It must be an expensive prospect for a company to get its rating=20 lowered, and it also may be a bit of an embarrassment. How do they react t= o=20 the possibility of a downgrade? Ray: We try to have a pretty good ongoing dialogue with a company so that = it=0F' s not a matter of calling them up one day and saying, =0F"Oh, by the way, w= e=0F're=20 putting you on review for a downgrade.=0F" To the extent that we develop a= reas=20 of concern, we like to bring them to the company=0F's attention=0F-both in = our=20 direct face-to-face meetings and in regular ongoing dialogue over the phone= . Obviously no company is ever pleased to be put on review for a downgrade. = =20 Our objective, quite frankly, is to make sure that they understand and=20 appreciate the position we=0F've taken and that they know why we=0F're doin= g what=20 we=0F're doing. Even though they ultimately may disagree with the action, at least we want = to=20 make sure that they understand the logic behind the steps we take. And we= =20 give them a chance to share with us their view as to why some of our concer= ns=20 may be less severe from their perspective. TR: Do you have any advice for telecom executives, investors, or=20 regulators? What needs to happen for the sector to climb out of its slump? Ray: For the long distance companies, it=0F's a matter of continuing to ge= t=20 their costs in line as best they can, knowing that their revenue is going t= o=20 continue to be under a lot of pressure for the foreseeable future. In the wireless segment, the key things are the ability of the wireless=20 players to build out their networks at a reasonable cost and to attract=20 high-value customers=0F-not only for voice but also for the emerging wirele= ss=20 data markets=0F-while maintaining cost structures that will allow them to= =20 continue to be profitable. There are more national wireless carriers now, and we expect that developme= nt=20 will put pressure on pricing. We don=0F't anticipate that it=0F's going to= be as=20 dramatic as the pressure we=0F've seen recently in the voice wireline secto= r. =20 But the more competitors you have and the broader their coverage, the great= er=20 the risk of continued pricing declines. TR: We haven=0F't talked much about the Bell companies=0F-the ILECs [incum= bent=20 local exchange carriers]. What=0F's your outlook for that sector? Ray: One argument that Moody=0F's has been making in support of them for a= long=20 time is that they have direct contact with their customers, and they=0F're = also=20 the ones with the line into the house. Our ratings on the ILECs are=20 certainly the highest we have in the telecom area. They are, by and large,= a=20 strong group of competitors who=0F've demonstrated better stability in thei= r=20 customer base and revenue mix than the long distance carriers have. TR: Does the prospect of greater regulatory oversight figure into your=20 calculations regarding the Bells? Ray: There=0F's a lot of regulatory oversight. As they seek to get approv= al=20 [to provide in-region interLATA (local access and transport area) service],= =20 that process has taken a bit longer than we would=0F've expected. We=20 anticipated that once the first state and the second state fell, other stat= es=20 would follow relatively rapidly. Telecom Sector=0F's Dubious Debts Create Drag on Financial Markets The rumblings began in Europe. The Bank of England issued warnings, follow= ed=20 by the Bank of France. The major credit-rating agencies=0F-Standard & Poor= =0F's,=20 Moody=0F's Investors Service, and Fitch ICBA=0F-issued ominous reports. On= the one=20 hand they sounded alarm bells, while on the other they said, =0F"Don=0F't p= anic.=0F" The reason for the caution flags is the level of questionable debt among=20 telecom companies. Pessimists fear that so many obligations will go unpaid= =20 that the telecom industry single-handedly will tip the economies of several= =20 countries into recession=0F-as the U.S. real estate industry did in the 198= 0s=20 when it built too much on borrowed funds before toppling like a rotten tree= . Even optimists admit that telecom debt is already a drag on the economy. I= t=0F' s dampening the profits of banks and rippling through related sectors leavi= ng=20 experts to wonder how much more bad debt will ooze from the telecom industr= y,=20 and how many defaults the economy can absorb. =0F`Fears Are Overdone=0F' By some estimates, telecom service providers have borrowed $322 billion ove= r=20 the past three years, including bonds and bank loans. Analysts generally= =20 divide that debt into two sectors. The bigger group has been generated by= =20 large carriers like AT&T Corp., British Telecommunications plc, and France= =20 Telecom SA. If one of those companies went under, it would be a=20 catastrophe. But analysts don=0F't think that=0F's likely. They=0F're more concerned about smaller service providers, like competitive= =20 local exchange carriers (CLECs). Fortunately, those carriers aren=0F't tho= ught=20 to carry enough debt to bring down a major bank, let alone an entire indust= ry=20 or an economy. =0F"At this stage, Moody=0F's is not forecasting defaults by major telecoms= ,=0F" Moody=0F' s Investors service says in a recent report. =0F"On the other hand, defaul= ts by=20 more marginal operators cannot be excluded. However, if a bank is not=20 massively exposed to such borrowers, its credit strength should not be=20 structurally hurt, let alone the fundamentals of the banking system.=0F" Fitch ICBA issued a similar statement. =0F"Large, profitable, and creditwo= rthy=0F"=20 telecom operators are responsible for the bulk of the debt load, Fitch says= . =20 =0F"Exposure to the riskier, alternative operator sector is, in relative te= rms,=20 modest.=0F" =0F"Fears of a banking crisis are overdone, in our view,=0F" says Morgan St= anley=20 Dean Witter analysts Richard Crehan and Graham Secker in a report on Europe= an=20 telecom debt. =0F"The vast majority=0F-about 90%=0F-of the debt raised in = the last 18=20 months is investment grade and unlikely to default. . .While the amount of= =20 loans made to the telecom sector in Europe is unprecedented, we do not thin= k=20 the telecom debt issue will sink financial markets.=0F" Those assessments don=0F't mean there won=0F't be pain for the telecom comp= anies=20 and their lenders on both sides of the Atlantic. The danger for banks is= =20 that their books will look uglier, their profits will sink, and their stock= =20 prices will tank. Bank of America Corp. and First Union Corp., for example, recently missed= =20 their profit goals, partly because of larger-than-expected loan-loss=20 provisions. Disappointed Wall Street analysts downgraded both companies, a= nd=20 their stocks slid. While those developments don=0F't constitute a bank =0F= " crisis,=0F" banks aren=0F't benefiting from their association with languish= ing=20 telecom companies. Telecom isn=0F't the only industry causing banks to spew red ink, says Cred= it=20 Suisse First Boston Corp. analyst Rosalind Looby. Movie theater companies,= =0F" dotcoms,=0F" and California electric utilities are doing their part, too. = =20 =0F"We are in the midst of a broader deterioration in commercial credit qua= lity=20 driven by loose lending standards adopted in the mid-1990s,=0F" Ms. Looby= =20 comments in a recent report. Banks traditionally were reluctant to fund money-losing companies. They=20 changed tacks during the dotcom frenzy on Wall Street. If they lent money = to=20 a young company, some bankers reasoned, that company might hire them for=20 other financial services. The risks were greater, but the prospects for=20 future revenue were tempting. That was before those young companies fell on hard times. CLECs=0F-one of = the=20 harder-hit sectors in the current economic slowdown=0F-have $8.2 billion in= loan=20 commitments from U.S. banks, Credit Suisse First Boston estimates. Skittis= h=20 banks have ways of dumping risky clients, but the process can be expensive,= =20 Ms. Looby says. =0F"Bankers attempting to sell any marginal CLEC credit into the distressed= loan=20 market today are likely to leave 20% to 25% of the loan=0F's face value on = the=20 table,=0F" she continues. =0F"CLEC-related losses could be material for ba= nks=20 attempting to downsize their exposure in this area.=0F" For now, however, many bankers are choosing to sit tight. =0F"I=0F'm not s= eeing a=20 lot of sales into the distressed loan market,=0F" says Robert H. Johnson,= =20 managing director-loan syndications for First Union Securities, Inc. Banke= rs=20 =0F"are not excited=0F" about holding onto some of the riskier telecom loan= s, but=20 they=0F're also not ready to take the financial hit that results from a =0F= " distressed=0F" sale, he says. Furthermore, bankers remain confident that they=0F'll collect the entire am= ount=20 on telecom loans, even in the worst cases, Mr. Johnson says. First Union,= =20 for example, still expects full repayment of its loans to two bankrupt CLEC= s=0F- ICG Communications, Inc., and NorthPoint Communications Group, Inc. =20 Bankruptcy courts often find ways of restructuring debt that enables banks = to=20 emerge unscathed, Mr. Johnson says. Meanwhile, the telecom industry appears to be recovering, Mr. Johnson notes= . =20 =0F"While there still may be more bankruptcies, the perspective in the bank= ing=20 industry is that things have bottomed out,=0F" he says. =0F"I believe we= =0F're at the=20 bottom.=0F" Recovery Could Be Stymied Debt-market analysts at Bear, Stearns & Co. are less sanguine. The debt=20 market appears to have regained its footing, Bear Stearns analysts say, but= =20 the recovery could be stymied by fear, uncertainty, and market failures. = =0F" The telecom sector remains prone to headline risk,=0F" they say, suggesting= that=20 the struggling market won=0F't be able to absorb bad news. Debt markets are especially vulnerable in Europe, where large carriers are= =20 selling =0F"noncore=0F" assets and holding initial public offerings (IPOs) = of stock=20 to raise badly needed funds, Bear Stearns notes. Those funds will help=20 carriers reduce their debts and pay for expensive new wireless networks. B= ut=20 what if nobody is willing to buy the assets or invest in the IPOs? Many analysts view France Telecom=0F's IPO of its wireless subsidiary, Oran= ge=20 plc, as a crucial test of Europe=0F's capital markets. If stock-market=20 investors don=0F't support that IPO, analysts fear that the budding recover= y=20 will wilt. =0F"IPOs and noncore disposals must succeed,=0F" Messrs. Crehan and Secker = of=20 Morgan Stanley declare. =0F"The situation has reached an impasse. Telecom= =20 companies need to spend more=0F-on network build-out and upgrades=0F-to rea= lize a=20 return on their original investment. But financial markets are reluctant t= o=20 risk even more money.=0F" =0F"If the European equity markets do not support [IPOs], necessary=20 capital-raising steps could be delayed, refocusing investors and the rating= =20 agencies on credit ratings,=0F" Bear Stearns says. =0F"Delayed plans might= force=20 the international telecom giants to turn to the banks at a time when the=20 banks are more closely scrutinizing their loan portfolios.=0F" Vendors Become Lenders The type of lending that seems to worry analysts most is vendor financing, = in=20 which equipment vendors give carriers loans in exchange for guaranteed=20 equipment orders. Vendor financing was much less common before last April,= =20 when the stock market still was the best source of funding for telecom=20 companies. When stock market investors closed their doors, many telecom companies went= =20 to the bond market. When bonds dried up, they visited banks. Rejected by= =20 banks, many carriers turned to vendors. Analysts are nervous because vendors sometimes aren=0F't qualified to judge= =20 creditworthiness and administer loan programs. But the vendors are eager t= o=20 snag customers. =0F"Offering financing has quickly developed into a compet= itive=20 weapon by equipment manufacturers keen to take market share,=0F" Messrs. Cr= ehan=20 and Secker explain. =0F"The aggressive expansion of vendor financing has raised fears that equi= pment=20 manufacturers could suffer like the banks should there be widespread=20 default,=0F" Messrs. Crehan and Secker said. =0F"Arguably, the equipment= =20 manufacturers are more exposed to this risk since, by definition, vendor=20 financing is lending to companies that the banks and financial markets have= =20 refused.=0F" Vendor financing worries already have stung some manufacturers. Lucent=20 Technologies, Inc., for example, recently increased its provision for bad= =20 debts to $500 million from $250 million, damaging its financial standing in= =20 the process (TR, Dec. 25, 2000). Vendor financing defaults won=0F't hurt only vendors, analysts say, but als= o=20 could cause equipment manufacturers to turn around and default on their=20 lenders=0F-not a positive development in a year when Standard & Poor=0F's a= lready=20 expects an increase in defaults by debt-laden telecom companies. =0F-Tom Leithauser Conn. Draft Decision Would Let SNET Drop Cable TV Business The Connecticut Department of Public Utility Control has proposed letting= =20 Southern New England Telephone Co. (SNET) and its video service subsidiary,= =20 SNET Personal Vision, Inc., stop providing cable TV services in the state. SNET, a subsidiary of SBC Communications, Inc., had told the department tha= t=20 its hybrid fiber/coaxial cable (HFC) cable TV network was unsuitable for=20 ubiquitous, full-service telephony and that the video-only deployment of th= e=20 HFC network was commercially impracticable (TR, Aug. 14, 2000). A draft department decision says the agency lacks the statutory authority t= o=20 require that SNET continue providing service. It says the department also= =20 lacks the authority to force the transfer of SNET=0F's cable TV franchise o= r=20 video assets to another company, as Connecticut Telephone & Communications= =20 Systems, Inc., had requested last fall (TR, Sept. 25, 2000). Written exceptions to the draft decision are due Jan. 26 in docket 00-08-14= . =20 The department will hold a Feb. 5 hearing, if one is requested, and plans t= o=20 issue a final decision Feb. 14. In 1999 the department modified the terms of SNET=0F's franchise, which=20 originally required the company to serve the entire state by September 2007= . =20 The recent draft decision says that transferring SNET=0F's modified franchi= se=20 agreement to Connecticut Tel would violate the state=0F's =0F"level playing= field=20 requirements.=0F" But the draft does encourage SNET to cooperate with Connecticut Tel and any= =20 other party interested in using its network, or parts of its network, to=20 provide competitive cable TV or other services. Executive Briefings Advanced Services =0F- The FCC gives data CLECs a major win by clarifying= =20 ILECs=0F' =0F"line-splitting=0F" duties and finding that ILECs must offer l= ine-sharing=20 over fiber loops. (Page 3) Bush=0F's =0F`E-rate=0F' Plan =0F- President Bush=0F's package of education= legislative=20 proposals draws criticism from policymakers who helped draft and implement= =20 the =0F"E-rate=0F" telecom discount program. It=0F's also sparking concern= among=20 schools and libraries that have participated and benefited from the program= . =20 (Page 4) 700 MHz Band Auction =0F- Large wireless carriers once again ask the FCC to= =20 postpone the scheduled auction of spectrum in the 700 MHz band, citing a ho= st=20 of familiar concerns that they say could dampen enthusiasm for bidding on t= he=20 frequencies. But rural carriers and TV broadcasters urge the Commission to= =20 begin the auction March 6, as scheduled. (Page 5) 700 MHz Band Relocation =0F- The FCC takes additional steps to help spur th= e=20 relocation of incumbent TV broadcasters from the 700 MHz band in order to= =20 make way for wireless carriers. But it won=0F't force incumbents to clear = the=20 frequencies=0F-at least not yet. (Page 6) Scarce Spectrum =0F- Spectrum issues will top the wireless industry=0F's Wa= shington=20 agenda this year, says CTIA President and CEO Tom Wheeler. He wants the FC= C=20 to lift the spectrum cap while a high-level effort to identify and allocate= =0F" 3G=0F" frequencies proceeds. (Page 8) Spectrum Cap =0F- The FCC reexamines whether to lift the cap on how much=20 spectrum wireless carriers may hold in any one market. It also explores if= =20 it should eliminate its cellular cross-interest rule. (Page 9) Internet Privacy =0F- Reps. Chris Cannon and Anna G. Eshoo introduce a bill= to=20 require operators of commercial Web sites that collect personally=20 identifiable information to explain to site visitors what type of informati= on=20 is collected, how it will be used, and who is collecting it. (Page 11) Infrastructure Tax-Credit Bill =0F- Key lawmakers who control the congressi= onal=20 purse strings revive a push to extend tax credits to carriers that deploy= =20 high-speed Internet facilities. They=0F've also asked President Bush to in= clude=20 the measure in his initial budget submission to Congress. (Page 11) New Approach to Broadband Regs? =0F- The =0F"time is ripe=0F" for legislati= on creating=20 a new regulatory regime for broadband services and networks, similar to the= =20 regime that governs the wireless industry, according to executives at=20 Verizon. (Page 12) =0F`Dominant=0F' Regulation =0F- A federal appeals court agrees with the fo= rmer U S=20 WEST that the FCC erred in focusing on the company=0F's market share when= =20 considering its request to be freed from =0F"dominant=0F"-carrier regulatio= n of=20 certain services. (Page 14) InterLATA Bid Approval =0F- The FCC=0F's authorization of SWBT to offer int= erLATA=20 services in Kansas and Oklahoma may offer insights to other Bell companies= =20 planning their own interLATA bids. (Page 15) Limits on EELs =0F- As it promised to do last year, the FCC begins reexamin= ing=20 its policy barring carriers from using enhanced extended links exclusively = to=20 provide access services. (Page 16) Directory Assistance Rules =0F- The FCC expands the category of competitors= =20 entitled to access local exchange carriers=0F' subscriber listing informati= on. =20 LECs now must provide Internet-based directory publishers with=20 nondiscriminatory access to those databases. (Page 17) TELRIC Rates and Pole Attachments =0F- The Supreme Court agrees to hear two= =20 cases involving disputes over FCC rules. One challenges the FCC=0F's=20 methodology for setting rates for interconnection and UNEs. In a separate= =20 case, the court will consider whether the agency has authority to regulate= =20 the pole attachment rates for wireless and cable TV service providers. (Pa= ge=20 17) State Immunity =0F- The Supreme Court again refuses to review an appeals co= urt=20 finding that state regulators are subject to federal lawsuits regarding=20 carrier interconnection. (Page 18) =0F'Net =0F`Filtering=0F' =0F- The FCC wants advice on how to implement the= Children=0F's=20 Internet Protection Act of 2000, which requires schools and libraries that= =20 receive =0F"E-rate=0F" discounts to use =0F"filtering=0F" technology preven= ting minors=20 from accessing =0F"harmful=0F" material over the =0F'Net. (Page 20) =20 Lucent Restructuring =0F- Wall Street analysts see Lucent=0F's restructurin= g as a=20 way to restore profitability but doubt that the plan will increase growth. = =20 Lucent=0F's bankers extend a new loan but ask for security, suggesting they= are=20 less certain than before of Lucent=0F's creditworthiness. (Page 21) Brazilian Wireless Consolidation =0F- Telefonica and Portugal Telecom are= =20 determined to lead what they say is the =0F"inevitable consolidation=0F" of= the=20 Brazilian wireless industry. The former rivals will combine their Brazilia= n=20 mobile telephony assets into a $10 billion joint venture that will be the= =20 country=0F's largest wireless service provider. (Page 23) Handset Outsourcing =0F- Ericsson decides to exit the mobile phone manufact= uring=20 business after that part of its operations turns in yet another disappointi= ng=20 quarter. =0F"The results in our mobile phones business, while in line with= =20 expectations, remain unsatisfactory,=0F" says Kurt Hellstrom, president and= CEO=20 of the Swedish company. (Page 23) Vancouver Rights-of-way =0F- Canadian regulator CRTC settles a dispute betw= een=20 the city of Vancouver and Ledcor Industries. The commission says a number = of=20 city-imposed project fees as unreasonable and paves the way for completion = of=20 the network deployment. (Page 24) Wireless Licenses =0F- Telecom regulators in Brazil and France face setback= s in=20 their attempts to award licenses for wireless services. (Page 24) Antenna Collocations =0F- Two wireless industry trade groups seek revisions= of a=20 draft agreement designed to streamline the review of antenna collocations= =20 under the National Historic Preservation Act. The groups say the changes a= re=20 needed to ensure that the pact accomplishes its goal. (Page 25) Building Access =0F- Building owners and competitive telecom service provid= ers,=20 escalating the battle they=0F've been waging for the last few years, shift = their=20 focus to multitenant residential buildings. (Page 27) Jurisdictional Cost Allocation =0F- The FCC orders Alaskan telco ATU to pay= an=20 interexchange carrier $2.7 million in damages to make up for improperly=20 assigning to the interstate jurisdiction the traffic-sensitive costs of=20 carrying Internet-bound traffic. (Page 29) =0F`C,=0F' =0F`F=0F' Block Reauction =0F- The FCC nets a record $16.8 billi= on in its=20 reauction of 422 =0F"C=0F" and =0F"F=0F" block PCS licenses=0F-an amount wi= thin the range=20 expected by most financial and industry analysts. Meanwhile, at least one= =20 participant is planning on challenging the results before the FCC=0F-and=20 possibly in court. (Page 30) Verizon Wholesale-Retail Split =0F- An administrative law judge recommends = that=20 the Pennsylvania PUC develop its own plan for Verizon to split its wholesal= e=20 and retail operations within one year. The ALJ also criticizes Verizon=0F'= s =0F" alternative=0F" plan for not going far enough. (Page 32) International Service Authorizations =0F- The FCC generally wins support fo= r its=20 proposals to streamline procedures governing pro forma assignments and=20 transfers of international service authorizations. (Page 32) Falling Credit Ratings =0F- Many telecom companies these days are groaning = under=20 the weight of excessive debt that they accumulated while building networks,= =20 acquiring other companies, and trying to enter new markets. Determining=20 whether they can pay those and future debts is the job of telecom analysts= =20 like Robert Ray of Moody=0F's Investors Service. (Page 39) Telecom=0F's Iffy Debts =0F- On the one hand analysts are sounding alarm be= lls,=20 while on the other they=0F're saying, =0F"Don=0F't panic.=0F" The reason f= or the caution=20 flags is the level of questionable debt at telecom companies. (Page 40) Copyright 2001, Telecommunications Reports International, Inc. All rights= =20 reserved.

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Telecommunications Reports -- 02/05/01

=20 =20 Telecommunications Reports - February 5, 2001 Verizon Wireless=0F' Reauction Bids Create Buzz As Analysts Praise Carriers= =0F'=20 Activities in Sale U.S. Carriers See Progress in Opening Markets But Ask USTR To Keep Pressure= =20 on Laggards USTR Delays Plea for WTO Probe Of Mexico, Keeps Options Open Burns To Unveil =0F`Tech Seven=0F' Legislative Package; House, Senate Telec= om=20 Panels To Add Members Powell To Lead with Review Of FCC Operational Changes Tauzin Demands Report on Critical Infrastructure=20 AT&T Execs See Hope of Truce In Long Distance Price Wars Verizon Wireless is rolling out its two-way text messaging service,... Versatel Absorbs VersaPoint, Cuts Workers, Writes Off Assets E.spire Mulls Reverse Split To Meet Nasdaq=0F's Conditions Convergent To Cut Workforce, Close Offices Early Talks with WRC-03 Nations Seen As Key for U.S. Success Bureau OKs Satellite Operators For Intersatellite Communications DoJ, FBI Want Foreign Control Of DT Limited by FCC Conditions Intelsat Told To Disclose Privatization Info Don=0F't Exempt Foreign Agencies From Ex Parte Rules, Carriers Say Unlicensed International Carriers Given 90 Days To Come Forward FCC Delays 700 MHz Auction Again at Request of Industry QUALCOMM Creates Platform To Spur Wireless Internet Apps PCIA Drops Opposition To Lifting Spectrum Cap France, Brazil Have Troubles Awarding Wireless Licenses Telefon AB L.M. Ericsson has announced a $400 million network expansion=20 contract... FCC Sets Arbitration Schedule For Interconnection Disputes Pay-Per-Call Providers=0F' Case Should Go to FCC, Court Says Aerial v. Underground Facilities Is Topic of City-CLEC Debate AeA Advises against Regulating Competitive Broadband Markets Missouri PSC Faults SW Bell=0F's InterLATA Bid CLECs Tout Effect on Economy But Seek Help from Congress Furchtgott-Roth=0F's Departure Plan Sparks Speculation on Nominees Court Upholds FCC Rules Giving ILECs Road to Pricing Flexibility AT&T Corp. has won a multiyear $100 million broadband service contract... Utah Bill Takes Aim at Cities Entering Telecom Business Va. Regulators Tell Verizon Not To Cut Off CLEC=0F's Customers Oftel Extends BT Price Controls For Retail, Wholesale Services Loral Scraps $3.5 Billion Plan For Direct-to-Consumer Service European Commission Seeks Cybercrime Policy Harmonization Psion plc and Motorola, Inc., say they are discontinuing a joint agreement.= .. Personnel Regulatory & Government Affairs Financial Briefs Industry News Wireless Industry Says Agreement Could Streamline Antenna Siting What=0F's Ahead. . . Executive Briefings Verizon Wireless=0F' Reauction Bids Create Buzz As Analysts Praise Carriers= =0F'=20 Activities in Sale The buzz on Wall Street last week in the wake of the FCC=0F's reauction of = 422 =0F" C=0F" and =0F"F=0F" block PCS (personal commu-nications service) licenses f= ocused on=20 the aggressiveness of Verizon Wireless, the nation=0F's largest wireless ca= rrier. Industry observers also talked up the prices paid for three 10- megahertz= =20 licenses in New York City. Verizon Wireless agreed to shell out more than $4 billion=0F-or nearly a qu= arter=20 of the entire $16.8 billion the auction netted=0F-for just two New York Cit= y=20 licenses (TR, Jan. 29). The additional 20 MHz of spectrum will give it 45= =20 MHz in the nation=0F's largest market. Alaska Native Wireless LLC, which is 39.9%-owned by AT&T Wireless Services,= =20 Inc., won the third New York City license with a $1.4 billion bid. Verizon Wireless topped all bidding at the sale, which ended Jan. 26,=20 offering more than $8.7 billion for 113 licenses covering 150 million =0F"p= ops=0F"=20 (potential customers). =0F"It is very interesting that the company with one of the strongest spect= rum=20 positions before the auction. . .has felt the need to be so aggressive,=0F"= =20 Lehman Brothers, Inc., analyst John M. Bensche said in a note to investors= =20 last week. =0F"We commend Verizon for its boldness in the auction, where i= t=20 garnered spectrum over almost twice as many =0F`pops=0F' as the next-closes= t=20 bidder.=0F" Mr. Bensche noted that Verizon Wireless and its founding companies =0F"had = been=20 quite conservative in their acquisition philosophy. . .This prior=20 conservatism makes the aggressive bidding all the more remarkable, and we= =20 wonder how much of the =0F`new=0F' philosophy was transplanted into the ven= ture by=20 Vodafone, the world leader in spectrum bullishness.=0F" Verizon Wireless is a joint venture of Verizon Communications, Inc., and=20 Vodafone AirTouch plc. =0F"Verizon, with its voracious appetite, was the clear upset victor,=0F" s= aid=20 Michael I. Rollins, an analyst with Salomon Smith Barney, Inc. He had=20 predicted before the auction that the carrier would bid $3 billion to $5=20 billion on licenses. =0F"Although we understand that spectrum is an attractive resource, we were= a=20 bit surprised at how aggressive the company was relative to others in the= =20 auctions,=0F" Cynthia M. Motz, an analyst for Credit Suisse First Boston Co= rp.,=20 agreed in a note to investors. She had expected Verizon Wireless to bid le= ss=20 than $1.3 billion in the reauction. =0F"Based on their auction wins, we believe Verizon is unlikely to be an av= id=20 participant in subsequent auctions,=0F" including the 700 megahertz band sa= le,=20 Ms. Motz added. The FCC=0F's Wireless Telecommunications Bureau last week postponed the 700= MHz=20 band auction from March 6 to Sept. 12 (see separate story). Verizon Wireless officials have declined to comment on the reauction result= s,=20 citing the FCC=0F's anti-collusion rules. But Dennis F. Strigl, the carrie= r=0F's=20 president and chief executive officer, acknowledged at the Comnet Conferenc= e=20 & Expo in Washington last week (see separate story) that the overall prices= =20 paid at the sale were =0F"extremely high.=0F" Analysts speculated why Verizon Wireless had agreed to pay so much for the= =20 New York City spectrum. It could be that the carrier wanted to ensure=20 dominance in the wireless data market, or to guarantee that competitors=0F-= such=20 as Cingular Wireless LLC=0F-didn=0F't land the valuable frequencies, they t= heorized. Or perhaps Verizon Wireless is closer than analysts believe to being tapped= =20 out regarding its available spectrum in New York, they speculated. =0F"The company has been quite mum about exactly why it felt the need to bu= lk up=20 so much,=0F" Mr. Bensche said. =0F"Of course, it will be incumbent upon ma= nagement=20 to be much more forthcoming about their view of the revenue and EBITDA=20 (earnings before interest, taxes, depreciation, and amortization) potential= =20 around wireless data than they have been in the past as they seek to explai= n=20 the $8.8 billion increase in the debt load.=0F" Indeed, Credit Suisse First Boston last week downgraded Verizon=20 Communications=0F' stock from a strong buy to a buy, in part because of its= need=20 to raise cash to pay for the spectrum and the costs of building its wireles= s=20 network. The parent company has said it will lend the wireless unit the=20 money to pay for the licenses. Standard & Poor=0F's revised its outlook on= =20 Verizon Communications to stable from positive, citing the auction debt as= =20 one reason. Whatever Verizon Wireless=0F' reasons for snatching up the New York City=20 spectrum, analysts concede that licenses there are valuable for any carrier= . =20 =0F"In order to provide nationwide coverage in the United States, New York = is=20 mandatory,=0F" noted Knox Bricken, an analyst at the Yankee Group. Overall, Mr. Bensche said, the C and F block reauction proceeds equate to= =20 $4.18 per =0F"megahertz pop,=0F" just behind third-generation (3G) auctions= in the=20 United Kingdom ($4.29 per MHz pop) and Germany ($4.68 per MHz pop) last yea= r,=20 which raised more than $80 billion (TR, May 1, and Aug. 21 and 28, 2000). = =20 Verizon Wireless=0F' bidding worked out to $5.79 per MHz pop, Mr. Bensche s= aid. =0F"We believe that biding was rational, and that an average of $4.18/pop/M= Hz=20 was a reasonable amount for carriers to pay for the spectrum available,=0F"= Mr.=20 Rollins said. Analysts Scrutinize Other Strategies Here=0F's a look at analysts=0F' take on how the other largest carriers did= at the=20 auction: AT&T WIRELESS: It didn=0F't win any licenses separately but will benefit f= rom=20 those won by its =0F"designated entity=0F" (DE), or small-business, partner= Alaska=20 Native Wireless, which bid $2.8 billion for 44 licenses. Through that alliance, analysts note, AT&T Wireless gained spectrum in Los= =20 Angeles and New York, bringing its holdings to 45 MHz in those markets. It= =20 also added licenses in other major markets. AT&T Wireless told analysts last week that the additional spectrum would=20 allow it to roll out a 3G system in 16 additional markets. In all, the=20 carrier says, it will be able to deploy the 3G universal mobile=20 telecommunications system (UMTS) technology in 88 of the top 100 markets. In addition, Mr. Bensche noted that DE affiliates or subsidiaries of two=20 other carriers with close ties to AT&T Wireless=0F-Triton PCS Holdings, Inc= .,=20 and Dobson Communications Corp.=0F-also won a total of 28 licenses at the= =20 auction. CINGULAR WIRELESS: The carrier has 85% equity in DE Salmon PCS LLC, the=20 number-three bidder at the reauction with $2.3 billion in bids on 79=20 licenses. Analysts say Salmon won licenses in a number of markets where=20 Cingular needs to fill in holes in its footprint, including Minneapolis;=20 Denver; Portland, Ore.; Norfolk, Va.; Pittsburgh; and Richmond, Va. =20 It also won licenses that could shore up Cingular=0F's spectrum position in= =20 other key markets, including Los Angeles, Dallas, and Boston. But it failed to win any spectrum in New York City=0F-a key market. Cingul= ar=20 already has a 10 MHz block of spectrum in the Big Apple, thanks to a swap o= f=20 licenses with VoiceStream Wireless Corp. announced before the auction (TR,= =20 Nov. 6, 2000). Mr. Bensche said Cingular =0F"should be comfortable=0F" with that block unt= il it=20 can acquire more spectrum in New York City in the 700 MHz band auction. He= =20 called Cingular-backed Salmon=0F's decision not to remain in bidding for Ne= w=20 York City spectrum =0F"an act of bravery on behalf of [Cingular] shareholde= rs.=0F" Ms. Motz also commended Cingular for its =0F"disciplined=0F" bidding via Sa= lmon. =0F" While the pressure was on for Cingular to win a New York license, it was no= t=20 enough for the company to be pressured into paying more than it was willing= ,=0F"=20 she said. =20 Salmon officials have said they intend to use the licenses for their own=20 network, although they would have the right to use Cingular=0F's name and m= ight=20 establish roaming and operations agreements with the large carrier. VoiceStream: A VoiceStream subsidiary, Voice-Stream PCS BTA, bid $482=20 million for 19 licenses. Its DE affiliate, Cook Inlet/VS GSM V P, offered= =20 $506 million for 22 licenses. =20 The companies filled important VoiceStream footprint holes in the Carolinas= ,=20 including Charlotte and Greensboro in North Carolina and Charleston and=20 Columbia in South Carolina, analysts said. VoiceStream also picked up licenses in Texas, the Pacific Northwest, and th= e=20 Midwest. Its auction success, combined with its planned merger with=20 Powertel, Inc., and recent spectrum swap with Cingular, has helped it build= a=20 nationwide footprint, Mr. Bensche said. Ms. Motz said Cingular=0F's and VoiceStream=0F's auction results =0F"could = suggest=20 that the two intend to work closely together on favorable roaming=20 arrangements in the near future (since each has what the other needs alread= y=20 built out).=0F" SPRINT PCS: SprintCom, Inc., a Sprint PCS subsidiary, dropped out of the= =20 reauction. But SVC BidCo L.P., a DE that is 80%-owned by Sprint PCS, won= =20 five licenses for $281 million. The licenses are in areas where analysts s= ay=20 Sprint PCS had only 10 MHz of spectrum=0F-Tampa and Orlando in Florida,=20 Cincinnati and Dayton in Ohio, and Norfolk, Va. Analysts note that Sprint PCS also secured additional spectrum in a swap wi= th=20 AT&T Wireless announced before the auction. They say that because it has= =20 such a strong spectrum position (30 MHz of spectrum in the majority of its= =20 markets), they aren=0F't surprised it wasn=0F't more aggressive in the sale= . NEXTEL COMMUNICATIONS, INC.: Nextel Spectrum Acquisition Corp., a Nextel= =20 subsidiary, dropped out of the reauction when bidding got too high, as did= =20 Connectbid LLC, a Nextel DE bidding partner controlled by cellular industry= =20 pioneer Craig McCaw. Analysts were not surprised. They said the auction d= id=20 not afford Nextel a chance to secure a full national footprint. =0F"The prospect of holding only 10 MHz of PCS spectrum in a handful of mar= kets=20 at high prices is not an ideal remedy to Nextel=0F's current spectrum need,= =0F" Mr.=20 Bensche said. =20 =0F"With an average of 16 MHz of spectrum in the 800 MHz band to operate it= s=20 iDEN system, it would suit Nextel more to acquire a contiguous 10 MHz on a= =20 nationwide basis rather than a piecemeal collection of properties,=0F" he = said. Analysts expect Nextel to continue acquiring 800 MHz and 900 MHz band=20 spectrum and say it also could pursue licenses at the 700 MHz band auction.= =0F" Whatever the strategy, the completion of the auction puts Nextel=0F's=20 competition in a much stronger position to better compete in both the voice= =20 and data markets, leaving Nextel at a disadvantage for future services,=0F"= Mr.=20 Bensche said. Meanwhile last week, Dana Frix, an attorney for San Antonio=0F-based Allegh= eny=20 Communications, Inc., told TRthat company officials still were considering= =20 their options for contesting the auction results. Allegheny, which dropped out of the reauction before it was over when the= =20 prices got too high, says the DE rules permitted large carriers to=20 participate through =0F"shell entities=0F" for licenses reserved for=20 entrepreneurs. Allegheny failed to persuade the U.S. Court of Appeals in= =20 Washington to block the reauction the day before it began in December 2000= =20 (TR, Dec. 18, 2000). The 35 winning bidders in the reauction have until Feb. 12 to submit down= =20 payments, the FCC said in a public notice released last week. The bidders= =20 also must submit their =0F"long-form=0F" 601 applications, as well as form = 602,=20 which includes ownership information, by that date. The FCC has said it=20 would review ownership arrangements of winning auction bidders closely befo= re=20 granting licenses. Of the 422 licenses on the block in the reauction, 170 were reserved for=20 qualified DEs and 252 were open to all bidders. Mr. Bensche noted that the= =20 liberal capitalization rules for DEs allowed large companies to jump back a= nd=20 forth between bidding on =0F"open=0F" and =0F"closed=0F" licenses, using bi= dding credits=20 for the open licenses through the DEs. =0F"In reality, this drove up the prices in the closed blocks to the same l= evels=20 as the open licenses being chased by the designated entities,=0F" Mr. Bensc= he=20 concluded. =0F"In fact, analyzing all of the markets in which at the close= of=20 the auction one of the open licenses was won by a bidder with bidding=20 credits, we come to the conclusion that the closed blocks went for 9% more= =20 than the open blocks!=0F" Meanwhile, last week bankrupt NextWave Telecom, Inc., whose reclaimed=20 licenses were snatched up at the reauction, filed its reply brief with the= =20 U.S. Court of Appeals in Washington in its case against the FCC. In its brief, NextWave repeated its argument that the cancellation of its= =20 licenses was prohibited by the U.S. Bankruptcy Code. Oral arguments are=20 scheduled for March 15 in NextWave Personal Communications, Inc., v. FCC=20 (case nos. 00-1402 and 1403). =0F-Paul Kirby U.S. Carriers See Progress in Opening Markets But Ask USTR To Keep Pressure= =20 on Laggards Countries around the world are making progress in complying with open-trade= =20 agreements affecting telecom services, but much more work needs to be done,= =20 U.S. carriers have told the Office of the U.S. Trade Representative. The carriers=0F' statements about global telecom markets had familiar theme= s. =20 They raised issues similar to those that have dominated debates on opening= =20 U.S. service markets to competition=0F-disputes over pricing unbundled netw= ork=20 elements and policies on collocating competitors=0F' equipment in incumbent= s=0F'=20 facilities. USTR recently asked for comments on the effectiveness of the World Trade=20 Organization=0F's basic telecom trade agreement, the telecom trade provisio= ns of=20 the North American Free Trade Agreement, and other telecom trade pacts. It= =20 plans to complete its annual review of the agreements by March 31. Germany Germany was a primary target of competitors=0F' complaints about the progre= ss of=20 market-opening efforts. The Competitive Telecommunications Association sai= d=20 the market conditions for competitors had =0F"worsened=0F" in Germany over = the last=20 year. =0F"The intermingling of interests between the German federal government an= d=20 Deutsche Telekom [AG], which the German federal government controls in=20 numerous overt and subtle ways, remains a serious problem,=0F" CompTel said= . CompTel objected to =0F"exorbitant=0F" licensing fees that require an =0F"u= p-front=20 payment of administrative costs projected over a 30-year period.=0F" It ch= arged=20 that Deutsche Telekom had delayed delivering services to competitors=0F'=20 customers and imposed onerous conditions on collocating equipment in its=20 central offices. Covad Communications Group, Inc., also complained of market conditions in= =20 Germany, specifically the rates for unbundled local loops. It said Deutsch= e=20 Telekom had proposed charging 34 deutsche marks ($16.25) per month for a=20 local loop, an increase of 33%. Deutsche Telekom=0F's online service unit= =20 offers ADSL (asymmetric digital subscriber line) service for 49 deutsche=20 marks ($23.42) per month. =0F"In order to provide a comparable ADSL retail product in a sustainable= =20 competitive market, a new entrant would have to charge an end user 49=20 deutsche marks, while paying Deutsche Telekom 34 deutsche marks per month f= or=20 a loop (in addition to apportioned payments for collocation, transport, and= =20 OSS, as well as amortizing the increased nonrecurring loop charge of 357=20 deutsche marks [$170.69]),=0F" Covad said. In addition, the competitor would have to amortize its own investments in= =20 equipment and network infrastructure, as well as salaries and marketing=20 costs, it said. Mexico As USTR decided last week to wait on pursuing a complaint against Mexico at= =20 the World Trade Organization (see separate story), U.S. carriers continued = to=20 raise concerns about market conditions in Mexico. WorldCom, Inc., said Mexico =0F"unquestionably presents the most serious an= d=20 pressing concerns.=0F" USTR=0F's =0F"persistent efforts to improve competi= tive=20 conditions in Mexico have resulted in some progress,=0F" it said, but it ci= ted=20 some remaining problems: (1) The rule that gives the incumbent, Telefonos de Mexico SA de CV=20 (Telmex), sole authority to negotiate accounting rates with foreign=20 carriers. Competitive carriers can=0F't offer =0F"market-based rates=0F" f= or=20 international calls because Telmex has resisted reducing the =0F"huge subsi= dies=0F"=20 it receives from U.S. carriers and customers, WorldCom said. (2) The Mexican regulatory agency, the Comision Federal de=20 Telecomunicaciones (Cofetel), has refused to implement =0F"flexible and=20 cost-oriented international termination rates=0F" as an alternative to the= =20 current system. (3) Cofetel has failed to regulate Telmex as a =0F"dominant=0F" carrier. (4) Cofetel=0F's decision-making process lacks =0F"transparency,=0F" and T= elmex=0F's=20 competitors don=0F't have adequate input into the regulatory process. CompTel said that =0F"despite promises of real change, no real advances hav= e=20 been made=0F" in Mexico. Telmex, it added, is failing to meet its obligati= on to=20 provide timely, nondiscriminatory, and cost-based interconnection. CompTel viewed the decision to cut the rate for =0F"on-net interconnection= =0F" to=20 1.25 cents per minute as a =0F"positive step.=0F" Telmex has challenged th= e rate=20 in court. Telmex charges carriers a =0F"resale=0F" tariff rate of more tha= n 9=20 cents per minute to terminate traffic in cities where the competitive carri= er=20 doesn=0F't have a network, CompTel said. Spain Spain=0F's Ministry of Science and Technology has completed an initial revi= ew of=20 Telefonica S.A.=0F's =0F"reference interconnection offer,=0F" Covad reporte= d. It said=20 it had several concerns with the terms of the offer. Telefonica =0F"offers only discriminatory collocation,=0F" it said, explain= ing that=20 Telefonica requires competitors to install equipment in separate caged=20 collocation spaces and restricts the types of equipment that can be=20 installed. Covad also complained about Telefonica=0F's slow provisioning= =20 intervals for unbundled loops and lack of information on the condition or= =20 availability of loops. United Kingdom Although the U.K.=0F's Office of Telecommunications has completed a series = of=20 proceedings to open markets, the telecom environment there is =0F"neither= =20 stable, predictable, nor nondiscriminatory,=0F" Covad said. British Telecommunications plc has refused to offer cageless collocation an= d=20 has limited the central offices that new entrants can access, it said. Cov= ad=20 said other new entrants had accused British Telecom of allocating=20 insufficient resources to provisioning unbundled loops. France=20 Covad criticized France Telecom S.A.=0F's =0F"highly problematic=0F" practi= ce of=20 refusing to sign any interconnection/operations agreement with a new market= =20 entrant that doesn=0F't hold an =0F"L 33.1=0F" telecom infrastructure licen= se=20 already. But the new entrant, Covad said, needs information in the draft= =20 local loop access agreement to formulate the business plan required by the= =20 license application. Covad also faulted France Telecom=0F's =0F"discriminatory=0F" collocation p= olicies,=20 which forbid new entrants from collocating ATM (asynchronous transfer mode)= =20 equipment and IP (Internet protocol) routers. France Telecom also refuses = to=20 provision for new entrants =0F"spare=0F" copper pairs (those that currently= aren=0F't=20 in use), Covad said. France Telecom=0F's pricing structure for unbundled loops, collocation,=20 transport, and electronic bonding to operation support system (OSS) functio= ns=20 =0F"clearly puts new entrants in a price-squeeze situation when compared to= the=20 retail prices for DSL service offered by France Telecom=0F's ISP affiliates= ,=0F"=20 Covad concluded. Peru=20 BellSouth Corp. focused on Peru, commending USTR=0F's role in opening the= =20 country=0F's telecom markets to competition. But it expressed concern abou= t new=20 regulations under consideration in Peru. Peruvian regulators plan to reduce the interconnection rate for wireless=20 carriers connecting with Telefonica del Peru=0F's wireline network, BellSou= th=20 said. It voiced concern that new rates would be challenged and not put int= o=20 effect. It also complained about the regulators=0F' decision that the new= =20 interconnection rates wouldn=0F't apply to fixed-to-mobile calls. Because the amount of fixed-to-mobile traffic exceeds the amount of=20 mobile-to-fixed traffic, mobile carriers would be =0F"significantly harmed= =0F" if=20 the changes went into effect, BellSouth said. It said the new arrangement= =20 was =0F"inconsistent with Peru=0F's WTO commitments to prevent anticompetit= ive=20 practices=0F" because it would benefit Telefonica del Peru. AT&T Corp. raised similar concerns about Peru. =0F"Continued USTR involvem= ent=20 remains necessary to ensure that Telefonica, as Peru=0F's major supplier, i= s=20 required to provide =0F`rates for all services at all levels that are=20 comparable, cost-oriented, reasonable, and nondiscriminatory,=0F'=0F" it sa= id. South Africa AT&T objected to constraints on providers of value-added network services= =20 (VANS) in South Africa. Telkom South Africa Ltd., the incumbent telecom=20 operator, =0F"continues to deny new telecommunications facilities to AT&T a= nd=20 many other VANS suppliers,=0F" AT&T said. It said the South African regulatory agency, the Independent Communication= =20 Authority of South Africa, had proposed to require that at least 15% of=20 ownership and control of a VANS license be held by =0F"historically=20 disadvantaged persons.=0F" Such a requirement would =0F"clearly violate So= uth=20 Africa=0F's WTO commitments to provide market access and national treatment= to=20 foreign VANS suppliers,=0F" AT&T said. Japan To comply with the WTO=0F's basic telecommunications service agreement, Jap= an=20 still needs to create an independent regulatory authority, CompTel said. I= t=20 noted that the government still owns a =0F"significant stake=0F" in Nippon= =20 Telegraph and Telephone Corp. (NTT). CompTel complained that NTT employees often leave to work at the Ministry o= f=20 Posts and Telecommunications (MPT) for a few years and then return to NTT. = =20 Those employees don=0F't recuse themselves from par-ticipating in regulator= y=20 actions regarding NTT, it said. CompTel said MPT =0F"must establish a clear and detailed regulatory=20 environment.=0F" MPT needs to set guidelines on cross-subsidies and tests = for=20 predatory pricing, transparency of accounts, and misuse of customer=20 information, CompTel said. MPT oversaw splitting NTT into five companies in 1999, CompTel noted. But= =20 MPT doesn=0F't regulate those carriers as =0F"dominant,=0F" despite their s= ignificant=20 market shares, it added. For example, local telecom service providers NTT= =20 East and NTT West jointly control more than 90% of the nation=0F's lines,= =20 CompTel said. CompTel also raised concerns about compliance with other points in the=20 reference paper and a May 1998 U.S.-Japan deregulation joint statement. Th= e=20 criticisms include the following:=20 (1) NTT levies =0F"excessively high interconnect charges=0F"; (2) NTT fails to provide access to ducts, conduits, and rights-of-way; and= =20 (3) Japan imposes =0F"unnecessary and burdensome licensing conditions.=0F" Taiwan CompTel said Taiwan hadn=0F't met its commitments outlined in the U.S.-Taiw= an=20 1998 Accession Protocol.It faulted Taiwan for restrictive licensing=20 conditions and a lack of =0F"transparency=0F" in the regulatory process.=20 =0F"With just six months to go before the telecommunications services marke= t is=20 to be opened to all new entrants, [Taiwan=0F's wireline regulations] requir= ing=20 an extraordinary investment of $1.2 billion in the Taiwan market and a=20 build-out of 1 million exchange lines=0F-150,000 of which must be installed= =20 prior to any service offering=0F-remain in effect,=0F" CompTel said. USTR Delays Plea for WTO Probe Of Mexico, Keeps Options Open The Office of the U.S. Trade Representative still may ask the World Trade= =20 Organization to investigate Mexico=0F's compliance with a WTO agreement to = give=20 foreign carriers=0F' access to its telecom market. But first USTR wants to= give=20 Mexico more time to address U.S. concerns before pressing its case. USTR declined last week to ask the WTO to convene a =0F"dispute-settlement= =20 panel=0F" to address claims that Mexico has failed to implement its=20 market-opening commitments under the WTO=0F's basic telecom service agreeme= nt. USTR asked the WTO in December 2000 to convene such a panel. But Mexico=20 blocked the initial request, as a WTO member country has the right to do. = A=20 second such request cannot be blocked. USTR didn=0F't make a second request for a dispute-settlement panel when WT= O=20 officials convened Feb. 1, but that does not mean USTR has =0F"dropped=0F" = the=20 case, a USTR spokeswoman said. =0F"That is not at all the case,=0F" she sa= id. =0F"We=20 reserve the right to move forward.=0F" =20 She said a second set of WTO consultations with Mexico ended Jan. 16, and= =20 USTR is =0F"evaluating where we stand.=0F" Although the parties have made = some=20 progress in addressing U.S. concerns, several areas of disagreement remain,= =20 the spokeswoman said. The key concern, she said, is the level of=20 international settlement rates on routes to Mexico. Industry sources also warned against reading too much into USTR=0F's decisi= on=20 not to move forward immediately. =0F"They=0F're just giving [Mexico] some = more=20 time to address the situation,=0F" one source said. =0F"It doesn=0F't mean= they can=0F't=20 [seek an investigation] a month from now=0F" at the next meeting of the WTO= =0F's=20 dispute-settlement panel in Geneva. In addition, President Bush and Mexican President Vicente Fox plan to meet= =20 Feb. 16, and sources said telecom topics could be on the agenda. The meeti= ng=20 would be =0F"an excellent time [for Bush] to bring these important issues u= p,=0F"=20 another source said. And President Fox, who took office last fall, has sai= d=20 he =0F"understands the importance of a competitive telecom marketplace,=0F"= the=20 source said. In addition to Mexico=0F's high international settlement rates, U.S. indust= ry=20 also is concerned about other interconnection rates in Mexico that are =0F"= well=20 above cost=0F" and the fact that there is =0F"still no meaningful regulatio= n of=20 Mexico=0F's dominant carrier,=0F" the source said. Burns To Unveil =0F`Tech Seven=0F' Legislative Package; House, Senate Telec= om=20 Panels To Add Members With the makeup of the House and Senate telecom subcommittees beginning to= =20 take shape, lawmakers from both panels are preparing to launch the first=20 major telecom and Internet-related initiatives of the 107th Congress. Leading the way in the Senate is communications subcommittee Chairman Conra= d=20 Burns (R., Mont.), who plans to unveil his =0F"tech seven=0F" package of te= lecom=20 and Internet bills this week. Sen. Burns, who dubbed his high-tech agenda= =20 for the last Congress the =0F"digital dozen,=0F" will reintroduce a few hol= dover=20 bills that weren=0F't passed, as well as some =0F"new surprises,=0F" his sp= okesman=20 told TRlast week. Sen. Burns=0F' digital dozen enjoyed considerable success last in the last= =20 Congress, as nearly half of the bills became part of new telecom laws. Tho= se=20 successes include measures to privatize the international satellite=20 consortium Intelsat, designate =0F"911=0F" as the universal emergency telep= hone=20 number, permit direct broadcast satellite TV companies to retransmit local= =20 broadcast station signals, legalize digital signatures, and set up a rural = TV=20 loan guarantee plan. Almost certain to be included in this year=0F's package are bills to expand= =20 deployment of broadband services using low-power TV spectrum, to ease=20 reporting requirements for small incumbent local exchange carriers, and to= =20 lift the caps on universal service =0F"high-cost=0F" support, the Burns spo= kesman=20 said. The other =0F"top priorities=0F" on Sen. Burns=0F' agenda are bills to bols= ter online=20 privacy and to curb =0F"spamming=0F" (sending unsolicited commercial e-mail= ), the=20 spokesman said. Sen. Burns also may address the process by which the=20 Internet Corporation for Assigned Names and Numbers (ICANN) selects Interne= t=20 domain name suffixes. He might do so either through legislation or through= =20 the subcommittee=0F's oversight capacity. Meanwhile, Sen. Burns=0F' subcommittee has grown by three seats since the= =20 previous Congress. In handing out subcommittee assignments last week,=20 Commerce, Science, and Transportation Committee Chairman John McCain (R.,= =20 Ariz.) gave the Democrats two extra seats on the panel and the Republicans= =20 one more. Both parties now have 10 members on the panel. The new Democratic members are Barbara Boxer (Calif.) and John D. Edwards= =20 (N.C.). Sen. Edwards has said he would reintroduce a bill to give consumer= s=20 more control over how their telecom service providers could use their calli= ng=20 records for marketing (TR,Nov. 8, 1999). In a statement on the Senate floor last week, Sen. Edwards said, =0F"During= the=20 last Congress, I introduced the Telephone Call Privacy Act [S 1850] in orde= r=20 to prevent phone companies from disclosing consumers=0F' private phone reco= rds=20 without their permission. I will be reintroducing this bill soon,=0F" he s= aid. Senate Republicans had five seats to fill on the communications=20 subcommittee. The GOP picked up one seat from Sen. McCain=0F's decision to= =20 expand the panel and was forced to fill four more because of three election= =20 casualties and the departure of William H. Frist (Tenn.) from the full=20 Commerce Committee (TR,Jan. 15). =20 The new Republican members on the communications subcommittee are Olympia J= .=20 Snowe (Maine), Gordon Smith (Ore.), Peter G. Fitzgerald (Ill.), and freshme= n=20 John Ensign (Nev.) and George Allen (Va.). =20 Tauzin Expands Telecom Panel Meanwhile, efforts to organize the House telecommunications subcommittee we= re=20 held up by a dispute over whether to add seats to the full House Energy and= =20 Commerce Committee. =20 Democratic leadership was pushing to add one more Democrat to the Commerce= =20 Committee, which would narrow the balance of power on the committee to 30= =0F-26=20 in the Republicans=0F' favor. House Speaker J. Dennis Hastert (R., Ill.),= =20 however, has proposed adding one more GOP and one more Democratic seat. Final determinations on committee matters, including the jurisdiction and= =20 membership of its subcommittees, will be made at an organizational meeting= =20 set for Feb. 7. =0F"We=0F'll be operating under the assumption that they a= re=20 adding a Democrat and a Republican=0F" to the committee, Commerce spokesman= Ken=20 Johnson said Friday, Feb. 2. Despite the delay, Commerce Chairman W.J. (Billy) Tauzin (R., La.) said his= =20 subcommittee assignments and selections for subcommittee chairmen had been= =20 ratified by the Commerce Committee=0F's Republican members. Rep. Tauzin has proposed adding two more GOP seats to the telecommunication= s=20 subcommittee, which had 15 Republicans last session when it was called the= =20 telecommunications, trade, and consumer protection subcommittee. Assuming= =20 committee approval for that expansion, new telecom subcommittee Republicans= =20 will be its Chairman Fred Upton (Mich.), Michael Bilirakis (Fla.), Joe Bart= on=20 (Texas), Thomas M. Davis III (Va.), and John B. Shadegg (Ariz.). Rep. Clif= f=20 Stearns (R., Fla.), who was on the panel during the last Congress, will be= =20 its vice chairman. Commerce Committee Ranking Democrat John D. Dingell (Mich.) will wait for t= he=20 House leadership to agree on the size of the Commerce Committee before movi= ng=20 to select new committee members and announcing his subcommittee assignments= ,=20 a Dingell spokeswoman said. That could happen =0F"early [this] week,=0F" s= he said. The telecom subcommittee=0F's first hearing of the 107th Congress is schedu= led=20 for Feb. 8. The hearing will focus on ICANN=0F's recent selection of regis= try=20 operators for new top-level domains. Powell To Lead with Review Of FCC Operational Changes With a Republican administration in place for the first time since the=20 passage of the Telecommunications Act of 1996, GOP insiders appearing at la= st=20 week=0F's Comnet convention in Washington said the political landscape was = ripe=20 for overhauling the FCC. Key congressional and FCC staffers predicted that federal policy-makers wou= ld=20 launch major efforts this year to (1) curb the Commission=0F's authority to= =20 impose =0F"voluntary=0F" conditions on merger applications, (2) update the = agency=0F's=20 traditional common carrier rules, and (3) pressure the FCC to accelerate it= s=20 decision making. =20 The Republican-heavy panel also saw spectrum- management issues=0F-includin= g the=20 identification of new spectrum for third-generation wireless services=0F-to= pping=20 the Bush administration=0F's telecom agenda. Lauren J. (Pete) Belvin, an attorney at Wilkinson Barker & Knauer LLP, said= =20 history proved that telecom policies inevitably would come to the forefront= =20 of the Bush administration =0F"whether the administration is deeply involve= d=20 with telecom or not.=0F" Ms. Belvin is a former FCC and Senate staffer. =0F"Telecom [policy-making] happens,=0F" Ms. Belvin said, because =0F"the m= arket pipes=20 its tune, there=0F's a reaction to it, and the FCC is at front and center.= =0F" Recently designated FCC Chairman Michael K. Powell=0F's first order of busi= ness=20 will be to determine which of the Commission=0F's operations are =0F"messed= up,=0F"=20 said Peter Tenhula, Mr. Powell=0F's senior legal adviser. =0F"We=0F'll pro= bably start=20 with initiatives that may not be regulatory or deregulatory but more=20 operational,=0F" Mr. Tenhula said. =20 During his first week as chairman, Mr. Powell received numerous complaints= =20 about the slow pace of the FCC=0F's decision-making process, Mr. Tenhula sa= id. =0F" Right now, 80% of the FCC=0F's agenda is reactive instead of proactive, whe= re it=0F' s responding to a petition for rulemaking or a [section] 271 application,= =0F"=20 Mr. Tenhula said. =0F"At the top of the chairman=0F's agenda will be refor= ming the=20 operation of the Commission=0F" and =0F"expediting its decision making,=0F"= he said. Mr. Tenhula suggested that Chairman Powell also would reexamine whether=20 obtaining the authority to provide in-region interLATA (local access and=20 transport area) services still is an incentive to encourage the Bell=20 operating companies to open their local exchange markets to competition. = =20 Under section 271 of the Telecommunications Act of 1996, the Bells must=20 satisfy a 14-point =0F"competitive checklist=0F" of market-opening requirem= ents=20 before receiving the FCC=0F's blessing to offer interLATA services. =0F"I=0F'm sure that more [section 271 applications] are going to be filed = in the=20 future, but whether or not [in-region interLATA service authorization] is a= =20 yummy enough carrot anymore, I=0F'm not sure,=0F" Mr. Tenhula said. =0F"At= the time=20 of the Act, though, it sure looked yummy,=0F" he said. A reexamination of the section 271 process couldn=0F't come soon enough, sa= id=20 Howard Waltzman, the recently named telecom counsel to the House Energy and= =20 Commerce Committee. Technology has =0F"overtaken legislation,=0F" he said,= =0F"and=20 what has been happening in the marketplace has eviscerated many parts of th= e=0F"=20 Act. Policy-makers need to =0F"reevaluate some of the core parts of the Act and= =20 determine. . .whether or not they=0F're hindering investment and innovation= ,=0F" he=20 said. =20 He predicted a groundswell of bipartisan support in the newly elected=20 Congress for limiting the FCC=0F's role in reviewing merger-related license= =20 transfers, as well as limiting its ability to impose conditions on section= =20 271 and merger applications. Congress will be looking at =0F"what we can do to change the agency to make= it=20 more efficient,=0F" Mr. Waltzman said. =0F"The biggest frustration with th= e way=20 the FCC implemented the telecom act under the Clinton administration was th= at=20 the processes were too slow,=0F" he said. Asked to comment on the financial struggles of competitive local exchange= =20 carriers (CLECs), Mr. Waltzman said the CLECs=0F' financial woes don=0F't = portend=20 an end to local exchange competition. Cable TV providers and wireless=20 carriers also are deploying alternative local phone service, he noted. Verizon=0F's Strigl Has Spectrum Plan In a keynote address at the Comnet conference, the head of Verizon Wireless= =20 said that with the growth of the wireless data sector creating demand for= =20 spectrum, federal regulators must adopt a consistent, market-based approach= =20 to allocating frequencies. =0F"We need to ensure that the precious spectrum we have reaches its fulles= t=20 potential through a competitive and forward-looking policy,=0F" Verizon Wir= eless=20 Chief Executive Officer and President Dennis F. Strigl said. =0F"Marketpla= ce=20 forces of fair and open competition should be the sole basis for awarding= =20 spectrum, not artificial controls like caps on spectrum. . .or limitations= =20 based on allowances or set-asides for various groups.=0F" Regarding the wireless Internet, Mr. Strigl said that to be successful, U.S= .=20 carriers must create =0F"a unique Internet experience.=0F" He added that h= is=20 company is not =0F"replicating what is done on the desktop.=0F" =0F"Deep customization of both content and delivery=0F" will drive the succ= ess of=20 the wireless Web, Mr. Strigl said. Examples of this include alerts sent to= =20 wireless devices that can notify their users when preselected stocks hit a= =20 certain price or when schools are closed during inclement weather, he said.= =20 Or users can access data such as weather or flight information. Two-way te= xt=20 messaging is another feature Mr. Strigl said he expected to help drive the= =20 growth of the wireless data sector. As for the devices themselves, he said, =0F"we need compelling wireless=20 appliances.=0F" He expects =0F"nontraditional handsets=0F" such as persona= l digital=20 assistants (PDAs) with voice capability to become more popular. He stresse= d=20 the need for technical standards to promote the use of various devices. Mr. Strigl said all major U.S. wireless carriers this year would be=20 aggressively forming alliances with applications providers and Internet=20 vendors in hopes of promoting the growth of mobile e-commerce. He touted the potential of location-based services and vehicle-based=20 telematics. However, he acknowledged the industry needs to protect=20 consumers=0F' privacy when offering location-based services, and he said it= must=20 encourage responsible driving when using telematic applications. Tauzin Demands Report on Critical Infrastructure=20 House Energy and Commerce Committee Chairman W.J. (Billy) Tauzin (R., La.) = is=20 demanding that the National Security Council provide his panel with a copy = of=20 a 200-page critical infrastructure report that he says was required by law = to=20 be transmitted to Congress by Jan. 15 but never arrived. The lawmaker also is seeking further information about published reports th= at=20 former President Clinton waited until the end of his term before naming=20 members to the National Infrastructure Assurance Council, even though the= =20 NIAC had been established by executive order in the summer of 1999. =20 =0F"I am concerned that President Clinton waited until his last full day in= =20 office to finally appoint the first group of members to this critical=20 council,=0F" Rep. Tauzin said in Jan. 25 letter to Richard Clarke, NSC nati= onal=20 coordinator-infrastructure protection and counterterrorism. =20 The executive order had called for the 30-member panel to propose and devel= op=20 new ways for the public and private sectors to cooperate on telecom and=20 information infrastructure issues (TR,July 19, 1999).=20 Rep. Tauzin has asked Mr. Clarke to turn over to the committee the names of= =20 the last-minute NIAC appointees and to =0F"indicate whether your office=20 recommended each of these individuals for a position on the NIAC and, if no= t,=20 specify the individual or entity that recommended such person.=0F" In requesting a copy of the overdue infrastructure report, Rep. Tauzin also= =20 questioned why the study =0F"was, in fact, prepared but never signed by=0F"= former=20 President Clinton. =0F"Under the Defense Authorization Act of 2001, this r= eport=20 was required to be transmitted to the Congress by Jan.15, 2001,=0F" he note= d. Rep. Tauzin originally had asked Mr. Clarke to provide the committee with t= he=20 information by Wednesday, Jan. 31. But a committee spokesman said the pane= l=20 had decided to give the NSC =0F"more leeway=0F" in meeting that deadline = =0F"because=20 of transition issues=0F" related to the change in presidential administrati= ons. AT&T Execs See Hope of Truce In Long Distance Price Wars AT&T Corp. executives believe they=0F're seeing at least a temporary cease-= fire=20 in the long distance rate wars that have ravaged the revenue streams of=20 incumbent interexchange carriers (IXCs). =0F"Pricing still is aggressive, = but=20 it is not setting new lows,=0F" AT&T Chairman and Chief Executive Officer C= .=20 Michael Armstrong said Jan. 29 during a conference call with financial=20 analysts to discuss the company=0F's year 2000 financial results. Analysts warn, however, that any equilibrium in the IXC sector may be=20 temporary. =0F"Some have noted that long distance pricing has stabilized, = which=20 recent data support,=0F" said Frank J. Governali, an analyst for Goldman, S= achs=20 & Co., in a report. =0F"But expecting long term =0F`price stability=0F' in= long=20 distance in our view is not realistic.=0F" Lower rates will spur greater demand, but demand growth won=0F't be enough = to=20 offset the lower rates, said Daniel P. Reingold, managing director-equity= =20 research at Credit Suisse First Boston Corp. The market will become more= =20 competitive as Bell companies win approval to offer in-region interLATA=20 (local access and transport area) service, and new entrants like Global=20 Crossing Ltd. and Qwest Communications International, Inc., will continue= =20 their incursions, Mr. Reingold said in a report. Mr. Reingold has no rating on AT&T, but he gives WorldCom, Inc., a =0F"hold= =0F"=20 rating because of its reliance on long distance revenue. =0F"Our concern r= uns=20 far deeper than price competition and [Bell company entry] in the voice lon= g=20 distance business,=0F" he said. =0F"Rather, it runs to pricing in the long= -haul=20 data-transport segment as well.=0F" WorldCom=0F's 2000 financial results, scheduled to be unveiled Feb. 8, are= =20 likely to show the same weakness as those of Sprint Corp. and AT&T. Last= =20 week, Sprint reported a 17% decline in long distance operating income for t= he=20 fourth quarter of 2000 compared with figures for the year-ago quarter,=20 despite an 18% increase in long distance calling volumes. AT&T=0F's consumer services unit, which relies heavily on long distance rev= enue,=20 posted a 9.5% decline in year 2000 sales. The long distance turmoil hit AT= &T=0F' s business services unit, too. Because of its reliance on revenue from voi= ce=20 long distance services, the business unit=0F's annual revenue increased onl= y=20 3.3%, AT&T executives said. But the price war didn=0F't seem to hurt Verizon Communications, Inc., a=20 relatively new entrant in the interLATA service market. Verizon=0F's inter= LATA=20 service revenue increased $55 million in the fourth quarter, the company sa= id=20 last week. AT&T executives suggested that new competitors like Verizon would have more= =20 effect on market share than on rates. Low rates will continue to cause pai= n=20 because customers still are migrating to cheaper calling plans, but AT&T=0F= 's=20 larger woe is the continuing loss of long distance subscribers to Bell=20 companies, wireless service providers, and other new rivals, executives sai= d. AT&T has tried to boost its sagging fortunes by offering local service. =20 Bundles of local and long distance service are thought to be popular with= =20 consumers and profitable for carriers. Verizon=0F's success in the interLA= TA=20 service markets of New York stems largely from its dominance in that state= =0F's=20 local service markets. But AT&T=0F's efforts to compete as a local service provider are hamstrung = by=20 the prices it must pay incumbent local exchange carriers for unbundled=20 network elements (UNEs), Mr. Armstrong said. =0F"If there is an open marke= t, we=20 can compete,=0F" he said, noting that AT&T corralled 750,000 customers for = its =0F" any distance=0F" service in New York. That state has one of the most open = and=20 competitive local telephone markets in the nation, he said. But in other states, AT&T=0F's local-service efforts have fallen flat becau= se of=20 UNE rates, Mr. Armstrong suggested. =0F"The way that the markets have been= =20 opened is not operationally or economically viable,=0F" he said. That leav= es=20 AT&T dependent on its shrinking long distance business for revenue, and on= =20 its cable telephony business as a way to break into local-service markets. Verizon Wireless is rolling out its two-way text messaging service,... Verizon Wireless is rolling out its two-way text messaging service, Mobile= =20 Messenger, in more than 200 markets. Subscribers with two-way text messagi= ng=0F- capable phones can send and receive messages of up to 120 characters. They= =20 can either sign up for one of two rate plans or pay two cents for each=20 message received and a dime for each message sent. One rate plan is $2.99 = a=20 month and includes 100 free messages, while another is $7.99 a month and=20 includes 600 messages. All messaging fees will be waived until April 1. Versatel Absorbs VersaPoint, Cuts Workers, Writes Off Assets Versatel Telecom International NV has absorbed what remains of VersaPoint= =0F-its=20 former joint venture with NorthPoint Communications Group, Inc.=0F-after cu= tting=20 most of the workforce and halting many of the operations of the money-losin= g=20 business. It said it would be writing off redundant assets. Before NorthPoint=0F's recent filing for bankruptcy protection (TR, Jan. 22= ), it=20 arranged sell its 50% stake in VersaPoint to Versatel for $6.5 million. Th= e=20 companies created the venture less than a year ago. According to Versatel Chief Executive Officer Raj Raithatha, the company=20 remains committed to Versa-Point=0F's strategy of deploying digital subscri= ber=20 line (DSL) service to compete against European incumbent network operators.= =20 But VersaPoint focused on wholesale DSL markets and staked out a large=20 European territory that included France and the United Kingdom. =20 Versatel=0F's focus is more narrow, offering retail service to business=20 customers in the Netherlands, Belgium, Luxembourg, and northwestern Germany= ,=20 Mr. Raithatha said. Versatel is happy to take control of VersaPoint=0F's assets, especially its= =20 central office (CO) collocations in the Netherlands, where =0F"space is at = a=20 premium,=0F" Mr. Raithatha said. =0F"It was particularly important that we= secure=20 the Dutch COs.=0F" Still, many of VersaPoint=0F's assets are redundant or are not crucial to= =20 Versatel=0F's plans, he said. Of 286 VersaPoint workers, 200 will be laid = off. =20 About 1,000 CO collocations that were planned or operational are being=20 abandoned because they lie outside Versatel=0F's territory, Mr. Raithatha s= aid. The VersaPoint acquisition is a mixed financial bag for Versatel, which wil= l=20 have to absorb VersaPoint=0F's projected EBITDA (earnings before interest,= =20 taxes, depreciation, and amortization) loss of $9.3 million. Versatel will= =20 take a charge of $4.6 million to account for the layoffs and the write-off = of=20 redundant assets. But Versatel will be able to redeploy the $70 million it had planned to=20 invest this year in VersaPoint. With that additional money, Versatel won= =0F't=20 have to seek additional funding for at least two years, and by then it=20 expects to be profitable, Mr. Raithatha said. E.spire Mulls Reverse Split To Meet Nasdaq=0F's Conditions The Nasdaq Listing Qualifications Panel has agreed to continue listing=20 e.spire Communications, Inc.=0F's securities on the Nasdaq National Market,= but=20 the financially struggling carrier will have to boost its stock price if it= =20 wants to stay there past April 2. Under conditions set by the Nasdaq panel, e.spire must demonstrate a closin= g=20 bid price of $5 per share by April 2 and maintain its closing bid price at= =20 that level for 10 consecutive trading days. To accomplish that, e.spire is= =20 considering a =0F"reverse stock split,=0F" the company said. =20 The company also must complete a restructuring of its bond indebtedness by= =20 April 2, the Nasdaq panel said. If it accomplishes both those goals, the= =20 panel would consider listing e.spire=0F's stock under Nasdaq=0F's =0F"alter= native=20 listing standards,=0F" requiring net tangible assets of at least $4 million= . E.spire will need additional funding to survive until April. It is due to= =20 run out of cash this month. A spokeswoman said e.spire was =0F"working 24/= 7=0F" to=20 try to secure additional capital. Meanwhile, e.spire said the U.S. District Court in Baltimore had dismissed= =20 with prejudice a class action lawsuit against the company and some of its= =20 former officers and directors. The lawsuit alleged that e.spire had used= =20 improper accounting methods to overstate its earnings for 1999. =20 =0F"Having fought and won this case, we can turn our focus fully on buildin= g=20 shareholder value,=0F" said George F. Schmitt, e.spire chairman and acting = chief=20 executive officer. Convergent To Cut Workforce, Close Offices Convergent Communications, Inc., plans to reduce its workforce by 22% and= =20 close five offices in an effort to reduce its monthly losses by $3 million,= =20 the telecom systems integrator has said. Convergent, of Englewood, Colo.,= =20 already has eliminated 11 offices by selling its PBX and key telephone syst= em=20 businesses to Inter-Tel, Inc. (TR, Jan. 8, notes). Convergent will boost its data service sales force from 85 people to 155=20 people as part of its new focus on the data business, said Joseph Zell,=20 president and chief executive officer. Early Talks with WRC-03 Nations Seen As Key for U.S. Success It=0F's important for U.S. officials to consult with other nations as they= =20 prepare for the International Telecommunication Union=0F's 2003 World=20 Radiocommunication Conference (WRC-03), FCC officials and industry=20 representatives agree. =0F"One of the best ways of achieving a tremendous amount at WRC is. . .[by= ]=20 listening to our compatriots in other countries, listening to their thought= s=20 as to what should be done,=0F" Commissioner Susan Ness said last week at th= e=20 opening meeting of an industry advisory committee helping the agency draft= =20 proposals for the WRC-03. =0F"And to the extent that we can work with these other countries to achiev= e=20 their goals at the same time we=0F're trying to formulate our goals, we=0F'= re going=20 to have a much more successful and less confrontational radio conference,= =0F"=20 Ms. Ness added. She noted that WRC-03 would be the fourth such conference= =20 since she became a member of the Commission. Donald Abelson, chief of the FCC=0F's International Bureau, agreed that the= =20 lesson the FCC had learned from past conferences =0F"is the sooner we get t= o=20 talk to our foreign colleagues and coordinate with them, the better our=20 proposals are.=0F" Mr. Abelson said the advisory committee would be important because it would= =20 help the FCC develop WRC-03 proposals it can present to other federal=20 agencies, such as the Commerce and State departments. Those proposals eventually would be the subject of consultations with=20 regulators from other countries leading up to WRC-03. Peter A. Tenhula, senior legal adviser to Chairman Michael K. Powell, agree= d=20 that early planning was essential for a successful WRC-03. Full Slate of Issues Among the issues the advisory committee wants addressed at WRC-03 are (1)= =20 spectrum for third-generation (3G) services, also known as International=20 Mobile Telecommunications-2000 (IMT-2000); (2) terrestrial wireless=20 interactive multimedia services; (3) spectrum sharing in the 40 gigahertz= =20 band; (4) aeronautical mobile-satellite services; (5) public protection and= =20 disaster relief; (6) interregional sharing issues for broadcasting satellit= e=20 services; (7) high-frequency broadcasting service; and (8) regulatory=20 procedures governing satellite networks. Much of the advisory panel=0F's work will be done by seven informal working= =20 groups focusing on specific issues, said Brian Fontes, chairman of the=20 advisory committee and vice president-federal regulation at Cingular Wirele= ss=20 LLC. Mr. Fontes is a former FCC chief of staff who led the U.S. delegation= =20 at the 1995 WRC. Jennifer Warren, senior director-telecom trade and=20 regulatory affairs at Lockheed Martin Corp., is the panel=0F's co-chair. Many of the issues the panel will explore are contentious, Mr. Fontes said.= =0F" I know full well as a member of a competitive industry that there=0F's a lo= t of=20 competition among the U.S. industry interests and that competition will rea= r=20 its head in various debates and discussions,=0F" he added. =0F"There are a= lso=20 differences between government and industry about how spectrum should be=20 used.=0F" But after all the issues have been debated, Mr. Fontes said, it=0F's import= ant=20 to reach a consensus=0F-and to do so in time to allow consultations with ot= her=20 countries. =0F"We=0F're going to have to recognize where we each come from and how we = best can=20 work cooperatively and constructively together,=0F" he said. =0F"No more d= o we=20 have the luxury of waiting to the last moment to achieve the U.S.=20 objectives. We must be prepared well in advance.=0F" Julie Garcia, director of the FCC=0F's WRC-03 preparation team, said the ag= ency=20 was listening to industry feedback about how to improve its conference=20 planning. =0F"This is an ongoing process,=0F" she said. =0F"We will conti= nue to look=20 for ways that we can take the industry=0F's view into account.=0F" U.S. officials who participated in WRC-2000 last year felt that they were= =20 successful on issues such as broadcasting satellite service and IMT-2000=20 planning (TR, June 5, 2000). Bureau OKs Satellite Operators For Intersatellite Communications The FCC=0F's International Bureau has modified the licenses of 10 operators= of=20 geostationary orbit (GSO) satellite systems, enabling them to provide fixed= =20 satellite services in parts of the Ka-band. The license modifications allo= w=20 them to operate intersatellite service links (ISLs) using that spectrum. The bureau said that it could permit the operators to provide ISL services = as=20 a result of decisions made at the 1997 World Radiocommunication Conference= =20 (WRC-97) and in light of the operators=0F' studies on sharing the ISL spect= rum. =20 WRC-97 resolved technical issues regarding GSO satellite transmissions and= =20 assigned the 65=0F-71 gigahertz band for ISL use by fixed satellite service= =20 (FSS) providers. The FCC subsequently reserved that spectrum for=20 nongovernment use. The bureau granted the ISL license modifications to PanAmSat Corp., Teledes= ic=20 LLC, Loral Corp., Hughes Communications Galaxy, Inc., Astrolink Internation= al=20 LLC, CyberStar Licensee LLC, EchoStar Satellite Corp., and WB Holdings 1 LL= C,=20 GE American Communications, Inc., and Motorola, Inc. In a series of =0F"or= ders=20 and authorizations=0F" released Jan. 31, the bureau assigned each operator = a=20 frequency. In some cases it also set system build-out =0F"milestones=0F" t= hat=20 operators must meet to retain the modified licenses. Section 25.145(f) of the FCC=0F's rules states that a Ka-band GSO FSS licen= see=20 must (1) begin construction of its first satellite within one year of grant= ,=20 (2) begin construction of the remainder within two years, (3) launch at lea= st=20 one satellite into each of its assigned orbit locations within five years,= =20 and (4) launch the remainder of its satellites by the date required by the= =20 International Telecommunication Union. The bureau also issued a Jan. 30 order modifying VisionStar, Inc.=0F's lice= nse=20 to launch and operate a satellite system in GSO to provide FSSs. The burea= u=20 gave VisionStar 500 MHz of additional downlink operating frequencies for=20 satellite-to-user transmissions, bringing its total to 1,000 MHz. =20 DoJ, FBI Want Foreign Control Of DT Limited by FCC Conditions The U.S. Department of Justice and the Federal Bureau of Investigation say= =20 they have reached an agreement with VoiceStream Wireless Corp. and Deutsche= =20 Telekom AG that reduces the law enforcement, national security, and public= =20 safety risks of DT=0F's planned acquisition of VoiceStream. In December 2000, the law enforcement authorities and the companies asked t= he=20 FCC to defer a decision on the transaction until the outstanding concerns= =20 could be resolved (TR, Dec. 25, 2000). DoJ and the FBI now say they won=0F= 't=20 oppose the FCC=0F's approving license transfers associated with the transac= tion=20 as long as the terms of their agreement with the carriers are conditions of= =20 the approval. In a petition filed with the FCC in International docket 00-187, DoJ and th= e=20 FBI said the agreement pays particular attention to the German government= =0F's=20 control or influence over DT. DT says the government is not involved in it= s=20 operations. The German government currently owns 60% of DT; its interest i= n=20 the combined entity would decline to about 45% after DT=0F's acquisitions o= f=20 VoiceStream and Powertel, Inc. Among other things, the agreement stipulates that DT shall not disclose=20 classified or sensitive information, subscriber information, or transaction= al=20 or call data to any foreign government. It also requires DT officials to= =20 notify the FBI and DoJ if a foreign government attempts to participate in= =20 day-to-day management of DT or exercise control of it in a way that=20 interferes with the carrier=0F's obligations to abide by the agreement. Th= e=20 agreement was reached Jan. 12. =0F"Although the agreement does not eliminate every law enforcement, nation= al=20 security, or public safety risk posed by the proposed transactions, it does= =20 reduce those risks while affording the companies treatment consistent with= =20 other carriers in like circumstances,=0F" the FBI and DoJ said in their pet= ition. Intelsat Told To Disclose Privatization Info The FCC=0F's International Bureau has required Intelsat LLC to disclose cer= tain=20 information=0F-including its draft shareholder=0F's agreement and bylaws=0F= -to parties=20 who agree to be bound by a protective order. =20 Intelsat LLC is the privatized entity slated to succeed the intergovernment= al=20 organization Intelsat this spring. On Dec. 18, 2000, it asked for=20 confidential treatment of =0F"supplemental=0F" information it was filing in= the FCC=0F' s proceeding to determine whether the privatization complies with a U.S. la= w=20 passed last year (the Open-Market Reorganization for the Betterment of=20 International Telecommunications Act). =20 In its order released Jan. 29, the FCC required Intelsat LLC to file copies= =20 of the most up-to-date versions of its novation agreement, distribution=20 agreement, and related documents within seven days after the March Intelsat= =20 board of governors meeting. The FCC also extended the deadlines for=20 commenting on the supplemental filing. Comments now are due Feb. 22;=20 replies, March 5; and responses to replies, March 12. Don=0F't Exempt Foreign Agencies From Ex Parte Rules, Carriers Say Only two carriers weighed in on the FCC=0F's proposal to exempt foreign=20 regulators from rules requiring them to report on their communications with= =20 FCC officials, but both vehemently opposed the plan. They said the rules= =20 protect regulated entities by making the FCC=0F's deliberations =0F"transpa= rent.=0F" Communications from the U.S. Department of Justice or the Federal Trade=20 Commission regarding =0F"a telecommunications competition matter in a proce= eding=20 which has not been designated for hearing and in which the relevant agency = is=20 not a party or commenter=0F" are exempt from the FCC=0F's rules requiring p= arties=20 to report such ex parte communications. In December 2000, the FCC proposed= =20 widening that exemption to include =0F"international and foreign government= al=20 bodies that exercise similar jurisdiction over relevant matters=0F" (TR,Dec= . 18,=20 2000). =20 In a rulemaking notice released in General Counsel docket 00-219, the FCC= =20 cited increased globalization and international mergers as reasons for the= =20 proposed rule change. The FCC said the rule change would encourage =0F" effective, expedited, and consistent=0F" communications among antitrust and= =20 competition policy-makers. The Competitive Telecommunications Association said extending the exemption= =0F" would impair significantly both the due-process rights of parties=20 participating in affected proceedings as well as the FCC=0F's ability to re= nder=20 a decision based on a complete record.=0F" =20 Communications between the FCC and foreign regulators raise different=20 questions from those between the FCC and DoJ or the FTC, CompTel said. It= =20 argued that foreign regulatory bodies =0F"operate under laws and regulation= s=20 that may embody substantially different competition goals=0F" than the FCC= =20 pursues, unlike DoJ or the FTC, which operate under a =0F"complementary=20 statutory scheme.=0F"=20 Many foreign governments maintain interests or have close ties to =0F"comme= rcial=20 enterprises that may be affected by the FCC=0F's decisions in merger cases,= =0F" it=20 continued. =20 And Vodafone Group plc, through its business unit Vodafone Americas Asia=20 Region, Inc., said the rationale behind the rule change the FCC cited was= =20 insufficient. If the FCC wanted to communicate with foreign regulators =0F= "on=20 general methods of analysis, for example, or general approaches to evaluati= ng=20 licenses transfers,=0F" those communications would not fall under ex parte= =20 rules. The rulemaking notice =0F"does not explain why, in the context of a= =20 specific proceeding, the ex parte rules hinder exchange of information,=0F"= it=20 said. Vodafone questioned whether the FCC has authority under the federal=20 Administrative Procedure Act to =0F"afford foreign government agencies the = same=20 treatment as [domestic] regulatory agencies.=0F" The APA=0F's =0F"whole re= cord=0F" and=20 due-process safeguards that ensure that parties may comment on the entire= =20 record of a proceeding are underlying principles of federal agencies=0F' ex= =20 parte rules, Vodafone said. The APA makes an =0F"express distinction=0F" b= etween=20 U.S. and non-U.S. government agencies, it added.=20 Vodafone acknowledged that there might be situations in which disclosure of= =20 an interagency ex parte communication =0F"is not advisable.=0F" But it sai= d the=20 FCC should address those situations case by case. Unlicensed International Carriers Given 90 Days To Come Forward The FCC=0F's International and Enforcement bureaus have given carriers and= =20 operators 90 days to turn themselves in if they=0F've been offering=20 international services or facilities without proper authorization. The=20 International Bureau doesn=0F't =0F"expect=0F" to undertake enforcement act= ions=20 against violators that come forward and seek the required authorization, bu= t=20 cases of noncompliance discovered after the three-month period will be=20 referred to the Enforcement Bureau, the two bureaus said. Their actions were prompted by requests from =0F"a number=0F" of carriers f= or=20 authorization to provide international services, after they were already=20 doing so, the bureaus said in a Jan. 30 public notice. They also cited=20 instances of companies=0F' belatedly seeking permission to assign or transf= er=20 control of their authorizations to provide international facilities or to= =20 land submarine cables. The 90-day period will begin on the date the public notice appears in the= =20 Federal Register. Once the notice is published, the International Bureau= =0F's=20 Telecommunications Division =0F"will be extremely reluctant to grant reques= ts=20 for nunc pro tunc approval [as though timely filed] of belatedly filed=20 applications,=0F" the notice says. Section 214 of the Communications Act of 1934, as amended, requires carrier= s=20 to obtain FCC authorization before they begin providing international telec= om=20 services. FCC Delays 700 MHz Auction Again at Request of Industry Major wireless carriers are praising the FCC=0F's decision to postpone, for= the=20 fourth time, an auction of spectrum licenses in the 700 megahertz band. Bu= t=20 a group representing rural carriers and a major TV broadcaster say the acti= on=20 wasn=0F't necessary. The decision to postpone the auction from March 6 until Sept. 12 was needed= =0F" to provide additional time for bidder preparation and planning=0F" and for = other=20 auction administrative reasons, the FCC=0F's Wireless Telecommunications Bu= reau=20 said in a public notice released Jan. 31. The action came after Verizon Wireless and other large carriers cited a hos= t=20 of concerns they said could dampen enthusiasm for bidding on the=20 frequencies. In a Jan. 18 letter to the Wireless Telecommunications Bureau= ,=20 Verizon Wireless said carriers needed time to assess their spectrum needs a= nd=20 form alliances between the reauction of =0F"C=0F" and =0F"F=0F" block PCS (= personal=20 communications service) licenses and the 700 MHz band sale (TR,Jan. 22). T= he=20 PCS reauction ended Jan. 26 (TR,Jan. 29; and separate story). Large carriers had supported in comments Verizon Wireless=0F' request for a= =20 postponement; some asked for the auction to be postponed even longer than t= he=20 six months Verizon Wireless had requested (TR,Jan. 29). Other reasons the industry cited in urging a delay included concerns that (= 1)=20 TV broadcasters occupy large chunks of the spectrum to be licensed and=20 additional time is needed to negotiate band-clearing agreements with them;= =20 (2) companies need more time to prepare for package-bidding rules that will= =20 be used for the first time in the auction; and (3) a high-level effort to= =20 identify and allocate frequencies for third-generation (3G) services will= =20 affect carriers=0F' interest in the 700 MHz band. Commissioner Harold W. Furchtgott-Roth opposed the postponement, noting tha= t=20 the FCC already had missed a Sept. 30, 2000, statutory deadline for=20 depositing proceeds from the auction into the U.S. Treasury. =0F"I am=20 disappointed that the Commission has decided to postpone this auction once= =20 again,=0F" he said in a statement. =0F"With each succeeding delay, the cre= dibility=20 of our spectrum and auction-management policies becomes more suspect.=0F" Commissioner Gloria Tristani, who dissented from the FCC=0F's decision last= year=20 to postpone the auction to this March, said she did not oppose the latest= =20 delay. She cited the short time frame between the C and F block auction an= d=20 the 700 MHz band sale. =0F"At this point, the scheduling problems before us are of a different nat= ure=20 and largely of this agency=0F's own making,=0F" she said. =0F"The challeng= es posed by=20 the early auction of 700 MHz spectrum need not be burdened further by=20 unfortunate administrative miscalculations. The bureau asserts that this= =20 delay is necessary to address these administrative matters.=0F" Large Carriers Welcome Delay Verizon Wireless President and Chief Executive Officer Dennis F. Strigl=20 praised the FCC=0F's decision. =0F"I think the FCC made exactly the right = move,=0F"=20 Mr. Strigl said after a keynote address at the Comnet Conference & Expo in= =20 Washington last week (see separate story). He said the presence of TV=20 broadcasters in the band =0F"will have a significant impact on the value of= this=20 spectrum.=0F" He added, =0F"At this point, I can=0F't tell you that the ne= w spectrum=20 has high value.=0F" Broadcasters are expected to vacate the spectrum (channels 60=0F-69) as par= t of=20 their transition to digital TV, but they don=0F't need to do so until 2006 = at=20 the earliest. The uncertainty over when the frequencies will be available= =20 has created anxiety among wireless carriers considering bidding in the=20 auction. Thomas E. Wheeler, president and CEO of the Cellular Telecommunications &= =20 Internet Association, also praised the FCC=0F's decision. =0F"We need to t= ake a=20 quick breath before plunging into the next round of spectrum bidding so tha= t=20 carriers can assess their spectrum needs and develop bidding strategies,=0F= " he=20 said. But several TV broadcasters and a group representing rural carriers opposed= =20 any further delay. They said that carriers had had plenty of time to prepa= re=20 for the auction and that further delay would be unfair. =0F"There didn=0F't seem to be any justification for another delay,=0F" sai= d Nancy=20 Udell, vice president-media relations for Paxson Communications Corp., the= =20 largest incumbent broadcaster in the spectrum to be auctioned. But =0F"sin= ce=20 the FCC has spoken, we=0F're ready to participate=0F" in any band-clearing= =20 negotiations, she added. Brent Weingardt, an attorney for the Rural Telecommunications Group (RTG),= =20 also criticized the postponement. =0F"There=0F's little pretense that the= =20 Commission only views auctions in terms of how much revenue they can=20 generate. . .and they=0F're willing to assist larger companies, who are the= only=20 ones that are going to be able to compete in that auction,=0F" he said. = =0F"We don=0F' t see any other public interest in postponing it.=0F" Mr. Weingardt said he didn=0F't expect RTG members to participate in the au= ction=20 but said his group opposed a further delay on =0F"principle.=0F" Analysts Assess Effect Wall Street analysts saw the auction delay as either positive or neutral fo= r=20 carriers. =0F"The additional six months until the start of the auction giv= es=20 both the FCC and the potential bidders quite a bit of time to ready=20 themselves,=0F" said John M. Bensche, an analyst at Lehman Brothers, Inc., = in a=20 note to investors. =0F"By September, the industry will hopefully have=20 appropriately addressed the various issues that remain surrounding the 700= =20 MHz band and the auction can commence without further delay.=0F" Michael I. Rollins, an analyst for Salomon Smith Barney, Inc., said the=20 delay, which he characterized as =0F"widely anticipated,=0F" was =0F"neutra= l=0F" for=20 carriers because many had indicated little interest in the 700 MHz auction,= =20 focusing instead on the C and F block sale. Cynthia M. Motz, an analyst for Credit Suisse First Boston Corp., echoed th= at=20 view. She doesn=0F't expect the bidding for 700 MHz licenses to be nearly = as=20 fierce as it was in the C and F block reauction and doubts that large=20 carriers such as Verizon Wireless, AT&T Wireless Services, Inc., VoiceStrea= m=20 Wireless Corp. and Sprint PCS will be very active. =0F"This should hopeful= ly=20 make for some attractive pricing for at least some of the licenses,=0F" Ms.= Motz=20 said in a note to investors. QUALCOMM Creates Platform To Spur Wireless Internet Apps QUALCOMM, Inc., has developed an open software platform to help spur the=20 development of applications for the wireless Internet. The binary run-time= =20 environment for wireless (BREW) platform will enable developers,=20 manufacturers, and carriers to reduce software-development costs and speed= =20 the delivery of data services to consumers, QUALCOMM said. The BREW platform was developed for devices that use CDMA (code-division=20 multiple-access) technology but eventually will be available for use with= =20 other technologies, a company spokesman said. Consumers will be able to=20 update their BREW-enabled handsets by deleting old software and downloading= =20 new programs. =0F"Compelling applications will generate consumer demand for wireless Inte= rnet=20 access, speeding the deployment of next-generation CDMA wireless services,= =0F"=20 said Paul E. Jacobs, QUALCOMM=0F's executive vice president. QUALCOMM has signed memoranda of under-standing with several wireless=20 carriers, manufacturers, and developers to use the platform, including=20 Verizon Wireless and Leap Wireless International, Inc., in the U.S., Korea= =20 Telecom in Korea, and Pegaso PCS in Mexico. QUALCOMM says BREW-enabled products are expected to be commercially availab= le=20 in some regions in the third quarter of this year. An investors note from= =20 Lehman Brothers, Inc., said BREW would be rolled out in Japan first by KDDI= =20 Corp. QUALCOMM will charge carriers a fee to use BREW and will receive a portion = of=20 fees paid by wireless device users for BREW applications. PCIA Drops Opposition To Lifting Spectrum Cap The Personal Communications Industry Association, which in the past has urg= ed=20 the FCC on behalf of small carriers to continue to limit the amount of=20 spectrum wireless carriers may hold in any one market, has declared it =0F"= will=20 no longer play an active role=0F" in the issue. In a statement released last week, PCIA President and Chief Executive Offic= er=20 Jay Kitchen said the spectrum cap had been =0F"tremendously successful.=0F"= But =0F" this issue has become moot as new spectrum is now available without=20 restrictions, leaving U.S. carriers a clear and open opportunity=0F" to off= er 3G=20 (third-generation) services, he added. Mr. Kitchen also cited PCIA=0F's =0F"focus on the development of the mobile= =20 convergence marketplace on a global level=0F" as a factor in its decision t= o=20 discontinue its =0F"active role in the spectrum cap issue.=0F" Large carriers have urged the FCC to lift the cap, saying they need more=20 spectrum to keep up with the demand for wireless services. The FCC has ask= ed=20 for comments on whether it should remove the restriction (TR, Jan. 29). France, Brazil Have Troubles Awarding Wireless Licenses French telecom regulator Authorite de Regulation des Telecommunications (AR= T)=20 has decided to organize another =0F"beauty contest=0F" in hopes of attracti= ng more=20 bidders for third-generation (3G) licenses. In its initial attempt, only t= wo=20 companies bid for four licenses on the block. Brazil had similar problems,= =20 postponing an auction of licenses Friday, Feb. 2, due to a lack of bidder= =20 interest. ART said last week that the two bids for the French licenses came from Fran= ce=20 Telecom=0F's Orange plc mobile phone service unit and Vivendi SA=0F's Ceget= el SA,=20 which owns French mobile phone operator Societe Francaise du Radiotelephone= =20 (SFR). Dropping out of the contest last week was French wireless carrier Bouygues= =20 Telecom SA. French utility Suez Lyonnaise des Eaux and Telefonica SA of=20 Spain had withdrawn from the running earlier (TR, Jan. 29). ART is selling the four UMTS (universal mobile telecommunications system)= =20 licenses for 4.95 billion euros ($4.6 billion) each. It has planned to awa= rd=20 the licenses in June. =0F"A structuring of the market around two operators only could not be=20 considered,=0F" ART said in a statement. It said that such an arrangement = =0F" would not make it possible to satisfy the objectives of development of a=20 competitive market.=0F" France is the latest European country to run into trouble selling 3G licens= es=20 in recent months after the United Kingdom and Germany raised more than $80= =20 billion auctioning such spectrum last year (TR, May 1, and Aug. 21 and 28,= =20 2000). Carriers and financial analysts have expressed concern that the high prices= =20 paid for the licenses, as well as the costs of building out systems, will= =20 make it difficult to recoup investments. Brazil Looks for Bidders In Brazil, telecom regulator Anatel announced that it was suspending its=20 planned auction of three licenses, which was scheduled to begin Feb. 6. It= =20 blamed the delay on a lack of bidders. Anatel said additional auction roun= ds=20 to sell three licenses each would be held as scheduled Feb. 20 and March 13= . =20 It said there were seven bidders each lined up for those rounds. The decision to suspend the first auction round came after a Brazilian judg= e=20 earlier last week lifted an injunction that had forced the round to be=20 delayed from Jan. 30. In other countries the following spectrum-related=20 developments occured: In Canada, Industry Canada=0F's auction of 3G PCS (personal communications= =20 service) licenses generated $1.48 billion Canadian (US$991 million) in bids= =20 for 52 10-megahertz licenses covering 16 markets. Five of the original sev= en=20 bidders won licenses in the sale, which closed Feb. 1 after three weeks and= =20 51 rounds. Bell Mobility, Inc., led all bidders, offering $720 million Canadian (US$48= 2=20 million) for 20 licenses, followed by Rogers Wireless, Inc., which bid $393= =20 million Canadian (US$263 million) for 23 licenses. TELUS Communications,= =20 Inc., came in third, bidding $355 million Canadian (US$238 million) for fiv= e=20 licenses. =0F"The licensing of this spectrum is a crucial step in improving Canada=0F= 's=20 information infrastructure,=0F" Canadian Industry Minister Brian Tobin said= . =0F" This will facilitate the development of new wireless telecommunications=20 services, bringing the Internet and other communications services, such as= =20 e-mail and mobile commerce, closer to all Canadians.=0F" In Singapore, the Infocomm Development Authority (IDA) said Jan. 30 that it= s=20 auction of fixed wireless broadband licenses would be postponed until after= =20 the country=0F's 3G auction in April or May. The fixed wireless license sa= le=20 was originally scheduled for February, as was the 3G auction (TR, Jan. 8,= =20 notes). =0F"A number of interested players have requested for more time to= =20 reassess the market situation, as well as to explore alternative=20 technologies,=0F" the IDA said. In Venezuela, telecom regulator Comision Nacional de Telecomunicaciones=20 (Conatel) Jan. 31 opened registration for an auction of LMDS (local=20 multipoint distribution service) licenses. The licenses will be auctioned = in=20 three blocks. One block will have national coverage, while the other two= =20 will provide regional footprints. Separately, Conatel=0F's auction of wire= less=20 local loop (WLL) licenses continued last week. Telefon AB L.M. Ericsson has announced a $400 million network expansion=20 contract... Telefon AB L.M. Ericsson has announced a $400 million network expansion=20 contract with Turkcell, a Turkish GSM (Global System for Mobile=20 communications) service provider. Ericsson said it would =0F"upgrade and= =20 develop=0F" the Turkcell system. FCC Sets Arbitration Schedule For Interconnection Disputes The FCC has set the schedule for arbitrating disputes between Verizon=20 Virginia, Inc., and three other carriers over interconnection agreements. = =20 The Commission said in a public notice last week that AT&T Communications o= f=20 Virginia, Inc., Cox Virginia Telecom, Inc., and WorldCom, Inc., may schedul= e=20 prefiling conferences now and submit requests for arbitration of their=20 interconnection agreements with Verizon within 30 days of the conference. In the notice, the FCC instructed the arbitrator of the proceeding to set= =20 dates for conferences and hearings on the matter. The arbitration proceedi= ng=20 will follow rules set out in the FCC=0F's 1996 =0F"local competition order= =0F" in=20 Common Carrier docket 96-98 (TR,Aug. 12, 1996). The FCC recently agreed to preempt the Virginia State Corporation Commissio= n=0F' s authority to arbitrate their interconnection pacts with Verizon (TR,Jan.= =20 22, p. 39). The state commission had refused to act in the matter, citing= =20 uncertainty over whether acting would be deemed a waiver of its immunity fr= om=20 federal court review under the 11th Amendment to the U.S. Constitution. At the same time it agreed to preempt the Virginia commission, the FCC=20 addressed generic procedural issues concerning arbitrations conducted=20 pursuant to its preemption authority in section 252(e)(5) of the=20 Telecommunications Act of 1996. In that undocketed Jan. 19 order, the FCC= =20 designated the chief of the Common Carrier Bureau to arbitrate such dispute= s,=20 with assistance from the Common Carrier and Enforcement bureau staffs. The FCC also granted the arbitrator additional flexibility in ruling on=20 disputed issues. The arbitrator has discretion to =0F"require parties to s= ubmit=20 new final offers, or adopt a result not submitted by any party, in=20 circumstances where the final offer submitted by one or more of the parties= =20 fails to comply with the Act=0F" or FCC rules, the Commission said. It also said the arbitrator could, in some circumstances, offer an=20 alternative solution even when the final offers submitted by the parties=20 complied with the Act and with FCC rules.=20 Interim arbitration procedures adopted in the 1996 local competition order= =20 allowed an FCC arbitrator in a carrier interconnection proceeding only to= =20 issue arbitration awards that were proposed as a =0F"final offer=0F" by a p= arty in=20 a proceeding.=20 Pay-Per-Call Providers=0F' Case Should Go to FCC, Court Says The U.S. District Court in New York City has dismissed a lawsuit alleging= =20 that WorldCom, Inc., unlawfully blocked calls to pay-per-call =0F"900=0F"-n= umber=20 services. District Judge John G. Koeltl told a group of pay-per-call servi= ce=20 providers to take their complaints against WorldCom to the FCC. =20 The plaintiffs charged that MCI WorldCom, Inc. (now WorldCom) violated=20 sections 201 and 202 of the Communications Act of 1934. Those provisions= =20 require common carriers to provide services under =0F"just and reasonable= =0F" terms=20 and forbid =0F"unreasonable discrimination=0F" in the provision of common c= arrier=20 services. The plaintiffs also alleged that WorldCom violated FCC rules by not providi= ng=20 sufficient notice before blocking their numbers. In LO/AD Communications, B.V.I. Ltd. et al. v. MCI WorldCom, Inc. (case no.= =20 00 Civ. 3594), the plaintiffs said WorldCom=0F's actions were motivated by = =0F" personal objections=0F" to the content of their 900-number services. The o= ther=20 plaintiffs are International Dialing Services, Inc., Ashera, Inc., and=20 Telemedia, Inc. WorldCom told the court it had discontinued service to the selected numbers= =20 after discovering that the plaintiffs unnecessarily routed their customers= =0F'=20 calls over expensive international traffic routes. WorldCom said customers believed they were making local calls and refused t= o=20 pay the unexpected international calling charges. The company said its FCC= =20 tariff allowed it to block calls =0F"to prevent unlawful use of, or nonpaym= ent=20 for, its services.=0F"=20 Citing the legal doctrine of =0F"primary jurisdiction,=0F" Judge Koeltl fou= nd that=20 the FCC should hear the complaints first. While federal courts have=20 concurrent jurisdiction with the FCC over litigation under the Act, the=20 doctrine =0F"allows a federal court to refer a matter extending beyond the= =20 conventional experiences of judges=0F" to an administrative agency with mor= e =0F" specialized experience, expertise, and insight,=0F" he noted. Aerial v. Underground Facilities Is Topic of City-CLEC Debate Municipalities and competitive local exchange carriers sparred last week ov= er=20 whether the FCC should preempt several Ohio cities=0F' authority over the= =20 placement of telecommunications facilities. Their debate centered on one question: Does requiring a competitive local= =20 exchange carrier (CLEC) to place its fiber lines underground, rather than o= n=20 aerial facilities where the incumbent=0F's facilities are located, constitu= te =0F" discrimination=0F" under section 253 of the Telecommunications Act of 1996? Predictably, the two sides split on the issue. CLECs said that subjecting= =20 them to different requirements from those faced by incumbent local exchange= =20 carriers constituted discrimination and created a =0F"barrier to market ent= ry=0F"=20 by increasing CLECs=0F' costs. Section 253(a) bars state and local governm= ent=20 actions that prevent or have the effect of preventing any entity from=20 providing any interstate or intrastate telecom service. Municipalities insisted that directing where telecommunications facilities= =20 should be placed was within the scope of authority reserved to local=20 governments under section 253 of the Act. According to section 253(c),=20 nothing in section 253 affects =0F"the authority of a state or local govern= ment=20 to manage the public rights-of-way or to require fair and reasonable=20 compensation from telecommunications providers, on a competitively neutral= =20 and nondiscriminatory basis.=0F" =20 Both sides presented their views in comments filed last week in Cable=20 Services docket 00-255. In that proceeding, City Signal Communications,=20 Inc., had asked the FCC to preempt the underground telecom line requirement= s=20 of Cleveland Heights, Wickliffe, and Pepper Pike, Ohio. It said the=20 municipalities=0F' rules prohibiting new telecommunication facilities from = being=20 placed on above-ground poles constituted an =0F"effective prohibition on en= try=0F"=20 by increasing costs for new service market entrants. AT&T Corp. said any disparity in cities=0F' treatment of incumbent telcos a= nd=20 CLECs gave the incumbents a =0F"substantial cost advantage=0F" over new ent= rants=20 and violated the FCC=0F's requirements that cities manage rights-of-ways on= a =0F" competitively neutral and nondiscrim-inatory=0F" basis. It said requiring = City=20 Signal to place its facilities underground effectively prohibited it from= =20 providing service, because the alternatives were (1) to pay the higher cost= s=20 of placing facilities underground, =0F"rendering its service noncompetitive= ,=0F" or=20 (2) to engage in a protracted negotiation and litigation.=20 Level 3 Communications LLC said the FCC had =0F"not hesitated=0F" to use it= s=20 preemptive power =0F"in cases involving treatment that could be viewed as= =20 creating barriers to entry.=0F" It cited a proceeding in CCBPol file 97-1 = in=20 which the FCC preempted a Connecticut state regulation that prohibited non= =0F- local exchange carriers from providing pay phone service (TR,Dec. 16, 1998)= . =20 In that proceeding, the FCC found that the restriction imposed additional= =20 burdens and costs, =0F"thus deterring the entry of potential competitors,= =0F" Level=20 3 recalled. It said the FCC should grant City Signal=0F's requests under t= he=20 Connecticut pay phone =0F"precedent.=0F" The Ohio cities=0F' reasoning behind the underground requirement isn=0F't = =0F" necessary to protect the public safety and welfare,=0F" Telergy Network=20 Services, Inc., said. According to section 253(b), nothing in section 253= =20 affects =0F"the ability of a state to impose, on a competitively neutral ba= sis=20 and consistent with [the Act=0F's universal service provisions], requiremen= ts=20 necessary to preserve and advance universal service, protect the public=20 safety and welfare, ensure the continued quality of telecommunications=20 services, and safeguard the rights of consumers.=0F" The Ohio cities had cited the =0F"visual blight=0F" caused by additional ae= rial=20 telecom facilities on poles. But that reasoning does not meet the high=20 standard that the FCC has used for judging state=0F's and localities=0F'=20 regulations on matters of competitive neutrality, Telergy said. =0F"By definition, if it is necessary for City Signal to place its faciliti= es=20 underground to protect the public, it must be necessary for the incumbent a= nd=20 other existing providers to place their identical facilities underground as= =20 well,=0F" Telergy said. =0F"If the =0F`visual blight=0F' of which the citie= s complain is=20 to be eliminated, all aerial facilities would have to be placed underground= .=0F" Municipalities often use such regulations as a tactic to delay the entry of= =20 CLECs into service markets, Adelphia Business Solutions, Inc., said. Case= =20 law, state legislatures, and =0F"harsh realities of the competitive marketp= lace=0F"=20 have =0F"driven home the lesson that municipal delays prevent competitive= =20 telecommunications companies from entering the market,=0F" it said. =20 A group of 50 municipalities from 13 states, including Denver; Santa Fe,=20 N.M.; Fort Worth, Texas; Detroit; and Tallahassee, Fla., defended the Ohio= =20 cities=0F' rights to set rules regarding the placement of telecom facilitie= s. =20 The Act =0F"expressly bars [the FCC=0F's] preemption authority under sectio= n 253 on=20 matters relating to right-of-way management,=0F" they said. =0F"Such matte= rs are=20 left solely to the jurisdiction of the federal courts,=0F" and the FCC has = no=20 authority to grant City Signal=0F's petition, they added. City Signal hasn=0F't made a showing of how the regulations requiring=20 underground installation constitute an =0F"effective prohibition on entry,= =0F" they=20 said. =0F"It has shown nothing with respect to the routes involved, the co= st=20 for aerial v. undergrounding construction on each. . .or how any purported= =20 cost increase compares against either the overall capital costs of the City= =20 Signal system or the revenues which City Signal expects to derive from it.= =0F" Section 253 doesn=0F't interfere with local government=0F's authority to di= rect=20 where cables and wires should be installed, the city of Richmond, Va., said= . =20 It recalled that in a 1996 order, In re Classic Telephone, Inc., the FCC=20 cited statements by Sen. Dianne Feinstein (D, Calif.) during the debate on= =20 section 253(c). Her statements dealt with the types of restrictions that= =20 local governments could impose as part of their right-of-way management. = =20 =0F"Included among those was the ability to =0F`require a company to place = its=20 facilities underground rather than overhead, consistent with the requiremen= ts=20 placed on other utility companies,=0F'=0F" Richmond recalled. The FCC =0F"and numerous courts have confirmed that the Act does not, and w= as=20 not intended to, render local governments impotent with respect to=20 maintaining control over the use of public property,=0F" it concluded. =20 AeA Advises against Regulating Competitive Broadband Markets The AeA (formerly the American Electronics Association) is advising federal= =20 policy-makers to take a hands-off approach to regulating broadband service= =20 markets with multiple providers. As examples of competitive broadband=20 markets, AeA cites =0F"residential areas served by cable, DSL [digital=20 subscriber line], and satellite providers.=0F" In a report that was submitted Jan. 29 to the White House and Congress, AeA= =20 also calls for more efforts at the federal level to promote competition in = =0F" sectors (such as multitenant buildings) where there are bottlenecks to=20 competitive entry.=0F" =20 It says the FCC should =0F"continue to show regulatory restraint with respe= ct to=20 emerging services, given the fact that the market for such services, while= =20 still nascent, is functioning in a competitive fashion.=0F"=20 Briefing reporters about AeA=0F's policy positions, AeA President and Chief= =20 Executive Officer William T. Archey said the organization=0F's report got a= =0F" favorable=0F" reception when it was presented to top White House officials.= The=20 paper reflects the views of AeA member companies that participated in a=20 series of =0F"town hall meetings=0F" last year, Mr. Archey said. The report also urges Congress to extend the current moratorium on new or= =20 discriminatory Internet taxes and permanently ban the taxation of Internet= =20 access services. The moratorium, which began in 1998, will expire in Octob= er=20 absent congressional action. The report also reiterates AeA=0F's recent ca= ll=20 for federal preemption of state privacy laws affecting e-commerce or Intern= et=20 businesses (TR, Jan. 22). Missouri PSC Faults SW Bell=0F's InterLATA Bid The Missouri Public Service Commission has decided against supporting=20 Southwestern Bell Telephone Co.=0F's efforts to obtain the FCC=0F's permiss= ion to=20 provide interLATA (local access and transport area) service in the state, P= SC=20 Commissioner Kelvin Simmons told TR. SW Bell=0F's planned application still could win the PSC=0F's backing if th= e=20 company addressed the PSC=0F's concerns, which include pricing and access t= o=20 unbundled local loops and transport, Mr. Simmons said. The PSC plans to=20 deliberate on the request again as early as Feb. 6, although a final decisi= on=20 won=0F't be issued then, he added. SW Bell intends to make changes to address the PSC=0F's concerns, a SW Bell= =20 official told TR. He said SW Bell was confident that the PSC ultimately=20 would support the petition. The FCC has the final say in determining whether a Bell company has met the= =20 14-point =0F"competitive checklist=0F" of market-opening requirements in th= e=20 Telecom-munications Act of 1996. =20 But the Act directs the FCC to consult the U.S. Department of Justice and t= he=20 relevant state regulators before deciding. CLECs Tout Effect on Economy But Seek Help from Congress Competitive local exchange carriers (CLECs) have played a major role in=20 fueling the economic growth of the last decade, according to a new study by= =20 the Association for Local Telecommunications Services (ALTS). Still, Congress should consider legislation to help CLECs overcome the=20 impediments to competition imposed by incumbent local exchange carriers=20 (ILECs), building owners, municipalities, and the financial markets, ALTS= =20 said. The report, Local Competition Policy & The New Economy,was written by ALTS= =20 Director-public policy research David A. Wolcott. He links the growth of t= he=20 Internet to partnerships between CLECs and Internet service providers=20 (ISPs). CLECs, he says, deliver about 60% of the local dial-up traffic to= =20 ISPs in the U.S. =0F"It is a symbiotic relationship that has led to increa= sed=20 competition in the two industries and has greatly impacted the virtual=20 explosion of the Internet in the United States,=0F" Mr. Wolcott writes. Broadband technology is one of the =0F"drivers that have fueled the explosi= ve=20 economic growth of the last decade,=0F" he writes. =0F"Federal Reserve Cha= irman=20 Alan Greenspan, while not singling out the [Telecommunications Act of 1996]= =20 or any other legislative initiative, has attributed much of the recent=20 productivity growth and deepening of capital markets to the communications= =20 and information technology industries.=0F" The study, however, raises a familiar list of complaints about actions of= =20 ILECs, building owners, and municipalities that it says =0F"frustrate the= =20 emergence of full and effective competition.=0F" It offers a list of=20 initiatives that Congress should consider so CLECs can continue fueling=20 economic growth. Among the legislative initiatives the association advocat= es=20 to address its complaints about ILECs are the following: (1) Separate ILECs into wholesale and retail units; (2) Allow the FCC to impose steeper penalties for violating pro-competitive= =20 directives; (3) Require that =0F"all combinations of network elements and full function= ality=20 of the loop be provided to competitors=0F";=20 (4) Extend collocation requirements to include =0F"multifunctional=0F" equi= pment; (5) Affirm the FCC=0F's pricing methodology for unbundled network elements;= and=20 (6) Permit interconnection among CLECs collocated in ILEC facilities. The ALTS study also targets building owners, with whom CLECs have been=20 feuding over the need for mandatory building access. It asks Congress to= =20 require building owners to =0F"provide nondiscriminatory access to their=20 buildings while at the same time protecting the security of the building an= d=20 ensuring that competitors pay for the costs of installing equipment.=0F" ALTS also takes aim at municipalities, which it says have caused =0F"excess= ive=20 delay=0F" by not promptly approving applications to use public rights-of-wa= y. =20 It asks Congress to do the following: (1) Ensure =0F"expeditious intervals=0F" for approving applications for acc= ess to=20 rights-of-way; (2) Require franchise fees to be based on the actual costs of managing the= =20 rights-of-way, not on a percentage of carriers=0F' revenues; (3) Bar cities from imposing =0F"unreasonable=0F" telecom and universal ser= vice=20 requirements on telecom carriers; (4) Ensure that carriers have a private right of action in the courts to=20 enforce the rights-of-way provisions in section 253 of the 1996 Act; and (5) Establish a process for obtaining rights-of-way across areas under=20 federal jurisdiction at cost-based rates and without =0F"unnecessary=20 restrictions.=0F" The study acknowledges that CLECs face =0F"financial impediments=0F" to ful= filling=20 the competitive goals of the 1996 Act. =0F"The current year will undoubted= ly be=20 a critical time for CLECs,=0F" it says, noting that some financial analysts= =20 predict half of all CLECs will file for bankruptcy protection or face=20 consolidation. To help CLECs overcome their financial hurdles, Congress should consider=20 establishing programs to extend credit to eligible carriers to finance the= =20 deployment of broadband services in rural areas, the study says. ALTS points to the proposed Broadband Internet Access Act of 2001, introduc= ed=20 in the House as HR 267 by Rep. Philip English (R., Pa.) and in the Senate a= s=20 S 88, introduced by Sen. John D. Rockefeller IV (D., W.Va.) (TR, Jan. 29). ALTS also urges Congress to establish programs authorizing the use of =0F" financial incentives=0F" for the deployment of broadband services to =0F"ta= rgeted=20 urban and rural areas.=0F" Furchtgott-Roth=0F's Departure Plan Sparks Speculation on Nominees FCC Commissioner Harold W. Furchtgott-Roth=0F's decision not to seek=20 renomination to a second term on the Commission has touched off a new round= =20 of speculation about who the Bush administration will appoint to the=20 Commission and when it will act to fill potential vacancies at the agency. Many industry and congressional observers think the White House will act=20 quickly to fill the vacancy that was created by the resignation by former= =20 Chairman William E. Kennard last month. They point to the speed with which= =20 President Bush tapped Commissioner Michael K. Powell to succeed Mr. Kennard= =20 as chairman. That announcement was made on the first business day after th= e=20 inauguration. =0F"I think they=0F're moving quickly on it. . .and we could see something = happen=20 in the next couple of weeks,=0F" former FCC Chairman Richard E. Wiley told = TR during a break at last week=0F's Comnet conference (see separate story). = =20 Mr. Wiley, who played a key role on the Bush administration=0F's FCC transi= tion=20 advisory team, said there might be a sense of urgency at the White House to= =20 name at least one GOP Commissioner to give the Republicans a majority on th= e=20 Commission. There currently are two Democrats on the five-seat FCC (Commissioners Susan= =20 Ness and Gloria Tristani) and two Republicans (Commissioners Furchtgott-Rot= h=20 and Chairman Powell). The Communications Act of 1934, as amended, prevents= =20 any one political party from appointing more than a bare majority of FCC=20 Commissioners. =20 Mentioned as possible Bush administration Republican appointees to the FCC= =20 are Patrick H. Wood III, chairman of the Texas Public Utility Commission, a= nd=20 Kevin Martin, a former adviser to Mr. Furchtgott-Roth and a central figure = in=20 the Bush administration=0F's FCC transition team (TR, Jan. 22). Earl Comst= ock,=20 a Washington attorney and former aide to Sen. Ted Stevens (R., Alaska), als= o=20 has been mentioned. Mr. Wood was seen as a possible successor to Mr. Kennard before President= =20 Bush tapped Chairman Powell for the top spot. Mr. Martin, meanwhile, has= =20 ties to the Bush administration beyond his work on the FCC transition team.= =0F" He=0F's really paid his dues and earned his stripes with the White House by= =20 helping out on the Florida ballot recount,=0F" a GOP congressional source s= aid. The White House also has the option of replacing Ms. Ness, who is serving a= =20 recess appointment that expires at the end of the first session of the 107t= h=20 Congress (TR, Dec. 25, 2000). =20 There=0F's also talk that the White House, along with nominating a new GOP= =20 Commissioner, simultaneously will nominate a Democrat to replace Ms. Ness. = =20 Democrats favor a =0F"package deal=0F" because it would make it easier for = their=20 nominees to win approval by a Republican-controlled Senate, according to a= =20 Senate source familiar with how the FCC nominations process works. =0F"It=0F's still a free-for-all right now,=0F" the source says, as numerou= s lawmakers=20 float names of individuals they would liked to see nominated to the FCC. = =0F" They=0F're also working industry, [congressional] leadership, and other mem= bers=20 of Congress for support, too,=0F" the source said. Mentioned as possible Democratic nominees are House Energy and Commerce=20 Committee Minority Staff Director Andy Levin, who is being pushed by his bo= ss=20 John D. Dingell (Mich.), and Michael I. Copps, assistant secretary of=20 commerce for trade development and a former chief of staff to Sen. Ernest F= .=20 Hollings (S.C.). =20 Former National Telecommunications and Information Administrator Gregory L.= =20 Rohde also is under consideration, sources say. Meanwhile, Mr. Furchtgott-Roth says he=0F'll remain on the Commission until= a =0F" mutually agreeable departure date is worked out=0F" with the Bush=20 administration. Mr. Furchtgott-Roth=0F's term expired last June; he can=20 continue at the agency until the end of the first session of the 107th=20 Congress, which is expected to occur this fall. In a Jan. 31 statement announcing his decision, Mr. Furchtgott-Roth gave fe= w=20 clues about his next move, saying only that =0F"there comes a time when eve= ry=20 free market advocate in government must fulfill his dream by returning to t= he=20 private sector. For me, that time has arrived.=0F" His tenure at the Commission drew praise from two House telecom Republicans= . =20 Energy and Commerce Committee Chairman W.J. (Billy) Tauzin (La.) says Mr.= =20 Furchtgott-Roth will be =0F"greatly missed,=0F" and Rep. Charles (Chip) Pic= kering=20 (R., Miss.) lauded his efforts =0F"to ensure that the FCC was an independen= t=20 agency accountable to consumers. . .and not an extension of the executive= =20 branch.=0F"=20 Court Upholds FCC Rules Giving ILECs Road to Pricing Flexibility A federal appeals court says it=0F's reasonable to use the number of carrie= rs=20 collocating equipment in an incumbent=0F's wire centers as =0F"proxy=0F" me= asures for=20 determining the levels of local competition. The FCC uses that proxy to=20 determine whether an incumbent local exchange carrier should be freed from= =20 some pricing regulations. The U.S. Court of Appeals in Washington last wee= k=20 rejected WorldCom, Inc.=0F's argument that the FCC=0F's criteria for granti= ng ILECs=20 pricing flexibility didn=0F't measure competition accurately and were unlaw= fully=20 arbitrary. The case centered on the FCC=0F's 1999 pricing-flexibility order in Common= =20 Carrier docket 96-262. The order allowed ILECs regulated under its price-c= ap=20 regime to gain greater flexibility in setting rates for interstate services= =20 if they met certain competitive =0F"triggers=0F" (TR, Aug. 9, 1999). For example, ILECs can win relief from some pricing rules if the FCC finds= =20 that unaffiliated carriers have collocated facilities in a certain percenta= ge=20 of the ILEC=0F's wire centers and that at least one collocator is=20 facilities-based. In its Feb. 2 ruling in MCI WorldCom, Inc., et al. v. FCC (case no. 99-1395= ),=20 the court found that the FCC =0F"made a reasonable policy determination=0F"= that=20 the number of collocating comptitors was a reasonable proxy for the level o= f=20 competition in a particular market. Judge David B. Sentelle wrote the=20 opinion; he was joined by Judge A. Raymond Randolph and Chief Judge Harry T= .=20 Edwards.=20 The judges didn=0F't specifically endorse the use of collocation as a proxy= ,=20 even allowing that =0F"it may well be that collocation is a poor measure of= =20 market share.=0F" But they noted that the FCC had not relied on market sha= re as=20 =0F"the be-all and end-all=0F" of competition. They agreed with the FCC th= at =0F"the=20 presence of sunk investment, and the resulting potential for entry into the= =20 market, can limit anticompetitive behavior by LECs.=0F" In oral arguments last December, the judges expressed frustration bordering= =20 on exasperation at WorldCom=0F's inability to present an alternative means = of=20 measuring competition (TR, Dec. 4, 2000). AT&T Corp. and Time Warner=20 Telecom, Inc., also were petitioners in the consolidated case. The judges concluded that because they found the FCC=0F's proxy model =0F" reasonable,=0F" there was no basis on which to require the FCC =0F"to condu= ct a=20 more searching analysis of competition before granting pricing flexibility.= =0F" =20 They cited a 1980 case before the circuit court in Washington, D.C., U.S. v= .=20 FCC.=20 =0F"Someone must decide when enough data is enough. In the first instance,= that=20 decision must be made by the Commission. . .To allow others to force the=20 Commission to conduct further evidentiary inquiry would be to arm intereste= d=20 parties with a potent instrument for delay,=0F" the judges quoted. The judges rejected WorldCom=0F's claim that the pricing-flexibility order= =20 violated FCC precedent because much of the relief it provided to ILECs was= =20 typical of that given to carriers that are regulated as =0F"nondominant.=0F= " =20 WorldCom argued that the FCC should be precluded from granting such relief= =20 without conducting the same kind of competition analysis that it does when= =20 determining if a carrier should be considered nondominant. =20 The appeals court disagreed, saying the pricing flexibility order did not= =20 grant LECs =0F"all the regulatory relief afforded nondominant carriers.=0F"= It=20 noted that carriers that obtain regulatory relief under the=20 pricing-flexibility order still must file tariffs, a requirement that is = =0F"not=20 insignificant.=0F" The appeals court also dismissed WorldCom=0F's argument that the FCC was=20 arbitrary and capricious in authorizing regulatory relief by metropolitan= =20 statistical area (MSA). It said the FCC had considered other options when= =20 devising its rules and called WorldCom=0F's objections =0F"at bottom. . .a= =20 difference in policy preferences. . .[and] not a sufficient basis on which = to=20 upset the FCC=0F's determination.=0F" The judges relied on similar reasoning in dismissing WorldCom=0F's objectio= ns to=20 the triggers the FCC established. The court called these objections =0F"no= more=20 than policy differences.=0F" It said the FCC had made =0F"rational=20 legislative-type judgments=0F" that it is =0F"empowered to exercise and we = are=20 required to respect.=0F"=20 AT&T Corp. has won a multiyear $100 million broadband service contract... AT&T Corp. has won a multiyear $100 million broadband service contract from= =20 MerchantWired, which provides network services to retailers, the company ha= s=20 announced. MerchantWired, of Indianapolis, will resell AT&T=0F's frame rel= ay=20 and asynchronous transfer mode services to merchants. It also has plans to= =20 resell AT&T=0F's virtual private network, Internet protocol, and digital=20 subscriber line services.=20 Utah Bill Takes Aim at Cities Entering Telecom Business Utah state Rep. Greg Curtis (R.) plans to introduce a bill to regulate=20 efforts by municipalities such as Provo that are getting into the=20 telecommunications business, a legislative staff member has told TR. The city of Provo recently bought a local cable TV company, Provo Cable, an= d=20 is competing against an AT&T Broadband cable TV system. Rep. Curtis=0F' bi= ll=20 would authorize state regulation of such government-owned telecom businesse= s. Provo is building a high-speed broadband system to bring advanced telecom= =20 services to every resident of the city, Michael Mower, Provo=0F's=20 director-community and governmental relations, told TR. Mr. Mower said AT&T=0F's cable TV system provides services only to select= =20 businesses and portions of the city. The legislative staff member said lawmakers were concerned about Provo=0F's= =20 owning its own telecom company because the state constitution bars the stat= e=20 from regulating cities. That would mean that the Utah Public Service Commission wouldn=0F't be able= to=20 regulate a municipal telecom company. The text of Rep. Curtis=0F' bill was= n=0F't=20 available as of TR=0F's news deadline. Mr. Mower hopes legislators understand that the process of leveling the=20 playing field =0F"goes both ways,=0F" he said, and that huge corporations h= old some=20 advantages over city-owned systems. Va. Regulators Tell Verizon Not To Cut Off CLEC=0F's Customers The Virginia State Corporation Commission has enjoined Verizon Virginia,=20 Inc., from =0F"unreasonably disconnecting=0F" customers who switch to compe= titor=20 Cavalier Telephone LLC for their local exchange service. Cavalier asked the SCC for help last September, claiming that Verizon =0F" unlawfully interrupted service=0F" to hundreds of customers who chose to mi= grate=20 to Cavalier. Verizon acknowledged that =0F"premature disconnections=0F" led= to 66=20 service outages but said 43 of those customers were reconnected by the day= =20 after the disconnections were reported to Verizon. The Virginia commission found that although the number of premature=20 disconnections was =0F"unacceptable,=0F" there was no evidence that Verizon= =0F's=20 disconnections were intentional. =0F"Nevertheless,=0F" the SCC said, =0F"w= e cannot=20 condone this inattention to customer service.=0F" The SCC directed the companies to file monthly reports, beginning Feb. 12,= =20 detailing any further unwarranted disconnections of service. Oftel Extends BT Price Controls For Retail, Wholesale Services British Telecommunications plc (BT) is facing an increased level of=20 competition =0F"but continues to have market power=0F" in the provision of= =20 residential telephone service, the United Kingdom=0F's Office of=20 Telecommunications (Oftel) has announced. Oftel said it would extend=20 existing BT price controls=0F-which had been scheduled to expire in August= =0F-for=20 an additional year. Oftel will continue to review the level of competition that BT faces in the= =20 U.K. in order to assess whether residential price controls will be necessar= y=20 beyond 2002. David Edmonds, Oftel=0F's director general-telecommunications, said Feb. 1 = that=20 extending the price control regime was necessary to protect consumers. =0F= " Oftel will carry out a review of the calls market to assess the impact of= =20 carrier preselection, indirect access, local loop unbundling, and mobile=20 substitution,=0F" he said. =0F"As competition increases and prices fall, t= he case=20 for retail price controls diminishes.=0F" Oftel also said it would keep price controls on wholesale network=20 interconnection rates that BT charges competitive carriers. Those controls= =20 will be extended until October 2005. Loral Scraps $3.5 Billion Plan For Direct-to-Consumer Service Loral Space & Communications Ltd. is scrapping plans to deliver high-speed= =20 Internet service directly to consumers over a $3.5 billion network of=20 satellites and optical fiber. =0F"Despite the feasibility of Loral=0F's pl= an, we=20 have concluded that we do not have the in-house skills to develop the=20 marketing resources to competitively deploy such a system,=0F" Bernard Schw= artz,=20 Loral=0F's chairman and chief executive officer, said at a Feb. 1 Merrill L= ynch=20 & Co. satellite conference in New York. =0F"Data delivery directly to the consumer entails packaging content, engag= ing=20 in e-commerce, providing consumer premises equipment, and acquiring and=20 caring for subscribers, and it is better left to others,=0F" Mr. Schwartz s= aid. =20 =0F"Furthermore, given the crowded field of players, we didn=0F't see a way= to=20 sufficiently differentiate our product from the others entering the=20 direct-to-consumer field.=0F" Under a plan unveiled last February, Loral had intended to complete its=20 network this year and eventually offer service to 10 million homes and smal= l=20 businesses. Loral surmised that digital subscriber line and cable modem=20 services wouldn=0F't satisfy consumers=0F' demand for bandwidth. But Loral= has=20 been stung recently by its investment in Globalstar Telecommunications Ltd.= ,=20 which uses satellites to offer global mobile telephony. Loral owns 38% of= =20 Globalstar, which is near bankruptcy (TR, Jan. 22). Instead of venturing into direct-to-consumer services, Mr. Schwartz said=20 Loral would =0F"stick to what we do best and where we already hold a strong= =20 leadership position=0F-the development of satellite technologies and hardwa= re=20 and the provision of high-quality, value-added transport services.=0F" European Commission Seeks Cybercrime Policy Harmonization The European Commission is developing a plan to harmonize the=20 cybercrime-fighting efforts of European Union member nations with those of= =20 other countries. It has asked for comments on how to do so =0F"without=20 hindering the rapid development of e-commerce in the EU, and respecting the= =20 fundamental right to privacy.=0F" Comments are due March 23. It wants to launch an EU forum for representatives of law enforcement=20 agencies, telecom and Internet service providers, and consumer groups to=20 discuss issues related to cybercrime. The first step will include naming= =20 forum representatives from those sectors. Relevant documents and comments= =20 will be published on a forum Web site. The commission has delivered a cybercrime policy planning document to the= =20 Council of Europe and European Parliament. On March 7 it will hold a publi= c=20 hearing on issues addressed in the planning document. Parties who wish to= =20 submit a statement at the hearing must request an =0F"invitation=0F" to do = so by=20 Feb. 20. Psion plc and Motorola, Inc., say they are discontinuing a joint agreement.= .. Psion plc and Motorola, Inc., say they are discontinuing a joint agreement = to=20 develop wireless devices as Motorola continues a streamlining of its=20 operations. Motorola said it would focus on a wireless smart phone to be= =20 launched in 2002 based on the platform developed by Symbian Ltd., an allian= ce=20 of companies including United Kingdom=0F-based Psion and Motorola. Motorol= a,=20 which owns 21% of Symbian, said it would continue to take an active role in= =20 planning the future of the alliance. Personnel Commissioner Harold Furchtgott-Roth, who has announced plans to leave the F= CC=20 (see separate story), has promoted his two legal advisers. Rebecca Beynon= =20 will be senior counsel, and Bryan Tramont will be senior legal adviser. The Idaho Senate unanimously has approved Gov. Dirk Kempthorne=0F's (R.)=20 nomination of Dennis S. Hansen (R.) to a second six-year term on the state= =0F's=20 Public Utilities Commission. Hansen, who first was appointed to the=20 commission by Gov. Phil Batt (R.), is also the PUC=0F's president. Before= =20 appointment to the commission, Hansen was an accountant with Monsanto Co. o= f=20 Soda Springs and served in the state Senate from 1987 to 1995. Joel I. Klein has been named chairman and chief executive officer of=20 Bertelsmann, Inc., the corporate services arm of German media company=20 Bertelsmann AG. Mr. Klein was assistant attorney general-antitrust for the= =20 U.S. Department of Justice from October 1996 to September 2000. He will=20 oversee Bertelsmann=0F's U.S. operations and advise the company on legal,= =20 strategic, and governmental issues. The law firm of Steptoe & Johnson LLP has merged with the United Kingdom la= w=20 firm of Rakisons. The U.S. practice will continue under its name, and the= =20 U.K. practice will be known as Steptoe & Johnson Rakisons. Lon Bouknight= =20 will be global chairman, and Tony Wollenberg will be managing partner of th= e=20 London practice. Danny Preiskel and Alfred Mamlet will head the London and= =20 U.S. telecom practices, respectively. David Judah in London and Stewart=20 Baker in Washington will lead a new technology, Internet, and media group. Richard R. Roscitt has been named chairman and chief executive officer of A= DC=20 Telecommunications, Inc., a Minneapolis-based telecom equipment maker. Mr.= =20 Roscitt was president of AT&T Corp.=0F's business services group. He succe= eds=20 William J. Cadogan, who is retiring. ADC also named Lynn Davis president a= nd=20 chief operating officer. Mr. Davis was president of ADC=0F's broadband=20 connectivity group. Robert E. Randall is the new chief executive officer at TeraGlobal=20 Communications Corp., a San Diego=0F-based manufacturer of telecom network= =20 software. He was executive vice president and chief operating officer at= =20 FirstWorld Communications Corp. Mr. Randall succeeds interim CEO William= =20 Reddersen, who will remain on the board.=20 Alamosa PCS Holdings, Inc., has said President and Chief Operating Officer= =20 Jerry Brantley left the company. In addition, Chief Technology Officer Ton= y=20 Sabatino and regional vice presidents now report to David Sharbutt, the=20 company=0F's chairman and chief executive officer. Frederick M. Lax has been named executive vice president and chief operatin= g=20 officer at Tekelec, Inc., a California telecom network equipment=20 manufacturer. He was VP and general manager at Lucent Technologies, Inc.= =0F's=20 messaging solutions unit. Nextel Communications, Inc., has promoted Scott E. Hoganson to senior vice= =20 president-sales operations. He previously was president of the carrier=0F'= s=20 Midsouth area. Nextel also has promoted Linda Marshall to VP of the Midwes= t=20 region. Ms. Marshall previously was president of the company=0F's Great La= kes=20 area. Jean-Francois Deschamps has been named senior vice president-global service= =20 operations at Global One, a France Telecom Group affiliate. He was assista= nt=20 VP-product management data services.=20 Vincent M. Oddo has been named executive vice president and chief informati= on=20 officer at Network Telephone Corp., a Pensacola, Fla.=0F-based integrated= =20 communications provider. He was executive VP and CIO at Gabriel/TriVergent= =20 Communications, Inc.=20 Frank D. Brilliant has joined Arch Wireless, Inc., as vice president of the= =20 paging carrier=0F's newly created Business Solutions Group. He previously = was=20 vice president-sales at BizRate.com. AOL Time Warner, Inc., has named John Buckley vice president-corporate,=20 effective March 12. He was senior VP-communications at Fannie Mae. NewSouth Communications Corp., a Greenville, S.C., integrated communication= s=20 provider has promoted Lori Reese to the position of vice president-governme= nt=20 affairs. She was director of that unit. Lucent Technologies, Inc., has named Barbara Gasper vice president-investor= =20 relations, effective Feb. 12. She held that title at Raytheon Co. Ms.=20 Gasper succeeds John DeBono, who will lead investor relations at Agere=20 Systems, Inc., the Lucent microelectronics unit that will be spun off later= =20 this year. Michael G. Donahoe has been named senior general counsel and vice=20 president-corporate development at DataVoN, Inc., a Dallas-based network=20 services provider. He most recently was VP-legal at CapRock Communications= =20 Corp., which late last year was acquired by McLeodUSA, Inc.=20 Lucent China has named Michael Kwan chief operating officer. He was=20 president at Lucent Technologies Qingdao Telecommunications Systems, Ltd., = a=20 51% Lucent-owned joint venture in China.=20 John Joyce was named chief operating officer at Ambient Corp., a powerline= =20 telecom technology manufacturer. He was president at ABB Financial=20 Consulting, Inc., and senior vice president at ABB Financial Services, Inc.= =20 Wilfred Kopelowitz was named Ambient=0F's chief financial officer. He was= =20 corporate controller at Amdocs Corp.=20 Harold Gowl is the new chief operating officer at Wisor Telecom, Inc., a=20 Rockville, Md., maker of operation support systems. He was president and= =20 chief executive officer at Newcomm Net, a competitive local exchange carrie= r. Research in Motion Ltd. has appointed Larry Conlee chief operating=20 officer-engineering and manufacturing. Mr. Conlee previously was at=20 Motorola, Inc., where he was a corporate vice president for various groups= =20 and divisions. NeTune Communications, Inc., has named Richard J. Agostinelli to the new=20 positions of chief operating officer and chief financial officer. He was= =20 chief executive officer and president-continental graphics at Continental= =20 Graphics Holdings, Inc. NeTune is a Culver City, Calif., provider of=20 broadband communications services to the motion picture and TV production= =20 industries.=20 JP Systems, Inc., a Dallas-based developer of wireless-enabling technology= =20 and services, has named Tim D. Torno chief financial officer. Mr. Torno wa= s=20 CFO and vice president-finance and secretary for Ultrak, Inc. Philip Veneziano was named chief financial officer at Everest Broadband=20 Networks Corp., a Fort Lee, N.J.=0F-based provider of broadband services to= =20 multitenant buildings. He was senior vice president-financial operations a= t=20 Juno Online Service, Inc. Christopher Dalrymple was named Everest Broadban= d=0F' s general counsel. He was associate counsel at Interliant, Inc. =20 Howard N. Levitas has joined the Industrial Telecommunications Association = as=20 chief information officer. Mr. Levitas was previously manager-applications= =20 development at Verizon Connected Solutions, Inc. Telefon AB L.M. Ericsson has hired Ase Lindskog as director-press relations= =20 in its external relations group and Ola Rembe to the same position in the= =20 public relations and special interest media group. Mr. Lindskog is a forme= r=20 journalist, financial analyst, and secretary general of the Swedish Society= =20 for Financial Analysts. Mr. Rembe was director-corporate communication and= =20 PR at Jobline International. Maureen O=0F'Connor is the new executive director at the Maryland Coalition= for=20 Telephone Competition, a consumer group whose industry members include AT&T= =20 Corp. and Winstar Communications, Inc. She=0F's founder of O=0F'Connor Pub= lic=20 Relations, LLC. The National Cable Television Association has promoted Director-state=20 telecommunications policy Rick Cimerman and Director-public affairs David= =20 Pierce. Both were promoted to senior director. San Diego=0F-based ideaEDGE Ventures has hired Hans Davidsson as a managing= =20 partner. Mr. Davidsson was vice president-Internet applications and=20 solutions at Telefon AB L.M. Ericsson. The Universal Service Administrative Co. has elected Allan T. Thoms vice= =20 chairman of its board of directors. Mr. Thoms is the chairman of the Iowa= =20 Utilities Board. Frank Gumper, vice president-public policy development at= =20 Verizon Communications, Inc., was reelected USAC=0F's chairman and Cheryl= =20 Parrino was reelected chief executive officer. Former U.S. Deputy Attorney General Ronald D. Lee has been elected partner = in=20 Arnold & Porter=0F's Washington, D.C. law office. He=0F'll focus on the= =20 regulatory and public policy legal issues of telecommunications, computer= =20 security, and encryption. Mr. Lee from 1987 to 1994 practiced law at the= =20 firm=0F's Washington and Los Angeles offices. Dale Hatfield, former chief of the FCC=0F's Office of Engineering and=20 Technology, has joined Fantasma Networks, Inc., as a technical adviser. Mr= .=20 Hatfield will advise the Mountain View, Calif.=0F-based wireless video=20 networking technology provider on ultrawideband technology. He also is=20 director of the Interdisciplinary Telecommunications Program at the=20 University of Colorado at Boulder. San Diego=0F-based AirFiber, Inc., says Brett Helm, its newly hired preside= nt=20 and chief operating officer, will join its board of directors along with=20 Marcel Gani, chief financial officer of Juniper Networks, Inc. Wireless Online, Inc., says Neil Cox, president of SecurityLink, will join= =20 its board of directors. Regulatory & Government Affairs DT Services, Inc., and 4MTV Corp. separately have asked the FCC to grant th= em=20 =0F"exempt telecommunications company=0F" (ETC) status under the Public Uti= lity=20 Holding Company Act of 1935 (PUHCA), as amended by the Telecommunications A= ct=20 of 1996. The PUHCA effectively prevented utility companies from providing= =20 telecom services, but the Act made it possible for them to do so either by= =20 acquiring or holding interest in an ETC. DT is a subsidiary of Dominion=20 Resources, Inc., a registered holding company under PUHCA. 4MTV is a priva= te=20 Nevada-based corporation, and plans to offer broadband Internet and other= =20 network services. Comments on DT=0F's request are due in Network Securities= file=20 ETC 00-53 by Feb. 9, and replies are due Feb. 16. Comments and replies on= =20 4MTV=0F's request are due Feb. 19 and 26, respectively. They should refer = to=20 ETC 01-01. The FCC is seeking comments on requests by Amana Colonies Telephone Co. and= =20 South Slope Cooperative Telephone Co. for waivers of its =0F"study area=0F"= =20 definitions. One of the requested waivers would enable Amana (d/b/a=20 Hickorytech and Heartland Telecommunications of Iowa) to alter its Iowa stu= dy=20 area to remove a telephone exchange it is transferring to South Slope. The= =20 other waiver would enable South Slope to include that exchange, which serve= s=20 about 1,500 lines, when calculating its universal service support. A study= =20 area is the geographical area over which universal service support is=20 calculated. Comments and replies on both requests are due Feb. 19 and Marc= h=20 1, respectively. Filings should refer to Common Carrier docket 96-45. The FCC=0F's Wireless Telecommunications Bureau is seeking comments on a re= quest=20 by an intergovernmental public safety agency for a rule waiver to allow it = to=20 use eight radio frequencies allocated for non-public safety use in Chicago.= =20 Comments on the DuPage Public Safety Communications request are due Feb. 20= =20 and replies are due Feb. 27. Parties should reference DA 01-264. The North American Numbering Council will discuss plans for a performance= =20 review and a =0F"requirements document=0F" for the North American Numbering= Plan=20 administrator, among other topics, during its Feb. 20-21 meeting. The NANC= =20 meeting will begin at 8:30 a.m. in Room TW-C305 of the FCC=0F's headquarter= s in=20 Washington. Contact Cheryl Callahan at 202/418-2320 for more information. The FCC=0F's Wireless Telecommunications Bureau is seeking comments on requ= ests=20 for frequency coordination certification in the 800 megahertz and 900 MHz= =20 private land mobile radio service (PLMRS) public safety pool frequencies. = =20 The International Association of Fire Chiefs, Inc., and the International= =20 Municipal Signal Association (IAFC/IMSA) are seeking certification in the 8= 00=20 MHz and 900 MHz bands, while the American Association of State Highway and= =20 Transportation Officials (AASHTO) is seeking certification in the 800 MHz= =20 band. Comments are due Feb. 21 and replies March 8. Comments on the=20 IAFC/IMSA request should reference DA 01-152, while comments on the AASHTO= =20 request should reference DA 01-151. The FCC is seeking comments on five petitions for declaratory ruling from= =20 companies partly owned by VoiceStream Wireless Corp. asking the FCC to perm= it=20 Deutsche Telekom AG to take an indirect ownership interest greater than 25%= =20 in those companies. DT would gain such an ownership interest as a result o= f=20 DT=0F's planned acquisition of VoiceStream (see separate story). The Germa= n=20 government owns 60% of DT. Comments are due Feb. 22 and replies March 8. = =20 Comments should reference DA 01-280 and International docket 00-187. The FCC is seeking comments on the National Exchange Carrier Association,= =20 Inc.=0F's proposed revisions to the average schedule universal service form= ulas=20 for the period from July 1, 2001, to June 30, 2002. On Dec., 28, 2000, NEC= A=20 submitted proposed changes to formulas for average schedule interstate=20 settlement disbursements. Comments and replies are due March 5 and 26,=20 respectively. They should refer to Accounting Safeguards file 01-16. The FCC is seeking comments on Western Wireless Corp.=0F's request that the= FCC=20 designate it an eligible telecommunication carrier for the purpose of=20 receiving universal service funding for serving the Pine Ridge Reservation = in=20 South Dakota. Comments are due 30 days after the notice seeking comment is= =20 published in the Federal Registerand should refer to Common Carrier docket= =20 96-45. Replies are due 15 days later. The FCC says five bidders have qualified to participate in the reauction of= =20 eight licenses for the 700 megahertz =0F"guard bands=0F" surrounding public= safety=20 spectrum, which is scheduled to begin Feb. 13. The licenses were offered b= ut=20 unsold at an auction last September. The qualified bidders and their upfro= nt=20 payments are Access Spectrum LLC ($156,000), Harbor Wireless LLC ($110,000)= ,=20 Nextel Spectrum Acquisition Corp. ($156,000), Pegasus Guard Band LLC=20 ($161,000), and PTPMS II Communications, Inc. ($161,000). Companies that= =20 make larger upfront payments can bid more in the auction. The FCC has affirmed its decision that economic area (EA) licensees are not= =20 required to make =0F"progress payments=0F" to incumbent SMR (specialized mo= bile=20 radio) service operators that are involuntarily relocated from the upper 20= 0=20 channels of the 800 megahertz band. Instead, the FCC said, EA licensees ca= n=20 wait until a relocation is completed before picking up the costs. In a thi= rd=20 order on reconsideration in Private Radio docket 93-144 released Feb. 2, th= e=20 FCC denied a petition filed by the American Mobile Telecommunications=20 Association, which had sought reconsideration of a 1999 decision=20 restructuring the licensing framework for the 800 MHz band SMR service. =20 The FCC has noted that Southwestern Bell Telephone Co. will no longer be=20 required to submit performance measurement data for its Kansas and Oklahoma= =20 operations. That requirement was one of the conditions of the FCC=0F's app= roval=20 of the merger between parent company SBC Communications, Inc., and Ameritec= h=20 Corp. When it approved the merger, the FCC established a =0F"carrier-to-ca= rrier=20 performance plan=0F" that required the merged company to report the monthly= =20 results of 20 performance measurements for the telco operations in each of= =20 the states in its service territory (TR, Oct. 11, 1999). The FCC last mont= h=20 determined that the Kansas and Oklahoma telcos had opened their markets to= =20 competition and approved them to offer in-region interLATA services,=20 effective March 7, under section 271 of the Telecommunications Act of 1996= =20 (TR, Jan. 29). SBC will submit its final performance measurements report= =20 under the plan on March 20. The New Jersey Board of Public Utilities has asked the FCC to rule on its= =20 request for authority to implement certain number-conservation measures,=20 including 1,000-number block =0F"pooling=0F" and number rationing. The New= Jersey=20 regulators last summer requested permission pursuant to an FCC order that= =20 introduced a plan for national pooling and encouraged states to apply for= =20 authority to conduct pooling trials until the national rollout began (TR,= =20 March 20, 2000). Despite receiving comments on the board=0F's request last= year=20 (TR, Aug. 14, 2000), the FCC has not yet issued a decision in the matter. = In=20 its recent petition in Common Carrier docket 96-98 and Network Security fil= e=20 L-00-95, the board asked the FCC immediately to approve its request so it c= an=20 implement the conservation measures =0F"before further depletion of finite= =20 numbering resources.=0F"=20 The Michigan Public Service Commission has asked the FCC for authority to= =20 conduct 1,000-number block =0F"pooling=0F" in two metropolitan statistical = areas=20 (MSAs). In its =0F"number optimization=0F" order last year in Common Carri= er=20 docket 99-200, the FCC announced a plan to conduct nationwide pooling (TR,= =20 March 20, 2000). It also encouraged states to seek authority to begin=20 pooling until the FCC announces a national rollout schedule. The Michigan= =20 PSC last week asked for authority to conduct 1,000-number block pooling in= =20 the Detroit and Grand Rapid MSAs, to order sequential number assignment, an= d=20 to maintain =0F"NXX=0F" rationing for six months after the implementation o= f=20 area-code relief measures. =20 In a joint petition, Golden West Telephone Cooperative, Project Telephone= =20 Co., and Range Telephone Cooperative have asked the FCC=0F's Common Carrier= =20 Bureau to reconsider its decision designating Western Wireless Corp. as an= =20 ETC (eligible telecommunications carrier) for the purpose of receiving=20 federal =0F"high-cost=0F" support in Wyoming (TR, Jan. 8). They said they = hadn=0F't=20 received notice that the areas covered by the ETC designation could include= =20 parts of their exchanges. They also argued that ETC designation must=20 correspond with the entire study area of the incumbent telco. In a separat= e=20 petition, Chugwater Telephone Co., Range Telephone, and RT Communications,= =20 Inc., also sought reconsideration or clarification of the order. They argu= ed=20 that the Wyoming legislature should be given time to pass a pending bill (H= B=20 0052) that would authorize the state Public Service Commission to make ETC= =20 designations itself.=20 Regionet Wireless Licensee LLC said it opposed a petition asking the FCC to= =20 reconsider its recent decision to freeze the processing of new applications= =20 in the automated maritime telecommunications systems (AMTS) as it considers= =20 switching from site-based licensing to geographic licensing. Warren C.=20 Havens has filed a petition for reconsideration of a =0F"fourth report and = order=20 and third notice of proposed rulemaking=0F" adopted last year in Private Ra= dio=20 docket 92-257 (TR, Nov. 20, 2000). The FCC=0F's Enforcement Bureau is proposing a $5,000 monetary forfeiture= =20 against Verizon Florida, Inc., for violating Commission rules by operating = an=20 air-ground station without agency authorization. Verizon told the FCC that= =20 it operated the station without authorization between Sept. 1, 1999, and=20 March 10, 2000. The notice of apparent liability was released Feb. 1 in fi= le=20 no. EB-00-TS-148. The FCC=0F's Wireless Telecommunications Bureau says its policy of permitti= ng=20 applicants one extra business day to file applications under its jurisdicti= on=20 is no longer in effect. In a public notice released Feb. 1, the bureau sai= d=20 it was clarifying that all applications for wireless telecom services filed= =20 since Feb. 12, 1999, have been deemed filed on the date received by the=20 Commission. The FCC began providing an extra day for those filing Common= =20 Carrier applications requiring fees when it moved the filing location to a= =20 bank in Pittsburgh in 1990. The Market Disputes Resolution Division of the FCC=0F's Enforcement Bureau = has=20 granted a request by Texcom, Inc., (d/b/a Answer Indiana) to withdraw a=20 complaint it had filed against SBC Communications, Inc. Texcom had said SB= C=20 improperly collected payment for termination of SBC-originated traffic on= =20 Texcom=0F's network. The companies settled the matter during private=20 negotiations. The division agreed to dismiss the complaint with prejudice = in=20 Enforcement Bureau file 00-MD-12. New Skies Satellites N.V. has asked the FCC=0F's International Bureau to cl= arify=20 or reconsider a recent order that granted Telesat Canada=0F's petition to a= dd=20 the Anik F-1 satellite to the Permitted Space Station List. New Skies said= =20 clarification was needed so all parties understand (1) =0F"that additional= =20 authorization would be necessary before Anik F-1 would be allowed to provid= e=20 narrowband services to any C-band earth stations operating in the United=20 States that are smaller than 4.5 meters in diameter,=0F" and (2) =0F"the Co= mmission=0F' s rationale for concluding that operations from adjacent orbital locations= =20 will be protected.=0F" Pegasus Development Corp. is asking the FCC=0F's International Bureau to=20 reconsider a recent decision to grant Loral CyberStar, Inc., authority to= =20 launch and operate two satellites in the geostationary satellite orbit (GSO= )=20 to provide fixed-satellite service (FSS) in the Ka-band. In a petition for= =20 reconsideration filed Jan. 19, Pegasus said the International Bureau=0F's o= rder =0F" relies on a stale and inapplicable record. . .A refreshed record will=20 demonstrate that there currently exists a shortage of available Ka-band=20 orbital locations, that Loral has sufficient access to other orbital=20 resources, and that the public interest would be better served by making th= e=20 67-[degree] W.L. orbital location available for the second-round Ka-band=20 applicants,=0F" Pegasus said. The Rural Health Care Division of the Universal Service Administrative Co.= =20 recently sent 50 letters committing funding to health care providers in rur= al=20 areas. The program funds discounts on telecom services for eligible rural= =20 hospitals and other health care providers. USAC has committed more than $7= =20 million to 613 health care providers during the second year of its =0F" telemedicine=0F" program. The Federal Trade Commission is supporting a Web site=20 (http://www.consumer.gov/sentinel) offering statistics on Internet fraud,= =20 identity theft, and tips on avoiding online frauds and deceptions. The FTC= =20 said more than 80 public and private organizations contribute consumer=20 complaints to the multiagency Consumer Sentinel database, which law=20 enforcement officials use to share data about fraud. =20 House Ways and Means Committee Republican Philip S. English (Pa.) introduce= d=20 a bill, HR 267, to extend tax credits to carriers that deploy high-speed=20 Internet facilities in rural and underserved areas. The legislation has mo= re=20 than 50 co-sponsors. It=0F's a companion to S 88, which was introduced las= t=20 month by Sen. John D. Rockefeller IV (D., W.Va.) (TR, Jan. 29). Rep. Rodney P. Frelinghuysen (R., N.J.) introduced legislation that would= =20 require carriers to get written consent from customers before obtaining the= ir=20 wireless location information. The Wireless Privacy Protection Act, HR 260= ,=20 would direct the FCC to adopt such rules within six months of enactment. House freshman Michael Honda (D., Calif.) plans to form a bipartisan wirele= ss=20 caucus to focus exclusively on issues related to third-generation (3G)=20 wireless technology. More details about the caucus will be released =0F"wi= thin=20 the next few weeks,=0F" a Honda spokesman told TRlast week. Rep. Honda=0F'= s=20 initiative would be the second congressional caucus that=0F's focused on=20 wireless issues. Last year the Congressional Wireless Telecommunications= =20 Caucus was formed by Reps. Albert Wynn (D., Md.) and Charles (Chip) Pickeri= ng=20 (R., Miss.) and Sens. Byron Dorgan (D., N.D.) and Sam Brownback (R., Kan.)= =20 (TR, April 17, 2000). =20 A push to repeal the 3% federal excise tax on telephone bills has been=20 revived in the Senate by Finance Committee Chairman Charles E. Grassley (R.= ,=20 Iowa). The tax =0F"is outdated, unfair, and complex=0F" for consmers and p= hone=20 companies,=0F" the lawmaker said Feb. 1 when introducing the Help Eliminate= the=20 Levy on Locution Act (HELLO), S 234. Sen. Grassley added, =0F"It cannot b= e=20 justified on any tax policy grounds.=0F"=20 Celtronix Telemetry, Inc., has asked a federal appeals court to review the= =20 FCC=0F's decision to implement a debt-restructuring plan for licensees in t= he=20 218=0F-219 megahertz service, which was formerly called the interactive vid= eo=20 and data service (IVDS) (TR, Dec. 18, 2000; and Jan. 8, notes). In a=20 petition for review and notice of appeal (case no. 01-1021 and 01-1022) fil= ed=20 with the U.S. Court of Appeals in Washington, Celtronix argued that the=20 Commission=0F's action was unlawful, arbitrary, and capricious. Washington state Rep. Richard DeBolt (R.) has introduced legislation to=20 provide tax incentives for companies seeking to deploy advanced telecom=20 services in rural areas. HB 1239 would exempt from taxation any sales to o= r=20 by telecom companies for machinery, equipment, or tangible personal propert= y=20 used to build telecom infrastructure in rural areas. Telecom company=20 machinery, equipment, or facilities used to provide advanced telecom servic= es=20 to rural areas would be exempt from the use tax. Telecom companies also=20 would be eligible for tax credits equal to 50% of their costs of constructi= ng=20 telecom structures or facilities, or acquiring machinery or equipment. HB= =20 1239 awaits consideration by the House Technology, Telecommunications, and= =20 Energy Committee. Illinois legislators are considering a bill to rewrite the telecom provisio= ns=20 of the state=0F's Public Utilities Act, which expires July 1. The bill (HB = 492=20 and SB 134) would freeze rates, with a cap on future linked to the rate of= =20 inflation. It also would deregulate optional services, such as call waitin= g=20 and Caller ID. =20 Hawaii state Rep. Calvin K.Y. Say (D.) has introduced legislation to amend= =20 the state franchise tax to include the revenues of telephone, telecom, and= =20 cable TV businesses. Those businesses would have to pay 2.5% of their gros= s=20 receipts for the preceding calendar year. The bill, HB 1180, awaits=20 consideration by the House Consumer Protection and Commerce Committee and t= he=20 House Finance Committee. The North Carolina Utilities Commission has ordered the North American=20 Numbering Plan administrator (NANPA) to release two =0F"NXX=0F" codes in th= e =0F"980=0F"=20 area code to BellSouth Telecommunications, Inc. NXX codes are blocks of=20 10,000 sequential phone numbers. BellSouth had requested the NXX codes for= =20 two large business customers, Duke Energy Corp. and Microsoft Corp. But th= e=20 application for numbers in the new area code didn=0F't meet FCC guidelines= =20 regarding =0F"months to exhaust,=0F" the NCUC said, so the NANPA had denied= the=20 request. The NCUC directed BellSouth to assign the phone numbers to the tw= o=20 customers sequentially and stated that the numbers would be subject to=20 reclamation if not used within the period allowed by industry guidelines. = =20 The 980 area code is scheduled to be activated as an =0F"overlay=0F" of the= =0F"704=0F"=20 area code April 1. The Australian government has created an E-Security Coordination Group to= =20 assess the nation=0F's telecom- and information-infrastructure security nee= ds. =20 The National Office for the Information Economy is the group=0F's lead agen= cy. =0F" In addition to focusing on security standards, the group will work on=20 incident reporting, awareness raising, and skills shortages,=0F" the govern= ment=20 announced Feb. 2. It also formed a critical infrastructure priorities=20 subcommittee, led by the Commonwealth Attorney General=0F's Department, to = carry=20 out critical infrastructure threat and vulnerability assessments. Financial Briefs The Amsterdam Exchange intends to add KPNQwest NV to the AEX Index, a listi= ng=20 of the exchange=0F's top 25 companies, KPNQwest said. KPNQwest is a joint= =20 venture of Qwest Communications International, Inc., and Royal KPN NV, the= =20 Dutch national carrier. XO Communications, Inc., will seek to raise as much as $2 billion through t= he=20 sale of common stock, preferred shares, depositary shares, warrants, or deb= t=20 securities under a =0F"shelf registration statement=0F" filed with the Secu= rities=20 and Exchange Commission. Further details of the fund-raising effort will b= e=20 revealed in future filings. XO intends to use the funds to pay for network= =20 expansion, operating losses, and possible acquisitions. Telecom Italia SpA has raised $1.85 billion through the sale of convertible= =20 bonds in Europe. The Italian carrier intends to use the proceeds to=20 refinance existing debt. Nortel Networks Ltd., a subsidiary of Nortel Networks Corp., intends to rai= se=20 $1.5 billion through the sale of senior unsecured notes. Nortel, a=20 Toronto-based telecom equipment maker, intends to use the funds for loans t= o=20 its affiliates and other corporate purposes. The company expects to comple= te=20 the transaction this month. Leap Wireless International, Inc., said QUALCOMM, Inc., had agreed to provi= de=20 it with $125 million to support the carrier=0F's purchase of licenses in th= e FCC=0F' s reauction of =0F"C=0F" and =0F"F=0F" block PCS (personal communications s= ervice)=20 licenses, which ended last month (see separate story). Under terms of a=20 senior secured credit facility, QUALCOMM will transfer to Leap a $125 milli= on=20 auction discount voucher previously issued by the FCC. Leap will repay the= =20 money within five years. Tellabs, Inc., has agreed to pay $181 million cash for Future Networks, Inc= .,=20 a cable modem maker based in Alpharetta, Ga. Tellabs, of Lisle, Ill., said= =20 the acquisition would fill gaps in its portfolio of cable modem and cable= =20 telephony products. The companies expect to complete the transaction this= =20 month. Lafayette Communications LLC has signed a definitive agreement to acquire= =20 licenses for 10 megahertz of spectrum from subsidiaries of Carolina PCS I= =20 Limited Partnership for an undisclosed price. The spectrum covers nine bas= ic=20 trading areas serving about 3.5 million people in the entire state of South= =20 Carolina. Industry News The Organization for the Promotion and Advancement of Small=20 Telecommunications Companies is holding a March 28 seminar to discuss=20 opportunities to purchase Bell companies=0F' rural exchanges. OPASTCO said= Bell=20 companies, including Qwest Communications Corp., may sell =0F"upwards of 20= =20 million lines=0F" in the next five years. The OPASTCO seminar will be held= at=20 the Hyatt Regency at the Dallas/Fort Worth Airport. For more information,= =20 contact Tiffani Belk at 202/659-5990. The Ordering and Billing Forum=0F's Vendor Demo 2001 will be held Aug. 27= =0F-29 in=20 Seattle. The OBF is an industry group sponsored by the Alliance for=20 Telecommunications Industry Solutions. The International Engineering=20 Consortium will co-host the event. Call 312/559-3328 or visit=20 http://www.atis.org or http://www.iec.org for more information. The Alliance for Telecommunications Industry Solutions and the=20 Telecommunications Industry Association have begun developing the operating= =20 principles and procedures for a new industry-led body that will act as a = =0F" gatekeeper=0F" for terminal equipment standards. The FCC late last year=20 selected ATIS and TIA to sponsor the Administrative Council for Terminal=20 Attachments (TR, Nov. 13 and Dec. 25, 2000). The council will oversee the= =20 development of standards to replace the detailed technical criteria in part= =20 68 (equipment) of the FCC=0F's rules. Parties wishing to be notified of th= e=20 first council meeting should forward their contact information, including a= n=20 e-mail address, to Megan Hayes ([email protected]). Consumers Union, publisher of Consumer Reports magazine, and TeleBright Cor= p.=20 have formed an alliance that will allow consumers to compare prices and=20 offerings of mobile phone service plans online. Consumer Reports Online=20 (http://www.ConsumerReports.org) is using TeleBright=0F's IntelliRate techn= ology=20 to offer the service. Verizon Communications, Inc., is ending its telephone rental service, the= =20 company told TR. The changes affect only former GTE Corp. telcos. The=20 former Bell Atlantic Corp. telcos already had terminated their rental=20 programs before the merger with GTE that formed Verizon. The company will= =20 bill customers for rental phones through May 2001, a spokesman said. Renta= l=20 customers will own the phones when the billing cycle is completed. BellSouth Corp. will exit the payphone business over the next two years,=20 selling or scrapping about 143,000 public phones, the company said. Pay=20 phone usage has declined dramatically since 1998 and the business has becom= e=20 less profitable, BellSouth noted. =0F"Our customers are opting for the new= =20 technology options we provide, including wireless telephones and interactiv= e=20 pagers,=0F" said Charles B. Coe, BellSouth=0F's president-network services,= in a=20 statement. BellSouth said it would take two years to exit the business so= =20 that its pay phone location providers would have time to find an alternativ= e=20 to BellSouth service. SigmaOne Communications Corp. says a patent-infringement lawsuit filed=20 against it by TruePosition, Inc., is =0F"totally without technical merit an= d=20 motivated strictly by commercial considerations.=0F" TruePosition=0F's act= ion,=20 filed in U.S. District Court in Delaware, claims that SigmaOne infringed on= =20 three patents related to its network-based wireless location systems (TR,= =20 Jan. 22, notes). SigmaOne has decided to counter sue. =0F"We believe that= our=20 counter suit will produce an unequivocal declaration that TruePosition=0F's= =20 patents have no relation to, and are not infringed by, SigmaOne=0F's techno= logy=20 and that, in addition, the patents are invalid,=0F" said SigmaOne President= Mark=20 Licht. =0F"SigmaOne will also aggressively enforce its own intellectual=20 property rights in the field of wireless location technology.=0F" Sprint Corp. has completed the transition of 95% of the circuits covered by= =20 the FTS2001 federal government telecom service contract, according to Antho= ny=20 G. D=0F'Agata, vice president and general manager of Sprint=0F's government= systems=20 division. Qwest Communications International, Inc., has challenged the=20 General Service Administration=0F's award of =0F"bridge contracts=0F" to Sp= rint and=20 AT&T Corp. to cover government agency customers who haven=0F't completed th= e=20 transition from FTS2000 to FTS2001 (TR, Dec. 18, 2000, p. 38). Mr. D=0F'Ag= ata=20 cited the need to obtain approval for an additional function required by on= e=20 agency customer as contributing to the transition delay. He also cited=20 agencies=0F' concerns about the year 2000 computer bug early in the transit= ion=20 period, which discouraged them from making changes in their telecom systems= .=20 Lucent Technologies, Inc., has won a two-year, $129 million contract to=20 provide broadband network equipment to Sprint Corp. Lucent said it will=20 deploy its Stinger DSL (digital subscriber line) platform in about 1,000=20 Sprint central offices in the U.S. Sprint will use the equipment for its I= ON=20 (integrated on-demand network) service.=20 Sprint PCS and Unplugged Games, Inc., have signed an agreement for Unplugge= d=20 Games to provide its wireless games service on the carrier=0F's wireless We= b. =20 Sprint PCS also has signed an agreement with Tribune Media Services that wi= ll=20 give Sprint PCS subscribers to access to entertainment content from Tribune= =20 Media Services=0F' Zap2it.com Web site. Global Crossing Ltd. of Bermuda has completed the Pan American Crossing=20 network segment linking the U.S. and Mexico to Central America and the=20 Caribbean. It=0F's the latest step in deployment of the company=0F's globa= l fiber=20 optic system, which is scheduled to be finished by mid-2001. Activation of= =20 the Pan American Crossing makes Global Crossing =0F"the first company to=20 directly link California, Mexico, and Panama,=0F" Global Crossing said. Certicom Corp., a provider of mobile e-business security software and=20 services, has opened a European office in London. Telefon AB L.M. Ericsson is forming a separate company to focus on mobile= =20 Internet networks and applications. The company will be called Ericsson=20 Internet Applications and Solutions AB. Asia Global Crossing Ltd., Digital Telecommunications Phils, Inc. (Digitel)= ,=20 and Broadband Infrastructure (BI) Group have launched Digitel Crossing, a= =20 40:40:20 joint venture in the Philippines. Digitel Crossing has plans to= =20 build a terrestrial fiber optic network that will connect in early 2002 wit= h=20 Asia Global Crossing=0F's undersea network. Under the terms of the agreeme= nt,=20 Digitel and BI Group will buy network capacity from Asia Global Crossing.= =20 QUALCOMM, Inc., has announced that it has prevailed in three patent=20 opposition proceedings in Korea and Europe. The proceedings were initiated= =20 by Motorola, Inc. The Korean Intellectual Property Office upheld two=20 QUALCOMM patents, the European Patent Office upheld a third. In another=20 development, SnapTrack, Inc., a QUALCOMM subsidiary, was awarded a patent= =20 from the U.S. Patent and Trademark Office for its wireless location and=20 asset-tracking technology. Vodafone Group plcs=0F' United Kingdom affiliate has extended the roaming= =20 capabilities of its Globalstar mobile satellite phone customers from the U.= K.=20 to North America. It now offers its customers =0F"roaming agreements with = 272=20 networks=0F" on both sides of the Atlantic, said Paul Donovan, Vodafone U.K= .=0F's=20 managing director. Oy Nokia of Finland has signed a $186 million contract to upgrade the=20 wireless communications infrastructure of PTK Centertel Sp. z.o.o. of=20 Poland. Nokia will upgrade PTK Centertel=0F's GSM (Global System for Mobil= e=20 communications) network and will deploy GPRS (general packet radio service)= =20 infrastructure.=20 Rogers AT&T Wireless has selected Ericsson Canada, Inc., as exclusive=20 supplier for its third-generation wireless network. The contract is the = =0F" largest ever awarded to Ericsson in Canada,=0F" Ericsson said.=20 Wireless Industry Says Agreement Could Streamline Antenna Siting The FCC, the Advisory Council on Historic Preservation (ACHP), and a=20 telecommunications working group that includes historic preservation=20 officers, federal officials, and industry representatives have formulated a= =20 programmatic agreement designed to streamline the review of antenna=20 collocations under the National Historic Preservation Act (TR, Nov. 27, 200= 0;=20 Jan. 8, notes, and Jan. 29). The agreement comes on the heels of the advisory council=0F's decision in= =20 November 2000 to revise rules that the industry maintains make it difficult= =20 to site antenna towers. The new regulations were adopted after a court=20 challenge alleged voting irregularities in the council=0F's 1999 adoption o= f the=20 original rules, which implemented section 106 of the National Historic=20 Preservation Act (TR, Aug. 14 and 28; and Sept. 11, 2000). Like many industry officials, Robert L. Hoggarth, senior vice=20 president-government relations for the Personal Communications Industry=20 Association, has problems with the ACHP=0F's rules. But he says he hopes t= he=20 programmatic agreement on collocations=0F-and perhaps other issues=0F-can h= elp=20 speed the antenna-siting process. Mr. Hoggarth discussed the agreement wit= h=20 TR. An edited excerpt of the conversation follows. TR: What=0F's your complaint with the process used to adopt the rules that= the=20 ACHP approved last November? Hoggarth: The new rules, in our view, were originally promulgated=0F-or at= =20 least an attempt was made to promulgate them=0F-back in 1999. The current= =20 version that the ACHP passed in the fall was essentially the same rules tha= t=20 they attempted to adopt in early 1999. TR: So in your view, the rules that were approved last November and took=20 effect in January are pretty much the same as those adopted in 1999? Hoggarth: The original revisions that took place in early 1999 never legal= ly=20 went into effect because they were incorrectly promulgated. This latest=20 effort on the part of ACHP was an attempt to cure the early illegalities. = =20 The shortened rulemaking process was, in many respects, a way to rubber-sta= mp=20 the original rules. While it did provide an opportunity for the industry t= o=20 suggest changes, not many of those were accepted by the ACHP. TR: What problems does the wireless industry have with the rules themselve= s? Hoggarth: The key to the wireless industry is speed to market. And the=20 latest applications of the advisory council rules by state authorities and = by=20 the federal government have created additional potential for real delays fo= r=20 the industry in the processing of new antenna-site requests. TR: Why have the rules hurt the antenna-siting process? Is the wireless=20 industry asking to be treated differently from other industries? Hoggarth: No. What=0F's happened is the new process has upped the ante wi= th=20 respect to the level of review by state and local authorities. The challen= ge=20 that the industry has found is that in implementing those rules, many state= =20 historic preservation officers and many other stakeholders have used it as = an=20 opportunity to almost step in and take an approval role, as opposed to an= =20 advisory role. . .It=0F's the FCC that approves the antenna sites as oppose= d to=20 the state historic preservation officers or the ACHP. TR: So you see the ACHP as trying to have a greater role than it=0F's allow= ed=20 under the law? Hoggarth: Correct. Our goal is to make sure that historic preservation=20 issues are addressed and that they=0F're looked at in a responsible way. = =20 Resources should be devoted to those sites that are going to present real= =20 challenges for cultural and historic preservation, as opposed to the creati= on=20 of an additional bureaucracy that does nothing but cause more pressure and= =20 work for state and local authorities, significantly increase the processing= =20 cost for carriers and tower companies, and delay the approval of those=20 facilities. TR:A telecom working group has drafted a programmatic agreement to streamli= ne=20 the antenna collocation process. What=0F's the purpose of such an agreemen= t? Hoggarth: The efforts to come up with a collocation agreement, as well as= =20 previous efforts of the telecommunications working group, were attempts to= =20 address the overall industry concern about the ACHP rules and processes. Our goal was to bite off manageable chunks of the problem so we could resol= ve=20 some things in the very short term and provide immediate benefits to the=20 historic preservation community and the industry. This is a billion-dollar= =20 issue overall, with respect to compliance, speed of service delays, and=20 additional obligations, both at the state and local levels. And collocation is one way to take a significant chunk out of that=20 billion-dollar burden. Since last summer there have been active negotiatio= ns=20 on issues such as delegation and collocation, in an effort to resolve some= =20 short-term, immediate goals. A group within the telecommunications working= =20 group established by the ACHP reached consensus on a collocation proposal. But what arose in the late fall was significant concern on the ACHP=0F's si= de as=20 to how to implement any agreement reached by the telecommunications working= =20 group. As a result, the ACHP authorized negotiations between the ACHP and= =20 the FCC to reach a programmatic agreement with respect to the collocation o= f=20 new antenna facilities on existing structures and buildings. A general consensus was reached in the fall as to what that would look like= . =20 The latest efforts, with respect to the programmatic agreement, focus on th= e=20 real desire=0F-on the part of both industry and government=0F-to have a spe= cific=20 agreement that has some teeth to it, that has some consistency to it, that= =20 everyone can be willing to abide by. . . The negotiations have become very complicated. We at PCIA and the tower=20 industry have been working with the ACHP, the FCC, and the state historic= =20 preservation officer community to reach agreements on language that satisfi= es=20 the goals of preserving historic properties in a responsible manner. TR: So the devil is in the details, it seems. PCIA asked the FCC to amend= =20 the draft agreement it sought comment on last month. So did the Cellular= =20 Telecommunications & Internet Association. Hoggarth: Certainly from our industry=0F's perspective, the draft agreemen= t=20 that was put on public notice is not our ideal. It=0F's simply a matter no= w of=20 word-smithing, and we want to make sure that the appropriate administrative= =20 rules are observed. TR: Ideally how would a programmatic agreement streamline the collocation= =20 process? Hoggarth: What it would do is allow the industry to put antennas on existi= ng=20 facilities without individual review, thereby minimizing the impact on the= =20 environment by limiting the number of new towers that go up. The programmatic agreement will have very specific parameters in which the= =20 historic preservation community will be assured that new facilities will go= =20 through a process of review. There=0F'll be assurance that the existing=20 structure on which the collocation is taking place already has undergone a= =20 measure of review, or that any significant site changes created by=20 collocation will be appropriately reviewed by local authorities. TR:Under this streamlined approach, what percentage of antennas no longer= =20 would have to undergo review by historic preservation officials? Hoggarth: Our hope is that, as a result of the programmatic agreement, we= =20 would eliminate 80% to 85% of the reviews by state and federal authorities. The present system anticipates significant review of literally every new=20 antenna that=0F's sited in a community. And with collocation, that=0F's si= mply not=20 necessary. TR: Is there a sense for how many antennas that 80% to 85% represents? Hoggarth: No, it=0F's hard to say. What we=0F're trying to do is create a= system=20 that not only ensures that current sites remain in place and aren=0F't subj= ect=20 to review, but also that going forward a large number of new sites will be= =20 collocations. TR: Where has the opposition come from to the collocation agreement? Hoggarth: The concerns expressed by the historic preservation community=20 center around language that ensures that there are no significant loopholes= ,=20 and we certainly agree with that. TR: Isn=0F't it also correct that some historic preservation officers have= been=20 concerned that they won=0F't have the same review authority on collocations= that=20 they currently have? Hoggarth: I think the concern is a combination of that, plus just a=20 lack-of-control issue, which says, =0F"My goodness, I don=0F't have the opp= ortunity=20 to review what sort of sites are going to go up.=0F" The reality is that the wireless industry is expanding so significantly and= =20 so greatly that historic preservation officers simply don=0F't have the tim= e to=20 review every new project. =20 They simply don=0F't need to review every one of them, given the lack of ad= verse=20 impacts from so many of these collocations. TR: In addition to collocation, what are some of the wireless industry=0F's= =20 other regulatory concerns that are being discussed by the telecom working= =20 group? Hoggarth: They involve such things as the time periods in which reviews ar= e=20 required. They involve the role of the FCC and the role of the industry in= =20 terms of application reviews, the use of authorized consultants to conduct= =20 the reviews, and the role of the ACHP v. the role of the state historic=20 preservation officers. Literally all aspects of the advisory council=0F's = rules=20 are touched on. TR: ACHP officials have said they=0F'd like to vote at their meeting in Ma= rch=20 on a broader programmatic agreement that includes many of these issues in= =20 addition to collocation. Do you think that=0F's still realistic? Hoggarth: There are various expectations that folks are bringing to the=20 table. The reality is that we thought collocation was something that could= =20 be resolved in a 60-day time frame, and it=0F's now taken four months. And= that=0F' s just one issue that we thought we had broad consensus on within the=20 telecommunications working group. As a result, it=0F's just a practical view that a broader programmatic agre= ement=20 is going to take a lot of hard work. I can=0F't give you any predictions o= n=20 time, because if we=0F're fortunate and if things break the right way, we m= ight=20 be able to accomplish things sooner rather than later. But I=0F'm optimistic. It=0F's going to take a tremendous amount of work o= ver the=20 next year to actually bring something to fruition. We continue to work on individual issues with the ACHP. We=0F've establish= ed=20 very positive working relationships with the NCSHPO organization, and we ar= e=20 building relationships with various tribal representatives as well, so that= =20 we can really address all aspects of cultural and historical preservation. What=0F's Ahead. . . FEBRUARY 5=0F-The U.S. Court of Appeals in Washington will hear oral arguments in=20 National Exchange Carrier Association, Inc., v. FCC(case no. 00-1055). NEC= A=20 is challenging the FCC=0F's December 1999 decision rejecting NECA=0F's prop= osed=20 modifications to the 1999 =0F"average-schedule=0F" Universal Service Fund f= ormula=20 (TR, 10/9/00 p.36). 7=0F-Comments are due to the United Kingdom=0F's Office of Telecommunicatio= ns on=20 whether to impose additional conditions on Cable & Wireless plc=0F's operat= or=20 license for certain international routes (TR, 1/15/01 p.32). 8=0F-Section 275 of Telecommunications Act prohibits Bell operating compani= es=20 from providing alarm monitoring services until this date (TR,11/17/97 p.7).= =20 The Act grandfa-thered alarm monitoring operations existing as of Nov. 30,= =20 1995. 13=0F-The FCC=0F's Wireless Telecommunications Bureau holds an auction of e= ight=20 700-megahertz band licenses that weren=0F't bought at the =0F"guard-band=0F= " auction=20 (TR, 10/16/00 p.38). 14=0F-CONNECTICUT: The Connecticut Department of Public Utility Control pl= ans=20 to issue its final decision on whether to require Southern New England=20 Telephone Co.=0F's video service subsidiary to continue providing cable TV= =20 services in the state (TR, 1/29/01 p.44). 14=0F-New deadline for submitting comments to the FCC on its most recent or= der=20 aimed at conserving telephone numbers. Replies are due March 7 (TR, 1/29/0= 1=20 p.35). Filings should reference Common Carrier dockets 99-200 and 96-98. 15=0F-NEW JERSEY: Deadline for Verizon New Jersey, Inc., to file a new=20 alternative rate regulation plan with state regulators (TR, 1/8/01 p.23). 15=0F-IRELAND: Grant proposals are due to Ireland=0F's Department of Publi= c=20 Enterprise as part of its plan to make $3.6 million available to community= =20 groups for communications technologies (TR, 12/4/00 p.30). 19=0F-CALIFORNIA: Comments are due to the Public Utilities Commission on C= ap=20 Gemini Ernst & Young=0F's reports on Pacific Bell=0F's operation support sy= stems=20 (OSSs). The commission plans to issue a draft decision on the reports Apri= l=20 6, and a final decision May 24 (TR, 12/25/00 p.4) 20=0F-22=0F-The Consortium for School Networking holds a tele-com and Inter= net=20 conference in Washington. For more information, call 202/624-1740 or go to= =20 http://www.k12schoolnetworking.org. 22=0F-The FCC holds a meeting. 22=0F-Comments are due to the FCC on its notice of proposed rule-making=20 concerning the allocation of third-generation wireless frequencies=20 (Engineering and Technology docket 00-258). Replies are due March 9 (TR,= =20 1/29/01 p.35). 22=0F-Comments are due to the FCC on its proposal to reallocate 27 megahert= z of=20 spectrum transferred from federal government to private use (Engineering an= d=20 Technology docket 00-221). Replies are due March 26 (TR, 1/29/01 p.35). 23=0F-The Alliance for Public Technology holds an advanced services policy = forum=20 at the National Press Club in Washington. 25=0F-28=0F-The National Association of Regulatory Utility Commissioners ho= lds its=20 winter committee meetings in Washington, D.C. For more information, call= =20 202/898-2214. 26=0F-Comments are due to the FCC on the federal-state joint board=0F's=20 recommendations regarding the Rural Task Force=0F's plan for reforming the= =20 universal service support mechanism (TR, 1/29/01 p.35). Replies are due=20 March 12 in Common Carrier docket 96-45. 26=0F-Comments are due to the FCC on the MAG (multiassociation group) propo= sal=20 for overhauling interstate access and universal service support mechanisms= =20 (TR, 1/29/01 p.35). Replies are due March 12. Comments on those aspects o= f=20 the MAG proposal that would increase or modify data-reporting requirements= =20 are due to the Office of Management and Budget by March 26. 27=0F-28=0F-Lucent Technologies, Inc., and the Association for Local=20 Telecommunications Services sponsor a competitive carrier regulatory summit= =20 in Washington. For more information, call 800/765-9222. MARCH 1=0F-2=0F-Credit Suisse First Boston holds a wireless Internet conference i= n=20 Tokyo. For more information, go to http://www.csfb.com/conferences. 5=0F-6=0F-Law Seminars International holds a =0F"Local Telecommunications= =20 Infrastructure=0F" conference in Atlanta. For more information, call=20 206/621-1938 or 800/854-8009. Executive Briefings Verizon Wireless=0F' Bidding =0F- The buzz on Wall Street in the wake of th= e FCC=0F's=20 reauction of 422 =0F"C=0F" and =0F"F=0F" block PCS licenses focuses on the = aggressiveness=20 of Verizon Wireless. Industry observers also talk up the prices paid for= =20 three 10 MHz licenses in New York City. (Page 3) USTR Review =0F- Countries around the world are making progress in complyin= g=20 with various telecom-munications trade agreements, but much more work needs= =20 to be done, U.S. carriers tell USTR. They raise concerns similar to those= =20 that have dominated the debates about telecom competition in the U.S. (Pag= e=20 5) Mexican Market =0F- The U.S. Trade Representative still may ask a World Tra= de=20 Organization panel to investigate Mexico=0F's compliance with a WTO agreeme= nt to=20 give foreign carriers access to its telecom market. (Page 7) Comnet Convention =0F- Key congressional and FCC staffers predict that fede= ral=20 policy-makers will launch major efforts this year to curb the Commission=0F= 's=20 authority to impose =0F"voluntary=0F" conditions on merger applications, up= date the=20 agency=0F's traditional common carrier rules, and pressure the FCC to accel= erate=20 its decision making. (Page 9) Critical Infrastructure =0F- House Energy and Commerce Committee Chairman T= auzin=20 demands a copy of a critical infrastructure report that he says the law=20 required be sent to Congress by Jan. 15 but that never arrived. (Page 10) Long Distance Rate War =0F- AT&T execs believe they=0F're seeing at least a= =20 temporary cease-fire in the long distance rate wars that have ravaged the= =20 revenue streams of incumbent IXCs. =0F"Pricing still is aggressive, but it= is=20 not setting new lows,=0F" AT&T Chairman Mike Armstrong says. Analysts, how= ever,=20 say any truce is likely to be short-lived. (Page 11) VersaPoint Breakup =0F- Versatel absorbs what remains of VersaPoint=0F-its = former=20 joint venture with NorthPoint=0F-after cutting most of the workforce and=20 canceling many of the operations of the money-losing business. (Page 12) World Radio Conference =0F- It=0F's important for U.S. officials to consult= with=20 other nations as they prepare for the ITU=0F's 2003 World Radiocommunicatio= n=20 Conference, FCC officials and industry representatives agree. (Page 13) Satellite Licenses =0F- The FCC=0F's International Bureau modifies the lice= nses of=20 GSO satellite system operators to allow them to use Ka-band spectrum for=20 intersatellite service links. (Page 14) DT-VoiceStream Merger =0F- The Justice Department and FBI say they have rea= ched=20 an agreement with VoiceStream and Deutsche Telekom that reduces the law=20 enforcement, national security, and public safety risks of DT=0F's planned= =20 acquisition of VoiceStream. (Page 14) Ex Parte Rules =0F- Two carriers vehemently oppose the FCC=0F's proposal to= exempt=20 foreign regulators from requirements to report on their communications with= =20 the FCC. They say the rules protect regulated entities by making the FCC= =0F's=20 deliberations =0F"transparent.=0F" (Page 15) Spectrum Cap =0F- PCIA, which in the past has urged the FCC on behalf of sm= all=20 carriers to continue to limit the amount of spectrum wireless carriers may= =20 hold in any one market, declares that it =0F"will no longer play an active = role=0F"=20 in the issue. (Page 16) 700 MHz Auction Delay =0F- Major wireless carriers praise the FCC=0F's four= th delay=20 of a 700 MHz band auction. But rural carriers and a major TV broadcaster= =20 criticize the move, saying it was unnecessary. (Page 16) Wireless Internet Applications =0F- QUAL-COMM develops an open software pla= tform=20 to help spur the development of applications for the wireless Internet. = =20 (Page 17) Spectrum Dilemma =0F- French and Brazilian telecom regulators have more tro= ubles=20 awarding wireless licenses. France decides to organize another =0F"beauty= =20 contest=0F" in hopes of attracting more bidders for 3G licenses after only = two=20 companies bid for four licenses on the block. Brazil postpones an auction = of=20 wireless licenses because of a lack of interest by bidders. (Page 18) Interconnection Arbitration =0F- The FCC sets the schedule for arbitrating= =20 disputes between Verizon and three other carriers over interconnection=20 agreements. The FCC says that AT&T, Cox, and WorldCom may now file request= s=20 for arbitration and that the Common Carrier Bureau chief will preside over= =20 the proceedings. (Page 20) Pay-Per-Call Case =0F- A federal district judge dismisses a lawsuit allegin= g=20 that WorldCom unlawfully blocked calls to pay-per-call =0F"900=0F"-number= =20 services. He tells a group of pay-per-call service providers to take their= =20 complaint against WorldCom to the FCC. (Page 20) Equipment-Placement Debate =0F- Municipalities and CLECs spar over whether = the=20 FCC should preempt several Ohio cities=0F' authority over the placement of= =20 telecom facilities. The debate centers around one question: Does requirin= g=20 a CLEC to place its lines underground, rather than on poles where the=20 incumbent=0F's facilities are located, constitute discrimination? (Page 2= 1) Missouri InterLATA Bid =0F- The Missouri PSC decides against supporting SW = Bell=0F' s bid to provide interLATA service in the state. It could change its mind = if=20 the company addresses the PSC=0F's concerns about issues such as pricing an= d=20 access to unbundled loops. (Page 21) AeA=0F's 2001 Agenda =0F- The former American Electronics Association advis= es=20 federal policymakers to take a hands-off approach to regulating broadband= =20 service markets with multiple providers. (Page 22) ALTS=0F' Wish List =0F- CLECs are major players in fueling economic growth,= ALTS=20 says. But Congress needs to consider legislation to help CLECs overcome th= e=20 impediments posed by ILECs, building owners, municipalities, and the=20 financial markets. (Page 23) FCC Commissioners =0F- Harold W. Furchtgott-Roth=0F's decision not to seek= =20 renomination to a second term on the Commission sparks a new round of=20 speculation about who the Bush administration will appoint to the FCC and= =20 when it will fill potential vacancies at the agency. Some think the White= =20 House will act quickly to fill the seat left open by former Chairman Kennar= d=0F' s resignation. (Page 24) Pricing-Flexibility Rules =0F- A federal appeals court says the FCC acted= =20 reasonably in counting the number of carriers collocating equipment in an= =20 incumbent=0F's wire centers to determine the level of local competition. T= he=20 U.S. Court of Appeals in Washington rejects WorldCom=0F's argument that the= FCC=0F' s criteria for granting LECs pricing flexibility don=0F't accurately measur= e=20 competition and are unlawfully arbitrary. (Page 25) City-Owned Telecom Businesses =0F- Utah state Rep. Greg Curtis plans to=20 introduce a bill to authorize state regulation of city-owned telecom=20 businesses, such as the broadband service offerings Provo is planning to=20 provide through its newly acquired cable TV system. Without the bill, the= =20 PSC couldn=0F't regulate such businesses. (Page 26) BT Price Controls =0F- Oftel acknowledges that BT faces increased competiti= on in=20 the provision of residential voice service but extends price controls for a= =20 year because of BT=0F's continued =0F"market power.=0F" It also extends co= ntrols on=20 competitive carrier interconnection charges. (Page 27) Fighting Cybercrime =0F- The European Commission launches an initiative aim= ed at=20 harmonizing the cybercrime policies of its member nations with those of oth= er=20 countries. (Page 27) Loral=0F's Retreat =0F- Loral Space & Communications scraps plans to delive= r=20 high-speed Internet service directly to consumers over a $3.5 billion netwo= rk=20 of satellites and optical fiber. =0F"We do not have the in-house skills to= =20 develop the marketing resources to competitively deploy such a system,=0F" = CEO=20 Bernard Schwartz says. (Page 27) Antenna Collocations =0F- Rob Hoggarth of PCIA hopes an agreement hammered= out=20 by the FCC, the Advisory Council on Historic Preservation, historic=20 preservation officers, and wireless industry reps can streamline the review= =20 of antenna collocations under the National Historic Preservation Act. (Pa= ge=20 35) Copyright 2001, Telecommunications Reports International, Inc. All rights= =20 reserved.

dasovich-j/all_documents/8817.

dasovich-j

['[email protected]']

RE: Fundamentals Welcome Mara

Sorry. It was in yesterday's Gas Daily on page 5. Mara -----Original Message----- From: Dasovich, Jeff Sent: Thursday, October 25, 2001 9:28 AM To: Bronstein, Mara Subject: RE: Fundamentals Welcome Mara Didn't work. Was it in yesterday's gas daily? If so, I can access it. Thanks very much for your help. Best, Jeff -----Original Message----- From: Bronstein, Mara Sent: Thu 10/25/2001 8:43 AM To: Dasovich, Jeff Cc: Subject: Fundamentals Welcome Mara <<Fundamentals Welcome Mara.htm>> Barry asked me to send you this article about DWR in yesterday's Gas Daily. The article is on page 5. I am not sure if this will work; if it doesn't, email me back and I will send the article a different way. Thanks, Mara Bronstein

dasovich-j/deleted_items/764.

dasovich-j

['[email protected]']

RE: Angelides Oct. 19th Letter to L. Lynch Urging July 1 DA

Thank you for your explanation. Often I think too literally and narrowly and forget about the importance of spin. All the same, I think we should know if Loretta appreciates the open support of evil industry or not...I'd say it's worth a call. E -----Original Message----- From: Dasovich, Jeff [mailto:[email protected]] Sent: Monday, October 22, 2001 1:58 PM To: Evelyn Kahl Subject: RE: Angelides Oct. 19th Letter to L. Lynch Urging July 1 DA Suspension Date Great question. If you think it would be useful, I can back channel to Loretta and find out. I'm of the view that this letter is more to refute Angelides, so that his wild assertions don't go unanswered in the court of public opinion. Perhaps the letter should be addressed to Angelides, instead. On the other hand, I think it is also useful to make it known to the press and the public that the PUC has the regulatory tools, processes, etc. necessary to permit customers broad latitude to manage their own energy needs on the one hand, and ensure that there's not the sort of massive cost-shifting to which Angelides refers on the other. In the public's view this has been painted as an either/or issue. Either we end direct access, or granny faces death and destruction. And that's just not the case. In fact, I think it can be argued that the scenario Angelides paints just isn't in the cards, period. But I may be missing the mark with all this and am open to other views. Let me know if you'd like me to find out if Loretta thinks the letter would help her. Could find that out in pretty short order. Best, Jeff -----Original Message----- From: Evelyn Kahl [mailto:[email protected]] Sent: Monday, October 22, 2001 3:46 PM To: Dasovich, Jeff Subject: RE: Angelides Oct. 19th Letter to L. Lynch Urging July 1 DA Suspension Date Has anyone ever stopped to ask Loretta whether the letters are helpful or not? Two things occur to me. First, it is not becoming for a commissioner to be taking actions consistent with the urgings of industry -- particularly if you're a Democrat. Second, it has always struck me that what she needs is some form of record support, not political pats on the back in one-page letters. I am asking you these questions not judging the proposal to send a letter .... but I've never understood what they're supposed to do for her and I honestly would like to understand. E -----Original Message----- From: Dasovich, Jeff [mailto:[email protected]] Sent: Monday, October 22, 2001 11:33 AM To: Dasovich, Jeff; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected] Subject: RE: Angelides Oct. 19th Letter to L. Lynch Urging July 1 DA Suspension Date FYI. Note below that even the mighty and powerful Power Authority's own crackerjack analysis asserts that there is still a net short (despite DWR contracts and DA "stampede"), which should leave one to believe that, contrary to Angelides' letter, the more the DA the better. Which further supports Loretta Lynch's response to the Angelides' letter that DA reduces the amount of spot power DWR has to buy. Best, Jeff CONSUMER POWER AND CONSERVATION FINANCING AUTHORITY Pace of Power Authority Renewable Portfolio Agenda is Slowed Quite possibly the most significant action taken at the October 19 Consumer Power and Conservation Financing Authority (Power Authority) was its inaction on contracts proposed for approval. The Power Authority has aggressively pursued a broad renewable portfolio, with the intent to approve contracts as soon as possible. Instead of approving a number of contracts on its October 19 agenda, the Power Authority deferred calendared decisions on request for bids until its November 2 meeting, acknowledging that no action can be taken until the Department of Water Resources (DWR) rate agreement stalemate has been resolved. Chairman Freeman stated that the Public Utility Commission's rejection of the rate agreement has created an obstacle for the Power Authority to exercise renewable contracts, to contract for peaker generation and/or to implement demand side programs. The Power Authority relies upon DWR's credit to fund these programs, and until a rate agreement is finalized the Power Authority cannot sign contracts. Freeman indicated that the Power Authority has signed letters of intent to purchase output from 14 biomass facilities in the Central Valley, as well as 400 MW generated by wind. With the Current Glut of Contracts, Why Do We Need Additional Reserves? Kellan Flukinger, Senior Advisor to Chairman Freeman and Laura Doll, provided a detailed presentation explaining why he believes the Power Authority must contract for additional renewable and peaking generation. Flukinger believes that despite direct access and the current glut of electricity supplied in long-term contracts, there still appears to be a net short of a few thousand megawatts within the State. Flukinger concluded that the State still is at the mercy of electric generators who are not subject to PUC regulatory authority and who have no real obligation to build and maintain new facilities or to serve customers within the State. He believes that the short-term contracts and spot purchases leave the state vulnerable to price-spikes and supply shortages. He believes that the reserve can be managed through Time-of-Use and Real-Time-Pricing, conservation, interruptibles, demand side management, renewables and peakers. Power Authority Names William Barry as Chief Financial Officer William Barry was approved as Chief Financial Officer of the Power Authority at its October 19 Board meeting in Sacramento. Mr. Barry currently works for the City of San Francisco, and has worked in the past for the New York Power Authority. ********************************************************************** This e-mail is the property of Enron Corp. and/or its relevant affiliate and may contain confidential and privileged material for the sole use of the intended recipient (s). Any review, use, distribution or disclosure by others is strictly prohibited. If you are not the intended recipient (or authorized to receive for the recipient), please contact the sender or reply to Enron Corp. at [email protected] and delete all copies of the message. This e-mail (and any attachments hereto) are not intended to be an offer (or an acceptance) and do not create or evidence a binding and enforceable contract between Enron Corp. (or any of its affiliates) and the intended recipient or any other party, and may not be relied on by anyone as the basis of a contract by estoppel or otherwise. Thank you. **********************************************************************

dasovich-j/inbox/707.

dasovich-j

['[email protected]', '[email protected]']

Re: Energy Issues

Miyung, You seem to be finding these okay by yourself so I guess I don't need to be= =20 forwarding the articles I find to you anymore? I don't mind doing it, but I can't see duplicating effort, either! :--) Either way...let me know,=20 Thanks! Joseph Miyung Buster@ENRON_DEVELOPMENT 04/25/2001 08:25 AM To: Ann M Schmidt/Corp/Enron@ENRON, Bryan Seyfried/LON/ECT@ECT,=20 [email protected], Elizabeth Linnell/NA/Enron@Enron, [email protected], James = D=20 Steffes/NA/Enron@Enron, Janet Butler/ET&S/Enron@ENRON, Jeannie=20 Mandelker/HOU/ECT@ECT, Jeff Dasovich/NA/Enron@Enron, Joe=20 Hartsoe/Corp/Enron@ENRON, John Neslage/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT,= =20 John Sherriff/LON/ECT@ECT, Joseph Alamo/NA/Enron@Enron, Karen=20 Denne/Corp/Enron@ENRON, Lysa Akin/PDX/ECT@ECT, Margaret=20 Carson/Corp/Enron@ENRON, Mark Palmer/Corp/Enron@ENRON, Mark=20 Schroeder/Enron@EnronXGate, Markus Fiala/LON/ECT@ECT, Michael R=20 Brown/LON/ECT@ECT, Mike Dahlke/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Mona L= =20 Petrochko/NA/Enron@Enron, Nicholas O'Day/AP/Enron@Enron, Peggy=20 Mahoney/HOU/EES@EES, Peter Styles/LON/ECT@ECT, Richard=20 Shapiro/NA/Enron@Enron, Rob Bradley/Corp/Enron@ENRON, Sandra=20 McCubbin/NA/Enron@Enron, Shelley Corman/ET&S/Enron@ENRON, Stella=20 Chan/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Steven J Kean/NA/Enron@Enron, Sus= an=20 J Mara/NA/Enron@Enron, Mike Roan/ENRON@enronXgate, Alex=20 Parsons/EU/Enron@Enron, Andrew Morrison/LON/ECT@ECT, [email protected], Jane= l=20 Guerrero/Corp/Enron@Enron, Shirley A Hudler/HOU/ECT@ECT, Kathleen=20 Sullivan/NA/Enron@ENRON, Tom Briggs/NA/Enron@Enron, Linda=20 Robertson/NA/Enron@ENRON, Lora Sullivan/Corp/Enron@ENRON, Jennifer=20 Thome/NA/Enron@Enron, [email protected],=20 [email protected], [email protected],=20 [email protected], [email protected], [email protected],=20 [email protected], Carin Nersesian/NA/Enron@Enron cc: =20 Subject: Energy Issues Please see the following articles: Sac Bee, Wed, 4/25: "State's credit takes hit" Sac Bee, Wed, 4/25: "Top energy adviser to quit as Davis pushes for plants= " Sac Bee, Wed, 4/25: "Senators offer bill to put a lid on power prices: Sen= .=20 Dianne Feinstein says there's a good chance the proposal can get out of committee" Sac Bee, Wed, 4/25: "Energy price gouging might end up felony" Sac Bee, Wed, 4/25: "Dan Walters: It's time for politicians to be honest= =20 about the energy crisis" SD Union, Wed, 4/25: "Bond-rating agency delivers reprimand, downgrade" SD Union, Wed, 4/25: "FERC to weigh limited curbs on electricity prices" SD Union, Tues, 4/24: "Grid officials declare a Stage 2 alert" SD Union (AP), Tues, 4/24: "Top credit agency lowers California's bond=20 rating" LA Times,Wed, 4/25: "State's Bond Rating Downgraded to A+" LA Times, Wed, 4/25: "Price Controls Spark Deja Vu" LA Times, Wed, 4/25: "Davis Names Executive to Speed Construction of Power= =20 Plants in State" LA Times, Wed, 4/25: "Power Plant Emits Tons of Fumes" LA Times,Wed, 4/25: "Power Plant Plan Worries Neighbors" SF Chron, Wed, 4/25: "Federal plan called 'too little, too late'=20 Limited price control seen as step in right direction, but officials renew= =20 call for price ceiling" SF Chron, Wed, 4/25: "S&P lowers California's bond rating=20 First cut since '94 could cost taxpayers millions" SF Chron, Wed, 4/25: "Richard Sklar=20 Ex-Muni boss becomes energy czar=20 Davis' pick to oversee power plant construction" SF Chron (AP), Wed, 4/25: "Will price caps deter investment, as federal=20 regulators say?" SF Chron (AP), Wed, 4/25: "Credit agency cites power troubles; lowers=20 state's bond rating"=20 SF Chron (AP), Wed, 4/25: "S&P downgrades California's bonds citing energy= =20 troubles"=20 Mercury News, Wed, 4/25: "State bond rating lowered" Mercury News, Wed, 4/25: "Q&A with Gov. Gray Davis on energy issues" =20 (Opinions/Commentary) Mercury News (AP), Wed, 4/25: "Davis: Power surplus by 2003" Mercury News (AP), Wed, 4/25: "Great America to avoid blackouts" OC Register, Wed, 4/25: "State's bond rating is lowered The energy crisis brings an A+ designation, which likely will mean higher= =20 borrowing costs" =20 OC Register, Wed, 4/25: "Fire stokes wholesale gas cost" Individual.com (Business wire), Wed, 4/25: "Power Companies and Regulators= =20 Must Take=20 Steps To Avoid Spread of California Power Virus/ Andersen Analysis" Individual.com(Business wire), Wed, 4/25: "Soaring Temperatures Produce Ca= ll=20 for Conservation; California ISO Also Announces New Outage Notification System and On-call=20 Number" ---------------------------------------------------------------------------= --- --------------------------------------------------------------------------- State's credit takes hit=20 By Dale Kasler and John Hill Bee Staff Writers (Published April 25, 2001)=20 Alarmed by the drain on California's treasury from more than $5 billion of= =20 electricity purchases, a leading Wall Street credit agency lowered its rati= ng=20 on state bonds Tuesday.=20 Standard & Poor's downgraded California's credit rating by two notches, a= =20 move that will increase the state's borrowing costs and illustrates a growi= ng=20 fear that the state's power expenditures could mushroom during a summer of= =20 blackouts and price spikes.=20 Although the state remains creditworthy, S&P said it has less confidence in= =20 California's ability to repay its debts. It said the state could be=20 downgraded further if electricity purchases spiral out of control and the= =20 economy suffers because of blackouts.=20 "This reflects the mounting uncertainty and the cost to the state of the=20 power purchases," said S&P analyst Steven Zimmermann. "The state is still= =20 strong -- it's just not as strong going forward."=20 Bond ratings are a benchmark of a state's finances, and California official= s=20 have been proud of their ability to restore the state's ratings since they= =20 bottomed out during the recession and budget deficits of the mid-1990s. S&P= 's=20 downgrade is the first for California since July 1994 and comes as a slowdo= wn=20 in the high-tech industry adds to the budgetary anxiety caused by electrici= ty=20 costs.=20 Still, Gov. Gray Davis' office downplayed the significance of S&P's decisio= n.=20 "California's economy is still fundamentally strong, period," said Davis=20 spokesman Roger Salazar. "We expect that in 2001 California will continue t= o=20 lead the nation in economic growth and job creation."=20 S&P lowered California from "AA" to "A-plus" status. That means California'= s=20 debt-payment ability has been reduced from "very strong" to "still strong"= =20 but "somewhat more susceptible to the adverse effects of the changes in=20 circumstances and economic conditions."=20 While it won't directly hamper Davis' plan for solving the energy crisis, t= he=20 downgrade increases the pressure on Davis to issue $10 billion to $15 billi= on=20 worth of bonds this summer as part of his rescue package.=20 The bonds are intended to replenish the state treasury as well as finance= =20 future power purchases. Since mid-January the state has committed $5.7=20 billion to buy electricity for troubled Pacific Gas and Electric Co. and=20 Southern California Edison. The commitment has chewed up a significant=20 portion of a budget surplus estimated by state Treasurer Phil Angelides at= =20 nearly $6 billion; Davis and other state officials have pegged the surplus = at=20 $8 billion.=20 Either way, it's clear that the power expenditures have left Wall Street an= d=20 many state officials nervous. S&P and other rating agencies have had=20 California on a ratings "watch" for some time, signifying that a downgrade= =20 was possible.=20 "The fact is that the state's credit rating and financial strength will=20 continue to be in jeopardy until the state's general fund is repaid for=20 energy costs," said Angelides, who's responsible for selling the bonds.=20 "We have to get the general fund out of the business of purchasing energy.= =20 (The budgetary drain) will begin to affect very dramatically the ability of= =20 the state to provide for core programs, from education to health care to=20 public safety."=20 Angelides spent much of the day urging legislators to pass legislation to g= et=20 the bond offering rolling.=20 The Legislature already authorized the bonds, but Angelides said it must do= =20 so again because PG&E and Edison are challenging the formula the state has= =20 developed for bond repayment. The bond will be repaid with money from a rat= e=20 hike passed by state regulators, but PG&E and Edison say the repayment=20 formula will siphon too much money from their coffers.=20 Angelides said lawmakers must quickly pass the new bill -- which requires a= =20 two-thirds majority -- or he might miss a make-or-break May 8 deadline for= =20 closing on a crucial $4.1 billion bridge loan. That loan is designed to tid= e=20 the state over until the bonds are sold later this summer. But the lenders= =20 won't fork over the funds until they're assured the bonds will be sold,=20 because the state will use the bond proceeds in part to pay off that loan, = he=20 said.=20 Ironically, the sale of those bonds won't be hurt by the S&P downgrade=20 because customer revenue instead of taxpayer dollars are being used to pay= =20 them off, analysts said.=20 "What's important for the bonds is how the (utility) rates are structured t= o=20 pay them off," said analyst Susan Abbott of Moody's Inc. in New York.=20 But the downgrade will raise the interest rate on a host of other bonds=20 issued by the state in the coming months. The likely increase is as much as= =20 one-quarter of 1 percent, said chief economist Ted Gibson of the state=20 Department of Finance.=20 With the state authorized to sell $12 billion worth of general obligation= =20 bonds, the downgrade could add $50 million to $100 million in borrowing cos= ts=20 over the life of those bonds, Angelides said.=20 The S&P action also could raise a red flag to anyone thinking of investing = in=20 a public or private-sector project in California.=20 It "will create perception issues about who we are and where we are in term= s=20 of the economy of the state," Angelides said. "The real issue here is the= =20 reputational damage to the state of California."=20 The two other leading credit agencies, Moody's and Fitch Investors Service,= =20 still have California on a credit watch but haven't issued downgrades.=20 S&P acted the same day the Independent System Operator, which manages=20 California's power grid, declared a Stage 2 power alert. Warm weather and t= he=20 unexpected shutdown of two key power plants caused electricity reserves to= =20 fall below 5 percent.=20 The Bee's Dale Kasler can be reached at (916) 321-1066 or [email protected]= m.=20 Bee Deputy Capitol Bureau Chief Dan Smith contributed to this report. ---------------------------------------------------------------------------= --- ------------------------ Top energy adviser to quit as Davis pushes for plants Bee Capitol Bureau (Published April 25, 2001)=20 John Stevens, Gov. Gray Davis' staff director and top energy adviser, is=20 leaving the governor's office at the end of the week, Davis announced=20 Tuesday.=20 Stevens, of Carmichael, joined the administration a year ago as staff=20 director after working 13 years as a top staffer in the Legislature,=20 including a stint as chief of staff to former Assembly Speaker Antonio=20 Villaraigosa.=20 He is the second top Davis adviser to leave in the past two weeks as the=20 Democratic governor struggles to deal with California's energy woes.=20 Like Phil Trounstine, the governor's communications director who announced= =20 his resignation two weeks ago, Stevens said he needed more time with his=20 family.=20 "It's an immense issue," he said of the energy crisis. "I've given what I c= an=20 to it, and I need to take a break."=20 Davis called Stevens, 54, "one of the most dedicated and loyal people that= =20 I've ever had working for me," but acknowledged long hours and intensity to= ok=20 its toll.=20 "This is tough work. This wears people out," Davis said. "He's so self-driv= en=20 that he needs a break, but I venture a guess that down the road, he'll be= =20 willing to come back and help us in some meaningful way on this energy=20 situation."=20 Davis also announced the appointment of Richard Sklar to head a Generation= =20 Implementation Task Force intended to speed up permitting and constructing= =20 power plants.=20 Sklar was the Clinton administration's representative in southeast Europe= =20 helping to rebuild war-torn Bosnia and Kosovo. ---------------------------------------------------------------------------= --- ------------------------ Senators offer bill to put a lid on power prices: Sen. Dianne Feinstein say= s=20 there's a good chance the proposal can get out of committee. By Les Blumenthal Bee Washington Bureau (Published April 25, 2001)=20 WASHINGTON -- West Coast senators formally introduced legislation Tuesday t= o=20 temporarily cap wholesale electric rates and expressed hope that their=20 proposal to ease the huge run-up in energy prices might clear the committee= =20 and make it to a vote on the Senate floor.=20 "I think we are very close to having the votes in committee," Sen. Dianne= =20 Feinstein, D-Calif., said of the Energy and Natural Resources Committee tha= t=20 has jurisdiction over the bill. "I am taking nothing for granted, but the= =20 committee is 50-50."=20 There are 11 Democrats and 11 Republicans on the committee, including=20 Feinstein and the other primary sponsor of the bill, Oregon Sen. Gordon=20 Smith.=20 Smith, a Republican, is the swing vote.=20 Feinstein said the committee chairman, Sen. Frank Murkowski, R-Alaska, has= =20 shown an increasing willingness to help her and Smith move the legislation,= =20 though some differences remain.=20 "He (Murkowski) has told me he'd like to help," Feinstein said. "I think we= =20 are very close to a markup and this could move quickly."=20 Murkowski did not rule out price caps but said he thought the bill sacrific= ed=20 long-term solutions for short-term gains.=20 "I have concerns about the proposal put forward today and the impact it may= =20 have in distorting the market," he said. "It is time to address the=20 underlying causes -- not just the symptoms."=20 Feinstein's comments came at a news conference during which she, Smith,=20 Washington state Democratic Sens. Patty Murray and Maria Cantwell, and New= =20 Mexico Sen. Jeff Bingaman, the ranking Democrat on the Senate Energy=20 Committee, unveiled details of the bill and criticized the Bush=20 administration and federal regulators for failing to take action to cap=20 rates.=20 If approved by Congress and signed by President Bush, the bill would give t= he=20 Federal Energy Regulatory Commission 60 days to impose price caps or set up= a=20 cost-based rate structure that would allow electricity generators to recove= r=20 their costs and earn a fair return.=20 The controls would apply in 11 Western states, including California, Oregon= =20 and Washington. Similar legislation has been introduced in the House of=20 Representatives.=20 The lawmakers said the price controls would remain in effect until March=20 2003, when, they said, enough new generating plants will have come on line = to=20 overcome the West's current electricity shortage.=20 Under federal law, FERC has the authority to ensure wholesale rates are jus= t=20 and reasonable.=20 Feinstein said that during a warm day this summer California may fall 2,000= =20 megawatts short of meeting demand and on a hot day with air conditioners=20 cranked up, there could be a 10,000-megawatt shortfall.=20 Feinstein said that in 1999 California utilities paid $7 billion for=20 electricity, in 2000 more than $32 billion and, according to some estimates= ,=20 the price tag could reach $65 billion this year.=20 "There has been a very strong element of price gouging in this," Feinstein= =20 said.=20 "We should not have to pass legislation to compensate for a federal agency= =20 not doing its job," Murray said, adding that Northwest utilities were payin= g=20 the highest prices in the country for next-day delivery of wholesale power.= =20 "This (bill) will bring the market under control until new generation comes= =20 on line."=20 Cantwell, who is also a committee member, said wholesale rates have risen= =20 11-fold over the past several months, resulting in thousands of layoffs in= =20 the region and the shutdown of the aluminum industry.=20 "We cannot allow our government to sit idly by and allow a tragically flawe= d=20 and easily manipulated power market to wreak havoc on our economy and quali= ty=20 of life," Cantwell said.=20 The Bonneville Power Administration has indicated it may have to raise its= =20 wholesale rates by 250 percent this fall as it is forced to buy power on=20 expensive spot markets because a severe drought in the Pacific Northwest ha= s=20 reduced electricity production at the region's vast hydropower system. BPA= =20 supplies 45 percent of the Northwest's wholesale electricity.=20 Smith said that, as a Republican, he was initially reluctant to support pri= ce=20 control and would have preferred the market sort out its own problems.=20 But, he said, "Hard-nosed business practices that generate big profits are= =20 not always good politics. It's a mistake to defend a system that some can= =20 game to make incredible profits."=20 The Oregon senator said he knew his decision to sponsor the bill was not=20 well-received at the White House.=20 "I know I'm not making any friends down the street," he said. "It's importa= nt=20 to keep this bipartisan, and I'm not going to attack the Bush=20 administration."=20 Both Smith and Feinstein said a FERC staff proposal to cap wholesale electr= ic=20 rates in California when rolling blackouts are imminent falls well short of= =20 what's needed. FERC will consider the proposal at a meeting today.=20 "California is not the only state affected," said Smith. "This is not a=20 California problem alone."=20 Feinstein said the proposal was inadequate.=20 "I'm not sure that is the right way to go," she said. "The only reason they= =20 are considering action is we are putting the heat on them."=20 The Bee's Les Blumenthal can be reached at (202) 383-0008 or=20 [email protected]. ---------------------------------------------------------------------------= --- ------------------------ Energy price gouging might end up felony By Emily Bazar Bee Capitol Bureau (Published April 25, 2001)=20 Democratic lawmakers this week will unveil a proposal to make energy price= =20 gouging a felony -- punishable by stiff fines and possible jail time -- tha= t=20 could be subject to the state's controversial "three strikes" law.=20 The measure, sponsored by Lt. Gov. Cruz Bustamante, would punish companies= =20 that sell electricity or natural gas in California at "unjust or unreasonab= le=20 rates."=20 "There is a tremendous amount of wealth that is being transferred from=20 California to five companies, mostly in Texas," Bustamante said. "If what= =20 they're doing isn't illegal, it ought to be."=20 Though lawmakers are expected to introduce the measure Thursday, it already= =20 has generated opposition from Republican lawmakers and constitutional=20 questions from legal experts.=20 Several aspects of the bill, AB 67x, are unresolved and could change.=20 But the intent will remain the same, and energy companies that take advanta= ge=20 of Californians will still face significant penalties, said the bill's=20 author, Assemblyman Dennis Cardoza, D-Merced.=20 According to a draft version of the bill and some proposed amendments, a=20 corporation, or a person with decision-making authority at the corporation,= =20 would be found guilty of a felony if "they collude or conspire to manipulat= e=20 the market to achieve unjust or unreasonable rates for electricity or natur= al=20 gas."=20 A state or federal regulatory agency -- such as the Federal Energy Regulato= ry=20 Commission -- would determine whether rates were unjust or unreasonable. If= =20 that happened, the bill would open the door for prosecution by the state=20 attorney general or local district attorneys.=20 In addition, if found guilty, companies would be forced to pay restitution= =20 and could face fines as high as 10 percent of their gross corporate assets.= =20 Lawmakers are debating whether to make the felony a "three strikes" offense= ,=20 which requires 25 years to life sentences for some people convicted of thre= e=20 felonies.=20 Though the provision was in an early draft of the bill, Cardoza said it's= =20 "not likely" to show up in the final version.=20 "While I think this crime is every bit as abhorrent as going in and stealin= g=20 money from a bank, we're going to have to figure out a little bit different= =20 way of dealing with it," he said.=20 Even without the three strikes provision, the bill raises certain=20 constitutional issues, said Clark Kelso, a professor at the McGeorge School= =20 of Law in Sacramento.=20 For instance, he said, it's not clear whether the state can legally base a= =20 fine on an out-of-state company's gross assets.=20 And the measure, which requires a two-thirds vote for passage, already has= =20 generated Republican opposition.=20 "To the extent this bill is onerous toward power producers, it may deter th= em=20 from selling here rather than risk fines and prison," said James Fisfis, a= =20 spokesman for the Assembly Republican Caucus. "We haven't seen the details,= =20 but it sounds like it may be a piece of legislation that goes too far."=20 The Bee's Emily Bazar can be reached at (916) 326-5540 or [email protected]= . ---------------------------------------------------------------------------= --- ------------------------ Dan Walters: It's time for politicians to be honest about the energy crisis (Published April 25, 2001)=20 Gov. Gray Davis is continuing to tell Californians that he's on top of the= =20 state's energy crisis and, as he said at one gathering last week, "in three= =20 years, this problem will be a distant memory." Fat chance. All major aspect= s=20 of the situation are growing worse, not better, minute by minute.=20 Politicians took over the crisis in January as the state's major utilities= =20 exhausted their cash reserves and lines of credit. Davis began what he said= =20 then would be a short-term emergency program of power purchases to keep=20 electrons flowing into homes and businesses.=20 From that moment forward, the situation has steadily deteriorated, moving= =20 toward a three-pronged disaster: severe summer blackouts, the bankruptcy of= =20 the utilities and sharply escalating power bills. With the bankruptcy filin= g=20 by Pacific Gas and Electric Co. and decisions by Davis and the state Public= =20 Utilities Commission to begin ratcheting up utility rates, two of the three= =20 negative scenarios are now in place. And everyone involved in the crisis=20 expects blackouts this summer as demands for power soar and supplies dwindl= e.=20 The Davis strategy, if there is one, is to continue the state's massive pow= er=20 purchases while negotiating longer-term and presumably cheaper supply=20 contracts, encourage conservation, help utilities pay off their debts by=20 selling their intercity transmission system to the state and tapping=20 ratepayers, and build more power plants to ease the supply crunch.=20 Currently, the governor is touting his deal with Edison International, pare= nt=20 company of Southern California Edison, to sell its portion of the power gri= d=20 and is working on a similar deal with Sempra, the parent of San Diego Gas &= =20 and Electric. But PG&E's bankruptcy filing casts doubt on the viability of= =20 the cash-for-grid concept, and legislators, particularly Davis' fellow=20 Democrats, are very skeptical of the Edison deal.=20 Clearly, Davis rushed into the Edison deal just three days after PG&E made= =20 its bankruptcy filing, in hopes of erasing the political stain of the latte= r=20 action, but its provisions are being labeled a bailout by critics. It place= s=20 only a token financial burden on Edison International while guaranteeing th= e=20 profitability of its utility subsidiary by charging its customers whatever = is=20 required to cover its costs and past debts.=20 Meanwhile, the state is spending -- by Davis' own account -- about $70=20 million a day or $2 billion-plus a month on spot power purchases, paying=20 roughly five times what consumers are being charged at the retail level. An= d=20 the futures market for power indicates that wholesale power prices will jum= p=20 50 percent by midsummer; higher prices and greater purchases could increase= =20 the drain on the state treasury to as much as $5 billion a month.=20 State Treasurer Phil Angelides is desperately trying to arrange a bridge lo= an=20 to relieve pressure on the state's rapidly vanishing reserves, but Wall=20 Street is reluctant to lend without a fuller explanation of what's happenin= g=20 and a specific authorization from a suspicious Legislature. Meanwhile,=20 bankers are sending strong signals that the state government is becoming as= =20 poor a lending risk as the utilities.=20 Davis, for some reason, is unwilling to declare this situation the emergenc= y=20 that it is truly becoming -- one that could take a toll on human life if=20 major blackouts shut down air conditioners, respirators and traffic lights.= =20 He insists on issuing his periodic -- and wholly unrealistic -- assurances= =20 that things will turn out all right, even declaring to reporters on Tuesday= ,=20 "We think we'll have this thing licked by the end of fall."=20 It's time for someone -- the governor, preferably, but someone -- to lay ou= t=20 for Californians exactly what's happening, the downside financial and power= =20 supply risks, and what's being done to deal with the looming disaster facin= g=20 this state. It's time for politicians to treat us as adults who can face=20 reality, not as children to be fed sugar-coated sound bites and slogans.=20 The Bee's Dan Walters can be reached at (916) 321-1195 or [email protected]= om . ---------------------------------------------------------------------------= --- ------------------------ Bond-rating agency delivers reprimand, downgrade=20 By Ed Mendel=20 UNION-TRIBUNE STAFF WRITER=20 April 25, 2001=20 SACRAMENTO -- An influential Wall Street firm yesterday gave Gov. Gray Davi= s=20 and the Legislature poor marks for handling the electricity crisis,=20 downgrading state bonds because of the drain on the state treasury and=20 warning of long-term damage to the state economy.=20 The bad news from Standard & Poor's came as state Treasurer Phil Angelides= =20 urged the Legislature to pass a bill this week needed to begin repaying the= =20 state general fund with a bond of $10 billion or more.=20 The bond would be paid off by ratepayers over 15 years. "From a small problem that could have been solved in a short period of time= =20 this is escalating into a big problem," said David Hitchcock of Standard &= =20 Poor's. "Even if they issue revenue bonds, it could stay with them for a lo= ng=20 period of time."=20 Standard & Poor's lowered its rating on state of California general=20 obligation bonds from AA to A+, which means it will cost the state more to= =20 borrow money.=20 The firm left California on credit watch with a negative outlook, a ranking= =20 applied after the state began buying power for utility customers in January= .=20 The state general fund has spent more than $5 billion buying power so far.= =20 There are predictions that spending will sharply increase this summer as he= at=20 drives up the demand for electricity.=20 "The fact is, we can't allow the general fund to be depleted," Angelides=20 said. "There are limits to it. It will begin to affect very dramatically th= e=20 ability of the state to provide core programs for education, health care,= =20 public safety."=20 Developments:=20 WEDNESDAY:=20 =01) No power alerts are called in the early morning, as electricity reserv= es=20 stay above 7 percent.=20 =01) The state Public Utilities Commission continues hearing energy experts= =20 evaluate ideas for implementing a recent rate increase. The panel includes= =20 George Sterzinger, a Washington-based renewable energy consultant; Peter=20 Bradford, an energy and regulatory adviser; and Severin Borenstein, directo= r=20 of the University of California, Berkeley's energy institute.=20 =01) Assembly Energy Committee holds a hearing on Gov. Gray Davis' proposal= to=20 keep Southern California Edison out of bankruptcy.=20 TUESDAY:=20 =01) Gov. Gray Davis says California will build enough power plants by 2003= to=20 end the state's power crisis, and have a 15 percent supply surplus by 2004.= =20 He names former U.S. diplomat Richard Sklar to be the state's new energy cz= ar=20 and head a Generation Implementation Task Force to speed up power plant=20 siting and construction.=20 =01) The Independent System Operator, which runs the state's power grid,=20 declares a Stage 2 alert, meaning the state is within 5 percent of running= =20 out of power. It warns rising temperatures could create problems later this= =20 week unless Californians conserve electricity.=20 =01) Standard and Poors lowers its rating on California state bonds, citing= the=20 growing financial drain from the continuing energy emergency. The state mus= t=20 quickly replenish its coffers if it is to avoid further damage, the rating= =20 agency says.=20 WHAT'S NEXT:=20 =01) Davis' representatives continue negotiating with Sempra, the parent co= mpany=20 of San Diego Gas and Electric Co., to buy the utility's transmission lines.= =20 Davis says he expects to have an agreement within two weeks.=20 =01) Senate Select Committee to Investigate Price Manipulation of the Whole= sale=20 Energy Market continues its investigation Thursday.=20 Standard & Poor's said that if the sale of a state revenue bond is delayed,= =20 the potential impact on the state general fund could be "severe" without a= =20 rate hike much larger than the increase of more than 40 percent approved by= =20 the state Public Utilities Commission last month.=20 "Rate increases appear difficult in the present political environment, and= =20 related voter initiatives, although none are currently on the ballot, remai= n=20 a possibility," said Standard & Poor's.=20 The state began buying power after the two largest utilities, Pacific Gas a= nd=20 Electric and Southern California Edison, were nearly bankrupt. The rates th= ey=20 could charge customers were frozen under deregulation as the cost of=20 wholesale power soared, producing a debt of $13 billion.=20 Standard & Poor's said the state expected in January to spend less than $1= =20 billion and resolve the problem in a few months with long-term power=20 contracts at lower prices. But most of the contracts do not begin until thi= s=20 fall or later.=20 "In addition," said Standard & Poor's, "it is not unreasonable to expect pa= st=20 and future blackouts to affect business location decisions, and hence the= =20 ultimate direction of the state's economy."=20 A spokesman for the governor said that Standard & Poor's view of how the=20 California economy will fare during the electricity crisis is far too dim.= =20 "California's economy is still fundamentally strong," said spokesman Roger= =20 Salazar. "We expect that in 2001 we will continue to lead the nation in=20 economic growth and job creation."=20 Another Wall Street credit-rating firm, Moody's, has a more positive view o= f=20 how the governor and the Legislature have handled the crisis and expects th= e=20 state general fund to be repaid by the ratepayer bond.=20 "We are still at our AA2 with a negative outlook," said Ray Murphy, Moody's= =20 vice president. "Nothing that we have learned over the last week or so has= =20 led us to change that opinion."=20 Angelides said legislation is needed because PG&E and Edison are challengin= g=20 a PUC action last month that gives the state some revenue from monthly=20 ratepayer bills, which is needed to finance the bond to repay the state=20 general fund.=20 The utilities say they need more of the ratepayer revenue.=20 The treasurer said the legislation would bypass the lengthy PUC process and= =20 authorize the state to issue a ratepayer bond of $10 billion or more. The= =20 governor said again yesterday that he believes a bond of $12.4 billion will= =20 cover state power costs this year.=20 Angelides said legislation is urgent because a commitment from three lender= s=20 to give the state a $4.1 billion short-term loan expires May 8.=20 He said the short-term bridge loan would ease the strain on the state gener= al=20 fund until the main bond can be issued, probably in late June.=20 The treasurer said that failure to obtain the short-term loan could lead to= =20 more credit downgrades and "create perception issues about who we are and= =20 where we are in terms of the economy of this state."=20 Davis has been criticized on Wall Street for not pushing for an early rate= =20 hike to stabilize the utilities and avoid the need for the state to begin= =20 buying power.=20 The governor said earlier this year that he could have solved the problem i= n=20 "20 minutes" with a rate hike, but refused to do so.=20 While addressing the California Chamber of Commerce yesterday, Davis said= =20 that the long-term contracts will spread the cost of buying power over a=20 decade, causing ratepayers to pay less than market rates in the early years= =20 and a little above the market rate in later years.=20 "I do not want to shock this economy into recession," Davis said. "I do not= =20 want to burden small business with more than they can sustain."=20 Davis wants the state to purchase the transmission systems of the utilities= =20 in exchange for giving them part of the ratepayer revenue to finance a bond= =20 to pay off their debts. That would enable the utilities to resume buying=20 power by the end of next year.=20 But negotiations to buy the transmission systems has taken much longer than= =20 expected. PG&E filed for bankruptcy earlier this month, and an agreement to= =20 buy the Edison transmission system announced a few days later faces=20 opposition in the Legislature.=20 Some legislators, who think Edison receives too much under the complex=20 agreement, have suggested that Edison join PG&E in bankruptcy, where=20 generators accused of price-gouging may not have all of their bills paid.= =20 "If they go into bankruptcy, the state will be buying power for three or fo= ur=20 years," Davis told the Chamber yesterday. "That is all we will be doing up= =20 here."=20 A Stage 2 emergency alert was called yesterday when two power plants=20 unexpectedly stopped operating with temperatures around the state rising.= =20 Meanwhile, Davis announced that Richard Sklar, a former ambassador to the= =20 war-torn Balkans, will lead a task force to speed up the construction of ne= w=20 power plants.=20 The governor acknowledged while speaking to reporters that he has not met h= is=20 earlier goals of avoiding blackouts, rate increases and keeping the utiliti= es=20 out of bankruptcy.=20 "This is probably the most complicated challenge the state has faced in 50= =20 years," Davis said. "But we are providing steady and reliable leadership, a= nd=20 I believe we will have this thing behind us by the end of this fall."=20 ---------------------------------------------------------------------------= --- --------------- FERC to weigh limited curbs on electricity prices=20 Caps would apply in Stage 3 shortages By Toby Eckert=20 COPLEY NEWS SERVICE=20 April 25, 2001=20 CALIFORNIA'S POWER CRISIS=20 WASHINGTON -- Federal regulators are expected to consider limited wholesale= =20 price curbs for California's chaotic electricity market today, but the=20 approach falls far short of the controls sought by many state officials.=20 Federal Energy Regulatory Commission staffers have proposed limiting the=20 price that power sellers can charge for wholesale electricity in California= =20 only during the most severe shortages, known as Stage 3 emergencies. The=20 "price mitigation" would be pegged to "the marginal cost of the=20 highest-priced (generating) unit called upon to run," according to a staff= =20 report.=20 Producers also would be required to sell their excess power to the state's= =20 grid operator.=20 The price controls would last one year and would not apply to other Western= =20 states suffering from gyrations in power costs and electricity shortages.= =20 FERC Chairman Curtis Hebert has been an implacable foe of price controls, b= ut=20 is under considerable political pressure to do more to help California as t= he=20 peak power-consuming summer months approach. Commissioner William Massey ha= s=20 advocated far-reaching price limits, while Commissioner Linda Breathitt has= =20 wavered on the issue.=20 Gov. Gray Davis and other California officials have called for broad price= =20 controls that also would include 10 other Western states. Yesterday, Sen.= =20 Dianne Feinstein, D-Calif., formally introduced legislation that would=20 require FERC to impose regional price limits through March 1, 2003.=20 Feinstein said the FERC staff proposal was inadequate.=20 "Once you put the cap just on Stage 3, you force the heavier pricing on=20 stages 1 and 2," she said.=20 Other critics have noted that wholesale power prices in California are=20 abnormally high during periods other than Stage 3 emergencies.=20 Feinstein's legislation, first outlined in March, would require FERC to set= =20 price caps or impose "cost-based" rates that would limit prices to the cost= =20 of producing the power, plus a set profit margin. New generating plants and= =20 power bought through long-term contracts would be exempt.=20 However, any state covered by the price controls would have to allow=20 utilities to recover their wholesale power costs from consumers. The clause= =20 helped draw a Republican co-sponsor to the bill, Sen. Gordon Smith of Orego= n.=20 Smith and other Western lawmakers have complained about the reluctance of= =20 California officials to raise retail rates while consumers in neighboring= =20 states have seen their power bills soar. In recent months, the California= =20 Public Utilities Commission twice has increased rates for customers of=20 Southern California Edison and Pacific Gas and Electric, the utilities hit= =20 hardest by skyrocketing wholesale power prices.=20 The FERC staff proposal rejected price caps or cost-based rates.=20 It would be hard to devise price caps that are low enough to provide price= =20 relief, but high enough to adequately compensate generators, the proposal= =20 said.=20 The Bush administration and top congressional Republicans are opposed to=20 price controls, so it is uncertain how far Feinstein's legislation will get= .=20 ---------------------------------------------------------------------------= --- ------------------------------- Grid officials declare a Stage 2 alert=20 ASSOCIATED PRESS=20 April 24, 2001=20 SACRAMENTO =01) The state's electric grid operator declared a Stage 2 power= =20 alert Tuesday after two power plants suddenly went offline.=20 Higher-than-forecasted temperatures in Southern California also caused dema= nd=20 to increase, said Lorie O'Donley, spokeswoman for the Independent System=20 Operator, keeper of the state power grid.=20 A Stage 2 alert is declared when electricity reserves fall or are expected = to=20 fall below 5 percent.=20 The two power plants that went offline had been producing about 1,080=20 megawatts, or roughly enough power for 810,000 homes.=20 "We think we may need to request interruptible customers, but barring any= =20 other big problems, we probably won't need to go to a Stage 3," said=20 O'Donley. Stage 3 alerts are called when the reserves drop below 1.5 percen= t=20 and could result in rolling blackouts like the state has seen on four days= =20 since January.=20 The ISO said 9,900 megawatts were unavailable Tuesday morning because of=20 power plants that were down for scheduled or unplanned maintenance. Another= =20 3,000 megawatts from alternative generators, such as solar, wind and=20 geothermal, was also not available, O'Donley said.=20 About half of the alternative generators say they can't afford to keep=20 operating because they are owed about $1 billion by Pacific Gas and Electri= c=20 Co. and Southern California Edison.=20 ---------------------------------------------------------------------------= --- -------------------------------------------------------------------- Top credit agency lowers California's bond rating=20 ASSOCIATED PRESS=20 April 24, 2001=20 SACRAMENTO =01) A top credit agency lowered its rating on California state = bonds=20 Tuesday, citing the growing financial drain from the continuing energy=20 emergency.=20 "The downgrade reflects the mounting and uncertain cost to the state of the= =20 current electrical power crisis, as well as its likely long-term detrimenta= l=20 effect on the state's economy," Standard and Poors said.=20 The state's ability to repay is debts has been reduced, though it is still= =20 adequate, S&P said.=20 It dropped the rating on general obligation bonds from double-A to=20 single-A-plus. It similarly revised other lease ratings, and ratings for th= e=20 California Health Facilities Construction Loan Insurance Fund, known as Cal= =20 Mortgage.=20 S&P said it didn't drop the rating farther because the state still has mone= y,=20 because of California's diverse economy, and because a proposed revenue bon= d=20 is slated to reimburse the state's treasury for money California is current= ly=20 using to buy power for two financially strapped utilities.=20 If the state can't quickly sell its revenue bond, the impact on the treasur= y=20 could be severe unless electricity rates are substantially increased beyond= =20 the large increases already scheduled to kick in, S&P warned.=20 S&P has had the state's general obligation bonds on a credit-watch "with=20 negative implications" since January, when the state began buying power for= =20 Southern California Edison and Pacific Gas and Electric.=20 ---------------------------------------------------------------------------= --- ------------------------------------------------------------------------- State's Bond Rating Downgraded to A+=20 Finance: Reduction of 2 notches puts it among states with the lowest credit= =20 ratings. Move could cost California hundreds of millions in borrowing fees.= =20 By LIZ PULLIAM WESTON and MIGUEL BUSTILLO, Times Staff Writers=20 ?????A major credit rating agency downgraded $25 billion of California bond= s=20 Tuesday in a move that could add hundreds of millions of dollars to the=20 state's borrowing costs and saddles California with one of the lowest state= =20 credit ratings in the nation. ?????Standard & Poor's Corp. cut California's bond rating by two notches,= =20 from AA to A-plus, citing "the mounting and uncertain cost . . . of the=20 current electrical power crisis," which has forced the state to spend=20 billions on electricity to keep the lights on. ?????S&P, one of three major rating agencies monitoring California's=20 financial health, said a further downgrade could occur if the state fails t= o=20 follow through on plans to issue at least $10 billion in revenue bonds to= =20 help pay off energy-related debts. ?????"S&P is saying, 'We don't have any faith that what you say you're goin= g=20 to do, you're going to do,' " said Zane Mann, publisher of the California= =20 Municipal Bond Advisor, a newsletter that tracks government debt. ?????Wall Street is concerned by delays surrounding the electricity bond=20 issue, but lawmakers hope to pass legislation this week to put the bond iss= ue=20 on a fast track and speed up return of the money to the state's general fun= d. ?????Credit ratings help determine how much states and other borrowers have= =20 to pay when issuing bonds. The lower the rating, the higher the interest ra= te=20 the state must pay to entice investors to buy. ?????The state Treasurer's Office concluded in a preliminary estimate that = as=20 a result of the downgrade, California could have to pay $190 million to $57= 0=20 million more on the $12 billion in general obligation bonds the state has= =20 authorized to pay for ongoing expenses such as school and road-building=20 projects, but has yet to issue.=20 ?????State revenue bonds should not be affected by the downgrade, the=20 officials said. However, some bond experts disagree. ?????California's energy crisis already has driven down prices of a wide=20 range of the state's bonds, from general obligation issues that depend on t= he=20 state's ability to repay to small issues by school districts and cities tha= t=20 could be hurt by rising electricity prices. Bond traders said S&P's downgra= de=20 probably would cause prices to fall further. ?????"All California bond holders are going to lose value in their bonds=20 because the state's credit has been downgraded," said John Fitzgerald,=20 managing partner of Seidler-Fitzgerald, a Los Angeles municipal debt=20 underwriter. ?????The downgrade most affects investors who want to sell their bonds now,= =20 before the issues mature. Investors who hold onto their bonds are still=20 almost certain to get the face value when their securities reach maturity,= =20 because the state is unlikely to miss any interest payments or otherwise=20 default on its bonds, traders said. ?????S&P analysts said the state's continuing surplus and "deep and diverse= "=20 economy helped prevent a further downgrade. ?????Still, the downgrade places California below most other states on S&P'= s=20 rating scale and on par with Hawaii. Among states rated by S&P, only=20 Louisiana has a lower rating, at A-minus, according to Bloomberg News.=20 ?????In addition, the two other major credit rating agencies have indicated= =20 they may downgrade California's bonds. Fitch Inc. said last week that it wa= s=20 contemplating such a move, and Moody's Investors Service earlier this month= =20 changed its outlook on California bonds to "negative" from "stable." ?????Some politicians Tuesday accused S&P of overreacting. ?????"It's just unfair, premature and inappropriate for them to do that. We= =20 do have reserves, we do have good revenue projections, we do have a plan to= =20 get us out of this," said Assemblyman Gil Cedillo (D-Los Angeles). ?????In a statement, Gov. Gray Davis said California's economy "is still=20 fundamentally strong, period. We expect that in 2001 we will continue to le= ad=20 the nation in economic growth and job creation." ?????State Treasurer Phil Angelides has been pleading with lawmakers to pas= s=20 legislation to speed up repayment of $5 billion drained from the state's=20 general fund to buy electricity this year. That figure is expected to reach= =20 $15 billion by year's end, according to the governor. ?????The consequences of a downgrade are profound, Angelides said, noting= =20 that it took California years to overcome the downgrades spurred by the=20 recession of the early 1990s. ?????"It is critical that the Legislature act immediately to clearly=20 establish our legal authority to sell bonds and replenish the state's gener= al=20 fund," Angelides said. ?????California began buying massive quantities of electricity in January= =20 because the state's three major investor-owned utilities could no longer=20 afford to do so. Since then, the state has been purchasing roughly one-thir= d=20 of the electricity the utilities need to service their customers, according= =20 to state officials. ?????Under a plan approved by the Legislature and signed into law by Davis,= =20 the general fund is supposed to be reimbursed for the power purchases with= =20 what is expected to be the largest municipal bond issue in U.S. history. Th= e=20 bond issue is to be repaid by utility ratepayers through a monthly charge o= n=20 their electricity bills. ?????However, obstacles that threaten timely repayment of the fund are=20 causing consternation among Wall Street analysts about California's financi= al=20 status. ?????The bankruptcy filing of Pacific Gas & Electric Co., the state's large= st=20 investor-owned utility, has thwarted the state's plan to restore the=20 utilities to financial health. ?????But it is a dispute over the state's formula for repaying the bonds th= at=20 has raised the most concern among state officials. The state and the=20 utilities are at odds over how much of consumers' electricity payments shou= ld=20 go to reimburse the state for its power purchases. ?????The state's two major utilities, Pacific Gas & Electric and Southern= =20 California Edison, have challenged the Public Utilities Commission's plan f= or=20 splitting up the money--a legal move that threatens to delay issuance of th= e=20 bonds. The firms contend the allotment granted to the state is too generous= =20 and could make it harder for them to recover from the energy crisis. ?????Hoping to sidestep the controversy, Angelides is urging state lawmaker= s=20 to pass an emergency measure this week that sets the bond amount and the=20 amount the state will receive from utility payments. The revenue bond was= =20 initially expected to be $10 billion, but the Davis administration has sinc= e=20 proposed a $12.4-billion issue. ---=20 ?????Times staff writers James Flanigan, Jenifer Warren and Julie Tamaki=20 contributed to this report. Copyright 2001 Los Angeles Times=20 ---------------------------------------------------------------------------= --- ---------------------------------------------------------------------------= --- ----------------------- Price Controls Spark Deja Vu=20 Energy: The specter of Richard Nixon's actions 30 years ago hangs over=20 current debate on how to check the state's surging power costs.=20 By JAMES F. PELTZ, Times Staff Writer=20 ?????A debate now rages in California over whether price controls should be= =20 adopted to stem the state's soaring power costs and help consumers who are= =20 bracing for huge spikes in their electric bills. ?????But price controls are one of the most controversial actions in=20 economics--and in politics, for that matter. And now the caps are more in= =20 dispute than ever because they run counter to the nation's move over the la= st=20 two decades to deregulate more and more industries, from airlines to=20 railroads to energy. ?????Yet California is a good example of deregulation gone haywire, so=20 controls are again being demanded by lawmakers, consumer advocates and othe= rs=20 as a way to check surging prices. On the other side is a chorus of critics= =20 who ridicule price caps as being ineffective and, at times, making matters= =20 worse for consumers. ?????Case in point: the Golden State itself, which tried last summer to use= =20 temporary price caps to keep a lid on skyrocketing wholesale electricity=20 prices. ?????Critics claim that the caps drove power sales out of state, thus=20 widening the imbalance between supply and demand, reinforcing the existing= =20 shortages and contributing to this winter's rolling blackouts. ?????But defenders of the caps note that the dysfunctional California marke= t=20 had no way to self-correct. The utilities couldn't simply refuse to buy=20 electricity in the face of higher prices, and with no price ceiling in sigh= t,=20 something had to be done. ?????And now Gov. Gray Davis and others are again calling for temporary=20 controls until more electricity supplies can be added, especially as the=20 state enters the peak-power summer season. On Tuesday, Sens. Dianne Feinste= in=20 (D-Calif.) and Gordon Smith (R-Ore.) introduced legislation that would impo= se=20 price controls on wholesale energy throughout 11 Western states. ?????Mindful of the controversial history of controls, Feinstein and Smith= =20 stressed that the caps would last only through March 1, 2003. But they also= =20 argued that the economic damage to industries and consumers from escalating= =20 power costs would exceed any harm caused by price controls. ?????"I have a strong preference for markets, but it's a mistake to believe= =20 that we have a free market when it comes to energy," said Smith, the only G= OP=20 co-sponsor of the legislation. ?????Their bill would require the Federal Energy Regulatory Commission, whi= ch=20 regulates U.S. wholesale electricity prices, either to impose a regional=20 price cap or institute a rate schedule for each power generator, tying the= =20 price of electricity to the cost of producing it. ?????Coincidentally, FERC today is expected to decide on various other=20 proposals to again limit California's power costs--but without explicitly= =20 stating that the plans include price controls. Why? Because the Bush=20 administration and FERC Chairman Curt Hebert Jr., among others, are on the= =20 record as adamantly opposing price caps. ?????That's not surprising. Price controls often are tagged as a liberal=20 maneuver that flies in the face of conservatives' free-market ideology. Yet= ,=20 ironically, hanging over the California debate is the legacy of a Republica= n=20 president who was the last one to mandate price controls on a nationwide=20 level: Richard M. Nixon. ?????The late president took that rare step 30 years ago this August to try= =20 to quell inflation and spark an economic rebound. His actions were so=20 dramatic that they are still invoked by those wanting to criticize or, in= =20 some cases, endorse setting limits on prices. ?????"What he did is almost larger than life now," said Shannon Burchett,= =20 chief executive of RiskLimited Corp., a strategic consulting firm in Dallas= . ?????Nixon's controls were the most far-reaching since World War II, when= =20 prices were capped so that profiteers couldn't reap huge sums for scarce=20 commodities being used for the war and simultaneously rationed at home. ?????In most cases, price controls have been much less sweeping and targete= d=20 at specific products or services. They don't always involve changing the la= w,=20 either. In 1962, President Kennedy publicly rebuked the then-U.S. Steel Cor= p.=20 and its chairman, Roger Blough, for starting an industrywide move to raise= =20 steel prices. The price hikes were rolled back a few days later. ?????Since Nixon, price controls have become rarer as industries that were= =20 once regulated--which means their prices were government-controlled--have= =20 been deregulated. ?????So it is in California, where electric utilities' prices were controll= ed=20 for decades until the state's deregulation law in 1996. But now that the la= w=20 has been blamed for the soaring wholesale prices, power shortages, crippled= =20 utilities and the need for a huge jump in ratepayers' costs, some again wan= t=20 price controls on electricity until the crisis eases. ?????Which brings everyone back to Nixon. ?????Some Nixon Controls Were Lifted by Reagan ?????"I've heard people make the analogy to what happened . . . when Nixon= =20 put on controls," but in California "this is fundamentally different," said= =20 Mike Florio, a board member of the California Independent System Operator,= =20 which oversees most of the state's electricity grid. ?????"When you get into a situation of shortage [of supplies], there is=20 really no restraint at all on prices," said Florio, who said he normally=20 prefers unfettered markets but also defended the state's caps last summer.= =20 Such government intervention "on a temporary basis is better than nothing,= =20 but I don't think it's ideal." ?????The reverberations from Nixon's fiat aren't just felt in California=20 either. When New York Mayor Rudolph Giuliani recently proposed more stringe= nt=20 controls on wholesale electricity costs in New York state, critics promptly= =20 pointed to Nixon's controls. "They were a disaster," one columnist wrote. ?????Even Federal Reserve Chairman Alan Greenspan, who was in the private= =20 sector in the early 1970s, turned down several requests to take high-level= =20 White House jobs in part because he was disgusted with Nixon's price contro= ls. ?????Many economists and historians also judge Nixon's controls as a mistak= e.=20 But some maintain that his decision--which began with a 90-day freeze on=20 prices, wages and rents--wasn't entirely a failure and even provided "shock= =20 value" that, for a while at least, arrested higher inflation. ?????In addition, part of Nixon's move involved taking the dollar off the= =20 gold standard--which in effect meant its price was controlled--and letting = it=20 float in value against other major currencies. And that, many believe, is t= he=20 base upon which today's global financial markets operate. ?????Others disagree. ?????"There really isn't an example of where they've [price controls]=20 worked," said Robert Goldberg, a senior fellow at the National Center for= =20 Policy Analysis, a nonpartisan think tank in New York. ?????"Controls always lead to an underproduction" of the commodity involved= =20 because producers don't have any incentive to spend more on additional=20 output, he said. When the caps ultimately are lifted, prices typically soar= =20 anyway as producers move to quickly recoup the profit they lost when the=20 controls were in place, Goldberg added. ?????Others note that although most of Nixon's price controls lasted only a= =20 couple of years, various forms of controls over crude oil and natural gas= =20 lasted for another decade until they were removed by President Ronald Reaga= n. ?????In the meantime, the controls--aggravated by embargoes and other suppl= y=20 cuts by the Organization of Petroleum Exporting Countries--distorted the fr= ee=20 market for energy, critics say. The controls kept U.S. oil prices=20 artificially low, which in turn kept demand for oil high, giving OPEC more= =20 power over world production and prices in the 1970s, they contend. ?????Nonetheless, proponents keep calling for controls when prices for=20 certain items seem to be spiraling out of control. ?????Critics Say Controls Worsen the Problems ?????President Clinton's massive health-reform proposal in the early 1990s= =20 included price controls on drugs. But the idea set off howls of protest fro= m=20 the pharmaceutical and biotechnology industries, and ultimately the entire= =20 proposal was shelved. Consumer advocates and others also demanded federal= =20 controls on rising cable TV rates in 1997 and 1998, again contending that t= he=20 cable operators were hiking prices at a much faster rate than inflation.=20 Cable firms were allowed to keep passing certain costs on to their=20 subscribers, but specific price caps weren't enacted. ?????But proponents of temporary price controls on California power emphasi= ze=20 that electricity isn't in the same category as an airplane seat, steel or= =20 other commodities that don't have to be bought if the price soars too high. ?????"In soybeans maybe the market can adjust quickly" to changes in supply= =20 and demand, "but in electric generation in California it can't," said Flori= o,=20 who also serves as an attorney for the Utility Reform Network, a consumer= =20 group. "For most products, one of the ways prices get determined is if buye= rs=20 refuse to buy when the price gets too high. But that's generally not an=20 option for people when it comes to electricity." ?????Critics of California's attempt to cap prices last summer said the=20 controls instead prompted many power suppliers to sell their electricity to= =20 other states. That "actually made the tight-supply problem worse [in=20 California] by driving imports out of the state," the Bay Area Economic=20 Forum, a research group funded by regional business and government agencies= ,=20 said in a report last week. ?????Indeed, the temporary caps were basically abandoned by year's end to= =20 keep enough electricity in the state. ?????Frank Wolak, a Stanford University economics professor who heads the= =20 Independent System Operator's market surveillance committee, said there are= =20 ways to mitigate the state's power prices without having to set rigid=20 controls. One proposal: Have FERC require that generators supply 75% of the= ir=20 expected future sales to California under long-term contracts at "just and= =20 reasonable" prices set by the federal agency, he said. ?????That would "send the right [price] signal to suppliers to come into th= e=20 state," Wolak said. ?????And because it will take time for California to get more of its own=20 power-generating plants up and running, the state's electricity crisis isn'= t=20 unlike a natural disaster in which "normal public service is disrupted" and= =20 short-term controls serve a purpose, Florio said. ?????"Over time, market forces will work" and controls shouldn't be need, h= e=20 said. "But does that mean we're supposed to pay $10,000 per kilowatt-hour= =20 until something gets done?" ---=20 ?????Times staff writer Ricardo Alonso-Zaldivar in Washington contributed t= o=20 this report. Copyright 2001 Los Angeles Times=20 ---------------------------------------------------------------------------= --- ---------------------------------------------------------------------------= --- ------------ Davis Names Executive to Speed Construction of Power Plants in State=20 Energy: Richard Sklar headed a building firm and worked for Clinton in=20 Bosnia. Governor sees the crisis abating by fall.=20 By DAN MORAIN, Times Staff Writer=20 ?????SACRAMENTO--With temperatures rising and electrical supplies strained,= =20 Gov. Gray Davis on Tuesday tapped a former Clinton administration official= =20 and executives from major construction firms to help speed completion of=20 power plants. ?????Davis, who predicted that the worst of the energy crisis will abate by= =20 the fall, announced that he has retained Richard Sklar, 67, former presiden= t=20 of a construction firm, to head a team that will help accelerate the buildi= ng=20 of power plants. ?????Speaking to business leaders at a California Chamber of Commerce=20 convention in Sacramento, Davis said Sklar's job will be "to make sure ther= e=20 are no hurdles [and] to cut red tape." ?????"Richard Sklar knows electricity," Davis said. "He knows how to find= =20 megawatts." ?????Former President Bill Clinton sent Sklar to the Balkans in 1996 to try= =20 to help resolve the war in Bosnia-Herzegovina. Sklar arrived in Sarajevo to= =20 find that power was on for only two hours a day and set about expanding=20 electricity generation. ?????In an interview, Sklar said his father was a mechanical engineer who= =20 designed power stations. ?????"This power world is my world," Sklar said, adding that he had an=20 electric car and solar panels in the mid-1970s. ?????This Feb. 8, Davis announced at a news conference that he was appointi= ng=20 Larry Hamlin, a vice president of Southern California Edison, as his=20 "construction czar." Hamlin's job was to speed power plant construction. ?????Davis spokesman Roger Salazar said that Hamlin's stint was temporary a= nd=20 that the executive must return to Edison. Sklar's contract is for a longer= =20 period, Salazar said, but it is unclear how long. ?????Sklar is being retained as a consultant, paid $100,000 initially. Othe= r=20 firms, Salazar said, are loaning employees as volunteers. Joining Sklar wil= l=20 be representatives of the engineering and construction firms Bechtel, URS= =20 Corp. Engineering, Fluor Daniel, Parsons Brinckerhoff Quade & Douglas, and = A.=20 Teichert & Sons. At least one Bechtel subsidiary is involved in power plant= =20 construction in California. ?????"There is no conflict of interest," Sklar said, adding that no one in= =20 the group will have authority to decide who gets contracts. ?????A mechanical engineer, Sklar was president of the San Francisco-based= =20 construction management firm O'Brien Kreitzberg Inc. Sklar's firm also=20 oversaw construction of the Metro Rail Green Line in Los Angeles and the=20 rebuilding of the Los Angeles Central Library. ?????He was also chairman of the San Francisco Public Utilities Commission= =20 under then-Mayor Dianne Feinstein. In that role, he oversaw rebuilding of t= he=20 cable car system, completing the work ahead of schedule--in time for the 19= 84=20 Democratic National Convention there. Feinstein's husband is a major invest= or=20 in URS, one of the firms that will loan employees to Sklar's team. ?????"He's very competent," said state Senate President Pro Tem John Burton= =20 (D-San Francisco) of Sklar, whom he met in 1972. "He's a very good problem= =20 solver and he brooks no nonsense. . . . He's a renaissance man. He loves=20 music, he loves politics and he's a gourmet cook." ?????Sklar has also displayed a sense of humor, once donating to San=20 Francisco Zoo two capybaras, rodents the size of a hog. He named one Quenti= n=20 and the other Kopp, after a former San Francisco city supervisor and state= =20 senator who is now a Superior Court judge. ?????"I'm 67; I've made all the money I need to make," said Sklar, who owns= a=20 vineyard near the Napa Valley town of Rutherford and has a home in San=20 Francisco. ?????"My reputation is what's going to be at stake in this, not the=20 governor's," he said. "I have a 40-year history of delivering--and that's= =20 what I'm going to do. I don't like to lose." ?????As Davis announced Sklar's appointment, one of the governor's top ener= gy=20 advisors, John Stevens, resigned, effective Friday. The governor praised=20 Stevens as a tireless worker. ?????Stevens worked on several energy-related tasks, among them Davis'=20 efforts to keep utilities out of bankruptcy. Davis appointed him for a day = in=20 January to the state Public Utilities Commission, on which he cast a key vo= te=20 to raise rates. ?????The state's power grid operators declared a Stage 2 emergency Tuesday= =20 afternoon, as temperatures hit 90 degrees in downtown Los Angeles and two= =20 major power plants in Southern California unexpectedly shut down. Power=20 reserves dropped to nearly 5%, below the minimum 7% that the California=20 Independent System Operator seeks to maintain. ?????Tuesday's emergency is not a predictor of worse electricity troubles t= o=20 come, said Cal-ISO's Stephanie McCorkle, because an unusually high number o= f=20 power plants are down for repairs that were planned months ago. ?????The plants not running Tuesday would be capable of supplying 10,000=20 megawatts, she said, or about a third of Tuesday's peak demand. By mid-June= ,=20 no power plants should be shut off for scheduled maintenance, McCorkle said= . ?????The state will lose more than 1,000 megawatts of production starting= =20 this weekend when a unit of the Diablo Canyon nuclear power plant near San= =20 Luis Obispo is shut down for refueling. The shutdown, planned a year ago,= =20 will last 35 days, according to Pacific Gas & Electric. ?????In his remarks Tuesday, Davis said his goal is to boost the state's=20 energy supply to exceed demand 15% by 2003.=20 ?????"This is probably the most complicated challenge the state has faced i= n=20 50 years," Davis said. "But we are providing steady and reliable leadership= ,=20 and I believe this thing will be behind us by the end of fall." ---=20 ?????Times staff writers Nancy Vogel and Jenifer Warren contributed to this= =20 story. Copyright 2001 Los Angeles Times=20 ---------------------------------------------------------------------------= --- ---------------------------------------------------------------------------= --- ------------------------------- Power Plant Emits Tons of Fumes=20 Round-the-clock operation of old generators in Glendale and elsewhere=20 produces more than twice the old limits of pollution.=20 By JEAN GUCCIONE, Times Staff Writer=20 ?????For the past five weeks, Glendale's Grayson power plant has been=20 belching a half-ton of pollutants into the air almost daily, more than twic= e=20 previous limits. ?????The same is true for many of the other 14 power plants in Southern=20 California as the "haves" generate power, sometimes round-the-clock, for th= e=20 "have-nots." ?????The generators, some of them nearly 50 years old and once considered t= oo=20 dirty for regular use, now keep electricity flowing to fellow residents=20 around the state. And those living downwind are subjected to twice as much= =20 air pollution as before California's energy crunch. ?????Not every Glendale resident is happy. ?????"You don't want anyone to get stuck with a rolling blackout, but we ge= t=20 struck with the pollution," Jerold Petrosian said as he and his family boug= ht=20 plants at a nursery across the street from the power plant. "It is a tough= =20 decision." ?????Not so for Ignacio Troncoso, director of Glendale Water & Power. "Ther= e=20 is a pretty decent trade-off, helping our neighbors in the state to keep=20 their lights on," he said. ?????A USC specialist warned that increased power plant emissions raise the= =20 risks of asthma and other lung ailments in the young and old. ?????"There is a potential for more emergency room visits, more people seei= ng=20 their doctors and more hospitalizations this summer," said Dr. Henry Gong,= =20 professor of medicine and a specialist in the health effects of air polluti= on. ?????With extended hours, the Glendale generators are emitting as much as 9= 95=20 pounds of pollutants into the air during peak demand, more than double the= =20 old limit of 390 pounds a day, city and air-quality officials said. ?????The other 14 power plants in Southern California also have more than= =20 doubled their overall emissions, according to preliminary figures from the= =20 South Coast Air Quality Management District. As a group, the plants emitted= a=20 total of 2,045 tons of smog-forming nitrogen oxide in the first three month= s=20 of 2001, compared with 905 tons for the same period last year. ?????The AQMD hearing board on Tuesday eased pollution controls so Glendale= =20 may continue to generate excess electricity for sale to the energy-starved= =20 state. Under the plan, Glendale may run three of its old steam boilers=20 around-the-clock to meet the state's energy demand. Usually, these boilers,= =20 hidden behind a tall brick wall, sit idle except during the peak summer=20 demand because they are inefficient and costly. ?????Glendale, like Burbank and the Los Angeles Department of Water and=20 Power, continues to produce electricity at its city-owned plant. The three= =20 cities opted against participating in a scheme of deregulation, a decision= =20 that has shielded their residents, by and large, from the huge utility rate= =20 hikes and rolling power outages experienced elsewhere. But they also will= =20 contribute to easing the state's energy emergency in the dirtier air they= =20 will be forced to breathe. ?????Air-quality officials said power plants contribute just about 3% of th= e=20 900 tons of pollution emitted into the air daily, with about 70% of the=20 pollution coming from vehicles, not factories. And in recent years, many of= =20 the region's municipal power generators have been updated with=20 pollution-control devices that reduce emissions. ?????Glendale's three steam generators, built between 1953 and 1963, are=20 inefficient by today's standards, but they are 85% cleaner since the city= =20 pumped millions of dollars into upgrades. They will be even cleaner, city= =20 officials say, with more retrofitting. ?????Under the plan, Glendale must reinvest profits from energy sales,=20 estimated at $3 million to $5 million this year, in equipment to reduce=20 future emissions at the plant and in community-based programs, such as mobi= le=20 asthma clinics and programs to reduce school bus emissions. ?????The city plans to sell as much as 50 megawatts of power, enough to ser= ve=20 50,000 homes. Under the decision Tuesday, pollution limits resume Jan. 1,= =20 2002, or when the energy emergency ends. ?????In Los Angeles, power officials said they don't expect to exceed AQMD= =20 caps, because they are adding pollution controls at two of the city's four= =20 power plants. Although they will produce more electricity, they should not= =20 produce any more nitrogen oxide, which in sunlight and heat form ozone, sai= d=20 Angelina Galiteva, LADWP's director of strategic planning. ?????"We will have much cleaner equipment in place by June," she said. ?????Even the environmentalists are trying to balance the risks. ?????"We realize we have a problem this summer. We have to run these plants= ,"=20 said Sheryl Carter, a senior policy analyst for the National Resources=20 Defense Council. ?????Carter said natural-gas-powered generators, like the ones in Glendale,= =20 are "a far superior solution to diesel generators," which produce 50 to 100= =20 times the emissions and would be turned on in businesses across the state i= f=20 energy is unavailable from other sources. ?????"We are trying to make sure the environment overall is made whole," sh= e=20 said. ?????Carl Zichella, regional staff director for the Sierra Club, said the= =20 generators should be run as a last resort. He also urged consumers to unplu= g=20 spare refrigerators and use energy-efficient light bulbs to reduce the=20 state's overall energy demand. ?????"The only thing that is going to work to offset air pollution is=20 efficiency," he said. Otherwise, "we will pay not only with higher rates bu= t=20 also with our health." ?????In neighboring Burbank, city officials are preparing for peak summer= =20 energy demands, when they expect to sell about 10% of their locally produce= d=20 electricity outside the city. ?????"For four or five years, we have been polluting Utah, Arizona, Nevada,= =20 Washington and Oregon, importing power to Los Angeles," said Ron Davis,=20 general manager of Burbank Water & Power, listing the energy-producing stat= es=20 that typically produce the bulk of Southern California's power. "We are=20 returning the favor." ?????Profits from those outside sales, Davis said, will help hold down=20 utility costs for local users. ?????"I think most people would take a little more smog to guarantee there= =20 are no rolling blackouts," he said. "But it's not an easy question." Copyright 2001 Los Angeles Times=20 ---------------------------------------------------------------------------= --- ---------------------------------------------------------------------------= --- ---------- Power Plant Plan Worries Neighbors=20 Energy crisis: Regulators will decide next week whether to allow Huntington= =20 Beach facility to boost output. Noise and pollution are concerns.=20 By CHRISTINE HANLEY, Times Staff Writer=20 ?????On Hula Circle in Huntington Beach, families have tried to live with= =20 their two very different neighbors. They live steps from the Pacific Ocean= =20 but next door to the mechanical shrieks and foul smells of the massive AES= =20 Corp. power plant. ?????But California's power crisis is rapidly unhinging life in the=20 neighborhood of ranch houses and bungalows. ?????State regulators will decide next week whether to allow the company to= =20 double the plant's operations by July, providing much-needed electricity bu= t=20 taking what residents fear will be a heavy toll on them. ?????It's one of several proposals to restart or build new power plants in= =20 the wake of the power crisis using a "fast track" process that allows the= =20 projects to go forward before environmental and pollution studies are=20 completed. ?????"The plant is so close. We want to know if it is impacting our kids in= =20 ways we won't know about until 10 years from now," said Janette Mortimer, w= ho=20 lives with her husband and their two young children in one of the homes=20 closest to the plant. ?????Already, residents say, the AES plant is casting a mightier shadow.=20 There are the ear-ringing rumbles and roars. There are the mysterious plume= s=20 of smoke that waft over the neighborhood. Then there is the grime that seem= s=20 never to go away. ?????If the California Energy Commission approves the permit for AES, the= =20 facility could run at full capacity for the first time in memory. Officials= =20 said the plant's previous owner, Southern California Edison, typically ran = it=20 at 30% of capacity. ?????AES could be allowed to run the four gas-fired boilers and a "peaker"= =20 unit whenever California hits a Stage 3 alert--which is expected to happen= =20 often this summer. The "peaker" plant alone is powered by eight jet=20 engines--and sounds like it. ?????Currently, only two boilers are operating. ?????But residents say they are most worried about the air they breathe and= =20 the water they swim in. ?????Under the fast-tracking process designed to get more electricity for t= he=20 state as soon as possible, several key environmental questions have yet to = be=20 studied. ?????Scientists studying the cause of ocean pollution that closed much of= =20 Huntington Beach's shoreline in the summer of 1999 said that the plant, alo= ng=20 with other factors, played a role by drawing partially treated sewage that = is=20 discharged miles offshore back toward the coast. ?????AES Inc. will pay $1.5 million to further study the issue, but the=20 research won't be complete for some time. ?????"So much is uncertain," said Huntington Beach Councilwoman Shirley=20 Dettloff. "These are big, big things." ?????For now, residents say they are bracing for more noise, smoke and=20 disruption. ?????To begin with, AES' proposal calls for 20 hours a day of nonstop=20 construction to get the two mothballed generators in service by July. ?????Then there are the sizzling summer temperatures. Residents usually ope= n=20 their windows to let the ocean breezes cool their homes. But the noise and= =20 smells from the plants may make that impossible. ?????"It's going to be bad. There's no escape," said Bryan Visnoski. ?????The plant has towered over the Huntington Beach coastline for nearly 4= 0=20 years. The housing tracts came later, but most inhabitants of Hula Circle a= nd=20 surrounding streets seemed to make peace with their industrial neighbor. ?????Some have installed double-paned windows to dampen the sound. Others= =20 have remodeled their homes to obstruct ugly views. The Mortimers grew tall= =20 trees and trained vines past the windows. ?????The problems, they say, began with the energy crisis. ?????The plant was owned by Edison until 1998, when it was sold to=20 AES--California's largest private electricity producer--at the dawn of=20 deregulation. ?????The two gas-fired boilers that AES wants to restart have been dormant= =20 since 1995 and were slated for demolition until the power crisis struck. ?????But a few months ago as rolling blackouts hit the state, Gov. Gray Dav= is=20 signed an executive order allowing "peaker plants" to operate at extended= =20 hours. "Peaker plants" can produce electricity in quick bursts but guzzle= =20 large amounts of natural gas and are noisy. ?????Hulu Circle residents said the order has resulted in more hours of lou= d=20 jet noises that make then feel like they live by an airport. ?????Whenever the peaker plant goes on, residents call the Air Quality=20 Management District to send someone to test the plume of smoke. The=20 inspections have not detected any violations. ?????The proposal before the state Energy Commission would allow AES to=20 double its electricity output in Huntington Beach from 500 megawatts to 1,0= 00=20 megawatts. ?????The company's two 40-year-old units represent about 10% of the 5,000= =20 additional megawatts Davis has promised to meet an expected energy shortfal= l=20 this summer. ?????Despite the fast-tracking process, the company has vowed that it would= =20 safeguard against environmental damage and remedy any problems from plant= =20 operations. ?????If the plant is identified as drawing bacteria back to shore, AES woul= d=20 have to pay the costs deemed necessary to fix problems. ?????This is little consolation to residents, who would prefer a full=20 environmental review. Copyright 2001 Los Angeles Times=20 ---------------------------------------------------------------------------= --- ---------------------------------------------------------------------------= --- Federal plan called 'too little, too late'=20 Limited price control seen as step in right direction, but officials renew= =20 call for price ceiling Zachary Coile, Chronicle Political Writer Wednesday, April 25, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/04= /25/M N104049.DTL=20 As federal energy regulators consider a plan intended to ease the state's= =20 worsening energy crisis, California officials and some energy experts are= =20 already criticizing it as inadequate.=20 The Federal Energy Regulatory Commission is scheduled today to debate a=20 proposal that would force power generators to sell electricity at a=20 discounted price to California during severe power emergencies.=20 The proposal would require producers to sell energy to the state's power gr= id=20 during Stage 3 emergencies. Stage 3 emergencies are declared when energy=20 resources are almost depleted, allowing utilities to cut off power to=20 customers at any time.=20 The plan also would limit how much energy firms could profit off such sales= .=20 But Gov. Gray Davis and Sen. Dianne Feinstein, among others, say stronger= =20 remedies -- including the temporary regional price limits they have advocat= ed=20 for months -- are needed to stave off a summer of blackouts and power=20 shortages.=20 "I think the plan before FERC is too little, too late," Davis said yesterda= y=20 in Sacramento.=20 "We need help all the time. The regulatory commission plan excludes 95=20 percent of the purchases of power. A Stage 3 situation is, by definition,= =20 chaotic as we scramble to find the megawatts to keep the lights on."=20 The commission ordered its staff in December to come up with remedies to=20 California's energy woes. The commissioners are expected to make their=20 decision by May 1, a self-imposed deadline to help the Golden State.=20 The proposal to be debated today would require producers to sell electricit= y=20 to California at a price based on the costs of the least-efficient plant=20 providing the energy. More efficient plants sending energy to the state wou= ld=20 still be able to make a sizable profit.=20 The plan has also drawn criticism because it applies only to California, no= t=20 other Western states that are also feeling the pinch of higher energy price= s.=20 But California officials say the proposal does signal a shift in the hard-= =20 line position of the commission's majority against any form of price=20 controls. The plan would set some form of price ceiling, even if only durin= g=20 extreme conditions.=20 In regulatory commission documents, the plan is referred to as "price=20 mitigation" -- not price limits.=20 "I sincerely don't believe that FERC would even be considering the Stage 3 = if=20 it were not for us making substantial noise about a temporary cap," said=20 Feinstein, D-Calif., who introduced a bill with other Western senators=20 yesterday to require the agency to impose temporary price controls on energ= y=20 sold to Western states.=20 Severin Borenstein, director of the University of California Energy=20 Institute, said the regulatory commission has yet to make a compelling case= =20 for why its "Stage 3" plan would help lower sky-high prices.=20 "The argument being made to support this is that firms are only able to=20 exercise market power during Stage 3 emergencies," Borenstein said. "And th= e=20 evidence is quite clear that's just not true.=20 "It's unfortunate that FERC thinks this is solving some problem for=20 California, because it won't."=20 E-mail Zachary Coile at [email protected].=20 ,2001 San Francisco Chronicle ? Page?A - 10=20 ---------------------------------------------------------------------------= --- --------------------------------------------------------------- S&P lowers California's bond rating=20 First cut since '94 could cost taxpayers millions=20 Kathleen Pender, Chronicle Staff Writer Wednesday, April 25, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/04= /25/M N211494.DTL=20 Citing the "rapidly escalating uncertainty" surrounding the power crisis,= =20 Standard & Poor's slashed California's credit rating yesterday for the firs= t=20 time since 1994, when the state was still climbing out of a recession.=20 The downgrade -- and the energy debacle that led up to it -- will cost=20 taxpayers tens or hundreds of millions of dollars a year by raising the=20 state's borrowing costs. Investors will probably see the market price of=20 California municipal bonds and bond funds decline further.=20 But the biggest blow may be to the state's ego. S&P downgraded the state's= =20 general obligation bonds two notches -- to A+ from AA. The only other state= =20 currently rated A+ is Hawaii. The only state with a lower credit rating is= =20 Louisiana, according to S&P.=20 Most states are rated AA. Some states don't have a credit rating because th= ey=20 don't have bonds.=20 California's credit rating is still "investment grade," which means it is n= ot=20 expected to default on its bonds. However, the state's ability to repay its= =20 debt "isn't as strong as it used to be," said Steve Zimmermann, a managing= =20 director with Standard & Poor's. "This is a very speculative situation."=20 States hire companies like S&P to give them an independent credit rating wh= en=20 they borrow money by selling bonds. The rating reflects the state's ability= =20 to repay its debt in full, on time.=20 When they sell new bonds, states with lower credit ratings usually pay high= er=20 interest than higher-rated states, to make up for the added risk.=20 A rating change does not affect the interest rate states pay on bonds that= =20 have already been issued, but it can affect the price of bonds when they=20 trade on the open market among investors.=20 Yesterday's downgrade "reflects the mounting and uncertain cost to the stat= e=20 of the current electrical power crisis, as well as its likely long-term=20 detrimental effect on the state's economy," S&P said in a news release.=20 "Given the large magnitude of the problem in relation to the size of fund= =20 balances the state typically budgets, the capacity to pay debt service, whi= le=20 still adequate, has been reduced."=20 In January, S&P placed the state's debt on "CreditWatch with negative=20 implications," a signal that it might lower the rating.=20 In an unusual move, S&P kept the state on CreditWatch after yesterday's=20 downgrade, which means the rating could fall even lower.=20 Zimmermann said S&P is keeping California on CreditWatch pending its abilit= y=20 to sell $10 billion to $14 billion worth of bonds to reimburse the state's= =20 general fund for past and future power purchases.=20 "If they did the bond issue, they'd replenish the fund, at least for the=20 short term. If they don't do it, then it's more of a concern," Zimmermann= =20 said.=20 Unfortunately, the downgrade could make it harder for the state to sell the= =20 bonds.=20 "If they could have gotten the deal done before the downgrade, they would= =20 have had a stronger deal," said Kelly Mainelli, a municipal bond fund manag= er=20 with Montgomery Asset Management.=20 California must obtain an investment-grade rating (BBB- or higher) on the= =20 bonds before it can sell them.=20 Mainelli said California municipal bond prices have already fallen in=20 anticipation of a ratings cut. When prices fall, bond yields go up.=20 "The downgrade is the culmination of everything that's happened since early= =20 December," he said.=20 In November, California municipal bonds yields were 0.4 to 0.5 percentage= =20 points below the national average. Today, they're 0.1 to 0.2 percentage=20 points above the national average, and Mainelli thinks they could go up 0.1= =20 to 0.2 percentage points more because of the downgrade.=20 The total difference -- about 0.7 percentage points -- doesn't sound like= =20 much, but it adds up.=20 Last year, the state itself sold $4.6 billion in new bonds (excluding bonds= =20 sold to replace existing bonds). If it sells the same amount this year, plu= s=20 $12 billion in energy bonds, that 0.7 percentage point difference on $16.6= =20 billion in bonds would cost the state $116 million a year in additional=20 interest costs.=20 Yesterday's downgrade only affected the state's general obligation bonds an= d=20 others secured by the "full faith and credit of the state," such as the=20 California Health Facilities Construction Loan Insurance Fund (Cal Mortgage= ).=20 But the energy debacle could wind up costing other municipal bond issuers i= n=20 California -- such as cities, counties, school and water districts -- more= =20 money when they sell bonds. Although their ratings have not changed because= =20 of the energy crisis, analysts say the yields on most California municipal= =20 bonds have gone up, and will go up some more, as a result of the state's=20 downgrade.=20 "The values of all California bonds will be hurt by this downgrade, whether= =20 they should be or not. Psychologically, it's just how the market reacts,"= =20 says Richard Goldstein, a San Ramon financial planner.=20 Investors who have to sell their California bonds on the open market before= =20 they mature may not get all their principal back. But investors who hold=20 their bonds until maturity will probably get paid in full, Goldstein said.= =20 No matter how bad the energy crisis gets, most experts believe the state wi= ll=20 continue making principal and interest payments on its bonds, even if it ha= s=20 to raise taxes, cut expenditures or run a temporary deficit to do so.=20 "There's also the prospect at some point of federal help," Goldstein said.= =20 "The federal government does not want California to default or even come=20 close.=20 Do you know what that would do to the national economy and the world=20 economy?"=20 California's bond-rating history=20 S&P cut its rating on California debt yesterday for the first time since=20 1994.=20 What credit ratings mean=20 -- AAA: Extremely strong capacity to meet financial commitments.=20 -- AA: Very strong capacity to meet financial commitments.=20 -- A: Strong capacity to meet financial commitments but somewhat more=20 susceptible to adverse circumstances and economic conditions.=20 -- BBB: Adequate capacity to meet financial commitments. However, adverse= =20 economic conditions could weaken ability to pay debts.=20 Note: Ratings below BBB are considered poor investment risks, and the issue= s=20 sometimes are called "junk bonds."=20 Source: Standard & Poor's=20 Chronicle Graphic=20 E-mail Kathleen Pender at [email protected].=20 ,2001 San Francisco Chronicle ? Page?A - 1=20 ---------------------------------------------------------------------------= --- --------------------------------------------------------------- NEWSMAKER PROFILE=20 Richard Sklar=20 Ex-Muni boss becomes energy czar=20 Davis' pick to oversee power plant construction=20 Greg Lucas, Sacramento Bureau Chief Wednesday, April 25, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/04= /25/M N232441.DTL=20 Sacramento -- San Franciscan Richard Sklar, onetime trouble-shooter for the= =20 Municipal Railway and later a figure in the U.S. aid effort for Bosnia, wil= l=20 head a team of construction experts working to build power plants faster,= =20 Gov. Gray Davis said yesterday.=20 Sklar, 66, is the second energy "czar" the governor has appointed in a week= .=20 Last week he named S. David Freeman, head of the Los Angeles Department of= =20 Water and Power, to lead the state's conservation efforts.=20 "Mr. Sklar is with us for the long haul," Davis said after speaking to the= =20 State Chamber of Commerce. "He's a no-nonsense person."=20 Sklar will work with representatives of some of the largest construction=20 firms in the world, such as Bechtel, to map out timelines and identify=20 potential problems in building power plants.=20 Under the Davis administration, 13 power plants have been approved, eight o= f=20 which are under construction.=20 "This is the red meat I chew on, my friend," Sklar said yesterday in a=20 telephone interview from New York.=20 "We're going to be getting these projects under way and follow them from th= e=20 'let's do it' stage to the day we cut the ribbon."=20 Sklar has already had a chance to study the energy situation in California= =20 from afar. In January, while serving as then-President Bill Clinton's point= =20 man for helping southeast Europe move toward capitalism, Sklar said,=20 "California is an object lesson in how not to deregulate. You've got to hav= e=20 both capitalism and regulation."=20 The way California worked deregulation, Sklar said, was a "colossal mistake= .=20 "=20 Sklar has more than 35 years of public and private management experience,= =20 much of it in San Francisco.=20 He came to the city from Cleveland in the mid-1970s and soon joined the=20 mayoral campaign of the late George Moscone. Impressed by Sklar's drive,=20 Moscone handed him the reins to the city's huge wastewater program.=20 Sklar, known as a man of limitless self-confidence, quickly made a name for= =20 himself as a head-knocking administrator with an abrupt management style, b= ut=20 he got the languishing program moving.=20 Citing Sklar's "vigor and force," then-Mayor Dianne Feinstein appointed him= =20 general manager of the San Francisco Public Utilities Commission, which=20 oversees the city's Water Department. He held the post until 1983 while als= o=20 leading the Muni for three years.=20 Sklar soon earned a reputation at City Hall for flamboyance. Critics said= =20 Sklar enjoyed seeing his name in print and his face on TV a bit too much. H= e=20 took the criticism in stride.=20 "I inspire intense feelings," he told The Chronicle in 1982. "You love me o= r=20 you hate me -- and probably for good reason."=20 By the end of his tenure, Feinstein and Sklar were feuding openly over=20 everything from the Muni to high-rise development. The mayor called him=20 "arrogant." He, in turn, called her a "lightweight" who was no great=20 political star.=20 From 1983 through 1996, Sklar worked for San Francisco-based O'Brien-=20 Kreitzberg, one of the largest construction management firms in the United= =20 States. The firm specializes in public works projects.=20 Sklar became the company's president in May 1995 after running O'Brien-=20 Kreitzberg's Eastern and international operations, a job that led to=20 Clinton's naming him to coordinate the rebuilding of war-ravaged Bosnia in= =20 1996.=20 During Sklar's year on the job, the Sarajevo airport was quickly reopened,= =20 and round-the-clock electricity was restored in the city before winter.=20 In 1997, Clinton named Sklar ambassador to the United Nations for reform an= d=20 management. His primary task was to shake loose from a reluctant GOP-=20 controlled Congress more than $1 billion in delinquent dues owed by the=20 United States.=20 In June 1999, he moved to Rome to serve as Clinton's point man on economic= =20 development of southeast Europe. He is now a mediator specializing in=20 construction cases.=20 E-mail Greg Lucas at [email protected].=20 ,2001 San Francisco Chronicle ? Page?A - 10=20 ---------------------------------------------------------------------------= --- --------------------------------------------------------------- Will price caps deter investment, as federal regulators say?=20 KAREN GAUDETTE, Associated Press Writer Wednesday, April 25, 2001=20 ,2001 Associated Press=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2001/04/25/s= tate0 343EDT0117.DTL=20 (04-25) 00:43 PDT SAN FRANCISCO (AP) -- Some key power generators say=20 California's dearth of energy supplies, and its growing demand, make it a= =20 good place to build more plants and sell more power in the years to come --= =20 even if dreaded price caps are imposed.=20 ``Regardless of what the (market) structure turns out to be, the state's=20 going to need electricity and it's going to need to buy it from somebody,''= =20 said Bill Highlander, spokesman for San Jose-based Calpine Corp.=20 Calpine is investing about $4 billion in power plants over the next four=20 years that will generate 9,000 megawatts, enough for more than 6 million=20 homes. The state's current energy crisis ``hasn't really changed our plans = or=20 our strategy,'' he said.=20 But Chief federal energy regulator Curtis Hebert says price caps on wholesa= le=20 electricity will hinder, not help, California's energy crisis.=20 Energy wholesalers seeking higher prices than California is willing to pay= =20 will invest in other states, warns Hebert, the chairman of the Federal Ener= gy=20 Regulatory Commission. And any regulations that cut into future profits wil= l=20 scare away desperately needed new power plants, he says.=20 Eight of the 13 new power plants approved in California already are under= =20 construction. Twelve more are under review, according to the California=20 Energy Commission, which approves power plants.=20 CEC spokesman Rob Schlichting said that's a huge boost over the last decade= ,=20 when uncertainty over the rules of deregulation -- not a threat of price ca= ps=20 -- kept applications down. No companies have withdrawn plans to build plant= s=20 since December.=20 ``The only way price caps would scare away investment is if they were set s= o=20 low you couldn't make a profit,'' Schlichting said. ``It's still a market= =20 that people seem to want to come in and produce power for.''=20 Other companies still planning to invest in California include North=20 Carolina-based Duke Energy, which has two plants in the works, and=20 Houston-based Reliant Energy, which is negotiating with the state to sell= =20 power on long-term contracts.=20 Reliant's spokesman, Richard Wheatley, wouldn't say whether price caps alon= e=20 would inhibit them from building more plants. What he did say is that=20 California's power politics leave a lot of room for improvement.=20 The state has considered taking over power plants through eminent domain an= d=20 implementing a windfall profits tax to take some of their earnings away.=20 Meanwhile, Attorney General Bill Lockyer is offering a bounty for any=20 information that could prove wholesalers worked together to drive up prices= ,=20 which could lead to more lawsuits and investigations.=20 If California wants to encourage construction, it's got to tone down its=20 vilification and stop adding more restrictions, Wheatley said.=20 ``Whenever we go into an area and consider building a power plant, we have = to=20 look at the economics of the facility, we have to look at the regulatory=20 situation, esoteric things like what the mindset is like,'' he said.=20 ``California is not the easiest place in which to do business.''=20 Some power companies have invested so much in pipelines, gas reserves and= =20 plants already under construction that it's folly to turn back now.=20 ``We want to build in California, but we need to have regulatory stability = or=20 at least regulatory clarity to move these things forward because they're=20 half-billion dollar projects in some cases,'' said Tom Williams, a spokesma= n=20 for Duke. ``That's a lot of bananas.''=20 Senators Dianne Feinstein, D-Calif., and Gordon Smith, R-Ore., plan this we= ek=20 to introduce legislation urging FERC to impose a temporary price cap over t= he=20 11 Western states. They hope to keep prices down in the short-term and give= =20 California and other troubled states a breather to make long-term decisions= .=20 Feinstein's bill does not yet specify a price. Some economists say $150 to= =20 $250 per megawatt hour would be just and reasonable, yet provide generators= a=20 profit. Prices have gone as high as $1,500 for the same amount of power in= =20 the past year.=20 Tying the price cap to the cost of making power could make it easier for=20 generators to swallow, said Severin Borenstein, director of the University = of=20 California, Berkeley's energy institute. Such a cap would account for=20 variables such as the wildly fluctuating cost of natural gas used to genera= te=20 much of the energy in California's power plants.=20 Price caps can be effective, but only if they are very carefully designed,= =20 warned Frank Wolak, chairman of the Independent System Operator's market=20 surveillance committee. The ISO manages the state's power grid.=20 Set them too high, and companies will only bid that amount, saving little= =20 money, Wolak said. Too low, and the generators could choose to sell elsewhe= re=20 unless all other nearby states have the same price limits.=20 Also, capping the most expensive energy sales -- power sold on the spot=20 market at times of high demand -- won't lower prices for other key componen= ts=20 of the state's energy supply, such as electricity bought for the next day's= =20 power needs.=20 ``Suppose you're paying $150 every single (megawatt) hour. That still puts = us=20 in big trouble with wholesale energy costs,'' Wolak said.=20 The state already has spent $5.1 billion buying power for customers of=20 California's three largest investor-owned utilities, which lost their credi= t=20 -- and thus their ability to buy power -- after paying sharply higher costs= =20 for wholesale energy.=20 Borenstein said paying even $250 a megawatt hour is still preferable to the= =20 unknown, particularly since economists have warned that there is virtually = no=20 upper limit to what energy companies can charge.=20 ``This summer we are going to be truly short of power and at those times th= e=20 price is going to be at the price cap, and if we don't have a price cap, th= ey=20 will be way above the price cap,'' Borenstein said.=20 FERC remains opposed to price caps, but after months of complaints, the boa= rd=20 this week is considering a limited cap on the most expensive last-minute=20 power buys.=20 The proposal would cap California but not the rest of the West, and order= =20 wholesalers to sell to the state during the most extreme power shortages.= =20 Though it provides some cushioning, it does not address the high prices=20 California swallows the rest of the time. That's the point of Feinstein's= =20 bill.=20 ``The crisis point is this summer to next summer and we need some federal= =20 assistance,'' said Howard Gantman, spokesman for Feinstein. ``This would=20 assure the generators a reasonable profit and continue to spur on further= =20 investment into new plants.''=20 On the Net:=20 California Energy Commission: www.energy.ca.gov=20 ,2001 Associated Press ?=20 ---------------------------------------------------------------------------= --- --------------------------------------------------------------- Credit agency cites power troubles; lowers state's bond rating=20 Wednesday, April 25, 2001=20 ,2001 Associated Press=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2001/04/25/s= tate0 552EDT0127.DTL=20 (04-25) 02:52 PDT SACRAMENTO, Calif. (AP) -- A major credit rating agency h= as=20 downgraded California's state bonds, citing the financial drain from the=20 continuing energy crisis.=20 ``The downgrade reflects the mounting and uncertain cost to the state of th= e=20 current electrical power crisis, as well as its likely long-term detrimenta= l=20 effect on the state's economy,'' Standard & Poors said Tuesday.=20 The state's ability to repay its debts, while still considered adequate, ha= s=20 been reduced, S&P said in dropping the rating on California's general=20 obligation bonds by two notches from AA to A+. It similarly revised other= =20 lease ratings, and ratings for the California Health Facilities Constructio= n=20 Loan Insurance Fund, known as Cal Mortgage.=20 S&P is one of three major rating agencies watching the state's financial=20 performance. Credit ratings help determine how much states and other=20 borrowers must pay when issuing bonds. The lower the rating, the higher the= =20 interest rate the state must pay to attract bond investors.=20 The downgrade now puts California's credit rating behind many other states= =20 and on par with Hawaii, which also has an A+ rating from S&P.=20 Preliminary estimates from the state's Treasurer's Office estimated that th= e=20 downgrade would cost the state an additional $190 million to $570 million o= n=20 the $12 billion in general obligation bonds that have been authorized, but= =20 not yet issued, for ongoing expenses, including school and transportation= =20 projects.=20 The agency said the rating was not reduced further because of California's= =20 diverse economy and a proposed revenue bond slated to reimburse the state's= =20 treasury. S&P said a further downgrade could occur if California does not= =20 follow through on plans to issue more than $10 billion in revenue bonds to= =20 pay off its energy-related debts.=20 The agency put the state's general obligation bonds on a credit-watch ``wit= h=20 negative implications'' Jan. 19, shortly after California began buying powe= r=20 for its two largest utilities, Southern California Edison and Pacific Gas a= nd=20 Electric Co.=20 On the Net:=20 Standard & Poors www.standardandpoor.com=20 ,2001 Associated Press ?=20 ---------------------------------------------------------------------------= --- --------------------------------------------------------------- S&P downgrades California's bonds citing energy troubles=20 Wednesday, April 25, 2001=20 ,2001 Associated Press=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2001/04/25/n= ation al0443EDT0483.DTL=20 (04-25) 01:43 PDT SACRAMENTO (AP) -- A major credit rating agency has=20 downgraded California's state bonds, citing the financial drain from its=20 continuing energy crisis.=20 ``The downgrade reflects the mounting and uncertain cost to the state of th= e=20 current electrical power crisis, as well as its likely long-term detrimenta= l=20 effect on the state's economy,'' Standard & Poors said Tuesday.=20 The state's ability to repay its debts, while still considered adequate, ha= s=20 been reduced, S&P said in dropping the rating on California's general=20 obligation bonds by two notches from AA to A+.=20 The agency said the rating was not reduced further because of California's= =20 diverse economy and a proposed revenue bond slated to reimburse the state's= =20 treasury. S&P said a further downgrade could occur if California does not= =20 follow through on plans to issue more than $10 billion in revenue bonds to= =20 pay off its energy-related debts.=20 The agency put the state's general obligation bonds on a credit-watch ``wit= h=20 negative implications'' Jan. 19, shortly after California began buying powe= r=20 for its two largest utilities, Southern California Edison and Pacific Gas a= nd=20 Electric Co.=20 On the Net:=20 Standard & Poors www.standardandpoor.com=20 ,2001 Associated Press ?=20 ---------------------------------------------------------------------------= --- --------------------------------------------------------------- State bond rating lowered=20 Posted at 10:53 p.m. PDT Tuesday, April 24, 2001=20 BY JENNIFER BJORHUS=20 Mercury News=20 One of Wall Street's top credit-rating houses has downgraded California's= =20 bonds because of the state's handling of the energy crisis, a move that cou= ld=20 ultimately cost taxpayers tens of millions of dollars.=20 Saying that mounting and uncertain power costs are likely to do lasting har= m=20 to California's economy, New York-based Standard & Poor's on Tuesday lowere= d=20 the state's credit rating on its ``general obligation'' bonds two notches,= =20 from AA to A+ with a negative outlook. That puts California near the bottom= =20 of the state bond heap with only one state -- Louisiana -- rated lower.=20 Standard & Poor's said the rating could go lower if the state cannot resolv= e=20 the power crisis.=20 The downgrade will cost California millions of dollars in coming years=20 because a lower rating makes it more expensive for the state to issue gener= al=20 obligation bonds to finance projects such as school construction.=20 The interest on those bonds, which will rise from an estimated 5 to perhaps= =20 5.25 percent, is paid from the state's tax-financed general fund. Although= =20 the rating change doesn't apply technically to the different type of bond t= he=20 state plans to issue by June for power purchases, it will probably make tho= se=20 bonds more expensive for the state, too, bond experts say.=20 Heightened urgency=20 ``There's a sense of urgency that this problem has been escalating,=20 particularly since the PG&E bankruptcy,'' said David Hitchcock, California= =20 analyst for Standard & Poor's. ``This problem could move quickly.''=20 At least one bond expert said the downgrade was surprising.=20 ``To me it's clear that S&P doesn't have much faith in this power-bailout= =20 plan of the Legislature and the governor. To me that's the reason they did= =20 it,'' said Zane Mann, publisher of the monthly California Bond Advisor=20 newsletter.=20 No single new piece of information triggered the downgrade, Hitchcock said.= =20 The major factor, he said, was simply spiraling costs and no long-term plan= =20 for paying the bills. Last week Gov. Gray Davis said the state had been=20 spending $73 million a day to buy electricity, up from $45.8 million a day = in=20 late March. Hitchcock said some energy traders suspect the actual costs are= =20 higher.=20 All three major Wall Street credit-rating agencies have California on=20 so-called ``credit watch,'' but only Standard & Poor's has downgraded. One= =20 municipal bond expert said Standard & Poor's had been ``trigger happy'' and= =20 eager to downgrade. Raymond Murphy, Moody's California analyst, said he had= =20 no immediate plans to change California's bond rating, but that he's anxiou= s=20 to see officials produce a long-term plan for financing power purchases.=20 Murphy said he had a conference call with state officials about the issue= =20 Tuesday morning.=20 ``We want the state to develop the plan that gets the general fund out of= =20 power purchasing,'' Murphy said.=20 The state says it's working on that, but there's a roadblock.=20 Revenue bonds=20 A major piece of the state's plan is to have the Department of Water=20 Resources issue $10 billion to $14 billion in revenue bonds to pay back the= =20 general fund for what has been taken to buy power in recent months. But tha= t=20 portion of the plan is tied up in a dispute between PG&E and the California= =20 Public Utilities Commission over how to spend the extra money generated by= =20 electricity rate increases. The dispute has also held up the $4.13 billion = in=20 financing the state had arranged to pay down the advances it took out of th= e=20 general fund to buy power.=20 To break the logjam, officials from the state treasurer's office have asked= =20 lawmakers to pass emergency legislation to allow the state to issue the=20 revenue bonds.=20 ``California's credit rating and financial strength will be in jeopardy unt= il=20 the state's general fund is repaid for energy costs,'' state Treasurer Phil= ip=20 Angelides said in a statement Tuesday.=20 State Finance Director Tim Gage and Gov. Davis both downplayed the=20 significance of the rate change. Through a press officer, Davis said the=20 state's economy remains fundamentally strong.=20 The state was downgraded to a lower A rating in 1994 and went on to see=20 tremendous economic growth.=20 Mounting pressure=20 Still, a downgrade is bad news that sends a psychological signal in both th= e=20 finance and real worlds. Some industry watchers said they hope the downgrad= e=20 pushes lawmakers and state officials, whom they perceive to be too slow in= =20 responding to the crisis.=20 ``It sounds like the bond market might be out ahead of some of the=20 policy-makers in California,'' said Severin Borenstein, director of the=20 University of California Energy Institute. ``We're facing a real emergency= =20 here.''=20 John Hallacy, managing director of municipal research at Merrill Lynch, sai= d=20 a lower credit rating puts more pressure on the state to issue the revenue= =20 bonds fast, and to conserve cash.=20 ``We're kind of at the critical juncture now where the pieces are still all= =20 over the floor,'' Hallacy said of the state's efforts to build and approve = a=20 long-term solution to the power crisis.=20 To Nettie Hoge, executive director of the Utility Reform Network and a=20 leading critic of the state's efforts to bail out PG&E and Southern=20 California Edison, the downgrade means ``the analysts are watching.'' She= =20 said she hopes that President Bush and the Federal Energy Regulatory=20 Commission are watching, too.=20 ``Hopefully, this is a wake-up call for FERC. Those guys could solve this i= n=20 a nanosecond,'' Hoge said. ``This is just another milepost on the downward= =20 spiral to economic catastrophe.''=20 Contact Jennifer Bjorhus at [email protected] or (408) 920-5660.=20 ---------------------------------------------------------------------------= --- ---------------------------------------------------------------------------= --- ----- Q&A with Gov. Gray Davis on energy issues=20 Gov. Gray Davis visited the Mercury News editorial board Monday. On the=20 subject of electricity, Davis talked about increasing the number of power= =20 plants, the rejection of price caps by the Federal Energy Regulatory=20 Commission, and the condition of the state's two largest utilities, Souther= n=20 California Edison and Pacific Gas & Electric. Davis has proposed a deal to= =20 rescue Edison, and the Legislature is considering it. PG&E has filed for=20 bankruptcy.=20 Here is a condensed version of Davis' remarks.=20 Q: What would you like to say by way of introduction about the state's=20 electricity problems?=20 Davis: There are really two problems. One is the amount of power available= =20 and the other is the price of power.=20 In 2002, we'll have more megawatts on line, at least 5,000 more. By 2003,= =20 we'll have a slight excess of power over demand. That's very important.=20 Because at the moment, we import 20 percent of our power. We have no=20 leverage. We are at the mercy of forces that show no mercy. That will never= =20 change until we have more power than we need.=20 OK, price. As you know, the only entity that can influence the [wholesale]= =20 price of electricity is the Federal Energy Regulatory Commission.=20 Deregulation surrendered the ability of the state to do that.=20 In 1999, this state for all power, including municipal power, spent roughly= =20 $7 billion. In 2000, we spent $32.5 billion. I don't know what it will be= =20 this year, but it will be substantially higher.=20 Through all this the Federal Energy Regulatory Commission has refused to do= a=20 thing, zero, zippo. Lest you think I'm being partisan, that commission=20 consists entirely of Clinton appointees.=20 The final piece is the financial consequences of what's happened to date. I= t=20 is our hope that if we can keep Southern California Edison credit-worthy an= d=20 able to re-enter the power purchasing market Jan. 1, 2003, we can then go t= o=20 the PG&E creditors committee [the generators to whom PG&E owes money] and s= ay=20 to them: ``Look at the arrangement we made with Southern California Edison.= =20 We believe that this is a far better deal than PG&E can give you.''=20 I think this is a fair plan. We get every electron that Edison's utility ow= ns=20 committed for 10 years, at a cost-of-service basis. Under [current law] the= y=20 could sell that next March at market rates. We got $400 million returned fr= om=20 the holding company, a $3 billion investment in the transmission and delive= ry=20 systems .?.?. a permanent easement on about 20,000 acres of environmental= =20 property around all their hydro facilities.=20 Q: Do you have in mind a finished product for the changes that are happenin= g=20 in the electric system? What will it look like in a couple of years?=20 Davis: It is my expectation that the utilities will be purchasing the power= =20 entirely, commencing Jan. 1, 2003. Our goal is to get them back in business= .=20 In addition to investor-owned utilities, I believe we also need a public=20 power authority. At some point I believe the private sector will say to=20 itself, ``I want to build new plants to replace the 40-year-old plants, but= =20 do I really want to get the state to a 15 percent margin over supply, there= by=20 reducing the value of the electrons I already own?'' If they do, God bless= =20 them. But if they don't, at least we'll have the opportunity to build them= =20 ourselves.=20 Once we have even a slight margin of capacity over demand, the spot market= =20 prices will come down dramatically.=20 Q: You said in February that you could have solved the electricity problem = in=20 20 minutes if you'd been willing to raise rates. Now, rates are going to be= =20 raised. Should you have favored a rate increase earlier?=20 Davis: I should have been more specific. I should have said I could have=20 solved it in 20 minutes if I wanted to triple rates. I think the rate=20 increase I proposed is fair. It rewards people who are the most energy=20 efficient, the people who only use up to 130 percent of their baseline. The= y=20 are approximately half the state. So half the state will see no rate=20 increase, beyond the 10 percent that everyone saw in January.=20 Q: Is the state willing to spend anything it costs to keep the lights on, o= r=20 at some point, would it stiff the generators and just say we will accept a= =20 blackout?=20 Davis: We have to provide power. There are many people who have medical=20 devices that have to keep running. Blackouts can cause deaths, traffic=20 accidents, all kinds of calamities that I wouldn't want to happen.=20 I'm reluctant to tell the generators we'll pay any price, so I'm not going = to=20 say we'll pay absolutely any price, but my bias obviously is to find a way = to=20 keep the lights on.=20 Q: When will you reveal how much electricity the state has bought, from wha= t=20 companies, at what prices and what this will cost the state this year and i= n=20 coming years?=20 Davis: We'll reveal an awful lot of information as soon as the bonds go to= =20 market. [The state plans a bond issue to cover the upfront costs of=20 purchasing electricity.] That information has to be made public. That will= =20 probably be in less than two months.=20 Believe me, I don't like going around getting beat up for hiding informatio= n.=20 I'm doing it for one reason only, which is that I know every additional edg= e=20 I give the generators will result in higher prices for customers.=20 Q: There's an impression that the state budget is being drained by the powe= r=20 crisis. Is that right?=20 Davis: The simple answer to that is no, because the state will be fully=20 reimbursed with interest as soon as these bonds are sold.=20 At the moment, in the short term, it is crowding out other spending. But I= =20 think everyone understands that's a temporary phenomenon, until the state i= s=20 reimbursed by bonds that are repaid over time through the rate structure th= at=20 I proposed.=20 Q: Would it be your pledge that ratepayers, not taxpayers, will fully repay= =20 the state's cost in purchasing electricity?=20 Davis: That is the assumption underlying these bonds. That's right as it=20 relates to electricity, but obviously the conservation incentives came out = of=20 the general fund.=20 Q: Have you talked to President Bush about this?=20 Davis: I hear all these rumors as to why the Bush administration doesn't wa= nt=20 to be helpful, but this state, and particularly this region, has been=20 disproportionately helpful in America's economic growth and technological= =20 productivity. If he wants America to grow, it behooves him to keep Californ= ia=20 growing. To date, I think it's fair to say that of my public requests,=20 President Bush has been responsive to all but the price caps.=20 ---------------------------------------------------------------------------= --- ---------------------------------------------------------------------------= --- ------- Davis: Power surplus by 2003=20 Published Wednesday, April 25, 2001, in the San Jose Mercury News=20 BY DON THOMPSON=20 Associated Press=20 SACRAMENTO -- Even as power grid operators warned the state's lights could= =20 flicker again by week's end, Gov. Gray Davis on Tuesday pledged that=20 Californians will be wallowing in electricity by the end of 2003.=20 Davis compared the emergency to fighting a large forest fire -- in a few=20 years, the fire will be out and the state will be out of the energy-buying= =20 business.=20 Just in case Davis' plans fail, however, an Assembly task force is=20 considering options, including having the state buy Southern California=20 Edison.=20 Critics have hammered Davis for his handling of the power crisis, and his= =20 predictions have faltered before.=20 In January, Davis set three goals as energy prices spiraled upward and shor= t=20 supply endangered the state's large investor-owned utilities: to avoid=20 blackouts, bankruptcies and rate increases.=20 All three have since happened.=20 On Tuesday, Davis lowered the bar substantially: ``If the lights stay on, w= e=20 will have succeeded. Our goal is to keep the power flowing in this state, t= o=20 avoid blackouts, to moderate the price increases in a fair and reasonable w= ay=20 and reward those who conserve the most, and to chart a steady course.''=20 Even keeping the lights on may be difficult as temperatures climb this week= ,=20 warned the Independent System Operator, which runs the state's power grid.= =20 The ISO declared a Stage 2 emergency Tuesday afternoon when the state came= =20 within 5 percent of running out of electricity after two power plants went= =20 off-line unexpectedly.=20 Spring's first warm spell is likely to boost demand by 2,000 megawatts -- t= he=20 equivalent of two large power plants able to power 1.5 million homes -- the= =20 ISO said in calling for more energy conservation.=20 The increase comes as hydroelectric power runs low across the dry Northwest= ,=20 and as 13,000 megawatts of power remain unavailable due to planned or=20 unplanned plant shutdowns.=20 Davis insisted that statewide conservation this summer can stave off=20 widespread blackouts as the state rushes to build its way out of the supply= =20 shortage.=20 ``At the end of 2003 we will have more power than we need, we will have=20 regained control of our energy destiny,'' Davis promised in a speech to the= =20 California Chamber of Commerce. ``By the end of 2003 you can have all the= =20 appliances on. You can, you know, don't turn anything off, you can just=20 luxuriate in all your electricity.''=20 Davis promised a 15 percent supply surplus by 2004.=20 To that end, he named former diplomat Richard Sklar to head a new=20 ``generation implementation task force'' of business consultants charged wi= th=20 speeding up power plant siting and construction. Before entering public=20 service, Sklar was president of San Francisco-based construction machinery= =20 manufacturer O'Brien Kreitzberg.=20 Standard and Poors dropped California's credit rating Tuesday, warning that= =20 continued purchases could hurt the state treasury. ---------------------------------------------------------------------------= --- ---------------------------------------------------------------------------= --- ---------- Great America to avoid blackouts=20 Published Wednesday, April 25, 2001, in the San Jose Mercury News=20 Associated Press=20 Paramount's Great America amusement park in Santa Clara has struck a deal= =20 with the municipal utility to keep the power on even during rolling blackou= ts=20 this summer.=20 The park will cut electricity usage by 10 percent on ``high-demand days'' -= -=20 which could be nearly every day this summer -- by turning off fountains,=20 decorative lighting and air conditioning in some buildings.=20 Santa Clara's city-owned utility, Silicon Valley Power, will use the power= =20 savings to help avert blackouts, said Larry Owens, customer service manager= =20 for the utility. Even if the situation gets dire and blackouts are required= ,=20 the park will be exempt because of the arrangement, Owens said.=20 About 20 companies with facilities in Santa Clara, including Intel Corp., S= un=20 Microsystems Inc. and Agilent Technologies Inc., have agreed to the same=20 arrangement, as has Santa Clara University. ---------------------------------------------------------------------------= --- ---------------------------------------------------------------------------= --- ---------- State's bond rating is lowered=20 The energy crisis brings an A+ designation, which likely will mean higher= =20 borrowing costs.=20 April 25, 2001=20 By JOHN HOWARD The Orange County Register=20 SACRAMENTO California's electricity crisis prompted a top credit agency to= =20 downgrade the state's credit rating by two notches to its lowest level in= =20 seven years. The move is likely to force the state to pay millions of dolla= rs=20 more in interest when it borrows.=20 "It's a statement from Wall Street to California to get your act together,"= =20 said Assemblyman George Runner, R-Lancaster, a GOP energy- finance expert i= n=20 the Assembly.=20 "The ratings action is serious and should be a warning to the state that it= =20 is on the wrong course," added Mark McCray, a municipal-bonds manager at=20 Newport Beach-based Pimco. "This downgrade will cost the state a lot in ter= ms=20 of increased financing and costs until, if ever, it is upgraded."=20 Standard and Poor's Corp., concerned about the $5 billion drained from the= =20 state's coffers to buy power this year, cut California's credit rating from= =20 AA to A+. The reduction applies to voter-approved bonds, called general=20 obligation, or G.O., bonds, that typically provide funds for schools, parks= ,=20 water projects and highways.=20 About $19.3 billion worth of G.O. bonds have been approved by voters. About= =20 $12 billion have not yet been sold.=20 The credit-rating cut would force the state to pay higher interest rates to= =20 attract buyers to the unsold bonds. If the state were to sell all $12 billi= on=20 under the lower credit rating, it could be forced to pay an additional $190= =20 million to $500 million annually in interest, depending on market condition= s.=20 Shortly after Standard and Poor's announcement, state Treasurer Phil=20 Angelides urged lawmakers to limit the size of the state's looming=20 electricity-bond sale to $10 billion - or $2.4 billion less than Gov. Gray= =20 Davis wants.=20 Angelides said capping the revenue bond at $10 billion would head off legal= =20 challenges from utilities, expedite the passage of the bond plan through th= e=20 Legislature and allow the sale to go forward.=20 "At a minimum, we need an authorization of $10 billion," Angelides said. If= =20 Davis and lawmakers want more, they should do it later, Angelides added.=20 Davis has sought $12.4 billion. The rift between the governor and the=20 treasurer, both Democrats, marks their sharpest political divergence since= =20 the energy crisis erupted last year.=20 A Davis spokesman declined to comment on the difference. "We are working wi= th=20 the treasurer and others to draft legislation for that bond bill, and we'll= =20 continue to work with him," said Roger Salazar.=20 The Davis administration hopes to raise the money by selling revenue bonds,= =20 backed by a charge on consumers' utility bills. The sale had been planned f= or=20 May but has since been pushed back to June or July at the earliest.=20 But there is a clock ticking: The state has been spending $45 million to $6= 0=20 million a day for electricity. The longer the delay in selling the bonds, t= he=20 less money will be available to buy cheaper energy for the state under=20 long-term contracts.=20 Before funding future power purchases, the bond proceeds must go to pay bac= k=20 the $5 billion the state has spent on electricity purchased since January o= n=20 behalf of California's three big cash-strapped utilities.=20 While the Standard and Poor's downgrade won't directly affect the electrici= ty=20 bonds, since they won't be G.O. bonds, it does reflect Wall Street's concer= n=20 about the unstanched outflow of state funds.=20 "In my mind there's no doubt that S&P is doing this because they simply don= 't=20 have faith in the proposed bailout and what the state is going to have to g= o=20 through to solve its power problems,' said Zane Mann, the editor of a=20 newsletter that tracks California's general-obligation bonds.=20 Mann said the A+ rating puts California "below average" nationally. The=20 rating downgrade sliced the value of an existing 30-year California G.O. bo= nd=20 by 3.5 percent, he said. But since most investors who buy California bonds= =20 hold them to maturity, Mann said the losses would be largely confined to=20 paper.=20 Assemblyman Fred Keeley, D-Boulder Creek, who authored the bill that=20 authorized the power bonds, said the sale should be limited to the $10=20 billion originally provided for in the bill. The bill provides for the=20 utilities to forward money collected from ratepayers to the state Departmen= t=20 of Water Resources, which purchases the power.=20 As the state spent more than anticipated on emergency electricity purchases= ,=20 Davis sought to increase the size of the bond sale. But that suggestion has= =20 led the utilities to challenge the bill's rate- diversion mechanism, which= =20 has "put a cloud on our ability to acquire financing," Keeley said.=20 Assembly Republican Leader Dave Cox of Fair Oaks said he would strongly=20 support any move to cap the amount of borrowing the state would do to buy= =20 electricity.=20 His staff said Republicans are skeptical that the ratepayers' revenues are= =20 sufficient to cover the costs in the Davis administration's electricity-=20 rescue plan.=20 "Nobody believes that the revenue stream is wide enough to cover all the=20 governor's energy solutions. It's still being sucked up by the state's=20 utilities," said Cox spokesman Jaime Fis Fis.=20 Register staff writers James B. Kelleher and Diana McCabe and the Associate= d=20 Press contributed to this report.=20 ---------------------------------------------------------------------------= --- ---------------------------------------------------------------------------= --- --------------------------- Fire stokes wholesale gas cost=20 The question is whether the retail price will climb, too.=20 April 25, 2001=20 By ANNE C. MULKERN The Orange County Register=20 The Tosco refinery fire may fuel rising prices on the gasoline retail marke= t.=20 The spot-market price rose 10 cents within hours of the fire. Photo: Leonard Ortiz / The Register ? ? Wholesale gasoline prices jumped Tuesday, a day after fire erupted at Tosco= =20 Corp.'s Carson refinery.=20 But energy experts said it is too soon to know whether the fire will drive= =20 retail gas prices higher.=20 Gas prices already are climbing because of increased demand heading into=20 summer, higher costs for additives that make cleaner-burning fuel and a shi= ft=20 in marketing strategy by Tosco, which wants to sell less gas at a higher=20 price.=20 The refinery fire has the ability to worsen an already bleak situation,=20 energy experts said.=20 "It doesn't take much in this market,'' said Suzanne Garfield, California= =20 Energy Commission spokeswoman. "It's very volatile.''=20 Tosco said it will shift any lost gasoline production to its Wilmington=20 refinery. It was unclear, however, how long the Carson refinery would be do= wn=20 for repairs. Tosco spokesman Clark Wrigley couldn't say whether the=20 Wilmington plant could make enough gasoline to meet the company's needs in= =20 Southern California.=20 Within hours of the fire, gas prices had jumped 10 cents per gallon on the= =20 spot market, a daily market where refiners sell surplus supplies. That was= =20 driven mainly by speculation, as those with gas to sell waited to see how= =20 high the price would go. Prices later fell back to an increase of about 3= =20 cents from a day before.=20 "Just the fact that there is a hiccup in the refinery makes everyone cringe= =20 and say, 'I'm not going to sell,''' said Bob van der Valk, manager at Cosby= =20 Oil, a Santa Fe Springs gasoline wholesaler.=20 A day or so of higher spot prices probably won't affect retail costs. But i= f=20 wholesale prices stay up for several days, retailers will pass on those cos= ts=20 to consumers.=20 ---------------------------------------------------------------------------= --- ---------------------------------------------------------------------------= --- --------------------------- Power Companies and Regulators Must Take Steps To Avoid Spread of=20 California Power Virus/ Andersen Analysis WASHINGTON--(BUSINESS WIRE)--April 24, 2001 via NewsEdge Corporation - A "new virus spawned in California" poses formidable challenges requiring new strategies on the part of power companies, regulators and policymakers to contain and reverse its damage, according to "Energy Crisis in the Western United States: Lessons for Navigating Regulatory and Market Minefields," a new Andersen report released today. "The implications for the development of competitive energy markets go far beyond the Western United States," Andersen's national utility practice head Matthew D. Smith told a Washington briefing. "Unfortunately, California has taught the nation that regulatory and political barriers can create and sustain an energy crisis." "California has demonstrated that the risks in the electricity industry, if not properly acknowledged and managed, can simultaneously and profoundly impact all market participants. To be effectively managed, these risks need to be exposed, assumed or shared, measured and monitored. When they are hidden or ignored, all parties can potentially suffer. A shared, integrated view of these risks, and a strategy for their assumption and management, is critical to avoiding rapid value destruction within the energy market," Smith said. An Andersen survey of senior utility executives outside California, also released at the briefing, indicates most utility companies believe they inoculated themselves against the California virus so that it is unlikely to affect their operations beyond slowing the pace of deregulation and increasing investor scrutiny. However, based on the potential implications it sees of the California situation, Andersen believes a series of booster shots are advisable for power companies and regulators. "To deliver reliable service at a predictable cost in today's environment, companies must focus on market integration by developing new and innovative relationships between suppliers, customers, employees and investors -- while working with government officials and regulators to chart a smoother transition to a deregulated power market," according to Smith. Eight Implications The Andersen report identified eight overriding implications emanating from the Western energy crisis that are shaping the longer-term operations of the Western grid, the regional and national economy, domestic energy policy and the industry's evolution: 1. Increased deregulation uncertainty and risk -- Tension and differences between state and federal regulators raise the specter of repeating the regulatory and political conundrum California's investor-owned utilities have faced. If federal initiatives open wholesale markets while retail markets remain regulated, a crucial question is raised: Will state regulators pass-through higher wholesale costs if they should materialize? Tensions between state and federal regulators over policies on deregulation will grow if states delay or abandon retail competition. As wholesale markets are deregulated and RTOs begin operating, the prudence principles that state regulators have used for many years may have to be changed. For example, if FERC and RTO monitors determine that deregulated wholesale markets operate fairly, prices derived from those markets must be considered reasonable. If so, these costs should be allowed into state-regulated retail rates without regard to the prudence principles state regulators have used for years. Therefore, utilities' traditional burden of proving costs are or are not justifiable shifts to regulators. 2. Reduced investor confidence -- Prior to deregulation, stringent prudence review and disallowance of generation costs in the rate base made regulatory risk largely uncontrollable, killing IOU interests in most new investment. A major purpose of deregulation was to create an environment in which risk could be managed, but California's political and regulatory environment provides only a limited ability to manage risks. The confidence and perceptions needed to support investment decision-making will be slow to return given the approach of the state to remedy the crisis. 3. Contributing factor in economic softening -- Uncertain energy reliability and higher costs can drive-out marginal businesses, cause healthy companies to constrain expansion, and lead new entrants to question whether to make new investments. As such, an extended energy crisis contributes to inflation pressures and may slow economic growth. 4. Increased pressure on the Western grid -- Even as capacity increases and demand reductions work to resolve the California crisis, these solutions have long-term implications for the Western Grid. These include a realistic possibility of California becoming an "energy island" as a result of near-term reduction in available regional resources for export to California; increased emphasis on security control to protect against overall Western grid failure as sub-regions have problems; RTO requirements to strengthen locally available supplies to bolster overall system reliability; longer-term development of new plants using plentiful coal resources and clean coal technology will alter the pattern of imports into California; and the emergence of Mexico as a major supplier to southern California and Arizona, contributing to a bifurcation of the Western Grid into northern and southern markets. 5. Unbundling failures that push companies back to portfolio strategies -- For California investor-owned utilities, unbundling has achieved neither the least-cost solution sought by regulators nor value maximization targeted by investors. This necessitates a reevaluation of portfolio management strategies potentially involving generation, transmission, power trading and marketing, and retail businesses in multiple geographies serving multiple markets. 6. Ineffectiveness in changing siting and development restrictions -- California's retail price caps and multiple explanations for the crisis have left accelerated siting processes and environmental standards changes open to challenge by various interests. In addition, limiting application of new siting orders only to small generators contributes to uncertainty and investor hesitancy. 7. Procurement management that alters user-utility negotiating leverage -- Competitive markets compel participants -- suppliers, marketers, large industrial buyers, etc. -- to strategically manage procurement as a critical value-driver. Because risk is explicitly shared and always has the potential of shifting advantage to either seller or buyer, the sophistication of negotiations and contracts increases as competitive markets evolve. 8. Increased emphasis on distributed generation and new technologies -- California's reliability and price challenges have triggered a re-emergence of energy crisis measures from the 1970s. End-users are investing in solutions they control, and the distributed generation market is being aggressively developed among large retailers, industrial users and residential customers. This makes possible the development of microgrids connecting consumers in local areas and related changes in traditional grid systems, from modifications in interconnection agreements to changing definitions of reserve margins and system reliability. Industry Executives' Response Senior executives from sixteen non-California utilities with a combined market capitalization over $120 billion and $145 billion in revenues responded to an Andersen survey with their views of the implications of the California power crisis for their companies and for the industry. The survey, conducted between February 19, 2001 and March 2, 2001 by Knowledge Systems &amp; Research, Inc. of Syracuse, found that the companies are observing the California situation carefully, expect a slowing -- but not a turnaround -- of deregulation, and believe their internal plans and preparations are on-target for the changing environment: -- Deregulation -- Nearly all executives believe recent California events will slow the pace of deregulation over the next five years for states that have not begun or finished writing restructuring legislation. None believe that it will cause advanced states to re-regulate markets, although many states will review their legislation to assess their risk of duplicating California's current situation and make any changes necessary to avoid it. -- National legislation -- Few executives suggest the situation will initiate national energy policy/legislation; others believe it will be a continuing issue but, because of state-to-state variances, Congress will be unable to pass any comprehensive measures or force states to a restructuring timeline. Some expect additional state-level legislation. -- Company strategies -- Most do not see any changes to their business models or strategies for generation, distribution or supply procurement as a response to the situation in California. However, many have expanded their risk management programs, reduced spot market purchases, begun emphasizing long-term supply contracts, planning new power generation capacity, and started hedging with futures trades. Those facing price caps are rethinking their stance on them. -- Investor scrutiny -- Many executives indicate their shareholders are aware of the situation and investors -- particularly institutional investors -- are more heavily scrutinizing their actions. Many say news coverage has prompted retail, commercial and industrial customer skepticism of industry restructuring. -- Transmission deregulation -- Many executives agree the California situation will increase interest in FERC's regional transmission organizations (RTO) deregulation effort. Utility Company Action Items Both to guard against a sudden California cascade and as a potentially powerful competitive thrust, forward-thinking utilities should bolster their basic preparedness with a variety of tactics -- or inoculations -- specifically aimed to combat a potential California power virus, according to Andersen partner Mark Moskovitz: -- Improve procurement management and risk management capabilities -- To manage exposure to volatile supply and demand shifts, organizations must be sure that comprehensive and clear supply procedures, controls, decision points, risk limits and communications are in place. -- Plan and design innovative rate and pricing structures -- Companies and regulators must focus on communicating price signals that create value for both the customer and the provider. Innovative rate and pricing structures that more closely tie the customer's price to the real cost of supply will better signal the value of the service as well as providing more accurate information upon which both end user and supplier can make decisions. -- Increase emphasis on demand side management (DSM) strategies -- In addition to new pricing strategies to help achieve and maintain supply-demand equilibrium, companies must now focus on employing more extensive and innovative demand side management programs. These programs may offer significant benefits with limited risk to both the customer and energy supplier. -- Assess the supply and generation dynamics in adjacent jurisdictions -- Companies must take a broader view -- beyond typical geographic market definitions -- of the economics of generation and related business decisions in an increasingly volatile market in which supply will follow the best prices. -- Develop contingency plans for the continued deferral of new generation capacity -- In the face of potential ongoing generation capacity shortages, companies and regulators must be prepared to move with a portfolio of strategies to meet demand, including for example DSM, flexible pricing and distributed generation. In addition, they should explore efficiency-improving upgrades to existing facilities and seize any opportunity to accelerate near-term construction plans. -- Proactively address potential organizational disruption -- As regulatory and economic changes continue to churn the industry waters and companies adjust and/or restructure, they must be highly cogniscent of, sensitive to, and directly address employees' concerns with information about the company's future and theirs'. Industry/Regulatory Lessons There are also a number of broad primary lessons the electric power industry -- nationally and internationally -- should take away from its first major domestic test case in deregulation and restructuring, according to Andersen principal David O. Jermain: -- Simplify market design. -- Build a continuing role for regulators. -- Maintain communications with multiple constituent interests. -- Prepare contingency plans for extreme stress conditions. -- Couple real-time retail pricing with transparently priced wholesale competition. -- Provide special incentives for RTO investment, formation and development. -- Break down regulatory and political barriers to market signals and responses. Andersen is a global leader in professional services. It provides integrated solutions that draw on diverse and deep competencies in consulting, assurance, tax, corporate finance, and in some countries, legal services. Andersen employs 85,000 people in 84 countries. Andersen is frequently rated among the best places to work by leading publications around the world. It is also consistently ranked first in client satisfaction in independent surveys. Andersen has enjoyed uninterrupted growth since its founding in 1913. Its 2000 revenues totaled US$8.4 billion. Learn more at www.andersen.com. Copies of the "Energy Crisis in the Western United States: Lessons for Navigating Regulatory and Market Minefields" report can be obtained at www.andersen.com/energyandutilities. A PDF copy of the report can be obtained by contacting Melanie Fahey at 713/222-1600 or [email protected] CONTACT: Sommers &amp; Associates, Houston | Tom Sommers, 713/222-1600 |=20 [email protected] |=20 or | Andersen, Houston | Melissa Spradley, 713/237-2385 |=20 [email protected] ---------------------------------------------------------------------------= --- ---------------------------------------------------------------------------= --- ------------------------------------------------ Soaring Temperatures Produce Call for Conservation;=20 California ISO Also Announces New Outage Notification System and On-call=20 Number FOLSOM, Calif.--(BUSINESS WIRE)--April 24, 2001 via NewsEdge Corporation - As the mercury climbs this week, the California Independent System Operator (California ISO) is reminding consumers to curb their electricity use in order to minimize the strain on the power grid. The first warm spell of the season is expected to cause temperatures to jump 10 degrees, leading to a 2,000 megawatt increase in electricity consumption -- the equivalent of two large power plants. The week started out with a peak demand of 28,835 megawatts, but by tomorrow it is forecasted to top 30,500 megawatts. This comes as hydroelectricity resources (both Northwest and California) run low, more than 10,000 megawatts of power plants remain off line due to planned and unplanned maintenance, and some 3,000 megawatts of Qualifying Facilities or alternative energy suppliers are not operating. The California ISO's renewed call for conservation precedes a forecast of 90 degree highs in the inland areas that may tempt many Californians to flip on air conditioners. For conservation tips -- such as using fans instead of air conditioners, setting thermostat at 78 degrees, etc. -- please see the California ISO's web site www.caiso.com. New Notification System: With a challenging summer around the corner, the California ISO wants to do all it can to bring information to the public as quickly as possible. For that reason, a new notification system is being brought on line. Media and the public can now access the Internet to keep current if rotating blackouts are issued. Navigation: Visit www.caiso.com Click on System Conditions for current information on rotating outages (will appear only when activated) For previous outage information (last hour, etc.), click on Market Notices, scroll to bottom of page and click on Notice Log The California ISO is also testing a new service to notify newsrooms immediately by email should the ISO initiate electrical emergencies (Stage One - Three) or rotating outages. If you would like to participate, please email [email protected] with a maximum of one email address per newsroom. Additionally, a single on-call media pager number has been established: 916/815-0679. To make it easier on media, ISO Communications will no longer be posting on-call schedules for media spokespersons on the web site. Simply call the on-call pager after hours. News releases alerting the media to electrical emergencies will continue, as will news conferences held on-site in Folsom and via telephone. As a reminder, if you wish to visit the ISO control rooms (in Folsom or Alhambra) always call ISO Communications first at 888/516-NEWS to make an appointment. Access to the control rooms may be limited on certain days, depending on system conditions and/or level of requests from media. CONTACT: California ISO | Patrick Dorinson, 888/516-NEWS | Media Hotline:= =20 888/516-NEWS

dasovich-j/all_documents/11551.

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Energy Issues

Please see the following articles: Sac Bee, Tues, 6/26: Energy-refund talks open on divisive note Sac Bee, Tues, 6/26: Daniel Weintraub: Davis' energy contracts preserve=20 long-term pain Sac Bee, Tues, 6/26: State, generators lock horns in talks Sac Bee, Tues, 6/26: Davis commends 3 'heroes' in generator refunds fight Sac Bee, Tues, 6/26: San Onofre blast released no radiation, spokesman says Sac Bee, Mon, 6/25: Congress demands list of participants in Cheney energy= =20 meetings Sac Bee, Mon, 6/25: Creditor expects no quick fix in PG&E's venture into=20 bankruptcy LA Times, Tues, 6/26: State, Power Firms Urged to Make a Deal LA Times, Tues, 6/26: Commerical Real Estate Apartments to Provide Own Powe= r LA Times, Tues, 6/26: Officials Oppose Utility Choice Power SF Chron, Tues, 6/26: Billions of dollars at stake as power talks begin SF Chron, Tues, 6/26: Compromise urged in electricity refund talks SF Chron, Tues, 6/26: Developments in California's energy crisis=20 SF Chron, Tues, 6/26: News briefs on California's power crisis Mercury News, Tues, 6/26: The haggling over refunds is under way=20 OC Register, Tues, 6/26: Power workers supported OC Register, Tues, 6/26: Judge sets tone at energy talks NY Times, Tues, 6/26: California and Energy Providers in Talks Over Electri= c=20 Fees NY Times, Tues, 6/26: Cheney Withholds List of Those Who Spoke to Energy Pa= nel WSJ, Tues, 6/26: Love, War and California Electricity=20 ---------------------------------------------------------------------------= --- -----------------------------------------=20 Energy-refund talks open on divisive note=20 By David Whitney Bee Washington Bureau (Published June 26, 2001)=20 WASHINGTON -- More than 130 lawyers and corporate chiefs crowded into a=20 courtroom Monday to begin secret talks aimed at ending months of bitterness= =20 and accusations over who should pay for California's haywire energy market.= =20 But the largely closed-door sessions before a Federal Energy Regulatory=20 Commission judge could be doomed from the start by sharply divided estimate= s=20 of how much money it will take to leave the past behind and launch Californ= ia=20 toward a new energy future.=20 The state says its consumers have been overcharged by at least $8.9 billion= ,=20 but Curtis Wagner, FERC's chief administrative law judge who is presiding= =20 over the settlement negotiations, said he believes at most it will be $2=20 billion to $2.5 billion.=20 "We told everyone that $8.9 billion is the floor. It is the most conservati= ve=20 possible number," Michael Kahn, a power grid official who is heading the=20 state's delegation, told reporters after Monday's talks.=20 The state's firm stance and Wagner's 15-day deadline for results had many= =20 predicting that little would come of the talks.=20 "I believe California is going to scuttle the talks. I believe that nothing= =20 will be good enough for them," said Arthur O'Donnell, editor of California= =20 Energy Markets, an industry newsletter.=20 More than $6 billion of the state's claims involve deals that are ineligibl= e=20 for refunds because of the seller or the date sold, O'Donnell said. FERC=20 doesn't have jurisdiction over all traders, and it already has excluded man= y=20 months of trades from refunds.=20 If the parties fail to settle within 15 days, Wagner has another week to=20 submit his own recommendations to the five FERC commissioners on how he=20 thinks they should resolve the disputes.=20 Wagner warned the parties that settlement would be the far preferable cours= e.=20 "I can tell you now that you are far better off to work out the refund issu= e=20 in these settlement proceedings," the blunt-speaking judge said. "The time = to=20 put California's past energy problems to rest and (to) structure a new=20 arrangement for California's energy future is now."=20 Wagner held out a carrot to the generators, who have been pummeled by Gov.= =20 Gray Davis and state Attorney General Bill Lockyer over allegations of mark= et=20 manipulation to drive up prices and their profits. "There are questions=20 concerning whether the settlement should offer immunity from existing and= =20 future lawsuits and prosecutions against generators," Wagner said.=20 California argues that power plant owners and traders manipulated a badly= =20 flawed market to drive up prices, racking up $9 billion in overcharges from= =20 May 2000 until May 2001. But electricity sellers say they obeyed the law, a= nd=20 they contend it's unfair to change the rules retroactively.=20 Assuming the refund issue is resolved, Wagner said there are at least six= =20 other issues on the table. They include agreement on moving power out of th= e=20 volatile spot market and selling it under long-term contracts; eliminating= =20 natural gas transmission constraints blamed for the high cost of gas in=20 California; and settlement of financial issues connected with PG&E's=20 bankruptcy filing.=20 Wagner began the brief, public opening of the negotiations by reading a=20 statement from FERC's two newest members, Patrick Wood III and Nora Mead=20 Brownell, the forces behind the order convening the talks.=20 Wood and Brownell said in a statement that it is in "everyone's best intere= st=20 to bring closure" to the crisis, and urged the participants to resist tryin= g=20 to blame each other for the power debacle. "Everyone must leave (the=20 negotiations) with more than they came in with," they said.=20 But skepticism remained high Monday. "We didn't take two weeks to get into= =20 this," said one participant late in the day. "It's hard to see how we'll ge= t=20 out of this in two weeks."=20 Among the participants are legal teams representing about 50 government=20 agencies, utilities and power generators, including Pacific Gas and Electri= c=20 Co., Southern California Edison, San Diego Gas & Electric and their corpora= te=20 parents and subsidiaries.=20 The talks also include municipal utilities such as the Sacramento Municipal= =20 Utility District, more than a dozen California towns and irrigation=20 districts, and utilities in Washington, Montana, Idaho, Colorado, New Mexic= o=20 and Arizona.=20 Meanwhile, FERC commissioners Wood and Brownell were in Sacramento to confe= r=20 with Davis and legislative leaders, then conduct a fact-finding hearing wit= h=20 California regulators on the high price of natural gas.=20 Brownell and Wood, Davis said, are "committed to working together with us t= o=20 drive down the price of natural gas in California to get it closer to what= =20 the rest of the country is paying."=20 "I think we are turning a corner," he said. "Conservation has been=20 spectacular. The outlook looks much more positive than it did two months=20 ago."=20 For more information: For the latest information on the state's energy=20 crisis, including rolling blackouts, visit www.sacbee.com. Also, sign up fo= r=20 the latest news headlines and Stage 3 power alerts at=20 www.sacbee.com/news/news2go=20 The Bee's David Whitney can be reached at (202) 383-0004 or=20 [email protected].=20 Bee Staff Writers Carrie Peyton and Emily Bazar contributed to this report. Daniel Weintraub: Davis' energy contracts preserve long-term pain (Published June 26, 2001)=20 With blackouts held at bay, federal price controls taking effect and the sp= ot=20 market cost for wholesale electricity declining toward historic lows, thing= s=20 are looking good for Gov. Gray Davis. If current trends continue, the=20 governor's public approval ratings might soon resemble one of those fever= =20 charts tracking the meteoric rise in electricity prices last winter.=20 But even if his strategy turns out to be a political success, a major probl= em=20 created by the governor's approach will loom as a quiet threat to the state= 's=20 economy for years to come.=20 The centerpiece of his solution to the energy crisis was a series of 38=20 agreements with electricity generators under which the state will buy power= =20 for the next 10 years. Davis signed those deals in desperation, just when= =20 prices were peaking, with the very companies he has been accusing of gougin= g=20 the state.=20 Now that prices have begun to fall, Davis is taking credit. His advisers ar= e=20 even trying to suggest that the existence of the long-term contracts has=20 contributed to the more favorable conditions in the market.=20 "It's economics 101," says David Freeman, one of the governor's closest=20 energy advisers.=20 But the most famous rule of economics 101 -- the law of supply and demand -= -=20 suggests that the contracts have little, if anything, to do with the recent= =20 decline in electricity prices. In a properly functioning market, prices=20 decline when supply exceeds demand. When demand chases a limited supply,=20 prices climb. It's true that the contracts have reduced the state's demand= =20 for power on the spot market. But they also have reduced, by an identical= =20 amount, the supply of electricity available on the spot market. That=20 shouldn't have any effect on the price.=20 Long-term contracts, used prudently, are a fine idea, but they are not=20 necessary for a stable market to exist. For two years after California's=20 deregulation plan took effect, the state's utilities bought power at=20 rock-bottom prices without the benefit of any contracts at all. By state=20 edict, all electricity was bought and sold on the spot market, and as long = as=20 supply was plentiful, the price was low. The generators were standing in li= ne=20 to sell us their electricity.=20 Then, a little more than a year ago, things went haywire. Demand caught up= =20 with supply, and at the same time, the price of natural gas, which is used = to=20 produce most of our electricity, rose rapidly. The design of the electricit= y=20 system created by the state also appears to have allowed the private=20 generators to game the market. It's still not clear whether their behavior= =20 was legal or not, but they did gain the upper hand. We needed their=20 electrons, and the generators suddenly were in the position to demand any= =20 price they liked.=20 It was at just this moment that Davis decided to lock up as much electricit= y=20 as he could under contract. Wanting to avoid a retail rate increase that he= =20 feared would prove unpopular, Davis sought the lowest possible price. To ge= t=20 it, he signed contracts with the longest possible terms. Shorter terms woul= d=20 have preserved the state's flexibility for the future. But the governor sai= d=20 he was willing to pay a price for stability, and so he locked every custome= r=20 of Pacific Gas & Electric and Southern California Edison into his plan.=20 Some suggest it's unfair to second-guess Davis now that prices have begun t= o=20 decline and his contracts are starting to look expensive. Severin Borenstei= n,=20 an economist and energy expert at UC Berkeley, compares the governor's=20 strategy to buying homeowners insurance.=20 "If your house doesn't burn down," Borenstein says, "that doesn't mean it w= as=20 a mistake to buy the insurance."=20 The trouble is that Davis bought his policy after the house was already on= =20 fire. Peter Navarro, a UC Irvine economics professor and consumer advocate,= =20 warned at the time that the governor was pursuing a faulty strategy. He=20 correctly saw then that the same private generators on whom Davis was=20 declaring war were rubbing their hands at the prospect of signing deals wit= h=20 the governor at top-of-the-market prices.=20 "They know there is going to be a highly competitive market in a couple of= =20 years," Navarro told me in March. "Rather than have to fight it out in the= =20 spot market at that point, of course they'd want to lock in 10-year=20 contracts. The governor is adopting a long-term strategy to address what is= =20 essentially a short-term problem."=20 Now, with prices drifting back down even sooner than expected, Navarro is= =20 more convinced than ever that Davis erred.=20 "The contracts were bargained in a panic from the utmost position of=20 weakness," Navarro said last week. "The cumulative effect of this strategic= =20 error will be a cost in the billions. It will be like driving the Californi= a=20 economy with the emergency brake on."=20 Voters may never notice the drag. But if companies start eyeing lower=20 electricity rates in Nevada and Arizona, and jobs get harder to come by, al= l=20 of California will be paying a long-term price for the governor's desire to= =20 avoid some short-term pain.=20 The Bee's Daniel Weintraub can be reached at (916) 321-1914 or at=20 [email protected]. State, generators lock horns in talks=20 Davis' $8.9 billion refund call too high, judge says By Toby Eckert=20 COPLEY NEWS SERVICE=20 June 26, 2001=20 WASHINGTON -- California officials staked out a tough bargaining position= =20 yesterday at the start of talks aimed at resolving disputes over refunds an= d=20 other thorny issues arising from the state's power crisis.=20 California's lead negotiator, Michael Kahn, called the $8.9 billion in=20 refunds Gov. Gray Davis has demanded from power sellers "an extremely=20 conservative estimate" and indicated the state would reserve the right to= =20 press for more in court.=20 The judge overseeing the hearings has called the state's refund estimate to= o=20 high.=20 Some power industry sources, meanwhile, were pessimistic about whether the= =20 negotiations would lead to a settlement between the long-warring sides, giv= en=20 the state's position.=20 Some 150 representatives from state agencies, cities, utilities and numerou= s=20 power-generating and marketing firms packed a hearing room at the Federal= =20 Energy Regulatory Commission for the first day of the talks. The negotiator= s=20 will attempt to settle the state's claim that power sellers have gouged=20 California for more than a year, and the sellers' contention that they are= =20 still owed billions of dollars for power they provided.=20 Pacific Northwest states were also invited into the discussions and are=20 seeking $6 billion in refunds from the power companies.=20 The electricity sellers deny wrongdoing, saying several factors converged t= o=20 drive up prices, including California's faulty power deregulation law, a hu= ge=20 spike in the price of natural gas that is used to generate most electricity= =20 in the state, and a short supply of electricity.=20 Speaking to reporters during a break in the closed-door session, Kahn said= =20 the state would not trim its estimate of what it believes it is owed for=20 electricity overcharges. Kahn chairs the Independent System Operator, the= =20 organization that manages most of California's power grid.=20 "Let there be no mistake. We are not going to ask the courts or FERC in=20 proceedings for $9 billion. We're going to ask for a lot more money than th= at=20 in our litigation position," he said. "The governor has said that he believ= es=20 FERC should order refunds at $8.9 billion now."=20 FERC Chief Administrative Law Judge Curtis Wagner Jr., who is mediating the= =20 talks, has said he believes the refund amount the state is seeking is far t= oo=20 high. A more realistic figure would be around $1 billion to $2.5 billion, h= e=20 said.=20 Wagner also said that one of the issues up for discussion would be whether= =20 power generators should be offered immunity from current and future legal= =20 action if a settlement is reached.=20 Kahn argued that the time period subject to refunds should start in May 200= 0,=20 when power prices started a dramatic upward spiral in California. Wagner ha= d=20 indicated he would scrutinize prices going back only to October, when FERC= =20 started examining the market.=20 When California officials took the price curbs that FERC approved last week= =20 for future power sales and applied them to power charges going back to May= =20 2000, the refunds owed to the state would came to roughly $9 billion, out o= f=20 $43.8 billion in total sales, Kahn said.=20 "I am absolutely confident that we have valid legal claims back to May. The= re=20 is no way that we are going to do anything to compromise those claims. That= =20 includes last summer, when San Diegans were terribly overcharged," Kahn sai= d.=20 "Last summer is a very important period to Californians that are seeking=20 redress. And we are not going to abandon those claims just because .?.?. FE= RC=20 has decided not to include them," he added.=20 Wagner asked the California officials to provide more information to back= =20 their numbers.=20 Power sellers continued to maintain that Davis' estimates of excessive powe= r=20 charges are wildly inflated. One group that represents generators gave a=20 bleak prognosis on the chances for a settlement.=20 "It's hard for us to contemplate how we're going to come to some agreement= =20 with 130 players in the room," said Gary Ackerman, executive director of th= e=20 Western Power Trading Forum.=20 "We stand by our business dealings in California," said Richard Wheatley, a= =20 spokesman for Reliant Energy, one of the companies targeted by the state fo= r=20 refunds. "Our power was priced competitively."=20 But Wagner, a courtly veteran of such complex discussions, appeared to take= =20 the sparring in stride.=20 "Everybody has to stick to their guns for a while," he told reporters after= =20 the first day of talks ended. "Everybody has their say, and now we're getti= ng=20 ready to get down to brass tacks."=20 Still, the starkly different positions taken by the state and the power=20 sellers illustrate the daunting task facing Wagner after months of bitter= =20 charges and countercharges between the two sides. FERC, which ordered the= =20 settlement talks as part of its price-curb order, gave the parties 15 days = to=20 reach an agreement.=20 If they fail, Wagner will have an additional seven days to make a=20 recommendation to FERC.=20 "I can tell you now that you are far better off to work out the refund issu= e=20 in these settlement proceedings," Wagner admonished the parties before the= =20 hearing room doors were closed to the media. "The time to put California's= =20 past energy problems to rest and structure a new arrangement for California= 's=20 energy future is now."=20 Wagner, who underlined his role as a broker by sitting among the parties to= =20 the talks instead of presiding from the bench, also warned the participants= =20 not to talk to reporters about specific negotiations.=20 While most of the attention has focused on refunds, Wagner laid out a broad= =20 agenda for the talks, including:=20 ?Moving more power sales in California into long-term contracts and away fr= om=20 the volatile spot market.=20 ?Ensuring there is a "creditworthy party" to pay for power in California.= =20 ?Resolving concerns about the independence of the California grid manager,= =20 the Independent System Operator, whose board is appointed by Davis.=20 ?Exploring natural gas issues, including transportation constraints and hig= h=20 prices in Southern California.=20 ?The bankruptcy of California's largest utility, Pacific Gas and Electric,= =20 which sought protection from creditors after it was unable to pay soaring= =20 wholesale power costs.=20 Davis commends 3 'heroes' in generator refunds fight=20 By Bill Ainsworth=20 UNION-TRIBUNE STAFF WRITER=20 June 26, 2001=20 SACRAMENTO -- Gov. Gray Davis praised three former employees at Duke Energy= 's=20 Chula Vista plant as "heroes" yesterday for coming forward with allegations= =20 that Duke policies created power shortages that raised electricity prices.= =20 For the second time in recent days, the three plant veterans dominated even= ts=20 in Sacramento with explosive allegations of mismanagement and market=20 manipulation by a company that has reaped enormous profits in California.= =20 Ed Edwards, Glenn Johnson and Jimmy Olkjer made those claims, under oath, o= n=20 Friday before a state Senate committee.=20 Davis and other Democratic politicians yesterday said these first insider= =20 accounts of how power plant operations might have manipulated prices will= =20 help the state in its attempt to get $9 billion in refunds from Duke and=20 other energy generating companies.=20 "There's no question in my mind a lot of money has been stolen from=20 California, and these men are going to help us get it back," said=20 Assemblywoman Barbara Matthews, D-Tracy.=20 The ex-employees told Davis that Duke risked jeopardizing equipment by=20 constantly powering the 706-megawatt plant up and down, dumped new spare=20 parts and took working turbines off-line for "economic reasons."=20 Davis said the power plant workers confirmed his suspicions that North=20 Carolina-based Duke and other companies engaged in price gouging.=20 "There's a concerted effort to suck every dime out of California and send i= t=20 back to Houston or North Carolina," he said.=20 Davis cautioned that he hadn't yet heard Duke's version of events. "The=20 company is entitled to their point of view," he said. "But they've got some= =20 explaining to do."=20 Duke Energy spokesman Tom Williams called the governor's meeting with the= =20 former workers "unfair and unproductive."=20 Williams said a review of company logs shows that during a Stage 3 energy= =20 alert the Chula Vista plant powered down under orders from California's=20 electricity grid manager, the Independent System Operator.=20 He said the company was doing its job by supplying the state with "spinning= =20 reserves" that could be added to the system in 10 minutes to balance the lo= ad=20 -- that is, to make sure that supply equaled demand.=20 ISO spokeswoman Stephanie McCorkle said the agency buys four types of=20 ancillary services to balance the load, including spinning reserves.=20 But she said only Duke can release information from Jan. 16. Williams said= =20 Duke soon plans to release logs from that day and several others.=20 Meanwhile, another former Chula Vista plant employee confirmed the=20 allegations of the other three workers. All of them had worked for San Dieg= o=20 Gas & Electric when the utility owned the plant before Duke took over its= =20 operation. Duke was required to keep the SDG&E employees on for two years,= =20 but it then let many of them go.=20 Rick Connors, a former operator who turned down an offer from Duke to stay = on=20 at the South Bay plant, said the plant output frequently was down for=20 "economic reasons."=20 The governor brought up those allegations during a subsequent meeting with= =20 two new FERC commissioners, Pat Wood and Nora Brownell. Davis asked the=20 federal regulators to look into possible price gouging, the high price of= =20 natural gas and the $9 billion in refunds he is seeking.=20 After meeting with Davis, Wood said he thinks California will emerge from t= he=20 energy crisis in 2003 or 2004 and become an energy trendsetter. He said he= =20 believes California leaders have the will to build more power plants and=20 improve natural gas pipelines that fuel new generators. But he cautioned th= at=20 there will be "some short-term pain."=20 "I think you folks will seem some blackouts this summer," he said.=20 Staff writer Ed Mendel contributed to this report.=20 San Onofre blast released no radiation, spokesman says=20 But motorists on I-5 weren't so sure By Bruce Lieberman=20 UNION-TRIBUNE STAFF WRITER=20 June 26, 2001=20 SAN ONOFRE -- Charlene Engel was driving with a few friends up Interstate 5= =20 Sunday when she saw flames and smoke shoot suddenly skyward from the nuclea= r=20 power plant.=20 Pieces of silvery material were fluttering through the air and drifting=20 toward the freeway. Traffic began speeding up.=20 "Everybody sort of saw it and thought, 'Oh my God, have we just been=20 irradiated or what?'?" said Engel, a Rancho Bernardo artist.=20 In fact, the explosion of a transformer was far outside the twin reactors a= t=20 the San Onofre Nuclear Generating Station, and posed no radiation danger, R= ay=20 Golden, a plant spokesman, said yesterday.=20 But Engel and her friends, who were heading to the Los Angeles County Museu= m=20 of Art for a Winslow Homer exhibit, didn't know that. "You don't actually= =20 know how things are hooked up, so you don't want to hang around," Engel sai= d.=20 "We moved north pretty quickly."=20 Santee resident Richard Carrico, whose niece was driving him to Dana Point,= =20 said the fireball rose about 50 feet. "My God, I thought she was going to= =20 faint," said Carrico, 93.=20 No one was injured in the explosion, which occurred at 11:03 a.m. and was= =20 followed by a fire that lasted about 40 minutes. The transformer was=20 destroyed, but no other equipment at the plant was damaged and the twin=20 reactors continued to operate at full power without interruption, Golden=20 said.=20 Yesterday, San Onofre investigators were still trying to figure out why the= =20 transformer failed. They should have some answers, and a new transformer=20 installed, in about a week.=20 The transformer was one of 54 in the plant's switching yard used to reduce= =20 the voltage of a sample of outgoing electricity. The so-called "potential= =20 transformers" step down the current sample to 115 volts so instruments can= =20 test the amperage and wattage. Electricity leaves San Onofre at 238,000 vol= ts=20 in transmission lines.=20 The explosion scattered shards of ceramic and aluminum debris, and 90 gallo= ns=20 of burning insulation oil, hundreds of feet, Golden said. Pieces of the=20 transformer, some as large as one foot square, landed on Old Highway 101.= =20 Plant operators feared debris would land on I-5, but the California Highway= =20 Patrol did not report any there, a dispatcher said. The CHP received severa= l=20 911 calls from drivers reporting a fireball.=20 The last time a potential transformer exploded at the plant's switching yar= d=20 was in 1994, Golden said. Plant workers discovered that corrosion caused by= =20 ocean air rusted the transformer's carbon-steel casing, allowing water to= =20 enter and contaminate the insulation oil.=20 After that, the plant replaced four transformers and repaired three. All ar= e=20 periodically washed down with high-pressure fire hoses to prevent corrosion= ,=20 Golden said. He would not speculate on the cause of the latest explosion, o= r=20 whether it could lead to the replacement of other transformers.=20 "If the root cause shows that it needs to be repaired or replaced, it will,= "=20 he said.=20 Although Sunday's explosion did not shut down the plant or release any=20 radiation, it was the latest in a string of mishaps this year. On Feb. 2, a= =20 faulty circuit breaker ignited a fire and cut off lubricating oil to Unit 3= 's=20 turbine generators, causing about $45 million in damage and shutting the=20 reactor down for four months.=20 On May 30, a portable crane dropped 40 feet to the ground when a sling on a= =20 large gantry crane failed. On June 6, workers inadvertently overfilled a=20 300-gallon steel bin with hydrazine, a toxic chemical used to purify water = in=20 the plant's cooling systems, spilling about 20 gallons.=20 Golden said the four accidents this year do not indicate that the plant is= =20 unsafe. "We perform hundreds, if not thousands, of work activities a day," = he=20 said.=20 Congress demands list of participants in Cheney energy meetings=20 By Scott Lindlaw ASSOCIATED PRESS=20 June 25, 2001=20 WASHINGTON =01) Congressional investigators are intensifying pressure on th= e=20 White House to identify who met privately with Vice President Dick Cheney's= =20 energy task force.=20 The General Accounting Office has sent Cheney's lawyer a 10-page letter=20 asserting a legal right to the lists and advising Cheney that it may make a= =20 formal demand for the information, rather than the polite requests it has= =20 made in recent weeks.=20 Comptroller General David M. Walker "is prepared to issue a demand letter .= ..=20 if we do not receive timely access to the information," the GAO said in a= =20 10-page letter dated Friday from office General Counsel Anthony H. Gamboa t= o=20 David S. Addington, attorney for the vice president.=20 The GAO is the investigative arm of Congress, and it has legal authority to= =20 federal agency records under the law. A demand letter could begin a legal= =20 battle: It would give Cheney's office 20 days to respond, either by turning= =20 over the names, or providing a reason why it is not compelled to do so, sai= d=20 Lynn Gibson, a lawyer for the GAO.=20 If Cheney declined to turn over the records, the GAO would notify Congress= =20 and Attorney General John Ashcroft, among others. The GAO would also be=20 authorized to file a civil action in court seeking the record, Gibson said.= =20 She knew of no previous case in which the GAO was forced to go to court to= =20 obtain agency records.=20 The White House team that developed the national energy plan, released last= =20 month, met with more than 130 interest groups, from environmentalists and= =20 unions, often at odds with Republicans, to major Bush supporters who got=20 private sessions with Cheney.=20 Reps. Henry Waxman, D-Calif., and John Dingell, D-Mich., in April asked the= =20 GAO to provide information on who served on the task force, what informatio= n=20 was presented to the panel, who presented it and what the task force spent.= =20 The White House has asserted that the GAO does not have the authority to as= k=20 for names of participants. However, it agreed that the GAO is entitled to= =20 financial records of the task force, and two administration officials said= =20 the vice president's office provided 77 pages of financial documents to the= =20 GAO last week.=20 The GAO contends it is entitled to a wider range of records. Federal law=20 "extends GAO's audit authority to all matters related to the use of public= =20 money, not just matters related to costs of activities," it argued in its= =20 letter to Cheney. "Over the years, GAO has conducted many reviews that=20 involve a wide range of White House programs and activities."=20 Juleanna Glover Weiss, a spokeswoman for Cheney, declined to comment on the= =20 GAO's assertions, other than to say, "I'm sure the GAO and the vice=20 president's office will be talking about that."=20 Waxman and Dingell called on Cheney to provide the information they seek.= =20 "The vice president should stop stonewalling and start cooperating with GAO= 's=20 investigation," Waxman said Monday. "Congress is entitled to know the=20 identity of the special interests that met with the Cheney energy task=20 force."=20 Creditor expects no quick fix in PG&E's venture into bankruptcy=20 By Ed Mendel=20 June 25, 2001=20 SACRAMENTO -- California's biggest utility, Pacific Gas and Electric, thoug= ht=20 it was moving toward an early exit from the power crisis by filing for=20 Chapter 11 bankruptcy in early April.=20 The top PG&E executive, Robert Glynn, optimistically told a Wall Street=20 publication that he hoped a settlement might be negotiated with creditors i= n=20 four to six months.=20 But an official with one of the 12 parties on the PG&E creditors committee,= =20 which includes the Bank of America and the state of Tennessee, said he does= =20 not see a quick end to the bankruptcy.=20 "My personal opinion," David Adante, executive vice president of Davey Tree= =20 Surgery, said last week, "is that it's going to take longer than everyone= =20 would like."=20 Adante said he thinks a resolution is likely to go beyond the bankruptcy=20 court and involve the state Public Utilities Commission, Gov. Gray Davis an= d=20 perhaps the Legislature.=20 "The rate part won't be resolved in the bankruptcy process," said Adante.= =20 Davey Tree Surgery, which is based in Kent, Ohio, trims trees that encroach= =20 on power lines for several California utilities.=20 PG&E owes Davey Tree $13 million, making it one of the smallest creditors o= n=20 a committee that includes big power providers, Enron and Dynegy, and big Wa= ll=20 Street firms, Morgan Guaranty and Merrill Lynch.=20 A turning point in the PG&E bankruptcy may have come earlier this month whe= n=20 the federal bankruptcy judge, Dennis Montali, declared that electricity rat= es=20 should be set by state regulators.=20 Experts disagreed about whether a bankruptcy judge could order a rate chang= e=20 for a utility without the approval of state regulators, in this case the PU= C.=20 "The public interest is better served by deference to the regulatory scheme= =20 and leaving the entire regulatory function to the regulator," Montali ruled= .=20 PG&E said it entered bankruptcy because the regulatory process failed,=20 denying a rate increase last fall that might have prevented the utility fro= m=20 running up what it says is a debt of at least $8 billion.=20 PG&E also said the political process failed when, among other things, the= =20 governor's negotiator broke a handshake agreement that included the state= =20 purchase of PG&E's transmission system.=20 "But we have said all along that intersection with the regulatory and=20 political process would probably reoccur," a PG&E spokesman said last week.= =20 The Legislature, after months of delay, held a hearing last week on the=20 governor's plan to keep Southern California Edison out of bankruptcy, which= =20 includes the state purchase of the Edison transmission system.=20 Legislative leaders say the plan is too generous to Edison. Undaunted, Davi= s=20 hopes to win legislative approval of some version of his Edison plan, and= =20 then persuade the PG&E creditors committee to accept a similar plan. But ev= en=20 if Davis can get his rescue plan approved by the Legislature and the PG&E= =20 committee, it's likely to be challenged with a ballot initiative by consume= r=20 groups, who denounce the proposal as a "bailout" for utilities.=20 Meanwhile, the period in which only PG&E can file a bankruptcy reorganizati= on=20 plan ends Aug. 5, allowing creditors or other parties to make proposals. An= d=20 if the Legislature does not act by Aug. 15, the agreement that the governor= =20 negotiated with Edison can be waived by either party.=20 But of course, as with most things in the electricity crisis, the deadlines= =20 could be extended.=20 ED MENDEL is Capitol bureau chief for the Union-Tribune.=20 State, Power Firms Urged to Make a Deal=20 Energy: Mediator says a refund pact would benefit both sides. Meanwhile,=20 Davis tones down his rhetoric as regulators come calling.=20 By MEGAN GARVEY and DAN MORAIN, Times Staff Writers=20 ?????WASHINGTON--After being vilified for months by Gov. Gray Davis, federa= l=20 energy regulators here and in Sacramento took steps Monday to show they are= =20 determined to respond to California's energy crisis. ?????A top federal regulator began mediating Davis' demand for nearly $9=20 billion in what the governor says are overcharges by power generators--and= =20 warned a room full of dark-suited lawyers, energy executives and state=20 officials here that they will be "far better off" if they decide among=20 themselves how big a refund the state is due. ?????Meanwhile, in Sacramento, Patrick H. Wood III and Nora M. Brownell,=20 President Bush's first appointees to the five-member Federal Energy=20 Regulatory Commission, spent the afternoon conferring with Davis and=20 legislative leaders. Then they held a fact-finding hearing with California= =20 regulators on the high price of natural gas, the fuel that spins most new= =20 electricity turbines in California. ?????"We're going to be working together through tough issues," Brownell=20 said. "We're going to work through them and solve them and move forward. It= =20 is a lot easier when people have sat down and gotten to know each other." ?????Davis has been attacking federal energy regulators--a majority of whom= =20 are holdovers from the Clinton administration--for failing to take a variet= y=20 of steps to bail California out of its energy woes. ?????On Monday, however, Davis toned down his bellicose attacks on the=20 federal commission. Brownell and Wood, Davis said, are "committed to workin= g=20 together with us to drive down the price of natural gas in California to ge= t=20 it closer to what the rest of the country is paying." ?????"I think we are turning a corner," Davis said, as temperatures across= =20 the state were moderate and electricity demand was low. "Conservation has= =20 been spectacular. Californians have responded heroically. The federal=20 government is now finally taking some positive actions. The outlook looks= =20 much more positive than it did two months ago." ?????The developments in Washington and Sacramento come as Davis issues=20 campaign-style demands for more aid from the federal government and as poll= s=20 show that voters are skeptical of how Davis and Bush are handling=20 California's energy crisis. ?????Republican lawmakers in Sacramento contend that the regulatory=20 commission has granted Davis virtually everything he has sought. The=20 commission earlier this month imposed temporary price restraints, a step=20 Davis said is helping to lower wholesale electricity prices paid by the sta= te. ?????Senate Republican leader Jim Brulte said Monday that he has "no doubt"= =20 the commission, known as FERC, will order power generators to issue refunds= =20 to California, as Davis has requested. ?????But Brulte, of Rancho Cucamonga, also predicted that Davis will find t= he=20 order wanting: "The governor's game is a political one. . . . The Davis=20 administration has a clear strategy--that no matter what FERC does, it isn'= t=20 enough." ?????In Washington, the roughly 150 participants who showed up for day one = of=20 a 15-day settlement conference on refunds showed little sign they were read= y=20 to agree, at least not yet. ?????For now, the differences remain considerable: about $9 billion in=20 refunds demanded by California's representatives at the talks, plus $6=20 billion more that other Western states say they have been unfairly charged.= =20 Power generators hotly dispute those figures. ?????"The time to put California's past energy problems to rest and structu= re=20 a new arrangement for California's energy future is now," said Curtis L.=20 Wagner, the chief administrative law judge for FERC. "We can do it if we tr= y." ?????Wagner, who told reporters last week he believed refunds of about $2= =20 billion were probably justified, is mediating the closed-door talks. Davis = is=20 asking that the refunds cover the period since May 2000. ?????"These out-of-state energy companies are taking us for a ride," Davis= =20 said in a brief interview in Sacramento on Monday. "I am determined to get= =20 every penny back that California is owed. The generators have bilked us=20 mercilessly, and I'm fighting back. I'm not giving up nothing." ?????Consumers wouldn't see refunds directly. Rather, the money would go to= =20 the state or to private utilities, such as Southern California Edison, for= =20 electricity purchases made during the energy crisis. ?????Participants in the Washington meeting represent about 70 entities wit= h=20 stakes in the electricity dispute. If they fail to reach agreement among=20 themselves within the allotted 15 days, Wagner will have seven days to make= a=20 formal recommendation of his own to FERC's five-member governing board. ?????The settlement negotiations are confidential; Wagner promised those=20 present he would shred his notes and transcripts at their completion. He=20 allowed reporters in the hearing room, where oversized pots of coffee perch= ed=20 on every table, only long enough to listen to his opening remarks and to a= =20 prepared statement he read from two of the five FERC commissioners. ?????Wagner, who asked that all sides send advocates with the authority to= =20 reach an agreement, said the issues to be resolved include: ?????* Refunds for past electricity purchases, including how much money is= =20 involved and who needs to be paid. ?????* Moving additional quantities of electricity off the spot market and= =20 into long-term contracts. ?????* Ensuring that generators receive payment for electricity already=20 provided. ?????* The bankruptcy of Pacific Gas & Electric. ?????Wagner said the talks also should address whether any settlement=20 provides generators with immunity from existing and future lawsuits and=20 prosecutions. ?????The statement from FERC commissioners Wood and Brownell encouraged=20 participants to "focus on what they absolutely need and not what they want.= "=20 But sorting out which is which may prove challenging. ?????The head of California's delegation, for example, reiterated Davis'=20 demands for $8.9 billion in refunds. ?????"We want our refunds. We want them now," Michael Kahn, one of Davis' t= op=20 energy advisors, told reporters during a break in the negotiations. ?????Kahn said the officials he is representing--the governor, state=20 legislators, the Electricity Oversight Board and the Public Utilities=20 Commission--consider the $8.9 billion figure to be an "extremely conservati= ve=20 estimate." ?????He indicated the delegation had little interest in relinquishing the= =20 right to sue for additional funds, even if power generators offered to make= =20 refunds for time periods before the Oct. 2 cutoff that FERC has proposed. ?????As they have in the past, electricity generators staked out a far=20 different position, characterizing as "absurd" the state's overcharge=20 estimate. ?????"We've done absolutely nothing wrong," said Tom Williams, a spokesman= =20 for Duke Energy Co., adding that his company was "gratified that all the=20 parties are at the table to discuss this." ?????The settlement negotiations were mandated by FERC last week as the=20 agency put in place an expanded "price mitigation plan" for Western=20 electricity markets. ---=20 ?????Garvey reported from Washington, and Morain from Sacramento. Copyright 2001 Los Angeles Times=20 Business; Financial Desk=20 Commerical Real Estate Apartments to Provide Own Power MORRIS NEWMAN ?=20 06/26/2001=20 Los Angeles Times=20 Home Edition=20 Page C-1=20 Copyright 2001 / The Times Mirror Company=20 With its wall of fins, abstract patterns and varying surfaces and colors,= =20 Colorado Court in Santa Monica is shaping up to be a real head-turner.=20 But the apartment complex is no mere exercise in style over substance. What= =20 makes the project groundbreaking in power-starved California is that it wil= l=20 generate nearly all its own energy: electricity , heat and hot water, all= =20 from alternative technologies.=20 The 44-unit complex at 5th Street and Colorado Avenue, scheduled to open in= =20 October, will be adorned with 199 solar panels, which will supply about a= =20 third of the building's electricity . The rest of the power will come=20 primarily from a micro-turbine, a generator that runs on clean-burning=20 natural gas. Southern California Edison will supply only a fraction of the= =20 building's energy needs.=20 "Colorado Court is unique because the building will produce 92% of its own= =20 power, which is very significant," said Bob Johnson, managing director of= =20 California Energy Coalition, a nonprofit energy conservation group based in= =20 Laguna Beach. In comparison, solar power sources for a proposed single-fami= ly=20 subdivision in Placer County would supply 30% to 50% of household energy=20 needs.=20 Intended as "single-room occupancy" housing for low-income renters, the=20 $5.8-million Santa Monica project has become a closely watched test case of= =20 still-experimental electricity generation equipment.=20 Though not outlandish, the Colorado Court building probably will make many= =20 driving down 5th Street look twice: Framed inside a rectangular shell of=20 light-colored plaster and concrete is a giant window of dark glass; the=20 "window" is an assemblage of many solar panels. The rear of the building is= =20 covered in an abstract pattern of vertical fins; the fins shade the=20 building's southern face from direct sunlight.=20 Sensible Concept for Low-Income Tenants=20 Although some may be surprised that a building intended for low-income=20 residents is the beneficiary of expensive energy technology, the concept=20 makes sense for people with limited incomes, said Robin Raida, project=20 manager for the builder, Community Corp. of Santa Monica. Energy efficiency= =20 is "especially important in affordable housing, because our tenants don't= =20 have extra money to spend on high utility bills," she said.=20 A host of public and private entities--including the cities of Santa Monica= =20 and Irvine, Southern California Edison and the California Energy=20 Coalition--are involved in planning, funding and monitoring the innovative= =20 building. The two cities, the conservation group and the utility have forme= d=20 a group known as Regional Energy Efficiency Initiative, which has contribut= ed=20 about $250,000 to energy-saving devices in the building. In addition, Santa= =20 Monica itself is contributing about $250,000 toward electricity generators.= =20 The building will be loaded with energy-saving and environmentally benign o= r=20 "sustainable" devices. Heat from the micro-turbine will produce hot water,= =20 eliminating the need for a conventional water heater.=20 The project also uses compact fluorescent lighting throughout the building,= =20 insulation made from recycled material and double-pane windows with a layer= =20 of heat-retardant krypton gas. Each apartment will be equipped with=20 energy-saving refrigerators that do not use chlorofluorocarbons, the widely= =20 used refrigerant linked to damage in the Earth's ozone layer.=20 Prevailing breezes will cool the building, which will have no mechanical ai= r=20 conditioners. The U-shaped structure "acts like a giant wind scoop," said= =20 architect Larry Scarpa, a principal of Santa Monica-based Pugh & Scarpa.=20 In yet another "green" flourish, the building will collect all the rainwate= r=20 from the alley behind the property and funnel it into a series of undergrou= nd=20 chambers. The water will slowly percolate back into the soil, which will=20 filter the pollutants from the water while preventing contaminated water fr= om=20 spilling into Santa Monica Bay. The drainage system was paid for separately= =20 by the city of Santa Monica.=20 The concept of a building that would be energy self-sufficient emerged abou= t=20 two years ago, when Santa Monica officials met with members of the Californ= ia=20 Energy Coalition. The city's Housing Division, which funds construction of= =20 low-income housing, chose to make a low-income housing project into a dream= =20 project of "green" construction, and Colorado Court became the target.=20 "We needed a demonstration project because a lot of developers feel that th= e=20 technologies are unproven," Raida said.=20 A number of apartment buildings in Santa Monica and Irvine are to be equipp= ed=20 with energy-saving technology by the Regional Energy Efficiency Initiative,= =20 but the Santa Monica building is the only project attempting to provide its= =20 own power as well.=20 Rebates from the state Energy Commission helped defray the high cost of the= =20 energy-generating equipment. The state's rebate on the solar panels, which= =20 cost about $225,000, will be about $62,000. The $57,000 micro-turbine and= =20 heat exchanger will yield a $15,000 rebate from Southern California Gas Co.= =20 If recent research and development has yielded new ways of conserving energ= y=20 and producing electricity , regulations and building codes have not kept=20 pace.=20 Prospects Uncertain for Conventional Buildings=20 In one instance, architects had to obtain special permission from the city = to=20 hang solar panels outside the exterior stairwells because building inspecto= rs=20 said the solar panels "enclosed" the stairwells and triggered requirements= =20 for floors, ceilings and fire-rated walls.=20 If energy-saving devices and electrical generators make sense for a buildin= g=20 that has $500,000 in subsidies, do the same costly materials make sense for= a=20 conventional apartment building? Opinions vary.=20 Even with rebates, the added cost of the conservation and energy-generating= =20 equipment may be a hard sell for developers of market-rate apartment units.= =20 Such developers often sell their projects shortly after completion and migh= t=20 not be able to fetch a higher price for energy-efficient buildings.=20 For a nonprofit like Community Corp., which plans to retain ownership of it= s=20 buildings for 80 years, the added front-end cost could be worthwhile becaus= e=20 the equipment will hold down energy costs for low-income tenants for years. California ; Metro Desk=20 Officials Oppose Utility Choice Power: They say users leaving traditional= =20 firms could jeopardize state's repayment of $50 billion in energy purchases= . TIM REITERMAN ?=20 06/26/2001=20 Los Angeles Times=20 Home Edition=20 Page B-1=20 Copyright 2001 / The Times Mirror Company=20 Consumer choice was a mantra when California moved in 1996 to restructure i= ts=20 electricity industry. But the right of utility customers to shop around for= =20 power is falling victim to the state's own strategy to drag itself from the= =20 energy debacle.=20 Warning of a "spiral of declining customers and rising power rates," top=20 state officials are calling for swift action to curtail the freedom of=20 utility patrons to buy from alternative electricity providers.=20 They fear that California 's ability to pay for nearly $50 billion in past= =20 and future electricity purchases would be jeopardized unless regulators or= =20 legislators suspend or restrict the state's so-called direct-access program= .=20 A flight of customers from the traditional utilities, the officials say,=20 would saddle the remaining businesses and consumers with paying off an unfa= ir=20 share of those billions.=20 Under direct access, thousands of utility customers--ranging from big=20 commercial and industrial users to environmentally aware residential=20 consumers who wanted "green power"--signed up with companies promising lowe= r=20 prices, better service or the security of long-term contracts.=20 But the energy crisis changed all that.=20 In January, the state's Department of Water Resources became the major=20 electricity purchaser for most Californians, as skyrocketing wholesale pric= es=20 put Pacific Gas & Electric Co. and Southern California Edison deeply into= =20 debt and many suppliers refused to sell to them. The same legislation that= =20 authorized the department's purchases called on the California Public=20 Utilities Commission to suspend direct access until the state stops buying= =20 power--which could be almost two decades under some of the long-term=20 contracts the state has signed with suppliers.=20 The commission is poised to vote Thursday on a proposal to suspend direct= =20 access by July 1, and it is expected to pass. Bills in the Legislature woul= d=20 resurrect the program while requiring new customers to pay "exit fees"=20 designed to protect the state's planned $13.4-billion bond sale for=20 electricity purchases, but the proposals have been mired in negotiations.= =20 In any case, state officials say they can ill afford to lose big commercial= =20 and industrial users as utility customers help pay off the state's current= =20 $8-billion power tab and more than $40 billion in long-term power contracts= .=20 "If such customers are permitted to 'exit the system' without [paying] thei= r=20 share of costs incurred by DWR . . . the burden of covering debt service=20 payments will fall on a smaller base of remaining customers, significantly= =20 and unfairly increasing their power rates," said a June 12 memo from state= =20 Treasurer Phil Angelides and the heads of the Finance and Water Resources= =20 departments to the PUC and the Legislature.=20 "There is a concern that as power rates paid by the remaining customers wou= ld=20 rise, customers would have additional economic incentive to abandon DWR=20 power, creating a spiral of declining customers and rising power rates," th= e=20 memo said.=20 Statewide, the total number of direct-access customers has fallen from a pe= ak=20 of more than 200,000 to about 88,000 in mid-May. Figures from the Californi= a=20 Energy Commission show that these customers--including hotel and hospital= =20 chains, factories, farms, the state's university systems and about 78,000= =20 residences--accounted for about 2.1% of the power consumed in California .= =20 The level of participation by residential customers was 1.1%--about a third= =20 as high as for large commercial and industrial customers.=20 The penetration rates were much higher early this year, when about 13% of= =20 industrial users had direct-access contracts. But many providers sent their= =20 customers back to Edison, PG&E and San Diego Gas & Electric, as wholesale= =20 energy costs soared and they could not compete with the utilities, whose=20 rates were frozen by the 1996 deregulation law.=20 One provider, AES NewEnergy, claims 60 to 70 customers, ranging from=20 mom-and-pop stores to grocery chains. About a year ago, the company had 150= =20 to 200 customers.=20 "Direct access is at the heart of the concept of competition and choice,"= =20 said Aaron Thomas, the company's manager of government relations. "The [PUC= ]=20 order stinks, and it is not necessary to put a stake in the heart of direct= =20 access to float a bond."=20 Said Rick Counihan, a spokesman for Green Mountain Energy: "Unless we see a= =20 legislative solution, direct access is dead. We're being driven out of=20 California ."=20 Green Mountain, a Vermont-based company that sells power from renewable=20 sources, has seen its California customer base shrink from 60,000 to 7,000,= =20 all in San Diego and Orange counties.=20 Although they have never fled en masse to direct access, many businesses an= d=20 institutions want to maintain direct access as an option, especially becaus= e=20 it is uncertain whether the state's power contracts will prove to be a=20 bargain or a bust in the long run.=20 Bill Dombrowski, president of the California Retailers Assn., representing= =20 more than 50 large companies, said it is important to maintain direct acces= s=20 as an option because "the market is in a shambles."=20 "At its peak, before the market was dysfunctional, you saw 5% to 10%=20 reductions [in electricity rates] compared to local utilities, which is=20 significant dollars when you are talking about larger companies," he said.= =20 Like other proponents, Dombrowski maintains that the fears expressed by sta= te=20 officials and Wall Street bond underwriters are exaggerated.=20 "Realistically, you will not see a wave of people going to direct access," = he=20 said.=20 The utilities commission measure, which would halt new direct-access=20 enrollments, was put off until this week in hopes that a solution could be= =20 worked out in Sacramento. PUC Commissioner Jeff Brown, one of three=20 appointees of Gov. Gray Davis on the five-member commission, said that, lik= e=20 the governor, he favors direct access on philosophical grounds but sees no= =20 way to avoid suspending the program.=20 "We are tied up in the realities of the bond sale," he said. "If the=20 Legislature wants to do something in the future, fine."=20 Commissioner Richard Bilas, another supporter of direct access, acknowledge= s=20 that "it could at the margins jeopardize the bond sale." But direct access,= =20 he said, "is what restructuring was about in the first place. . . . Without= =20 it, you no longer have restructuring."=20 Advocates of direct access remain hopeful that a legislative solution could= =20 balance the desires of the business community and the bond underwriters. A= =20 bill by state Sen. Debra Bowen (D-Marina del Rey) would require exit fees a= nd=20 other provisions sought by state finance officials. Billions of dollars at stake as power talks begin=20 MARK SHERMAN, Associated Press Writer Tuesday, June 26, 2001=20 ,2001 Associated Press=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2001/06/26/f= inanc ial0338EDT0014.DTL=20 (06-26) 00:38 PDT WASHINGTON (AP) --=20 Energy users and providers are billions of dollars apart in their estimates= =20 of how much the power crisis in the Western states has cost. The federal=20 official overseeing confidential settlement talks wants them to come to ter= ms=20 quickly.=20 With just two weeks to reach agreement, Federal Energy Regulatory Commissio= n=20 chief administrative law judge Curtis L. Wagner said he wants all sides to= =20 start using realistic numbers when they meet Tuesday for the second day of= =20 negotiations.=20 "Now we're getting ready to get down to brass tacks," Wagner said Monday,= =20 after the first day of talks.=20 Led by California, Western states say power-generating companies overcharge= d=20 them by $15 billion in the past year.=20 Michael Kahn, California's chief negotiator, said the $9 billion in refunds= =20 his state claims it is owed should be the first order of business. "We want= =20 our refunds. We want them now," said Kahn, chairman of the California=20 Independent System Operator, which manages the state's power grid.=20 The states claim that the companies unfairly drove up prices to take=20 advantage of a power shortage. Prices frequently surpassed $300 a=20 megawatt-hour, 10 times what they were in 1999. One megawatt is enough to= =20 power about 750 homes.=20 The power companies argue that the charges were justified. In some cases,= =20 older, more costly power plants were pressed into service to deal with the= =20 high demand and tight supply.=20 Wagner attributed the states' claims to the rhetorical flourishes that ofte= n=20 accompany the start of negotiations. "Everybody has to stick to their guns= =20 for a while," he said.=20 The judge, who is playing a mediator's role in the negotiations, said he ha= s=20 seen nothing to change his previously stated view that refunds in any=20 settlement probably would not exceed $2.5 billion.=20 He cautioned all sides that a brokered settlement would be preferable to a= =20 plan he would recommend to federal regulators should talks fail.=20 More than 150 people representing about six dozen entities gathered in a=20 government hearing room for negotiations. The talks were one result of a=20 federal order last week extending price controls on spot power sales in=20 California and imposing limits in 10 other Western states.=20 Wagner laid out several issues negotiators will have to tackle, including h= ow=20 much generators are owed for power they supplied to California without=20 getting paid.=20 The size of the refunds and the unpaid bills "must be, both ways, resolved = at=20 the outset to put everyone on the same playing field," Wagner said. Any=20 settlement probably would also have to answer whether the generators should= =20 have immunity from existing and future lawsuits and prosecution, he said.= =20 The parties also have to try to reach agreement on additional long-term pow= er=20 contracts, which would reduce the amount of power California would have to= =20 purchase on the volatile spot market.=20 The attendees included representatives from California and a dozen city and= =20 county governments, investor-owned and municipal utilities, power generator= s=20 and natural gas companies.=20 On the Net: Federal Energy Regulatory Commission: www.ferc.gov/=20 ,2001 Associated Press ?=20 Compromise urged in electricity refund talks=20 Zachary Coile, Chronicle Washington Bureau Tuesday, June 26, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/06= /26/M N122522.DTL=20 Washington -- With armies of lawyers on each side, California officials and= =20 representatives of the nation's power generators began the first day of=20 federally ordered settlement talks yesterday far apart on the issue of=20 electricity refunds.=20 California officials, including attorneys for the investor-owned utilities,= =20 stuck to their claim that the state was owed nearly $9 billion in alleged= =20 overcharges by the generators.=20 But electricity suppliers were equally adamant in their opposition to=20 refunds, arguing the prices they charged were legitimate. Suppliers are=20 demanding payment for billions of dollars they are owed for electricity=20 already sold into the state.=20 The mediator in the talks, veteran Federal Energy Regulatory Commission=20 administrative law Judge Curtis L. Wagner Jr., warned both sides they would= =20 have to compromise -- or accept a settlement imposed by federal regulators.= =20 "The time to put California's past energy problems to rest and structure a= =20 new arrangement for California's energy future is now," Wagner said. "We ca= n=20 do it if we try."=20 The difficulty of the task was made clear when the judge asked those in the= =20 hearing room yesterday to stand and identify themselves. About 140 people -= -=20 nearly all lawyers -- stood to declare which state, city, power exchange or= =20 generator they represented.=20 In addition to a host of energy firms, other Western states are involved in= =20 the talks. Officials in Washington and Oregon say they may ask for up to $6= =20 billion in refunds.=20 Wagner opened the talks by reading a letter from new FERC Commissioners=20 Patrick Wood and Nora Mead Brownell urging both sides to compromise.=20 "Parties must only focus on what they absolutely need, not what they want,"= =20 the statement read. "This is not the place to debate the shopping list, nor= =20 is it the place to assign blame."=20 If the parties can't settle the money fight in 15 days, Wagner will have=20 seven days to recommend action to FERC's five commissioners.=20 "I can tell you now that you are far better off to work out the refund issu= e=20 in these settlement proceedings than to have me recommend an answer to the= =20 commission," Wagner said.=20 As the talks started in Washington, Wood and Brownell met yesterday in=20 Sacramento with Gov. Gray Davis, legislative leaders and other groups=20 involved in solving the energy crisis.=20 Davis said in a statement that he was more encouraged by FERC's actions=20 recently since the two joined the regulatory body.=20 "In a refreshing change . . . these commissioners offered a problem-solving= =20 approach in resolving California's energy challenge," Davis said.=20 Wood expressed optimism the settlement talks would be fruitful.=20 "I think it is far better to settle than to stretch out through litigation,= =20 even if the state were to ultimately prevail," he said. "This is really=20 (about) businesspeople who need to re-establish a business relationship tha= t=20 has been poisoned."=20 Although the divide between California officials and the generators is vast= ,=20 some have faith in the mediator, a 72-year-old judge with a track record of= =20 reaching settlements in difficult cases.=20 "He's a miracle worker," said FERC commissioner William Massey. "He's very= =20 good at persuading parties that it's in their best interests to settle rath= er=20 than proceed" with lawsuits.=20 Wagner set the tone yesterday by ordering reporters out of the hearing room= =20 after half an hour explaining the ground rules. And Wagner warned=20 participants to keep the discussions confidential.=20 "I would hate to read something in the business section tomorrow that=20 somebody said here today," Wagner said.=20 Michael Kahn, chairman of California's Independent System Operator, said th= e=20 state would hold firm to its request for $8.9 billion in refunds. Any refun= ds=20 would go to the electricity buyers -- the utilities and the Department of= =20 Water Resources, which has bought energy on behalf of the state since=20 January.=20 But to suppliers, even the word "refund" is an unacceptable term.=20 "Certainly, you will not find a supplier who will agree that they have been= =20 overcharging anyone in California, so clearly any refund obligation will be= =20 contested," said Mark Stultz, a vice president of the Electric Power Supply= =20 Association, which represents the generators. "The suppliers will argue the= =20 charges were appropriate for the market conditions."=20 State officials may face difficulty recovering the full amount, based on=20 electricity sales from May 2000 to May 2001. Under FERC rules, overcharges= =20 can only be authorized after a formal investigation is ordered, which began= =20 Oct. 2,=20 2000.=20 "There is no way that we're going to do anything to compromise those claims= ,=20 " Kahn said. "That includes last summer, when San Diegans were terribly=20 overcharged. That includes last summer, when there were no credit problems,= =20 and the gas situation was not anywhere near as severe as it was later in th= e=20 year, and still there were hideous (electricity) prices."=20 POWER ISSUES These are some of the items administrative law Judge Curtis L. Wagner Jr.= =20 expects to tackle during settlement talks between Western state officials a= nd=20 power generators:=20 -- -- California's claim that the generators overcharged the state by nearl= y=20 $9 billion for electricity.=20 -- Generators' claims of overdue payments, estimated at several billion=20 dollars, due them from PG&E and other utilities.=20 -- Long-term power contracts, which would reduce the amount of power=20 California must purchase on the volatile spot market.=20 -- Ensuring a creditworthy party to pay for power.=20 -- Natural gas prices and pipeline capacity, particularly in Southern=20 California.=20 -- PG&E's bankruptcy proceedings. Source: Chronicle staff and news services= =20 Chronicle staff writer Lynda Gledhill contributed to this report from=20 Sacramento. / E-mail Zachary Coile at [email protected].=20 ,2001 San Francisco Chronicle ? Page?A - 3=20 Developments in California's energy crisis=20 The Associated Press Tuesday, June 26, 2001=20 ,2001 Associated Press=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2001/06/26/s= tate1 039EDT0149.DTL=20 (06-26) 07:39 PDT (AP) --=20 Developments in California's energy crisis:=20 TUESDAY: * No power alerts Tuesday as electricity reserves stay above 7 percent.=20 MONDAY: * Gov. Gray Davis meets with three former energy company employees he calls= =20 "heroes" for testifying that Duke Energy reduced power production at times= =20 when the state needed it most, charges the Charlotte, N.C.-based company=20 denies.=20 * A Federal Energy Regulatory Commission hearing officer begins attempting = to=20 negotiate a settlement between the state and energy producers over the $9= =20 billion Davis says the state is owed for overcharges.=20 * FERC commissioners Pat Wood and Nora Brownell meet with Davis and attend= =20 California Energy Commission meeting.=20 * The Senate, by a 34-0 vote, gives final approval to a resolution asking= =20 Congress to allow states to extend daylight-saving time to the full year to= =20 save energy. The resolution by Sen. Betty Karnette, D-Long Beach, will be= =20 sent to Congress and President Bush.=20 * A bill to give customers a one-month schedule of when they might be=20 vulnerable to rolling blackouts is rejected by the Assembly Energy Costs an= d=20 Availability Committee.=20 * In a pre-emptive strike against rolling blackouts, Azusa's city-owned=20 utility encourages industries to shut down before power supplies get tight.= =20 * No power alerts Monday as electricity reserves stay above 7 percent.=20 * Edison International stock drops 41 cents to $11.57. PG&E Corp. falls 25= =20 cents to $11.70. Sempra Energy rises 19 cents to $26.94.=20 WHAT'S NEXT: * Three Senate committees plan hearings on Davis' proposal to aid financial= ly=20 strapped Southern California Edison: Natural Resources Committee Tuesday,= =20 Energy Committee Wednesday and Judiciary Thursday.=20 * Senate Select Committee to Investigate Price Manipulation sets a Thursday= =20 deadline for power generators to comply with document subpoenas or face=20 contempt citations.=20 THE PROBLEM: High demand, high wholesale energy costs, transmission glitches and a tight= =20 supply worsened by scarce hydroelectric power in the Northwest and=20 maintenance at aging California power plants are all factors in California'= s=20 electricity crisis.=20 Southern California Edison and Pacific Gas and Electric say they've lost=20 nearly $14 billion since June to high wholesale prices the state's=20 electricity deregulation law bars them from passing on to consumers. PG&E,= =20 saying it hasn't received the help it needs from regulators or state=20 lawmakers, filed for federal bankruptcy protection April 6. Electricity and= =20 natural gas suppliers, scared off by the companies' poor credit ratings, ar= e=20 refusing to sell to them, leading the state in January to start buying powe= r=20 for the utilities' nearly 9 million residential and business customers. The= =20 state is also buying power for a third investor-owned utility, San Diego Ga= s=20 & Electric, which is in better financial shape than much larger Edison and= =20 PG&E but also struggling with high wholesale power costs.=20 The Public Utilities Commission has approved average rate increases of 37= =20 percent for the heaviest residential customers and 38 percent for commercia= l=20 customers, and hikes of up to 49 percent for industrial customers and 15=20 percent or 20 percent for agricultural customers to help finance the state'= s=20 multibillion-dollar power buys.=20 Track the state's blackout warnings on the Web at=20 www.caiso.com/SystemStatus.html.=20 ,2001 Associated Press ?=20 News briefs on California's power crisis=20 Tuesday, June 26, 2001=20 ,2001 Associated Press=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2001/06/26/s= tate0 539EDT0120.DTL=20 (06-26) 02:39 PDT TEMECULA, Calif. (AP) --=20 Residents who live along a proposed power line through southwestern Riversi= de=20 County are infuriated that San Diego Gas & Electric Co. officials would ste= p=20 foot on their property to conduct land surveys without asking first.=20 The company recently mailed letters to residents who may be affected by the= =20 proposed 31-mile power line that will connect its grid to a unit operated b= y=20 Southern California Edison. The letter informed residents that crews would = be=20 conducting the surveys over the next few months.=20 Company officials said they are protected by law to survey the land. But=20 opponents said it is unclear if the company has access to the property=20 because legal questions have been raised about the utility's eminent domain= =20 powers.=20 Some residents have threatened to call police if SDG&E officials come on=20 their property.=20 "I was furious," said Eve Brehm, 73, who lives in the affected area. "They= =20 haven't bought it yet (her land) and they don't have my permission to be ou= t=20 there."=20 Company officials said the letters are giving residents proper notification= =20 for work that needs to be done.=20 "We are doing everything we can to avoid any inconvenience to property=20 owners," said SDG&E spokeswoman Jacqueline Howells. "There is no legal=20 requirement for notification, but we sent the letters out as a courtesy to= =20 keep the property owners informed."=20 SAN CLEMENTE, Calif. (AP) -- A transformer explosion at the San Onofre=20 Nuclear Generating Station caused a fire outside its twin reactors but no o= ne=20 was injured, said a plant spokesman.=20 Sunday's explosion posed no radiation danger to people, according to plant= =20 spokesman Ray Golden, but it did scare a few motorists who were driving by= =20 the reactors and saw a fireball rise 50 feet into the air.=20 "You don't actually know how things are hooked up, so you don't want to han= g=20 around," said Burt Engel, who was driving from San Diego to Los Angeles=20 County. "We moved north pretty quickly."=20 The explosion occurred shortly after 11 a.m. and was followed by a fire tha= t=20 lasted about 40 minutes. The transformer was destroyed but no other equipme= nt=20 was damaged, Golden said. The twin reactors continued to operate without=20 interruption.=20 The explosion sent shards of aluminum and ceramic debris skyward, some of i= t=20 landing on Old Highway 101. None of the debris fell on nearby Interstate 5,= =20 authorities said.=20 The transformer was one of several dozen that is used to reduce the voltage= =20 of a sample of outgoing electricity. The explosion was the fourth accident = at=20 the plant this year.=20 A faulty circuit breaker caused a fire in February that cut electricity to = an=20 oil pump which lubricates steam turbines. The accident forced the closure o= f=20 one of its generators for four months. Repair work cost nearly $50 million.= =20 ,2001 Associated Press ?=20 The haggling over refunds is under way=20 Posted at 9:40 p.m. PDT Monday, June 25, 2001=20 BY JIM PUZZANGHERA=20 Mercury News=20 WASHINGTON -- The warring parties in the California electricity crisis=20 funneled into a room here Monday morning to try to cut through the animosit= y=20 and agree how much in refunds the state will get from energy suppliers.=20 Billions of dollars are at stake as legal teams from California, its=20 utilities and dozens of power suppliers try to negotiate a settlement by Ju= ly=20 10. The Federal Energy Regulatory Commission set up the settlement conferen= ce=20 to resolve California's claims that energy suppliers have overcharged the= =20 state $8.9 billion for power since last spring.=20 The commission has ordered about $124 million in refunds for a small portio= n=20 of that time. Power companies balk at the suggestion they overcharged, sayi= ng=20 it is they who are owed billions by state utilities that haven't paid their= =20 bills for electricity purchases.=20 Deadlock warning=20 If the parties can't settle the dispute during the talks, Judge Curtis=20 Wagner, a straight-talking, 72-year-old administrative law judge, will=20 recommend a solution to the commission.=20 ``I can tell you now that you're far better off to work out the refund issu= es=20 in these settlement proceedings than to have me recommend an answer to the= =20 commission,'' Wagner warned the 150 participants before the confidential=20 talks began. ``The time to put California's past energy problems to rest an= d=20 structure a new arrangement for California's energy future is now. We can d= o=20 it if we try.''=20 Early indications were that a settlement will be difficult, although state= =20 and federal officials in Sacramento talked with optimism about a new level = of=20 cooperation.=20 But at the meeting in Washington, the head of California's team gave no=20 ground Monday, reiterating the state's position that it wants all of the $8= .9=20 billion Gov. Gray Davis demanded during congressional testimony last week.= =20 Michael Kahn, chairman of the state's Independent System Operator, said tha= t=20 all the parties in California -- the governor, the attorney general, the IS= O,=20 the Public Utilities Commission and the three investor-owned utilities -- a= re=20 presenting a unified front.=20 ``We are all together along with representatives from the Legislature,'' Ka= hn=20 said, ``in saying the same thing to FERC and saying the same thing to the= =20 generators: We want our refunds. We want them now, and we want that to be t= he=20 first order of business.''=20 Kahn said the $8.9 billion figure is bolstered by initial estimates by the= =20 state of overcharges if a new price-limit formula approved by the commissio= n=20 last week had been in effect since May 2000. The total is ``an extremely=20 conservative estimate,'' he said, and the state will ask for ``a lot more= =20 money'' if the issue is referred to the commission for action, or if the=20 whole dispute goes to court. The total amount of electricity purchases by= =20 California and its utilities during that 13-month period was $43.8 billion.= =20 But how far back the state could seek refunds is one of several issues Wagn= er=20 said must be determined in the settlement talks. The commission has said it= =20 has authority to order refunds only from last October, though everything is= =20 subject to negotiations. Wagner said last week he believes the amount=20 suppliers owe the state is about $2.5 billion.=20 The state estimates it was overcharged $2.94 billion from May 2000 to=20 September 2000, according to a confidential ISO breakdown obtained by the= =20 Mercury News. The breakdown of alleged overcharges by 44 suppliers goes onl= y=20 through February 2001, when the state estimated overcharges at $6.8 billion= ,=20 a figure recently updated through the end of May to $8.9 billion.=20 For the whole period from May 2000 to February 2001, the biggest=20 over-chargers were Williams Energy Services Corp., $861 million; Duke Energ= y=20 Trading and Marketing, $805 million; and Southern Company Energy Marketing,= =20 $754 million.=20 Other concerns=20 Among other subjects to be negotiated are who should get refunds and immuni= ty=20 for suppliers from future lawsuits for overcharges. In convening the=20 negotiations, FERC commissioners said they hoped many issues could be=20 addressed in addition to refunds, including more long-term contracts betwee= n=20 the state and power suppliers.=20 At the end of the first day of talks, Wagner said the state and some others= =20 were digging in. In all, about 50 parties sent representatives, ranging fro= m=20 energy suppliers to utilities to municipalities. Wagner admonished them all= =20 to keep the talks confidential.=20 ``Everybody has to stick to their guns for a while,'' he said, noting the= =20 negotiations may have to go late into the evenings and into weekends to mee= t=20 the deadline.=20 In Sacramento on Monday, the newest commissioners to join FERC -- Pat Wood= =20 and Nora Brownell -- praised California for its handling of the energy=20 crisis.=20 Wood, a Texan appointed by President Bush and expected to become the next= =20 FERC chairman, said he had come to California to help ``patch up'' the=20 state's strained relationship with federal regulators.=20 After meeting with Davis and legislative leaders, Wood said he was ``more= =20 hopeful today than I was at any time in the past year.''=20 ``They are very committed to getting this energy cowboy back on the bucking= =20 bronco,'' he said.=20 Davis, who has bashed Bush and federal regulators for weeks, also changed h= is=20 tone.=20 ``From my conversations with these commissioners, it appears that FERC may= =20 finally be poised to do its job controlling energy costs,'' he said in a=20 prepared statement.=20 Mercury News Staff Writer Dion Nissenbaum contributed to this report.=20 Power workers supported=20 Earlier testimony about deliberate manipulation of power plants is backed u= p=20 by a new group of employees.=20 June 26, 2001=20 By KIMBERLY KINDY The Orange County Register=20 SACRAMENTO A second wave of former power-plant workers stepped forward Mond= ay=20 to say they witnessed power merchants intentionally damage generators -=20 including some in Orange County - a practice they believe led to price=20 gouging of Californians.=20 The generating companies, Duke Energy and AES Corp., also denied the new=20 round of allegations, made by a half-dozen workers who took their stories= =20 public or contacted legislators with offers to provide sworn testimony.=20 One of those speaking out Monday, a former manager at Duke's Chula Vista=20 plant, told The Orange County Register that he supports the testimony of=20 three former colleagues who Friday told a Senate committee that new parts a= t=20 the plant were destroyed, routine maintenance was neglected and generators= =20 were unnecessarily throttled down.=20 Rick Connors said that unlike the three Chula Vista plant workers who=20 testified earlier, he was offered continued employment by Duke and cannot b= e=20 dismissed by the company as a terminated employee with an ax to grind.=20 "I listened to the entire hearing. I can tell you that everything they said= =20 was the truth; nothing they said was even a stretch,'' said Connors, who ha= s=20 decided to retire and become a card dealer instead of working for Duke, whi= ch=20 took over the plant from San Diego Gas & Electric and laid off many of his= =20 experienced co-workers.=20 Connors and another new witness, Dan Davis, a former electrician at the=20 AES-owned Huntington Beach plant, each on Monday said they saw maintenance= =20 schedules at their respective plants abandoned and generators constantly=20 turned on and off, which damaged them.=20 "They learned that they would operate one generator and make more money tha= n=20 if they were operating three,'' said Connors.=20 Conners had worked at the plant 20 years before Duke took it over in 1998 a= nd=20 said he was familiar with generation levels before and after the takeover.= =20 Conners said that even though Duke dramatically cut back on how much it ran= =20 its generators in the first year, Duke executives boasted to employees at a= =20 company party that they had made as much money in their first year as SDG&E= =20 had made in the previous five.=20 Similarly, Davis said, the generators at the AES plant in Huntington Beach= =20 would be ramped down and quickly ramped up again.=20 He believes this wear and tear coupled with a lack of maintenance not only= =20 helped create an immediate scarcity in the market but also created an=20 environment of constant breakdowns - which created further scarcity.=20 "At first I thought they were stupid,'' said Davis, who now works for the= =20 union representing plant workers. "I had been there 10 years and I was=20 watching them destroy the plant. But then I saw how it made them money.=20 Breakdowns made them money."=20 Both companies vigorously denied the allegations.=20 "Any talk of us intentionally breaking down equipment is ludicrous,'' said = Ed=20 Blackford, manager of the AES plant. "When our units break down, we lose=20 money. We have commitments and if we can't produce that electricity, we hav= e=20 to go out into the market and buy it."=20 Duke spokesman Tom Williams said he is sure the workers saw changes in the= =20 way the plants were operated after deregulation - but said their conclusion= s=20 of price-fixing and gouging are off base.=20 "It's highly offensive to us,'' said Williams. "They were seeing things fro= m=20 their own viewpoint and they don't see the full picture."=20 Duke took out a full page ad in today's Orange County Register and other=20 newspapers that says the powering up and down was done at the order of the= =20 Independent System Operator, which manages the state's power grid. Williams= =20 acknowledged, however, that some of those orders were made by Duke itself,= =20 but couldn't say what percentage.=20 The advertisement doesn't address the allegation that equipment was=20 intentionally mistreated or replacement parts scrapped, although Duke said= =20 earlier that the parts were obsolete and it was more cost-efficient to orde= r=20 parts as needed.=20 ISO spokeswoman Stephanie McCorkle said its orders to power suppliers to ra= mp=20 generators up and down are confidential and she could not verify Williams'= =20 explanation. However, the ISO, she said, would give Duke orders to ramp up= =20 and down no more often than every 10 minutes.=20 A review of three days of logs obtained by the Register showed that on more= =20 than a dozen occasions, orders were given in two-, three- or four-minute=20 intervals - the so-called dramatic "yo-yoing" of the generators that some= =20 legislators say indicates Duke was acting by itself.=20 Williams said the bottom line is that forced outages at the Chula Vista pla= nt=20 were done under Duke's control just 1.1 percent of the time, compared to 1.= 8=20 percent under SDG&E.=20 Those numbers, however, are disputed. Frank Wolak, a Stanford economics=20 professor who oversees the ISO's market-surveillance committee, said the=20 forced outage numbers have only been reliable for the past six months.=20 "There is no independent verification of these numbers until Jan. 1, 2000,= =20 until the governor required that they report this information every single= =20 day,'' Wolak said. "That information isn't any good."=20 Wolak also said the employees are correct about the destructive results of= =20 the constant ramping up and down, comparing it to the wear and tear on a ca= r=20 that travels through a succession of city traffic lights vs. a clear freewa= y.=20 The governor Monday stood by the three former Chula Vista workers who=20 testified Friday, calling them "brave individuals."=20 "I am enormously proud of these people who would step forward, risk the=20 harassment and retaliation these big energy companies are known for," Davis= =20 said just before having breakfast with the men. Judge sets tone at energy talks=20 He suggests that all sides, including the state delegation, would be better= =20 off settling.=20 June 26, 2001=20 By DENA BUNIS The Orange County Register=20 WASHINGTON On the first day of talks over how to settle billions of dollars= =20 of refund claims and other issues surrounding California's electricity=20 crisis, a federal energy judge gave a friendly warning to the more than 140= =20 people in his hearing room:=20 "I can tell you now that you are far better off to work out the refund issu= e=20 in these settlement hearings than to have me recommend an answer to the=20 commission," Curtis L. Wagner, chief administrative law judge for the Feder= al=20 Energy Regulatory Commission, said Monday.=20 The FERC ordered a 15-day settlement conference for stakeholders in the=20 electricity crisis to resolve such issues as alleged generator overcharges,= =20 how much generators still have to sell to California and the future of=20 long-term contracts.=20 The first day ended where it began:=20 "California wants $8.9 billion worth of refunds," Michael Kahn, chairman of= =20 California's Independent System Operator and Gov. Gray Davis' representativ= e=20 at the talks, said during a break.=20 Kahn and the rest of the state delegation met for 90 minutes with Wagner on= =20 Monday afternoon. Kahn then got on a plane for California. The state has=20 until Wednesday to produce more information for the judge.=20 Wagner later met with power sellers in an effort to understand their=20 position, which is that the state's refund figure is laughable.=20 "Now we're ready to get down to brass tacks," Wagner said. The veteran ener= gy=20 jurist wasn't phased by Kahn's and Davis' hard line on the $9 billion refun= d=20 figure, even though Wagner signaled last week that a couple of billion in= =20 refunds is more likely.=20 "Everybody has to stick to their guns for a while," Wagner said. The judge= =20 wouldn't say how he arrived at his refund estimate. But within Davis' $9=20 billion estimate is more than $4 billion that he says is owed to the state = by=20 entities over which the FERC has no control, such as municipal power=20 companies. In addition, the state has calculated the $9 billion based on=20 alleged overcharges from May 2000 to May 2001. The FERC began calculating= =20 overcharges in October 2001.=20 There's no way, Kahn said, that the state will abandon its overcharge claim= s=20 for last summer.=20 The first day's proceedings were largely theater. The conference started wi= th=20 a statement from Wagner, including his reading of a letter from new FERC=20 Commissioners Patrick Wood and Nora Brownell, both of whom were in Sacramen= to=20 on Monday researching the natural-gas issue.=20 "This is not the place to debate the shopping list," the letter said. "Nor = is=20 it a place to assign blame. Everyone must leave with something more than th= ey=20 came in with."=20 Then representatives from the power sellers, the utilities, the state and= =20 interests from throughout the West introduced themselves to each other.=20 After that, Wagner closed the conference and admonished all the parties not= =20 to talk about what goes on in the closed hearing room. Business/Financial Desk; Section C=20 California and Energy Providers in Talks Over Electric Fees By JOSEPH KAHN ?=20 06/26/2001=20 The New York Times=20 Page 7, Column 1=20 c. 2001 New York Times Company=20 WASHINGTON, June 25 -- For the first time since the end of the Clinton=20 administration, California and the companies that sell it electricity sat a= t=20 the same table today to try to resolve a multibillion-dollar feud over the= =20 state's energy bills.=20 California is demanding that power companies refund as much as $9 billion f= or=20 what it says were overcharges, while power companies say that the state's= =20 nearly insolvent utilities owe them billions of dollars. City and state=20 officials from across the West are also participating in the negotiations.= =20 The Federal Energy Regulatory Commission convened the talks, which are=20 scheduled to last up to two weeks. The sessions are the first since top=20 Clinton administration officials tried and failed to broker a settlement to= =20 California 's electricity crisis in their waning days in office.=20 ''The time to put California 's past energy problems to rest and structure = a=20 new arrangement for California 's energy future is now,'' said Curtis Wagne= r,=20 an administrative law judge for the energy commission who is presiding over= =20 the settlement talks.=20 The proceeding, which was standing-room-only on opening day, attracted scor= es=20 of people representing multiple sides in the dispute. The main participants= =20 are electricity generating companies, electric utilities, and public=20 officials from state and local governments and regulatory agencies.=20 Mr. Wagner urged the public officials and companies involved to reach an=20 agreement on how much California and other states in the Western grid shoul= d=20 have paid for power over the last year, when California 's partly deregulat= ed=20 market broke down. He said that if they failed to do so by July 10, he woul= d=20 recommend a solution to the energy agency's five commissioners, who would= =20 then have the option of imposing a settlement.=20 Wholesale power costs in California , which totaled $7 billion in 1999,=20 soared to about $27 billion last year and, by some state estimates, could= =20 double again this year. The higher costs, which have not been fully passed= =20 along to consumers, have rendered California 's two main utility companies= =20 unable to pay their bills and forced the state to buy power in their place.= =20 The opening bid by Gov. Gray Davis, who set out his views in a letter sent = to=20 the energy commission today, is that the leading electricity generators=20 should refund about $9 billion that ''they have overcharged the people of t= he=20 state of California .'' Michael Kahn, chairman of the California Independen= t=20 System Operator, is leading the state delegation.=20 Generating companies have dismissed that figure as grossly inflated. They= =20 acknowledge that prices are high. But they say the charges are linked to=20 shortages of natural gas, a crucial fuel for electricity generation, and we= re=20 set fairly in a free market.=20 The companies also contend that a large proportion of what they have billed= =20 California is a credit premium justified because wobbly utilities owe them = as=20 much as $15 billion. Reliant Energy, Duke Energy, the Williams Companies, t= he=20 Enron Corporation and the Mirant Corporation are among the major sellers of= =20 electricity in the Western region.=20 The energy commission, which has the duty of determining ''just and=20 reasonable'' electricity prices under a New Deal-era law, long ago found th= at=20 the California market had become dysfunctional and that prices were=20 unjustified. But the agency has struggled to come up with a method for=20 determining fair rates, changing its method three times in recent months.= =20 So far, the agency has identified about $125 million in potential=20 overcharges. But that number was reached using a restrictive method that th= e=20 agency has since abandoned.=20 Last week, the agency adopted a new price control regime that is intended t= o=20 limit price spikes throughout the West. If the controls it is using now wer= e=20 retroactively applied to electricity sales made over the last year, the=20 generators would be asked to refund much more money. By some estimates, the= =20 refunds could total more than $1 billion but seem likely to fall well short= =20 of the $9 billion California is seeking. National Desk; Section A=20 Cheney Withholds List of Those Who Spoke to Energy Panel By JOSEPH KAHN ?=20 06/26/2001=20 The New York Times=20 Page 17, Column 1=20 c. 2001 New York Times Company=20 WASHINGTON, June 25 -- Vice President Dick Cheney has declined to identify= =20 the people who met privately with his energy task force, raising tensions= =20 with Congressional investigators who have repeatedly requested the=20 information.=20 The General Accounting Office, an investigative arm of Congress, sent Mr.= =20 Cheney's office a letter late last week complaining that a month had passed= =20 since it first submitted an inquiry about the workings of the task force. T= he=20 letter said the vice president had a legal obligation to provide the=20 information immediately.=20 Mr. Cheney's office said the letter was sent one day after it submitted 77= =20 pages of documents to the accounting office.=20 ''Our correspondence crossed in the mail,'' said Juleanna Glover Weiss, a= =20 spokeswoman for Mr. Cheney.=20 But Ms. Weiss said the vice president had not provided the names of people,= =20 including industry executives, who may have influenced the formation of the= =20 Bush administration's energy policy, which was released last month.=20 ''Our counsel and the G.A.O. will continue to talk about this,'' Ms. Weiss= =20 said.=20 The energy task force Mr. Cheney headed spent several months compiling a=20 lengthy energy strategy that contained about 150 recommendations for=20 administrative and legislative actions to address what it termed an energy= =20 crisis.=20 Administration officials have said that they met with a wide variety of=20 people concerned about energy issues, including executives of oil, natural= =20 gas, electricity , nuclear power and energy infrastructure companies. They= =20 have declined to provide a list of people who had access to the task force.= =20 Some Democrats have asserted that leading Republican donors had special=20 access to the task force and that the energy policy is skewed toward measur= es=20 favored by major corporations. Two Democratic representatives, Henry A.=20 Waxman of California and John D. Dingell of Michigan, asked the accounting= =20 office to report on the officials who served on the task force, what=20 information was collected by the panel, whom they met with and how much the= =20 task force spent.=20 The White House provided the G.A.O. with the financial records of the task= =20 force. But administration officials have told the investigative body that= =20 they are not compelled to provide the names of outsiders who met with the= =20 task force.=20 The accounting office's general counsel, Anthony H. Gamboa, said in a lette= r=20 to Mr. Cheney's office last week that the investigative body is entitled to= =20 more information.=20 The letter warned that if the White House does not provide the full range o= f=20 information the G.A.O. is seeking, it may issue a ''demand letter,'' a more= =20 formal request. Under the law, the White House would have 20 days to respon= d.=20 If the dispute continues, the accounting office could bring a civil action= =20 against the administration.=20 Love, War and California Electricity=20 By Susan Lee ?=20 06/26/2001=20 The Wall Street Journal=20 Page A22=20 (Copyright (c) 2001, Dow Jones & Company, Inc.)=20 California 's energy crisis presents at least a dozen major policy issues,= =20 but perhaps the most complicated question -- and the one with the least=20 satisfactory solution -- is who should pay for past power usage.=20 Specifically, who should pay wholesale electricity suppliers for juice that= =20 was consumed after wholesale prices rose fiercely above fixed retail prices= ?=20 Between May 2000 and January 2001, before the state of California intervene= d,=20 a $14 billion gap opened up between what the suppliers charged and the=20 utilities could pay.=20 Right now, nobody is paying. To be sure, Gov. Gray Davis has issued a=20 memorandum of understanding in which he suggests that ratepayers would bear= =20 part of the repayment burden in the form of a surcharge on their electricit= y=20 bills, and taxpayers would bear another part in helping fund the state's=20 purchase of utilities' transmission grids. But the memorandum is just a vag= ue=20 promise, and is already in deep political trouble.=20 It isn't fair to leave power suppliers hanging; the power was used and must= =20 be paid for. The problem is that, just as in love and war, the California= =20 energy mess no longer has a fair solution.=20 There are several groups of potential payers. The No. 1 target group is=20 consumers, or ratepayers, on the grounds that they used the power and thus= =20 should pay its market cost. Yet consumers demanded the amount of power they= =20 used based on its low retail price. It's hardly fair to now go back and rai= se=20 the price retroactively. After all, if the price had been higher, consumers= =20 would have used less of it.=20 A second group of potential payers are the taxpayers, on the grounds that= =20 this is a big political and regulatory problem for the entire state of=20 California . Since most taxpayers are voters and since voters are ultimatel= y=20 responsible for the acts of officials they elect, fairness dictates that=20 taxpayers ought to suffer the punishment for the botched deregulation schem= e.=20 But this solution, too, has flaws. Although sticking taxpayers with the bil= l=20 might result in taxpayers (to the extent they are voters) throwing the=20 political and regulatory bums out, it doesn't locate the economic burden=20 efficiently. As distinct groups, taxpayers and consumers may overlap, but= =20 they aren't identical.=20 And then there is a third group -- the utilities themselves -- on the groun= ds=20 that they shouldn't have been running around buying power they knew they=20 couldn't afford. Although this may satiate a certain blood lust (who doesn'= t=20 loathe utilities?), utilities are regulated companies and operate under=20 regulatory constraints and imperatives. Accordingly, they bought power on= =20 behalf of ratepayers and they bought it like mad until they went bankrupt.= =20 Too, it might be argued that shareholders have already "paid" -- shares of= =20 Pacific Gas & Electric and Southern California Edison have lost 50% to 60% = of=20 their value since the crisis began.=20 There is one other group of sitting ducks, the suppliers, on the grounds th= at=20 they are, in the words of Gov. Davis, pirates and marauders who profited fr= om=20 California 's crisis. But aside from basic questions of equity, suppliers= =20 have already paid a price in the form of (still mounting) legal bills to=20 defend themselves from charges of profiteering, as well as in the lost=20 opportunity to deploy the money owed to them. Moreover, suppliers already c= an=20 be expected to bear some of the payment burden since Mr. Davis has indicate= d=20 they will not be repaid dollar for dollar,=20 Finally, there is the group who is most at fault but the least likely to=20 suffer -- the regulators and politicians -- on the grounds that they pretty= =20 much created the mess and they surely haven't moved to clean it up.=20 Regulators, most pointedly, because they refused to let the utilities hedge= =20 their purchases of electricity when they pleaded to do so in 1999.=20 Politicians, in particular the governor, because they dithered for over a= =20 year, preferring to blame the problem on someone else. Although putting thi= s=20 group out of work might be the most satisfying civic outcome, the solution = is=20 a flop if financial restitution is the goal.=20 The latest, most popular approach to solving the mess is to look at the=20 transfer of wealth, required in any case, that would take place under each= =20 payment scenario. This is what some of California 's politicians mean when= =20 they complain that full restitution means transferring $14 billion from the= =20 state of California to the evil out-of-state power suppliers. But, as Irwin= =20 Stelzer, economist at the Hudson Institute, points out, there is a long=20 history of wealth transfers to tote up.=20 Initially, when the botched deregulation plan was agreed to several years= =20 ago, it involved a transfer of wealth from ratepayers to shareholders. That= =20 is, the utilities were concerned about making back their so-called stranded= =20 costs, mostly from overbudget nuclear power plants. Those stranded costs we= re=20 to be paid by fixing, or freezing, rates at a level that would provide "pay= =20 back" to the utilities for their nuclear construction. However, when=20 wholesale prices shot up a year ago, the utilities (and their shareholders)= =20 were caught paying much more money for power than the rates they were allow= ed=20 to charge. And so the transfer of wealth reversed itself -- shareholders=20 subsidized ratepayers.=20 Now, if Mr. Davis's memorandum of understanding becomes operative, the=20 transfer of wealth changes again. Ratepayers will get socked by a surcharge= =20 on their electricity bills and taxpayers by the state's purchase of=20 transmission lines. Taxpayers might also get hit if the bond issue goes off= =20 as planned in August and, as expected, erodes California 's credit quality.= =20 That erosion would mean that all state agencies that issue bonds would be= =20 required to pay higher interest rates. (In fact, California 's bond rating= =20 has already been downgraded by two major rating agencies.)=20 Simply put, looking at the transfers of wealth doesn't yield a clear-cut or= =20 fair solution to the payment problem either.=20 All this leaves politics to dictate the answer, and the shape of it is=20 already apparent. Suppliers, ratepayers, taxpayers and shareholders will be= ar=20 the cost while the politicians and regulators evade the consequences. In=20 short, the unfairness of love and war doesn't hold a candle to politics in= =20 California .=20 ---=20 Ms. Lee is a member of the Journal's editorial board.

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VentureWire, Monday, November 13, 2000

====================================================== VENTUREWIRE --- Monday, November 13, 2000 ====================================================== Private Company Business News ------ Published Daily by Technologic Partners ------- http://technologicpartners.com ====================================================== Top Stories: o eVentures India Gets $150 Million from Softbank, Epartners o Evite Laying Off 60% of its Workforce, Still Hoping to Sell o LowerMyBills.com Names Former Intuit CEO Harris to Board o Australian Government Commits $47.8 Million to Startups |||||||||||||||||||| Advertisement |||||||||||||||||||| COMMERCE UNPLUGGED A new breed of smart phones and connected PDAs are enabling us to shop, even long after we've dropped. But the mobile shopper is a new breed of consumer, and the mobile value chain presents a host of new issues. Mobile Services, one of five expert panels at Technology Outlook 2000, will examine the promises and pitfalls of m-commerce, wireless advertising, and the role of location-based services. Come hear from: Mark F. Bregman, CEO, AirMedia Bernard Desarnauts, CEO, ViaFone Paul Palmieri, VP & GM, Wireless Services, Advertising.com Only at Technology Outlook 2000: The Future of Pervasive Computing December 4 and 5, San Francisco A VentureWire investment conference. http://technologicpartners.com/tp/conf/to2000/?vw=20001113 ||||||||||||||||||||||||||||||||||||||||||||||||||||||| Also in This Issue: New Money: o E-commerce Firm RedSpark Gets $14 Million in First Round o SS8 Networks Raises $25 Million in Second-Round Funding o Logistics Technology Firm Velant Raises $7 Million Round One o Network App Firm XDegrees Raises $8 Million First Round o Ticket Tech Firm Justarrive Gets $5 Million in First Round o Wireless Network Firm ReefEdge Raises $6.8 Million Round One o Fiber-based ICP Scindo Networks Gets $1.6 Million Seed Money o Broadband Developer Malibu Networks Raises $30 Million o Cambridge Silicon Radio Raises $34 Million Second Round o XML App Firm Bowstreet Raises $50 Million Round Four o Benchmark Storage Holds Third Round Funding for $40 Million o Business Travel Site I-tinerary Gets $4 Million Second Round o eDreams, Online Travel Site, Raises $13.8 Million Round o MyQube Invests In Electronic Control Network Firm FSB o Next Generation Network Raises $30 Million from CDP o Optical Chip Firm Integration Associates Raises $9 Million o Software Firm CES Lands $12 Million in Second Round o Spike Broadband Systems Raises $47 Million o TenantDirect.com Raises $9.35 Million Second Round o TV Programming App Firm Jovio Gets $1.5 Million Round Two o Embedded Wireless Devices Raises $20 Million Third Round o Online Banking Firm CR2 Raises $8 Million in Third Round o Revenio Raises $27 Million in Third Round of Funding o Compare and Shop Site Bisanjia Gets $1 Million o Infrastructure Firm Soneta Gets Funding from Gray Cary o Video Networking Firm Artel Raises $10.5 Million Round Four o Valeo Takes 15% Stake in Automotive Application Maker ITF Bad News: o Online Brokers' Venue Insureon.com Cuts Over Half its Staff New Products: o Claims Web Site ClaimsDesk.com Launches First Product o IT Products and Service Directory KnowledgeStorm Launches o Online Idea Exchange Site Ideas.com Launches o Online Network For Childcare Industry QualKids Launches New Deals: o Invite Service Mambo.com Service Shut Down by Parent Company o DSSI Takes 4% Stake in Noise Reducing Firm Silentium M&A: o Sheldahl to Acquire IFT for $30 Million in Stock o B2B Online Music Source Amplified Acquires OneBigCD o Vina Technologies Acquires Woodwind Communications New Directors: o eSpeed Fulfillment Taps Lawyer, Consultant for Board New People: o Datria Systems Names Ex-Colorado Land Developer as CEO VC Fund News: o Telesis & Capital Z Convergence Europe in Joint Fund Venture o Vista Ventures Gets $15 Million for Vista Ventures I IT Fund o Legend Holdings Plans New Chinese Technology Venture Fund o Indian Bank of Baroda to Invest in Venture Funds VC Personnel: o Columbia Capital Adds Two Partners To Investment Team o Two Join Patricof As Venture Partners |||||||||||||||||||| Advertisement |||||||||||||||||||| VENTUREWIRE GOES WIRELESS POWERED BY ADAPTIVEINFO VentureWire subscribers can now get the same top-quality news wirelessly -- in the airport, on the road, in the gym, or on the golf course. VentureWire is now available on all wireless devices, served and automatically personalized for each user by the Adaptive News Server. PQAs for the Palm are available at http://venturewire.net/vwmobile.asp?vw=ai0 or visit adapt.am for the RIM pager and web phone version. For more information call 1-866-ADAPTIVEINFO or visit http://www.adaptiveinfo.com/ ||||||||||||||||||||||||||||||||||||||||||||||||||||||| ======= Top Stories ======= o eVentures India Gets $150 Million from Softbank, Epartners MUMBAI, India -- eVentures India, an investment and operating company, said it received $150 million from previous investors Softbank and epartners. eVentures India focuses on investing in and developing Internet and new media related ventures with a significant Indian component. The company said it will use the new capital to invest in four areas: Internet-based software and IT-enabled services, infrastructure, new technologies in areas like wireless and broadband, and B2B enabling services. P.K. Mittal, an Indian industrialist, is also an investor. eVentures India has committed $65 million to 14 partner companies, including NetAcross Online Solutions, Netpilgrim, and Customerasset.com. The company has offices in Mumbai and New York. http://www.eventures.co.in/ _____________________________________________ o Evite Laying Off 60% of its Workforce, Still Hoping to Sell SAN FRANCISCO -- Evite, an online service that specializes in coordinating and planning activities through group electronic invitations, said it was laying off 42 employees, or approximately 60% of its staff, to bring the company's payroll down to 28 people. The cuts will eliminate the company's marketing and business development departments and cut into product developers and sales significantly. The company said last week that it was looking for a buyer and did not expect to be able to hold an IPO. The company also said last week that it had $17 million, enough cash to last them over one year. The company said the layoffs would lower its burn rate and move it closer to profitability. The company said it is in active discussions with several potential buyers. Evite is backed by Advent International, August Capital, Greylock Management, Hikari Tsushin, North Hill Ventures, Staenberg Venture Partners, and Technology Crossover Ventures. http://www.evite.com/ _____________________________________________ o LowerMyBills.com Names Former Intuit CEO Harris to Board LOS ANGELES -- LowerMyBills.com, which operates a Web site that enables users to research and compare their recurring monthly bills, said it named Bill Harris to its board of directors. Mr. Harris was recently president and CEO with X.com, but resigned after six months. Prior to X.com, he served as president and CEO of personal finance services developer Intuit. LowerMyBills.com is backed by eCompanies Venture Group. http://www.lowermybills.com/ _____________________________________________ o Australian Government Commits $47.8 Million to Startups SYDNEY, Australia -- The Australian Minister for Industry, Science, and Resources said that the government would commit AUS$90.7 million ($47.8 million) to four venture capital fund managers. The four funds, Nanyang Ventures, Start Up Australia, Newport CDIB Fund Management, and Foundation Management, will also contribute approximately $38.3 million to the Commonwealth Government's Innovation Investment Fund. In total, with the funds from the private equity firms, the government intends to make $86.1 million available for investment in new Australian technology. In the course of two rounds of the Innovation Investment Fund, the Australian government and equity firms have made $188.7 million available to startup technology companies operating in Australia. Telephone 61-02-6277-7580. ======= New Money ======= o E-commerce Firm RedSpark Gets $14 Million in First Round SAN FRANCISCO -- RedSpark, which provides applications and e-commerce services for the manufacturing industry, said it has raised $14 million in its first round of funding led by Crosspoint Venture Partners that included Impact Venture Partners. RedSpark, which was spun out of Autodesk, said it will use the funds for deployment of its services. Bob Lisbonne, general partner of Crosspoint, will join Carol Bartz, the chief executive officer of Autodesk, and RedSpark president and chief executive officer Dominic Gallello, on the company's board of directors. http://www.redspark.com/ _____________________________________________ o SS8 Networks Raises $25 Million in Second-Round Funding SAN JOSE, Calif. -- SS8 Networks, which provides a signalling engine for real-time communications over IP networks, has received $25 million in second-round funding, a source close to the company said. Kleiner Perkins Caufield & Byers participated in the round. Other details were not made available. Earlier this year, the company received $10 million in a round led by Woodside Fund that included CIT Group, Onset Ventures, and Sofinov. http://www.ss8networks.com/ _____________________________________________ o Logistics Technology Firm Velant Raises $7 Million Round One ATLANTA -- Velant, which develops Web-based decision making software for automating and speeding up transportation planning, said it closed its first round with $7 million from Matrix Partners and other individual investors. The company will use the funds to expand its staff and offices. http://www.velant.com/ _____________________________________________ o Network App Firm XDegrees Raises $8 Million First Round MOUNTAIN VIEW, Calif. -- XDegrees, a provider of infrastructure for network applications, announced it has launched and raised $8 million in its first round of funding from Redpoint Ventures and Cambrian Ventures. The company was founded by Michael Tanne, the chief executive officer, and Dan Teodosiu, the chief technology officer. XDegrees has built a secure scalable infrastructure services that enables enterprise and consumer application developers to build and deploy network applications. http://www.xdegrees.com/ _____________________________________________ o Ticket Tech Firm Justarrive Gets $5 Million in First Round SAN FRANCISCO -- Justarrive, a university sports ticket firm that uses magnetic swipe technology to facilitate ticket purchases and exchanges, said it has received $5 million from Mohr, Davidow Ventures and that it will use the funds to develop stadium entrance technology and to form new partnerships and fan loyalty systems. Justarrive also announced it has appointed Ronnie Lott, ex-San Francisco 49er and NFL Hall of Fame inductee, as the board's second member. http://www.justarrive.com/ _____________________________________________ o Wireless Network Firm ReefEdge Raises $6.8 Million Round One FORT LEE, N.J. -- ReefEdge, a wireless corporate networking firm, said it has raised $6.8 million in its first round of funding from co-leads Bessemer Venture Partners and Columbia Capital. Robert Goodman, general partner at Bessemer, and Jay Markley, general partner at Columbia, will join ReefEdge's board as the third and fourth members. ReefEdge said it will use the funds to develop its products. http://www.reefedge.com/ _____________________________________________ o Fiber-based ICP Scindo Networks Gets $1.6 Million Seed Money DENVER -- Scindo Networks, a fiber-based integrated communications provider (ICP) of local, long distance, Internet, and data services to small and medium businesses, said it received $1.6 million in its seed round, led by Barron Ventures. The company said it will use the funds for operations and marketing. http://www.scindonetworks.com/ _____________________________________________ o Broadband Developer Malibu Networks Raises $30 Million SEATTLE -- Malibu Networks, which is developing wireless broadband technologies, raised $30 million in its second round of funding, according to investors CVC Capital Partners and Second Avenue Partners. The two firms jointly contributed $10 million to the round which also included investments from ARCH Venture Partners, Polaris Venture Partners, and a consortium of existing investors. Calabasas-based Malibu Networks is developing wirelss broadband modem chips. http://www.malibunetworks.com/ _____________________________________________ o Cambridge Silicon Radio Raises $34 Million Second Round CAMBRIDGE, U.K. -- Cambridge Silicon Radio, a developer of single chip Bluetooth radio devices, said it raised $34 million in its second round of financing. The round included investments from 3i, ALPS, Amadeus Capital, ARM, Capital Research, Gilde, Intel Capital, Mustang Ventures, Razorfish, Virata, and Wavecom. Cambridge Silicon Radio said it will use the funding to support its development of new Bluetooth technologies. http://www.csr.com/ _____________________________________________ o XML App Firm Bowstreet Raises $50 Million Round Four PORTSMOUTH, N.H. -- Bowstreet, an e-commerce XML infrastructure firm, said it closed its fourth round of financing with $50 million from new investors Amerindo Investment Advisors, Azure Capital, Essex Partners, and Putnam Investors and from previous investors Charles River Ventures, Matrix Partners, Integral Capital Partners, and Kleiner Perkins Caufield & Byers, among others. Bowstreet said it will use the funds to develop and research its products. There will be no board changes as a result of the round. http://www.bowstreet.com/ _____________________________________________ o Benchmark Storage Holds Third Round Funding for $40 Million BOULDER, Colo. -- Benchmark Storage Innovations, which develops tape backup and archive systems for small to medium-sized computer networks and workstations, said it raised its third round of funding with $40 million. New investors Advanced Digital Information, Lafe Holdings, Storage Tek, and individuals funded the round along with previous investors Aweida Venture Partners, which led the round, and Quantum. The company will use the funding for working capital in new partnerships with customer companies. Benchmark Storage Innovations, formerly Benchmark Tape, is also backed by Read-Rite. http://www.4benchmark.com/ _____________________________________________ o Business Travel Site I-tinerary Gets $4 Million Second Round SCOTTSDALE, Ariz. -- I-tinerary Travel Solutions, an Internet-based travel booking service targeted at business travelers, said it secured $4 million in its second round of funding from Frankfurt-based business travel company I:FAO. The company plans to use the funds for system and business development. http://www.i-tinerary.com/ _____________________________________________ o eDreams, Online Travel Site, Raises $13.8 Million Round LONDON -- eDreams, a European online travel site, raised EUR 16 million ($13.8 million) in its second round of funding. The round was led by new investor 3i and investments from previous investors Apax Partners, BSCH, Doll Capital Partners, and Net Partners. The company said it will use the funding for continued growth and expansion. eDreams intends to launch its service in France and continue development in Spain and Italy. http://www.edreams.com/ _____________________________________________ o MyQube Invests In Electronic Control Network Firm FSB MILAN -- MyQube, an early stage Italian development fund, said it has invested an undisclosed amount in FSB, an integrator of hardware and software systems for managing devices connected to the electric network through the Internet. FSB, which is developing the open standard control network based on a standard developed by Echelon, plans to install its technology in 27 million homes, public buildings, and offices in Italy by 2004. http://www.myqube.com/ _____________________________________________ o Next Generation Network Raises $30 Million from CDP MINNEAPOLIS -- Next Generation Network, a developer of electronic billboards that deliver digital information and advertising, said it raised $30 million in funding from CDP Capital Communications, the media and telecommunications investment arm of Caisse de depot et placement du Quebec. The company said the funds will be used for continued business development and the global rollout of its network. http://www.ebillboards.com/ _____________________________________________ o Optical Chip Firm Integration Associates Raises $9 Million MOUNTAIN VIEW, Calif. -- Integration Associates, which designs and manufactures optoelectronic and RF analog/digital chips for wireless devices, said it raised $9 million in funding from individual investors. The round included investments from Mark Green, formerly of Goldman Sachs; Ralph Parks, of JP Morgan Chase; and Charles R. Schwab and Mark Thompson, both of Charles Schwab. Both Mr. Schwab and Mr. Thompson have seats on the Integration Associates board of directors. http://www.integration.com/ _____________________________________________ o Software Firm CES Lands $12 Million in Second Round ATLANTA -- CES International, which makes operations management software for utility companies, received $10 million in its second round of financing from Cinergy Ventures, the venture division of utility company Cinergy, and $2 million from previous investor Wexford Capital Management. Larry Thomas, group president of new technology and energy delivery for Cinergy, will join CES's board as its sixth member. CES said it plans to use the funds to expand the company in the U.S. and abroad and for research and development. http://www.ces.com/ _____________________________________________ o Spike Broadband Systems Raises $47 Million NASHUA, N.H. -- Spike Broadband Systems, a provider of carrier-class, fixed wireless broadband access products, said it has raised $47 million from Canada-based CDP Sofinov, a subsidiary of the Caisse de depot et placement du Quebec, an investment fund manager. Other investors include CDP Capital Communications, Sandler Capital Management, Cabletron Systems, Ironside Ventures, HLM Management, US Bancorp Piper Jaffray, Dain Rauscher Venture Partners, Wheatley Partners, Rosewood Corp., Agilent Technologies, Signal Equity Partners and Commonwealth Capital Ventures. Spike said it will use the funding to meet product demand, increase its sales activities, and scale its production and distribution capacity. http://www.spikebroadband.net/ _____________________________________________ o TenantDirect.com Raises $9.35 Million Second Round LOS ANGELES -- TenantDirect.com, maker of ResidentDirect and TenantDirect, online management systems designed for the multi-family and commercial real estate industries, said it closed a $9.35 million second round of funding. Investors included HPC, a subsidiary of Primedia, which owns and operates Apartment Guide and ApartmentGuide.com; Kennedy-Wilson, a Los Angeles based real estate owner and manager; and other real estate owners.The company said it would use the funds to expand its market reach and add to its list of online services. As part of the financing, HPC will help promote the company's national advertising and marketing program. The company has raised $10.75 million to date. http://www.tenatdirect.com/ _____________________________________________ o TV Programming App Firm Jovio Gets $1.5 Million Round Two PITTSBURGH -- Software developer Jovio said it raised $1.5 million of its targeted $5 million second round of funding from individual investors. Jovio's software profiles viewers based on demographic, geographic, and psychographic data and delivers them television programming. The company has raised $3 million to date. http://www.jovio.com/ _____________________________________________ o Embedded Wireless Devices Raises $20 Million Third Round PLEASANTON, Calif. -- Embedded Wireless Devices (EWD), a developer and marketer of silicon services for wireless, audio, and Internet applications, said it received more than $20 million in third round financing from new investors H&Q/GAI and Anadigics and previous investors Trieste Investment Groups, Good Honor Holdings, Apodaca, Maton Fund II L.P., and Hotung Investment Holdings Limited. The company plans to use the capital to strengthen its engineering and marketing teams, develop new semiconductor and software products, and bring wireless multi-point services to market. The company has raised $30 million to date. http://www.embeddedwireless.net/ _____________________________________________ o Online Banking Firm CR2 Raises $8 Million in Third Round LONDON -- CR2 Group, which provides online banking, channel management, and card payment technology, said it raised $8 million in its third round of funding. New investors Goodbody Stockbrokers and AIB Corporate Banking joined previous investors GIMV, NIB Capital, and ACT Venture Capital in the round. CR2 Group said it will use the funding to expand its business and marketing. The company has a valuation of $88 million following the close of the funding round. The company has recently relocated to larger offices in Dublin and established operations in India and the Czech Republic to support Asian and Eastern European operations. CR2 Group has received additional support from the Irish government's state agency, Enterprise Ireland. http://www.cr2.com/ _____________________________________________ o Revenio Raises $27 Million in Third Round of Funding BURLINGTON, Mass -- Revenio, a developer of a platform for managing and automating customer interactions across marketing channels, said it secured $27 million in its third round of funding led by General Catalyst. The round includes new investors Vignette, Chase H&Q, Comdisco, Pictet Global Telecom Fund, Williams, Jones & Associates, and NETinvest, and previous investors Charles River Ventures and Matrix Partners. The company said it will use the financing to fund sales, marketing, and product development. General Catalyst co-founder and managing partner David Fialkow will join the Revenio board of directors. The company has raised $43 million to date. http://www.revenio.com/ _____________________________________________ o Compare and Shop Site Bisanjia Gets $1 Million BEIJING -- Bisanjia.com, a subsidiary of U.S.-based BestEDeal.com that provides price comparison services, said it received $1 million from undisclosed investors. The company said it will use the funds to develop wireless application protocol and e-commerce technologies. http://www.bisanjia.com/ _____________________________________________ o Infrastructure Firm Soneta Gets Funding from Gray Cary DALLAS -- Soneta, which develops technology and applications for e-commerce service providers, said it has received an undisclosed amount of cash and a pledge of services from the Internet technology law firm of Gray Cary Ware & Freidenrich in return for an equity stake. The details of the deal were not disclosed. Last week, Soneta said it closed its Series A round of financing with a $2 million investment from Yazam. http://www.soneta.com/ _____________________________________________ o Video Networking Firm Artel Raises $10.5 Million Round Four MARLBOROUGH, Mass. -- Artel, which provides video networking systems to cable television and telecommunications service providers, said it has secured $10.5 million in its fourth round of funding. New investors, Liberty Mutual and Boston University's Community Technology Fund, joined previous investors, Cornerston Equity Investors, Atlas Venture, BancBoston Capital, Charles River Ventures, Commonwealth Capital Ventures, New England Partners, and Massachusetts Capital Resource Co., to invest in the round. Artel said it will use the funds to develop its next generation of video switching platform technology. http://www.artel.com/ _____________________________________________ o Valeo Takes 15% Stake in Automotive Application Maker ITF PARIS -- Valeo Ventures, the venture arm of European automobile supplier Valeo, said it has taken a 15% stake in TTF, which develops applications that enable automotive manufacturers to exchange different CAD software files. Financial details of the deal were not disclosed. TTF's technology allows auto makes to exchange CAD software files. http://www.ttf-group.com/ ======= Bad News ======= o Online Brokers' Venue Insureon.com Cuts Over Half its Staff PASADENA, Calif. -- Insureon.com, which provides an online venue for brokers and insurance carriers to transact commercial insurance deals in real time, said it cut about 16 jobs, more than half of its staff. The company said it was overstaffed on its technical side and would be refocusing on product development and geographic expansion. The company said it needed to cut back on its spending in order to increase its appeal to investors. Insureon.com, which was incubated by the incubator Netcubator, is seeking $5 million in its first institutional round of funding. The company is backed by individual investors. http://www.insureon.com/ ======= New Products ======= o Claims Web Site ClaimsDesk.com Launches First Product SEATTLE -- ClaimsDesk.com, a provider of online property and casualty claims management services, said it launched its first product, P&C Claims Workplace. The product is a subscription service that enables claims adjusters to obtain claims-related information through a database. ClaimsDesk is funded by Voyager Capital and Staenberg Private Capital. http://www.claimsdesk.com/ _____________________________________________ o IT Products and Service Directory KnowledgeStorm Launches ATLANTA -- KnowledgeStorm, an IT directory, announced its launch. The company's Web site lists a directory of IT software products and services. Users can save their criteria and get free reports. Registered vendors include Ariba, Baan, Documentum, Firepond, I2, Oracle, and PeopleSoft. KnowledgeStorm is funded by Apex Venture Partners, and Live Oak Equity Partners. http://www.knowledgestorm.com/ _____________________________________________ o Online Idea Exchange Site Ideas.com Launches MOUNTAIN VIEW, Calif. -- Ideas.com, an online marketplace where users can exchange ideas, launched its service and Web site. The company has already signed on the Coca-Cola Company, DaimlerChrysler, International Paper, S.C. Johnson & Son, and Sears, Roebuck & Co. as members. The Web site enables people to direct their ideas and technologies to corporations' new product development, research and development, innovation and brand marketing departments. Ideas.com is backed by three individual investors from Junglee and other undisclosed individuals. http://www.ideas.com/ _____________________________________________ o Online Network For Childcare Industry QualKids Launches MAITLAND, Fla. -- QualKids, an interactive online network linking child care professionals, families and healthcare professionals, announced it has launched. Through its business-to-business and business-to-consumer electronic marketplace, QualKids gives child care professionals access to health, safety, education and management information. The company, which was founded by Dr. David Milov, is backed by E.V. Ventures, QualKids Majik Fund, Westven Fund, and individual investors. http://www.qualkids.com/ ======= New Deals ======= o Invite Service Mambo.com Service Shut Down by Parent Company MENLO PARK, Calif. -- Mambo.com, an online service providing online event planning applications and commerce, will shut down on November 20. Dynamic Transactions, the parent comany formerly operating under the name Mambo.com, said it was discontinuing the service to focus on its flagship product, PayPlace.com, an online payment service. The company said that invitation services had a future better suited as a feature to a larger portal. There were no layoffs resulting from the service being discontinued. Dynamic Transactions is backed by Angel Investor Group, Hummer Winblad Venture Partners, Trans Cosmo USA, and individual investors. http://www.payplace.com/ _____________________________________________ o DSSI Takes 4% Stake in Noise Reducing Firm Silentium MAHWAH, N.J. -- DSSI, a provider of computer consulting and development services, said it acquired approximately 4% of the equity of Silentium, an Israeli start-up company, through its subsidiary, DSI Israel. DSI Israel received the equity and warrants to purchase additional equity in Silentium in exchange for providing development services at lower than its prevailing rates. Silentium owns and is marketing low cost active noise cancellation technology for nosiy equipment. Its investors include Israeli Sadot Research & Development Fund and Zoom-it Holding, an Israeli high-tech investment company. http://www.dssiinc.com/ ======= M&A ======= o Sheldahl to Acquire IFT for $30 Million in Stock NORTHFIELD, Minn. -- Sheldahl a publicly traded producer of high-density substrates, flexible printed circuitry, and flexible laminates for the automotive electronics and data communications markets, said it will acquire International Flex Technologies (IFT), a producer of fine-line, flexible circuits approximately 7.6 million shares of common stock worth approximately $29.9 million. Morgenthaler Partners, IFT's majority shareholder, and Ampersand Ventures will invest $25 million in equity capital in exchange for approximately 4.9 million shares of Sheldahl common stock and shares of a new series of preferred stock that is convertible into approximately 4.1 million shares of common stock. In addition, Molex, a Sheldahl customer and new joint venture partner, has agreed to join with Morgenthaler and Ampersand in purchasing up to an aggregate of $15 million of Sheldahl subordinated debt and warrants. Morgenthaler, Ampersand, and other IFT investors will collectively hold 49% ownership of Sheldahl on a fully diluted basis. Molex will also increase its ownership of Sheldahl securities and will own approximately 10% of Sheldahl on a fully diluted basis. http://www.sheldahl.com/ _____________________________________________ o B2B Online Music Source Amplified Acquires OneBigCD ATLANTA -- Amplified, an online business-to-business digital media services provider, said it acquired syndicated Internet jukebox provider OneBigCD.com for an undisclosed amount. As a result of the deal, Amplified has released a new product, called MaMa, which is integrated into an online retailer's site and tracks customers' music preferences. Amplified is backed by Valley Media, Bear Stearn's Constellation Ventures, Psilos Group, Chase Capital, Noro-Moseley Partners. OneBigCD is funded by Draper Atlantic Venture Capital. http://www.amplified.com/ http://www.onebigcd.com/ _____________________________________________ o Vina Technologies Acquires Woodwind Communications NEWARK, Calif. -- Publicly traded Vina Technologies said it acquired Woodwind Communication Systems, a maker voice over broadband technology, for approximately 5 million shares of stock valued at approximately $44 million. Richard Berger, Woodwind president, chairman, and CEO, will be a vice president of Vina. Woodwind's 40 employees were offered jobs with the combined company. Woodwind was backed by Novak Biddle Venture Partners, Boulder Ventures, SpaceVest, Alta Partners, and Sterling Capital. http://www.vinatechnologies.com/ http://www.wcsinc.com/ ======= New Directors ======= o eSpeed Fulfillment Taps Lawyer, Consultant for Board DALLAS -- eSpeed Fulfillment, which provides services and technology to business-to-business and business-to-consumer Internet companies, said it has appointed David Bryant, partner of Hughes & Luce, a Texas technology law firm, and Robert J. Potter, president and CEO of R. J. Potter, a Dallas-based consulting firm, as the second and third members of its board. eSpeed Fulfillment closed its first round of funding in September at just under $1 million from undisclosed individual investors. eSpeed said that it will use the funds to develop logistics and order management technology. http://www.espeedfulfillment.com/ ======= New People ======= o Datria Systems Names Ex-Colorado Land Developer as CEO ENGLEWOOD, Colo. -- Datria Systems, a developer of voice-to-data technology for mobile computing, said James Greenwell joined the company as president and CEO, replacing founder Jim Blaha who will continue to play an active role within the company and serve on the board of directors.. He previously served as president and CEO of Fairway Properties, a Colorado land developer and residential homebuilder. Mr. Greenwell was also senior vice president of sales and marketing for DecisionOne, a provider of multivendor computer maintenance services. Datria Systems' investors include Koch Ventures, Quest International Management, Four States Investment, and Greenwood Gulch Ventures. http://www.datria.com/ ======= VC Fund News ======= o Telesis & Capital Z Convergence Europe in Joint Fund Venture NEW YORK -- Capital Z Convergence Europe, a fund sponsored by Capital Z, and Telesis Investment Bank have established a joint investment vehicle co-managed by Telesis and Capital Z affiliated management firm Fusion Partners. Telesis Investment Bank is raising $50 million from local investors in Greece for the jointly managed fund based in Thessaloniki. Capital Z Convergence Europe Fund, which currently holds $75 million under management, will make co-investments and is looking to raise $300 million for investment in later stage telecommunications, financial services, media and entertainment, healthcare, and information technology companies. http://www.capitalz.com/ _____________________________________________ o Vista Ventures Gets $15 Million for Vista Ventures I IT Fund BROOMFIELD, Colo. -- Vista Ventures said it raised more than $15 million in commitments for its venture capital fund and has begun looking into investment opportunities in its target markets. Vista Ventures I, focused on early and development stage information technology and communications companies in the Rocky Mountain region, will make initial equity investments ranging from $250,000 to $2 million. With its affiliations with other venture funds, it plans to provide $5 to $50 million total funding to each portfolio company. http://www.vistavc.com/ _____________________________________________ o Legend Holdings Plans New Chinese Technology Venture Fund HONG KONG -- Legend Holdings announced it plans to form a new venture capital fund. The size of the fund was not disclosed, however, Legend Group Holding, a subsidiary of Legend Holding, said it would make an initial contribution of $25.3 million to the fund. The new fund is expected will go into operation sometime around April 2001. The fund will provide technology companies in Beijing's Zhongguancun area with start-up funding and management experience. http://www.legend-holdings.com/ _____________________________________________ o Indian Bank of Baroda to Invest in Venture Funds MUMBAI, India -- Bank of Baroda plans to invest $5.4 million in venture capital funds for investments in the IT field. The bank plans to invest the funds by March 2001 in up to five venture capital funds, both private and institutional. The bank has made one investment so far. http://www.bankofbaroda.com/ ======= VC Personnel ======= o Columbia Capital Adds Two Partners To Investment Team ALEXANDRIA, Va. -- Columbia Capital, a communications and information technology venture capital fund, said it appointed Arun Gupta and John Siegel Jr. as partners in the firm. Mr. Siegel joins Columbia from Morgan Stanley Dean Witter Capital Partners and Mr. Gupta comes from Carlyle Venture Partners. Columbia Capital has invested in more than 60 companies, and manages approximately $1.4 billion. http://www.colcap.com/ _____________________________________________ o Two Join Patricof As Venture Partners PALO ALTO, Calif. -- Investment firm Patricof & Co. Ventures, a member of the Apax Partners global network, said it appointed F.E. Weissman and Evangelos Simoudis as venture partners. Mr. Weissman was formerly vice president of strategy and corporate marketing for Verity, which provides information retrieval and portal software for electronic commerce and corporate Intranets. Mr. Simoudis previously was president and chief executive officer of Customer Analytics, an electronic customer relationship management company. http://www.patricof.com/ |||||||||||||||||||| Advertisement |||||||||||||||||||| P2P OR NOT P2P? We've heard distributed computing and peer-to-peer networks will change computing. But how? Dozens of companies are making bids for pieces of the P2P pie. Some of them will succeed, but many will fail. Industry Futures,one of five expert panels at Technology Outlook 2000, will examine the business plans and challenges in distributed computing: David P. Anderson, CTO, United Devices Shishir Mehrotra, President & CEO, Centrata Andreas Stavropoulos, Director, Draper Fisher Jurvetson Steve Stephansen, President & CEO, WebV2 Only at Technology Outlook 2000: The Future of Pervasive Computing December 4 and 5, San Francisco A VentureWire investment conference. http://www.tpsite.com/tp/conf/to2000/?vw=200011133 ||||||||||||||||||||||||||||||||||||||||||||||||||||||| SEND TO A FRIEND To subscribe to VentureWire, tell your friends and colleagues to go to: http://venturewire.net/ This copy of VentureWire may be distributed freely, provided that the distribution is without charge, that the issue is distributed complete and unaltered, and that all copies retain the Technologic copyright notice. This copy of VentureWire and the information within it, however, may not be reproduced, saved, or otherwise copied into a database without the prior written consent of Technologic Partners. _____________________________________________ TO SUBSCRIBE go to: http://venturewire.net/ To CHANGE your address, send your old and new e-mail address to: [email protected] To UNSUBSCRIBE, send e-mail to: [email protected] Send COMMENTS, QUESTIONS, or NEWS ITEMS to: [email protected] Entire Contents Copyright 2000 by Technologic Partners VentureWire is a Service Mark of Technologic Partners =====================================

dasovich-j/all_documents/3379.

dasovich-j

['[email protected]']

VentureWire People, Friday, October 26, 2001

high-tech management news <http://people.venturewire.com/> Published by Technologic Partners <http://www.technologicpartners.com> EXECUTIVE CHANGES FOR Friday, October 26, 2001 EXECUTIVE SEARCHES * VP OF SALES-SF BAY AREA * VP OF TELECOMMUNICATIONS SALES-IRVINE, CA * MANAGING DIRECTOR-DENVER, CO CEO HIRES ceo watch <http://people.venturewire.com/ceowatch.asp> SERVICES * VentureWire index <http://alert.venturewire.com/index.asp> LINKS * sponsor VentureWire people <http://people.venturewire.com/adv.asp> * place a classified ad <http://people.venturewire.com/specs.asp> * refer VentureWire <http://venturewire.gazooba.com/cid3723/tellafriend.html> * send news, tips, releases to [email protected] <mailto:[email protected]> * FAQ <http://people.venturewire.com/help.asp> YOUR ACCOUNT * change e-mail <http://people.venturewire.com/account.asp> * cancel VentureWire people <http://people.venturewire.com/account.asp> * feedback <http://people.venturewire.com/account.asp> * this newsletter mailed to you at: [email protected] SERVICES * VentureWire index <http://venturewire.com/index.asp> UPCOMING EVENTS * Outlook Conferences <http://www.tpsite.com/tp/conf/default.html> Venture Capital community and industry executives come together! healthcareoutlook <http://www.healthcareoutlook.com> San Francisco Airport Marriott, Burlingame, CA January 22, 2002 TOP MANAGEMENT * Original Management Team Departs at RLX * IntellectExchange Hires President and CEO; Raising Capital * Relativity Technologies Promotes Skip Yakopec to Pres, COO MARKETING & SALES * NuVox Taps Richard Frizalone as VP of Direct Sales OPERATIONS * Drug Developer BioStratum Names Seymour Mong VP of Research * Telelogue Promotes Robert Burke to COO * Amisys Promotes Several Management Members FINANCE * Electronic Delivery Firm PostX Names CFO and New VP * iSuppli Adds GET Exec John Zimmerman as CFO TECHNOLOGY * Molecular Mining Appoints Two to Executive Team * Kyma Technologies Names Ex-Intel Executive VP Engineering OTHER * Smarts Appoints David Przeracki VP of Legal Services TOP MANAGEMENT * Original Management Team Departs at RLX top mail <http://people.venturewire.com/o_mailer.asp?sid=IJQQMHJNII> HOUSTON, TEXAS -- Most of the original management team has left RLX Technologies, a supplier of Web servers founded earlier this year by ex-Compaq computer executives. Earlier this week VentureWire reported that Michael Swavely, formerly president and chief operating officer, had left the company last week, and that Gary Stimac, chairman and CEO, will step down from the CEO position. Company spokesperson Patrick Kimball confirmed that there have been additional executive departures. Among those leaving were chief financial officer, J Tempesta; vice president of development, Keith McAuliffe; vice president of systems engineering, Ronnie Ward; and vice president of business development, Bob Jackson. The company said it will seek replacements. A spokesperson said that the executives chose to leave the firm as RLX underwent restructuring. In August, the company laid off 17% of its staff, or 20 employees, citing a slow market for IT products. RLX Technologies has raised $59 million in financing from ComVentures, IBM, Ignition, Soros Private Equity Partners, and Sternhill Partners. <http://www.rlxtechnologies.com> * IntellectExchange Hires President and CEO; Raising Capital top mail <http://people.venturewire.com/o_mailer.asp?sid=ILHKKPHNII> BEDFORD, MASS. -- IntellectExchange, which assists companies in finding experts to solve business, technology, and research problems, said it appointed Jonathan Rubin as its first president and CEO. The new executive told VentureWire that the company is raising its last stage of seed financing. Mr. Rubin, 42, joins the company from E-Sync, where he was CEO. He was introduced to IntellectExchange through technology executive search firm the Onstott Group, based in Wellesley, Mass. He has also been named to the company's three-member board. The CEO said that the company is raising its final piece of seed funding for $1.5 million. He expects to close the round by the end of the year. The company has raised $2.5 million from individual investors to date. The money will be used for sales and marketing and product development. The company could go after its Series A as early as the second quarter of 2002, he said. Mr. Rubin said the company is in the early stages of talking to two different companies about acquiring them. Both companies approached IntellectExchange, he said, adding, that if the deals were to be done, they would be in the form of cash and stock. <http://www.intellectexchange.com> * Relativity Technologies Promotes Skip Yakopec to Pres, COO top mail <http://people.venturewire.com/o_mailer.asp?sid=MJNMHIINII> RESEARCH TRIANGLE PARK, N.C. -- Relativity Technologies, which develops software for integrating legacy systems with new technology and Internet applications, said it promoted Skip Yakopec to president and chief operating officer. Mr. Yakopec, 46, joined the company in January 2001 as vice president and general manager of the Americas and was named COO in August. No one has held the position of president prior to Mr. Yakopec's appointment. Mr. Yakopec does not hold a board seat as of yet. Relativity Technologies has raised $12 million to date from Intel, Nichimen America, NIIT, Noro-Moseley Partners, and Wakefield Group, and expects to be profitable within 90 to 100 days. <http://www.relativity.com> MARKETING & SALES * NuVox Taps Richard Frizalone as VP of Direct Sales top mail <http://people.venturewire.com/o_mailer.asp?sid=HHNKPHHNII> ST. LOUIS -- NuVox Communications, a facilities-based integrated communications provider, said it named Richard R. Frizalone as vice president of direct sales for the company. Mr. Frizalone joins NuVox from Colo.com, where he served as senior vice president of sales and marketing. At NuVox he will be responsible for leading the efforts of more than two dozen direct sales teams. Bank of America, Boston Millennia Partners, Brookes Investments, Centennial Ventures, CIBC World Markets, Don Investment Group, First Union Capital Partners, Meritage Private Equity Fund, Moore Capital Management, Norwest Equity Partners, OneLiberty Ventures, Richland Ventures, Telecom Partners, Toronto Dominion Capital, and Whitney & Co, have funded the company. <http://www.nuvox.com> OPERATIONS * Drug Developer BioStratum Names Seymour Mong VP of Research top mail <http://people.venturewire.com/o_mailer.asp?sid=LNLLNJJNII> RESEARCH TRIANGLE PARK, N.C. -- BioStratum, a development of drugs based on basal lamina research, said it named Seymour Mong vice president of research. Most recently he served as vice president of biotechnology at Structural BioInformatics, where he was also a co-founder. BioStratum has received more than $41 million from undisclosed investors through six rounds to date. Founded in 1994, the company has approximately 31 employees. <http://www.biostratum.com> * Telelogue Promotes Robert Burke to COO top mail <http://people.venturewire.com/o_mailer.asp?sid=IJOIMIHNII> ISELIN, N.J. -- Telelogue, which provides telecommunications services that make use of automated speech recognition, said it promoted Robert Burke to chief operating officer. He previously served as its vice president of corporate development and general counsel. Before Telelogue, he was a managing partner at iPoint Ventures. Telelogue is backed by Pequot Capital Management and iPoint. <http://www.telelogue.com> * Amisys Promotes Several Management Members top mail <http://people.venturewire.com/o_mailer.asp?sid=NQHNMKHNII> ROCKVILLE, MD. -- Amisys, an information management technology company for health care payers, announced new management promotions. Kathleen McCarthy was appointed chief operating officer. Ms. McCarthy joined the company in 1993 and most recently served as general manager. Cheryl Wint was named vice president of customer support and services. Ms. Wint joined the company in 1994 and most recently served as executive director of product support for the company's call center. Al Gain was named vice president of product development, most recently serving as executive director of product development. Amisys was acquired by private equity firm Platinum Equity in July and was combined with another Platinum company Synertech Health System Solutions. <http://www.synertechsystems.com> FINANCE * Electronic Delivery Firm PostX Names CFO and New VP top mail <http://people.venturewire.com/o_mailer.asp?sid=LJOJPMINII> CUPERTINO, CALIF. -- PostX, a provider of a provider of electronic delivery of confidential documents to desktops, said it named Cliff Lundberg as chief financial officer and Ramesh Ragu as senior vice president of professional services. Mr. Lundberg previously served as chief executive officer of Certainty Solutions while Mr. Ragu is the former vice president of professional services-Americas and APAC of Inktomi. PostX has received funding from Mayfield Fund and Alloy Ventures. <http://www.postx.com> * iSuppli Adds GET Exec John Zimmerman as CFO top mail <http://people.venturewire.com/o_mailer.asp?sid=LLPQIJHNII> EL SEGUNDO, CALIF. -- iSuppli, a provider of procurement and supply-chain management services for the electronic components industry, said it named John Zimmerman as chief financial officer. Prior to joining the company, Mr. Zimmerman served as CFO and vice president of administration at GET Manufacturing. iSuppli is backed by AC Ventures, CMEA Ventures, Loewenthal Capital Management, NeoCarta Ventures, and Tyco Ventures. <http://www.isuppli.com> TECHNOLOGY * Molecular Mining Appoints Two to Executive Team top mail <http://people.venturewire.com/o_mailer.asp?sid=IPJNQIJNII> RALEIGH, N.C. -- Molecular Mining, which focuses on the exploration, inference, and prediction of molecular networks derived from gene expression, proteomics, and single nucleotide polymorphisms data, said it appointed Mary Jane Cunningham, former director of pharmacogenomics at Genometrix, as its new director of discoveries and Jim Sullivan, formerly with Lion Bioscience where he dealt with Northeastern U.S. sales and business development, as its new director of North American Sales. Molecular Mining is backed by CDP Sofinov, Business Development Bank of Canada, Cardinal Partners, CMDF Queen's Scientific Breakthrough Fund, and S.R. One Limited. <http://www.molecularmining.com> * Kyma Technologies Names Ex-Intel Executive VP Engineering top mail <http://people.venturewire.com/o_mailer.asp?sid=QNQOPJHNII> RESEARCH TRIANGLE, N.C. -- Kyma Technologies, which develops and supplies nitride substrates, said it named John Bumgarner, former process integration group leader at Intel, as its new vice president of engineering. Kyma is backed individual investors. <http://www.kymatech.com> OTHER * Smarts Appoints David Przeracki VP of Legal Services top mail <http://people.venturewire.com/o_mailer.asp?sid=QPLHNMHNII> WHITE PLAINS, N.Y. -- System Management ARTS (Smarts), a provider of real-time analysis software that identifies infrastructure problems, analyzes their impacts, and automates the responses, said David Przeracki has joined the company as its new vice president of legal services. Prior to joining Smarts, he was vice president and general counsel at XcelleNet. Smarts' investors include Bessemer Venture Parnters and Soros Private Equity Partners. <http://www.smarts.com> EXECUTIVE SEARCHES VP of Sales--IT services--SF Bay Area Lohika Systems, Inc., a recently-funded IT services start-up headquartered in Silicon Valley, is seeking a hands-on VP of Sales to build and manage its sales organization. This person should have a proven record of generating sales and exceeding sales targets, possess excellent networking ability, be able to prospect and manage clients throughout the sales cycle, be able to develop a focused sales strategy, and have experience recruiting and managing a sales team. Responsibilities: * Manage and execute the entire sales cycle from generating prospects and cold calling to closing the sale * Sell strategically to key decision-makers (CFO, COO, CIO) and tactically at the operational level * Cultivate and maintain strong client relationships * Build and manage a sales team * Develop a well-targeted sales strategy * Work closely with our IT professionals to close the sale Requirements: * Minimum of 5 years of sales management experience * Proven record of consistently meeting and exceeding sales quota * Previous history of selling high-tech products, IT consulting services, or software * Have experience selling to key decision makers * Excellent networking ability * Bachelor's degree or equivalent * Excellent oral and written communication and presentation skills coupled with strong negotiation skills e-mail: [email protected] <mailto:[email protected]> company: Lohika Systems, Inc. [top] VP of Telecommunications Sales--Wireless and Voice Applications--Irvine, CA AdaptiveInfo provides state-of-the-art software infrastructure for automatically personalizing wireless and voice applications. Our products enable high-quality mobile applications that overcome the constraints of mobile devices by learning each individual?s preferences. This is a growth opportunity in privately held company located in a research park on a University of California campus. VP of TELECOMMUNICATIONS SALES Duties and Responsibilities: * Sell to top tier Telecommunications accounts with a high degree of independence. * Sell at a strategic level, developing and implementing strategic business plans. * Articulate strategy, products and services to customers and prospects. * Identify market segments, create and execute sales strategy. * Provide feedback on an ongoing basis with market trends and customer needs Required Qualifications: * 4+ years selling high-end software or services to the telecommunications industry. * A record of sustained sales success identifying and closing new customer accounts. * Start-up experience is a plus. * Ability to work with other executives in a collegial, team oriented environment. * Excellent negotiating, speaking, writing and listening skills. * BA degree in a business/technical e-mail: [email protected] <mailto:[email protected]> company: AdaptiveInfo [top] Managing Director--VENTURE CAPITAL--Denver, CO Denver-based investment management company seeks managing director to lead a venture capital firm focused on early stage Colorado investments. Candidate must have at least 5 years of direct investment experience, a demonstrable track record, and actively participate in capital raising efforts. The ideal candidate will manage the investment of $30 to $50 million in early stage opportunities in the region. Competitive compensation structure including a unique opportunity for ownership and a carried interest in the fund. Qualifications * A minimum of five years experience in early-stage investing focusing on the technology, telecommunications, or life science industries * Proven history of venture investing with a definitive record of returns * Experience fundraising from both institutional investors and high net worth individuals * Expertise managing portfolio company investments * Excellent communication and presentation skills * Educational qualifications important e-mail: [email protected] <mailto:[email protected]> company: [top] To cancel, change, or update your subscription: <http://people.venturewire.com/account.asp>

dasovich-j/deleted_items/735.

dasovich-j

['[email protected]', '[email protected]', '[email protected]']

Non-core state monitoring

One more that I meant to send. Have a good weekend! ----- Forwarded by Elizabeth Linnell/NA/Enron on 06/22/2001 10:57 AM ----- Elizabeth Linnell 06/20/2001 08:22 AM To: Alan Comnes/Enron@EnronXGate cc: Subject: Non-core state monitoring Enron has hired the firm of Stateside Associates to provide State Legislative Monitoring and Regulatory Forecasting services on those states that aren't currently being actively monitored by the department. Stateside Associates is based in Arlington, Virginia and is the largest state and local issue management firm. It has 50 employees and over 13 years of experience providing high quality information resources. The professionals who monitor state legislation are all former state legislative staff members and Regulatory Forecasting is provided by attorneys familiar with our issues. We will receive an updated Legislative and Regulatory report every two weeks. Everyone on the attached notification list will receive an email alerting us that the report has been updated. If you're not on the list and would like to be added please let me know. The list is currently set up geographically, but we can add an issue-based distribution if needed. At any time, we can access our report by clicking www.stateside.com/istatelink or by following the site link from the Gov't Affairs intranet site. The Enron logon is phoenix06 (not case sensitive). This logon must not to be shared outside Enron. We will also receive email alerts about our issues. These will be sent to the designated recipients based on the issue or geography. Because interaction with us is very important to Stateside, any Enron employee may contact Stateside Associates for additional information (Special Request) pertinent to the monitoring service. For example, you may want to learn more about who is lobbying for a bill, what the deadlines are for a regulatory activity or to receive a list of who testified at a hearing. This follow-up research is part of the Stateside Associates' service. It will not result in any additional fees. However, if a Special Request is made that is outside the scope of the Enron program, it will be addressed with me prior to the commencement of any work. Again, if Stateside responds to your request, there will be no additional fee - so please use this feature. Our principal Stateside Associates' contact is Todd Cohn, Manager, Legislative Information Services. He can be reached at [email protected] or 703-525-7466. The Enron iStateLink website also features a roster of other Stateside professionals, including their email addresses. You can learn more about Stateside on their website at www.stateside.com. I hope you find this service useful and look forward to your feedback. Distribution list: Covered states: Arizona Colorado Connecticut Idaho Kansas Kentucky Maine Massachusetts Nebraska New Hampshire New Mexico North Carolina North Dakota Rhode Island South Carolina South Dakota Utah Vermont Wyoming Covered issues: Divestiture Electric Utility Regulation Electricity Deregulation Electricity Market Restructuring Licensing Market Entry and Exit Requirements Stranded Costs Aggregation Consumer Education and Protection relative to Electricity Deregulation Fuel Adjustment Clauses (All forms) Generation Siting Low Income Energy Assistance Programs Net Metering Pilot Programs Provider of Last Resort Emissions Renewable Portfolio Standards System Benefit Charges

kean-s/internet_sites/110.

kean-s

['[email protected]', '[email protected]', '[email protected]', '[email protected]', '[email protected]', '[email protected]']

Bush Admin to Stay the Course on Price Caps: Latest Update,

This paraphrased from Tom Briggs, Enron Govt Affairs, DC: The Bush Administration has indicated that it will not support any sort of legislation containing price caps. Although something could get out of the Senate, it won't go anywhere without Administration support. Thus, by default, the just and reasonable standard becomes the FERC's evolving rate-screen process, which, for imports into California, is "daily spot market gas prices and an average 12,000 Btu/kWh heat rate." The standard for in-state resoruces is higher, more like 18,000 Btu/KwH. Instead, expect to see legislation that will take short-term actions to increase supply and decrease demand. This could include demand buy down programs, and laws the force utility financial solvency. Every day is a new day but I am told this will likely be the status quo until the congressional recess is over (recess is from 6-30 April). Alan Comnes

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Enron Mentions

USA: UPDATE 1-Energy casts some light in gloomy profit season. Reuters English News Service, 10/16/01 USA: Energy permits some light in gloomy profit season. Reuters English News Service, 10/16/01 USA: INTERVIEW-Enron says may partner or sell broadband business. Reuters English News Service, 10/16/01 USA: UPDATE 6-Enron posts loss after taking $1 bln in charges. Reuters English News Service, 10/16/01 Enron Has Third-Quarter Loss After Expansion Fails (Update9) Bloomberg, 10/16/01 USA: UPDATE 1-Energy casts some light in gloomy profit season. By Per Jebsen 10/16/2001 Reuters English News Service (C) Reuters Limited 2001. NEW YORK, Oct 16 (Reuters) - Energy and mining companies have provided a few glimmers of light but otherwise third-quarter results on Monday and Tuesday are helping to fulfill expectations for the worst quarter in 10 years. Technology bellwethers Intel Corp. and International Business Machines Corp. , which reported sharply lower profits, did little to buck the downward trend. FirstEnergy Corp. , an owner of electric utilities in northern Ohio and western Pennsylvania, on Tuesday reported a better-than-expected 18 percent increase in earnings, citing increased electricity sales and lower costs. Mining company Freeport-McMoRan Copper & Gold Inc. reported a third-quarter profit that reversed a year-earlier loss, due to higher gold production. Yet such good news is proving more the exception than the rule. Top chipmaker Intel said on Tuesday after the close of exchanges that profits tumbled 77 percent as it suffered from slowing global economies and weak personal computer sales. PC maker IBM announced its first quarterly earnings decline since the end of 1999 as weak sales continued to weigh on profits. Energy giant Enron Corp. posted a quarterly loss after taking $1.01 billion in charges. Companies from a range of industries reported profit shortfalls, including Caterpillar Inc. , the world's largest maker of construction equipment, and Unisys Corp. , a computer company. "The earnings season is one that the market has digested and in some cases predigested as being just ugly, and therefore horrible or ugly results are not met with surprise at this point," said Michael Holland, who runs the $65 million Holland Balanced Fund. FOCUS NOT ON EARNINGS "The focus (for investors) has been and continues to be outside of earnings, that is, the war on terrorism specifically," he said. Dynegy Inc. , a natural gas and power marketer and trader, on Monday said third-quarter earnings rose 62 percent as its backbone wholesale energy business nearly doubled its returns. While Enron posted a loss, it reported that its profit excluding charges rose 35 percent due to strong performance in its core energy business. "Energy companies manage to earn pretty good money even when prices are down," said Jon Burnham, portfolio manager for the $170 million Burnham Fund. "These are good, well-financed companies." Caterpillar helped to lead a litany of earnings woes. The Peoria, Illinois-based company on Tuesday said its third-quarter earnings fell 5 percent because of higher expenses and less efficient manufacturing. The company also said it expects fourth-quarter revenues to be down slightly from the year-ago quarter, with full-year profit down 10 percent to 15 percent. It blamed economic uncertainty in the wake of last month's attacks for the expected shortfall, but added that 2002 sales will be at least flat to up slightly from 2001 levels. Unisys on Monday reported its third-quarter profits plunged by 50 percent due to weakening demand for high-end server computers and systems integration work. It said it would cut 3,000 jobs and slashed its fourth-quarter outlook. TAKING GRIM TIDINGS IN STRIDE Other companies that have reported profit drops include Novellus Systems Inc. , a maker of semiconductor production equipment, and Charles Schwab Corp. , the top U.S. discount brokerage. Schwab said Tuesday that quarterly earnings fell 51 percent as customers avoided stocks all summer, although a surge in September trading pointed to better times ahead. Money managers are taking the grim profit tidings in stride. "Most of these earnings situations are in these stocks," said Burnham. "Barring unforeseens in the national and international situation, the market should work its way higher over the next 6 to 9 months." "Whatever earnings are in this quarter isn't going to matter too much, except in cases where they're considerably better than expected or worse," he said. This week is the busiest for earnings with 15 Dow Jones industrial average and 180 Standard & Poor's 500 Index companies scheduled to report. Profits for the companies in the index are expected to shrink by 22.8 percent, according to market research firm First Call/Thomson Financial, making it the worst quarter since the second quarter of 1991. That's down from an expected 6.2 percent decline at the beginning of the quarter, and a 14.7 percent drop expected on Sept. 10, said First Call analyst Joe Cooper. Some 85 S&P 500 companies so far have reported quarterly results. Of these, 50 companies have beaten the most recent, often lowered Wall Street expectations while 26 have matched and nine have missed forecasts. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. USA: Energy permits some light in gloomy profit season. By Per Jebsen 10/16/2001 Reuters English News Service (C) Reuters Limited 2001. NEW YORK, Oct 16 (Reuters) - Energy and mining companies provided a few glimmers of light but otherwise third-quarter results on Monday and Tuesday are helping to fulfill expectations for the worst quarter in 10 years. FirstEnergy Corp., an owner of electric utilities in northern Ohio and western Pennsylvania, on Tuesday reported a better-than-expected 18 percent increase in earnings, citing increased electricity sales and lower costs. Mining company Freeport-McMoRan Copper & Gold Inc. reported a third-quarter profit that reversed a year-earlier loss, due to higher gold production. Yet such good news is proving more the exception than the rule. Energy giant Enron Corp..ENE) posted a quarterly loss after taking $1.01 billion in charges. Companies from a range of industries reported profit shortfalls, including Caterpillar Inc., the world's largest maker of construction equipment, and Unisys Corp., a computer company. "The earnings season is one that the market has digested and in some cases predigested as being just ugly, and therefore horrible or ugly results are not met with surprise at this point," said Michael Holland, who runs the $65 million Holland Balanced Fund. "The focus (for investors) has been and continues to be outside of earnings, that is, the war on terrorism specifically," he said. Investors are likely to pay attention to the earnings reports from tech bellwethers International Business Machines Corp., a computer maker, and chipmaker Intel Corp.. These are scheduled to be released on Tuesday after the close of trading. Dynegy Inc., a natural gas and power marketer and trader, on Monday said third-quarter earnings rose 62 percent as its backbone wholesale energy business nearly doubled its returns. While Enron posted a loss, it reported that its profit excluding charges rose 35 percent due to strong performance in its core energy business. "Energy companies manage to earn pretty good money even when prices are down," said Jon Burnham, portfolio manager for the $170 million Burnham Fund. "These are good, well-financed companies." Caterpillar helped to lead a litany of earnings woes. The Peoria, Illinois-based company on Tuesday said its third-quarter earnings fell 5 percent because of higher expenses and less efficient manufacturing. The company also said it expects fourth-quarter revenues to be down slightly from the year-ago quarter, with full-year profit down 10 percent to 15 percent. It blamed economic uncertainty in the wake of last month's attacks for the expected shortfall, but added that 2002 sales will be at least flat to up slightly from 2001 levels. Unisys on Monday reported its third-quarter profits plunged by 50 percent due to weakening demand for high-end server computers and systems integration work. It said it would cut 3,000 jobs and slashed its fourth-quarter outlook. Other companies that have reported profit drops include Novellus Systems Inc., a maker of semiconductor production equipment, and Charles Schwab Corp., the top U.S. discount brokerage. Schwab said Tuesday that quarterly earnings fell 51 percent as customers avoided stocks all summer, although a surge in September trading pointed to better times ahead. Money managers are taking the grim profit tidings in stride. "Most of these earnings situations are in these stocks," said Burnham. "Barring unforeseens in the national and international situation, the market should work its way higher over the next 6 to 9 months." "Whatever earnings are in this quarter isn't going to matter too much, except in cases where they're considerably better than expected or worse," he said. This week is the busiest for earnings with 15 Dow Jones industrial average and 180 Standard & Poor's 500 Index .SPX) companies scheduled to report. Profits for the companies in the index are expected to shrink by 22.8 percent, according to market research firm First Call/Thomson Financial, making it the worst quarter since the second quarter of 1991. That's down from an expected 6.2 percent decline at the beginning of the quarter, and a 14.7 percent drop expected on Sept. 10, said First Call analyst Joe Cooper. Some 85 S&P 500 companies so far have reported quarterly results. Of these, 50 companies have beaten the most recent, often lowered Wall Street expectations while 26 have matched and nine have missed forecasts. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. USA: INTERVIEW-Enron says may partner or sell broadband business. 10/16/2001 Reuters English News Service (C) Reuters Limited 2001. HOUSTON, Oct 16 (Reuters) - Energy giant Enron Corp. said on Tuesday it is reviewing strategic options for its loss-making broadband telecommunications business, which could involve selling the business or finding a partner. "In addition to us looking at our business on a standalone business, we clearly have entertained some discussions on other possibilities," Chief Executive Officer Ken Lay told Reuters in a telephone interview. Earlier on Tuesday, Enron reported that one-time charges of $1.01 billion for broadband and other businesses outside its core energy operations pushed the company to a third-quarter net loss of $638 million, its first quarterly loss in more than four years. Future options for the broadband business include "sale, partnership, all kinds of possibilities" he said. "We still think over time that it will be a valuable business," Lay said, but for now the broadband market is in a "total meltdown", he added. Enron's broadband unit, which owns an 18,000 mile network, posted a loss of $80 million for the third quarter, but Lay said losses should be smaller in subsequent quarters. Enron launched its broadband business last year, predicting that network capacity would one day be traded like natural gas or electricity, but it has recently admitted that it overestimated the market's early potential and has scaled down its operations. Enron's stock rose by 87 percent last year, driven by enthusiasm for the broadband plans and the success of the EnronOnline Internet energy and commodity trading platform. But the stock has fallen some 59 percent so far this year as sentiment toward the broadband project soured, CEO Jeff Skilling resigned after only six months in the job and wrangling continued over Enron's stalled Dabhol power plan project in India. Enron shares on Tuesday closed up 67 cents, or 2.02 percent, at $33.84. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. USA: UPDATE 6-Enron posts loss after taking $1 bln in charges. By C. Bryson Hull 10/16/2001 Reuters English News Service (C) Reuters Limited 2001. WASHINGTON, Oct 16 (Reuters) - Enron Corp. on Tuesday reported its first loss in more than four years after taking $1.01 billion in charges on ill-fated investments, including water and telecommunications services, which it said have clouded the strength of its core energy businesses. Enron, North America's biggest marketer and trader of natural gas and power, said the charges were an attempt to put its house in order after a tumultuous year in which a new chief executive suddenly resigned and the company's stock lost two-thirds of its value as once enthusiastic investors lost faith in the company. "What we've tried to do here is clean up anything that we thought needed cleaning up to get these distractions out of the way," Chief Executive Officer Ken Lay said in a conference call. Lay reassumed the CEO mantle at Enron after his successor, Jeff Skilling, resigned in August after only six months at the helm. Houston-based Enron reported a third-quarter net loss of $638 million, or 84 cents a share, compared with net income of $271 million, or 34 cents a share, in the same period of 2000. It was Enron's first loss since the second quarter of 1997. The charges covered the company's loss-making broadband telecommunications business, its troubled water affiliate Azurix, and New Power Co., Enron's retail electricity joint-venture with AOL/Time Warner and IBM. Commerzbank Securities analyst Andre Meade said it would probably take Enron a few more quarters to rebuild confidence in the company which was a Wall Street favorite just 12 months ago. "They do a couple of things very well and if they stick to their knitting, they're a solid company, but they have stumbled when they strayed further afield," said Meade. Enron's stock closed 67 cents higher at $33.84 on Tuesday, but for the year it is down about 59 percent, underperforming the Standard & Poor's utilities index .SPU), which has fallen some 23 percent over the same period. ILL-FATED BUSINESSES Originally a natural gas pipeline operator, Enron seized on opportunities created by the deregulation of U.S. energy markets to become the nation's dominant wholesale marketer and trader of natural gas and electricity. The company moved into the water services business in 1998 by acquiring Britain's Wessex Water and forming Azurix, a unit which Enron took public in 1999 but had to buy back this year after it failed to meet performance targets and its stock price tumbled. Enron helped set up New Power Co. and take it public last year but its stock has since fallen from about $28 per share to less than $2 as companies have found it hard to make a profit in deregulated U.S. residential electricity markets. Enron also launched a broadband telecommunications business last year, predicting that network capacity would one day be traded like natural gas or electricity, but it has recently admitted that it overestimated the market's early potential. Enron's stock soared past sector peers last year when it posted a gain of 87 percent, driven by enthusiasm for the broadband plans and the success of its EnronOnline Internet energy and commodity trading platform. But the stock has fallen sharply this year as broadband sentiment soured, Skilling resigned and wrangling continued over Enron's stalled Dabhol power plan project in India. Enron's third-quarter earnings before one-time charges rose to $393 million, or 43 cents a share, from $292 million, or 34 cents a share, meeting analysts' expectations of 42 to 45 cents a share, according to Thomson Financial/First Call. The company reaffirmed its previously stated earnings targets of 45 cents a share for the fourth quarter, $1.80 for all of 2001 and $2.15 for all of 2002. DEBT ON CREDIT REVIEW Rating agency Moody's Investors Service on Tuesday said it had placed all of Enron's long-term debt obligations on review for a possible downgrade. The writedowns would reduce Enron's equity base, increase its nominal financial leverage and materially impact its earnings, Moody's said. Enron's third-quarter earnings report showed that income at its wholesale marketing and trading division, the company's backbone moneymaker, grew 28 percent. The division, which deals primarily in electricity and natural gas, saw pretax income rise to $754 million from $589 million in the third quarter of 2000. All of the income growth in the segment came from Enron's gas and power trading and marketing operations in the Americas, where income grew to $701 million from $536 million last year. The European segment, which includes gas and power operations there and other commodity sales like metals, coal and crude oil, remained flat at $53 million amid lower volatility. The latest earnings report marked the first time that Enron has provided a financial breakdown of the European and Americas wholesale operations. In doing so, Lay delivered on a promise he made after Skilling's departure: that he would make Enron's financial reporting more transparent. Many analysts and investors had grumbled about a lack of clarity from Enron. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Enron Has Third-Quarter Loss After Expansion Fails (Update9) 2001-10-16 16:29 (New York) Enron Has Third-Quarter Loss After Expansion Fails (Update9) (Adds in sixth paragraph that losses are equal to 70 percent of Enron's profits over the last four quarters. Closes shares.) Houston, Oct. 16 (Bloomberg) -- Enron Corp., the largest energy trader, had a $618 million loss in the third quarter after expansion into water, telecommunications and retail-energy sales cost the company $1.01 billion. The loss was 84 cents a share after payment of preferred dividends, Enron said. Net income a year earlier was $292 million, or 34 cents. Revenue rose 59 percent to $47.6 billion. Investors have sent Enron stock down 60 percent this year on concern about investments outside energy trading and natural-gas pipelines. Some investors praised Kenneth Lay, Enron's chairman and chief executive officer, for acknowledging the failure of the new businesses. Others said they're not confident all the bad news is out. ``What is disconcerting is that they didn't do this sooner,'' said Donald Coxe, manager of the $352 million Harris Insight Equity Fund. ``If you kill one cockroach in the kitchen, it doesn't mean there aren't more.'' Investors have questioned Enron's financial reporting in the past year, especially after Jeffrey Skilling's resignation as CEO in August. Skilling, who helped Lay transform Enron from a gas- pipeline company into the top competitor in energy trading, said he left for personal reasons. Investors said they weren't confident Enron was detailing all its problems. Failed Businesses The $1.01 billion in losses, which total $1.11 a share, are equal to 70 percent of Enron's $1.45 billion in profits over the past four quarters. Included were $544 million for losses on investments in New Power Co., a venture formed with AOL Time Warner Inc. and International Business Machines Corp. New Power competes for energy sales in states that allow consumers to choose power and gas suppliers as they do long-distance phone companies. The $544 million also includes losses from the Enron unit that trades space, known as bandwidth, on fiber-optic networks, as well as for the ``early termination of certain structured finance arrangements'' with an undisclosed ``entity.'' Enron wouldn't be more specific. Enron said restructuring the fiber-optic unit would cost another $180 million, including severance pay to 500 fired workers. The business collapsed this year along with the fortunes of the dot-com companies that were expected to be some off its biggest customers. The declining value of assets owned by Azurix Corp., its water and sewage treatment business, will cost $287 million, Enron said. Enron might take a first-quarter ``adjustment'' of less than $200 million because of accounting changes related to goodwill, Lay said in an interview. ``If we thought there were any other significant concerns, we would have taken care of them today,'' Lay said. Excluding Losses Minus the losses, Enron would have earned $393 million, or 43 cents a share, up 35 percent from the year-earlier period. That matched the average estimate of analysts surveyed by Thomson Financial/First Call. Enron has averaged quarterly profit increases of 31 percent for the past year. Its wholesale services business, which includes energy trading, had income before interest, minority interests and taxes of $754 million, up 28 percent from a year earlier. Shares of Enron rose 67 cents to $33.84. Earlier, the stock had risen as much as 5.2 percent to $34.90. ``There's a sigh of relief that Enron's core businesses, its energy merchant businesses, are OK,'' said Roger Hamilton, who helps manage John Hancock's Value funds, which own 600,000 shares. Enron said it still expects to earn 45 cents a share in the fourth quarter, $1.80 for the full year and $2.15 in 2002. `Ridiculous Investments' At one time, Enron pinned high hopes on the businesses that contributed to the $1.01 billion in losses. Enron spent $2.8 billion in 1998 for the U.K.'s Wessex Water, from which Azurix emerged. Enron sold shares to the public in 1999, and then bought back the company this year after Azurix failed in its strategy of buying up water companies and winning large projects. In August, Enron agreed to sell Azurix's North American business to American Water Works Inc. for $150 million. In February 2000, Lay said trading bandwidth could become the company's fastest-growing business. In the latest quarter, the bandwidth unit's loss before interest, minority interests and taxes widened to $80 million from $20 million a year earlier. Revenue plunged to $4 million from $162 million. ``You can make the case that Jeff Skilling leaving was for the best,'' John Hancock's Hamilton said. ``Under him, they built the best trading operation while also making all these ridiculous investments.'' While admitting its poor choices, Enron also supplied more information this quarter about how it makes money. The company gave results of individual commodity-trading desks, including coal, forest products and steel. ``I liked that they broke out the different commodities,'' Hamilton said. ``I think Lay has gotten the message loud and clear, and that the effort is there.''

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Enron Mentions

USA: UPDATE 1-Enron third-quarter earnings rise. Reuters English News Service, 10/16/01 Enron Has Loss of 84 Cents a Share in Third Quarter (Update2) Bloomberg, 10/16/01 OUTLOOK Enron Q3 EPS 43 cents vs 34 AFX News, 10/16/01 Reliant Hires Merrill to Find Buyer for Dutch Power Producer Bloomberg, 10/16/01 India: IDBI signals SOS for Rs 3,000-cr equity Business Line (The Hindu), 10/16/01 INDIA: Tata Power Q2 net up 74 pct, beats f'cast. Reuters English News Service, 10/16/01 USA: UPDATE 1-Enron third-quarter earnings rise. 10/16/2001 Reuters English News Service (C) Reuters Limited 2001. HOUSTON, Oct 16 (Reuters) - Energy trading giant Enron Corp. said on Tuesday its third-quarter earnings rose as its core wholesale marketing and trading division delivered strong returns. The company said earnings rose to $393 million, or 43 cents per share, from $292 million, or 34 cents per share, a year earlier. The company reported a share loss of 84 cents after $1.01 billion of nonrecurring charges. "After a thorough review of our businesses, we have decided to take these charges to clear away issues that have clouded the performance and earnings potential of our core energybusinesses," said Kenneth Lay, Enron chairman and chif executive officer. Enron's non-recurring charges included $287 million related to the write-down of its troubled water venture, Azurix, as well as $544 million writedown related to various investments including its retail electricity provider New Power Co. and $180 million related to restructuring of its broadband operations. Analysts polled by Thomson Financial/First Call had expected earnings of 42 cents to 45 cents per share, with a mean estimate of 43 cents. The results met expectations for a rocky quarter that included the surprise departure of President and Chief Executive Jeff Skilling in August, after just six months at the helm. Enron shares closed on Monday at $33.17, down $2.64 or 7.3 percent on the New York Stock Exchange. So far this year, the stock has fallen some 60 percent, far worse than the 25 percent loss of the Standard & Poor's utilities index . Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Enron Has Loss of 84 Cents a Share in Third Quarter (Update2) 2001-10-16 07:45 (New York) Enron Has Loss of 84 Cents a Share in Third Quarter (Update2) (Adds profit excluding charges in fourth paragraph.) Houston, Oct. 16 (Bloomberg) -- Enron Corp., the largest energy trader, said it had a third-quarter loss after taking $1.01 billion in charges for restructuring, investment losses, and the planned sale of a water business. The loss was $618 million, or 84 cents a share after preferred-dividend payments, Houston-based Enron said in a statement. A year earlier, Enron had net income of $292 million, or 34 cents. Revenue rose 59 percent to $47.6 billion from $30 billion. The charges totaled $1.11 a share. They included $287 million for asset impairments by water company Azurix Corp., $180 million to restructure the company's unit that trades fiber-optic bandwidth and $544 million for losses on investments including New Power Co., a retail energy-sales venture. Excluding the charges, Enron said it would have earned $393 million, or 43 cents a share. That matched the average estimate of analysts surveyed by Thomson Financial/First Call. Enron said it still expects to earn 45 cents a share in the fourth quarter, $1.80 for the full year and $2.15 in 2002. (Enron will hold a conference call to discuss third-quarter earnings at 10 a.m. New York time. Log on at http://www.enron.com and follow the directions to the ``Investors'' section.) OUTLOOK Enron Q3 EPS 43 cents vs 34 10/16/2001 AFX News (c) 2001 by AFP-Extel News Ltd NEW YORK (AFX) - Enron Corp is expected to report later today third-quarter earnings per share of 43 cents, compared with 34 cents a year earlier, according to the First Call/Thomson Financial consensus of 17 brokers. The integrated energy company is expected to meet near-consensus results driven by its wholesale services division, analysts said. Montgomery Securities analyst Daniel Tulis is calculating third-quarter EPS of 42 cents, 1 cent below consensus. Full-year EPS stands at 1.85. Enron's third quarter was marked by the unexpected departure of chief executive Jeff Skilling, for personal reasons, with Chairman Ken Lay reassuming the key position. Lay is likely to remain in the position until it is filled within 12-18 months, Tulis said. The company remains embroiled in arbitration proceedings in India after its 2.9 bln usd Dabhol power plant in India was closed. The plant's sole client, the Maharashtra State Electricity Board (MSEB), failed - and later refused - to pay bills that now total about 45 mln usd. blms/gc For more information and to contact AFX: www.afxnews.com and www.afxpress.com Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Reliant Hires Merrill to Find Buyer for Dutch Power Producer 2001-10-16 05:45 (New York) Reliant Hires Merrill to Find Buyer for Dutch Power Producer Amsterdam, Oct. 16 (Bloomberg) -- Reliant Energy Inc., the owner of Houston's utility, said it hired Merrill Lynch & Co. to find a buyer for its Dutch power-generation business, two years after acquiring the company from the government for $2.3 billion. Reliant has already been approached by possible buyers, said Clyde Moerlie, a spokesman for Reliant Energy Europe. The unit, which doesn't have any household customers, earned $9 million in the second quarter compared with $26 million a year earlier. The U.S. company may struggle to get the price it paid for the Utrecht-based unit, formerly known as UNA, analysts said, on expectations heightened competition will erode profit further and as utilities increasingly seek customers as well as power plants. In the Dutch generation market, ``there aren't many opportunities, but prices will fall to much lower levels as growing competition pushes down tariffs,'' said Steven de Proost, an analyst at Delta Lloyd Securities in Antwerp. Houston-based Reliant paid 2.9 times sales for UNA in 1999, while Electrabel SA, Belgium's dominant power provider, paid 2.7 times sales for Epon, the biggest utility in the Netherlands. E.ON AG of Germany paid 1.6 times sales the same year for the generator NV Electriciteitsbedrijf Zuid-Holland, or EZH. Reliant joins rivals TXU Corp. and Edison International in reassessing its European business amid disappointing earnings. Reliant in July tied the second-quarter profit drop in Europe to increased competition and falling margins in the Dutch market. Enron Cuts Enron Corp. said last week it will cut 10 percent of its European workforce, while Edison Mission Energy agreed to sell two U.K. power plants to American Electric Power Co. on Monday. The U.S. utility said last month it was considering a sale of the Dutch business after it was contacted ``by a number of parties who have expressed an interest'' in its European assets, and as it reallocates capital to fulfill ``growth objectives.'' Merrill already advised the Dutch state on the original sale of UNA to Reliant, the only time a U.S. company has taken control of a continental European utility. This year, Merrill ranks sixth in advising on transactions involving a European utilities target, with $6.9 billion worth of mergers and acquisitions. Potential buyers for UNA, which provides about 20 percent of the Netherlands' electricity, are likely to be companies already present in the Dutch market, such as Nuon NV, Eneco, or Spain's Endesa SA, analysts said. UNA may also attract generation companies including Mirant Corp. and International Power Plc. Atlanta-based Mirant and International Power predecessor National Power Plc both bid for UNA when it was first put up for sale. Central and Northern Europe are ``areas we're interested in,'' said Aarti Singhal, an International Power spokeswoman. ``We're looking at all options,'' said Fransce Verdeuzeldonk, a spokeswoman for Nuon, in an interview. Spanish Interest Endesa, Spain's largest power producer, agreed to buy Remu NV, the No. 4 electric utility in the Netherlands, for 1.5 billion euros last December. The completion of the transaction has been held up by the Dutch government, which wants at least 51 percent of utility company shares to remain in the hands of public authorities until at least 2004. An Endesa spokeswoman declined to comment on whether the company would be interested in UNA. Endesa said in July its purchase of an Italian generator was enough to meet its goal of having 8,000 megawatts of capacity in Europe outside Spain. Based in Utrecht in central Netherlands, UNA is one of the four main power generation companies in Holland, operating six power plants. It had 1998 sales of about $800 million and is one of the only generation companies in the market up for grabs. Germany's E.ON owns EZH, Belgium's Electrabel controls Epon, while EPZ, another big power producer, is owned by Essent NV. India: IDBI signals SOS for Rs 3,000-cr equity 10/16/2001 Business Line (The Hindu) Fin. Times Info Ltd-Asia Africa Intel Wire. Business Line (The Hindu) Copyright (C) 2001 Kasturi & Sons Ltd. All Rights Res'd NEW DELHI, Oct. 15. INDUSTRIAL Development Bank of India (IDBI), the country's largest development financial institution, appears to be heading for some serious trouble. A revised set of figures placed by the institution to the Ministry of Finance has indicated a cash requirement of Rs 7,000 crore over the next three years, much of which it is finding difficult to tie up. Besides, it has also placed a request for a Rs 3,000-crore equity infusion from the Government. The revised financial projections were placed before the Finance Ministry last week by an IDBI team headed by the Chairman, Mr P.P. Vora. The meeting was attended by the Advisor, Ministry of Finance, Dr Rakesh Mohan, the Additional Secretary, Capital Markets Division, Mr S.K. Purakayastha, and the Deputy Governor, Reserve Bank of India (RBI), Mr G.P. Muniappan. At a meeting on October 5, IDBI had placed its capital infusion requirement at Rs 2,500 crore and immediate fund requirement at about Rs 5,500 crore. Officials have been particularly concerned over IDBI's admission that it has been struggling to raise resources from the market due to the rating downgrade in August despite its massive requirements. It has also admitted to the Ministry that it may be heading for losses during the current fiscal. According to sources, the institution has admitted that the losses could spill over to the subsequent year unless assistance comes at an appropriate time. IDBI has said the capital infusion of Rs 3,000 crore is being sought to write off a portion of the institution's huge portfolio of non-performing assets (NPAs), which at the end of fiscal 2000-01 stood at over Rs 9,000 crore in gross terms. The institution has argued that only a massive NPA write-off would enable it to get back its rating, thereby allowing it to tie up the funds requirement from the market. IDBI's rating was downgraded by Crisil from AAA to AA+ recently. IDBI, which was directed by the Government to submit a three-year cash flow statement during the October 5 meeting, has said the additional cash requirement for the three years alone stands at Rs 7,000 crore. Of the cash requirement, the immediate need includes a Rs 2,200-crore repayment arising out of the institution's decision to exercise the call option on its earlier bonds series. The repayment would be due in March 2002. Moreover, the institution also wants to keep itself ready in the event that Enron, the promoters of Dabhol Power Company, invokes its guarantee of about Rs 1,800 crore. Sarbajeet K. Sen Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. INDIA: Tata Power Q2 net up 74 pct, beats f'cast. 10/16/2001 Reuters English News Service (C) Reuters Limited 2001. BOMBAY, Oct 16 (Reuters) - Tata Power Company, India's largest private utility, on Tuesday reported net profit for the July-September quarter rose 74 percent over a year earlier, far above analysts' expectations. The company, which is negotiating to buy Enron Corp's stake in a troubled Indian unit, said net profit rose to 2.42 billion rupees ($50.42 million) from 1.39 billion a year earlier on sales that rose 17.54 percent to 10.99 billion rupees. The performance was boosted by a profit of 660 million rupees from sale of long term investments in the quarter, against 210 million a year earlier. A Reuters poll of 14 brokerages released last week forecast net profit for the quarter would drop to a median 1.27 billion rupees from a year earlier, on an 8.45 percent rise in sales to 10.11 billion rupees. Tata Power generates thermal and hydro-electric power, and distributes electricity across the western state of Maharashtra, including its capital Bombay. Ahead of the results, its shares closed down 0.62 percent at 96.65 rupees while the Bombay benchmark index ended 0.54 percent higher. (US$1=47.99 Indian rupees). Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

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Enron Mentions - 06/06/2001

USA: Enron to cut one-fifth of jobs at broadband unit. Reuters English News Service, 04/06/2001 UK: London timecharter fixtures. Reuters English News Service, 04/06/2001 USA: RESEARCH ALERT-Morgan starts Dynegy as buy. Reuters English News Service, 04/06/2001 NYMEX Analysis CNNfn: Before Hours, 04/06/2001 CONSULTANTS HIRED FOR GAS PLANTS STUDY South Florida Sun-Sentinel, 04/06/2001 Trojan Nuclear Plant; Notice of Docketing of Materials License No. SNM-2509, Amendment Application for the Trojan Independent Spent Fuel Storage Installation Federal Register, 04/06/2001 APPROVE ENRON POWER PLANT PUT POLLUTION ISSUE IN PERSPECTIVE South Florida Sun-Sentinel, 04/06/2001 Haleywest L.L.C., et al.; Electric Rate and Corporate Regulation Filings Federal Register, 04/06/2001 Verizon to Pitch Movies-on-Demand to Studios, Variety Says Bloomberg, 04/06/2001 USA: Enron to cut one-fifth of jobs at broadband unit. 04/06/2001 Reuters English News Service (C) Reuters Limited 2001. HOUSTON, April 6 (Reuters) - Energy trading giant Enron Corp. said on Friday it will eliminate some 250, or roughly 20 percent, of the jobs at its broadband telecommunications unit, detailing a move which it has previously described as an internal redeployment of staff. Enron Broadband Services spokeswoman Kelly Kimberly said the company is cutting jobs at the unit, which now employs 1,150 people, because it has completed the build-out of its 18,000-mile (29,000 km) fiber-optic network and because of slow demand for streaming media products delivered to personal computers. "The network is substantially complete now, so that means fewer people are required for technical positions," she said. The job cuts also reflect Enron Broadband's decision to play a less active role in the market for streaming media services, such as video of corporate events delivered to personal computers, where demand had been slower than expected, she said. However, Kimberly said Enron Broadband will continue to pursue entertainment-on-demand services actively. Kimberly said employees whose jobs are being eliminated will be eligible for redeployment to other positions at Enron Broadband Services or other Enron units, although there could be some involuntary terminations. Previously Enron officials had dismissed rumors about job cuts at Enron Broadband Services and had spoken instead of an internal redeployment of staff within the unit without detailing its impact on overall employment there. The company's stock, which peaked at just above $90 last year and was trading in the $80s as recently as mid-February, has recently fallen into the $50s in line with broader weakness in the stock market and among technology and telecommunications stocks in particular. On Friday it was up 95 cents at $56.65. Since early last year Enron has been building a high-speed broadband communications network that it plans to use as a base to build a bandwidth marketing and trading business similar to its huge natural gas and electricity trading operation. Excitement among investors about the broadband business and about Enron's success in developing a strong Internet-based trading platform for energy and other commodities drove an 87 percent rise in the company's share price last year, outpacing a gain of 54 percent for the S&P utilities index. Kimberly said Enron's bandwidth trading operation is continuing to perform strongly, with more than 500 trades carried out in the first quarter, exceeding the total for all of 2000. Despite the jobs cuts at Enron Broadband, she said, the unit is recruiting to fill some other positions. UK: London timecharter fixtures. 04/06/2001 Reuters English News Service (C) Reuters Limited 2001. LONDON, April 6 (Reuters) - Bulk Atalanta - (built 1990) 149,512 dwt 13.25 on 44 ndas delivery retroactive Cape Passero in direct continuation Apr 25/30 3-5 months trading redelivery world-wide $13,200 daily Enron. Golden Disa - (built 1999) 75,200 dwt delivery Qingdao spot trip via Australia plus Mideast Gulf redelivery passing Muscat outbound $11,250 daily ETA. Bergen Trader - (built 2000) 75,000 dwt delivery Kosichang Apr 10/20 3-5 months trading redelivery world-wide $11,600 daily Swiss Marine. Rutland Glen - (built 1999) 73,700 dwt delivery Cape Passero Apr 10/20 trip via east coast South America redelivery Skaw-Cape Passero $12,000 daily Azure. Pacific Paradise - (built 1993) 73,600 dwt delivery Kohsichang Apr 21/22 trip and redelivery Continent $13,500 daily Matinc. Endless - (built 1999) 73,400 dwt delivery Porto Vesme prompt trip via east coast South America redelivery Far East $11,500 daily Transfield. Mass Merit - (built 1993) 69,620 dwt delivery U.S. Gulf Apr 15/25 trip and redelivery Taiwan $10,750 daily plus $190,000 ballast bonus Taho. Menites - (built 1981) 64,896 dwt delivery Ghent Apr 10/15 trip via Brazil redelivery Antwerp approximately $10,000 daily Pan Ocean. Atlantic Savior - (built 1983) 64,754 dwt delivery Cape Passero Apr 10/15 trans-Atlantic round voyage redelivery West Mediterranean-Continent range $10,000 daily T and E. USA: RESEARCH ALERT-Morgan starts Dynegy as buy. 04/06/2001 Reuters English News Service (C) Reuters Limited 2001. NEW YORK, April 6 (Reuters) - J.P. Morgan said Friday that analyst Anatol Feygin had initiated coverage of Dynegy Inc. as a long term buy with a price target of $63 a share. He said the company has provided "defensive earnings growth through a top tier wholesale energy player" that is "second only to Enron ." Dynegy's asset-light strategy allows the company to follow Enron's lead, with a favorable risk/reward profile with 73 percent of EBIT coming from non-regulated "merchant energy" opportunities, he said. "We project Dynegy's long-term earnings growth rate at 22 percent," he added. The analyst attributed Dynegy's "retreat from the $57 level to the California power crisis, which has been a major stumbling block for the stock and should hinder near-term performance. It casts doubt on the very dynamic that Dynegy is a play on, and usurps management time and talent. "Although fundamentally we see it as more of a nuisance - a few credit/collection issues (with) little to no earnings risk, and a delay, not a derailment of the deregulation process - the resolution of the Golden State debacle is to us the key catalyst for an upgrade." Dynegy shares were off 94 cents at $49.98 in early New York Stock Exchange trading. Business NYMEX Analysis Jack Cafferty 04/06/2001 CNNfn: Before Hours (c) Copyright Federal Document Clearing House. All Rights Reserved. JACK CAFFERTY, CNNfn ANCHOR, BEFORE HOURS: On March 20, Vincent Viola was voted in as the new chairman of the New Mercantile Exchange. He takes over during a time of change and challenge for the NYMEX. Mr. Viola is here now to talk about his new position and the task ahead. Congratulations on the ascension to the throne down there. VINCENT VIOLA, NYMEX CHAIRMAN: Thank you, Jack. CAFFERTY: Job one is? VIOLA: Making sure that the exchange is postured to fulfill it`s purpose as a magnificently liquid and efficient pricing mechanism, and a stable, global counterparty for mediation of credit and risk on the products that we pursue to trade on the exchange. CAFFERTY: And to do it with an eye on making a profit. VIOLA: Yes, exactly. CAFFERTY: Which is a little bit different assignment than it`s been down there. VIOLA: Yes, exactly, the fact that our business model now, by virtue of the fact that we seek to make and provide profit to our shareholders compels us to start to act and function like a business. CAFFERTY: Now last year, you did incur losses down there of about almost $3 million. Tell me a little bit about why that happened and what you`re doing that`s going to prevent it from continuing to happen. VIOLA: Well, simply put, we had to make a decision as to enhancing the access of participants to our marketplace. And we went and decided to create our own proprietary electronic platform. CAFFERTY: Animex (ph), is that way. VIOLA: Enymex. CAFFERTY: Enymex, I`m sorry. VIOLA: And that was capital decision, capital spending decision that we made, rightfully so. And that caused the gap to close between revenues and expenses. CAFFERTY: All right, this is because, I would assume, of pressures from companies like Intercontinental Exchange, Enron Online, and some of the foreign operations as well, right? I mean, you to upgrade to stay competitive, is that. VIOLA: I think the B2B model hit everyone as a novel yet substantively interesting concept. For our marketplace, the most efficient source of liquidity right now, and the culture around trading our major product, oil, is based in the physical execution of those trades through open auction outcry. And the culture around oil trading is clearly much more comfortable person-to-person. We like to say, simply put, the best price for oil in the world is found on the floor of the NYMEX. The electronic umbrella around that execution in liquidity clearly will be best served by an electronic platform. CAFFERTY: Who`s going to win this tug-of-war eventually between the advent of electronic transactions and the old way of doing it by yelling out your bid? VIOLA: I think the source of liquidity that has the most continuous and consistent tightness between the bid and offer will in fact win out. And I think that the support of electronic access to the marketplace can only enhance the individual trader on the floor`s ability to provide the best service. CAFFERTY: Is it a matter of time, though, until technology simply outstrips the ability of individuals to move with the speed and proficiency that these computers can do? VIOLA: Clearly, technology, as it improves in terms of reliability and consistency, in terms of delivery of price, is the trend that we will react to as business people on the mercantile exchange. And we are preparing very, very aggressively to continue to make our markets the most efficient. It has to be stated that NYMEX is a double-A credit and a global counterparty, which mediates risk across a very, very wide range of market participants looking for credit mediation for the exchange of energy products. CAFFERTY: Talk to me for a minute about commodities and about the areas of the commodity business that you see perhaps being the areas that will generate the best profits for you, where the most action is likely to be. Just give me an overview of the markets from where you sit. VIOLA: Well, as a business model, the exchange provides for revenue- sourced, value-added functions. Firstly, it`s the only neutral model that can be conceived and executed currently, and looking for in the future. Secondly, its banking and mediation and price management through its margin facility and clearing facility, is a unique source of value. Thirdly, its information and data that it provides from the uniquely neutral and independent and uninfluenced prices that are physically identified on the floor is a unique source of basis and benchmark for oil trading throughout the world. And lastly, the professional and unique ability and experience of the best oil traders in the world, both on the floor and the ring of individuals that deal with those people off the floor every day, make the NYMEX a uniquely talented pool of business potential. It has to be stated that the gentlemen who trade oil for major concerns, institutional concerns, while they`re communicating with the floor of the NYMEX, every day, for many years, there`s a very, very close connection and cultural comfort and reliability on those prices and their efficiencies that have grown over the years. And we think that that`s going to be maintained. So I think those four principal sources of revenue are the essence of our model. CAFFERTY: What scares you about the new job? when you wake up in the middle of the night, you go, gee, I`m the chairman now, what worries you? VIOLA: I think I get a sense of unbridled excitement. I`ve always enjoyed a real good, fair fight. And I think what concerns me and excites me at the same time is that I`m responsible for almost 800-plus members and their families and the marketplaces that we serve, trying to bring very fair, open, properly banked markets. CAFFERTY: Good stuff. VIOLA: Yes. CAFFERTY: Appreciate your coming in. I wish you well, I hope your very successful as the new chairman of the NYMEX. VIOLA: You`re very kind, thank you. CAFFERTY: All right, Vincent Viola, thanks. TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 888-CNNFN-01 OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT WWW.FDCH.COM THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED. Content and programming copyright 2001 Cable News Network, Inc. ALL RIGHTS RESERVED. Prepared by eMediaMillWorks, Inc. (f/k/a Federal Document Clearing House, Inc.) No license is granted to the user of this material other than for research. User may not reproduce or redistribute the material except for user`s personal or internal use and, in such case, only one copy may be printed, nor shall user use any material for commercial purposes or in any fashion that may infringe upon Cable News Network, Inc.`s copyright or other proprietary rights or interests in the material; provided, however, that members of the news media may redistribute limited portions (less than 250 words) of this material without a specific license from CNN so long as they provide conspicuous attribution to CNN as the originator and copyright holder of such material. This is not a legal transcript for purposes of litigation. LOCAL CONSULTANTS HIRED FOR GAS PLANTS STUDY Staff Reports 04/06/2001 South Florida Sun-Sentinel Broward Metro 3B (Copyright 2001 by the Sun-Sentinel) Deerfield Beach City Manager Larry Deetjen has hired two consultants to help a committee of volunteers shore up information about plans to build two natural-gas power plants in the southwest end of the city. The consultants, Tom T. John and Pete Hoffman, will help members of the city's seven-member Ad Hoc Energy Committee find out as much information as possible about the proposed plants. Enron Corp. and El Paso Corp. want to build power plants in the city's industrial area. John and Hoffman made a presentation to the committee on Thursday. Many people who live in North Broward County have opposed those plans, particularly in the case of Enron Corp., which also wants to build a plant in Pompano Beach. Notices Trojan Nuclear Plant; Notice of Docketing of Materials License No. SNM-2509, Amendment Application for the Trojan Independent Spent Fuel Storage Installation 04/06/2001 Federal Register 18321 Copyright (c) 2001 Federal Information & News Dispatch, Inc. All rights reserved By letter dated February 19, 2001, Portland General Electric Company (PGE) submitted an application to the Nuclear Regulatory Commission (NRC or the Commission) in accordance with 10 CFR part 72 requesting an amendment of the Trojan Nuclear Plant independent spent fuel storage installation (ISFSI) license (SNM-2509) for the ISFSI located in Columbia County, Oregon. PGE is seeking Commission approval to revise the Trojan ISFSI Technical Specifications (Appendix A to the license) to conform to a change in the Code of Federal Regulations (10 CFR 72.48) which will become effective on April 5, 2001, and to make editorial corrections. This application was docketed under 10 CFR part 72. The ISFSI Docket No. is 72-17 and will remain the same for this action. The amendment of an ISFSI license is subject to the Commission's approval. The Commission may issue either a notice of hearing or a notice of proposed action and opportunity for hearing in accordance with 10 CFR 72.46(b)(1) or, if a determination is made that the amendment does not present a genuine issue as to whether public health and safety will be significantly affected, take immediate action on the amendment in accordance with 10 CFR 72.46(b)(2) and provide notice of the action taken and an opportunity for interested persons to request a hearing on whether the action should be rescinded or modified. For further details with respect to this application, see the application dated February 19, 2001, which is available for public inspection at the Commission's Public Document Room, One White Flint North Building, 11555 Rockville Pike, Rockville, MD, or from the publicly available records component of NRC's Agencywide Documents Access and Management System (ADAMS). ADAMS is accessible from the NRC Web Site at http://www.nrc.gov/NRC/ADAMS/index.html (the Public Electronic Reading Room). Dated at Rockville, Maryland, this 29th day of March 2001. For the Nuclear Regulatory Commission. E. William Brach, Director, Spent Fuel Project Office, Office of Nuclear Material Safety and Safeguards. [FR Doc. 01-8503 Filed 4-5-01; 8:45 am] BILLING CODE 7590-01-P EDITORIAL APPROVE ENRON POWER PLANT PUT POLLUTION ISSUE IN PERSPECTIVE 04/06/2001 South Florida Sun-Sentinel Broward Metro 30A (Copyright 2001 by the Sun-Sentinel) In a "perfect" world, there would be no automobiles, with their internal combustion engines spewing pollutant-laden exhaust into the air. But how perfect would such a world be without the mobility and economic vitality those cars provide? In a "perfect" world, there would be no factories or refineries polluting air and water alike. But how perfect would such a world be without the steel, the textiles and the petroleum products those plants produce to meet the needs of consumers? And in a "perfect" world, there would be no power plants spewing pollutants into the air. But how perfect would such a world be without the electricity those plants generate to light, heat and cool our homes and businesses? Modern life forces unpleasant choices on all of us, from the average consumer to the highest-ranking public official. Those choices should be made with an eye on the big picture, and never on the basis of unrealistic notions of an idyllic world devoid of the sometimes unhealthy byproducts of human enterprise. The Pompano Beach City Commission is faced with such a choice. On Tuesday, commissioners are to consider a proposal by Enron Corp., a Houston-based energy company, to build a "peaking" power plant in the city. That type of plant operates only when a public utility, in this case Florida Power & Light Co., needs to purchase a backup source of power during periods of peak usage. The commissioners are under tremendous pressure from other politicians as well as residents, not only of Pompano Beach but of neighboring Margate and Coconut Creek, who worry about the increased air pollution such a plant inevitably would create. Opponents also are suspicious of Enron's long-range plans, which they contend involve a hidden agenda to push for state deregulation of the electric industry, which in turn would enable Enron to operate the plant 24 hours a day and sell the excess power elsewhere. There also are concerns about Enron's plans to use diesel fuel as a backup to its natural gas supply, the primary fuel source for the plant. Those worries are understandable, and no one should be unsympathetic to the residents' concerns. But if commissioners keep their eye on the big picture, they will have to conclude that the positives of this proposal greatly outweigh the negatives. To begin with, South Florida's burgeoning population requires foresight to avoid future power shortages like those California is now experiencing. A region that expects to add 2.3 million people during the next 20 years should be preparing now for the additional energy needs such growth will create. Moreover, a plant using relatively clean-burning natural gas and built by Enron, a company lauded as "progressive" by environmentalists for embracing alternative energy sources and for its commitment to tackling global warming, should be seen as preferable to what the area might ultimately be stuck with if forced in desperation to seek new sources of electricity generation during a power crisis. Already it has been determined that the proposed Enron plant would generate far, far less nitrogen oxide and sulfur dioxide than FPL's oil-powered plant at Port Everglades. To put things in further perspective, the plant would emit less than 2 percent of the amount of nitrogen oxide emitted by Broward County automobiles in a typical year. Opponents of the plant should be asking themselves whether their concern for the environment extends to carpooling or even leaving their cars at home at times when they could walk or ride a bicycle to their destination. Concerns about the possible burning of diesel fuel are valid, but Enron has agreed to fixed limits on the amount of diesel it would use, and to use relatively high-quality, low-sulfur diesel. Moreover, Enron's smokestacks are to be 80 feet high, meaning neighborhoods near the plant would likely experience no more pollution than other neighborhoods in the area. It should also be noted that the state Department of Environmental Protection has given preliminary approval to a permit for the plant, saying a lengthy review had found that it would have little impact on the region's air quality. Little impact. Compare that with the positive impact it would have on Pompano Beach, by increasing its tax base, providing jobs and developing a large piece of land that no one else has expressed any interest in; and on all of South Florida, by providing a source of relatively clean power for a region that will surely need it in the not-too-distant future, by minimizing costs to consumers and by making rolling brownouts unnecessary during periods of peak electrical usage. The plant cannot be built without a zoning change for the 28-acre site from industrial to public utility. The Pompano Beach Planning and Zoning Board has already approved the rezoning. City commissioners should keep their eye on the big picture and ratify that decision, for the good of Pompano Beach and all of South Florida. Notices Haleywest L.L.C., et al.; Electric Rate and Corporate Regulation Filings 04/06/2001 Federal Register 18239 Copyright (c) 2001 Federal Information & News Dispatch, Inc. All rights reserved March 30, 2001. Take notice that the following filings have been made with the Commission: 1. Haleywest L.L.C. [Docket No. EG01-161-000] Take notice that on March 28, 2001, 2001, Haleywest L.L.C. (Applicant), an Idaho limited liability company, whose address is P.O. Box 171, Laclede, Idaho 83851 filed with the Federal Energy Regulatory Commission an application for determination of exempt wholesale generator status pursuant to part 365 of the Commission's regulations. Applicant intends to lease and operate a facility comprised of three (3), continuously rated 1.6-megawatt generator sets (non- road engines) fired on diesel fuel with a maximum total output of 6-megawatts (the "Facility"). The Facility is located in Plummer, Idaho. Electric energy produced by the Facility will be sold by Applicant to the wholesale power market in the Northwestern United States. Comment date: April 20, 2001, in accordance with Standard Paragraph E at the end of this notice. The Commission will limit its consideration of comments to those that concern the adequacy or accuracy of the application. 2. Fountain Valley Power, L.L.C. [Docket No. EG01-162-000] Take notice that on March 26, 2001, Fountain Valley Power, L.L.C. (Applicant), filed with the Federal Energy Regulatory Commission an application for determination of exempt wholesale generator status pursuant to Part 365 of the Commission's regulations. Applicant is presently a wholly-owned subsidiary of Enron North America Corp., but is expected to become a wholly-owned indirect subsidiary of Black Hills Energy Capital, Inc. Applicant stated that it served its application on the following: Public Service Company of Colorado, the Colorado Public Utilities Commission, South Dakota Public Utility Commission, Wyoming Public Service Commission and the Securities and Exchange Commission. Comment date: April 20, 2001, in accordance with Standard Paragraph E at the end of this notice. The Commission will limit its consideration of comments to those that concern the adequacy of accuracy of the application. 3. Pinnacle West Energy Corporation [Docket No. EG01-163-000] Take notice that on March 28, 2001, Pinnacle West Energy Corporation (PWE) filed with the Federal Energy Regulatory Commission an application for determination of exempt wholesale generator status pursuant to Part 365 of the Commission's regulations. PWE is a wholly owned subsidiary of Pinnacle West Capital Corporation (PNW) and an associate company of Arizona Public Service Company. PWE was created to serve as PNW's competitive generation affiliate. The eligible facilities to be owned by PWE are a 120 MW natural gas-fired, combined cycle unit that is presently under construction and 10 trailer-mounted generating units with a combined capacity of less than 200 MW. Comment date: April 20, 2001, in accordance with Standard Paragraph E at the end of this notice. The Commission will limit its consideration of comments to those that concern the adequacy or accuracy of the application. Standard Paragraph E. Any person desiring to be heard or to protest such filing should file a motion to intervene or protest with the Federal Energy Regulatory Commission, 888 First Street, NE., Washington, DC 20426, in accordance with Rules 211 and 214 of the Commission's Rules of Practice and Procedure (18 CFR 385.211 and 385.214). All such motions or protests should be filed on or before the comment date. Protests will be considered by the Commission in determining the appropriate action to be taken, but will not serve to make protestants parties to the proceeding. Any person wishing to become a party must file a motion to intervene. Copies of these filings are on file with the Commission and are available for public inspection. This filing may also be viewed on the Internet at http://www.ferc.fed.us/ online/rims.htm (call 202-208-2222 for assistance). Comments, protests, and interventions may be filed electronically via the internet in lieu of paper. See, 18 CFR 385.2001(a)(1)(iii) and the instructions on the Commission's web site at http://www.ferc.fed.us/efi/doorbell.htm. David P. Boergers, Secretary. [FR Doc. 01-8459 Filed 4-5-01; 8:45 am] BILLING CODE 6717-01-P Notices Transwestern Pipeline Company; Notice of Application 04/06/2001 Federal Register 18238 Copyright (c) 2001 Federal Information & News Dispatch, Inc. All rights reserved April 2, 2001. Take notice that on March 29, 2001, Transwestern Pipeline Company, P.O. Box 3330, Omaha, Nebraska 68103-0330, in Docket No. CP01-115-000 filed an application pursuant to Sections 7(b) and (c) of the Natural Gas Act for permission and approval for Transco to replace mainline compression facilities at four existing compressor stations in Arizona, all as more fully set forth in the application which is on file with the Commission and open to public inspection. This filing may be viewed on the web at http://www.ferc.fed.us/online/rims.htm (call 202-208-2222 for assistance). Specifically, Transwestern proposes to abandon in place twelve existing drivers and compressors, totaling 49,500 horsepower, at Stations 1, 2, 3 and 4; and install operate a 41,500 ISO-rated horsepower turbine centrifugal compressor at each of the four stations. Transwestern also requests, to ensure a smooth transition to the new compressor units, to maintain the ability to operate the existing facilities up to six months after the installation of the new units. It is stated that the new units will require less maintenance activity than the existing units as well as operate more efficiently in flowing more gas through its system. Transwestern states that result of the project it will be able to provide incremental capacity of approximately 150,000 Mcf per day on its mainline from Thoreau, New Mexico to California, increasing its total capacity to California to 1,240,000 Mcf per day. It is indicated that the proposed modification will enable it to meet the supply and demand imbalance in the California area. Transwestern proposes to place the facilities into service by June 1, 2002. Transwestern estimates the cost for the proposed construction to be approximately $93,300,000, to be financed with internally-generated funds. Transwestern also states that it is not at this time requesting rolled-in pricing for the new facilities, and understands that it will be at risk for the recovery of costs associated with the proposed modifications. Any questions regarding the application should be directed to Keith L. Petersen, at (402) 398-7421. There are two ways to become involved in the Commission's review of this project. First, any person wishing to obtain legal status by becoming a party to the proceedings for this project should, on or before April 16, 2001, file with the Federal Energy Regulatory Commission, 888 First Street, NE, Washington, DC 20426, a motion to intervene in accordance with the requirements of the Commission's Rules of Practice and Procedure (18 CFR 385.214 or 385.211) and the Regulations under the NGA (18 CFR 157.10). A person obtaining party status will be placed on the service list maintained by the Secretary of the Commission and will receive copies of all documents filed by the applicant and by all other parties. A party must submit 14 copies of filings made with the Commission and must mail a copy to the applicant and to every other party in the proceeding. Only parties to the proceeding can ask for court review of Commission orders in the proceeding. However, a person does not have to intervene in order to have comments considered. The second way to participate is by filing with the Secretary of the Commission, as soon as possible, an original and two copies of comments in support of or in opposition to this project. The Commission will consider these comments in determining the appropriate action to be taken, but the filing of a comment alone will not serve to make the filer a party to the proceeding. The Commission's rules require that persons filing comments in opposition to the project provide copies of their protests only to the party or parties directly involved in the protest. Persons who wish to comment only on the environmental review of this project should submit an original and two copies of their comments to the Secretary of the Commission. Environmental commenters will be placed on the Commission's environmental mailing list, will receive copies of the environmental documents, and will be notified of meetings associated with the Commission's environmental review process. Environmental commenters will not be required to serve copies of filed documents on all other parties. However, the non-party commenters will not receive copies of all documents filed by other parties or issued by the Commission (except for the mailing of environmental documents issued by the Commission) and will not have the right to seek court review of the Commission's final order. [Page Number 18239] The Commission may issue a preliminary determination of non-environmental issues prior to the completion of its review of the environmental aspects of the project. This preliminary determination typically considers such issues as the need for the project and its economic effect on existing customers of the applicant, on other pipelines in the area, and on landowners and communities. For example, the Commission considers the extent to which the applicant may need to exercise eminent domain to obtain rights-of-way for the proposed project and balances that against the non-environmental benefits to be provided by the project. Therefore, if a person has comments on community and landowner impacts from this proposal, it is important either to file comments or to intervene as early in the process as possible. Also, comments protests, and interventions may be filed electronically via the internet in lieu of paper. See, 18 CFT 385.2001(a)(1)(iii) and the instructions on the Commission's web site at http://www.ferc.fed.us/efi/doorbell.htm. If the Commission decides to set the application for a formal hearing before an Administrative Law Judge, the Commission will issue another notice describing that process. At the end of the Commission's review process, a final Commission order approving or denying a certificate will be issued. Linwood A. Watson, Jr., Acting Secretary. [FR Doc. 01-8489 Filed 4-5-01; 8:45 am] BILLING CODE 6717-01-M Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Verizon to Pitch Movies-on-Demand to Studios, Variety Says 2001-04-06 15:29 (New York) New York, April 6 (Bloomberg) -- Verizon Communications Inc. is offering movie studios millions of dollars in incentive fees and other inducements to try to interest the studios in its high- speed Internet movie-on-demand service, Variety magazine reported. Metro-Goldwyn-Mayer Inc., AOL Time Warner Inc.'s Warner Bros. and Sony Corp. are expected to meet with the telephone company beginning next week, the magazine said. Verizon has completed market tests of the service in Washington, and has placed tens of millions of dollars in orders for television set-top boxes in order to begin offering the service as early as June, the magazine said. An agreement could hurt plans by Enron Corp. to attract the studios as partners for a service it planned with Viacom Inc.'s Blockbuster Entertainment unit, the magazine said. Enron and Blockbuster ended their exclusive relationship last month. (Variety.com 4-6) For the Web site of Variety.com, see {VRTY <GO>}. --Rachel Katz in the Princeton newsroom at (609) 279-4116, or at [email protected]/jjs

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Enron Mentions

Enron Shares Fall on Concern Over CFO's Partnerships (Update4) Bloomberg, 10/19/01 USA: UPDATE 1-Enron stock sustains further heavy losses. Reuters English News Service, 10/19/01 Enron Corp. Cut to `Hold' at A.G. Edwards Bloomberg, 10/19/01 BANDWIDTH BEAT: Enron Broadband Unit Takes A Beating Dow Jones Energy Service, 10/19/01 Dynegy Chief: Bandwidth Growth Won't Wait For Trading Dow Jones Energy Service, 10/19/01 UK: Jobs in base metals down but definitely not out. Reuters English News Service, 10/19/01 New Power Hldg Sees Meeting 3Q Loss Estimate Dow Jones News Service, 10/19/01 Enron Shares Fall on Concern Over CFO's Partnerships (Update4) 2001-10-19 16:24 (New York) Enron Shares Fall on Concern Over CFO's Partnerships (Update4) (Updates with Chief Financial Officer Fastow didn't immediately return a call for comment in fifth paragraph.) Houston, Oct. 19 (Bloomberg) -- Enron Corp.'s shares have fallen 26 percent in the past three days on concern the biggest energy trader's dealings with partnerships run by its chief financial officer contributed to investment losses. Enron's stock dropped 10 percent today. Enron's board cost the company at least $35 million by allowing Chief Financial Officer Andrew Fastow to manage LJM Cayman and LJM2 Co-Investment, partnerships that bought Enron assets, a shareholder alleged Wednesday in a lawsuit. The lawsuit came the day after Enron reported $1.01 billion in third-quarter losses from failed investments. The Wall Street Journal reported $35 million of the losses were connected with the two limited partnerships. Enron also reduced shareholders' equity by $1.2 billion when it bought back 55 million shares from the partnerships, the paper reported yesterday. ``It looks sleazy,'' said Roger Hamilton, a manager at John Hancock's Value funds, which own 600,000 shares. ``If you are someone who invests in a company's management, it's almost time to punt with Enron.'' Enron spokeswoman Karen Denne didn't return calls or written requests seeking comment. Fastow didn't immediately return a telephone call for comment. Fastow and a handful of associates made more than $7 million last year in management fees and about $4 million in capital increases on an investment of about $3 million in one of the partnerships, the Journal reported today. Buying Enron Assets Fastow is involved in 17 other similar companies and partnerships that appear to have ties to Houston-based Enron, based on filings with the Texas secretary of state. The foreign business corporations and limited liability companies have directors, officers or managers whose address is listed as 1400 Smith Street in Houston, Enron's corporate address, according to Texas records. Fastow is listed as a director, officer or managing member in each one. At least one of the companies bought and sold Enron assets, including foreign power plants. Whitewing Management, which lists Fastow as its managing member, received $807 million from the sale of Enron debt last year. Under the terms of the debt sale, Whitewing is allowed to use the proceeds to buy power plants from Enron or make other ``permitted investments.'' Whitewing has bought 14 Enron plants or companies since 1999 and sold four. Enron's Denne has not responded to written requests about Fastow's role at Whitewing or whether he used his knowledge of the value of Enron assets to benefit outside investors or company executives at Enron's expense. Shares of Enron fell $2.95 to $26.05. They have fallen 69 percent this year. --Russell Hubbard in the Princeton newsroom, 609-750-4651 or [email protected], and Jim Kennett in Houston, (713) 353-4871 or [email protected]/pjm/alp/pjm USA: UPDATE 1-Enron stock sustains further heavy losses. 10/19/2001 Reuters English News Service (C) Reuters Limited 2001. (New first paragraph, adds additional analyst comment) By Andrew Kelly HOUSTON, Oct 19 (Reuters) - Enron Corp. stock sustained further heavy losses on Friday as investor confidence in the former Wall Street favorite was rocked by reports about the company's relationship with a limited partnership that was run until recently by Enron's chief financial officer. The energy giant's stock closed down $2.95 or 10.2 percent at $26.05 per share, making a cumulative loss of 27 percent for a week in which Enron reported a third-quarter loss of $638 million, its first quarterly loss in over four years. Analysts said confidence was shaken by several articles in the Wall Street Journal this week alleging possible conflicts of interest on the part of Chief Financial Officer Andrew Fastow, who until recently ran a limited partnership that bought assets worth hundreds of millions of dollars from Enron. "I don't think this thing passes the smell test," said one analyst who spoke on condition of anonymity. "I think the CFO should be out of there right now. In the interest of the stockholders, that CFO should be gone," he said. Enron has rejected the suggestion that there was anything improper about the arrangements, but Fastow severed his ties with the LJM2 partnership earlier this year to allay concerns raised by investors and analysts about his dual responsibilities. POOR JUDGMENT? Analysts said that at the very least, the arrangement showed poor judgment by senior managers at Enron, which recently pledged to be more open with investors and analysts following a series of high-profile stumbles that culminated with the shock resignation of new chief executive officer Jeff Skilling in August. "For a company that had a lot of question marks around it already, these questions about financial dealings are really worrisome for investors," said Commerzbank Securities analyst Andre Meade. "It points to poor decision-making on behalf of the board and top management at Enron," he said. Enron, North America's biggest buyer and seller of natural gas and electricity, was one of Wall Street's high flyers last year, when its stock posted a gain of 87 percent. The stock's ascent was driven by enthusiasm for the company's plans to build a broadband telecommunications business and the success of its EnronOnline Internet energy trading platform. This year Enron's shares have fallen 69 percent as sentiment toward broadband and the Internet soured, Skilling resigned after only six months as CEO, and the company's Dabhol power plant project in India became mired in a payments dispute. Moody's Investors Service said earlier this week that it had placed all of Enron's long-term debt obligations on review for a possible downgrade after Enron took $1.01 billion in write-downs and charges that substantially reduced valuations for several non-core businesses, including broadband and water services. Some of Enron's financing arrangements require the company to maintain investment grade credit ratings. Analysts said Enron's credibility has been severely damaged and the recent reports about the LJM2 partnership had raised concerns that more unpleasant surprises may lie ahead. "What don't we know that went on at that company? Where's the credibility?" asked one frustrated analyst. "We don't know if it's limited to this," he said. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Enron Corp. Cut to `Hold' at A.G. Edwards 2001-10-19 16:27 (New York) Princeton, New Jersey, Oct. 19 (Bloomberg Data) -- Enron Corp. (ENE US) was downgraded to ``hold'' from ``buy'' by analyst Michael C Heim at A.G. Edwards & Sons Inc. BANDWIDTH BEAT: Enron Broadband Unit Takes A Beating By Michael Rieke 10/19/2001 Dow Jones Energy Service (Copyright (c) 2001, Dow Jones & Company, Inc.) A Dow Jones Newswires Column HOUSTON -(Dow Jones)- Early last year, Enron Corp.'s (ENE) hype and skyrocketing share price enticed a number of other energy companies into the telecommunications business. Now investors are wondering whether Enron is leading the charge out of telecom. The company announced Oct. 16 that its broadband unit lost $80 million before interest and taxes in the third quarter on revenue of $4 million. In the third quarter of last year, the unit lost $20 million on revenue of $162 million. Enron also recorded a $180 million non-recurring charge for restructuring its broadband unit in the third quarter of this year. That amount included severance costs for cutting 400-500 jobs, loss on sale of inventory and the reduced value of Enron's content services. At an analysts meeting Oct. 16, Enron Chairman and Chief Executive Ken Lay said the broadband business is "not that robust" right now. Industry revenue is low and there's substantial overcapacity in the bandwidth market, "more than even we anticipated," Lay said. The company still has a problem finding creditworthy counterparties for bandwidth trading. Consolidation in the telecom sector has also eliminated potential trading partners. "A year ago it looked like an excellent business to get into," he said. "Others thought so, too." Looking back, Enron could have gotten into the broadband business with less capital, Lay said. It spent "too much too soon." An Ominous Comparison He compared Enron's move into telecom with its move into the water business with its Azurix unit. That comparison probably won't be good news to those who still have broadband jobs at Enron. Azurix caused Enron to take a bigger writedown - $287 million - than broadband in the third quarter. The water business has been a bigger and longer-lasting headache than broadband. Maybe Enron's surviving broadband employees will feel better knowing that Lay told analysts the company is exploring alternatives to preserve its play in telecom at a reasonable price so it will be ready when the business recovers. It's trying to reduce general and administrative costs in broadband to $40 million a quarter and is on track to reach that goal next year, he said. It could cut those costs even more in order to sustain the business. Meanwhile, the company is trying to determine which parts of the telecom business it wants to be in, he said. Enron President and Chief Operating Officer Greg Whalley told analysts the company needs to determine how much network and hardware it needs. At one time, they had thought that they wanted to use physical network assets as a springboard, Whalley said. Now they "wouldn't want to forever be in the network business." Both executives mentioned the possibility of joint ventures in telecom. Lay said other companies are asking Enron to do them. Whalley said the company has talked about exchanging fiber and other assets. The one part of the telecom business Enron still seems committed to is broadband intermediation. "Intermediation" is a term the company uses in most of its commodity businesses, said an Enron spokeswoman. It's a combination of trading and deal origination - wholesale and enterprise customers. More Bad News Expected Rebecca Followill, a research analyst for Howard, Weil, Labouisse, Friedrichs Inc., she had expected a larger writedown in broadband for the third quarter. "If you look at how much the stocks of their peers in broadband have fallen, you've got to figure that their assets' values have fallen similarly," Followill told Bandwidth Beat. "I was expecting more like an 80% writedown in broadband." Another analyst, who didn't want to be identified, said he also expects more broadband writedowns from Enron. "To the extent that they can take more writedowns, I think it would make eminently good sense to do it." He predicted "a $200 million haircut" in the first quarter of next year because of a goodwill valuation issue. And that might not be the end of it. Enron had a net of $948 million of broadband property, plant and equipment at the end of last year, he said. They had another $600 million of risk management asset receivables, inventories and working capital items. Followill doesn't see much future in broadband for Enron. "I think the business will shrink to the point where it won't be shown as a key sector in their reporting," she said. Enron might keep a small broadband group in case the market rebounds, she said. Her investor clients don't expect broadband to contribute to Enron's earnings within the next three years. She thinks Enron is looking for an exit strategy. The other analyst said Enron is trying to preserve some value in broadband. "It doesn't look like there's any right now, to be honest," he said. "They'll carry the trading operation to some degree." -By Michael Rieke, Dow Jones Newswires; 713-547-9207; [email protected] Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Dynegy Chief: Bandwidth Growth Won't Wait For Trading By Erwin Seba Of DOW JONES NEWSWIRES 10/19/2001 Dow Jones Energy Service (Copyright (c) 2001, Dow Jones & Company, Inc.) HOUSTON -(Dow Jones)- Dynegy Inc. (DYN) Chairman and Chief Executive Chuck Watson understands why some think he is mistaken in believing the bandwidth sector has reached its bottom and is recovering. But those critics don't understand his bandwidth business, Watson told Dow Jones Newswires in an exclusive interview. They don't understand how the business world has changed since the Sept. 11 terrorist attacks, he said. In announcing third-quarter results for Dynegy Monday, Watson said the bottom in bandwidth demand was reached on Sept. 11 and that the market would begin recovery in the fourth quarter of this year. Businesses are reassessing where to store data and how to distribute operations to avoid losing everything in a sudden catastrophic event, be it of natural or human origin. That's what's driving the recovery, he said. Also, businesses will avoid travel, he said, relying instead on video conferencing. Enron Corp. (ENE) Chairman Kenneth Lay said Tuesday that he hasn't seen any signs of recovery in telecom. The bandwidth market is suffering, in part, because there are few creditworthy companies to trade with, he said. "They're trying to find trading partners for broadband," Watson said. "That's going to be tough to do." Dynegy isn't concentrating on bandwidth trading because there isn't "a realistic model" for it yet, he said. "I said two years ago it was at least two years away. I still think it's probably at least two years away, before we actually call it a trading commodity." The metro-area infrastructure that Dynegy and other companies are building will create connections between networks, which are needed in order to trade bandwidth as a commodity, Watson said. It's unfortunate that Enron's model for bandwidth as a traded commodity is the dominant image for the entire market, Watson said. Dynegy's model includes telecom contracts, negotiated directly with customers for long-term supply of bandwidth. Dynegy's bandwidth trading desk is staffed by four people. For the past several months, they have been buying bandwidth for Dynegy's customers. The goal has been to build a customer base. "We're looking at being an intermediary, and really looking at the same customers that we feed energy today." Since Dynegy lit its 16,000 route-mile network two weeks ago, the trading desk has been trying to fill the company's network instead of buying bandwidth from others. "I'm trying to find enterprises that have communication requirements," Watson said. He pointed to ChevronTexaco Corp. (CHX) as a target for those services. "They have offices that never talked to each before," he said. "Now they've got to talk to each other. I would say that the credit quality of Chevron and Texaco is pretty reasonable." ChevronTexaco owns about 26% of Dynegy, said a Dynegy spokesman. Dynegy and ChevronTexaco already have a large energy trading relationship which includes natural gas and gas liquids. The average burn rate of Dynegy Global Communications, the corporation's telecommunications unit, is $20 million to $25 million a quarter, Watson said. In the third quarter, it lost $15 million, down from $20 million in the second quarter. Dynegy predicts that Global Communications will break even or record a small loss before interest and taxes in the fourth quarter. "If we can get to (income of) $10 million per month - that's what we need really," he said. "If we can get there by the end of next year, I'll be very happy. I think by '03, this market will have righted itself." Watson believes telecommunications has the potential to transform Dynegy. "Dynegy is an energy company," he said. "Our energy merchant company is doing very well and business is growing like a weed...(Telecommunications) is not our core business by any stretch right now. But I'd love to be able to tell you it's going to be. I'd love to be able to tell you it is someday." -By Erwin Seba, Dow Jones Newswires; 713-547-9214; [email protected] Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. UK: Jobs in base metals down but definitely not out. By Amanda Cooper 10/19/2001 Reuters English News Service (C) Reuters Limited 2001. LONDON, Oct 18 (Reuters) - Dismal industrial demand and the fickleness of hedge funds seduced by more volatile markets have slashed London Metal Exchange members' profits over the past year and set off a gathering wave of job cuts. The decline and fall of base metal prices in the past year and a half has prompted a series of high-profile companies to withdraw from the market, casting a pall over next week's yearly LME Week industry gathering in London. Jobs have gone from front office to back in trading houses and banks, raising questions about the prospects for those now seeking work. "Good people can always be placed. As long as there is a job to fill and the company has a budget to hire," Sarah Gilley of London-based recruitment group Exchange Consulting said. "Where the situation starts to get difficult is where everyone is cutting budgets, people are not being replaced when they leave and there have been an awful lot of redundancies." Last week, ScotiaMocatta, a subsidiary of the Bank of Nova Scotia and a key ring dealing member, unveiled its decision to give up open outcry trading on the LME floor, prompting around 25 job losses among traders, phone jockeys and clerks. Then blue-blooded banker N.M. Rothschild & Sons closed its London and New York base metals units. It left its core precious metals business intact, but 20 base metals staff were laid off in the process. In the same week, the LME's largest floor trader, Enron Metals, said it planned to cut 10 to 20 percent of its metals staff as part of an exercise to cut 250 to 500 jobs in the Enron Group . SECURITY With three big market players and several major banks with commodities divisions slashing jobs at the same time, competition in the labour market will intensify and those in work are becoming wary about job security. "What we're finding at the moment is that there is still demand for traders with a track record, which is possibly increasing because people are nervous about their jobs and so they're keen to stay put," Gilley said. "So whereas someone who might be a big money-spinner with a track record would have previously stayed in their job for two to three years, they are now staying for three to five years. "They probably feel that they're reasonably safe where they are, they're well recognised and not going to stick their necks out," she said. BONUS FEARS October has never traditionally been a strong month for the the jobs market in base metals as players are often distracted by LME week functions and conferences Also, traders tend to be looking towards their annual performance-linked bonuses, which are usually announced at the end of the year. "Those who are in work at the moment are sticking. Often at this time of year, people are hanging on for their bonuses. But I don't think any of them are anticipating good bonuses. They're probably just happy to have a job," Sian Griffiths of Exchange Consulting said. LME volumes traded have been fallen over the past 18 months as the powerful hedge funds that once took a shine to the metals swarmed into areas such as hi-tech and telecomms stocks. Metals traders who handled the large volume of fund activity have begun to focus again on moree traditional clients, and this may yet prove a boon for the jobs market. Companies are seeking to fill a shortage of staff schooled in the traditional practices of trading physical metal. "A lot of companies who had sidelined the traditional physical business are now re-aligning their focus and need poeple who understand the physical market and know how to set up a hedge and manage it, " Gilley said. "The other area where demand has markedly increased in comparison to a few years ago is marketing," she added. As for morale in the industry, individuals' confidence in their future is seemingly undimmed. "Just because I've lost my job doesn't mean I'm going to sell my Porsche," one trader said. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. New Power Hldg Sees Meeting 3Q Loss Estimate 10/19/2001 Dow Jones News Service (Copyright (c) 2001, Dow Jones & Company, Inc.) PURCHASE, N.Y. -(Dow Jones)- New Power Holding Inc. (NPW) expects to meet its prior third quarter loss estimates; and said it has revised an agreement with Enron Corp. (ENE), lowering the collateral New Power must post under a master netting agreement. In a press release Friday, New Power said the amendment to the Enron pact and cost-cutting efforts will allow the company to continue to conduct business until it secures ongoing asset-backed financing. The company reiterated its earlier expectations of a third quarter loss of $65 million to $70 million, or $1.12 to $1.20 a share. Analysts put the company's third quarter loss at $1.16 a share, according to Thomson Financial/First Call. Third quarter revenue will be "slightly lower" than the $60 million to $65 million forecast in August, New Power said. In the year-ago third quarter New Power lost $1.23 a share on revenue of $18.19 million. The amendment to the master netting agreement with Enron North America Corp., Enron Energy Services Inc. and Enron Power Marketing Inc. affects the master cross-product netting, setoff, and security agreement, and expands through Jan. 4 the types of collateral that New Power is permitted to post to the Enron units. Under the amended pact, the first $70 million of posted collateral must be in the form of cash, while amounts in excess of $70 million may consist of not more than $40 million of eligible receivables and inventory of New Power, valued at discounts specified in the amendment, and subject to a $25 million limit for October 2001. Shares of New Power traded recently on the New York Stock Exchange at $1.67, up 1 cent, or 0.6%, on early composite volume of 7,900 shares. Average daily volume is 223,800 shares. -Bill Platt; Dow Jones Newswires; 201-938-5400 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

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['[email protected]', '[email protected]', '[email protected]', '[email protected]']

Energy Issues

Please see the following articles: Sac Bee, Fri, 6/22: Employees: Power supply held down Sac Bee, Fri, 6/22: Consumers cut down their own power in protest Sac Bee, Fri, 6/22: Davis consultants had contract with Edison: The=20 disclosures turn up the heat on the governor for hiring=20 ex-Clinton aides SD Union, Fri, 6/22: State deal may ease blackout threat Canada to supply energy as summer demand rises=20 SD Union, Fri, 6/22: Ex-worker: Duke manipulated market LA Times, Fri, 6/22: Estimates of power profits disputed LA Times, Fri, 6/22: Edison plans bond offer at 13% rate LA Times, Fri, 6/22: Energy company abandons plans for Baldwin Hills plant= =20 SF Chron, Fri, 6/22: Western states could feel pinch from California pricin= g=20 SF Chron, Fri, 6/22: Feds spurn Duke Energy in its bid to avoid refunds SF Chron, Fri, 6/22: News Analysis: Davis winning Washington PR battle=20 Price cap victory may rob Democrats of campaign issue SF Chron, Fri, 6/22: Suit filed over report on power lines, health=20 Deal on transmission grid could raise liability SF Chron, Fri, 6/22: Texas power firm's shares failing (Enron spotlighted) Power baron Enron finds fortunes fading Mercury News, Fri, 6/22: Power firm accused of price-fixing Mercury News, Fri, 6/22: Enron chief: Gov. Davis not to blame for energy=20 crisis (Jeff Skilling comments, Ken Lay and Enron mentioned) OC Register, Fri, 6/22: Three say company purposely cut power Ex-Duke workers say repairs were curbed in order to manipulate market OC Register, Fri, 6/22: FERC judge tackles task of generating a deal=20 OC Register, Fri, 6/22: Davis seeks $9 billion refund=20 OC Register, Fri, 6/22: Energy notebook: Blackouts are still a hot prospect= ,=20 officials warn OC Register, Fri, 6/22: In rolling blackouts, 'together' is all relative Employees: Power supply held down By Kevin Yamamura and Emily Bazar Bee Capitol Bureau (Published June 22, 2001)=20 Three former San Diego Gas & Electric Co. employees who worked at a Duke=20 Energy plant said Thursday that the generator destroyed working parts,=20 withheld power supply or otherwise took actions that they believe drove up= =20 the price of electricity.=20 State officials said the whistle-blowers' comments at a state Senate hearin= g=20 today could provide the most damaging illustration yet that power generator= s=20 held down production to inflate prices on the spot market. Gov. Gray Davis= =20 has long alleged that power companies have overcharged the state and=20 utilities.=20 Jimmy Olkjer, a former assistant control room operator at Duke's South Bay= =20 plant in San Diego, said in a phone interview that during the state's power= =20 shortages, Duke cut supply. Although Duke, a Charlotte, N.C.-based company,= =20 owned the plant, and it contracted with SDG&E to operate the unit, he said.= =20 "Rather than creating more power, they were creating less," Olkjer said. "I= =20 think there was manipulation of the market."=20 The California Public Utilities Commission and several state legislative=20 committees continue to investigate price manipulation allegations, and=20 Attorney General Bill Lockyer has said he will take witnesses to a grand ju= ry=20 next month.=20 The generators have denied they manipulated the market.=20 "We stand behind our maintenance practices and have done a good job keeping= =20 the power flowing," Duke spokesman Tom Williams told the CBS television=20 network.=20 But former mechanic Glenn Johnson said he saw generation units taken "down= =20 for economics."=20 Ed Edwards, also a mechanic, said he was ordered to destroy 23 pallets of= =20 working parts.=20 "We were asked, myself and other employees, to disperse of perfectly good= =20 parts that were used to make repairs of systems and components," Edwards=20 said.=20 State Sen. Joe Dunn, D-Santa Ana, chairman of the market-manipulation=20 committee, said his staff has been looking for employees or others with=20 intimate knowledge of power plant operation to come forward, and he promise= d=20 that others will testify at future hearings.=20 "It's the first time that we've had evidence from directly within power=20 plants in California that the ramping up and ramping down of power generati= on=20 was a response to price and not to demand," Dunn said.=20 He said he would reach no conclusions until Duke and other generators testi= fy=20 next month, but he added that the former employees' testimony raises=20 suspicions "at first blush."=20 The Bee's Kevin Yamamura can be reached at (916) 326-5542 or=20 [email protected]. Consumers cut their own power in protest=20 By Silvina Mart?nez Bee Staff Writer=20 (Published June 22, 2001) When the temperature hit 100 degrees at 7 p.m. Thursday, Larry Lynch turned= =20 off the air conditioner, unplugged the refrigerator, pulled out the TV cord= s=20 and shut down all other appliances in the house.=20 Lynch, a 61-year-old newsletter publisher in Sacramento, responded to the= =20 "Roll Your Own Blackout" Thursday and joined thousands throughout the state= =20 to protest energy policies and promote conservation by stopping the use of= =20 energy from 7-10 p.m.=20 But the data coming off the grid at the California Independent System=20 Operator didn't show the effort.=20 During the first hour of the voluntary shut-off, the demand for energy by= =20 PG&E customers in Northern California was almost the same as at the same ti= me=20 Wednesday, ISO officials said.=20 Protesters didn't expect significant changes on the grid.=20 "I feel it will at least send a message that we don't have to depend on it= =20 (energy)," said Jackie Bell, 37, a consultant at the Capitol joining the=20 conservation drive from her apartment on Fulton Avenue.=20 "It's just a symbolic act," said Peter Lopez of Sacramento, who decided to= =20 use the evening to meditate. "Maybe I'll just go outside, stare at the star= s=20 and try to spot a few constellations in the night."=20 It was the longest day of the year, and one of the hottest. But those=20 determined to advocate conservation didn't mind the sacrifice.=20 "People are getting focused on the fact that we have power at our end," sai= d=20 Joan Blades, a spokeswoman for MoveOn, a grass-roots organization in the Ba= y=20 Area and one of hundreds of online groups passing along the call for the=20 voluntary blackout.=20 An electrical engineer in Oakland started the "Roll Your Own Blackout" idea= =20 when he posted a note in a political chat room in April. Then an artist in= =20 Los Angeles forwarded the e-mail to a number of friends and from there it= =20 quickly spanned the globe.=20 By Thursday afternoon, more than 12,000 people had signed up at the MoveOn= =20 Web site to join the protest, Blades said.=20 Many threw blackout parties. In San Francisco, the nonprofit group Global= =20 Exchange gathered hundreds around a big bonfire at Ocean Beach.=20 At his home in east Sacramento, Lynch did fine without electricity for thre= e=20 hours. He ate tuna salad for dinner, watered the lawn and when it got dark,= =20 he opened the windows and let some air in.=20 "We should show that people are willing to shut the power off if the prices= =20 go too high," he said.=20 ISO has not declared a power emergency since May 31.=20 "We have seen a consistent conservation on a day-to-day basis, and it's=20 making the difference between blackouts and no blackouts," ISO spokeswoman= =20 Stephanie McCorkle said.=20 McCorkle encouraged initiatives like "Roll Your Own Blackout."=20 "People are conserving," she said. "And we can only support this whole=20 effort."=20 The Bee's Silvina Mart?nez can be reached at (916) 321-1159 or=20 [email protected]. Davis consultants had contract with Edison: The disclosures turn up the hea= t=20 on the governor for hiring the ex-Clinton aides. By Emily Bazar Bee Capitol Bureau (Published June 22, 2001)=20 Two consultants hired to advise Gov. Gray Davis on energy policy officially= =20 disclosed their contract with Southern California Edison on Thursday, but= =20 Davis aides insisted it is not a conflict because "Edison and the Governor'= s=20 Office have the same goal."=20 Communications consultants Chris Lehane and Mark Fabiani have drawn intense= =20 criticism since they were hired last month to shape the Democratic governor= 's=20 public response to the state energy crisis.=20 The former Clinton administration communication aides -- nicknamed the=20 "Masters of Disaster" for their spin on the Whitewater, travel office and= =20 1996 fund-raising controversies at the Clinton White House -- have come und= er=20 fire for receiving a six-month, $30,000-a-month contract, more than the=20 governor or anyone on his staff makes.=20 Secretary of State Bill Jones, a Republican who is running for governor nex= t=20 year, has called for an investigation into potential conflicts. State=20 Controller Kathleen Connell, a Democrat, has said she will not issue=20 paychecks to the pair pending her own investigation.=20 The criticism mounted after the duo's economic interest disclosure forms we= re=20 released late Thursday, showing that each has received at least $10,000 und= er=20 contract from Edison in the past year.=20 But Davis spokeswoman Hilary McLean defended their credibility, saying=20 there's no conflict of interest because Lehane and Fabiani both disclosed= =20 that they had worked for Edison before they signed their contracts with the= =20 state.=20 Besides, she added, Edison and the governor are working toward the same goa= l:=20 Both want the Legislature to adopt a memorandum of understanding, a propose= d=20 agreement, that would prevent Edison from going bankrupt by financing a sta= te=20 purchase of the utility's transmission lines.=20 "It's not a conflict because there's been full disclosure," McLean said.=20 "Edison and the Governor's Office have the same goal, passing the MOU. We'r= e=20 working together at this point with Edison."=20 But open-government groups and Republican lawmakers bristled at the notion= =20 that disclosure negates any potential conflict.=20 Derek Cressman of the California Public Interest Research Group pointed to = a=20 section of state law that prohibits public officials from influencing=20 decisions if it would have "a material financial effect" on a business enti= ty=20 that provided them $500 or more within the last year.=20 "You have two individuals on the government payroll who had previously been= =20 on the Edison payroll and it's not clear to whom their loyalties are," he= =20 said. "Just because they've revealed it doesn't mean there's not a conflict= =20 there, and that they're not serving two masters."=20 On Thursday, Jones said he is awaiting the results of the Fair Political=20 Practices Commission investigation and agrees with Connell's decision this= =20 week to withhold payment from the consultants.=20 "This further calls into question the ethics of how these individuals were= =20 hired and contracts were let," Jones said.=20 Senate Republican leader Jim Brulte believes there's no question that Lehan= e=20 and Fabiani are violating conflict-of-interest laws and suggested that the= =20 two should be paid out of Davis' campaign funds, which had reached $26=20 million by Jan. 1.=20 Brulte, of Rancho Cucamonga, added that he would not vote for a state budge= t=20 as long as Lehane and Fabiani remain on the state payroll.=20 "The state of California does not need to be paying political wordsmiths=20 $30,000 a month," he said. "I just wish (Davis) were as frugal with the=20 taxpayers' money as he is with his campaign money."=20 The Bee's Emily Bazar can be reached at (916) 326-5540 or [email protected]= . State deal may ease blackout threat=20 Canada to supply energy as summer demand rises By Ed Mendel=20 UNION-TRIBUNE STAFF WRITER=20 June 22, 2001=20 SACRAMENTO -- California may be able to avoid some of the blackouts predict= ed=20 for this summer, thanks to a little-known power-swapping agreement with a= =20 Canadian utility.=20 The arrangement is expected to give California electricity in July and Augu= st=20 from the hydroelectric generators of BC Hydro in British Columbia, despite = a=20 serious drought in the Northwest.=20 California has sold surplus power in recent months to the government-owned= =20 utility, which is expected to return power to the state as heat drives up t= he=20 demand for electricity.=20 State deal may ease blackout threat=20 Continuing coverage: California's Power Crisis=20 ?=20 Despite the energy crunch, the state often finds itself with surplus power= =20 that can be sold or swapped. For instance, advance power purchases that=20 provide energy at a better price may deliver more power than needed at any= =20 given time, particularly during off-peak hours.=20 BC Hydro's reservoirs and hydroelectric generators are a little like an=20 electricity storage battery. By importing California power, BC Hydro has be= en=20 able to conserve water that can be released this summer to produce power fo= r=20 California.=20 As a result of the agreement and other factors, state power buyers say they= =20 are in a stronger position going into the hot summer months than they had= =20 expected. So far this week, the state has managed to get through a heat wav= e=20 without so much as a Stage 1 power alert.=20 "We are in much better shape at this point than I imagined we would have be= en=20 as little as a month ago," said Ray Hart, head of the power purchasing unit= =20 in the state Department of Water Resources.=20 The North American Electric Reliability Council, which last month predicted= =20 260 hours of rolling blackouts for California this summer, has noticed a=20 change in recent weeks.=20 "We don't seem to have the crisis we were all expecting," said Ellen Vancko= ,=20 a council spokeswoman. "But whether that is a short-term or a long-term eve= nt=20 we don't think anyone knows yet."=20 Much of the credit for avoiding blackouts is given to unexpectedly high=20 conservation by Californians and an increased supply of power. Many=20 generators that had been shut down for maintenance or lack of payment are n= ow=20 back on line.=20 But the hydroelectric power agreement had gone unnoticed until now.=20 Hart mentioned it during a Senate Energy Committee hearing this week. But h= e=20 declined to reveal the amount of power banked with BC Hydro, saying it coul= d=20 hurt the state's competitive position in the market.=20 "If I start talking specifics," said Hart, "then I have to give out what I = am=20 doing every single day, and I have no market position."=20 In the past, California routinely sent power to a number of utilities in th= e=20 Pacific Northwest during the winter when residents there needed heat.=20 Northwest utilities returned power to California in the summer when air=20 conditioning drove up demand.=20 Little was expected from the reciprocal arrangement this year because=20 California was short of power last winter as electricity prices soared, and= =20 drought has sharply lowered reservoirs in the Northwest. But the agreement= =20 with BC Hydro will provide at least some power this summer.=20 The state was forced to begin buying power in January after its two largest= =20 utilities, Southern California Edison and Pacific Gas and Electric, were=20 unable to borrow because of a $13 billion debt. The rates that the utilitie= s=20 could charge their customers were frozen under a failed deregulation plan a= s=20 the cost of power on the wholesale market skyrocketed.=20 Hart said it took time to convince BC Hydro, which has demanded cash for so= me=20 electricity, that it could safely do business with California despite big= =20 debts owed to generators for power they supplied to the utilities.=20 "We have only been able to do it for the last couple of months," said Hart.= =20 "It took a long time to get them to do it because of credit issues."=20 A spokesman for BC Hydro said the utility engages in power swaps but does n= ot=20 release the name of the other parties or the terms of the agreements.=20 "Our first priority is taking care of our own," said Warren Cousins of BC= =20 Hydro. "We are still looking for opportunities to help out other entities= =20 when we can."=20 Hart said the state has another arrangement with the federal Bonneville Pow= er=20 Authority, but again refused to provide details. He said the state has sold= =20 surplus power to several buyers, including the Los Angeles Department of=20 Water and Power.=20 Information about state power purchases had been closely guarded until=20 recently. Gov. Gray Davis, pressured by lawsuits and a court ruling, releas= ed=20 edited versions last week of 38 long-term power contracts worth $43 billion= .=20 The Davis administration said it agreed to release contract information=20 because power prices have dropped, easing competitive pressures.=20 ?=20 Ex-worker: Duke manipulated market=20 By Bill Ainsworth=20 UNION-TRIBUNE STAFF WRITER=20 June 22, 2001=20 SACRAMENTO -- A former operator at Duke Energy's Chula Vista plant said he= =20 was told frequently by company officials during the past year to alter the= =20 plant's output in a way that may have boosted electricity prices.=20 The operator, Jimmy Olkjer, said he was even ordered to cut power generatio= n=20 during energy emergencies, when the state faced rolling blackouts because o= f=20 a scarce supply of electricity.=20 He said he believes reducing the electricity generation helped the company= =20 charge higher prices. "It looks like that's what they were doing," Olkjer= =20 said in an interview.=20 He and another former plant employee said that during the past year the=20 company regularly operated its least-efficient turbine, possibly to justify= =20 higher prices.=20 The allegations, which they plan to repeat today at a state Senate hearing= =20 investigating power generators, provide the first insider evidence that Duk= e=20 Energy may have manipulated output at its South Bay plant to drive up price= s.=20 Duke, based in North Carolina, leases the South Bay plant from the San Dieg= o=20 Unified Port District.=20 A March report by the Independent System Operator, which manages California= 's=20 electricity grid, alleged that by withholding power Duke and four other=20 owners of generating plants have contributed to billions of dollars in=20 overcharges to California consumers.=20 Tom Williams, spokesman for Duke Energy North America, said that varying th= e=20 output of the generating units at the Chula Vista plant had nothing to do= =20 with trying to achieve higher prices.=20 He said the changes in output helped balance the state's grid by "dancing i= n=20 the market" -- providing flexibility for grid managers by allowing the plan= t=20 to add or reduce power quickly.=20 Williams added that the aging South Bay plant produced as many megawatts la= st=20 year as it did in 1994.=20 Olkjer served as a plant operator for 18 years, mostly when the plant was= =20 owned by San Diego Gas & Electric Co. After Duke took over the plant, worke= rs=20 were guaranteed their jobs for two years. In April, when that period ended,= =20 Duke laid off Olkjer and other workers. Now he is retired.=20 During the two years Duke has managed the plant, Olkjer said, operators=20 frequently got calls from officials with Duke Energy Trading and Marketing = in=20 Salt Lake City telling them to adjust their production schedule.=20 Some employees at the plant monitored the hourly price of electricity poste= d=20 by the Independent System Operator and recognized a correlation, he said.= =20 "We noticed that a lot of times when the price was down (our) megawatts wou= ld=20 go down," he said. "If the price was up, often the megawatts would go up."= =20 Olkjer said he was never told why he was being ordered to turn the plant's= =20 output up and down. When he asked, he said, company officials told him it w= as=20 none of his business.=20 Still, he was puzzled, particularly when he was told to throttle down the= =20 plant during electricity emergency alerts -- as he says he did Jan. 16 when= =20 the state declared a Stage 3 alert, with the possibility of rolling=20 blackouts.=20 "It doesn't make sense to cycle up and down when there's a Stage 3 alert," = he=20 said.=20 Duke spokesman Williams said the company may turn down units at the orders = of=20 the ISO during a Stage 3 alert because the grid manager can find cheaper=20 power somewhere else.=20 Lisa Szot, spokeswoman at the ISO, said she couldn't determine whether the= =20 ISO had ordered Duke to power down its Chula Vista plant Jan. 16.=20 Olkjer said the frequent adjustments of power production, which sometimes= =20 occurred every half-hour, wear out the plant's equipment.=20 "It's harder on the machinery," he said. "It's like driving down the street= =20 putting your (foot) on the gas and then slamming on the brake."=20 Before deregulation, Olkjer said, the four units at Chula Vista, which have= =20 the capacity to produce 706 megawatts, had been operated steadily during mu= ch=20 of their history.=20 S. David Freeman, formerly general manager of Los Angeles' Department of=20 Water and Power and now chief energy adviser to Gov. Gray Davis, said rapid= =20 cycling had become more common under deregulation and is hard on equipment.= =20 "We had almost 15,000 megawatts of generating capacity down for repair last= =20 winter," said Freeman, referring to what industry experts agreed was an=20 extraordinary level of plant outages over several months.=20 SDG&E, which built the Chula Vista plant in the 1960s, sold it to the Port= =20 District for $110 million. In 1998 the port leased the plant to Duke Energy= =20 for 101/2 years in what critics are now calling a sweetheart deal.=20 The company pays minimal rent, but has made large profits. In the first=20 quarter of this year, Duke, which owns three other plants in California, sa= id=20 profits rose 208 percent to $428 million from energy sales and trading.=20 Duke may hold the record for charging the highest price for electricity. It= =20 asked $3,880 per megawatt-hour this year. By comparison, before the energy= =20 crisis began, electricity sold for around $35 per megawatt-hour, an amount= =20 which powers about 750 homes.=20 Federal regulators have ordered the company to refund $20 million to the=20 state for charging excessive prices unless the company can justify them.=20 In May, the company offered to pay the state to settle any price gouging=20 investigations, but Gov. Gray Davis declined.=20 Olkjer and Ed Edwards Jr., who worked at the plant for 20 years before bein= g=20 laid off in April, said they couldn't understand why Duke ran the=20 inefficient, high-cost turbine unit during the past year while other=20 generators sat idle.=20 They said they believed it may have been an attempt to fetch a higher price= =20 for electricity because the company got extra fees when it ran.=20 Williams, the Duke spokesman, said the opposite was true. He said Duke ran= =20 the small turbine more frequently because it was less expensive. It ran on= =20 jet fuel, which was cheaper than the natural gas powering the other units.= =20 Edwards said the smaller unit was run so hard that it was destroyed.=20 "It ran so frequently and so hard, it needed extensive repairs," he said.= =20 Edwards told CBS News last night that plant outages at Chula Vista were=20 prolonged because one supervisor ordered him to dump spare parts.=20 The former power plant employees said they felt compelled to come forward= =20 because they saw the impact the power crisis was having on their community.= =20 "It kind of irritated me because you know there's people on a fixed income= =20 that can't afford a big utility bill," said Olkjer.=20 Staff writer Craig D. Rose contributed to this story.=20 ?=20 Estimates of Power Profits Disputed=20 Electricity: A study of overcharges by suppliers may be flawed, state=20 officials say. Davis quoted the figures to Congress.=20 By DOUG SMITH, ROBERT J. LOPEZ and RICH CONNELL, Times Staff Writers=20 ?????Gov. Gray Davis' contention that California has been nicked for billio= ns=20 of dollars in inflated electricity costs is based on a study that state=20 officials concede may have significant flaws, according to interviews and= =20 confidential government documents. ?????Those costs--estimated by the state to be as high as $9 billion--were= =20 central to Davis' testimony this week before a U.S. Senate committee, where= =20 he again denounced power wholesalers and urged federal regulators to "give = us=20 back the money that was wrongly taken from us." ?????The governor's impassioned demand, however, was based on shaky=20 calculations. The formulas are being reworked, said Charles Robinson, vice= =20 president of California's grid operator, which prepared the study. ?????Robinson said he "had no idea" how much the amount allegedly overcharg= ed=20 by the generators might change. For now, he said, the agency stands by the= =20 numbers. ?????But internal documents from the California Independent System Operator= =20 warn that some of the financial assumptions used to quantify the alleged=20 excess profits could be well off the mark. ?????What's more, the documents caution against relying on the agency's stu= dy=20 as a basis for allegations of overcharging--as Davis did during his testimo= ny=20 Wednesday. That warning was particularly important because the documents=20 provide for the first time a detailed accounting of how much each energy=20 supplier prospered from the state's power troubles between last summer and= =20 February. ?????The largest amounts were charged by four out-of-state power companies,= =20 according to the confidential Cal-ISO report. Okalhoma-based Williams Cos.= =20 led the group with $860 million, followed by Duke Energy with $805 million,= =20 Southern Company Energy Marketing (now Mirant) with $754 million and Relian= t=20 Energy Services with $750 million. ?????When told of the alleged profiteering attributed to them, executives o= f=20 the companies insisted the numbers were grossly overstated because of=20 Cal-ISO's poor methodology. ?????Duke spokesman Tom Williams said his company's entire energy earnings= =20 for North America were less than the amount it was accused of reaping=20 unfairly in California. ?????"It doesn't add up. It doesn't come close to adding up," Williams said= .=20 "What [Cal-ISO] has done is highly irresponsible math." ?????Paula Hall-Collins, a Williams Cos. spokeswoman, said the firm would= =20 need to study the ISO report further. But generally, she said, such reports= =20 fail to fully account for electricity production costs. ?????"We maintain that we have not overcharged, and that we have operated= =20 legally." ?????Reliant spokesman Richard Wheatley also questioned the figures, saying= ,=20 "There's a lot of misinformation out of there." ?????A Mirant spokesman said: "We haven 't overcharged. We haven't=20 manipulated. We haven't withheld."=20 ?????Even some firms alleged to have overcharged to a much lesser degree we= re=20 outraged. ?????Joe Ronan, vice president for government and regulatory relations at= =20 Calpine, said the $236 million attributed to his company "doesn't bear any= =20 relation to reality." ?????"Anybody can throw out any number," he said. "It's like McCarthyism. .= .=20 . Where is the evidence?" ?????A spokeswoman for Davis conceded that his refund figure was an estimat= e=20 but defended it as reasonable. ?????"It's no surprise that the people that are gouging us want to dispute = an=20 estimate of how much they're gouging us," senior advisor Nancy McFadden sai= d. ?????Despite the cautions expressed in the Cal-ISO documents, officials=20 Thursday insisted they were not troubled that the governor referred to the= =20 agency's figures as potential overcharges.=20 ?????"The way it should be characterized is the amount paid above a=20 competitive benchmark," said Robinson, who is also Cal-ISO's general counse= l. ?????The first version of the now-disputed Cal-ISO study was made public in= =20 March. It estimated that power sellers earned $6.3 billion in excess profit= s=20 between May 2000 and last February. The report, later revised upward to $6.= 7=20 billion, became a crucial element of the Davis Administration's campaign=20 against alleged electricity price gougers. ?????This week, just before Davis' appearance in Congress, the study was=20 updated again, adding another $2.2 billions in alleged excess profits throu= gh=20 May. ?????The orginal study, which did not include actual pricing data, was most= ly=20 intended to prod federal regulators into seeking information from generator= s=20 that the state had been denied, Robinson said. ?????Thus far, the Federal Energy Regulatory Commission has ordered refunds= =20 of only $125 million. Next week FERC is convening an unusual settlement=20 conference aimed at addressing the outstanding claims by the state, as well= =20 as those of sellers who claim they are owed hundreds of millions of dollars= =20 by California utilities. ?????One encouraging signal for state officials came this week when FERC=20 reiterated an earlier order that Duke Energy pay millions in refunds. The= =20 order stemmed from the company's sale of electricity at $3,880 a megawatt= =20 hour--for thousands of hours. ?????FERC's order said Duke's pricing had resulted in $11 million in=20 billings. A fair price for that power would have been $273 per megawatt hou= r,=20 the agency said. ?????Tom Williams, a Duke spokesman, said the firm is willing to accept the= =20 lower price. He said he company has yet to collect a dime.=20 ---=20 ?????Times staff writers Elizabeth Shogren and Dan Morain contributed to th= is=20 story. Edison Plans Bond Offer at 13% Rate=20 Debt: Yield is about double what a credit-worthy company would pay, analyst= s=20 say. But will investors bite?=20 By JERRY HIRSCH, Times Staff Writer=20 ?????Edison International is offering investors what analysts are calling a= n=20 unprecedented 13% interest rate for $1.2 billion in notes to refinance debt= .=20 Even so, it's far from certain that the Rosemead-based power company will= =20 find enough buyers to complete the deal. ?????A failure by Edison to refinance $618 million in bank debt that comes= =20 due June 30 and an additional $250 million in notes due in July could put t= he=20 company precariously close to bankruptcy and cast a shadow on California's= =20 plan to sell $12.5 billion in bonds to pay for power purchases, said Dan=20 Scotto, a bond analyst at PNB Paribas in New York. ?????"Even though it would at first appear to be a company setback, it woul= d=20 really be a major setback for the state," said Scotto, who added that=20 Edison's credit troubles could translate into higher prices for California'= s=20 proposed bond offering. ?????Edison, however, said Thursday that the deal is moving forward. ?????"We believe our deal is going well, and we are comfortable with it,"= =20 said Jo Ann Goddard, vice president for investor relations. She declined to= =20 discuss other details of the offering. ?????Goldman Sachs Group, Edison's investment bank, expects to formally pri= ce=20 the offering Monday. Edison officials would not comment on the proposed pri= ce=20 of the note offering, but Wall Street sources said the power company was=20 shopping the issue at the 13% rate. ?????Edison floated the plan earlier this month as a way to tap the borrowi= ng=20 power of a profitable subsidiary to trim debt that comes due this year and = to=20 insulate itself from a possible bankruptcy of its ailing utility unit. The= =20 utility, Southern California Edison, has lost billions of dollars on=20 electricity sales over the last year. ?????The high interest rate on Edison's proposed sale of seven-year notes i= s=20 about double what a credit-worthy company would pay for a similar bond or= =20 note issue and would add a premium amounting to tens of millions of dollars= =20 in annual interest costs to the company's already strapped financial=20 condition, analysts said. It's a full two percentage points higher than the= =20 average rate for other junk, or speculative, bonds. And corporate bonds wit= h=20 similar ratings are going out at 9% to 10%. ?????Edison originally started marketing the issue at 12%, a full two=20 percentage points higher than what analysts initially expected, but then=20 raised the rate to 13% in recent days because it was finding few takers on= =20 Wall Street. ?????"The word is that they couldn't get people interested and that they=20 might not be able to get it done," said Kurt Stabel, a money manager at=20 Street Asset Management in Newport Beach. ?????The higher rate, however, might be pulling investors out of the woodwo= rk=20 and has increased the chance that Edison will pull off the deal, Scotto sai= d. ?????"This never promised to be a day at the beach," Scotto said. "I think = it=20 is really a question of find the right price, the price at which people fee= l=20 comfortable with the risk." ?????Both Stabel and Scotto said that Edison's note offering is unusually= =20 complicated and requires far more explaining or "selling" than typical=20 corporate offerings. ?????Mission Energy Holding Co., a company created by Edison for the sole= =20 purpose of issuing these bonds, will offer the notes. The assets of Edison= =20 Mission Energy, a subsidiary that owns a network of power plants across the= =20 United States and in Asia, Australia and New Zealand, will secure the debt. ?????Mission Energy Holding plans to issue the proceeds to Edison in the fo= rm=20 of dividends, giving the parent company funds to pay off a substantial=20 portion of its debt. ?????The notes will have a credit rating of BB-minus and come due in 2008,= =20 according to bond rating agency Standard & Poor's. That's slightly higher= =20 than the near-default CC rating now carried by Edison. ?????If the offering failed, Edison would face a series of difficult choice= s=20 that range from depleting its cash cushion to going back to its bankers and= =20 begging for continued forbearance.=20 ?????Its SCE subsidiary already has defaulted on $931 million in bonds and= =20 notes. That triggered a default in bank lines of credit at Edison=20 International and SCE, which has since operated under extensions from its= =20 lenders. ?????Edison has about $3 billion in cash, including $2 billion held by SCE,= =20 according to regulatory documents. ?????"This could all still unravel, but I have been impressed with [Edison'= s]=20 effort to inch along so far," said Ellen Lapson, an analyst at Fitch Inc., = a=20 corporate credit rating service. "Who would have thought that they could ha= ve=20 lasted so many months after their first default in January and still not be= =20 in bankruptcy?" ?????Positive developments for Edison, including a deal to hold small=20 generators at bay with partial payments from SCE and progress at crafting a= =20 rescue plan in both the state Legislature and the Public Utilities Commissi= on=20 have sparked a small rally in the company's stock.=20 ?????Edison shares have risen 8% this month. They gained 21 cents Thursday = to=20 close at $11.90 on the New York Stock Exchange. Energy Company Abandons Plans for Baldwin Hills Plant=20 Power: Homeowners and environmentalists rejoice at decision. The site is=20 proposed as a 1,200-acre state park.=20 By JOE MOZINGO, Times Staff Writer=20 ?????In a victory for environmentalists and nearby homeowners, an energy=20 company announced Thursday that it was abandoning its plan to build a power= =20 plant on the site of a proposed state park in the Baldwin Hills.=20 ?????La Jolla Energy Development Inc., in a letter to the state Energy=20 Commission, said it was withdrawing its application for fast-track approval= =20 of the 53-megawatt plant and "will not pursue the Baldwin facility in the= =20 future." ?????"We listened to the community," La Jolla President Steve Wilburn said = in=20 an interview Thursday. "We need to find another place for this equipment." ?????The project was to be a joint venture between La Jolla and Stocker=20 Resources, an oil company that leases the land where the trailer-sized=20 natural-gas plant would sit. ?????Stocker officials said they will decide in the next few days whether= =20 they will pursue the project. "At this point it's just La Jolla pulling out= ,"=20 Stocker spokesman Steve Rusch said. ?????But most observers said it would be difficult to move forward on the= =20 fast-track schedule the state has implemented to relieve the energy crisis. ?????The state commission was scheduled to decide whether to approve the=20 project today in Sacramento, but the hearing has been canceled. ?????The news sparked elation among environmentalists and nearby homeowners= =20 who had fought the proposal on grounds that it would pollute neighborhoods= =20 and threaten an ambitious plan to piece together 1,200 acres of public open= =20 space in the hills. ?????"We're getting ready to have the biggest party," said Tony Nicholas,= =20 president of the hills' United Homeowners Assn. "This shows how a community= =20 can come together for a common goal and mobilize the people in a matter of= =20 days." ?????About 76% of the residents in the hills are African American and many= =20 saw the issue as a matter of environmental justice.=20 ?????In addition, Stocker and La Jolla were seeking approval for the plant= =20 within 21 days of filing their application, under the governor's emergency= =20 power orders. By following this fast-tracked procedure, they would have bee= n=20 able to avoid the normal, time-consuming environmental review process. ?????That angered opponents even further, and nearly 1,000 people showed up= =20 at a public hearing Monday to fight the project. ?????But what officials said turned the tide against the project--at a time= =20 when the energy commission is approving such plants as fast as possible--wa= s=20 testimony from a South Coast Air Quality Management official who said his= =20 agency would not be able to approve the plant quickly. ?????Executive Director Barry Wallerstein said his agency would have to=20 conduct hearings that would take up to 60 days, pushing construction well= =20 beyond a Sept. 30 deadline set by the governor for fast-track projects. He= =20 also said it was unlikely Stocker could get needed exemptions from federal= =20 clean air laws. ?????In a letter to the Energy Commission this week, Wallerstein wrote: "It= =20 appears that the Baldwin Energy Facility could not begin operation until so= me=20 time in the first part of 2002 at the earliest." By Wednesday night, the=20 energy commissioner who presided over the public hearings issued a statemen= t=20 recommending that the rest of the commission deny the application for a=20 plant, citing Wallerstein's concerns. ?????Conservationists embraced the outcome as a sign that the movement to= =20 create a park was gaining steam. The Baldwin Hills Conservancy was created= =20 last year with the idea of creating green space for the densely populated= =20 neighborhoods of south Los Angeles. With support from the governor and loca= l=20 politicians, the state recently bought a 68-acre parcel in the area for an= =20 unprecedented $41 million. ?????"This is a great day for the Baldwin Hills and all the people who have= =20 worked so hard to bring this world-class vision to reality," said Esther=20 Feldman, president of Community Conservancy International and the main=20 organizer to build the park. ?????Also applauding La Jolla's decision were state Sen. Kevin Murray=20 (D-Culver City) and Assemblyman Herb Wesson (D-Culver City), who had come o= ut=20 strongly against the project. They and others questioned whether the small= =20 amount of power provided by the facility--coming online after the dog days = of=20 summer--would do much to relieve the energy crisis. ?????"I'm ecstatic" Wesson said. "At this point the environment has won." ?????The plant would have sat on what is a working oil field about 650 feet= =20 from the Kenneth Hahn State Recreation Area. And according to park=20 proponents, it would lie in the middle of the grander state conservancy, on= =20 what would be a half-mile bridge of land arching over La Cienega Boulevard. ?????Rusch, the spokesman for Stocker, said much of the information=20 circulating about the trailer-sized plant is false. ?????The plan did not call for "a stack with billowing smoke," he said. "If= =20 the issue is air quality, we've cleaned air quality up." In the last decade= ,=20 Rusch said, the company's existing 400 oil pumps on the property have reduc= ed=20 nitrogen oxide emissions from 374 tons to 3 tons a year. The power=20 plant--with two 70-foot stacks--would ultimately add about 18 tons a year. ?????He said the company was trying to cut its energy bills by providing it= s=20 own power to pump oil, while also contributing an extra 39 megawatts to the= =20 state grid during the energy crisis. ?????Residents say there are more desolate places for the state to relieve= =20 the energy problem. Said Mary Ann Green, president of the Blair Hills=20 Homeowners Assn.: "We just hope that Stocker would be responsive to the=20 outcry from the community." Western states could feel pinch from California pricing=20 KAREN GAUDETTE, Associated Press Writer Friday, June 22, 2001=20 ,2001 Associated Press=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2001/06/22/n= ation al0545EDT0489.DTL&type=3Dnews=20 (06-22) 02:45 PDT SAN FRANCISCO (AP) --=20 When power supplies stretch thin across the West this summer, who will deci= de=20 whether Silicon Valley computers, Washington apple orchards or Las Vegas=20 casinos get first dibs on what's left?=20 It's a key question raised by the decision of federal energy regulators thi= s=20 week to cap electricity prices throughout the West, using a formula based o= n=20 California's power costs.=20 Economists, energy industry executives and officials in all 11 states are= =20 beginning to analyze the fit of this new piece in the energy puzzle.=20 Though most call the order a good step that could prevent price gouging,=20 others worry the pricing system could lead to electricity shortages for=20 California's neighbors, or prompt utilities to stock up on power contracts = to=20 fend off shortages. That could diminish any leverage power buyers might hav= e=20 as they compete for the remaining megawatts available each day.=20 Tying the highest possible power price to California could cause a problem= =20 come winter, when power demand drops in the Golden State, said Gary Ackerma= n,=20 director of the Western Power Trading Forum, which represents most sellers = of=20 energy.=20 States where consumers need electricity to heat furnaces through the winter= =20 would be unable to outbid each other above the price cap, which is usually= =20 determined by a formula based on the highest bid for last-minute power duri= ng=20 the most recent energy supply emergency in California.=20 That may leave power wholesalers, and not a free market, to decide who gets= =20 the energy.=20 "Certainly, California has a tremendous pull on our prices and has for=20 probably the last year," said Claudia Rapkoch, spokeswoman for Montana Powe= r=20 Co., which supplies natural gas and electricity to two-thirds of the Big Sk= y=20 state. "What it means for this winter, we're just going to have to wait and= =20 see."=20 California utilities had much more control over power supplies before=20 deregulation in 1996 obligated them to sell off their power plants to=20 encourage competition. This brought lower prices for a time, but gave contr= ol=20 over power supplies to wholesalers that aren't obligated by state law to=20 serve the serve the best interests of local customers.=20 Rather than appointing one power grid manager to decide how to divide power= =20 in the West, Ackerman predicts utilities in non-deregulated states will=20 simply sell their power within their borders. That would hurt California,= =20 which this week imported about 10 percent of its electricity and its=20 remaining supply from local plants owned by out-of-state power companies.= =20 Price cap or not, utilities in the region will watch out for each other as= =20 best they can, because they might need the favor returned, said Charles=20 Reinhold, executive consultant for Electric Resources Strategies in Ariz.= =20 Saddled with rising bills that threatened to exhaust the state's budget,=20 California recently began to sign long-term contracts with generators. Gov.= =20 Gray Davis credits the change for helping to drastically reduce prices on t= he=20 spot market, which earlier this month fell below $50 per megawatt hour for= =20 the first time in a year.=20 The long-term contracts, though, weren't cheap. California will pay an=20 average of $70 per megawatt hour during the next decade under 38 different= =20 contracts signed so far.=20 On the Net:=20 Western Power Trading Forum: www.wptf.org=20 RTO West: www.rtowest.org=20 ,2001 Associated Press ?=20 Feds spurn Duke Energy in its bid to avoid refunds=20 Christian Berthelsen, Chronicle Staff Writer Friday, June 22, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/06= /22/M N95159.DTL&type=3Dnews=20 Federal regulators have rejected attempts by Duke Energy Inc. to avoid=20 refunding millions of dollars to California for charging exorbitant=20 electricity prices in January and February.=20 The Federal Energy Regulatory Commission first ordered the refunds on March= =20 9, and Duke responded by filing a challenge. But the commission on Monday= =20 rejected the company's appeal and reiterated its earlier order, claiming Du= ke=20 had abused its power in the California energy market when it sold power for= =20 $3, 880 per megawatt hour.=20 "We will not tolerate abuse of market power or anticompetitive bidding or= =20 behavior," the commission said.=20 Duke acknowledged this month that it had charged $3,880 per megawatt for=20 about 5,500 megawatt hours sold to the state's major utilities in January a= nd=20 February, netting it more than $19 million in receivables.=20 The commission did not specify how much money Duke should refund, but it=20 directed the company to readjust its January billings for those hours to a= =20 price of $273. From a FERC document, it appears that about 2,835 hours=20 occurred in January, which would result in a total refund for that month of= =20 $10.2 million.=20 Duke is one of the companies that have been identified by both the Californ= ia=20 Independent System Operator, the manager of the state's electricity grid, a= nd=20 the FERC as having exercised market power and overcharged Californians for= =20 electricity.=20 Meanwhile, employees at the South Bay power plant in San Diego run by Duke= =20 are expected to testify in a state Senate committee hearing today that the= =20 company ramped production up and down. That allegedly was aimed at lowering= =20 power production during shortages and attempting to drive up electricity=20 prices on the spot market.=20 The workers were employed by San Diego Gas & Electric Co. but were working= =20 under contract to Duke.=20 E-mail Christian Berthelsen at [email protected].=20 ,2001 San Francisco Chronicle ? Page?A - 4 NEWS ANALYSIS=20 Davis winning Washington PR battle=20 Price cap victory may rob Democrats of campaign issue=20 Marc Sandalow, Washington Bureau Chief Friday, June 22, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/06= /22/M N167044.DTL&type=3Dnews=20 Washington -- There was a reason Gov. Gray Davis donned a dark blue jacket= =20 and endured beastly humid 90-degree heat this week in an area behind the=20 Capitol known as the "House swamp."=20 The nation was watching. And after months of political free fall, his messa= ge=20 seemed to be taking hold.=20 "California has been bilked out of $9 billion while the Federal Energy=20 Regulatory Commission was asleep at the switch," Davis declared, repeating= =20 testimony he had delivered hours earlier in the air-conditioned confines of= a=20 Senate hearing room.=20 Wiping a bead of sweat from his brow as 10 television cameras and two dozen= =20 reporters recorded the scene, the California governor apparently couldn't= =20 resist taking another shot: "For nearly a year I've been pounding on this= =20 commission to enforce the law."=20 The state's energy crisis, with its volatile spot markets, out-of-state=20 generators and dearth of alternative energy providers, is a dizzyingly=20 complex policy puzzle. The politics are much simpler.=20 Democrats present themselves as consumer crusaders, defending helpless=20 utility customers from greedy energy conglomerates and misguided regulators= .=20 Republicans portray themselves as stewards of the free market and long-term= =20 solutions, rejecting price caps and refunds as heavy-handed overreactions= =20 with Soviet-style results.=20 The Democratic populism seems to be winning the battle. Though the debate i= s=20 far from settled, the consumer-oriented approach to California's energy woe= s=20 has raised their hopes of winning back the House of Representatives in 2002= =20 and the White House in 2004.=20 "Republicans are scared out of their minds about this," said one gleeful=20 Democrat on Capitol Hill, who suggested that the White House's lackadaisica= l=20 response to California's problems would rile consumers from coast to coast.= =20 "This could rival Pete Wilson's alienation of Latinos," said the Democrat,= =20 referring to the former Republican governor's strident stand against illega= l=20 immigrants, which many blame for the party's weak standing in California.= =20 A sign of the GOP's concern surfaced this week with television ads, finance= d=20 by anonymous sources but produced by Republican Party strategists, that bla= me=20 the Democratic governor for California's energy problems.=20 Democrats, who long have worried that the crisis could cost Davis a second= =20 term, now take credit for having pressured the White House and federal=20 regulators to take a more active role.=20 The Federal Energy Regulatory Commission, which had previously resisted suc= h=20 efforts, took steps toward controlling wholesale electricity prices Monday.= =20 Later in the week, two commissioners appointed by President Bush testified= =20 that they might be open to further price restrictions and support huge=20 refunds to California. And just yesterday, Vice President Dick Cheney, who= =20 has been among California's most vocal critics, told Senate Democrats behin= d=20 closed doors that he could support refunds to California if federal=20 regulators agreed, according to those in the meeting.=20 "There is no doubt in my mind that action (taken by federal regulators) was= =20 the direct result of pressure for price relief led primarily by the=20 California delegation," Davis said.=20 The pressure did not come only from Democrats. Republican lawmakers, some o= f=20 whom fear the crisis could cost them seats in 2002, wrote FERC last week,= =20 requesting commissioners to "take further actions" to help the state.=20 The Democrats' public relations success follows an effort by the party to= =20 raise the profile of its consumer crusade. Hardly a day has passed in the= =20 past several weeks without a group of Democrats holding a news conference t= o=20 attack the White House, the Republican controlled House or FERC for inactio= n.=20 But it may have just as much to do with a White House that has been far mor= e=20 focused on long-term energy production than the immediate concerns of=20 Californians. Even as it engaged in a legitimate policy dispute over how to= =20 solve the power mess, the Bush administration appeared indifferent to the= =20 plight of residents experiencing skyrocketing energy bills and rolling=20 blackouts.=20 Bush tried to correct that impression with a trip to the state last month.= =20 But the damage appears to have extended beyond California.=20 A CBS News/New York Times poll released this week of 1,050 adults from acro= ss=20 the country showed that only one in three voters approved of the job Bush w= as=20 doing on energy. More than half the respondents said that protecting the=20 environment was a higher priority than producing energy, yet barely one in = 10=20 said that Bush shared that priority.=20 Some Republicans say that Bush was in a no-win position, contending that=20 anything he did would have been attacked by California's opportunistic=20 governor.=20 "Politics is (Davis') main objective, and I don't see the Bush administrati= on=20 being that way," said Rep. George Radanovich, R-Fresno.=20 The question for some analysts is whether Democrats might have been too=20 successful. By pressuring the federal government to take a more active role= ,=20 Democrats may lose their ability to point the finger at a convenient=20 scapegoat.=20 "Davis has always needed rate caps much less than he needed a scapegoat. No= w=20 that FERC has given him what he wants, or close enough to it, it's a lot=20 harder for him to lay blame back on Washington when the blackouts kick in,"= =20 said Dan Schnur, a GOP analyst based in San Francisco.=20 E-mail Marc Sandalow at [email protected].=20 ,2001 San Francisco Chronicle ? Page?A - 4=20 Suit filed over report on power lines, health=20 Deal on transmission grid could raise liability=20 Matthew Yi, Chronicle Staff Writer Friday, June 22, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/06= /22/M N114037.DTL&type=3Dnews=20 As state legislators consider Gov. Gray Davis' deal to buy part of the powe= r=20 grid in California, a public records advocacy group filed a lawsuit yesterd= ay=20 demanding that the state release a report on potential health hazards of=20 living near high-voltage transmission lines.=20 The document could be vital to how legislators vote on the $2.76 billion de= al=20 to buy Southern California Edison's power lines, said Terry Francke, genera= l=20 counsel for the California First Amendment Coalition, which filed the lawsu= it=20 in Alameda County Superior Court. The power line deal was brokered by the= =20 governor to help the cash-strapped utility.=20 Legislators must approve the power grid purchase by Aug. 15 or the utility= =20 can back out. Davis also has a $1 billion agreement to purchase San Diego G= as=20 and Electric's power grid, which also would require the Legislature's=20 approval.=20 Pacific Gas and Electric has not agreed to sell its transmission lines.=20 The power lines report was completed in April by California Electric and=20 Magnetic Fields Program, an agency set up by the state Department of Health= =20 Services to study the issue, Francke said. Both state agencies and their=20 directors are named in the lawsuit.=20 Efforts to keep the report secret are suspect, Francke said.=20 "If it's known there's some danger . . . do you want the state owning that= =20 liability?" he asked.=20 The study began in 1993 after the state Public Utilities Commission committ= ed=20 $7.2 million for research and education on the subject, Francke said.=20 The state document deals with scientific findings on how magnetic and=20 electric fields from transmission lines affect humans and possible policies= =20 based on those findings, he said.=20 The report was scheduled to be released to the public on May 7, but "at the= =20 last minute, the Public Utilities Commission apparently instructed the staf= f=20 of the EMF Program to keep the reports secret," the lawsuit said.=20 State health services spokeswoman Lea Brooks said that the report was only = a=20 draft and that her department was following orders from the PUC.=20 "The PUC wanted to see the draft before (it is released)," she said. "We=20 prepared (the report) for them. We are following their request."=20 Brooks refused comment on the lawsuit, saying her office hadn't seen it. PU= C=20 officials were not available for comment.=20 Studies on the effects of magnetic fields have resulted in no clear consens= us=20 on their effects, Francke said. That's what makes the state study important= =20 for legislators to consider before voting on the governor's deal to buy=20 transmission lines, he said.=20 Opponents of the power grid deals say the report may add to objections to= =20 Davis' agreements with the utilities. Some legislators would rather the sta= te=20 help build more power generators in California.=20 "They are extra nails in the coffin," said James Fisfis, spokesman for stat= e=20 Assembly minority leader Dave Cox, R-Fair Oaks. "We have fundamental issues= =20 with the transmission lines, but when you start stacking these items up,=20 you have an undigestible deal."=20 Davis' spokesman Roger Salazar said he believed the governor hadn't seen th= e=20 health hazard report.=20 "Obviously, if something pops up and is an issue, you'll take a look at it,= =20 but I don't think we're at that point yet," he said.=20 An Alameda County Superior Court judge will hear the lawsuit on July 23,=20 Francke said.=20 E-mail Matthew Yi at [email protected].=20 ,2001 San Francisco Chronicle ? Page?A - 4=20 Texas power firm's shares falling=20 Power baron Enron finds fortunes fading=20 Christian Berthelsen, Chronicle Staff Writer Friday, June 22, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/06= /22/B U178338.DTL&type=3Dnews=20 There's trouble in Texas.=20 Enron Corp., the Houston power firm that's profited mightily during=20 California's energy crisis, is suffering a surprising lack of popularity on= =20 Wall Street.=20 While all eyes have been on Enron's enormous profits here and its enormous= =20 pull in Washington, D.C., the reputed titan of the newly incarnated, free-= =20 wheeling power industry has lost half its market capitalization -- more tha= n=20 $30 billion -- since its peak in August.=20 Forgive Californians for savoring a bit of schadenfreude over the Houston= =20 boys' reversal of fortunes. But what gives? Isn't this the company that was= =20 fattening up on the backs of the state's beleaguered utilities, residents a= nd=20 state budget? Isn't this the company with such close ties to the Bush=20 administration that Kenneth Lay, Enron's chairman, was reported to have=20 interviewed a candidate for a job on the commission that regulates his=20 company?=20 Yup. That Enron.=20 On Monday, Enron shares hit a 52-week low of $43.07, after the Federal Ener= gy=20 Regulatory Commission decided to apply the same price controls to power=20 marketers such as Enron that had applied to power-generating companies for= =20 months. That's a far cry from August, when the company's shares peaked at= =20 $90.=20 "There's a whole kaleidoscope of issues that Enron is being challenged with= =20 in the marketplace right now, none of which on the surface is a major deal,= "=20 said Donato J. Eassey, an analyst with Merrill Lynch Global Securities in= =20 Houston. "But when you combine them all . . . I think what's happening here= =20 is you have a crescendo with this FERC announcement. You have people saying= ,=20 'OK, the growth rate is now in question.' "=20 That growth rate was an eye-popping 88.82 percent in revenues for the Unite= d=20 States on a two-year average, and nearly 98 percent in the rest of the worl= d.=20 Enron officials did not respond to a request for interviews, but as the sto= ck=20 continued to drop Tuesday morning, chief executive Jeff Skilling issued a= =20 statement to the markets in which he reiterated "strong confidence" in its= =20 earnings guidance. The stock rebounded slightly throughout the week, closin= g=20 at $44.05 yesterday.=20 In a speech at the Commonwealth Club last night, Skilling blamed regulatory= =20 interference with the "free market" for investor flight from his company.= =20 "Our stock prices have gotten hammered," he said. "They're half what they= =20 were a year ago."=20 Tumbling stock prices weren't the only bad news for Skilling last night. A= =20 protester pelted the executive with a berry pie just before he began=20 speaking. As Skilling used paper towels to wipe the pie from his face, a=20 woman was arrested on battery and malicious mischief charges.=20 Enron isn't the only company with stock prices that soared in tandem with= =20 California's power crisis and are now suddenly headed south. Shares of=20 Reliant Energy Inc., AES Inc. and Williams Companies Inc., which generate a= nd=20 sell electricity in California, and El Paso Energy Corp., which sells natur= al=20 gas here, are all trading near 52-week lows.=20 The main culprit appears to be the suddenly serious talk in Washington abou= t=20 power price controls, re-regulation and now, the possibility of big refunds= =20 being ordered for California. Even Calpine Corp. of San Jose, which has=20 developed a reputation as an industry good guy because it has not played th= e=20 spot market and has not been accused of manipulative tactics, dropped nearl= y=20 7 percent yesterday, to $37.10. But none of the companies has been hit as= =20 hard as Enron.=20 Such a drastic drop in market capitalization poses serious problems for any= =20 company. It leaves it less money to invest in its own growth, and because= =20 executive compensation is so closely tied to stock price, a sharp decline= =20 makes it more difficult to retain talented leaders.=20 While Enron's power wholesaling division seems to be doing fine, the firm h= as=20 been buffeted by disappointments in other lines of business and other regio= ns=20 in recent months. In the financial press, the continuing knock on Enron is= =20 that its business lines are so new and complex, and the company is so=20 secretive about its operations, that analysts and fund managers don't feel= =20 confident in their understanding of what it does.=20 A look at the firm's recent troubles exemplifies its diversity.=20 For instance, Enron has engaged in repeated battles with the state governme= nt=20 of Maharashtra in India over a 2,184-megawatt power plant there. The Dahbol= =20 Power Co., which is 65 percent controlled by Enron, stopped construction on= a=20 second phase of the project on Sunday, claiming it is owed $48 million by t= he=20 Maharashtra State Electricity Board. The state has accused Enron of chargin= g=20 too much and not generating enough, and stopped buying power from the plant= =20 last month.=20 Closer to home, Enron has struggled with its investments in fiber-optic=20 bandwidth. The company buys and sells unused, high-speed bandwidth space,= =20 treating it like a commodity as it does electricity, coal or natural gas. B= ut=20 the fiber-optic sector has imploded in recent weeks as it has become clear= =20 that for all the long-distance cable laid in the ground, there have not bee= n=20 enough "last mile" connections set up for users to actually take advantage = of=20 it. Earlier this year, Enron scuttled plans for a joint venture with=20 Blockbuster to offer what it called "video on demand," in which customers a= t=20 home would be able to select a video of their choice for a fee and have it= =20 transmitted via fiber-optic cables.=20 Then there was the FERC ruling. For months, the agency had resisted=20 aggressive price controls in the West, preferring to let the market run its= =20 course. But as control of the U.S. Senate was handed to Democrats this mont= h=20 and President Bush appointed a tough Texan regulator named Patrick Wood III= =20 to the commission, the agency changed its tune. It expanded price controls = to=20 all hours of the day, spread the controls throughout the Western region and= =20 brought previously excluded power marketers under the tent.=20 So under current calculations, that means Enron could sell power for no mor= e=20 than $108 per megawatt in a shortage and about $90 during normal hours -- f= ar=20 short of the hundreds of dollars that companies were regularly charging=20 during the past year.=20 In part, the company's gyrating stock price reflects the volatile nature of= =20 the businesses Enron has decided to pursue. And the hard-charging company h= as=20 a reputation for going aggressively into entirely new markets. But sometime= s=20 that approach gets it in trouble, as was the case last year, when Enron had= =20 to take a $400 million charge for its failed investment in Azurix, a global= =20 water company that set out to make a commodity out of water supply the same= =20 way it had done for electricity service, as governments privatized their=20 water systems. The opportunities never materialized.=20 Add it all together and Enron has a tough time supporting a price-earnings= =20 ratio of nearly 39, considerably above the liberal standard of health, whic= h=20 is 25. The company had less than $1 billion in profits on more than $100=20 billion in revenues last year. Still, a survey by Thomson Financial/First= =20 Call found that analysts expect Enron to deliver earnings of 42 cents per= =20 share in the second quarter (up from 34 cents last year), and $1.79 per sha= re=20 on the year. Most maintain a strong "buy" rating on the stock.=20 But investors with big positions in Enron have taken a hit. Hardest-put of= =20 them will be the Janus funds, which, as Enron's largest mutual fund investo= r,=20 held nearly $3.33 billion of its stock as of the end of April.=20 In a semiannual report to investors, John Schreiber, a portfolio manager,= =20 said the stock price of the "new-age energy merchant" was a victim of=20 negative psychology resulting from the California energy crisis. Janus=20 declined to make fund managers available for interviews.=20 "There are tremendous rewards for being first into new markets," said Raymo= nd=20 Niles, an energy analyst with Salomon Smith Barney in New York. "When you'r= e=20 an aggressive first-mover, from time to time you're going to make mistakes.= =20 But I don't think any of the mistakes Enron has made hit the core of the=20 company."=20 E-mail Christian Berthelsen at [email protected].=20 ,2001 San Francisco Chronicle ? Page?B - 1=20 Power firm accused of price-fixing Former employees say Duke Energy slowed production of electricity to create= =20 an artificial shortage, boost profits=20 BY DION NISSENBAUM Mercury News Sacramento Bureau=20 SACRAMENTO -- One of the largest companies producing power in California=20 ordered workers to throw out spare parts and shut down equipment in an effo= rt=20 to drive up the price of electricity, former power plant workers said=20 Thursday.=20 Speaking out on the eve of appearances at a state Senate hearing, the three= =20 men offered the strongest evidence yet that at least one power producer --= =20 Duke Energy -- sought to make more money by creating an artificial shortage= =20 that may have created huge electricity price spikes.=20 ``Their intent, in my opinion, was to boost the price up,'' said Glenn=20 Johnson, a mechanic who worked for two decades at the Chula Vista power pla= nt=20 now run by Duke. ``If I've got the only box of penicillin in town and you'r= e=20 sick, I can charge a million dollars a box,'' he said. ``If you want to liv= e,=20 you're going to have to pay.''=20 Officials at Duke angrily challenged the accusations, calling them=20 irresponsible charges by disgruntled workers who were let go in April.=20 ``Their allegations are just comical, just highly erroneous,'' said Tom=20 Williams, a spokesman for Duke, which runs four plants in California that= =20 produce enough energy for nearly 2.6 million homes.=20 The charges come as the state heads into negotiations next week with=20 generators over the $8.9 billion the state claims its consumers have been= =20 overcharged. Duke, based in Charlotte, N.C., came under considerable=20 criticism when it disclosed that it charged the state a record $3,880 a=20 megawatt-hour for power in January. Federal officials have called the charg= e=20 unreasonable and ordered Duke to refund California the money.=20 The employees, who first made their allegations public on ``CBS Evening=20 News'' Thursday night, will be the only witnesses today at an energy crisis= =20 hearing headed by lawmakers who suspect that power companies have been=20 illegally gouging California.=20 State Sen. Joe Dunn, D-Garden Grove, chairman of a committee investigating= =20 price gouging, said the allegations raise serious concerns. ``While we stil= l=20 need to hear the other side of the story from Duke, if there's any truth to= =20 the information, I believe it would be devastating to the generators,'' he= =20 said.=20 `Perfectly good parts'=20 In interviews with the Mercury News Thursday night, the three former plant= =20 workers said that they were directed to scale back energy production and=20 throw out good spare parts that kept the plant from getting up to full powe= r=20 for weeks.=20 Ed Edwards, who worked in the Southern California plant, said that he was= =20 told to get rid of many boxes of good spare parts. Edwards said he tossed= =20 more than 23 pallets of parts into a dumpster.=20 ``I don't know why they were throwing away perfectly good parts,'' he said.= =20 ``It didn't make sense.''=20 Johnson said the lack of on-site parts prevented workers from quickly fixin= g=20 problems that reduced the amount of power the plant could produce. Sometime= s,=20 he said, it took weeks to get parts.=20 Johnson's suspicions of gouging were echoed by Jimmey Olkjer, who spent 18= =20 years in the plant and worked as an assistant control operator.=20 Even at times when California regulators were warning residents the state= =20 might not be able to find enough energy to prevent imminent blackouts, Olkj= er=20 said, he was directed to scale back the amount of electricity the plant was= =20 producing.=20 ``In hindsight, it looks to me like they were manipulating the power,''=20 Olkjer said.=20 Duke called the allegations ``baseless'' and said the workers didn't=20 understand the reasons for the actions. ``Continued accusations, repetitive= =20 investigations and inflammatory rhetoric concerning the company's operation= s=20 in the state are distracting attention from the true issue of solving=20 California's energy crisis,'' Duke said in a statement.=20 Williams did not directly dispute the worker's allegations. But he said the= y=20 did not understand the reasons behind the decisions.=20 State directives=20 Duke cut back on the amount of power it was producing in response to=20 directives from state regulators at the Independent System Operator, which= =20 runs the power grid, Williams said.=20 ``They did not know that the ISO was instructing them to go up and down to= =20 meet supply and demand,'' he said.=20 An ISO spokeswoman said that the grid manager sometimes asks generators to= =20 produce more or less power to adjust traffic on the transmission system or= =20 respond to the state's electricity needs.=20 Some companies ``bid'' power into the reserve market, which means these=20 plants run only when the extra energy is tapped. ISO officials say they are= =20 prohibited from discussing individual bids.=20 As for the spare parts, Williams said they were eliminated as unnecessary= =20 after Duke bought the plants from San Diego Gas & Electric.=20 Williams said Duke has one of the best performance records in the state, wi= th=20 its power plants off-line for unscheduled maintenance only about 1.1 percen= t=20 of the time.=20 All three workers were given severance packages and let go in April.=20 But Edwards disputed any contention that they were trying to get back at=20 Duke.=20 ``I'm not a disgruntled employee,'' he said. ``I'm just telling the truth o= f=20 what I saw the last two years I worked there.''=20 No matter what the reasons were for the decisions, Duke has made huge profi= ts=20 during the California energy crisis. And those profits apparently created= =20 good cheer among Duke executives.=20 At one party, Johnson said, executives gleefully celebrated their good=20 fortune.=20 ``We're making more money than we ever thought possible,'' Johnson quoted t= he=20 plant's manager as saying.=20 Mercury News staff writer John Woolfolk contributed to this report.=20 Contact Dion Nissenbaum at [email protected] or (916) 441-4603.=20 Enron chief: Gov. Davis not to blame for energy crisis BY KAREN GAUDETTE Associated Press Writer SAN FRANCISCO (AP) -- California Gov. Gray Davis isn't to blame for=20 California's power crisis, and neither are electricity wholesalers, a Texas= =20 energy executive told a crowd at the Commonwealth Club of California.=20 Jeffrey Skilling, CEO and president of Houston-based Enron Corp., wiped awa= y=20 the remnants of a pie hurled by a protester Thursday and placed the blame= =20 squarely on California's energy regulators.=20 The state Public Utilities Commission in the early 1990s put together a=20 broken market by preventing utilities to pass along the full cost of power= =20 and discouraging power contracts that would have lowered dependence on buyi= ng=20 last-minute power, Skilling said.=20 ``Because of these rules, the power consumers of the state of California we= re=20 thrown totally to the mercy of the spot market,'' Skilling said.=20 PUC president Loretta Lynch defended the regulators' actions last week,=20 saying utilities have been free to enter into long-term contracts. Utilitie= s=20 countered that the PUC never made clear what contracts it would accept, whi= ch=20 left open the possibility they would later be overruled.=20 ``I think consumers in California are angry and they should be,'' Skilling= =20 said. ``Prices in California shouldn't be as high as they are.''=20 Skilling also:=20 --Congratulated Davis for California's ``unprecedented'' conservation=20 --Denied accusations that Enron chairman Kenneth Lay personally interviewed= =20 candidates for the Federal Energy Regulatory Commission, which oversees=20 interstate energy markets=20 --Told the audience to expect a report that would show California municipal= =20 utilities have profited the most selling power to the state=20 --Said price caps ordered by FERC earlier this week would likely damage the= =20 markets and would only exacerbate the problem=20 --Acknowledged that municipal utilities in the state have managed to provid= e=20 cheaper power to their customers and even profit from the power crisis by= =20 selling off extra power despite public control=20 Enron has come under fire after accusations from Davis and state officials= =20 that it and other energy companies forced electricity prices skyward by=20 holding back supply.=20 Enron denies such claims, and joins other power producers in arguing that t= he=20 state and utilities still owe them billions in unpaid bills. Davis=20 acknowledges that Pacific Gas & Electric Co., which has declared bankruptcy= ,=20 and Southern California Edison together still owe generators such as Enron,= =20 Duke Energy, Mirant and Reliant Energy about $2.5 billion for past=20 electricity sales.=20 ``Our success is linked to efficient markets, not higher prices in Californ= ia=20 or anywhere else,'' Skilling said.=20 Protesters gathered outside the building wearing pig masks and carrying=20 hand-made signs, one of which read ``Greed is the only power crisis.''=20 ``It's basically Enron and the other companies raising prices,'' said Berna= rd=20 Greening, a Santa Clara computer programmer who said he's unhappy with the= =20 record prices for electricity and natural gas.=20 Pete Snoek of Tiburon said he believed what Skilling had to say.=20 ``I believe the energy situation has been politicized so badly,'' Snoek sai= d,=20 saying he was one of several in the audience to shush protesters during the= =20 meeting. ``I hear the same people out there, as if it's a sin to make any= =20 money in this country.''=20 State officials counter that wholesalers charged as much as $9 billion in= =20 illegal overcharges dating back to May 2000.=20 Companies have said California's claims are wildly exaggerated.=20 The Federal Energy Regulatory Commission has already estimated that=20 wholesalers owe California $124 million in overcharges for the first four= =20 months of the year. Davis and others say that's a mere drop in the bucket.= =20 Enron has also been tied to President Bush's hands-off approach to the ener= gy=20 crisis. Company chairman Kenneth Lay is a friend and one of the largest=20 campaign contributors to Bush and the GOP. Several prominent members of the= =20 Bush administration hold stock in the company.=20 Enron is one of several major GOP donors accused of meeting secretly with= =20 Vice President Dick Cheney as he drafted the Bush administration's energy= =20 plan.=20 Enron is one of the world's leading electricity, natural gas and=20 communications companies, with $101 billion in revenues in 2000. It owns=20 30,000 miles of pipeline, has 20,000 employees and is active in 40 countrie= s.=20 During the first quarter of this year, Enron's revenues increased 281 perce= nt=20 to $50.1 billion.=20 Three say company purposely cut power=20 Ex-Duke workers say repairs were curbed in order to manipulate output.=20 June 22, 2001=20 By KIMBERLY KINDY The Orange County Register=20 FORMER DUKE ENERGY employees Ed Edwards, left, Glenn Johnson, center, and= =20 Jimmy Olkjer are to appear before a state Senate committee today. Photo: Dave Yoder / The Register ? Three former Duke Energy workers say they were ordered to tamper with=20 equipment at a San Diego County power plant - causing mechanical problems= =20 that helped drive up electricity prices during the state's energy crisis.= =20 The workers say they will offer eyewitness testimony to a state Senate=20 committee today - the first public accounts from power plant employees of h= ow=20 energy production may have been manipulated.=20 Duke officials deny most of the allegations. The whistle-blowers - mechanic= s=20 Ed Edwards and Glenn Johnson and control room operator Jimmy Olkjer - lost= =20 their jobs four months ago.=20 State Sen. Joe Dunn, the Santa Ana Democrat who is chairing the investigati= ve=20 committee on price-fixing, said his staff will attempt to verify the accoun= ts=20 from the whistle-blowers. But their mere presence in a Capitol hearing room= =20 is expected to set off a media circus. And if the accusations are true, it= =20 could have wide-ranging effects on the North Carolina company's operations = in=20 California. Duke officials were working late into the night to prepare for= =20 the hearing and have scheduled a news conference later today.=20 "They were doing all kinds of things that didn't make sense," Johnson said = in=20 an interview. "But if you asked them why, to explain, they told you to shut= =20 up and do your job."=20 The testimony comes on the heels of a Federal Energy Regulatory Commission= =20 ruling Thursday ordering Duke to refund $10 million in overcharges for=20 January 2001.=20 "This information lends credence to the concern that there was a deliberate= =20 strategy for outages for the sole purpose of impacting price," Dunn said.= =20 "What they are saying is disturbing."=20 Duke Energy spokesman Tom Williams said the fact that the former workers lo= st=20 their jobs may be shaping their testimony.=20 "The proof is in the pudding. Production is up and we've had fewer forced= =20 outages since we've taken over,'' said Williams.=20 But control-room logs obtained by The Orange County Register show Duke's=20 trading arm ordered its South Bay power plant in Chula Vista to reduce=20 production minutes after Stage Three alerts were issued. The logs are for= =20 January 2001 - the same month that Duke was accused of overcharging in=20 California.=20 The three former Duke workers each worked at the Chula Vista plant for more= =20 than two decades when it was owned by San Diego Gas & Electric. They lost= =20 their jobs when Duke assembled a new team to run the plant.=20 The three whistle-blowers outlined their accusations in interviews with the= =20 Register. The accusations include:=20 The company ordered workers to throw unopened boxes of bolts, steam seals,= =20 valves and other parts into Dumpsters. The parts were needed to perform=20 routine maintenance but were no longer available when repairs were required= .=20 Duke officials acknowledge that new parts were discarded, but say the high= =20 inventory tax made it more efficient to order parts as needed because they= =20 could be delivered within 24 hours.=20 Edwards and Johnson say they were ordered to dismantle critical equipment= =20 necessary for the generating units to run at full capacity. Because parts= =20 were thrown away, they couldn't make repairs and generators ran at diminish= ed=20 capacity for days or weeks. Energy experts say this allegation, if true,=20 would allow Duke to withhold energy from the marketplace, which could drive= =20 up the price. Duke officials counter that production has increased at its= =20 power plants and forced outages have decreased since they took over. But in= =20 late 2000, there was a spike in outages at the Chula Vista plant, according= =20 to records kept by the state's power-grid operator. The plant reported 3,00= 0=20 hours of outages from October through December. There were relatively few= =20 outages before that.=20 The mechanics say the inability to perform repairs forced them to use a=20 small, expensive generator that was rarely powered up before Duke took over= =20 the plant. Experts say that could have been used to exploit federal rules= =20 allowing generators to justify prices based on the costliest units online.= =20 Olkjer says he received orders from Duke's trading arm to reduce production= .=20 Then, when energy prices jumped, he would get new instructions to power up= =20 again. Duke officials did not respond to Olkjer's claim.=20 Stanford professor Frank Wolak, an expert in California's energy market, sa= id=20 that if their testimony can be proven, the state could be refunded millions= =20 of dollars and future energy prices could be dramatically reduced.=20 "What they are saying is amazing. This is a classic plot. I've always=20 wondered how they kept the generators out for so long,'' said Wolak, who=20 heads an electricity market surveillance for the California agency that=20 oversees the buying and selling of power. "They were very happy to have the= m=20 off-line because it allowed them to make more money.=20 Wolak said the testimony seems to back up research conducted by the state= =20 Independent System Operator, which runs most of the state's power grid and= =20 oversees the buying and selling of electricity in California.=20 In a report to federal regulators, ISO said that from May to November 2000,= =20 Duke withheld electricity from the state's power grid 80 percent of the tim= e.=20 The report accused more than a dozen power plant companies of powering down= =20 generators to create scarcity in the marketplace that would in turn drive u= p=20 prices.=20 In a separate report, the state power grid operator accused Duke of=20 overcharging California again in January of this year, resulting in the $10= =20 million refund order. Duke officials say charging $3,880 a megawatt-hour wa= s=20 justified during a short period of time. Federal regulators disagreed and= =20 said the power merchant should have charged no more than $273 per=20 megawatt-hour.=20 Williams, Duke's spokesman, said that the company has been an ethical=20 operator.=20 "All but 1.1 percent of the time, we were operating. That's very good,'' sa= id=20 Williams, adding that when SDG&E owned the plant forced outages took place= =20 1.8 percent of the time.=20 But Dunn said that if the testimony from the whistle-blowers is true, and= =20 Duke had the ability to manipulate prices, federal regulators would be=20 required under the Federal Power Act to move them out of the competitive=20 marketplace.=20 This would mean they would be moved back into a "cost-based" market structu= re=20 and would only be allowed to recover costs at a fair rate of return.=20 "This would bring the prices down dramatically in California,'' Dunn said.= =20 "What generators fear most is being returned to cost-based rate regulation.= "=20 Allegations=20 of market manipulation Nearly a dozen investigations are under way to determine if=20 energy producers=20 illegally manipulated California's dysfunctional electricity market. Here a= re=20 the main allegations: Was power=20 deliberately withheld to boost prices?=20 Several investigators, including the Public Utilities Commission, the=20 California attorney general and the Federal Energy Regulatory Commission, a= re=20 trying to determine if the largest generators and power marketers - includi= ng=20 Duke, Reliant, Mirant and Dynegy - shut down power plants at key times.=20 Federal=20 Environmental Protection Agency records showed times in December when=20 Tulsa-based Williams throttled back at midday, letting=20 Williams boost profits at other plants it=20 controlled, including a=20 Huntington Beach plant owned by AES Corp.=20 Were financial=20 incentives offered to plant operators who shut down?=20 Federal regulators have settled a case for $8.million with Williams. Among= =20 the allegations: Williams offered ffinancial incentives to AES if it would= =20 keep its plants offline. Williams has denied any wrongdoing. Did companies=20 collude?=20 Traders and producers were able to share=20 information on Web sites that helped them determine when to get the highest= =20 prices for electricity. Attorney General Bill Lockyer is investigating othe= r=20 allegations of collusion.=20 Were workers ordered to fake outages?=20 Three former Duke=20 employees will testify today that they were ordered to create=20 malfunctions at a San Diego County power plant, allowing the=20 company to command higher prices at other Duke-owned power plants. Duke=20 denies this. RELATED STORIES=20 =01=07 FERC judge tackles task of generating a deal =01=07 California's blackout forecasts rolled back=20 FERC judge tackles task of generating a deal=20 He's described as a down-to-earth gentleman, but one who 'can slice you up'= =20 if you cross him.=20 June 22, 2001=20 By DENA BUNIS The Orange County Register=20 WASHINGTON - He's a plain-talking, folksy Southern gentleman. But if the=20 nation's chief energy judge, Curtis Lee Wagner Jr., believes the players in= =20 Monday's megaconference aren't dealing straight with each other, watch out.= =20 "He's kind of like (President) Reagan -- a big-picture guy," says Patrick= =20 Wood, the newest federal energy commissioner who's known Wagner for years.= =20 "He can tell a story that always fits the situation." But cross him, and "h= e=20 can slice you up like a Veg-O-Matic."=20 The 72-year-old Tennessee lawyer has been the Federal Energy Regulatory=20 Commission's chief judge for 22 years. His 47 years of government service= =20 includes being a lawyer with the military and Justice Department.=20 And beginning Monday, he'll have California's electricity crisis in his=20 hands. All the players -- from the state to utilities to power generators -= -=20 will be in one room trying to settle who owes whom money and how much.=20 The state wants $9 billion in refunds from generators they say charged too= =20 much for electricity. The generators want billions from the utilities and t= he=20 state that they say didn't pay the bill for other power they bought. And=20 California's ratepayers just want to keep the lights on.=20 "I don't think there's $9 billion," Wagner said Thursday from his office at= =20 FERC headquarters. "I think there may be a billion or so."=20 He spent much of the day fielding calls from some of the several hundred=20 people who could show up in his hearing room Monday.=20 "Let's see, I've talked to Reliant, to Dynergy once, Mirant. I'm going to= =20 talk to Dynergy again this afternoon. And I've talked to the governor's=20 office, and I've talked to some FERC folks, to someone from Oregon and some= =20 municipalities in California. Oh, and I've talked to the fellow who is goin= g=20 to represent the city of Los Angeles."=20 Wagner likes to know what he's getting into ahead of time. He makes a habit= =20 of talking to everyone individually.=20 Monday's is the kind of deal Wagner likes best. Rather than a formal trial= =20 where he wears the robe, pounds the gavel and renders a decision after both= =20 sides make their cases, settlement conferences give him a chance to wheel a= nd=20 deal.=20 "First thing, I'll make an opening statement of some kind, give 'em a pep= =20 talk," Wagner said. "And if we have any big wheels there I'll let them say = a=20 thing or two."=20 After the introductions, he'll start to work through the issues. He'll take= =20 one guy aside, he said, then maybe two. Then maybe a group. And little by= =20 little he hopes to bring them together.=20 By all accounts this case could be more difficult than any he has handled.= =20 "This has got more dollars,'' Wagner said.=20 Thursday, Wagner asked California's Independent System Operator and the pow= er=20 sellers for information that can help him sort out the complicated issues. = He=20 wants the ISO to calculate what wholesale electricity prices wold have been= =20 had the price caps FERC ordered Monday been in effect in the fall of 2000.= =20 And he wants the power companies to tell him how much power they have to se= ll=20 - short and long term.=20 And as if his task wasn't difficult enough, FERC has asked Wagner to make= =20 this deal in 15 days.=20 "It's pretty tight," he said, "but it can be done."=20 Stephen Angle, a Washington lawyer who represents power producers and=20 utilities, ran FERC's trial section for 14 years. The California case is on= e=20 of the most difficult he's seen. But he's not counting Wagner out.=20 "I have learned that it's unwise to assume he won't be successful," Angle= =20 said. The odds that Wagner will get a deal? "Fifty-fifty."=20 This is not the only high-profile case that's taking up the chief's time=20 these days. He's presiding over a FERC inquiry into whether El Paso Energy= =20 Corp., a large natural gas pipeline owner, is overcharging California.=20 Wagner has a history of taking impossible cases.=20 Angle says he recently worked with the judge on a dispute in the Midwest.= =20 "That was a case where few people thought would be successful," Angle said.= =20 It had been on FERC's docket for years. Wagner got the people talking and= =20 emerged with a settlement.=20 And Monday won't be Wagner's first effort at solving California's energy=20 crisis.=20 Last December, he got the parties together to try to break the logjam over= =20 the long-term contracting issue. But just as he was getting a head of steam= =20 on that, says Wood, the Clinton administration yanked the deal away from=20 Wagner and tried to broker it themselves.=20 "I know he's too much of a gentleman to say it. But that was a missed=20 opportunity."=20 Now he'll be reuniting some of the same parties that were together six mont= hs=20 ago.=20 Because of Wagner's longevity on the bench, almost every lawyer or energy= =20 executive who is likely to be in the hearing Monday will have had some=20 dealings with him.=20 "He'll be very clear. He will not mince words," said former FERC Chairman= =20 James Hoecker. "He will make his impatience with any dawdling very, very=20 obvious to everyone.''=20 Davis seeks $9 billion refund=20 The governor tells a Senate panel that power operators 'bilked our state.'= =20 June 21, 2001=20 By DENA BUNIS and KATE BERRY The Orange County Register=20 WASHINGTON - Gov. Gray Davis told anyone here who would listen Wednesday th= at=20 overcharges from what he calls greedy power generators have now risen to $9= =20 billion - $2 billion more than earlier reported.=20 And he wants that money back.=20 The governor said if the meetings federal regulators have ordered next week= =20 to try and hammer out the differences between power companies, utilities an= d=20 the state do not end with that kind of money in California's pocket, he'll = be=20 back.=20 "They must be required to give us back our money,'' Davis told the Senate= =20 Government Affairs Committee during two hours of testimony and questioning.= =20 It was the first time California's chief executive has testified on the=20 state's crisis. "It is unconscionable that FERC looked the other way while= =20 energy companies bilked our state for up to $9 billion."=20 The $9 billion is the amount California's Independent System Operator says= =20 generators overcharged utilities and the state from May 2000 to May of this= =20 year. It had initially calculated that between May 2000 and February 2001= =20 there were $6.7 billion in overcharges, Davis said. Those figures are a far= =20 cry from the $124 million that the Federal Energy Regulatory Commission say= s=20 were overcharges. That's because FERC only looked at three months of rates= =20 and only when the state was in an energy alert.=20 The governor faced tough, pointed questioning from Republican members and= =20 glowing praise and sympathy for his state's plight from Democratic=20 colleagues.=20 Everything from refunds to long-term contracts will be on the table at next= =20 week's settlement meeting. FERC has given the parties until July 9 to make = a=20 deal.=20 If they can't, the administrative judge overseeing the talks will make a=20 recommendation to FERC, which can order the paybacks. Sen. Barbara Boxer=20 introduced a bill Wednesday to require refunds if FERC doesn't act.=20 Not surprisingly, generators don't see the refund issue the governor's way.= =20 "It's just crazy," said Tom Williams, a spokesman at Duke Energy. "I don't= =20 know how they're coming up with these numbers."=20 And there's skepticism about next week's talks.=20 "The negotiations are going to be like the SALT Treaty," said Gary Ackerman= ,=20 president of the Western Power Trading Forum, which represents power=20 suppliers. "I question whether it can happen and work out."=20 Also at issue is money generators say they are owed by the utilities. Davis= =20 said that's about $2.5 billion. But power companies say it's more like $5.5= =20 billion to $6.5 billion.=20 Whatever the figure, Davis said, "we want to see their money in our pockets= =20 before we talk about working anything out on their end."=20 The settlement conference was part of FERC's order instituting=20 around-the-clock price caps for California and its 10 Western neighbors.=20 Those price caps were made possible, experts agree, because California=20 lawmakers from both sides of the aisle riled up the public enough over the= =20 issue that the Bush administration felt the heat.=20 The question is whether that can work with refunds.=20 "Pressure could come from a number of places," said Charles Cook, a=20 nonpartisan political analyst who has followed California's crisis. "It cou= ld=20 come from Republican members from the state, from party donors in Californi= a=20 who (President George W.) Bush is going to have to go back to, and then may= be=20 from his economic advisers who say that California can't be allowed to go= =20 belly up."=20 Davis and Sen. Dianne Feinstein, D-Calif., said new FERC Commissioner Patri= ck=20 Wood, a confidant of Bush, has been receptive to their refund pleas. That w= as=20 the case Wednesday when Wood - expected to be named FERC chairman sometime= =20 this year - told members of the Senate panel that refunds "may be an=20 important tool in the regulatory toolbox. If we're to be a vigilant market= =20 cop, we need to make sure that our bite matches our bark."=20 Wood and the other new commissioner, Nora Mead Brownell, will meet with Dav= is=20 in Sacramento on Monday.=20 RELATED STORY=20 =01=07 Energy notebook Energy notebook=20 Blackouts are still a hot prospect, officials warn=20 June 21, 2001=20 By the Associated Press=20 BERKELEY - Experts at the University of California Energy Institute say=20 residents statewide should not be comforted by the fact that widespread=20 blackouts have been avoided recently.=20 "I would say this is not a great sign that we're going to skate by later th= is=20 summer," said Severen Borenstein, a UC Berkeley economist who heads the=20 institute. "It doesn't look like the system right now can handle a blazing,= =20 hot day. If it's real hot in Northern and Southern California, we're going = to=20 have blackouts."=20 Greg Fishman, a spokesman for the California Independent System Operator,= =20 which controls the state's electricity grid, said ISO preferred to look on= =20 the bright side.=20 "Does the fact that we're meeting electricity demand today mean we're out o= f=20 the woods? No, but is the fact that we're meeting demand today good? Sure i= t=20 is," Fishman said.=20 Air conditioners are the single biggest factor in summer electricity demand= .=20 "If thermostats on air conditioners were turned to 78 degrees across the=20 state, this problem would pretty much go away," Borenstein said.=20 Davis' plan to buy SDG&E grid has fans and critics=20 SAN DIEGO - Gov. Gray Davis' plan for the state to buy San Diego Gas &=20 Electric Co.'s transmission system, owned by parent company Sempra Energy, = is=20 getting mixed reaction.=20 Under the plan unveiled Monday, the state would buy the system for $1=20 billion, and a $747 million debt owed to the utility by its customers would= =20 be forgiven.=20 "It would seem that anything that in the short term lets the ratepayers off= =20 the hook, particularly small businesses that can ill afford drastic balloon= =20 payments, is a good thing," said Suzanne Strassburger of Escondido's Downto= wn=20 Business Association.=20 Douglas Heller, a consumer advocate with the Foundation for Taxpayer and=20 Consumer Rights, called the deal "a cruel joke on the part of Gov. Davis to= =20 say that he's burst the balloon payment, because we're going to be paying f= or=20 it. We're applying that much to buy out Sempra's transmission lines."=20 GE tries to enter state's transmission-lines business=20 SACRAMENTO - Through an alliance with a little-known start-up company,=20 General Electric Co. is trying to enter California's transmission- lines=20 business.=20 Although Trans-Elect, a 2-year-old company based in Washington, has no=20 experience in the transmission business, it has the financial support of GE= 's=20 $66 billion financial arm, GE Capital. Trans-Elect's latest offer comes as= =20 Gov. Gray Davis seeks legislative approval for his plan to buy the=20 transmission lines of both San Diego Gas & Electric and Southern California= =20 Edison.=20 Any involvement by GE in the state's transmission grid could be a conflict = of=20 interest, said a lawmaker involved in the efforts to end California's power= =20 crisis.=20 "You've got someone with generation and transmission systems, how do they= =20 keep them separate and do they?" said Assemblyman Fred Keeley, D-Boulder=20 Creek. "That's a concern for me. Would they have the ability to restrict=20 competitors' access to transmissions?"=20 Bob Mitchell, Trans-Elect's vice president, said the company made its offer= =20 believing that the Legislature won't approve the deals to buy the two=20 utilities' lines.=20 GE joined forces with Trans-Elect on March 14, when GE Capital Services=20 Structured Finances Group Inc. announced it had bought a minority stake in= =20 the company. Neither company would reveal the size of the investment.=20 In other news:=20 A state board unanimously voted to reclaim its role in setting property tax= es=20 for electricity generators. Supporters say the Board of Equalization's=20 decision could mean millions of dollars in higher taxes for electricity=20 companies. The EOB will resume setting the assessed value of plants that=20 produce at least 50 megawatts of power and are owned by generating companie= s=20 whose rates are not controlled by the state.=20 Despite hot temperatures in much of the state, blackouts were averted=20 Wednesday as power reserves remained above 7 percent. Track the state's=20 blackout warnings on the Web at www.caiso.com/SystemStatus.html.=20 In rolling blackouts, 'together' is all relative=20 June 21, 2001=20 I have a confession to make: I'm an N001. And as an N001 I can't help feeli= ng=20 a little guilty.=20 I feel guilty that I won't be called upon to share the pain of all those=20 A001s in=20 Irvine and Laguna Woods, or the M003s in Costa Mesa and Cypress. While the= =20 M011s in Fountain=20 Valley suffer and sweat through rolling blackouts, I'll be sitting pretty.= =20 Because I'm an N001. And the dirty little secret about rolling power=20 blackouts is how many of us are out there.=20 Allow me to explain.=20 As you may have heard, Southern California Edison has been required to set = up=20 a public notification system for rolling blackouts. If you hear on the news= =20 that the power guys are expecting rolling blackouts, you can go to a Web si= te=20 (www.sce.com) or call a toll-free phone number (800-611-1911) to see if you= r=20 "rotating outage group" is on the list for going temporarily dark.=20 How do you know which group you're in? On your Edison power bill, next to= =20 your account number, there's a code that starts with A or M - A001, A002,= =20 M001, M002 and so on. That's your outage group number.=20 But wait. There's another category of outage group. If your power bill has= =20 the code number N001 on it, it means that you're exempt from rolling=20 blackouts.=20 You see, under Public Utilities Commission rules, electric power customers= =20 who provide "essential public health, safety and security services" - such = as=20 fire and police stations, hospitals, jails and so on - are automatically=20 exempt from rolling blackouts, even if they have emergency generators on=20 site. And because of the way electric power service is set up, anybody who'= s=20 on the same circuit with an essential service provider is also exempt from= =20 rolling blackouts.=20 For example, my house shares a circuit with a fire station. So I'm an exemp= t=20 N001, as are the other power customers on the same circuit.=20 But here's the kicker: According to an Edison spokesman, 50 percent of all= =20 Edison customers are N001s - that is, they share circuits with essential=20 service providers, and thus are currently exempt from rolling blackouts.=20 Let me repeat that: Half of all Edison customers are exempt from rolling=20 blackouts. (For San Diego Gas & Electric customers it's 40 percent.)=20 Mind you, this isn't something Edison likes to publicize. When I asked abou= t=20 it for a column three months ago, Edison said it didn't know how many power= =20 customers are automatically exempt. And when the company unveiled its=20 blackout warning plan this week, neither the Edison press release nor news= =20 reports mentioned the 50 percent exemption figure.=20 True, even exempt power customers can be affected by rolling blackouts - at= =20 work, at the store, at a traffic light.=20 Still, the next time you hear some power company or government official say= ,=20 "We're all in this together," don't believe it. When it comes to rolling=20 blackouts, the truth is that only half of us are really all in this togethe= r.=20 And even an N001 can see that isn't fair.=20

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['[email protected]', '[email protected]', '[email protected]']

Davis Wants Generators to Accept Less Than Owed (Update2)

Davis Wants Generators to Accept Less Than Owed (Update2) 2/28/1 18:56 (New York) Davis Wants Generators to Accept Less Than Owed (Update2) (Adds names of California generators in fifth paragraph, and Reliant comment in sixth.) New York, Feb. 28 (Bloomberg) -- California Governor Gray Davis said he intends to ask power generators to accept partial payment for power sold to the state's cash-strapped utilities this summer and winter, Wall Street analysts who attended a closed-door meeting with the governor said. ``It looks like the people he wants sharing the pain are the companies generating power sold to utilities,'' said Kevin Boone, a bond analyst with Bear, Stearns & Co. who attended the meeting in New York. ``He wants to force them to take cents on the dollar. That seems to be what his initial proposal will be.'' PG&E Corp.'s Pacific Gas & Electric, and Edison International's Southern California Edison, the state's largest utilities, are near bankruptcy after accumulating more than $12 billion in debt buying power from generators at soaring prices. Regulators have not let the utilities pass on most of their power- buying debt to consumers. Davis said some generators have approached him with offers to accept less than full payment, said Michael Worms, a utility analyst with Gerard Klauer Mattison & Co. Davis spoke to about 35 analysts from Wall Street and energy-research firms in New York in a meeting that was criticized by investors and analysts who were not allowed to attend. No Names Mentioned Davis didn't specify which companies came to him with partial- payment proposals, analysts said. Duke Energy Corp., Calpine Corp., Willams Cos., Dynegy Inc. and Reliant Energy Inc. are among the biggest suppliers of electricity to California utilities. ``I'm not aware of him talking to anyone at Duke about forgiveness,'' Duke Energy spokesman Tom Williams said. Reliant spokesman Richard Wheatley said Davis's proposal ``doesn't really come as a surprise'' because politicians in Sacramento, the capital of California, have been discussing the idea for weeks. Reliant has opposed anything other than full payment of its debts. ``Williams fully expects to be paid the money that is owed us,'' spokeswoman Paula Hall-Collins said. ``We have worked in very good faith with the state, selling voluntarily into the market, negotiating with them for long-term contracts and working with them to solve the problem.'' Enron Corp., an energy trader that has set aside unspecified reserve for possible losses in California, has not been approached about debt forgiveness, said Karen Denne, a company spokeswoman. ``This proposal. . . is news to us,'' and does not address the immediate problem of electricity shortages in California this summer, Denne said. Industry analysts say California, which has already had scattered blackouts this winter, will face more this summer when power demand surges. Buying the Grid Davis said at the meeting that negotiations to buy PG&E Corp.'s power transmission system may take another 30 days, though he was optimistic an agreement could be reached within two weeks, analysts said. He offered few other specifics on the PG&E talks, said Steve Fetter, group managing director of global power for Fitch Inc. State officials are trying to reach agreement with PG&E and Edison, as well as with Sempra Energy, to buy their transmission lines as part of a plan to help them pay debt and borrow money at low interest rates to avoid bankruptcy. A tentative agreement to buy Edison's lines for $2.76 billion was reached last week. Talks with Sempra are continuing. The governor said he was optimistic an agreement with PG&E could be reached in two weeks, but negotiations could drag on longer, Fetter said. ``We are making progress,'' Davis said at a news conference after the analysts meeting at the Cornell Club on the east side of Manhattan. ``We are close to a final agreement with (Edison) and relatively close with Sempra.'' The governor told analysts he's confident he can get a utility rescue plan that doesn't require an immediate rate increase, but Davis did say that rate increases are going to be needed at some unspecified time in the future, Fetter said. Davis said he wasn't sure if he resolved all of analysts' doubts about California's plans to save its utilities from bankruptcy. ``He's in a hole and he's got a long way to go to get out of it,'' said Paul Patterson, an analyst with Credit Suisse First Boston who attended the meeting. ``We still don't have a final solution in sight.'' Shares of San Francisco-based PG&E fell 9 cents to $13.96. Rosemead, California-based Edison shares fell 4 cents to $14.90. San Diego-based Sempra fell 16 cents to $22.15. --Mark Johnson and Jonathan Berr in New York (212) 318-2300 or [email protected] and [email protected] with reporting by Margot Habiby in Dallas and Jim Kennett in Houston/alp

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Enron Mentions

US Power, Gas Companies Restrict Dealings With Enron Dow Jones Energy Service, 11/08/01 USA: Enron provides financing data, restates earnings. Reuters English News Service, 11/08/01 Enron Thinks Ex-CFO Got More Than $30M Thru Partnerships Dow Jones Corporate Filings Alert, 11/08/01 Dynegy confirms in talks with Enron over possible tie-up AFX News, 11/08/01 USA: Dynegy says in talks with Enron over possible deal. Reuters English News Service, 11/08/01 U.S. Stocks Open Higher on Retail Sales Data, European Rate Cuts Dow Jones Business News, 11/08/01 Dynegy/Enron Talks -4: Follows SEC Inquiry Launch Dow Jones News Service, 11/08/01 Dynegy Confirms Discussions With Enron Business Wire, 11/08/01 USA: UPDATE 1-Before the Bell - Dynegy flat, Enron slips. Reuters English News Service, 11/08/01 FERC 'Watching With Interest' Enron's Woes, Chairman Says Dow Jones Energy Service, 11/08/01 Ripples From Enron's Troubles Hit Its Trading Partners Dow Jones Energy Service, 11/08/01 Enron in Talks With Dynegy; to Restate Earnings (Update8) Bloomberg, 11/08/01 Fitch Comment on Wessex Water Ratings Following Enron Downgrade Bloomberg, 11/08/01 NewPower 3rd-Qtr Loss Narrows After Adding Customers (Update2) Bloomberg, 11/08/001 Dynegy May Offer at Least $8 Bln to Acquire Enron (Update5) Bloomberg, 11/08/01 Enron Bonds Gain as Dynegy Considers $8 Bln Buyout (Update1) Bloomberg, 11/08/01 Enron Confirms Dynegy Talks TheStreet.com, 11/08/01 Stocks Surge On Rate Cuts, Jobless Numbers TheStreet.com, 11/08/01 Some Glamour Stocks That Are Ugly Down Deep RealMoney.com, 11/08/01 Top Of The News Enron Trades Itself Forbes.com, 11/08/01 US Power, Gas Companies Restrict Dealings With Enron By Jon Kamp, Kristen McNamara and Mark Golden Of DOW JONES NEWSWIRES 11/08/2001 Dow Jones Energy Service (Copyright (c) 2001, Dow Jones & Company, Inc.) (This article was originally published Wednesday.) NEW YORK -(Dow Jones)- Trading companies in Enron Corp.'s (ENE) key North American power and gas markets are restricting their dealings with the ailing Houston-based giant, people at those companies said Wednesday. Concerns have mounted because Enron, which accounts for about a quarter of the trade in the country's power and gas markets and which makes a market for those commodities on its Internet-based system EnronOnline, has seen its share price fall by about 75% and its credit ratings downgraded since mid-October due to uncertainties about its extremely complex financial structure. "We've restricted our business with them," said Mike Smith, chief financial officer for Mirant Corp. (MIR) unit Mirant Americas Group, a Top 10 trader of power and gas in the U.S. Smith wouldn't be more specific, but his comments echoed those of others in the business. "Our exposure to Enron is insignificant compared with the previous exposure," said Al Butkus, spokesman for Aquila Inc. (ILA), a Top 5 U.S. power and gas trader. Tractebel Energy Marketing, the North American subsidiary of the Belgian company Tractebel S.A., has limited the term of transactions with Enron to three years or less, a person at the company said. And a power broker said some medium sized western utilities have stopped trading with Enron even for near-term delivery. Enron didn't return calls seeking comment. The Wall Street Journal reported Wednesday that Enron was in talks for a capital infusion and possible acquisition by competitor Dynegy Inc. (DYN). Also, Enron said Thursday it was restating its financial statements from 1997 through the second quarter of 2001, saying its financial and audit reports are unreliable for all those periods. The company fired its treasurer and general counsel. Key Markets Enron's ability to transact in its core markets - North American wholesale gas and power - is essential if the company maintain the earnings and cash flow needed to emerge from its current credit crisis, Wall Street analysts and ratings agencies have said. Standard & Poor's and Moody's Investors Service downgraded Enron's credit to within two steps of junk-bond status last week and have it on watch for further downgrade. Enron still has its supporters. Exelon Corp. (EXC) is monitoring its own risk management, but hasn't changed its relationship with Enron, said Chief Financial Officer Ruth Ann M. Gillis. "We haven't changed our relationship," Gillis said. Enron is a very important factor in the vitality of the wholesale energy markets, she said. They're still the "largest, best" of the companies out there, she said. Likewise, a trading floor manager at one energy company said Enron called earlier in the week and asked that the company increase its trading on EnronOnline. The company's EOL volumes had fallen, but it honored Enron's request out of respect for Enron's still market-making power. PPL Corp. (PPL) moved to mitigate its exposure to Enron following the downgrades, a person in the marketing organization at PPL EnergyPlus said. "Enron would not be a first choice to do long-term transactions," the person said. "For shorter terms, deals, they wouldn't be considered equally with everyone else. There's just too much risk there." Since Enron's troubles began several weeks ago, energy trading partners had stood by the company in ways that stock and bond traders hadn't. Until this week, "business as usual" was an almost constant refrain. Energy companies' immediate exposure to Enron was limited to a maximum of seven weeks of receivables, and Enron was paying its bills. But for some of those companies, business as usual also meant not changing value-at-risk formulas, even though the formulas were generating ever lower allowable volumes of business with Enron as the company's credit quality deteriorated, one risk manager said Wednesday. Lower value-at-risk limits got most trading companies to flatten their portfolios by taking positions to offset currently profitable long-term positions with Enron. PPL, for example, is still following its credit policy and as a result has limited its dealings with Enron, which has seen its credit quality fall, the person at PPL EnergyPlus said. "We've taken a look at our book," the person said. "Based on the events of this and last week, we've taken some action to mitigate the risk based on their ratings downgrade." Trading companies constantly evaluate their counterparties' credit and adjust their dealings accordingly, but rarely have been required to address problems on the scale of Enron's recent difficulties. "It certainly ranks just behind California," the person at PPL said. Enron Claims Trading Normal An Enron spokesman, reached later, said the company continues to see a normal range of transactions, including long-term deals. "We've not seen closing out of positions," spokesman Eric Thode said. Susan Abbott, a managing director in corporate finance at Moody's, said the ratings agency wasn't aware of significant changes in trading companies' dealings with Enron. The agency continues to watch for new restrictions, in particular margin calls, which could quickly strain Enron's liquidity. A drop in new business with Enron isn't as much of a concern, she said. "If you're restricting new business with the company, what you're doing is moving the company out of the market in an orderly way," Abbott said. PPL is shying away from doing deals with Enron and is limiting the dollar amount and terms of the deals it will do with the company, but hasn't yet imposed margin calls or required additional collateral, the person in the marketing organization said. "Neither the credit thresholds nor our exposure threshold have been breached," the person said. PPL said it's limiting exposure to Enron for shorter-term deals too, the person said. "Their liquidity just isn't there anymore," the person said. No large company can afford to pull the plug on Enron, given the company's centrality to the power and gas markets. "Enron is such a large player and they're so important in terms of maintaining the liquidity of the markets," said Sandy Fruhman, spokeswoman for Reliant Energy Inc. (REI). "We see this as a situation that has potential downsides for the entire industry." Enron's North American wholesale trading unit brought in $1.9 billion in income before interest and taxes in the first nine months of the year, up from $1.1 billion in the same period last year. Reliant continues to do business, but Fruhman wouldn't say specifically whether it had restricted its dealings. "We're monitoring the situation carefully and making sure we follow prudent business practices," she said. "But we're trying to work with them, because it's in the best interest of the entire industry to overcome their current problems." -By Jon Kamp, Dow Jones Newswires; 312-750-4129; [email protected] (Kristen McNamara, Mark Golden and Andrew Dowell in New York, John Edmiston in Houston and Erik Ahlberg in Chicago contributed to this article.) Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. USA: Enron provides financing data, restates earnings. 11/08/2001 Reuters English News Service (C) Reuters Limited 2001. HOUSTON, Nov 8 (Reuters) - Enron Corp. said on Thursday it has provided additional information about off-balance sheet and other transactions that led to an investigation by the U.S. Securities and Exchange Commission and a shattering of the energy trader's credibility. Houston-based Enron also confirmed it is in talks with its hometown rival Dynegy Inc. over a possible business combination. Terms of any transaction have not been agreed on, the two companies said. Enron said that it will restate its earnings from 1997 to 2000, and the first two quarters of 2001 as the company addresses concerns raised by the SEC and shareholders. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Enron Thinks Ex-CFO Got More Than $30M Thru Partnerships 11/08/2001 Dow Jones Corporate Filings Alert (Copyright (c) 2001, Dow Jones & Company, Inc.) ISSUER: ENRON CORP. SYMBOL: ENE 10:02 DJ CFA SOURCE:SEC 8-K ISSUER: ENRON CORP. SYMBOL: ENE REASON CODES: 5 -- Other Materially Important Events WASHINGTON (Dow Jones)--Enron Corp. (ENE) said it believes the company's former chief financial officer, Andrew Fastow, received more than $30 million from managing and investing in several partnerships that did business with the energy giant. The company disclosed the information in a Form 8-K filing released Thursday by the Securities and Exchange Commission. Enron said it believes it committed $16 million in initial capital to one of the partnerships run by Fastow and paid $394 million in capital commitments to another partnership he managed. The partnerships were described to Enron's board as potential sources of capital to buy assets from Enron, potential equity partners for Enron investments, and counterparties to help mitigate risks associated with Enron investments, the filing said. As reported, shareholders and analysts have questioned whether the partnerships posed a conflict by putting Enron's CFO, who has a fiduciary duty to Enron shareholders, in a position of reaping financial rewards for representing partnership investors in business deals with Enron. On Oct. 24, Enron dismissed Fastow as its financial chief. As reported, the board of Dynegy (DYN) tentatively agreed last night to acquire Enron for about $8 billion in stock, or roughly $10 a share. Enron is a Houston-based energy and utilities company. -Dan Lowrey; Dow Jones Corporate Filings Alert; 202-393-7402; [email protected] 10:30 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Dynegy confirms in talks with Enron over possible tie-up 11/08/2001 AFX News (c) 2001 by AFP-Extel News Ltd HOUSTON (AFX) - Dynegy Inc, a ChevronTexaco Corp affiliate, confirmed it is in talks with Enron Corp over a possible business combination. Dynegy said it has not agreed to the terms of any transaction with Enron. Dynegy added that it does not anticipate making any further announcement with respect to a possible transaction until a definitive agreement is reached or discussions are terminated. aw/shw For more information and to contact AFX: www.afxnews.com and www.afxpress.com Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. USA: Dynegy says in talks with Enron over possible deal. 11/08/2001 Reuters English News Service (C) Reuters Limited 2001. HOUSTON, Nov 8 (Reuters) - Dynegy Inc. said on Thursday it is in talks over a possible combination with Enron Corp., the beleaguered energy-trading giant crippled by an SEC probe and investor doubts about its ability to raise cash. Dynegy has not agreed to the terms of any transaction with Enron, the Houston-based rival of Enron said. Dynegy said it does not anticipate making any further announcement with respect to a possible transaction until a definitive agreement is reached or discussions are terminated. A source close to the talks told Reuters on Wednesday that Dynegy is in talks to buy Enron in a deal that would involve a stock swap and $1.5 billion in capital from ChevronTexaco Corp., which has a big stake in Dynegy, The deal, which could be announced officially this week, was expected to give what the source called a "modest premium" to Enron shareholders, whose stock has plummeted in value as a fast-moving financial crisis enveloped the company. Enron shares, which traded as high as $90 in August of last year, dropped to a 10-year-low of $7 during Wednesday trading, before rallying on news of the Dynegy talks and closing at $9.05 a share. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. U.S. Stocks Open Higher on Retail Sales Data, European Rate Cuts By Erin Schulte 11/08/2001 Dow Jones Business News (Copyright (c) 2001, Dow Jones & Company, Inc.) The Wall Street Journal Online Stocks logged solid gains Thursday as investors focused on a few bright spots in sales reports from U.S. retailers. Interest-rate cuts from two European central banks also bolstered confidence. The Dow Jones Industrial Average was up 40 to 9595 soon after the opening bell, after losing 36.75 in the previous session. The Nasdaq Composite Index gained 21.20 to 1858.80, after inching ahead 2.45 points on Wednesday. Other indexes also lost ground on Thursday. The Standard & Poor's 500-stock index advanced 6.50 to 1122.30, the New York Stock Exchange Composite Index moved up 2.50 to 571 and the Russell 2000 Index edged up 1.90 to 442.70. Bonds were mixed and the dollar fell. Traders said interest-rate cuts by the European Central Bank and the Bank of England helped to underpin U.S. equities. Both banks lowered key rates by a half percentage point on Thursday, in an effort to keep the regional economy from slipping into recession. Investors are hoping October sales figures show that consumer spending is on the road to recovery and will gain steam during the holiday shopping season. Consumer spending slowed significantly in the wake of the Sept. 11 terrorist attacks. Wal-Mart Stores said sales at stores open at least a year rose 6.7%, including the results of its Sam's Club chain. The nation's biggest retailer, whose same-store sales topped analysts' expectations, also said total sales for the four weeks ended Nov. 2 jumped more than 14% to $16.62 billion. Its shares rose 1.4%. But Federated Department Stores posted a steeper-than-anticipated 8.7% drop in same-store sales. The company, which operates the Bloomingdale's and Macy's chains, said total sales also suffered, falling 8.9% to nearly $1.12 billion. Its shares slipped. Trendy discounter Target said same-store sales climbed 2%, while total sales for the week ended Nov. 3 increased 8.9%; its stock edged higher. And TJX, which owns popular discount clothier T.J. Maxx, said same-store sales climbed 4%, while total retail sales jumped 12% for the month. In addition to sorting through the retail-sales reports, investors also will have two economic indicators to scrutinize Thursday morning. The Labor Department reported initial jobless claims fell to 450,000 in the week ended Nov. 3 from 496,000 a week earlier. Economists surveyed by Thomson Global Markets anticipated 513,000 jobless claims for the latest period. A separate Labor Department report showed a 2.4% decline in prices of imported goods for October, following a 0.1% rise in September. Economists had forecast a 0.5% fall in prices. Among stocks to watch, Dynegy held talks to buy Enron for roughly $7 billion to $8 billion in stock, one-tenth of what Enron was worth 15 months ago. The energy trading and power firm also is expected to inject $1.5 billion into Enron. Exxon Mobil won a significant victory as an appeals court ruled that a jury's $5 billion punitive-damage verdict for the Exxon Valdez oil spill was excessive and should be reduced. Its shares rose 1.2%. Gains in key international markets may help put U.S. investors in a buying mood. Frankfurt's DAX index was up 1.6% in intraday trading, while London's Financial Times-Stock Exchange 100-Share Index was 0.6% higher. Earlier, Japan's Nikkei 225 average closed with a gain of 1.4% and Hong Kong's Hang Seng Index jumped 2.6%. On Wednesday, U.S. blue-chip stocks came under pressure from weakness in overseas markets, particularly in Tokyo, as well as profit-taking following the Federal Reserve's decision Tuesday to cut interest rates. In major U.S. market action Thursday: Stocks climbed. On the Big Board, where 32.2 million shares traded, 624 stocks rose and 259 fell. On the Nasdaq, 88.3 million shares changed hands. Bonds were mixed. The 10-year Treasury note slipped less than 1/8, or $2.50 for a $1,000 bond, pushing the yield to 4.19%. The 30-year bond rose almost 3/8 to yield 4.77%. The dollar fell. It traded at 89.84 U.S. cents to the euro, compared with 89.81 late Wednesday in New York. The dollar fell to 120.69 yen from 120.92. For continuously updated news from The Wall Street Journal, see WSJ.com at http://wsj.com. Copyright (c) 2001 Dow Jones & Company, Inc. All Rights Reserved. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Dynegy/Enron Talks -4: Follows SEC Inquiry Launch 11/08/2001 Dow Jones News Service (Copyright (c) 2001, Dow Jones & Company, Inc.) The talks between Enron and Dynegy follow a sharp drop in Enron's stock over the past several weeks as controversy arose over the companies dealings with certain partnerships. The SEC later requested information from Enron related to the company's dealings with those partnerships, which were set up and run until recently by Andrew S. Fastow, who was recently replaced as Enron's chief financial officer. The investigation is centered on disclosure controversies that have damaged the Houston energy company's credibility. Internal partnership documents indicate Fastow and possibly a handful of associates made millions of dollars from the partnerships. Fastow severed his ties with those partnerships in July. Internal documents related to one of the Fastow partnerships disclose that Enron also did as much as hundreds of millions of dollars of business with an entity connected to another company official, who has since left Enron, the Wall Street Journal reported on Oct. 26. While Enron disclosed its Fastow-related transactions in SEC filings, a computerized search of the SEC's database of public filings produced no reference to this other employee-related entity known as Chewco. Over the past couple of days, Enron has been scrambling to line up quick financing from a prominent outside investor and has been in discussions with private-equity firms and power-trading companies. Discussions between Dynegy and Enron began about 10 days ago, but reportedly intensified last weekend. Also Thursday, Enron restated its earnings for 1997 through 2000 and the first half of 2001 due to the transactions and resulting account adjustments. -Thomas Gryta; Dow Jones Newswires; 201-938-5400 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Dynegy Confirms Discussions With Enron 11/08/2001 Business Wire (Copyright (c) 2001, Business Wire) HOUSTON--(BUSINESS WIRE)--Nov. 8, 2001--Dynegy Inc. confirmed today that it is engaged in discussions with respect to a possible business combination with Enron. Dynegy has not agreed to the terms of any transaction with Enron. Dynegy does not anticipate making any further announcement with respect to a possible transaction until a definitive agreement is reached or discussions are terminated. CONTACT: Dynegy Inc. 713/507-6400 09:36 EST NOVEMBER 8, 2001 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. USA: UPDATE 1-Before the Bell - Dynegy flat, Enron slips. 11/08/2001 Reuters English News Service (C) Reuters Limited 2001. NEW YORK, Nov 8 (Reuters) - Dynegy Inc. shares traded flat and Enron Corp. slipped as the market mulled news that the companies are in an advanced stage of talks for Dynegy to acquire Enron by means of a stock swap, according to a source familiar with the deal. Terms of the possible combinmation have not yet been decided, but Enron stockholders would likely receive an amount of Dynegy stock that would give them a "modest premium" over current Enron stock prices, said the source, who spoke on condition of anonymity. Enron shares traded at $8.50, down from $9.05, and Dynegy was at $33, in line with the price at the prior New York Stock Exchange close. More broadly, the U.S. stock markets were expected to gain at the open, based on the upward moves of equity-index futures. The Standard & Poor's 500 December contract rose 7.5 points to 1,127.00 and the Nasdaq 100 index contact added 19.00 points to 1,554.50. Shares in XO Communications Inc. rose to $1.38 per share from $1.17 in very active pre-open trade on Thursday as the voice and data services company posted a narrower third-quarter loss. Markets overseas rallied on back-to-back interest-rate cuts by the European Central Bank and the Bank of England on Thursday. The reductions follow the Federal Reserve's rate cut two days ago, the U.S. central's bank's 10th such move of the year. Among other issues active ahead of the regular trading session, Intel Corp. rose to $28.80 from $28.29, BEA Systems Inc. traded up to $15.25 from $14.71 and Cisco Systems Inc. improved to $19.40 from $18.93. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. FERC 'Watching With Interest' Enron's Woes, Chairman Says 11/08/2001 Dow Jones Energy Service (Copyright (c) 2001, Dow Jones & Company, Inc.) (This article was originally published Wednesday) WASHINGTON -(Dow Jones)- The U.S. Federal Energy Regulatory Commission is "watching with interest" the problems confronting Enron Corp. (ENE), but isn't intervening in the matter, Pat Wood III, FERC's chairman, said Wednesday. "We're watching the impact Enron or other entities would have on the markets," Wood told reporters during a press conference following the commission's meeting Wednesday. "We are watching with interest," he said for emphasis. But the commission doesn't intend to intervene in the U.S. Securities and Exchange Commission's investigation of financial hedging instruments with partnerships overseen by Enron's former financial officer, Wood said. The dealings led to a $1.2 billion writedown in Enron shareholder equity earlier this year. -By Bryan Lee, Dow Jones Newswires; 202-862-6647; [email protected] Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Ripples From Enron's Troubles Hit Its Trading Partners By Sarah Spikes Of DOW JONES NEWSWIRES 11/08/2001 Dow Jones Energy Service (Copyright (c) 2001, Dow Jones & Company, Inc.) LONDON -(Dow Jones)- Enron Corp.'s (ENE) financial troubles have created a new problem for U.K. power market players, and they don't quite know how to respond. Enron's significant presence in the U.K. market means there are many trading partners who are counterparties in deals with a company whose creditworthiness is now less secure than when those deals were struck. Companies are reluctant to cease doing business with a firm of Enron's size and stature, but they're also aware of the risk of becoming creditors to a bankrupt Enron. Since Enron revealed a $1.2 billion reduction in shareholder equity last month related to controversial transactions with entities connected to former Chief Financial Officer Andrew Fastow, the company's shares have tumbled; its senior unsecured debt has been downgraded by Fitch Inc., Standard & Poor's Corp. and Moody's Investors Service; and the U.S. Securities and Exchange Commission has launched a formal investigation into the matter. Already, many have backed off from trading power with Enron, citing the need to minimize exposure, but to what, exactly, they're not sure. Three Options For Enron's Trading Partners Enron's problems give rise to three major options for counterparties. They can wait, anticipating that Enron will go bust, and then terminate their contracts; they can try to invoke a controversial clause in their contracts and get Enron to put up more collateral; or they can back off from new forward trading and hope a company like Dynegy Inc. (DYN) will take Enron over and assume the contracts. One is available only if Enron goes bankrupt, and the other two are available right now, but most market-makers are still undecided. "No huge power merchant has ever had serious problems with their credit in the U.K. market before, so the viability of any theoretical option is uncertain," said a partner in a London-based law firm with an international energy practice. If a company takes the first option - continuing to trade with Enron - and Enron does go bankrupt, the trading partner would then be able to terminate existing contracts. Sarah Moynihan, an associate with Allen & Overy, the firm that wrote the Grid Trade Master Agreement - the contract used by most power trading parties in the U.K. - says the GTMA allows parties to terminate outstanding transactions with an insolvent company. "To terminate any transactions under one master agreement though, they would have to terminate all of them," she added. Terminating parties would be reimbursed, or charged, based on a marked-to-market value of their contracts. Power prices have been on a steep decline since the introduction of the New Electricity Trading Arrangements in March, so parties with majority selling positions through Enron would suffer financial penalties when they had to resell their power for less, but if they had bought through Enron, they would be able to get the same power for less money on the U.K. market today. "Market participants calculate the mark-to-market value all the time anyway, but particularly as this is the first NETA winter, the trust in price forecasting isn't as strong as it could be, so you may not be confident that (would be able to get) the equivalent of your contract...and you will live without peace of mind in the meantime," said the head of trading at a large generating and trading company. "Even if you were successful in terminating contracts, you might not get paid, and then who will trade with you, if you have a big debt owed to you by someone who can't pay it?" said a lawyer from a London law firm with an international energy practice. The only U.K. power-related company to go into insolvency recently was Independent Energy a small supply company. In that case, Innogy Holdings PLC (U.IOG), the company which took it over, assumed its contracts. Many Can't Afford To Lose Enron As A Partner Enron has always traded with a wide range of counterparties, some of which other big players wouldn't go near because of their relative lack of size and financial strength. This means there will be many companies that may not be able to afford to let Enron go. Not trading with Enron will make recovery harder, but a trading party will appear foolhardy if it continues to trade with a company that eventually goes under. The second option open to Enron's trading partners involves trying to invoke a muddied clause in the GTMA - the material adverse change, or MAC, clause. By asserting that the company's credit is not compatible with one with which they would normally agree to trade, they may be able get Enron to put up more collateral in support of the contracts. By asserting that Enron's credit isn't as secure as they expected when they agreed to the contracts, they may be able get Enron to put up more collateral in support of the contracts. The problem is that it's hard to be sure that a change in circumstances warrants invoking the MAC clause. However, this hasn't stopped some counterparties from asking their lawyers to investigate the feasibility of invoking MACs in their contracts with Enron, said lawyers who declined to be identified. "People are definitely talking about the chances of getting a MAC through these days," said one lawyer who declined to be named. Having to put up more capital would worsen Enron's situation, particularly if several counterparties were to ask for it, and most aren't interested in making Enron's situation worse. "Enron helps the U.K. market. It would be unhelpful for them not to be there and do what they do in terms of providing liquidity," said British Energy PLC (BGY) Chief Financial Officer Keith Lough in a conference call Wednesday. He said BE's dealings with Enron are two-way - Enron takes part of its baseload generation from BE's nuclear facilities while BE takes peak power from Enron for its direct sales unit. So far, the dilemma means most companies are taking the middle ground. They are reducing the number of new forward contract deals they do with Enron, but they aren't ceasing altogether and they aren't trying to get out of existing contracts. This partly reflects confidence that Enron will remain solvent, either on its own or through a merger. The company does have several things in its favor. First, Enron secured $1 billion in new credit lines using its gas pipeline assets as collateral. Second, there is no evidence that Enron is on the wrong side of the U.K. power market. Many traders say Enron has in fact gone into the first NETA winter short - a strategy that appears prescient in light of the warmest October in recent memory and low power prices. -Sarah Spikes, Dow Jones Newswires; (+44 20) 7842 9345; [email protected] Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Enron in Talks With Dynegy; to Restate Earnings (Update8) 2001-11-08 11:09 (New York) Enron in Talks With Dynegy; to Restate Earnings (Update8) (Updating to add stock movement.) Houston, Nov. 8 (Bloomberg) -- Enron Corp., the largest energy trader, restated and reduced its earnings for the past four years because of losses from partnerships that are under investigation by the Securities and Exchange Commission. Dynegy Inc. said it may acquire Enron, whose shares have plunged 89 percent this year. Dynegy's board last night weighed a proposal to pay $8 billion in stock, said people familiar with the situation. Concerns Enron may be lowered to a junk credit rating within days stalled the talks, the people said. Houston-based Dynegy is concerned that a reduction to junk status would precipitate a cash crisis by requiring Enron to repay early $3.3 billion of bonds. Enron's credit rating, currently rated ``BBB'' by Standard & Poor's Corp., or two levels above junk, is on review to be lowered. ``Merging with Enron is fraught with potential problems for Dynegy,'' said Commerzbank analyst Andre Meade. ``The bulk of Enron's value is in its trading business, and it's trading business is people.'' Enron shares were little changed after the announcement hich will result in a $96 million reduction in 1997 net income, $113 million in 1998, $250 million in 1999 and $132 million in 2000. In 2001, the changes result in an increase to net income of $17 million and $5 million in the first and second quarters, respectively, and reduction of $17 million for the third quarter. Enron also fired Treasurer Ben Glisan and Kristina Mourdant, a lawyer for an Enron division. The company ``now believes'' Glisan, Mourdant and two other employees no longer working for Enron bought interests in subsidiaries of a partnership run by former Chief Financial Officer Andrew Fastow. Enron said it believes Fastow made more than $30 million from partnerships called LJM1 and LJM2 which he ran. `Running Out of Time' ``Enron is running out of time and that's what's pushing them to the bargaining table,'' said Zach Wagner, an analyst with Edward Jones & Co., who cut his recommendation on Enron to ``reduce'' from ``accumulate'' on Oct. 23. Dynegy would gain a wholesale energy business, the leading energy manager for commercial and small-industrial customers, and an Internet energy trading operation many times larger than its own, said UBS Warburg LLC analyst James Yanello. ChevronTexaco Corp., which owns about 27 percent of Dynegy, is also involved in the talks. ``If history is any guide, Dynegy is stingy when it comes to acquisitions, so I don't expect them to do anything stupid'' such as overpaying for Enron, said Yanello. ``A deal could provide Dynegy with tremendous opportunity.'' He rates Dynegy ``strong buy'' and doesn't own shares of either company. Enron Chairman and Chief Executive Officer Kenneth Lay wouldn't hold a management position with the combined company under terms being discussed Wednesday, the Wall Street Journal reported. He would get a seat on the board, the paper added. ChevronTexaco is considering adding $1.5 billion to the transaction to help Enron. It would provide another $1 billion when the purchase is closed, the New York Times and Wall Street Journal reported. The companies agreed on a breakup fee providing Dynegy with about $400 million if Enron accepts a higher offer, people familiar with the talks said. Dynegy spokesman Steve Stengel, Enron spokesman Mark Palmer and ChevronTexaco spokesman Fred Gorell declined to comment. Losing Confidence Companies that trade natural gas, electricity and other commodities with Enron may pull back if Enron's finances deteriorate to the point that it loses its investment-grade credit rating, investors say. ``Dynegy has to act fast,'' said Roger Hamilton, a money manager with John Hancock Advisers Inc., which sold its Enron shares in recent weeks. ``If Enron can't get financing and its bonds go to junk, they lose counterparties and their marvelous business vanishes.'' Moody's Investors Service lowered its rating on Enron's bonds to ``Baa2'' and Standard & Poor's cut the debt to ``BBB.'' in the past two weeks. Federal regulators may overlook antitrust concerns in order to keep Enron afloat, Hamilton said. Securities regulators are investigating trading by partnerships run by Fastow, the former financial director. The entities bought and sold Enron shares and assets, with trades costing Enron $35 million and $1.2 billion in lost shareholder equity. Enron ousted CFO Fastow last month. Shares of ChevronTexaco rose 34 cents to $87.80 in early trading. Dynegy, the fifth-largest U.S. natural gas marketer, rose 25 cents to $33.25. Enron shares and bonds have tumbled in the past month. One of its bonds, an issue paying 6.725 percent that matures in November 2008, fell to 69.11 cents on the dollar, according to Bloomberg data, down from 71.90 cents yesterday. ``We would be very surprised if Dynegy buys the whole company,'' said Tim Ghriskey, president of Ghriskey Capital Partners, which doesn't own Enron or Dynegy shares. ``All the (Dynegy) board has to do is look at what's happening to their stock price today, and you'd wonder why they would want to do it in the face of what's happening with the stock.'' Ghriskey made his comments on Wednesday. Enron Meets Creditors Enron is to meet with J.P. Morgan Chase & Co., Citigroup Inc. and other lenders on Friday to discuss merger plans and a possible increase in the amount the company pays for existing credit lines, according to bankers familiar with the matter. The company has invited more than 300 creditors to its offices in Houston to listen to presentations by Enron's financial team, led by its new chief financial officer, Jeffrey McMahon, the bankers said. Dynegy began in 1985 as Natural Gas Clearinghouse, a gas- trading company. In 1998, the company took the name Dynegy -- a combination of the words dynamic and energy -- to reflect its expansion beyond natural gas. Chuck Watson, the company's president from 1985, became chairman and chief executive in 1989. Watson is an investor with Enron CEO Lay in the Houston Texans, who begin playing in the National Football League next year, and is a board member at Baker Hughes Inc. As of an April filing with the SEC, Watson owned 12.3 million Dynegy shares, or about 5.1 percent of the common stock. Fitch Comment on Wessex Water Ratings Following Enron Downgrade 2001-11-08 10:48 (New York) FITCH COMMENT ON WESSEX WATER RATINGS FOLLOWING ENRON DOWNGRADE Fitch-London-08 November 2001: In light of the recent downgrade of the Senior Unsecured and Short-term ratings of Enron Corp ("Enron") to 'BBB-' and 'F3' respectively, Fitch has commented today on the ratings of the Azurix Europe Limited group of companies. Enron, in conjunction with Marlin Water Trust, owns Azurix Corp. ("AZX"), which in turn owns Azurix Europe Limited ("AEL", rated 'BBB+/F2'). AEL is the ultimate UK parent of Wessex Water Services Limited ("WWSL", rated 'A-/F2'). AEL owns WWSL via an intermediate holding company, Wessex Water Limited ("WWL"), rated 'BBB+/F2'. The Outlook for the ratings of AEL, WWL and WWSL is Stable. WWSL is one of the UK's 10 monopoly, regulated water and sewerage companies. Fitch has not changed the ratings of the AEL group companies but notes the deteriorating credit profile of Enron, the group's ultimate US parent. Ring-fencing provisions between AEL and AZX are not considered by Fitch to be entirely watertight, particularly as AEL is allowed to loan funds to subsidiaries of AZX, which can be used for acquisitions and for general corporate purposes within the acquired businesses. Notwithstanding, the companies remain largely insulated from potential negative events at Enron. Credit protection is derived from a GBP425 million banking facility to AEL, which prohibits the company from making dividends or loans directly to AZX. AEL is also prohibited from taking on additional indebtedness and engaging in any business other than owning WWSL. In addition, under the banking facility, the total amount that can be borrowed by AEL in its name, yet on-lent to AZX subsidiaries, is capped at GBP240m. The capped amount was originally earmarked to help fund AZX's growth aspirations. All loans from AEL to AZX subsidiaries are short-term, on commercial terms, are senior obligations of the SPV (AEL's direct counter-party) and are guaranteed by AZX. However, hypothetically, these loans may have been re-invested in a subordinated stake in a water project. Mitigating this risk profile, the bank facility has certain ratio thresholds measured on a consolidated AEL group and a de-consolidated AEL basis. Considering a worst case scenario, (assuming a failure to recover the maximum amount that could be on-lent to entities outside the AEL group), within the bank facility's ratio thresholds, Fitch calculates that the AEL group would be able to maintain its current rating category. Going forward, Enron has publicly stated that is does not view AZX as a core strategic asset. The latter has stated that it is pursuing the disposal of certain assets, including those in North America that have since been sold for USD150m. This deal, which is not expected to have any impact on AEL, is due to close soon. At this time Enron has made no public statement about the future of the AEL business although it is reviewing its options internally. Fitch will continue to monitor developments in this respect and would expect to review the ratings of AEL and WWSL in the context of clear announcements from Enron. A key factor in assessing the remaining AEL group would be the level of debt "crystallised", or assumed, by that entity. The assigned ratings reflect Fitch's approach to rating regulated utilities in the UK, which starts with the consolidated debt and income profiles of the ultimate UK holding company, (in this case AEL), while considering both intermediate holding companies (here, WWL) and the operating business (WWSL). The ratings of AEL and WWL are supported by strong operating performance in the monopoly business of WWSL, which is regulated by Ofwat, and delivers relatively predictable cash flows within the context of its regulatory price controls. NewPower 3rd-Qtr Loss Narrows After Adding Customers (Update2) 2001-11-08 10:38 (New York) NewPower 3rd-Qtr Loss Narrows After Adding Customers (Update2) (Adds job cuts in fourth paragraph.) Purchase, New York, Nov. 8 (Bloomberg) -- NewPower Holdings Inc., a venture formed by Enron Corp. to compete with traditional gas and electric utilities, said its third-quarter loss narrowed after cutting costs and adding customers. The loss was $67.1 million, or $1.15 a share, compared with a loss of $69.9 million, or $2.96, a year earlier. Revenue tripled to $54.7 million from $18.2 million, the company said. NewPower was forecast to have a loss of $1.16 a share, the average estimate of three analysts polled by Thomson Financial/First Call. NewPower added 80,000 customers in the third quarter and expects to have 840,000 to 860,000 customers by the end of the year. The company, based in Purchase, New York, reduced sales, general and administrative costs by 41 percent, primarily by cutting systems-development and professional expenses. The company is eliminating 40 jobs, or 22 percent of its workforce, to cut costs, Chief Financial Officer William Jacobs said on a conference call. The company expects severance costs of $16 million in the fourth quarter. Enron, the largest energy trader, owns about 44 percent of NewPower. Houston-based Enron, whose shares have fallen 73 percent since Oct. 16 amid concern over affiliated partnerships run by its former chief financial officer, said it had $544 million in losses on investments including NewPower in the third quarter. Shares of NewPower rose 39 cents to $1.20 in midmorning trading. The company went public in October 2000 for $21 a share. Fourth-Quarter Excluding severance costs, NewPower expects a fourth-quarter loss of $41 million to $46 million, or 65 cents to 73 cents a share, and a full-year loss of $210 million to $215 million, or $3.55 to $3.63. The company was expected to lose 74 cents in the fourth quarter, according to First Call's average of three analysts' estimates. The full-year's loss was expected to be $3.71, the average of four analysts' estimates. In 2002, NewPower expects to have a loss of $100 million to $125 million, or $1.59 to $1.99 a share. The average estimate of four analysts polled by First Call was $2.26. NewPower expects to be profitable in 2003 with 1.5 million customers. The company is focusing more on small businesses. It now has 25,000 small-business customers and expects to have more than 35,000 by the end of the year. International Business Machines Corp. owns 1.5 million shares of NewPower, less than 5 percent of the company. Dynegy May Offer at Least $8 Bln to Acquire Enron (Update5) 2001-11-08 10:17 (New York) Dynegy May Offer at Least $8 Bln to Acquire Enron (Update5) (Updates with Dynegy statement.) Houston, Nov. 8 (Bloomberg) -- Dynegy Inc.'s board last night failed to agree to pay $8 billion in stock to acquire Enron Corp. in part because of concerns the biggest energy trader may be lowered to a junk rating within the coming days, people familiar with the situtation said. Dynegy, a Houston-based energy trader, said the talks were continuing. The company is concerned that Enron's ``BBB'' credit rating may be lowered by Standard & Poor's Corp. The rating company is reviewing the company, which it downgraded Nov. 1. ChevronTexaco Corp., which owns about 27 percent of Dynegy, is also involved in the talks. The prospect of a lower credit rating, which would force Enron to repay $3.3 billion of bonds that mature in 2003 early, along with an investigation by the Securities and Exchange Commission investigation into partnerships run by former Chief Financial Officer Andrew Fastow prompted Enron's board to consider selling the company. Enron today said it would restate its financial statements since 1997 after concluding some of the accounting for its partnerships didn't comply with generally accepted accounting principles. ``Enron is running out of time and that's what's pushing them to the bargaining table,'' said Zach Wagner, an analyst with Edward Jones & Co., who cut his recommendation on Enron to ``reduce'' from ``accumulate'' on Oct. 23. Shares of Enron fell 45 cents to $8.60 cents in early trading on the news, which was previously reported by the Wall Street Journal and New York Times. The stock reached a record $90.75 in August 2000. With 850 million shares outstanding, the company has a market value of about $7.7 billion. Dynegy would gain a wholesale energy business, the leading energy manager for commercial and small-industrial customers, and an Internet energy trading operation many times larger than its own, said UBS Warburg LLC analyst James Yanello. `Stingy' Buyer ``If history is any guide, Dynegy is stingy when it comes to acquisitions, so I don't expect them to do anything stupid'' such as overpaying for Enron, said Yanello. ``A deal could provide Dynegy with tremendous opportunity.'' He rates Dynegy ``strong buy'' and doesn't own shares of either company. Enron Chairman and Chief Executive Officer Kenneth Lay wouldn't hold a management position with the combined company under terms being discussed Wednesday, the Wall Street Journal reported. He would get a seat on the board, the paper added. ChevronTexaco is considering adding $1.5 billion to the transaction to help Enron. It would provide another $1 billion when the purchase is closed, the New York Times and Wall Street Journal reported. The companies agreed on a breakup fee providing Dynegy with about $400 million if Enron accepts a higher offer, people familiar with the talks said. Dynegy spokesman Steve Stengel, Enron spokesman Mark Palmer and ChevronTexaco spokesman Fred Gorell declined to comment. Losing Confidence Companies that trade natural gas, electricity and other commodities with Enron may pull back if Enron's finances deteriorate to the point that it loses its investment-grade credit rating, investors say. ``Dynegy has to act fast,'' said Roger Hamilton, a money manager with John Hancock Advisers Inc., which sold its Enron shares in recent weeks. ``If Enron can't get financing and its bonds go to junk, they lose counterparties and their marvelous business vanishes.'' Moody's Investors Service lowered its rating on Enron's bonds to ``Baa2'' and Standard & Poor's cut the debt to ``BBB.'' in the past two weeks. Federal regulators may overlook antitrust concerns in order to keep Enron afloat, Hamilton said. SEC Probe Securities regulators are investigating trading by partnerships run by Fastow, the former financial director. The entities bought and sold Enron shares and assets, with trades costing Enron $35 million and $1.2 billion in lost shareholder equity. Enron ousted CFO Andrew Fastow last month. Shares of ChevronTexaco rose 34 cents to $87.80 in early trading. Dynegy, the fifth-largest U.S. natural gas marketer, rose 25 cents to $33.25. Enron shares and bonds have tumbled in the past month. One of its bonds, an issue paying 6.725 percent that matures in November 2008, fell to 69.11 cents on the dollar, according to Bloomberg data, down from 71.90 cents yesterday. ``We would be very surprised if Dynegy buys the whole company,'' said Tim Ghriskey, president of Ghriskey Capital Partners, which doesn't own Enron or Dynegy shares. ``All the (Dynegy) board has to do is look at what's happening to their stock price today, and you'd wonder why they would want to do it in the face of what's happening with the stock.'' Ghriskey made his comments on Wednesday. Enron Meets Creditors Enron is to meet with J.P. Morgan Chase & Co., Citigroup Inc. and other lenders on Friday to discuss merger plans and a possible increase in the amount the company pays for existing credit lines, according to bankers familiar with the matter. The company has invited more than 300 creditors to its offices in Houston to listen to presentations by Enron's financial team, led by its new chief financial officer, Jeffrey McMahon, the bankers said. Dynegy began in 1985 as Natural Gas Clearinghouse, a gas- trading company. In 1998, the company took the name Dynegy -- a combination of the words dynamic and energy -- to reflect its expansion beyond natural gas. Chuck Watson, the company's president from 1985, became chairman and chief executive in 1989. Watson is an investor with Enron CEO Lay in the Houston Texans, who begin playing in the National Football League next year, and is a board member at Baker Hughes Inc. As of an April filing with the SEC, Watson owned 12.3 million Dynegy shares, or about 5.1 percent of the common stock. Enron Bonds Gain as Dynegy Considers $8 Bln Buyout (Update1) 2001-11-08 10:12 (New York) Enron Bonds Gain as Dynegy Considers $8 Bln Buyout (Update1) (Updates note prices in second and fourth paragraphs.) New York, Nov. 8 (Bloomberg) -- Enron Corp. bonds gained as Dynegy Inc. considered paying about $8 billion in stock for the biggest energy trader. An acquisition would bolster Enron's credit rating, which was recently lowered, traders said. Enron's 7.88 percent coupon notes due in 2003 rose 5 cents to be bid at 82 cents on the dollar this morning from 77 cents yesterday, traders said. The yield declined to 22 percent from 27 percent. The debt was trading near 100 last month. ``Enron bonds have been in free fall,'' said Joe Walker, who follows Dynegy bonds for SWS Securities in Dallas. Enron's bondholders ``now have the opportunity of going to a much stronger source.'' Enron's 6.4 percent notes due in 2006 traded at 84 cents on the dollar today, up 10 cents to 12 cents from yesterday, traders said. The company's longer-dated debt, bonds with maturities of 10 years or more, rose as much as 10 cents. While Moody's Investors Service rates Enron's credit as ``Baa2'', one rung higher than its ``Baa3'' grade for Dynegy, other ratings companies including Standard & Poor's and Fitch Inc. have assigned Dynegy a higher rating. Also, Enron's ratings have been cut in recent weeks and face further reduction, while Dynegy's credit outlook is stable. Enron bonds and shares have fallen in recent weeks on concern about partnerships run by the company's former chief financial officer and concerns the company's trading business will be hurt by the downgrades. Dynegy and Enron, both based in Houston, met yesterday to negotiate terms of a buyout, said people familiar with the situation. Enron Confirms Dynegy Talks By TSC Staff <<mailto:[email protected]>> TheStreet.com 11/08/2001 08:00 AM EST Enron (ENE:NYSE - news - commentary) and rival energy trader Dynegy (DYN:NYSE - news - commentary) confirmed Thursday they were in merger talks. According to reports, Dynegy held talks to acquire Enron for up to $8 billion in stock and to make an immediate cash infusion of up to $2 billion to help relieve Enron's debt crisis. The possible agreement is said to have the backing of ChevronTexaco (CVX:NYSE - news - commentary) , which owns about a quarter of Dynegy. Enron shares continued their recent fall, dropping 16 cents to $8.89, while Dynegy jumped $1.83 to $34.83. Stocks Surge On Rate Cuts, Jobless Numbers By Kevin Burke <<mailto:[email protected]>> Staff Reporter 11/08/2001 09:42 AM EST TheStreet.com Updated from 8:49 a.m. EST Stocks surged at the open following surprising moves by two European central banks and a positive report from the Labor Department. The Dow was recently gaining 39 points, or 0.41%, to 9594. The Nasdaq was up about 17 points, or 0.95%, to 1855, and the S&P 500 was unchanged at 1116. Both the Bank of England and European Central Bank announced half-point reductions in their key lending rates Thursday, the BOE dropping its to 4% and the ECB lowering to 3.25%. The cuts were larger than expected and reflected increased economic risk in a low-inflation environment, the banks said. Overseas markets were uniformly higher on the moves. London's FTSE 100 was gaining fractionally at 5219, while Germany's Xetra DAX was up 1.5% to 4936. In Asia, Japan's Nikkei gained 1.4% to 10,432 while Hong Kong's Hang Seng added 2.6% to 10,539. The Labor Department said initial claims for jobless benefits fell unexpectedly by 46,000 to 450,000 in the week ended Saturday. Retail sales reports for October were also pouring in Thursday, with Wal-Mart (WMT:NYSE - news - commentary) posting a slightly higher-than-expected gain in same-store sales. Limited (LTD:NYSE - news - commentary) said same-store sales fell 6% while Gap Stores' (GPS:NYSE - news - commentary) fell 17%. The Enron (ENE:NYSE - news - commentary) saga continued with news that rival energy trader Dynegy (DYN:NYSE - news - commentary) has held talks to buy the company for up to $8 billion in stock. The possible deal is said to have the blessing of ChevronTexaco (CVX:NYSE - news - commentary) , which owns 27% of Dynegy. The price of crude oil was rising Thursday after Saudi Arabia's oil minister warned of impending OPEC production cuts. Prices were up almost 4% on the news, the biggest jump since just after the terrorist attacks. The 10-year Treasury note was recently losing 6/32 to 106 11/32, yielding 4.20%. Some Glamour Stocks That Are Ugly Down Deep By Brett Messing <<mailto:[email protected]>> Special to TheStreet.com 11/08/2001 08:16 AM EST RealMoney.com I know it's tempting. I know what you're thinking: If I can catch a big ride on one of these beaten-down stocks, I can get my portfolio back to where it was in March 2000. Forget it. Rip up those old statements. Treat them like UFOs. Instead, think singles and doubles instead of homers. While a number of glamour stocks have been decimated, they deserve to be decimated. I am an opportunist. I've looked at all of them. They are a collective disaster, and they are not worth the risk. Let's start with Jim Cramer's favorite punching bag, Enron (ENE:NYSE - news - commentary) . As bad as this situation is, it is going to get worse before it is over. And while the Bushies may have been willing to help out Bill Gates with his little Justice Department problem, they will not go near this one with a 10-foot pole. Enron is not an energy company. It is a trading company. Moreover, it appears they are not particularly good traders. Instead of Enron, invest your money with the best trading company in the world, Goldman Sachs (GS:NYSE - news - commentary) . These guys have probably been picking Enron's pockets for years. Isn't it interesting that Goldman Sachs was unwilling to participate in the recent short-term loans to Enron, an investment banking client? They might actually know what's behind the curtain. I worked at Goldman Sachs for eight years, and I have tremendous respect for them. They know how to trade. They made a ton of money handling Sid Bass' recent 125 million-share block of Walt Disney (DIS:NYSE - news - commentary) stock. Forget about the 6-cent-per-share fee they charged. How about the 10 million to 20 million shares that they kept for themselves? I imagine that Goldman made more than $30 million on this one trade. Not a bad day's work. Stay away from Qwest (Q:NYSE - news - commentary) . Taken in the best light, the company is way too aggressive with its accounting; Qwest bullies the analyst community and it overpromises and underdelivers. Qwest has justifiably lost the trust of the investment community. It will take years of execution and fence-mending to earn this trust back. Ask Cendant CEO Henry Silverman. He is still paying for the damage inflicted upon him by former Cendant Chairman Walter Forbes, who has pleaded not guilty to conspiracy and wire fraud charges. Go with WorldCom (WCOM:Nasdaq - news - commentary) instead. These guys actually get it. They are among the telecom industry's best operators, and they are the best dealmakers. Like everyone else, they goofed, but they have found religion. This quarter's operating results show some promise. Previously skeptical analysts at Lehman and Merrill had some nice things to say about the company. I think WorldCom is an up stock from here. It is not going back to the $60s, but I could see it above the driving age by year-end. I know it's also tempting to think that if the economy rebounds, consumer finance stocks will scream. You are turned on by Providian (PVN:NYSE - news - commentary) and Conseco (CNC:NYSE - news - commentary) . Providian recently hired my pals at Goldman Sachs to help them out. Forget this, too. Providian feels like a doughnut to me. Their balance sheet is a mess. We do not know how bad it is. They may not know how bad it is. Moreover, they were not candid with the investment community. Conseco announced that Gary Wendt and other senior managers bought a bunch of stock with their own money. While I love to see management buying stock, this one feels too staged to me. Pre-Wendt, Conseco had a long history of management buying stock with loans from the corporate treasury. Moreover, 1 million shares (or $3 million) is not that much money to Wendt. I would like to see him buy $25 million of restricted stock directly from the company. Conseco is probably the best speculative bet of the bunch, but I would still pass. It is a very high-risk situation, given the leveraged state of its balance sheet. Wendt is a tremendous manager, and he did a great job with GE Capital. However, he would not be the first guy to have a sequel that bombs at the box office. Go with Citigroup (C:NYSE - news - commentary) instead. Citigroup is the biggest and best financial services company in the world. While Wendt is something special, I would draft Weill and Rubin ahead of him in my CEO Rotisserie League. The best way to make money is to stay out of trouble. Stick with singles and doubles. Don't be tempted. Top Of The News Enron Trades Itself Dan Ackman , Forbes.com , 11.08.01, 8:47 AM ET NEW YORK - Enron, once a star, has lately looked more like a truck racing down a Texas highway with a load of burning lumber: no one knew where it was going or why. Finally, it seems to be nearing a rest stop as Enron (nyse: ENE) is reportedly about to sell itself to its much smaller rival Dynegy (DYN ) for $8 billion in stock, a fraction of its former value. As part of the deal, ChevronTexaco (CVX ) , which owns 27% of Dynegy, would pump at least $1.5 billion in cash into Enron upon the inking of an agreement and an additional $1 billion when the deal closed. The deal, if consummated, represents a possible way out for Enron, which has been humbled by an accounting scandal, the resignation and firing of top executives, the defection of investors, and massive losses. The rough outlines of what humbled Houston-based Enron are known, but the details remain a mystery, as well as the subject of a Securities and Exchange Commission investigation and at least one major lawsuit, with more to come. Once basically an oil and natural gas pipeline company, Enron expanded into energy trading, broadband telecommunications and other businesses. It was often said to be at the center of a "revolution," perhaps several revolutions, with telecommunications, the Internet, and energy deregulation among them. But a revolution is not a tea party. For a while, the fact that few investors understood what Enron did was probably a plus. Between 1997 and the end of 2000, Enron's share price climbed steadily from less than $20 per share to over $80 per share. It had a $70 billion market value as recently as a year ago. During the run-up, Enron's financial conditions don't seem to have justified the surge. Revenues were growing wildly, from $20 billion in 1997 to $101 billion in 2000. But much of that increase was due to the fact that Enron was now a trading company, and revenues were of a different type altogether. In any event, profits, after a huge jump between 1997 and 1998, increased much more slowly, from $878 million in 1998 to $1.4 billion. Of course, whether these profits were real is now very much in doubt. Last quarter, Enron reported a $618 million loss, mostly due to accounting charges. The road down has been a lot steeper. Over the last 12 months, the stock fell all the way back and closed Wednesday at $9.05, wiping out all the gains and then some. Today, the inscrutability of Enron's finances is considered a bad thing. Jeffrey Skilling, the company's new chief executive officer, resigned in August after just six months at the helm. Kenneth Lay, 58, the former C.E.O. and a close friend of President George W. Bush, was brought back in. Lay will have a seat on the combined company's board, but no day-to-day job, according to reports. Lay earned $12 million in total compensation from Enron in 2000, not counting his profits from the exercise of $123 million in options. Other Enron executives also exercised tens of millions in options in 2000, when the stock was flying high. Enron paid Skilling, once Lay's top lieutenant, $84.5 million over the last five years. Last month, the company's problems became public. It disclosed $1 billion in write-downs and a $1.2 billion reduction in shareholder equity. The reduction in equity arose from "related party" transactions that turned out to be with investment partnerships involving Andrew Fastow, the chief financial officer. Fastow was forced to resign on Oct. 24. The Securities and Exchange Commission is investigating. Today, Enron is expected to send the S.E.C. answers to questions the agency has posed in its investigation. Dynegy officials have seen those answers already, and the public should see them soon. Enron will meet Friday with its creditors about the company's continuing crisis and the proposed merger. The hope is a deal with Dynegy, also based in Houston, will lead Enron out of the storm and cause its trading partners to have enough confidence to do business with the company. Enron's credit rating is in jeopardy. Both Moody's Investors Service and Standard & Poor's have already cut it to two rungs above junk status. On Nov. 5, Fitch cut it to one notch above junk. As part of the deal, Dynegy, which had 2000 revenues of $29.5 billion, would be taking on Enron's $12.8 billion debt load. But this figure does not include billions of dollars of other debt, accumulated off the balance sheet, that has played a major role in Enron's current problems. Some of Enron's assets will likely be sold to pay down the debt. The acquisition would combine Enron, a dominant player in the trading of electricity and natural gas in the U.S., but which has been selling off hard assets such as utilities, with Dynegy, a company that uses trading to maximize earnings from its power plants. Dynegy will pick up the pieces of Enron, hoping it can make some sense of it. After that it may make some money, too.

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Enron Mentions

Public Service Says 1st-Qtr Profit Fell 5.9 Percent (Update2) Bloomberg, 04/17/01 Enron Bandwidth Unit Reports Loss For First Quarter Dow Jones Energy Service, 04/17/01 USA: Enron CEO uses naughty word on conference call. Reuters English News Service, 04/17/01 Enron, Dynegy post healthy profit gains on energy demand Associated Press Newswires, 04/17/01 USA: Enron Broadband posts expected loss amid mixed growth. Reuters English News Service, 04/17/01 WSJ.COM WRAP: Enron, Dynegy Post Immpressive Results Dow Jones News Service, 04/17/01 Action on energy trading floors reverberate in power-hungry California Associated Press Newswires, 04/17/01 Energy Trading-Floor Gambits Perturb Power-Hungry US West Dow Jones Energy Service, 04/17/01 High demand for power behind Enron's increased earnings Associated Press Newswires, 04/17/01 Enron CEO: Earnings Target Up By A Nickel CNNfn: Market Coverage - Morning, 04/17/01 Enron Corp. Says First-Quarter Profit Rose 20 Percent (Update6) Bloomberg, 04/17/01 Dynegy's 1st-Qtr Profit Rises 73% on Gas, Power Sales (Update4) Bloomberg, 04/17/01 Red Herring 100 Celebrates Top Companies Reshaping Business PR Newswire, 04/17/01 Enron Says PG&E Owes About $570 Million, CNBC Says (Update1) Bloomberg, 04/17/01 Public Service Says 1st-Qtr Profit Fell 5.9 Percent (Update2) 2001-04-17 17:25 (New York) Public Service Says 1st-Qtr Profit Fell 5.9 Percent (Update2) (Updates with profit from operations in second paragraph and possible expansion in California in second section. For more on the California electricity crisis, see {EXTRA <GO>}.) Newark, New Jersey, April 17 (Bloomberg) -- Public Service Enterprise Group Inc., owner of New Jersey's largest utility, said first-quarter profit fell 5.9 percent because of a rate cut and higher fuel costs. Profit from operations fell to $254 million, or $1.22 a share, from net income of $270 million, or $1.25, a year earlier, spokesman Paul Rosengren said. Revenue rose 13 percent to $2.81 billion from $2.48 billion. The company has been trying to expand outside New Jersey as the state opens its energy markets to competition. Talks to buy Cinergy Corp., owner of Cincinnati's utility, for about $5.6 billion fell apart in March, possibly because it offered only a slight premium, according to newspaper reports. The company's Public Service Electric & Gas utility has 3.5 million New Jersey customers. Utility profit fell 11 percent because of a 2 percent power-rate cut and costs to refinance debt, the Newark, New Jersey-based company said. Profit at PSEG Power, the company's U.S. trading and power- generation unit, fell 19 percent because of higher fuel costs and interest expenses. Public Service uses natural gas to fuel some of its power plants. Gas prices more than doubled from a year ago. A $2 million charge for a debt payment and a $9 million gain from an accounting change made net income $261 million, or $1.25 a share, the company said. Public Service had 208 million shares outstanding in the latest quarter. It had 216 million shares outstanding a year earlier. Operating profit of PSEG Energy Holdings, which includes international business, rose 88 percent. Public Service expects to have 3.7 million customers outside the U.S. after some acquisitions are complete, the company said. California Public Service is talking with California officials about expanding six power plants in the state, Rosengren said. The plants, owned 50 percent by Public Service, generate enough power for 150,000 U.S. homes and might be ``substantially enlarged'' with turbines Public Service has on order, provided the state confirms payment for power, he said. He declined to provide details on the size of the expansion. Shares of Public Service rose 90 cents to $46.08. They have fallen 5.2 percent this year. Enron Bandwidth Unit Reports Loss For First Quarter 04/17/2001 Dow Jones Energy Service (Copyright (c) 2001, Dow Jones & Company, Inc.) HOUSTON -(Dow Jones)- Enron Broadband Services was the only one of Enron Corp.'s (ENE) business sectors to report a loss for the first quarter of 2001, company executives said in a conference call with analysts Tuesday. Before interest and taxes, Enron reported a loss for Broadband Services of $35 million for the first quarter of this year compared to a break-even quarter a year ago. "Only one sector is down from what we expected and that's broadband," Enron President and Chief Executive Jeff Skilling told investors. "The other sectors are up, significantly up." Enron Corp. reported earnings of $405 million on revenues of $50.1 billion for the first quarter of 2001. The per-diluted share earnings were 49 cents, compared with 40 cents in the year-ago period. Company executives also revised upward their per-share earnings goal for 2001 from $1.73 to the $1.75-$1.80 range. The Broadband Services loss came on $83 million in revenues compared to $59 million last year. The total value of contracts for the first quarter 2001 was $45 million, compared with $31 million in the first quarter 2000. Broadband Services delivered 43,400 terabytes of capacity in the first quarter 2001, up from 6,005 terabytes a year ago. For all of last year, the company delivered a total of 72,406 terabytes of bandwidth. Skilling said the company has contracts to deliver 40% of its goal of 570,000 terabytes this year. "We're making excellent progress in creating a commodities market," he said. Broadband Services did a total of 580 transactions in the first quarter of 2001, double the 236 transactions it did in the fourth quarter of last year. In all of 2000, the company did 321 trades. In the first quarter, Enron added 70 new customers, bringing its total up to 120, Skilling said. He added that 70% of those customers are carriers or network service providers. Skilling said he is disappointed with the slow growth of the long-term deal origination segment of the bandwidth operation. "We face one big issue in this market, the counterparties have no credit capacity," he said. The Broadband Services loss wasn't due to increased costs of seeking video-on-demand partners to replace Blockbuster Inc. (BBI). Enron and Blockbuster canceled an exclusive agreement to distribute movies via the Internet in the first quarter. Enron will seek to make deals with motion picture companies directly. The biggest snag in making those deals are Hollywood's desires. "They want to keep as much of the money as they can," said Ken Rice, chairman and chief executive of Broadband Services. -By Erwin Seba, Dow Jones Newswires, 713-547-9214 [email protected] Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. USA: Enron CEO uses naughty word on conference call. 04/17/2001 Reuters English News Service (C) Reuters Limited 2001. (Editors note language) By C. Bryson Hull HOUSTON, April 17 (Reuters) - Enron Corp.'s top executive Tuesday publicly fired off the same vulgarity that brought President George W. Bush embarrassing headlines when he unwittingly uttered it in front of an open microphone last fall. But unlike Bush, Enron President and Chief Executive Officer Jeff Skilling says he knew the microphone was on when he called a fund manager an "asshole" during a conference call to discuss first-quarter earnings with analysts. Bush made headlines on the campaign trail last year when he remarked to Vice President Dick Cheney that a New York Times reporter was a "major-league asshole," not knowing that a microphone had picked up his remark. Skilling laid down the insult after an exchange with Richard Grubman, managing director of Highfields Capital Management in Boston, who asked to see Enron's balance sheet and was told it would not be available until its inclusion in a Securities and Exchange Commission filing later this month. "You're the only financial institution that can't come up with balance sheet or cash flow statement after earnings," Grubman grumbled. "Well, thank you very much, we appreciate that. Asshole," Skilling responded with a laugh. Skilling, whose candor frequently gives his public relations staff fits, told Reuters in a telephone interview that he knew the microphone was on. "The specific fellow that I was not real happy with is a shortseller in the market. I don't think it is fair to our shareholders to give someone a platform like that they are using for some personal vested interest related to their stock position," Skilling told Reuters in an interview. "I get a little exasperated with that sort of thing, and I want people to know I am exasperated," he said. Grubman said he felt "pretty thin-skinned" about the remark. He disputed Enron's assertion the balance sheets and cash flow statements were not ready yet, particularly in light of Skilling's mention during the call that Enron reconciles its credit risks and trading book daily. "I'm sort of at a loss as to why that was such an objectionable question," Grubman said, adding: "He's got some nerve. He and his management team sold 7 million shares into the market last year, so he's plugged the market for a half a billion dollars worth of stock valued in the $70s and $80s. "Now the stock is the high $50s-low $60s and I'm an asshole because I ask about the balance sheet?" Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Enron, Dynegy post healthy profit gains on energy demand By The Associated Press 04/17/2001 Associated Press Newswires Copyright 2001. The Associated Press. All Rights Reserved. Energy wholesalers Dynegy Inc. and Enron Corp. posted healthy profit gains Tuesday, beating Wall Street's expectations, as demand for electricity and natural gas surged during the first quarter. Both companies saw revenues jump as well, with Enron's sales coming in nearly four times that of the previous quarter. Carol Coale, an analyst with Prudential Securities Inc. in Houston, said Enron's results were no surprise because of increased demand for power and gas in power-strapped California and across the country. "Clearly the California energy crisis has raised the bar on those power and gas trading and marketing profits," she said. "Opportunities have existed outside California as well." Meanwhile, Dynegy, a major power generator in California, said it was being "unfairly and inaccurately" accused of withholding power from the state's power market. It said that sales there "did not make a material contribution" to first-quarter results. Enron Corp. Houston-based Enron, the world's top buyer and seller of natural gas and electricity, said Tuesday that it earned $425 million, or 49 cents per share, in the three months ended March 31, compared with $338 million, or 40 cents per share in the year-ago period. This year's results include a $19 million, or 2 cents per share gain, due to the adoption of new accounting standards; excluding the item, Enron earned $406 million, or 47 cents per share. The result beat comparable expectations of analysts surveyed by Thomson Financial/First Call, who predicted earnings of 45 cents per share. First-quarter revenues nearly quadrupled to $50.1 billion, compared to revenues of $13.1 billion in the first three months of 2000. Enron also increased its 2001 overall earnings prediction to $1.75 to $1.80 per share. Previously, the company said it expected 2001 earnings of $1.70 and $1.75 per share, and the consensus of analysts was for $1.74 per share. "Enron's wholesale business continues to generate outstanding results. Transaction and volume growth are translating into increased profitability," said Jeff Skilling, president and CEO of Enron. The company attributed the increase to continued growth in its wholesale energy-trading business, acceleration in its retail energy services and in its broadband Internet business. In its wholesale business, Enron resells power and gas to utilities and other large customers. That business accounted for 96 percent of its first-quarter revenues. Shares of Enron rose $1.04 to $60.48 in trading Tuesday on the New York Stock Exchange. Dynegy Inc. The Houston-based energy marketer said Tuesday it earned $139.5 million, or 41 cents a share, in the first three months of 2001, more than double that from first-quarter 2000 earnings of $69 million, or 26 cents per share. Analysts surveyed by Thomson Financial/First Call expected Dynegy's first-quarter earnings to be 40 cents a share. The results include a $2 million gain for an accounting change, which did not affect the per-share figure. Revenues for the first three months of the year were $14.2 billion, nearly triple the $5.3 billion reported in the same period a year ago. Dynegy chairman and chief executive officer Chuck Watson attributed the increase to cold weather demands in northern states, not the California power shortage. In a statement following the release of the earnings, president and chief operating officer Steve Bergstrom defended the company, saying it had been "unfairly and inaccurately accused of withholding power from the California market." "As we have repeatedly communicated to California policy-makers and regulators and to industry officials, we remain ready and willing to generate and sell power to any and all buyers, at fair and reasonable prices, when they are able to provide appropriate assurances that they will fulfill their obligation to pay for those purchases, Bergstrom said. Dynegy said it has softened nearly all of its prospective credit exposure in the California market through an agreement with the California Department of Water Resources to provide the state with up to 2,300 megawatts of electricity through 2004. Shares of Dynegy rose $2.17 to $55.32 in trading on the NYSE. --- On the Net: http://www.enron.com http://www.dynegy.com Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. USA: Enron Broadband posts expected loss amid mixed growth. By C. Bryson Hull 04/17/2001 Reuters English News Service (C) Reuters Limited 2001. HOUSTON, April 17 (Reuters) - Enron Corp.'s nascent broadband Internet division posted an expected quarterly loss on Tuesday amid a weak telecommunications market and mixed growth in the Houston energy giant's flashiest unit. Enron Broadband Services reported a loss of $35 million on $83 million in revenue, compared with a break-even first quarter in 2000, when it had $59 million in revenues. Enron has consistently said it did not expect its broadband arm to record a profit until 2002 and instead has offered other measures of growth by which to benchmark the unit's progress. The broadband unit encompasses two distinct segments: the bandwidth intermediation business, which turns Internet bandwidth into a tradeable commodity; and the content services division, which engages in sales and transmission of Internet content. The bandwidth trading unit recorded 580 transactions in the first quarter of 2001, compared with 321 in all of last year. It delivered 43,400 terabytes - a unit equal to one trillion bytes - in the first quarter, compared with 6,000 in the similar year-ago period, a more than sixfold increase. But Enron President and Chief Executive Jeff Skilling said he was disappointed with the rate at which Enron is signing large, structured bandwidth contracts, which he said are a casualty of the low credit capacity of potential counterparties. "If you look at most of the large telecom companies right now, you would be hard-pressed to assume they could perform on a contract that is anything more than six months to a year long," Skilling said. Enron's bread-and butter, developed in the natural gas business, is creating long-term commodity deals that are geared to combat price volatility for its customers. Skilling said Enron is looking at ways to use the inherent credit of telecommunication companies' assets to finance the deals, much as Enron did with credit-poor natural gas companies in the mid-1980s. "This is going to come a little slower than what we expected," he acknowledged. The content services unit had suffered some setbacks during the first quarter, including the premature dissolution of its marquee 20-year video on demand deal with Blockbuster Inc. EBS also trimmed 20 percent of its staff last month, moving them out of the unit and into other parts of the parent company. "The losses in bandwidth have nothing to do with Blockbuster," Skilling told investors. Rather, the changes came as a result of Enron slashing $500 million off the $750 million it had set aside to build its network. The weak telecom market means a long bandwidth supply and an easy way for Enron to secure contractual access to bandwidth at low prices, Skilling has said. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. WSJ.COM WRAP: Enron, Dynegy Post Immpressive Results 04/17/2001 Dow Jones News Service (Copyright (c) 2001, Dow Jones & Company, Inc.) A WSJ.COM News Roundup HOUSTON -(Dow Jones)- Electricity suppliers Enron Corp. (ENE) and Dynegy Inc. (DYN) posted strong first-quarter results as their wholesaling and trading businesses thrived in a market roiled by California's energy crisis. Enron on Tuesday reported net income that rose 26% to $425 million, or 49 cents a diluted share, compared with net income of $338 million, or 40 cents a share, a year earlier. Results in the latest quarter include a gain related to the required adoption of new accounting standards. Excluding the gain, the company earned $406 million, or 47 cents a share, two cents better than the estimate from analysts surveyed by Thomson Financial/First Call. Revenue in the quarter surged to $50.13 billion from $13.15 billion a year earlier. The energy giant also boosted its earnings outlook for 2001 to $1.75 to $1.80 a share. As recently as March 23, the company said it expected to earn $1.70 to $1.75 a share. The current consensus estimate of analysts is $1.75 a share for 2001. "Enron's wholesale business continues to generate outstanding results. Transaction and volume growth are translating into increased profitability," Jeff Skilling, Enron's president and chief executive, said in a prepared statement. "In addition, our retail energy services and broadband intermediation activities are rapidly accelerating." The company's wholesale-services operations reported a 76% increase in income before interest, minority interests and taxes, or IBIT, to $755 million, led by growth in its natural-gas and power businesses. In addition, Enron's new wholesale commodity businesses, including coal, steel and forest products, contributed to the quarter's strong results. Enron's assets and investments unit posted a 73% drop in IBIT to $59 million because of lower earnings from merchant investments and related assets. Enron said IBIT at its retail energy services group surged to $40 million from $6 million a year earlier, amid a 60% increase in contracting in the period. The company said its new long-term energy-management customers include Owens-Illinois Inc., Quaker Oats Co., Eli Lilly & Co., J.C. Penney Co. and Saks Inc. The transportation-services unit reported IBIT that inched up 3.9% to $133 million, amid strong demand for natural-gas pipeline services. Its Portland General Electric investor-owned utility posted a 43% drop in IBIT to $60 million, which reflects higher power costs, reduced investment income and the effect of certain regulatory events. Enron's broadband-services operations reported a $35 million loss before interest, minority interests and taxes for the quarter. The company said it added 70 new broadband customers this quarter for a total of 120 customers. Unlike beleaguered utilities such as PG&E Corp.'s Pacific Gas & Electric Co. and Edison International's Southern California Edison Co., Enron's Portland General has benefited from the power crisis in California, where a botched utility-deregulation plan combined with general power shortages have driven average wholesale prices 10 times as high as a year ago. Before the energy crisis, Portland General locked in low prices and more power than it needed through long-term contracts. Then, by the third quarter of 2000, Portland General nearly tripled its revenue from selling excess power on the wholesale market. The higher revenue led to higher profits, which allowed the company to rescind a 17% rate increase that was to go into effect in January. Meanwhile, the inability to keep up with soaring electricity prices forced Pacific Gas to seek Chapter 11 bankruptcy protection earlier this month. Pacific Gas and Southern California Edison weren't allowed to fully pass on the high power costs to customers because, under deregulation, they agreed to assume the risk of fluctuating power prices. For the first two years of this arrangement, wholesale prices were so low that the utilities collected billions of dollars extra that they used to pay down old debts. But with skyrocketing wholesale costs, Pacific Gas and Edison accrued billions of dollars of power-purchase liabilities. By early this year, both had stopped paying many of their obligations to conserve cash. Dynegy's Net Income, Revenue More Than Double Dynegy, a big supplier of electrical energy to the California market, saw its first-quarter net income more than double amid a surge in revenue. The Houston-based company posted net income of $139.5 million, or 41 cents a diluted share, compared with net income of $69 million, or 23 cents a share, a year earlier. Excluding a $2 million gain from an accounting change, Dynegy earned $137.5 million, or 41 cents a share, a penny better than the mean estimate from analysts surveyed by Thomson Financial/First Call. Revenue in the quarter more than doubled to $14.17 billion from $5.35 billion. Dynegy's earnings a year earlier include a gain of $33.8 million from the sale of certain power-generation facilities, and a charge of $44.2 million for merger-related costs and the sale and impairment of certain liquids assets. Excluding the items, the company earned $79.4 million, or 26 cents a share, for the 2000 first quarter. The company's outstanding shares rose 16% to 337.7 million as of March 31 from 291.9 million shares a year earlier. Dynegy attributed first-quarter growth to "nationwide asset optimization, increased customer origination and risk-management activities." The company said it benefited from strong industry fundamentals in both natural gas and power. It capitalized on a return to seasonal winter weather and the supply and demand imbalances affecting multiple energy commodities. Earlier this month, Dynegy raised its first-quarter earnings outlook to 40 cents a share. At the time, analysts had expected the power supplier to earn 31 cents a share. Dynegy's marketing and trading unit, which also runs power generators, turned in another strong performance, accounting for 73% of the company's net income for the quarter. The segment earned $100.3 million for the first quarter, nearly double the $50.3 million it posted a year earlier. The company said its marketing and trading operation benefited from seasonal winter weather across the U.S. and strong supply and demand fundamentals, which allowed for higher prices. Increased origination activity from Dynegy's European operations also contributed to the segment's positive results. Dynegy said generation operations at West Coast Power, its joint venture with NRG Energy Inc., Minneapolis, didn't make a "material contribution" during the quarter. But the venture reduced its prospective credit exposure in the California market through its agreement with the California Department of Water Resources to provide the state with up to 2,300 megawatts of energy through 2004. In February, Dynegy joined Reliant Energy Inc. and Mirant Corp. to form a creditors committee to explore options for getting paid for electricity sold to the California Independent System Operator and California's investor-owned utilities, amid frustration with the slow progress in California's attempts to solve the energy crisis. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Action on energy trading floors reverberate in power-hungry California By MICHAEL LIEDTKE AP Business Writer 04/17/2001 Associated Press Newswires Copyright 2001. The Associated Press. All Rights Reserved. In Houston, it's known as "the power corner." Separated by just a few city blocks, four major power wholesalers run trading exchanges that have a strong influence on energy prices nationwide. The trading floors run by Enron Corp., Reliant Energy Inc., Dynegy Inc. and Duke Energy Corp. represent ground zero in a power crisis threatening the quality of life in much of the western United States this summer. By seizing upon opportunities created by deregulation, the energy traders have turned up the juice in the electricity business in ways similar to how junk bond traders ignited Wall Street in the 1980s and venture capitalists fueled Silicon Valley last decade. And thanks to an exemption granted in the early 1990s, nobody monitors daily trading to detect unfair or illegal practices. Utility bills in California have gone up nearly fourfold in the past year, to $27.1 billion. Without fundamental changes in the energy market, this year's bill will rise to $70 billion - more than $2,000 for every person in the state, according to operators of the state's power grid. The staggering electricity price increases have pushed the state's largest utility, Pacific Gas and Electric, into bankruptcy and left No. 2 Southern California Edison on the brink of insolvency. California's once-ample budget surplus also has shriveled, as the state is spending about $50 million a day to buy enough power to keep the lights on. The energy wholesalers say they're doing nothing wrong. They blame the high prices on the rising price of natural gas, burned to generate electricity, and the state's botched deregulation plan. By failing to line up reliable power ahead of time and by imposing price caps for consumers, the state put itself into this mess, the companies say. "There have been accusations of wrongdoing for eight months now and there isn't a shred of evidence to support the allegations," said Gary Ackerman, executive director of the Western Power Trading Forum, a Menlo Park, Calif., trade group. "People are very angry and frustrated about electricity right now and attorneys are trying to take that anger out on us." Attorneys general in Washington, Oregon and California are probing whether the wholesalers have violated antitrust laws or engaged in unfair business practices. A California state senate committee may issue subpoenas for records and the testimony of top energy executives, and at least five lawsuits accuse energy companies of market abuses. "This is the best fraud I have ever seen," attorney Michael Aguirre of San Diego, who is involved in one of the class-action suits. "The generators are doing everything that you think that they might be doing, only it's worse than you ever imagined." The lawsuits and investigations allege that generators have conspired to hijack billions of dollars from consumers and taxpayers by withholding electricity from energy-starved California until the last minute, and then supplying it at exorbitant prices. At Enron's headquarters in Houston, energy specialists among the company's 1,500 traders swap electricity and natural gas contracts like stocks and bonds. Mathematicians, meteorologists and economists make complex calculations to identify where to buy the cheapest power and where to deliver it at the greatest profit. "They are extremely good at what they do," said Severin Borenstein, director of the University of California at Berkeley's energy institute. The Internet has provided the traders with the tools to do their jobs even better. Online marketplaces and password-protected exchanges provide them with invaluable real-time information on the buying and selling patterns of their rivals. Two lawsuits allege that traders have parlayed the sensitive information collected online to fix prices artificially high, a violation of antitrust laws. Aguirre has spent six months assembling reams of data about traders and their activities, but he has yet to develop concrete evidence to prove his price-fixing allegations. A March 21 report by California's electricity grid managers concluded that, between last May and November, 98 percent of trading bids were driven up by noncompetitive patterns of behavior. The California Independent System Operator report stopped short of accusing wholesalers of illegal market manipulation, but it did determine that the wholesalers collected as much as $6.9 billion in "unjust and unreasonable" rates. Enron says its trading system, particularly the online exchange, has resulted in fairer and more efficient markets. The allegations of market abuse are "just some sour grapes from people who didn't come up with the idea in the first place," said Enron spokesman Eric Thode. The online exchanges and other industry Web sites provide the energy traders with a window to see the energy availability and bids in markets around the country. Power industry critics, however, contend the Web's instant access provides the traders a way to exploit a delicate supply-demand balance. If the scale is tipped even slightly toward an inadequate supply, they say, prices soar and energy traders reap huge gains. "The whole trading thing is just a front that lets them game the market," Aguirre said. "They can get away with it because no one (outside the industry) can figure out what they are doing." Whatever the energy traders are doing, it's not closely monitored by government regulators. In 1993, the trading of energy products received an exemption from oversight by the Commodity Futures Trading Commission, a federal agency that oversees commodity and options trading to protect markets from fraud and manipulation. Energy is the only commodity that has received a blanket CFTC exemption. The exemption was shepherded beginning in 1992 by then-CFTC chairwoman Wendy Gramm, wife of Texas Sen. Phil Gramm. She left the CFTC three months before the exemption received final approval in 1993. That same year, she joined the Enron board of directors, a post that last year earned her $50,000. Gramm, an economist at the Mercatus Center at George Mason University, said she doesn't recall talking with Enron about the exemption, which she characterized as a routine matter triggered by an antitrust case involving crude oil. "It really didn't have anything to do with Enron or any specific company," said Gramm. "It had to do with a general market problem." In granting the exemption, the CFTC accepted the industry's contention that it shouldn't be subjected to the government's usual commodities regulation because its markets are dominated by "large sophisticated commercial entities" capable of protecting themselves - in short, that there would be no little people to hurt. At the time, then-CFTC commissioner Sheila Bair scoffed at the reasoning, comparing energy traders to boiler room sales operations that had the potential to violate federal anti-fraud laws. "Is it really that much of burden on market participants (for the CFTC) to retain a sliver of authority regarding fraudulent activity?" Bair wrote in a dissenting opinion. Wholesale electricity prices negotiated by the traders are eventually compiled in quarterly reports and reviewed by the Federal Energy Regulatory Commission. And while FERC by law is supposed to prevent unfair prices, a majority of its commissioners have advocated a hands-off approach to California's energy crisis, insisting that the market can correct itself. That posture may finally be changing somewhat. On Wednesday in San Jose, Calif., FERC chairman Curt Hebert told lawmakers that his agency hopes to begin "monitoring and mitigating" the wholesale electricity market by May 1. This could allow FERC to preemptively influence prices. Energy economists who have studied the market see signs of ruthless, but perfectly legal, behavior. Paul Joskow, an MIT economist, concluded in January that electricity producers deliberately withheld power to drive up prices. "Every business exercises market power when it can, so I don't know why people are so surprised that (the generators) used their market power," Joskow said. "I didn't see any evidence of collusion in what they did ... It was just good business." Enron's specific trading methods remain a mystery even to industry analysts, partly because the company considers its techniques to be proprietary. But it yielded a big payoff last year - an operating profit of $1.6 billion, up 160 percent from $628 million in 1999. When electricity and natural gas prices soared to record highs in the fourth quarter, Enron's trading profit more than tripled to $538 million. Without providing specifics, Enron officials said the profits poured in from all over the country. "Our success is linked to efficient markets, not higher prices in California, or anywhere else for that matter," Steve Kean, an Enron executive vice president, said in January testimony before the U.S. Senate. "What we are interested in is competitive and well-functioning markets. Our financial success is not built on California's back." AP Photo FX101 of April 16, AP Graphic POWER PLAYERS Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Energy Trading-Floor Gambits Perturb Power-Hungry US West 04/17/2001 Dow Jones Energy Service (Copyright (c) 2001, Dow Jones & Company, Inc.) HOUSTON (AP)--In Houston, it's known as "the power corner." Separated by just a few city blocks, four major power wholesalers run trading exchanges that have a strong influence on energy prices nationwide. The trading floors run by Enron Corp. (ENE), Reliant Energy Inc. (REI), Dynegy Inc. (DYN) and Duke Energy Corp. (DUK) represent ground zero in a power crisis threatening the quality of life in much of the western U.S. this summer. By seizing upon opportunities created by deregulation, the energy traders have turned up the juice in the electricity business in ways similar to how junk bond traders ignited Wall Street in the 1980s and venture capitalists fueled Silicon Valley last decade. And thanks to an exemption granted in the early 1990s, nobody monitors daily trading to detect unfair or illegal practices. Utility bills in California have gone up nearly fourfold in the past year, to $27.1 billion. Without fundamental changes in the energy market, this year's bill will rise to $70 billion - more than $2,000 for every person in the state, according to operators of the state's power grid. The staggering electricity price increases have pushed the state's largest utility, Pacific Gas and Electric (PCG), into bankruptcy and left No. 2 Southern California Edison (EIX) on the brink of insolvency. California's once-ample budget surplus also has shriveled, as the state is spending about $50 million a day to buy enough power to keep the lights on. The energy wholesalers say they're doing nothing wrong. They blame the high prices on the rising price of natural gas, burned to generate electricity, and the state's botched deregulation plan. By failing to line up reliable power ahead of time and by imposing price caps for consumers, the state put itself into this mess, the companies say. "There have been accusations of wrongdoing for eight months now and there isn't a shred of evidence to support the allegations," said Gary Ackerman, executive director of the Western Power Trading Forum, a Menlo Park, Calif., trade group. "People are very angry and frustrated about electricity right now and attorneys are trying to take that anger out on us." Attorneys general in Washington, Oregon and California are probing whether the wholesalers have violated antitrust laws or engaged in unfair business practices. A California state senate committee may issue subpoenas for records and the testimony of top energy executives, and at least five lawsuits accuse energy companies of market abuses. "This is the best fraud I have ever seen," attorney Michael Aguirre of San Diego, who is involved in one of the class-action suits. "The generators are doing everything that you think that they might be doing, only it's worse than you ever imagined." The lawsuits and investigations allege that generators have conspired to hijack billions of dollars from consumers and taxpayers by withholding electricity from energy-starved California until the last minute, and then supplying it at exorbitant prices. At Enron's headquarters in Houston, energy specialists among the company's 1,500 traders swap electricity and natural gas contracts like stocks and bonds. Mathematicians, meteorologists and economists make complex calculations to identify where to buy the cheapest power and where to deliver it at the greatest profit. "They are extremely good at what they do," said Severin Borenstein, director of the University of California at Berkeley's energy institute. The Internet has provided the traders with the tools to do their jobs even better. Online marketplaces and password-protected exchanges provide them with invaluable real-time information on the buying and selling patterns of their rivals. Two lawsuits allege that traders have parlayed the sensitive information collected online to fix prices artificially high, a violation of antitrust laws. Aguirre has spent six months assembling reams of data about traders and their activities, but he has yet to develop concrete evidence to prove his price-fixing allegations. A March 21 report by California's electricity grid managers concluded that, between last May and November, 98% of trading bids were driven up by noncompetitive patterns of behavior. The California Independent System Operator report stopped short of accusing wholesalers of illegal market manipulation, but it did determine that the wholesalers collected as much as $6.9 billion in "unjust and unreasonable" rates. Enron says its trading system, particularly the online exchange, has resulted in fairer and more efficient markets. The allegations of market abuse are "just some sour grapes from people who didn't come up with the idea in the first place," said Enron spokesman Eric Thode. The online exchanges and other industry Web sites provide the energy traders with a window to see the energy availability and bids in markets around the country. Power industry critics, however, contend the Web's instant access provides the traders a way to exploit a delicate supply-demand balance. If the scale is tipped even slightly toward an inadequate supply, they say, prices soar and energy traders reap huge gains. "The whole trading thing is just a front that lets them game the market," Aguirre said. "They can get away with it because no one (outside the industry) can figure out what they are doing." Whatever the energy traders are doing, it's not closely monitored by government regulators. In 1993, the trading of energy products received an exemption from oversight by the Commodity Futures Trading Commission, a federal agency that oversees commodity and options trading to protect markets from fraud and manipulation. Energy is the only commodity that has received a blanket CFTC exemption. The exemption was shepherded beginning in 1992 by then-CFTC chairwoman Wendy Gramm, wife of Texas Sen. Phil Gramm. She left the CFTC three months before the exemption received final approval in 1993. That same year, she joined the Enron board of directors, a post that last year earned her $50,000. Gramm, an economist at the Mercatus Center at George Mason University, said she doesn't recall talking with Enron about the exemption, which she characterized as a routine matter triggered by an antitrust case involving crude oil. "It really didn't have anything to do with Enron or any specific company," said Gramm. "It had to do with a general market problem." In granting the exemption, the CFTC accepted the industry's contention that it shouldn't be subjected to the government's usual commodities regulation because its markets are dominated by "large sophisticated commercial entities" capable of protecting themselves - in short, that there would be no little people to hurt. At the time, then-CFTC commissioner Sheila Bair scoffed at the reasoning, comparing energy traders to boiler room sales operations that had the potential to violate federal anti-fraud laws. "Is it really that much of burden on market participants (for the CFTC) to retain a sliver of authority regarding fraudulent activity?" Bair wrote in a dissenting opinion. Wholesale electricity prices negotiated by the traders are eventually compiled in quarterly reports and reviewed by the Federal Energy Regulatory Commission. And while FERC by law is supposed to prevent unfair prices, a majority of its commissioners have advocated a hands-off approach to California's energy crisis, insisting that the market can correct itself. That posture may finally be changing somewhat. On Wednesday in San Jose, Calif., FERC chairman Curt Hebert told lawmakers that his agency hopes to begin "monitoring and mitigating" the wholesale electricity market by May 1. This could allow FERC to preemptively influence prices. Energy economists who have studied the market see signs of ruthless, but perfectly legal, behavior. Paul Joskow, an MIT economist, concluded in January that electricity producers deliberately withheld power to drive up prices. "Every business exercises market power when it can, so I don't know why people are so surprised that (the generators) used their market power," Joskow said. "I didn't see any evidence of collusion in what they did... It was just good business." Enron's specific trading methods remain a mystery even to industry analysts, partly because the company considers its techniques to be proprietary. But it yielded a big payoff last year - an operating profit of $1.6 billion, up 160 percent from $628 million in 1999. When electricity and natural gas prices soared to record highs in the fourth quarter, Enron's trading profit more than tripled to $538 million. Without providing specifics, Enron officials said the profits poured in from all over the country. "Our success is linked to efficient markets, not higher prices in California, or anywhere else for that matter," Steve Kean, an Enron executive vice president, said in January testimony before the U.S. Senate. "What we are interested in is competitive and well-functioning markets. Our financial success is not built on California's back." Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. High demand for power behind Enron's increased earnings By KRISTEN HAYS Associated Press Writer 04/17/2001 Associated Press Newswires Copyright 2001. The Associated Press. All Rights Reserved. HOUSTON (AP) - High demand for electricity and natural gas helped Enron Corp.'s first-quarter net income surge more than 25 percent. The company also announced increased earnings expectations for 2001. Houston-based Enron, the world's top buyer and seller of natural gas and electricity, said Tuesday that it earned $425 million, or 49 cents per share, in the three months ended March 31, compared with $338 million, or 40 cents per share in the year-ago period. This year's results include a $19 million, or 2 cents per share gain, due to the adoption of new accounting standards; excluding the item, Enron earned $406 million, or 47 cents per share. The result beat comparable expectations of analysts surveyed by Thomson Financial/First Call, who predicted earnings of 45 cents per share. First-quarter revenues nearly quadrupled to $50.1 billion, compared to revenues of $13.1 billion in the first three months of 2000. Enron also increased its 2001 overall earnings prediction to $1.75 to $1.80 per share. Previously, the company said it expected 2001 earnings of $1.70 to $1.75 per share, and the consensus of analysts was for $1.74 per share. "Enron's wholesale business continues to generate outstanding results. Transaction and volume growth are translating into increased profitability," said Jeff Skilling, president and CEO of Enron. Carol Coale, an analyst with Prudential Securities Inc. in Houston, said Enron's earnings reports were no surprise because of increased demand for power and gas in power-strapped California and across the country. "Clearly the California energy crisis has raised the bar on those power and gas trading and marketing profits," she said. "Opportunities have existed outside California as well." Coale said volatile electricity prices have helped trading profits, and demand remains strong despite an economic slowdown. The company attributed the increase to continued growth in its wholesale energy-trading business, acceleration in its retail energy services and in its broadband Internet business. In its wholesale business, Enron resells power and gas to utilities and other large customers. That business accounted for 96 percent of its first-quarter revenues. Shares of Enron rose $1.29 to $60.73 in trading Tuesday on the New York Stock Exchange. --- On the Net: http://www.enron.com Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Business Enron CEO: Earnings Target Up By A Nickel Rhonda Schaffler, Gregg Hymowitz 04/17/2001 CNNfn: Market Coverage - Morning (c) Copyright Federal Document Clearing House. All Rights Reserved. RHONDA SCHAFFLER, CNNfn ANCHOR, MARKET CALL: Markets are down. We`re going to talk about one stock moving higher, though. North America`s largest gas and electricity maker is bucking the current earnings trend. Enron (URL: http://.www.enron.com/) is raising its earnings forecast for this year by a nickel. The company also earned 47cents a share for its first quarter, 2 pennies better than estimates and 7 cents better than the year ago. Revenues rose a healthy 282 percent. Jobs cuts and the end of its video on demand deal with Blockbuster (URL: http://www.blockbuster.com/) put pressure on the stock, which has fallen from $90, to significantly lower level right now, about $60 a share. Joining us from Houston with an inside look at Enron is the company`s CEO, Jeff Skilling. Jeff, welcome back to "Market Call." JEFFREY SKILLING, CEO, ENRON CORP.: Thank you, Rhonda. Glad to be here. SCHAFFLER: Let`s talk about the revenue growth because it is rather impressive. You`re an old economy company with a new twist. Where was most of the revenue growth from? SKILLING: Well, surprisingly, it came from our natural gas and electricity business. SCHAFFLER: No, well that`s not surprising. It`s a key part of your business. As opposed to your broadband, do you mean? SKILLILNG: Well, just about 90 percent of our earnings- I`m going to pull this out of my ear because I`m getting some feedback on the earphone. Actually that`s working better now. About 90 percent, or 95 percent, of our revenues are in the natural gas and electricity business, so as long as that business is healthy, our business overall is healthy. GREGG HYMOWITZ, CNNfn GUEST HOST, MARKET CALL: Jeff, it`s Gregg Hymowitz. Can you discuss, as related to that business, the pricing of megawatt hours going forward, what we`ve seen it at. And also can you just touch upon fiber-optic bandwidth pricing lately? SKILLING: Sure-a tale of two cities. The electricity business is seeing very strong prices. In California, for example, probably a year and a half ago power sold for about $20 to $22 a megawatt hour. Right now in California, we`re probably closer to $550 a megawatt hour for the summer. And this is just because we have a short supply situation. There`s a lot of demand growth in California. We just haven`t built the power plants to serve it. Now, conversely in the fiber business, we`ve seen enormous capital investments over the last several years. Supply much exceeds demand and in that market prices have collapsed. In fact by our numbers, as you know, we`re in the process of creating a market for bandwidth, those prices are dropping in some cases by 30 percent a month. SCHAFFLER: Let`s talk about California for a moment. Pacific Gas & Electric (URL: http://www.pgecorp.com/) owes you some money. You`ve taken reserves against that. I`m wondering if you feel a need to increase reserves going forward or you`re comfortable with the situation as it is? SKILLING: We`re very comfortable. What we had said to investors, as long ago as December, was that we felt very comfortable with the $1.70 to $1.75 number for this year. As you mentioned, we`re raising that from $1.75 to $1.80. And we feel very comfortable with that number really regardless of what happens with the credit situation in California. HYMOWITZ: Jeff, getting back to that tale of two markets, discuss what could potentially happen to change the trend in both markets? SKILLING: Well, I think in the electricity market, we`ll have tight prices for another couple of years. It takes that long to get the construction cycle going. But once that construction cycle gets going it`s pretty easy to bring on capacity and prices will drop significantly. And probably the $30 to $40 megawatt hour area in the next couple of years and I think that`s very possible. In fact, I think that`s probable. In the bandwidth market, very, very different situation. The problem, to date, is that we built what amounts to an interstate highway system for bandwidth, or for data, with no on ramps and no off ramps. We need to get this last-mile problem fixed, so that people can get data from these networks all the way out to end-use customers. Once that happens, we`ll see a lot of applications developed that use bandwidth. It will soak up some of that excess supply and we might see prices coming back. I think that`s a much longer term proposition. SKILLING: Jeff, we`ve heard so much about this last-mile for so many years now. I mean when is it going to actually happen? SKILLING: Well, it`s just been slower. You were just mentioning the earnings of Sprint FON (URL: http://www.sprint.com/) . Many telecom companies are working to put DSL cable systems on, that helped bridge the last-mile problem, but it`s come much slower than people expected. These are enormously capital intensive investments. They take a long time to put in. There are still technical issues with some of these solutions. So, I just think we have a little ways to go. It will take some more time. SCHAFFLER: You had incredible revenue growth, which we mentioned, up 282 percent. Do you do anything different in this quarter? It`s always hard to top the last great act on Wall Street. SKILLING: The revenue numbers are not as important as our volume growth numbers. What really drives our profitability is growth in volume, physical volumes. They were up about 69 percent. Actual revenue numbers will be influenced by price changes. Price changes really don`t make that much of a difference for us. We don`t have any exposure to the commodity price cycle. So, what we look at is physical volumes transported through the system. And we`ve had just a tremendous track record for the last couple of years on volume. As I mentioned, this quarter up 69 percent in physical volumes. We think that`s a function of our market share position. And what amounts to a unique, logistics capability in North America and Europe. No one else can match it. SCHAFFLER: Jeffrey Skilling, we`ll leave it at that. Congratulations on the quarter. SKILLING: Thank you, Rhonda. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Enron Corp. Says First-Quarter Profit Rose 20 Percent (Update6) 2001-04-17 16:04 (New York) Enron Corp. Says First-Quarter Profit Rose 20 Percent (Update6) (Adds closing share price in eighth paragraph.) Houston, April 17 (Bloomberg) -- Enron Corp., the largest energy-trading company, said first-quarter profit rose 20 percent as increased electricity and natural-gas demand sent prices surging in California and other parts of the U.S. Profit from operations rose to $406 million, or 47 cents a share, from $338 million, or 40 cents, in the year-earlier period, Enron Chief Executive Jeffrey Skilling said. Revenue almost quadrupled to $50.1 billion from $13.1 billion. ``The market is perfect for a trader and marketer,'' Commerzbank Capital Markets Co. analyst Andre Meade said. ``Volume is growing, prices are high and prices are volatile.'' Enron sold 90 percent more power and 32 percent more gas in North America than in the year-earlier quarter as prices surged. About one-fifth of the power-sales increase came from the western U.S. as California electricity prices averaged nine times higher than a year earlier. The rest came from the eastern U.S., which also has had power shortages. The Houston-based company also raised its 2001 profit forecast to $1.75 to $1.80 a share, from its January projection of $1.70 to $1.75. Once just a natural-gas pipeline company, Enron has spent more than a decade creating a trading operation that buys power, gas and other commodities and resells them to utilities and other large consumers, a business made possibly by deregulation of U.S. energy markets in the 1980s and 1990s. As a result, the company's sales have risen an average of 66 percent annually for the past five years. Enron had 2000 revenue of $101 billion, making it the second-largest U.S. energy company behind Exxon Mobil Corp. Revenue will total as much as $170 billion this year, Skilling estimated in March. Enron shares rose 56 cents to $60. They had fallen 28 percent this year on concerns about the company's telecommunications business and an India power project. California Business Electricity prices in California were higher in the first quarter than a year earlier as a power shortage continued and generators demanded higher payments to offset the risk of selling to the state's utilities. Prices for gas, used to fuel power plants, were more than double the year-earlier average. The higher prices have left California utilities more than $14 billion in debt because regulators won't let them pass on all the cost of power purchases on to consumers. Enron is owed $570 million by PG&E Corp.'s Pacific Gas & Electric, Skilling said in an interview. Pacific Gas & Electric, California's biggest utility, filed for Chapter 11 bankruptcy protection April 6. Enron has set aside money to cover potential California losses and doesn't expect the energy crisis to affect 2001 earnings, Skilling said. He wouldn't say how much was set aside. Investors are entitled to know how much Enron has put in reserves, analysts told Skilling on a conference call today. Skilling disagreed. ``I think that would hurt our competitive position, particularly when people are jostling for position in bankruptcy,'' Skilling said. Enron's business in energy-services contracts has escalated as a result of California's power crisis. Skilling has said demand is increasing as companies look to cut energy costs and protect themselves from the risks of energy-price movements. ``If you or I were running a factory around New York right now, we'd be calling Enron or a company like them to lock in energy prices,'' Credit Suisse First Boston analyst Curtis Launer said. ``That business is going gangbusters.'' Contracts increased nearly 60 percent to $5.9 billion in the quarter. Enron, which recently signed contracts with Owens- Illinois Inc., Quaker Oats Co. and Eli Lilly & Co., manages energy buying and consumption at more than 31,000 facilities. It is the largest manager of customer energy assets, Skilling said. Energy Deregulation The company's Wholesale Energy Operations and Services business, which includes trading and power-plant development, saw first-quarter profit before interest, minority interests and taxes rise 76 percent to $755 million from $429 million. In the first quarter, gas volumes more than tripled outside North America and rose 55 percent worldwide. On the power side, worldwide volumes more than doubled, while sales outside North America more than quadrupled. Enron has gained customers through EnronOnline, its Internet trading site. EnronOnline handled $162 billion in transactions in the quarter, Skilling said. It has handled more than $525 billion since it opened in late 1999. Enron's broadband unit, set up to build a U.S. fiber-optic network and help trade space on such networks, had a quarterly loss of $35 million on revenue of $83 million. It broke even a year earlier. Enron added 70 broadband customers in the latest quarter, for a total of 120. Broadband Woes Shares of Enron fell 11 percent on March 12 after the collapse of an agreement for Blockbuster Inc., the largest video- store chain, to deliver movies on demand over Enron's fiber-optic system. The stock continued to fall on speculation Enron would exit the broadband business, analysts said. Enron denied the speculation. Enron has been trying to get paid for power sold by its India unit to the western Indian state of Maharashtra. Enron's $3 billion, 740-megawatt project is the biggest foreign investment in India. A first-quarter gain of $19 million, or 2 cents a share, for an accounting change, made net income $425 million, or 49 cents a share. There were no charges or gains in the year-earlier period. The company was expected to make 45 cents a share, the average estimate of analysts polled by First Call/Thomson Financial. Estimates ranged from 43 cents to 47 cents. Dynegy's 1st-Qtr Profit Rises 73% on Gas, Power Sales (Update4) 2001-04-17 16:21 (New York) Dynegy's 1st-Qtr Profit Rises 73% on Gas, Power Sales (Update4) (Adds company comment on future earnings and additional generation capacity in the fifth paragraph, closes shares. For more on California, see {EXTRA <GO>}.) Houston, April 17 (Bloomberg) -- Dynegy Inc., a U.S. electricity and natural gas trader, said first-quarter profit rose 73 percent as colder winter weather boosted gas and power sales. Profit from operations rose to $137.5 million, or 41 cents a share, from $79.4 million, or 26 cents, a year earlier, the company said in a statement. Revenue more than doubled to $14.2 billion from $5.35 billion. Marketing and trading profit almost doubled to $100.3 million, or 73 percent of net income as the average price of gas more than doubled from a year ago. Power sales to California, hit by a 10-month electricity crisis, ``did not make a material contribution'' to earnings, the statement said. ``It's not just a California ballgame,'' UBS Warburg analyst James Yanello said. ``Lots of areas around the country have supply and demand imbalances, and this is one of the big players capable of resolving those supply and demand issues.'' Company executives remain comfortable with their earlier second-quarter earnings guidance of 35 cents a share, Chairman Chuck Watson told analysts during a conference call. Next year's earnings likewise should increase by up to 25 percent as Dynegy continues to build or acquire power plants, he said. ``What's driving the train for Dynegy for the past few years is the continued adding to our portfolio in generation across the country, and I don't see that slowing down in 2002,'' Watson said. California Reserves Dynegy has a reserve to cover money it might not get from power sales to California, canceling out profit from the state, spokesman Steve Stengel said. The company was owed $265 million from power sales to California as of Feb. 28, a filing with the U.S. Securities and Exchange Commission said. Dynegy, based in Houston, and joint venture partner NRG Energy Inc. have sold 2,300 megawatts of power to the state's Department of Water Resources through 2004. That has cut credit risk from the state's cash-strapped utilities, the company said. California power prices rose ninefold last quarter from a year ago. A megawatt is enough power to light about 1,000 U.s. home. Shares of Dynegy rose $2.80 to close at $55.95. They are almost unchanged for the year. Northeast Dynegy's electricity sales and production rose 19 percent last quarter to 26.1 million megawatt-hours from a year ago, boosted by the addition of 1,100 megawatts of generation in the 2000 second half and the purchase last quarter of New York state power plants that can produce 1,700 megawatts. ``Dynegy is in a good position to earn good returns from those plants,'' analyst Anatol Feygin of J.P. Morgan Securities Inc. said. ``The press is full of prognostications that the New York area and the Northeast are the next California.'' New York and New England won't have enough generators or power lines to meet demand if temperatures are higher than normal this summer, industry officials have said. Few were built in the Northeast in recent years because of regulatory hurdles, even as economic growth boosted electricity consumption. Broadband Loss Dynegy's new Global Communications division, which markets and trades broadband, had a $11.6 million loss from start-up and expansion costs. Profit from the processing and marketing of natural-gas liquids fell 5.4 percent to $22.9 million. Last year's profit included about $4 million from assets that have been sold. Profit at Dynegy's Illinois Power utility, with 650,000 gas and power customers in southern Illinois, more than quintupled to $25.9 million on cost reductions and higher winter demand. The company was expected to earn 40 cents, based on the average estimate of analysts surveyed by First Call/Thomson Financial. A gain of $2.03 million in the quarter from an accounting change made net income of $139.5 million, or 41 cents a share. A year ago, a gain of $33.8 million from a power-plant sale and a charge of $44.2 million made net income $69 million, or 23 cents. Red Herring 100 Celebrates Top Companies Reshaping Business 04/17/2001 PR Newswire (Copyright (c) 2001, PR Newswire) Magazine Chooses 50 Private and 50 Public Companies That Continue to Reshape Markets Despite Current Economic Trends SAN FRANCISCO, April 17 /PRNewswire/ -- In the fifth annual Red Herring 100, editors of Red Herring, the leading magazine on the business of technology and innovation, identify the 100 companies whose products, services or business models - despite current economic uncertainties-continue to forge new markets. The leaders are profiled in Red Herring's May 1 double issue and are posted at http://www.rh100.redherring.com. The Red Herring 100 stands apart because companies are not measured by statistics alone, but are also reviewed on the subjective and metrical criteria favored by venture capitalists and investment bankers, including: a company's potential for disrupting its market, its execution of a sound strategy, the quality of its management and its financial performance, which is summed up by "The Herring Take". The listing favors companies whose promise is based on innovative and defensible technology with more than a dozen sectors represented, including software, biotechnology and communications services. Major category shifts were recognized in this year's Red Herring 100 in sectors like data storage, enterprise software and semiconductors, while entire sectors that failed to remain innovative are gone: Linux companies, PC makers, wireless communications and commerce. Editor Jason Pontin explained that companies were chosen for the Red Herring 100 based upon the magazine's belief in certain broad trends: continuing importance of IP telephony, critical advancements in energy production, the sudden glamour of biotechnology, and the utility of reconfigurable microchips. "In short, the Red Herring 100 are companies that retain the capacity to disrupt existing markets or create entirely new ones," Pontin exclaims. "As we shout on our cover, whatever the state of public and private equity markets, these companies still matter." The Red Herring 100 50 Private Companies 50 Public Companies Accel Partners Akamai Technologies Accenture AOL Time Warner Aimster Applied Micro Circuits Corporation AirFiber Ballard Power Systems Altra Energy Technologies Charles Schwab Amber Networks Check Point Software Technologies Asera Ciena Bang Networks Cisco Systems Bertelsmann Citigroup Bowstreet Corning Centerpoint Broadband Technologies Credit Suisse Group Cereva Networks eBay Cytokinetics Electronic Arts eCredit.com Enron Excelergy EMC Foliofn Exodus Communications Genoa Flextronics ID Software Gemstar-TV Guide Intira Genentech Jamcracker Goldman Sachs Kleiner Perkins Caufield & Byers Homestore.com LaserComm i2 Technologies Layton BioScience IBM Matrix Partners Illumina Mellanox Technologies Immunex Metro-Optix JDS Uniphase NerveWire Juniper Networks Nishan Systems McLeodUSA PhotonEx Metromedia Fiber Network PurpleYogi Microsoft RealChip Communications Morgan Stanley Dean Witter Savi Technology Network Appliance Scale Eight Nortel Networks Science Applications International Corp. NTT DoCoMo SeeCommerce Oracle Sequoia Capital Palm SmartPipes PMC-Sierra Telseon Qwest Communications Tensilica Research in Motion Thomas Weisel Partners Siebel Systems Tradescape.com Singapore Telecommunications Troika Networks Sun Microsystems Tropian Sycamore Networks VBrick Systems Taiwan Semiconductor Manufacturing Co. Voxeo Texas Instruments Walmart.com Veritas Software Xacct Technologies Vitesse Semiconductor Xenoport Vivendi Universal Yipes Communications Vodafone Group Zaplet Yahoo About Red Herring Communications, Inc. Red Herring Communications, Inc. is an integrated network of media properties connecting the people, companies and industries whose ideas and technological innovations are inspiring and reshaping the world of business. Founded in 1993, Red Herring magazine, the company's flagship platform, provides in-depth analysis and reporting on the business of technology, innovation and entrepreneurialism. RedHerring.com, Red Herring Research and Red Herring Events offer a unique blend of news, commentary, financial analysis, investor tools and access to leaders of emerging technologies and markets. A privately held company, Red Herring Communications, Inc. is headquartered in San Francisco and has offices in New York, Los Angeles, Boston and London. /CONTACT: Deirdre Hussey of Red Herring Communications, Inc., 415-486-2879, [email protected]/ 16:47 EDT Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Enron Says PG&E Owes About $570 Million, CNBC Says (Update1) 2001-04-17 11:08 (New York) Enron Says PG&E Owes About $570 Million, CNBC Says (Update1) (Adds earlier report in fifth paragraph.) Houston, April 17 (Bloomberg) -- Enron Corp. is owed about $570 million in gross receivables by PG&E Corp., Enron President and Chief Executive Jeffrey Skilling said in an interview with financial news network CNBC. Enron, the largest energy trader, is fully reserved and has some offsets against that amount, Skilling said. PG&E filed for bankruptcy this month. ''It's not a good situation when a state allows a company with a 100-year history to go bankrupt,'' Skilling said. ``It's kind of surprising.'' There is a big threat of politicizing the energy situation in the West, Skilling said. Some proposals in various state legislatures ``would be enough to make an economist cry,'' he said. The Houston Chronicle reported the $570 million figure this weekend, citing a letter from Enron to a bankruptcy trustee. Enron refused to confirm the figure until today.

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Energy Issues

Please see the following articles: Sac Bee, Thurs, 5/10: "PUC sweats $4.8 billion rate raise" Sac Bee, Thurs, 5/10: "PG&E wants panel to get boot" Sac Bee, Thurs, 5/10: "Major job losses predicted; governor presses=20 generators" Sac Bee, Thurs, 5/10: "Bond-sale bill goes to Davis " Sac Bee, Thurs, 5/10: "State revenue outlook shrinks " SD Union, Thurs, 5/10: "No blackouts despite dip in supplies" SD Union (AP), Wed, 5/9: "Biggest users face huge rate hikes under PUC pla= n" LA Times, Thurs, 5/10: "Rate Hikes Up to 60" Proposed by PUC Chief" LA Times, Thurs, 5/10: "Bush Energy Stance Begins to Worry Some in GOP" LA Times, Thurs, 5/10: "In Office Buildings, the Lights Are On, But Nobody= 's=20 Home" LA Times, Thurs, 5/10: "Power Shifts to Congress" (Commentary) SF Chron, Thurs, 5/10: "Proud state forced to knees in power hunt"=20 SF Chron, Thurs, 5/10: "Power bills set to skyrocket for heavy users=20 Graduated rate increase would take effect in June " SF Chron (AP), Thurs, 5/10: "Developments in California's energy crisis " SF Chron (AP), Thurs, 5/10: "PG&E says fewer small power plants offline " SF Chron (AP), Thurs, 5/10: "A look at two rate designs before power=20 regulators" SF Chron, Thurs, 5/10: "Lights stay on despite failure of big plant"=20 SF Chron, Thurs, 5/10: "PG&E fights consumer committee=20 Obstruction feared in bankruptcy case " SF Chron, Thurs, 5/10: "Generators silent on Davis plan=20 He offers lower compensation to stave off Edison bankruptcy " Mercury News, Thurs, 5/10: "Rate plans shield most households" Mercury News, Thurs, 5/10: "Energy bond plan gets final legislative OK,=20 faces delay" Mercury News, Thurs, 5/10: "Fusion research gets a boost" OC Register, Thurs, 5/10: "Power is Money PUC details plan to raise Edison rates up to 34%. Half of users to see no= =20 hike" OC Register, Thurs, 5/10: "Economic crisis in forecast" OC Register, Thurs, 5/10: "GOP stalls sale of bonds with vote" OC Register, Thurs, 5/10: "Electricity notebook Davis asks power suppliers to accept 30% less than owed" OC Register, Thurs, 5/10: "Regulators says more electricity rate hikes are= =20 likely" OC Register, Thurs, 5/10: "Starting all over again The Legislature's special session on the power crisis ends today -- with mo= re work to do at an added cost" OC Register, Thurs, 5/10: "Davis is set to sign a $13.4 billion bond-issue= =20 measure today to cover electricity costs" OC Register, Thurs, 5/10: "Papering over state electricity problems" Individual.com (AP), Thurs, 5/10: "Task Force To Propose Legislation" Individual.com (AP), Thurs, 5/10: "Stage 2 Electrical Emergency Declaratio= n; SCE to Curtail 'Load' for Some Customers" Individual.com (Bridgenews), Thurs, 5/10: "[B] FULL/ Pacific Gas & Electri= c=20 restores all Qualifying=20 Facilities --Pacific Gas & Electric says 8 of 300 QFs still shut down"=20 ---------------------------------------------------------------------------= --- ------------------------------------- PUC sweats $4.8 billion rate raise By Carrie Peyton Bee Staff Writer (Published May 10, 2001)=20 Big industries' electric bills would leap 50 percent or more and household= =20 bills would rise an average of 11 percent to 17 percent under two proposals= =20 outlined by state regulators Wednesday for revamping electric rates.=20 The twin proposals are efforts by Loretta Lynch, president of the state=20 Public Utilities Commission, and Christine Walwyn, a PUC administrative=20 judge, to decide how to divide the burden of a $4.8 billion rate hike.=20 "Both of them are just going to be very, very hard on business," said Bill= =20 Booth, an attorney for the California Large Energy Consumers Association. H= e=20 said it appeared that some cement and steel makers could face 90 percent ra= te=20 hikes.=20 But small consumers were equally dismayed.=20 "This never should have happened in the first place," said Bob Finkelstein,= =20 an attorney with The Utility Reform Network, placing the blame for soaring= =20 rates on electric deregulation.=20 "In terms of allocating the fallout from the failed experiment, they seemed= =20 to do a reasonable job. But it assumes that the fallout should be allocated= =20 in the first place, and that just sticks in our craw," he said.=20 Several PUC commissioners have said they want to select a new rate design a= t=20 a special meeting Monday, so the higher electric bills can begin going out= =20 June 1 to customers of Pacific Gas and Electric Co. and Southern California= =20 Edison.=20 One version before the PUC would include Lynch's call to begin looking for= =20 ways to charge federal installations power rates that are tied to wildly=20 gyrating wholesale costs.=20 Reportedly first floated as a joke, the idea quickly took hold within the= =20 PUC. Lynch said she wants to set it up as "pilot program," perhaps beginnin= g=20 in mid-summer, so the federal government can test its own theories about=20 unfettered market prices being good for consumers.=20 "I don't believe it's a dig at the FERC (Federal Energy Regulatory=20 Commission)," she said during a news conference.=20 But she repeated her attack on federal regulators, saying electric rates ar= e=20 rising in California only because the FERC has refused to cap runaway=20 wholesale electric prices.=20 Commissioner Richard Bilas later called a special federal rate "silly" and= =20 "kindergartenish," and said the proposal was clearly intended "just to get= =20 back at the federal government."=20 Any of the five appointed commissioners can offer an alternate version of t= he=20 rate design, as Lynch did. The alternates will be considered alongside the= =20 proposal by Walwyn, the judge who presided over lengthy hearings on how the= =20 new rates should be crafted.=20 She recommended increases that would fall slightly more softly on residenti= al=20 customers -- averaging 11 percent for Edison and 15 percent for PG&E -- and= =20 more heavily on large industrial users, averaging 52 percent for Edison and= =20 55 percent for PG&E.=20 But within those averages could be much higher individual increases, and=20 advocates for everyone from farmers to manufacturers waited anxiously=20 throughout the day for detailed tables that would list rates for dozens of= =20 customer categories.=20 "I have got my expert economist standing by to look at the numbers when the= y=20 come out," said Ron Liebert, associate counsel for the California Farm Bure= au=20 Federation.=20 The release of the rate proposal has been delayed repeatedly as the PUC tri= ed=20 to cram work that usually takes months into just a few weeks, and many of i= ts=20 details remained obscure late Wednesday, dismaying those who are still=20 arguing for changes.=20 "We have to file comments on this by Friday. What they're doing is, they're= =20 shutting down the comment period," said Jack Stewart, president of the=20 California Manufacturers & Technology Association.=20 He said it appears that some rates could nearly double, and "that's just a= =20 death knell for many California manufacturers."=20 Lynch provided only sketchy summaries of her ideas, saying she wanted to=20 raise residential rates 16 percent for Edison and 17 percent for PG&E on=20 average, raise industrial rates 50 percent to 52 percent and cap agricultur= al=20 rate increases on a sliding scale from 23 percent to 30 percent, partly at= =20 Gov. Gray Davis' urging.=20 She said that about half of households statewide would see no increase unde= r=20 a state law that protects those who use less than 130 percent of a "baselin= e"=20 amount. However, PG&E has calculated that far more households -- 69 percent= =20 -- use more than the baseline at some point during the year.=20 PG&E's baseline varies by region and season but generally runs between 300= =20 and 400 kilowatt-hours, or about 50 percent to 60 percent of average=20 electricity use per household. It was created to give people access to a=20 minimal amount of power at a lower rate.=20 The heaviest household users still would see no increase on their first few= =20 hundred kilowatt-hours, but after that prices would rise sharply, in tiers,= =20 so that some households could see their overall bills rise 34 percent or=20 more.=20 Lynch and Walwyn also have proposed "bill limiters" so that businesses with= =20 unusual usage patterns won't get hammered by unintended rate spikes.=20 The increases will not affect customers of the Sacramento Municipal Utility= =20 District, which recently approved its own hikes, averaging 22 percent, and= =20 other ratepayer-owned utilities.=20 The Bee's Carrie Peyton can be reached at (916) 321-1086 or=20 [email protected].=20 PG&E wants panel to get boot By Claire Cooper Bee Legal Affairs Writer (Published May 10, 2001)=20 SAN FRANCISCO -- Pacific Gas and Electric Co. on Wednesday asked a judge to= =20 disband an unprecedented committee of ratepayers appointed last week to=20 represent consumers in the utility's bankruptcy case, saying that some in t= he=20 group were politically biased.=20 The utility filed a motion arguing that U.S. Bankruptcy trustee Linda Ekstr= om=20 Stanley exceeded her legal authority by designating a consumers committee= =20 armed with broad powers to investigate and negotiate alongside the utility= =20 and its creditors.=20 The utility denounced the committee as a collection of "special interest"= =20 groups with "well-known political and policy agendas" and a "history of=20 aggressive lobbying and litigation."=20 The PG&E motion, which was set for a hearing May 18 before Bankruptcy Judge= =20 Dennis Montali, warned that turning the consumer committee loose could=20 "substantially retard the progress of this case and seriously prejudice its= =20 outcome."=20 On Friday, PG&E singled out Consumers Union and The Utility Reform Network = as=20 "well-organized lobbyists and political operatives."=20 Consumers Union regional chief Harry Snyder, a committee member, said he=20 would have no comment. TURN's representative to the committee, Nettie Hoge,= =20 did not respond to a request for comment.=20 In appointing the ratepayers committee last week, Stanley, who is=20 administering the bankruptcy proceedings, said she was bringing it into the= =20 case because the state, which ordinarily would represent the public, has=20 chosen to stay out.=20 Stanley chose the nine committee members to represent a mix of energy=20 consumers -- households, businesses, farms and government. In addition to= =20 Consumers Union and TURN, the groups include the California Farm Bureau, th= e=20 California School Boards Association and the California Manufacturers &=20 Technology Association.=20 If Montali upholds Stanley's action, PG&E must pay for the committee's=20 lawyers, accountants and other consultants to analyze data and present=20 arguments in the bankruptcy proceedings from the consumer's perspective.=20 "They (will) have all of the information that's going on," said Judy Beckne= r=20 Sloan, a bankruptcy expert at Southwestern Law School, who speculated that= =20 PG&E was balking at the committee's potential power and its costs to the=20 bankruptcy estate.=20 "The creditors and PG&E are opposed to their presence because to the extent= =20 the judge heeds the consumers' concerns, he's going to be less aggressive= =20 about raising rates," said Jesse Fried, a law professor at the University o= f=20 California, Berkeley.=20 While Fried said Stanley's decision was defensible because the judge "is=20 supposed to take into account the wider interests of society," Los Angeles= =20 bankruptcy lawyer Richard Levin sided with PG&E. Only the state should have= =20 been allowed to represent consumers, Levin said, and its decision not to do= =20 so should be final.=20 The Bee's Claire Cooper can be reached at (415) 551-7701 or=20 [email protected].=20 Major job losses predicted; governor presses generators By Dale Kasler, Ed Fletcher and Emily Bazar By Dale Kasler, Ed Fletcher and Emily Bazar (Published May 10, 2001)=20 As a private consultant predicted the state will lose 135,000 jobs from a= =20 summer of blackouts, Gov. Gray Davis on Wednesday pressed power generators = to=20 forgo 30 percent of their California earnings to help pull the state out of= =20 the energy crisis.=20 Summoning executives of the companies he has repeatedly accused of price=20 gouging, Davis said the generators probably would have to forgive a portion= =20 of the debt they're owed by California's two destitute utilities to win the= =20 Legislature's approval for his controversial plan to repay the debts and=20 rescue the utilities.=20 "I suggest that they should look to (accept) 70 percent of what they claim= =20 they were owed," Davis said after a four-hour meeting in the Capitol. "I fe= lt=20 the Legislature will insist on a reduction."=20 Although Davis said, "I believe they are willing to take some reduction," a= t=20 least one generator, Reliant Energy Inc., immediately dismissed the=20 governor's proposal.=20 The meeting capped a roller-coaster day in which anti-generator protesters= =20 brought a pig to the Capitol and the state narrowly averted a third straigh= t=20 day of rolling blackouts. But while enough megawatts were found to scrape b= y=20 for a day, the state is surely facing a summer of severe shortages.=20 A study, commissioned by some of the state's most influential business=20 lobbyists and partly funded by Intel Corp., predicted chronic blackouts wil= l=20 mean significant economic harm to California.=20 The study by John Urbanchuck of New Jersey-based AUS Consultants said the= =20 blackouts would erase 135,000 jobs and cause $26 billion in economic=20 devastation.=20 Several California economists said the prediction was overblown, but none= =20 doubted the electricity crisis could significantly harm the state's busines= s=20 climate.=20 "It really depends on how severe the blackouts are," said UCLA economist=20 Chris Thornberg. "If we have 30 straight days of blackouts in June ... you'= re=20 going to end up with a mess."=20 Everything else being equal, the loss of 135,000 jobs would raise=20 California's unemployment rate by 0.7 percent, to 5.4 percent, based on the= =20 latest numbers from the Employment Development Department.=20 Ted Gibson, chief economist with the state Department of Finance, said AUS'= =20 estimates seem high.=20 "It'd be hard for me to think those relatively limited, one-hour-at-a-time= =20 (blackouts) would have such an impact," Gibson said.=20 As it is, the blackouts have struck some of California's most important=20 employers, such as Sun Microsystems Inc. and Advanced Micro Devices.=20 Tuesday's blackout hit Apple Computer Inc.'s lone U.S. factory, in Elk Grov= e.=20 Economic development agencies from other states have stepped up recruiting= =20 efforts in California, hoping to capitalize on the state's misfortunes. A f= ew=20 glass manufacturers have moved production, said Jack Stewart, president of= =20 the California Manufacturers & Technology Association.=20 It could get worse. For example, a leading Silicon Valley electronics=20 manufacturer, Solectron Corp. of Milpitas, said it is seriously considering= =20 pulling some of its operations out of California.=20 "The blackouts and the lack of reliable power are our biggest concerns," sa= id=20 Solectron spokesman Bob Kula. "We have the ability to move (production)=20 quickly."=20 Solectron, whose factories were hit with blackouts in January and March,=20 employs 4,000 workers in Northern California.=20 A top state official said business leaders around the country look at the= =20 electricity crisis as emblematic of a state that's becoming iffy as a place= =20 to do business.=20 "The whole question of how did the state allow it to get this far -- I keep= =20 hearing that from Wall Street, I keep hearing that from the business=20 community," said the official, who asked to remain anonymous. "The last yea= r=20 has demonstrated that the risks of doing business in California are much=20 higher than anywhere else in the United States."=20 The state was spared a third day of blackouts Wednesday when cooler, windie= r=20 weather in the late afternoon produced a spurt of wind-generated electricit= y=20 and a much-needed drop in demand. Throw in an unexpected power purchase fro= m=20 the Pacific Northwest, and the state's fragile power grid suddenly had 1,40= 0=20 megawatts it wasn't expecting, more than enough to compensate for a breakdo= wn=20 of a major Bay Area power plant in early afternoon.=20 Another boost: Pacific Gas and Electric Co. said all but a handful of its= =20 alternative-energy suppliers have resumed production. These suppliers,=20 responsible for a fourth of the state's energy supply, have been closed for= =20 weeks because of nonpayment by PG&E and Southern California Edison. The two= =20 stricken utilities are paying them again.=20 But while blackouts were unlikely today, there were no guarantees.=20 "We're not swimming in megawatts," said spokeswoman Stephanie McCorkle of t= he=20 Independent System Operator, which runs the state's power grid.=20 Representatives from a dozen wholesale power generators -- 10 in person and= =20 two by phone -- attended the Capitol summit.=20 Despite months of verbal potshots between Davis and the generators, the=20 meeting was described as cordial by John Stout, senior vice president of=20 Houston-based Reliant.=20 But Davis also said he told the executives that unless they accept a=20 reduction in payment for back debts, the Legislature is likely to reject hi= s=20 plan to buy the utilities' transmission lines -- a key element of his plan = to=20 pay back billions the utilities owe them.=20 If the plan goes through, the generators can get paid this year, Davis said= .=20 If it's killed, they'll probably have to wait three or four years to get=20 their money in Bankruptcy Court.=20 So far only Edison has agreed to sell its lines to the state. Senate=20 President Pro Tem John Burton, D-San Francisco, said Wednesday that the=20 Edison deal will be rejected unless the generators forgive some debts.=20 "I'm going to insist that they take at least a 30 percent haircut on the=20 monies that they're owed," Burton said earlier.=20 The Bee's Dale Kasler can be reached at (916) 321-1066 or [email protected]= m.=20 Bee Staff Writer Kevin Yamamura contributed to this report.=20 Bond-sale bill goes to Davis=20 (Published May 10, 2001)=20 The state Senate sent legislation to Gov. Gray Davis on Wednesday authorizi= ng=20 the largest revenue bond sale in U.S. history over continued Republican=20 opposition.=20 The bill, SB 31x, would allow California to sell $13.4 billion in bonds,=20 starting in August, to repay the state for past and future power purchases.= =20 Davis is expected to sign the bill today.=20 Because the bill failed to receive the two-thirds majority needed for an=20 urgency measure, however, the bonds can't be sold until 90 days after the e= nd=20 of the Legislature's special session.=20 Lawmakers are expected to end the session Monday, and most of the 200 pendi= ng=20 energy bills already introduced will be reborn in a second energy session,= =20 said Senate President Pro Tem John Burton, D-San Francisco.=20 SB 31x passed on a 23-12 vote, with most Democrats supporting the measure a= nd=20 all Republicans opposing it. Sen. Joe Dunn, D-Garden Grove, was the only=20 Democrat to vote against it.=20 Republicans proposed that the state use the surplus to write off $6 billion= =20 that California has spent on electricity since mid-January. But Democrats= =20 said the state needs to replenish those funds to support other state progra= ms=20 in education, transportation and health care.=20 Treasurer Phil Angelides had pursued a bridge loan of $4.13 billion to=20 bolster the state's budget and ensure that non-energy programs remain funde= d.=20 But when Assembly Republicans assailed the immediate bond sale, the=20 short-term loan was lost.=20 Zane Mann, editor of the California Municipal Bond Advisor, said the delay = in=20 the bond sale "casts a cloud" over the project but won't kill it. It will= =20 probably lead to a higher interest rate, which will add to the ratepayers'= =20 costs, he said.=20 -- Kevin Yamamura and Dale Kasler=20 State revenue outlook shrinks=20 By John Hill Bee Capitol Bureau (Published May 10, 2001)=20 Legislative Analyst Elizabeth Hill dropped a budget bombshell Wednesday,=20 reporting to legislators that state revenues will be $3.4 billion lower tha= n=20 Gov. Gray Davis predicted in his January budget proposal.=20 Instead of enjoying a $1.9 billion reserve, the Davis budget plan for the= =20 fiscal year beginning July 1 would now leave the state $1.5 billion in the= =20 hole, Hill wrote in a letter to legislators overseeing the budget.=20 Dwindling revenue from a faltering economy leaves Davis' plan in need of=20 major revisions. The new revenue estimates would require cuts in one-time= =20 expenditures that Davis proposed for programs such as clean beaches and=20 fiscal relief for local governments. Cuts also may have to be made in new= =20 spending contemplated for education, which got most of the new money in the= =20 $104.7 billion January budget proposal.=20 "The number is so deep that it's going to be hard for us not to contemplate= =20 cuts or make cuts," said Assemblyman Tony C?rdenas, D-Sylmar, vice chairman= =20 of the Joint Legislative Budget Committee. "We don't know where those cuts= =20 are going to come from."=20 Little will be immune, said Dan Howle, chief of staff for Sen. Steve Peace,= =20 D-El Cajon, chairman of the Joint Legislative Budget Committee.=20 "It's going to include programs the governor is very supportive of and woul= d=20 like to get done, but we're in a little bit of a cash crunch here, and you'= ve=20 got to do what you've got to do," he said.=20 "If anything's got a protective fence around it, it's education. But I stil= l=20 think it'll have to take a share of the cuts."=20 These grim budget figures don't take into account possible hits on the budg= et=20 caused by the state's breathtaking expenditures on electricity.=20 Those effects could be negligible if the state is able to sell bonds to pay= =20 for power and replenish the treasury. But considering recent events in the= =20 volatile energy crisis, no assumption is safe.=20 The budget crunch will likely highlight conflicting spending priorities and= =20 could lead to more polarization between Democrats and Republicans who have= =20 been squabbling over the energy crisis.=20 "A third of the Assembly has never done a budget," Howle said. "Another thi= rd=20 has never dealt with anything other than huge surpluses. Now you're saying= =20 we've got to go in and cut. This could be a long, hot summer."=20 The new revenue projections are a dramatic illustration of the state's=20 faltering economy. Revenues for the fiscal year that starts July 1 are now= =20 expected to be $4.8 billion less than anticipated in January, Hill wrote.= =20 That includes a decrease of $3.9 billion in income tax, $500 million in sal= es=20 tax and $600 million in bank and corporation taxes, offset by some moderate= =20 increases in insurance and estate taxes, said Brad Williams, chief economis= t=20 in the non-partisan Legislative Analyst's Office.=20 "It's deterioration in the stock market and implications for capital gains= =20 and stock options," Williams said, "and also the weakening outlook for the= =20 economy as a whole."=20 The $4.8 billion blow is softened somewhat by unexpectedly strong revenues= =20 from last year's tax returns, which helped boost revenues $1.4 billion high= er=20 than had been anticipated.=20 The net effect is $3.4 billion less for the fiscal year that begins July 1.= =20 If the Democratic governor's budget were approved as is, the deficit would= =20 reach almost $6 billion in the fiscal year that begins July 1, 2002, Hill= =20 wrote.=20 The governor is expected to release his revised budget Monday. The state=20 Department of Finance said Wednesday that it wouldn't comment on the new=20 revenue estimates until then.=20 One obvious target for budget cutters is one-time expenditures in the Janua= ry=20 proposal. This includes money for local governments, state building project= s,=20 housing initiatives, replacing diesel engines that contribute to air=20 pollution, cleaning up beaches, law enforcement technology grants, flood=20 control, parks along rivers and more.=20 Even if the state axed $2.5 billion for one-time expenditures that Davis=20 proposed, it would still have to cut an additional $1.7 billion proposed fo= r=20 ongoing programs.=20 Davis' budget -- which projected an $8 billion surplus -- includes at least= =20 $1.9 billion more for education than required under formulas approved by=20 voters in Proposition 98. But considering Davis' commitment to education,= =20 most believe it's unlikely the governor would balance the budget by=20 throttling back to the minimum funding level, which would require cuts to= =20 existing education programs.=20 C?rdenas said education, health care and transportation should be protected= =20 from cuts.=20 Assembly Republicans agree about education, but have different ideas about= =20 the rest.=20 On Wednesday, the Republicans released their plan for the revised budget. I= t=20 includes protecting schools and law enforcement, creating a $4 billion=20 reserve for future electricity purchases, and striking a proposed 1/4-cent= =20 sales tax increase.=20 The sales tax, which went into effect in the early 1990s, was removed this= =20 year, but Davis has proposed restoring it in 2002.=20 "All this does is put a new burden on the backs of Californians" already=20 coping with higher energy costs, said Assemblyman George Runner, R-Lancaste= r,=20 a member of the Assembly Budget Committee.=20 Republicans say an electricity reserve could avoid the need to do another= =20 bond sale for power purchases next year.=20 "This is the time to make sure we are putting money aside and that we're no= t=20 going to have to turn back to taxpayers or ratepayers and put an additional= =20 burden on them," Runner said.=20 The Bee's John Hill can be reached at (916) 326-5543 or [email protected].= =20 No blackouts despite dip in supplies=20 Stage 2 alert, power plant breakdown add to concerns By Jeff McDonald=20 UNION-TRIBUNE STAFF WRITER=20 May 10, 2001=20 In the nip-and-tuck world of meeting California's energy needs, a small=20 victory was notched yesterday in Folsom, where managers of the state power= =20 grid avoided blackout orders for the first time since the weekend.=20 But tensions nonetheless ran high among power industry officials, and=20 business leaders in San Diego County are growing increasingly alarmed at th= e=20 nagging energy crisis.=20 The number of available megawatts fluctuated throughout the day yesterday a= nd=20 a major power plant broke down, but engineers at the Independent System=20 Operator maintained service across the state.=20 Persistent shortages combined with unusually high temperatures prompted pow= er=20 alerts as early as 10:15 a.m., when grid officials warned that supplies had= =20 dipped within 7 percent of reserves.=20 With more than 12,000 megawatts of power unavailable from idled plants,=20 system operators issued a Stage 2 warning about 11:45 a.m. and asked large= =20 users to cut back consumption through the afternoon.=20 Two hours later, a boiler tube leak knocked out a 750-megawatt power plant = in=20 the Bay Area. Repairs will probably take several days.=20 "It wrecked my day," said Jim McIntosh, the Independent System Operator=20 director of grid operations. "It just changed the whole perspective of what= =20 was going on."=20 The loss of the 750 megawatts deepened concerns in Folsom, where ISO=20 engineers measured a peak afternoon demand that barely trailed supplies of= =20 almost 34,000 megawatts.=20 As late as 3 p.m., grid officials expected to be forced into cutting servic= e=20 to hundreds of thousands of homes and businesses. Cooling temperatures and= =20 conservation efforts helped kill the last threat, McIntosh said.=20 More blackouts could be ordered today, however, and tomorrow may be just as= =20 problematic.=20 "The next couple of days will certainly be impacted by the loss of that=20 unit," McIntosh said.=20 The latest breakdown added to some already high drama at utility companies,= =20 where officials braced through the day for orders to cut power to hundreds = of=20 thousands of customers.=20 Blackout orders never came. But executives at San Diego Gas and Electric Co= .=20 spent the day on heightened alert, calling critical-need residents and=20 businesses and informing them of potential service interruptions.=20 "This has become relatively commonplace," SDG&E spokesman Douglas Kline sai= d.=20 "We handle it as a matter in the course of business now, unfortunately. We'= ve=20 been on high alert all day."=20 Service was cut to more than 23,000 customers in several San Diego-area=20 neighborhoods Monday and Tuesday afternoons. More than 500,000 homes and=20 businesses across the state also lost power.=20 In a power interruption unrelated to the power problems across the state, a= =20 number of major businesses in downtown San Diego were cut off unexpectedly = in=20 midafternoon.=20 Customers between F Street and Harbor Drive lost power about 3:15 p.m. when= =20 something went wrong with an underground cable that serves, among others, t= he=20 Marriott Marina hotel, SDG&E said.=20 Service was restored within two hours, but not before convention meeting=20 rooms went dark and hotel restaurants closed.=20 The heat wave that has hung across California the past three days is expect= ed=20 to begin cooling today and tomorrow, the National Weather Service said. Tha= t=20 should reduce demand for air conditioning, one of the biggest power draws i= n=20 the state.=20 However, the constant uncertainty in the electricity industry is taking its= =20 toll on local businesses, which not only are seeing huge run-ups in utility= =20 costs but are girding for potential losses that even a few minutes of=20 interruptions can cause.=20 "From a business standpoint, it's not 15 minutes of downtime for many of ou= r=20 companies," said Julie Meier Wright, president of the San Diego Regional=20 Economic Development Corp. "For many of them, it means the loss of hours,= =20 days, weeks and even longer of work."=20 Biggest users face huge rate hikes under PUC plan=20 By Karen Gaudette ASSOCIATED PRESS=20 May 9, 2001=20 SAN FRANCISCO =01) Customers of California's two largest utilities who use = the=20 most electricity would pay much more to run canneries, tumble laundry and= =20 conduct other tasks under a tiered rate plan implementing record hikes=20 approved in March.=20 The rate plan proposed Wednesday by Loretta Lynch, president of the state= =20 Public Utilities Commission, suggests how the rate hikes should be allocate= d=20 among residential, industrial, commercial and agricultural customers.=20 Residential customers of Pacific Gas and Electric Co. and Southern Californ= ia=20 Edison Co. who use the most electricity would face average rate hikes of 35= =20 percent to 40 percent.=20 And industrial users, such as factories and food processors, could face hik= es=20 of 50 percent or more as the state desperately tries to start recouping the= =20 $5.2 billion it already has paid to buy power for customers of those=20 financially ailing utilities.=20 Still, under Lynch's plan, as many as half of the 9 million customers of PG= &E=20 and SoCal Edison would not see their bills rise at all.=20 Lynch's plan is the culmination of weeks of discussion among customers, sta= te=20 officials, consumer activists and the utilities about how best to allocate= =20 the record rate hikes approved in late March by the PUC.=20 Those rate hikes will affect all classes of customers, from small families = to=20 the huge Silicon Valley facilities powering the Internet, but not all will= =20 face the same magnitude of rate increases.=20 And, even within those classes, customers will pay more depending on when= =20 they use the electricity. Those who use power during times of highest deman= d=20 =01) generally, during daylight hours =01) will pay the most.=20 Lynch said her plan "recognizes that energy is expensive at every hour of= =20 every day by every customer," but penalizes those who do not cut back on=20 energy use or try to shift to different times of the day.=20 Under Lynch's proposal, agricultural customers could face rate hikes rangin= g=20 from 23-30 percent, with increases capped at 30 percent. Industrial users= =20 face average increases of 50 percent or more, and commercial users average = 34=20 percent to 45 percent hikes.=20 Her proposal, Lynch said, designs rates to encourage conservation and=20 provides $5 billion over the next year to help pay the state Department of= =20 Water Resources for the billions it has spent providing electricity for=20 customers of PG&E and Edison.=20 Lynch left the door open for future rate hikes, noting that the state=20 provides its electricity-buying expenses to the commission only on a monthl= y=20 basis, while wholesale electricity prices continue to soar.=20 Lynch's proposal, and a largely similar proposal from PUC administrative la= w=20 judge Christine Walwyn, will be reviewed in public hearings throughout the= =20 state the rest of this week.=20 Rate Hikes Up to 60% Proposed by PUC Chief=20 Power: Lynch says about half the residential customers of Edison, PG&E woul= d=20 escape increases. Her plan draws fire from all sides.=20 By TIM REITERMAN and NANCY RIVERA BROOKS, Times Staff Writers=20 ?????SAN FRANCISCO--About 4 million California residential electricity=20 customers will face increases in their monthly bills of up to about 60% und= er=20 a proposal unveiled Wednesday by the state's chief utility regulator.=20 Interest groups on all sides promptly condemned the plan as too hard on=20 either consumers or businesses. ?????The proposal by California Public Utilities Commission President Loret= ta=20 Lynch would increase the bills of roughly half of Southern California=20 Edison's residential customers, who consume medium to heavy amounts, by $8 = to=20 $93 a month. Pacific Gas & Electric Co. customers would be hit with hikes o= f=20 $6 to $87 a month. Elisabeth Charion is among about 70 people testifying at a PUC hearing=20 Wednesday in Fullerton, most venting their anger at elected officials and= =20 utility companies, whom they blame for the crisis. IRFAN KHAN / Los Angeles Times ?????About half of the residential customers of the state's two biggest=20 public utilities would see no increase under the proposal if they continued= =20 to consume energy at their current pace. ?????Lynch said she could not guarantee that more rate increases would not = be=20 necessary. "Even these astronomical average rates may prove inadequate," sh= e=20 said, noting that wholesale electricity prices are still high and=20 unpredictable. ?????The rate hike, Lynch said at a news conference, is necessary because= =20 "federal regulators have failed to follow federal laws to ensure just and= =20 reasonable prices." ?????The deepening energy crisis compelled Lynch to release her proposal=20 after public hearings on the rate increase already had begun. Lynch said th= at=20 she wished her proposal had been ready sooner, but that at least some of th= e=20 remaining public hearings will have the benefit of reviewing it. ?????PUC passage of the essential elements of Lynch's plan seems likely. ?????Along with two of her colleagues on the five-member commission, Lynch= =20 was appointed by Gov. Gray Davis, and they often vote as a bloc. Lynch said= ,=20 however, that testimony later this week from utilities, the public and othe= r=20 interested parties could prompt modifications. ?????Structuring the $5-billion rate increase is an important but political= ly=20 sensitive step in California's attempt to restore stability to the delivery= =20 of power to 9 million customers of two financially troubled utilities while= =20 protecting the state budget. ?????The PUC has tried to design rates that would encourage conservation=20 without damaging business. Competing interest groups, ranging from consumer= =20 advocates to large manufacturers, have been jockeying for advantage for wee= ks. ?????The PUC approved a rate increase of 3 cents per kilowatt-hour March 27= =20 to help pay the state's mounting power tab, which now exceeds $5 billion.= =20 This week, the commission is conducting statewide hearings on how the pain= =20 should be shared among millions of residents and businesses. On Monday the= =20 panel is set to vote on Lynch's plan and a similar one by a PUC=20 administrative law judge. ?????Neither proposal appeared to please anyone. ?????"The PUC says everyone should share the pain, but we think the fair=20 share of the pain for residential consumers should be zero," said Mindy=20 Spatt, spokeswoman for the Utility Reform Network, a San Francisco consumer= =20 group. "It should be paid by commercial and industrial customers who wanted= =20 and still want deregulation." ?????Consumer activist Harvey Rosenfield said regulators should go after=20 power generators and their hefty profits rather than ratepayers. ?????"Rate increases are not the answer, and this is not going to be the en= d=20 of them," said Rosenfield, president of the Foundation for Taxpayer and=20 Consumer Rights in Santa Monica. "This is like organized crime: The more yo= u=20 give them, the more they want." ?????Commercial and industrial customers would see increases of up to 50%,= =20 and agricultural interests would face increases of 23% to 30% under Lynch's= =20 proposal. ?????Business interests contend that the rate hikes hit them much harder th= an=20 residential users. ?????Calling the proposal "a death knell for the California economy," Jack = M.=20 Stewart of the California Manufacturers and Technology Assn. estimated that= =20 industrial customers would see their power rates increase an average of 53%= .=20 And the pain of the rate hikes will be compounded by blackouts this summer,= =20 which the group contends will cost California businesses $21.8 billion in= =20 lost productivity. ?????"For most large manufacturers, energy is a large piece of their=20 operating costs," Stewart said. "If you add 53% to that, it's going to=20 severely hamper their ability to do business." ?????Unlike residential customers, the business customers are not grouped= =20 into tiers based on their amount of usage. Lynch said there was insufficien= t=20 time to establish a tiering system for nonresidential customers by June 1,= =20 when the rate hikes will start showing up on bills. ?????An earlier proposal by Lynch had attempted to narrow the gap between= =20 residential rates and the lower rates paid by nonresidential customers. But= =20 the commission president said that goal could not be immediately achieved= =20 without seriously damaging the state's economy. ?????To protect the largest users from gigantic rate increases, Lynch's=20 proposal caps the maximum bill increase at 300% for most customers and 250%= =20 for agricultural customers. ?????"While we understand bill limiters may have some troubling conservatio= n=20 impacts, at some point, price signals are unbearable for customers. Bill=20 limiters will protect customers from unanticipated extraordinary bill=20 impacts," Lynch wrote. ?????In recent weeks, the commission has received about 20 plans for=20 structuring the rate increase, including one from Davis, who had proposed a= =20 slightly smaller overall rate increase. Lynch said her plan incorporates a= =20 number of features of the governor's plan, including a tiered structure tha= t=20 would punish heavy users and reward those who conserve. ?????Under state legislation, there is no rate increase for consumption up = to=20 130% of baseline, the amount deemed the minimum needed by a customer in a= =20 given area and noted on ratepayer bills. Also exempted are low-income=20 customers who already receive discounted electricity rates. ?????Edison and PG&E said they could not assess how the PUC proposals would= =20 affect their customers because the commission had not provided details to t= he=20 utilities as of late Wednesday. ?????But PG&E has disputed the commission's claim that half of customers=20 would not be affected by the increase, noting that only 32% of PG&E custome= rs=20 never exceeded 130% of baseline usage in the last year. ?????Industrial and commercial customers complained that the plan should no= t=20 exempt such a large group of residential customers, in any event. A rate=20 increase for these users--based on the PUC's estimate that the group will= =20 constitute about half of residential customers--could generate an extra $1= =20 billion. ?????If the PUC insists on exempting so many, the $1-billion shortfall shou= ld=20 be covered solely by other residential users, businesses say. ?????Under Lynch's plan the burden of paying that amount would be split=20 equally among commercial, industrial and nonexempt residential customers. ?????If covering the shortfall were not shared by the three groups, Lynch= =20 said, some residential customers would suffer a 100% increase in their bill= s. ?????The proposal calls for a pilot program, including one that would let= =20 federal agencies based in California "experiment with their own market rate= =20 policies." ?????Lynch challenged federal agencies to try to live with "real time," or= =20 hourly, prices in the volatile wholesale marketplace--a slap at officials o= f=20 the Federal Energy Regulatory Commission who favor a free wholesale market= =20 over price caps. Use of real-time pricing requires installing a special met= er. ?????"'It would be great if the federal users respond to price signals enou= gh=20 that prices come down," Lynch said, adding that she was skeptical that woul= d=20 happen in today's dysfunctional market. ?????A FERC spokeswoman declined to comment on Lynch's proposal. ?????During the third day of PUC hearings, about 200 people gathered at=20 Fullerton College. Seventy people testified, most venting their anger at=20 elected officials and utility companies, whom they blame for the state's=20 flawed deregulation plan. ?????"I am opposed to any rate increase for residences and small business,"= =20 testified Ruth Shapin, a Santa Ana attorney. "This crisis was created by=20 politicians. PG&E and SCE have transferred billions of dollars to their=20 parent companies. Let them bail themselves out, not the ratepayers." ?????Others said the baselines might be unfair because the commission had n= ot=20 taken into consideration home size, the number of occupants and the locatio= n. ?????"It's going to be hard for many people to stay below the 130% baseline= ,"=20 said Sylvia Hartman of Lakewood. "Some customers could easily go 400% over= =20 the baseline." ---=20 ?????Reiterman reported from San Francisco, Rivera Brooks from Los Angeles.= =20 Times staff writer Dan Weikel in Fullerton contributed to this story. Copyright 2001 Los Angeles Times=20 Bush Energy Stance Begins to Worry Some in GOP=20 By GREG MILLER and RICHARD SIMON, Times Staff Writers=20 ?????WASHINGTON--As power shortages and price spikes spread beyond=20 California, congressional Republicans are beginning to worry that the Bush= =20 administration's reluctance to offer much immediate relief could hurt the= =20 party in the 2002 elections. ?????A national energy plan to be unveiled by the White House next week wil= l=20 focus on long-term strategies. But with California and other states bracing= =20 for a summer of electricity turmoil and gasoline prices surging across the= =20 country, some GOP lawmakers are pressing for short-term solutions. U.S. Rep. Mary Bono, left, and Gov. Gray Davis discuss meeting with=20 executives of power-generating companies. Bono plans to seek $100 million t= o=20 help poor people pay energy bills. AP ?????"The White House has been taking a look at the big picture," said a GO= P=20 leadership aide in the House. "But they're going to be around in four years= .=20 We might not have members around in two years if we don't show we care." ?????That sentiment is being voiced by a rising number of GOP lawmakers.=20 "We're in a crisis situation, which is only going to get worse if we don't= =20 act very aggressively," Rep. Elton Gallegly (R-Simi Valley) said Wednesday.= =20 Gallegly is one of four congressional Republicans from California to break= =20 with the administration by supporting temporary price controls on wholesale= =20 electricity. ?????The rising anxiety, which has begun spreading beyond the California=20 delegation, underscores how much has changed since the state declared its= =20 first Stage 3 power emergency in December. At that time, Congress' response= =20 was largely: That's Gov. Gray Davis' problem. ?????Not anymore. ?????Thirty-nine Stage 3 alerts later, a House committee today will take up= a=20 GOP-drafted emergency bill that would, among other things, allow Davis to= =20 temporarily waive certain emission standards for power plants during an=20 emergency and provide federal aid to relieve a notorious bottleneck in the= =20 California power grid. ?????But some GOP lawmakers say the legislation doesn't go far enough, and= =20 plan to offer amendments containing their own ideas. Rep. Mary Bono (R-Palm= =20 Springs) plans to push for $100 million in energy assistance to low-income= =20 households and for a directive to federal facilities in the West to cut=20 energy use by 20%. ?????"House leaders recognize that they could lose the House in California = if=20 there's not an action plan that members can campaign on," said Scott Reed, = a=20 GOP strategist. ?????As lawmakers search for ways to provide immediate relief, the White=20 House continues to cite California's troubles as evidence of the need to=20 upgrade an aging, overburdened electricity transmission system. ?????Responding to reports that the administration would propose legislatio= n=20 to give the federal government eminent domain authority in siting power=20 lines, White House press secretary Ari Fleischer said Bush wants to ensure= =20 that the distribution infrastructure can move electricity from regions with= =20 surpluses to regions that need more power. ?????"That's one of the reasons that California is going through the=20 difficulties it's going through," Fleischer said. "There is energy availabl= e=20 in other parts of the country, but it can't be shipped to California as=20 easily as you would hope, because of infrastructure problems." ?????Fleischer took exception to a front-page story in The Times reporting= =20 that Bush, in a speech delivered Tuesday, "offered no hint of what his=20 administration might do" to help California avert a possible economic=20 downturn caused by power blackouts. ?????Though the president did not specifically mention possible actions in= =20 the speech, Fleischer said Bush last week "announced a series of steps,=20 including conservation," to help California get through an energy crisis th= is=20 summer. ?????He said that the Pentagon is reducing its energy needs within Californ= ia=20 by 10% and that all other federal agencies, at Bush's direction, are=20 reviewing their energy consumption patterns. ?????Environmentalists already have begun blasting the administration's=20 energy plan--even before its details are made public--for what they=20 characterize as a failure to emphasize energy efficiency and investments in= =20 renewable fuels. ?????Activists Say Crisis Isn't Real ?????At a Wednesday news briefing, a coalition of environmental advocates= =20 disagreed with the administration's assertion that the country is=20 experiencing an energy "crisis," and accused it of crafting a plan designed= =20 to boost the profits of key campaign contributors. ?????"We cannot drill our way out of this situation," said Dan Becker of th= e=20 Sierra Club. He and others argued that conserving fuel--with cars that use= =20 less gasoline and appliances that use less electricity, for example--is the= =20 best way to avoid energy shortages in the short term. ?????So far, it is not clear whether the energy crisis will work to either= =20 party's advantage. Many on Capitol Hill are bracing for an election year th= at=20 could be brutal for incumbents of both parties if voters who endure high=20 energy bills this summer vent their frustration in the voting booth next ye= ar. ?????Some House Republicans acknowledged that they have been pushing the=20 White House to appear more engaged in finding near-term solutions. ?????When House Republicans met with Cheney last week, "they urged him and= =20 all the administration to at least make it clear that a lot of effort is=20 going into finding a way to solve the problem," said Jim Specht, a spokesma= n=20 for Rep. Jerry Lewis (R-Redlands), leader of the California GOP delegation. ?????Though some Republicans have offered ideas to address the immediate=20 problem, it is not clear whether any will receive congressional approval. ?????Indeed, the emergency assistance bill being taken up today by the Hous= e=20 energy subcommittee faces trouble, although it was drafted by the panel's= =20 chairman, Rep. Joe Barton (R-Texas). ?????Barton stripped out a number of provisions opposed by environmentalist= s.=20 But Democrats plan to seek a vote on capping wholesale electricity prices, = a=20 proposal most Republicans oppose. Democrats also plan to introduce an=20 amendment to target natural gas prices. ?????House Minority Leader Richard Gephardt (D-Mo.) said the bill "fails=20 miserably" to address California's problems. "During the campaign, Presiden= t=20 Bush promised a sensible energy policy," Gephardt said. "In recent weeks,= =20 however, the president has responded to the gathering crisis by throwing up= =20 his hands and saying there's nothing we can do, there's no way to give peop= le=20 immediate relief from blackouts and sky-high increases of price of gasoline= =20 at the pump." ?????Lawmakers of both parties acknowledge that they are hearing a rising= =20 chorus of constituent complaints about the energy price spikes and supply= =20 shortages. ?????Rep. Chris Cox (R-Newport Beach) was caught in a blackout during a tou= r=20 of a computer chip factory in his district. "They said it cost them $1=20 million if the power goes off even for five minutes," said Cox, who=20 nonetheless opposes price controls. ?????Cox said he is worried about how the California electricity crisis mig= ht=20 affect the national economy. He said that when he asks business owners abou= t=20 expanding in California, "they just look at you like you're nuts. They don'= t=20 consider California an option because of this uncertainty." ?????"People come up to you and want you to help solve the problem," said= =20 Rep. George Radanovich (R-Mariposa). ?????He has explained that there is little the federal government can do in= =20 the short term. ?????"Californians want somebody to do something," said John J. Pitney Jr.,= =20 associate professor of government at Claremont McKenna College. "When peopl= e=20 are in a mood like that, politicians get nervous thinking that they're the= =20 ones who might get blamed." ?????Said Reed, the GOP strategist: "Every incumbent in California is=20 vulnerable in the next election, in both parties. This is an issue that is= =20 not ideological. It's about action and solving a short-term problem.=20 "Politics have taken over this issue, like it or not," he said. "They may= =20 have been raging in California for the last three or four months. It's now = a=20 national political issue."=20 ---=20 ?????Times staff writers James Gerstenzang, Edwin Chen, Elizabeth Shogren a= nd=20 Ricardo Alonso-Zaldivar contributed to this story. Copyright 2001 Los Angeles Times In Office Buildings, the Lights Are On, But Nobody's Home=20 Energy: Analysts say metering individual tenants could encourage=20 conservation.=20 By JERRY HIRSCH, Times Staff Writer=20 ?????Despite power outages and soaring energy prices, workers stream out of= =20 California's downtown and suburban offices each evening leaving lights=20 blazing and computers humming. And there has been scant incentive to=20 conserve, since commercial building leases typically include the cost of=20 energy. ?????Energy experts and other analysts say metering of individual office=20 tenants would encourage conservation by pushing companies to shut off light= s,=20 computer monitors, desk fans and other electrical devices at night, but sta= te=20 regulations and utility policies are in the way. ?????That conflict between policy and conservation efforts has drawn the=20 attention of state Sen. Debra Bowen (D-Marina del Rey), who chairs the Sena= te=20 Energy, Utilities and Communications Committee. On Tuesday, Bowen asked=20 California Public Utilities Chairwoman Loretta Lynch to review what Bowen= =20 called "archaic" regulations governing how electricity meters are used in= =20 office buildings. Bowen said she also plans to take up the issue in her=20 committee. ?????At issue is Rule 18, a regulation established by the commission two=20 decades ago that prohibits landlords from using submeters to assess energy= =20 charges to tenants. ?????"It is quite old and dates back to a different era of electricity=20 distribution in California," said Bowen, who was urged to take action by th= e=20 Building Owners and Managers Assn. "I asked Loretta Lynch to open a=20 proceeding to revise or eliminate that ban." ?????Lynch did not return calls for comment on the state's metering policie= s,=20 but PUC regulatory analyst William Gaffney said more metering "would be a= =20 boon to energy conservation" because "you could see what you are using." ?????"Direct metering would ultimately foster greater energy savings . . .= =20 more permanent savings, because it would encourage capital investments in= =20 more efficient equipment, windows, etc., etc.," said Evan Mills, a scientis= t=20 in the energy analysis department of the Lawrence Berkeley National=20 Laboratory in Berkeley. ?????Usually, the only tenants in office buildings with utility meters are= =20 retail and restaurant businesses, according to commercial real estate=20 experts. Most tenants in California office towers sign what are called "gro= ss=20 leases" that include power. When electricity usage or rates go up=20 unexpectedly, landlords can charge monthly or annual "escalation fees" to= =20 cover the extra cost. The fees typically are apportioned by the percentage = of=20 the building a tenant occupies. ?????This method of billing is counterproductive to energy savings, said=20 Willet Kempton, senior policy scientist at the University of Delaware's=20 Center for Energy and Environmental Policy. Energy hogs are subsidized by= =20 other tenants. Conversely, savings through conservation are only fractional= ly=20 shared. ?????Two key obstacles block metering of individual tenants in a building. ?????One is economics--high-rise buildings get a far better rate with one= =20 utility meter than if each floor is metered. ?????"We can sell a lot of energy on just one bill," said Randy Howard,=20 manager of commercial services at the Los Angeles Department of Water and= =20 Power. "If we had 200 meters there and had to do the billing and meter=20 reading for each of them, each tenant would pay a higher rate." ?????Moreover, utilities aren't anxious to send meter readers to every floo= r=20 of a building, going through private offices to find the meters. One=20 alternative--locating all the meters in a central area where the main=20 electrical line enters the building--would require massive rewiring of=20 existing office towers that could cost several hundred thousand dollars or= =20 more, depending on the size of the building, said Ali Sherafat, senior vice= =20 president of the Los Angeles office of Syska & Hennessy, a consulting=20 engineering firm. ?????A 1995 ruling by the PUC required that individual tenants in office=20 buildings be placed on meters operated by a public utility (as opposed to= =20 landlord-managed submeters), but relatively few have been installed because= =20 of exemptions. ?????For example, Southern California Edison Co. officials typically meet= =20 with developers at the start of a building project to determine how many=20 meters it might require, said Matt Deatherage, a planning support manager f= or=20 the utility. But because developers build office space so that its=20 configuration can change easily as tenants shift, the estimate is often=20 wrong. A building designed with three meters for three tenants might find= =20 itself with six tenants or more by the time it opens. ?????"We don't require them to go back and rewire the building if it turns= =20 out to be wrong, that would be too expensive," Deatherage said. ?????The second obstacle is Rule 18, the 1981 ban on submetering originally= =20 intended to protect utility monopolies and to prevent landlords from gettin= g=20 electricity at a discount price and selling it at a markup to tenants. ?????"When you resell electricity like that, you function as a utility and= =20 that's not allowed," said Deatherage. ?????Nonetheless, Bowen believes that deregulation may have superseded thos= e=20 issues and that current policy should emphasize conservation. ?????Although the leasing model used in California is common, it's not=20 universal, said Peter L. DiCapua, energy chairman of the Building Owners an= d=20 Managers Assn. International. ?????Many New York tenants have individual meters. Others are on landlord= =20 submeters, a system that allows them to tap into the lower, high-volume rat= es=20 paid by the building's operator but still pay for actual, rather than=20 estimated, energy use.=20 ?????Landlords would welcome a changed regulation to allow submetering for= =20 several reasons. There are the conservation benefits, said Dan Emmett, chie= f=20 executive of Douglas Emmett & Co., one of the largest building owners and= =20 managers in Los Angeles County. It also would reduce some of the inevitable= =20 arguments with tenants who claim they pay more than their fair share for=20 services at a building. ?????"I think submetering could be practical," Emmett said. "It is not that= =20 complicated and is fairly inexpensive." ?????Sherafat said it would cost about $2,000 per tenant for the submeter a= nd=20 the necessary software. Submeters could be installed at the electrical pane= l=20 level without expensive rewiring for utility meters, he said. Better yet, t= he=20 software allows data to be collected at a central point, eliminating the ne= ed=20 for meter readers. Such a system also could allow big buildings to use one= =20 master meter to get the best rate . ?????Though submetering would foster conservation, it still is not a panace= a,=20 said Kempton of the University of Delaware. When it comes to energy=20 conservation, changing the behavior of businesses and workers is notoriousl= y=20 tricky. ?????"Attorneys literally can't be bothered with the nuances of energy," sa= id=20 DiCapua, an executive at Atco Properties & Management in New York. "They ar= e=20 focused on things other than if the air conditioning was left on all night. ?????That is typical of professional services firms, because energy is just= a=20 small fraction of their expenses, Kempton said. ?????And individual metering sounds great in theory, Kempton added, but it = is=20 useless if the bill goes to a home office elsewhere or if the on-site manag= er=20 of the firm never sees it. ?????In any push to change the rules, however, people should remember that= =20 the current system was developed for sound reasons, often based on reducing= =20 the expense of constructing buildings and finding tenants the lowest prices= =20 for energy, Howard said.=20 ?????"Right now we are in a conservation mode, so everybody is talking abou= t=20 this," he said. "But that hasn't always been the case, so a single meter fo= r=20 a big building made sense." Copyright 2001 Los Angeles Times=20 Thursday, May 10, 2001=20 Power Shifts to Congress=20 ?????Wholesale electricity prices soared with the temperature this week,=20 jumping to eight times the peak of only three weeks ago. No one knows how= =20 high the price may go when high summer hits. Which makes it all the more=20 intriguing that one of the big power-generating companies is now calling fo= r=20 temporary price caps, which the Bush administration stubbornly opposes.=20 ?????Authority over wholesale power prices rests with the Federal Energy=20 Regulatory Commission, which is charged by Congress with maintaining "just= =20 and reasonable" rates. But FERC refuses to impose what California desperate= ly=20 needs, a broad temporary price cap that allows companies to recover their= =20 costs plus a reasonable profit. The state's last hope for rate caps now res= ts=20 with Congress.=20 ?????Sens. Dianne Feinstein (D-Calif.) and Gordon Smith (R-Ore.) are=20 sponsoring legislation that would require FERC to establish temporary maxim= um=20 rates. Rep. Henry Waxman (D-L.A.) is scheduled to propose amendments to a= =20 House bill today to do the same. The support of three Republican House=20 members from California, who are on the energy and air quality subcommittee= ,=20 is crucial. They are Christopher Cox of Newport Beach, Mary Bono of Palm=20 Springs and George Radanovich of Mariposa. The Waxman measure serves the be= st=20 interests of California. Concern about losing seats in Congress may also he= lp=20 the GOP members make the right choice.=20 ?????It was Feinstein who got a letter from Keith E. Bailey, chairman of=20 Williams Cos., an energy producer, in support of temporary price controls.= =20 Perhaps some generators are tired of being labeled gougers, pirates and=20 bloodsuckers, and they will settle for a reasonable profit through the rest= =20 of this crisis. But price caps would have to apply to all the producers.=20 Congress must act, starting today with the subcommittee vote on the Waxman= =20 measure. Copyright 2001 Los Angeles Times=20 Proud state forced to knees in power hunt=20 Robert Salladay, Chronicle Sacramento Bureau Thursday, May 10, 2001=20 ,2001 San Francisco Chronicle=20 URL: http://www.sfgate.com/cgi-bin/article.cgi?f=3D/c/a/2001/05/10/MN40227.= DTL=20 California has turned into the trailer park next door, the cash-only,=20 deadbeat neighbor forced to beg for enough power to keep the swamp cooler= =20 running.=20 Yesterday in Folsom, home of the state's energy managers, was another study= =20 in high-tech, air-conditioned humiliation -- punctuated by a frantic scrapi= ng=20 and bowing for energy across the West.=20 Poor people with "secured" credit cards can relate to the scene at the=20 California Independent System Operator. This week began with Canada's BC=20 Hydro threatening to shut off power again until the state actually wired ca= sh=20 to its bank account.=20 "We got the money," an ISO engineer stood up and told another employee at t= he=20 agency's semi-secret Folsom headquarters yesterday. "Yeah, we're good for= =20 another $14 million. Burn it up, huh, Lloyd?"=20 Lloyd started burning it up, thanks to an OK from the Department of Water= =20 Resources and to several million California taxpayers' footing the bill.=20 California narrowly missed a third day in a row of blackouts yesterday. The= =20 situation was tight when a power plant in Pittsburg shut down because its= =20 boiler was leaking, but cooler weather and increased supply from other=20 generators helped keep the lights on.=20 All week at the ISO, engineers have been fretting about facilities and=20 finances.=20 BC Hydro shut off 2,000 megawatts of power to the state Monday while it=20 waited for a check from the water agency. The state has a line of credit wi= th=20 BC Hydro, but California is buying so much at such high prices that it was= =20 reaching the limit.=20 The company already is owed about $307 million from the state's insolvent= =20 utilities, so it is impatient.=20 "They wanted to make sure we were good for it before we could continue," sa= id=20 Oscar Hidalgo, a spokesman for the water agency, which is paying the bills.= =20 The power cutoff sent the ISO into a panic, since BC Hydro was providing=20 enough to power an estimated 2 million homes. Two hours later, the state=20 marched down to the bank and wired the money. Power was restored, and an=20 agreement was reached yesterday for daily payments.=20 The engineers in shirtsleeves at the ISO aren't used to this kind of=20 treatment. Since the energy crisis drained the bank accounts of the=20 utilities, it's been months of constant struggle to get power generators to= =20 fork over electrons.=20 "We have to go into higher begging mode for generators out of state," said= =20 Jim McIntosh, director of grid operations for the ISO. "It scares the hell= =20 out of these guys. They've never been put in that position. . . . From the= =20 electricity standpoint, we're operating like the Third World."=20 The ISO has no control over energy prices or even how the bills are paid. T= he=20 bills are the job of the water agency, which has been spending about $50=20 million a day since mid-January.=20 Not only have a near-record number of power plants been shut down for repai= rs=20 this month, the hot weather is breaking records and causing energy use to= =20 spike. The state would probably be near blackouts even without the shaky=20 financial situation.=20 But the final insult is that some of the bills are getting paid late, in pa= rt=20 because power generators are charging unprecedented rates on the daily ener= gy=20 market.=20 That causes the people who work at power companies to get snippy sometimes= =20 and threaten to withhold power. That also leads to the same things that poo= r=20 people face every day: higher prices, bad service and frustration.=20 "We pay more for gasoline. We pay more for natural gas. We pay more for=20 electricity than anywhere else in the country," said Larry Bellnap, shift= =20 manager at the ISO, a two-decade veteran in the power business. "I can't=20 think of a reason except we're California, and they are taking advantage of= =20 us."=20 Here's a conversation recorded a few months ago between an ISO engineer and= a=20 generating plant in El Segundo. At the time, the ISO needed the plant to go= =20 on line immediately to avoid blackouts.=20 "You need to get somebody that has the authority to tell me how I'm going t= o=20 get paid," the plant manager demands on the phone.=20 "I have the authority to order these plants on," the ISO manager says, and= =20 then gets this back a few minutes later:=20 "I still need clarification on how you're going to pay me if I get these=20 things on."=20 "OK. I can't give you that right now. That will have to wait until tomorrow= .=20 "=20 "No, I need that now," the plant manager says.=20 "That's unacceptable."=20 The conversation is contained in court records compiled when several out-of= -=20 state generators threatened to cut off power, despite their contracts, and= =20 the ISO sued. The state lost its case essentially, but federal regulators= =20 backed them up last week in a ruling.=20 McIntosh said he'd never in his 31 years working in the power industry had = to=20 get a lawyer on the phone to force a power generator to start up a plant to= =20 provide more power. But now they have two available if needed to remind=20 generators of their commitment.=20 GALLING POSITION The problem is especially irritating because power generators are charging= =20 the highest prices ever seen for power.=20 McIntosh and others said the situation was much smoother now that Californi= a=20 was the major creditor and was pumping billions of dollars into buying powe= r.=20 Most of the generators are confident enough they will get paid.=20 Hidalgo said the BC Hydro situation this week was isolated so far, but he= =20 offered one solution for the future:=20 "Maybe they shouldn't charge so much."=20 E-mail Robert Salladay at [email protected].=20 ,2001 San Francisco Chronicle ? Page?A - 1=20 Power bills set to skyrocket for heavy users=20 Graduated rate increase would take effect in June=20 David Lazarus, Chronicle Staff Writer Thursday, May 10, 2001=20 ,2001 San Francisco Chronicle=20 URL: http://www.sfgate.com/cgi-bin/article.cgi?f=3D/c/a/2001/05/10/MN176943= .DTL=20 As state regulators outlined plans to raise residential electricity bills b= y=20 as much as 40 percent, the head of the Public Utilities Commission warned= =20 yesterday that power rates could soar even higher.=20 The PUC, which adopted an increase in March, is scheduled to approve detail= s=20 of the new rates in San Francisco on Monday. Consumers will see the higher= =20 rates in their June utility bills.=20 State regulators say nearly half of all consumers will see no change in the= ir=20 power bills. The remainder will experience rate increases ranging from 3=20 percent to more than 50 percent, depending on the type of customer and the= =20 amount of power used.=20 The increases would be added to an average 10 percent increase adopted in= =20 January.=20 PUC President Loretta Lynch suggested that rates could rise yet again if=20 wholesale electricity prices continue to surge this summer.=20 "If the sellers decide to turn up the heat and raise prices, we'll have to= =20 look again at the numbers," she said.=20 INCREASE WILL CONTRIBUTE LITTLE The proposed rate increase would bring in about $5 billion annually -- a=20 fraction of the estimated $65 billion California will spend this year=20 purchasing power on behalf of the state's cash-strapped utilities.=20 Lynch said she expects the remainder to be made up by issuing bonds. The=20 state Senate yesterday approved $13.4 billion in bonds to help cover=20 California's power costs.=20 However, those bonds would not be released until August, by which time=20 California's energy tab would be billions of dollars higher.=20 "There's huge cause for concern that this latest rate increase is a down=20 payment rather than anything close to a final installment," said Bob=20 Finkelstein, staff attorney for The Utility Reform Network in San Francisco= .=20 The PUC's Lynch stressed that while California's new rate structure would= =20 place a greater burden on the state's heaviest power users, the increases a= re=20 intended to spread the pain among all consumers.=20 "Energy is expensive for every hour of every day for every customer," she= =20 said.=20 LINING UP TO GET PAID That includes the state Department of Water Resources, which is spending=20 about $70 million a day to keep California's lights on.=20 While the PUC is moving to have more money collected from consumers to pay= =20 California's power bills, it has yet to address the thorny question of how= =20 the proceeds will be distributed among the various parties lined up for=20 compensation.=20 The Water Resources Department wants all rate-related revenues to first=20 replenish state coffers, while Pacific Gas and Electric Co. and Southern=20 California Edison Co. insist that they be paid as well for their own=20 expenses.=20 The utilities' costs include payments to small power generators that can no= =20 longer afford natural gas to run their plants. The recent closure of hundre= ds=20 of such facilities is a key reason California is experiencing blackouts thi= s=20 week.=20 Although PG&E said yesterday that most of the smaller generators with which= =20 it does business are now back online, it is not yet clear whether the utili= ty=20 will be able to keep paying for their power.=20 "It appears that everything (from the rate increase) is going to DWR (the= =20 Water Resources Department)," said John Nelson, a PG&E spokesman.=20 Lynch said the PUC will take up the matter of apportioning funds at an=20 unspecified future date.=20 CONSERVATIVE USE PAYS For the moment, state regulators have their hands full digesting two=20 competing -- and highly complex -- proposals for how rates should be=20 increased next week.=20 One proposal was submitted by an administrative law judge working with the= =20 PUC and the other by Lynch. Commissioners will choose between them on Monda= y.=20 The two proposals are largely identical. Under both, residential customers= =20 who can keep electricity usage within 130 percent of predetermined limits= =20 would experience no rate increase.=20 The "baseline usage" figure -- included near the bottom of PG&E bills --=20 represents the minimal amount of power consumers require. It includes a=20 number of variables, such as climate, time of year and type of fuel used.= =20 The PUC said about half of all utility customers statewide historically sta= y=20 within 130 percent of baseline limits.=20 Heavy residential users whose electricity usage tops 400 percent of baselin= e=20 figures would see power bills rise by as much as 40 percent. Heavy commerci= al=20 and industrial users would see bills rise by more than 50 percent.=20 The average increase for all PG&E residential customers would be about 16= =20 percent, the PUC said, although this number is skewed by the addition of al= l=20 those customers whose bills would remain unchanged.=20 Harvey Rosenfield, head of the Foundation for Taxpayer and Consumer Rights = in=20 Santa Monica, questioned whether these rate increases will be sufficient to= =20 motivate greater conservation among consumers and thus ease California's=20 energy woes.=20 He called instead for the state's political leaders to seize generating=20 plants from out-of-state power companies and impose a special tax on the=20 companies' "windfall" profits.=20 "Unless our elected officials take action, this is just the beginning of ou= r=20 rate increases," Rosenfield warned.=20 FEDERAL BUILDINGS IN SIGHTS One of the main differences between the two rate-increase proposals is=20 Lynch's inclusion of a "real-time pricing program" for federal agencies.=20 If enacted, she said, federal buildings in California would be fully expose= d=20 to the volatile wholesale power market and would pay whatever California pa= ys=20 to keep the lights on throughout the day.=20 Lynch denied that this is an effort on the part of California officials to= =20 drive home to federal authorities the impact of sky-high wholesale=20 electricity prices.=20 "It's just an experiment," she said.=20 While California officials have called on federal regulators and the Bush= =20 administration to assist the state by capping wholesale power prices,=20 Washington has provided only limited relief to date.=20 The Utility Reform Network's Finkelstein complained that the proposed rate= =20 increases place a severe burden on residential customers when commercial an= d=20 industrial users account for the greater percentage of power consumption.= =20 "It was the commercial and industrial customers who were clamoring for=20 deregulation," he said. "You didn't hear any calls for deregulation from=20 residential customers."=20 Lynch said she was aware that residential users are being asked to carry a= =20 high proportion of the load but said efforts to force industrial users to p= ay=20 higher rates ran into political opposition.=20 E-mail David Lazarus at [email protected].=20 ,2001 San Francisco Chronicle ? Page?A - 1=20 Developments in California's energy crisis=20 The Associated Press Thursday, May 10, 2001=20 ,2001 Associated Press=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2001/05/10/s= tate0 948EDT0159.DTL&type=3Dnews=20 , , -- (05-10) 06:48 PDT Developments in California's energy crisis:=20 THURSDAY: -- Grid operators say cooler temperatures will help them meet California's= =20 electricity demands. Officials at the Independent System Operator say=20 supplies are tight, but they don't expect blackouts.=20 -- The PUC holds a public hearing on the proposed rate structure in=20 Sacramento.=20 -- Gov. Gray Davis is scheduled to sign a bill authorizing $13.4 billion in= =20 revenue bonds to pay for power for customers of the state's three largest= =20 utilities. The bonds will repay the state general fund for $6.7 billion=20 authorized for power buys since January and will finance future electricity= =20 purchases.=20 WEDNESDAY: -- After a difficult afternoon, grid operators are able to avoid blackouts= =20 after temperatures drop slightly.=20 -- The Public Utilities Commission releases recommendations for rate=20 increases, sparing about 9 million customers of Pacific Gas and Electric Co= .=20 and Southern California Edison, but socking residential customers who don't= =20 cut back with a 40 percent hike. PUC president Loretta Lynch says the plan = is=20 designed to encourage conservation and provides $5 billion more to help pay= =20 the state for the $6.7 billion it has spent so far providing electricity fo= r=20 the customers of PG&E and Edison.=20 -- The state Senate approves a bill authorizing $13.4 billion in bonds for= =20 power buys, sending the bill to the governor.=20 -- The governor meets with the CEOs of several major energy suppliers to=20 discuss the money they're owed by the state's two largest utilities, the=20 state's creditworthiness and how wholesalers can help the state during the= =20 energy crisis. Davis says he won't be discussing any of the investigations= =20 into price manipulation in the wholesale market.=20 -- A consortium of business interests releases a study saying continued=20 blackouts this summer could cost the state $21.8 billion in losses from=20 sales, wages and production.=20 -- PG&E says only eight of the 300 small power plants in its territory are= =20 still shut down for payment reasons. All eight are natural gas-fired plants= =20 that deliver a combined 109 megawatts of electricity, enough to power about= =20 80,000 homes. Owners of these plants say they haven't been fully paid for= =20 millions of dollars in past power deliveries and that they would operate at= a=20 loss if they resume full operations.=20 -- PG&E asks U.S. Bankruptcy Judge Dennis Montali to void the appointment o= f=20 a committee representing ratepayers. The utility says that such a committee= =20 isn't allowed under bankruptcy law and that the state attorney general can= =20 represent ratepayers in the bankruptcy process.=20 Montali also says PG&E can use hundreds of millions of dollars in payments= =20 from customers to buy gas, which the utility in turn sells to homes and=20 businesses. That came as other creditors wait to recoup billions of dollars= =20 from the bankrupt utility. Montali rules that creditors lining up to collec= t=20 from PG&E cannot use any money they secure to sue the utility's largest=20 creditor, The Bank of New York.=20 -- A major electricity generator starts an ad campaign that offers to sell= =20 power to the state for 2 cents per kilowatt hour -- as long as the state=20 provides the natural gas to produce the power. Reliant Energy says the ads= =20 are necessary because their offer is being ignored by power buyers. Another= =20 energy producer, Mirant, has also kicked off a media campaign.=20 WHAT'S NEXT: -- Davis' representatives continue negotiating with Sempra, the parent=20 company of San Diego Gas and Electric Co., to buy the utility's transmissio= n=20 lines.=20 THE PROBLEM: High demand, high wholesale energy costs, transmission glitches and a tight= =20 supply worsened by scarce hydroelectric power in the Northwest and=20 maintenance at aging California power plants are all factors in California'= s=20 electricity crisis.=20 Edison and PG&E say they've lost nearly $14 billion since June to high=20 wholesale prices the state's electricity deregulation law bars them from=20 passing on to consumers. PG&E, saying it hasn't received the help it needs= =20 from regulators or state lawmakers, filed for federal bankruptcy protection= =20 April 6.=20 Electricity and natural gas suppliers, scared off by the two companies' poo= r=20 credit ratings, are refusing to sell to them, leading the state in January = to=20 start buying power for the utilities' nearly 9 million residential and=20 business customers. The state is also buying power for a third investor-own= ed=20 utility, San Diego Gas & Electric, which is in better financial shape than= =20 much larger Edison and PG&E but also struggling with high wholesale power= =20 costs.=20 The Public Utilities Commission has approved rate increases of as much as 4= 6=20 percent on average to help finance the state's multibillion-dollar power=20 buys. The PUC is still determining how those increases will be spread among= =20 utility customers.=20 ,2001 Associated Press ?=20 PG&E says fewer small power plants offline=20 KAREN GAUDETTE, Associated Press Writer Thursday, May 10, 2001=20 ,2001 Associated Press=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2001/05/10/s= tate0 343EDT0125.DTL&type=3Dnews=20 (05-10) 00:43 PDT SAN FRANCISCO (AP) -- Only eight of the 300 small power= =20 plants in Pacific Gas and Electric Co.'s territory remain shut down for=20 payment reasons, the struggling utility says. That means more vital megawat= ts=20 have come back online that could help prevent rolling blackouts.=20 But operators of those so-called qualifying facilities say that's because= =20 they're required to run their plants during periods of high demand to get= =20 paid, not because of a change of heart over millions of dollars owed to the= m=20 for past electricity deliveries.=20 ``What I believe will start happening is you will see QFs operate for a=20 minimal amount of time during peak times in order to get their capacity=20 payments,'' said Jan Smutney-Jones, executive director of the Independent= =20 Energy Producers. ``They won't be fully available to California.''=20 All eight of the plants in PG&E's territory are natural gas-fired plants th= at=20 deliver a combined 109 megawatts of electricity, enough to power about 80,0= 00=20 homes.=20 Lorie O'Donley, a spokeswoman with the Independent System Operator, which= =20 manages California's electric grid, said that more of so-called qualifying= =20 facilities had indeed come back online throughout the state.=20 ``Right now we have 1,400 megawatts offline statewide,'' O'Donley said,=20 though she didn't yet know how many QFs were offline in PG&E's territory an= d=20 in other territories.=20 QFs harness solar, biomass, geothermal or wind power, as well as natural ga= s,=20 to generate environmentally friendly electricity, and provide electricity t= o=20 the state's investor-owned utilities under contract.=20 QFs contribute about 6,000 megawatts to the state's power grid, O'Donley=20 said. A few weeks ago, around 3,000 megawatts were offline. Many plants wer= e=20 shut down in protest for not getting paid millions of dollars for past=20 electricity deliveries. That lack of power contributed to rolling blackouts= =20 which swept the state.=20 The past debt, as well as a new pricing system ordered by the Public=20 Utilities Commission, would force QFs to operate at a loss if they start=20 producing power at full capacity, said Smutney-Jones.=20 The new PUC price structure ties how much they can charge for their=20 electricity to the price of natural gas coming in at the Oregon border, whe= re=20 natural gas is cheaper. However, many plants can only ship and buy their ga= s=20 at the Topock border in the south, where prices are much higher.=20 ``I don't think we're anywhere near out of the woods with respect to the QF= =20 issue,'' Smutney-Jones said.=20 PG&E and Southern California Edison Co. have paid for QF electricity=20 delivered since April under order by the PUC. However, PG&E had made partia= l=20 payments on deliveries since last year, while SoCal Edison had paid nothing= .=20 San Diego Gas and Electric Co. says it never fell behind on its payments.= =20 www.pge.com=20 ,2001 Associated Press ?=20 A look at two rate designs before power regulators=20 The Associated Press Thursday, May 10, 2001=20 ,2001 Associated Press=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2001/05/10/s= tate0 338EDT0123.DTL&type=3Dnews=20 , , -- (05-10) 00:38 PDT=20 Key components of rate design proposals introduced Wednesday by Loretta=20 Lynch, state Public Utilities Commission president, and Christine Walwyn, a= =20 PUC Administrative Law Judge. Both proposals suggest how to implement recor= d=20 rate increases passed by the PUC on March 27. Both rate plans use baseline = --=20 an average amount of power used based on a customer's climate, geography an= d=20 the time of year -- to help determine how much to charge customers.=20 President Loretta Lynch's proposal:=20 --Divides residential groups into five tiers=20 Tiers 1 and 2 include low-income customers exempt from rate hikes and power= =20 use up to 130 percent of baseline.=20 Tier 3 covers power use from 130 percent to 200 percent of baseline. Rate= =20 increase percentage was not released Wednesday.=20 Tier 4 covers power use from 200 percent to 300 percent of baseline. Rate= =20 increase percentage was not released Wednesday.=20 Tier 5 covers power use beyond 300 percent of baseline. Lynch said power us= ed=20 within these limits would receive an average 48 percent rate increase. Paul= =20 Clanon, head of the PUC's energy division, says that number is closer to=20 35-40 percent on average.=20 --Commericial customers of PG&E would receive an average 37.5 percent=20 increase on all electricity used.=20 --Industrial customers of PG&E would receive an average 52 percent increase= =20 on all electricity used, depending what time of day they used it.=20 --Agricultural customers of PG&E would receive an average 21 to 30 percent= =20 rate increase on all electricity used, depending what time of day they used= =20 it. Rates are capped at 30 percent.=20 --Would adopt a pilot program to introduce real-time pricing to federal=20 electric customers. Real-time pricing charges customers the full cost of=20 electricity. Therefore, proponents say, customers should shift their electr= ic=20 use away from times of high demand and higher prices, thus lowering demand= =20 and eventually lowering wholesale prices.=20 Administrative Law Judge Christine Walwyn's proposal:=20 --Divides residential groups into four tiers=20 Tier 1 includes low-income customers exempt from rate hikes and power use u= p=20 to 130 percent of baseline.=20 Tier 2 covers power use between 130 percent to 200 percent of baseline. Pow= er=20 used within these limits would receive an average 3 percent increase.=20 Tier 3 covers power use betwen 200 percent to 300 percent of baseline. Powe= r=20 used within these limits would receive an average 10 percent increase.=20 Tier 4 covers power use over 300 percent of baseline. This use would receiv= e=20 an average 34 percent increase.=20 --Exact information on other classes was not provided.=20 Source: Public Utilities Commission, Energy Division=20 ,2001 Associated Press ?=20 Lights stay on despite failure of big plant=20 John Wildermuth, Joe Garofoli, Chronicle Staff Writers Thursday, May 10, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/05= /10/M N173855.DTL&type=3Dnews=20 With temperatures still high and generating plants running full out, state= =20 power officials managed by the smallest of margins to prevent a third=20 straight day of rolling blackouts yesterday.=20 "It's been a roller-coaster of an afternoon," said a weary Stephanie=20 McCorkle, spokeswoman for the California Independent System Operator.=20 Demand was running slightly ahead of estimates early in the day, but the=20 situation improved when the ISO asked its interruptible power users to cut= =20 their loads shortly after noon, McCorkle said.=20 Those users, who agree to temporarily limit their power use when asked in= =20 return for lower rates, gave the system an additional 800 megawatts to work= =20 with.=20 Temperatures again soared inland, but by 2 p.m. a slight break in the weath= er=20 raised hopes that the emergency could be easing.=20 Then, a 750-megawatt plant in Pittsburg broke down.=20 "That wrecked my day," said Jim McIntosh, the ISO's operations director.=20 While the ISO managed to beg, borrow and buy enough extra power to replace= =20 the Pittsburg plant for the afternoon, the generator's loss is another=20 headache for a system already stretched to the maximum.=20 The Pittsburg plant will be shut down for a minimum of 60 hours while crews= =20 repair a boiler tube leak, said a spokesman for Mirant Corp., the plant's= =20 owner.=20 "I stress 'minimum' here, because that's usually the least amount of time i= t=20 takes to fix one of these things," said Chuck Griffin, a company spokesman.= =20 The Pittsburg plant is the largest gas-fired generator in the state's power= =20 grid, McIntosh said.=20 California already has plants that normally produce 12,000 megawatts of pow= er=20 out for maintenance and repair.=20 "We knew May was going to be a tough month," McIntosh said.=20 E-mail the writers at [email protected] and=20 [email protected].=20 ,2001 San Francisco Chronicle ? Page?A - 12=20 PG&E fights consumer committee=20 Obstruction feared in bankruptcy case=20 Bob Egelko, Chronicle Staff Writer Thursday, May 10, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/05= /10/M N150518.DTL&type=3Dnews=20 Pacific Gas and Electric Co. asked a judge yesterday to dissolve a committe= e=20 appointed to represent consumers in the utility's bankruptcy case, calling= =20 its members "special interest groups" who could obstruct the proceedings.= =20 The nine-member committee, with representatives from businesses, government= =20 agencies and consumer organizations, was named last week by the Justice=20 Department's bankruptcy trustee for Northern California and Nevada. Trustee= =20 Linda Ekstrom Stanley said her action was needed to give the public a voice= =20 because the state had declined to take part in the case.=20 The appointment was significant because the committee can participate fully= =20 in the high-stakes case, conduct investigations, comment on PG&E's plan to= =20 settle its debts and propose an alternative plan. No past utility bankruptc= y=20 case has included a consumer committee.=20 In papers filed late yesterday, PG&E said the committee was unauthorized by= =20 bankruptcy law and was potentially harmful.=20 The law allows only unsecured creditors and equity security holders to be= =20 appointed to official committees, and consumers do not fit those categories= ,=20 PG&E attorneys argued.=20 A committee of the largest unsecured creditors, including banks and power= =20 generators, was appointed earlier. That committee has also opposed the=20 appointment of the consumers' committee but has not filed legal objections.= =20 Even if individual customers qualified for appointment, "none of the specia= l=20 interest groups can claim a mandate to represent the interests of PG&E=20 ratepayers generally," the utility said.=20 PG&E said the two consumer organizations on the committee, The Utility Refo= rm=20 Network and Consumers Union, have "well-known political and policy agendas= =20 that have nothing to do with the reorganization principles of the Bankruptc= y=20 Code" and "a demonstrated history of aggressive lobbying and litigation."= =20 Noting that the consumers' committee would be funded by PG&E, the utility= =20 said the consumer groups' "proclivities could substantially retard the=20 progress of this case and seriously prejudice its outcome."=20 U.S. Bankruptcy Judge Dennis Montali has scheduled a May 18 hearing on PG&E= 's=20 challenge. Stanley said she had met last week with PG&E representatives and= =20 lawyers, concluding "after significant research" that her action was both= =20 legal and necessary.=20 "The public's interest is not being protected in the bankruptcy case," she= =20 said, noting that the state government was keeping out of the proceedings i= n=20 order to avoid exposure to PG&E lawsuits.=20 "The ratepayers are claimants here," Stanley said. "They have a right to=20 expect performance from this utility. They have a right to be heard here."= =20 Committee member Nettie Hoge, executive director of The Utility Reform=20 Network, said she was confident in Stanley's judgment. "You've got a monopo= ly=20 utility and customers who are forced to pay rates for an essential service,= "=20 Hoge said. "You've got to have customers involved in the discussions.=20 "The trustee has done an admirable job, choosing a committee that is very= =20 diverse, folks who have a stake in every aspect of the economy."=20 E-mail Bob Egelko at [email protected].=20 ,2001 San Francisco Chronicle ? Page?A - 10=20 Generators silent on Davis plan=20 He offers lower compensation to stave off Edison bankruptcy=20 Lynda Gledhill, Chronicle Sacramento Bureau Thursday, May 10, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/05= /10/M N128963.DTL&type=3Dnews=20 Sacramento -- Gov. Gray Davis, who has portrayed power generators as greedy= =20 villains in the state's power crisis, met face-to-face with industry=20 officials yesterday, calling on them to forgive some of the debt racked up = by=20 an insolvent utility.=20 In a three-hour meeting described as "businesslike," Davis said generators= =20 will have to accept 70 cents on the dollar of past debt as part of a soluti= on=20 designed to prevent Southern California Edison Co. from going bankrupt.=20 At least one of the companies flatly rejected the idea after the meeting,= =20 putting the deal in jeopardy.=20 If the two sides are not able to reach an agreement, Southern California=20 Edison would probably follow Pacific Gas & Electric Co. into bankruptcy=20 court, where creditors face a lengthy and uncertain resolution to recoverin= g=20 debts.=20 Davis has run into legislative opposition to the original terms of the=20 agreement he brokered with Southern California Edison, which includes the= =20 state's purchase of the utility's transmission lines as a way to help it=20 regain financial stability.=20 But the governor said he now believes that the deal can win passage in the= =20 Legislature if the generators "take a haircut."=20 "I indicated that passage of the (agreement) that we signed with Edison wou= ld=20 only work if they agreed to reduce the amount of money they claim the=20 utilities owe them," he said.=20 Edison owes generators, including municipal utilities, between $1.1 billion= =20 and $1.2 billion, Davis said. He said he agreed that talks would also take= =20 place with municipal utilities about taking less money on the dollar.=20 Most of the generators refused to comment on the proposal, but a=20 representative of Reliant Energy dismissed the suggestion.=20 "That's simply an unreasonable number to start with," said John Stout, seni= or=20 vice president of Reliant, who said that 67 cents on every dollar the compa= ny=20 receives goes to pay the fuel bill, which doesn't include personnel and=20 maintenance of facilities.=20 "It doesn't get any supply built," Stout said of the idea. "I would much=20 rather get that 100 cents on the dollar" to invest in new generation.=20 The generators, who have reaped huge profits in the past year, said the mai= n=20 thrust of the meeting was on short-term issues, such as lining up more powe= r=20 for the summer.=20 Davis asked which companies were not yet selling to the state and said he= =20 would work to get the Department of Water Resources to sign agreements with= =20 them.=20 He also asked the generators to support the Edison deal, reportedly asking= =20 them to try to win GOP support for it.=20 Davis agreed to a proposal from the companies to form permanent working=20 groups to deal with the crisis.=20 A handful of protesters led by former Senate candidate Medea Benjamin=20 condemned Davis for meeting with the companies. Dressed as pigs, with the= =20 names of the companies on their masks, the five protesters brought a small= =20 live pig into the Capitol, where it proceeded to defecate outside the=20 governor's office before the group was escorted out of the building.=20 Lawmakers have insisted that the generators must take a cut in the money th= ey=20 are owed as part of any deal ending the energy crisis.=20 Senate President Pro Tem John Burton, D-San Francisco, said earlier in the= =20 day that at least a 30 percent "haircut" would be necessary before he would= =20 allow any deal to be approved.=20 "What we have here is a problem caused by the unfettered greed of generator= s=20 that has brought capitalism to a new low," Burton said.=20 He said if the generators don't agree to some kind of cut, they will find= =20 themselves in bankruptcy court.=20 Earlier in the day, the Senate approved a bill that allows the state=20 treasurer to issue $13.4 billion in bonds. The money, which will eventually= =20 be repaid by ratepayers, will be used to replace the funds that have draine= d=20 out of the state's general fund since January to buy electricity and pay fo= r=20 future power purchases.=20 The state has spent about $6 billion so far -- money, Democrats argue, that= =20 has to be replaced in order to fund other state services.=20 "Where do those revenues go?" asked Sen. Sheila Kuehl, D-Santa Monica, duri= ng=20 the floor debate. "They create child care slots, pay in-home support servic= es=20 and provide medical benefits for the poor."=20 But Republicans said the state's budget should take some of the hit, instea= d=20 of pushing it all off on ratepayers.=20 Sen. Tom McClintock, R-Northridge, said the average ratepayer will see a $2= ,=20 000 increase on their utilities bills over the next 15 years to pay for the= =20 bond.=20 The final vote was 23 to 15. Because not enough Republicans supported the= =20 measure in either the Assembly or Senate to make the bill an urgency measur= e,=20 the law will not take effect until 90 days after the end of the special=20 session. Davis will sign the bill today.=20 Chronicle staff writer Greg Lucas contributed to this report.=20 E-mail Lynda Gledhill at [email protected].=20 ,2001 San Francisco Chronicle ? Page?A - 10=20 Rate plans shield most households=20 Posted at 11:05 p.m. PDT Wednesday, May 9, 2001=20 MICHAEL=20 BAZELEY=20 Mercury News=20 State regulators on Wednesday painted the clearest picture yet of who will= =20 bear the brunt of the biggest electrical rate hike in 20 years: Commercial,= =20 industrial and agricultural users will be socked with power bills that coul= d=20 soar by 50 percent or more.=20 But most residential customers will be shielded from huge rate increases,= =20 regulators said. In two proposals unveiled Wednesday by the California Publ= ic=20 Utilities Commission and to be voted on Monday, only the heaviest residenti= al=20 users get hit with big hikes, potentially doubling their rates in an effort= =20 to push them toward conservation.=20 ``The moderate users will be largely protected,'' said PUC chairwoman Loret= ta=20 Lynch.=20 The PUC has been grappling with designing a rate plan for customers since= =20 March, when it announced an across-the-board rate hike of 3 cents per=20 kilowatt-hour. The PUC announced the increase -- designed to help the state= =20 climb out of its ongoing power crisis -- before deciding how the rate=20 structure would work and considered at least 20 plans.=20 Details of the proposals were criticized Wednesday by energy experts who sa= id=20 residential customers are not being charged enough to encourage conservatio= n,=20 and by business representatives who said business and commercial users are= =20 being unfairly targeted.=20 ``This is not a real rate increase for the residential class and we need=20 one,'' said Severin Borenstein, director of the University of California=20 Energy Institute. ``This is ridiculous. This is not a way to respond. This= =20 will send no price signal to people at all.''=20 Both proposals create a five-tier billing system for residential customers,= =20 with heavy users -- nearly 10 percent of all households -- seeing their rat= es=20 possibly double. Energy misers and moderate users -- the other 7.3 million= =20 households -- would either see no change at all in their bills or only mode= st=20 increases of up to about $12 month.=20 The consumer group the Utility Reform Network said it was generally satisfi= ed=20 with the rate plans and how they spread the increase across all customer=20 groups.=20 ``Yes, they've done a reasonable job of allocating the pain equitably,'' sa= id=20 Bob Finkelstein, a staff attorney with the organization. ``But we shouldn't= =20 be in this position in the first place. I think it's a shame we're even goi= ng=20 to see a rate increase.''=20 Covering state's costs=20 Lynch said this rate increase, along with a statewide bond recently approve= d=20 by lawmakers, should cover the state's costs in purchasing power.=20 But she left the door open for further rate increases, especially if energy= =20 suppliers raise the price of electricity.=20 ``If the sellers decide to turn up the heat and raise rates,'' she said,=20 ``we'll have to look at those numbers again.''=20 Lynch and an administrative law judge both submitted similar plans. Because= =20 Lynch is the commission president, her proposal would appear to be the most= =20 likely to gain the support of fellow commissioners.=20 Industrial users appear to take the biggest hit under Lynch's plan. Those= =20 equipped with special meters could see their rates double or more for power= =20 they consume during peak demand periods. Small commercial users would pay= =20 about 45 percent more for their ``on-peak'' electricity, Lynch said.=20 Lynch said she intentionally ``weighted'' the on-peak rates higher as a way= =20 to encourage conservation.=20 ``By promoting energy conservation during summer peak hours,'' she said in= =20 her proposal, ``we attempt to limit blackouts and service interruptions in= =20 order to preserve public health and safety.''=20 But industry representatives cried foul.=20 ``These costs make it impossible to operate at a profit,'' said Jack Stewar= t,=20 president of the California Manufacturers and Technology Association. ``You= =20 can't add these kinds of prices to the product and try to sell it. This loo= ks=20 like the beginning of the ringing of the death knell for the economy.''=20 Agriculture caps=20 For agricultural users, the proposals are a mixed bag. Agricultural groups= =20 were hoping the PUC would endorse a recommendation by Gov. Gray Davis to ca= p=20 their rate increases at 5 to 15 percent. Agriculture groups did get caps, b= ut=20 they are higher than the governor's, ranging from 23 to 30 percent in both= =20 plans.=20 Even before the rate increase, farmers and other agricultural businesses we= re=20 bracing for a rough summer. Because of a statewide water shortage, farmers= =20 will need to rely more on groundwater pumps, significantly driving up their= =20 energy use.=20 ``We are definitely going to be impacted significantly,'' said Michael=20 Boccadoro, executive director of the Agricultural Energy Consumers=20 Association.=20 Federal buildings=20 Lynch also slung an arrow at the federal government, proposing that federal= =20 buildings in California be forced to pay market rates for electricity. Her= =20 proposal that federal buildings be given real-time meters could drive up=20 federal government energy rates by 10 times or more.=20 Lynch is angry with the federal government's hands-off attitude toward the= =20 state's power crisis and its insistence that Californians pay market rates= =20 for electricity.=20 Lynch's idea -- which she said would be studied in the coming weeks -- was= =20 derided by several critics.=20 ``This is something you do in kindergarten,'' said fellow Commissioner=20 Richard Bilas. ``All it's going to do is make matters worse'' with the=20 federal government.=20 The PUC considered rate proposals from utility companies, consumer groups a= nd=20 the governor. Gov. Davis' proposal was perhaps the most closely watched=20 because three of the PUC commissioners are Davis appointees.=20 Davis proposed a slightly smaller across-the-board rate increase, an idea= =20 that was rejected by both Lynch and the judge. But Lynch, a Davis appointee= ,=20 stressed that the two plans embrace other aspects of the governor's proposa= l,=20 such as the caps on agricultural rates.=20 Contact Michael Bazeley at [email protected] or (415) 434-1018.=20 Energy bond plan gets final legislative OK, faces delay=20 Posted at 8:28 p.m. PDT Wednesday, May 9, 2001=20 BY DION NISSENBAUM=20 Mercury News Sacramento Bureau=20 SACRAMENTO -- Amid rising partisan attacks, state Democrats gave final=20 approval Wednesday to a record $13.4 billion energy crisis bond plan to=20 replenish the drained California budget and buy critical power for the=20 state's impoverished utilities.=20 Democrats blasted Republicans for their steadfast refusal to support the pl= an=20 -- opposition that will force the state to continue to use its already=20 strained budget to buy power through the summer.=20 ``I think the Republicans are playing a perilous game with dire=20 consequences,'' said Assemblywoman Carole Migden, D-San Francisco, after th= e=20 Senate approved the bill on a 22-15 vote. Gov. Gray Davis plans to sign the= =20 bill today.=20 Without two-thirds support in both houses, the bonds cannot be sold=20 immediately, and the state will lose the chance to line up about $4 billion= =20 in short-term loans.=20 Because Democrats could pass the bond plan by only majority votes, the=20 Legislature will have to shut down its special energy crisis session Monday= .=20 Without the two-thirds support, the bond measure cannot become law until 90= =20 days after the session comes to a close.=20 Closing the session would force state lawmakers to reintroduce hundreds of= =20 other energy crisis bills when Davis, as expected, launches a second energy= =20 crisis special session.=20 Zane Mann, publisher of the monthly California Bond Advisor newsletter,=20 blasted Republicans for not throwing their support behind the bonds.=20 ``I can't understand why the Republicans did what they did,'' Mann said. ``= I=20 find it totally obstructionist. They're willing to sell out the state in=20 order to blame Davis.''=20 During Wednesday's floor debate, Sen. Tom McClintock, R-Thousand Oaks, said= =20 bonds would saddle each Californian with an extra $2,000 on their energy=20 bills.=20 ``This expense was incurred because of some very bad decisions by elected= =20 officials of California,'' he said.=20 The state has just about used up its $6.6 billion budget surplus buying pow= er=20 for the state's cash-strapped utilities and will have to tap unused cash fr= om=20 state programs to continue to buy power this summer.=20 There is still concern that the state will be unable to find buyers for the= =20 largest bond measure in U.S. history.=20 Mann, as well as the bank behind the bonds, J.P. Morgan, insist there's a= =20 market for them. Mann said the state's two largest mutual funds are waiting= =20 to buy the bonds -- if they have a high interest rate.=20 If not, he said, ``they'll go out the window.''=20 Mercury News Staff Writer Jennifer Bjorhus contributed to this report.=20 Fusion research gets a boost=20 Published Thursday, May 10, 2001, in the San Jose Mercury News=20 BY JIM PUZZANGHERA=20 Mercury News Washington Bureau=20 WASHINGTON -- With California and the nation facing energy troubles, Rep. Z= oe=20 Lofgren introduced bipartisan legislation Wednesday to accelerate research= =20 into fusion power, a potential long-term solution that promises cheap,=20 environmentally friendly power if major scientific hurdles can be overcome.= =20 Fusion is the way the sun and stars produce their energy. Unlike nuclear=20 power, which is a product of fission, or the splitting of atoms, fusion=20 produces energy by fusing atoms together -- with no high-level radioactive= =20 waste. If it works, 50 cups of seawater could produce as much energy as two= =20 tons of coal, advocates said.=20 Fusion energy has been proven possible in laboratories, but a power plant= =20 using the technology is still decades away, experts said. The Department of= =20 Energy is spending $248 million on fusion research this year, with the=20 Lawrence Livermore National Laboratory one of several facilities around the= =20 country receiving funding.=20 Fusion research funds, however, have decreased about 40 percent in the past= =20 decade, and Lofgren wants to reverse that. Her legislation, the Fusion Ener= gy=20 Sciences Act of 2001, seeks an increase of $72 million over the next two=20 years. It would also require the energy secretary to submit a plan by July= =20 2004 for the next major step in fusion energy, a burning-plasma experiment.= =20 ``It is time for this country to move beyond caveman technology to the=20 technology of the future -- fusion technology,'' said Lofgren, D-San Jose, = as=20 she announced the legislation in front of the Capitol Hill Power Plant, whi= ch=20 burns coal, oil and natural gas to power congressional offices. She was=20 joined by Reps. Mike Honda, D-San Jose, Randy Cunningham, R-Escondido, and= =20 Rush Holt, D-N.J., a physicist. The bill also is co-sponsored by Reps. Elle= n=20 Tauscher, D-Walnut Creek, and Barbara Lee, D-Oakland.=20 Fusion requires intense heat and pressure. Under the proper conditions, lik= e=20 those inside the sun, the nuclei of two hydrogen atoms can be forced togeth= er=20 so tightly that they fuse, forming a helium nucleus and releasing large=20 amounts of energy that could be harnessed for electricity.=20 The major source of fusion fuel is deuterium (heavy water), which is readil= y=20 extracted from water. The other fuel source, tritium, is widely available= =20 from seawater and land deposits.=20 Fusion is not to be confused with so-called ``cold fusion,'' a disputed=20 theory that few scientists believe is achievable. In 1989 two Utah scientis= ts=20 reported cold-fusion success in the laboratory by immersing metal electrode= s=20 in a jar of heavy water. Their results were later discredited, but some=20 scientists continue to experiment with cold fusion.=20 Although research on ``hot'' fusion has been moving forward, it still has= =20 many scientific hurdles to overcome, said Robert Park, a physics professor = at=20 the University of Maryland.=20 ``We're still a long way away. Thirty years ago they used to say it would b= e=20 30 years, and they're still saying the same thing,'' he said. ``We can fuse= =20 atoms every day, but the trick is when you produce more energy than it take= s=20 to get there.''=20 The head of one of the leading fusion research facilities in the country=20 agreed that it will probably be the middle of this century before a=20 functioning fusion power plant is operating, but he said the scientific=20 advances ``have really been fantastic.''=20 Robert Goldston, director of the Plasma Physics Laboratory at Princeton=20 University, said that as a graduate student there in 1974 he and other=20 researchers were thrilled to produce one-tenth of a watt of electricity for= =20 one-hundredth of a second using fusion. In 1997, they produced 10 million= =20 watts of electricity for about a second -- a degree of advance that outstri= ps=20 the phenomenal increases in computing power.=20 ``The trick now is to make fusion as practical as computers are,'' he said.= =20 ``It's a grand scientific challenge.'' Power is money=20 PUC details plan to raise Edison rates up to 34%. Half of users to see no= =20 hike.=20 May 10, 2001=20 By KATE BERRY The Orange County Register=20 JOHN MEE of Fullerton is focused at a PUC hearing Wednesday at Fullerton=20 College. Photo: Daniel A. Anderson / The Register ? ? Customers of Southern California Edison would see their electricity bills= =20 jump as much as 34 percent under rate proposals unveiled Wednesday by the= =20 state's top energy regulator.=20 The Public Utilities Commission designed two rate plans to encourage energy= =20 conservation and repay the state of California for wholesale power purchase= s.=20 Though many customers would pay higher rates, half of all residential=20 customers, or 4 million households, would not be subject to any rate increa= se=20 at all. In January, the Legislature blocked rate hikes for customers who us= e=20 relatively little electricity or have low incomes.=20 Loretta Lynch, president of the PUC, blamed "unbounded and exorbitant=20 wholesale electricity prices" for the proposed increases, which she disclos= ed=20 at a news conference in San Francisco. "We all have to share the pain of=20 that," she said.=20 If either of the proposed plans is approved Monday by the commission, the= =20 higher rates will appear on electricity bills beginning June 1.=20 The rate increase won't apply to customers of San Diego Gas & Electric or= =20 Anaheim Public Utilities.=20 The burden of higher rates would fall primarily on the 2 million households= =20 that consume the most electricity.=20 A household that pays $114 a month would, on average, pay $12 more. Bigger= =20 users with monthly bills of $213 would pay an additional $73 - a 34 percent= =20 increase.=20 The hikes would come on top of a 9 percent increase approved by the PUC in= =20 January.=20 Economic crisis in forecast=20 May 10, 2001=20 By ANNE C. MULKERN The Orange County Register=20 Rolling blackouts this summer could cost California $26.4 billion in lost= =20 production and income, a business report released Wednesday forecasts.=20 "This isn't an energy crisis, it's an economic crisis,'' said Nancy=20 Heffernan, spokeswoman for the group of retailers, manufacturers and other= =20 business groups that funded the $25,000 study.=20 The report came as Orange County and California escaped a third consecutive= =20 day of rolling blackouts. Energy demand fell when the weather cooled.=20 The report was released to coincide with a state Public Utilities Commissio= n=20 announcement on higher electricity rates. The highest rate hikes - up to 50= =20 percent - will hit industrial customers.=20 Although economists previously have said the energy crisis is unlikely to= =20 cause a recession, the report said blackouts could cut state productivity= =20 growth from current projections of 2.3 percent to less than 1 percent.=20 If the energy crunch is more severe, economic growth could stop, the report= =20 said.=20 The study, by New Jersey-based research AUS Consultants, is based on=20 interviews with 34 businesses in 25 different industries.=20 It assumes 110 hours of blackouts will darken businesses and homes this=20 summer and that the average customer will experience about 20 hours of=20 blackouts.=20 Based on the state's so-far limited experience with rolling blackouts, that= =20 prediction may be overly severe.=20 The report assumes statewide blackouts, but not every customer is blacked o= ut=20 during any given outage. On March 19, for example, when the most severe=20 blackouts so far hit the state, only 14 percent of Orange County was affect= ed. GOP stalls sale of bonds with vote=20 The $13.4 billion measure is approved, but it lacks two-thirds support for= =20 immediate implementation.=20 May 10, 2001=20 By JOHN HOWARD The Orange County Register=20 For Gov. Gray Davis, the bond sale and the new state budget for the 2001-02= =20 fiscal year beginning July 1 were linked.=20 The governor had hoped to win Republican support for the bonds, and thus a= =20 two-thirds majority in both houses, which would have allowed the legislatio= n=20 to take effect immediately and the bonds to be marketed as early as this=20 month.=20 But Republican opposition meant the legislation was approved by only a simp= le=20 majority, forcing a 90-day wait.=20 "We think we're probably biting off more financing than we can chew," said= =20 Jaime Fis Fis, spokesman for Assembly Republican Leader Dave Cox.=20 That means the bond-sale proceeds won't be contained in the state's spendin= g=20 plan until weeks after the new fiscal year begins, and if the market sours= =20 for such a large bond issue the state could be affected.=20 "This greatly complicates the budget process," Davis said.=20 Earlier in the day, the Legislature's financial expert said a slowing econo= my=20 was causing a drop in incoming revenue that could force some $3.4 billion i= n=20 cuts from the plan Davis proposed in January.=20 The administration is going to announce its own view of the budget on Monda= y,=20 but Davis signaled that the worsening economy would affect his spending pla= n.=20 "I suspect it will have an impact," he said.=20 The sole Democratic dissenter in Wednesday's 23-15 Senate vote was Sen. Joe= =20 Dunn, D-Santa Ana.=20 He did not address the bond bill on the Senate floor, but earlier said he= =20 opposed the bond plan because it was not tied to aggressive action targetin= g=20 profiteering power generators.=20 Electricity notebook=20 Davis asks power suppliers to accept 30% less than owed=20 May 10, 2001=20 From Register news services=20 SACRAMENTO Gov. Gray Davis asked generators to accept 30 percent less than= =20 they are owed for electricity sold to the state, saying the discount is the= =20 price of keeping Edison International solvent.=20 Davis said power suppliers must accept less than they are owed in order to= =20 win legislative approval for a financial-rescue package designed to keep=20 Edison, owner of the state's No. 2 utility, Southern California Edison, out= =20 of bankruptcy. PG&E Corp.'s Pacific Gas & Electric declared bankruptcy Apri= l=20 6.=20 "I suggested that 70 percent now was better than anything they could get in= =20 bankruptcy three to four years down the line," the governor said during a= =20 press conference in Sacramento.=20 Davis made his pitch during a meeting with executives from 12 of the larges= t=20 U.S. energy producers.=20 Air pollution rules to be modified for power plants=20 DIAMOND BAR Southern California air regulators are close to slashing their= =20 market-based system for controlling power plant pollution, which for years= =20 has allowed plant operators to avoid installing emission controls.=20 The move is designed to allow large power plants to operate at full capacit= y=20 without facing stiff fines as they try to meet the demand for electricity.= =20 The change was prompted by an executive order from Gov. Gray Davis requirin= g=20 air districts to let large generators run at the greatest capacity.=20 Rules expected to be considered Friday by the South Coast Air Quality=20 Management District Governing Board would curtail a program known as RECLAI= M,=20 which has allowed power plants to buy and sell unused emission "credits"=20 controlled by other polluters.=20 Edison, PG&E allege El Paso withheld natural gas supply=20 SAN FRANCISCO California's two largest utilities have filed testimony with= =20 federal regulators alleging El Paso Corp. withheld natural gas from the=20 state, leading to an overcharge of some $3.7 billion in energy costs over t= he=20 past year and worsening the state's power crisis.=20 "We believe El Paso has withheld significant amounts of natural gas from=20 California and manipulated gas prices to the tune of $3.7 billion. ... PG&E= =20 also supports these findings," said Kevin Lipson, lead attorney for Edison= =20 International unit Southern California Edison, the state's No. 2=20 investor-owned utility.=20 A spokesman for PG&E Corp. unit Pacific Gas & Electric, the state's No. 1= =20 utility, confirmed Wednesday that it made a filing late Tuesday with federa= l=20 energy regulators alleging that El Paso Corp. "clearly possessed the abilit= y=20 and incentive to raise (gas) prices."=20 Natural-gas prices in California, the highest in the U.S. over the past yea= r,=20 have been a key reason for the surge in power prices in the state because= =20 gas-fired turbines are the single biggest source of electricity in=20 California, providing more than a third of the power used by the state's 34= =20 million residents.=20 Regulator says more electricity rate hikes are likely=20 PUC member tells a Fullerton audience that more increases may be necessary.= =20 May 10, 2001=20 By KATE BERRY The Orange County Register=20 FULLERTON COLLEGE economics professor Arienne Turner brought students to=20 Wednesday's PUC hearing on power-rate increases. Photo: Daniel A. Anderson / The Register ? ? A California energy official said consumers can expect more electricity rat= e=20 increases beyond the proposals unveiled Wednesday.=20 Carl Wood, one of five commissioners on the state's Public Utilities=20 Commission, said at a public hearing at Fullerton College on Wednesday that= =20 raising electricity rates was a "hateful choice," but one the commission ma= y=20 have to revisit.=20 "This may not be the end of the rate increases," Wood told about 250 people= =20 at the hearing, one of nine held by the PUC throughout California this week= .=20 The hearings were scheduled to allow consumers a voice on how the rate=20 increase should be divvied up among different classes of customers.=20 PUC President Loretta Lynch unveiled two rate proposals Wednesday. Under=20 those plans, rate increases of as much as 34 percent would show up on the= =20 bills of customers of Southern California Edison and Pacific Gas & Electric= =20 starting in June. The increases would be retroactive to March 27.=20 Consumers expressed anger and frustration at the hearing in Fullerton befor= e=20 Wood and Administrative Law Judge Michael Galvin.=20 "Consumers did not create this mess, and we should not have to pay for it,"= =20 said Ruth Shapin, a Santa Ana lawyer.=20 Darrell Nolta, a systems engineer in Westminster, held up copies of the 199= 6=20 law that deregulated the electricity industry, which promised consumers a 2= 0=20 percent reduction in retail electricity rates by 2002.=20 "I want a refund of my money," Nolta said, referring to the roughly $19=20 billion in so-called "stranded costs" that the state's three largest=20 utilities have collected in the past four years and transferred, in part, t= o=20 their parent corporations. "I want to be able to sue the state of Californi= a=20 and the PUC for this."=20 The money transfers and salaries paid to executives at Edison and PG&E were= =20 the subject of most of the consumer vitriol.=20 The PUC is investigating the utilities' connections with their parent=20 companies. The utilities say their actions have been legal.=20 Tom Martin, a representative of the Small Manufacturers Association of=20 California, said the rate increases will cripple the state's economy.=20 "Some people believe businesses can just raise prices to make up the=20 difference," he said. "But they cannot."=20 Under the proposals released Wednesday, nearly half of all consumers would= =20 pay no rate increase. The 2 million heaviest residential users would pay 10= =20 percent to 34 percent more, or an extra $12 to $73 a month. The 2 million= =20 households that are medium users would pay just $2 more a month, a 3 percen= t=20 increase.=20 Small and medium-sized businesses, which pay lower rates than consumers, ca= n=20 expect a 35 percent increase, while farmers will pay 23 percent more.=20 Industrial users face a 50 percent rate hike.=20 The rates would be partly used to pay back up to $13.4 billion in bonds the= =20 state Senate approved Wednesday to recover state expenditures on power sinc= e=20 January and future purchases. In just four months, the state has spent abou= t=20 $6 billion buying power for Edison, PG&E and San Diego Gas & Electric Co.= =20 customers. Lynch, the PUC president, said the rate proposals would raise $5= =20 billion statewide this year.=20 Under deregulation, consumers' rates were frozen at artificially high level= s=20 to allow the utilities to collect "stranded costs," mostly investments in= =20 nuclear power plants and contracts with small energy producers. The utiliti= es=20 thought those investments would be unprofitable in a deregulated environmen= t.=20 Starting a year ago, when wholesale electricity prices rose above the level= =20 of frozen retail rates, the utilities were stuck with losses on their power= =20 purchases. The losses amounted to more than $14billion for Edison and PG&E= =20 through January.=20 "Most of the money in this crisis went to the power cartel," said Wood,=20 referring to private power generators that purchased power plants from Edis= on=20 and PG&E under deregulation. "In the long run, we have to move back to a=20 regulated system because this is an essential commodity."=20 PG&E declared bankruptcy April 6, saying it could no longer shoulder its=20 debt.=20 Starting all over again=20 The Legislature's special sesion on the power crisis ends today -- with mor= e=20 work to do at an added cost.=20 May 10, 2001=20 By HANH KIM QUACH The Orange County Register=20 SACRAMENTO The state will have to restart a $3.2 million legislative proces= s=20 after lawmakers today adjourn the special session devoted to fixing the=20 energy market.=20 The energy crisis is by no means solved, but because of the rules of the=20 Legislature, the special session must be gav eled to a close to ensure that= =20 the $13.4 billion revenue bond bill passed by the Senate on Wednesday can b= e=20 enacted 91 days after Gov. Gray Davis signs it.=20 But by abruptly ending the session, about 200 energy-related bills that=20 lawmakers have been hashing out will die, said Jon Waldie, chief consultant= =20 for the Assembly Rules Committee.=20 Lawmakers would have to reintroduce them in a new special session with a ne= w=20 bill number, he said. The non-partisan Legislative Analyst's Office estimat= es=20 that it costs an average of $15,900 for each bill that moves through the=20 legislative process. That accounts for printing and staff hours.=20 Democrats are trying to make sure bills don't have to go through the troubl= e=20 of being rescheduled for hearings and re-debated in committees, both=20 time-consuming efforts, said an aide for Assembly Speaker Bob Hertzberg.=20 But restarting the process has Republicans worried.=20 "It's going to delay the process,'' said Assemblyman Tony Strickland,=20 R-Ventura. "How can the process be delayed when people are going through=20 rolling blackouts?"=20 It's also more work for staff members who have spent countless hours drafti= ng=20 ideas into legalese.=20 Bion Gregory, lead attorney for the Legislative Counsel's Office, said the= =20 attorneys need to recreate bills each time they're amended to show how the= =20 proposal would change from existing law.=20 "It's not a matter of taking language and reproducing it,'' he said.=20 The special session mechanism allows lawmakers to pass and enact bills more= =20 quickly than in the regular session. In special session, bills that pass wi= th=20 a simple majority vote take effect 90 days after the session adjourns, rath= er=20 than the following Jan. 1, as with regular-session bills.=20 Bills passed with a two-thirds majority in special session can be enacted= =20 immediately after the governor signs them. In regular session, such bills= =20 don't become effective until 90 days after signed.=20 Having a second session on the same topic didn't concern Ron Roach of the= =20 California Taxpayers Association as much. He said the second session might= =20 even be more efficient because lawmakers will be more aware of each other's= =20 bills and not introduce similar ones. In fact, the second time around might= =20 streamline the process, he said.=20 In addition, some of bills that have been largely passed over as legislativ= e=20 leaders search for more immediate fixes to the energy problem are probably= =20 not going to make it far anyway.=20 "If they didn't get a hearing (and voted on by now) they never will - what'= s=20 the point?'' Roach said.=20 Davis is set to sign a $13.4 billion bond-issue measure today to cover=20 electricity costs=20 May 10, 2001=20 By JOHN HOWARD The Orange County Register=20 SACRAMENTO Gov. Gray Davis is prepared to sign off on the biggest state loa= n=20 in history today - a $13.4 billion bond sale to buy emergency electricity f= or=20 California's beleaguered utilities and replenish a state treasury sapped by= =20 the energy crisis.=20 The average residential utility ratepayer would pay $2.50 to $3 per month f= or=20 up to 15 years to retire the debt. Some critics placed the figure at $10.55= =20 per month for ratepayers of all sizes.=20 The Democrat-ruled state Senate, like the Assembly earlier in the week,=20 approved the bond-sale legislation along partisan lines Wednesday.=20 The bill authorizes the state to borrow up to $13.4 billion by selling=20 revenue bonds beginning in August. The money will be used to pay back the= =20 state for more than $6 billion worth of electricity it has bought since=20 January on behalf of the utilities and to finance the purchase of new power= =20 in long-term contracts.=20 Davis said he plans to use about $12.5 billion of the bond and keep the res= t=20 in an emergency reserve.=20 Democratic supporters said the borrowing protected the state budget as=20 California faces an economic downturn and dwindling revenue, and protected= =20 potentially threatened programs. Republican critics said the bonds would=20 burden ratepayers for years.=20 "If we don't pass this bill today, we're going to have to wipe out programs= ,"=20 said Sen. Tom Torlakson, D-Antioch, although he did not say which programs= =20 could be affected.=20 But Republicans in both houses said the bonds were too high, and urged the= =20 governor and legislative leaders to strike a compromise.=20 Thursday, May 10, 2001=20 Papering over state electricity problems=20 Crisis management and recovery plans are the way to solve a crisis, not=20 piecemeal programs and gimmicks. But even as new blackouts roll across the= =20 state, piecemeal is about all we're getting in the way of solutions from Go= v.=20 Gray Davis and the California Legislature.=20 The latest one came Monday when the Assembly voted for a $13.4 billion=20 revenue bond to pay for this year's high electricity bills. (Revenue bonds= =20 are paid by a service's users, in this case ratepayers.) The Senate is=20 expected to pass the bill, Senate Bill 31X, today or Thursday.=20 Because the two-thirds threshold was not met in the Assembly, the bonds cou= ld=20 not be issued immediately, but instead will be issued in 90 days, in August= .=20 In the 49-29 vote, only Republican Assemblyman Anthony Pescetti of Rancho= =20 Cordova sided with the Democratic majority. The bonds will repay the state general fund for electricity purchases which= ,=20 so far in the crisis, amount to at least $5 billion and will rise much high= er=20 later this year. Bonds will be repaid over 15 years.=20 In a conference call Gov. Davis held with us and several other newspapers= =20 Monday, he explained that he hoped for bipartisan support for the bonds=20 because the delay "would greatly complicate the budget process and could=20 damage the economy. It's my hope that both parties can be part of the=20 solution, not part of the problem. People elected us to be problem solvers.= " The Republicans' beliefs were summarized by Assemblyman Tony Strickland of= =20 Thousand Oaks. "Let me tell you what our caucus' philosophy is," he told th= e=20 San Diego Union-Tribune. "If you have money today, you don't borrow against= =20 your children and grandchildren's future." The Republicans favor using the= =20 state budget surplus to pay for the state electricity purchases. Indeed, the bond sale will create more problems than it solves. "It's not= =20 needed," Adrian Moore, director of economic studies at the Reason Public=20 Policy Institute, told us. "It helps cover up the costs of what Davis's=20 overall policies are bringing about. It just stretches it out so it's not= =20 paid this budget cycle. Plus it adds interest [costs]." What's really needed, Mr. Moore said, is to "get back to a market-based=20 solution." Retail prices to ratepayers, now capped, should be further freed= .=20 Higher retail prices then would bring about more conservation and power pla= nt=20 investment and, as less electricity is used, wholesale and retail prices=20 would moderate.=20 And, the governor and Legislature should stop attacking power producers wit= h=20 threats of seizures and taxes, especially given the intermittant price caps= =20 instituted by federal energy regulators. Leaders should instead encourage= =20 producers to build here. The longer California's leaders paper over the dimensions of the crisis, th= e=20 longer it will persist and the more expensive it will become.=20 Task Force To Propose Legislation By SCOTT LINDLAW Associated Press Writer WASHINGTON (AP) via NewsEdge Corporation - President Bush's energy task force plans to propose legislation allowing the seizure of private property to accelerate the construction of electrical power lines, three administration officials said Tuesday. The recommendation is contained in the final draft of a broad energy blueprint to be unveiled by President Bush next week, the officials said. The ``eminent domain'' authority allows the government to appropriate private property for public use; the property owners are usually compensated. The Federal Energy Regulatory Commission already has eminent domain authority over the siting of natural gas pipelines, but has no such power over long-distance electricity transmission lines. The lack of authority often requires electrical companies to get approval from several states and numerous local jurisdictions. Federal authority to locate transmission lines would quicken the approval process, supporters of the provision contend. The shortage of transmission lines has been cited by officials as one reason for bottlenecks in the electric grids and a shortage of power in areas of high demand. New lines also are needed to connect new power plants to the grid. Vice President Dick Cheney said on CNN Tuesday that the energy task force he heads will include a recommendation on eminent domain for power lines. ``The issue is whether or not we should have the same authority on electrical transmission lines'' as the government has on gas lines, Cheney said. ``That's never been granted previously.'' He did not say what the recommendation would be. But the administration officials, speaking on condition of anonymity, said the report would ask Energy Secretary Spencer Abraham to draw up legislation allowing utilities to obtain rights of way for transmission lines, presumably through FERC. The energy strategy report is going to the printers in stages this week. Officials said there was no talk of taking out the eminent domain provision, though they could not rule out that remote possibility. Utilities, not the government, would own the property, one official said. Earlier this year, a draft of a Republican energy bill in the Senate had included giving FERC eminent domain authority for power lines. But that provision later was deleted when it was introduced by Sen. Frank Murkowski, R-Alaska. The electric utility industry for some time has been lobbying for a federal role in siting electric power lines, which now must go through a maze of overlapping local jurisdictions and state agencies for approval. ``If FERC has the eminent siting authority, that will help facilitate siting of electric power transmission lines,'' said Jim Owen, a spokesman for the Edison Electric Institute, which represents investor-owned utilities. It especially would help in getting interstate transmission rights of way approved, he said. ``But it's still not a silver bullet because ... it can still be a cumbersome process,'' said Owen. Some natural gas pipeline cases before FERC have taken years to resolve, he said. Critics have questioned whether Cheney's task force will emphasize power production and transmission over conservation. Cheney said the report would use tax breaks to encourage conservation. ``Most of the financial incentives that we recommend in the report go for conservation or renewables, for increased efficiencies,'' Cheney said. The task force will likely recommend tax incentives for purchase of ``hybrid,'' ultra-efficient automobiles that run on gasoline and electricity, one administration official said. A similar provision was included in the budget Bush sent to Congress earlier this year. The report will also call for a new tax credit for builders of certain new power plants. Cheney outlined the energy plan at the weekly Senate GOP conference Tuesday. According to one Republican who was present, the vice president said that while he supported energy price controls when President Nixon used them three decades ago, he wouldn't advocate them now. Caps that are too high cause voters to blame politicians rather than the utilities, Cheney said, according to the Republican. Excessively low caps undermine the incentives for developing new power sources, Cheney said. After Cheney spoke, Sen. Gordon Smith, R-Ore., rebutted, saying he came from a state where energy prices have risen enormously in the past year, and he favors price caps. Stage 2 Electrical Emergency Declaration; SCE to Curtail 'Load' for Some=20 Customers ROSEMEAD, Calif., May 9 /PRNewswire/ via NewsEdge Corporation - The California Independent System Operator (Cal-ISO) again declared a Stage 2 Emergency this afternoon, due t= o low power reserves and increased demand for power because of high temperatures. The agency called upon Southern California Edison and other investor-owned utilities to begin voluntary "load" curtailment programs for certain customers within their service areas. Cal-ISO said the Stage 2 Emergency would be in effect from 11:45 a.m. through midnight. Cal-ISO and SCE are making urgent appeals for all custom= ers to immediately reduce their electricity consumption so that reserve levels = do not deteriorate further. To achieve this load reduction during Stage 2, SCE is required to activate its voluntary load curtailment program, under which large industrial, commercial, and agricultural customers have agreed to temporarily curtail electricity usage during an electrical emergency in exchange for reduced rates. Should the situation worsen for any reason, and power reserves drop below 1.5%, Cal-ISO could declare a Stage 3 Emergency, the most critical status. Cal-ISO could direct utilities to "drop load," necessitating involuntary rolling blackouts for groups of customers across their service areas until sufficient reserve levels are achieved. SCE customers are asked to reduce power consumption by turning off any unneeded electrical appliances and lights, especially during the state's da= ily peak consumption period -- noon to 6 p.m. Following are some effective ways customers can reduce their power use and not be greatly inconvenienced: LARGE ENERGY USERS -- turn off all auxiliary or redundant machinery where possible; -- consider shifting or staggering operations outside the hours of highest electrical demand, typically noon to 6 p.m.; AIR CONDITIONERS -- set thermostats no lower than 78 degrees (F); -- use electric fans instead of air conditioning if practical; -- avoid using evaporative coolers or humidifiers at the same time an air conditioner is running; -- avoid cooling unoccupied rooms; -- open windows during evening hours to take advantage of cool breezes; APPLIANCES AND TOOLS -- delay until evening hours the optional use of appliances (dishwashers, clothes washers and dryers), chargers, power tools, and electrical equipment; REFRIGERATORS AND FREEZERS -- avoid unnecessarily opening refrigerators; -- keep your refrigerator or freezer set at the proper temperature; -- be sure to use the "power-saver" switch if your refrigerator has one; -- keep the condenser coils behind or beneath your refrigerator/freezer clean (refrigerators represent approximately 25% of the electric bill for a typical residence); ADDITIONAL TIPS -- run swimming pool equipment during early morning and evening hours; -- limit the reopening of a refrigerator, which is a major user of electricity in most homes; -- use drapes and blinds to keep out direct sunlight; -- replace incandescent light bulbs with ENERGY Star(R) qualified compact fluorescent bulbs; -- always wash a full load of clothes or use the variable water level adjustment for smaller loads; and -- be sure your home has adequate insulation. For more information about electricity conservation and SCE's energy efficiency programs, go to www.sce.com. An Edison International (NYSE: EIX) company, Southern California Edison is one of the nation's largest electric utilities, serving a population of mor= e than 11 million via 4.3 million customer accounts in a 50,000-square-mile service area within central, coastal and Southern California. SOURCE Southern California Edison CONTACT: Corporate Communications of Southern California Edison, 626-302-2255 Web site: http://www.edisonnews.com Web site: http://www.sce.com (EIX) B] FULL/ Pacific Gas & Electric restores all Qualifying Facilities --Pacifi= c=20 Gas & Electric says 8 of 300 QFs still shut down=20 May 10, 2001=20 New York, May 9 (BridgeNews) - Pacific Gas & Electric Co. restored nearly a= ll=20 of the Qualifying Facilities that had been shut down earlier in the year du= e=20 to financial reasons. The company now has only eight of the more than 300= =20 Qualifying Facilities under contract to it still shut down for=20 payment-related reasons.=20 --Adrian Viegas, BridgeNews=20 * * * The following is the text of today's announcement, with emphasis added by= =20 BridgeNews. BridgeStation users will find links to company data at the end:= =20 Most of PG&E's Qualifying Facilities are Back On Line; Only 3% Still Shut= =20 Down for Payment-Related Reasons=20 SAN FRANCISCO----May 9, 2001--PACIFIC GAS AND ELECTRIC COMPANY ANNOUNCED=20 TODAY THAT NEARLY ALL OF THE QUALIFYING FACILITIES (QFS) THAT HAD SHUT DOWN= =20 EARLIER THIS YEAR FOR FINANCIAL REASONS HAVE RETURNED TO SERVICE, AND ARE= =20 AGAIN GENERATING POWER FOR PG&E'S ELECTRIC CUSTOMERS.=20 ONLY EIGHT OF THE MORE THAN 300 QFS UNDER CONTRACT TO PG&E ARE STILL SHUT= =20 DOWN FOR PAYMENT-RELATED REASONS. THESE EIGHT REMAINING GENERATORS TYPICALL= Y=20 DELIVER ABOUT 109 MW OF POWER, OUT OF THE ROUGHLY 2,500 MW TOTAL TYPICALLY= =20 DELIVERED BY ALL PG&E-CONTRACTED QF GENERATORS COMBINED. ALL EIGHT FACILITI= ES=20 ARE GAS-FIRED GENERATORS.=20 "We remain optimistic that these last few generators will come back on line= =20 in the next few days, and we are working with them to help make that happen= ,"=20 said Gordon R. Smith, president and CEO of Pacific Gas and Electric Company= .=20 "Ironically, our Chapter 11 filing has provided additional financial=20 certainty to many QFs, since we are now able to pay them in full for power= =20 they are delivering, and since rates currently cover their costs. We will= =20 continue to work with the QF producers to assure that all of the power they= =20 are supposed to deliver will be available for our customers."=20 The QFs under contract to Pacific Gas and Electric Company have been paid i= n=20 full since early April, and received partial payments for prior deliveries.= =20 In addition to the facilities shut down for nonpayment, another 13 faciliti= es=20 that would ordinarily be delivering an average of 82 mw are out for schedul= ed=20 maintenance or unplanned outages. This amount is fairly typical and not=20 unusual for this time of year.=20 For energy saving tips, please visit our website at www.pge.com/123 or=20 contact the Smarter Energy Line at 1-800-933-9555.=20 CONTACT: Pacific Gas and Electric Company=20 News Department, 415/973-5930 End=20

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Energy Issues

Please see the following articles: Sac Bee, Wed, 6/20: Weather an early test for fee caps:=20 Any severe jump in prices will likely be curbed, experts say Sac Bee, Wed, 6/20: State to borrow up to $5 billion to buy energy Sac Bee, Wed, 6/20: Dan Walters: Once burned, lawmakers are very wary of Davis-Edison agreement SD Union, Wed, 6/20: Senate Democrats lay back to see if FERC action=20 provides rate relief=20 SD Union, Wed, 6/20: House panel erases Bush energy cuts LA Times, Wed, 6/20: Davis, Regulators Face Off at Hearing LA Times, Wed, 6/20: Energy on Agenda, but Issue Is Blame LA Times, Wed, 6/20: Blackout Forecasts' Dark Side LA Times, Wed, 6/20: FERC Move Short-Circuits for Hard Price Caps LA Times, Wed, 6/20: Plan Won't Raise Rates, Davis Says LA Times, Wed, 6/20: State to Pay Electric Bill With Loan, Not Taxes LA Times, Wed, 6/20: Edison Unveils Blackout Warning Plan LA Times, Wed, 6/20: State Joins Challenge to Bush on Air-Conditioner=20 Standards LA Times, Wed, 6/20: New Price Caps Not a Deterrent, Power Firms Say LA Times, Wed, 6/20: The FERC's Action Is Good, Bad, Ugly (Commentary) SF Chron, Wed, 6/20: Davis OKs stopgap loan=20 CRISIS POWERS: Action sidesteps Legislature SF Chron, Wed, 6/20: Experts say state must seize the day=20 ANALYSIS: Price caps set stage for future SF Chron, Wed, 6/20: California's energy crisis hits Northwest like a tidal= =20 wave SF Chron, Wed, 6/20: Davis demands nearly $9 billion for electricity=20 overcharges SF Chron, Wed, 6/20: Fed price caps placate Demos=20 But Feinstein's bill to regulate energy producers was more strict SF Chron, Wed, 6/20: Potrero Hill power plant hit by 2 lawsuits=20 Neighbors, city ask court to cut back hours of operation SF Chron, Wed, 6/20: Washington wakes up Mercury News, Wed, 6/20: Feinstein halts electricity price caps bill=20 Mercury News, 6/20: FERC's fixes have fallen short (Commentary) OC Register, Wed, 6/20: Easing the crunch on costs of power (Commentary) Individual.com (Bridgenews), Wed, 6/20: [B] POWER UPDATE/ US Senate panel to hold off vote on Calif. cap bill=20 Individual.com (Bridgenews), Wed, 6/20: [B] FERC order seen having little= =20 effect on US generator profits Individual.com (PRnewswire), Wed, 6/20: SCE Unveils Rotating Blackout Web S= ite and Public Notification Plan=20 Individual.com (AP), Wed, 6/20: Edison CEO/ Ruling Hasn't Helped NY Times, Wed, 6/20: At Last, Action on California (Editorial) NY Times, Wed, 6/20: Regulators' Order Could Bring Broad California Power= =20 Accord Wash. Post, Wed, 6/20: Davis Finds Hope in Calif. Power Crunch NY Times, Wed, 6/20: The Lesson of When to Give Aid to Free Markets ---------------------------------------------------------------------------= --- ------------------------------- Weather an early test for fee caps: Any severe jump in prices will likely b= e=20 curbed, experts say. By Dale Kasler Bee Staff Writer (Published June 20, 2001)=20 California electricity prices have shot back up recently, potentially posin= g=20 an early test of a new federal price-control plan that takes effect today.= =20 Warm weather has sent wholesale prices doubling this week, partially=20 reversing a dramatic slide that had some state officials believing they'd= =20 tamed the wildly unpredictable California electricity market.=20 The rebound in prices "would be expected," said Arthur O'Donnell, editor of= =20 the California Energy Markets newsletter. "It's 110 degrees in Phoenix, and= =20 it's 100 degrees (in Sacramento) and points in between."=20 Prices this week moved back above $100 a megawatt hour, about double what= =20 they were last week -- although well below the roughly $300 suppliers were= =20 charging California in mid-May. Prices showed signs of stabilizing Tuesday,= =20 analysts said.=20 Experts said the Federal Energy Regulatory Commission's new price-mitigatio= n=20 plan is likely to curb the most severe price spikes. "This will eliminate t= he=20 astronomical prices," said Severin Borenstein, director of the University o= f=20 California Energy Institute.=20 But the plan probably won't bring California a cascade of cheap power,=20 either.=20 Prices likely will bump up constantly against FERC's new price caps, which= =20 will fluctuate from time to time, and they're not likely to go much below t= he=20 caps unless there's a significant glut of energy, said Peter Stiffler of th= e=20 energy consulting firm Economic Insight Inc.=20 "Traders will always trade in at the price ceiling," Stiffler said. "They'r= e=20 going to offer power at the highest price they can."=20 The fluctuating FERC caps are tied to the production costs of the=20 least-efficient, most-expensive generating plant operating in California wh= en=20 supplies are tight and an official "power alert" is declared by the state's= =20 Independent System Operator, which runs most of the power grid. When there= =20 isn't a power alert, prices can't exceed 85 percent of the price establishe= d=20 during the most recent alert.=20 FERC said the system would begin today with a cap of $108.49 a megawatt hou= r=20 but would rise to $127.64 if a power alert is declared.=20 But the cap can fluctuate significantly. Under the old FERC plan, the price= =20 cap in May was set at $267 a megawatt hour. The old plan was similar to the= =20 new system but applied only to California and only kicked in during power= =20 alerts.=20 With the caps flexible, generators could have incentives to withhold power = at=20 some plants in order to raise the caps, said Stanford University economist= =20 Frank Wolak.=20 The FERC plan "still doesn't solve the problem of withholding," said Wolak,= =20 chairman of the ISO's market surveillance committee.=20 Wolak also said he's afraid FERC will let power generators exaggerate their= =20 costs in order to bump up the caps.=20 "The good news is, they seem to be more serious," Wolak said of the=20 oft-criticized commissioners. "But given how many times we've been taken in= ,=20 I'm wary."=20 In addition, generators will be allowed to exceed the price caps if they ca= n=20 justify it to FERC officials. Borenstein said FERC in the past has allowed= =20 generators to justify just about every price level imaginable, and he's=20 suspicious that the commission will let generators do the same in order to= =20 evade the new price controls.=20 State officials, while cautiously optimistic about the plan, were upset tha= t=20 FERC will allow a 10 percent price premium on electricity because of the ri= sk=20 of selling to the California market.=20 "We recognize that the risk of nonpayment in California continues to be=20 greater" than in other states, the commission said in its written opinion,= =20 released late Tuesday.=20 Gov. Gray Davis' spokesman, Steve Maviglio, called the premium ludicrous=20 because the state Department of Water Resources has been buying electricity= =20 ever since the state's troubled utilities exhausted their credit in=20 mid-January.=20 "The state is as creditworthy a buyer as you can get," Maviglio said.=20 Experts said the plan also won't correct the state's energy imbalance.=20 "None of this is going to have much effect on blackouts," Borenstein said.= =20 "This is solving part of the problem; I'm worried people will think=20 everything has been solved.=20 "The emphasis now has to be on getting California to conserve," he added.= =20 A spokesman for power generators, Gary Ackerman, said the price controls=20 could worsen shortages this summer and will discourage generating firms fro= m=20 investing in the new power plants the West desperately needs.=20 Builders "are going to sit on the fence and think about this," said Ackerma= n,=20 head of the Western Power Trading Forum.=20 Acting in the face of mounting political pressure and unrelenting criticism= =20 from California, FERC voted Monday to impose round-the-clock price controls= =20 throughout the 11-state Western region.=20 The FERC plan replaces a three-week-old plan that applied only to Californi= a=20 and took effect only when power reserves fell to below 7 percent of demand= =20 and an official "power alert" was declared.=20 By extending the plan to the entire West, experts said the commission=20 probably put an end to the phenomenon known as "megawatt laundering," in=20 which power was shipped out of California and then re-imported. Imported=20 power wasn't subject to the old price controls.=20 The new controls, said consultant Stiffler, "significantly narrow the abili= ty=20 of a trader to move power around and play the market."=20 The Bee's Dale Kasler can be reached at (916) 321-1066 or [email protected]= m. State to borrow up to $5 billion to buy energy=20 By Emily Bazar Bee Capitol Bureau (Published June 20, 2001)=20 State Treasurer Phil Angelides announced Tuesday that he will borrow up to = $5=20 billion to pay for future power purchases, a move he said was necessary to= =20 avoid a continued drain on California's budget and cuts in other state=20 programs.=20 Since mid-January, energy purchased by the state Department of Water=20 Resources on the spot market and under long-term contracts has come out of= =20 the state's general fund, the source of most state spending.=20 Once the loan becomes final by the end of next week, however, energy will b= e=20 purchased with the proceeds.=20 Made possible by an emergency order from the governor, the loan ultimately= =20 will be paid off by customers of the state's investor-owned utilities throu= gh=20 their electricity rates.=20 "In essence, it stops the general fund bleeding," Angelides said.=20 The state has so far committed $8.2 billion from the general fund to=20 electricity purchases. Of that amount, Angelides said the Department of Wat= er=20 Resources has actually spent about $6.1 billion through June 12 on power=20 purchases, and has received about $900 million back from customers'=20 electricity rates.=20 Officials expect the loan to finance power purchases through September, whe= n=20 they plan to issue up to $13.4 billion in revenue bonds.=20 The bonds will reimburse the general fund and and pay off the loan.=20 "This gives the state some more running room, some more cushion in case=20 anything goes awry with the bond sale to make sure ... the state does not r= un=20 out of general fund money, jeopardizing education programs, law enforcement= =20 programs, children's and health services," the Democratic treasurer said.= =20 Angelides said he has obtained firm commitments for $3.5 billion from JP=20 Morgan and Lehman Brothers at a blended interest rate of about 4.5 percent.= =20 If the long-term bonds are not issued by Oct. 31, the interest rate would= =20 climb to about 7 percent.=20 Lawmakers initially had hoped to close the short-term loan in May and float= =20 the long-term bonds shortly thereafter. However, Republicans in the state= =20 Legislature balked at the plan, forcing the delay of the bond sale until=20 mid-August.=20 Rather than wait, Gov. Gray Davis invoked his emergency powers to allow for= =20 the loan and circumvent the delay.=20 Assembly Republicans don't mind that the governor used his emergency powers= =20 to expedite the loan, said James Fisfis, a spokesman for the caucus. Instea= d,=20 he said, they're concerned the loan could backfire and hurt Californians.= =20 "If the larger bond offering falls through, the penalties and added interes= t=20 could add up on ratepayers' bills," he said.=20 But Angelides argued that the loan would benefit ratepayers on several=20 fronts: Power generators can no longer argue the state should pay a "credit= =20 premium" on electricity, he said, and for the most part will not be able to= =20 walk away from long-term energy contracts that have provisions requiring th= e=20 Department of Water Resources to obtain external financing by July 1.=20 Outside the Legislature, the announcement drew praise from financial analys= ts=20 who had criticized the state for buying power with taxpayer money.=20 In late April, for instance, Standard & Poor cited fears over the state's= =20 mounting power costs when it downgraded California's credit rating on state= =20 bonds.=20 But S&P managing director Steven Zimmermann called the governor's executive= =20 order a step in the right direction.=20 "We're very happy," Zimmermann said. "We were very anxious for the state to= =20 take the general fund out of the energy purchasing position it's been in."= =20 The Bee's Emily Bazar can be reached at (916) 326-5540 or [email protected]= . Dan Walters: Once burned, lawmakers are very wary of Davis-Edison agreement (Published June 20, 2001)=20 The Capitol's politicians rarely attempt to resolve big, complicated policy= =20 issues, preferring to occupy their time with relatively trivial matters --= =20 which also tend to be the priorities of well-heeled and generous interest= =20 groups.=20 And when they even acknowledge a need to address something big, they'll oft= en=20 just nibble at the edges rather than confront the underlying conflicts=20 squarely. That's been the pattern on water, transportation, population grow= th=20 and public education, to name but a few of many examples.=20 The Capitol completed just one comprehensive, or seemingly comprehensive, b= it=20 of policymaking during the last quarter-century. But the issue on that=20 occasion was electric utility deregulation, which has exploded into an ener= gy=20 crisis of monumental proportions. And that experience is having a paralyzin= g=20 effect on the Capitol's denizens.=20 Some Capitol old-timers call it "1890 disease," named after the number of t= he=20 1996 bill that created California's fatally flawed system of pricing electr= ic=20 power. The legislation was written largely by lobbyists for affected intere= st=20 groups and then presented to the full Legislature for take-it-or-leave-it= =20 approval. The measure was passed without a single dissenting vote, even=20 though only a few lawmakers even began to understand its ramifications.=20 It was a huge failure of the legislative process, virtually a dereliction o= f=20 duty, and those who participated have been doing some fancy explaining. But= =20 given the history, both veteran legislators and those who came to the Capit= ol=20 after 1996 are very leery about putting their names on additional pieces of= =20 energy policy that could backfire if the real-world outcome is markedly=20 different from the purported effects.=20 One example is the $43 billion in long-term energy supply contracts=20 negotiated by Gov. Gray Davis' administration to end the state's dependence= =20 on volatile spot market prices. When the long-term contracting program was= =20 authorized by the Legislature early this year, it was on the assurances of= =20 the administration that it could obtain large quantities of power at cheap= =20 prices. But by the time that the contracts were made final, months later, t= he=20 average price was 25 percent higher than what was stated earlier, while the= =20 spot market had fallen dramatically. Now the long-term contracts that seeme= d=20 like such a good idea in January and February could become financial=20 albatrosses.=20 An even more telling example is the deal Davis made with Southern Californi= a=20 Edison to keep the utility from joining Pacific Gas and Electric in=20 bankruptcy. The utilities accumulated at least $13 billion in debts in six= =20 months, buying power at prices much higher than they were allowed to=20 recapture from their customers. Consumer groups are denouncing the Edison= =20 deal as a corporate bailout that would impose multibillion-dollar burdens o= n=20 customers while imposing virtually no financial onus on Edison or its=20 creditors. And the deal's critics are pouncing on legislators' reluctance t= o=20 do something that might haunt them later -- especially in 2002, a critical= =20 election year.=20 "Five years ago, lawmakers and the utilities foolishly foisted this=20 deregulation scheme onto California consumers, and now the governor and=20 Edison expect the ratepayers to pay billions more to save the utilities fro= m=20 their own mismanagement and bad policy decisions," consumer gadfly Harvey= =20 Rosenfield said Tuesday as legislative hearings opened on the Edison deal.= =20 "This time, the whole world is watching the Legislature."=20 Harry Snyder of Consumers Union echoed Rosenfield's pledge to hold=20 legislators accountable. "It looks a lot like 1890," Snyder said. "It's too= =20 big, (and) this is the same process all over again."=20 The sheer complexity and potential ramifications of the deal are weighing= =20 heavily on lawmakers. "This is not a Mother's Day resolution," Senate Energ= y=20 Committee Chairwoman Debra Bowen said wryly as the hearings began. Davis an= d=20 Edison lobbyists are pulling out all the stops, but legislators are very,= =20 very nervous about taking another big step that could generate public=20 backlash.=20 The Bee's Dan Walters can be reached at (916) 321-1195 or [email protected]= om . Senate Democrats lay back to see if FERC action provides rate relief=20 By Finlay Lewis COPLEY NEWS SERVICE=20 June 19, 2001=20 WASHINGTON =01) Key Senate Democrats called a truce Tuesday in the politica= l=20 wars raging over California's energy crisis, as they adopted a wait-and-see= =20 posture over the Federal Energy Regulatory Commission's latest order=20 restricting electricity prices across much of the West.=20 Senators of both parties expressed relief over FERC's action on Monday. But= =20 Sen. Dianne Feinstein, D-Calif., said she was skeptical that the order woul= d=20 end wholesale price manipulation by power providers or result in refunds to= =20 overcharged ratepayers.=20 Feinstein and Sen. Gordon Smith, R-Ore., have prepared legislation seeking = a=20 much tighter pricing formula than the one FERC used. But she asked that the= ir=20 bill be set aside temporarily in deference to the agency's action.=20 "I think we should wait and see what happens," Feinstein said during a Sena= te=20 Energy and Natural Resources Committee hearing on the FERC order.=20 Democrats on the committee pressed FERC Chairman Curtis L. Hebert and the= =20 four other commissioners on why they had not acted sooner to control the=20 daily price turbulence in the California energy market. A market-interventi= on=20 order issued by FERC in April was designed to cope only with energy-supply= =20 emergencies, despite pleas by California Gov. Gray Davis and other Californ= ia=20 Democrats for more drastic measures.=20 "It's time to stop blaming and start problem-solving," said Hebert, a=20 Republican appointed chairman by President Bush.=20 Hebert noted that electricity prices on the volatile spot market have dropp= ed=20 considerably since the April order. Prices on the energy futures market hav= e=20 also tumbled, as have natural gas prices =01) a key component in the cost o= f=20 electricity.=20 On Monday, FERC unanimously ordered around-the-clock restraints on wholesal= e=20 electricity prices in California and 10 neighboring states over the next 15= =20 months.=20 As was the case with the April measure, prices will be pegged to the costs = of=20 the least efficient power provider when reserves in California fall below 7= =20 percent. But when reserves are more plentiful, the prices will drop to 85= =20 percent of the level established during supply shortages.=20 The order also provides for a 22-day period, involving arbitration and revi= ew=20 by an administrative law judge, for resolving price-gouging allegations and= =20 providing refunds in cases of improper pricing.=20 Adamantly opposing price controls earlier, FERC acted after coming under=20 intense pressure from lawmakers of both parties. Republicans said they were= =20 worried that their GOP colleagues in California would have been blamed and= =20 possibly imperiled at the polls if FERC had failed to act.=20 Bush, who also took a hard line against price caps, blessed FERC's action= =20 after it was taken.=20 Hebert criticized the bill advanced by Feinstein and Smith as an attempt to= =20 solve California's problem by "bureaucratic fiat."=20 Their measure would calculate wholesale electricity prices based on the=20 reported production costs of the individual generators, with an added=20 allowance for a profit margin.=20 Hebert argued that the "mitigation price" that FERC will establish "is not = a=20 blunt, arbitrary figure that bears no resemblance to market conditions and = is=20 subject to political pressures and whims."=20 Meanwhile, Commissioner William Massey made it clear that he harbors=20 misgivings about the FERC measure, although he supported it.=20 He said the agency should have acted earlier to avoid the subsequent=20 "carnage" in California, has failed to provide guidelines that would assure= =20 refunds to overcharged consumers and has acted questionably in allowing pow= er=20 providers to impose a 10-percent surcharge to cover credit-worthiness risks= .=20 Massey, a Democrat who has consistently criticized his colleagues for movin= g=20 too slowing in the California crisis, also said he wondered whether the ord= er=20 would provide an unintended incentive for generators to continue using=20 inefficient units in order to assure higher profit margins for their more= =20 modern facilities.=20 Sen. Barbara Boxer, D-Calif., said she would propose legislation later this= =20 week designed to assure refunds to customers who have had to pay unfair=20 prices for their electricity.=20 "If FERC won't do it ... Congress should," Boxer said.=20 A spokesman for Sen. Jeff Bingaman, D-N.M., chairman of the committee, said= =20 Bingaman agreed with Feinstein on the need for a time-out while the FERC=20 order is being implemented.=20 Gov. Davis will testify today (6/20) before the Senate Government Affairs= =20 Committee, which is investigating FERC's role in the crisis. Hebert and the= =20 other commissioners will also appear.=20 House panel erases Bush energy cuts=20 By Alan Fram ASSOCIATED PRESS=20 June 19, 2001=20 WASHINGTON =01) A House subcommittee voted Tuesday to spend $1.2 billion mo= re=20 next year than President Bush proposed for energy and water programs,=20 underlining lawmakers' sensitivity to the West's power problems and their= =20 desire for home-district projects.=20 The $23.7 billion measure, approved by voice vote by a panel of the House= =20 Appropriations Committee, is normally one of the more routine of the 13=20 annual spending measures Congress must approve. But with this year's=20 escalating battle between Bush and Democrats over energy policy, the=20 measure's profile has been raised.=20 The bill would provide $18.7 billion for the Energy Department, $641 millio= n=20 more than Bush requested and $444 million more than this year. Fiscal 2002,= =20 which the bill covers, begins Oct. 1.=20 It also includes nearly $4.5 billion for the Army Corps of Engineers and th= e=20 hundreds of water projects it has under way across the country, $568 millio= n=20 more than Bush proposed but $73 million less than this year.=20 The measure was approved shortly after top members of the committee met wit= h=20 Bush at the White House.=20 Participants said Bush and the lawmakers reaffirmed their goal of keeping t= he=20 price tag of the 13 bills to $661 billion, which is one-third of the overal= l=20 federal budget. That would be a 4 percent boost over 2001, which many=20 Democrats =01) and some Republicans in private =01) say is too low.=20 "He said there would be attempts to raise this as we go through the process= ,=20 and let's stick with him," said Rep. Sonny Callahan, R-Ala., chairman of th= e=20 energy and water subcommittee.=20 Illustrating the pressures Republicans face, David Sirota, spokesman for th= e=20 Democrats on the committee, said the bill lacked the new spending needed fo= r=20 renewable energy and other programs that could help alleviate power=20 shortages.=20 Under the bill approved Tuesday, renewable energy programs would get $377= =20 million, $100 million more than Bush wanted and $1 million more than this= =20 year. Nuclear energy, basic energy sciences, biological and environmental= =20 research and a study of whether spent nuclear fuel should be stored at a=20 Nevada site would all get about what Bush proposed.=20 The bill's $7.03 billion for environmental cleanups is $699 million more th= an=20 Bush proposed. Programs aimed at containing the nuclear arsenals of former= =20 Soviet states would get $845 million, $71 million more than Bush's plan.=20 Members voted to hold the brief meeting behind closed doors after citing th= e=20 national security sensitivity of publicly discussing some of the nuclear=20 weapons programs covered by the bill.=20 Davis, Regulators Face Off at Hearing From Reuters=20 ?????WASHINGTON -- California Governor Gray Davis, a Democrat, today blamed= a=20 Republican-led energy regulatory agency for not doing enough to help his=20 energy-starved state and demanded refunds of $6.7 billion for alleged=20 price-gouging by power generators. ?????Davis, whose political future has been linked to his state's electrici= ty=20 woes, was testifying at a Senate hearing with members of the Federal Energy= =20 Regulatory Commission. ?????The hearing marked the first time that Davis met face to face with all= =20 five FERC commissioners. ?????FERC regulates interstate electricity markets and has jurisdiction to= =20 order refunds by power generators found to have overcharged utilities. ?????Earlier this week the agency, led by a Republican majority, rejected= =20 Davis' pleas for strict caps on prices that soared above $400 per megawatt= =20 hour last month. ?????Sen. Joseph Lieberman, the former Democratic vice presidential nominee= ,=20 heads the Senate Governmental Affairs Committee that quizzed the FERC=20 commissioners and Davis on efforts to stabilize the chaotic Western=20 electricity market. ?????Davis accused FERC of failing to act aggressively against alleged=20 price-gouging by out-of-state generators. ?????"To date, not a single penny in refunds has been returned to=20 Californians," Davis said. "It is unconscionable for the generators to prof= it=20 from their egregious overcharges. FERC must move quickly to enforce the law= =20 and order the energy companies to give back the money." ?????Davis said the state is owed refunds of at least $6.7 billion.=20 California's grid operator has estimated that from May 2000 to May 2001,=20 power generators charged the state nearly $9 billion more than a competitiv= e=20 market would warrant, he said. ?????California, the nation's most populous state, has been hit with a seri= es=20 of rolling blackouts, the bankruptcy of its largest utility, and an economi= c=20 slowdown since the power crisis began last year. ?????The state is expected to convene a criminal grand jury to investigate= =20 whether some power generators withheld supplies, shut down plants or=20 exploited the bidding process to drive up prices. Out-of-state generators= =20 deny any illegal activity, saying the high prices simply reflect supply=20 shortages. ?????Today also marks the day that FERC's newly expanded "price mitigation"= =20 program goes into effect in all 11 Western states with a wholesale price=20 limit of $107.9 per megawatt hour linked to a market formula. The plan had= =20 previously applied only to California during emergency power outages. ?????Since FERC's action earlier this week, Senate Democrats dropped a=20 legislative effort to strictly cap electricity prices in the West. However,= =20 California Democrats in the House were still trying to force a full vote on= a=20 package of energy amendments, including a price cap. ?????The Bush administration and many Republicans oppose price caps,=20 contending they would discourage more power production. ?????Separately, today the U.S. Energy Department issued a study that=20 supported the White House's view that strict price caps would hurt, not hel= p,=20 California. ?????The study found California faces about 113 hours of rolling blackouts= =20 this summer, a level that would double if wholesale prices were capped at= =20 $150 per megawatt because some 3,600 megawatts of generating capacity would= =20 shut down. An alternative approach of setting a price cap based on producti= on=20 costs plus $25 per megawatt would delay or close about 1,300 megawatts of= =20 capacity scheduled to be built in the state, according to the study. ?????However, lawmakers from both political parties have scrambled for some= =20 kind of solution to address the shortages in California well before the=20 congressional elections next year. ?????The FERC plan expands an existing "price mitigation" program in=20 California to 10 other Western states. The plan, which runs through Septemb= er=20 2002, means that during nonemergency periods the price for wholesale power= =20 cannot exceed 85 percent of the cost of electricity sold during a Stage 1= =20 power shortage emergency in California. ?????A Stage 1 emergency is declared when electricity supplies fall below 7= =20 percent of demand on the Western power grid. ?????The plan also imposes a 10 percent surcharge on all power sales into= =20 California as financial protection for generators reluctant to sell to the= =20 state's financially weak utilities. ?????Davis was due to meet the two newest FERC commissioners, Patrick Wood = of=20 Texas and Nora Brownell of Pennsylvania, today. Both are former utilities= =20 regulators in states that successfully deregulated their power industry and= =20 nominated to the agency by President Bush. Copyright 2001 Los Angeles Times=20 NEWS ANALYSIS Energy on Agenda, but Issue Is Blame=20 Politics: Gov. Davis will try to sway voter anger toward the GOP as he face= s=20 a Senate panel.=20 By RONALD BROWNSTEIN, Times Political Writer=20 ?????WASHINGTON--When California Gov. Gray Davis testifies at a high-profil= e=20 Senate hearing today, the issue formally on the table will be the expanded= =20 electricity price controls that federal regulators approved this week. But= =20 the session's political subtext will be the escalating struggle between Dav= is=20 and national Republicans to determine where California voters look for=20 solutions--and blame--for the state's power woes. ?????In both California and Washington, Republican strategists believe Davi= s=20 is trying to manufacture a succession of conflicts with the White House tha= t=20 will allow him to run in 2002 as much against President Bush as against=20 whomever the state GOP nominates in the gubernatorial race. In return,=20 Republicans are trying to shift the focus back toward Davis--most=20 aggressively through a California-wide television advertising campaign=20 organized by Scott Reed, a former executive director of the Republican=20 National Committee. ?????"Our goal is to get the focus back to Sacramento, where it belongs,"= =20 Reed said. ?????Both sides see the same prize in this tug of war: the opportunity to= =20 determine where most Californians direct their anger during what could be a= =20 long, hot summer of power shortages. ?????"The situation is that the public's minds are not made up on this=20 issue--whether it is Sacramento or Washington who has acted too little, too= =20 late," said Mark Baldassare, a pollster at the independent Public Policy=20 Institute of California. "That gives both sides an opportunity to get their= =20 messages out. The stakes are fairly high in terms of how the public in=20 California ends up assessing blame over the next few months." ?????A Slight Uptick in Davis' Popularity ?????Overall, Davis' political situation appears to be stabilizing. After= =20 months of runaway power costs, the prices the state pays for wholesale=20 electricity are falling and new plants will come online next month. And=20 following a free fall in private polls, Davis has seen his numbers tick bac= k=20 up slightly. Similarly, a poll financed by independent power generators=20 showed that in mid-June, for the first time in months, Californians were=20 becoming slightly more confident that the crisis is easing. ?????Within the state Capitol, Davis is asserting himself, demanding that= =20 lawmakers hold hearings on his rescue plan for Southern California Edison. = On=20 Monday, he released details of a similar plan for San Diego Gas & Electric.= =20 Last week, he announced an agreement that is likely to increase generation = by=20 alternative energy producers, who account for about a fourth of the state's= =20 supply. ?????"This guy is changing," said state Sen. Steve Peace (D-El Cajon), who = a=20 few months back had been urging that Davis take a more aggressive stance on= =20 the crisis. "There is a difference in his demeanor and focus." ?????Yet the energy crisis still looms as a vast cloud over a reelection=20 campaign that once looked like a stroll on the beach. ?????The paradox for Davis is that the substantive victory for pricecontrol= =20 advocates at the Federal Energy Regulatory Commission meeting this week may= =20 complicate his political goal of maintaining a heavy focus on Washington.= =20 Though Davis and some congressional Democrats portrayed FERC's decision as= =20 insufficient, it appears to have lanced the pressure for federal legislatio= n=20 to impose the tighter price controls that Davis supports.=20 ?????Sen. Dianne Feinstein (D-Calif.), a principal sponsor of that bill, on= =20 Tuesday announced she would shelve the measure for six months to give the n= ew=20 FERC plan time to work. ?????As a result, the political effect of the FERC ruling could be to shift= =20 the focus away from Washington back toward decisions in Sacramento, which i= s=20 exactly what Republicans prefer. "Gray Davis is the dog that finally caught= =20 the car," said Dan Schnur, a San Francisco-based GOP consultant. "Davis is= =20 going to keep screaming about price caps and refunds, but now Republicans c= an=20 point to substantive action." ?????Davis: 'Much More They Should Do' ?????For months, Davis has criticized Bush for refusing to support=20 electricity price controls and other measures that the governor says could= =20 ease California's energy crunch. At almost every opportunity, Davis offers= =20 the same message: California is taking the steps it needs to, but Washingto= n=20 has failed to help enough. That was precisely Davis' message Monday when FE= RC=20 significantly expanded the limited price caps it had imposed previously. ?????While saying that FERC had "finally taken a step in the right=20 direction," Davis added: "There is much more they should do"--including=20 providing refunds to California for alleged overcharges. The overall tone o= f=20 Davis' statement was much more skeptical about FERC's action than the remar= ks=20 from Feinstein, who described the decision as "a giant step forward." ?????Aides say Davis plans to repeat that two-part message in his appearanc= e=20 today before the Senate Governmental Affairs Committee, chaired by Sen.=20 Joseph I. Lieberman (D-Conn.). In his testimony, and in a round of schedule= d=20 television appearances, Davis will demand that FERC order refunds in the=20 range of $5 billion to $6 billion to the state, aides said. Davis also will= =20 distribute to every member of Congress a 177-page book chronicling the=20 state's response to the crisis. ?????Inside the Bush White House, some officials see in Davis' cool respons= e=20 to FERC's decision more evidence that the governor is determined to use the= =20 White House as a foil in his reelection campaign. The prevailing view, one= =20 official said, is that, no matter what concessions the administration offer= s,=20 Davis will immediately raise the bar and demand something else--the way he= =20 did by talking about rebates as soon as FERC offered tougher price controls= . ?????"That is Davis' M.O.," said one official involved in the White House's= =20 energy strategy. "He asks the administration to do something, the=20 administration does it, and then he attacks the administration for not doin= g=20 enough. . . . He needs someone to blame." ?????Davis aides reject that characterization, arguing that the governor is= =20 merely representing the state's interests against an administration that th= ey=20 maintain is favoring energy producers over consumers. But Davis advisors=20 acknowledge that they have used focus groups to test campaign messages that= =20 pin the blame for the energy crunch primarily on Davis' Republican=20 predecessor, Pete Wilson, and a "Republican president who has failed to sto= p=20 his rich friends in the energy industry" from gouging consumers, one aide= =20 said. ?????"You don't have to tell people in focus groups more than once how this= =20 is connected," the Davis aide said. ?????Gubernatorial Rivals Are Free of Blame ?????Baldassare, the independent pollster, notes it may be especially=20 imperative for Davis to keep Bush's energy decisions in the spotlight becau= se=20 none of his potential Republican opponents in 2002--California Secretary of= =20 State Bill Jones, former Los Angeles Mayor Richard Riordan or businessman= =20 William E. Simon Jr.--is easily tagged with complicity in the problem. "Non= e=20 of them were really involved in the decision-making over deregulation,"=20 Baldassare said. "The only one else to blame, in a political sense, is=20 Washington and the Bush administration." ?????The new independent advertising campaign against Davis was inspired=20 largely by the fear of that strategy succeeding--damaging the standing in= =20 California not only of Bush but also of other Republicans, particularly tho= se=20 in Congress. Reed, whose American Taxpayers Alliance is funding the ads, sa= id=20 he decided to launch the campaign after Davis appeared to gain the upper ha= nd=20 in the media debate following Bush's visit to California late last month. ?????"The Bush trip really changed the terms of debate about Davis' problem= =20 and made it more of a possible national Republican problem," Reed said. "Th= e=20 entire terms of debate turned around and was focused on the issue of price= =20 caps as opposed to negligence on Davis' behalf. Our group is attempting to = go=20 out and engage Davis." ?????To "engage" Davis, Reed's group, which has not revealed its donors, is= =20 spending what he said would be $1.5 million on an initial ad criticizing=20 Davis this week, though a spot check of TV stations around the state=20 indicated a far more modest buy. Reed said the group is planning to air a n= ew=20 ad as soon as this week. ?????Democrats plan to answer the ads with attacks of their own and will be= =20 filing complaints with the IRS and other federal agencies about the anonymo= us=20 funding of the Reed ad. ?????Today's Senate hearing will give Davis another chance to respond to th= e=20 GOP and make his case for greater help from Washington. But Lieberman aides= =20 acknowledge the hearing is likely to be much less confrontational than it= =20 would have been if FERC had not acted Monday. The agency's decision "change= d=20 the dynamic," the aide said. ?????That assessment may apply not only to the conflict between FERC and it= s=20 critics but also equally to the hostilities between Davis and the White Hou= se. ---=20 ?????Times staff writers Dan Morain in Sacramento and Mark Z. Barabak in Lo= s=20 Angeles contributed to this story. Copyright 2001 Los Angeles Times=20 Blackout Forecasts' Dark Side=20 If optimists are wrong and the power runs out, California's energy crisis= =20 could quickly cost lives and cripple the economy.=20 By JENIFER WARREN, Times Staff Writer=20 ?????It's here. Summer 2001, the blackout season, is only a day away. ?????Already Californians anticipate power outages when temperatures rise. = By=20 August, the occasional annoyances endured so far--stoplights gone dark,=20 computers, air conditioners and elevators idled--could seem almost quaint. ?????Gov. Gray Davis insists we needn't worry. Four large new power plants= =20 are firing up soon, he said, and government's best and brightest are lockin= g=20 up still more megawatts to help meet our peak summer need. Californians,=20 Davis predicts, will valiantly heed his call to conserve, helping the state= =20 survive the hot months, no sweat. ?????With luck, he'll be right. Power prices have stabilized, and some ener= gy=20 analysts are wondering whether California may have tamed the blackout beast= . ?????But what if those plants don't get built in time, people don't trim=20 their electricity use 7% and energy imports are more meager than expected? ?????And what if the state gets hit by a summer that is not moderately hot,= =20 as Davis bets, but blistering, record-setting hot? ?????Government experts who ponder such questions don't expect disaster in= =20 the coming months. But they are planning for it nonetheless. ?????At best, they say, Californians can expect some gridlocked=20 intersections, an occasionally overloaded 911 system, perhaps some business= =20 bankruptcies, certainly inconvenience. At worst, the Western power grid cou= ld=20 crash, causing uncontrolled blackouts that might lead to looting,=20 contaminated water supplies, even civil unrest. ?????"How bad could this summer get?" said state Sen. Joe Dunn (D-Santa Ana= ).=20 "This summer could be the worst disaster to ever hit the state of Californi= a." ?????Imagine it's a Thursday morning in the third week of July. Relentless= =20 heat grips California, the curse of a stubborn high-pressure ridge that jus= t=20 won't budge. ?????As air conditioners from Redding to Chula Vista lumber to life, manage= rs=20 of the state's power grid in Folsom gulp their third and fourth cups of=20 coffee, stare at a bank of computers and begin to fret. ?????Demand is jumping. Supply is static, Canada and Arizona have nothing t= o=20 sell. It's looking tight. ?????Thirty minutes later, the picture is gloomier. A brush fire shuts down= =20 transmission lines near Fresno, squeezing supply in the Central Valley. In= =20 the Bay Area, the unusual heat drives demand well past projections. ?????By noon things look bleak. Operators of the Diablo Canyon nuclear powe= r=20 plant near San Luis Obispo have cut output by 80%. The trouble? Chunks of= =20 kelp have lodged in one of the plant's seawater intake valves, creating a= =20 clog like one that plagued the facility in January. ?????With a chorus of groans, the grid's keepers scour the market for power= =20 to offset the Diablo loss. No luck. As the mercury climbs and the Golden=20 State economy roars into full swing, electricity consumption ticks upward,= =20 minute by minute. And when managers of a power plant near Long Beach cut=20 output because of a cracked turbine, everyone knows what it means. ?????Alert the utilities. It's lights out, California, for the fourth day i= n=20 a row. ?????Dr. J. Michael Leary dreads blackouts--not personally, but=20 professionally. Leary is an emergency room physician in the desert city of= =20 Rancho Mirage. When air conditioners go on the blink there, the=20 victims--scores of them, mostly old folks--wind up in his ER. ?????In a normal year, 75% of his emergency patients are geriatrics. Like= =20 infants, the elderly are unusually vulnerable to the heat. When blackouts= =20 hit, they are most at risk. ?????"It's as if you lived in Maine and they turned the heat off in January= ,"=20 Leary said. "This is an extreme environment we live in. The effects can be= =20 devastating." ?????Many desert seniors are on fixed incomes and live in mobile homes, som= e=20 of them poorly insulated boxes that turn into ovens under the brutal summer= =20 sun. Take away the air conditioning and the humans inside start baking, qui= ck. ?????For Leary, the specter of continual, back-to-back blackouts in=20 July--and, some predict, in June and August too--conjures images of an=20 82-year-old man, living alone in one of those mobile homes, taking medicati= on=20 for heart disease. The cardiovascular drugs plague the man with numerous si= de=20 effects; one inhibits his body's ability to cool itself. ?????When a person gets overheated, body temperature eventually rises=20 uncontrollably. Then comes a nasty spiral of effects, and pretty soon "you = go=20 into shock," Leary said. "Everything just shuts down." ?????On average each year, 371 Americans die from heat-related causes, more= =20 than the number killed by earthquakes, tornadoes, hurricanes, lightning and= =20 floods combined. In 1995, a record hot spell in Chicago killed 465 people.= =20 Eleven Californians died from the heat in 1998. ?????A new report by the United Seniors Assn. predicts that more than half = a=20 million elderly Californians could need hospitalization for heat-related=20 ailments this summer.=20 ?????Some communities have laid plans for cooling shelters, wading pools an= d=20 other measures to provide relief. But will all who need help get it? Or get= =20 it in time? ?????Out in the desert, paramedics expect a crush of 911 calls when the pow= er=20 goes out and the ill, frail and frightened seek help. Leary and others at= =20 Eisenhower Medical Center will be waiting, armed with ice packs, cooled IVs= =20 and ventilators. ?????"I am very, very worried," the doctor said. "I think we'll see a great= =20 toll in human suffering, even mortality." ?????California's tomato processors are no less anxious. They wash, cook,= =20 peel, chop, mash and can about 1 million tons of tomatoes a week from July = to=20 October--enough to account for half the world's supply. For them, a string = of=20 unexpected power losses could mean economic ruin in a matter of days. ?????The reason lies in the peculiar nature of food processing--a sterile= =20 system instantly contaminated if the power fails and the plant's precise=20 temperature is disturbed. ?????Once a batch of tomatoes is tainted, it must be thrown out--all 50,000= =20 pounds. The plant must then be sanitized, a painstaking process that takes= =20 about 36 hours. ?????"If you get hit by blackouts every third day for, say, two weeks, you'= re=20 starting, stopping, cleaning, restarting--it's a nightmare," said Jeff Boes= e,=20 president of the California League of Food Processors. "You could lose thre= e=20 batches and be out $40 million before you knew what hit you." ?????Meanwhile, farmers with still more truckloads of tomatoes line up=20 outside the plant, waiting to be paid for their crop: "If we can't process= =20 them, the farmers have spent an entire season growing them for nothing,"=20 Boese said. ?????In Sonoma County, the object in peril is the chicken. Egg producers=20 equip their laying houses with fans and swamp coolers to keep the hens=20 comfortable. Power is also needed to run giant refrigerators filled with eg= gs. ?????"In a blackout, those hens can overheat in no time," said Rich Matteis= =20 of the Pacific Egg and Poultry Assn. "In 20 or 30 minutes, you could have= =20 100,000 birds die." ?????Many large producers have backup generators, but they are not designed= =20 for ongoing, intensive use. Will they hold up? Small-scale egg producers=20 often have no backup power at all. ?????Hundreds of other California businesses could suffer if summer shapes = up=20 as bad as some predict. ?????The Valero Refining Co. of California, northeast of San Francisco,=20 produces 115,000 barrels of gasoline a day. Because restarting a refinery i= s=20 a complicated task, two or three blackouts close together could prompt=20 officials to shutter it until electricity supplies stabilize--costing=20 California about 10% of its gasoline supply. ?????At a Berkeley medical laboratory, doctors say power losses to their=20 freezers could destroy bone marrow needed to give young leukemia patients= =20 lifesaving transplants. The state's 400 dialysis centers, where patients=20 without kidney function go to have their blood cleansed every other day, ar= e=20 in the same fix. Few have backup generators, so when an outage hits,=20 technicians must crank the machines by hand. ?????Most Californians, of course, face far more ordinary consequences. The= =20 scoreboards will fizzle at summer softball games, joggers on treadmills wil= l=20 be stopped in their tracks, electric organs will go silent, leaving choirs = to=20 sing without accompaniment. ?????Parents will be asked to retrieve children from day-care centers when= =20 the lights and cooling systems conk out. Anniversary lunches may be ruined= =20 when restaurants cannot grill salmon or blend margaritas. ?????Most people will tolerate occasional disturbances, psychologists say,= =20 doing their part in a time of crisis. But what if such irritations become a= n=20 everyday fact of life? ?????Hundreds of "essential" energy users--including prisons, fire=20 departments and airports--are protected from blackouts, and hundreds more= =20 have applied for exemptions. That means the pool of people bearing the=20 blackout burden is shrinking, so more frequent outages are likely. ?????Blackout predictions vary widely, but at least one forecaster, a=20 consultant for California water districts, anticipates an outage almost eve= ry=20 afternoon of every workday this summer if temperatures are unusually warm. ?????Californians are accustomed to trash compactors, giant-screen TVs and= =20 having the Internet at their fingertips. How much deprivation will they=20 tolerate? ?????"So far, the version of blackouts we've experienced hasn't looked too= =20 scary to people--it happens on a workday, in the afternoon, and you basical= ly=20 have to come home and reset your VCR," said Dan Kammen, a professor of ener= gy=20 and society at UC Berkeley. ?????But if outages become daily events, and start to invade the evening=20 hours, the public mood could change abruptly. ?????"When there's a disaster or crisis or trauma, people tend to act=20 heroically and work together," said Robert Butterworth, a Los Angeles=20 psychologist and trauma specialist. "But the civilized behavior only lasts = a=20 short period. Then people start acting in unpredictable ways." ?????That tendency may be exacerbated, Butterworth said, by the nature of t= he=20 energy crisis--not a natural disaster, but a man-made one. ?????"People start to look for a scapegoat," he said. "People will look for= a=20 target, and there's a tendency to strike out at whoever is closest to you." ?????One place that tendency may surface, Butterworth said, is on=20 traffic-clogged roads. Blackouts already have led to scores of accidents. A= dd=20 summer heat to the mix, and repeat the pattern day after day at rush hour,= =20 and motorists' patience could wear thin, law enforcement officials say. ?????"We're bracing for . . . possible acts of violence and road rage," sai= d=20 Sacramento County Sheriff's Lt. Larry Saunders. ?????Lon House is the water consultant who predicts California could see=20 blackouts almost every summer weekday. Among the worries for the 440 water= =20 agencies he represents: losing the ability to pump water during wildfire=20 season. ?????"I'm telling them to be ready for a major earthquake every day this=20 summer--meaning all your power is out throughout your district for multiple= =20 hours," House said. ?????House insists he isn't an alarmist. But on top of the fire fears, he= =20 warns that blackouts of more than a few hours would allow air into water=20 pipes, contaminating supplies. If that happens, Californians would be urged= =20 to boil their water until the system can be disinfected from one end of the= =20 pipe to the other. ?????Though rolling blackouts are risky, they remain essentially a controll= ed=20 phenomenon, occurring when and where the grid managers and utilities decide= .=20 Far more frightening--and devastating--are unexpected, cascading outages th= at=20 could shut down the entire Western power grid. It happened in August 1996,= =20 leaving 4 million people without power during a triple-digit heat wave. ?????The problem began when power lines in Oregon sagged into trees and shu= t=20 themselves off. That triggered a chain reaction of automatic switch-offs an= d=20 oscillating surges of energy that ultimately shut down all four of the main= =20 power arteries between California and the Pacific Northwest. ?????That robbed the system of thousands of megawatts--enough to power the= =20 city of Seattle four times over--and scattered outages across California an= d=20 six other Western states. Thousands of customers were without power for mor= e=20 than a day. ?????Though such an episode is rare, California grid managers say it is mor= e=20 likely today because the system is taxed by the ever-increasing load of=20 electricity it bears. ?????"The system is very dynamic, and when it's heavily loaded and highly= =20 stressed, like it is now, the smallest little thing could cause big trouble= ,"=20 said Kevin Bakker, who oversees California's connection to the greater=20 Western power grid.=20 ?????If a massive, uncontrolled outage should hit, the ramifications could = be=20 dizzying, said Mike Guerin, chief of law enforcement for the state Office o= f=20 Emergency Services. Police departments would probably go to tactical alert,= =20 guarding against looting by criminals who might take advantage of disabled= =20 alarm systems and darkened street lights. ?????In hot areas, cities might convert municipal buses--parked with air=20 conditioners running--into cooling shelters, Guerin said. The state would= =20 provide emergency generators to nursing homes and others in need, while the= =20 California National Guard might be called into action. ?????"With this kind of blackout scenario, you're not worried about the=20 bologna going bad in the refrigerator," Guerin said. "We're talking about= =20 doctors doing surgeries on backup generators for three days. We're talking= =20 about a lot of things we don't like to think about." ---=20 ?????Times staff writers Nancy Vogel and Alexander Gronke and researcher=20 Patti Williams contributed to this story. Copyright 2001 Los Angeles Times=20 FERC Move Short-Circuits Push for Hard Price Caps=20 By RICHARD T. COOPER and JANET HOOK, Times Staff Writers=20 ?????WASHINGTON--The Federal Energy Regulatory Commission's decision to=20 impose full-time price ceilings on wholesale electricity in California and= =20 the West appears to have deflated the congressional drive for a return to= =20 traditional utility regulation. ?????Sen. Dianne Feinstein (D-Calif.), calling the "price mitigation" syste= m=20 FERC unveiled Monday "a giant step forward," announced Tuesday that she is= =20 pulling back her bill to force a return to the "cost of service" pricing=20 system that prevailed before deregulation. Republican Sen. Gordon Smith of= =20 Oregon, a co-sponsor, agreed, as did Sen. Jeff Bingaman (D-N.M.), chairman = of=20 the Senate Energy Committee. ?????House Democrats vowed to fight on for tougher controls, but they were= =20 given little chance to succeed. ?????As a result, although the political blame game will rage on, the reali= ty=20 of a long, ugly summer for California appears to have arrived: at least=20 several months of tears, toil, sweat--and fast-rising electric bills. ?????California consumers are likely to face an unpleasant paradox, energy= =20 analysts said: Given present power shortages, blackouts are virtually=20 inevitable this summer. And, since state authorities are beginning to let= =20 high wholesale prices flow through into retail bills after months of=20 subsidies, many consumers could face higher charges at the same time their= =20 lights begin to flicker. ?????Even if FERC's order succeeds and wholesale prices fall, as they have= =20 begun to do in recent weeks, consumers' bills are likely to rise. Since=20 retail charges lag well behind wholesale prices, closing the gap will=20 probably mean a period of higher costs for consumers, regardless of what=20 happens in wholesale markets. ?????There is light at the end of the tunnel, energy analysts said, but it = is=20 probably a year away. And reaching it, they said, depends in part on=20 government officials taking no action that might spook investors and disrup= t=20 present plans for expanding the region's capacity to generate and deliver= =20 more power. ?????The new FERC system, which its designers said would provide temporary= =20 price relief while preserving incentives for energy investment, imposes=20 cost-based curbs on wholesale prices throughout the West and covers all suc= h=20 sales, not just those during periods of extreme shortages, as did the order= =20 issued in April. ?????FERC Chairman Curtis L. Hebert Jr. told the committee the new system= =20 will prevent "megawatt laundering" and other potential abuses. He said his= =20 agency is "committed to ferreting out any forms of market misbehavior 24=20 hours a day, seven days a week." ?????With the apparent collapse of demands for more intervention, Congress= =20 now seems ready to give FERC a year or more of leeway to see whether its pl= an=20 will curb wholesale prices and create what FERC member Linda Breathitt, a= =20 Democrat, called "a breathing spell" in which California and the West can= =20 "repair their dysfunctional markets." ?????"It still remains to be seen whether there can be manipulation, but I= =20 think we should wait and see," Feinstein said Tuesday at a Senate Energy=20 Committee meeting attended by all five FERC members. The commissioners call= =20 their new system "price mitigation," not price caps, but Feinstein said it= =20 amounts to the same thing. ?????"Whether you call it price mitigation or something else, a rose is a= =20 rose is a rose," said Feinstein, a member of the energy committee. ?????And Sen. Barbara Boxer (D-Calif.), appearing before the committee as a= =20 witness, said: "I was very pleased with [Monday's] about-face by FERC. I=20 believe they have a new tone." ?????Democrats on the other side of the Capitol pledged to keep fighting fo= r=20 traditional regulation, but with Republicans in control of the House, the= =20 struggle appears to be largely symbolic. ?????House Democrats wanted to introduce amendments on price controls and= =20 other energy policy to a mid-year supplemental appropriation bill due to co= me=20 before the House today. However, GOP leaders expected to block Democrats fr= om=20 even offering the amendments on procedural grounds. ?????The most sweeping of the amendments would set cost-based limits on=20 wholesale energy prices in the West. Rep. Henry A. Waxman (D-Los Angeles) a= nd=20 other sponsors insisted that the measure is still needed in spite of the FE= RC=20 action, which he said would continue to provide windfall profits to=20 generators, encourage suppliers to withhold power and do too little to=20 restrain the price of natural gas. ?????He called the FERC policy an "experiment" that is using California and= =20 other Western states as subjects. ?????Similarly, Rep. Nancy Pelosi (D-San Francisco) said: "Although the FER= C=20 decision [Monday] is a step in the right direction, I am concerned it does= =20 not remove incentives for energy suppliers to withhold power, drive up pric= es=20 and gouge consumers." ?????The commission went as far as it did in part because of the specter of= =20 broader price control legislation, Pelosi said. "They felt the heat, they s= aw=20 the amendments coming and decided to act." ?????And Rep. Bob Filner (D-San Diego), in an interview Tuesday, said he wi= ll=20 press ahead with legislation to impose hard price caps. "I would advise the= =20 senators that after a year of dealing with these price gougers that they wi= ll=20 easily manipulate this latest order," he said, calling it a "Swiss cheese= =20 order--full of holes."=20 ?????Feinstein's shift put House Democrats in an awkward political position= =20 because it came just as they prepared to make their big push for tougher=20 controls. But the Democrats tried to minimize the differences in legislativ= e=20 strategy. ?????"She too is waiting to see if the FERC experiment works," Waxman said.= =20 "I'm a little more skeptical, but we're both watching carefully." ?????As a political matter, a Democratic leadership aide acknowledged, the= =20 FERC order muddies the debate at a time when Democrats have been working ha= rd=20 to make it a defining issue--and one they had hoped would help them win=20 control of the House in the 2002 elections. ?????"It's hard to describe to people what the difference is between what w= e=20 want and what FERC has done," said the aide. ?????And Republicans said FERC's action had clearly taken the wind out of t= he=20 sails of price control efforts that some GOP strategists feared might have= =20 passed the House. ?????"I would have thought [it would pass] last week," said John Feehery,= =20 spokesman for House Speaker J. Dennis Hastert (R-Ill.). "But now, with what= =20 FERC did, it takes a lot of air out of the balloon." ?????"I think the FERC action will dissipate that strong push," agreed Emil= y=20 Miller, a spokeswoman for House Majority Whip Tom DeLay (R-Texas). "It will= =20 take the heat off." ?????House Majority Leader Dick Armey (R-Texas) said the message to Democra= ts=20 was, "It's time to come off your political high horse." ?????He said he wanted to keep Democrats from offering their price control= =20 amendment to Wednesday's supplemental appropriation bill because the propos= al=20 is "a political statement, not a policy statement." ---=20 ?????Times staff writers Megan Garvey and Richard Simon contributed to this= =20 story. Copyright 2001 Los Angeles Times=20 Plan Won't Raise Rates, Davis Says=20 Edison: Governor seeks to assure Senate, where Democrats say action is a=20 bailout of nearly bankrupt utility.=20 By CARL INGRAM, Times Staff Writer=20 ?????SACRAMENTO--Gov. Gray Davis sought to assure the state Senate on Tuesd= ay=20 that his plan to save Southern California Edison from threatened financial= =20 collapse would work without increasing customer rates. ?????Davis sent assurances to the Senate Energy Committee through his top= =20 attorney, Barry Goode, who helped negotiate the controversial proposal with= =20 the utility. ?????Senate Republicans have taken a wait-and-see attitude on the plan. But= =20 they generally contend that the business of utilities belongs in the hands = of=20 private enterprise. ?????But Democrats in both houses have charged that the deal between Democr= at=20 Davis and Edison represents a state bailout of the nearly bankrupt=20 Rosemead-based utility. The analysis is shared by leading consumer activist= s. ?????At the first in a series of Senate hearings on the package, which is= =20 considered all but dead in its current form, Sen. Byron Sher (D-Palo Alto)= =20 voiced concerns about political problems with the plan. ?????He asked Goode, who was flanked at a witness table by Edison executive= s,=20 whether monthly bills of the utility's customers would increase as a=20 consequence of approval of the governor's package. ?????"Our models say there will be no additional impact on the ratepayers,"= =20 Goode replied. ?????Other members appeared ready to pursue rate increase questions, but=20 Chairwoman Debra Bowen (D-Marina del Rey) cut them short. She said the issu= e=20 would be fully examined at a later hearing. ?????To spare Edison from going into bankruptcy and to restore its=20 credit-worthiness, Davis and executives of the utility reached a complex=20 compromise in April, the centerpiece of which was a state purchase of=20 Edison's transmission grid for about $2.8 billion, more than twice its book= =20 value. ?????Edison has estimated that it owes $3.5 billion to creditors, including= =20 wholesale power generators, as a result of deregulation of retail electrici= ty=20 prices in 1996. ?????Because of a freeze in retail rates, Edison was prohibited from passin= g=20 its energy costs to customers. ?????Other features of the deal include dedicating a portion of consumer=20 rates to help pay off the debt, a guaranteed 11.6% rate of return to Edison= =20 on its sales and investments, and termination of an ongoing Public Utilitie= s=20 Commission investigation into financial dealings of Edison's parent company= ,=20 Edison International. ?????The energy committee held the hearing for fact-finding purposes and di= d=20 not consider the Edison bill, SB 78x by Sen. Richard Polanco (D-Los Angeles= ). ?????But the Davis-Edison deal has angered consumer activists, who contende= d=20 that bankruptcy for Edison would be preferable. ?????They deplored it as a bailout that would cost Edison customers $5=20 billion to $7 billion. ?????"If the Legislature makes the mistake of forcing the ratepayers of=20 California to pay one more penny to bail out these companies, we will put [= an=20 initiative] right on the ballot," said Harvey Rosenfield of the Foundation= =20 for Taxpayer and Consumer Rights. ?????Consumer organizations in 1998 put to the voters an initiative to junk= =20 the 1996 deregulation law. The measure failed. ?????Rosenfield, Harry Snyder of Consumers Union and Matt Freedman of the= =20 Utility Reform Network all asserted at a news conference that the Davis=20 rescue program should be killed. ?????Snyder, who opposed deregulation, said the governor's bill is shaping = up=20 as a replay of 1996. ?????"It's too big, too complicated. . . . This is the same process that=20 brought about this [deregulation] disaster," Snyder said. ?????Separately, San Diego Gas & Electric agreed Monday to sell its=20 transmission grid to the state for about $1 billion on the same terms as=20 Edison. ?????With all the controversy surrounding the Edison deal, the chance of=20 SDG&E winning legislative approval of its sale is slightly better than 50%,= =20 said Stephen L. Baum, chief executive of Sempra Energy, parent of SDG&E. ?????"I think there's a widely shared view in the Legislature that they don= 't=20 want the state in the long-term business of power procurement. . . . In ord= er=20 to get Edison back into that business there has to be this infusion of=20 capital" to pay off past electricity debts and make the utility=20 credit-worthy, Baum said. ---=20 ?????Times staff writer Nancy Rivera Brooks contributed to this story. Copyright 2001 Los Angeles Times=20 State to Pay Electric Bill With Loan, Not Taxes=20 By MIGUEL BUSTILLO, Times Staff Writer=20 ?????SACRAMENTO--California taxpayers, who have had to bankroll billions of= =20 dollars in electricity purchases for the teetering power utilities, will so= on=20 no longer see their money evaporate at record rates, under an executive ord= er=20 by Gov. Gray Davis. ?????As early as next week, the order will stop the hemorrhaging of the sta= te=20 budget by allowing Treasurer Phil Angelides to borrow $5 billion to buy=20 electricity. That money is expected to cover power purchases until this fal= l,=20 when the state plans to sell an unprecedented $12.5 billion in bonds to rep= ay=20 the general tax fund and buy future electricity. ?????Angelides said Tuesday that he has already lined up $3.5 billion in=20 loans from two Wall Street firms, and expects to secure at least another=20 billion by next week, when he plans to close the deal and obtain the money. ?????The loan is critical, he said, because without it, electricity purchas= es=20 would completely deplete state coffers as early as October. ?????"In essence, it stops the general-fund bleeding," Angelides said. "Wha= t=20 this interim financing does is take the pressure off the general fund and,= =20 hopefully, avert a cash crisis." ?????The loan could also ease concerns on Wall Street that California's ris= ky=20 entry into the power business has placed the state budget in a precarious= =20 position. Those concerns were one of the main reasons two major credit rati= ng=20 agencies downgraded the state earlier this year. ?????"We have been looking forward to this day," said Ray Murphy, a vice=20 president at Moody's Investors Service, one of the two firms that downgrade= d=20 California's credit rating. "We view this as a positive first step toward= =20 getting the state out of the power business. We wanted the state to get the= =20 general fund out of the business as quickly as possible." ?????California has allocated $8.2 billion in taxpayer money for electricit= y=20 since January because the state's private utilities became too saddled with= =20 debt to continue purchasing power on the open market. and massive blackouts= =20 loomed. ?????Under a plan devised by Davis and approved by the Legislature, the sta= te=20 budget is supposed to be reimbursed for the power purchases with the bond= =20 issue, the largest in American history. The bonds, in turn, are to be paid= =20 off by utility ratepayers through their monthly bills. ?????The bond issue, however, has been delayed by partisan politics and=20 complex legal issues raised by the bankruptcy of Pacific Gas & Electric Co.= ,=20 the state's largest private utility. ?????A bond sale initially planned for May is now scheduled for late=20 September, according to Angelides' latest estimate. The state's Public=20 Utilities Commission still needs to take a number of technical actions befo= re=20 the sale can take place. ?????As a result, the state budget has been drained for power purchases far= =20 longer than initially anticipated--a situation that has imperiled spending = on=20 education, transportation and other critical needs, at least temporarily. ?????Angelides had earlier sought to secure a $4-billion bridge loan to rep= ay=20 the state budget for power purchases until the bonds were sold, but was=20 rebuffed by Republicans in the Legislature, who argued that the loan was no= t=20 necessary. ?????Davis' executive order, issued late Monday as part of the Democratic= =20 governor's emergency powers during the energy crisis, gives Angelides the= =20 authority to press ahead. ?????But it does not allow the treasurer to use the loan to repay the budge= t=20 for the billions spent so far this year on electricity, as he had originall= y=20 intended. Rather, it permits Angelides to use the loan proceeds to assist t= he=20 Department of Water Resources, the state agency buying power, with its futu= re=20 electricity expenses. ?????If the bond issue is further delayed, Angelides estimated, the loan=20 would gives California another four to six months before it would begin to= =20 run out of money. Furthermore, the loan closes a potential loophole that=20 existed in the long-term contracts Davis had signed to stabilize the cost o= f=20 electricity, which would have let power suppliers walk away from the deals = if=20 the state had not secured a source of financing by next month. ?????But Republicans warned that by entering into a bridge loan deal withou= t=20 knowing when the bonds would be sold, Davis and the Democrats were incurrin= g=20 major risks that could further drive up the price tag of the crisis. ?????The loan carries a blended interest rate of about 4.5%, but if it is n= ot=20 repaid by Oct. 31, the rate jumps to 7%. Because the loan is to be repaid b= y=20 the bonds, which have been marred by a history of delay, GOP officials=20 Tuesday were already calling the bridge loan a "bridge to nowhere." ?????"The thing that is most troubling is that the governor did not bother = to=20 consult with anyone," said Assembly Republican leader Dave Cox (R-Fair Oaks= ),=20 who learned of Davis' order from reporters. "It's disappointing, but the=20 governor does not seem to recognize there is a legislative branch." Copyright 2001 Los Angeles Times=20 Edison Unveils Blackout Warning Plan=20 Technology: The utility will notify customers by Internet and telephone whe= n=20 power might go out.=20 By DANIEL HERNANDEZ, Times Staff Writer ?????Southern California Edison on Tuesday unveiled a system that will=20 forecast coming blackouts over the Internet and by telephone.=20 ?????Ordered by the state to create a warning system for customers as=20 California enters a summer that will almost certainly include rotating=20 blackouts, Edison is also preparing to use automatic phone calls, faxes and= =20 wireless communications to alert subscribers to outages.=20 ?????With these steps, Edison is complying with an order by the state Publi= c=20 Utilities Commission, which in April told the company to notify customers o= f=20 coming outages. Privately held Pacific Gas and Electric Co. established a= =20 similar program months ago.=20 ?????Edison previously opposed a notification system, arguing that such a= =20 system could incite looters and burglars. But police agencies, including th= e=20 Los Angeles County Sheriff's Department, saw more danger in not warning=20 customers, said Richard Rosenblum, an Edison senior vice president. ?????"On balance, [we concluded] it was preferable for public safety to mak= e=20 that information available," Rosenblum said. ?????Consumer advocates said Edison's notification system is welcome, if=20 tardy. ?????"It's fair to say that Edison has been a little behind where PG&E has= =20 been in trying to implement this," said Mike Florio, an attorney with the= =20 Utility Reform Network and a member of the California Independent System=20 Operator board, which runs the state power grid. ?????Edison's Web site, www.sce.com, now features a pop-up screen that warn= s=20 of any blackouts coming in the next hour. It also links to a page, which ca= n=20 be reached at www.outagewatch.com, that forecasts which "outage groups" wil= l=20 be cut off next in the event of rotating blackouts. Detailed maps outline= =20 which areas are included in each group.=20 ?????The new Web features are expected to handle about 4 million simultaneo= us=20 users. Beginning this month, Edison customers also can learn their block=20 number by looking at their bills, said Edison spokesman Gil Alexander. ?????Outage information also will be made available on an automated phone= =20 line, (800) 611-1911. ?????Edison officials are negotiating with another company to provide=20 additional warnings by e-mail, fax, phone and wireless communications. SDG&= E,=20 which like Edison was required to inform customers of outage forecasts, has= =20 moved more quickly, providing large industrial customers with blackout=20 notification via pager since June 4. ?????Up-to-the-minute outage reports also will be provided in several=20 languages to radio and TV stations, Edison officials said. ?????Edison officials emphasized that the new alert system can never be 100= %=20 accurate, and that sudden blackouts, although rare, are always a possibilit= y.=20 ?????"We have planned as aggressively as we think is warranted, understandi= ng=20 that you can't predict how your customers will respond," Alexander said. Copyright 2001 Los Angeles Times=20 State Joins Challenge to Bush on Air-Conditioner Standards=20 Regulations: U.S. rolled back Clinton rule from 30% increase in efficiency = to=20 20% on manufacturers' urging.=20 By JENIFER WARREN, Times Staff Writer=20 ?????California and two other states joined environmentalists Tuesday in=20 suing the Bush administration over its decision to weaken efficiency=20 standards for home air conditioners. ?????The lawsuit caps weeks of criticism heaped on the administration after= =20 it rolled back a rule requiring manufacturers to increase the efficiency of= =20 air conditioners 30% by 2006. ?????That rule was adopted by President Clinton during his final days in=20 office and after years of research and debate. California and other=20 states--including Texas--endorsed it as a way to substantially cut energy u= se=20 and improve air quality. ?????But after reviewing the rule at the industry's behest, Bush=20 administration officials in April sliced the mandated increase to 20%. The= =20 higher standard, they said, would have made home coolers too expensive,=20 especially for the poor. ?????Conservationists and consumer groups blasted the policy change, callin= g=20 it shortsighted at a time when California and other states are enduring an= =20 energy crunch. ?????In California, residential air-conditioning accounts for about 15% of= =20 the peak energy demand. Weakening efficiency standards, critics say, will= =20 require as many as 60 new power plants nationwide, four in California. ?????"This is a time when we need to conserve electricity and reduce our=20 dependence on the large energy generators and importers," state Atty. Gen.= =20 Bill Lockyer said in an interview. "Weakening this standard is precisely th= e=20 wrong message at precisely the wrong time." ?????In their lawsuit, Lockyer and the attorneys general of New York and=20 Connecticut allege that federal law bars the U.S. Department of Energy from= =20 softening an appliance efficiency standard. A separate but similar suit was= =20 filed by the Natural Resources Defense Council, the Consumer Federation of= =20 America and another nonprofit group. ?????Joe Davis, the Energy Department's deputy spokesman, said there would = be=20 no immediate comment on the suit, filed in federal court in Manhattan. He= =20 added, however, that "we believe all of the actions of our decision-making = in=20 the air conditioner standards are well within the law." ?????When Clinton's rule was issued in January, his outgoing energy=20 secretary, Bill Richardson, said the payoff in power savings and cleaner ai= r=20 would be one of the administration's greatest environmental achievements. ?????But a trade association representing air conditioner manufacturers=20 challenged the new rule, arguing that it would dramatically increase costs = of=20 the units--priced between $2,000 and $4,000--and thus discourage people fro= m=20 replacing old ones. ?????The Department of Energy sided with the industry group in April.=20 Officials said Clinton's proposal would have added $335 to the price of a n= ew=20 air conditioner, while the lower, 20% standard would boost prices only abou= t=20 $213. ?????Others, however, say those figures do not take into account the=20 economies of scale gained when manufacturers increase production of the mor= e=20 efficient units. When Congress passed the first efficiency standard for air= =20 conditioners in the late 1980s, "industry said the sky was falling, and tha= t=20 it would increase the cost of air conditioners by $700," said Andrew Delask= i,=20 executive director of the nonprofit Appliance Standards Awareness Project. = In=20 fact, he said, U.S. Department of Commerce data showed no price jump. ?????Dan Reicher, the assistant secretary of Energy under Clinton who overs= aw=20 development of the stricter standards, added that high-efficiency air=20 conditioners "are not some exotic, untested technology." ?????"There are lots and lots of air conditioners already meeting the=20 standards--between 5% and 10% of the units sold today," he said. ?????Although most manufacturers support the Bush rollback, the second=20 largest maker of air conditioners--Houston-based Goodman Global Holding,=20 which produces the Amana brand--opposes it, saying any higher upfront costs= =20 would be recovered by consumers in lower utility bills. ?????On Tuesday, the company's president, John Goodman, issued a statement= =20 supporting the lawsuit, saying the tougher standard would "give consumers a= n=20 enormous cost saving, U.S. energy consumption will drop and our environment= =20 will benefit from reduced air pollutant emissions and greenhouse gases." ---=20 ?????Times staff writer James Gerstenzang in Washington contributed to this= =20 story. Copyright 2001 Los Angeles Times=20 New Price Caps Not a Deterrent, Power Firms Say=20 Regulation: Producers are unhappy with the federal action but say it is=20 unlikely to discourage them from constructing new plants.=20 By NANCY VOGEL and THOMAS S. MULLIGAN, Times Staff Writers=20 ?????The expanded electricity price limits approved by federal regulators= =20 could squeeze big energy traders but will probably not discourage power pla= nt=20 construction in California, electricity producers said Tuesday. ?????Power plant owners and marketers said they had not had time to digest= =20 the 53-page order and thus could not say exactly how it would affect=20 California and the 10 other Western states it covers. ?????But the companies generally asserted Tuesday that the order would not= =20 deter them from investing in the vast, power-starved Western region--though= =20 they have often raised such a prospect in arguing against price controls. ?????Whatever its long-term effects, Monday's order by the Federal Energy= =20 Regulatory Commission appeared to have an immediate effect in dampening=20 prices in California's volatile daily, or spot, market. ?????The order does not take effect until today, but the prospect of new=20 measures aimed at limiting prices appeared to tame markets Tuesday.=20 Californians used more electricity at the late-afternoon peak than on any d= ay=20 this year, yet market prices hovered around $100 a megawatt-hour. ?????That is well below the average of $284 a megawatt-hour that the state= =20 paid for electricity from January through April, with prices soaring as hig= h=20 as $1,900 at times of tight supply. ?????"All the markets in the West have come down," said Mike Wilczek, senio= r=20 power markets reporter for Platts, the energy market information division o= f=20 the McGraw-Hill Cos. "It's bearish news." ?????Nevertheless, several generators minimized the effects of the FERC=20 order, contradicting earlier warnings from some industry sources and=20 officials of the Bush administration who consider price limits to be=20 impediments to future investment in power plants. ?????"Calpine will have no problem operating under this order," said Joe=20 Ronan, vice president of regulatory affairs for San Jose-based Calpine Corp= .,=20 which has three power plants under construction in California and plans to= =20 build at least three others. ?????The federal order lasts only until September 2002, he said, and becaus= e=20 it sets prices based on the cost of running the most expensive, inefficient= =20 power plant in the market, it should guarantee the owners of modern plants = a=20 profit. ?????Another company planning major investments in California, Duke Energy= =20 Corp. of North Carolina, said it will not be seriously affected by the=20 federal order because it has sold the output of its four California plants= =20 well into the future. ?????"We've already forward-sold 90% of our generation for 2001 and 70% for= =20 2002," company spokesman Pat Mullen said. ?????Reliant Energy Inc. of Houston, which owns five power plants in=20 California, was not so sanguine about the federal order, but it has not=20 backed away from plans to install more generators. ?????"We remain committed to California, as hard as it is to do business he= re=20 today," spokesman Richard Wheatley said. "We have plans that are on the=20 drawing boards for at least one, possibly two projects." ?????On Monday, Reliant Chief Executive Joe Bob Perkins called the FERC=20 action "more of a political response" than an acknowledgment of the gap=20 between electricity supply and demand in California. ?????"Price caps don't work," Perkins said, and he warned California=20 consumers against assuming that the energy crisis is over simply because=20 wholesale electricity prices have recently dropped to their lowest levels i= n=20 a year. ?????Prices are falling because of mild weather, not price controls, he sai= d. ?????"Without sound economics that increase available supply and reduce pea= k=20 demand . . . consumers can only hope for favorable weather and look forward= =20 to [rolling blackouts]," Perkins said. ?????Energy analyst Frederick Schultz of Raymond James & Associates in=20 Houston called the FERC order "a nonevent to the California generators"=20 because so much of their power is now being sold through long-term contract= s. ?????However, every long-term deal reduces the size of the electricity=20 market, which supplies about 20% of California's needs. And that, in turn,= =20 limits trading opportunities for such firms as Enron Corp., which profit on= =20 the daily market's ups and downs, Schultz said. ?????Enron representatives did not respond to calls for comment. ?????The federal order imposes round-the-clock price curbs on wholesale=20 electricity sold in 11 Western states that are connected by transmission=20 grids. ?????Under the order, traders say, market prices will probably hover around= =20 $100 a megawatt-hour, depending upon the price of the natural gas that fuel= s=20 most of the state's electric generating plants. Though that is well below= =20 recent market prices, it is higher than the average of about $32 a=20 megawatt-hour that California utilities paid in 1999, before the state's=20 deregulated market spiraled out of control. ?????The FERC order dictates that the price for spot market electricity=20 across the West will be based on the cost of producing one megawatt-hour of= =20 power at the least-efficient plant selling to California grid operators. Ma= y=20 31, when a previous FERC order based on a similar formula took effect, the= =20 price set was $127 a megawatt-hour. ---=20 ?????Vogel reported from Sacramento, Mulligan from New York. Copyright 2001 Los Angeles Times=20 Wednesday, June 20, 2001=20 The FERC's Action Is Good, Bad,Ugly=20 By PETER NAVARRO ?????The Federal Energy Regulatory Commission's new wholesale price caps wi= ll=20 save the Western states literally tens of billions of dollars in electricit= y=20 bills. As wonderful as that sounds, the FERC order still allows wholesale= =20 generators to extract enough windfall profits to drive the region into=20 recession.=20 ?????The FERC's approach may also perversely lead to more air pollution and= =20 natural gas shortages.=20 ?????Let's look at what the FERC did right. First, the order approved Monda= y=20 establishes price caps on a 24/7 basis rather than simply during power=20 emergencies--a long overdue reform.=20 ?????Second, the order protects the entire West, not just California. This= =20 regional cap will end "megawatt laundering," whereby in-state generators so= ld=20 power across California lines and then resold it back into the state to eva= de=20 caps.=20 ?????Third, the order closes the ridiculous broker loophole that made the= =20 FERC's previous price caps Swiss cheese. Before, generators could redirect= =20 their sales from the market to energy brokers who were exempt from the pric= e=20 caps.=20 ?????So where did the FERC go wrong? The problem may be traced to the two= =20 competing methods of imposing price caps and the all-important concept of= =20 "economic rent."=20 ?????Economic rent, in the wholesale electricity market, is the market pric= e=20 of electricity minus the producer's cost, where cost includes not just labo= r=20 and fuel but a "fair profit" on the invested capital as well. In traditiona= l=20 regulation, this fair profit is calculated very simply as the market cost o= f=20 the money borrowed to build the power plant.=20 ?????Under this definition, if the producer's cost is a nickel a kilowatt= =20 hour and he can sell it for 35 cents--as producers in the West have been=20 doing--the producer can extract 30 cents of economic rent from consumers.= =20 ?????In California, the extraction of such economic rent through market=20 manipulation has taken place on a grand-theft scale. In 1999, California's= =20 electricity bill was about $7 billion. Last year, it was almost $30 billion= =20 for roughly the same amount of electricity. This year, California's bill is= =20 well on its way to $50 billion annually.=20 ?????To stop this rip-off, Gov. Gray Davis proposed "cost-based" price caps= .=20 Such caps are calculated on a plant-specific basis. Each generator is allow= ed=20 to recover its cost of production, including the fair profit, but not a pen= ny=20 more.=20 ?????Thus, for example, a newer, highly efficient plant generating power at= a=20 nickel per kilowatt hour would collect a nickel. The oldest, least efficien= t=20 plant that generated power for 20 cents would be allowed to collect 20 cent= s.=20 ?????By setting different prices for different plants, the economic rents a= re=20 driven to zero. Yet each generator still has a fair profit incentive to=20 produce. From a public policy perspective, it's the best of all possible=20 worlds. And it was categorically rejected by the FERC. Instead, the FERC se= ts=20 a single price for all generators based on the cost of the "least efficient= =20 plant."=20 ?????The obvious problem with this umbrella pricing rule is that it still= =20 allows generators to extract billions in economic rent from consumers.=20 ?????In our previous example, and under the FERC's rule, the least efficien= t=20 plant still collects 20 cents a unit to recover costs. However, the most=20 efficient plant producing power at a nickel-per-kilowatt also collects 20= =20 cents rather than a nickel and thus extracts a full 15 cents of economic=20 rent.=20 ?????Thus, under the FERC's rule, wholesale generators still will be able t= o=20 capture tens of billions of dollars more from consumers and businesses than= =20 under Davis' cost-based rule.=20 ?????The FERC's approach is still subject to the same kind of strategic=20 gaming that has been the hallmark of this crisis. Generators will ensure th= at=20 during peak times, when the price cap is being established, the most=20 expensive possible plant is in operation--whether it needs to be or not. Th= is=20 will peg the price at the highest level.=20 ?????In addition, the FERC provides generators with a perverse incentive to= =20 run their least efficient units more often. Since these least efficient=20 plants are also the highest polluting, the result will be dirtier air.=20 Moreover, the excessive running of these plants may also put a strain on=20 already stretched natural gas supplies. These least efficient plants use up= =20 to 40% more natural gas to produce a unit of electricity.=20 ?????The bottom line: The FERC "done good." But it could have done a lot=20 better. And the way things stand now, there still is a danger that higher= =20 electricity costs could push California and the rest of the West--and=20 eventually the nation--into a nasty recession.=20 - - - Peter Navarro Is an Associate Professor of Economics and Public Policy at U= c=20 Irvine. E-mail: [email protected] Copyright 2001 Los Angeles Times=20 Davis OKs stopgap loan=20 CRISIS POWERS: Action sidesteps Legislature=20 Greg Lucas, Sacramento Bureau Chief Wednesday, June 20, 2001=20 ,2001 San Francisco Chronicle=20 URL: http://www.sfgate.com/cgi-bin/article.cgi?f=3D/c/a/2001/06/20/MN173816= .DTL=20 Circumventing the Legislature, Gov. Gray Davis used his emergency powers=20 yesterday to authorize borrowing up to $5 billion for energy purchases in= =20 advance of a record bond issue.=20 Sidestepping the Legislature with a stroke of the pen, Davis' action=20 indicates that the state may need more time to prepare a $12.5 billion bond= =20 issue this fall, the largest sale of its kind in history.=20 The Democratic governor's action was swiftly assailed by the Republican=20 leadership.=20 "This is not a dictatorship. It's a democracy," said Assembly GOP leader Da= ve=20 Cox of Carmichael. "There is a judiciary, a legislative side and an executi= ve=20 side, and everyone has roles and responsibilities. Yet we continue to have= =20 the governor say, 'I'm the only one around here that makes any difference.= =20 The rest of you shall do my bidding.' "=20 Normally, it is the Legislature that has the power to raise and spend money= ,=20 and a governor may not spend a cent unless lawmakers allow him to.=20 But Davis has broad powers under the state of emergency, which he declared = in=20 January to combat California's energy crisis.=20 NO ADVANCE NOTICE The governor's aides declined to comment on yesterday's executive order and= =20 gave no advance notice of it.=20 "This executive order, authorizing a bridge loan, will allow us to get=20 California's General Fund out of the power-buying business," was the=20 governor's only comment in a written statement issued last night.=20 State Treasurer Phil Angelides said lawyers had advised him and the governo= r=20 that such borrowing could be authorized by an executive order.=20 The loan from Wall Street will temporarily fill the $5.2 billion -- and=20 growing -- hole in the state budget created when the state began buying=20 electricity on behalf of the state's cash-starved utilities in January.=20 The idea is to tide the state over until a larger bond sale of $12.5 billio= n=20 can be arranged later this year. A portion of that sale will pay back the= =20 $5.2 billion borrowed from Wall Street.=20 'STOPS THE BLEEDING'=20 "It stops the general fund bleeding," said Angelides. "It takes the pressur= e=20 off, and hopefully we'll avert a cash crisis."=20 The state runs out of internal borrowing power sometime in October. Angelid= es=20 said the loan would buy the state another four to six months.=20 The idea of a loan was floated earlier this year.=20 Cox and other GOP lawmakers objected, wondering why the state should pay=20 interest on borrowed money when it could still borrow from various accounts= =20 within the state budget.=20 They refused to vote for a bill authorizing the larger bond sale of $12.5= =20 billion, forcing a delay in issuing it until at least Aug. 14.=20 The idea of borrowing from Wall Street appears to have been abandoned, sinc= e=20 both Davis administration and legislative budget-writers said the state cou= ld=20 keep borrowing internally into October, well after the bond sale.=20 Yesterday's executive order authorizing the borrowing suggests that neither= =20 Angelides nor Davis are confident that the steps needed to prepare the $12.= 5=20 billion bond issue for market can be completed before then.=20 Angelides had previously said he hoped to sell the bonds in early September= .=20 Yesterday, he said the governor's "hope is to still sell long-term bonds by= =20 Sept. 30."=20 ACT OF DESPERATION? Sen. Tom McClintock, R-Northridge, described the executive order as an act = of=20 desperation that "would suggest they are expecting the large bond sale to= =20 occur later rather than sooner.'=20 Numerous actions must be completed before the bond sale.=20 Among them are the approval by the Public Utilities Commission of several= =20 deals with the state and utilities, to ensure that enough money from=20 consumers flows back to bond buyers to pay off interest and principal.=20 Although Davis' executive order authorizes $5 billion in loans, Angelides h= as=20 only lined up $3.5 billion.=20 So far, only two lenders have come forward to offer the state a loan, J.P= =20 Morgan with $2.5 billion and Lehman Brothers with $1 billion, at an interes= t=20 rate of 4.5 percent. If the long-term bonds are not sold by Oct. 31, that= =20 will increase to 7 percent.=20 Angelides said he hoped to line up another $1 billion by next week, when th= e=20 loan deal occurs.=20 Assuming a loan of $4.5 billion, Angelides said the state would pay out $8= =20 million in fees.=20 E-mail Greg Lucas at [email protected].=20 ,2001 San Francisco Chronicle ? Page?A - 1=20 Experts say state must seize the day=20 ANALYSIS: Price caps set stage for future=20 David Lazarus, Chronicle Staff Writer Wednesday, June 20, 2001=20 ,2001 San Francisco Chronicle=20 URL: http://www.sfgate.com/cgi-bin/article.cgi?f=3D/c/a/2001/06/20/MN58963.= DTL=20 One day after federal authorities ordered long-sought electricity price cap= s=20 throughout the West, analysts said yesterday it is up to California to=20 respond with measures to bring an end to the state's long, frustrating=20 experiment with deregulation.=20 Possible steps the experts point to include raising power bills, easing=20 pollution controls and spending billions of dollars in taxpayers' money on= =20 new plants.=20 "Gov. (Gray) Davis and his team have been making this up week by week," sai= d=20 Paul Joskow, director of the Center for Energy and Environmental Policy=20 Research at the Massachusetts Institute of Technology.=20 "It's time for them to get together with the Federal Energy Regulatory=20 Commission (FERC) to come up with some solutions," he said. "The state need= s=20 to get down to business and decide how the power market is going to look 18= =20 months from now."=20 Easier said than done. To date, California's strategy for tackling its ener= gy=20 woes largely has consisted of wheedling, cajoling and all but begging feder= al=20 officials to come to the rescue.=20 Now that the federal regulators have gone much of the way toward granting t= he=20 state's wishes, analysts said Davis and other officials must act swiftly an= d=20 decisively to further remedy California's prolonged power troubles.=20 For his part, however, the governor feels that federal regulators have not= =20 done enough. He will push today during congressional hearings in Washington= =20 for billions of dollars in refunds for California ratepayers.=20 "FERC has taken some first steps, but the proverbial fat lady hasn't sung,"= =20 said Steve Maviglio, a spokesman for Davis.=20 This persistent focus on federal assistance could slow progress toward a=20 lasting solution to California's problems, some analysts believe.=20 "We are still likely to experience blackouts this summer," said Michael=20 Zenker, director of Cambridge Energy Research Associates in Oakland. "It's= =20 not yet clear that the state will do what it can to address other aspects o= f=20 the problem."=20 Put simply, such steps would require enormous political courage -- and woul= d=20 be very expensive. In the end, taxpayers and ratepayers will bear the burde= n=20 for this prolonged fiasco.=20 Among measures under consideration:=20 -- Raising electricity rates even higher. Although Californians got the=20 largest rate increase in state history last month, even higher charges woul= d=20 promote conservation and lessen the need for California to borrow billions = of=20 dollars in the bond market.=20 -- Loosening emissions restrictions for power plants statewide. This would= =20 provide more electricity during shortages but turn back the clock on=20 California's strict environmental standards.=20 -- Building new plants at taxpayers' expense. This would guarantee a steady= =20 supply of juice but would leave the state struggling for years to recoup th= e=20 huge investment costs.=20 Of the three, easing pollution controls is the easiest first step and the= =20 most likely, analysts said. Such environmental protections have been roundl= y=20 criticized by power industry officials who claim the restrictions have=20 hampered the construction of new generating plants.=20 Taxpayer-financed power plants are possible under a new state power authori= ty=20 backed by the governor, but the timing and financing remain undecided.=20 Higher electricity rates could be the toughest move to make, analysts agree= .=20 They note that Davis will seek re-election next year and doesn't want to be= =20 seen as the governor who sent voters' power bills into the stratosphere.=20 Already, critics are trying to paint him as the governor who was asleep at= =20 the power switch.=20 As federal regulators were moving at last on the price-cap front this week,= =20 another big development took place closer to home Monday when Davis disclos= ed=20 a tentative deal with Sempra Energy's San Diego Gas & Electric Co. The plan= =20 calls for the state to purchase the utility's 1,800 miles of power lines fo= r=20 nearly $1 billion.=20 As with a similar accord reached with Southern California Edison, the Sempr= a=20 deal is intended to counter the catastrophic effects of California having= =20 deregulated wholesale power prices but not allowing the state's utilities t= o=20 pass on costs to customers.=20 Between them, California's three major utilities have rung up more than $15= =20 billion in debt.=20 Here, too, the state appears unsure how to proceed. Both the Sempra and=20 Edison agreements require approval from the Legislature. It's anyone's gues= s=20 whether such approval is forthcoming.=20 "It's going to be a really, really tough sell," said Nettie Hoge, executive= =20 director of The Utility Reform Network in San Francisco. "These aren't=20 fabulous deals."=20 ONE SCENARIO FOR UTILITIES Rather, she believes the agreements will be reworked so that less taxpayer= =20 money changes hands while allowing the utilities to retain possession of=20 their power systems.=20 Hoge said this could subsequently influence a speedy resolution of Pacific= =20 Gas and Electric Co.'s bankruptcy proceedings. If it can avoid selling off= =20 key assets like power lines, PG&E may be more open to any settlement plans= =20 put forward by the state.=20 "The utilities are all going to end up with similar deals," Hoge forecast.= =20 State Senate President Pro Tem John Burton, D-San Francisco, isn't so sure.= =20 He observed that the Edison deal hinges on a sale of the utility's power=20 lines to the state, while the Sempra accord could stand even without such a= =20 transaction.=20 "The two deals are totally unrelated," Burton said, adding that approval of= =20 the Edison accord is "very much in flux." A bankruptcy filing by the state'= s=20 second-largest utility remains a distinct possibility, he said.=20 This would only increase the importance of price caps in bringing some=20 stability back to California's power market.=20 While the state's current rate freeze will continue cushioning consumers fr= om=20 the volatility of wholesale electricity prices, the caps -- or "price=20 mitigation," as federal regulators are calling it -- will limit the amount= =20 that power generators can charge on the open market.=20 SYSTEM HAS FLAWS It is not a perfect system: Power companies can base prices on the cost of= =20 running the least-efficient -- and thus costliest -- generating facility. B= ut=20 this amount almost certainly will be below some of the more outrageous pric= es=20 seen when the sky was the limit.=20 On at least one occasion this year, California's wholesale power price topp= ed=20 $3,000 per megawatt hour, compared with just $30 about a year ago.=20 "This is a plan that is good for California, good for the Pacific Northwest= =20 and good for the entire West," said FERC Chairman Curt Hebert.=20 That remains to be seen. As it stands, the price caps will remain in effect= =20 through next summer.=20 E-mail David Lazarus at [email protected].=20 ,2001 San Francisco Chronicle ? Page?A - 1=20 California's energy crisis hits Northwest like a tidal wave=20 Jeff Hammarlund Wednesday, June 20, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/06= /20/E D165509.DTL=20 THERE WAS a time when many Northwesterners thought we could watch=20 California's energy crisis from a safe distance.=20 We have since learned that a major energy crisis does not stop at the Golde= n=20 State's borders but, instead, rolls over the Northwest like a tidal wave,= =20 wreaking havoc with our economy and overwhelming our carefully crafted ener= gy=20 policies.=20 As one Northwest utility official put it, "We learned that everyone else is= =20 the tail. California is the dog."=20 To understand why the Northwest is now facing its own energy crisis and how= =20 the energy problems in the Northwest and California each affect each other,= =20 one must understand how the Northwest gets its power.=20 In the Northwest, falling water is our primary fuel. Depending on the=20 available snowpack, hydroelectricity produced at more than 200 dams in the= =20 Columbia River basin generates between 60 and 75 percent of the region's=20 electricity. About two-thirds of this hydropower comes from 29 dams owned a= nd=20 operated by the two federal agencies, the U.S. Army Corps of Engineers and= =20 the Bureau of Reclamation.=20 By taking advantage of the region's geography and climate, the Columbia's= =20 hydroelectric dams have produced some of the least expensive electricity in= =20 the nation, power that has been the economic backbone of the region.=20 However, the Columbia's hydrosystem also has two curses.=20 One is that water conditions can vary greatly, and right now the Northwest= =20 and California are in the middle of an extreme drought. The second is the= =20 dams' negative impact on salmon. These dams operate under a federal salmon= =20 recovery plan established under the Endangered Species Act that calls for= =20 more water to be sent over spillways to help push the salmon downstream=20 instead of through the dams' power-generating turbines.=20 That power is sold at cost and transmitted to Northwest consumer-owned=20 utilities by yet another federal agency called the Bonneville Power=20 Administration. These "cost-based" rates cover the expense of repaying the= =20 U.S.=20 Treasury for the cost of developing these hydropower projects, moving the= =20 power over massive transmission lines, and supporting efforts to restore th= e=20 dwindling salmon runs.=20 Under federal law, Northwest consumers get preferred access to the relative= ly=20 low-cost power. Any surplus power can be sold, most often to California's= =20 municipal and investor-owned utilities.=20 This Northwest "regional preference" to federal power was part of the deal= =20 that led to the construction of the massive transmission lines, called "the= =20 intertie," which first connected the Northwest with California and the=20 Southwest in the late 1960s.=20 For decades, the intertie worked almost flawlessly and to everyone's benefi= t.=20 During the summer, when air conditioners caused California's power use to= =20 peak, many California utilities would supplement their needs by turning to= =20 the Northwest. In the winter, when Northwest electric furnaces are turned o= n=20 for space heating, California utilities would return the favor and ship the= ir=20 surplus power north.=20 Recently, the BPA has had to purchase large blocs of power on the wholesale= =20 market to meet its contractual obligations to its Northwest customers.=20 The same exorbitant wholesale prices that began to plague California last= =20 year have also affected the Northwest, meaning that the BPA has been runnin= g=20 out of money, and is now in danger of defaulting on its debt obligations to= =20 the Treasury.=20 California's deregulation plan has affected energy relations between the tw= o=20 regions in other ways. For example, the BPA has historically sold surplus= =20 power to California for relatively low prices. However, the state's=20 deregulation law made it almost impossible for California utilities to ente= r=20 into favorable long-term contracts.=20 Instead, power had to be purchased at the much higher "market clearing pric= e"=20 on the short-term spot market.=20 The BPA has taken extraordinary steps to help California keep the lights on= .=20 At times, the agency even declared energy emergencies, which allowed it to= =20 temporarily override salmon protections and use the water to generate power= =20 for California rather than sweep salmon over the dams. California officials= =20 have praised the BPA for its cooperation, but Northwest environmentalists a= nd=20 tribal leaders complain that the BPA has been helping California address it= s=20 energy crisis by selling salmon down the river.=20 The Northwest will be helped by FERC's decision yesterday to extend limited= =20 temporary price restrictions it had imposed in California in the spring to= =20 other Western states during severe shortages. The order should also be good= =20 for California. Without consistent price restrictions throughout the West,= =20 power marketers would simply skip California during an emergency and sell a= t=20 higher prices elsewhere.=20 But not everyone is happy with the decision. Many critics say the rates are= =20 still too high, and some critics said in s published report that the "order= =20 rewards inefficiency by pegging price ceilings to the costliest California= =20 gas plants."=20 The half-hearted response from FERC, along with continuing supply shortages= =20 and other problems make it likely that California will continue to face=20 rolling blackouts and high utility bills -- even though they may not be as= =20 high as we once feared.=20 The Northwest may follow suit next winter.=20 Some in our region fear that some desperate California political leaders=20 might try to wrest control of the BPA and a large portion of the Columbia= =20 Basin's hydropower. The 6,600 megawatts of hydropower from the Columbia's= =20 federal dams would only offer a few drops in the bucket for California's=20 massive 50,000-megawatt system, but its loss would devastate the Northwest= =20 economy.=20 The four Northwest governors (of Washington, Oregon, Idaho and Montana) and= =20 more than 40 state legislators met in February and agreed to explore ways t= o=20 ensure that the Northwest does not lose its regional preference to the=20 Columbia's hydropower.=20 Northwest governors have had some productive meetings with Gov. Gray Davis= =20 and his staff this year regarding power sharing, and there are encouraging= =20 signs that trust is growing at this and other levels.=20 Just last week, officials from the BPA, California's Department of Water=20 Resources, and the California ISO agreed on a plan that outlines when and h= ow=20 the BPA may be able to help California during the expected summer shortages= .=20 We will soon find out whether our two regions will succeed in collaborating= =20 with or cannibalizing each other as we enter the next phase of the West Coa= st=20 energy crisis.=20 Ultimately, California's experience with energy deregulation makes the case= =20 for a strong and supportive federal role in the energy markets. It also=20 reinforces the view that electricity should be treated as an essential=20 service and be sold at cost by utilities that are owned and controlled by t= he=20 public, rather than as a commodity and sold at the highest price.=20 In fact, something like a California power authority that places California= =20 in charge of its own destiny makes more sense to me all the time.=20 Jeff Hammarlund is an adjunct associate professor and research fellow at th= e=20 Mark Hatfield School of Government at Portland State University where he=20 teaches graduate courses on energy policy. He is also president of Northwes= t=20 Energy and Environmental Str=20 ,2001 San Francisco Chronicle ? Page?A - 19=20 Davis demands nearly $9 billion for electricity overcharges=20 H. JOSEF HEBERT, Associated Press Writer Wednesday, June 20, 2001=20 ,2001 Associated Press=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2001/06/20/n= ation al1103EDT0569.DTL=20 (06-20) 08:03 PDT WASHINGTON (AP) --=20 California Gov. Gray Davis demanded that power generators refund nearly $9= =20 billion in electricity overcharges and complained that federal regulators= =20 have "looked the other way while energy companies bilked our state."=20 Davis told a Senate hearing Wednesday that the decision by the Federal Ener= gy=20 Regulatory Commission to curtail price spikes in California and 10 other=20 Western states was a step forward. "But its actions do nothing about the=20 overcharges" over the past year, he said.=20 The governor, a Democrat, has been criticized by Republicans, who charge he= =20 has allowed the California power crisis to get out of hand.=20 Davis defended his actions, saying the state has stepped up approval for ne= w=20 power plants and strengthened conservation programs. He also said the state= =20 has little control over price gouging by out-of-state power generators.=20 "The governor once said he could solve California's problems in 15 minutes.= =20 ... But it appears that California has continued to try and hide the true= =20 cost of power by having the state pay for it instead of the utilities,"=20 putting California taxpayers in jeopardy, said Sen. Frank Murkowski,=20 R-Alaska.=20 Murkowski said many of the alleged overcharges are by public power entities= =20 not under FERC jurisdiction=20 Sen. Joe Lieberman, D-Conn., chairman of the Governmental Affairs Committee= ,=20 said the FERC, which regulates wholesale electricity sales, has been slow t= o=20 respond and "surprisingly reluctant" to assure that electricity prices are= =20 just and reasonable, as required by the 1934 Federal Power Act.=20 The agency's response to the Western power problem "raises serious question= s=20 about whether (FERC) has or will oversee the newly deregulated energy=20 markets" not only in the West but across the rest of the country.=20 The federal agency, whose commissioners were to testify later in the day,= =20 imposed limited, market-based price caps on Monday in California and 10 oth= er=20 Western states from Washington to Arizona. The agency also ordered the=20 parties to attend a conference next week to try to work out agreements on= =20 overcharges and other issues.=20 Months ago, the FERC singled out $124 million in alleged overcharges by pow= er=20 generators. The power companies have since challenged the agency's findings= =20 and the matter remains in dispute.=20 "To date not a single penny in refunds has been returned to California,"=20 complained Davis. He said that between May 2000 and the beginning of this= =20 month power generators are believed to have overcharged California $8.9=20 billion.=20 "They must be required to give us back our money," said Davis. "It is=20 unconscionable that FERC looked the other way while energy companies bilked= =20 our state for up to $9 billion."=20 The state spent $7 billion for electricity in 1999 and $27 billion in 2000= =20 and is projected to pay nearly $50 billion this year, said Davis. "Power=20 generators have been able to exert extreme power over our energy market," h= e=20 said.=20 Davis rejected Republican criticism that the state is not addressing the=20 problem. He said newly approved power plants will provide 20,000 additional= =20 megawatts of electricity by 2003, including 4,000 megawatts by the end of= =20 this summer. "Everything that can be done to bring reliable, affordable=20 energy to California is being done ... except wholesale price relief," he= =20 said.=20 "This administration has minimized this crisis (for) more months," said Sen= .=20 Patty Murray, D-Wash., alluding to President Bush's repeated refusal to urg= e=20 the FERC to mitigate electricity prices. Bush has strongly opposed price=20 controls, although he indicated support for FERC's limited price mitigation= =20 effort this week.=20 Murray said the government should issue a disaster declaration so that=20 businesses can get low-income loans, and require that FERC press its=20 investigation into price gouging and demand refunds not only in California= =20 but in the Pacific Northwest, where electricity prices have also skyrockete= d.=20 Republicans continued their opposition to more stringent price caps based o= n=20 the cost of generation at individual power plants.=20 "Having a federal agency try to determine what is a just and reasonable pri= ce=20 is laughable," said Sen. Fred Thompson of Tennessee, the committee's rankin= g=20 Republican. Hard price caps "don't work when supply is the problem. ... The= y=20 make a bad situation worse," he said.=20 After FERC issued its limited price control order this week, Senate Democra= ts=20 on Tuesday said they would drop legislation to require more stringent=20 cost-based price caps on Western electricity sales.=20 Democrats in the House, however, said they would continue to pursue a bill= =20 requiring the FERC to take more aggressive action.=20 ,2001 Associated Press ?=20 Fed price caps placate Demos=20 But Feinstein's bill to regulate energy producers was more strict=20 Carolyn Lochhead, Chronicle Washington Bureau Wednesday, June 20, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/06= /20/M N145950.DTL=20 Washington -- With federal regulators moving to cap prices on wholesale=20 electricity, California's Dianne Feinstein and other Senate Democrats=20 yesterday withdrew their threat to do it for them.=20 "A rose is a rose by any other name," Feinstein declared to the five member= s=20 of the Federal Energy Regulatory Commission, the day after they unanimously= =20 imposed a sweeping price ceiling on electricity throughout eleven western= =20 states.=20 "I'm very grateful," Feinstein told the commissioners, who were called to= =20 testify to the Senate Energy and Natural Resources Committee. "Let's watch= =20 and wait and see how this order works."=20 Feinstein had been leading the Democratic charge in Washington to force FER= C=20 to impose price controls; indeed, yesterday's hearing had been intended to= =20 highlight the agency's inaction. Gov. Gray Davis is still billed to appear= =20 today at another Senate panel headed by Sen. Joe Lieberman, D-Conn., to=20 investigate price gouging.=20 The 60-page FERC order, which takes effect at midnight tonight and remains= =20 until September 2002, limits prices based on the cost of the least-efficien= t,=20 and therefore highest-cost, generating plant. It is intended to mimic the w= ay=20 a competitive market functions.=20 While Democrats hailed FERC's move, power generators and marketers warned= =20 that it would backfire, leading to more blackouts and stifling investment i= n=20 new power plants.=20 "It doesn't create or conserve a single megawatt in California or the West,= "=20 said Enron spokesman Mark Palmer. "Government price controls always have=20 unintended consequences, and history has proven that those have never been= =20 good for consumers."=20 Joe Bob Perkins, president and chief operating officer of Reliant Energy,= =20 bluntly called the price caps "a political response" to California's crisis= =20 that ignores the basics of supply and demand.=20 "Price caps don't work," Perkins said in a statement. "This fact has been= =20 proven over and over in the context of virtually every business sector in= =20 which government regulators have experimented with such measures."=20 The Bush administration, which has fought electricity price caps since taki= ng=20 office in January, yesterday insisted that FERC had actually spurned them.= =20 "It's important to note that FERC rejected price controls," said White Hous= e=20 spokesman Ari Fleischer, who instead called it "a market-based mitigation= =20 plan."=20 He added the order is "in keeping with the president's desire to help the= =20 state of California and to make certain that there is no illegal price=20 gouging carried on by any companies."=20 FERC's action coincided with the arrival of two new Bush appointees to the= =20 agency, Patrick Henry Wood III, a former Texas utility regulator, and Nora= =20 Mead Brownell, a former Pennsylvania regulator.=20 The soft-spoken, boyish-looking Wood yesterday sought to allay Feinstein's= =20 lingering concerns that the new price control scheme would still permit=20 generators to manipulate the market.=20 Feinstein's bill would have gone further than the new FERC plan, imposing a= =20 cost-of-service based price cap that would return California to the=20 regulatory regime it had before its 1996 electricity restructuring.=20 "I am personally not allergic to that sort of remedy," Wood told the panel = -=20 - a position that is toxic to the Bush administration's former opposition t= o=20 price caps. "The cost-of-service regime was good enough for 80 years," Wood= =20 said. "We're trying to move away from it but we can still do it."=20 FERC's action, followed by Feinstein's bill withdrawal, quickly defused a= =20 mounting political confrontation between the Bush White House and Democrats= =20 over price caps -- one that saw Capitol Hill Republicans beating a retreat.= =20 Democrats argued that Bush, by refusing to impose price controls, was=20 allowing out-of-state generators based mostly in Texas to gouge California= =20 consumers.=20 The administration, especially Vice President Dick Cheney and Energy=20 Secretary Spencer Abraham, had insisted that price controls would backfire = by=20 reducing electricity sales and power plant investment, making the state's= =20 blackouts worse.=20 Yesterday, Sen. Gordon Smith, an Oregon Republican who co-sponsored=20 Feinstein's bill, as much as said the White House would have lost the fight= .=20 Smith said their measure "would have won large majorities in both the Senat= e=20 and House" had it gone to a vote.=20 E-mail Carolyn Lochhead at [email protected]=20 ,2001 San Francisco Chronicle ? Page?A - 11=20 Potrero Hill power plant hit by 2 lawsuits=20 Neighbors, city ask court to cut back hours of operation=20 Rachel Gordon, Chronicle Staff Writer Wednesday, June 20, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/06= /20/M N238116.DTL=20 The San Francisco city attorney joined forces with environmental and=20 community groups and sued in federal court yesterday to force the operator = of=20 the Potrero Hill power plant to cut its ramped-up electricity output until= =20 more rigorous pollution controls are installed.=20 The plant, run by Mirant Corp., increased its output in response to Gov. Gr= ay=20 Davis' move to relax environmental laws on power producers and generate mor= e=20 electricity for Californians.=20 The lawsuits, filed against Mirant in U.S. District Court, allege the compa= ny=20 is illegally operating its so-called peaker plants. The suits appear to be= =20 the first challenge in California to Davis' efforts to produce more power.= =20 The Potrero Hill plant, which runs during times of peak demand, has a total= =20 of six turbines that generate 156 megawatts of electricity, enough to power= =20 156,000 homes. Each turbine is permitted to operate 877 hours a year -- a= =20 threshold that already has been exceeded.=20 Mirant struck a deal March 30 with administrators of the Bay Area Air Quali= ty=20 Management District -- the regional agency that regulates air pollution -- = to=20 run the plants as much as needed to keep up with the energy demand. In=20 return, Mirant will pay $20,000 per ton of excess emissions of nitrogen=20 oxides, a pollutant that causes smog. The company placed $400,000 on deposi= t.=20 "The Mirant Corporation is behaving like an outlaw and the air district is= =20 their willing accomplice in violating clean air laws," said Mike Thomas, an= =20 organizer with Communities for a Better Environment, one of the plaintiffs.= =20 The other groups that sued are Bayview-Hunters Point Community Advocates an= d=20 Our Children's Earth.=20 The city filed a separate suit over the same issue.=20 The lawsuits ask the court to order Mirant to stop operating beyond the 877= -=20 hour cap until it obtains new permits. The city and environmental groups=20 argue the permits for expanded operation are required by the federal Clean= =20 Air Act.=20 The lawsuits also demand that more stringent pollution controls be installe= d=20 on the peakers. The increased power production poses a potentially serious= =20 health risk to the people who live and work in the surrounding neighborhood= ,=20 the plaintiffs charge.=20 Because the peaker plants weren't originally intended to run full time, the= y=20 aren't equipped with the most up-to-date pollution controls.=20 The plaintiffs also allege the air district regulators violated the=20 California Environmental Quality Act by failing to conduct thorough reviews= =20 of the expanded operation and not allowing for public comment.=20 "We as a city are not saying no to power. We're saying there's a process an= d=20 they need to follow it," said San Francisco Supervisor Sophie Maxwell, who= =20 represents District 10 where the power plant is located.=20 Terry Lee, a spokesman for the air district, said her agency and Mirant did= =20 nothing illegal. Mirant spokesman Patrick Dorinson concurred.=20 They pointed to Davis' executive orders earlier this year that gave power= =20 companies the right to step up production without going through the normal= =20 permit process and adhering to the stricter pollution controls.=20 William Rostov, an attorney for Communities for a Better Environment,=20 contends Davis does not have authority to override federal air quality laws= .=20 Lee said the U.S. Environmental Protection Agency signed off on the=20 governor's plan.=20 The plant, near 23rd and Illinois streets, long has been a target of=20 neighbors trying to close it. Mirant is hoping to build a new 540-megawatt= =20 plant on the site that uses cleaner-burning natural gas. The existing plant= =20 burns highly polluting distillate oil.=20 Lee said the money Mirant is paying for the extra emissions will help reduc= e=20 air pollution in Potrero Hill. The efforts include placing filters on Muni= =20 diesel fuel buses that operate in the neighborhood and installing a lower-= =20 polluting engine on a tug boat that runs off the nearby shores.=20 "Is this a perfect situation? No," Lee said. "But under the governor's=20 executive orders this is the way we're proceeding."=20 E-mail Rachel Gordon at [email protected].=20 ,2001 San Francisco Chronicle ? Page?A - 13=20 Washington wakes up=20 Wednesday, June 20, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/06= /20/E D40132.DTL=20 WASHINGTON, after all, does feel our pain. Partial but reasonable price=20 controls will contain wholesale electricity prices beginning today under a= =20 long-sought ruling by the Federal Energy Regulatory Commission. It's about= =20 time.=20 Where was this agency until now, and why the sudden willingness to help?=20 Politics.=20 At first, the Bush administration denounced controls as market interference= =20 that would chase off investment in power generation.=20 But the peril has spread beyond California to other Western states, whose= =20 governors are Republicans. Mid-term elections for Congress are coming up ne= xt=20 year. Also, the White House was besieged by California Republicans and=20 business groups worried about blackouts and price gouging.=20 President Bush finally sounded the retreat the day before the commission=20 vote. He could accept a "mechanism" that would "mitigate any severe price= =20 spike." He insisted that the final results were not firm price controls,=20 which arguably they are not.=20 Gov. Gray Davis, who begged for help for months, said the final package=20 didn't go far enough. What he wanted were tougher limits pegged to generati= on=20 costs, plus a profit figure of 30 to 50 percent.=20 The final formula approved by the commission amounts to a loose-fit limit= =20 that should dampen the absurd price surges that have endangered the state.= =20 The 24/7 plan rewards modern plants by setting prices based on the=20 least-efficient power producers. It covers 11 states, not just sickly=20 California.=20 There is room for doubt. Canny operators may find ways to exploit the prici= ng=20 mechanism. Also, California will be whacked with a one-state-only surcharge= =20 of 10 percent. The commission took no action on another Davis complaint tha= t=20 power generators may have overcharged the state by $6.2 billion.=20 Still, the new limits may be the most anyone could expect. Consider how far= =20 Washington has come: A hidebound ideology has given way to real-world=20 recognition of a huge problem. U.S. Sen. Dianne Feinstein acknowledged as= =20 much yesterday when she dropped a measure to impose stricter price limits.= =20 California's troubles aren't over. Conservation remains supremely important= .=20 New power plants need approval and speedy construction. The financial damag= e=20 to state utilities and the state's coffers needs attention. The severity of= =20 summer blackouts is a wild card.=20 The federal controls add a measure of protection from this volatile mix. It= 's=20 a shame that help didn't come sooner.=20 ,2001 San Francisco Chronicle ? Page?A - 18=20 Feinstein halts electricity price caps bill=20 Posted at 12:15 a.m. PDT Wednesday, June 20, 2001=20 BY JIM PUZZANGHERA=20 Mercury News=20 WASHINGTON -- Like a steam valve on an overheating boiler, the move by=20 federal regulators to enact broad new electricity price controls in the Wes= t=20 has relieved much of the growing political pressure for stronger action --= =20 for now.=20 Sen. Dianne Feinstein removed one major source of that pressure Tuesday.=20 Satisfied that the Federal Energy Regulatory Commission has taken ``a giant= =20 step forward'' in curbing California energy prices, Feinstein withdrew her= =20 legislation to enact price caps on wholesale electricity prices throughout= =20 the West.=20 ``Let's watch and wait and see how this order works,'' the California=20 Democrat told members of the commission during a Senate hearing.=20 But while the battle over the actions of federal regulators may have=20 subsided, the larger political war over energy prices continues.=20 California Gov. Gray Davis, who has been pounding away for weeks at the Bus= h=20 administration for not providing enough help to the state, will step into t= he=20 fray here today. The governor will appear at a Senate hearing where he will= =20 praise federal regulators for moving in the right direction with the new=20 plan. But he's also expected to continue to press for harder price caps and= =20 criticize federal regulators for taking months to act while the state drain= ed=20 billions from its budget to pay for electricity.=20 In addition, Davis will question some aspects of the plan, such as the lack= =20 of strong action on forcing refunds from suppliers. ``He wants to make sure= =20 that Congress gets the message loud and clear that we want our money back= =20 from the overcharges by generators,'' said Davis media representative Steve= =20 Maviglio.=20 But the Republicans are just as eager to lay responsibility for the=20 electricity crisis on Davis, who is up for re-election next year. A=20 hard-hitting Republican-backed TV ad campaign in California organized by=20 Scott Reed, a former executive director of the Republican National Committe= e,=20 blames the governor for failing to act quickly when the crisis first emerge= d.=20 The politics of shifting blame are likely to set the tone for the hearings= =20 organized by the new Democratic chair of the Senate Governmental Affairs=20 Committee, Sen. Joe Lieberman, D-Conn. Davis and all five FERC commissioner= s=20 have been invited to the hearing to determine if the commission has lived u= p=20 to its legal obligation to ensure ``just and reasonable'' electricity price= s=20 in California.=20 Price controls=20 With that oversight hearing pending this week, the commission called a=20 special meeting Monday and took stronger action. It expanded existing=20 electricity price controls around the clock and to 11 Western states. Under= =20 the commission's plan, ceiling prices will be set that suppliers can exceed= =20 as long as they provide justification for the higher price. A hard price ca= p=20 would set a price that could not be exceeded.=20 Commission Chairman Curt H,bert, a Republican, said politics played no role= =20 in enacting the new plan. But Commissioner William Massey, one of two=20 Democrats on the five-member commission, acknowledged that political pressu= re=20 in recent weeks from Republicans and newly empowered Democrats in the Senat= e=20 had an impact.=20 ``We are an independent agency but we operate in a highly charged political= =20 environment. I would not imply that we did not rule on an independent basis= =20 here, but you know, this is Washington, D.C., for God's sake,'' Massey told= =20 the Mercury News on Tuesday. ``I think that it was enlightening to the agen= cy=20 that this wasn't just a Democratic question, this was Democrats and=20 Republicans throughout the West saying, `My God, solve this problem.' And s= o=20 we hope we have.''=20 The White House, which had opposed any form of price controls, also moved t= o=20 adjust to this political reality.=20 ``To the degree that it is a market-based program, this is in keeping with= =20 what the president said, and the president is pleased to be able to help=20 California in that manner,'' White House press secretary Ari Fleischer said= .=20 ``It does not change the president's fundamental view that a separate=20 economic matter, which would be price controls, would not be productive.''= =20 But Democrats are eager to point to the shift as evidence that the White=20 House realized it was paying too high a political price for its earlier=20 position, insisting that the electricity crisis was largely California's=20 problem to solve.=20 ``The Bush administration is realizing the jig is up. The game is over,''= =20 said Sen. Barbara Boxer, D-Calif. ``Their attitude of hands-off has hurt th= em=20 deeply.''=20 Democrats in the House have vowed to continue pushing for a vote on their o= wn=20 price-caps bill. The legislation is adamantly opposed by Republican leaders= =20 in Congress, who believe FERC's actions Monday are enough government=20 intervention.=20 ``I hope that its actions are based on market principles, not political=20 half-measures,'' said House Majority Whip Tom DeLay, R-Texas. ``It's now ti= me=20 for Governor Davis to stop pointing fingers and shifting blame.''=20 Feinstein has vowed to quickly resurrect her bill if electricity prices sho= ot=20 up dramatically. Boxer said she will introduce legislation to force FERC to= =20 order power suppliers to refund what the state says are billions of dollars= =20 in overcharges for electricity purchases.=20 Meeting on refunds=20 The commission has set up a conference for the state, suppliers and utiliti= es=20 to settle the contentious refund issue by July 10. If no settlement can be= =20 reached under the auspices of an administrative law judge, the judge will= =20 make a recommendation to the commission and it will resolve the dispute,=20 H,bert said.=20 Massey had supported Feinstein's legislation to force him and his fellow=20 commissioners to enact price caps. But after the commission unanimously=20 approved its expanded price-control plan, he joined the four other=20 commissioners Tuesday in urging the Senate Energy and Natural Resources=20 Committee not to pass such a law.=20 The commission's chair, H,bert, strongly warned against legislative action,= =20 saying, ``I believe in my heart, and I know in my educated mind, that we ar= e=20 on the right track.''=20 But the issue disappeared Tuesday as Feinstein and the Republican co-sponso= r=20 of the price-cap legislation tabled their plan.=20 ``I think it renders substantially moot the legislative efforts that she an= d=20 I were pursuing,'' Sen. Gordon Smith, R-Ore., said of the commission's new= =20 price-control plan. ``And I do believe that effort would have won large=20 majorities in the Senate and the House, and so I think what you are doing i= s=20 reflecting the will of the elected representatives of the American people.'= '=20 Feinstein said that whatever the commission calls the plan, it is close=20 enough to hard caps to merit a chance to work.=20 ``I view this action by FERC as a giant step forward and I'm very grateful = to=20 you,'' she told the commissioners. ``I also view the fact that Senator Smit= h=20 and I have worked hard on this bill perhaps has been helpful in urging you= =20 along.''=20 FERC's fixes have fallen short=20 Published Wednesday, June 20, 2001, in the San Jose Mercury News=20 BY FRANK WOLAK=20 ON Monday, for the third time in the past eight months, the Federal Energy= =20 Regulatory Commission, the agency charged with regulating wholesale=20 electricity prices in California, implemented remedies that it claims will= =20 set just and reasonable wholesale electricity prices. This is a case where= =20 the third time is unlikely to be a charm.=20 As chairman of the Market Surveillance Committee of the California=20 Independent System Operator, the independent committee formed by FERC to=20 monitor the California market, I have analyzed the results of FERC's previo= us=20 attempts. They reveal a misunderstanding of important details of the=20 California electricity market. It is therefore not surprising that they hav= e=20 been ineffective.=20 Starting in November of 2000, FERC acknowledged that wholesale prices in=20 California during the summer of 2000 were unjust and unreasonable. Its=20 December 2000 order implemented the first set of remedies. Both the=20 California Power Exchange Market Monitoring Committee and the committee I= =20 chair pointed out important shortcomings in FERC's analysis of the Californ= ia=20 market and argued that its remedies would most likely harm, rather than=20 enhance, market performance.=20 At this time, FERC also did not order refunds for the unjust and unreasonab= le=20 prices, even though it acknowledged the prices reflected the exercise of=20 market power, which is the ability of a producer to force prices higher. Th= e=20 Federal Power Act requires refunds under these circumstances. But FERC said= =20 it was unable to find specific instances of firms exercising market power.= =20 This makes no sense. If FERC finds that prices indicate market power, then= =20 the generators who bid those prices are exercising market power.=20 Following the implementation of these remedies, conditions in the Californi= a=20 market deteriorated far beyond what had been predicted by the two market=20 monitoring committees. Even though January and February are the lowest dema= nd=20 months of the year, average wholesale electricity prices were almost 10 tim= es=20 higher in 2001 than they were during the same two months of 2000 and almost= =20 double the average price during the summer of 2000. In January, March and= =20 May, California experienced several days of rolling blackouts and had syste= m=20 emergencies almost every day during January and February of 2001.=20 IN April, FERC made another round of market rule changes designed to lead t= o=20 just and reasonable prices. However, in response to growing pressure from= =20 Congress, less than 10 days after these remedies were implemented, FERC=20 enacted its most recent order.=20 Before Congress declares victory, it should verify that FERC's most recent= =20 plan achieves the following two goals.=20 First, the plan should guarantee that the average price of wholesale=20 electricity paid by California over the next two years is equal to the=20 average price that would occur in a competitive electricity market, with=20 California's current supply and demand conditions and fuel costs. The Feder= al=20 Power Act requires not just a high probability of just and reasonable rates= ;=20 it requires that they occur with certainty.=20 The second goal is to alter the incentives faced by all market participants= =20 so that it will no longer be profit-maximizing for a firm to withhold=20 electricity from the market in order to drive up prices.=20 FERC's most recently implemented plan does not achieve either of these goal= s,=20 although it does come closer than any previous attempts.=20 One solution satisfying both of these goals has been proposed to FERC. In a= =20 December report to FERC, the Market Surveillance Committee of the Californi= a=20 ISO proposed a one-time regulatory intervention. This intervention would=20 require that each generator serving California sign a forward contract=20 guaranteeing that California consumers can purchase 75 percent of the=20 generator's expected output over the next two years at a specified=20 competitive benchmark price. Once a firm has signed these forward contracts= ,=20 it is free to sell all remaining energy in the western U.S. wholesale marke= t=20 at whatever price it can obtain.=20 The obligation to provide power under the contracts, and the incentive to= =20 sell 25 percent of power at unrestricted prices, would prevent generators= =20 from withholding power.=20 Unless FERC implements a solution satisfying these two goals, Congress shou= ld=20 require FERC to suspend the market-based pricing authority for all supplier= s=20 in the Western U.S. for the next two years and order all sales during this= =20 period at cost-of-service prices. This will guarantee that FERC meets the= =20 statutory mandate of the Federal Power Act in California. Frank Wolak is a professor of economics at Stanford University.=20 Wednesday, June 20, 2001=20 Easing the crunch on costs of power=20 It could have been worse. Yesterday the Federal Energy Regulatory Commissio= n=20 expanded limited price caps on electricity to cover 11 Western states and t= o=20 last 24 hours a day during an emergency.=20 This follows an action in April that imposed caps only in California during= =20 the hours the state declared a power emergency.=20 Under the new rules, "when reserves are below 7 percent in the California= =20 Independent System Operator spot markets ... the maximum price that can be= =20 charged for spot market sales ... will be 85 percent of the highest hourly= =20 price that was in effect during the most recent Stage 1 [emergency] called = by=20 the ISO," the FERC explained yesterday. The order will last until Sept. 30, 2001.=20 The action came after intense pressure by Democrats and the Bush=20 administration on the FERC, whose three Republican and two Democrat members= =20 all voted for the new controls. It also comes after continuing stories about "gouging" by suppliers. On=20 Sunday, the Register reported how Tulsa-based Williams, an energy supplier,= =20 manipulated the market to keep prices high.=20 And after Gov. Gray Davis last week attacked Los Angeles' government-run=20 Department of Water and Power for gouging the state on electricity purchase= s,=20 reported the Los Angeles Daily News, "the DWP caved in, and agreed to start= =20 selling the state power at 'cost'." The new FERC ruling certainly is better than the demand for across-the-boar= d,=20 continuous price controls demanded by Gov. Davis and other Democrats. "They're trying to let the market do the best it can under tremendous=20 pressure," Robert Michaels, a professor of economics at Cal State Fullerton= ,=20 told us of the FERC members. "It's explicitly only for one kind of power,= =20 that on short-term, so-called spot market kinds of exchanges. Most power is= =20 under other kinds of contracts not touched." The main effect of the new order is that, unlike full-blown price controls,= =20 it should not discourage the construction of new power generators.=20 [B] POWER UPDATE/ US Senate panel to hold off vote on Calif. cap bill=20 June 20, 2001=20 (BridgeNews) June 19, 2124 GMT/1724 ET=20 ................................................................. TOP=20 STORIES:=20 US Senate panel to hold off vote on Calif. power cap bill=20 San Francisco, June 19 (BridgeNews) - U.S. Senate Energy and Natural=20 Resources Committee Chairman Jeff Bingaman, D-N.M., plans to hold off on=20 voting on a bill for U.S. West power price caps following a request by fell= ow=20 senators Dianne Feinstein, D-Calif., and Barbara Boxer, D-Calif., according= =20 to an aide in Bingaman's office Tuesday. ( Story .20121 )=20 IPE says merger with ICE complete; will keep IPE name=20 New York, June 19 (BridgeNews) - London's International Petroleum Exchange= =20 has completed its merger with the Intercontinental Exchange, an electronic= =20 market for the trading of energy and metals products, IPE Chief Executive= =20 Richard Ward said Tuesday. He said the company will still be called the IPE= .=20 His statement follows ICE's announcement Monday that all of conditions of i= ts=20 recommended offer to acquire the issued share capital of IPE Holdings had= =20 been satisfied or waived and that the offer was unconditional. ( Story=20 .17970, .19353 )=20 ................................................................. OF=20 INTEREST:=20 --AMERICAS--=20 FERC order seen having little effect on US generator profits=20 San Francisco, June 19 (BridgeNews) - A U.S. Federal Energy Regulatory=20 Commission order to impose a "soft" price cap on U.S. West wholesale power= =20 prices will likely have little significant effect on producer profits from= =20 electricity sales while the order is in effect over the next year, industry= =20 analysts said Tuesday. Some analysts cautioned that some producers without= =20 long-term contracts could be negatively affected by the order. ( Story .203= 40=20 )=20 White House says FERC power plan "helpful step" for California=20 Washington, June 19 (BridgeNews) - The White House Tuesday said action take= n=20 Monday by the federal energy regulators to extend limits on electricity=20 prices in California "is and can be a helpful step" for the beleaguered=20 state. ( Story .18824 )=20 Calif. ISO rescinds Tues blackout forecast; supplies still tight=20 New York, June 19 (BridgeNews) - While the California Independent System=20 Operator has rescinded its forecast of possible blackouts for Tuesday, the= =20 agency running the Golden State's electricity grid is currently projecting= =20 very little surplus power generated in the state for the day. ( Story .1491= 3=20 )=20 Three states sue DOE over air conditioning standards ruling=20 New York, June 19 (BridgeNews) - Attorney generals of California, Connectic= ut=20 and New York along with several consumer groups sued the Department of Ener= gy=20 to block a Bush Administration plan allegedly designed to weaken efficiency= =20 standards for residential appliances, including air conditioners and heat= =20 pumps. The complaint filed Tuesday in Manhattan federal court calls the=20 administration "short sighted" and seeks to invalidate its rule changes. (= =20 Story .18548 )=20 NY, New England ISOs expand power reserve sharing agreement=20 New York, June 19 (BridgeNews) - The Independent System Operators (ISO) for= =20 New York (NYIOS) and New England (ISO-NE) have agreed to expand their=20 reserve-sharing agreement to allow for each ISO to draw on available reserv= es=20 in the other region in the event of a system interruption, according to a= =20 statement issued Tuesday by ISO-NE. ( Story .19283 )=20 AGA Preview: US natural gas inventories seen up 85 to 95 bcf=20 New York, June 19 (BridgeNews) - The American Gas Association (AGA) is=20 expected to report Wednesday that U.S. natural gas stocks have risen by 85= =20 billion to 95 billion cubic feet (bcf) for the week ended Friday, according= =20 to a BridgeNews survey of brokers, analysts and traders. The AGA will relea= se=20 the storage report at 1400 ET Wednesday. ( Story .1856 )=20 --ASIA/PACIFIC--=20 GAIL planning 20-bln-rupee gas pipeline in southern India=20 New Delhi, June 19 (BridgeNews) - India's state-owned Gas Authority of Indi= a=20 Ltd. plans to lay a new 500-kilometer-long natural gas pipeline connecting= =20 the two southern states of Kerala and Karnataka at a cost of 20 billion=20 rupees, the Press Trust of India said Tuesday. The pipeline will carry 6=20 million cubic meters of gas. ( Story .12193 )=20 Indonesia official sees power cuts by 2004 unless new units built=20 Jakarta, June 19 (BridgeNews) - Indonesia will face power cuts by 2004 unle= ss=20 additional generating capacity is built, Eddie Widiono, president director = of=20 state power group PLN, said at an industry seminar here on Tuesday. But=20 experts warned that the capital markets were unwilling to finance the=20 billion-dollar investments needed and the public sector could not afford it= .=20 ( Story .12536 )=20 Indonesia to restructure PLN, raise power tariff, says minister=20 Jakarta, June 19 (BridgeNews) - The government aims to revive investment in= =20 Indonesia's power sector with a scheduled 17.5% rise in electricity prices= =20 this year and a later $3 billion debt equity swap to restructure state powe= r=20 company PLN, minister of energy and mines Purnomo Yusgiantoro said Tuesday.= =20 PLN will negotiate directly with independent power producers (IPPs) to=20 install additional capacity, he added. ( Story .10568 )=20 Indonesian minister claims ExxonMobil to resume Aceh operations soon=20 Jakarta, June 19 (AFP) - PT Exxon Mobil Indonesia will resume oil and gas= =20 production in separatist-plagued Aceh province in early July, ending a free= ze=20 of more than three months for security reasons, a minister said Tuesday. (= =20 Story .10751 )=20 --EUROPE/MIDDLE EAST--=20 Czech's Temelin nuclear plant reactor to be restarted in July=20 Prague, June 19 (AFP) - Reactor number one at the controversial Temelin=20 nuclear plant in the Czech Republic will be restarted on July 21 after bein= g=20 shut down for two months for repairs, the plant's spokesman announced=20 Tuesday. The reactor was shut down in early May when faults were detected i= n=20 its non-nuclear secondary circuit, the latest in a series of technical=20 glitches discovered since it was first put into service in October last yea= r.=20 ( Story .16716 )=20 British Energy: Sizewell B power plant back onstream=20 London, June 19 (BridgeNews) - The 1188-megawatt Sizewell B nuclear power= =20 plant has been back onstream "for a few days," a spokeswoman for operator= =20 British Energy told BridgeNews Tuesday, refusing to detail when exactly the= =20 plant was recommissioned and whether its available capacity had since been= =20 utilized by the market. ( Story .12928 )=20 Germany's Mueller says nuclear phase-down formula won't disrupt=20 Berlin, June 19 (BridgeNews) - The formula for shutting down German nuclear= =20 power plants should cut atomic generating capacity only one-sixth by 2010,= =20 insufficient to raise fears of shortages, said Economics Minister Werner=20 Mueller. ( Story .12337 )=20 TURKEY CRISIS: Press: Govt late on IMF pledged power sell-offs=20 Ankara, June 19 (BridgeNews) - The Turkish Cabinet has decided to propose t= o=20 the parliament to extend the transfer of operational rights of power plants= =20 to the private sector by another four months, once again violating pledges= =20 made to the IMF when securing a U.S. $10 billion bailout package after the= =20 February crisis, Sabah newspaper reported Tuesday. The government, in its n= ew=20 IMF-supported program, pledged to complete transfer of the rights by=20 end-June. ( Story .11978 )=20 se ................................................................. SPOT= =20 NEWS LINKS:=20 Media://NewsSearch::/source=3Dmar/category=3Dn-eny/go/search=20 ................................................................. THE=20 MARKETS:=20 US FUTURES: UK FUTURES .1908 NY Natural Gas Pre-Opg .1795 IPE Nat Gas Review=20 .1906 NY Natural Gas Review .1794 IPE Nat Gas Midday=20 .1747 NY Natural Gas=20 US/CANADA CASH NATURAL GAS UK/EUROPE CASH NATURAL GAS .1894 Henry Hub natural gas .1807 UK Spot Gas=20 .1884 US/Canada Spot Natural Gas=20 US CASH ELECTRICITY UK/EUROPE CASH ELECTRICITY .8575 California PX: Next day .1892 UK Power Index=20 .8576 .8577 WSCC Forwards (AM/PM) .1889 Nordic Power Market=20 .8585 .8586 PJM Forwards (AM/PM) .1890 Spanish Power Market=20 .8593 .8594 Cinergy Forwards (AM/PM) .1844 UK EFA Power Market=20 .8597 .8598 Entergy Forwards (AM/PM) CANADA CASH ELECTRICITY=20 .8601 .8602 ERCOT Forwards (AM/PM) .5637 Canadian Power Market=20 .8603 New England Forwards=20 .8587 .8600 TVA Forwards (AM/PM)=20 OTHER=20 .1873 US Nuclear Plants Operating Status=20 .2029 BRIDGE CALENDAR: US POWER: Key events to watch=20 .2030 US Utility Deregulation Digest=20 .1704 US Utility M&A Digest=20 ................................................................. SYMBOL=20 LINKS:=20 Click below for adamb chart in Athena NATURAL GAS=20 NYMEX - Media://Chart:NYMEX:/[email protected]=20 IPE - Media://Chart:IPE:/[email protected] NYMEX ELECTRICITY=20 Palo Verde electricity - Media://Chart:PaloVerde:/[email protected]=20 COB electricity- Media://Chart:COB:/[email protected]=20 Cinergy electricity - Media://Chart:Cinergy:/[email protected]=20 Entergy electricity - Media://Chart:Entergy:/[email protected]=20 PJM electricity - Media://Chart:PJM:/[email protected]=20 .................................................................=20 BridgeNews=20 Send comments to [email protected]=20 [B] FERC order seen having little effect on US generator profits=20 June 20, 2001=20 By Christine Cordner San Francisco, June 19 (BridgeNews) - A U.S. Federal Energy Regulatory=20 Commission order to impose a "soft" price cap on U.S. West wholesale power= =20 prices will likely have little significant effect on producer profits from= =20 electricity sales while the order is in effect over the next year, industry= =20 analysts said Tuesday. Some analysts cautioned that some producers without= =20 long-term contracts could be negatively affected by the order.=20 * * * "FERC's decision to expand the soft price cap throughout the western grid i= s=20 not very painful for generators," Barry Abramson, UBS Warburg analyst, said= =20 in a research note. "The expanded soft price cap will have little impact on= =20 the earnings of the wholesale generating companies. By definition, every=20 other power plant is more efficient than the least efficient power plant, a= nd=20 thus every other power plant should be able to make a good profit selling a= t=20 the soft price cap.=20 "Furthermore, on most days, most of the power that is produced is sold at= =20 prices below the soft price cap, so the soft-price cap has little impact on= =20 the overall earnings of the wholesale generators in the region," Abramson= =20 said.=20 FERC on Monday unanimously voted 5-to-0 to expand wholesale price caps to t= he=20 10 western states comprising the Western Systems Coordinating Council. FERC= =20 also expanded the price caps on wholesale power to 24 hours per day, seven= =20 days per week, from limits only during supply emergencies when reserve=20 margins in California fall below 7%.=20 Under the order, wholesale power prices will be limited to 85% of the price= =20 in effect during the final hour of the most recent emergency, when Californ= ia=20 is not in a supply emergency. The proxy price will be based on the costs fo= r=20 the least efficient power plant used to generate electricity on that day as= =20 well as the price for natural gas.=20 Generators, investor-owned utilities and independent power producers,=20 however, can receive more than the proxy price if they can justify the high= er=20 generation costs. The plan also allows a 10% surcharge on all wholesale pow= er=20 sales in California in order to account for credit risk.=20 In a research note, JP Morgan analysts Jim Von Riesemann and Anatol Feygin= =20 said that earnings for generating companies "should remain relatively intac= t=20 and valuations look attractive," especially for AES, Mirant and NRG.=20 Robert Winters, a Bear Stearns analyst, said, "The near-term actions by the= =20 FERC (and the focus on Monday's meeting), the heightened political rhetoric= =20 and the weakening in gas and power prices across much of the U.S. over the= =20 past month has led to the weakness in the shares of the wholesale energy=20 companies...We believe very attractive buying opportunities are being creat= ed=20 within certain areas of the wholesale energy sectors where companies are no= w=20 trading at discounts to their projected earnings growth range."=20 Winters said there were buying opportunities with Williams, "which continue= s=20 to be our top pick in the wholesale energy space," and with Enron Corp.=20 But Abramson noted that the order does not allow producers "to mark up the = r=20 price of spot power for resale above the soft price cap," which could affec= t=20 some profit margins.=20 "The FERC plan should make it challenging for some to repeat the growth of= =20 the last couple of quarters in the West, particularly those that without=20 long-term contracts. It appears that the plan would likely dampen volatilit= y,=20 although price caps can have unexpected consequences," said Merrill Lynch= =20 analyst Steven Fleishman.=20 "On a relative basis, we believe companies that have locked up much of thei= r=20 capacity under long-term contracts and have efficient baseload power are be= st=20 positioned under the new FERC plan," Fleishman said in a note. He said=20 Calpine, Dynegy, NRG Energy and Williams stand to benefit the most from thi= s=20 scenario.=20 "Companies that could be challenged are those with less long-term contracts= ,=20 that are more dependent on inefficient peaking plants, and that could be=20 affected by less volatility in the West," Fleishman said. "The big question= =20 is how well the marketers positioned their books ahead of this changed=20 environment." He said Reliant Resources since it appears to have the least= =20 contracted in the West for 2002.=20 The plan, which will be in effect from Wednesday to Sept. 30, 2002, follows= =20 pleas from California Gov. Gray Davis to control wholesale prices, which he= =20 said cost the state roughly $50 billion this year.=20 The state's largest utility Pacific Gas & Electric declared bankruptcy=20 earlier this year, citing losses from high wholesale prices. End=20 SCE Unveils Rotating Blackout Web Site and Public Notification Plan=20 June 20, 2001=20 ROSEMEAD, Calif., June 19 /PRNewswire/ via NewsEdge Corporation -=20 Southern California Edison (SCE) today unveiled its enhanced Web site and= =20 public notification process to help guide the public through possible=20 rotating power blackouts when ordered by the California Independent System= =20 Operator (Cal-ISO).=20 "We have been able to increase significantly the amount of outage informati= on=20 available to our customers, because we want to empower them with critical= =20 information to prepare for and safely cope through power blackouts," said P= am=20 Bass, SCE's senior vice president of customer service. "We recognize that t= he=20 more information customers have before and during rotating outages, the=20 better equipped they will be to address the concerns and safety of their=20 families and employees."=20 Bass said customers have indicated they want to know four basic things when= =20 rotating blackouts occur: the location, the duration, whether it affects=20 them, and what they should and should not do to safely get through the=20 outages. SCE offers several information resources that address these concer= ns=20 -- through toll-free phone lines, through news media updates, and now throu= gh=20 an expanded, user-friendly rotating outage Web site.=20 All of these sources will tell customers that the outages rotate among=20 electrical circuits across SCE's vast service area for about one hour, as= =20 directed by Cal-ISO. They will also list the likely affected customer group= s=20 and communities, and even provide geographic maps outlining the specific=20 neighborhoods. Customers will also be able to access practical tips on how = to=20 prepare and function safely through outages.=20 Customers can find out the group their home or business is assigned to by= =20 identifying their alphanumeric Rotating Outage Group Number, which now=20 appears directly under the customer's name and address in the top left corn= er=20 of the bill's front page. When Cal-ISO predicts possible rotating outages,= =20 SCE will immediately announce which groups may be affected through its outa= ge=20 hotline -- (800) 611-1911 -- its Web site -- www.sce.com -- and through the= =20 news media.=20 When outages are forecasted or actually begin, customers can determine if= =20 their group is part of the current outage or likely to be included in the= =20 next round, since SCE generally interrupts groups in numerical order, with= =20 some exceptions. For example, customers can now hear on the morning news=20 whether Cal-ISO is predicting outages for the day. By calling the hotline o= r=20 checking www.sce.com, they can learn which groups would likely be interrupt= ed=20 if circumstances turn out as predicted. If their group number is on the lis= t=20 of groups likely to be interrupted, the customer could take steps to prepar= e=20 for the likelihood of rotating blackouts affecting their home or business= =20 that particular day.=20 It should be noted that group numbers may change without advance notice for= =20 operational reasons or when state regulators revise their policy regarding= =20 customers exempted from blackouts. SCE will notify customers of such change= s=20 as quickly as practical.=20 Visitors to SCE's customer Web site, www.sce.com, will find the following= =20 helpful enhancements:=20 -- The site displays outage group numbers and corresponding communities=20 affected during recent, current, and predicted rotating outage=20 incidents.=20 -- When customers click on the name of a community affected by an outage,= =20 they are taken to a detailed street map of the affected circuit.=20 -- The Web site offers general outage information and links, including=20 outage preparation and safety tips, grid status information from Cal-=20 ISO, frequently asked questions about rotating outages, and=20 conservation tips.=20 -- A dynamic home-page pop-up window will change messages depending on=20 state power conditions. For example, during a Stage 2 Emergency,=20 customers will be directed to information about potential outages.=20 During a Stage 3 Emergency in which rotating outages are underway, the=20 box will provide a hotlink to group numbers and communities currently=20 affected and likely to be affected should outages likely continue.=20 For customers who don't have Internet access, SCE provides essentially the= =20 same Web site information through an automated outage phone line, (800)=20 611-1911. This service makes it possible to obtain outage information=20 immediately without waiting. Among major features:=20 -- Customers can call at any time to learn the Rotating Outage Group=20 Number assigned to their home or business.=20 -- When customers experience a power blackout, they can call to determine= =20 whether they are part of a rotating outage incident or if their=20 circuit has been affected by a routine interruption such as a car or=20 construction accident.=20 -- During rotating blackouts, customers can learn if their circuit is=20 currently affected or may be affected in the coming hours and which=20 portions of specific communities may be affected.=20 -- When customers call, they should have their account number and group=20 number handy. However, if customers call during a rotating outage=20 incident and do not know their group number, they will be able to=20 obtain information by entering their zip code.=20 SCE's media relations office has developed strategic communications=20 partnerships with radio and television stations that provide frequent live= =20 updates to the public, including information about circuit groups affected = or=20 likely to be affected by outages.=20 It should be further noted that while SCE is committed to providing as much= =20 advance public notification about pending rotating blackouts, it can only d= o=20 so as it receives timely notification from Cal-ISO.=20 SOURCE Southern California Edison=20 CONTACT: Corporate Communications of Southern California Edison,=20 626-302-2255, www.edisonnews.com=20 Web site: http://www.sce.com (EIX)=20 Edison CEO/ Ruling Hasn't Helped=20 June 20, 2001=20 By LESLIE GORNSTEIN AP Business Writer LOS ANGELES (AP) via NewsEdge Corporation -=20 A federal ruling this week limiting wholesale energy prices in 10 Western= =20 states hasn't been enough to pull Southern California Edison any further fr= om=20 the brink of bankruptcy, Edison International chief John E. Bryson said=20 Tuesday.=20 The state's second-largest utility is no further from or closer to bankrupt= cy=20 now than it was ``two weeks, four weeks, six weeks ago,'' Bryson told a pre= ss=20 conference before a speech to Town Hall Los Angeles, a public policy forum.= =20 Bryson is chairman, president and chief executive officer of Edison=20 International, parent of subsidiary Southern California Edison, which serve= s=20 4.2 million customers.=20 Bryson said, however, that he senses a warming among state legislators to a= =20 proposed bailout deal between his company and the state.=20 That deal would supply billions of dollars to Edison in exchange for years = of=20 cheap power and possibly the utility's power lines.=20 ``Interest has at least intensified in Sacramento on the part of legislator= s=20 to take steps _ debate continues exactly what steps _ to have Edison health= y=20 and to take the state out of the power business and so on,'' Bryson said.= =20 Such lawmaker approval is required for the deal to survive. Key lawmakers= =20 surrounding the deal were not immediately available for comment.=20 In his Town Hall address, Bryson used the forum as a kind of open plea to= =20 state legislators, listing what he called a series of widespread myths that= =20 might be keeping leaders from acting.=20 ``The first myth is that somehow Southern California Edison is seeking a=20 bailout from taxpayers,'' Bryson said. ``Only the reverse is true.''=20 Instead, Bryson said, it was Edison who bailed out California by keeping th= e=20 lights on even when the utility's power costs far exceeded its revenues.=20 Secondly, Bryson said, Edison and its investors are not profiting from the= =20 power crisis, and SoCal Edison's parent did not act improperly by collectin= g=20 money from the utility earlier this year.=20 That money was later given to shareholders, a move that outraged consumer= =20 groups.=20 Bryson also warned that a SoCal Edison bankruptcy would severely hurt=20 California's economy by scaring away new businesses and investment capital.= =20 ``Inaction would deeply hurt the state of California and all of us,'' he=20 said.=20 Editorial Desk; Section A=20 At Last, Action on California=20 ?=20 06/20/2001=20 The New York Times=20 Page 22, Column 1=20 c. 2001 New York Times Company=20 After months of dithering, the Federal Energy Regulatory Commission took so= me=20 potentially meaningful steps on Monday to contain the wholesale price of=20 electricity in California and elsewhere in the Western United States. Anxio= us=20 not to be seen as caving in to public pressure or abandoning its fidelity t= o=20 the free market, the White House described the new policy as ''consistent= =20 with where the president has been all along.'' Gov. Gray Davis of Californi= a=20 , for his part, said the policy did not go far enough, and of course only= =20 time will tell whether it does. But to many others, including Senator Diann= e=20 Feinstein of California , the move amounted to the first significant federa= l=20 intervention in the California wholesale market since the crisis began last= =20 year. Ms. Feinstein withdrew her own price-cap bill pending the outcome of= =20 the new plan.=20 Under the new arrangement, approved unanimously by a reshuffled five-member= =20 Regulatory Commission, price limits will be based on the cost of producing= =20 electricity at the least efficient generator. The formula covers the sale o= f=20 electricity for immediate delivery -- the so-called ''spot market'' that=20 supplies about 20 percent of California 's needs and that California turns = to=20 when it is desperately trying to keep the lights on. The companies will be= =20 allowed to charge higher prices during peak periods, but not the huge sums= =20 they command today.=20 In addition, the constraints will apply throughout 10 other Western states,= =20 presumably eliminating any incentive for generators to withhold power from= =20 the California market in order to obtain a higher price elsewhere. The=20 controls are to expire in September of next year, which should relieve some= =20 of the administration's earlier fears that constraints of any kind would=20 discourage investment in new and badly needed sources of supply.=20 The benefits will not immediately be felt by California consumers. Both=20 individuals and businesses have recently been hit by rate increases belated= ly=20 imposed by the state's Public Utilities Commission at Mr. Davis's request.= =20 But the new plan should ultimately benefit taxpayers by lessening the impac= t=20 of higher energy costs on the state government, which has been buying power= =20 on behalf of the state's two largest utilities, both essentially insolvent.= =20 Recent estimates have suggested that California , which paid $7 billion for= =20 electricity two years ago, could pay as much as $50 billion this year.=20 Until quite recently the president and his energy czar, Dick Cheney, had=20 seemed almost indifferent to California 's needs. But Republican members of= =20 Congress from California and other Western states have been growing=20 increasingly restive as they contemplate the potential political fallout in= =20 the midterm elections of 2002. In addition, the two newest members of the= =20 regulatory commission, both Bush appointees, have expressed sympathy for=20 California 's plight. Whatever the reason, the administration appears to ha= ve=20 seen the light, even though it is reluctant to admit it. National Desk; Section A=20 Regulators' Order Could Bring Broad California Power Accord By LAURA M. HOLSON with JEFF GERTH ?=20 06/20/2001=20 The New York Times=20 Page 14, Column 3=20 c. 2001 New York Times Company=20 LOS ANGELES, June 19 -- An order by federal regulators that power generator= s=20 enter settlement talks with the State of California could open the door to = a=20 sweeping compromise of the financial issues in the state's power crisis,=20 energy industry analysts and executives said today.=20 But the question that remains -- and it is a vital one, they said -- is=20 whether the Federal Energy Regulatory Commission has the wherewithal to for= ce=20 the warring parties to hammer out an understanding that, at its heart, is a= s=20 much about politics as about money.=20 The commission on Monday gave California regulators and power generators=20 until July 9 to come up with a plan for settling accounts between the=20 generators and California 's struggling utilities. The power companies are= =20 owed billions, but the state has accused them of price-gouging. If the=20 parties cannot reach some agreement, an administrative judge will step in a= nd=20 recommend a settlement to the commission instead.=20 Asked at a Senate hearing in Washington today to clarify what he hoped to= =20 accomplish as a result of the two weeks of settlement talks, the commission= 's=20 chairman, Curtis L. Hebert Jr., was noncommittal. The parties, he explained= ,=20 need two things for the talks to succeed: a deadline and uncertainty.=20 Senator Dianne Feinstein, Democrat of California , expressed skepticism abo= ut=20 the undertaking. Ms. Feinstein said at the hearing, held by the Senate Ener= gy=20 and Natural Resources Committee, that she was concerned that the commission= =20 had laid out ''no rules'' for the talks.=20 ''Very little, if any, money has changed hands as a result of prior=20 settlement conferences,'' she said.=20 Many industry executives and state officials have not yet seen the=20 commission's order, and they were scrambling today to figure out exactly wh= at=20 they were being asked to do.=20 ''Without seeing what exactly is in the order, who knows?'' said Sean=20 Gallagher, a staff lawyer for California 's Public Utilities Commission.=20 ''But we wouldn't turn our noses up at participating in negotiations.''=20 Gary Ackerman, executive director of the Western Power Trading Forum, a=20 coalition of energy traders and electricity generators, noted that the=20 federal regulators' timetable ''has a very short fuse.'' And the fact that= =20 the state's biggest utility, the Pacific Gas and Electric Company, has file= d=20 for bankruptcy will complicate efforts to reach a comprehensive agreement, = he=20 added.=20 ''I don't hold high hopes that a settlement would work out,'' Mr. Ackerman= =20 said, ''but I commend the FERC for taking a stab.''=20 Moreover, the parties to the settlement talks may lack an element vital to= =20 successful negotiations: trust.=20 Several California entities, including the Public Utilities Commission, are= =20 investigating whether generators took advantage of consumers by charging=20 excessive prices for power. The Independent System Operator, which runs the= =20 state's power grid, released a study in March concluding that Californians= =20 might have been overcharged for electricity by more than $6 billion. One=20 state government negotiator said the California attorney general's office= =20 could file a suit against the power generators in the next few weeks.=20 And as state officials, including Gov. Gray Davis, continue to hurl attacks= =20 at the generators, calling them pirates and profiteers, the companies and= =20 California utilities are blaming legislators, saying they failed to address= =20 the power crisis quickly enough.=20 In March, Duke Energy, one of the companies the state has accused of=20 profiteering, offered to negotiate a broad settlement, but Governor Davis= =20 ruled out calling off the state's inquiries as part of any agreement.=20 The outlines of Duke's proposal included a compromise on the money owed by= =20 California utilities, in exchange for the dropping of private lawsuits,=20 California 's complaints to federal regulators and the state investigations= .=20 Duke would have admitted no wrongdoing.=20 In formal proceedings, the power generators to date have vigorously fought= =20 discounting the debts they are owed by California .=20 The Federal Energy Regulatory Commission has ordered generators to refund= =20 nearly $130 million in what it judged to be overcharges. Today one of the= =20 commissioners, William L. Massey, said 80 percent of that money had not bee= n=20 collected. A Section=20 Davis Finds Hope in Calif. Power Crunch Rene Sanchez and Peter Behr ?=20 06/20/2001=20 The Washington Post=20 FINAL=20 Page A06=20 Copyright 2001, The Washington Post Co. All Rights Reserved=20 LOS ANGELES, June 19 -- Sinking in the polls, under attack by a new=20 Republican advertising campaign and still struggling to avert a summer of= =20 blackouts, California Gov. Gray Davis (D) nevertheless seems heartened abou= t=20 the latest developments in the power crisis that has engulfed his state and= =20 threatened his political career.=20 On his first trip to Washington in months, Davis will detail California 's= =20 plight Wednesday in testimony to a Senate committee newly led by sympatheti= c=20 Democrats -- one important reason for his optimism.=20 But he has others: Conservation is taking hold in the state, and prices for= =20 power on the daily spot market are dropping. California has managed to avoi= d=20 rolling blackouts so far this month, in part because it has been spared a= =20 heat wave.=20 Federal regulators, under pressure even from Republican lawmakers, decided= =20 Monday to impose more controls on prices that energy suppliers can charge= =20 California . Two new power plants are scheduled to begin producing=20 electricity in weeks. California also has recently secured more than a doze= n=20 deals for power over the next decade, a move Davis contends will stabilize= =20 the volatile wholesale market for energy.=20 In short, Davis and his aides say their concerted political strategy and=20 efforts to ease the crisis are beginning to pay off.=20 "The bottom line is that we're stabilizing prices and assuring the power wi= ll=20 be there without additional rate increases," said Steve Maviglio, a spokesm= an=20 for the governor. But he added: "We're not ready to say the war is over. It= 's=20 still going to be a tight summer."=20 Whether any or all of those steps will keep the lights on in California thi= s=20 summer, or help solve an array of other financial problems the crisis has= =20 caused, is hardly clear.=20 In fact, California 's power shortfall could produce 113 hours of rotating= =20 outages this summer, according to a U.S. Department of Energy study schedul= ed=20 to be released Wednesday.=20 Since California 's two largest utilities fell into financial ruin this yea= r,=20 forcing the state to spend nearly $5 billion to buy power directly and=20 saddling residents with huge new rate increases, the support that Davis onc= e=20 had from a majority of voters has vanished. Recent polls suggest that he=20 could have trouble winning a second term.=20 Consumer advocates here are besieging him, saying that the $43 billion in= =20 long-term power deals that Davis has signed could lock residents into payin= g=20 artificially high utility rates for years. Some contend that all he has=20 gained from Washington is political cover.=20 "The Bush administration has created this toothless price cap mechanism tha= t=20 will be used as political protection but certainly not consumer protection,= "=20 said Doug Heller, a director of the Foundation for Taxpayer and Consumer=20 Rights.=20 Davis has stuck mostly to the same political script. He is demanding more= =20 federal help for California -- on Monday he called the Federal Energy=20 Regulatory Commission's decision merely "a step in the right direction" --= =20 and he is denouncing out-of-state energy suppliers and their Republican=20 allies.=20 Today, Republicans launched a $1.5 million advertising offensive that blame= s=20 Davis for the state's energy crunch. The spots, running on English and=20 Spanish-language media, describe the crisis as "Grayouts from Gray Davis."= =20 Scott Reed, the GOP strategist who runs the American Taxpayers Alliance,=20 which funded the ad campaign, said his group wants to counter the governor'= s=20 spin. "The blame game has to end," said Reed.=20 But Davis's aides say the ads are a sign that Republicans sense California = 's=20 energy predicament could deepen GOP political troubles in the state.=20 Privately, some Republican lawmakers pushing for more federal assistance sa= y=20 they are worried that in midterm congressional elections next fall the GOP= =20 could lose House seats in California that it needs to hold a majority.=20 Today's hearing will bring both Davis and his adversaries on the Federal=20 Energy Regulatory Commission before the Senate's Governmental Affairs=20 Committee, chaired by Sen. Joseph I. Lieberman (D-Conn.).=20 Instead of a committee debate on California 's electricity prices, the focu= s=20 of the session may be shifting toward the billions of dollars of alleged=20 overcharges by energy suppliers.=20 Under growing pressure from both parties in Congress, FERC's commissioners= =20 responded Monday with far more extensive price controls than they had been= =20 willing to consider previously. They extended April price controls that had= =20 applied only to times of power emergencies to all hours of the day, through= =20 September 2002. And they expanded the controls to cover 10 other western=20 states.=20 California Sens. Dianne Feinstein and Barbara Boxer, both Democrats, said= =20 FERC's action was a positive step and agreed to delay efforts to direct the= =20 commission to clamp down on California 's energy prices. "We're willing to= =20 give them a chance to see if it works," Boxer told reporters.=20 Now, Davis will press his demands that FERC recover some $8 billion in=20 alleged overcharges by wholesale power suppliers since the crisis began -- = a=20 far larger amount than the $124.5 million in refunds that FERC has so far= =20 assessed.=20 Whether there is even a chance of a peace process is unclear. Just last wee= k,=20 California Attorney General Bill Lockyer announced plans to convene a=20 criminal grand jury to investigate whether power generators illegally=20 conspired to drive up electricity and natural gas prices.=20 The governor could face other new problems. Several of California 's major= =20 independent power generators said the price controls and state lawsuits=20 against the generators made it more difficult to justify expanding operatio= ns=20 in California , a warning echoed today by Energy Secretary Spencer Abraham.= =20 But heading into the summer, California 's power prices are much lower than= =20 they were a month or two ago, with daily or "spot" power prices averaging $= 78=20 per megawatt hour in June, compared to $372 in April.=20 Both Davis and the FERC commissioners are taking credit. S. David Freeman,= =20 Davis's energy adviser, said that the long-term power contracts the state h= as=20 signed, the new power plants and favorable weather have tamed prices.=20 FERC Chairman Curt Hebert Jr. said Monday that the limited price restraints= =20 that the commission imposed on wholesale electricity sales in April have be= en=20 a key reason for the price decline.=20 Sanchez reported from Los Angeles and Behr from Washington. Staff writers= =20 Mike Allen and Juliet Eilperin contributed to this report from Washington.= =20 http://www.washingtonpost.com=20 Contact: http://www.washingtonpost.com=20 National Desk; Section A=20 The Lesson of When to Give Aid to Free Markets By DAVID E. SANGER ?=20 06/20/2001=20 The New York Times=20 Page 14, Column 3=20 c. 2001 New York Times Company=20 WASHINGTON, June 19 -- Three weeks ago George W. Bush addressed a sympathet= ic=20 audience of business executives at the Century Plaza Hotel in Los Angeles a= nd=20 declared that his administration ''will not take any action that makes=20 California 's problems worse, and that's why I oppose price caps'' on=20 electricity .=20 As he spoke, the Democratic governor of California , Gray Davis, sat=20 impassively on the dais, preparing to meet Mr. Bush and then denounce him f= or=20 failing to protect California consumers from an electricity market gone wil= d.=20 Today, the White House halfheartedly welcomed action by federal regulators = to=20 impose throughout the West a system that looks and smells a lot like price= =20 caps -- though the White House said it was something different.=20 ''This is not a price control,'' Ari Fleischer, the White House spokesman,= =20 said. ''This is a market-based mitigation plan that now will extend to 11= =20 Western states.''=20 In fact, it bore some resemblance to a proposal made by 10 leading economis= ts=20 who urged a middle ground between fixed prices and a deregulated electricit= y=20 market. Mr. Davis used their proposal to support his position in favor of= =20 limited price restraints when Mr. Bush visited California .=20 The White House shift from outright opposition to price controls to its mor= e=20 nuanced position today exemplifies how Mr. Bush has tempered his embrace of= =20 completely unfettered markets in recent weeks. He didn't have much choice.= =20 As the threat of blackouts loomed, demands for action rose from officials o= f=20 both parties and from consumers in the West. It was almost possible to hear= =20 sighs of relief at the White House today that the Federal Energy Regulatory= =20 Commission -- an independent body in the Energy Department -- had moved to= =20 turn down the political heat.=20 In fact, while some House Democrats are still pressing for firmer caps on= =20 prices, Senators Dianne Feinstein, Democrat of California , and Gordon H.= =20 Smith, Republican of Oregon, withdrew a bill that would have placed strict= =20 price controls on electricity sold in Western markets.=20 Senator Feinstein said the White House could call yesterday's regulatory=20 action ''mitigation'' or anything else it pleased.=20 ''A rose is a rose by any other name,'' she said today.=20 And a free market is not always free. Two weeks ago the administration said= =20 it would rescue steel companies and steelworkers who have long complained= =20 about unfair competition from South Korea, Taiwan, China, Brazil, Germany,= =20 Russia and Ukraine. The White House defended the action by saying it was th= e=20 only way for the industry to adjust to a new competitive environment.=20 Last month, with no major announcements at the White House, the Bush=20 administration voted for International Monetary Fund aid to two countries,= =20 Turkey and Argentina, that (like California ) had made some economically=20 disastrous political decisions.=20 In each case, Mr. Bush's economic orthodoxies were tempered by political=20 realities.=20 The California crisis was one thing when it involved a Democratic governor = in=20 a state Mr. Bush lost by a million votes; it was another, one of his aides= =20 conceded today, when congressional Republicans from around the West were=20 warning Mr. Bush that blackouts and sky-high prices could blow up in his=20 first year in office.=20 ''We heard from a lot of members of Congress who feared that Republicans=20 would be tarred with worsening the problem, even though it happened on Gray= =20 Davis's watch,'' the political aide said. ''The president took that on=20 board.''=20 Similarly, the steel decision was partly about enforcing laws against=20 ''dumping'' foreign products in the market -- and partly about Mr. Bush's= =20 desire to convince labor unions not to block his trade agenda. Like=20 Californians coping with higher energy prices, the steelworkers need time t= o=20 adjust to a new world, the administration said.=20 ''Open markets improve the lives of people by increasing opportunity, choic= e=20 and economic freedom,'' Robert B. Zoellick, Mr. Bush's trade representative= ,=20 said in an interview today. ''But compassionate conservatism also recognize= s=20 the reality that the effects of rapid change fall harder on some communitie= s=20 and industries,'' which, he said, need ''vital breathing space to adapt to= =20 change.''=20 While Mr. Bush expressed deep reservations about I.M.F. bailouts during the= =20 presidential campaign, the situation seemed a bit more complicated once he= =20 got to Washington. The State and Defense Departments feared that if Turkey= =20 were engulfed in economic chaos, and blamed the United States for failing t= o=20 come to its aid, its leaders might be less inclined to let American fighter= =20 jets use its territory to mount missions over Iraq.=20 So given the choice between letting the Turkish people pay a high price for= =20 political mistakes -- Californians take note -- and weakening American=20 pressure on Saddam Hussein, Mr. Bush decided that economic niceties were le= ss=20 important than political consistency. Mr. Bush chose the Pentagon over the= =20 Treasury.=20 Administration officials said these actions did not represent a retreat fro= m=20 let-the-markets-prevail orthodoxy.=20 Lawrence B. Lindsey, Mr. Bush's chief economic adviser, said in an intervie= w=20 today that he opposed price caps at the beginning of the California crisis= =20 and that he opposed them now. But he would not criticize the federal=20 commission for ''mitigating'' price spikes in the market.=20 ''What they are trying to do is achieve two incompatible missions --=20 preserving what is called 'just and reasonable pricing' and assuring an=20 adaquate supply of electricity ,'' Mr. Lindsey said. Yet the reality, he=20 added, is that new supplies of electricity will not become available for a= =20 year or more. ''FERC is doing its best to square that circle in the face of= =20 the fundamental problem, which is inadequate supply,'' he said.=20 That is the kind of argument that keeps economists happily arguing for hour= s.=20 It is not likely to be the kind of argument Mr. Bush himself is likely to= =20 engage in for long. As one of his political advisers said the other day,=20 ''Don't think about this purely in terms of megawatts. We need to produce= =20 more electricity , but we also need to produce some more seats in the=20 House.''=20

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VentureWire, Tuesday, September 12, 2000

====================================================== VENTUREWIRE --- Tuesday, September 12, 2000 ====================================================== Private Company Business News ------ Published Daily by Technologic Partners ------- http://technologicpartners.com ====================================================== Top Stories: o Internet Network Frim Interxion Raises $173 Million Series B o Government Rejects One Argument in Napster Appeal o AppleSoup Becomes Flycode After Apple Computer Complains o Affiliates of Citicorp Venture Capital To Anchor New Fund o Juniper Financial Holds $94 Million Series B Funding o Palladium Equity Partners Closes $300 Million Fund |||||||||||||||||||| Advertisement |||||||||||||||||||| vcapital is the place to find funding for your business. That's because vcapital offers you access to over 370 venture capital firms representing over $70 billion in capital under management. Plus, vcapital gives you access to educational tools and resources to better position your executive summary, along with personalized assistance and guidance from venture capital consultants. What's it all mean? Success. Your success. So stop spending time chasing after funding. Turn to vcapital for your best deal today. http://www.vcapital.com ||||||||||||||||||||||||||||||||||||||||||||||||||||||| Also in This Issue: New Money: o Oracle ASP Appshop Closes Series A Round with $17 Million o Digital Music Provider FullAudio Gets $15 Million Round Two o ICP Company MetStream Closes $4 Million Series A o NC Virtual Systems Raises $5 Million First Round o Net Infrastructure Firm Waveset Gets $7.3 Million Round One o Network Storage Firm Panasas Raises $10 Million Led by MDV o Online Medical Resource Veritas Raises $8 Million Round One o Ownership Services Firm Allmystuff Gets $10 Million Series A o Security Consultant Espiria Gets $6 Million Series A o Sun & GigaPixel Co-Founders Invest in Multimedia Company o Supplier Integration Firm RioLabs Has $6 Million First Round o Web Network Bla-bla Gets $3.25 Million More in Seed Round o Web Security Firm Ingrian Systems Gets $4 Million Round One o Wireless Firm Red Jade Gets $10 Million in Initial Funding o Advice Site AskForFree.com Completes First Round of Funding o Data Replication Firm Cogenia Raises $1 Million First Round o Document Exchange Raises $30 Million Led by Apax Partners o IXEurope Raises $56.8 Million Second Funding Round o $15 Million Round Two for Latin E-Commerce Enabler Decidir o Broadband Wireless Firm nBand Closes $14 Million Series B o CascadeWorks Raises $8 Million in Second Round of Funding o E-business Firm Event Zero Gets $20 Million Round Two o Mobile Net Firm Mobilocity Raises $21 Million Second Round o VoDSL Provider Woodwind Closes $12.2 Million Second Round o Freelancer Marketplace Guru.com Raises $44 Million C Round o Net Messaging Provider @Once Closes $8.1 Million Series C o Data Storage Company 3Ware Secures $43 Million in Series D o eNIC Gets $4 Million and Commitment for $21 Million More o New Forum Gets $6 Million, Lamar Alexander Joins Board o Mobile Communications Software Firm Ecutel Gets $6 Million o Translation Software Firm Trados Receives $4 Million New Products: o Info, Resource Site for Minority Businesses Announces Launch o Online Business Info Provider RhondaWorks Launches o Gilat-To-Home Becomes StarBand Communications o Local Busines App Firm Dbusiness.com Now LocalBusiness.com M&A: o Contact Center Firm !hey Software Merges with icontact.com o Tech Licensing Firm UVentures Buys Datamonitor's QX Health o BarterNet Acquires Majority Interest in BXI Exchange New Directors: o Supply Chain B2B SupplyLinks Adds Curry to Board o Former FCC Director Joins Hispanic Sports' Board o Money Management Services Provider eBalance Adds to Board o ARM Holdings COO Joins NCipher Board of Directors New People: o Mobilestop Hires Former Ericsson Exec. As President, CEO o DailyShopper Network Names Ex-L.A. Times VP President & COO o XML App Firm Vordel Names Former Siemens Exec as CEO o Former Internet Capital Group Exec Named CEO of XYAN.com o Authentication Provider BioNetrix Names Ex-Previo Chief CEO o Newmediary.com Hires Former Adsmart CEO as President, CEO o U.K. Internet Graphics Firm ZY.com Appoints New CEO o Virtue Names Freshmarketing.net Co-Founder as President VC Fund News: o Pacifica Fund Gets $25 Million to Build Early Stage Fund o TechnoCap Raises Additional $74.4 Million For New Fund VW Corrections: o North Castle Partners |||||||||||||||||||| Advertisement |||||||||||||||||||| Size does matter when it comes to bandwidth. In the online economy, the bigger the pipe the better. Which is why The Wall Street Journal Technology Summit is featuring keynotes by CEOs of three companies that help the Internet handle more data in less time: --David Huber of Corvis, the optical communications startup that recently set a Wall Street record for new issues by companies without revenues, raising $1.1 billion in its IPO at a market capitalization of $11 billion. --Scott Kriens of Juniper Networks, the young maker of high-speed Internet equipment whose shares have risen tenfold since IPO. --David Peterschmidt of Inktomi, the network-caching company with revenue growth of more than 25% for 10 consecutive quarters. Register today at http://info.wsj.com/techsummit/ ||||||||||||||||||||||||||||||||||||||||||||||||||||||| ======= Top Stories ======= o Internet Network Frim Interxion Raises $173 Million Series B AMSTERDAM -- Interxion Holding, which provides carrier neutral Internet exchange centers, raised EUR 200 million ($173 million) in a Series B financing round. New investors, including GS Capital Partners 2000 and Whitehall Real Estate Funds, both sponsored by Goldman Sachs; DLJ Real Estate Capital Partners II; CSFB Private Equity; CSFB Real Estate Investment Banking; CSFB Technology Group; Enron Broadband Services, a subsidiary of Enron; Continuum Group; and Aman Ventures participated in the round. Previous investors including Baker Communications Fund, Navis Partners V, Morgan Stanley Dean Witter, and Bear Stearns Merchant Banking also contributed. The company said it will use the capital to continue to develop its Internet exchange centers across Europe and new service offerings and to increase staffing. http://www.interxion.com/ _____________________________________________ o Government Rejects One Argument in Napster Appeal NEW YORK -- The United States Copyright Office and the Department of Justice have rejected one facet of Napster's defense that claims it is protected by the Home Audio Recording Act. Record labels and music industry organizations have charged Napster, operator of a site for sharing copyrighted music files in MP3 format, with copyright infringement. In an advisory brief filed with the United States District Court for the Northern District of California, the Copyright Office stated the "Audio Home Recording Act does not protect Napster from the plaintiff's claims of copyright infringement." The U.S. Copyright Office and the Justice Department argue that the Audio Home Recording Act addresses a different phenomenon, specifically the use of DAT recorders used for home taping. "We have great respect for the Department of Justice, but in this instance we believe their position is incorrect, " said Napster's attorney David Boies. In a statement Mr. Boies also noted that the government did not address Napster's liability and the precedents cited in Napster's appeal. A&M Records and other record labels, the Recording Industry Association of America, and the National Music Publishers Association have filed the suit against Napster. The company is backed by Hummer Winblad Venture Partners and individual investors. http://www.napster.com/ _____________________________________________ o AppleSoup Becomes Flycode After Apple Computer Complains SAN FRANCISCO -- AppleSoup, which develops software for a peer-to-peer network of distribution and file sharing for video, said it changed its name to Flycode after receiving a 'cease and desist' letter from Apple Computer. Apple Computer's letter claimed the name AppleSoup infringed on its trademark. In a copy of the letter provided by Flycode, a law firm representing Apple demands that the company discontinue use of the AppleSoup name by July 28, 2000. Calls to Apple Computer for comment were not returned. Flycode, founded by two co-founders of Napster, has raised $2.5 million in seed funding from individual investors including Bill Krause, president of LWK Ventures; Frank Biondi, chairman of Biondi Reiss Capital Management; Joon Yun, an investment analyst at Palo Alto Investors and a founding partner of Targesome; and the Jack Valenti family. http://www.flycode.com/ _____________________________________________ o Affiliates of Citicorp Venture Capital To Anchor New Fund LONDON -- Digital Networks, which recently launched as a venture capital group, said it secured anchor investments from affiliates of Citicorp Venture Capital, an investment branch of Citigroup. The Digital Networks Group is raising a EUR 75 million ($60.6 million) fund. The fund will invest in early and late stage European digital infrastructure companies providing software, services, and hardware to companies involved in the media, communications, or information technology sectors. The average investment size will range between $867,000 to $8.7 million. Telephone +44-20-816-8890. _____________________________________________ o Juniper Financial Holds $94 Million Series B Funding WILMINGTON, Del. -- Juniper Financial, an online financial services company that offers banking and personal financial services, said it raised $94 million in its Series B round of funding. New investor J.W. Seligman led the round, which included other new investors Aether Systems, Fifth Third Bancorp, Kemper Ventures, Kingdon Capital, Maverick Capital, Sonera, Total Technology Ventures, and previous investors Benchmark Capital and individual investors. The round brings the company's total funding to $114 million. Sonera Plaza president and CEO Harri Hollmen and Total Technology Ventures managing partner Tom Smith will join the company's board. The company will use the funding for launching its products and services this fall and for company expansion. Juniper Financial focuses on credit card, checking, and bill payment services with a focus on Internet and wireless technology. http://www.juniper.com/ _____________________________________________ o Palladium Equity Partners Closes $300 Million Fund NEW YORK -- Palladium Equity Partners said it closed a new fund, Palladium Equity Partners II, for $300 million. The fund will invest in basic industries and focus on companies in the automotive, chemical, food, healthcare, media, plastics, and packaging industries. Palladium has invested in two companies so far through its new fund: Wise Snacks, a snack food company, and Physicians WebLink. Telephone 212-218-5153. ======= New Money ======= o Oracle ASP Appshop Closes Series A Round with $17 Million FREMONT, Calif. -- Appshop, an ASP of Oracle applications providing IT infrastructure for small and mid-size companies, said it raised $17 million in Series A funding led by Menlo Ventures. El Dorado Ventures, Osprey Ventures, RSA Ventures and Stanford University also contributed to the round. Menlo Ventures managing partner Douglas Carlisle has joined the board of directors. The company said the funds will support the development of its ASP hosting facilities, marketing, and the roll-out of national sales and service. http://www.appshop.com/ _____________________________________________ o Digital Music Provider FullAudio Gets $15 Million Round Two CHICAGO -- FullAudio, a digital music subscription service, said it raised $15 million in its second round of funding. The round was led by Venture Strategy Partners and included investments from New Enterprise Associates and Kettle Partners. The company said the funds will be used for the further development of FullAudio's secure subscription service, including the technical advancement and design of FullAudio's service platform, which it expects to introduce early next year. FullAudio secured $4.5 million in first round financing in December 1999 led by Stewart Alsop of New Enterprise Associates that included investments from Chicago based Kettle Partners, GRP Records and N2K founder Larry Rosen, former WebTV and TiVo CEO Randy Komisar, and IDEO Ventures. Tony Conrad of Venture Strategy Partners will join Stewart Alsop, Lee Rosenberg of Kettle Partners, Mr. Komisar, and Mr. Rosen on the FullAudio board. http://www.fullaudio.com/ _____________________________________________ o ICP Company MetStream Closes $4 Million Series A PORTLAND, Ore. -- MetStream Communications, an integrated communications service provider targeting residential communities with broadband services, said it closed its Series A round with $4 million from Vertex and Integrated Electrical Services. The company said it plans to use the money for hiring staff in Portland and Seattle. MetStream provides digital television, video-on-demand, Internet access, hosted IP applications, and telephony services mainly to apartment and condominium communities. http://www.metstream.com/ _____________________________________________ o NC Virtual Systems Raises $5 Million First Round WARSAW -- NC Virtual Systems, which provides software for security, subscriber management, and billing for ASPs, said it raised $5 million in its first round of funding. The round was led by Copernicus Capital Management, a venture capital fund focusing on investments in central Europe. Other investors in the round include Actron International, Central Poland Fund, Intel Capital, ISAL Amlat Investments, the Poland Investment Fund, and Israeli investor Star-West Capital. The company said it will use the funding to accelerate research and development, and create an international marketing campaign. Neil Milne, chief executive officer of Copernicus Capital Management, and a representative from Star-West Capital will both take seats on the company's board of directors. Telephone +49-22-826-8580. http://www.copernicus.pl/ _____________________________________________ o Net Infrastructure Firm Waveset Gets $7.3 Million Round One AUSTIN, Texas -- Waveset Technologies, a provider of Internet infrastructure software, said it closed its first round of funding with $7.3 million. Participating investors included Austin Ventures, Origin Partners, seed investor AV Labs, and individual investors Martin Neath, president and COO of Works.com; and Bill Wood, special limited partner at Austin Ventures. The funding will go towards business and product development, and marketing initiatives. Chris Grafft of Austin Ventures, Marc Yagjian of Origin Partners, and Bill Wood of Austin Ventures will join the board of directors. http://www.waveset.com/ _____________________________________________ o Network Storage Firm Panasas Raises $10 Million Led by MDV MENLO PARK, Calif. -- Mohr, Davidow Ventures (MDV), an early stage venture capital firm, said it has led an investment round of $10 million in Panasas, a network storage company. In addition to the investment, MDV co-managing partner Jon Feiber and MDV East Coast office partner Michael Sheridan will join the Panasas' board of directors. http://www.panasas.com/ _____________________________________________ o Online Medical Resource Veritas Raises $8 Million Round One CAMBRIDGE, Mass. -- Veritas Medicine, an online medical resource developed to provide patients, physicians, and other health care professionals with information about clinical trials and innovative treatments, said it has raised $8 million in its first round of funding. The round was funded by Burrill & Company, BioAsias Biotechnology Development Fund II, Cambridge Incubator, and Seaflower Ventures. Along with the preparation for the October launch of its online resource, the funds will be used for marketing and distribution, expanding the number of diseases profiled, and product enhancement. Telephone 781-674-0216. _____________________________________________ o Ownership Services Firm Allmystuff Gets $10 Million Series A AUSTIN, Texas -- Allmystuff, which provides product ownership services for durable goods companies, said it raised $10 million in its Series A round of funding. TL Ventures led this first round, which follows a seed round provided by AV Labs and Polaris Ventures. Dell Ventures and Austin Ventures also joined in this Series A round. As a result of the funding, Guy Hoffman, a venture partner at TL Ventures and former chief executive officer of Deja.com, and Manish Mehta, the principal at Dell Ventures, will join the Allmystuff's board of directors. Allmystuff's technology allows companies to create Web pages that contain product information, self-help tools, warranty trackers, and other product data for their customers. http://www.allmystuff.com/ _____________________________________________ o Security Consultant Espiria Gets $6 Million Series A MINNEAPOLIS -- Espiria, an information security consulting firm, said it raised $6 million in Series A funding. Wheatley Partners led the round, which included Dalewood Associates, Family Financial Strategies, and Jumpstart Capital. Wheatley Partners general partner Seth Lieber and Jumpstart Capital founder and general partner Shawn Kreloff have joined the company's board of directors. The company will use the funding for market expansion and to further develop its services. Espiria provides business planning, security consulting, technology deployment, and managed services. http://www.espiria.com/ _____________________________________________ o Sun & GigaPixel Co-Founders Invest in Multimedia Company SANTA CLARA, Calif. -- QuArc, a provider of digital multimedia technology, said it raised $5 million in funding from private investors. Investors in the round included the co-founder of Sun Microsystems, Andreas Bechtolsheim and George Haber, co-founder of Gigapixel. Mr. Bechtolsheim will take a seat on the company's board of directors. Mr. Haber has been named president, CEO, and a member of the company's board of directors. Sorin Cismas, company founder, will serve as chief technology officer and chairman of the company's board of directors. QuArc develops and markets high bandwidth memory controllers and high definition MPEG-2 decoders. http://www.quarc.com/ _____________________________________________ o Supplier Integration Firm RioLabs Has $6 Million First Round DENVER -- RioLabs, which provides supplier integration technology, said it raised $6 million in its first institutional round of funding. Barnard & Co. led the round, which included Sequel Venture Partners and previous individual seed round investors including Pete Estler, founder of iBelay; Ernest Jacquet, managing director of Boston's Parthenon Capital; and Rich Patch, a former vice president with Sybase. Barnard & Co.'s Steve Change will join the company's board of directors. The company will use the funding for company development, sales and marketing, and North American expansion. RioLabs links enterprise information sources with exchanges or direct trading services for business-to-business Internet commerce marketplaces. http://www.riolabs.com/ _____________________________________________ o Web Network Bla-bla Gets $3.25 Million More in Seed Round NEW YORK -- Bla-bla, an online portal for independent content, said it received an additional $3.25 million in its seed round of financing, bringing the total raised to date for the round to $7.65 million. The round has is still open. Bla-bla said it will use the funding for general company growth and expansion. Investors in this round include Silicon Alley Venture Partners, Hudson Venture Partners, Liberty View Equity Partners, SBIC, Youngtree Partners, and Stonehenge Capital. Bla-bla said its network has over 230 sites and is adding 40 sites per month. http://www.bla-bla.com/ _____________________________________________ o Web Security Firm Ingrian Systems Gets $4 Million Round One REDWOOD CITY, Calif. -- Ingrian Systems, which is developing scalable Internet security products that will increase the speed of transactions, said it has secured $4 million in its first round of funding from a group of investors. The round included Andy Bechtolsheim and Bill Joy, co-founders of of Sun Microsystems, and Martin Hellman, professor emeritus of electrical engineering at Stanford University. Other investors in the round included Andrew Dumke, general partner of Pacific Mezzanine Fund; John Hamm, the managing director of Internet Capital Group; Greg Chabrier, most recently vice president of business development for VALinux; and Sardina, the co-founder of Tasmania Network Systems, which was acquired by Cisco last year. http://www.ingrian.com/ _____________________________________________ o Wireless Firm Red Jade Gets $10 Million in Initial Funding PALO ALTO, Calif. -- Ericsson said it has made a $7 million investment in Red Jade, a developer of wireless entertainment products. Red Jade also received an additional $3 million from IT Provider, a Swedish venture capital firm. In addition to financial support, Ericsson Business Innovation will support Red Jade with product design and development, marketing, manufacturing, and distribution. http://www.redjade.com/ _____________________________________________ o Advice Site AskForFree.com Completes First Round of Funding CUPERTINO, Calif. -- Al Shugart International (ASI) said AskForFree.com, which offers free advice in a variety of categories, completed its first round of funding for an undisclosed amount. The round was led by Shugart Venture Fund 2, the venture arm of ASI, with participation from Angel Investors. Jon van Bronkhorst of Shugart Venture Funds will join the board of directors. http://www.askforfree.com/ _____________________________________________ o Data Replication Firm Cogenia Raises $1 Million First Round SUNNYVALE, Calif. -- Cogenia, which specializes in data replication technology for the wireless data industry, said it has closed its Series A round of funding at $1 million. The Jain Family Trust, Crest Communications Holdings, Satwik Ventures, the Pillsbury Madison and Sutro Venture Fund, and several individual investors provided the funds. Cogenia was founded by chairman Ashok Jain, CEO Scott Andrews, and CTO Doug Terry. Telephone 650-279-0242. _____________________________________________ o Document Exchange Raises $30 Million Led by Apax Partners NEW YORK -- Bolero.net, which provides an online data exchange for electronic trading communities, said it raised $30 million in its most recent round of funding. The round was led by Apax Partners. The company said it will use the funding for implementation efforts across the Bolero.net affiliated network, and development of new products and services for the company's clients. Tim Wright, and Richard Lenane, both of Apax Partners, will take seats on the company's board of directors. Bolero.net acts as a neutral third party to ensure secure delivery and receipt of the information and provides a legal structure that binds all users together. http://www.bolero.net/ _____________________________________________ o IXEurope Raises $56.8 Million Second Funding Round LONDON -- IXEurope, which provides co-location and facilities management services, said it raised $56.8 million in its second round of funding. A group of investors including European Acquisition Capital (EAC), IXEurope's majority shareholder; Banc of America Equity Partners; J. P. Morgan Capital; First Union Capital Partners; and some of EAC's fund investors participated in the round. The company said it will use the funding to increase its number of co-location sites from three to eight by the end of the year. The expansion will involve development in France, Germany, and Switzerland. http://www.ixeurope.com/ _____________________________________________ o $15 Million Round Two for Latin E-Commerce Enabler Decidir BUENOS AIRES -- Decidir.com, a business-to-business portal and infrastructure service that provides credit risk information and payment platforms for conducting e-commerce in Latin America, said it raised $15 million in second round funding. New investors GE Capital, HSBC-Tower Fund, and SCP Private Equity Partners, a U.S. fund associated with Safeguard Scientifics, were joined in the round by previous investors Citicorp Venture Capital Latin America, CVC Opportunity, CIMA Investments, and International Real Returns. The company, which has offices in Argentina, Brazil, Mexico, Chile, and Miami, will use the funds to complete its regional expansion and to develop new tools and services. Decidir offers an authentication product for secure e-commerce transactions and has developed databases of financial, legal, credit, and import/export information of businesses and individuals in Latin America. http://www.decidir.com/ _____________________________________________ o Broadband Wireless Firm nBand Closes $14 Million Series B SUNNYVALE, Calif. -- nBand Communications, a broadband wireless technology company, said it closed its Series B funding round with $14 million led by VantagePoint Venture Partners. Original investors Axis Communications, Sunrise Capital Fund, and several private investors also participated. VantagePoint partner Matt Ocko joined nBand's board of directors. The company will use the funds toward hiring its engineering and sales teams, product development, and marketing. http://www.nband.com/ _____________________________________________ o CascadeWorks Raises $8 Million in Second Round of Funding SAN FRANCISCO -- CascadeWorks, which provides Web-hosted applications for managing Internet procurement services, said it raised $8 million in its second round of financing led by New Enterprise Associates (NEA). The funding will be used to accelerate product development and sales and marketing. Chip Linehan, partner at NEA, will join CascadeWorks' board of directors. CascadeWorks raised $1.1 million in January from individual investors. http://www.cascadeworks.com/ _____________________________________________ o E-business Firm Event Zero Gets $20 Million Round Two ARLINGTON, Mass. -- Event Zero, a provider of Internet and wireless systems for businesses, said it raised $20 million in its second round of funding led by First Union Capital Partners. Previous investors Shawmut Capital Partners, Trident Capital, Integral Capital Partners, and Sparkventures, also participated in the round. The funds will be used to support infrastructure expansion in the Boston, New York, and San Francisco offices, as well as to enhance service offerings. Event Zero clients include CBS Employer Services, BankPass.com, and Brainshark. http://www.eventzero.com/ _____________________________________________ o Mobile Net Firm Mobilocity Raises $21 Million Second Round NEW YORK -- Mobilocity, a builder of mobile Internet businesses, said it has raised $21 million in its second round of funding led by Morgan Stanley Dean Witter Private Equity. The round also included investments from J.P. Morgan Capital; LabMorgan, the e-finance unit of J.P. Morgan; Siemens Business Services Ventures; Cambridge Samsung Partners; Telligent Capital; Comdisco Ventures; Usheron Ventures; and Morrison & Foerster. The funding will be used to continue Mobilocity's growth in the U.S., fuel its expansion into Europe and Asia, and further develop its Mobility Lab. Mobilocity named Noah Walley, General Partner of Morgan Stanley Dean Witter Venture Partners, to its board. Mr. Walley joins a board comprised of executives from LabMorgan, Cambridge Samsung Partners, and LCC International. Prior investors in Mobilocity include LCC International; Cambridge Samsung Partners; WS Investment; and individual investors, including current and former executives of Donaldson Lufkin & Jenrette, Goldman Sachs, Morgan Stanley Dean Witter, CIBC World Markets, and Chase Manhattan Bank. http://www.mobilocity.net/ _____________________________________________ o VoDSL Provider Woodwind Closes $12.2 Million Second Round GERMANTOWN, Md. -- Woodwind Communication Systems, a provider of integrated access devices for broadband services such as voice over digital subscriber lines, said it completed its second round with $12.2 million. The round included new investors Alta Partners, SpaceVest, and Sterling Venture Partners, and original investors Boulder Venture and Novak Biddle Venture Partners. The company will use the funds for marketing its broadband products. http://www.woodwindcom.com/ _____________________________________________ o Freelancer Marketplace Guru.com Raises $44 Million C Round SAN FRANCISCO -- Guru.com, a marketplace connecting freelance professionals with contract projects, said it has raised $44 million in its Series C round of financing led by Investor AB. The round included investments by August Capital, Credit Suisse First Boston, Greylock, Tarrant Venture Partners, and WR Hambrecht. American Express and Red Hat also made investments in this round in a strategic alliance that will provide American Express with small business and financial products through Guru.com and will combine Red Hat and Guru.com's resources in order to build a project marketplace for the open source Linux community. The company said it will use the funds for product and technological development, running its day-to-day operations, and to expand its senior management team. Guru.com has raised a total of $63 million in financing in the past year. The company also named David Lee, a managing director of Investor Growth Capital, to its board. Investor Growth Capital is a venture arm of Investor AB, Sweden's largest holding company. http://www.guru.com/ _____________________________________________ o Net Messaging Provider @Once Closes $8.1 Million Series C PORTLAND, Ore. -- @Once, an Internet messaging provider, said it has raised $8.1 million in its Series C round of funding from Olympic Venture Partners (OVP) and previous individual investors. As a result of the funding, David Chen, OVP Partner, will take a seat on the company's board of directors. @Once's services allow clients to learn about their customers preferences and conduct targeted direct e-mail campaigns. http://[email protected]/ _____________________________________________ o Data Storage Company 3Ware Secures $43 Million in Series D MOUNTAIN VIEW, Calif. -- 3Ware, which provides data storage, back up, security, and management for Internet applications, said it has secured $43 million in its Series D round of funding. Investors in the round include NeoCarta Ventures, Franklin Templeton, New Enterprise Associates, Quantum Technology Ventures, VantagePoint Venture Partners, Veritas Software, as well as several strategic partners. The company said it will use the funds to improve its services. http://www.3ware.com/ _____________________________________________ o eNIC Gets $4 Million and Commitment for $21 Million More SEATTLE -- eNIC, a top-level Internet domain name registry, said it received a strategic financing commitment of $25 million from Malaysian-based investment holding company MOL.com Berhad. eNIC has received $4 million so far. The remaining investment of $21 million will be made upon approval from the Malaysian Securities Commission and the Foreign Exchange Department of the Malaysian Central Bank. The funding will be used for marketing, sales, and mergers and acquisitions. http://www.enic.com/ _____________________________________________ o New Forum Gets $6 Million, Lamar Alexander Joins Board CONSHOHOCKEN, Pa. -- New Forum Publishers, an Internet-based provider of proprietary interactive educational content, said it has raised $6 million in funding from Walter W. Buckley Jr., president of Buckley Muething Capital Management, and Walter W. Buckley III, the president and CEO of Internet Capital Group. The company said it will use the financing for sales and marketing and to expand its product line. The company also announced it has appointed Lamar Alexander, a candidate for U.S. president in 1996 and 2000, to its board of directors. Mr. Alexander served as Secretary of Education under President George W. Bush from 1991 to 1993. He also co-founded Simplexis, an online educational service provider focusing on K-12 schools and their suppliers. http://www.newforum.com/ _____________________________________________ o Mobile Communications Software Firm Ecutel Gets $6 Million ALEXANDRIA, Va. -- Core Capital Partners said it had led a $6 million investment in mobile Internet communications software company Ecutel. Other investors included Intel, Updata Capital, McDonnell and Associates, Steve Walker and Associates, and Avansis. Ecutel will use the funding for sales and marketing. http://www.ecutel.com/ _____________________________________________ o Translation Software Firm Trados Receives $4 Million ALEXANDRIA, Va. -- Trados, a provider of software tools for translation professionals, said it received $4 million in a round of financing. AdAstra Erste Beteiligungs GmbH was the sole investor for the round. The financing will be used for marketing, sales, and product development. Previous investors include Mercury Private Equity, a subsidiary of Merrill Lynch & Co., and First Union Capital Partners. http://www.trados.com/ ======= New Products ======= o Info, Resource Site for Minority Businesses Announces Launch NEW YORK -- MinorityInterest Network, which provides online information, services, and resources to minority-owned businesses, their employees, customers and related community organizations, announced the launch of the beta version of its Web site. MinorityInterest Network is backed by CEA Latin American Partners, Zero.net, and individual investors. http://www.minorityinterest.com/ _____________________________________________ o Online Business Info Provider RhondaWorks Launches PALO ALTO, Calif. -- RhondaWorks, a provider of online and offline information, advice, and tools for small businesses and entrepreneurs, said it has launched. The company will offer an online interactive business planning center that aims to enable and assist entrepreneurs in starting up and growing their businesses. The RhondaWorks team includes both publishing and Internet veterans led by chief operating officer Jim Schulte, formerly the editor-in-chief of USATODAY.com, and Rhonda Abrams, founder and CEO of RhondaWorks. The company is backed by individual investors. http://www.rhondaworks.com/ _____________________________________________ o Gilat-To-Home Becomes StarBand Communications MCLEAN, Va. -- Gilat-To-Home, which provides consumer focused two-way satellite broadband Internet service, said it changed its name to StarBand Communications. The company said the change in name represented its new category Intenet high-speed delivery, which it plans to launch this fall. StarBand is backed by Gilat Satellite Networks, Microsoft, EchoStar Communications, and ING Furman Selz Investments. http://www.starband.net/ _____________________________________________ o Local Busines App Firm Dbusiness.com Now LocalBusiness.com FORT LAUDERDALE, Fla. -- Dbusiness.com, an Internet provider of local business applications, local news and intelligence, tools, and research resources for small and medium-sized businesses, said it has changed its name to LocalBusiness.com. The company, which recently acquired request-for-proposal provider TrueAdvantage, said the name change reflects its focus on local business applications and services. LocalBusiness.com is backed by U.S. Equity Partners, TMCT Ventures, and Tribune Ventures. http://www.localbusiness.com/ ======= M&A ======= o Contact Center Firm !hey Software Merges with icontact.com NORTH ANDOVER, Mass. -- !hey software, a provider of contact center and voice technologies, and icontact.com, a personalized online communication software firm, said the companies have merged to form new company !hey. Terms of the merger were not disclosed. Duncan Mackay, president and CEO of !hey software, will remain as president and CEO of the new company. Investors in !hey include Telecom-Internet Investors, a subsidiary of Telecom Ventures, eCOM Partners, Broadband Ventures, Goldman Sachs, and individuals. http://www.heyinc.com/ _____________________________________________ o Tech Licensing Firm UVentures Buys Datamonitor's QX Health NEW YORK -- UniversityVentures, a marketplace for the technology licensing industry, said it has acquired Datamonitor's QX Health technology assets and changed its name to UVentures. The terms of the acquisition were not disclosed. UVentures said the acquisition will broaden its global technology transfer marketplace and enhance its content and service offerings. UVentures is backed by individual investors. http://www.uventures.com/ _____________________________________________ o BarterNet Acquires Majority Interest in BXI Exchange FOSTER CITY, Calif. -- BarterNet, a marketplace for businesses to trade products and services, said it has acquired a controlling interest in BXI Exchange, a retail barter exchange in the U.S. with a roster of 20,000 businesses in 85 markets throughout the United States. Financial terms of the transaction were not disclosed. BarterNet was previously a minority shareholder. BarterNet is backed by Wand Partners, Alignment Capital, and the partners of Parthenon Capital. http://www.barternet.com/ ======= New Directors ======= o Supply Chain B2B SupplyLinks Adds Curry to Board SAN FRANCISCO -- SupplyLinks, an Internet business-to-business supply chain network, said it appointed W. Roger Curry to its board of directors. Mr. Curry was the president and CEO of Consolidated Freightways and a former colleague of SupplyLinks CEO David I. Beatson. After being appointed president and CEO of Emery Worldwide in 1994, Mr. Curry brought Mr. Beatson on board as vice president of sales and marketing. SupplyLink's board consists of Mr. Beatson, Mitch Weseley, president and CEO of Global Logistics Technologies, and Tim Sensenig, managing director of New Meadows Venture Capital Partners. SupplyLinks is funded by New Meadows Venture Partners and G-Log. http://www.supplylinks.com/ _____________________________________________ o Former FCC Director Joins Hispanic Sports' Board SAN DIEGO -- Former Federal Communications Commission director Francisco Montero joined the board of directors for Hispanic Sports, a company that acquires the exclusive Spanish-language radio, television, and Internet broadcast rights to professional U.S. sports teams and leagues. Mr. Montero is a partner with the Washington D.C. law firm of Shaw Pittman Potts & Trowbridge in its telecommunications and technology practice group. Hispanic Sports is backed by Bencap Partners and recently closed an undisclosed seed round of funding. The company is in the process of raising its first funding round. Telephone 619-920-7609. _____________________________________________ o Money Management Services Provider eBalance Adds to Board SAN RAMON, Calif, -- eBalance, which provides market research to financial institutions by offering online money management services to individual consumers, said it named Mark A. Johnson to its board of directors, bringing the board to five members. Mr. Johnson was former vice chairman of CheckFree, an Internet billing and payment service. eBalance is funded by Signia, Alliant Partners and Internet Angels. http://www.ebalance.com/ _____________________________________________ o ARM Holdings COO Joins NCipher Board of Directors WOBURN, Mass. -- nCipher Corporation, a developer of security products for e-commerce and Public Key Infrastructure (PKI) applications, said it has appointed ARM Holdings chief operating officer Jamie Urquhart to its board of directors. Mr. Urquhart joins nCipher founders and executive directors Alex and Nicko van Someren and fellow board members Ossama Hassanein of Newbury Ventures, Richard Gourlay of Top Technology, and Roger Maggs of Celtic House Investment Partners. nCipher also announced the completion of a round of funding in which Deutsche Bank became a shareholder. The majority of nCipher's existing institutional investors also increased their stockholdings. The terms for this recent round of funding have not been disclosed. Ncipher has received funding from Celtic House Investment Partners, Newbridge Networks, Newbury Ventures, Security Dynamics Technology, and Top Technology. http://www.ncipher.com/ ======= New People ======= o Mobilestop Hires Former Ericsson Exec. As President, CEO MIAMI -- Mobilestop, which provides an e-commerce platform for wireless carriers, said it has appointed Hakan Wretsell as its new president and CEO. Mr. Wretsell is former executive vice president and general manager of the Americas division at Ericsson Mobile Phones, and was vice president of Ericsson Mobile Phones Latin America. He will replace Arnthor Halldorsson, who now assumes the position of executive vice president of development. Mobilestop has received venture capital from Swedish firm Novestra, Time Vision, Artic Ventures, Talenta-Internet and individual investors. The firm is based here and has offices in Buenos Aires, Luxembourg, Oslo, Reykjavik, Sao Paolo, Seattle, and Stockholm. http://www.mobilestop.com/ _____________________________________________ o DailyShopper Network Names Ex-L.A. Times VP President & COO SEATTLE -- DailyShopper Network, which provides online promotion services for traditional retailers, said it named Carol Perruso as its president and COO. Ms. Perruso was most recently president of latimes.com and vice president of the Los Angeles Times. Ms. Perruso succeeds company co-founder and former president Michael Skinner, who is no longer with the company. DailyShopper Network is backed by Madrona Venture Group and Voyager Capital. http://www.dailyshopper.net/ _____________________________________________ o XML App Firm Vordel Names Former Siemens Exec as CEO DUBLIN -- Vordel, a provider of Talk XML, which delivers applications that enable enterprises to establish secure communication channels to organizations in their business networks, named David Ryan as chief executive officer. Prior to joining Vordel, Mr. Ryan was chief executive officer of Siemens Business Services in Ireland and was acting chief executive officer of SSE, the Siemens Internet security firm. Vordel is backed by individual and institutional investors. http://www.vordel.com/ _____________________________________________ o Former Internet Capital Group Exec Named CEO of XYAN.com KING OF PRUSSIA, Pa. -- XYAN.com, an online resource for comprehensive digital content management and document production, said it has named Richard G. Bunker Jr., former managing director and chief technology officer of Internet Capital Group, as chief executive officer and president. Mr. Bunker, who was a member XYAN.com's board of directors, replaces John H. Foster, who will remain as chairman of the company's executive committee. Mr. Bunker, who will no longer serve on XYAN's board, is also former president and CEO of Reality Online, a provider of online investing products, hosting, and tech support for financial services firms. He was previously senior vice president and chief information officer of SEI Investments. XYAN is funded by venture capital firm Foster Management. http://www.xyan.com/ _____________________________________________ o Authentication Provider BioNetrix Names Ex-Previo Chief CEO VIENNA, Va. -- BioNetrix Systems, a provider of personal authentication security, said John Ticer has been named CEO, replacing co-founder Peter Bianco who will become vice chairman and executive vice president of marketing and business development. Ticer was formerly CEO of Previo, a computer systems management company. BioNetrix investors include Carlyle Venture Partners, Columbia Capital, the Dinner Club, and individual investor Steve Walker. http://www.bionetrix.com/ _____________________________________________ o Newmediary.com Hires Former Adsmart CEO as President, CEO NEWTON, Mass. -- Newmediary.com, a network of online marketplaces for e-commerce services, named John Federman as president and CEO. Mr. Federman joins Newmediary.com from Engage Technologies, where he served as executive vice president of worldwide sales and business development. Prior to joining Engage, Mr. Federman was the CEO and president of Adsmart, a CMGI-backed Internet advertising network. Newmediary has secured venture capital from Advanced Technology Ventures, CommonWealth Capital, and Still River Fund. http://www.newmediary.com/ _____________________________________________ o U.K. Internet Graphics Firm ZY.com Appoints New CEO MENLO PARK, Calif. -- ZY.com, a U.K.-based provider of Web graphics and Web page building services, said it appointed Tony Vine-Lott as chief executive officer. Mr. Lott previously served as a managing director at Barclays. ZY.com is backed by ICE Securities and undisclosed institutional investors. The company said it is exploring the possibility of undertaking an initial public offering later this year on a European exchange and is also considering a U.S. listing. http://www.zy.com/ _____________________________________________ o Virtue Names Freshmarketing.net Co-Founder as President NATICK, Mass. -- Virtue Ltd., a 3-D graphics software provider, said it appointed Lori Dustin as president of its U.S. subsidiary. Dustin formerly co-founded and was CEO for freshmarketing.net, an Internet marketing firm. Virtue Ltd. is backed by Technoplast Technologies, Technorov Holdings, and Yardworth B.V. http://www.virtue3d.com/ ======= VC Fund News ======= o Pacifica Fund Gets $25 Million to Build Early Stage Fund REDWOOD SHORES, Calif. -- Pacifica Fund has raised $25 million and anticipates raising an additional $10 million to establish an investment fund focused on early stage companies. Investors include global corporations, private individuals, and a management consulting firm. The fund will focus on first round capitalization, making investments in the range of $500,000 to $1,250,000 with additional participation in subsequent rounds. The general partners, who have operational experience in both Global 500 and small venture companies, expect to make between 15 and 20 deals with the new fund. Pacifica Fund invests in communications technologies and services, business infrastructure transformation, and basic enabling technologies for emerging IT platforms. http://www.pacificafund.com/ _____________________________________________ o TechnoCap Raises Additional $74.4 Million For New Fund MONTREAL -- TechnoCap, a venture capital firm, said it raised an additional C$110 million ($74.4 million), bringing its total capital to C$210 million. Investors in the firms most recent fundraising include Bombardier Trust, Desjardins Pension Fund, the Solidarity Fund, and TechnoAnge. http://www.technocap.com/ ======= VW Corrections ======= o North Castle Partners NEW YORK -- A story in the September 8 issue of VentureWire misspelled the last name of the former Nabisco CEO who is a new general partner at North Castle Partners. She is Ellen R. Marram, not Miram. |||||||||||||||||||| Advertisement |||||||||||||||||||| What is the future for the business-to-consumer model, the business-to-business model, and the path to profitability? Find out at Healthcare Outlook. October 31, 2000 Palace Hotel - San Francisco, California For more information and registration, go to: http://tpsite.com/tp/conf/ho2000/default.html ||||||||||||||||||||||||||||||||||||||||||||||||||||||| SEND TO A FRIEND To subscribe to VentureWire, tell your friends and colleagues to go to: http://www.venturewire.com/register/vw This copy of VentureWire may be distributed freely, provided that the distribution is without charge, that the issue is distributed complete and unaltered, and that all copies retain the Technologic copyright notice. _____________________________________________ TO SUBSCRIBE go to: http://www.venturewire.com/register/vw To CHANGE your address, send your old and new e-mail address to: [email protected] To UNSUBSCRIBE, send e-mail to: [email protected] Send COMMENTS, QUESTIONS, or NEWS ITEMS to: [email protected] Entire Contents Copyright 2000 by Technologic Partners VentureWire is a Service Mark of Technologic Partners =====================================

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['[email protected]']

VentureWire, Friday, November 3, 2000

====================================================== VENTUREWIRE --- Friday, November 3, 2000 ====================================================== Private Company Business News ------ Published Daily by Technologic Partners ------- http://technologicpartners.com ====================================================== Top Stories: o Gateway Still On Board After IBM Says No To Transmeta Chip o Health Site Drkoop.com to Acquire Young Adult Site drDrew o UCLA Says It Funded Napster o ASP NetworkOSS Closes Series A at $16.5 Million |||||||||||||||||||| Advertisement |||||||||||||||||||| Motley Fool CEO- 41 weeks, Yahoo VP- 45 weeks... Still think traditional search firms know Internet talent? Don't let your valuation suffer as you wait for a candidate. VentureWorx' search professionals have completed 400+ assign- ments-from placing CEOs at leading technology companies to building entire management and advisory teams for startups. Whether recruiting top talent or developing bulletproof strat- egy and PR, let VentureWorx' knowledge work for you. Contact Jonathan Long at 704.377.4100 or http://www.ventureworx.com/ ||||||||||||||||||||||||||||||||||||||||||||||||||||||| Also in This Issue: New Money: o Integreated Semiconductor Firm Avaz in $15 Million Round One o B2B-Matrix Gets $500,000 from eSamsung USA in Round One o Content Firm StreamSage Lands $250,000 From Duncaster o Optical Network Firm Dyotec in $3 Million Round One o Shalom.com Puts $5.5 Million in Telecom's E-ntouch Round One o Component Platform iSuppli Raises $30 Million Second Round o Net Telephony Firm Callserve Has $11.9 Million Round Two o Wireless Firm Argogroup Raises $20 Million Second Round o $49.6 Million Fourth Round for Broadband Firm Tantivy o FairEx International Financial Systems Raises $10 Million o HotOrigin, Irish Technology Incubator, Raises $2.7 Million o SanDisk Invests $7.2 Million in Digital Imaging Firm Divio o Cube Consulting Gets $3 Million from Bizzbuild, Durlacher o Online Marketing Firm USAData Raises $6 Million Round Three o Analytic Software Firm SafeLogic Raises GBP 400,000 o Mitiska Announces $6.2 Million in Third Quarter Investment o Consortium Invests $1.5 Million in Mobile Tech Firm Mgage New Products: o Internet Architecture Management Firm FastTide Launches New Deals: o Food Gift Company Harry and David Invests in eVineyard.com M&A: o E-mail, Messaging Firm Commtouch Buys Wingra for $17 Million o Prescription Processing Application Firm TechRx Buys Flux o BtoBfactory Acquires Latin American Investment Firm BtoBen o eLearning Firm Intellinex Buys PC Skills Trainer Teach.com o Utilities Service Blink.com Acquires Bookmark Firm Coolsync o ClearCross Acquires Atrion in Stock Swap New Directors: o CharterHub Names Ex-Canadian Airlines Executive to Board o Online Address Service Ukibi Names Board of Directors New People: o Telco Software Firm Watchmark Names Former GTE Exec as CEO VC Fund News: o CDC Launches Accelerator With $85.9 Million Investment VC Personnel: o Grotech Adds Former Legg Mason Director as Partner o Technology Incubator eHatchery Adds Two to Board VW Corrections: o Broadstorm Telecommunications o eBenefits o Kymata o Mobileum |||||||||||||||||||| Advertisement |||||||||||||||||||| Showcase your company to 100 CEOs of the hottest start-ups in pervasive computing and hundreds of senior venture capitalists at Technology Outlook 2000, December 4-5 in San Francisco. Corporate Sponsorship of Technology Outlook 2000 provides unparalleled opportunities to gain exposure and establish business relationships with the rising stars of the pervasive computing industry. At Technologic Partners' conferences: * Private companies get funding * Investors realize opportunities * Sponsors develop new client relationships To learn more about how sponsoring Technologic Partners conferences can meet your objectives, contact Jack Cowie at [email protected] for more information. ||||||||||||||||||||||||||||||||||||||||||||||||||||||| ======= Top Stories ======= o Gateway Still On Board After IBM Says No To Transmeta Chip SAN DIEGO -- Computer manufacturer and retailer Gateway said it is still on track to use chip design company Transmeta's microprocessor in an Internet appliance it is developing with America Online. IBM announced this week it will not use Transmeta's Crusoe chip on its ThinkPad 240. IBM said it never committed to using Transmeta in its 240 laptop, and only used the chip in its demonstration model. IBM, which did not comment on why it decided against the Transmeta chip, said it is still considering using Transmeta in future ThinkPad models and has not called off its plans to manufacture the chip. Gateway, which said it has not deviated from the plans it announced in May, said it opted for Transmeta's Crusoe processor because of its small size, long battery life, and low operating temperature. Gateway also said it selected Transmeta's Mobile Linux as the operating system for its products. Transmeta plans to hold its IPO next week to raise a maximum of $194 million. Transmeta did not return calls for comment. The five-year old Transmeta is backed by America Online, Compaq Electronics, Compaq Computer, First International Computer, Five Points Capital, Deutsche Bank, Gateway, Invemed Associates, Phoenix Technologies, Soros Fund Management, Tudor Investment, Van Wagoner Capital Management, Vulcan Ventures, and individual investors. http://www.transmeta.com/ _____________________________________________ o Health Site Drkoop.com to Acquire Young Adult Site drDrew AUSTIN, Texas -- Drkoop.com, a publicly traded Internet health site, said it acquired the assets of drDrew.com, a struggling online lifestyle community for 14- to 24-year-olds, that had laid off most of its staff. Drkoop.com bought all of drDrew.com's assets from Sherwood Partners, a corporate restructuring and business advisory firm, for $150,000 in cash and 1.58 million shares of common stock, worth approximately $1.4 million. The sites will continue operating independently and there will be some basic content integration. Drew Pinsky, founder of drDrew.com, will be an advisor to drkoop.com. drDrew.com backers included Softbank Venture Capital, Freedom Communications, Garage.com, Mentor Venture Partners, and individuals. Drkoop.com, which has also been in some difficult financial straits recently, received a cash infusion from private investors in August including Prime Ventures, JF Shea Ventures, Cramer-Rosenthal-McGlynn, RMC Capital, ComVest Venture Partners, Eco Associates, and NetStar Ventures. http://www.drdrew.com/ http://www.drkoop.com/ _____________________________________________ o UCLA Says It Funded Napster LOS ANGELES -- The University of California at Los Angeles confirmed it is an investor in Napster, the embattled music exchange software company being sued for copyright infringement by the Recording Industry Association of America. A UCLA spokesperson said the school has invested $25,000 into the business to date. The news was first reported in the Wall Street Journal, which cited internal Napster documents prepared as part of the deal with Bertelsmann to drop its suit against Napster announced earlier this week. The Journal report also disclosed that the rock group Limp Bizkit is an investor in Napster. The band's representatives did not return calls for this story. Napster's other investors are Hummer Winblad Venture Partners and various individuals. http://www.napster.com/ _____________________________________________ o ASP NetworkOSS Closes Series A at $16.5 Million NEW YORK -- NetworkOSS, which provides Internet services and business applications to the world-wide communications industry, closed its Series A funding after receiving $3.5 million from El Dorado Ventures; Datamat, an Italian Internet and mobile communications technology company; Kiwi; and other investors. NetworkOSS received $13 million earlier in the round from Sevin Rosen Funds, Datamat, and Crescendo Ventures, bringing the Series A total to $16.5 million. NetworkOSS will use the funds to expand its customer base and its communication industry partnerships in the United States and Europe. Mr. Scott Jarus, former senior vice president of operations at RCN Telecom and current president and COO of OnSite Access, is joining the NetworkOSS board as its fifth member. http://www.networkoss.com/ ======= New Money ======= o Integreated Semiconductor Firm Avaz in $15 Million Round One SAN BRUNO, Calif. -- VantagePoint Venture Partners said it participated in the $15 million first-round financing of Avaz, an Irvine, Calif.-based company that designs, develops, and markets integrated semiconductor and software technologies for voice-over-IP networks. Other details were not released. _____________________________________________ o B2B-Matrix Gets $500,000 from eSamsung USA in Round One SAN JOSE, Calif. -- B2B-Matrix, which designs, architects, and deploys collaboration systems for enterprise and business-to-business collaboration, said it received $500,000 in its first of funding from venture firm eSamsung USA. B2B-Matrix develops, markets, and supports distributed infrastructure for synchronous/asynchronous ad hoc collaboration within and across enterprises. Chad J. Cooper of eSamsung USA took a seat on the board of directors. http://www.b2b-matrix.com/ _____________________________________________ o Content Firm StreamSage Lands $250,000 From Duncaster WASHINGTON -- Duncaster Investments announced that it has made a $250,000 seed-stage investment in StreamSage, a company that is developing a tool to manage and customize multimedia Web site content. With these funds, StreamSage will move its office and expand its staff to complete the beta version of its product. Richard Blake, the sole principal of Duncaster Investments, will join StreamSage's board of directors. http://www.streamstage.com/ _____________________________________________ o Optical Network Firm Dyotec in $3 Million Round One SAN BRUNO, Calif. -- Dyotec Networks, a developer of optical networking systems, has received $3 million in first round funding. VantagePoint Venture Partners participated in the round, but other aspects of the deal were not released. Dyotec's products enable carriers to manage, monitor, and maintain their IP backbone networks by using optical cross-connect switches and transport systems. http://www.dyotec.com/ _____________________________________________ o Shalom.com Puts $5.5 Million in Telecom's E-ntouch Round One NEW YORK -- Incubator Shalom.com said it invested in $5.5 million in E-ntouch, an Israeli startup, in its first round of funding. E-ntouch develops advanced distributed software applications to control traffic and configurations within telecommunications networks. The company will use the funds for product development, to hire additional staff, and to begin operations in the United States. http://www.shalom.com/ _____________________________________________ o Component Platform iSuppli Raises $30 Million Second Round EL SEGUNDO, Calif. -- iSuppli, a supply network for electronic component procurement and delivery, said it raised $30 million in its second round of funding, led by Tyco Ventures. Loewenthal Capital Management and Tailwind Capital Partners also participated, as did previous investors CMEA Ventures, NeoCarta Ventures and AC Ventures. The company will use the funds for business expansion and to fund strategic acquisitions. http://www.isuppli.com/ _____________________________________________ o Net Telephony Firm Callserve Has $11.9 Million Round Two LONDON -- Callserve, which provides online telecommunications services, said it raised $11.9 million in its second round of funding. Investors in the round included Casenove Private Equity, Jupiter International Group, TH Lee.Putnam Internet Partners, and the eVestment Company. The company said it will use the funding to accelerate the roll-out of its international infrastructure and marketing company. The company said it will use its European strategy as the template for its implementation in the U.S. http://www.callserve.com/ _____________________________________________ o Wireless Firm Argogroup Raises $20 Million Second Round ELSTEAD, U.K. -- Argogroup, which develops software to deliver content to wireless phones, WAP, or i-Mode without having to change their mobile site, said it raised $20 million in second round funding. The round included investments from 3i and Apax Partners. The company also announced a co-marketing agreement with Lucent Technologies to enable developers from both Lucent and Argogroup to integrate the company's products with Lucent's wireless technology. The company has raised a total of $30 million. http://www.argogroup.com/ _____________________________________________ o $49.6 Million Fourth Round for Broadband Firm Tantivy MELBOURNE, Calif. -- Tantivy Communications, a provider of portable broadband technology, said it completed a $49.6 million fourth round of financing, led by Bowman Capital. Additional investors included Bay Hill Partners, Chase H&Q, Intel, Morgan Stanley Dean Witter, New Enterprise Associates, North Bridge Venture Partners, Novak Biddle Venture Partners, Riggs Capital Partners, Redback Networks, Stephens Inc., Westway Capital, Wheatley Partners and Venrock Associates. All participants in the round were previous investors. The company will use the financing for product trials and to prepare its products for launch. Tantivy creates silicon and software for consumer devices and infrastructure equipment. The company has raised $72.2 million to date. http://www.tantivy.com/ _____________________________________________ o FairEx International Financial Systems Raises $10 Million SINGAPORE -- FairEx International Financial Systems, which provides technology for online trading of international currencies, futures, and commodities, said it raised SGD 17.5 million ($10 million) in venture capital funding. The round was raised from 3i and eVentures, the venture capital arm of the Bank of Singapore. The company said it will use the funding to expand its research and development operations and open operation centers in different time zones. FairEx enables users to conduct real-time online transactions. http://www.fairex.com/ _____________________________________________ o HotOrigin, Irish Technology Incubator, Raises $2.7 Million DUBLIN -- AIB, the largest financial institution in Ireland, said it made an investment of EUR 3.2 million ($2.7 million) in Irish technology incubator, HotOrigin. Through the investment, part of a strategic partnership between the two firms, HotOrigin will introduce AIB to relevant e-commerce companies. HotOrigin was established in March, and has incubated six companies including Unison, An Post, and property portal anscotfirst.com. http://www.hotorigin.com/ _____________________________________________ o SanDisk Invests $7.2 Million in Digital Imaging Firm Divio SUNNYVALE, Calif. -- Publicly-traded SanDisk, which develops flash memory-based products, said it invested $7.2 million in Divio, a manufacturer of digital imaging compression technology and products. Divio said the investment was not part of a formal round. Under terms of the deal, SanDisk will take a 10% stake in the company and have a seat on the board of directors. Divio's previous investors are Investar Capital, Newbury Ventures, Pac-Link Management, and Star Capital Group. http://www.divio.com/ _____________________________________________ o Cube Consulting Gets $3 Million from Bizzbuild, Durlacher LONDON -- Bizzbuild.com, an e-commerce management, development and investment group, said it and Durlacher, an investment and securities group focused on emerging technology and media, invested GBP 2 million ($3 million) in Cube Consulting, an Internet consulting startup. Bizzbuild has invested an initial GBP1.5 million and Durlacher invested GBP 500,000 in exchange for a combined stake of just under 12%. Bizzbuild and Durlacher have also obtained an option to invest up to GBP 8 million more to take their combined stake to 40%. http://www.bizzbuild.com/ _____________________________________________ o Online Marketing Firm USAData Raises $6 Million Round Three NEW YORK -- USAData, an online marketing services provider, said it completed a third round of financing with $6 million from Acxiom, a real-time, multi-channel customer data integration company. USAData will use the proceeds to accelerate its development of Web applications for conducting sales and marketing processes online. The Acxiom investment expands upon a strategic alliance between USAData and Acxiom announced earlier this year. Acxiom will receive a seat on the board of directors. USAData received $11.7 million from SI Venture Fund in June. The company also raised $2.6 million in its initial round in February 1999. http://www.usadata.com/ _____________________________________________ o Analytic Software Firm SafeLogic Raises GBP 400,000 LONDON -- NewMedia Spark, which provides early stage capital investments for new technology companies, said it invested GBP 400,000 ($578,290) in SafeLogic, a developer of software for the analysis and verification of large systems in the electronics, automotive, and aerospace sectors. The company said it will use the funding to speed its development processes, and for sales and marketing. As a result of its investment, director of the Stockholm office of NewMedia Spark Peter Lindgren will take a seat on the SafeLogic board of directors. http://www.safelogic.com/ _____________________________________________ o Mitiska Announces $6.2 Million in Third Quarter Investment TERNAT, Belgium -- Mitiska Net Fund Europe, a Belgian venture capital fund, said it invested EUR 7.2 million ($6.2 million) in the third quarter. The company said it invested in Fordaq, an online platform for wood industry specialists, and WH Selfinvest, an online telephone broker. The company also said it invested in a third company, which it would not disclose. The fund said it has invested $22 million to date, or 36.3% of its $61.4 million in available capital. The fund invests between $3 million and $5 million per company, and makes average investments per round of between $429,000 and $2.6 million. http://www.netfundeurope.com/ _____________________________________________ o Consortium Invests $1.5 Million in Mobile Tech Firm Mgage STOCKHOLM -- Mgage Systems, which develops, markets, and sells applications for mobile Internet service providers, raised SEK 15 million ($1.5 million), according to investor InnovationsKapital. The round included investments from InnovationsKapital, Trident, and Kaupthing, an Icelandic investment bank. The company will use the funding to develop new products and services. http://www.mgage.com/ ======= New Products ======= o Internet Architecture Management Firm FastTide Launches MCLEAN, Va. -- FastTide, which provides content delivery and Internet infrastructure management, said the company has launched. FastTide's proprietary technology integrates multiple Internet architectures and uses the viewer's browsers to select the best route for content to travel at any given moment. Since it was founded in May 1999, the company has raised $8.5 million from Capital Investors and individual investors. The company said it is raising its second round of funding. http://www.fasttide.com/ ======= New Deals ======= o Food Gift Company Harry and David Invests in eVineyard.com PORTLAND -- eVineyard.com, an online winestore, said it has secured an undisclosed investment from Harry and David, a food gift company owned by Bear Creek. The investment was made as part of a joint marketing partnership agreement between the two companies. In early 2001, the two companies will launch a gift program pairing eVineyard's wines with selected gifts from Harry and David. As part of the agreement Bill Williams, president and CEO of Bear Creek, has taken a seat on Vineyard's board of directors. eVineyard is backed by Osprey Ventures, ITech, Angel Investors, and undisclosed individuals. http://www.evineyard.com/ ======= M&A ======= o E-mail, Messaging Firm Commtouch Buys Wingra for $17 Million MOUNTAIN VIEW, Calif. -- Commtouch, a publicly traded company that provides outsourced e-mail and integrated messaging services, said it signed a definitive agreement to acquire Wingra Technologies, a developer of messaging integration and migration services for enterprises that want to transition from an existing to a new messaging platform. Commtouch will issue approximately 1.25 million ordinary shares, worth approximately $16,875,000. Commtouch plans to maintain and expand Wingra's operations in Madison, Wisconsin. Wingra will operate as a wholly-owned subsidiary and keep its current management team in place. The combined company will offer an e-mail and messaging service that includes a migration service. Commtouch expects the additional revenue from Wingra in 2001 to be between $6 million and $8 million. Wingra is backed by individual investors. http://www.commtouch.com/ http://www.wingra.com/ _____________________________________________ o Prescription Processing Application Firm TechRx Buys Flux PITTSBURGH -- TechRx, which provides prescription fulfillment software applications for the pharmacy industry, said it has acquired Flux Technology Solutions, the developer of an Internet enabled application for mail service prescription processing. The financial terms of the agreement were not disclosed. In May, DCH Health, a vertical application service provider serving pharmacies, announced it was acquiring Flux Technology. TechRx officials said that the DCH agreement fell through and was never consummated. TechRx is backed by Cardinal Health Partners. http://www.techrx.com/ _____________________________________________ o BtoBfactory Acquires Latin American Investment Firm BtoBen BUENOS AIRES -- Btobfactory, a unit of Spain's Banco Santander Central Hispano (BSCH), said it bought Internet incubator BtoBen.com, which focuses on business-to-business companies in Latin America, for an undisclosed amount. BtoBfactory also plans to invest $30 million in the company within the next year. BtoBen.com is backed by Next International. http://www.btoben.com/ http://www.btobfactory.com/ _____________________________________________ o eLearning Firm Intellinex Buys PC Skills Trainer Teach.com NEW YORK -- Online learning firm Intellinex, a stand-alone business launched in October 2000 by Ernst & Young, said it acquired Teach.com, a provider of online business and PC skills training courseware. Terms were not disclosed. Teach.com's 90 employees and president and CEO Elizabeth Tomaszewicz will remain with the company. Ms. Tomaszewicz will be a member of the company's management team. Teach.com is backed by individual investors. http://www.teach.com/ http://www.intellinex.com/ _____________________________________________ o Utilities Service Blink.com Acquires Bookmark Firm Coolsync NEW YORK -- Blink.com, a Web utilities provider, has acquired Coolsync, a bookmark management service for an undisclosed amount of cash. As a result of the deal, Blink.com will expand the features it offers at its Webite utilities community. Blink said it will not retain Coolsync's staff of less than ten employees. Coolsync's founders, Subra Kumaraswamy, Steve Souders, and Ganapthy Chockalingam will not join Blink's board. In the spring of 2000 Blink received an undisclosed amount of Series B funding from investors including Sandler Capital Management and Tudor Investment Corporation. http://www.blink.com/ http://www.coolsync.com/ _____________________________________________ o ClearCross Acquires Atrion in Stock Swap NEW YORK -- New York-based ClearCross, provider of Internet tools for global trade, said it will acquire Reston, Virginia-based Atrion International, a provider of Internet management technology for trade regulation logistics, for an undisclosed amount of stock. The new company will retain the name ClearCross. Although the New York office will remain open, headquarters will be based in Reston. Bruce Johnson, current CEO of Atrion, will be the CEO of the merged company. Richard Giordanella, current CEO and chairman of ClearCross, will be chairman of the new board, whose membership is still being determined. ClearCross received $50 million in Series D financing in June led by Softbank and Oak Investment Partners. Atrion International received $5 million in first round financing in October from KnorrCapital Partner and Sofinov. http://www.myatrion.com/ http://www.clearcross.com/ ======= New Directors ======= o CharterHub Names Ex-Canadian Airlines Executive to Board TORONTO -- Charterhub, which runs an Internet site for reserving charter business flights, has appointed its seventh board member, Mr. Douglas Carty, former senior vice president and CFO of Canadian Airlines. Mr. Carty joined Canadian Airlines in 1990 and was named to senior vice president and CFO in 1996. CharterHub has received in-house investments and is currently closing its first round of financing. http://www.charterhub.com/ _____________________________________________ o Online Address Service Ukibi Names Board of Directors NEW YORK -- Ukibi, a business-to-business provider of networked address book services, announced the completion of its board of directors. Ukibi co-founder and CTO Sebastien Luneau and Mars Capital president Alexandre Mars will join Jean-Louis Gass,e, co-founder of Be, a software platform developer, and Jean-David Chamboredon, CTO of Europatweb, on the board. Ukibi is an application service provider offering proprietary software, StayInSync, to Web portals, Web sites, PDA manufacturers, mobile phone companies, and Web/WAP applications. The company is backed by Europatweb, the industrial Internet arm of the Arnault Group, and Mars Capital. http://www.ukibi.com/ ======= New People ======= o Telco Software Firm Watchmark Names Former GTE Exec as CEO BELLEVUE, Wash. -- WatchMark, a software developer for wireless telecommunications service providers, said it appointed Todd Eliason as chief executive officer. Mr. Eliason most recently served as president of national operations marketing for GTE. WatchMark's investors include Argo Global Capital, Lucent Technologies, Origin Partners, and Pequot Capital. http://www.watchmark.com/ ======= VC Fund News ======= o CDC Launches Accelerator With $85.9 Million Investment PARIS -- The Caisse de Depots Group, a French financial group which provides banking and investment services, said it launched a new information technology accelerator, CDC Kineon, with an investment of EUR 100 million ($85.9 million). The accelerator will co-invest with other financial institutions including, but not limited to, Partcom, CDC Innovation, and Up&Up, the venture partners within the Caisse de Depots Group. The accelerator is focusing its attention on electronic signature, archiving, and non-financial exchange technologies. The company said Yann Boaretto, inspector general of finance, has been appointed president of CDC Kineon. http://www.caissedesdepots.fr/ ======= VC Personnel ======= o Grotech Adds Former Legg Mason Director as Partner RESTON, Va. -- Grotech Capital, an investment firm that focuses on the mid-Atlantic region, said it added Douglas M. Schmidt as a partner. Mr Schmidt will join Frank A. Adams, managing general partner, and Patrick J. Kerins, general partner, and will focus on technology investments in Washington D.C., Virginia, and Maryland. Prior to joining the company, Mr. Schmidt was managing director of investment firm Legg Mason, where he was head of its information technology services group. Grotech currently has $1 billion in capital under management. http://www.grotech.com/ _____________________________________________ o Technology Incubator eHatchery Adds Two to Board ATLANTA -- eHatchery, a technology incubator, said it added Michael Coles and David Hayden to its board of managers, the company's version of a board of directors. Mr. Coles is the founder of the Great American Cookie Company, and is currently vice-chairman of Charter Bank and Trust, which is now part of Synovus. Mr. Hayden founded Critical Path in 1997 and currently serves as the company's chairman. eHatchery is backed by idealab!; United Parcel Service; Donaldson, Lufkin & Jenrette; and Cox Enterprises. http://www.ehatchery.com/ ======= VW Corrections ======= o Broadstorm Telecommunications NEW YORK -- Due to incomplete information released by VantagePoint Venture Partners, a story in Monday's VentureWire concerning Broadstorm Telecommunications incorrectly stated the amount of financing the company received in its first round. The company received $5 million, not $2.5 million, in that round. Vulcan Ventures was also a participant in the financing. _____________________________________________ o eBenefits NEW YORK -- An item in yesterday's VentureWire about eBenefits appointing a new CEO incorrectly stated that their software and services are free. eBenefits charges a monthly fee, which can cost between $30 and $200, depending upon the number of employees that the client retains. _____________________________________________ o Kymata NEW YORK -- An item in Thursday's VentureWire about Kymata's fourth round of funding mistated the amount of funding raised in the round. The company received $67 million in the round. _____________________________________________ o Mobileum NEW YORK -- An item in Monday's VentureWire about Mobileum's $45 million Series A funding round neglected to list Doll Capital Management as a co-lead investor in the company. |||||||||||||||||||| Advertisement |||||||||||||||||||| Computers in our pockets, our cars, our kitchens, our showers? When it happens, there's little doubt that IBM and Intel will have had something to do with it. Come hear what these industry powerhouses are doing in this field from Claude Leglise, VP of the Intel Architecture Group & GM of Intel's Home Products Group, and from Michel Mayer, GM of Pervasive Computing at IBM at: Technology Outlook 2000: The future of pervasive computing December 4 and 5, San Francisco http://www.tpsite.com/tp/conf/to2000/?vw=20001102 A VentureWire investment conference. ||||||||||||||||||||||||||||||||||||||||||||||||||||||| SEND TO A FRIEND To subscribe to VentureWire, tell your friends and colleagues to go to: http://venturewire.net/ This copy of VentureWire may be distributed freely, provided that the distribution is without charge, that the issue is distributed complete and unaltered, and that all copies retain the Technologic copyright notice. This copy of VentureWire and the information within it, however, may not be reproduced, saved, or otherwise copied into a database without the prior written consent of Technologic Partners. _____________________________________________ TO SUBSCRIBE go to: http://venturewire.net/ To CHANGE your address, send your old and new e-mail address to: [email protected] To UNSUBSCRIBE, send e-mail to: [email protected] Send COMMENTS, QUESTIONS, or NEWS ITEMS to: [email protected] Entire Contents Copyright 2000 by Technologic Partners VentureWire is a Service Mark of Technologic Partners =====================================

dasovich-j/all_documents/2994.

dasovich-j

['[email protected]']

VentureWire, Wednesday, October 18, 2000

====================================================== VENTUREWIRE --- Wednesday, October 18, 2000 ====================================================== Private Company Business News ------ Published Daily by Technologic Partners ------- http://technologicpartners.com ====================================================== Top Stories: o Jamcracker Raises $100 Million Plus in Second Round o Broadcom To Buy Optical Firm Allayer in $264 Million Deal o SonicWall Buys Net Security Firm Phobos For $258.9 Million o Broadband Firm Edgix Gets $50 Million Round Two |||||||||||||||||||| Advertisement |||||||||||||||||||| UpShot.com is a Web-based sales force automation solution that can be easily deployed. Access it anytime, anywhere, even from your Palm or Internet phone. For a six-month free trial, sign up with UpShot.com now. To learn more, visit us at http://upshot.com/cgi-upsite/referral.asp?ReferralID=MKT0000000332 Or call us at (888) 700-8774. ||||||||||||||||||||||||||||||||||||||||||||||||||||||| Also in This Issue: New Money: o Customer Feedback Technology Firm Gets $15 Million Round One o Internet Security Firm Raises $15.6 Million in First Round o Optical Networking Firm Quake Raises $12 Million Round One o B2B E-Commerce Service Firm MegaMags Adds $1 Million Seed o Intranet Application Firm Planet Intra Closes First Round o Marketing Info Firm NetUsability Gets $2 Million Seed o Visual Info Firm IdeaLogix Secures $1.7 Million First Round o Web Browser Tech Firm VisualTop Gets $1 Million First Round o Wireless Information Firm Let Me Know Raises $3.5 Million o DoubleClick, Flatiron, Chase Put $7.7 Million in Return Path o Online Software Market SoftViaNet Gets $915,000 First Round o Data Service Firm Sonic Telecom Gets $9.8 Million Round Two o Metreo, Online Profit Management Service, Raises $10 Million o Online Learning Firm KnowledgeNet Has $30 Million Round Four o Wireless Infrastructure Firm, Broadbeam, Gets $29 Million o Dynamic Logic, e-Marketing Analysis Firm, Raises $5 Million o Infinity Outdoor Takes $5 Million Equity Stake in Kintera o Workplace Apps Provider CoVia Raises $25 Million Series E o Cell Innovation Takes 7.7% Interest In Swedish Firm Snapsend o Member Management Firm MEI Software Secures $1.2 Million o Mobile Computing Software Developer Callisto Gets Funds New Products: o Wireless Messaging Platform Provider ShareSpan Launches o Web Greeting Card Site Ecards Changes Name, Broadens Market o The Carmen Group Launches B2G Incubator DCVentureNet o Staff Management Site TurboStaff Now Called LiquidMedium M&A: o Online Vintner Wine.com to Acquire European Wine Exchange o Optical Firm Tellium Acquires Astarte Fiber Networks o SimplyDone Acquires Scheduling Firm ClickOfTime o Healthcare IT Firm HealthNet Buys Two Transcend Divisions o Mass Medium Acquires Incentive Marketer Powerdime New Directors: o Ex-Nat'l Security Advisor Poindexter Joins Saffron's Board o E-Business Consultant NetNumina Adds Granum Partner to Board o Routing Platform Firm Gotham Names Winphoria CEO to Board o CEO Of Relativity Joins Technology Firm BlueBolt's Board o IT Firm Kernel Group Adds Updata Partner to Board o Novarra Appoints Former U.S. Robotics Exec. To Board o OpsXchange Names New Executive VP and Director New People: o Mixed Media Services Firm How2TV Names New President and CEO o User Relationship Tech Firm APPower! Names President o E-Marketing Services Firm Impower Names AT&T Exec President o Integration Technology Firm Evoke Names New President, COO o Sales Software Firm UpShot Names President and CEO o Former Andersen Consulting Exec is Rebel.com President, COO o Online News Site The Deal Promotes Exec to President o Online Risk Management Service Provider Names First CEO o Executive Jet Service eBizJets Names First CEO VC Fund News: o New Israeli Fund Delta Ventures Launches With $60 Million o Velocity Capital Raises $7 Million, Targets Northwest Firms o Nash, Sells & Partners Changes Name and Raises New Fund VC Personnel: o Ignition Names Former NextLink CEO As Managing Director o Atlanta Investor Henagan Joins SSM Ventures As Partner o Bay Partners Names Kana VP as General Partner o Anila Names Recruiting Firm Exec as Venture Partner |||||||||||||||||||| Advertisement |||||||||||||||||||| CHANGING SUPPLY CHAINS A typical hospital buys $50 million in supplies from 22,000 suppliers annually. On average there is a 75% price discrep- ancy for identical products. Paper invoices cost 30 times as much as electronic invoices. Room for improvement? Perhaps. We've convened an expert panel at Healthcare Outlook 2000 to help us understand where the changes will come from and who the big winners will be: Dr. Gilbert H. Kliman, General Partner, InterWest Partners Dr.David M. Auerbach, Principal, Decision Health Sundeep Bhan, Chairman,President, & CEO, Medsite.com Anne De Gheest, President & CEO, medpool.com Daren C. Marhula, Sr. Research Analyst, Healthcare, U.S. Bancorp Piper Jaffray For a full agenda, and to register: http://tpsite.com/tp/conf/ho2000/?vw=20001018 ||||||||||||||||||||||||||||||||||||||||||||||||||||||| ======= Top Stories ======= o Jamcracker Raises $100 Million Plus in Second Round SUNNYVALE, Calif. -- Jamcracker, a Web-based provider of IT and business applications, said it raised more than $100 million in second-round funding. The funding includes $85 million in preferred financing, led by affiliates of Soros Private Equity Partners, and more than $15 million in equipment financing. Pivotal Asset Management, e4e, The Rolling Thunder Networks, Morgan Stanley Dean Witter, Goldman Sachs, Credit Suisse First Boston, Robertson Stephens, and Bay Partners also contributed funds. Internet Capital Group, Navis Partners, and First Analysis, all prior investors, provided financing as well. The equipment financing was led by GATX Ventures, with participation from Western Technology Investment, Third Coast Capital, Transamerica Business Credit, and Sand Hill Capital. Jamcracker, which received $42 million in its first round, will use the funds for product development, to extend its core platform and support infrastructure, to open new headquarters and regional offices, and to purchase hardware and software. Neal Moszkowski, a Soros partner, joined Jamcracker's board. http://www.jamcracker.com/ _____________________________________________ o Broadcom To Buy Optical Firm Allayer in $264 Million Deal SAN JOSE, Calif. -- Broadcom, a publicly traded company provider of integrated circuits enabling broadband communications, said it is acquiring Allayer Communications, a provider of optical networking technology, in a deal worth about $264 million. Under the terms of the agreement, Broadcom will issue in aggregate about 1.23 million shares of its Class A common stock in exchange for all of Allayer's outstanding shares. An additional 300,000 shares of Broadcom could be issued to Allayer's shareholders if certain performance goals are met. Allayer has received funding from Acer Capital, VenGlobal Capital Fund, Greylock, and individual investors. http://www.allayer.com/ http://www.broadcom.com/ _____________________________________________ o SonicWall Buys Net Security Firm Phobos For $258.9 Million SUNNYVALE, Calif. -- SonicWall, an Internet security technology provider, said it has entered into an agreement to acquire Phobos, a privately-held Internet security infrastructure manufacturer based in Salt Lake City. Under the terms of the agreement, approximately 12.2 million shares and options of SonicWall and $50 million in cash will be exchanged for all outstanding shares, options and warrants of Phobos. Based on SonicWall's closing price of $17.13 on Tuesday, the cash and stock exchange would have an aggregate value of $258.9 million. Of the $50 million, $20 million is contingent upon Phobos achieving certain revenue targets. Phobos has received funding from Millennium Technology Ventures and Blackstone Group Holdings and its affiliates. http://www.sonicwall.com/ _____________________________________________ o Broadband Firm Edgix Gets $50 Million Round Two NEW YORK -- Edgix, which provides infrastructure services to broadband access providers, said Chase Capital Partners led its $50 million Series B financing. Existing investors Battery Ventures and Venrock Associates contributed to the funding. The company also announced the launch of edgeMedia, its flagship managed caching service. http://www.edgix.com/ ======= New Money ======= o Customer Feedback Technology Firm Gets $15 Million Round One PALO ALTO, Calif. -- BetaSphere, a provider of Web-based customer feedback software for marketers and developers, said it received $15 million in its first round of funding. Chase Equity Partners and GE Equity participated in this round. The company will use the funds to expand into new markets. The company created the Feedback Manager Server, which integrates customer feedback into product marketing and development. http://www.betasphere.com/ _____________________________________________ o Internet Security Firm Raises $15.6 Million in First Round RESEARCH TRIANGLE PARK, N.C. -- NetOctave, a developer of silicon-based Internet security services targeted at system vendors in the network equipment and server markets, said it secured $15.6 million in its first round of financing. New investors include Intel Communications Fund, which invests in companies which support programs and initiatives in voice and data communications, and Intersouth Partners, an early-stage venture fund. Seed investors Kitty Hawk Capital, MCNC, North Carolina Enterprise, and Wakefield Group also joined this round. NetOctave spun off from Celotek, a WAN network security company, in July 2000. http://www.netoctave.com/ _____________________________________________ o Optical Networking Firm Quake Raises $12 Million Round One SAN JOSE, Calif. -- Quake Technologies, a fabless semiconductor company developing physical layer chips for high speed optical networking applications, said it has raised $12 million in financing from Mohr Davidow Ventures (MDV). MDV partners Robert Chaplinsky and Jim Smith will join Quake's board of directors. The company raised $3 million in seed funds from Brian Potiva, chief executive officer of ADVA Optical, JDS Uniphase, and undisclosed individual investors. http://www.quaketech.com/ _____________________________________________ o B2B E-Commerce Service Firm MegaMags Adds $1 Million Seed MINNEAPOLIS -- MegaMags, a business-to-business Internet commerce service provider that offers customized magazine newsstands for Internet sites, said it received an additional $1 million in its seed round of financing. The company has received funding from lead investor Quatris Fund, a fund which invests in primarily Internet commerce products and services, enterprise applications, convergent media, communications, and networking ventures. Additional funding came from MegaMags' founders and existing individual investors. MegaMags has raised $2 million to date and is currently seeking Series A funding of $4 million to $7 million. http://www.megamagsinc.net/ _____________________________________________ o Intranet Application Firm Planet Intra Closes First Round MOUNTAIN VIEW, Calif. -- Planet Intra, an Intranet software application developer, said it closed on an undisclosed amount of first round funding led by Indocean Chase Capital Advisors, an affiliate of Chase Capital Partners. AsiaTechGroup, Itochu, Linc Media, and Zain Technologies also participated in the round. Planet Intra will use the funding to further its expansion into European and Asia Pacific markets and to develop software applications. Planet Intra's application enables a medium size business or division of a large company to collaborate on projects, documents, schedules and contacts. http://www.planetintra.com/ _____________________________________________ o Marketing Info Firm NetUsability Gets $2 Million Seed LONDON -- New online marketing fund, eVerger, said it provided $2 million in seed funding for London-based marketing information firm, NetUsability. NetUsability is developing a product enabling companies to record customer experience through a virtual focus group. eVerger was established in April with $100 million by the Aegis Group and Warburg Pincus. Andrew Burke, former chief operating officer of eVentures, heads the new fund, which expects to have a network of investments in twelve countries by the end of 2001. http://www.everger.com/ _____________________________________________ o Visual Info Firm IdeaLogix Secures $1.7 Million First Round BROOKLINE, Mass. -- IdeaLogix, a visual information management company, said it has secured $1.7 million in its first round of funding from individual investors. The company, which is developing hardware and software products for capturing, storing, analyzing and streaming video information, said it will use the funds to develop its technology platform and products. http://www.idealogix.com/ _____________________________________________ o Web Browser Tech Firm VisualTop Gets $1 Million First Round NEW YORK -- VisualTop, a developer of Web site navigation technology, said it closed its first round of financing with $1 million from Tel-Aviv based Giza Venture Capital. VisualTop said it will use the money for research and development and to launch its product, Navixo, scheduled for later this fall. The company is in the process of raising an additional $2 million to $3 million dollars. A representative of Giza will receive a seat on VisualTop's four-member board of directors. http://www.navixo.com/ _____________________________________________ o Wireless Information Firm Let Me Know Raises $3.5 Million TEL AVIV -- Let Me Know Technology, a provider of mass synchronized distribution of information through online and wireless devices, said it raised $3.5 million in its first round of funding. The round was financed by investors including the Aria Venture Fund and Formula Ventures. The company said it will use the funding to support its marketing and development activities, concentrating on Asian and European markets. Roni Zor, with the Aria Venture Fund, will take a seat on the Let Me Know board of directors as a result of the funding. http://www.letmeknow-technology.com/ _____________________________________________ o DoubleClick, Flatiron, Chase Put $7.7 Million in Return Path NEW YORK -- DoubleClick, a provider of ad delivery technology, along with Flatiron Partners and Chase Capital Partners, will invest $7.7 million in Return Path, an e-mail management and change-of-address service. The investment will close Return Path's second round of funding. DoubleClick has the option over the next year to invest up to $10 million in the company. Return Path will use the funding to expand its service for its corporate and consumer clients. Return Path and DoubleClick have formed a channel partnership through which DoubleClick will offer Return Path's services to its e-mail clients. Jonathan Shapiro, DoubleClick's senior vice president of data services, and Phil Summe, from Flatiron Partners, will join Return Path's board of directors. http://www.doubleclick.net/ http://www.returnpath.net/ _____________________________________________ o Online Software Market SoftViaNet Gets $915,000 First Round LONDON -- SoftViaNet, which operates an online software retail site, said it raised FFR 7 million ($915,000) in its first round of funding. The round included investments from TriNova, based in Lyons, and individual investors including a prominent former Exxon manager. The company, which sells the downloadable software online, said it will use the funding to translate its Web site into German and Spanish. The company already operates English- and French-language versions of the site. An undiclosed individual investor will take a seat on the company's board of directors as a result of the financing. http://www.softbynet.com/ _____________________________________________ o Data Service Firm Sonic Telecom Gets $9.8 Million Round Two CHANTILLY, Va. -- Sonic Telecom, a global data services provider, said it has raised $9.8 million in its second round of funding from Broadwing Communications, Incentis, Saudi Cable Co., MasTec, Robin Hood Ventures, and several individual investors. Viatel also participated, acquiring additional shares under an existing agreement. Sonic Telecom said it will use the funding for expansion of its international sales force and for its global marketing and customer care. http://www.sonictelecom.com/ _____________________________________________ o Metreo, Online Profit Management Service, Raises $10 Million PALO ALTO, Calif. -- Metreo, which provides online profit management services, said it raised $10 million in its Series B funding. The round included investments from Sequoia Capital, Prospect Venture Partners, and the Mentor Capital Group. The company said it will use the funding to continue development and marketing activities for its product. All three investment companies have representatives on the company's board of directors. http://www.metreo.com/ _____________________________________________ o Online Learning Firm KnowledgeNet Has $30 Million Round Four SCOTTSDALE, Ariz. -- KnowledgeNet.com, a provider of online learning products, said it received $30 million in fourth round funding from new investor Cisco Systems as well as existing investors Morgenthaler Partners, Sierra Ventures, Trinity Ventures, and Berkeley International Capital. Thomas Kelly, vice president of Cisco's worldwide training group, will join KnowledgeNet's board of directors as a board observer. The company will use the funds to develop its Internet-based training technology, sales, and marketing. http://www.knowledgenet.com/ _____________________________________________ o Wireless Infrastructure Firm, Broadbeam, Gets $29 Million PRINCETON, N.J. -- Broadbeam, a provider of wireless infrastructure provider, said it secured $29 million in a round of financing led by ABS Capital Partners with Nassau Capital, The Co-Investment 2000 Fund, StarVest Partners, Allegra Partners, and Dime Capital Partners contributing. Timothy T. Weglicki, a partner of ABS Capital Partners, joined the board of directors. The funds will be used for product development, sales, and marketing. http://www.broadbeam.com/ _____________________________________________ o Dynamic Logic, e-Marketing Analysis Firm, Raises $5 Million NEW YORK -- Dynamic Logic, which provides analysis on online marketing effectiveness, said it raised $5 million in its Series C round of funding. The round was funded entirely by eVerger, a $100 million fund formed by the Aegis Group and Warburg Communications. The company said it will use the funding for new marketing initiatives, additional researchers, and customer support. eVerger will take a seat on the company's board of directors as a result of its investment. http://www.everger.com/ http://www.dynamiclogic.com/ _____________________________________________ o Infinity Outdoor Takes $5 Million Equity Stake in Kintera SAN DIEGO -- Kintera, which provides Internet fundraising services to charitable non-profit educational and political organizations, said Infinity Outdoor, a North American outdoor advertising company, will take an equity stake in the company. Kintera will issue $5 million worth of its preferred stock to Infinity Outdoor, a wholly owned subsidiary of publicly-traded Infinity Broadcasting, in exchange for $5 million in Infinity Outdoor advertising displays. Kintera's backers include Prudential Securities and individual investors. http://www.kintera.com/ http://www.infoutdoor.com/ _____________________________________________ o Workplace Apps Provider CoVia Raises $25 Million Series E MOUNTAIN VIEW, Calif. -- CoVia, a provider of interactive workplace applications, said it has raised over $25 million in its Series E round of funding led by new investor American Express Financial. Pogue Capital, also a new investor, and previous investors Adobe Ventures, Granite Ventures, SAP, Viridian Capital, and Dain Rauscher Wessels joined several late stage and crossover fund investors to invest in this round. CoVia said it will use the funding for expansion. http://www.covia.com/ _____________________________________________ o Cell Innovation Takes 7.7% Interest In Swedish Firm Snapsend STOCKHOLM -- Cell Innocation, Cell Network's venture capital arm, said it is investing in Swedish firm Snapsend, an Internet digital photo service. Cell Innovation said it has taken a 7.7% equity interest in Snapsend, which has also received funding from Wikow Invest, Core Ventures, AU-system, and Element Park. http://www.snapsend.se/ _____________________________________________ o Member Management Firm MEI Software Secures $1.2 Million RESTON, Va. -- MEI Software Systems, a provider of application software and member management systems for associations and member-based organizations, said it has secured $1.2 million from previous investors Nextgen and MidAtlantic Ventures. The company said it will use the funds to develop new products and customer support initiatives. http://www.meisoft.com/ _____________________________________________ o Mobile Computing Software Developer Callisto Gets Funds WHEATON, Ill. -- Callisto Software, a developer of mobile computing management software, said it secured an undisclosed amount of additional venture capital from previous investors ARCH Venture Partners, The Ohio Partners, which is headed by former CompuServe president and CEO Maury Cox. The funds will be used to expand sales, marketing, and product development. http://www.callisto.com/ ======= New Products ======= o Wireless Messaging Platform Provider ShareSpan Launches STAMFORD, Conn. -- ShareSpan, a developer of a content aggregation, management, and distribution platform that supports wireless browsers and devices, announced its launch. ShareSpan received $300,000 in seed funding from its parent company Heynetwork.com, which has since spun off the company. ShareSpan is also backed by Redwood Partners, Riverside Management Group, and individual investors. http://www.sharespan.com/ _____________________________________________ o Web Greeting Card Site Ecards Changes Name, Broadens Market TORONTO -- Ecards.com, which has been operating as an Internet greeting card site, said it has changed its name to Blab.com and expanded its offerings in the entertainment market. The company cited several reasons for the change: Ecards conflicted with another Web site called E-cards, so the companies settled on "amicable" terms, agreeing that Ecard visitors will be redirected to Blab.com. The company said that in addition to offering cards, it has added new features to its Web site such as trivia games and services that enable customers to make their own invitations and award certificates. Blab.com is funded by individual investors. http://www.blab.com/ _____________________________________________ o The Carmen Group Launches B2G Incubator DCVentureNet WASHINGTON, D.C. -- The Carmen Group, a professional advocacy and government relations firm, said it launched DCVentureNet. A wholly owned subsidiary of The Carmen Group, DCVentureNet will provide business-to-government office facilities, financial backing, and technical support. Stephen Goldsmith, former Mayor of Indianapolis, will act as managing director of DCVentureNet. The subsidiary's board includes Raul J. Fernandez, president and CEO of Proxicom; Abe Pollin, chairman of Washington Sports & Entertainment; Joe Wright, vice chairman of Terremark Worldwide; Carol Anderson, managing director of TSG International; and H. Patrick Swygert, president of Howard University. DCVentureNet plans to incubate around twelve companies. http://www.dcventurenet.com/ _____________________________________________ o Staff Management Site TurboStaff Now Called LiquidMedium PLEASANTON, Calif. -- TurboStaff, which provides business-to-business workforce management technology, said it changed its name to LiquidMedium to better reflect its services. LiquidMedium provides electronic sourcing, purchase orders, order tracking, timesheet submission and approval, and payments. The company is funded by individual investors. http://www.liquidmedium.com/ ======= M&A ======= o Online Vintner Wine.com to Acquire European Wine Exchange NAPA, Calif. -- Wine.com said it has signed an agreement to acquire European Wine Exchange (EWX), an electronic commerce company aimed at both the business-to-business and business-to-consumer market in Germany. The EWX site will be integrated into the wine.com U.S. site in 2001, and will serve the German wine market via the URL www.wine.de. EWX co-founder Tarek El Din will continue as the managing director of wine.com's German efforts. His partner, Marc Steiner, will remain with the company in an advisory role. Wine.com and WineShopper.com recently announced they were merging. Wine.com is backed by TH Lee. Putnam Internet Partners, New Millennium Partners, GE Capital, MediaOne Ventures, Inroads Partners, Alpine Technology Ventures and Applied Technology. http://www.wine.com/ _____________________________________________ o Optical Firm Tellium Acquires Astarte Fiber Networks OCEANPORT, N.J. -- Tellium, a provider of intelligent optical switches, said it acquired Boulder-based Astarte Fiber Networks, which designs and manufactures photonic fiber-optic matrix switching systems used in high-speed optical networks. Details of the deal were not disclosed. Tellium said the Astarte acquisition was intended to support the development of the company's all optical switch. Tellium is backed by investors including Accel Partners, Blue Rock Capital Investors, Cisco Systems, Oak Investment Partners, Ortel, Pequot Capital, SAIC Telcordia, Thomas Weisel Partners, and Worldview Technology Partners. http://www.starswitch.com/ http://www.tellium.com/ _____________________________________________ o SimplyDone Acquires Scheduling Firm ClickOfTime LOS ANGELES -- SimplyDone Business Solutions said it acquired online scheduling company ClickOfTime. SimplyDone offers online services such as appointment scheduling, Web catalogs, pricing estimators, and customer relationship management tools to the service industry. Terms of the deal were undisclosed. The company is laying off an undisclosed number of staff, but Jay Goss, ClickOfTime's chief executive officer, will remain as senior director of customer support. SimplyDone is funded by Idealab Capital Partners and SBC Interactive. http://www.simplydone.com/ http://www.clickoftime.com/ _____________________________________________ o Healthcare IT Firm HealthNet Buys Two Transcend Divisions DALLAS -- Provider HealthNet Services, which provides information services to the healthcare industry, said it acquired Co-Sourcing and CodeRemote, two divisions of publicly-traded Transcend Services, in an undisclosed cash transaction. Both companies provide electronic medical record management. Provider is funded by Credit Agricole Indosuez, Navis Partners, Ferrer Freeman & Thompson, and Gryphon Capital. http://www.phns.com/ _____________________________________________ o Mass Medium Acquires Incentive Marketer Powerdime NEW YORK -- Mass Medium, parent company of Milesource.com, said it acquired incentive marketer Powerdime.com. Terms of the deal were undisclosed. Milesource, also an incentive marketer, enables members to earn points when they purchase from the Web site or refer someone to the site. Powerdime members will automatically be transferred to Milesource, where they can redeem their points. Milesource has offered employment to all Powerdime staff and CEO Brian Kreiter will remain part of the management team. MileSource is funded by BCI Partners. http://www.milesource.com/ http://www.powerdime.com/ ======= New Directors ======= o Ex-Nat'l Security Advisor Poindexter Joins Saffron's Board RESEARCH TRIANGLE PARK, N.C. -- Saffron Technology, a provider of software that keeps track of customer preferences to enable vendors tailor their products and offerings, said it has appointed Vice Admiral (VADM) John M. Poindexter to its board of directors. VADM Poindexter, who was national security advisor under former President Reagan, serves as senior vice president of information systems at Syntek, a professional services firm. Saffron is backed by the Aurora Funds and individual investors. http://www.saffrontech.com/ _____________________________________________ o E-Business Consultant NetNumina Adds Granum Partner to Board BOSTON -- NetNumina Solutions, an online business systems integrator and consultant, said it named Peter Williams as the fifth member of its board of directors. Mr. Williams is managing partner of Granum Partners, a private equity fund specializing in early stage communications ventures. The company completed its first round of financing in May. The company is backed by Greylock, BancBoston Venture Partners, TA Associates, Allaire, and BEA Systems. http://www.netnumina.com/ _____________________________________________ o Routing Platform Firm Gotham Names Winphoria CEO to Board ACTON, MA -- Gotham Networks, which is developing a switching and routing platform, said it named Michael Champa, president and CEO of networking startup Winphoria Networks, to the sixth seat on its board of directors. The company was founded in July 1999 with funding from Charles River Ventures and Bessemer Ventures. Crescendo Ventures and Comdisco Ventures joined the original investors in Gotham's second round financing last month, bringing its total funding to $33 million. http://www.gothamnetworks.com/ _____________________________________________ o CEO Of Relativity Joins Technology Firm BlueBolt's Board DURHAM, N.C. -- BlueBolt Networks, a technology company that focuses on the interior design industry, said it has appointed Vivek Wadhwa, founder and chief executive officer of Relativity Technologies, to its board of directors. BlueBolt is backed by Wakefield Group and Gray Ventures. The company said it is seeking its second round of funding, set to close late in the fourth quarter. http://www.bluebolt.com/ _____________________________________________ o IT Firm Kernel Group Adds Updata Partner to Board AUSTIN -- The Kernel Group, which designs, deploys, and manages infrastructures, said it added Updata Venture partner Tim H. Meyers to its board of directors. TKG recently raised $4 million in its first round from Updata Venture Partners and also added venture partner John H. Burton to its board. The company plans to expand and develop its two products, Bare Metal Restore, a data recovery software, and AutoTrace, which identifies defects in a software product. http://www.tkg.com/ _____________________________________________ o Novarra Appoints Former U.S. Robotics Exec. To Board DEERFIELD, Ill. -- Novarra, a provider of wireless Internet commerce technology, said it has appointed Semir D. Sirazi, former senior executive at U.S. Robotics, to its board of directors. Mr. Sirazi has made a significant investment in Novarra, and is a strategic adviser to the company. Novarra, formerly InfoSpeed, is backed by JK&B Capital, Skyscraper Ventures, and Kettle Partners. http://www.novarra.com/ _____________________________________________ o OpsXchange Names New Executive VP and Director SAN FRANCISCO -- OpsXchange, which provides e-procurement services to real estate operators and suppliers, said it named Howard Hoover as the company's executive vice president and to its board of directors. Mr. Hoover previously co-founded American Residential Services/American Mechanical Services. Investors for OpsXchange include SAP Ventures, Cohen & Steers Capital Management, and Vortex Partners. http://www.opsxchange.com/ ======= New People ======= o Mixed Media Services Firm How2TV Names New President and CEO LOS ANGELES -- How2TV, a rich media services provider for manufacturers, bricks-and-mortar retailers, and e-commerce sites, said it named Herio R. Arcangeli Jr. as president and CEO. Mr. Arcangeli previously served as vice president/general manager in the consumer products division for Yamaha Corp. of America. He replaces founder Rick Carroll, who will remain as chairman of the board of directors. How2TV creates mixed-media instruction packages for retailers and manufacturers containing graphics and diagrams that help customers assemble or operate products they have purchased. The company is backed by Chase Capital Partners, Chase Capital Entertainment Partners, Thomas Weisel Partners, Staenberg Private Capital, and individual investors including Michael Karlin of S1 Technologies, Gregg Freishtat of VerticalOne, Jeff Levy of Relevant Knowledge, Jack Jolley of Quadra Finance, and others. http://www.how2tv.com/ _____________________________________________ o User Relationship Tech Firm APPower! Names President SAN MATEO, Calif. -- APPower!, a provider of user relationship management technologies which creates open lines of communication between software application users and software vendors and publishers, said that R.J. Van Stetson has been named the company's first president. Mr. Van Stetson most recently served as vice president of marketing and dedicated sales for a telecommunications broadband data startup. The company has raised more than $2.5 million in its first round, led by Jerusalem Global Ventures along with The Scientist Organization, both Israeli firms. APPower!'s Research and Development center is located in Tel Aviv. The company said it hopes to begin its second round of financing within the next few weeks. http://www.appowerinc.com/ _____________________________________________ o E-Marketing Services Firm Impower Names AT&T Exec President PRINCETON, N.J. -- Impower, an electronic marketing services firm, said it has appointed former vice president of consumer e-business at AT&T, Karen Varhley, to the position of president. She will replace Eric Zilling, who has been named chief vision officer. Mr. Zilling was part of the founding management team of Impower. Both will report to Donn Rappaport, the chairman and chief executive officer. Impower is backed by Counsel Corp. of Toronto, which invested $15 million in the company in November 1999. http://www.impower.com/ _____________________________________________ o Integration Technology Firm Evoke Names New President, COO SAN FRANCISCO -- Evoke Software, which provides integration technology for online businesses, said it named Rick Cortese as president and chief operating officer, both new positions for the company. Mr. Cortese was previously president and chief executive officer for Experian's information solutions division, which provides information to credit reporting and direct marketing industries. Evoke Software is backed by Signal Equity, GE Equity, Wheatley Partners, Axiom Venture Partners, and RRE Investors. http://www.evokesoft.com/ _____________________________________________ o Sales Software Firm UpShot Names President and CEO MOUNTAIN VIEW, Calif. -- UpShot.com, which develops sales-force automation software for sales teams, announced that it has named Robert K. Reid as president and CEO. Reid replaces UpShot founder Keith Raffel, who will continue with the company as chairman. Mr. Reid was previously president of the Concur Commerce Network. UpShot's backers include ABN AMRO Private Equity, Ensley Partners, FrontLine Capital Group, New England Partners, Advanced Technology Ventures, Alloy Ventures, Worldview Technology Partners, and individual investors including Bob Finocchio, chairman of Informix; Ken Oshman, chief executive officer of Echelon; Tom Proulx, chief executive officer of Netpulse; and Ben Rosen, chairman of Compaq Computer. http://www.upshot.com/ _____________________________________________ o Former Andersen Consulting Exec is Rebel.com President, COO OTTAWA -- Rebel.com, a provider of business networking technology, said it appointed Solly Patrontasch as president and chief operating officer. Mr. Patrontasch was a partner in the Ottawa office of Andersen Consulting responsible for business development. Mr. Patrontasch replaces Michael Mansfield, former president and COO, who will remain with the company as an executive advisor and member of the board of directors. Rebel.com is backed by individual investors. http://www.rebel.com/ _____________________________________________ o Online News Site The Deal Promotes Exec to President NEW YORK -- The Deal, a media company that provides news to the financial, corporate, and legal markets, said it has promoted Kevin Worth from chief strategic officer to the company's first president. Prior to joining the company, Mr. Worth was a senior executive at American Lawyer Media, a media company focused on the legal market. The Deal is funded by U.S. Equity Partners. http://www.thedeal.com/ _____________________________________________ o Online Risk Management Service Provider Names First CEO NEW YORK -- Sakonnet Technology, a provider of online risk management services to companies trading in commodities said it named Stephen Sinacore as its first chief executive officer. Mr. Sinacore previously served as managing director and head of European fixed income trading at Greenwich Captial, the fixed-income trading subsidiary of Royal Bank of Scotland. Sakonnet Technology is backed by individual investors. http://www.sknt.com/ _____________________________________________ o Executive Jet Service eBizJets Names First CEO HINGHAM, Mass. -- EBizJets, an executive jet transportation services company, said it appointed John I. Williams, Jr. as its first chief executive officer. Mr. Williams, an instrument-rated pilot, previously served as president and CEO of Biztravel.com, a travel Web site, and as a vice president for American Express. eBizJets is a portfolio company of CSFB Private Equity, the private investment arm of the global Credit Suisse Group. http://www.ebizjets.com/ ======= VC Fund News ======= o New Israeli Fund Delta Ventures Launches With $60 Million TEL AVIV -- Delta Ventures announced the close of its first fund. The new Israeli venture capital firm raised $60 milllion from investors including Nomura International and Poalim Capital Markets. The company said the seed fund will make investments in communications, semiconductors, and electronics companies. The firm said it will make investments primarily within Israel. http://www.delta-ventures.com/ _____________________________________________ o Velocity Capital Raises $7 Million, Targets Northwest Firms SEATTLE -- Velocity Capital announced it has raised $7 million in its venture capital fund for Velocity Capital Partners. The fund targets early-stage Northwest companies seeking pre-venture funding before raising a larger funding round. The firm said it intends to invest between $100,000 and $500,000 in 20 companies. So far, Velocity, which was founded by managing partner David Alhadeff, currently has in its portfolio Worldcatch.com, PlyMedia, PlayNetwork and SeasonTicket.com. Additionally, Velocity announced it has teamed up with Sequoia Capital to identify and invest in Northwest-based opportunities. The company's backers include Whitney & Co. and The Mathew G. Norton Company, as well as executives from Northwest-based technology and non-technology companies. http://www.velocitygroup.com/ _____________________________________________ o Nash, Sells & Partners Changes Name and Raises New Fund LONDON -- Nash, Sells, and Partners, an English venture capital firm, said it is changing its name. The company said that the new name of the firm will be Sovereign Capital, beginning November 1. The firm also said it is raising a new fund. http://www.nashsells.co.uk/ ======= VC Personnel ======= o Ignition Names Former NextLink CEO As Managing Director KIRKLAND, Wash. -- Ignition, an investment company designed to fund, mentor, and build wireless startups, said it named Steve Hooper joined the firm full time as managing director and partner. Mr. Hooper, who helped found Ignition earlier this year, formerly served as chief executive officer of NextLink Communications, Teledesic, McCaw Cellular Communications, and AT&T Wireless Services. Ignition has made three investments in etrieve, UIEvolution, and Avogadro. Ignition has also, through its Ignition Venture Fund, made more passive investments in companies including TellMe, Everypath, Nimble, and mDiversity. http://www.ignitioncorp.com/ _____________________________________________ o Atlanta Investor Henagan Joins SSM Ventures As Partner MEMPHIS -- SSM Ventures, a Southern venture capital firm with a $156 million in capital, said Bill Henagan joined the firm as a general partner. Mr. Henagan, who has invested in and advised early stage information technology companies in the Atlanta area, is one of the funding members of Atlanta Technology Angels. SSM said it plans to open an office in Atlanta early next year and begin a new fund this Fall. The venture capital firm invests in online businesses and related infrastructure. http://www.ssmventures.com/ _____________________________________________ o Bay Partners Names Kana VP as General Partner CUPERTINO, Calif. -- Bay Partners, a venture capital firm that invests in early-stage data networking, wireless, and software fundamental technology companies, said it named Chris Noble as general partner. Mr. Noble was most recently the vice president of marketing at Kana Communications and is on the board of directors of three Bay Partners' portfolio companies: Jarna, iSpheres, and RightFreight. http://www.baypartners.com/ _____________________________________________ o Anila Names Recruiting Firm Exec as Venture Partner PALO ALTO, Calif. -- Anila Fund, which provides early stage funding to optical and broadband companies, said Gary Schlageter has joined the company as venture partner. Mr. Schlageter is founder and manager of Open Systems Consultants, an executive recruiting firm for data and telecommunications companies. The company said Mr. Schlageter will help Anila hire management teams for their portfolio companies. Prior to joining Open Systems, Mr. Schlageter was founder and vice president of marketing at RouterWare, a data communications protocol company. http://www.anila.com/ |||||||||||||||||||| Advertisement |||||||||||||||||||| ComputerLetter For 15 years, the best analysis of trends and companies in digital technology. Sample issue available at: http://technologicpartners.com/tp/cl/?vw=20001018 ||||||||||||||||||||||||||||||||||||||||||||||||||||||| SEND TO A FRIEND To subscribe to VentureWire, tell your friends and colleagues to go to: http://venturewire.net/ This copy of VentureWire may be distributed freely, provided that the distribution is without charge, that the issue is distributed complete and unaltered, and that all copies retain the Technologic copyright notice. _____________________________________________ TO SUBSCRIBE go to: http://venturewire.net/ To CHANGE your address, send your old and new e-mail address to: [email protected] To UNSUBSCRIBE, send e-mail to: [email protected] Send COMMENTS, QUESTIONS, or NEWS ITEMS to: [email protected] Entire Contents Copyright 2000 by Technologic Partners VentureWire is a Service Mark of Technologic Partners =====================================

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VentureWire, Friday, October 27, 2000

====================================================== VENTUREWIRE --- Friday, October 27, 2000 ====================================================== Private Company Business News ------ Published Daily by Technologic Partners ------- http://technologicpartners.com ====================================================== Top Stories: o Broadband Provider Altrio Holds First Round for $125 Million o European Strategic Partners Raises $718.2 Million New Fund o Reports: Modo Service Closes Weeks After Launch o Commerx Co-founders Resign, Remain on Board; COO Interim CEO |||||||||||||||||||| Advertisement |||||||||||||||||||| DODADS, GADGETS, AND GIZMOS, OH MY! Our pockets are overflowing with mobile phones, PDAs, and two-way pagers, and more products -- from Web pads to picture frames -- come with Internet connections. Consumer Devices, one of five expert panels at Technology Outlook 2000, will sort through the clutter to determine which devices have the best chances of finding mass-market audiences: Safi Qureshy, Chairman, AudioRamp Daniel H. Rimer, Partner, The Barksdale Group Kent Savage, President & CEO, Netpliance Michael Slater, President, PhotoTablet Technology Outlook 2000: The future of pervasive computing December 4 and 5, San Francisco http://www.tpsite.com/tp/conf/to2000/?vw=20001026 A VentureWire investment conference. ||||||||||||||||||||||||||||||||||||||||||||||||||||||| Also in This Issue: New Money: o News Firm Gannett Buys Stake in Media Company Space.com o Optical Networking Firm Edgeflow Gets $5.5 Million Round One o E-Commerce Network eScout.com Raises $25.5 Million Round Two o Infrastructure Software Firm eQview Has $3 Million Round One o Online Business Analysis Firm Raises $2.6 Million Round One o Info Service Traffic.com Secures $45 Million Third Round o Commercial Property B2B FacilityPro Gets $5 Million Series B o Gay.com Invests in Italian Gay Portal Gay.it o Online Bank Service Firm BNKR Raises $1.5 Million Round Two o Custom CD Provider DigitalSwift Raises Second Round o Launchworks Invests in Utility Management Firm E2MS o Semiconductor Materials Firm EpiWorks Adds $1 Million New Deals: o Oracle Trades Interactive TV Assets for Stakes in Two Firms o More Details on Sony and Candescent's $77.5 Million Pact M&A: o Red Cube Makes $20 Million Payment to Buy Majority of I-Link o Credence Systems Buys NewMillennia for $11.3 Million o Embarcadero Acquires Web Design Firm in $13 Million Deal o Q&A Firm Answers.com Acquires Real-time Help Firm Knowitall o Broadband Firm MegaPath Networks Purchases Phoenix Networks o Digital Video Firm Ligos Buys Digital I/O App Firm Sequoia o Sega to Acquire Family-Oriented Web Site FamilyWonder o UConnections.com Acquires Software Developer Alumnipride o Varimetrix Acquires European Distributor From Encee Systems New Directors: o Web App Software Firm Notara Adds Two to Board o Advent Partner Joins Board of Imaging Firm LightLab o Optical Firm LiquidLight Announces Board of Directors o Screen4me Adds President of Consumer Research Firm to Board o Wireless Tech Firm Altawave Adds Prodigy COO to Board New People: o Data Firm eData Names Ex-Andersen Consulting Exec as CEO o Telco Services Firm Zenfinity Names New CEO and Director VC Fund News: o Advent Venture Partners' New Fund Raises $232 Million o Village Ventures Launches Nashville Fund VC Personnel: o VS&A Communications Partners Names New Principal |||||||||||||||||||| Advertisement |||||||||||||||||||| Computers in our pockets, our cars, our kitchens, our showers? When it happens, there's little doubt that IBM and Intel will have had something to do with it. Come hear what these industry powerhouses are doing in this field from Claude Leglise, VP of the Intel Architecture Group & GM of Intel's Home Products Group, and from Michel Mayer, GM of Pervasive Computing at IBM at: Technology Outlook 2000: The future of pervasive computing December 4 and 5, San Francisco http://www.tpsite.com/tp/conf/to2000/?vw=20001026 A VentureWire investment conference. ||||||||||||||||||||||||||||||||||||||||||||||||||||||| ======= Top Stories ======= o Broadband Provider Altrio Holds First Round for $125 Million GLENDALE, Calif. -- Altrio Communications, a provider of broadband communications, said it raised $125 million in its first round of funding. Bessemer Holdings and Frontenac co-led the round, which included Bank of America Capital Investors; Grove Street Advisors; RBC Partners, the private equity unit of Royal Bank Financial Group; Soros Private Equity Partners; and SSB Capital Partners, the private investment unit of Salomon Smith Barney. Adam Godfey and Ed Park of Bessemer Holdings, James E. Crawford III and Walter C. Florence of Frontenac, and representatives of Soros Private Equity and SSB Capital Partners will join the company's board of directors. The company will use the funding to build its broadband communications network in the Los Angeles area. http://www.altrio.net/ _____________________________________________ o European Strategic Partners Raises $718.2 Million New Fund EDINBURGH, Scotland -- Standard Life Investments, a U.K. mutual investment company, said it completed the final closing of its new private equity fund, European Strategic Partners. The total commitments to the fund are now EUR 868 million ($718.2 million) from 40 investors in 12 countries. A third of the capital raised for the fund has already been committed to investments in 13 funds and 6 direct transactions. The fund will focus on the mid-market-buyout and the telecommunications and technology investment sectors. The fund is split 60% to 40% between investments in other funds and direct investment in companies. Telephone +44-131-245-5593. _____________________________________________ o Reports: Modo Service Closes Weeks After Launch NEW YORK -- Scout Electromedia, developer of a wireless handheld device and urban guide service, has closed down, according to multiple reports. Scout, which launched its Modo service last month with an extensive ad campaign, ceased operations after failing to secure additional funding, according to the reports. The company raised $18 million in May from idealab, Chase Capital Partners, Flatiron Partners, and TechFund Capital. Scout's corporate Web site, and the Modo site were both inaccessible today. _____________________________________________ o Commerx Co-founders Resign, Remain on Board; COO Interim CEO CHICAGO -- Commerx, which develops and operates electronic business networks, said its board of directors has accepted the resignations of co-founders Tim Stojka, chairman and CEO, and Nick Stojka, executive vice president. Both will retain their seats on the board of directors. Tim Stojka will continue to serve as chairman of the board. Commerx named COO Jeff Garwood as interim chief executive officer. Last week, Mr. Garwood announced his intention to resign as Commerx COO for a chief executive position with another company. He has agreed to remain at Commerx through a transitionary period. Commerx's electronic business networks enable manufacturing companies and their trading partners to optimize their supply chains. The company's investors include Capital Research and Management, divine interVentures, MC Capital, Mitsui & Co., Palantir Associates, Pivotal Asset Management, Ashland Distribution, Eastman Chemical, EP Partners, Huntsman, Mitsubishi International, MSC Industrial Direct, H. Nuehlstein & Co., Internet Capital Group, and individual investors. http://www.commerx.com/ ======= New Money ======= o News Firm Gannett Buys Stake in Media Company Space.com NEW YORK -- News and information company Gannett said it took an equity stake in Space.com, a media company dedicated to outer space and space related content. The equity exchange is part of a strategic partnership between the two companies. Space.com has acquired Space News newspaper and other media properties of Gannett. Gannett will invest an undisclosed amount of cash and provide services for Space.com. Earlier this month, Space.com laid off 22 of its 108 employees. Space.com is backed by Blue Chip Venture, Greylock, NBC, PaineWebber, SpaceVest, Venrock Associates, and individuals. http://www.space.com/ _____________________________________________ o Optical Networking Firm Edgeflow Gets $5.5 Million Round One KANATA, Ontario -- Edgeflow, a developer of optical networking services to the carrier and enterprise markets, said it raised $5.5 million in its first round from Sierra Ventures and Venture Coaches. The company will use the funds to continue development of its technology. http://www.edgeflow.com/ _____________________________________________ o E-Commerce Network eScout.com Raises $25.5 Million Round Two LEE'S SUMMIT, Mo. -- eScout.com, a Web-based Internet commerce and business network for independent businesses and banks, said it raised $25.5 million in its second round of financing. New investors include Allfirst Financial, Citizens Financial Group, Golden State Bancorp, Marquette Bancshares, Texas Financial Bancorp, and Utilicorp Communications Services. First round investors including Mayfield Fund, Oak Hill Venture Partners, Tarrant Venture Partners, A.G. Edwards Capital, and Commerce One also participated this round. The company will use the funds to accelerate the integration of its online service, eScout MarketPlace, into the back-end, legacy applications at its partner banks. EScout has raised $54 million to date. http://www.escout.com/ _____________________________________________ o Infrastructure Software Firm eQview Has $3 Million Round One ATLANTA -- eQview, which provides enterprise infrastructure software that enables companies to do business electronically, said it has raised $3 million in first round of funding from Cordova Ventures and individual investors. eQview said it will use the funding to develop its product, and for sales and marketing. The company plans to seek up to $20 million in additional funding early next year. http://www.eqview.com/ _____________________________________________ o Online Business Analysis Firm Raises $2.6 Million Round One LONDON -- IntelligentApps,which provides online analytical processing services, raised GBP 1.8 million ($2.6 million) in its first round of funding. The round was led by publicly-traded UK incubation firm NewMedia Spark and a consortium of individual investors. Among the individuals to invest in the company was Geoff Squire, founding managing director of Oracle UK and later executive vice president for Oracle. The company's technology was developed exclusively for the new Microsoft.net platform. The company said it will use the funding for business development. IntelligentApps also owns Knosys, which provides a front-end analytical application platform. http://www.intelligentapps.com/ _____________________________________________ o Info Service Traffic.com Secures $45 Million Third Round WAYNE, Pa. -- Traffic.com, which provides traffic information services, said it raised $45 million in its third round of funding. New investor Baker Capital led the round, which included other new investors DVCRF Ventures, Hearst Interactive Media, and PNC Financial Service's Group unit VentureBank@PNC. Previous investors Bessemer Venture Partners and TL Ventures also participated in this round. Baker Capital partner Larry Bettino will join the company's board of directors. The company will use the funding to launch its operations and expand its data center. Traffic.com provides prediction services and real-time traffic news. The company has also received backing from Internet Capital Group and Pennsylvania Early Stage Partners. http://www.traffic.com/ _____________________________________________ o Commercial Property B2B FacilityPro Gets $5 Million Series B ATLANTA -- FacilityPro.com, a business-to-business electronic marketplace for commercial property owners, managers and suppliers, said it has secured $5 million in its Series B round of funding from First Union Capital Partners. The funding brings the total of the company's Series B financing to $40 million. The round included Constellation Real Technologies and previous investor Austin Ventures. The company said it will use the funds to enhance and expand the capabilities of its online marketplace and hire additional consulting and operating personnel. FacilityPro has also received funding from Encompass Services. http://www.facilitypro.com/ _____________________________________________ o Gay.com Invests in Italian Gay Portal Gay.it SAN FRANCISCO -- Gay.com, a provider of products and services for gay men and women, said it made a strategic investment in Gay.it, a gay and lesbian portal based in Italy. Gay.com said the investment is part of its ongoing global expansion. The company acquired France-based Ooups.com, and launched news sites aimed at the gay community in the U.K. and Latin America. Gay.com is backed by Chase Capital Partners, Flatiron Partners, Baroda Ventures, Macluan Digital, Jesse.Hansen.CoVe, and IDG Ventures. http://www.gay.com/ http://www.gay.it/ _____________________________________________ o Online Bank Service Firm BNKR Raises $1.5 Million Round Two BUFFALO, N.Y. -- Rand Capital said it made a second investment in BNKR, which provides online banking capabilities to banks and credit unions. The return investment, a bridge loan of $200,000, is part of BNKR's $1.5 million second round. Minneapolis-based BNKR is also backed by Softbank affiliate Seed Capital Partners. BNKR provides banking marketing and application services. http://www.bnkr.com/ _____________________________________________ o Custom CD Provider DigitalSwift Raises Second Round ATLANTA -- DigitalSwift, a producer of custom CDs via its SwiftCD.com division, said it raised an undisclosed amount of second round funding. The round was led by Universal Investment & Manufacturing Co., whose chairman Hisham Araim will take a new seat on the board as a result of the investment. Financial consultant Gregory N. Gallagher also joined the board but is not an investor. The company will use the funds to expand its Atlanta office. http://www.swiftcd.com/ _____________________________________________ o Launchworks Invests in Utility Management Firm E2MS TORONTO -- Launchworks, which provides early stage capital to software and technology companies, said it invested $2 million in E2MS, which provides software and services that enables users to manage their gas, electrical, and water utility services. E2MS, which is also based here, will use the funds for marketing and expansion. http://www.launchworks.com/ http://www.e2ms.com/ _____________________________________________ o Semiconductor Materials Firm EpiWorks Adds $1 Million CHAMPAIGN, Ill. -- EpiWorks, which develops and manufacturers compound semiconductor materials, said it has secured an additional $1 million in its Series C funding from previous investor Open Prairie Ventures. The investment follows an earlier investment of $1.5 million by Open Prairie in March. The funds will support hiring. http://www.epiworks.com/ ======= New Deals ======= o Oracle Trades Interactive TV Assets for Stakes in Two Firms REDWOOD SHORES, Calif. -- nCube, which provides media streaming infrastructure, said database giant Oracle sold assets of its interactive television unit to nCube and broadband network service provider Thirdspace Living in exchange for minority equity stakes in both companies. Financial terms of the deals were undisclosed. Under the terms of the agreement, nCube and Thirdspace will jointly own the intellectual property of Oracle's interactive TV video server technology. The three companies will also work together to develop interactive TV products and services. Publicly traded broadband access provider Alcatel also invested its interactive TV intellectual property and cash for a minority stake in Thirdspace. nCube is backed by Oracle CEO Larry Ellison and other institutional and individual investors. http://www.ncube.com/ http://www.oracle.com/ _____________________________________________ o More Details on Sony and Candescent's $77.5 Million Pact TOKYO -- Flat panel display developer Candescent Technologies and Sony released details of their previously reported agreement to develop high voltage field emission display technology. Sony will pay a total of $77.5 million as a result of the agreement. Sony will invest $27.5 million in Candescent for an equity stake and will pay $50 million to license Candescent's technology. Additional funding will come from both companies over the life of their joint development agreement. Candescent has raised over $410 million from corporate, government, institutional, and venture capital sources. http://www.candescent.com/ http://www.world.sony.com/ ======= M&A ======= o Red Cube Makes $20 Million Payment to Buy Majority of I-Link ZURICH, Switzerland -- Red Cube International, a provider of Internet Protocol (IP) and Web-based communications services, said it is has made a first payment of $20 million in cash under its agreement to acquire a majority interest in publicly-traded I-Link, a provider of enhanced voice/data services. As part of its securities agreement to acquire all I-Link securities held by Winter Harbor, a Marriott holding company, Red Cube will make an additional cash payment of $15 million to complete the first closing of the transaction within the fourth quarter of 2000. A second closing involving payment by Red Cube of $25 million in cash is expected to be completed within the first quarter of 2001. Under the terms of the transaction, Red Cube agreed to pay Winter Harbor a total of $60 million in cash and $20 million in long-term, Red Cube share options in return for its majority interest in I-Link. Red Cube is backed by Rafaello Private Equity Investment, Credit Suisse Asset Management, Banc Pictet & Cie, and Swiss Re Investors in Europe. http://www.i-link.com/ http://www.redcube.com/ _____________________________________________ o Credence Systems Buys NewMillennia for $11.3 Million FREMONT, Calif. -- Credence Systems, a publicly-traded company that manufacturers automatic test equipment for the semiconductor industry, said it is acquiring NewMillennia Solutions (NMS), a provider of test strategies and products, for approximately $11.3 million. The purchase price includes $4 million that Credence provided as part of NewMillennia's Series A round in August. Before the acquisition, Credence held a 19.8% interest in NMS. Jim Ellis, founder, president and chief executive officer of NMS will become vice president and general manager of the NMS Division of Credence Systems. http://www.credence.com/ http://www.moduletest.com/ _____________________________________________ o Embarcadero Acquires Web Design Firm in $13 Million Deal SAN FRANCISCO -- Embarcadero Technologies, a publicly-traded provider of database lifecycle management software, said it acquired Advanced Software Technologies for $13 million in cash. Advanced Software Technologies develops software that designs, maintains, and re-engineers Java, C++, IDL and component-based applications. The company's 40 employees and CEO Greg Schottland will remain with the company in Colorado. Mr. Schottland's position is yet to be decided. Advanced Software Technologies is funded by Draper Fisher Jurvetson, Gateway Associates, Wasatch Venture Fund, and Zone Ventures. http://www.embarcadero.com/ http://www.advancedsw.com/ _____________________________________________ o Q&A Firm Answers.com Acquires Real-time Help Firm Knowitall PASADENA, Calif. -- Answers.com, a provider self-service question and answer technology, said it acquired Austin, Texas-based Knowitall.com, which provides real-time communication and collaboration products, for an undisclosed amount. Dewey Gaedcke, Knowitall's interim chief executive officer, will step down to focus on his position as president of Complete Data Solutions. Carl Samos, chief technology officer, and Lance McInnes, vice president of corporate development, will remain in their current positions with the new company. Knowitall's offices in Austin will remain as a sales and development office for Web-enabled customer interactive technology. Answers.com is backed by idealab! Knowitall is backed by Crest Financial, G51, and individual investors. http://www.answers.com/ http://www.knowitall.com/ _____________________________________________ o Broadband Firm MegaPath Networks Purchases Phoenix Networks PLEASANTON, Calif. -- MegaPath Networks, a national broadband services provider, said it has purchased Phoenix Networks, also a broadband services provider. Under the terms of the deal, MegaPath purchased the assets of Phoenix Networks in exchange for MegaPath stock. Phoenix Networks president and CEO, Dan Foster, will become MegaPath's chief marketing and sales officer. The companies plan to merge operations and administrative functions over the next 60 days. Phoenix DSL business customers will be immediately switched to MegaPath's systems and customer service. The company will maintain a St. Louis presence. MegaPath Networks' investors include Trident Capital and U.S. Venture Partners. Phoenix Networks is backed by individual investors. http://www.megapath.net/ http://www.phoenixnetworks.net/ _____________________________________________ o Digital Video Firm Ligos Buys Digital I/O App Firm Sequoia SAN FRANCISCO -- Ligos Technology, a developer of media stream management software, said it acquired Sequoia Advanced Technologies, a supplier of digital input/output (I/O) software and digital storage technology. Terms of the deal were undisclosed. Sequoia's staff will remain with the company and Sequoia co-founders and acting CEOs Rick Tewel and Tore Slotseldt will stay as part of the management team. Ligos is funded by Mercantile Capital Partners, Intel Capital, Lakeland Capital, Thomas Weisel Partners, Nomura Technology Fund, Oscar Capital New Ventures Fund, Permal Capital Management, and Westbury Equity Partners. Sequoia is self-funded. Telephone 415-249-0100. http://www.ligos.com/ _____________________________________________ o Sega to Acquire Family-Oriented Web Site FamilyWonder TOKYO -- Digital entertainment media giant Sega Group said it is in negotiations to acquire a 100% stake in FamilyWonder, an online retailer of children's products and a provider of family-oriented consumer information. Further financial deals were undisclosed. The company's Web site, current staff, and assets will be managed by Sega as a result of the acquisition. FamilyWonder's chief executive officer Charlie Baker will remain with the company. FamilyWonder is backed by MeriTech Capital Partners, RRE Ventures, Accel Partners, and U.S. Venture Partners. http://www.familywonder.com/ _____________________________________________ o UConnections.com Acquires Software Developer Alumnipride NEW YORK -- UConnections.com, an online resource for e-commerce and information tailored to local campus communities, said it has acquired Alumnipride, a software provider for national college and university alumni associations, for an undisclosed amount. UConnections.com has established a new division, University Services, to support development and sales of Alumnipride's Web site software. Alumnipride's founder, David Landau, will become executive vice president, corporate development for Uconnections.com. Alumnipride is also launching a new software product for national alumni associations that builds, hosts and maintains Web sites for their organizations. AlumniPride's staff has moved into the Uconnections.com's New York offices. Uconnections.com is backed by Allen & Company and KnowledgeCube. AlumniPride is backed by Seneca Ventures, Woodland Venture Fund, Dalewood Associates, the principals of Wheatley Partners, and the founders of Cheyenne Software. http://www.alumnipride.com/ http://www.uconnections.com/ _____________________________________________ o Varimetrix Acquires European Distributor From Encee Systems PALM BAY, Fla. -- Varimetrix, a developer of CAD/CAM technology for engineering and manufacturing industries, said it acquired its European distributor from Encee Systems for an undisclosed amount and opened a distribution site in Tokyo. The new European division will be staffed by Varimetrix personnel and will support existing partners in the U.K., Germany, Italy, Switzerland, Portugal, and Turkey. The Asian distributor is being established by the company's investor Shin Nippon Koki (SNK). Former SNK president Hizakasu Yamaguchi will serve as president of the Asian distributor. Varimetrix is backed by SNK and Samsung. http://www.vx.com/ http://www.encee.com/ ======= New Directors ======= o Web App Software Firm Notara Adds Two to Board NEW YORK -- Notara, a Web application software company, said it has appointed Neil Austrian, the chairman of iWon.com and former president and chief operating officer of NFL, to its board of directors. Mark Dowley, the president of the marketing communications group of McCann-Erikson WorldGroup and chairman and chief operating officer of Momentum Worldwide has also taken a seat on the board, Notara said. Notara is backed by Hummer Winbald Venture Partners, RRE Ventures, Bessemer Venture Partners, Nassau Capital, Sumitomo Corp, and the UK-based Prot,g, Group. http://www.notara.com/ _____________________________________________ o Advent Partner Joins Board of Imaging Firm LightLab WESTFORD, Mass. -- LightLab Imaging, a developer of optical coherence tomography systems for imaging applications, said it appointed William C. Mills III to its board of directors. Mr. Mills is a partner at investment firm Advent International, where he focuses on biotech investments. LightLab is backed by German-based optics company Calzeiss. http://www.lightlabimaging.com/ _____________________________________________ o Optical Firm LiquidLight Announces Board of Directors ATLANTA -- LiquidLight, a developer of optical networking technology, said it named the members of its board of directors. Appointees include Morgan M. Jones, General Partner with Battery Ventures; Fahri Diner, president, CEO and founder of Qtera, a wholly-owned subsidiary of Nortel Networks; Jim Orlando, principal with Battery Ventures; TC Nie, founder, CEO, and president of LiquidLight; and Scott Hardin, LiquidLight co-founder and vice president of marketing and sales. The company is backed by Battery Ventures and Dominion Ventures. http://www.liquidlightinc.com/ _____________________________________________ o Screen4me Adds President of Consumer Research Firm to Board ATLANTA -- Screen4me, a provider of privacy and permission tools and services that allow consumers to control the marketing materials they receive, said it named J. Walker Smith to its board of directors. Mr. Smith is president of Yankelovich Partners, a market research firm. Screen4me's investors include Robinson-Humphrey Company, Intelligent Systems and individuals from Brann RMG, Yankelovich Partners, Siebel Systems, Boston Consulting Group, and Holland & Knight. http://www.screen4me.com/ _____________________________________________ o Wireless Tech Firm Altawave Adds Prodigy COO to Board FREMONT, Calif. -- Wireless infrastructure builder Altawave said it appointed Gregory G. Williams to its board of directors. Mr. Williams is the chief operating officer at Prodigy Communications. Mr. Williams is also chairman of the Wireless Application Protocol (WAP) Forum board of directors. Altawave is backed by New Millennium Partners and Clarity Capital. http://www.altawave.com/ ======= New People ======= o Data Firm eData Names Ex-Andersen Consulting Exec as CEO BOCA RATON, Fla. -- EData, a provider of Internet-accessable data management services, said it has appointed former managing partner and founder of Andersen Consulting's CRM practice Dale Renner as its first chief executive office. Founder Hank Asher will remain on the eData board as founder and will continue to work on product design and technology. EData is funded by individual investors. http://www.edata.com/ _____________________________________________ o Telco Services Firm Zenfinity Names New CEO and Director ISELIN, N.J. -- Zenfinity, a provider of infrastructure services for telecommunications service providers, said it appointed Paul Shaneck as CEO and a director of the company. Mr. Shaneck , a former IBM executive, replaces Paras Shah, who provided the seed funding to launch Zenfinity and is now a member of its advisory board. The company's backers include Comstellar Technologies. http://www.zenfinityinc.com/ ======= VC Fund News ======= o Advent Venture Partners' New Fund Raises $232 Million LONDON -- Advent Venture Partners, a U.K.-based venture capital firm, said it has held a first closing of GBP 162 million ($232 million) for its new fund, Advent Private Equity Fund III. The fund is targeted at $375 million dollars, but the firm said it could raise up to $450 million. In line with Advent's investment strategy, the new fund will focus on investing between $5 million and $15 million in emerging growth technology companies in typically second round financings, with some pre-IPO and startup investments as well. The fund focuses primarily on investments in the United Kingdom and, to a lesser extent, other European Union countries and the United States. Since it was formed in 1981, Advent Venture Partners has raised $602 million, and invested in 160 companies. http://www.adventventures.com/ _____________________________________________ o Village Ventures Launches Nashville Fund WILLIAMSTOWN, Mass. -- Village Ventures, which manages a network of early-stage venture capital funds, said it is organizing a fund in Nashville, Tenn. The Nashville fund will be managed by Tuff Yen, a former partner with Hambrecht & Quist. The fund, which has yet to be named, will focus on early to mid-stage companies located in the Southeast. With the new fund, the Village Ventures network of funds now totals nine, with a typical fund size of between $10 million and $15 million. http://www.villageventures.com/ ======= VC Personnel ======= o VS&A Communications Partners Names New Principal NEW YORK -- VS&A Communications Partners III, an equity affiliate of media merchant bank Veronis Suhler, said it has named George Coles as a principal. Mr. Cole was most recently the managing director of First Union Securities' media and entertainment investment banking group. At VS&A, he will report to Jeffrey T. Stevenson, partner at Veronis Suhler, and president and managing general partner of VS&A Communications Partners. VS&A's has18 companies in its Funds I and II, and has made more than 80 add-on acquisitions. http://www.veronissuhler.com/ |||||||||||||||||||| Advertisement |||||||||||||||||||| CHANGING SUPPLY CHAINS A typical hospital buys $50 million in supplies from 22,000 suppliers annually. On average there is a 75% price discrep- ancy for identical products. Paper invoices cost 30 times as much as electronic invoices. Room for improvement? Perhaps. We've convened an expert panel at Healthcare Outlook 2000 to help us understand where the changes will come from and who the big winners will be: Dr. Gilbert H. Kliman, General Partner, InterWest Partners Dr.David M. Auerbach, Principal, Decision Health Sundeep Bhan, Chairman,President, & CEO, Medsite.com Anne De Gheest, President & CEO, medpool.com Daren C. Marhula, Sr. Research Analyst, Healthcare, U.S. Bancorp Piper Jaffray For a full agenda, and to register: http://tpsite.com/tp/conf/ho2000/?vw=20001026 ||||||||||||||||||||||||||||||||||||||||||||||||||||||| SEND TO A FRIEND To subscribe to VentureWire, tell your friends and colleagues to go to: http://venturewire.net/ This copy of VentureWire may be distributed freely, provided that the distribution is without charge, that the issue is distributed complete and unaltered, and that all copies retain the Technologic copyright notice. Nothing that appears in VentureWire, however, may be reproduced, saved, or stored in a retrieval system without the prior written consent of Technologic Partners. _____________________________________________ TO SUBSCRIBE go to: http://venturewire.net/ To CHANGE your address, send your old and new e-mail address to: [email protected] To UNSUBSCRIBE, send e-mail to: [email protected] Send COMMENTS, QUESTIONS, or NEWS ITEMS to: [email protected] Entire Contents Copyright 2000 by Technologic Partners VentureWire is a Service Mark of Technologic Partners =====================================

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Enron Mentions

SEC Seeks Information on Enron Dealings With Partnerships Recently Run by F= astow The Wall Street Journal, 10/23/01 Where Did the Value Go at Enron? New York Times, 10/23/01 FRONT PAGE - FIRST SECTION: SEC probes Enron over financial dealings=20 Financial Times; Oct 23, 2001 COMPANIES & FINANCE THE AMERICAS: Group full of surprises after failing to = open up=20 Financial Times; Oct 23, 2001 Enron Discloses SEC Inquiry=20 The Washington Post, Oct 23, 2001 Enron Suffers After Unclear Disclosure, New York Times Says Bloomberg, 10/23/01 SEC asks Enron for investing data Houston Chronicle, 10/23/01 Minnesota Mining and GM Climb In a Rally That Builds Late in Day The Wall Street Journal, 10/23/01 WORLD STOCK MARKETS: Wall St bargain hunters counter earnings gloom AMERICA= S=20 Financial Times; Oct 23, 2001 Milberg Weiss Announces Class Action Suit Against Enron Corp. Business Wire, 10/22/01 Enron To Host Conference Call Tues 9:30 am EDT Dow Jones News Service, 10/22/01 Janus Had Biggest Enron Stake at End of 2nd-Quarter (Update1) Bloomberg, 10/22/01 Enron Says SEC Asks About Related-Party Transactions (Update9) Bloomberg, 10/22/01 Trusts Keeping Enron Off Balance TheStreet.com, 10/22/01 Why Enron's Writedown Unnerves Some Investors TheStreet.com, 10/22/01 SEC Seeks Information on Enron Dealings With Partnerships Recently Run by F= astow By Rebecca Smith and John R. Emshwiller Staff Reporters of The Wall Street Journal 10/23/2001 The Wall Street Journal A3 (Copyright (c) 2001, Dow Jones & Company, Inc.) Enron Corp. said it has been contacted by the Securities and Exchange Commi= ssion seeking information on the energy giant's controversial dealings with= partnerships that were set up and run until recently by its chief financia= l officer, Andrew S. Fastow.=20 Following Enron's announcement yesterday morning of the SEC inquiry, the co= mpany's stock took another big slide, falling more than 20% in New York Sto= ck Exchange trading. As of 4 p.m., Enron shares were trading at $20.65, off= $5.40, knocking about $4 billion off Enron's market capitalization. Volume= topped the Big Board's most-active list at about 36 million shares. A week= ago, Enron stock was trading at about $33 a share. Subsequently, the compa= ny announced a $1.01 billion third-quarter write-off that produced a $618 m= illion loss. Analysts also voiced concerns yesterday about possible other bad news lurki= ng amid Enron's vast and extremely complex operations. The company has deal= ings with a number of related entities. Under certain circumstances, if Enr= on's credit rating and stock price fall far enough, the company would be ob= ligated to issue tens of millions of additional shares to these entities, d= iluting the holdings of current shareholders.=20 Enron has previously acknowledged the provisions but said its business is s= trong and it feels confident that there will be no defaults.=20 In a statement, Enron Chairman and Chief Executive Kenneth Lay said the com= pany "will cooperate fully" with the SEC inquiry and "look(s) forward to th= e opportunity to put any concern about these transactions to rest." Enron h= as consistently said that it believes its dealings with the Fastow-related = partnerships were proper and properly disclosed. The company has said it pu= t billions of dollars of assets and stock into partnership-related transact= ions as a way to hedge against fluctuating market conditions.=20 The SEC inquiry came from the agency's Fort Worth, Texas, regional office. = According to a person familiar with the matter, this would indicate that th= e inquiry comes from the SEC's enforcement arm, as opposed to its corporate= -finance section. The participation of the enforcement branch would indicat= e that the agency is looking into whether there were possible violations of= securities law. However, enforcement-branch inquiries often don't produce = any allegations of wrongdoing. It also appears that the SEC hasn't yet take= n the step of launching a formal investigation, which would be a sign that = the agency believes securities laws might have been violated. The SEC decli= ned to comment.=20 Certainly, there have been questions and concerns about those partnership t= ransactions, which contributed to a $1.2 billion reduction in shareholder e= quity last week as part of Enron's efforts to unwind the deals. Mr. Fastow,= who has declined repeated interview requests, resigned from the partnershi= ps, known as LJM Cayman LP and LJM2 Co-Investment LP, in late July in the f= ace of rising conflict-of-interest concerns by Wall Street analysts and maj= or company investors.=20 Since then, internal partnership documents have shown that Mr. Fastow and p= erhaps a handful of Enron associates made millions of dollars last year in = fees and capital increases as general partner of the LJM2, the larger of th= e two partnerships.=20 Mr. Fastow's partnership arrangement caused some unhappiness inside Enron, = according to people familiar with the matter. For instance, these people sa= y, sometime after the creation of the partnerships in 1999, Enron Treasurer= Jeffrey McMahon went to company president Jeffrey Skilling and complained = about potential conflicts of interest posed by Mr. Fastow's activities. Mr.= Skilling didn't share Mr. McMahon's concern, these people say, and Mr. McM= ahon requested and received reassignment to another post.=20 Mr. Skilling resigned as Enron president and chief executive in mid-August,= citing personal reasons and the fall in Enron's stock price, which peaked = at about $90 a share last year. Mr. McMahon and Mr. Skilling haven't respon= ded to repeated interview requests.=20 Investors are also concerned about potential problems arising in Enron's de= alings with other related entities. In some cases, Enron could be required = to issue large amounts of stock to noteholders in some of the entities if c= ertain so-called double trigger provisions occur.=20 For example, last July Enron helped create the Marlin Water Trust II, which= sold $915 million in notes that are due July 15, 2003. However, Enron can = be considered in default, in advance of that date, if its stock price falls= below $34.13 for three trading days and its senior debt is downgraded to b= elow investment grade by either Moody's Investors Service or Standard & Poo= r's.=20 Currently, Enron debt is still investment-grade at both ratings agencies an= d would have to be lowered by several notches to fall into a noninvestment = grade category. Last week, Moody's put Enron on review for a possible downg= rade. However, observers believe that even if Moody's lowers Enron's rating= , the company will still be investment-grade. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 October 23, 2001 Where Did the Value Go at Enron? By FLOYD NORRIS New York Times What really went on in some of the most opaque transactions with insiders e= ver seen? Wall Street has been puzzling over that since Enron (news/quote </redirect/= marketwatch/redirect.ctx?MW=3Dhttp://custom.marketwatch.com/custom/nyt-com/= html-companyprofile.asp&symb=3DENE>) released its quarterly earnings a week= ago. Yesterday shares in Enron plunged $5.40, to $20.65, after the company= said that the Securities and Exchange Commission was looking into the tran= sactions. The reaction was in some ways puzzling. Given the questions that have been = raised since the earnings announcement - some of them prominently featured = in The Wall Street Journal - it was likely that the S.E.C. would begin a pr= eliminary inquiry. Whether it will go farther than that is not clear, but if nothing else the = slide in Enron shares over the last week shows the hazards that can confron= t a company that allows word of a major reduction in its balance sheet valu= e to dribble out. Enron's shares rose 67 cents, to $33.84, last Tuesday, as= investors first reacted to the earnings announcement. But since then they = have fallen $13.19, or 39 percent. The $1.2 billion reduction in shareholders' equity was not mentioned in a n= ews release Enron issued on its quarterly earnings last Tuesday. It was bri= efly mentioned in a conference call with analysts, but many of the listener= s seem to have not noticed that, wrongly thinking Kenneth L. Lay, Enron's c= hairman and chief executive, was referring to a $1 billion write-off that w= as disclosed in the earnings release. When questions were asked in the following days, the explanations were less= than thorough. Enron explained that the reduction in shareholders' equity = was related to the termination of "structured finance vehicles" involving p= artnerships that had been controlled by the company's chief financial offic= er. "Both the debt and the equity people are looking for more clarity about how= the company goes about its business," said Ralph Pellecchia, a credit anal= yst at Fitch Investors Service. He added that the issue of the company's "c= redibility related to this transaction really seems to have a life of its o= wn." Enron declined yesterday to allow any officials to be interviewed about its= financial reports. But last night it said Mr. Lay would hold another confe= rence call with investors at 9:30 a.m. today.=20 The company's earlier disclosures regarding the partnerships baffled many a= nalysts. They referred to such things as "share settled costless collar arr= angements" and "derivative instruments which eliminated the contingent natu= re of existing restricted forward contracts." The disclosures said the comp= any entered into the transactions "to hedge certain merchant investments an= d other assets." It appears that Enron was able to report profits from them, even though the= underlying assets included investments that declined in value. The Wall St= reet Journal, citing reports the partnerships made to institutional investo= rs, has reported the partnerships did well enough to make large cash distri= butions to their investors. Enron officials in recent days have refused to = discuss the arrangements in any detail. One of the questions that the S.E.C. may look into is whether the terminati= on of those transactions should have been treated as a balance sheet item, = or whether it should have been taken as a loss that affected reported earni= ngs. An S.E.C. spokesman declined to comment. Under accounting rules, a company's transactions in its own shares cannot p= roduce profits or losses, whatever the effect on cash flow. So a company th= at sells its shares for $10 each, and buys them back at $50, or at $1, will= report no earnings effect. Enron said that the reduction to shareholders e= quity, and a related reduction in notes receivable, "is the result of Enron= 's termination of previously recorded contractual obligations to deliver En= ron shares in future periods." Stephen Moore, an analyst with Moody's Investors Service who has put Enron'= s debt on review for a possible downgrade, said that while some of the deta= ils were not clear, "Essentially, Enron's promise was that a certain amount= of Enron's shares would be worth $1 billion. The shares plummeted, and the= y were not" worth that much. Enron emphasizes its own version of earnings, which leaves out some expense= s, and directs attention away from its balance sheet, which is disclosed on= ly in S.E.C. filings, not in the earnings news release. The reduction in sh= areholders' equity would be shown only on the third-quarter balance sheet, = which has yet to be released. Earlier this year, Jeffrey Skilling, then Enron's chief executive, reacted = strongly when a questioner on a conference call challenged the failure to p= rovide balance sheet numbers when earnings were released. He called the que= stioner a common vulgarity that surprised many listeners. Mr. Skilling late= r resigned for what he said were personal reasons and Mr. Lay, the chairman= and former chief executive, took back the latter title. While Enron was riding high, its often difficult-to-understand reports were= generally seen as not being a problem. The company appeared to be the domi= nant force in the business of energy trading, and to be able to produce phe= nomenal profits. When Mr. Lay was reported as having played an important ro= le in formulating the Bush administration's energy policies, the aura was o= nly enhanced. In January, the shares traded for $84. But now, with some of the company's ventures clearly having run into proble= ms, it appears that investors are growing less willing to accept the compan= y's reports. That the partnership transactions were disclosed at all was be= cause of the involvement of the chief financial officer, and some have wond= ered if there might have been similar deals with others. Mr. Lay has promised to make the company's financial reports easier to unde= rstand, and last week's report was at first praised by some analysts for do= ing just that. In a news release yesterday, Mr. Lay said the company welcomed the S.E.C.'s= request for information. "We will cooperate fully with the S.E.C. and look= forward to the opportunity to put any concern about these transactions to = rest," he said. FRONT PAGE - FIRST SECTION: SEC probes Enron over financial dealings=20 Financial Times; Oct 23, 2001 By JULIE EARLE, JOHN LABATE and SHEILA MCNULTY Enron, the US energy giant, disclosed yesterday that the Securities and Exc= hange Commission had asked it to provide financial information at the start= of an informal inquiry.=20 The announcement follows a rapid sell-off in the stock in reaction to Enron= 's surprise revelation last week of a Dollars 1.2bn charge to equity to eli= minate the dilutive effects of closing one of its controversial financing v= ehicles.=20 In revealing the SEC call for more detailed information "regarding certain = related party transactions", Enron hopes to counter growing criticism that = it should be more transparent. "We welcome this request," said Kenneth Lay,= Enron chairman and chief executive officer. "We will co-operate fully with= the SEC and look forward to the opportunity to put any concern about these= transactions to rest."=20 The SEC probe into Enron's financial dealings is an informal one at this st= age, according to the company, and the request for documents is voluntary. = However, SEC probes often begin lightly as investigators gather information= on an issue.=20 Such a probe could turn into a formal investigation at any time. In that ca= se, regulators would be armed with subpoena powers and could demand certain= documents be handed over. The SEC would not confirm or deny the existence = of the Enron probe.=20 Mr Lay did not say which transactions the SEC was reviewing, although analy= sts believe they relate to Andrew Fastow, Enron chief financial officer, wh= o has been reported to have run a limited partnership that bought assets va= lued at hundreds of millions of dollars from Enron.=20 Analysts say the transactions, while controversial because of Mr Fastow's l= inks to the company, have been disclosed. What concerns them, however, is h= ow Enron valued the assets involved. www.ft.com/energy=20 Copyright: The Financial Times Limited COMPANIES & FINANCE THE AMERICAS: Group full of surprises after failing to = open up=20 Financial Times; Oct 23, 2001 By SHEILA MCNULTY Ronald Barone joked he would have to get plenty of rest ahead of Enron's re= sults last week, noting the US energy company's reputation for producing wh= at some analysts say is the most complicated of earnings reports.=20 The UBS Warburg analyst was, nevertheless, as ill-prepared as his peers for= the announcement of a Dollars 1.2bn charge to equity to eliminate the dilu= tive effects of closing one of its controversial financing vehicles.=20 The news overshadowed Enron's on-target 26 per cent increase in third-quart= er earnings per share, sending the stock plunging.=20 The Securities and Exchange Commission's subsequent request for more inform= ation about Enron's financial activities has reinforced analyst perceptions= that the company should have been more transparent in its reporting.=20 Curt Launer, of Credit Suisse First Boston, says expectations for more disc= losure had built up over the past two months. Kenneth Lay, Enron chairman, = had promised to be more forthcoming when he resumed the duties of chief exe= cutive following the resignation of Jeff Skilling in August.=20 While Mr Lay did improve Enron's disclosure by creating headings for new bu= siness segments and providing more detail within each of them, the Dollars = 1.2bn charge still caught the market off guard.=20 "It came as a surprise to us," said Stephen Moore, of Moody's Investors Ser= vice. "We should have been informed that it was there."=20 Mr Barone found it disturbing that Enron disclosed the charge in "a fleetin= g comment" during its conference call with analysts and did not mention it = in its nine-page news release.=20 "Despite progress in other areas, there appears to be much more work ahead = before the lingering credibility issues that have vexed this company in the= past are fully resolved," he said.=20 Enron contends that "we did disclose it in the conference call, and it was = one of the first points raised in the Q and A session (on the conference ca= ll)".=20 Mr Lay has pledged to co-operate with the SEC's request, which appears to b= e part of an informal inquiry rather than an official investigation. In the= meantime, he adds, Enron will focus on its core businesses.=20 That is something analysts say Enron has strayed too far away from. Ray Nil= es of Salomon Smith Barney says the company's core franchise - its wholesal= e business - is doing well. Most of Enron's problems have arisen from stepp= ing out of this area.=20 "They need to come clean on the financial effects of all of their off-balan= ce sheet financing," Mr Niles says. "Investors want to see clear, easy-to-u= nderstand financial information." Moody's has placed Enron's Dollars 13bn i= n debt securities on review for possible downgrade and Mr Moore believes th= ere is potential for more write-offs.=20 Enron is embroiled in a legal dispute with an Indian state electricity boar= d over a power project and is one of several energy traders facing question= s in California over accusations of a manipulation of power prices - a char= ge it denies.=20 Analysts say its UK businesses are not seeing big multiples, and Enron says= it only expects to take Dollars 200m in "goodwill" versus Dollars 5.7bn on= its books.=20 Copyright: The Financial Times Limited Enron Discloses SEC Inquiry=20 Information Request Involves Ties to Money-Losing Partnerships=20 Washington Post By Peter Behr Washington Post Staff Writer Tuesday, October 23, 2001; Page E03=20 Enron Corp. shares sank more than 20 percent yesterday after the Houston en= ergy company disclosed a Securities and Exchange Commission request for inf= ormation about Enron's ties to outside investment partnerships set up by th= e company's chief financial officer. The SEC would not comment on its action, which Enron spokesman Mark Palmer = called an "informal inquiry," not an investigation. "We welcome this reques= t," said Kenneth L. Lay, chairman and chief executive of the Houston-based = company. But the announcement jarred investors' confidence in the giant energy-tradi= ng company, already hurt by the unexpected resignation of chief executive J= effrey K. Skilling in August, and heavy losses from investments in broadban= d Internet and other technology ventures. "A lot of people threw in the towel today," said Anatol Feygin, an analyst = with J.P. Morgan in New York. The SEC request was made privately last Wednesday, the day after Enron repo= rted a $1 billion write-off of investment losses and restructuring charges = from unsuccessful technology ventures and other operations. The write-offs = left Enron with a $618 million loss in the third quarter (84 cents a share)= . The Wall Street Journal reported last week that $35 million of the write-of= f was tied to losses at limited partnerships established by Enron's chief f= inancial officer, Andrew Fastow, and run by him until July. Enron told investment analysts last week that it had repurchased 55 million= shares of its stock held by the partnerships that Fastow had directed, red= ucing shareholder equity by $1.2 billion. According to the Wall Street Journal, Fastow set up several investment part= nerships with the approval of Enron's board. The partnerships engaged in bi= llions of dollars in complex financial transactions involving Enron and mad= e major investments in power plants and other assets alongside Enron. An Enron shareholder has filed suit in Texas state court alleging that Enro= n's board violated its duty to the company by permitting the chief financia= l officer to engage in the outside transactions that allegedly earned milli= ons of dollars in fees for himself and other investors in the partnerships.= What Enron received from the relationships is not clear. Feygin said that the company had informed analysts about the limited partne= rships, which offered Enron a way to take positions in strategic but uncert= ain technology ventures without detailing the outcomes in its public financ= ial statements.=20 "In hindsight, that was an error in judgment. I don't think it was an error= in principle," the analyst said. Enron could have revealed the SEC inquiry last week but did not disclose it= until yesterday, and for many investors, that was the last straw, Feygin s= aid. The stock closed yesterday at $20.65, down $5.40, as 36 million shares chan= ged hands. Staff researcher Richard Drezen contributed to this report. Enron Suffers After Unclear Disclosure, New York Times Says 2001-10-23 06:31 (New York) Houston, Oct. 23 (Bloomberg) -- The U.S. Securities and Exchange Commission's decision to look into some Enron Corp. transactions and the company's recent decline in value show what can happen when a company lets a major reduction in its balance sheet dribble out, Floyd Norris of the New York Times reported in his column, citing analysts. Investors are concerned as to how Enron reduced shareholders' equity by $1.2 billion and why this was not mentioned in a news release the company issued with its quarterly earnings last Tuesday, the paper said. Enron Corp.'s shares fell 21 percent yesterday after the Houston-based company said the Securities and Exchange Commission requested information on partnerships run by Chief Financial Officer Andrew Fastow and other executives. Enron created partnerships and other affiliated companies to buy and sell assets such as power plants to lower the debt on its books. ``Both the debt and the equity people are looking for more clarity about how the company goes about its business,'' said Ralph Pellecchia, a credit analyst at Fitch Investors Service, according to the Times. (New York Times 10-23 1) Oct. 23, 2001 Houston Chronicle SEC asks Enron for investing data=20 Stock price declines as regulators seek details on partnerships=20 By LAURA GOLDBERG=20 Copyright 2001 Houston Chronicle=20 Shares in Enron Corp. fell almost 21 percent Monday after the company discl= osed federal securities regulators asked for details on investment partners= hips formerly run by its chief financial officer.=20 The request covers transactions between Enron and two private partnerships,= LJM Cayman and LJM2 Co-Investment, that did business with Enron.=20 The partnerships entered into complex financing and hedging arrangements wi= th Enron.=20 Enron declined to say if the SEC's request -- which it called voluntary and= said represents an "informal inquiry" -- included other issues.=20 The SEC request, made by fax Wednesday to Enron and followed up with a call= Thursday, comes as the Houston-based energy trader was already fighting to= put a series of problems behind it and regain credibility with investors a= nd analysts.=20 "It's further bad news, further question marks related to Enron in general = and this transaction specifically," Andre Meade, an analyst with Commerzban= k Securities in New York, said of the SEC request.=20 Some investors prefer to sit on the sidelines until the issue clears up, Me= ade said, adding: "The level of uncertainty with this stock has gotten pret= ty high."=20 An SEC spokesman declined comment.=20 Enron's Chief Financial Officer, Andrew Fastow, managed both of the LJM par= tnerships, according to SEC filings made by Enron last year.=20 Both partnerships are described as investment companies that primarily buy = or invest in businesses involved in energy and communications.=20 Fastow resigned his roles with the LJM partnerships in June amid criticism = and questions from some on Wall Street about a potential conflict of intere= st.=20 Investors worried Monday that Fastow's duty to Enron shareholders competed = with his duties to LJM, Meade said.=20 In a written statement Monday, Ken Lay, Enron's chairman and chief executiv= e officer, said the company welcomed the SEC's request.=20 "We will cooperate fully with the SEC and look forward to the opportunity t= o put any concern about these transactions to rest," said Lay, who reassume= d the duties of CEO after Jeff Skilling resigned unexpectedly in August.=20 Enron said its external and internal auditors and attorneys reviewed the ar= rangements, its board was fully informed of and approved the arrangements, = which were disclosed in Enron's SEC filings.=20 The issue drew renewed interest from investors and analysts after Enron rel= eased third-quarter earnings last Tuesday.=20 During the quarter, Enron took $1.01 billion in one-time charges to reflect= losses in its broadband, retail electricity and water investments.=20 The amount also included $35 million related to "early termination" of Enro= n's relationships with the LJM partnerships.=20 During a call with analysts the same day, Enron said it recorded a $1.2 bil= lion reduction to shareholder equity, or the shareholders' ownership stake = in the company, as part of the LJM termination.=20 Enron declined to answer questions Monday about the LJM entities, including= those about their relationship with Enron or Fastow's role with them.=20 The day after Enron's third-quarter earnings release, the Wall Street Journ= al ran the first of three articles highlighting the LJM partnerships, Fasto= w and Enron.=20 The Journal's Friday report said LJM2 "realized millions of dollars in prof= its in transactions it did with Enron," and that "Fastow, and possibility a= handful of partnership associates, realized more than $7 million last year= in management fees."=20 Shares in Enron, which closed last Tuesday at $33.84, ended the day Friday = at $26.05. Then Monday, shares in Enron dropped by $5.40 to close at $20.65= .=20 Anatol Feygin, an analyst with J.P. Morgan in New York, believes there were= no improprieties surrounding LJM.=20 "From inception, the LJM situation was obviously one that would raise eyebr= ows," said Feygin, adding Enron anticipated that and made sure proper legal= structures were in place.=20 The LJM entities are what's known as off-balance sheet financing vehicles, = he said. Generally, they allow a corporation to take on financial obligatio= ns without having to report them as liabilities.=20 Feygin also said it appeared Enron intended to give Fastow an "opportunity = to participate in the upside from these entities" to reward him.=20 Even though the LJM transactions have been disclosed by Enron, Meade noted = that they are complicated, difficult to follow and their implications tough= to understand.=20 In transactions detailed in an SEC filing made by Enron last year, LJM Caym= an received shares of Enron common stock and LJM2 acquired assets from Enro= n.=20 Another filing last year said LJM Cayman and/or LJM2 acquired various debt = and equity securities of certain Enron subsidiaries and affiliates.=20 Investors are also concerned about potential shareholder lawsuits as well a= s equity commitments facing Enron from two other financing vehicles called = Whitewing and Marlin, Jeff Dietert, an analyst with Simmons & Co. Internati= onal in Houston, wrote in a research note Monday.=20 If Enron should lose its current investment-grade quality debt rating, thos= e equity commitments from Whitewing and Marlin could trigger steps that wou= ld cause the value of Enron's current outstanding shares to become diluted.= =20 At least two shareholders have already sued Enron's board in state district= court, while two law firms filed suit on behalf of Enron shareholders Mond= ay in federal court seeking class-action status.=20 Carol Caole, an analyst with Prudential Securities in Houston, downgraded E= nron from a buy to a hold Monday primarily because of issues surrounding th= e credibility of Enron's management.=20 Several times over the past six months, Caole asked specific questions of s= enior Enron executives, she said. They denied problems existed, but six wee= ks to two months later it was revealed there were, indeed, issues, she said= .=20 Coale recently asked about an SEC investigation and was told there wasn't o= ne. But, she said, it turns out it's an "inquiry," not an investigation.=20 Abreast of the Market Minnesota Mining and GM Climb In a Rally That Builds Late in Day By Robert O'Brien Dow Jones Newswires 10/23/2001 The Wall Street Journal C2 (Copyright (c) 2001, Dow Jones & Company, Inc.) NEW YORK -- During yesterday's Wall Street rally, investors responded with = accommodation toward the release of third-quarter earnings results and four= th-quarter forecasts.=20 Shares of Minnesota Mining & Manufacturing added $5.22, or 5.1%, to $107.39= after the manufacturing company released third-quarter earnings, which nar= rowly edged out analysts' projections, and spoke frankly of the challenges = the company continues to face this quarter in light of economic weakness. Despite this kind of hesitation about the economy's outlook, investors grav= itated toward some of the manufacturing and capital-equipment stocks that t= end to struggle during periods of weak economic activity. Shares of General= Motors, for example, added 1.21, or 2.9%, to 42.57, Alcoa gained 1.16, or = 3.7%, to 32.83, and Fluor, an engineering and construction company, rose 1.= 79, or 4.2%, to 44.77.=20 Stock averages initially struggled for direction, reflecting some skepticis= m about the sustainability of the market's recent success, before turning f= irmly higher in the final two hours of trading. Trading levels thinned out,= as well; on the New York Stock Exchange, less than 1.1 billion shares chan= ged hands, compared with 1.2 billion shares Friday, an options-expiration s= ession.=20 Nevertheless, market averages posted impressive gains. The Dow Jones Indust= rial Average improved 172.92 points, or 1.88%, to 9377.03. The Nasdaq Compo= site Index gained 36.77 points, or 2.2%, to 1708.08.=20 "We had another one of those days where there is a lack of liquidity, so an= y moves, in either direction, just get exaggerated," Bob Basel, senior trad= er at Salomon Smith Barney, said yesterday.=20 Shares of semiconductor companies, including makers of both chips and chip-= making equipment, rose sharply after a spending forecast from Intel, the le= ading chip maker, proved less grim than some experts had anticipated. The c= ompany said its capital spending could be cut 10% to 20% in 2002 from this = year's levels; that wouldn't be as severe as some chip industry experts had= forecast.=20 Shares of Applied Materials advanced 2.22, or 6.8%, to 34.77 on Nasdaq, whi= le KLA-Tencor gained 2.74, or 7.5%, to 39.25, and Lam Research improved 1.3= 6, or 7.8%, to 18.80, all on Nasdaq. Among chip makers, Analog Devices rose= 2.57, or 7.1%, to 38.74, LSI Logic gained 89 cents, or 5.6%, to 16.83, and= Texas Instruments tacked on 1.17, or 4.2%, to 28.91. For its part, Intel r= ose 1.15, or 4.8%, to 25.30 on Nasdaq.=20 Shares of Lexmark International dropped 5.58, or 11%, to 44.77. The Lexingt= on, Ky., maker of computer printers reported third-quarter results that mat= ched Wall Street's forecasts, but warned that it continues to face sluggish= demand in the fourth quarter.=20 SBC Communications declined 2.24, or 5.1%, to 41.40. The telecommunications= service provider reported third-quarter earnings that fell short of analys= ts' forecasts, and warned that the company won't show "meaningful growth" n= ext year.=20 Citrix Systems fell 4.14, or 16%, to 21.08 on Nasdaq. Dain Rauscher reduced= its rating on the Fort Lauderdale, Fla., maker of computer networking prod= ucts, saying the company faces competitive pressures from products introduc= ed by rival vendors.=20 Jabil Circuit eased 16 cents, or 0.7%, to 22.90. The St. Petersburg, Fla., = contract electronics maker adopted a so-called shareholder rights plan, whi= ch is aimed at preventing an acquirer from gaining control of the company.= =20 EMC advanced 68 cents, or 5.9%, to 12.19. The Hopkinton, Mass., maker of da= ta-storage systems signed what was described as a multibillion-dollar enter= prise storage agreement with Dell Computer. Dell improved 50 cents, or 2.1%= , to 24.55 on Nasdaq.=20 SeaChange International advanced 88 cents, or 3.6%, to 25.03 on Nasdaq, boo= sted by an upbeat research note from Dain Rauscher, which said the Maynard,= Mass., provider of video-on-demand technology figures to have posted an up= beat quarter.=20 Lucent Technologies declined 20 cents, or 2.8%, to 6.90. UBS Warburg, in a = research note, expressed some caution about the outlook for the telecommuni= cations equipment maker's quarterly results.=20 Emerson Electric gained 1.38, or 2.8%, to 50.27, even though the St. Louis = manufacturer, which makes electronics and telecommunications products, amon= g other product lines, reduced its earnings guidance for fiscal 2001.=20 Enron lost 5.40, or 21%, to 20.65, setting a 52-week low. The Houston energ= y trader, whose stock has weakened since recent articles in The Wall Street= Journal raised questions about the company's relationship with two limited= partnerships organized by its chief financial officer, said it had receive= d a request for information on Wednesday from the Securities and Exchange C= ommission regarding some of its transactions with those partnerships. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 WORLD STOCK MARKETS: Wall St bargain hunters counter earnings gloom AMERICA= S=20 Financial Times; Oct 23, 2001 By MARY CHUNG US equities rose sharply yesterday with bargain hunting in technology stock= s countering a slew of mostly disappointing corporate earnings and more ant= hrax scares.=20 Gains accelerated late in the session as the Dow Jones Industrial Average s= urged 172.92 to close at at 9,377.03 while the S&P 500 index added 16.42 at= 1,089.90. The Nasdaq Composite rose 36.78 at 1,708.09. Volume remained lig= ht with 1.1bn trades in the NYSE.=20 Investors were upbeat in spite of a lack of positive news, suggesting under= lying strength in the market and optimism for a rebound, some analysts said= . The indices were slightly rattled after news that two postal workers in W= ashington died after suffering symptoms consistent with anthrax, but the ma= rket quickly regained its footing.=20 "The market is acting very well. It's come an awful long way in a short tim= e and had to deal with anthrax," said Alfred Goldman, chief market strategi= st at AG Edwards. "The message is that investors and consumers and the coun= try are in a recovery mode."=20 Semiconductor stocks showed strength with Intel up 4.7 per cent at Dollars = 25.30 and Advanced Micro Devices 4.2 per cent at Dollars 9.58.=20 Microsoft rose 3.9 per cent at Dollars 60.16 before the launch this week of= its Windows XP operating system. Lexmark dropped 11 per cent at Dollars 44= .77 after the company reported third-quarter results that met estimates, bu= t warned of a fourth-quarter revenue shortfall. Applied Digital Solutions g= ained 66 per cent at 58 cents after the company said it had formed a subsid= iary to develop and market its ThermoLife thermoelectric generator product = powered by body heat.=20 3M gave a lift to Dow components, up 5.1 per cent at Dollars 107.39 after t= he maker of Post-it notes said quarterly earnings beat expectations by a pe= nny a share. The company forecast fourth-quarter profit would be in line wi= th analyst estimates.=20 SBC Communications was the biggest decliner within the Dow, down 5.1 per ce= nt to Dollars 41.40 after it said earnings failed to meet Wall Street conse= nsus estimates.=20 American Express gained 3.4 per cent to Dollars 30.32 despite reporting a 6= 0 per cent drop in third-quarter earnings.=20 Dow components Citigroup and JP MorganChase tacked on 2.5 per cent and 4.2 = per cent respectively. Shares in Alcoa were up 3.7 per cent at Dollars 32.8= 3 and ExxonMobil 1.4 per cent at Dollars 41.12.=20 Enron fell 20.7 per cent at Dollars 20.65 after the energy trading company = said the Securities and Exchange Commission requested it voluntarily provid= e information regarding certain transactions.=20 In Toronto the S&P 300 composite index fell just 0.08 per cent to 6,905.21 = at the close.=20 Copyright: The Financial Times Limited Milberg Weiss Announces Class Action Suit Against Enron Corp. 10/22/2001 Business Wire (Copyright (c) 2001, Business Wire) NEW YORK--(BUSINESS WIRE)--Oct. 22, 2001--The law firm of Milberg Weiss Ber= shad Hynes & Lerach LLP announces that a class action lawsuit was filed on = October 22, 2001, on behalf of purchasers of the common stock of Enron Corp= . ("Enron" or the "Company") (NYSE:ENE) between January 18, 2000 and Octobe= r 17, 2001, inclusive. A copy of the complaint filed in this action is avai= lable from the Court, or can be viewed on Milberg Weiss' website at: http:/= /www.milberg.com/enron/=20 The action, numbered H013630, is pending in the United States District Cour= t for the Southern District of Texas, Houston Division, located at 515 Rusk= Street, Houston TX 77002, against defendants Enron, Kenneth Lay, Jeffrey K= . Skilling and Andrew Fastow. The Honorable Melinda Harmon is the Judge pre= siding over the case. The Complaint alleges that defendants violated Sections 10(b) and 20(a) of = the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder,= by issuing a series of material misrepresentations to the market between J= anuary 18, 2000 and October 17, 2001, thereby artificially inflating the pr= ice of Enron common stock. Specifically, the complaint alleges that Enron i= ssued a series of statements concerning its business, financial results and= operations which failed to disclose (i) that the Company's Broadband Servi= ces Division was experiencing declining demand for bandwidth and the Compan= y's efforts to create a trading market for bandwidth were not meeting with = success as many of the market participants were not creditworthy; (ii) that= the Company's operating results were materially overstated as result of th= e Company failing to timely write-down the value of its investments with ce= rtain limited partnerships which were managed by the Company's chief financ= ial officer; and (iii) that Enron was failing to write-down impaired assets= on a timely basis in accordance with GAAP. On October 16, 2001, Enron surp= rised the market by announcing that the Company was taking non-recurring ch= arges of $1.01 billion after-tax, or ($1.11) loss per diluted share, in the= third quarter of 2001, the period ending September 30, 2001. Subsequently,= Enron revealed that a material portion of the charge related to the unwind= ing of investments with certain limited partnerships which were controlled = by Enron's chief financial officer and that the Company would be eliminatin= g more than $1 billion in shareholder equity as a result of its unwinding o= f the investments. As this news began to be assimilated by the market, the = price of Enron common stock dropped significantly. During the Class Period,= Enron insiders disposed of over $73 million of their personally-held Enron= common stock to unsuspecting investors.=20 If you bought the common stock of Enron between January 18, 2000 and Octobe= r 17, 2001, you may, no later than December 21, 2001, request that the Cour= t appoint you as lead plaintiff. A lead plaintiff is a representative party= that acts on behalf of other class members in directing the litigation. In= order to be appointed lead plaintiff, the Court must determine that the cl= ass member's claim is typical of the claims of other class members, and tha= t the class member will adequately represent the class. Under certain circu= mstances, one or more class members may together serve as "lead plaintiff."= Your ability to share in any recovery is not, however, affected by the dec= ision whether or not to serve as a lead plaintiff. You may retain Milberg W= eiss Bershad Hynes & Lerach LLP, or other counsel of your choice, to serve = as your counsel in this action.=20 Milberg Weiss Bershad Hynes & Lerach LLP, a 190-lawyer firm with offices in= New York City, San Diego, San Francisco, Los Angeles, Boca Raton, Seattle = and Philadelphia, is active in major litigations pending in federal and sta= te courts throughout the United States. Milberg Weiss has taken a leading r= ole in many important actions on behalf of defrauded investors, consumers, = and companies, as well as victims of World War II and other human rights vi= olations, and has been responsible for more than $30 billion in aggregate r= ecoveries. The Milberg Weiss Web site (http://www.milberg.com) has more inf= ormation about the firm.=20 If you wish to discuss this action with us, or have any questions concernin= g this notice or your rights and interests with regard to the case, please = contact the following attorneys:=20 Steven G. Schulman or Samuel H. Rudman One Pennsylvania Plaza, 49th fl. New= York, NY, 10119-0165=20 Phone number: (800) 320-5081 Email: [email protected] Website: http:/= /www.milberg.com=20 William S. Lerach or Darren J. Robbins 600 West Broadway1800 One America Pl= azaSan Diego, CA 92101-3356 Phone number: (800) 449-4900 CONTACT: Milberg Weiss Bershad Hynes & Lerach LLP Steven G. Schulman or Sam= uel H. Rudman 800/320-5081 Email: [email protected] Website: http://w= ww.milberg.com or William S. Lerach or Darren J. Robbins 800/449-4900=20 19:16 EDT OCTOBER 22, 2001=20 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Enron To Host Conference Call Tues 9:30 am EDT 10/22/2001 Dow Jones News Service (Copyright (c) 2001, Dow Jones & Company, Inc.) HOUSTON -(Dow Jones)- Enron Corp. (ENE) will hold a conference call at 9:30= a.m. EDT Tuesday to address investor concerns, the company said in a press= release Monday.=20 Earlier Monday, a shareholder filed a derivative lawsuit against Enron alle= ging the board breached their fiduciary duties by allowing Chief Financial = Officer Andrew Fastow to create and run certain limited partnerships. Last week, Enron said it received a request for information about "certain = related party transactions" from the Securities and Exchange Commission.=20 On Oct. 16, Enron announced that it would take a $35 million charge relatin= g to the limited partnerships and revealed that the company had to repurcha= se 55 million of its shares in order to unwind its involvement in the partn= erships, thereby reducing the company's shareholder equity by $1.2 billion.= =20 Shares of Enron closed Monday at $20.65, down $5.40, or 20.7%, on New York = Stock Exchange volume of 36.4 million shares. Average daily volume is 5.8 m= illion shares. In intraday trading, the shares reached a 52-week low of $19= .67. The previous 52-week low was $24.46, reached on Sept. 27. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Janus Had Biggest Enron Stake at End of 2nd-Quarter (Update1) 2001-10-22 18:04 (New York) Janus Had Biggest Enron Stake at End of 2nd-Quarter (Update1) (Adds Stilwell shares at bottom.) Denver, Oct. 22 (Bloomberg) -- Janus Capital Corp., whose stock funds have lost more than a third of their value this year, may get another jolt from Enron Corp. As of June 30, Denver-based Janus was the biggest institutional holder of Enron, owning 42.8 million shares, or a 5.71 percent stake in the largest U.S. energy trading company, according to Thomson Financial/Carson. Enron shares have fallen 39 percent over the past four days on concern that the company's dealings with partnerships run by its chief financial officer contributed to investment losses. The Securities and Exchange Commission has asked for information on the partnerships, Enron said. Janus, which boosted its Enron stake in the past year in an effort to diversify its technology-heavy stock funds, is among a handful of firms including Putnam Investments, Alliance Capital Management, Barclays Global Investors and Fidelity Investments that owned more than 2 percent of the Houston-based company as of June 30, according to Bloomberg data. ``It was definitely a real growth darling,'' said Christine Benz, a senior analyst at Chicago-based fund tracker Morningstar Inc. ``In a year like 2000, when almost nothing was working for growth managers, Enron emerged as a story that a lot of growth managers could like.'' Fund Holdings According to Thomson Financial, 1,187 mutual funds, or 15.4 percent of all U.S. stock funds, owned a combined 207.9 million Enron shares as of June 30. Combined losses on the holdings amount to $2.7 billion since Tuesday. According to the latest available data compiled by Thomson, the biggest fund holders of Enron were: Janus Fund, with 2.15 percent; Janus Twenty Fund, with 1.19 percent; Alliance Premier Growth Fund, with 1.14 percent; American Century Ultra Fund, with 1.01 percent; Janus Mercury Fund, with 0.88 percent; Vanguard 500 Index Fund, with 0.82 percent; Fidelity Magellan Fund, with 0.73 percent; AIM Value Fund, with 0.6 percent; CREF Stock Account, with 0.58 percent; and, Putnam Investors Fund, with 0.52 percent. Janus Fund has lost 33.2 percent this year through Friday, while Janus Twenty Fund has lost 33.4 percent and Janus Mercury Fund has fallen 34 percent. A Janus spokeswoman wasn't immediately available to comment. Morningstar's Benz said she suspects Janus fund managers have already begun trimming their Enron positions. Enron shares had fallen 59 percent this year before last week's news on concerns about financial reporting and money-losing investments outside energy trading, such as trading space on broadband telecommunications networks and building water treatment plants. The stock fell $5.40, or 21 percent, to $20.65 in New York trading today. ``Anecdotal evidence that I'm hearing from the fund managers there is that they had been trimming pretty aggressively,'' said Benz. She added that it's ``difficult to make the assertion that they are in the clear.'' Janus Capital is owned by Kansas City, Missouri-based Stilwell Financial Inc., whose shares gained 73 cents today to $22.52. Stilwell shares have fallen 43 percent this year. Enron Says SEC Asks About Related-Party Transactions (Update9) 2001-10-22 18:30 (New York) Enron Says SEC Asks About Related-Party Transactions (Update9) (Adds information on conference call in 26th paragraph.) Houston, Oct. 22 (Bloomberg) -- Enron Corp.'s shares fell 21 percent after the Houston-based company said the Securities and Exchange Commission requested information on partnerships run by Chief Financial Officer Andrew Fastow and other executives. Enron, the largest energy trader, created partnerships and other affiliated companies to buy and sell assets such as power plants to lower the debt on its books. An investor sued Enron's board Wednesday, saying two partnerships cost the company $35 million and Fastow's leadership of them was a conflict of interest. Investors today said they were concerned that Enron may be forced to dismantle the affiliated companies by paying off the owners in cash or stock. Chief Executive Ken Lay said last week he may be have to ``unravel'' agreements that created the companies if Enron's debt ratings fall too far. ``We need confidence their long-term credit rating won't go below investment grade,'' said Roger Hamilton, an analyst at John Hancock's value funds, which own 600,000 Enron shares. Enron reduced shareholders' equity by $1.2 billion when it repurchased 55 million shares of two such partnerships controlled by Fastow, LJM Cayman and LMJ2 Co-Investment, the Wall Journal reported last week. Dismantling more of the affiliated companies and partnerships would cost Enron or its shareholders as much as $3 billion, Ray Niles, a Salomon Smith Barney analyst, wrote in a report to investors today. Shares Plunge Enron shares fell $5.40 to $20.65. They touched $19.67 during the day's trading, the lowest level since Jan. 15, 1998. The stock has fallen 75 percent this year amid concerns about failed investments in trading of space on fiber-optic communications networks and a water company, and the resignation of Jeff Skilling as CEO in August after seven months on the job. While Skilling said he resigned for personal reasons, investors say his departure led them to question whether the company was concealing problems, including possible liabilities from affiliated companies. On Tuesday, Enron surprised many investors when it reported a $618 million third-quarter loss, the result of writing off $1.01 billion in failed investments. Moody's Investors Service placed the company's debt on watch for possible downgrade. The company's debt is rated at investment grade by Fitch, Standard & Poor's and Moody's. The company received a faxed request for information from the SEC on Wednesday asking for information, spokesman Mark Palmer said, and will respond ``as soon as possible.'' ``We will cooperate fully with the SEC and look forward to the opportunity to put any concern about these transactions to rest,'' Lay, who is also Enron's chairman, said in a statement. Dilution Fears Enron has formed at least 18 companies to serve as financing vehicles for its projects, based on filings with the Texas secretary of state. Fastow and other Enron executives are named as the controlling partners or the board members in the companies. Some have bought Enron assets such as power plants, removing the debt for those projects from Enron's books. That allows Enron to keep cash earned from the main trading business from supporting what it views as secondary businesses, Standard & Poor's debt analyst Todd Shipman said. Enron brokers trades of electricity, natural gas and other commodities as well as owns power plants and natural-gas pipelines. Dismantling the affiliates would be costly. Whitewing Management, an affiliated company that has bought 14 Enron power plants and lists Fastow as managing director, holds 250,000 preferred shares of Enron. Enron may have to convert the preferred shares to common stock if share prices fall below a certain level and the credit rating drops below investment grade, according to company filings. That would dilute the value of common shareholders' investment. ``The concern is how many of these dilutive structures are out there?'' Shipman said. ``Investors are worried they might have to share their Enron earnings with a lot more people than they originally thought.'' Worrisome Financing Enron's auditors and attorneys reviewed the company's ``related party arrangements,'' the board approved them, and they were disclosed in SEC filings, Enron said in its statement. That hasn't eased concerns. The reduction of shareholder equity by $1.2 billion from the LJM partnerships is reason to worry about Enron's other financing vehicles, wrote Niles, the Salomon analyst. Enron also may take another $2.4 billion in losses from investments in the Dabhol power plant in India and projects in South America, he wrote. Bonds Fall Enron's 8 percent coupon bonds due in 2005 fell $34 per $1,000 face value to be offered at $1,022 today from $1,056 on Friday, traders said. Yield on the debt rose to 7.33 percent from 6.33 percent. Based on Bloomberg composite ratings, most of Enron's long- term debt is rated at BBB2 and BBB1, two or three levels above investment grade. Fastow continues to work, and Enron hasn't punished him, Palmer said. Fastow declined to be interviewed, spokeswoman Karen Denne said. SEC spokesman John Heine declined to comment on the agency's request to Enron. ``We believe everything that needed to be considered and done in connection with these transactions was considered and done,'' Lay said in the statement. Enron will hold a conference call to discuss investors' concerns at 9:30 a.m. New York time Tuesday. The call may be accessed through the ``Investors'' section of Enron's Web site at http://www.enron.com. --Russell Hubbard in the Princeton newsroom at 609-750-4651, or at [email protected] and Mark Johnson in the Princeton newsroom at (609) 750-4662, or [email protected], with reporting by Terry Flanagan/slb/alp/pjm/slb/*atr/alp/taw Trusts Keeping Enron Off Balance By Peter Eavis <mailto:[email protected]> Senior Columnist TheStreet.com 10/22/2001 07:15 AM EDT URL: <http://www.thestreet.com/markets/detox/10002702.html> Enron (ENE:NYSE - news - commentary) stock plunged 20% last week after the = energy giant revealed that a complex financing deal caused a $1.2 billion h= it to its equity. But other big deals that have yet to receive much public = scrutiny could further damage the company's balance sheet.=20 In the spotlight last week were transactions done with investment partnersh= ips called LJM2 and LJM Cayman. An examination of the LJM2-related equity w= ritedown can be found here.=20 However, the LJM deals make up only part of Enron's sophisticated financing= arrangements. Also at issue are two large trusts that contain assets Enron= shifted from its balance sheet. These are the $1 billion Marlin Water Trus= t II and the $2.4 billion Osprey Trust, usually known as Whitewing.=20 The key risk for investors is how Enron chooses to repay these trusts if th= ey don't unwind as planned. The company may end up issuing stock to repay m= oney borrowed through the trusts. This would dilute existing shareholders. = Alternatively, Enron could resort to using cash raised through sales of on-= balance sheet assets. But this would hamper efforts to reduce debt and depr= ive the company's profitable business lines of much-needed capital.=20 Whitewing and a Prayer? Though set up by Enron, Marlin II and Whitewing are legally distinct from t= he company. Institutional investors bought notes issued by the trusts. The = $3.4 billion in proceeds from the notes flowed to Enron.=20 Both trusts are scheduled to unwind in 2003. Originally, Enron had hoped to= repay them by selling the trusts' underlying assets. This repayment method= would have had a minimal impact on Enron's balance sheet.=20 However, there's a potential problem brewing with this approach. The value = of the assets may be too low to raise sufficient funds to pay back the trus= t investors. Hence Enron's two unenviable options: issuing stock, or raisin= g cash from its own balance sheet.=20 Enron treasurer Ben Glisan concedes that assets in Marlin II won't be suffi= cient to pay it back. But he adds that proceeds from planned sales of on-ba= lance sheet assets will provide Enron with the necessary funds for Marlin I= I. When asked if Whitewing's assets are adequate for repayment, Glisan repl= ied: "We believe so."=20 In reference to the two trusts, Enron CEO Kenneth Lay said on a conference = call Tuesday: "We anticipate the sale of assets will be the primary source = of repayments."=20 Sterling Marlin TheStreet.com hasn't seen offering documentation for Whitewing; Enron didn'= t provide it when requested. But TSC has reviewed the Marlin II prospectus.= Here's how Marlin II works. Enron took water assets, primarily based in th= e U.K., off its balance sheet, and the Marlin II trust took a stake in them= . Meanwhile, Marlin II issued senior debt to investors, the proceeds of whi= ch went to Enron. The company didn't have to recognize these notes as debt = on its balance sheet, due to the structure of the trust. Marlin II replaced= a similar trust called Marlin that was set to mature at the end of this ye= ar.=20 Ideally, the aim was for Enron managers to maximize the value and profitabi= lity of the assets over the life of Marlin and Marlin II so it could sell t= hem off and pay down the trusts. To cover the risk that asset sales wouldn'= t raise enough money, Enron also pledged to issue as much new convertible p= referred stock as might be needed to pay off the notes.=20 As it happened, the water assets didn't perform well. In fact, Enron set up= Marlin II in July to succeed the original Marlin because it wanted to avoi= d paying off the first Marlin with convertible stock, or with cash from its= own balance sheet. This move risked angering the rating agencies that had = agreed not to treat Marlin as debt because of Enron's pledge to backstop it= with preferred stock. Suddenly, it seemed Enron was wriggling out of its c= ommitment to make good with stock.=20 Enron's Glisan responds that many of the investors in the first Marlin also= invested in Marlin II, illustrating that investors weren't upset by the ma= neuver.=20 Glisan says Enron almost certainly won't decide to issue stock to pay off M= arlin II. Instead, he adds, money from pending asset sales can be used to p= ay it off when it matures in July 2003. When asked if Enron might use the e= xpected $1.9 billion in proceeds from selling Portland General, the utility= based in Portland, Ore., Glisan replied: "That's a good one."=20 But using the Portland General windfall would run counter to Enron's freque= ntly stated strategy of selling off low-yielding assets and investing the p= roceeds in higher-yielding businesses. Portland General is almost certainly= a more profitable business than the U.K.'s Wessex Water, which is the domi= nant asset in Marlin II. In addition, doing so would mean Enron couldn't us= e all the Portland proceeds to pay off debt. Enron aims to get its debt-to-= total-capital ratio down to 40%, from the current 50%.=20 Maturity What about Whitewing, which matures in early 2003? Glisan lists Whitewing's= assets as: Central American gas distribution assets; turbines destined for= European power stations; interests in European power stations; and various= debt and equity participations in energy investments. Glisan says these as= sets can be sold to pay off the $2.4 billion in notes issued by the trust.= =20 But what would happen if the Whitewing assets can't fetch the necessary pri= ce? Enron could sell off more on-balance-sheet assets. But, again, this wou= ldn't help debt-reduction efforts, and it may be running short of large ass= ets that it can quickly sell.=20 Whitewing is backed with Enron convertible stock. But Enron may be reluctan= t to issue paper when its stock is so far below recent highs, and current s= hareholders may begrudge the prospect of further dilution.=20 Investors also need to keep their eyes on the early-repayment triggers of t= he trusts. In fact, the stock price-related element of the triggers has alr= eady been set off. For Whitewing, the stock has to fall below $59.78; for M= arlin II, the stock has to be under $34.13. However, something else has to = happen before the trust investors can claim their money back through asset = sales and stock issuance. Enron's credit rating must fall below investment = grade. That looks to be a long shot, since its rating is currently three no= tches above subinvestment grade. But it is something the market will watch = after Moody's said last week that it was putting Enron on review for a poss= ible downgrade.=20 Despite all the questions stemming from the trusts, Enron still seems keen = to use the structure. Last week, Barclays Capital was inviting investors to= subscribe to an Enron-related entity called the Besson Trust. This is bein= g set up to enable Enron "to monetize substantially all of its interests in= EOTT Energy Partners," an Enron affiliate that markets and transports crud= e oil. Expected proceeds from the deal are $227 million, according to the p= rospectus. Could Enron be setting up new trusts to pay off damaged old trus= ts?=20 Due to off-balance sheet financings like Marlin II and Whitewing, it's clea= r that uncertainty could weigh on Enron's battered stock for some time.=20 Why Enron's Writedown Unnerves Some Investors By Peter Eavis <mailto:[email protected]> Senior Columnist TheStreet.com 10/22/2001 07:15 AM EDT URL: <http://www.thestreet.com/markets/detox/10002713.html> Enron is trying to improve disclosure to investors, but its decision to red= uce equity by $1.2 billion in the third quarter has created dismay and conf= usion in the market.=20 The action was disclosed in a dubiously discreet manner. More important, in= vestors are struggling to pinpoint how the shrinkage will affect Enron's ba= lance sheet, profits and earnings guidance.=20 Enron didn't provide answers to questions submitted on the equity reduction= .=20 Enron doesn't include a balance sheet in its earnings release, so the equit= y decrease couldn't be spotted in numbers supplied Tuesday. And even though= Enron did break out $1 billion in earnings charges in its release, the com= pany didn't feel it necessary to mention the equity write down anywhere in = the text.=20 Instead, the public first heard about it on a Tuesday conference call. CEO = Kenneth Lay said Enron had shrunk its equity as a result of terminating a s= o-called "structured finance arrangement." The Wall Street Journal later re= ported that Enron's counter-party in this transaction was an investment par= tnership called LJM2 Co-Investment, which has set up and run by Enron's fin= ance chief, Andrew Fastow.=20 This is what Lay said on the Tuesday call about the equity move: "In connec= tion with the early termination, shareholders' equity will be reduced appro= ximately $1.2 billion, with a corresponding significant reduction in the nu= mber of diluted shares outstanding." According to The Journal, Lay then sai= d Wednesday on another call that Enron had repurchased 55 million shares.= =20 Enron's supporters count Lay's mention of a reduction in the share count as= bullish, because it should boost earnings per share numbers in the future.= =20 But there are two possible problems with this theory.=20 First, Enron affirmed its previous earnings guidance that it expects to mak= e $2.15 per share in operating earnings next year. Critically, the company = did not say whether its guidance was given using a share count without the = 55 million shares or not. If the forecast does assume the exclusion of the = 55 million shares, the company should have upped its 2002 per-share earning= s forecast by around 6%, since that's the amount by which the share count w= ill be reduced. Enron needs to say what share count it's using in its guida= nce.=20 Second, it's almost impossible to determine where these shares were ever re= corded, casting a certain amount of doubt on Lay's assertion that the share= count will come down.=20 Why question the CEO? Well, in its 2000 annual report, Enron included some = disclosure of the 55 million shares connected with LJM2. It reads: "At Dece= mber 31, 2000, Enron had derivative instruments...on 54.8 million shares of= Enron common stock." The derivative instruments appear to be types of opti= ons, or agreements that give the counterparty the right to buy or sell stoc= k at agreed prices.=20 But these derivatives-linked shares don't show up where they should in the = annual report: in the table that breaks out the difference between the basi= c and diluted share counts. The line item in this table that shows options-= related shares totals only 43 million shares, which is close to the amount = of employee pay options that qualified for inclusion. Therefore, that numbe= r almost certainly doesn't include the 55 million LJM2-related shares. The = fact is, at least some of the 55 million derivatives-linked shares should b= e included if the derivatives were like normal options. That's because the = LJM2 derivatives appear to have been "in the money", or profitable for the = holders. Typically, all in-the-money options-based stock has to be included= in the diluted share count. And these LJM2 derivatives did appear to have = that status at the end of 2000. Back then, Enron stock was trading around $= 80, way above the average $68 level at which these derivatives made money f= or LJM2.=20 Maybe these weren't simple options and had other conditions attached that e= xcluded them from the diluted share count. That's what disclosure elsewhere= in the annual report appears to imply. Alternatively, the options were emb= edded somewhere else in the share count table or equity disclosure, though = it's hard think where.=20 Presumably, investors will get a full explanation in Enron's quarterly fina= ncial results filing with the Securities and Exchange Commission, due by th= e middle of November.

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Enron set to enter Japanese broadband market

All, Here is what the press have to say about our Japanese office opening, the= =20 last sentence is of particular importance to the regulatory team. Xi Xi ----------------------------------------------------------- 02 November 2000 ??=20 Enron Broadband Services (EBS) has announced plans to enter Japan's telecom= s=20 market with a variety of broadband-related services scheduled to start with= in=20 the next three years.=20 The announcement came at the launch of its wholly-owned subsidiary in Tokyo= ,=20 Enron Japan Corp., where Kenneth L. Lay, chairman and chief executive offic= er=20 of U.S.-based energy giant Enron Corp., spelled out the company's plans for= =20 Japan.=20 Enron is to offer its clients, including other service providers and=20 corporates, a broadband fibre optic network - a backbone infrastructure for= =20 network-based video content distribution - and the leasing of bandwidth on= =20 high-capacity telecoms circuits, amongst other services, he said. The compa= ny=20 plans to have its Japanese fiber-optic network in place within the next two= =20 or three years.=20 =01&Japan is a large and technologically advanced market, and we believe th= e=20 opportunities for our business here are tremendous,=018 said Ken Rice, chai= rman=20 and chief executive of Enron Broadband Services. =01&We look forward to=20 developing mutually beneficial relationships with content providers and=20 distribution partners in Japan. This will extend our global reach and provi= de=20 our Japanese partners with the opportunity to give their customers the=20 highest quality Internet experience.=018 EBS recently announced an agreement with i2, a U.S. electronic software=20 developer, to provide bandwidth capacity to meet its international networki= ng=20 needs, including linking i2's Dallas headquarters with its Tokyo location. = In=20 addition, EBS is developing a pooling point in Tokyo, which will facilitate= =20 the buying and selling of bandwidth between Japan and the U.S.=20 The company also said it hoped to eventually supply Japan with the same=20 video-on-demand service planned for the U.S., which it is developing with= =20 video rental store chain Blockbuster Inc.=20 As a first step to competing in Japan, Enron must find a Japanese affiliate= =20 to obtain a Type 1 telecoms carrier license.=20

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Social Venture Competition Expands into New National Partnership

Haas NewsWire September 4, 2001 ---------- CONTENTS * Social Venture Competition Expands into New National Partnership * Blue Martini CEO Zweben to Give Keynote at 2001 Knowledge Forum * Michael Katz to Serve as Deputy Assistant Attorney General for Economic Analysis * Leading Edge: The Future Comes to Haas * The First of Six New Faculty Profiles: Terrence Hendershott Joins the Manufacturing and Information Technology Group * Haas CEO Exchange to Air on PBS in September * Diane Dimeff Heads for Colorado as Assistant Dean for MBA Programs at CU Boulder * The Summer 2001 Issue of the California Management Review is Available * Haas in the News * Happening at Haas * Haas Celebrations ---------- SOCIAL VENTURE COMPETITION EXPANDS INTO NEW NATIONAL PARTNERSHIP The Haas School of Business and Columbia Business School have formed a joint partnership with The Goldman Sachs Foundation to expand the Haas Social Venture Competition into the National Social Venture Competition. The competition invites aspiring entrepreneurs to develop plans for businesses that have a clear, quantifiable social return as well as a healthy financial bottom line. The National Social Venture Competition originated in 1999 as a student-organized social venture competition at the Haas School of Business. In the past few years, the competition has attracted more than 100 teams from business schools across the United States and Europe. The new partnership with Columbia Business School and The Goldman Sachs Foundation will expand the competition's reach and scale. The Goldman Sachs Foundation will underwrite the competition with a gift of $1.5 million to help build a national platform for social entrepreneurship. "This innovative program is an important milestone in the social enterprise field and presents a unique opportunity to advocate high quality entrepreneurship education on a national scale," said Stephanie Bell-Rose, president of The Goldman Sachs Foundation. "The program underscores the Foundation's mission of supporting educational excellence by encouraging outstanding students to develop the tools that help them become the global leaders of tomorrow." "The National Social Venture Competition reflects the growing commitment of business leaders and entrepreneurs to foster profitable activities that address major social challenges, such as protecting the environment, preventing disease, and improving educational outcomes," said Laura Tyson, dean of the Haas School of Business. "Haas MBA students have done an outstanding job in launching a business plan competition to promote socially responsible business ventures. Our new partnership with Columbia University's business school and The Goldman Sachs Foundation will increase public awareness of these issues and encourage business students to employ the tools of business to create positive social change." Throughout the year, the entrepreneurship centers of the two business schools will coordinate with The Goldman Sachs Foundation to organize and promote national events in the San Francisco Bay Area and New York. The Eugene M. Lang Center for Entrepreneurship at Columbia Business School will host an inaugural symposium on October 5 in New York City. The symposium will feature a public dialogue with leaders in the social entrepreneurship arena to explore the growing demand and marketplace expectations for social ventures. Throughout the year, both schools will host additional events to encourage participation and evaluate submissions. Mentoring workshops will take place at Columbia Business School and the Haas School with prominent investors and alumni helping teams to perfect their business plans and presentations. The teams' executive summaries are due on January 18, 2002. The 2001/2002 national competition finals, hosted by the Haas School's Lester Center for Entrepreneurship and Innovation, will take place at UC Berkeley on April 5-6, 2002. "This unique and powerful partnership reflects Columbia's commitment to supporting entrepreneurship as a vehicle for social change," remarked Meyer Feldberg, dean of Columbia Business School. "Tomorrow's business leaders must grasp more than convention; they must also be prepared to develop and steer businesses of all sizes and types through a global economy that demands consideration not only of profit and shareholder value, but also of broader human interests." Teams in this year's competition can look to past participants in the Haas Social Venture Competition for inspiration in launching social ventures. Previous participants who have gone on to establish businesses include: + Sea Power & Associates (www.seapower.cc), winner of the 2001 Haas Social Venture Competition, harnesses ocean wave power to produce electricity for coastal communities in the Pacific. +Aprotea (www.aprotea.com) makes biochips to enhance drug discovery and won a prize for best management team in 2001. +Prisma Microfinance (www.prismamicrofinance.com) provides investor-funded micro-loans in developing countries and won a prize for the best analysis of its social return on investment. +Ripple Effects (www.rippleeffects.com), a winner of the 2000 competition, has already won nine major national product awards for its learning software. ---------- BLUE MARTINI CEO ZWEBEN TO GIVE KEYNOTE AT 2001 KNOWLEDGE FORUM The fifth annual UC Berkeley Forum on Knowledge and the Firm will explore "New Patterns of Management in the Knowledge Economy" in the Arthur Andersen Auditorium on September 21. Leading thinkers and practitioners in the field of knowledge management will discuss the new patterns of management that are emerging as companies experiment and adapt different ways to beat their competition. The Knowledge Forum is organized annually by the Institute of Management, Organization, and Innovation (IMIO) at the Haas School. This event is open to faculty, students, staff, alumni, and members of the public. The registration fee will be waived for faculty and UC Berkeley students. Students need to register by September 14. The keynote address will be given by Monte Zweben, chairman, president, and CEO of Blue Martini Software, which helps companies understand, target, and interact with their customers and business partners. Prior to founding Blue Martini, Zweben was vice president and general manager of PeopleSoft's manufacturing industry unit. In 1992 he co-founded Red Pepper Software Company, and was CEO, president, and chairman. Dean Laura Tyson will give the opening remarks, followed by three sessions of panelists featuring Ikujiro Nonaka, Xerox Distinguished Professor in Knowledge; David Teece, Mitsubishi Bank Professor of International Business and Finance and director of IMIO; Susan DeSanti, director, Office of Policy Planning, FTC; Seiji Horibuchi, president, VIZ Communications (Pokeman USA); and Saburo Kobayashi, general manager, Corporate Planning, Honda. For registration information, please visit http://groups.haas.berkeley.edu/imio/knowledge/index2001.htm. ---------- MICHAEL KATZ TO SERVE AS DEPUTY ASSISTANT ATTORNEY GENERAL FOR ECONOMIC ANALYSIS Michael Katz, the Edward J. and Mollie Arnold Professor of Business Administration, has been appointed the deputy assistant attorney general for economic analysis in the Antitrust Division of the Department of Justice. As deputy assistant attorney general, Katz will supervise all economic analysis within the Antitrust Division and direct the division's Economic Analysis Group. "Like the stereotypical economist, I look at Michael's appointment from two perspectives," says Ben Hermalin, associate dean of academic affairs. "On the one hand, I can't think of a Haas faculty member who'd be harder to lose for a year or two than Michael. On the other hand, I can't think of an economist I'd trust more to advise the nation on antitrust matters than Michael. I just hope the current administration has sufficient sense to listen to Michael and take his advice seriously." Since 1987, Katz has served as a professor at the Haas School of Business. In addition to researching on competitive strategy in systems markets, vertical integration, cooperative research and development, and antitrust in high-tech industries, he also directs the school's Center for Telecommunications and Digital Convergence. In 1989 and 1993, he was awarded the Earl F. Cheit Outstanding Teaching Award. From 1994 to 1996, Katz served as Chief Economist at the Federal Communications Commission, where he was responsible for integrating economic analysis into all aspects of Commission policy making. He formulated and implemented regulatory policies for all industries under the FCC's jurisdiction, including cable and broadcast television and local, long distance, and wireless telephony. In 1996 he was recognized with the FCC chairman's Special Achievement Award for his excellence in service at the commission. He graduated summa cum laude from Harvard University in 1978, where he was awarded a prize as the top graduate in economics. He received his Ph.D. from Oxford University in 1982. A frequent lecturer and author of numerous articles on antitrust and consumer issues, Katz is also co-editor of the California Management Review and the Journal of Economics and Management Strategy. "Michael Katz is a leading scholar with extensive experience in issues important to the Antitrust Division," said Charles A. James, assistant attorney general for antitrust. "His keen insight will be of great advantage to the department as we work to protect competition in today's global economy. We are privileged to have him join us." Carl Shapiro, the Transamerica Professor of Business Strategy and director of the Institute of Business and Economics Research (IBER), was the deputy assistant attorney general for Economics in the Antitrust Division from 1995 to 1996. ---------- LEADING EDGE: THE FUTURE COMES TO HAAS This year's Leading Edge Conference, titled "@ the intersection of business, technology, and leadership," will bring heavy hitters from the business and technology sectors to Haas to discuss the future of their industry. Scheduled for September 21 and 22, the Leading Edge Conference has traditionally been one of the largest of the student-run conferences at Haas. This year the conference will have 15 panel discussions with over 70 of the most influential minds in technology and business today, the EdgeXpo technology fair, and the opportunity to network and drop resumes with some of the top technology firms in the industry who will be making special appearances on campus for this event only. As part of the keynote schedule this year, the organizers are debuting the Edge Futurists' Forum -- a keynote discussion session about the future of technology between industry innovators from Sun Microsystems, Xerox Parc, and the Institute for the Future. This event includes distinguished visionaries such as John Gage, chief science officer of Sun Microsystems, and will be hosted by Business 2.0 President Ned Desmond. Brian Bogosian, president and CEO of Visto Corporation, will be the closing keynote speaker on Saturday evening. For more information on the conference or to register, please visit www.theleadingedge.org. ---------- THE FIRST OF SIX NEW FACULTY PROFILES: TERRENCE HENDERSHOTT JOINS THE MANUFACTURING AND INFORMATION TECHNOLOGY GROUP Terrence Hendershott has joined the Haas faculty as an assistant professor of manufacturing and information technology. Hendershott researches the information technology behind electronic stock markets. His previous position was as the Xerox Assistant Professor of Computers & Information Systems at the William E. Simon School of Business Administration at the University of Rochester. Hendershott earned his bachelors in mathematics and statistics at Miami University. He spent several years in industry, first as a senior analyst at Andersen Consulting then as an associate at Cornerstone Research. He went on to earn his Ph.D. in operations, information, and technology at the Graduate School of Business at Stanford University in 1999. In his dissertation at Stanford, Hendershott created a theoretical model of how electronic trading systems compete with stock exchanges. The largest electronic trading systems are electronic communications networks (ECNs), which are used for 30 to 40% of NASDAQ trades each day. Hendershott is now looking at the impact that ECNs have had on stock trading. This includes the expansion of trading outside the normal trading day, the cost of trading using ECNs, and how the use of ECNs affects price discovery. "While the use of ECNs has grown dramatically since the mid-90s, unless there is some structural change in trading behavior, I don't think we will see 24-hour trading anytime soon," says Hendershott. As a sideline to this work, Hendershott collaborates with his father, Patric, who is a professor of property economics and finance at the University of Aberdeen in Scotland, and his brother, Robert, who is an associate professor of finance at Santa Clara University. "The papers we wrote combined our interests in how the Internet is affecting the economy by examining real estate (malls in particular)," says Hendershott. "I expect I will continue to do some of these because they are fun and an excuse to interact with my father and brother more." Hendershott will teach an information technology strategy course during the Spring 2002 semester. His office is in F596, his phone number is 643-0619, and his e-mail address is [email protected]. ---------- HAAS CEO EXCHANGE TO AIR ON PBS IN SEPTEMBER CEO Exchange, the PBS television program hosted by the Haas School, will be broadcast in early September. Filmed in the Zellerbach Auditorium on April 11, 2001, the program featured Cisco's John Chambers and HP's Carly Fiorina along with host Jeff Greenfield and an audience of Haas students, faculty, staff, and alumni. The show will air on local public television stations this month, on the following dates: KQED, channel 9, Thursday, September 13, at 11:00 p.m. KRCB, channel 22, Tuesday, September 11, at 9:00 p.m. KTEH, channel 54, Thursday, September 13, at 10:00 p.m. and September 20 at 1:00 a.m. ---------- DIANE DIMEFF HEADS FOR COLORADO AS ASSISTANT DEAN FOR MBA PROGRAMS AT CU BOULDER After serving for 8 years as director of the Haas School's Evening MBA Program, Diane Dimeff has accepted a position at the University of Colorado at Boulder as the assistant dean for MBA Programs. She will be leaving Haas on Friday, September 28. "I'm very excited about the opportunity to help build and grow CU Boulder's MBA Programs, especially since Colorado has been a vacation destination for my family for so many years," says Dimeff. "It will be hard to leave Haas and UC Berkeley as I've been associated with the university for 30 years now, either as a student or as an employee. I'm very appreciative of the opportunity I've had to participate in the evolution of the Haas Evening MBA Program and thank the faculty, staff, students, alumni, and the administration for their support." Under Dimeff's direction, the Evening MBA Program has grown from a San Francisco satellite to a thriving on-campus program. Her major accomplishments: - applications to the Evening MBA Program increased by 128%, and enrollment increased by 58% - the average GMAT increased from 652 to 680 - the Evening MBA Program moved from San Francisco to the UCB campus - the core curriculum was reconfigured - the number of electives offered tripled - the comprehensive examination was replaced by the the mid-program academic retreat - the International Business Seminar was initiated "We wish Diane great success at the University of Colorado, Boulder -- despite her new school having as a mascot a shaggy, plodding, female buffalo named Ralphie instead of a sophisticated, nimble bear named Oski!" says Andrew Shogan, associate dean of instruction. ---------- THE SUMMER 2001 ISSUE OF THE CALIFORNIA MANAGEMENT REVIEW IS AVAILABLE The Summer 2001 issue of the California Management Review (CMR) is now available. CMR, which is published by the Haas School, serves as a bridge of communication between those who study management and those who practice it. This issue includes articles from two symposia, one by Haas marketing professor Russell Winer on Customer Relationship Management and one on Systems Dynamics. CMR articles in the Summer 2001 issue: System Dynamics Modeling: Tools for Learning in a Complex World John D. Sterman Tradeoffs in Responses to Work Pressure in the Service Industry Rogelio Oliva Past the Tipping Point: The Persistence of Firefighting in Product Development Nelson P. Repenning, Paulo Gon?alves, and Laura J. Black Nobody Ever Gets Credit for Fixing Problems that Never Happened: Creating and Sustaining Process Improvement Nelson P. Repenning and John D. Sterman A Framework for Customer Relationship Management Russell S. Winer Uncovering Patterns in Cybershopping Wendy W. Moe and Peter S. Fader The Customer Pyramid: Creating and Serving Profitable Customers Valarie A. Zeithaml, Roland T. Rust, and Katherine N. Lemon Haas students receive CMR on a complimentary basis. It is available in the program offices and student lounges. The alumni subscription rate is $35 and the foreign alumni rate is $50. All the subscription info is at CMR's web site: www.haas.berkeley.edu/cmr/. ---------- HAAS IN THE NEWS A study of market analysts' performance for the year 2000, which was co-authored by Brett Trueman, the Donald and Ruth Seiler Professor of Public Accounting and chair of the Haas Accounting Group, and Reuven Lehavy, assistant professor in the Haas Accounting Group, appeared in The American Enterprise Online in their September issue. Read the full article here: http://www.taemag.com/taesep01b.htm. Janet Yellen was mentioned in the Capital Markets Report on September 1 in an article about tax cuts and debt paydowns. The Seattle Times quoted Severin Borenstein, the E.T. Grether Professor in Public Policy and Business Administration, on September 1 in an article about the absence of power blackouts this summer. Ken Rosen, professor of the Haas Real Estate Group and chairman of the Fisher Center for Real Estate and Urban Economics, was featured in the Los Angeles Times on August 28 in an article about commercial real estate and in connection to Shorenstein Co. Read more here: http://latimes.com/templates/misc/printstory.jsp?slug=la%2D000069589aug28. The Financial Times mentioned Raymond Miles, professor emeritus and former dean, in its August 21 issue in an article about the future of Hewlett-Packard. Read the full article here: http://globalarchive.ft.com/globalarchive/articles.html?print=true&id=010821007311. ---------- HAPPENING AT HAAS "Business Combinations and Goodwill -- What The New FASB Rulings Mean to You?" The methodology used to determine the amount of goodwill and identifiable intangible assets to be recorded in a business combination is undergoing a major change. A panel of experts will discuss the details of the FASB rulings. Friday, September 7, 2001 1:00 p.m. to 5:00 p.m. San Francisco Airport Marriott Price: $200 per person Contact: Dayna Haugh at 510-642-6334 or [email protected] or visit http://www.haas.berkeley.edu/accounting Guest Speakers: Helen Munter, Deloitte & Touche; Kim Marie Boylan, Mayer, Brown & Platt; John Hertz, Intel; Jeff Jones, Deloitte &Touche; Peter Wheeler, Deloitte & Touche; and John Whittle, Corio. MBA SUMMER WORKSHOP: WINE AND CHEESE TASTING PARTY Please come and meet the entering first-year MBAs and join old friends from past years. Friday, September 7, 2001 Wells Fargo Room A nice selection of wines (favoring reds this year), cheeses, and other tasty treats funded from surplus revenues of the Summer Communications and Quantitative Methods Workshops. Be sure to bring an ID if you even look like you might POSSIBLY be under 21! MBAs, staff, and faculty invited. PACIFIC RIM FIRM NIGHT First- and second-year students mingle with representatives from a variety of companies at this business casual recruiting event. Bring your resume. Thursday, September 13, 2001 6:00 p.m. to 8:00 p.m. Consumption Function Friday, September 14, 2001 5:00 p.m. to 9:00 p.m. Haas Courtyard/B of A Forum PH.D. SEMINARS E.T. GRETHER MARKETING SEMINAR "Self-schema Matching and Attitude Change: Situational and Dispositional Determinants of Message Elaboration," by Christian Wheeler, Stanford University Thursday, September 6, 2001 3:30 p.m. to 5:00 p.m. Room F320 For more information, contact Laura Gardner at [email protected]. IDS270-INSTITUTIONAL ANALYSIS WORKSHOP "Foreign Direct Investment and Technology Transfer," by Garrick Blalock, UC Berkeley Thursday, September 6, 2001 4:00 p.m. to 6:00 p.m. Room C325, Cheit Hall For more information, contact Anita Stephens at [email protected]. FINANCE SEMINAR "An Analysis of Shareholder Agreements" by Gilles Chemla, University of British Columbia Thursday, September 6, 2001 4:15 p.m. to 5:45 p.m. Room C110, Cheit Hall For more information, contact June Wong at [email protected]. REAL ESTATE SEMINAR "Signaling-Screening Equilibrium in the Mortgage Market," by Danny Ben-Shahar, Interdisciplinary Center Herzliya Friday, September 7, 2001 11:00 a.m. Room C250, Cheit Hall For more information, contact Lynn Lobner at [email protected]. E.T. GRETHER MARKETING SEMINAR "Promoting to Multiple Agents: The Case of Direct-to-Consumer Drug Advertising," by Marta Wosinska, UC Berkeley Thursday, September 13, 2001 3:30 p.m. to 5:00 p.m. Room F320 For more information, contact Laura Gardner at [email protected]. ALUMNI EVENTS East Bay Chapter Haas Connection The East Bay Chapter of the Haas Alumni Network invites you to network and exchange ideas with fellow East Bay alumni and Haas students on the first Thursday of every month. Thursday, September 6, 2001 7:30 p.m. to 9:30 p.m. Pyramid Brewery, 901 Gilman Street (at Eighth Street) in Berkeley. Contact: Bill Vederman, East Bay Chapter President, [email protected]. East Bay Chapter Family Picnic The East Bay Chapter of the Haas Alumni Network presents "Fun in the Montclair Sun," an informal afternoon pinic in the park. All Haas alums welcome. Saturday, September 15, 2001 3:00 p.m. to 5:00 p.m. Location: Montclair Park, Montclair Village (off Hwy 13 at Moraga or Park exits in Oakland). Contact and Phone: Leslie Fisher, 925-244-1233 or e-mail at [email protected]. Soft drinks will be provided. Please bring your own food or snacks and a dessert to share. RSVP: Leslie Fisher at 925-244-1233 or [email protected]. Please provide your name, email address, and number of people attending. ---------- HAAS CELEBRATIONS Birthdays David Stuckey, September 4 Alison Thompson, September 6 Yong No, September 9 Evelyn Graham, September 10 Dan Sullivan, September 13 The Haas NewsWire respects the wishes of staff and faculty who would not like their birthdays announced. Please e-mail a request to have your birthday marked "do not announce" on the central birthday list to [email protected]. ---------- The Haas NewsWire is the electronic news weekly for the Haas community published every Monday by the Marketing and Communications Office at the Haas School. Send your news, feedback, and suggestions to [email protected]. Archived issues of Haas NewsWire are available online at http://www.haas.berkeley.edu/groups/newspubs/haasnews/archives/hncurrent.html. To subscribe to Haas NewsWire, address e-mail to [email protected]; in the body of the message type "subscribe haasnewswire" in the first line, and "end" in the second line. To unsubscribe to HNW, type "unsubscribe haasnewswire" in the first line, and "end" in the second line.

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Joining the Haas Network: New MBA, Undergraduate, and Ph.D.

Haas NewsWire August 27, 2001 _____ CONTENTS Joining the Haas Network: New MBA, Undergraduate, and Ph.D. Students Arrive at Haas Chancellor Berdahl Appoints Ben Hermalin Interim Dean All the 2001 YEAH Graduates Pursue Higher Education The Haas School Welcomes New Faculty New Staff Haas in the News Happening at Haas Haas Celebrations _____ JOINING THE HAAS NETWORK: NEW MBA, UNDERGRADUATE, AND PH.D. STUDENTS ARRIVE AT HAAS The Haas School is bubbling with activity this week as the new school year begins and incoming classes of students in four degree programs settle into their new routines. In keeping with tradition, the Undergraduate, Evening MBA, MBA, and Ph.D. programs have worked hard to admit select groups of students. "I am thrilled with the outstanding students we have admitted for this fall's entering class," says Pete Johnson, acting co-director of admissions for the full-time MBA program. "They are a talented and diverse group of people who bring a wealth of experiences with them to Haas." The full-time MBA class of 2003 includes 238 students, selected from an applicant pool of 3,259. Thirty-five percent of the new first-years are international students, representing 31 different countries. Seventy-four percent are bilingual and 62% are trilingual. On average, the members of the new MBA class have 5 years of professional work experience, and they bring a wealth of knowledge and experience to the Haas community. The class includes a producer from Fox Sports and NBC TV, a freelance director of plays and musicals, a design engineer from Porsche, and a former writer for "Let's Go" travel books. On the extracurricular side, the class includes members of the Peruvian National Rowing Team; the Kyoto University Ballroom Dancing Team; the 1994 National Taekwondo Champion; a four-time state cycling champion; and the winner of a 1999 New York Film Festival producer award for best drama. The new Evening MBA students distinguish themselves by their strong educational backgrounds. The Evening MBA class of 116 students represents 13 countries and the students have, on average, 7.1 years of post-university work experience. Thirty-five percent of the students hold Masters degrees and 9% have Ph.D.s. Thirty-three percent of the class is bilingual and 25% is trilingual. "This was a particularly competitive applicant pool, with a 60% increase in applications from last year," says Diane Dimeff, executive director of the Evening MBA Program. "We broke our previous record for applications by 30%, so we are especially excited about this group of new students and the depth and breadth of experience they bring to the classroom." The Evening MBA class includes a former submarine officer; the chief of Otorhinolaryngology (ear, nose, and throat specialist) at the Veterans Affairs Medical Center in San Francisco; a California water resources manager; an associate treasury program manager for the state of California; a researcher who helped establish a clinical program to provide experimental medicine for a viral liver disease; a competitive swimmer; a student who helped pay his way through school by fighting forest fires for two summers; and a student who interned in a high-pressure French restaurant in Paris. As one of the most popular undergraduate majors on campus, the Haas Undergraduate program always attracts the cream of the crop of continuing Cal and incoming transfer students. This year, off the 1,150 applicants to the Undergraduate Program, 214 have enrolled. Seventy-nine of the students transferred to UC Berkeley. For the UC Berkeley admits, the average GPA was 3.59. In the Ph.D. program 467 people applied to the program, but only 39 were admitted. Sixteen new Ph.D. students were enrolled, bringing the total for the program to 80. The average GMAT for the students is 730 and the average GPA is 3.82. There are 11 men and six women in the class. Ten of the students are international, hailing from eight different countries. "We have students from Asia, Europe, South America, New Zealand, and the US," says Jan Price Greenough, associate director of the Ph.D. Program. "They have compiled an impressive scholastic and professional record. We are very excited about their potential and promise and look forward to a very good class." _____ CHANCELLOR BERDAHL APPOINTS BEN HERMALIN INTERIM DEAN When Dean Laura Tyson announced that she would resign on December 31, 2001, Chancellor Robert Berdahl immediately announced that he would appoint Ben Hermalin as interim dean while the university runs a national search for a new dean of the Haas School. Associate Dean Ben Hermalin has been an integral part of Dean Tyson's administration at Haas since he was appointed associate dean in 1999. "Ben has worked closely with me and the rest of the Dean's Office on all of our initiatives, from the Pilot Program to the new degree programs, " says Tyson. "He has won the loyalty and support of both faculty and staff through his unique combination of boundless energy, fairness, attention to detail, intelligence, and good humor. He is committed to the well-being of the Haas School and has been an effective advocate for its interests on the campus." Hermalin, 39, is the Willis H. Booth Professor of Banking and Finance and has been with the Haas School since 1988. He has a joint appointment with the Department of Economics and is a co-founder and director of the private online academic publishing company Bepress. As associate dean Hermalin overseas all faculty recruitment and retention as well as merit raises and promotions for the Haas faculty. Working with Dean Tyson, Hermalin has helped to get permission from the campus administration to recruit more faculty members in a given year than is normally allowed and to meet competitive offers to current faculty. "Dean Tyson has built a good team, a strong organization, and an excellent staff. I hope to provide continuity and continue the school's initiatives," says Hermalin of his future role as interim dean. "Haas is very fortunate to have someone of Ben's stature, experience, and dedication willing to serve as interim dean," says Michael Katz, the Edward J. and Mollie Arnold Professor of Business Administration. "His ability to be equally comfortable in a three-piece suit and a Hawaiian shirt makes him ideally suited to face the diverse challenges of leading the school." His recent research has focused on telecom pricing with Katz. This fall he will teach a Ph.D. course in the economics department called, "Mechanism Design and Agency Theory." Hermalin holds a BA in Economics from Princeton and a Ph.D. in economics from the Massachusetts Institute of Technology. He is also on the Editorial Board for the American Economic Review and is co-editor of the Berkeley Electronic Journals in Economic Analysis & Policy. "Ben is an excellent squash player," says Dwight Jaffee, professor of banking and finance. "My hope is that his deanly duties will slow him down so that I can win more often." Tyson and Hermalin will work together throughout the fall with Andy Shogan, Jay Stowsky, and the school's professional staff to make the 2001-2002 academic year a successful one for the Haas School. _____ ALL OF THE 2001 YEAH GRADUATES PURSUE HIGHER EDUCATION In another sign of continuing success for the Young Entrepreneurs At Haas (YEAH) program all ten of the 2001 graduating high school seniors from the Young Entrepreneurs Program are continuing their education. "Our YEP students have taken to heart the principles and real-life lessons of entrepreneurship and finance, and followed their interest toward higher education," says Oscar Wolters-Duran, director of YEAH. "It's a real testimony to the quality of our Haas MBA mentors and the YEAH staff that so many of these youth, who often come from severely under-served schools, continue on to college. We are very pleased with the success of our students." The success of the Young Entrepreneurs Program and its sister program Business, Economics, Technology Achievement (BETA), is due in large part to the commitment and diligence of MBA and undergraduate students who work with the YEAH participants. Both YEP and BETA are primarily aimed at building strong academic habits and encouraging students to continue on to college by providing a clear link between entrepreneurial success and academic skills, achievement, and advancement. The 84 students in the 2001 YEP class hail from over 20 schools across the Oakland, Berkeley, and West Contra Costa school districts. YEP, which was founded in 1989, teaches basic business skills to 9th and 10th graders, and is supported by more than forty Haas MBA volunteer mentors/business coaches. YEAH is also creating an alumni network to support students through their last years of high school and the college admissions process. The BETA program, which began as a pilot program in 2000 serving five school sites/programs, will serve ten sites/programs in 2001 - 2002 and reach over 200 students. In BETA, the undergraduates encourage middle- and high-school students to research and plan for future careers, act as role models for aspirants to higher education, and help students see the relevance of their math coursework through business projects involving sales tax, tracking stock prices, and using area/perimeter to identify possible business sites. Undergraduate students who would like to work (and get paid) for the BETA program should contact Tanya Fraley at 510-643-4622. MBA students who would like to volunteer for the YEP Program should contact Ajuah Helton at 510-643-8906. For more information on all of YEAH's programs, visit www.haas.berkeley.edu/yeah/ <http://www.haas.berkeley.edu/yeah/>. 2001 YEP GRADUATES Ten high school seniors participated in YEP 2000 - 2001: + Waymando Brown, alumnus of YEP I and II, graduated from Skyline High School in June 1999, is enrolled at the College of Alameda, and hopes to transfer to UC Davis in 2002. + Ivan Chavez, alumnus of YEP I and II, graduated from Richmond High School in June 2001, and was admitted to San Francisco State University. + Nosa Ikponmwonba, alumnus of YEP I and II, graduated from Skyline High School in June 1999. He is currently a student at College of Alameda and hopes to transfer to UC Davis in 2002. +Jahmilah Jones, alumna of YEP I and II, graduated from Bishop O'Dowd High School in June 2001 and was admitted to Clark Atlanta University. +Obatala Mawusi, alumnus of YEP II, graduated from Luxor Academy in December 2000, at the age of sixteen, and has begun culinary studies at the California Culinary Academy in San Francisco. +Yetunde Onipede, alumna of YEP I and II, graduated from Holy Names High School in December 2000, and began studies at Merritt Community College this year. Yetunde hopes to transfer to UC Berkeley in 2003. +Lorrie Savage, alumna of YEP I, graduated from Bishop O'Dowd High School in June 2001 and was admitted to UC Berkeley. +Jacob Scott, alumnus of YEP I and II, graduated from Oakland Technical High School in December 2000 and was admitted to UC Berkeley. +Emily Teruya, alumna of YEP II, graduated with honors from Skyline High School in June 2001 and was admitted to UC Berkeley. +Thomas Woo, alumnus of YEP II, graduated with honors from Skyline High School in June 2001 and was admitted to UC Berkeley. _____ THE HAAS SCHOOL WELCOMES NEW FACULTY The Haas School of Business maintains its commitment to excellence with the addition of six new members to its faculty. After successfully concluding a nine-month search and conducting more than 400 interviews, the Haas ladder-track faculty now has 70 members, or roughly 64 full-time equivalents. The new faculty members are: + Terrence Henderschott, assistant professor in Management of Information Technology. + Christopher Hennessy, assistant professor in Finance. + Professor Barbara Mellers, professor in Marketing and Organizational Behavior and Industrial Relations. + Terrance Odean, Haas Ph.D. 97, assistant professor in Finance. + Philip Tetlock, professor of Organizational Behavior and Industrial Relations. + Professor Candace Yano, who is transferring to Haas after eight years with UC Berkeley's Department of Industrial Engineering and Operations Research. Over the next few months, the Haas NewsWire will introduce each new faculty member with a short profile. _____ NEW STAFF NEW ASSISTANT DIRECTOR FOR MAJOR GIFTS AND CORPORATE RELATIONS Jeff Rhode joins the Haas School development team as the new assistant director for Major Gifts and Corporate Relations. He has been working as an intern in the development office since earlier this summer. Prior to joining Haas, he worked as a sports writer for ESPN.com and ZuluSports.com. Rhode's communication, research, and writing skills make him a valuable addition to the school. Working on campus is a homecoming for Rhode as he earned an undergraduate degree in history and a Masters in education from UC Berkeley. He also holds a Masters in Sports and Fitness Management from the University of San Francisco. Currently, Jeff lives in San Francisco with his wife, Nada, who is also a Cal graduate. His phone number is 642-1907, his e-mail is [email protected], and his cubicle is in the dean's suite. NEW ACCOUNT MANAGER AND OFFICE MANAGER IN THE CAREER CENTER Mark Friedfeld comes to Haas from the University of Maryland's Smith School of Business. Friedfeld is the new account manager for financial services recruitment. He will be working closely with MBA and MFE students and building and maintaining contacts with companies across the finance industry. Prior to his work at the Smith School, Mark spent a few years as the director of marketing at the Princeton Review. His office is in the Recruitment Center on the 3rd floor. His phone number is 642-6588 and his e-mail address is [email protected]. Christine Blaine is the new office manager for Career Services. She was previously the general manager at Beth's Desserts. She brings a wealth of knowledge in the areas of operations, staffing, and budget management. Christine is located on the fourth floor in the Career Center. Her phone number is 643-7802 and her e-mail address is [email protected]. _____ HAAS IN THE NEWS Hal Varian, dean of the School of Information Management and Systems and Haas professor, commented on President Bush's Administration's lack of interest in technology in Los Angeles Times on Aug. 27. Read the full article here: <http://latimes.com/templates/misc/printstory.jsp?slug=la%2D000069457aug27> Russ Winer, the J. Gary Shansby Professor of Marketing Strategy and the chair of the Marketing Group, was quoted extensively in The Industry Standard Online on Aug. 27 on the right metrics to use to measure the effectiveness of banner ads. Read the full article here: <http://www.thestandard.com/article/0,1902,28813,00.html> Severin Borenstein, E.T. Grether Professor in Public Policy and Business Administration, in the San Jose Mercury on Aug. 26 that the mild weather contributed more to California avoiding rolling blackouts, than conservation did. Read the full article at: <http://www0.mercurycenter.com/premium/front/docs/summerend26.htm> The Management of Technology program was mentioned in Electronic Buyer's News on Aug. 27 in connection with NEC support of the program. The study of market analyst's performance for the year 2000, which was co-authored by Brett Trueman, the Donald and Ruth Seiler Professor of Public Accounting and chair of the Haas Accounting Group, and Reuven Lehavy, assistant professor in the Haas Accounting Group, appeared in The American Enterprise Online on their September issue. Read the full article here: <http://www.taemag.com/taesep01b.htm> The Young Entrepreneurs at Haas (YEAH) program was mentioned in the San Jose Mercury on Aug. 24 in the article titled "2 east bay schools send most frosh to UC Berkeley." Read the complete article here: <http://www0.mercurycenter.com/premium/local/docs/cal24.htm> Severin Borenstein commented in the LA Times on Aug. 24 that the state should not run public power. Read more here: <http://latimes.com/templates/misc/printstory.jsp?slug=la%2D000068605aug24> Hal Varian and the book "Information Rules" which he co-wrote with Carl Shapiro were mentioned an article about the changing intellectual property of businesses and its effects on the economy in the Wall Street Journal on Aug. 23. On Aug. 23 the LA Times quoted David Vogel, George Quist Professor of Business Ethics, regarding the Microsoft lawsuit in the article "Lobbyists Tied to Microsoft Wrote Citizens' Letters." Read the full story here <http://latimes.com/news/printedition/la-000068380aug23.story> Janet Yellen, the Eugene E. and Catherine M. Trefethen Professor of Business Administration, was quoted in the Sacramento Bee on Aug. 22 and expressed her agreement with the Fed's recent short-term interest rate cut. Read more on this story here <http://www.sacbee.com/ib/news/ib_news01.html> Borenstein appeared in the Washington Post on Aug. 21 in an article about California deregulation. Read the article at <http://www.washingtonpost.com/wp-dyn/articles/A37193-2001Aug20.html> Borenstein also commented on the California energy crisis in the St. Louis Post-Dispatch on Aug. 20. Tyson appeared on CNN: Inside Politics on Aug. 20 and made remarks on how the Fed will behave in the future. Read the transcript at <http://www.cnn.com/TRANSCRIPTS/0108/20/ip.00.html> Dwight Jaffee, professor of banking and finance, was mentioned in San Francisco Chronicle on Aug. 19 and offered remarks on the accuracy of forecasts offered by technology research companies. For the full text see <http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/08/19/BU138607.DTL> The article "Some Funds to Read Your Mind," in the New York Times mentioned Terrance Odean, assistant professor of finance, in an article about behavioral economics on Aug. 19. Borenstein was once again quoted in regards to the California power crisis on Aug. 19 in the Contra Costa Times. Read the complete article here: <http://www.contracostatimes.com/cgi-bin/emailfriend/emailfriend.cgi?mode=print&doc=http://www.contracostatimes.com/news/topstory/outlook_20010819.htm> The LA Times quoted John Myers, Professor Emeritus of the Haas Marketing Group, on Aug. 17 in an article about the safety of the free toys given by fast-food restaurants. Read more on this topic here: <http://latimes.com/business/la-000066664aug17.story> Trueman, appeared in CBS Marketwatch on Aug. 15, in the article "Beware of tech earnings 'dead zone'". Read the full article: <http://cbs.marketwatch.com/news/story.asp?siteID=mktw&guid=%7BF4F96E1B%2D798B%2D4276%2D8CE1%2D3FA7C324CC6B%7D> Ken Rosen, Haas Real Estate professor and Chairman of the Fisher Center for Real Estate and Urban Economics, was quoted in the San Francisco Chronicle on Aug. 12 in the article "Housing Prices Stay Hot." Read more here: <http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/08/12/BU194539.DTL> "Foundations for Success in the Knowledge Economy: Challenges and Opportunities in New Zealand," a lecture by David J. Teece, professor of international business and finance and director of the Institute of Management, Innovation, and Organization, was delivered live for 30 minutes on Sky TV on August 3, 2001, at the Knowledge Wave Conference. Teece also appeared on Testra Business (Channel 2) and his lecture was condensed and printed in the Christchurch Press, the Dominion, Radio New Zealand, and many other media outlets. Dean Laura Tyson's announcement about her resignation as dean was covered by the following papers below from Aug. 13-18. New York Times on Aug. 13 <http://www.nytimes.com/aponline/business/AP-Business-Dean-Resigns.html?searchpv=aponline&pagewanted=print> San Francisco Chronicle on Aug. 14 <http://www.sfgate.com/cgibin/article.cgi?file=/chronicle/archive/2001/08/14/BU119475.DTL> San Jose Mercury News on Aug. 14 <http://www0.mercurycenter.com/business/top/084361.htm> Oakland Tribune on Aug. 14 Contra Costa Times on Aug. 14 <http://www.contracostatimes.com/cgibin/emailfriend/emailfriend.cgi?mode=print&doc=http://www.contracostatimes.com/news/stories_news/tyson_20010814.htm> Business Week Online on Aug.15 <http://www.businessweek.com/bschools/content/aug2001/bs20010814_174.htm> Daily Californian on Aug. 15 <http://www.dailycal.org/article.asp?id=5891> The Berkeleyan on Aug. 16 San Francisco Business Times on Aug. 17 <http://sanfrancisco.bcentral.com/sanfrancisco/stories/2001/08/20/weekinbiz.html?t=printable> The Economist on Aug. 18 The Independent of London on Aug. 21 <http://www.independent.co.uk/story.jsp?story=89771>. _____ HAPPENING AT HAAS UC Berkeley Entrepreneurs Forum "What's the Frequency Kenneth?" featuring: Peter Buhl, partner, Nokia Ventures; Cliff Higgerson, partner, ComVentures; Patrick Lilley, CEO, Digital Transit; Amit Nagpal, senior consultant, Analysys Group; Greg Shirai, director, Handheld Products Handspring. Moderated by Keval Desai, associate, Onset Ventures. Thursday, August 30, 2001 6:30 p.m. Arthur Andersen Auditorium Registration: There are special rates for faculty and staff. Faculty and staff are encouraged to pre-register by E-mail. Note registration procedure for students: a) in person with cash or check in room F450, weekdays 9-11:30AM and 12:30 - 4PM. b) with Mc/Visa over the phone, please call (510) 642 4255 The fee for pre- registration is $5. There will be a $10 registration fee at the door. Note: On-site registration is subject to space available. Pre-registration for students and staff closes at 4PM on Tuesday, August 28 or earlier if it is sold out. For more information on the series, please visit <http://www.haas.berkeley.edu/lester/bef.html> and <http://www.haas.berkeley.edu/lester/aug01.html>. Business Combinations and Goodwill -- What The New FASB Rulings Mean to You? The methodology used to determine the amount of goodwill and identifiable intangible assets to be recorded in a business combination is undergoing a major change. A panel of experts will discuss the details of the FASB rulings. Friday, September 7, 2001 1:00 p.m. to 5:00 p.m. Location San Francisco Airport Marriott Price $200 per person ($160 if registered by August 29, 2001) Contact: Dayna Haugh at 510-642-6334 or [email protected] or visit <http://www.haas.berkeley.edu/accounting> Guest Speakers: Helen Munter, Deloitte & Touche; Kim Marie Boylan, Mayer, Brown & Platt; John Hertz, Intel; Jeff Jones, Deloitte &Touche; Peter Wheeler, Deloitte & Touche; and John Whittle, Corio. Ph.D. Seminars E.T. GRETHER MARKETING SEMINAR "Private Labels, Price Rivalry, and Public Policy," by Tommy Gabrielsen, University of Bergen and Visiting UC Berkeley. Thursday, August 30, 2001 3:30 to 5:00 p.m. Room F320 For more information, contact Laura Gardner at [email protected]. IDS270-INSTITUTIONAL ANALYSIS WORKSHOP "The Science of Contract: Private Ordering," by Oliver Williamson, UC Berkeley Thursday, August 30, 2001 4:00 to 6:00 p.m. Room C325, Cheit Hall For more information, contact Anita Stephens at [email protected]. REAL ESTATE SEMINAR Organizational Meeting Friday, August 31, 2001 11:00 a.m. to 12:30 p.m. Room C250, Cheit Hall For more information, contact Lynn Lobner at [email protected]. ACCOUNTING SEMINAR "Valuation of the Debt-Tax Shield," by Doron Nissim, Columbia University Friday, August 31, 2001 4:00 pm Room C325 Cheit Hall For more information, contact Lorraine Seiji at [email protected]. E.T. GRETHER MARKETING SEMINAR "Self-schema Matching and Attitude Change: Situational and Dispositional Determinants of Message Elaboration," by Christian Wheeler, Stanford University Thursday, September 6, 2001 3:30 to 5:00 p.m. Room F320 For more information, contact Laura Gardner at [email protected]. IDS270-INSTITUTIONAL ANALYSIS WORKSHOP "Foreign Direct Investment and Technology Transfer," by Garrick Blalock, UC Berkeley Thursday, September 6, 2001 4:00 to 6:00 p.m. Room C325, Cheit Hall For more information, contact Anita Stephens at [email protected]. REAL ESTATE SEMINAR "Signaling-Screening Equilibrium in the Mortgage Market," by Danny Ben-Shahar, Interdisciplinary Center Herzliya Friday, September 7, 2001 11:00 a.m. Room C250, Cheit Hall For more information, contact Lynn Lobner at [email protected]. _____ ALUMNI EVENTS Singapore Monthly Meeting Meetings for Haas alumni are held the last Tuesday of each month. Tuesday, August 28, 2001 7:00 p.m. to 9:00 p.m. Bar & Billiard Room, Raffles Hotels, Singapore No RSVP is required. Contact: Dirk Hofer +65-98191039 or via e-mail at [email protected]. East Bay Chapter Haas Connection The East Bay Chapter of the Haas Alumni Network invites you to network and exchange ideas with fellow East Bay alumni and Haas students on the first Thursday of every month. Thursday, September 6, 2001 7:30 p.m. to 9:30 p.m. Location: Pyramid Brewery, 901 Gilman Street (at Eighth Street) in Berkeley. Contact: Bill Vederman, East Bay Chapter President, [email protected] _____ HAAS CELEBRATIONS Birthdays Lee Forgue, Sept 1 David Stuckey, Sept. 4 Alison Thompson, Sept. 6 No Young, Sept. 9 _____ The Haas NewsWire respects the wishes of staff and faculty who would not like their birthdays announced. Please e-mail a request to have your birthday marked "do not announce" on the central birthday list to [email protected]. The Haas NewsWire is the electronic news weekly for the Haas community published every Monday by the Marketing and Communications Office at the Haas School. Send your news, feedback, and suggestions to [email protected]. Archived issues of Haas NewsWire are available online at <http://www.haas.berkeley.edu/groups/newspubs/haasnews/archives/hncurrent.html>. To subscribe to Haas NewsWire, address e-mail to [email protected]; in the body of the message type "subscribe haasnewswire" in the first line, and "end" in the second line. To unsubscribe to HNW, type "unsubscribe haasnewswire" in the first line, and "end" in the second line.

dasovich-j/deleted_items/1053.

dasovich-j

['[email protected]', '[email protected]', '[email protected]']

Energy Issues

Please see the following articles: Sac Bee, Thurs, 5/31: A rush to duck power outages: About half of the state's electric users already have been exempted from rolling blackouts SD Union, Thurs, 5/31: Sempra chief: County may fare OK on outages SD Union, Thurs, 5/31: 'Plan B' gains key support in Assembly SD Union, Thurs, 5/31: FERC boss unfazed by Davis' lawsuit threat SD Union, Thurs, 5/31: Chula Vista names itself a municipal power entity SD Union (AP), Thurs, 5/31: Circuit breaker=20 Giddy investors in the power trade get their wires crossed SD Union (AP), Thurs, 5/31: After months of pressure, mayor agrees on power= =20 plant=20 SD Union, Wed, 5/30: Panel OKs weakened utility district bill SD Union, Wed, 5/30: Davis fails to sway Bush on price caps SD Union, Wed, 5/30: Head of FERC confident California suit will fail SD Union (AP), Wed, 5/30: Grid managers call Stage 2 alert, but hope to avo= id=20 blackouts=20 LA Times, Thurs, 5/31: FERC Chief Unfazed By Threat of Third Lawsuit LA Times, Thurs, 5/31: The Home Energy Drain SF Chron, Thurs, 5/31: Heat's on, but so are lights=20 100-degree temperatures aren't widespread, sparing the grid SF Chron, Thurs, 5/31: Municipal utilities warned=20 Governor says he'll seize excess electricity if prices don't come down SF Chron, Thurs, 5/31: Regulators want state trade-off for caps=20 Davis asked to give up control of power lines SF Chron, Thurs, 5/31: Plan would have biggest customers pay Edison's debt Mercury News, Thurs, 5/31: San Jose mayor changes course, endorses power= =20 plant Mercury News, Thurs, 5/31: State admits power-deal secrecy=20 Mercury News, Thurs, 5/31: California Gov. Davis blasts Bush energy policy= =20 Mercury News, Thurs, 5/31: Mayor sees the light on power plant (Editorial)= =20 OC Register, Thurs, 5/31: Building a new plant? More power to them OC Register, Thurs, 5/31: Watering down fun Many summer activities in O.C. will be diminished by the electricity crunch OC Register, Thurs, 5/31: Energy notebook San Jose mayor switches position, backs power plant OC Register, Thurs, 5/31: Deadline near on regional power grid=20 OC Register, Thurs, 5/31: Bush standing tall as Davis plays blame game = =20 (Commentary) Individual.com (Businesswire), Thurs, 5/31: Electrical Emergency Stepped Up= =20 to Stage Two;=20 Need for Energy Conservation is Critical =20 Individual.com (AP), Thurs, 5/31: Washington's Role Helped Spark=20 California's Power Crunch Individual.com (Businesswire), Thurs, 5/31: Energy Experts Say Solution to= =20 California Crisis is Inescapable/ Build More Power Plants and Ensure Competition NY Times, Thurs, 5/31: In California, Blackouts Spur A Search for Home=20 Remedies ---------------------------------------------------------------------------= --- ------------------------------------- A rush to duck power outages: About half of the state's electric users=20 already have been exempted from rolling blackouts. By Carrie Peyton, Terri Hardy and Clint Swett Bee Staff Writers (Published May 31, 2001)=20 Up and down California, businesses, government agencies, campuses and other= s=20 are scrambling to join the millions who will escape this summer's predicted= =20 waves of rolling blackouts.=20 Some have gotten state regulators to change blackout rules. Some have given= =20 different versions of their needs to utilities, changing their stories in= =20 ways that satisfy exemption standards. Some have persuaded legislators to= =20 propose laws just for them.=20 "People that have political power or economic power are going to find ways = of=20 getting exempted. It happens all the time," said Richard Bilas, one of five= =20 appointed members of the state Public Utilities Commission.=20 Every addition to the largely confidential list of those exempt from outage= s=20 boosts the frequency of blackouts for everyone else.=20 While a few thousand institutions -- including hospitals, fire departments= =20 and prisons -- are deemed "essential" users who should not be blacked out,= =20 nearly half the state is spared outages because millions more share circuit= s=20 with those exempt facilities.=20 In Sacramento, for example, the electric utility will not cut power to a=20 water treatment facility along the American River for fear of endangering= =20 water quality. But sheltering that circuit also spares the sprawling=20 California State University, Sacramento, campus nearby.=20 If exemptions grow, "at some point, you lose the ability to reliably have= =20 rolling blackouts," said PUC commissioner Carl Wood. He has estimated that= =20 fewer than 1,000 more institutions can be exempted without compromising the= =20 system that rolls outages from one part of the state to the next when the= =20 electric grid can't supply power for everyone.=20 With close to half of the state sitting out outages, "that means the other= =20 half is going to get blacked out twice as often. It's basically unfair to t= he=20 rest of the community," said Paul Perkovic, who sits on the board of the=20 Montara Sanitary District, which provides sewer, garbage and other services= =20 to a San Mateo County community.=20 Perkovic urged the PUC last week to make more government agencies, includin= g=20 his tiny district, eligible for blackouts, arguing that they should be=20 prepared for other emergencies anyway.=20 The deluge of exemption requests has created a dilemma of values and number= s.=20 Should nursing homes be placed on the essential list? What about outpatient= =20 surgical clinics or transit agencies or schools? And when, if ever, should= =20 someone review existing exemptions to see if they're still needed?=20 Utilities and regulators say they try to apply the rules fairly. But=20 inconsistencies appear, and the rules keep changing as the realization sink= s=20 in that many more blackouts could await California.=20 The state's two biggest utilities are close in size, but one shields about = 25=20 percent more customers than the other from outages.=20 The Sacramento Municipal Utility District, which sets its own outage=20 standards, exempts only 21 of its 530,000 customers.=20 Pacific Gas and Electric Co., which applies rules set by the PUC, is much= =20 more generous, giving 2,600 of its 4.8 million customers the "get out of=20 blackouts free card."=20 Southern California Edison is even more open handed in its interpretation o= f=20 the same rules, doling out 3,600 exemptions among its 4.3 million customers= .=20 The roads to getting an exemption are varied. There are at least three plac= es=20 to start for those who want to stay cool and bright when all around are goi= ng=20 dark.=20 Businesses or governments can apply to their utility, which determines=20 whether they fit rules for a public safety exemption.=20 Or if their utility is regulated by the PUC, they can apply directly to a n= ew=20 program set up to examine their petition for exemptions.=20 Finally, they can go to the state Legislature, where lawmakers have=20 introduced a range of bills that would protect schools, nursing homes,=20 refineries -- even Universal Studios.=20 But in the attempt to quickly piece together a system to grant exemptions,= =20 critics say, a haphazard process has been developed.=20 Dan Johnson, associate vice president for facilities development and=20 operations at San Jose State University, said he has sought an exemption fr= om=20 PG&E and is still waiting, while campuses with similar circumstances have= =20 succeeded. Now he wonders about the fairness of what seems to him a murky= =20 decision-making process.=20 "Each utility has its own way of dealing with exemptions," he said. "If it= =20 appears that the decision is arbitrary and capricious, we hope that when we= =20 appeal to the PUC some sanity prevails."=20 One person in PG&E's tariff's department has done nothing but process=20 exemption requests since March, officials said, after the job became too bi= g=20 to be absorbed in another worker's duties.=20 About 200 requests have come in since early this year, and PG&E has approve= d=20 45 of them and denied 72, with 79 still pending.=20 The process is aimed at being a straightforward evaluation of whether an=20 entity fits into existing PUC categories of "essential" customers.=20 But it isn't always that simple, said Roland Risser, PG&E director of tarif= fs=20 and compliance.=20 Sometimes, said Risser, a customer will say it has adequate backup=20 generation, and PG&E will let the customer know the backup disqualifies it= =20 from an exemption. Later, the customer calls back and says "we've=20 re-evaluated" and the backup generator won't supply all its needs.=20 "We just take their word for it," Risser said. "We don't police."=20 From universities to transit agencies, a wide range of customers worry that= =20 as different utilities apply PUC standards, those regulations don't always= =20 yield the same results.=20 So far, at least eight campuses within the University of California and CSU= =20 systems will not be subject to rolling blackouts, including UC Davis.=20 In a letter to PG&E asking for an exemption, UC Davis stressed the potentia= l=20 danger to animals in its veterinary hospital and the possible destruction o= f=20 research. But PG&E spokesman Ron Low said health and safety arguments are t= he=20 only ones that matter. PG&E granted the exemption because the campus does n= ot=20 have generators for its airport and its radio station -- which is part of t= he=20 emergency broadcasting network.=20 Transportation officials say they're frustrated by the mixed signals sent b= y=20 utilities.=20 While the PUC has declared the Bay Area Rapid Transit District exempt from= =20 blackouts, Edison says Los Angeles' Municipal Transportation Authority is= =20 not. Ralph de la Cruz, deputy executive director of operations for the MTA,= =20 doesn't understand that logic. True, BART travels under the bay. But the=20 MTA's Green Line runs down the middle of the I-105 Century Freeway. Some MT= A=20 rail lines are elevated, and passengers trying to extricate themselves from= a=20 stalled train could plunge to the ground.=20 The MTA asked Edison to reconsider and has appealed to the PUC.=20 "We are anxious to see this resolved as quickly as possible, before blackou= ts=20 occur," de la Cruz said. "My God, we don't want to be in the position of ou= r=20 lines experiencing the prospect of stranded passengers."=20 The San Francisco Giants also have appealed to the PUC to be exempt during= =20 games. A blackout at Pacific Bell Park would "pose major operational=20 challenges," said Staci Slaughter, a Giants' spokeswoman.=20 Electric turnstiles wouldn't work. Concession stands could only accept cash= =20 only for hot dogs and beers. The field would go dark and night games would= =20 have to be canceled.=20 The PUC has been so swamped with bids to escape blackouts that it has hired= a=20 scientific and engineering consulting firm to study who else should be adde= d.=20 Meanwhile, it has asked utilities to look into ways to reconfigure the wiri= ng=20 so that each essential customer won't take so many nonessential ones out of= =20 the blackout pool. A report on those efforts is due Friday.=20 "We've been deluged at the commission by individual requests that do have a= =20 broader public policy good," said PUC president Loretta Lynch, including on= e=20 from the lone U.S. maker of a blood-clotting agent for hemophiliacs.=20 The PUC has hired Exponent, a Menlo Park consulting firm, for $615,000 to= =20 analyze who else should be exempt.=20 Exemption applications are due Friday and will be reviewed by people with= =20 specialties ranging from toxicology to environmental sciences to electrical= =20 engineering, said Robert Caligiuri, an Exponent vice president.=20 The company will rank applicants based on safety risks, and it will work wi= th=20 utilities to determine the potential impacts of adding each one to the=20 exemption pool. It will report to the commission in July, and Wood expects = a=20 decision in early August. He hopes the new rules can be implemented by=20 utilities soon after.=20 But no one within the PUC is taking an equally rigorous look at those who a= re=20 already exempt, and the commission is split on whether such a study is=20 necessary. Wood, who specializes in the blackout issue, believes that the= =20 commission simply doesn't have the time for such an effort during the curre= nt=20 emergency.=20 Unsure of their prospects with utilities or the PUC, some are taking their= =20 cases to the Capitol.=20 State Sen. Sheila Kuehl, D-Santa Monica, said lawmakers are scrambling to= =20 draft energy policies that help all Californians, and at the same time, loo= k=20 after interests in their districts.=20 One example is Kuehl's bill that would allow 15 businesses -- including=20 Universal Studios -- which straddle the boundary between Edison and the Los= =20 Angeles Department of Water and Power to get their electricity from DWP. No= t=20 only would that deal provide them with cheaper rates, but it would likely= =20 exempt them from blackouts.=20 The Los Angeles city utility is not part of the region controlled by the=20 state Independent System Operator, and so it functions independently when t= he=20 ISO orders utilities to impose blackouts.=20 Kuehl said the proposal is fair because those businesses were harmed by a= =20 "geographic quirk," where parts of the park are in DWP territory but they a= re=20 solely an Edison customer.=20 "These are already DWP customers," Kuehl said. "They should be able to draw= =20 all their energy from DWP."=20 Other lawmakers are carrying bills for public schools, oil refineries and= =20 customers in areas where there are extreme temperatures. Sen. Richard=20 Polanco, D-Los Angeles, is proposing a law that would ensure municipal=20 utilities -- such as his district's DWP -- don't have to participate in=20 blackouts.=20 Sen. Debra Bowen, D-Marina del Rey, chairwoman of the Senate energy=20 committee, said the state has to realize that not everyone can be exempt.= =20 "All these bills that seek to put one group of folks in a better position= =20 than someone else do is Balkanize the issue," Bowen said. "Unfortunately,= =20 instead of having people come together to try and share the pain equally,= =20 we're seeing folks rushing for their own lifeboat without regard for who ge= ts=20 thrown overboard in the process."=20 The Bee's Carrie Peyton can be reached at (916) 321-1086 or=20 [email protected].=20 Sempra chief: County may fare OK on outages=20 By Kristen Green=20 UNION-TRIBUNE STAFF WRITER=20 May 31, 2001=20 San Diego County may be more insulated from blackouts this summer than the= =20 rest of the state, the chief executive officer of Sempra Energy said=20 yesterday.=20 Stephen Baum said power supply shortages aren't as profound in Southern=20 California, in part, because the capabilities for importing energy are=20 better.=20 And that might mean Northern Californians will face more days in the dark= =20 than San Diegans over the next three months, he said.=20 In a lecture at University of California San Diego yesterday, Baum, who=20 oversees San Diego Gas & Electric's parent company, said the state will=20 probably have at least 30 days of rolling blackouts this summer, an estimat= e=20 often repeated by other energy experts.=20 But Baum hopes to limit San Diego County energy outages by introducing a=20 rolling blackout reduction program. Sempra is asking the state to support t= he=20 program, which would give San Diego County credit for the energy that=20 businesses contribute to statewide energy supplies when electricity reserve= s=20 drop dangerously low.=20 Local companies would turn on generators as the state nears blackouts, whic= h=20 would make more energy available. In return, Sempra asks that the state=20 reduce the number of households that would be blacked out in San Diego=20 County. The state Public Utilities Commission has not considered the idea= =20 yet.=20 State officials, however, have suggested that the program be applied=20 statewide. That would mean San Diego County businesses that run generators= =20 would contribute to the state's energy supply, but the number of local=20 residents impacted by blackouts would not shrink.=20 During the afternoon lecture, attended by about 30 UCSD students and=20 visitors, Baum acknowledged the significance of President Bush's visit=20 Tuesday but said he disagrees with Bush's opposition to price caps.=20 And he expressed frustration that a resolution seems so far off.=20 "I see no leadership in this issue," he said.=20 The lecture was sponsored by the Irwin and Joan Jacobs School of Engineerin= g,=20 the Graduate School of International Relations & Pacific Studies, and the= =20 Center for Energy Research.=20 'Plan B' gains key support in Assembly=20 Lawmakers also want state costs on energy to be fully disclosed By Ed Mendel? UNION-TRIBUNE STAFF WRITER=20 May 31, 2001=20 CALIFORNIA'S POWER CRISIS=20 SACRAMENTO -- Assembly Democratic leaders have decided to back an alternati= ve=20 to Gov. Gray Davis' plan to keep Southern California Edison out of bankrupt= cy=20 that places less emphasis on state purchase of the Edison transmission=20 system.=20 The long-awaited "Plan B" from Assembly Speaker Robert Hertzberg, D-Van Nuy= s,=20 is taking shape as legislative leaders are demanding that the governor reve= al=20 detailed information about state power purchases, which total more than $7= =20 billion.=20 "You can't come to a solution of this problem until you know exactly what t= he=20 Department of Water Resources is spending," said Senate President Pro Tempo= re=20 John Burton, D-San Francisco.=20 A Davis spokesman said the administration expects to begin complying with t= he=20 legislators' request soon. But there is a question about whether standard= =20 confidentiality clauses prevent release of long-term contracts and concern= =20 that revealing daily purchases would result in higher prices.=20 "The governor philosophically wants to release them as soon as possible,"= =20 said Steve Maviglio, Davis' press secretary. "We just want to make sure we= =20 don't adversely affect our ability to get power at lower cost for the=20 summer."=20 Reserve power levels dropped yesterday, and the state power grid operator= =20 declared a Stage 2 alert for the first time in three weeks. The Independent= =20 System Operator said some power plants were off-line for maintenance and ho= t=20 weather across the state increased demand. Fewer imports were available=20 yesterday in comparison to last week.=20 Another reason legislative leaders are pushing for a full disclosure of sta= te=20 spending on power is to help the Legislature prepare a new state budget for= =20 the fiscal year that begins July 1.=20 "There are many reasons that having very precise numbers in that regard are= =20 important to Sen. Burton and the speaker," said Assemblyman Fred Keeley,=20 D-Boulder Creek, who has been active on the power issue in the Legislature.= =20 Keeley said disclosure of power spending costs might encourage Republican= =20 legislators to provide an urgency vote allowing the prompt sale of a bond o= f=20 up to $13.4 billion to repay the state general fund for the power purchases= .=20 Without an urgency vote the state cannot begin issuing the massive bond=20 before late August, nearly two months into the new fiscal year. The bond=20 would be paid off by ratepayers over 15 years.=20 In addition, said Keeley, detailed information about state spending might= =20 also lead to an agreement on legislation sought by Republicans that would= =20 allow "direct access" purchase of electricity, where businesses and other= =20 consumers contract with generators and marketers.=20 The state began buying power for utility customers in January after a faile= d=20 deregulation plan, which froze customer rates as power costs soared, result= ed=20 in a combined $13 billion debt for Edison and Pacific Gas and Electric and= =20 left them unable to borrow.=20 After PG&E went into bankruptcy in early April, Davis quickly completed a= =20 memorandum of understanding to purchase the Edison transmission system for= =20 $2.76 billion as part of a plan to keep Edison out of bankruptcy and able t= o=20 resume buying power for its customers by the end of next year.=20 But Republican legislators immediately opposed the state purchase of the=20 transmission system. Democratic legislators think the plan is too generous= =20 for Edison and are reluctant to approve what consumer groups have called a= =20 "bailout" of the utility.=20 Burton said that before legislators can evaluate an alternative to the=20 governor's plan they need to know how much the state power purchasing agenc= y,=20 the Department of Water Resources, is spending and how much money has been= =20 committed for the future.=20 "Until we can find that out it's kind of tough to plan," Burton said.=20 Speaker Hertzberg has asked Keeley and senior Assembly staff members to=20 prepare the documents for an alternative to the governor's plan that=20 Hertzberg is expected to propose in a few days.=20 "The transmission purchase is not featured as prominently as it was in the= =20 governor's proposal," Keeley said.=20 One of the options considered by the Assembly Democratic "Plan B" group was= a=20 proposal by Assemblymen John Dutra of Fremont and Joe Nation of San Rafael= =20 that would give the state the option of purchasing the Edison transmission= =20 system for $1.2 billion within five years.=20 A key part of both the governor's plan and the Dutra-Nation proposal is=20 giving Edison part of the revenue from monthly utility bills, a "dedicated= =20 rate component," that could be used to pay off Edison's debt and allow the= =20 utility to resume buying power.=20 Both plans also would require Edison to make other concessions, including= =20 providing low-cost power and the return of a $400 million tax refund that= =20 Edison gave to its parent firm. Generators would be asked to forgive 30=20 percent of what they are owed.=20 Assembly Republicans said last week that what the state should receive in= =20 exchange for aiding Edison is not the transmission system, but an agreement= =20 that Edison would build new power plants to provide low-cost power. FERC boss unfazed by Davis' lawsuit threat=20 Court has dismissed similar action already By Toby Eckert=20 COPLEY NEWS SERVICE=20 May 31, 2001=20 WASHINGTON -- The head of the Federal Energy Regulatory Commission said=20 yesterday he is confident the agency would prevail in a legal battle with= =20 California Gov. Gray Davis over electricity price controls.=20 "I feel good about our chances," said FERC Chairman Curtis Hebert, citing a= =20 federal court's decision Tuesday to dismiss a similar lawsuit filed by=20 California legislative leaders.=20 Davis has threatened to sue the FERC for allegedly failing to meet its lega= l=20 obligation to ensure that wholesale power costs are "just and reasonable."= =20 Such a move would be the latest escalation in Davis' running battle with th= e=20 agency over its response to California's power crisis.=20 "I think the 9th Circuit (federal appeals court) made very clear that the= =20 commission is doing its job appropriately," Hebert told reporters.=20 A three-judge panel of the San Francisco-based court rejected a suit by=20 California Senate President Pro Tempore John Burton and Assembly Speaker=20 Robert Hertzberg that sought to force the FERC to impose wholesale price=20 controls. The court said the lawmakers "have not demonstrated that this cas= e=20 warrants the intervention of this court."=20 Davis says his administration has laid a firmer legal foundation for a=20 lawsuit by first pursuing administrative remedies at the FERC. Several stat= e=20 agencies made a flurry of filings with the commission last week, asking it = to=20 crack down on wholesale prices that have increased tenfold over the past=20 year.=20 "The (legislative leaders') lawsuit was thrown out .?.?. because there wasn= 't=20 a preliminary filing with FERC asking for the relief that the plaintiffs we= nt=20 into court to seek," Davis said Tuesday. "We have made such filings as=20 recently as Friday. .?.?. So we have to give them some time to review that= =20 information."=20 But legal experts said the state may have a tough time building a successfu= l=20 case against the FERC.=20 Federal statutes generally "give a great deal of discretion to agencies in= =20 carrying out their duties," said Peter Shuck, an expert in regulatory polic= y=20 at Yale Law School. "So it would be very hard for the state to prevail."=20 Hebert and fellow Commissioner Linda Breathitt have rejected the firm price= =20 controls sought by Davis, overruling Commissioner William Massey, who favor= s=20 them.=20 Hebert says the commission has taken steps to lower wholesale power prices = in=20 California and punish price gouging. He cites $125 million in refunds=20 recently ordered by the agency and a "price mitigation" plan that went into= =20 effect Tuesday.=20 The plan will use a complicated formula to set a price ceiling for power=20 sales during severe shortage periods. Generators breaching the limit will= =20 have to justify their prices to the FERC or pay refunds.=20 Davis and other critics say the plan is riddled with loopholes and will bri= ng=20 little relief to the state. They also say the refunds ordered by the FERC t= o=20 date fall far short of the billions of dollars in overcharges the state has= =20 endured.=20 Meanwhile, a spokesman for the California Independent System Operator, whic= h=20 controls most of California's power grid, said the agency intends to meet a= =20 Friday deadline for filing comments with the FERC on joining a regional gri= d=20 management organization. The FERC has threatened to revoke the limited pric= e=20 curbs if the ISO fails to present a plan for joining the organization.=20 Chula Vista names itself a municipal power entity=20 Move is latest effort to combat energy crisis By Amy Oakes=20 UNION-TRIBUNE STAFF WRITER=20 May 31, 2001=20 CHULA VISTA -- The city has declared itself a municipal utility district as= =20 one possible way to cope with the state's crippling energy crisis.=20 The declaration, approved by the City Council on Tuesday, is the city's fir= st=20 step in examining the costs and benefits of owning and operating all or par= t=20 of an energy generation and distribution system.=20 "It's a fairly simple act in a complex environment," Assistant City Attorne= y=20 Glen Googins told the council.=20 The council also approved an energy conservation and strategy plan, which= =20 outlines eight options for the city to review. The choices, range from=20 entering into a fixed-price contract with an energy service provider to=20 partnering with a third party, such as Duke Energy, to operate a power=20 generation facility.=20 The council also voiced concerns about a proposed 62.4 megawatt peak-use=20 plant to be built near Main Street. Ramco Inc., which wants to build an=20 enclosed gas turbine plant, held a site tour and information meeting Tuesda= y=20 evening.=20 If approved by the California Energy Commission, the plant would be=20 operational by Sept. 30.=20 The city has scheduled its own informational public hearing for residents= =20 from 6 to 8 p.m. Friday at the Otay Community Center, 1671 Albany Ave.=20 Several on the council said another plant could harm the air quality in the= =20 city because the peak-use facilities primarily use natural gas.=20 The city is home to Duke's South Bay facility and has approved plans for a= =20 49.5 megawatt peak-use plant near Main Street.=20 "We think another peaker plant is a little much," Councilwoman Patty Davis= =20 said yesterday. "I think Chula Vista has done its job."=20 Davis said the council had not received any information about the Ramco=20 project. She said she learned about the proposal Tuesday before the council= =20 meeting.=20 By naming itself a municipal utility district, the city can consider=20 establishing and operating public works for its residents, such as water=20 distribution. The decision does not commit the city to providing those=20 services.=20 The council on Tuesday also approved using $50,000 from its traffic signal= =20 fund to install backup battery power supply packs and light emitting diodes= =20 at 55 intersections. The battery packs will ensure that the traffic lights= =20 will function if the area is subject to a rolling blackout. Circuit breaker=20 Giddy investors in the power trade get their wires crossed By Brad Foss=20 ASSOCIATED PRESS=20 May 31, 2001=20 NEW YORK -- Investors in power companies who were sipping champagne after= =20 President Bush unveiled his national energy strategy got a bad case of the= =20 hiccups when Democrats regained control of the Senate.=20 Shares of companies that trade power climbed higher in the days following t= he=20 release of the Bush plan. They've been sliding since Sen. James Jeffords of= =20 Vermont defected from the Republican Party, and Wall Street analysts say=20 perceptions about the fate of the Bush plan are definitely a factor.=20 "The energy bill was so favorable it almost seemed like (power companies) g= ot=20 everything they would have asked for," said Barry Abramson, utility analyst= =20 at UBS Warburg. "Now it looks like everything is going to be more difficult= =20 to achieve, but not impossible."=20 The Bush plan seeks to give oil and gas drillers easier access to public=20 lands, to speed up the review process for refinery and power plant expansio= ns=20 and spur renewed interest in nuclear power.=20 Shares of Calpine, Dynegy, Mirant and San Diego-based Sempra Energy, climbe= d=20 between May 16 and May 21 -- the time between the release of the Bush plan= =20 and reports of a Senate shake-up.=20 These stocks began to descend May 23, when Sen. Jeffords announced he was= =20 leaving the GOP, and have continued downward, with Calpine and Dynegy losin= g=20 13 percent, Mirant off 17 percent and Sempra Energy down more than 4 percen= t.=20 Still, analysts say investors might be overreacting.=20 "Despite the fanfare following the unveiling of President Bush's energy pla= n,=20 we believed its chances of passage -- even with a Republican majority -- wa= s=20 slim at best," said Daniel Ford, head of a team of energy analysts at Lehma= n=20 Brothers. "With Jeffords' move, the effort may be even more remote, but the= =20 most likely outcome, inaction, has not changed."=20 Ford acknowledged that talk of capping wholesale electricity prices for=20 California has resurfaced in the Senate, though he dismissed the likelihood= =20 of this happening -- even with a Democratic majority -- because "Bush still= =20 has veto power and, to date, has been steadfastly against caps."=20 Democrats no doubt will emphasize conservation more than Republicans would= =20 have, but the momentum shift in the Senate will not be overly dramatic,=20 according to Bill Breier, vice president of the Edison Electric Institute, = a=20 Washington-based group that represents utilities.=20 But other experts note how quickly political positions could shift if Weste= rn=20 power markets suffer the kind of meltdown San Diego experienced last summer= .=20 During that crisis, power bills quickly tripled, costs were passed directly= =20 to electricity consumers and even the most conservative local Republican=20 leaders called for an end to the open market and a cap on wholesale=20 electricity prices.=20 There still will be fierce battles over efforts to relax power plant=20 emissions -- a Bush proposal that would benefit coal burners -- and proposa= ls=20 to expand the nation's electricity and natural gas infrastructure.=20 "There's going to have to be consensus and we've known that from the get-go= ,"=20 Breier said.=20 Analysts emphasized that it would be wrong to assume that much of the Bush= =20 energy plan is now dead-on-arrival with Democrats in control of the Senate.= =20 For instance, attention has been given to the fact that Sen. Jeff Bingaman,= a=20 Democrat from New Mexico, will take over as chairman of the Senate Energy a= nd=20 Natural Resources Committee, replacing Sen. Frank Murkowski of Alaska.=20 Bingaman, however, supports legislation critical to the nuclear power=20 industry, including the Price Anderson Act, a 1957 law set to expire in 200= 2=20 that limits corporate liability from a nuclear accident.=20 Other energy strategies favored by Bush, such as the deregulation of=20 electricity markets and the construction of 1,300 power plants over the nex= t=20 20 years, will not be affected by the Senate overhaul simply because their= =20 implementation is heavily dependent on state government, not federal, said= =20 Ray Niles, who analyzes the power and natural gas industries for Salomon=20 Smith Barney.=20 "I don't think it makes a huge amount of difference," Niles said. "Things= =20 like increasing drilling were going to be a hard haul for the country=20 anyway."=20 Staff writer Craig D. Rose contributed to this report.=20 After months of pressure, mayor agrees on power plant=20 By Brian Bergstein ASSOCIATED PRESS=20 May 31, 2001=20 SAN JOSE =01) After months of pressure, Mayor Ron Gonzales has dropped his= =20 opposition to a proposed large power plant in southern San Jose.=20 In a crowded news conference in his office Wednesday, Gonzales announced hi= s=20 staff had negotiated important concessions from the companies that want to= =20 build the $400 million Metcalf Energy Center =01) Calpine Corp. and Bechtel= =20 Enterprises Inc.=20 The companies agreed to donate $6.5 million to community programs, offer=20 long-term power contracts at below-market rates to San Jose businesses and= =20 take extra steps to keep the plant's pollution levels down.=20 "We came to the conclusion this power plant was on its way to San Jose, and= =20 we needed to do everything we could to use our leverage to make this the be= st=20 facility we could," Gonzales said. "We worked hard to make this plant bette= r=20 for the people of San Jose."=20 Gonzales and the entire City Council in November voted against the=20 600-megawatt Metcalf plant on the grounds it would be too close to=20 residential areas.=20 But as California's energy crisis deepened, Gonzales' position became=20 increasingly unpopular. Gov. Gray Davis, state representatives, county=20 supervisors and the Sierra Club called for the plant to be built.=20 The decision on whether the plant will be built now rests with the Californ= ia=20 Energy Commission, which did not return a call for comment Wednesday. The= =20 agency, which is expected to vote this summer, could have approved the plan= t=20 even without Gonzales' support.=20 But Gonzales said the city still "could have made it difficult" by refusing= =20 to extend San Jose's recycled water line to the plant. Calpine and Bechtel= =20 agreed to pay for part of the extension.=20 Peter Cartwright, president and chief executive of San Jose-based Calpine,= =20 also said Gonzales' support was important.=20 "We didn't want a situation where the Energy Commission overruled the city,= "=20 Cartwright said. "We have to live here."=20 Construction on the natural gas-fueled plant could begin this summer, meani= ng=20 it could start generating enough electricity for 450,000 homes in 2003.=20 The Metcalf plant would be built in the Coyote Valley, one of the city's la= st=20 remaining chunks of open space. The plant has been opposed by Internet=20 equipment maker Cisco Systems Inc., which plans to build a $1.3 billion=20 office complex nearby. A Cisco spokesman did not return a call for comment= =20 Wednesday.=20 Members of the Santa Teresa Citizen Action Group, based in a neighborhood= =20 near the proposed plant, said the mayor failed to win any significant=20 environmental concessions on the Metcalf plant. The group's president,=20 Elizabeth Cord, said she will go to court to block the plant if necessary.= =20 Panel OKs weakened utility district bill=20 By Ed Mendel=20 UNION-TRIBUNE STAFF WRITER=20 May 30, 2001=20 SACRAMENTO -- A watered-down bill originally intended to create a San Diego= =20 County municipal utility district was approved by an Assembly committee=20 yesterday after San Diego Gas & Electric dropped its opposition.=20 The committee rejected a bill last week authorizing the creation of a new= =20 municipal utility district. The new version of the bill simply expresses th= e=20 "intent" that the county, cities and special districts cooperate to obtain = a=20 stable source of low-priced power.=20 The author, Assemblyman Mark Wyland, R-Escondido, pledged to bring the bill= =20 back to the committee for final approval after attempting to negotiate=20 agreements in the Senate on the operation, governing and public approval of= a=20 proposed new agency.=20 "What we are really asking for today is to let this proceed out of this=20 committee, because we do need to address many, many, many of the issues tha= t=20 were raised and then have the bill come back to this committee for its fina= l=20 working," Wyland told the committee.=20 Wyland said he hopes to negotiate a bill that would allow the new agency to= =20 obtain cheap long-term power contracts, possibly by forming groups of=20 customers that could purchase power directly from generators or marketers.= =20 He said the agency might also generate some power through San Diego County= =20 Water Authority hydroelectric facilities or by purchasing the South Bay pla= nt=20 in Chula Vista, which is owned by the San Diego Unified Port District and= =20 operated by Duke Energy under a lease.=20 One thing the new agency would not be doing is using the public power of=20 "eminent domain" to force SDG&E to sell any of its property. An SDG&E=20 lobbyist said the utility dropped its opposition after it was made clear th= at=20 the proposed new agency would not have the power of eminent domain.=20 Wyland said he thought the original version of the bill was rejected by the= =20 committee partly because SDG&E "felt burdened" and partly because committee= =20 members thought it might influence attempts to create municipal utility=20 districts in other areas of the state.=20 Advocates of municipal utility districts say they have historically provide= d=20 cheaper power than investor-owned utilities. The Los Angeles Department of= =20 Water and Power has continued to provide low-cost power to its customers=20 during the current electricity crisis.=20 A proposal to create a new municipal utility district may appear on the=20 ballot in San Francisco this fall. Backers of the San Diego proposal=20 initially wanted to create a new district without a vote of the people,=20 hoping to quickly get cheaper power.=20 Now legislators have made it clear that a vote of the people will be=20 required. But there is a dispute over whether approval should require a=20 majority vote or a two-thirds vote, as urged by some Republicans who think= =20 the proposed new agency might be able to raise taxes.=20 Wyland said that even if the legislation is approved this year, getting a= =20 detailed proposal ready for the ballot next March may be difficult. Some=20 groups in Escondido and San Marcos have been talking about creating municip= al=20 utility districts in those cities.=20 Jim Madaffer, a San Diego city councilman, told the committee that he=20 believed the bill could allow streamlining and efficiencies and other steps= =20 that SDG&E might find beneficial.=20 "It's on that premise that I am here today," Madaffer said, "and I believe= =20 also that SDG&E is now allowing it to move forward."=20 Madaffer was corrected by the committee chairman, Rod Wright, D-Los Angeles= ,=20 who said the committee decides whether bills pass. Madaffer quickly agreed,= =20 saying he meant to say that SDG&E had dropped its opposition.=20 Wright, who opposed the original version of the bill last week, joined in t= he=20 13-to-0 vote for the new measure.=20 "You have a lot of work yet to do," Wright told Wyland.=20 The committee also approved a bill by Assemblyman Jay La Suer, R-La Mesa,= =20 that would require the SDG&E "balancing account" debt to be paid off by=20 ratepayers over a five-year period.=20 Legislation capped SDG&E rates last September at a level far below the=20 wholesale cost of power, producing a debt of more than $600 million by last= =20 month, a sum known as the balancing account.=20 An aide said La Suer wants to protect ratepayers from a large "balloon=20 payment" due in a short period. The Utility Consumers' Action Network of Sa= n=20 Diego opposed the bill, arguing that the debt might be lowered by=20 negotiations or regulatory action.=20 The aide said the bill does not specify the amount of the debt and that La= =20 Suer is willing to discuss the issue with the consumer group.=20 Davis fails to sway Bush on price caps=20 Meeting cordial, but president remains opposed to controls By John Marelius=20 UNION-TRIBUNE STAFF WRITER=20 May 30, 2001=20 LOS ANGELES -- After a weeklong buildup worthy of international summitry,= =20 President Bush and Gov. Gray Davis met yesterday to discuss California's=20 electricity crisis, leaving unresolved their fundamental disagreement over= =20 the merits of imposing federal price controls to curb soaring utility rates= .=20 While the meeting between two political rivals was steeped in cordiality, i= t=20 ended with Davis proclaiming he intended to sue the federal government if i= t=20 didn't deliver price relief to California electricity consumers.=20 "I am going to pursue every recourse available to me," Davis told reporters= =20 after the 35-minute meeting. "We will file a lawsuit against the Federal=20 Energy Regulatory Commission for failing to discharge its legal obligation.= "=20 While Bush refused to budge on wholesale electricity price caps, Davis said= =20 he was pleased by one Bush action. The president designated Pat Wood III,= =20 Bush's first appointee to the FERC, to act as a personal emissary between t= he=20 governor and the regulatory commission's investigation into allegations of= =20 market manipulation by Texas natural gas distributors who charge California= =20 three times what they charge New York.=20 More than four months into his presidency, Bush yesterday made his first=20 public appearances in California as president of the United States.=20 The president met with Marines and their families at Camp Pendleton in the= =20 early morning, then traveled to Los Angeles, where he delivered a speech on= =20 energy and economic policy to the Los Angeles World Affairs Council.=20 Summing up his approach to unpredictable electricity prices and supplies, t= he=20 president said:=20 "My administration will continue to work to help California through the=20 difficult months ahead. All our efforts are guided by a simple test: Will a= ny=20 action increase supply at fair and reasonable prices? Will it decrease dema= nd=20 in equitable ways? Anything that meets that test will alleviate the=20 shortages, and we will move swiftly to adopt it. Anything that fails that= =20 test will make the shortage worse."=20 The president outlined his opposition to electricity price controls -- a=20 stance Democrats have exploited to portray the Bush administration as a=20 lackey for profiteering energy companies.=20 "We will not take any action that makes California's problems worse. And=20 that's why I oppose price caps," he said. "At first blush, for those=20 struggling to pay high energy bills, price caps may sound appealing. But=20 their result will ultimately be more serious shortages and therefore even= =20 higher prices."=20 An long-distance war of words between Democrat Davis and Republican=20 administration officials, particularly Vice President Dick Cheney, has=20 escalated in recent weeks over energy policy.=20 With Davis two seats away on the World Affairs Council dais, Bush pointedly= =20 called for an end to the acrimony.=20 "For too long, too often, too many have wasted energy pointing fingers and= =20 laying blame," the president said. "Energy is a problem that requires actio= n=20 -- not politics, not excuses, but action. Blame shifting is not action; it = is=20 a distraction."=20 Leading up to yesterday's meeting was a week of posturing by spokesmen for= =20 the two leaders on seemingly every detail, including who invited whom to th= e=20 meeting in the first place.=20 But when the two met -- Bush and Davis are casual acquaintances from their= =20 briefly overlapping tenures as governors -- the session was, by all account= s,=20 as devoid of rancor as it apparently was of productivity.=20 "The meeting was cordial, informational, businesslike," Davis said.=20 As Davis told it, he even deployed the only remaining weapon in his=20 gubernatorial arsenal -- the threat of a lawsuit -- delicately.=20 "I said, 'Mr. President, you understand I have to do everything in my power= =20 to seek relief for the people of this state. You would do the same thing if= =20 you were in my position,' and he agreed," Davis said.=20 Karl Rove, Bush's hard-nosed chief political adviser, also characterized th= e=20 meeting in amiable terms.=20 "They did agree on one thing: that California is entitled to price relief,"= =20 Rove told reporters. Of course, he went on, the president's prescription fo= r=20 price relief lies in conservation and development of new energy sources, no= t=20 price controls.=20 "When the cap was lowered by the administration in California, 3,000=20 megawatts of power disappeared from California (to be sold elsewhere)," Rov= e=20 said.=20 For his part, Davis contended the Bush administration's free-market economi= c=20 arguments against price caps are beside the point. He maintained federal la= w=20 compels the FERC to guarantee reasonable wholesale electricity prices and= =20 stabilize wildly fluctuating markets.=20 Lawsuits by states against the federal government have little history of=20 success. Indeed, a lawsuit against the FERC by Assembly Speaker Bob=20 Hertzberg, D-Van Nuys, was thrown out by the 9th U.S. Circuit Court of=20 Appeals yesterday just as Davis was threatening another one.=20 Davis said the court rejected Hertzberg's suit because it failed to allow= =20 administrative remedies to be exhausted. The governor said he filed a numbe= r=20 of motions with FERC seeking rate relief last Friday and would wait 30 days= =20 or so for those to run their administrative course before proceeding with= =20 legal action.=20 Davis said the total electricity bill in California went from $7 billion in= =20 1999 to a projected $50 billion this year. He said he reminded the presiden= t=20 of the potential political disaster facing both of them if the electricity= =20 situation is not brought under control.=20 "I did tell him that if we have to pay $50 billion for power, it could well= =20 trigger a recession in California, which could drag down the American econo= my=20 into a recession as well," he said.=20 Bush was greeted at both stops yesterday by protesters denouncing his energ= y=20 and environmental policies. Three women -- one of them former Green Party= =20 U.S. Senate candidate Medea Benjamin -- tried to disrupt Bush's World Affai= rs=20 Council speech and were removed from the ballroom.=20 Earlier in the day, Davis held a session where several San Diegans told how= =20 they were affected by soaring electricity costs: YMCA director Michael=20 Brunker, Gabriel and Christine Rodriguez of Chiquita's Mexican Restaurant,= =20 and Cybele Thompson, president of the San Diego Building Owners and Manager= s=20 Association.=20 "It may not be as obvious as an earthquake," said Brunker of the Jackie=20 Robinson Family YMCA. "But it's hit us in such a way that it's really=20 crippling a lot of people."=20 Staff writer Ed Mendel contributed to this report.=20 Head of FERC confident California suit will fail=20 By Toby Eckert COPLEY NEWS SERVICE=20 May 30, 2001=20 WASHINGTON =01) The head of the Federal Energy Regulatory Commission said= =20 Wednesday he is confident the agency would prevail in a legal battle with= =20 California Gov. Gray Davis over electricity price controls.=20 "I feel good about our chances," FERC Chairman Curtis Hebert said, citing a= =20 federal court's decision Tuesday to dismiss a similar suit filed by=20 California legislative leaders.=20 Davis has threatened to sue the FERC for allegedly failing to meet its lega= l=20 obligation to ensure that wholesale power costs are "just and reasonable."= =20 Such a move would be the latest escalation in Davis' running battle with FE= RC=20 over its response to California's power crisis.=20 "I think the 9th Circuit (federal appeals court) made very clear that the= =20 commission is doing its job appropriately," Hebert told reporters.=20 A three-judge panel of the San Francisco-based court rejected a lawsuit by= =20 California Senate President Pro Tempore John Burton and Assembly Speaker=20 Robert Hertzberg that sought to force FERC to impose wholesale price=20 controls. The court said the lawmakers "have not demonstrated that this cas= e=20 warrants the intervention of this court."=20 Davis says that his administration has laid a firmer legal foundation for a= =20 suit by first pursuing administrative remedies at FERC. Several state=20 agencies made a flurry of filings with the commission last week, asking it = to=20 crack down on wholesale prices that have increased ten-fold over the past= =20 year.=20 "The (legislative leaders') lawsuit was thrown out ... because there wasn't= a=20 preliminary filing with FERC asking for the relief that the plaintiffs went= =20 into court to seek," Davis said Tuesday. "We have made such filings as=20 recently as Friday. ... So we have to give them some time to review that=20 information."=20 But legal experts said the state may have a tough time building a successfu= l=20 case against FERC.=20 Federal statutes generally "give a great deal of discretion to agencies in= =20 carrying out their duties," said Peter Shuck, an expert in regulatory polic= y=20 at Yale Law School. "So it would very hard for the state to prevail."=20 Hebert and fellow Commissioner Linda Breathitt have rejected the firm price= =20 controls sought by Davis, overruling Commissioner William Massey, who favor= s=20 them.=20 Hebert insists the commission has taken steps to lower wholesale power pric= es=20 in California and punish price gouging. He cites $125 million in refunds=20 recently ordered by the agency and a "price mitigation" plan that went into= =20 effect Tuesday.=20 The plan will use a complicated formula to set a price ceiling for power=20 sales during severe shortage periods. Generators breaching the limit will= =20 have to justify their prices to FERC or pay refunds.=20 Davis and other critics say the plan is riddled with loopholes and will bri= ng=20 little relief to the state. They also say the refunds ordered by FERC to da= te=20 fall far short of the billions of dollars in overcharges the state has=20 endured.=20 Meanwhile, a spokesman for the California Independent System Operator, whic= h=20 controls most of California's power grid, said the agency intends to meet a= =20 Friday deadline for filing comments with FERC on joining a regional grid=20 management organization. FERC has threatened to revoke the limited price=20 curbs if the ISO fails to present a plan for joining the organization.=20 California's three investor-owned utilities =01) Southern California Edison= , San=20 Diego Gas & Electric and Pacific Gas & Electric =01) plan to make similar= =20 filings.=20 Grid managers call Stage 2 alert, but hope to avoid blackouts=20 ASSOCIATED PRESS=20 May 30, 2001=20 SACRAMENTO =01) Managers of the state's power grid called a Stage 2 alert= =20 Wednesday and asked customers to conserve power as temperatures climbed.=20 The Independent System Operator said it did not expect blackouts, although= =20 spokeswoman Stephanie McCorkle said electricity supplies were "obviously ve= ry=20 tight."=20 Higher temperatures statewide were driving up electricity use about 1,200= =20 megawatts over Tuesday, she said.=20 Power plants off-line for repairs and increased power usage caused the=20 state's electricity reserves to dip below 5 percent, prompting officials to= =20 declare a Stage 2. A Stage 3 alert is called when reserves are in danger of= =20 falling below 1.5 percent and can be followed by rolling blackouts.=20 FERC Chief Unfazed By Threat of Third Lawsuit=20 By RICARDO ALONSO-ZALDIVAR and JUDY PASTERNAK, Times Staff Writers=20 ?????WASHINGTON--The beleaguered chairman of the Federal Energy Regulatory= =20 Commission said Wednesday that he was not fazed by California Gov. Gray=20 Davis' threat to sue the agency for failing to cap wholesale electricity=20 rates. ?????California officials have gone to the federal courts twice before to= =20 force FERC to impose price caps, Curt Hebert told reporters. And the U.S. 9= th=20 Circuit Court of Appeals in San Francisco has twice rejected the suits. ?????Davis, observing that FERC has a legal obligation to ensure that=20 wholesale electricity rates are "just and reasonable," threatened to go to= =20 court again after he failed in a meeting Tuesday to persuade President Bush= =20 to support caps on wholesale electricity prices. ?????"They've sued us two times and they have been [dismissed] two times,"= =20 Hebert said. "I feel very good about it." ?????Responding to reporters' questions, Hebert also appeared to be unaware= =20 of media reports that President Bush had asked a rival for his chairmanship= ,=20 Patrick Wood III, to play a special role in dealing with California's=20 problems. ?????Wood, a Bush confidant who until now had been chairman of the Texas=20 Public Utility Commission, was confirmed by the Senate as a FERC commission= er=20 last week and is widely expected to be named to Hebert's job. The president= =20 can designate any FERC commissioner as chairman without further action by t= he=20 Senate. ?????White House officials said during Bush's visit to Los Angeles on Tuesd= ay=20 that Wood would follow up on concerns raised in the president's meeting wit= h=20 Davis. ?????Wood said in an interview that he talked briefly with Davis three week= s=20 ago and more recently with California PUC President Loretta Lynch. He said= =20 his charge is vague: to review the entire situation. ?????"I'm looking at short-term things and long-term things," he said, noti= ng=20 that he had heard from lawmakers "on both sides of the aisle" complaining= =20 that FERC had not gone far enough. ?????Wood, who advocates a more activist role for FERC, said he wants to=20 monitor how the agency's efforts to limit price spikes in California are=20 working and that he might push for changes. Unlike Hebert, he said the=20 agency's standard for deciding whether a company has market power--enough= =20 influence to sway prices--needs to be reconsidered. He said he is also open= =20 to increasing the amount of rebates ordered to utilities for January. ?????And he said he thought FERC should also take another look at the desig= n=20 of California's deregulated market. "Your work never stops," Wood said. "Yo= u=20 never get there and say, 'We're done.' " ?????California, he added, "is salvageable," though he said blackouts are= =20 inevitable this summer. ?????FERC itself has acknowledged that California is paying unfair prices f= or=20 electricity, particularly during power shortages. But instead of imposing= =20 price caps, the agency has instituted a complex system to monitor the marke= t=20 and seek refunds from power sellers that overcharge during emergencies. ?????A majority of FERC's governing board believes that price caps would=20 deter investors from building new power plants in California, thereby=20 complicating efforts to increase energy supplies. Price caps "would destroy= =20 what is left of California," Hebert said Wednesday. ?????State officials disagree. ?????With California paying as much as $1,900 per megawatt hour to avert=20 blackouts earlier this month--five times the current market price--state=20 officials argue that FERC's approach is no deterrent and that the agency ha= s=20 a legal obligation to impose price caps. ?????Davis and others contend that temporary controls would bring order to= =20 the power markets and prevent further damage to California's economy. They= =20 point out that the energy industry operated efficiently under government-se= t=20 rates until the recent onset of deregulation.=20 ?????But the courts have held that FERC has wide latitude in fulfilling its= =20 obligations under federal law. ?????In an April 11 decision denying a petition for relief by the city of S= an=20 Diego, a 9th Circuit panel ruled that the same law that gives FERC authorit= y=20 to impose price caps also allows it to pursue alternatives. ?????On Tuesday, the same court dismissed a petition from state Senate lead= er=20 John Burton, citing its earlier decision in the San Diego case. Copyright 2001 Los Angeles Times=20 The Home Energy Drain=20 How Appliances Draw Electricity, Even When Off=20 By DAVE WILSON, Times Staff Writer=20 ?????When devices such as stereos are turned off, we think of them as dead.= =20 But it turns out they're only mostly dead. And mostly dead is a little bit= =20 alive. Graphic: Standby power consumption of common appliances.=20 ?????For instance, have you ever wondered how a television set can understa= nd=20 the "power on" command from the remote control if the TV isn't using any=20 power at all? The fact is nearly all television sets--in fact, most home=20 appliances--use power as long as they're plugged in to a live electrical=20 outlet, if only to receive and interpret remote control signals or keep the= =20 little clock running. ?????All those little trickles of electricity can add up to a steady stream= =20 of juice that users end up paying for--power that's being drained from a=20 system that can't meet the state's needs as California enters a summer of= =20 rolling blackouts and rising power bills. Plus, the delicate electronic=20 circuitry that makes our favorite gizmos work can be damaged when the power= =20 flow abruptly stops and starts. ?????Researchers refer to this sort-of-off-but-sort-of-on condition as=20 "standby power" and say the drain on the electrical supply is=20 significant--and continuing to rise. ?????"When you add up all these things like TVs and VCRs, it looks like=20 standby use in California is almost 10% of the residential use of=20 electricity," said Alan Meier, staff scientist at the Berkeley Laboratory a= nd=20 an internationally recognized expert on the phenomenon of standby power dra= in. Shopping for a Surge Supressor Fluctuating power levels can cause damage under certain conditions to devic= es=20 that draw power all the time. One tactic to prevent damage is using a surge= =20 supressor. =01=07 When shopping for a surge suppressor, the key number is the maximum = level=20 of electricity that will be let through in case of a surge. This number is= =20 referred to as, depending on the marketing guys behind the product, "clampi= ng=20 voltage," "let-through voltage" or "voltage rating." The lower the number,= =20 the better. =01=07 Right now, the best rating you can get is a surge suppressor carryin= g the=20 UL inspection seal certifying that it's met the 1449 standard and a clampin= g=20 voltage rating of 330 volts. =01=07Also, look for suppressors with a 1-nanosecond response time or less;= =20 cheaper suppressors take longer to respond to a spike, which can be too lat= e=20 to protect your components. -- DAVE WILSON ?????The cost of this drain probably isn't especially onerous to most=20 consumers. Leaving your answering machine plugged in all the time, for=20 instance, will cost you about 37 cents a month, assuming you're paying abou= t=20 17 cents a kilowatt-hour. ?????The total cost of standby power probably is in the neighborhood of $10= 0=20 a year per household at current rates, though that figure will rise as=20 electricity becomes more expensive. Though that's not a vast sum to many=20 people, reducing electricity usage is critical to maintaining a steady powe= r=20 supply in California. ?????The difference between a Stage 2 power emergency and Stage 3--the poin= t=20 at which rolling blackouts kick in--is only 3.5% of total reserve electrica= l=20 capacity. So cutting back on that leaking 10% in homes can make the=20 difference. ?????Not all the standby power is wasted. An answering machine is pretty=20 useless if it doesn't have access to power all the time since part of the= =20 device's job is to be primed to pick up the phone if it should ring. It's= =20 those other devices, such as the microwave oven clock that pulls power even= =20 though nothing's being cooked, that are the problem. All devices that use= =20 standby power could be designed to use as little electricity as possible. ?????Standby power drain is getting worse as more of the items we have in o= ur=20 homes move from mechanical switches and timers to electronic controls. The= =20 typical household today uses 7,000 kilowatt-hours of power each year. ?????Overall, residential consumption of power has risen 17.6%, from 68,000= =20 gigawatt-hours in 1990 to an estimated 80,000 gigawatt-hours, according to= =20 the California Energy Commission. Even when adjusted for population growth,= =20 Californians use more power than they did 10 years ago--despite the fact th= at=20 household appliances got more energy efficient. ?????One reason: We've got a lot more energy-gobbling devices in our homes.= =20 For instance, Fred Johnson, who works in Silicon Valley's high-tech industr= y,=20 has three TVs, each with a DVD player. He's also got two TiVo digital=20 recorder boxes, four computers and two stereo systems. ?????"Fortunately, it's not all on simultaneously," he said. ?????Another reason for the increase in power draw is a simultaneous increa= se=20 in the number of devices that are always on. For instance, older microwave= =20 ovens used a mechanical timer, which means the device didn't draw power=20 unless the oven was actually heating something up. Newer ovens use electron= ic=20 touch pads and digital clocks, both of which require a steady stream of=20 power. Part of the reason for the shift was interest in reliability;=20 mechanical switches wear out or need maintenance, whereas electronic contro= ls=20 are generally service free. ?????Those digital controls are showing up in things such as stoves,=20 dishwashers, washers and dryers, which means these devices also leak=20 electricity even when they're not actually working. ?????Some devices are so badly designed that they generally use as much=20 electricity when they're theoretically off as when they're on, Meier said.= =20 "The set-top boxes for cable and satellite television broadcasts are good= =20 examples," he said. Manufacturers aren't under any pressure to improve the= =20 design of electronic components in the home because there's no financial=20 incentive for them to do so. ?????Consumers wind up paying the price. ?????"We think there are typically 20 devices in a home that are consuming= =20 standby power," Meier said. "In the average home in California, standby pow= er=20 is somewhere around 500 kilowatt-hours a year. And some users are paying 20= =20 cents a kilowatt. So that's about $100 a year for appliances that aren't=20 actually doing what you bought them for."=20 ?????That hundred bucks during the course of a year might seem a pretty sma= ll=20 price to pay for the ability to change the music coming out of the CD playe= r=20 without having to lever yourself off the couch. ?????But even if it does bother you, there's not a lot you can do, short of= =20 unplugging devices when they're not in use. Sometimes unplugging a device= =20 isn't practical, though, because many components will lose information stor= ed=20 in them if the power goes out. Your radio might forget its presets, your VC= R=20 will lose the time and some TVs will have to be reprogrammed with the local= =20 television stations available. ?????On a fundamental level, this is an issu= e=20 that has to be addressed by electronics manufacturers, who, until now,=20 largely ignored the issue. Meier has been leading a fight during the last= =20 couple of years to get manufacturers to build devices that use standby powe= r=20 more efficiently, to keep that functionality but make better use of=20 electricity. ?????"Some of these devices draw 15 or 20 watts," Meier said. New designs c= an=20 reduce that flow to 1 watt, but few manufacturers have shown enthusiasm for= =20 the goal. That might change as governments put pressure on manufacturers.= =20 Australia, for one, recently endorsed the goal of 1-watt standby drain for= =20 all appliances.=20 ?????In addition, there is some concern that, under certain conditions,=20 devices that draw power all the time could be slightly more vulnerable to= =20 damage caused by fluctuations in the power supply than devices that are=20 completely powered down. ?????If that's true, it makes such things as surge suppressors and=20 uninterruptible power supplies even more important to consumers at a time= =20 when rolling blackouts are expected to become a regular occurrence. ?????Surge suppressors are designed to choke off a spike of electricity=20 before it can reach your valuable components and damage them. Typically, a= =20 lightning strike a mile or so away can flow down electric, telephone or cab= le=20 television wires and fry any component connected to the line, such as a hom= e=20 computer. The surge suppressor intercepts that overload. ?????These surges can occur in many different situations, such as apartment= =20 buildings where large motors--for instance, those used in air conditioners= =20 and elevators--routinely go on and off. ?????"Any time the power goes off and goes back on again, that's a tremendo= us=20 hit on the electrical system, and that can cause surges," said John=20 Drengenberg, an electrical engineer who's manager of global consumer affair= s=20 for Underwriters Laboratories, the nonprofit testing organization. "I think= =20 maybe right now in California, in particular, installing transient voltage= =20 surge suppressors would be a good idea." ?????Surge suppressors don't help at all with a brownout, which is an=20 insufficient flow of electricity through the wires. ?????Brownouts are most often caused by things such as a squirrel shorting= =20 out a line and can be identified by suddenly dimmed lights. Low voltage can= =20 seriously damage appliances that use motors--such as refrigerators and air= =20 conditioners--so if the lights go dim and stay dim, unplug such appliances= =20 until the power company makes repairs. ?????Items that use electricity to create heat or produce light will contin= ue=20 to function with little chance of damage; they just won't get as hot or be = as=20 bright. ?????Some devices, such as computers, will get trashed by low power or sudd= en=20 loss of power, especially if the power fluctuates while the system is writi= ng=20 data to the hard drive. Computers should be turned off using the standard= =20 shutdown procedure for their particular make and model to avoid corruption = of=20 the operating system, which can create lots of headaches for users. ?????To avoid that, consider an uninterruptible power supply, basically jus= t=20 a system of rechargeable batteries that's always plugged in to the electric= al=20 outlet. Plug the components into the UPS, and if the voltage on the line=20 drops or disappears, the juice flows from the batteries to the device. ?????Many of these systems also come with surge suppressors built in as wel= l,=20 protecting equipment from both too much and too little electricity. A=20 high-end consumer UPS costs less than $200. ?????Most of these systems are designed to safely power down a computer in= =20 the event of a power outage. They won't provide enough juice for more than = a=20 few minutes on a standard desktop computer. ?????And of course, the debate about whether some conservation efforts have= =20 diminishing returns continues. Turning off your computer reduces electricit= y=20 consumption, but repeatedly turning the computer off and on can stress the= =20 electronic circuitry, which could cause it to fail sooner. ?????Devices that are pulling down considerably less electricity might eke= =20 out an hour or two on a UPS. If you find yourself growing increasingly=20 annoyed at having to reset the clock on the VCR or microwave, a=20 consumer-level UPS might provide enough stored power to get you through a= =20 blackout that lasts an hour or two. ?????Don't plan on watching TV or making popcorn. We're talking strictly=20 about keeping the clock on line, although most people probably won't be=20 interested. "Spending $150 because you don't want to set the clock on the V= CR=20 probably won't be very appealing to many people," said James Little, a=20 spokesman for Belkins Components, which makes such devices. ?????And there's no such thing as a free lunch. UPS systems are also a drai= n=20 on power. It costs money to keep the batteries charged in preparation for t= he=20 blackout. So don't look to a UPS as a solution to conservation. ?????What you can do is plug components that can safely be completely shut= =20 down into a surge suppressor and kill the power to that surge suppressor wh= en=20 you're not using them. ?????For instance, think about running all the power cords for every=20 component that makes up your stereo system--amplifier, CD player, DVD=20 player--into a single power strip equipped with a surge suppressor. Most=20 surge suppressors have a kill switch, a button that will cut off all power = to=20 the devices plugged into it. ?????Hit the switch and make those components more than mostly dead. * * * ?????Dave Wilson is The Times' personal technology columnist. Copyright 2001 Los Angeles Times=20 Heat's on, but so are lights=20 100-degree temperatures aren't widespread, sparing the grid=20 Matthew B. Stannard, Carolyn Said, Chronicle Staff Writers Thursday, May 31, 2001=20 ,2001 San Francisco Chronicle=20 URL: http://www.sfgate.com/cgi-bin/article.cgi?f=3D/c/a/2001/05/31/MN206011= .DTL=20 Thermometers reached triple digit records around the Bay Area yesterday,=20 feeding several fires and challenging, but not quite breaking, the state's= =20 power grid.=20 The sweltering heat was caused by a huge dome of hot air that blocked the s= ea=20 breezes that normally keep the Bay Area comparatively cool this time of yea= r.=20 National Weather Service forecasters said the high pressure system, centere= d=20 over Nevada, should head east today and allow temperatures to return to=20 somewhere near normal by tomorrow.=20 The short duration and highly localized nature of the heat wave --=20 concentrated mainly in Central and Northern California -- kept it from addi= ng=20 much to the state's energy woes, said Stephanie McCorkle, a spokeswoman for= =20 the Independent System Operator, which oversees the state's power grid.=20 "Those are the kinds of heat waves that we like: the type that are isolated= =20 to one area."=20 Yesterday presented California's grid operators with a better scenario than= =20 two weeks ago, when more-pervasive hot weather and numerous plant service= =20 interruptions set off two days of rolling blackouts.=20 While no rolling blackouts were ordered, the ISO declared a Stage 2 energy= =20 alert at 2 p.m., asking customers to conserve power as temperatures climbed= =20 and the state's energy reserves dipped below 5 percent.=20 Aiding yesterday's situation was the availability of more power plants in= =20 service than during the May 7 and May 8 blackouts. About 14,400 megawatts o= f=20 power generation -- one-third of the state's capacity -- were offline for= =20 repairs and other reasons on May 7 and 8, while yesterday the figure was 10= ,=20 700 megawatts out of service.=20 Meanwhile, downtown San Francisco melted as the thermometer hit 101 degrees= ,=20 higher than any day in May since at least 1914. Not quite the city's all-ti= me=20 high of 103, but close enough to drive some people out of the city=20 altogether.=20 FLEEING HOT S.F. Sonafman Allah, 22, drove to Lake Temescal in Oakland with his friends Nabi= la=20 Suleiman, 20, and her sister, Saida, 19.=20 "It's a quick little getaway from San Francisco," Allah said, relaxing on a= =20 blanket spread under the shade of a tree.=20 But Oakland was pretty hot, too. Temperatures at the airport hit 94, the=20 hottest May 30 since 1978. May 30 records were also shattered in San Jose,= =20 where the mercury hit 100; San Rafael, which saw 99; Santa Cruz, where=20 surfers sweltered in 92 degree heat.=20 Redwood City, at a record 101, was hot enough to make John Handley loath to= =20 leave his nicely air-conditioned Office Depot delivery truck.=20 "I stay in there as long as I can," Handley said, hustling a cart of office= =20 supplies across the steaming concrete into San Mateo County's Hall of=20 Justice.=20 FIREFIGHTERS HAMPERED Elsewhere in the state, the heat and low humidity hampered thousands of=20 firefighters.=20 An early morning fire near the Sonoma-Napa county line quickly built to a= =20 100-plus acre blaze and was battled by 30 engines, five bulldozers, and 11= =20 hand crews from state and local fire stations. Fire officials are still=20 investigating the cause.=20 The fire, near Kellogg, had imperiled some homes in the early part of the= =20 day, but the threat abated by 12:30 p.m., according to Mike Parkes of the= =20 California Department of Forestry. It was fully contained last night.=20 Nearly 250 miles away, near Susanville, more than 1,900 firefighters were o= n=20 the scene of a 4,346 acre fire yesterday, and officials said they hoped the= =20 blaze, fed by heat and strong winds, would be contained by 6 p.m. today.=20 Investigators believe that the fire was caused by target shooting near=20 Williams Creek and have cited a man they identified as William Bushey for= =20 allegedly sparking the blaze. The cost of suppressing the fire so far has= =20 been $3.1 million, and $2.5 million in timber has been lost, fire officials= =20 estimate.=20 SUISUN CITY BLAZE And late yesterday, the Solano County Sheriff's Department reported a 75-= =20 acre fire burning out of control near Suisun City. It was being battled by= =20 volunteers and its cause is under investigation.=20 The good news, forecasters said last night, is that the heat spell should= =20 prove short-lived: temperatures in San Francisco should collapse back into= =20 the 80s today, and inland cities should see relief by tomorrow.=20 Chronicle staff writers Suzanne Herel, Pamela J. Podger and Pia Sarkar=20 contributed to this report. / E-mail the writers at [email protected]= om=20 and [email protected].=20 ,2001 San Francisco Chronicle ? Page?A - 1=20 Municipal utilities warned=20 Governor says he'll seize excess electricity if prices don't come down=20 David Lazarus, Chronicle Staff Writer Thursday, May 31, 2001=20 ,2001 San Francisco Chronicle=20 URL: http://www.sfgate.com/cgi-bin/article.cgi?f=3D/c/a/2001/05/31/MN154796= .DTL=20 Sacramento -- Gov. Gray Davis threatened last night to seize excess power= =20 generated by California's municipal utility districts, which he said have= =20 charged even higher electricity prices than out-of-state generators.=20 Davis said in an interview with The Chronicle that some municipal utility= =20 districts have charged the state as much as 10 percent more than the averag= e=20 wholesale cost demanded by private power companies.=20 The governor's tough talk came as California suffered through a Stage 2 pow= er=20 alert and faced the prospect of a long, hot summer of rolling blackouts and= =20 skyrocketing electricity prices. So far this year, the state has paid more= =20 than $8.2 billion to buy power for its cash-strapped utilities.=20 In a variation on his threat to seize power plants from out-of-state=20 generators if they continue gouging California ratepayers, the governor sai= d=20 he would use his executive powers to claim excess juice from the locally=20 owned utilities if they do not lower their prices.=20 He said he is ready to go to court if they offer resistance.=20 "We're going to get that power one way or another," Davis said.=20 Municipal utilities are city-owned power companies. In Northern California,= =20 there are municipal utilities in Alameda, Palo Alto, Redding, Sacramento an= d=20 Santa Clara. Los Angeles has the largest municipal utility in the state.=20 30 DAYS TILL CONTRACT DETAILS=20 For the first time, the governor also gave a time frame for releasing detai= ls=20 of more than 40 long-term electricity contracts California is signing with= =20 generators since the financial meltdown of the state's two biggest utilitie= s.=20 He said that after about six more contracts get nailed down, he expects ful= l=20 details to be made available within 30 days.=20 Although the contracts involve nearly $40 billion in public funds, Davis an= d=20 other state officials have adamantly refused to divulge their contents,=20 insisting that secrecy is needed to remain competitive during negotiations.= =20 The Chronicle and other media outlets have filed suit for access to the=20 contracts, arguing that the public has a right to know how its money is bei= ng=20 spent.=20 RUDE AWAKENING While going toe-to-toe with the out-of-state generators, the last thing Dav= is=20 needed was for municipal utilities -- the home team, as it were -- to emula= te=20 the Texas big boys and dig deep into California's pockets.=20 Yet the governor's negotiators have been struggling for weeks to convince= =20 municipals that they are obliged to provide power at cost -- which Davis=20 insisted they are required to do by law.=20 He met last week with the heads of a dozen municipal utilities and told the= m=20 explicitly that he would not tolerate gouging from within the state as=20 California faces a summer of potential blackouts.=20 The governor said after the meeting that the municipals had agreed "to make= =20 most of their excess power available this summer . . . at prices=20 significantly lower than those being charged on the spot market."=20 Apparently, however, little progress has been made since that declaration.= =20 Davis told The Chronicle last night that he is still "trying very hard to= =20 promote this notion that we're all in this together."=20 While unwilling to specify which municipal utilities have been most=20 aggressive in their pricing, and refusing to place a dollar amount on how= =20 much the utilities charged, Davis said he is prepared to seize up to 800=20 megawatts of output if the they do not change their ways.=20 Eight hundred megawatts is enough power to light about 800,000 homes.=20 Representatives of the various municipal utilities could not be reached for= =20 comment, nor could a spokesperson for the California Municipal Utilities=20 Association in Sacramento.=20 "I told them that they will either (reduce their prices) voluntarily or=20 involuntarily," the governor said.=20 UNCERTAIN FUTURE It remains to be seen, however, whether the municipal utilities will play= =20 ball. To date, they have shown a firm inclination to go their own way.=20 In March, Lodi's municipal utility district and a Northern California=20 municipal utility cooperative that includes Palo Alto, Santa Clara and=20 Alameda told Pacific Gas and Electric Co. that they will not participate in= =20 rolling blackouts during power shortages.=20 "I won't arbitrarily screw my customers . . . so 5,000 PG&E customers can= =20 turn on their lights somewhere else," said Alan Vallow, director of the=20 utility serving Lodi's 58,000 residents.=20 E-mail David Lazarus at [email protected].=20 ,2001 San Francisco Chronicle ? Page?A - 1=20 Regulators want state trade-off for caps=20 Davis asked to give up control of power lines=20 Bernadette Tansey, Chronicle Staff Writer Thursday, May 31, 2001=20 ,2001 San Francisco Chronicle=20 URL: http://www.sfgate.com/cgi-bin/article.cgi?f=3D/c/a/2001/05/31/MN221412= .DTL=20 California's testy relationship with federal energy regulators could turn= =20 into a showdown tomorrow, when state power officials must decide whether to= =20 surrender some control over the state's electricity market or risk losing= =20 limited price curbs that kicked in this week.=20 In agreeing last month to set flexible caps to restrict price gouging durin= g=20 electricity shortages, the Federal Energy Regulatory Commission said the=20 state and its utilities must agree to let an independent organization manag= e=20 California's power transmission lines.=20 Under that setup, California would be one of a group of Western states=20 sharing a linked transmission grid whose rates and access rules would be se= t=20 by independent managers.=20 It is part of the commission's drive to create regional electricity markets= =20 throughout the country and make it easier to trade power across state lines= .=20 The regional grids would be a prelude to the nationwide free market in=20 electricity advocated by the Bush administration and power marketers like= =20 Enron.=20 But California Assembly Democrats who have challenged the federal demand sa= y=20 the requirement could interfere with some of the state's homegrown solution= s=20 to its energy crisis, such as Gov. Gray Davis' proposal that the state buy= =20 and run transmission lines owned by Southern California Edison Co.=20 "A lot of folks were wondering how those two things would interact and are= =20 they mutually exclusive," said Paul Hefner, an aide to Assembly Speaker=20 Robert Hertzberg, D-Sherman Oaks.=20 Other officials say the federal requirement is premature because no regiona= l=20 organization yet exists that California can join.=20 Mike Florio, a board member of the California Independent System Operator,= =20 which manages the state's power grid, said California is already part of=20 regional efforts to clear transmission bottlenecks and share surplus power.= =20 But Florio said no Western state will rush into a regional arrangement and= =20 surrender part of its authority without ensuring a good deal for its own=20 consumers.=20 "We certainly don't want to be forced into an entity where generators or=20 power marketers get to dictate the terms," Florio said. "This has got to be= a=20 long courtship rather than a shotgun wedding."=20 When federal regulators initiated the move toward regional transmission gri= ds=20 during the Clinton administration in 1999, participation was voluntary, sai= d=20 Gary Cohen, general counsel to the state Public Utilities Commission.=20 But in its April 26 order, the federal energy commission made its offer of= =20 limited price relief contingent on a filing by June 1 from the Independent= =20 System Operator committing the state to a regional management plan.=20 The PUC and the Assembly are challenging that requirement. If anything, Coh= en=20 said, the state needs to increase control over its energy system while it= =20 recovers from its disastrous debut into deregulation, rather than submit to= a=20 regional authority that would be overseen by the federal government.=20 "This doesn't seem to be the time to be doing more experimenting," Cohen=20 said. "We certainly have not been able to rely on FERC to look out for the= =20 interests of Californians."=20 WAITING FOR STATE'S RESPONSE Curt Hebert, chairman of the federal commission, declined to say yesterday= =20 whether the government would immediately yank the soft price caps that went= =20 into effect this week if it found the ISO response unsatisfactory.=20 "He said he didn't want to prejudge the case," said commission spokeswoman= =20 Tamara Young-Allen. "He will wait to see what California files."=20 PUC Commissioner Jeff Brown said he would be willing to give up some state= =20 control of the grid in exchange for meaningful price controls. But, he said= ,=20 the federal measures granted fell far short of what California needed.=20 "Hell, those caps are pretty toothless as they are," Brown said.=20 The price controls are in effect only during power shortages. The cap is th= e=20 price offered by the least-efficient generating plant. And generators can= =20 challenge any federal ruling that they have exceeded the caps, by claiming= =20 high costs.=20 The controls were in place for the first time yesterday, when the state=20 declared a Stage 2 power emergency, meaning reserves fell below 5 percent o= f=20 available capacity.=20 Florio said state power managers' answer to the federal government will=20 probably be that they are already doing within California much of what a=20 regional transmission organization would do.=20 ISO COULD PLAY A ROLE The ISO manages the grid to ensure that power gets to where it is needed in= =20 the state, the organization told federal regulators in January. The agency= =20 could represent California when a Western regional organization develops, i= t=20 said.=20 The governor declined to say yesterday what stand he would take on federal= =20 regulators' demand.=20 "I'm of a mind to do something, but I still have to talk to my lawyers,"=20 Davis said.=20 Assembly Democrats say regulators in Washington have no right to withhold= =20 actions to correct California's dysfunctional power market.=20 "They're required to . . . ensure that just and reasonable rates prevail in= =20 the market," Hefner said. "Why should we have to dicker to get them to do t= he=20 job Congress created them to do?"=20 E-mail Bernadette Tansey at [email protected].=20 ,2001 San Francisco Chronicle ? Page?A - 1=20 NEWS=20 Plan would have biggest customers pay Edison's debt=20 Greg Lucas=20 Sacramento Bureau Chief=20 ? 05/31/2001=20 The San Francisco Chronicle=20 FINAL=20 A.5=20 (Copyright 2001)=20 ? ? Legislative leaders are drafting a new rescue plan for Southern California= =20 Edison that would put the utility back on its feet financially at the expen= se=20 of its biggest customers.=20 The plan would leave manufacturers, refineries and other big industrial=20 customers with the burden of paying nearly all the utility's $3.5 billion= =20 back debt through a dedicated charge. Residential and small commercial user= s=20 would be on the hook for only a fraction of the back debt.=20 ? Big users say it is unfair to saddle them with all of Edison's debt, but=20 supporters of the plan say it's these users that wanted deregulation and=20 should shoulder the costs it created.=20 "We're trying to put something together in a way that solves all these=20 problems, and if people are to be pigheaded about it, we won't solve any=20 problems," said Assemblyman Fred Keeley, D-Boulder Creek (Santa Cruz County= ).=20 Although the plan is an alternative to Gov. Gray Davis' proposed deal to pu= t=20 Edison back on its feet financially, it could be used as a model to help=20 restore Pacific Gas and Electric Co. to solvency.=20 Democrats say the plan contains some elements desired by Republicans, but G= OP=20 lawmakers object to saddling large business users with Edison's debt.=20 The plan is based on the way gas customers are divided into "core" and=20 "noncore" users.=20 SEPARATING 'CORE' USERS=20 Under this proposal, electrical users would be divided the same way. Core= =20 users would be customers who use 500 kilowatts or less a month. Noncore wou= ld=20 be those using more than 500 kilowatts.=20 Out of Edison's 4.2 million customers, only 3,600 would be noncore customer= s.=20 But those 3,600 customers use about 26 percent of Edison's demand for energ= y.=20 Core customers would get their power from generators owned by Edison,=20 long-term contracts and alternative energy producers, such as wind farms an= d=20 solar panels, on contract with the utility.=20 That would mean those customers would no longer be subject to the whims of= =20 the spot market, which has far higher prices than other sources of=20 electricity.=20 Large users, the noncore customers, would be given the right to negotiate t= o=20 buy their power directly from generators or build on- site power plants to= =20 make themselves energy self-sufficient.=20 The plan would be phased in through January 2003 to give large energy=20 customers time to prepare for buying power on the open market.=20 During that period, residential, small business and large industrial users= =20 would all share in paying off Edison's debt. But in 2003, that burden would= =20 shift exclusively to the big users.=20 Republican lawmakers and those same large users have been clamoring to be= =20 given what is called "direct access" to generators so they can negotiate=20 cheaper rates.=20 Enron is also backing the idea of cutting loose the largest electricity use= rs=20 because that would create a built-in market for the energy the company sell= s.=20 Large users who want to remain on the grid could do so.=20 EDISON 'ENCOURAGED'=20 Sources said Edison officials met with lawmakers over the weekend to iron o= ut=20 details of the plan.=20 A spokesman for Edison said he was "encouraged" by the talks.=20 "I haven't seen a finished product or a plan," said Bob Foster, a senior vi= ce=20 president with Edison. "They're approaching this in a spirit of goodwill an= d=20 trying to find a solution."=20 Big businesses complain that the plan does not work because right now, ther= e=20 is nowhere they can buy cheap electricity.=20 "We're very concerned that separating the core from the noncore means we wi= ll=20 experience extreme rate hikes over the next two years," said D.J. Smith, a= =20 lobbyist for the California Large Energy Consumers Association.=20 "When you add blackouts, the multiple interruptions of production and anoth= er=20 potentially huge rate hike, the result would be catastrophic to the economy= ,"=20 Smith said.=20 Added Dorothy Rothrock, a lobbyist for the California Manufacturers and=20 Technology Association: "What's the rationale for the noncore to be paying= =20 the entire Edison undercollection? It sounds to me like just pure politics.= =20 They don't want voters to pay because they vote."=20 CONSUMER ADVOCATE SMELLS A RAT=20 Harvey Rosenfield, head of the Foundation for Taxpayer and Consumer Rights,= =20 said he thought the plan would eventually turn into a bailout as business= =20 interests muscle lawmakers into pushing some portion of Edison's debt onto= =20 residential and smaller commercial customers.=20 "I think it's a trick. We've seen this same tactic used at the Public=20 Utilities Commission, where what were supposed to be rate increases for big= =20 business end up costing more for residential and small businesses,"=20 Rosenfield said.=20 The new plan also does not include the outright purchase of Edison's part o= f=20 the transmission system that loops electricity around the state.=20 Davis backs buying the lines for $2.7 billion. Democrats have insisted that= =20 for the state's financial help, taxpayers receive something of value.=20 Republicans have insisted that they will back no proposal that includes sta= te=20 purchase of transmission lines.=20 In the new proposal, the state would have a five-year option to buy the=20 transmission lines for $1.2 billion -- the book value of the asset.=20 In addition, the utility would make $1.5 billion available to the state to= =20 either purchase other assets -- such as Edison's hydroelectric facilities,= =20 for example -- or use it in partnership to build new power plants.=20 PHOTO; Caption: "If people are to be pigheaded about it, we won't solve any= =20 problems," said Assemblyman Fred Keeley.=20 =09=09 =09=09 =09=09 =09=09 San Jose mayor changes course, endorses power plant=20 Posted at 10:29 p.m. PDT Wednesday, May 30, 2001=20 MIKE=20 ZAPLER=20 Mercury News=20 After a year of staunch opposition to a major power plant in South San Jose= ,=20 Mayor Ron Gonzales reversed course Wednesday and endorsed the project,=20 removing the largest remaining barrier to construction and angering residen= ts=20 of a nearby neighborhood he had pledged to protect.=20 Speaking before news cameras and reporters in his City Hall office, Gonzale= s=20 said he had negotiated an agreement with Calpine that eased his concerns=20 about the Metcalf Energy Center project. The deal, he said, contains=20 provisions to help shield the Santa Teresa neighborhood from air pollution,= =20 gives local businesses the chance to negotiate below-market electricity rat= es=20 and provides a sure energy source for local residents.=20 ``We need power in San Jose and we believe this power plant is needed in Sa= n=20 Jose,'' Gonzales said. ``We've worked hard to make this plant better for th= e=20 neighborhoods and better for the city.''=20 But the city entered talks with Calpine about five weeks ago in a vastly=20 weakened position, and its chief negotiator, mayoral budget director Joe=20 Guerra, was unable to extract most of the concessions the city and=20 neighborhood had sought. Santa Teresa leader Elizabeth Cord called the=20 neighborhood protection provisions ``totally not substantive,'' and another= =20 opponent said a lawsuit is likely if the plant is ultimately approved.=20 ``The mayor's deal does nothing to reduce the impact on this neighborhood,'= '=20 Santa Teresa activist Issa Ajlouny said. ``It's the same project as it was= =20 two years ago except San Jose residents will be paying millions of dollars= =20 more.''=20 Shift by Cisco?=20 Cisco Systems, which is planning a 20,000-worker campus adjacent to the=20 proposed plant and has strenuously opposed it, appears to be softening its= =20 opposition. Kent Jenkins Jr., a spokesman for the company, said Wednesday= =20 that Cisco would still prefer not to have the plant, but that officials wer= e=20 pleased, at first glance, with the health and safety concessions Gonzales h= ad=20 negotiated. Asked whether Cisco might file a lawsuit, Jenkins said, ``We're= =20 not ruling anything in or out and by that, I don't want to imply we are=20 considering anything.''=20 He added that the agreement will have no bearing on the company's plans to= =20 build the campus. ``All along we were committed to pursuing Coyote Valley a= nd=20 that remains unchanged,'' he said.=20 With experts predicting a summer of rolling blackouts, and with the=20 California Energy Commission expected soon to override the city council's= =20 November rejection of the plant, Gonzales was under enormous pressure to=20 strike a deal. Polls taken by Calpine had shown overwhelming public support= =20 for the plant, another ominous sign for the mayor who is up for re-election= =20 next year.=20 While the city probably could not have blocked approval of the plant once i= t=20 got state approval, the mayor indicated as late as April?18 that the city= =20 might fight it in court. But that possibility vanished with Wednesday's=20 announcement, leaving a possible neighborhood-backed lawsuit as the only=20 potential threat.=20 ``This power plant is coming to San Jose. That's clear from the support it= =20 has gathered in Sacramento,'' Gonzales conceded, referring to Gov. Gray=20 Davis' endorsement in April. So rather than continue to fight an uphill=20 battle, Gonzales decided it was best to negotiate what he could.=20 At the news conference, Gonzales touted provisions in the deal that will=20 provide two additional air monitoring stations to ensure the plant complies= =20 with local air quality standards. The agreement also provides a three-month= =20 window, prior to the plant's opening, for San Jose businesses to negotiate= =20 long-term power contracts with the Metcalf plant at a ``below-market'' rate= ,=20 said Calpine chief executive officer Peter Cartwright.=20 City's concessions=20 But the city clearly got less than it wanted, which was at least partly the= =20 price of Gonzales' longtime resistance to the 600-megawatt plant:=20 ?One key negotiating point was how much Calpine would pay to extend a=20 recycled-water pipeline seven miles to the plant site. The city started by= =20 asking the company to pay at least $25 million of the roughly $50 million= =20 price tag. But, in a provision Gonzales touted as a victory, Calpine will p= ay=20 20 percent of the cost, or $10 million, and the city will pick up the=20 remaining $40 million. Calpine said the company is simply paying its fair= =20 share.=20 ?In an effort to protect neighborhoods from pollution, the city wanted=20 Metcalf to operate full time, since emissions are highest when a power plan= t=20 first fires up. The city tried to arrange a long-term contract with the sta= te=20 to buy power from Metcalf to keep it running constantly, but officials balk= ed=20 at such a commitment.=20 Calpine said it intends to keep the plant running constantly as long as=20 demand -- in the form of annual contracts with the state -- justifies it. I= f=20 demand is lacking, the company will lower the number of potential times the= =20 generator will start up by 25 percent, from 624 per year to 468 annually.= =20 That restriction would last five years, by which time the energy crisis in= =20 California is expected to be long over.=20 ?In the fall, Calpine offered $10 million in electricity discounts to help= =20 win the city's backing for Metcalf. Wednesday's agreement includes a $6.5= =20 million benefits package, including $5 million for parks and open space=20 acquisition in Santa Teresa; $1 million for energy conservation programs an= d=20 assistance to low-income people to help pay their energy bills; and $500,00= 0=20 to help provide health insurance to San Jose children.=20 ?Calpine has agreed to install new technologies that reduce or eliminate th= e=20 use of ammonia, which would be extremely hazardous if accidentally released= ,=20 as soon as those systems are deemed ``economically feasible'' and approved = by=20 state regulators. But because there is no standard in the agreement, the=20 burden would fall on the city to prove that a new technology was feasible. = If=20 the two sides disagreed, the decision would fall to a third-party arbitrato= r.=20 There is also a significant question of whether ammonia-free technology,=20 known as SCONOx, already is viable -- a position taken by the U.S.=20 Environmental Protection Agency.=20 Calpine's Cartwright, who appeared with Gonzales, said Wednesday that the= =20 company is committed to switching as soon as possible from liquid ammonia t= o=20 less hazardous solid ammonia.=20 The city council is scheduled to take up the agreement at its Tuesday=20 meeting. Although Gonzales persuaded the council to vote with him against t= he=20 controversial project last fall, most members are expected to go along with= =20 the mayor's switch. At a closed-door meeting on Tuesday, council members=20 Forrest Williams, who represents Santa Teresa, and Linda LeZotte aired=20 significant concerns with the pact's environmental provisions, but there wa= s=20 no other notable dissent, an attendee said.=20 The project would then go through the city planning process again this fall= .=20 Calpine hopes to begin construction this year and to have the plant up and= =20 running by summer 2003.=20 Contact Mike Zapler at [email protected] or at (408) 275-0140.=20 State admits power-deal secrecy=20 Posted at 10:55 p.m. PDT Wednesday, May 30, 2001=20 BY JOHN WOOLFOLK=20 Mercury News=20 As state officials cut deals in recent months to spend millions of taxpayer= =20 dollars to purchase electricity, they signed agreements not to reveal the= =20 terms of those contracts to the public.=20 Even the state's chief energy czar admits the confidentiality clause=20 conflicts with the public's right to know how its money is spent, and that= =20 officials are trying to get around it. But the clause gives sellers veto=20 power over releasing information.=20 ``Our hope would be to release these contracts, but we can't release them, = at=20 least our lawyers tell us, without consent of the parties,'' said S. David= =20 Freeman, who acknowledged the agreements for the first time Wednesday.=20 Consumer advocates voiced outrage.=20 ``There's no such thing as a non-disclosure agreement with regards to=20 taxpayer money,'' said Doug Heller of the Foundation for Taxpayer and=20 Consumer Rights.=20 The administration's secret electricity spending has been a top concern amo= ng=20 lawmakers and public advocates since January, when the state stepped in to= =20 buy power for its troubled utilities at a cost that has reached more than $= 70=20 million a day.=20 Freeman said Wednesday that the state was so pressured to sign contracts to= =20 lock up lower-cost power supplies that negotiators never considered the=20 ramifications of the secrecy clause. He said violating that agreement could= =20 void the contracts.=20 Would companies bail?=20 A representative for power companies said Thursday that he doubts companies= =20 would bail on existing contracts but might not sign more.=20 Without seeing details of the spending, lawmakers this month approved a=20 record $13.4 billion in ratepayer-backed bonds to cover power costs that ha= ve=20 reached nearly $8 billion. Critics question whether the state is getting a= =20 good deal and wonder whether the bonds will cover the costs.=20 Until now, Gov. Gray Davis has answered critics by arguing that revealing t= he=20 deals would jeopardize the state's bargaining position, exposing ratepayers= =20 to even higher costs. Critics said the administration never before mentione= d=20 confidentiality clauses.=20 ``These contracts have been out there for a couple of months and this is an= =20 excuse I've never heard before,'' said Mindy Spatt of the Utility Reform=20 Network, a consumer group. ``It makes me wonder whether they've really got = a=20 good reason or something they're trying to hide.''=20 The state routinely enters into contracts in other areas, and those contrac= ts=20 are governed by public-records law and open for review. But Freeman suggest= ed=20 new rules may be in play.=20 ``Businesses don't reveal their contracts, and the state has gone into the= =20 business of buying power,'' Freeman said. ``I recognize that if the state= =20 does something that people have a right to know about it. On the other hand= ,=20 if the government is acting in an emergency way as businesses do, there's a= =20 clash.''=20 Freeman said the administration plans to reveal the contracts ``in the very= =20 near future'' and is working to find a way around ``this legal problem'' wi= th=20 the confidentiality clause.=20 ``We have nothing to hide,'' Freeman said. ``We're very proud of those=20 contracts.''=20 2003 release date=20 But in response to lawsuits from news agencies and lawmakers seeking to=20 compel disclosure, the administration has argued it shouldn't reveal the=20 contracts until Jan. 1, 2003, when they are no longer commercially sensitiv= e.=20 The state's power-buying authority ends on that date.=20 News agencies, whose case will be heard Friday, say there's no evidence=20 disclosure would jeopardize the state's bargaining position, and that the= =20 secrecy serves the governor's political interests more than the public's.= =20 Alonzo Wickers, a lawyer for the news agencies, including the Mercury News,= =20 said the administration hasn't made an argument based on confidentiality=20 clauses, and that the law wouldn't support that claim.=20 ``The courts have said you can't do that if you're a public agency,'' Wicke= rs=20 said.=20 Jamie Fisfis, spokesman for Assemblyman Dave Cox, R-Sacramento, said the=20 confidentiality argument is ``frankly outrageous.''=20 ``If he signed a contract to build roads, would he then argue he couldn't= =20 disclose it?'' Fisfis said.=20 Daily deals costly=20 The contracts guarantee a supply of power at costs below today's high marke= t=20 prices, helping to avoid rolling blackouts and limit rising rates. Without= =20 the deals, the state must scramble to buy power day by day at much higher= =20 prices.=20 The administration has signed dozens of contracts ranging from several mont= hs=20 to a decade or more, and said the average price over 10 years is 7.1 cents= =20 per kilowatt-hour, a bargain compared with the 20- to 30-cent daily rates.= =20 Even with the contracts already signed, the state still will have to buy ha= lf=20 to two-thirds of its power day by day this summer. It's unclear how many=20 sellers might walk away from deals if the state discloses them.=20 A spokesman for Calpine of San Jose, which has signed two, 10-year contract= s=20 and another for 20 years, said it already has revealed the basic terms and= =20 wouldn't oppose further disclosure.=20 ``I don't know any reason for us to get upset,'' said Calpine spokesman Bil= l=20 Highlander. ``We came in at a very attractive price that we think is good f= or=20 California and good for us.''=20 A representative of several major power sellers said companies probably=20 wouldn't walk away from deals they've already signed. But he said=20 confidentiality is important.=20 ``It certainly would drive away people from doing deals like this in the=20 future,'' said Gary Ackerman, executive director of the Western Power Tradi= ng=20 Forum. ``It's just not professional.''=20 Contact John Woolfolk at [email protected] or (408) 278-3410=20 California Gov. Davis blasts Bush energy policy=20 NEW YORK (Reuters) - California Gov. Gray Davis on Thursday blasted Preside= nt=20 George Bush's energy policy, saying in a newspaper op-ed piece that the=20 president is setting a ''perilous'' course by opposing caps on wholesale=20 electricity prices.=20 Davis, writing in The New York Times, likened California's long-running=20 energy crunch to the U.S. energy shock in the 1970s and said the Bush=20 administration ``must adopt a more responsible energy policy.''=20 The comments follow a meeting earlier this week between Davis and Bush that= =20 underscored their differences on federal price caps. Bush reiterated his=20 opposition to caps on wholesale electricity prices at the meeting, Davis=20 said.=20 Davis called caps necessary to prevent price-gouging by power companies,=20 while Bush asserted that caps will make the situation worse by discouraging= =20 investment in new power plants.=20 The governor told President Bush on Tuesday that he would seek a court orde= r=20 to force action by the Federal Energy Regulatory Commission (FERC).=20 In his op-ed piece, Davis cited an estimate that the size of California's= =20 energy crisis is likely to be in the range of $40 billion to $50 billion th= is=20 year.=20 Defending his own methods of dealing with the power crisis, which has cause= d=20 rolling blackouts in the state, Davis said only FERC has the power to ensur= e=20 a reasonable wholesale electricity market in California. ``This is not a=20 matter of discretion for federal regulators,'' the Governor wrote, ``It is = an=20 obligation.''=20 Davis acknowledged that California's power problems stemmed from ``a=20 fundamentally flawed'' 1996 state electricity deregulation law, and he=20 repeatedly raised the specter of economic turmoil brought on by policies=20 favored by President Bush.=20 ``The threat is real,'' Davis wrote, ``and the Bush administration must ado= pt=20 a more responsible energy policy, one that restrains energy price=20 manipulation and creates a fair and competitive energy market across the We= st=20 and the whole country.'' Mayor sees the light on power plant=20 Published Thursday, May 31, 2001, in the San Jose Mercury News=20 THE mayor standing on the tracks waving a red flag at the onrushing=20 locomotive has calculated the effects of a collision. Calpine's proposal fo= r=20 the Metcalf power plant at the north end of Coyote Valley is now fine with= =20 Ron Gonzales.=20 It's been fine with almost everybody else outside the immediate neighborhoo= d=20 since the plant was proposed by Calpine and Bechtel more than a year ago. I= t=20 escalated from fine to urgent as the shortage of electricity pushed prices= =20 into the clouds and led to blackouts.=20 In the process, the opposition of Gonzales and the San Jose City Council, o= n=20 thin factual ice from the start, couldn't withstand the weight of the force= s=20 in favor of the 600-megawatt plant, enough to serve 600,000 homes.=20 The Legislature and Gov. Gray Davis wondered what San Jose could be thinkin= g.=20 The California Energy Commission has the last word on power plant siting=20 regardless of the city's position. Denial would be flabbergasting.=20 Wednesday afternoon, Gonzales yielded gracefully; Calpine, along with its= =20 partner Bechtel, triumphed politely. The city will ``provide all requested= =20 municipal services in a timely matter.'' And it won't sue to overturn Energ= y=20 Commission approval.=20 Calpine will add two stations to monitor air quality, reduce the number of= =20 pollution-creating stops and starts at the plant, give $5 million for parks= =20 in the area, and contribute $1.5 million for community programs, including= =20 assistance with energy bills.=20 These are not trivial additions to the original proposal. But Calpine/Becht= el=20 held all the cards. Almost certainly, it could have jammed the plant throug= h=20 without sweeteners.=20 Instead, both parties recognized that Calpine and the city must do business= =20 together for the plant to work well. Calpine depends, for instance, on=20 recycled water from the city's sewage treatment plant. And the city needs= =20 customers like Calpine, which will consume 3 million gallons a day, to use = up=20 that water.=20 It's a mutually beneficial arrangement, just as it was from the start. ? ? Gordon Dillow [email protected] ? ? Building a new plant? More power to them=20 May 31, 2001=20 By GORDON DILLOW Orange=20 County Register=20 As you probably know, the main reason we're in a power crisis in California= =20 is because we haven't built enough power-generating plants. And one reason = we=20 haven't built enough plants is NIMBY-ism: When faced with having a new powe= r=20 plant nearby, most people shout "Not in my back yard!"=20 Well, I just found out that a new power plant is being built in my back yar= d.=20 And frankly, I think it's a dandy idea.=20 The power plant in question is being built at the county Olinda Alpha=20 Landfill in Brea. The plan is to take the methane gas formed by the natural= =20 decomposition of refuse in the dump - which ordinarily would have to be=20 flared off -- and burn it in engines to produce electricity. Actually,=20 they've been producing power at the landfill that way for years, but now,= =20 with power at a premium, a New Jersey-based company called Ridgewood Power= =20 wants to expand the plant's output by about 50 percent.=20 True, the power plant isn't literally in my back yard; it's a couple of=20 ridgelines away. But it's still close enough for the Air Quality Management= =20 District to recently send me a letter informing me of increased pollution= =20 from the plant - and warning me that the plant emissions could cause cancer= .=20 Now, ordinarily those would be the sort of grim tidings that would cause=20 palpitations in my homeowner's heart. So why am I being so welcoming to my= =20 new power-generating, air-polluting neighbor?=20 Several reasons. First, it's a pretty tiny power plant. Even with the 50=20 percent production boost, it will only crank out 8 megawatts - enough to=20 provide power to about 8,000 homes, but still less than 1 percent of the=20 juice produced by one reactor at the San Onofre nuclear power plant.=20 Also, the increased air pollution hardly seems like enough to worry about.= =20 For example, the AQMD says the plant will produce up to 9 pounds of fine=20 particulates per day - which is probably about the same amount of=20 particulates I release into the atmosphere when I burn a steak on the=20 barbecue. And according to the AQMD's calculations, I'd have to suck in the= =20 plant's air for 70 years to run even a 1-in-1 million risk of developing=20 cancer from the emissions.=20 But the big thing in favor of the landfill power plant is that it's exactly= =20 the sort of clever power-producing scheme we need right now. It takes=20 something we don't need - the methane from our garbage - and turns it into= =20 something we desperately need: electric power. These days, every 8 megawatt= s=20 helps.=20 And now that I think on it, there's another, more personal advantage to=20 having the landfill power plant nearby:=20 Without requiring any real sacrifices on my part, it makes me feel like a= =20 non-NIMBYist. So when they start looking around for a place to build anothe= r=20 power plant to help ease the energy crunch, I can strongly suggest - no,=20 demand! -- that they build it in somebody else's back yard.=20 Because I already have one in mine. Watering down fun=20 Many summer activities in O.C. will be diminished by the electricity crunch= .=20 May 31, 2001=20 Story by TIFFANY MONTGOMERY Photos by MICHAEL KITADA The Orange County Register=20 LEISURE WORLD resident Jackie Lane works out five days a week in the pool a= nd=20 says she notices the 2-degree difference in the water temperature. ? ? Many in Orange County will find the power crunch crimping their fun this=20 summer as some cities and groups slash pool hours, turn off tennis-court=20 lights, raise swimming-class fees and drop pool temperatures to cut utility= =20 bills and conserve energy.=20 Two Orange County community colleges will switch from night to day football= =20 games come fall, along with most of their 12-team conference. And Orange ci= ty=20 officials have even floated the idea of moving popular adult softball leagu= es=20 to weekend afternoons rather than weekday nights.=20 "If we need to save energy, I'm all for it," said Saddleback College=20 defensive back Derrick Waddell, 19, who prefers the excitement of evening= =20 games. "I just never expected (the power crisis) to go this far that it wou= ld=20 affect a football game."=20 Athletic Director Tony Lipold said the college needed to cut utility bills,= =20 and stadium lights are expensive - a $1,500 demand charge to turn them on= =20 each month, then $45 an hour. Plus, the school wants the community to know = it=20 is conserving.=20 "When people drive by the stadium and see lights burning, we don't want the= m=20 to say, 'Hey, what's going on?' " Lipold said.=20 Fullerton College will also switch to day games next season, and Santa Ana= =20 has played in the afternoon for years. Orange Coast and Golden West college= s=20 share a stadium, so one team often plays in the day, the other at night.=20 An official with the southern section of the California Interscholastic=20 Federation, or CIF, which oversees high school athletics in the region, sai= d=20 he has not heard whether high schools are giving up Friday night football= =20 games.=20 HERE'S A SWITCH: Conservation efforts are apparent at Leisure World. ? ? In Seal Beach, the city has raised fees ($7 for residents and $12 for other= s)=20 for swimming lessons and recreation and lap swimming (50 cents) because the= =20 Recreation Department's utility budget has jumped $21,000, a 123 percent=20 increase. Mission Viejo has stopped illuminating courts at the Felipe Tenni= s=20 Center on weekends and will open the Sierra Recreation Center pool this=20 summer for five hours during the day instead of eight.=20 Fullerton is raising tennis-court fees by $2 for peak hours and $1 other=20 times with its new budget in July to cover energy costs. Currently the fees= =20 are $6 or $7 per hour depending on day and time. And the city of Westminste= r=20 and the Newport-Mesa Unified School District have shut off court lights all= =20 together.=20 Newport-Mesa will also begin charging the cities of Newport Beach and Costa= =20 Mesa for heating four school pools that the cities use for summer swim=20 programs. Mike Fine, the district's assistant superintendent of business=20 services, has calculated that it costs $24 a day for each degree of heat.= =20 As a result, Newport Beach is raising swim-lesson fees by $5 and will squee= ze=20 most of its programs, including lessons and short periods for recreation an= d=20 lap swimming, into the Newport Harbor High School pool, which it will share= =20 part of the time with Costa Mesa. The pool at Corona del Mar High School wi= ll=20 be open for lap swimming, but not heated.=20 "You can't teach swim lessons with kids (in a cold pool)," said Andrea=20 McGuire, Newport Beach recreation-services manager. "They turn blue, their= =20 teeth chatter and they're not happy."=20 Newport Beach will also raise lap fees by varying amounts but keep recreati= on=20 swim costs the same.=20 Costa Mesa has decided to absorb the added cost of heating the pools,=20 estimated to be about $5,000 for the summer, instead of passing it on, said= =20 Ruth Raheb, a recreation supervisor.=20 Colder pools have also affected swimming routines at Leisure World in Lagun= a=20 Woods. Temperatures at all six pools have been dropped 2 degrees, so some= =20 have begun exercising in the afternoons when it's warmer, said Debby Lamb,= =20 recreation director. Officials did keep one pool a toasty 84 degrees for=20 those with achy bones.=20 Alan Davis, 69, a heart patient, recently had to exercise in colder waters= =20 while pool four, the warm pool, was being renovated.=20 "It was a shock to get into," he said. "If it's too cold it doesn't work we= ll=20 with arthritis."=20 The warmer water, he said, soothes and restores his body, so he was happy= =20 when pool four opened again last week.=20 The energy crunch has also affected the ceramics studio at Leisure World,= =20 which draws about 300 people a week. Electric- and gas-powered kiln usage h= as=20 been cut back to save money.=20 "It's slowed us down," said Marjorie Amstadter, president of the Potters an= d=20 Sculptors Club. She estimates they are two to three weeks behind in firing,= =20 but people have generally understood, she said.=20 "The only people who are complaining are non-Leisure World residents ... wh= o=20 may have to wait until next fall (when classes start again) to pick up thei= r=20 pieces," she said.=20 Those in charge of cutting or adjusting recreation programs said most peopl= e=20 have been very understanding about the energy crisis. After all, California= ns=20 are already conservation minded: The state ranks 49th in per capita energy= =20 consumption, according to a 1999 Energy Information Administration report.= =20 Wally Johnson is one of the understanding ones. A fierce Saddleback footbal= l=20 fan, he has gone to 256 straight games and doesn't plan to miss one because= =20 of a time change.=20 "I'll go to them anytime - daytime, nighttime, midnight, Sunday," he said.= =20 "Day games are fun. They don't get quite so cold."=20 Energy notebook=20 San Jose mayor switches position, backs power plant=20 May 31, 2001=20 From Register news services=20 SAN JOSE After months of pressure, Mayor Ron Gonzales has reversed course a= nd=20 decided to support a large proposed power plant in southern San Jose.=20 Gonzales said Wednesday that the companies that would build the $400 millio= n=20 Metcalf Energy Center - Calpine Corp. and Bechtel Enterprises Inc. - have= =20 agreed to donate money to community programs, offer long- term power=20 contracts at competitive rates to San Jose businesses, and take extra steps= =20 to ensure the safety of the surrounding neighborhood.=20 Gonzales and the entire City Council in November voted against the=20 600-megawatt Metcalf plant on the grounds that it would be too close to=20 residential areas.=20 But as California's energy crisis deepened, Gonzales' position became=20 increasingly unpopular. Gov. Gray Davis, state representatives, county=20 supervisors and the Sierra Club called for the plant to be built.=20 The decision on whether the plant will be built now rests with the Californ= ia=20 Energy Commission, which is expected to vote on the issue this summer.=20 New hydroelectric plant goes on line a year early=20 HEMET A new hydroelectric facility at a huge new reservoir began generating= =20 power Wednesday, a full year earlier than planned.=20 The facility at Diamond Valley Lake will provide power for 13,000 household= s=20 initially and 40,000 households once the reservoir is completely full next= =20 year, officials said. The lake is about three-fourths full now.=20 "This may just be a drop in the bucket for California, but we believe that= =20 every little bit counts, especially this summer," said Phillip J. Pace,=20 chairman of the Metropolitan Water District board.=20 The facility is the first new hydroelectric generator in the state in six= =20 years, according to the California Energy Commission.=20 Lab's Web site posts potential blackout data=20 BERKELEY Californians can now get their own information about whether the= =20 lights will stay on without waiting for the Independent System Operator to= =20 issue blackout warnings.=20 Residents can see supply and demand levels rise and fall before their eyes = on=20 a new Web site put together by Lawrence Berkeley Laboratory scientists.=20 The site -- found at http://energycrisis.lbl.gov -- also shows statewide=20 power imports and exports and the capacity that's out of service on any giv= en=20 day.=20 In other news:=20 California power reserves fell below 5 percent because higher temperatures= =20 spurred demand for electricity to run air conditioners, prompting a state= =20 agency to call an alert.=20 The California Independent System Operator, which runs the state=20 power-transmission system, called a Stage Two alert at 2 p.m. No blackouts= =20 were necessary.=20 Forecasters say today will be even hotter, with the mercury rising to 100 i= n=20 San Bernardino.=20 Anaheim will only reach 82, because of an onshore breeze.=20 Gov. Gray Davis said Wednesday that he'll give federal energy regulators at= =20 least 30 days to respond to his requests for massive electricity rebates or= =20 rate cuts before taking them to court.=20 He said judges are "reluctant to tell agencies what to do until agencies=20 review the matter."=20 Bloomberg News, The Associated Press and Register staff writer Gary Robbins= =20 contributed to this report.=20 Deadline near on regional power grid=20 State has until Friday to abide by FERC call to join transmission network.= =20 May 31, 2001=20 By JOHN HOWARD The Orange County Register=20 SACRAMENTO Gov. Gray Davis has until Friday to decide whether to place=20 California's 28,000 miles of electricity lines under increased federal=20 control by joining other Western states in a regional power grid.=20 The decision, which has provoked little public discussion, has long-term=20 implications for the way the state will be able to control its electricity.= =20 Federal energy regulators believe creating about 18 huge multistate grids= =20 across the United States - known as regional transmission organizations, or= =20 RTOs - will make it easier to speed electricity across the country. That wi= ll=20 limit outages and lower prices for consumers, according to the Federal Ener= gy=20 Regulatory Commission.=20 Critics of deregulation, however, contend the creation of an RTO in effect= =20 turns over the state's lines to the Bush administration, which has close ti= es=20 to power companies that have profited mightily in California.=20 "The whole (FERC) plan is to federalize the transmission lines and federali= ze=20 energy policy, and to get the biggest state to commit to this scheme, (whic= h)=20 would be a huge boost for Bush and his allies," said San Diego energy=20 consumer advocate Michael Shames.=20 The RTOs would have the authority to levy transmission charges on wholesale= =20 power, subject to FERC's approval, and control the flow of electricity=20 throughout the grids. The FERC wants the RTOs up and running by December.= =20 FERC has given California's three investor-owned utilities and the grid=20 manager, the Independent System Operator, until Friday to describe how they= =20 would participate.=20 Davis, although not directly deciding the issue, wields influence over the= =20 ISO board, which he appointed, and has been in negotiations with at least t= wo=20 of the utilities. The reports to FERC are expected to largely reflect his= =20 will.=20 Missing Friday's deadline could cause the Bush administration to halt the= =20 so-called "soft cap" price controls currently on California's roiling=20 electricity market. But the threat that holds little worry for Davis.=20 Last month, FERC decided to set targets for power prices when state=20 electricity reserves fall to 7.5 percent or lower during Stage 1, 2 or 3=20 power alerts. Davis and others complained that the targets were "soft caps"= =20 that could easily be ignored by power companies.=20 Stanford University energy economist Frank Wolak suggested that California= =20 should refuse to join an existing RTO, but devise its own plan and present = it=20 to FERC. Others agree, saying such a huge state could be a single-state RTO= ,=20 its grid managed internally but required to participate in the regional flo= w=20 of power.=20 That might better play into a proposal for the state to buy the transmissio= n=20 lines from the utilities.=20 "I would basically say, 'Thanks, but no thanks,' and this is where FERC has= =20 left a giant opening for California to do something clever,'' Wolak said.= =20 Advocates of the RTOs say they represent the reality of geography and the= =20 marketplace - not artificially created political borders.=20 "Markets are regional; they don't stop at the state border," said Elizabeth= =20 Moler, a former FERC chairwoman.=20 Register reporters Kate Berry and Dena Bunis contributed to this story.=20 Thursday, May 31, 2001=20 Bush standing tall as Davis plays blame game=20 So Gov. Gray Davis had a short meeting and is going to sue to set price cap= s=20 on energy ["Bush: No price caps," Front Page, May 30]. What gives a judge t= he=20 power to set price caps on anything? Going through an old high school yearbook, I found a gasoline receipt from= =20 Wilshire Gas where I paid 25 cents per gallon. Why doesn't good old Gov.=20 Davis have the prices rolled back on everything? My first apartment in Sant= a=20 Monica was $150 per month, and I'm sure people would like to see apartment= =20 rents rolled back to that rate.=20 However, to keep everything equal, the judge would also have to roll back= =20 salaries to earlier levels of decades past. The latest trend is to go into= =20 court and ask a judge to legislate what should be done. Doesn't anyone=20 question whether judges have the authority to do that?=20 I don't like higher prices, but how can a California judge order Pacific Ga= s=20 & Electric or Southern California Edison to sell power for one-third of wha= t=20 it pays to bring energy from Idaho? Of course, both would go bankrupt and= =20 shut down. Then, energy costs would go down because there wouldn't be any.= =20 Stock up on candles.=20 Burl Estes Mission Viejo=20 I have nothing but the utmost respect for President Bush for standing firm = in=20 his refusal to implement price caps on wholesale energy prices. Even though= I=20 personally stand to suffer from any electricity rate hikes passed on to=20 customers by Southern California Edison, I firmly support Bush's hands-off= =20 policy and any other federal or state policies that help transfer price=20 controls to those of a free market: the basic controlling forces of supply= =20 and demand. I remind all Californians that the whole reason we are sufferin= g=20 energy problems today are past attempts to unnaturally control prices and= =20 production. I will happily endure any rate hikes, even beyond 500 percent,= =20 knowing full well that such rate increases are essential steps to our=20 recovery from the terrible effects of regulation and our so-called=20 "deregulation." Dennis Chang Seal Beach=20 Gov. Davis wants the Federal Energy Regulatory Commission to set price caps= =20 for wholesale electric rates, but FERC refuses because it believes wholesal= e=20 electric rates are "fair and reasonable." Well, if Davis really wants price= =20 caps, all he has to do is start charging all federal customers the actual= =20 wholesale rate for electricity. Imagine if all the post offices, federal=20 courthouses, FBI offices, INS offices and IRS offices in California had to= =20 pay the actual wholesale rate for electricity, plus assorted delivery=20 charges. That might get FERC to consider price caps. And it would put an en= d=20 to California subsidizing federal customers. The federal customers could no= t=20 complain because FERC says that wholesale electric rates are fair and=20 reasonable. Douglas Ditonto Yorba Linda=20 President Bush announced during his visit to California that he was opposed= =20 to capping energy prices for fear that caps would only lead to more shortag= es=20 and higher prices for gas and electricity. Why does that sound more like a= =20 thinly veiled threat from an extortionist than concern from a nation's=20 leader? I did not vote for George Bush. It seemed obvious to me that he wou= ld=20 be more inclined to support the views of the wealthy in this country,=20 particularly those of the oil industry, than those of the working class. It= =20 appears that Bush will live down to my expectations.=20 Leslie E. Lyon Anaheim=20 Electrical Emergency Stepped Up to Stage Two; Need for Energy Conservation = is=20 Critical FOLSOM, Calif.--(BUSINESS WIRE)--May 30, 2001 via NewsEdge Corporation - The California Independent System Operator (California ISO) declared a Stage Two Electrical Emergency today, Wednesday, May 30, 2001, at 2:00 p.m. with operating reserves dipping below five percent. A number of factors are contributing to today's emergency condition: -- With higher than expected temperatures and the corresponding use of air conditioning units, the demand for power is trending approximately 1,200 megawatts over the forecast. -- Net imports are running at 4,000 megawatts; 3,000 less than last week. -- A total of 9,800 megawatts worth of generation remains unavailable today with power plants off-line because of preventative repairs and plant malfunctions. Consumers are asked to step up conservation efforts as the California ISO's job of balancing the supply and demand for power becomes more challenging this afternoon and into the evening peak hours. Demand across the California ISO Control Area is expected to peak at 36,174 megawatts around 3:00 p.m. this afternoon. Today's Stage Two Emergency is in effect until midnight. With the Stage Two declaration, the California ISO is able to access emergency resources that will help maintain operating reserves. A Stage Two Emergency is declared when operating reserves dip below five percent or are expected to within the next two hours. If an operating reserve shortfall of less than one-and-a-half percent is unavoidable, Stage Three will be initiated. Involuntary curtailments of service to customers, including "rotating blackouts," are possible during this emergency declaration. The California ISO is charged with managing the flow of electricity along the long-distance, high-voltage power lines that make up the bulk of California's transmission system. The not-for-profit public-benefit corporation assumed the responsibility in March, 1998, when California opened its energy markets to competition and the state's investor-owned utilities turned their private transmission power lines over to the California ISO to manage. The mission of the California ISO is to safeguard the reliable delivery of electricity, facilitate markets and ensure equal access to a 25,526 circuit mile "electron highway." Information about the California ISO control area's electricity supply and the current demand is available on the web at www.caiso.com. Other helpful contacts: Pacific Gas and Electric 415/973-5930 Southern California Edison 626/302-2255 San Diego Gas and Electric 877/866-2066 CONTACT: California ISO | Stephanie McCorkle, 888/516-NEWS Washington's Role Helped Spark California's Power Crunch WASHINGTON, May 29, 2001 (States News Service via COMTEX) via NewsEdge=20 Corporation - Although it is popular in Washington to point the finger at California for its energy cris= is, the federal government shares a good deal of blame for the California energ= y crisis. In 1995, the Federal Energy Regulatory Commission helped lay the foundation= =20 for what has become the debacle of the new millenium when it rejected a state p= lan calling for new power plants that today would be providing 1,300 megawatts = in new electricity. What's more, records from that year show that the regulatory commission expressed "grave concerns about the need" for new power generation in the= =20 state. Had those power plants been built, they would be generating power for an estimated 1.3 million homes at the wholesale fixed cost of between 3.5 and = 6.6 cents per kilowatt-hour with binding, long-term contracts. At the time, retail prices averaged 9 cents per kilowatt-hour, according to= =20 FERC documents. In recent months, wholesale prices have been averaging between 12 cents to = 13 cents per kilowatt-hour, according to California Public Utility Commission spokesman James Hendry. During peak usage, those prices can reach 20 cents = to=20 40 cents and at times have rocketed to a record $1.90 since last December. "Everybody is saying those prices will go higher this summer," Hendry added= . Nevertheless, members of the Federal Energy Regulatory Commission -- known = as FERC -- have regularly blamed California for failing to build new power pla= nts to meet present power needs that have sparked energy shortages and higher= =20 prices throughout the West. The commission also shares the widely held view that faulty legislation aim= ed=20 at deregulating the state's power industry in 1996 is to blame. Although FERC put limited price caps into effect on wholesale electricity o= n Tuesday, the commission continues to resist broader demands to stabilize=20 prices in the Western region, as has been sought by California Gov. Gray Davis, an= d other lawmakers. They claim that FERC has ignored their responsibility to= =20 ensure that electricity rates are "just and fair." President Bush has sided with FERC's limited price caps because he believes= =20 that market-oriented supply and demand is the only sure way to restore permanent order to the crisis. The messy trail of the Golden State's rolling blackouts and power failures passed through Washington in January 1995 when several California utility companies asked FERC to rule against the state's plans to build power=20 facilities around the state. As part of that plan, first announced in 1992, the California Public Utilit= ies Commission nailed down bids through a competitive auction process to build = two new geothermal plants, one wind farm, and the repowering of an existing ste= am plant in Southern California. A "badly needed" gas-powered plant on the San Francisco Peninsula also was called for. All would have been up and running by 1999. Had the plants been build, California's electrical utilities would have bee= n required to buy power from them under a long-standing policy first enacted = by Congress in 1978, the Public Utility Regulatory Policies Act. But two utili= ty companies protested, claiming they didn't need more electricity. Besides, t= hey said they could provide or purchase cheaper electricity elsewhere if needed= . California used "a flawed auction process," recalled Art Larson, spokesman = for Sempra Energy, parent company of San Diego Gas &amp; Electric, when asked= =20 about the decision. "It didn't consider the least-cost bids," he said, because=20 California mandated the use of renewable energy. So, just two months before construction on the plants was to begin, Souther= n California Edison and San Diego Gas &amp; Electric filed a protest with FER= C.=20 The five-member regulatory commission approves rates for wholesale electric sal= es=20 of electricity and transmission in interstate commerce. Both utility companies argued that because the PUC favored renewable energy generation, it ignored less expensive ways to provide electricity such as gas-fired plants and other sources. Southern California Edison also expressed concerns about California's effor= ts=20 to deregulate the electric utility industry that soon would be approved the following year. Such legislation would likely bring down energy costs, it predicted. Other parties also weighed in on the complaint, including the National Coal= =20 and Western Fuels Association, which claimed that Edison could purchase power f= rom out-of-state sources at 3 cents a kilowatt hour. Today, FERC and other crit= ics of California's electricity policies believe that the state relies far too heavily on out-of-state sources. California responded to the complaints by noting that it did approve gas=20 powered turbines in its plans, but also wanted "clean" energy suppliers as part of = the state's environmental objectives. After factoring in the costs of controlli= ng pollution in California caused by other forms of energy production, the pri= ce for electricity provided from alternative sources would be competitive, it= =20 said. California's argument fell of deaf ears and FERC sided with the utility companies. In its ruling, the commission stated that California's auction procedure violated the standards set by PURPA because the state explicitly sought out renewable energy providers and ignored other sources in the bidd= ing process. FERC added that "we have grave concerns about the need" for added electrici= ty=20 in California. It also cautioned that the fact that the state was moving towar= d deregulating the electricity industry, "heightens our concern" about forcin= g utility companies into long-term contracts. FERC's controversial ruling, which was opposed by many independent energy organizations, still disturbs Loretta Lynch, chairman of the California Pub= lic Utilities Commission. What derailed the effort to build more power "was not the actions of=20 California, but instead the actions of FERC itself," she said last December when FERC= =20 first denied requests to place wholesale price caps on electricity in western sta= tes and blamed California for not building enough power plants. And how do the utility companies now feel about the power plants they fough= t=20 in 1995 when long-term contracts would have been had for a fraction of the cos= t they are now paying? "20/20 hindsight is a luxury," responds Larson of Sempra Energy. "But the= =20 prices were out of line in the 1990s." By David Phinney Energy Experts Say Solution to California Crisis is Inescapable/ Build More= =20 Power Plants and Ensure Competition ATLANTA--(BUSINESS WIRE)--May 30, 2001 via NewsEdge Corporation - As the Bush Administration continues to face harsh criticism in California over perceived inaction regarding the energy crisis, industry executives appear to be lining up behind Bush's assertion that enhancing the availability and reliability of the nation's energy supply is the long-term solution. And they consider creating more supply while maintaining the transition to a deregulated marketplace crucial, reports the May issue of Energy Competition Strategy Report, published by Atlanta-based NHI Publications. One leading utility executive says the solution to the nation's long-term supply problem is inescapable. "We need to build new power plants. And those new plants will be built only if we allow the competitive market to do its job," says William Hecht, chairman, president, and CEO of Allentown, PA-based PPL Corp. Price caps - which California is pushing for and Bush opposes - "reduce the incentive to invest in new production and unnecessarily prolong and exacerbate the current supply and demand mismatch," Hecht adds. PPL is aggressively developing new power plants in Connecticut, New York, Pennsylvania, Washington, and Arizona that will add more than 4,000 megawatts of supply. Other members of the Washington, DC-based Electric Power Supply Association, such as ABB Energy Ventures of Switzerland and Zeigler Coal Holding of Ashland, KY, are building new, unregulated merchant power plants. Meanwhile, EPSA is asking Congress to enact legislation that would allow federal eminent domain for transmission siting and establish a standardized interconnection policy to make it easier for generation companies to "get onto the grid." Other highlights of this month's Energy Competition Strategy Report include: -0- *T -- A new energy market study finds that despite several major setbacks, including California's ongoing crisis, the energy industry still has its sights set on achieving full competition. Retail Energy Markets (REM), produced annually by Xenergy, a Burlington, MA, research firm, is featured in the report and includes a wealth of data suggesting that, despite restructuring problems, the shift to competition continues. -- Get a detailed look at PowerSolution, a core technology platform that helps energy companies manage their data by integrating business applications, external trading partners, and legacy systems. -- Regional utilities are forging loyalties with big commercial and industrial chains through National Accounts programs that provide value-added, one-stop customer service. Award-winning Southern Co. shares its secrets to success. -- Can fuel cells meet the growing demands for electricity? A large energy company plans to build, operate, and maintain an electric generation plant that will use six fuel cells to generate primary electric supplies. -- Evaluate opportunities for investment. Use this process to assess whether any of 700 technologies spanning the energy value chain are appropriate investments. *T Free three-month trial subscriptions to Energy Competition Strategy Report are available by sending an e-mail with your full mailing address to [email protected], calling 800-597-6300 or 404-607-9500, or faxing your address to 404-607-0095. CONTACT: NHI Publications, Atlanta | David Schwartz, 404-607-9500 Business/Financial Desk; Section A=20 In California, Blackouts Spur A Search for Home Remedies=20 By LAURA M. HOLSON=20 ?=20 05/31/2001=20 The New York Times=20 Page 1, Column 5=20 c. 2001 New York Times Company=20 LOS ANGELES, May 30 -- For Evans Keller, a turkey farmer in the Central=20 Valley of California, the energy crisis has become a matter of life and=20 death.=20 For 17 years, he and his family have raised turkeys near Fresno, far from t= he=20 dot-com companies of Silicon Valley and the ''Baywatch'' beaches most=20 outsiders associate with the state. In his world, where daily summer=20 temperatures soar above 100 degrees on dusty ranches, Mr. Keller is forced = to=20 use electric fans and fog-making machines to cool his one million turkeys -= -=20 or watch them roast in tin-roofed sheds.=20 But with energy experts forecasting more than 260 hours of blackouts this= =20 summer and no relief in sight from regulators or politicians, Mr. Keller ha= s=20 taken matters into his own hands. In April, he bought eight small generator= s=20 at Costco that he could hook up to tractors and use to keep the fans and=20 misters running when the Pacific Gas and Electric Company cuts his power.= =20 Since then he has regularly conducted drills on the 14 farms that supply hi= m=20 with turkeys -- 4 farms he owns and 10 run by independent contractors -- an= d=20 has spent weeks winnowing the routine down to 40 minutes, barely enough tim= e=20 before the birds begin to wither under the searing sun.=20 ''Believe me, we're not proud,'' said Mr. Keller, who said he had appealed= =20 earlier this year, without success, to Pacific Gas and Electric for advance= =20 warnings of blackouts. ''We'll do what we have to to protect our=20 investment.''=20 The energy crisis here has come to this: from tourist attractions in sunny= =20 Southern California, to farmers who dominate the central region of the stat= e,=20 to technology concerns up north, businesses are coming up with novel ways t= o=20 cope with what many fear will be an unpleasant summer.=20 The concerns are understandable given the issues that many businesses face,= =20 including lost revenue and potential layoffs, as the state's power shortage= s=20 continue. ''The uncertainty is what kills you,'' Jerry Meek, utility=20 operations manager at Roche Pharmaceuticals in Palo Alto, said.=20 Trying to reduce that uncertainty, businesses are applying to the state's= =20 Public Utilities Commission for exemptions from having their power turned o= ff=20 this summer. (The deadline is Friday.) Last week, Gov. Gray Davis announced= =20 that the state would begin a three-tiered warning system for residences and= =20 businesses that are likely to be affected. The first warning will come two= =20 days before a blackout; the second, one day in advance; and the final=20 warning, one hour before the lights go out.=20 A more radical approach is being suggested by Mike Briggs, a Republican=20 assemblyman from Fresno. He is asking the state to schedule potential=20 blackout days as much as months in advance so business owners know when the= ir=20 turn is coming. ''It is scary what this has come to,'' Mr. Briggs said. ''B= ut=20 this gives people options.''=20 Farmers in the Central Valley, for instance, have to order water for their= =20 crops a day ahead. But if the power is off when the water shows up in an=20 irrigation canal, he said, ''they can't open the gates and the water flows= =20 right past them.'' One business owner told Mr. Briggs that he spent $30,000= =20 one month to lease two generators that were never used. ''He said it would= =20 have been nice to know ahead of time so he could rent the generators for a= =20 day,'' the assemblyman said.=20 Of course critics worry that burglars will know when the lights go out, too= .=20 ''Yes, there is the downside of more potential burglaries,'' Mr. Briggs sai= d.=20 ''But maybe people are willing to make that trade-off.''=20 Even those business owners who say they are currently protected from power= =20 failures are making preparations -- just in case. The Legoland California= =20 amusement park in Carlsbad, near San Diego, has an arrangement with its=20 utility, the San Diego Gas and Electric Company, to keep the lights on, sai= d=20 a spokeswoman, Courtney Simmons. Still, she added, the park is prepared in= =20 the event of a loss.=20 The contingency plan consists of keeping open the 3 rides, of the 20 total,= =20 that are not powered by electricity, she said. Barbecues would be rolled ou= t=20 to cook food, and the park's boulevards would be flooded with performers,= =20 including singers, dancers, jugglers and musicians who will entertain until= =20 the power comes back on. ''We are prepared for outages no matter what the= =20 cause this summer,'' she said.=20 Many tourist attractions, including Disneyland in Anaheim, are already=20 prepared because they upgraded their systems in 1999, fearing a Year 2000= =20 disaster that would threaten the power grid. ''A lot of these things were= =20 already tested and documented,'' said Ray Gomez, director of communications= =20 at Disneyland Resorts. ''We are skilled at emergency evacuations. Energy is= =20 only one part of that.''=20 As part of its plan, Disneyland shored up its emergency operations center,= =20 holding employee drills to turn on emergency power. This summer, Disneyland= =20 will have employee volunteers who roam the park day and night, turning out= =20 lights and replacing incandescent bulbs with more energy-efficient ones. Th= e=20 park also works with the city of Anaheim, which supplies the park with powe= r,=20 to conserve 5 to 10 percent, minimizing the risk of blackouts at all.=20 Oddly enough, Disneyland is reviving its Main Street Electrical Parade, a= =20 29-year-old light show that had most recently been an attraction in Florida= .=20 Leslie Goodman, a senior vice president for strategic communications for Wa= lt=20 Disney Parks and Resorts, said the park had made sure that the parade did n= ot=20 use energy when Californians need it most. The lights in the parade are=20 powered by battery, and are recharged during off-peak hours. But, she added= ,=20 despite what was a difficult decision and a potential public relations=20 nightmare, ''the show goes on.''=20 While most businesses make an effort to conserve (if for no other reason th= an=20 to save money as rates soar), some communities are giving corporations adde= d=20 incentives. The city of Palo Alto, for example, has agreed not to cut off= =20 power to Roche Pharmaceuticals as long as the company reduces energy=20 consumption by 15 percent within 30 minutes of an announced Stage 3 alert,= =20 the state's most critical. Only once has Roche lost power, said Mr. Meek, t= he=20 company's utility operations manager. And that, he added, was because of a= =20 mistake.=20 Roche has a plan to ensure that a blackout does not happen. Once Mr. Meek= =20 gets an alert on his pager from a city representative (who can see how much= =20 is being saved because the company has a real-time meter for the 15-buildin= g=20 campus), voice mail and e-mail messages are sent to more than 1,000 employe= es=20 asking them to turn off nonessential lights. The air-conditioning is change= d=20 to raise the temperature in most areas to 78 degrees from a normal 72=20 degrees. Lighting in all offices is reduced, and some employees move from= =20 their dark cubicles to the window-walled cafeteria to work, he said.=20 ''The question is, do you treasure light or do you want your computer shut= =20 down?'' Mr. Meek asked. If these measures do not reduce overall demand by 1= 5=20 percent, Roche will switch on backup generators to power the laboratories.= =20 Why? If laboratory tools are not properly shut off before a loss of power, = it=20 takes days to recalibrate them, costing thousands of dollars and wasted tim= e,=20 Mr. Meek said. ''My focus with the uncertainty is to do what we can to get= =20 around it,'' he said.=20 One way that California businesses are seeking certainty is by appealing to= =20 the state's Public Utilities Commission for relief. One commissioner, Carl= =20 Wood, said in a recent interview that about half the customers who got=20 electricity from the state's three largest utilities were exempt from=20 blackouts because their services were considered essential, like fire=20 stations or hospitals, or because they shared power with an essential sourc= e.=20 No more than 60 percent of the state's customers can be exempted from=20 blackouts.=20 Recently, an exemption was granted for the Bay Area Rapid Transit District,= =20 which runs 95 miles of commuter train service in the San Francisco=20 metropolitan area, Mr. Wood said. Pacific Bell Park, home of the San=20 Francisco Giants, has asked for one, too; that request is being reviewed.= =20 ''It can be extremely disruptive and expensive if there are lots of blackou= ts=20 this summer,'' he said. ''This is a big economic issue.''=20 Just imagine, he said, musing about how the summer could end: ''Disneyland= =20 without rides?''=20

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Energy Issues

Please see the following articles: Sac Bee, Mon, 5/7: "It's crunch time on power rates" SD Union, Sun, 5/6: "SDG&E shutoff notices increasing" SD Union, Sun, 5/6: "State OKs $7 billion contract" SD Union, Sun, 5/6: "The energy crisis gives Filner some easy targets" SD Union, Sat, 5/5: "Gephardt tells rally here he's pushing price caps" LA Times, Mon, 5/7: "Proud Linemen Take a Hit" LA Times, Sun, 5/6: "Utility's Workers Watch Helplessly as Company Falls" LA Times, Mon, 5/7: "Utility Bills Are Just One Way People Pay for Energy= =20 Crisis" LA Times, Mon, 5/7: "Questions Remains Who'll Take Brunt of the Rate Hikes= " LA Times, Sun, 5/6: "Riordan and Freeman's Feud Erupts in Public" LA Times, Sat, 5/5: "Cheney Rejects Price Caps, Aid for Calif. Power Crisi= s" SF Chron, Mon, 5/7: "Rolling Health Hazards=20 Summer Blackouts May Pose Public Health Risks" SF Chron, Mon, 5/7: "Oh, that boom in 2002 " SF Chron (AP), Mon, 5/7: "Developments in California's energy crisis"=20 SF Chron, Mon, 5/7: "U.S. considers withdrawing lawsuits against coal=20 industry=20 Pollution controls affect power plants " SF Chron, Mon, 5/7: "Swimming pool owners get PG&E discounts=20 Operating pumps at night saves energy " SF Chron, Sun, 5/6: "Legislators plan to sue U.S. panel on energy=20 Top state Democrats want cap on prices" SF Chron, Sun, 5/6: "Nevada's winning hand -- power=20 State sees profit in California's crisis" Mercury News, Mon, 5/7: "Share prices rise amid news of big energy deals" Mercury News, Mon, 5/7: "Florida shrugs off Calif-blackout scenario" Mercury News, Mon, 5/7: "Hot days worry energy watchers" OC Register, Mon, 5/7: "Unplugged Manking has lived thousands of years without electricity. The Amish still = do. Californians may have to. We called an Ohio hardware store to find out how" Individual.com (AP), Mon, 5/7: "Mexico Continues Power Exports To=20 California" WSJ, Mon, 5/7: "Charged Up: Texas May Face a Glut of Electricity, but that Won't Aid Rest of U.S." Energy Insight, Mon, 5/7: "Out of Eden: California on the edge" ---------------------------------------------------------------------------= --- ---------------------------------------------------- It's crunch time on power rates By Carrie Peyton Bee Staff Writer (Published May 7, 2001)=20 In a San Francisco hearing room, lawyers settled into squeaky green seats,= =20 flopped their briefcases onto the orange carpet and waited.=20 Where was Gov. Gray Davis' plan for how a whopping electric rate hike shoul= d=20 be spread among homes and stores, farms and offices?=20 Where were the underlying calculations that explained why Pacific Gas and= =20 Electric Co. customers should pay a stiffer increase than Southern Californ= ia=20 Edison's customers?=20 And where was the sworn witness who would answer tough questions after=20 formally introducing the governor's plan at quasi-legal rate hearings at th= e=20 state Public Utilities Commission?=20 The Governor's Office knew that business and utility lawyers were asking fo= r=20 details and for someone they could cross-examine, Administrative Law Judge= =20 Christine Walwyn assured those gathered in the dingy hearing room last week= .=20 "We have relayed all parties' comments to their office. There has been no= =20 response," she said.=20 Chuckles and snorts played over the room. "Surprise, surprise" one attorney= =20 muttered.=20 "Frankly, it was handled terribly," Shelly Sharp, PG&E's director of rates,= =20 said later. "It's sort of a mockery of the process."=20 Rarely has the interplay between Sacramento and San Francisco been as visib= ly=20 strained as it was in the rate-making drama that has unfolded for the past= =20 month.=20 At stake are issues that will touch virtually every home and business in th= e=20 state and could drastically alter California's power landscape.=20 The right rates could spur conservation, reduce summer blackouts and drive= =20 down wholesale costs, many believe. The wrong ones could decimate businesse= s=20 and kill jobs, regulators have been warned.=20 The PUC, which regulates rates, has been gathering data to decide which=20 consumers will get hit hardest by the $4.8 billion rate hike approved in la= te=20 March. Normally, it takes six months to a year to make such decisions.=20 Now, the PUC is trying to do the job in about six weeks, and Walwyn is=20 scheduled to release her draft decision Tuesday. Community hearings will be= =20 held across the state before commissioners vote May 14, two weeks before th= e=20 new charges start showing up on customers' bills June 1.=20 Hanging over it all have been two patches of fog. The state did not give=20 regulators the details on how much money it thinks it needs in rates until= =20 Wednesday -- so late it was "useless" for this round of rate design, said a= =20 source familiar with the process.=20 The wait for the data has been "just purely frustrating and leaves everyone= =20 in the dark," said Ed Yates, vice president of the California League of Foo= d=20 Processors.=20 And the governor, who outlined some general ideas for rates in a speech Apr= il=20 5, followed up two weeks later by trying to submit, as written testimony, a= =20 short question-and-answer summary and slides from his Web site.=20 "There's no meat on the bones. There are hardly any bones," said Bob=20 Finkelstein, an attorney for The Utility Reform Network in San Francisco.= =20 Ultimately, the judge refused to admit Davis' offerings as testimony, letti= ng=20 them into the record only as "reference items" that do not carry the weight= =20 of evidence.=20 The governor's press office has said it believes Davis' opinions will be=20 thoroughly considered by the commission in that format.=20 Davis gave the PUC the same template he gave the Legislature, said spokesma= n=20 Steve Maviglio, and "the outlines of the plan are clear." He added that PUC= =20 staffers assured the Governor's Office the information was "acceptable."=20 The episode was nerve-wracking for participants because of the clout Davis = is=20 believed to carry at the PUC, where three of the five commissioners are his= =20 appointees.=20 "The parties are legitimately afraid that the governor's proposal might be= =20 rammed down their throats," consumer advocate James Weil said.=20 The parties include everyone from winemakers to oil refineries. They've bee= n=20 presenting witnesses, firing off briefs and trying to persuade regulators t= o=20 set rates in ways that will have the least possible effect on their=20 operations.=20 Do this wrong, and "you're going to lose whole industries," lobbyist D.J.= =20 Smith warned in an interview.=20 Do this wrong, and "we're going to have severe economic disruption of the= =20 state, of the sort we haven't seen in 30 years," energy economist Severin= =20 Borenstein testified.=20 Taking the first stab at sorting the wrong choices from the right ones will= =20 be Walwyn, the judge and former Nevada PUC commissioner whom business group= s=20 accuse of tending to favor small consumers. She will have to sift conflicti= ng=20 arguments on two key issues and scores of smaller ones, often with hundreds= =20 of millions of dollars at stake:=20 First, how can rates be designed to encourage conservation?=20 Borenstein, who heads the University of California Energy Institute, urged= =20 the commission to get tough with virtually everyone, despite political=20 pressure. Big users should be forced onto real-time rates that fluctuate wi= th=20 the power market, and household users should get rebates for cutting use an= d=20 face steep charges if they surpass baseline rates.=20 Such calls have met with strong opposition from businesses least able to cu= t=20 consumption when prices are highest, such as canneries that operate around= =20 the clock and department stores that want to stay open at peak hours.=20 A second, equally contentious issue is who should bear the brunt of the rat= e=20 hike.=20 PUC President Loretta Lynch, the commissioner assigned to oversee this rate= =20 case, suggested early on that her colleagues should consider reversing a=20 long-standing policy of charging the biggest users some of the lowest price= s.=20 Before this year's twin rate hikes, PG&E's household rates averaged more th= an=20 10 cents a kilowatt-hour while its largest industrial customers paid less= =20 than 5 cents. Heavy industries contend such imbalances are fair because the= =20 biggest power users cost less to serve. They consume steady amounts of=20 electricity around the clock, while homeowners' consumption shoots up durin= g=20 high-priced peaks.=20 The overall rate hike approved unanimously by commissioners March 27 gives= =20 PG&E and Edison the right to collect the equivalent of an extra 3 cents for= =20 every kilowatt-hour of electricity they sell.=20 There are at least two ways to do that: Charge everyone 3 cents more or sen= d=20 everyone's rates up about 29 percent for PG&E customers and 26 percent for= =20 Edison's.=20 "Any time you use an equal-cents allocation, it's going to be to the benefi= t=20 of smaller customers," said Sharp, PG&E's rate director. The equal-cent=20 method is also fairer than equal percentage hikes, she said, because those= =20 are based on "very, very old" calculations about how much it costs to serve= =20 different customers.=20 But Edison has taken the opposite stand, urging the commission to go easier= =20 on its biggest customers, with rate hikes that top out at about 30 percent= =20 for any one group. "We want to ensure that the increase is allocated fairly= =20 among customer classes," said Akbar Jazayeri, Edison's manager of pricing a= nd=20 tariffs.=20 The Bee's Carrie Peyton can be reached at (916) 321-1086 or=20 [email protected].=20 ---------------------------------------------------------------------------= --- --------------------------------------------- SDG&E shutoff notices increasing=20 By Jeff McDonald=20 UNION-TRIBUNE STAFF WRITER=20 May 6, 2001=20 Not much bigger than a postcard, the final notice from San Diego Gas &=20 Electric Co. came curled inside the front gate of her Lakeside mobile home.= =20 Marie Maurer found it only after hearing rustling outside. The bill collect= or=20 was already on his way to a nearby mobile home, without having spoken a wor= d=20 to the 72-year-old woman.=20 The news was not good. SDG&E wanted $200 -- a big chunk of her $283.95 debt= =20 -- and Maurer was $47 short. The retired nurse had three days to come up wi= th=20 the money or have her electricity shut off.=20 "I try so hard to save and to budget," said Maurer, who gets by on a few=20 hundred dollars a week in Social Security and government rental assistance.= =20 "I don't go anywhere. I collect cans. I pawn stuff."=20 Maurer is among a growing number of fixed-income senior citizens,=20 small-business owners and others getting pinched by rising electricity cost= s=20 -- and increasingly fearful of what the hot summer months might bring.=20 Unable to meet the commanding debt piling up on their electric and=20 natural-gas bills, ratepayers such as Maurer are facing 72-hour disconnect= =20 notices, or in many cases agreeing to what amounts to revolving=20 pay-as-you-can accounts.=20 SDG&E refused to say how many customers have had their power shut off for= =20 nonpayment in recent months, saying such information is proprietary and=20 confidential.=20 But consumer groups and business resource centers report a fresh influx of= =20 calls for help in finding what little relief is available.=20 "I'm getting more people contacting me with disconnection notices," said Jo= di=20 Beebe, an analyst with the Utility Consumers' Action Network. "They're=20 flooded. It's very frustrating for many people."=20 Ken M. Clark of the Small Business Development Center at Southwestern Colle= ge=20 said he gets 10 or 12 calls a week from business owners worried about the= =20 price of power. At this time last year, he was receiving none.=20 "Some of them are looking for a shoulder to cry on," Clark said. "They're n= ot=20 necessarily looking to solve the energy crisis, but possibly to buy some ti= me=20 or make a strategy to get through this."=20 The situation could grow worse in a hurry. Gov. Gray Davis has suggested th= at=20 the Public Utilities Commission allow SDG&E to raise its electricity rate b= y=20 44 percent.=20 Not only that, but barely half the low-income ratepayers in California=20 eligible for relief programs have enrolled. Regulators blame the low figure= =20 on less-than-diligent outreach efforts by the utilities.=20 At their meeting last week, commissioners warned utility companies to work= =20 harder at signing up more of the 2 million or so customers eligible for the= =20 California Alternate Rates for Energy program.=20 "If they don't, we'll order them to," PUC President Loretta Lynch said.=20 Eligibility rules allow customers with incomes of up to 175 percent of the= =20 federal poverty level to qualify. A one-or two-resident home is now eligibl= e=20 with an income of $21,233 or less; a three-person home, $25,083.=20 The program, which offers a 15 percent discount on electricity, is funded b= y=20 a 25-to 50-cent surcharge on the bills of other customers. That fee may ris= e=20 once regulators decide how to implement the latest rate increase.=20 Low-income customers are exempt from the recent rate hike.=20 Officials at SDG&E, where almost 20 percent of the 1.2 million ratepayers a= re=20 eligible for discounted electric rates, say they steer as many customers as= =20 they can into the programs. Customer service representatives also are=20 available to help consumers arrange payment plans, the utility said.=20 "Whenever we hear that a customer has a problem, we want to contact them an= d=20 see if we can't solve the problem," spokesman Ed Van Herik said. "We work t= o=20 keep customers' power on."=20 Jane Johnson isn't so sure.=20 The disabled woman from San Diego's Lomita neighborhood received a disconne= ct=20 notice Friday. SDG&E demanded $210 to avoid shutting off the power within= =20 three business days.=20 "We were fairly good, but every now and then the bill was late," Johnson=20 said. "Last August our bills tripled, and ever since then I have not been= =20 able to get caught up."=20 The run-up in electricity costs last summer prompted state regulators to=20 order SDG&E to stop shutting off power to customers who could not pay their= =20 bills. But that directive lasted only through October.=20 By November, the utility began asking larger users to bring their bills=20 current, and the same request was made of small businesses in December. SDG= &E=20 began requiring residential customers to pay off their debts in January.=20 Those who cannot pay are subject to a $15 disconnect fee and a $9 charge fo= r=20 delivering final notices. Even more daunting, a deposit equal to twice the= =20 consumer's highest monthly bill may be required before service is restored.= =20 It is difficult to gauge how deeply the crisis has hurt low-income people.= =20 SDG&E will only discuss in vague terms the numbers of customers who have be= en=20 issued disconnect notices or been forced into revolving payment plans.=20 "After resuming credit collections, we did have an accelerated number of=20 customers who entered into pay agreements," Van Herik said.=20 For Maurer and Johnson, assistance came in the form of intervention by Beeb= e,=20 the Utility Consumers' Action Network analyst who works with SDG&E in=20 restructuring customer payments.=20 Nonetheless, "it's a constant worry," said Maurer, who said she had to sell= a=20 gold watch to finance part of her latest utility bill. "I don't think we're= =20 going to have any real relief for two or three years." The Associated Press contributed to this report.=20 ---------------------------------------------------------------------------= --- --------------------------------------------- State OKs $7 billion contract=20 Sempra unit to sell half its power output By Ed Mendel=20 UNION-TRIBUNE STAFF WRITER=20 May 6, 2001=20 SACRAMENTO -- A San Diego-based firm that is building several efficient,=20 clean-burning power plants has agreed to sell about half its output to the= =20 state under a 10-year contract worth $7 billion.=20 Sempra Energy Resources becomes the second-largest provider as the state pu= ts=20 together a portfolio of cheaper long-term power contracts, lowering the cos= t=20 of buying power for utility customers on the expensive spot market.=20 As the state struggles to find power at reasonable prices to keep the light= s=20 and air conditioners on this summer, Sempra Energy Resources will begin=20 providing 250 megawatts next month during peak-load periods, enough to supp= ly=20 power to 188,000 to 250,000 households.=20 Sempra Energy Resources, an unregulated sister company to San Diego Gas &= =20 Electric, will provide as much as 1,900 megawatts by 2004 as new plants at= =20 Bakersfield, Phoenix and Mexicali come on-line. The company is seeking=20 permits for a new plant in Escondido and an expansion of a plant near Las= =20 Vegas.=20 "The fact that we are taking roughly half of our output and committing that= =20 to the state I think is a good outcome for us and the state," said Donald= =20 Felsinger, group president of Sempra Energy's unregulated units.=20 State officials said the price paid for power under the Sempra contract is= =20 lower than the portfolio long-term average of 6.9 cents per kilowatt-hour a= nd=20 that the price will be a third to a half cheaper this summer than current= =20 spot market prices. They have not revealed the exact price of power specifi= ed=20 in any of the energy contracts.=20 "This is a positive step toward increasing the available power supply to=20 California at a significantly lower price than currently found on the spot= =20 market," Gov. Gray Davis said in a statement.=20 Felsinger said Sempra is investing $2 billion in power plants with the late= st=20 technology capable of using about 40 percent less natural gas while produci= ng=20 the same amount of power as older models.=20 "We are probably one of the more attractive prices that has been negotiated= ,"=20 said Felsinger, "because we have a brand-new, efficient fleet."=20 Sempra Energy of San Diego is the parent firm of Sempra Energy Resources an= d=20 SDG&E, the local utility.=20 In one of the ironies of the California electricity crisis, the state will = be=20 buying power from one unit of Sempra Energy and providing the power to the= =20 customers of another Sempra unit, SDG&E.=20 The state began buying power for utility customers in January after Souther= n=20 California Edison and Pacific Gas and Electric, whose rates were frozen und= er=20 deregulation as wholesale power costs soared, ran up a $13 billion debt and= =20 were no longer able to borrow.=20 Monthly bills for customers of SDG&E, the first utility to be deregulated,= =20 doubled and tripled last summer before they were capped by legislation in= =20 September.=20 The state has spent about $6 billion buying power for the customers of the= =20 three investor-owned utilities. Davis wants to repay the state general fund= =20 with a $12.5 billion bond that would be paid off by ratepayers over 15 year= s.=20 Assembly Republicans have proposed that the state surplus be used to pay fo= r=20 $5 billion of the power costs, lowering the bond to $8 billion and reducing= =20 monthly bills for ratepayers in the months ahead.=20 There are grim predictions of blackouts and soaring costs as the demand for= =20 power increases this summer, traditionally by about half because of air=20 conditioning and other factors.=20 The agency that manages the power grid, the Independent System Operator, ha= s=20 forecast that the peak demand could reach 50,303 megawatts next month, 3,64= 7=20 megawatts above the generation expected to be available in the region.=20 The state has to purchase only about a third of the total supply -- the "ne= t=20 short" remaining after the power provided from utility generators and small= =20 nonutility generators operating under the federal "qualifying facilities"= =20 program.=20 The state contract with Sempra, which jointly operates a 480-megawatt plant= =20 near Las Vegas with Reliant Energy of Houston, does not add new generation= =20 but will lower state spending.=20 An analysis issued by the governor's consultants last week forecast that 37= =20 percent of the power that the state will have to buy from July through=20 September will be covered by long-term contracts.=20 The rest of the power will have to be purchased on the expensive spot marke= t.=20 Some think the analysts' prediction that the average price will be 19.5 cen= ts=20 per kilowatt-hour is optimistic.=20 The analysts expect a decline in the average price of 35 cents per=20 kilowatt-hour from April through June because of additional small plants=20 operating during peak periods and conservation, including "sticker shock"= =20 from a rate increase that may boost the average residential bill 26 percent= .=20 The state Department of Water Resources, which purchases power for the stat= e,=20 also is trying to negotiate more contracts like the Sempra agreement that= =20 will help lower costs this summer.=20 "I don't think we have any others quite that large under negotiation," said= =20 Ray Hart, DWR deputy director, "but we are still working on a number of=20 contracts."=20 Hart said that only a contract with a San Jose-based firm, Calpine, is larg= er=20 than the Sempra contract announced yesterday. Calpine reportedly has an=20 agreement to sell the state $12.9 billion worth of power. ---------------------------------------------------------------------------= --- -------------------------------------------------- The energy crisis gives Filner some easy targets=20 He's carving new niche, bringing state woes to Washington's attention By Philip J. LaVelle=20 UNION-TRIBUNE STAFF WRITER=20 May 6, 2001=20 When he passed on the 2000 San Diego mayor's race, Rep. Bob Filner based hi= s=20 decision, at least in part, on a flawed political calculation.=20 "I thought the Democrats would be in the majority in Congress," Filner said= =20 in a recent interview. "Given my seniority, I would have a large role to=20 play."=20 He was dead wrong. In November, Republicans retained slim control in the=20 107th Congress while the Electoral College gave the White House to a=20 Republican who now governs from the right.=20 Hard times for an old-school liberal like Filner?=20 Not to hear him tell it.=20 His party may be out of power, but Filner, 58, is carving a niche for himse= lf=20 in California's energy crisis, an issue he caught on to last year, long=20 before it popped up on Washington's radar screens.=20 Filner is attacking the issue with his well-known brand of aggressive actio= n.=20 As a San Diego City Council member (1987-1992) he led the Gang of Five, a= =20 dissident bloc that opposed then-Mayor Maureen O'Connor.=20 As a congressman, the San Diego Democrat reveled in making life difficult f= or=20 visiting GOP big shots, crashing local events featuring former Senate=20 Majority Leader Bob Dole and ex-House Speaker Newt Gingrich.=20 He peppers county newsrooms with news releases of his energy pronouncements= =20 and frenetic schedule, including a protest Friday with House Minority Leade= r=20 Dick Gephardt, D-Mo., outside Duke Energy's South Bay plant.=20 The crisis provides easy targets:=20 Democratic Gov. Gray Davis? "You cannot be moderate to solve this problem,"= =20 Filner said.=20 Republican President Bush? "Basically a prop of the big, big corporations,= =20 and the energy crisis shows it."=20 Out-of-state energy producers? "They know they can rob our state blind=20 because they have a friend in the White House."=20 Energy prices actually began their rise through the stratosphere when=20 Democrat Bill Clinton was president.=20 Fifth term Voters in Filner's solidly Democratic 50th Congressional District seem to= =20 approve. In November they handed him a fifth term with a commanding 69=20 percent of the vote against light opposition.=20 A tough campaigner, Filner has consistently won re-election in his South Ba= y=20 district by comfortable margins, and ran unopposed in 1998. His biggest=20 primary challenge came from Democrat Juan Vargas, then on the City Council,= =20 who lost to Filner by 9 percent in 1996. Vargas is now a state assemblyman.= =20 Filner follows the late House Speaker Tip O'Neill's maxim that all politics= =20 is local. After first meeting Filner, people of all stripes typically recei= ve=20 great-to-meet-you letters, usually within 48 hours.=20 His district, which abuts the U.S.-Mexico border, includes the southern hal= f=20 of the city of San Diego, plus National City and Chula Vista. It is one of= =20 the most ethnically diverse in the nation, at 41 percent Latino, 29 percent= =20 Anglo, 15 percent Filipino and 15 percent African-American.=20 Back in Washington, despite the Republican domination, Filner says he is we= ll=20 positioned to pursue national leadership roles in the energy crisis and=20 border infrastructure.=20 Filner sits on the House Veterans Affairs Committee and the Transportation= =20 and Infrastructure Committee. His successes include helping get an=20 international sewage treatment plant built here; securing limited benefits= =20 for Filipino veterans of the U.S. military; and securing greater benefits f= or=20 all veterans.=20 He has failed, so far, in efforts to restore full benefits to Filipino=20 veterans of World War II.=20 Wide interests At times, Filner's interests range far afield, from championing a homeland= =20 for the Kurds, a policy rejected by the U.S. government, to co-sponsoring= =20 legislation this term condemning destruction of pre-Islamic statues in=20 Afghanistan by the Taliban regime.=20 On core issues, Filner swims against a strong tide. Congress "is totally=20 controlled by the Republican majority," said UC San Diego political scienti= st=20 Gary Jacobson, making "the role of the minority severely circumscribed."=20 Filner's top areas of interest have been slow to gain traction in the=20 Beltway. The border is a neglected issue there, but the energy crisis has= =20 finally become a national story.=20 On border infrastructure -- "my key thing" -- Filner supports completing=20 state Route 905 to link the Otay Mesa crossing with the interstate freeway= =20 system. He also hopes to revive the San Diego & Arizona Eastern Railway to= =20 create a "jobs train" that could spur commerce here.=20 "If we can do this border infrastructure .?.?. we not only help trade betwe= en=20 the two nations, we transform the economy of this region," he said.=20 Julie Meier Wright, president of the San Diego Regional Economic Developmen= t=20 Corp., applauds Filner's focus but finds his positions inconsistent, given= =20 his opposition to the North American Free Trade Agreement. "Border=20 infrastructure is needed in significant part because of the increased=20 economic activity" spurred by NAFTA, she said.=20 Being anti-NAFTA fits his political base; organized labor, which opposed=20 NAFTA, ranks consistently among Filner's biggest institutional sources of= =20 campaign cash, according to the Center for Responsive Politics.=20 Paul Ganster, director of San Diego State University's Institute for Region= al=20 Studies of the Californias, sees no inconsistency. "It's possible to be ver= y=20 critical of NAFTA and at the same time recognize there are very positive=20 benefits that can be brought by free trade," he said.=20 Border problems Filner and others are concerned that the NAFTA has increased problems along= =20 the border that are not being addressed.=20 "That's my biggest disappointment, that we have not been able to bring the= =20 border to its rightful place in national consciousness. .?.?. Nobody gives = a=20 damn about it in Washington," said Filner, who attended Mexican President= =20 Vicente Fox's inauguration and is in his second year of Spanish lessons.=20 Filner got on the energy crisis last year when San Diego became the first= =20 California city to bear the brunt of the state's 1996 deregulation=20 legislation. His working-class district has been particularly hard hit.=20 In January, he introduced a bill to force the Federal Energy Regulatory=20 Commission to cap energy rates, retroactive to last June. It was supported = by=20 Rep. Duncan Hunter, R-El Cajon, a conservative about as far from Filner on= =20 the political spectrum as one can get. Filner now supports another energy= =20 bill advanced by representatives from California, Washington and Oregon.=20 Filner may have no desire to ever run for governor -- but if he held the jo= b,=20 he said, there would be no mistaking him for Gov. Davis on the energy issue= .=20 "I'd be all over the place. .?.?. I'd probably be in jail because I'd be=20 joining protests."=20 He's been there before.=20 In 1961, as a Cornell University undergraduate, Filner took on segregation= =20 and went to Mississippi as a Freedom Rider. He integrated a lunch counter,= =20 which landed him in state prison for a few months.=20 A Pittsburgh native raised in New York City, Filner, with a doctorate in th= e=20 history of science, is one of the most highly educated members of Congress.= =20 He taught history at SDSU for 20 years. In the mid-1970s he was an aide to= =20 the late Sen. Hubert H. Humphrey. Filner was on the San Diego school board= =20 from 1978 to 1983 before being elected to the City Council.=20 Will Filner run for mayor in 2004?=20 "It's a possibility," he said. But if Mayor Dick Murphy "continues the job= =20 he's doing, he's there for two terms, and that puts me a pretty old guy." H= e=20 may choose instead to attempt a long House career, hoping the Democrats=20 become the majority in next year's midterm elections. "The more terms --=20 assuming you stay in touch with your constituents -- gives you a chance to = do=20 all kinds of things."=20 ---------------------------------------------------------------------------= --- ------------------------------------------------------------ Gephardt tells rally here he's pushing price caps=20 By Ronald W. Powell and Craig D. Rose=20 UNION-TRIBUNE STAFF WRITERS=20 May 5, 2001=20 CHULA VISTA -- The nation's electric power crisis heated up here yesterday = as=20 House Minority Leader Richard Gephardt demanded that President Bush and the= =20 Federal Energy Regulatory Commission work to immediately curb runaway=20 electric rates.=20 Standing before a noontime crowd of more than 300 angry electricity consume= rs=20 outside the bay-front South Bay Power Plant, Gephardt said Bush should tell= =20 the commission to cap the prices power companies can charge. And he said he= =20 is pushing a bill that would impose caps on energy prices.=20 The former presidential aspirant from Missouri exhorted the throng to=20 organize and fight against the power generators that have dramatically rais= ed=20 rates in California and the West.=20 "This is your country," said Gephardt, pounding the podium to rousing cheer= s.=20 "If you vote, if you make yourself heard, we can solve this problem."=20 Rep. Bob Filner, D-San Diego, who organized the rally, said federal=20 regulators should order more refunds to consumers for overcharges by what h= e=20 described as an "energy cartel."=20 "This is the kind of pressure that will bring down prices," Filner said.=20 Filner chose the South Bay plant as the backdrop for the rally because=20 critics are accusing the facility, operated by Duke Energy, of charging=20 exorbitant electric rates after receiving a low-cost lease from the San Die= go=20 Unified Port District. The 10-year deal was negotiated in 1998.=20 According to the terms of the deal, Duke is obligated to build a replacemen= t=20 plant off-site before its lease expires. Duke then should dismantle the=20 existing plant and turn over to the port 200 acres, including the plant=20 property, free of contamination and ready for development.=20 But critics say taxpayers may not get what was advertised because Duke want= s=20 to build the new plant on 30 of the promised acres.=20 Filner is joining those who say the existing plant and any new plant should= =20 be publicly owned and offer affordable rates. He said Duke and other=20 generators are using their facilities to charge illegal power prices -- a= =20 breach of the lease.=20 "They have broken the terms of the lease and we should take it back," Filne= r=20 said.=20 Jerry Butkiewicz, secretary-treasurer of the San Diego-Imperial Counties=20 Labor Council, accused Duke of gouging consumers.=20 "We want the government and the port to take back this property," Butkiewic= z=20 told the crowd. "We own this (plant)."=20 Duke officials insist the company is abiding by its lease with the port.=20 After the rally, Duke spokesman Tom Williams said the company does not have= =20 to do anything about building a replacement plant at this time, but is acti= ng=20 "proactively" by exploring the possibility of constructing a new generating= =20 plant on the same site.=20 Chula Vista Mayor Shirley Horton, interviewed at the rally, chided Gephardt= =20 and the other congressional representatives, including Rep. Susan Davis,=20 D-San Diego, for criticizing Duke for raising electric rates while doing=20 nothing about power plants owned by the federal government that have also= =20 hiked rates.=20 "What are they doing to provide affordable energy at reasonable prices (at= =20 the federally operated plants)?" Horton asked. Horton wants to see a new=20 power plant built on a part of the 200-acre site that is south of the curre= nt=20 facility and inland from the bay. She said Chula Vista is negotiating with= =20 Duke in hopes of striking a deal that would allow joint ownership of a new= =20 plant.=20 Michael Aguirre, a local lawyer suing power companies on behalf of Lt. Gov.= =20 Cruz Bustamante and on behalf of ratepayers in a separate class-action case= ,=20 said Duke is among a handful of companies in an energy cartel that have=20 manipulated prices statewide. Aguirre said the port should move to void its= =20 lease with the company.=20 But Williams, the Duke spokesman, denied accusations that the South Bay pla= nt=20 sold power at illegal prices. The Federal Energy Regulatory Commission=20 recently required the company to issue refunds, but Williams said those=20 payments are related to surcharges the company imposed on power sales to=20 compensate for growing credit risks in California.=20 ---------------------------------------------------------------------------= --- --------------------------------------------------------- Second of three articles EDISON'S AGONY Proud Linemen Take a Hit=20 Energy: Morale sinks as the utility's workers are forced to do the=20 unthinkable: leave customers in the dark.=20 By NANCY CLEELAND, Times Staff Writer=20 ?????Lineman Ernie Lopez has been rousted out of bed on countless cold, rai= ny=20 nights. He's climbed 100-foot utility poles in heavy winds and grabbed live= =20 electrical lines with nothing but a pair of rubber gloves to protect him.= =20 ?????But the hardest thing Lopez has done in 20 years at Southern Californi= a=20 Edison is walk away from a darkened apartment building while residents=20 pleaded for their heat. Lineman Ernie Lopez repairs ground wire in Hacienda Heights. He doesn't loo= k=20 forward to work like he used to. BRIAN WALSKI / Los Angeles Times ?????It happened in late January. Sinking in debt, Edison had just announce= d=20 drastic budget cuts, including a ban on most overtime. The new rule: If it'= s=20 not a public safety problem, it has to wait until the next business day.=20 ?????Edison's 990 linemen, as well as the people they left shivering in the= =20 dark, howled. Within a week, the utility loosened its overtime restriction.= =20 But Lopez had already done the unthinkable--twice--and remained shellshocke= d. ?????"You get the lights on at all costs. That was bred into us from the=20 get-go," he said two weeks after leaving customers without power in Whittie= r=20 and La Puente. "It's in the preamble of our [union] contract."=20 ?????Months of uncertainty and bad press have chipped away at the pride=20 linemen like Lopez once took in their jobs. Customers harangue him,=20 complaining about rate increases and fat Edison salaries. Service levels ar= e=20 deteriorating. It's going to be a terrible summer. "I don't look forward to= =20 coming to work as much as I used to." ?????As Lopez drives toward an outage in Covina, he shouts into a cell phon= e=20 over the rattling of his big white truck. "I just wish I knew what directio= n=20 they're heading in," he says. "They're not telling us much. . . . We're not= =20 so sure they care about us or the customers anymore." ?????Edison Lacks Enough Veteran Linemen ?????This is bad news for anyone in Edison territory. The utility can't=20 afford to alienate its veteran linemen because there aren't enough to go=20 around. Journeymen are in short supply, drawing big signing bonuses and=20 promises of generous overtime. Edison was trying to hire more than 100 when= =20 the financial crisis hit last summer. Now it faces the triple whammy of a= =20 hiring freeze, low morale and overtime pay cuts that could set off an exodu= s=20 of talent.=20 ?????Already, there have been some defections, including several to the flu= sh=20 cross-town rival, the Los Angeles Department of Water and Power. Lopez and= =20 other veterans remain loyal, but they're checking the Internet, just in cas= e.=20 "Everybody's depressed, bummed out," he says. Ernie Lopez now spends more time with his family in Chino Hills. Cutbacks a= t=20 Edison have meant less overtime for linemen. BRIAN WALSKI / Los Angeles Times ?????Linemen like to see themselves as roughneck heroes, riding into town t= o=20 turn on the lights, to help the kitty out of the tree. Many are loners,=20 outsiders, proud of their cowboy culture. They don't tend to move up to=20 office jobs. They prefer to be out in the field. They are well paid, but wh= at=20 many love even more are the small signs of gratitude, the cup of coffee fro= m=20 a customer, the sound of applause when the lights go back on.=20 ?????"We don't do it for the money. We do it for the glory," says Lopez,=20 almost serious.=20 ?????Along with weathered faces and fallen arches from standing astride=20 poles, most linemen have developed a rigid sense of civic duty. It is what= =20 makes them leave a warm bed and barge into a downpour at 3 a.m. They've=20 missed birthdays, anniversaries, Christmas with the kids for their jobs.=20 Every one of them has stories, of working through hurricanes, ice storms an= d=20 earthquakes. Some have been close to death. Some have watched other linemen= =20 die.=20 ?????"Our whole careers have been designed to provide people with power, no= t=20 cut it off," says Pat Lavin, a veteran Edison lineman, now business agent f= or=20 the International Brotherhood of Electrical Workers, Local 47. "I think our= =20 members would probably offer to work for free if they thought it would help= .=20 They like working for Edison. It's a pride thing." ?????Team Spirit Takes a Hit ?????You see this ethos in Kansas City, home of the International Lineman's= =20 Rodeo. Every September, hundreds of utility field-worker teams pour in from= =20 as far as Jamaica and England to test their skills and stamina against othe= r=20 linemen.=20 ?????They scramble up wooden poles in seconds, replace transformers and=20 rescue "hurt man" dummies from the wires. In one event that tests focus as= =20 well as strength and dexterity, a lineman climbs a 45-foot pole holding the= =20 handle of a bucket in his teeth. In the bucket is an egg. At the top, the= =20 lineman ties the bucket to a wire, puts the egg in his mouth and climbs bac= k=20 down, taking care not to bite. ?????Last year, Edison's senior team--45 years and older--placed fourth out= =20 of 213. It was a huge coup and a career highlight for team member Joe Baker= ,=20 a crew foreman and 25-year Edison veteran working out of the Barstow office= .=20 His parents came down from Iowa to watch. His wife and son--an Edison=20 apprentice--were cheering from the bleachers. Baker had been training for= =20 months, and was in top form. "If you look at the scores," he notes, "you'll= =20 see that we were awfully close to first." ?????He might have made it to the top this year, but Edison won't be sendin= g=20 linemen to Kansas City in September. The rodeo team is one more casualty of= =20 the California crisis. ?????Seven months after his big win, Baker watches as pieces of Barstow go= =20 dark. Planned blackouts sweep across the southern part of the state for the= =20 first time since World War II. Traffic lights blink off; drivers skid into= =20 intersections. Manufacturing lines stop cold. Root canals go unfinished.=20 Customers call, confused and angry. They see the men in the white trucks an= d=20 wonder, are they pulling the switch? ?????"Today I went into a grocery store. I had on an Edison hat," Baker sai= d=20 in early April. "The store manager, who's a friend of mine, says, 'Is it sa= fe=20 to wear that around here?' He wasn't joking. These days, people look at you= =20 funny, like it's all your fault." ?????Union Opposed Deregulation Plan ?????For decades, Edison's linemen enjoyed a strong safety record,=20 top-of-the-line equipment and lifetime job security. Then came=20 deregulation--a concept that the linemen's union opposed long before the 19= 96=20 state law was adopted, convinced it would destabilize their lives. ?????They were downsized. Their jobs were contracted out or given to=20 temporary workers. They felt exposed and vulnerable. As early as 1998, an= =20 Edison veteran warned on a linemen's Web site: "All you guys, look out when= =20 deregulation comes your way. . . . SCE is still good, but not like the old= =20 days." ?????Among the 2,000 jobs Edison cut in January were hundreds of contracted= =20 linemen working on large construction projects. Veteran linemen absorbed hu= ge=20 losses in their half-million-dollar retirement accounts based on Edison sto= ck. Joe Baker, a 25-year Edison veteran who works in Barstow, says he's noticed= a=20 change in public attitude since power crisis began. BRIAN WALSKI / Los Angeles Times ?????The utility was on the TV news every night. Linemen began spending mor= e=20 time with customers, explaining, defending. They blamed the state regulator= s=20 who set up the dysfunctional market and the energy suppliers who took=20 advantage and reaped huge profits, but they also wondered: Why isn't the=20 company doing more to get the facts out? Why isn't it being more aggressive= ? ?????In February, the union launched its own campaign, organizing a protest= =20 march at a Huntington Beach generating plant owned by AES, a giant=20 Texas-based energy wholesaler. The message was that Edison was the victim o= f=20 gouging by the generators. But what motorists saw as they drove by were ang= ry=20 picketers at a power plant, wearing Edison hats and jackets. Victim and=20 villain were confused. The problem was too complex to fit on a placard. No= =20 more protests are planned. ?????Soon after Edison's belt-tightening, the electrical workers union file= d=20 objections with the state Public Utilities Commission, arguing that the=20 layoffs and overtime restrictions would seriously reduce the level of servi= ce=20 in Edison territory--a violation of PUC rules. ?????Two months later, the PUC agreed and ordered Edison to restore jobs an= d=20 hours that could affect service. By then, some linemen argued, it was too= =20 late. "The customers will remember we weren't there for them," says Lopez, = a=20 longtime union activist and an officer of Local 47. ?????Even after the PUC ruling, overtime restrictions for routine work=20 continue to cut linemen's pay by at least 20%, far more in some cases. It's= a=20 traumatic loss for those who have grown accustomed to fat checks, and to=20 nearly doubling their base pay of about $65,000. ?????"For someone with no college degree, earning six figures is not bad,"= =20 says Russ Neal, a supervisor in the Santa Ana distribution center. "But kee= p=20 in mind, this job is hard on personal lives. A lot of these guys are paying= =20 ex-wives, child support. They're not all choosing between a boat and a=20 camper." ?????For some, the change has been a partial blessing. Elite "troublemen"= =20 like Lopez, who are the first on the scene of an outage, get to sleep throu= gh=20 the night, spend more time with their children and read them bedtime storie= s. ?????"Having Dad home has been wonderful," says Peggy Lopez, Ernie's wife o= f=20 20 years. "We have a son, and there's been a lot of bonding lately." ?????But they all miss what the linemen call blood money. The Lopez family = is=20 scaling back on weekend trips and dinners out. Peggy wonders whether she'll= =20 need to go back to work after staying home for 11 years with her two=20 children. Nine-year-old Albert is in tears after a day of teasing at school= :=20 Your dad's going to lose his job, the kids taunt. ?????"We hadn't shared with the children how serious it was," says Peggy.= =20 "Afterward, he and Ernie had that talk. Now we just pray that things get=20 worked out." ?????Job-wise, Edison's linemen are probably safe, no matter what happens.= =20 After all, someone has to keep the power going, even through bankruptcy or= =20 state ownership. Still, it's unsettling. Linemen who were once disciplined= =20 for accidentally tripping brief outages are now ordered to cut off customer= s=20 for an hour at a stretch. They're nervous and distracted. They want this=20 crisis to end, but see no end in sight. Supervisors worry about their=20 linemen's ability to concentrate, to stay focused. After all, in this job, = a=20 moment's carelessness can be deadly. ?????"It's important that we talk to them more and let them vent a little,"= =20 says Bob Woods, who manages Edison's Santa Ana operating center. "When you= =20 read that your company is on the verge of bankruptcy, it's frightening. We= =20 don't want them thinking about that out in the field." ?????Into Woods' office walks Paul Miller, a clean-cut 34-year-old=20 troubleman, earnest, eager. He's been with the company 15 years. His job is= =20 to make the scene safe, restore as much power as possible, then call in the= =20 regular field crews for heavy-duty work. ?????He's out a lot on weekend nights, when drunk drivers tend to knock dow= n=20 poles. He's busy when the weather is lousy. He missed Christmas with his wi= fe=20 and toddler son last year when winds blew lines down all over north Orange= =20 County. Woods called him in for a 12-hour day, along with the station's 11= =20 other troublemen. "I didn't hear one complaint," Woods says. ?????Miller is so proud of his job that he had his name embroidered on his= =20 khaki Edison uniform, along with that odd title, Troubleman. He hopes to=20 retire from Edison someday. He hasn't had to walk away from a job, not yet.= =20 But it bothered him when he was sent to a Santa Ana apartment building that= =20 had been without power all night.=20 ?????"They were pretty unhappy. Nobody's used to that kind of service. We'v= e=20 always been right there. . . . I can't stand it, actually, leaving people= =20 off." Copyright 2001 Los Angeles Times=20 ---------------------------------------------------------------------------= --- ------------------------------------------------------------------ EDISON'S AGONY Utility's Workers Watch Helplessly as?Company Falls Energy: Proud engineers and technicians, wincing as the firm is pilloried,= =20 blame deregulation rules. Firm was "dragged into this kicking and screaming= ,"=20 one says. By NANCY CLEELAND, Times Staff Writer "I'd cry if I had any more emotion." John Ballance keeper of Southern?California Edison's transmission and=20 distribution grid for most of he past 32 years. ?????There are hundreds of them at Southern California Edison--engineers an= d=20 technicians hired a generation ago at the height of California's=20 build-and-grow frenzy. Steady Eddies. Methodical thinkers. ?????They designed massive things like nuclear reactors and gas-fired=20 generators and kept electrons flowing over 50,000 square miles of territory= .=20 They did their jobs so well that no one ever noticed. ?????For more than 100 years their precise, problem-solving nature defined= =20 Edison culture, and distinguished the company as one of the country's most= =20 highly regarded utilities. ?????Then came deregulation, which eventually cut the financial guts out of= =20 Edison, creating a crisis solvable only by political consensus. ?????For once the engineers were stumped. Mathematical logic no longer=20 served. They lacked the intangibles--the finesse, the gifts of spin and=20 horse-trading--to put their company back together. ?????Today they draw up intricate plans to salvage the company, but the pla= ns=20 go nowhere with regulators and politicians. ?????The world hates and blames Edison, and the engineers cannot understand= =20 why. They brandish the truth--Blame a flawed deregulation system, not us!--= as=20 if it might redeem them. Yet each week finds them more marginalized.=20 Bewildered, some have been reduced to waiting, with nothing to do but watch= =20 their legacy disintegrate. It's a cruel way to end a career that was built = on=20 long-term planning and the power of rational thought. ?????"I'd cry if I had any more emotion," says John Ballance, keeper of=20 Edison's transmission and distribution grid for most of the last 32 years. ?????He is a soft-spoken, church-volunteering grandfather with twinkling ey= es=20 and a navy blue cardigan. Mr. Rogers with a slide rule. He was hired in the= =20 late 1960s straight out of UC Berkeley, where he played clarinet in the=20 marching band. Edison brought him back to his hometown. It was a dream job. ?????Now 53, Ballance still gets excited thinking about the highlights: tha= t=20 hot early summer when he installed six temporary transformers in a weekend = to=20 avoid blackouts. That post-earthquake scramble when he guided crews to=20 restore a substation that powered Ventura and Santa Barbara counties. Seven= =20 years later, he remembers every detail: 23 lines tripped at 4:17 a.m., all= =20 back up by 12:30 p.m. ?????"It was a good day when you had a problem come up that wasn't=20 anticipated but you had a contingency plan for it, and it worked," he says= =20 nostalgically. ?????No one anticipated this: Edison on the verge of bankruptcy. And so far= ,=20 none of the contingency plans has worked. ?????By early January, Edison has had to pay so much money to power=20 wholesalers that it owes several billion dollars and is bleeding nearly $20= =20 million more a day. Each time a customer turns on a light or a computer or = a=20 hair dryer, the debt grows. ?????Here's what passes for humor at utility headquarters in suburban=20 Rosemead, 10 miles east of downtown Los Angeles: When you lose money on eve= ry=20 kilowatt, you don't make it up in volume. ?????Edison defaults on loans and suspends its dividends for the first time= =20 in its history. Creditors threaten to haul it=20 Edison engineer John Ballance, left, with systems operator Kenneth House,= =20 never dreamed the firm would be on the brink of bankruptcy. ??Photos by BRIAN WALSKI /=20 Los Angeles Times into bankruptcy court. Budgets are slashed, and nearly 2,000 employees get= =20 pink slips. More than 100 executives work a week for free. ?????"It's very depressing," says Donald Fellows, who once designed power= =20 plants and is now reduced to feeding numbers to the state commission that= =20 sets utility rates. "Most people go to work for a utility because they have= =20 high security needs. You don't find a lot of risk takers here." ?????A large, balding man with a penchant for mirthful sarcasm and a tenden= cy=20 to answer questions by pulling out a calculator, Fellows becomes downright= =20 grumpy when talking about his current job: manager of revenues and tariffs. ?????Pure frustration, he huffs. He spends far too much time in hearing=20 rooms, listening to "self-serving drivel" from Edison's many critics and=20 second-guessers, who seem to pass right over the numbers Fellows so=20 meticulously gathers. ?????In his view, state regulators micro-managed Edison into this mess, by= =20 forcing it to buy power on the volatile spot market. Wholesale prices=20 exploded, from 3 to 30 cents a kilowatt. Now the people who made the rules= =20 are blaming Edison for letting it happen. And getting away with it. ?????"You sit in those hearings and sometimes it's like Alice in Wonderland= ,=20 the way things get twisted," he says. "You look around and wonder: Did I fa= ll=20 into a trapdoor?" ?????He is just back from a Public Utilities Commission meeting in San=20 Francisco, where he pleads Edison's case for a 30% rate hike. Nothing less= =20 will keep the utility solvent, he warns. ?????Consumer advocates are hostile, suspicious. The commission compromises= =20 by raising rates about 10%. Edison's stock plunges, at one point losing hal= f=20 its value in a few hours of trading. Credit agencies downgrade its investme= nt=20 rating to just above junk status. Banks suspend corporate credit cards. ?????Fellows, who put in 28 mostly good years at Edison, loses the bonus th= at=20 was nearly half his salary last year. He looks at his worthless stock optio= ns=20 and wonders whether he can still afford that early retirement in May, when = he=20 turns 55. And if so, should he take it? Is it right to walk away? ?????Panicked Retirees Flood Firm With Calls ?????The winter passes in a painful fog of uncertainty across the bland=20 1970s-era Edison complex, home to 4,000 engineers, lawyers, managers and=20 clerks. Employees keep their heads down, but they cannot escape the crisis. ?????It jumps out from the cafeteria entrance, where a posting advertises= =20 brown-bag sessions on resume writing and interview techniques. It startles= =20 them every evening at 5, when a too-loud recorded voice warns that power wi= ll=20 soon shut down to emergency levels. Television crews camp outside, lining u= p=20 for live shots every few hours. Employees pray for other breaking news,=20 anything to take them off the front page for a while. Managers cut budgets,= =20 look for expendable jobs. Public relations spokesmen set up a SWAT team to= =20 deal with all the calls. ?????Jo Ann Goddard, parent company Edison International's vice president f= or=20 investor relations, fields calls from dozens of panicked retirees. One=20 80-year-old man, who lost a fourth of his income when dividends were=20 suspended, calls every week for an update. He always takes time to ask how= =20 she's holding up. ?????Pam Bass, Southern California Edison's vice president for customer=20 relations, takes flak from angry business owners in the state-regulated=20 "interruptibles" program, which was designed to handle rare emergencies. Fo= r=20 weeks now, the businesses have had to shut down several hours a day. Some= =20 have lost millions and laid off entire shifts. ?????As the company's value dives, it takes down children's college funds,= =20 vacation dreams, early starts on retirement. Yet many engineers are even mo= re=20 troubled by the steep erosion of service. ?????Ballance is close to tears as he guts his construction budget, canceli= ng=20 orders and contracts that were eagerly placed just six months earlier. This= =20 was going to be a big year, a chance to fix Edison's aging collection of=20 poles, substations and wires. ?????He hesitates, scarcely believing what he is about to say: "We're=20 knowingly taking on risk. . . . If we get extreme temperatures this summer,= =20 only a few pockets out could cause serious problems." ?????Through his office window, he looks out on a trail of hulking=20 transmission towers marching toward the horizon, a solid, sturdy bit of=20 evidence that Edison is still the proud source of power for Southern=20 California. What he doesn't know is that the lines themselves will soon be= =20 caught up in the energy debacle. ?????An Odd Sense of Hope and Mission ?????Along with nail-biting anxiety, January brings an odd sense of hope an= d=20 mission to Edison headquarters. State and federal legislators are finally= =20 paying attention, trying to understand what happened. Auditors are going=20 through the books. Gov. Gray Davis says he will consider a state plan to=20 rescue California's private utilities, but with a daunting pair of=20 parameters--no utility bankruptcies and no rate increases. ?????Edison must analyze hundreds of contract, rate and transmission-cost= =20 variables--months of work--within a couple of days. At last the problem=20 solvers have something to sink their teeth into. ?????"I've seen this time and again over the 21 years I've worked here," sa= ys=20 an optimistic Charles Basham, who runs Edison's internal Web site and=20 considers himself its unofficial historian. "We work best in a crisis." ?????Corridors that thread past gray cubicles and into wood-paneled executi= ve=20 offices are strangely silent. No gossip around the water coolers. No shriek= s=20 of exasperation. Just lots of conference calls and long nights with cold=20 pizza and coffee. ?????Alan J. Fohrer, who helped design the San Onofre nuclear plant, has co= me=20 back to help. These days he runs Irvine-based Edison Mission Energy, a=20 fast-growing, unregulated sister company to Southern California Edison that= =20 owns and operates generating plants around the world. ?????Fohrer's wife is out of town. At dawn he dashes home to Arcadia to wak= e=20 his kids before they notice he's gone, make their lunches and get them off = to=20 school. Then he rushes back for another day of calculations. ?????After 36 hours, Fohrer wears a tentative smile. There is a way--if a= =20 series of events falls perfectly in line--to pay off Edison's debts without= =20 raising rates. ?????"We have an opportunity," says the 50-year-old executive, laying out a= ll=20 the little pieces. "But we have to move quickly. The problem gets bigger=20 every day." ?????Weeks pass. Fohrer's plan becomes moot because state legislative=20 proposals keep adding demands: Edison must hand over a chunk of company=20 stock. Or all of its prized hydroelectric system. Or its valuable=20 transmission lines. These ideas come and go, almost whimsically, without ev= er=20 taking solid form. The urgency that once distracted Edison employees=20 dissolves into a numbing sense of powerlessness. ?????Fohrer--intense, serious, focused, a veteran of the 1990s deregulation= =20 debate, when he says most of his ideas were ignored--struggles for words to= =20 describe his frustration, then finally sputters, "This is silly." ?????He graduated from USC in 1973 with a degree in civil engineering. He= =20 dreamed of designing huge, complex structures like oil refineries, and talk= ed=20 to all the major international firms. Then Edison courted him, and Fohrer w= as=20 charmed. Edison was at the tail end of a five-year hiring binge, ramping up= =20 to design and build dozens of new power plants for the fast-growing state. ?????The expansion didn't last long. Inflation hit, raising the cost of=20 construction. The Arab oil embargo struck, straining supplies and making=20 conservation look like a good idea. The Three Mile Island nuclear plant=20 leaked radiation, setting off a fierce antinuclear backlash. Edison built= =20 only two generators after 1973. ?????None of that compares to the current mess, says John L. Jurewitz, an= =20 economist and Edison's manager of regulatory policy. Like many veterans, he= =20 knows precisely when it started: April 1994, when the PUC announced that it= =20 was moving to an open retail market. ?????"Starting at that point," Jurewitz says, "we were in damage control=20 mode." ?????Edison executives worked with state legislators to fashion the 1996=20 state law that became the framework for restructuring. But Ballance, Fohrer= ,=20 Jurewitz and others directly involved in those talks insist that what they= =20 lobbied for was a far cry from what was later implemented. ?????They want the world to know that, as Fellows puts it, "the utility was= =20 dragged into this kicking and screaming." They highlight passages and fax= =20 reports and letters dating back to 1993. ?????But the old papers are dense and complicated. Southern California=20 Edison--big, familiar, accessible--continues to be a target. ?????The engineers shout at the television. They cringe at the morning=20 newspaper. They riffle through their files to find the old documents that= =20 will prove their point. But by then it's too late. The media, the=20 politicians, the public have moved from one oversimplified idea to the next= . ?????And these consumer advocates! ?????"How do they get coverage so easy just because they sound good?" asks= =20 Danny Haberern, an engineer who lost his Illinois railroad job when the lin= e=20 went bankrupt, then fled to a "safe," regulated utility. He's now district= =20 supervisor in Edison's Montebello center. "I don't get it." ?????Edison is getting bundles of hate mail. Edison is the butt of shock=20 radio programs. Edison employees are being snubbed at their children's=20 basketball games. ?????It's not our fault, they say, a little too desperately. We never wante= d=20 to sell our power plants. We asked for long-term contracts four years ago. = We=20 pleaded for a rate hike in December. When we ran the system, it never faile= d. ?????Facing the new market, Edison slashed its staff through a series of=20 layoffs and voluntary retirements in the mid-1990s. In 1998, to comply with= =20 deregulation, it sold 12 gas-fired power plants and bought the electricity= =20 back through a state-supervised market where prices fluctuate daily. ?????Other retailers are invited to jump in and compete, but retail=20 competition never materializes in force, and prices do not drop but soar. B= y=20 last December, it is clear that the market is dysfunctional. Under the=20 deregulation law, Edison cannot respond by raising rates. By the end of the= =20 year, the utility is out of cash and comes within a filament of cutting pow= er=20 to customers. ?????Back in the old days, John Ballance could make a troubled generator=20 continue running if the grid needed juice. He could get on the phone and te= ll=20 the manager, "You'll just have to hang on for a few hours, until we get pas= t=20 the peak." And it would happen. ?????Now those same plants go offline whenever the new owners say, and all= =20 the begging in the world won't bring them back. ?????In February an international energy firm, PA Management Group, names= =20 Edison the most reliable utility in the Western region, based on 1999=20 figures. The veterans chuckle. They know it will be many years before Ediso= n=20 is lauded for reliability again. They try not to think about it, gathered i= n=20 the cafeteria, graying heads bent over the tortilla soup. ?????"It used to be something to be proud of, to work for the utility," say= s=20 John R. Fielder, 56, a senior vice president for regulation, who once=20 directed Edison's information technology team. ?????"There was an ethic and an attitude, being good citizens, financially= =20 healthy, part of the communities we serve," he says. "Now people don't=20 understand. They wonder, 'How did you let this happen? Who's going to get= =20 fired?' It's just destroying the whole fabric of the place." ?????Ballance leaves for a long-planned family vacation, to visit his new= =20 grandchild in Massachusetts. "I wonder if I'll have a job to come back to,"= =20 he says. He checks the Internet for news every morning and night, and draws= a=20 blank. ?????It's only after his return that Ballance learns the state will buy=20 Edison's transmission grid--half of his job--in exchange for a "bailout." T= he=20 federal government won't let it happen, he says. Besides, it makes no sense= . ?????"I fail to see what the state or customers are going to actually get f= or=20 all of this," Ballance says, hours after Gov. Gray Davis announces a=20 tentative deal for the wires in late February. "I just don't understand the= =20 rationale, when it seems to me that there's a fairly simple solution, and= =20 that is to raise the rates of electricity." ?????In March, saturated with frustration, Fellows decides to take that ear= ly=20 retirement. He will move to central Oregon with his wife, his mother and hi= s=20 28-year-old paraplegic son. He will play golf and try to forget about=20 California's new, deregulated world. ?????"It's hard," he says. "You almost feel like you're abandoning the plac= e.=20 I've wrestled with that for a while. But my wife wants to go, and I've come= =20 to the conclusion that I'm probably not indispensable after all." ?????He stays around long enough to watch California's other struggling=20 utility, Pacific Gas & Electric, file for bankruptcy protection. It happens= =20 April 6, a Friday. On Saturday, members of Fellows' staff work through the= =20 night, gathering numbers for a final deal with the state, which Davis unvei= ls=20 with great fanfare Monday. ?????Already disengaged, watching from an emotional distance, Fellows=20 pronounces the deal DOA; the Legislature won't approve it. His voice is=20 uncharacteristically unburdened. This is no longer his problem. Copyright 2001 Los Angeles Times=20 ---------------------------------------------------------------------------= --- ------------------------------------------------------------------------- Utility Bills Are Just One Way People Pay for Energy Crisis=20 Money: From hotel rates to zoo admission, fees are being added.=20 By JENIFER WARREN, Times Staff Writer=20 ?????Do you depend on a dry-cleaner? Dine out now and then? Do you patroniz= e=20 a hair salon, pump iron at a gym, send flowers occasionally or plan to take= a=20 vacation this year? ?????If so, you'll probably be paying an energy surcharge on those and many= =20 other goods and services. In some cases, you already are. ?????Visitors at the San Diego Zoo found a $1.50 "energy assistance fee"=20 tacked onto the admission as of last week. The Water Grill in downtown Los= =20 Angeles raised prices about 3% last month. And the San Francisco Federal=20 Reserve Bank predicts the average Californian will spend at least $750 extr= a=20 over the next year on new energy-related costs. ?????Hotels were the first to pass on the pain of the state's spiking utili= ty=20 costs, but now the practice is spreading. The result: Many Californians wil= l=20 get stung by the energy crisis multiple times: once through rate hikes comi= ng=20 next month, then again and again through special fees tacked on by business= es=20 coping with their own power bills. ?????The surcharges aren't popping up just on luxuries such as a stay at a= =20 beach-side inn or an hour in a tanning bed. Even staples such as milk could= =20 cost more. ?????Milk processors have asked the state Department of Food and Agricultur= e=20 for a price adjustment, a shift that--if approved at a hearing late this=20 month--could bump up costs at the supermarket. And gasoline prices--already= =20 about $2 a gallon--could be nudged further upward if summer blackouts shut= =20 down refineries and pinch fuel supplies. ?????For some Californians, the risks are more basic. Some businesses,=20 reluctant to raise prices too high for fear of scaring off customers, will= =20 offset soaring utility costs by laying off employees, cutting wages or=20 slashing benefits. ?????"We will see an impact on unemployment rates, we will see an impact on= =20 wages, we will see an impact on benefits," said Shirley Knight, assistant= =20 state director of the National Federation of Independent Business. "When=20 you're a small business owner and your [power] bill triples, you simply hav= e=20 no choice." ?????Four months after the energy crisis hit California full force, financi= al=20 repercussions continue to multiply. The state is spending upward of $50=20 million a day buying energy for struggling utilities, and the sale of $12.5= =20 billion in bonds to return that money to government coffers is clouded by= =20 politics and a legal dispute. ?????Summer Blackouts Threaten Economy ?????The state's $1.25-trillion economy, while still strong, is already=20 showing wear and tear as uncertainty about energy costs and supply endure,= =20 some economists say. A summer of blackouts, meanwhile, threatens to hurt=20 business productivity, discourage new investment and push inflation rates u= p,=20 they say. ?????"Elevated energy costs present a significant drag on the economy and c= an=20 be expected to reduce growth and economic output and employment," a study b= y=20 the Bay Area Economic Forum said. The study said 42% of Bay Area businesses= =20 report that power problems have already hurt their profit margins and their= =20 competitiveness relative to competitors outside the region. ?????Steven Cochrane, a senior economist at Economy.com in West Chester, Pa= .,=20 is not surprised: "There are strong downsides to this [energy crisis] for t= he=20 state both short term and long term. Everyone is watching California." ?????For most residents of the Golden State, the most visceral blow will be= =20 felt through rate hikes, beginning--but probably not ending--with the=20 increase reaching as high as 46% for some that will show up in June bills. ?????But the effects go far beyond that, and some analysts are attempting t= o=20 quantify them. The San Francisco Federal Reserve Bank study estimating a $7= 50=20 annual hit for an average Californian figures $250 for electricity bill=20 increases, $200 for additional natural gas charges and $300 for the indirec= t,=20 day-to-day costs that will rise because of power-related surcharges and pri= ce=20 hikes. ?????The report's authors emphasize that their figure "would rise=20 substantially" if the full increase in wholesale electricity prices borne b= y=20 the state was taken into account. ?????Even so, $750--representing 1.5% of the average Californian's annual= =20 income--is a very real bite, especially for the poor. Already, community=20 organizations report increases in calls for help from people forced to choo= se=20 among keeping their power on, buying food or paying for day care. ?????"It's that whole fixed-income thing," said Dennis Osmer, who runs a=20 nonprofit organization in Santa Cruz County that helps the poor pay their= =20 energy bills. "If they're living on Social Security and just getting by, an= y=20 kind of increase in anything can push them right off the edge." ?????Extra Outlay Just 'Sunk Down a Hole' ?????Veterans of the state's consumer groups warn that the consequences of= =20 the energy crisis for Californians--and the fiscal health of the state as a= =20 whole--are staggering, and not yet fully known. Harry Snyder, a senior=20 advocate for Consumers Union, likens it to "a 7.0 earthquake that hits=20 everyone, everywhere." ?????"Wherever you turn, there's an impact," Snyder said. "The cafe owner= =20 around the corner said his utility costs doubled in the last year and are n= ow=20 the same as his rent. A friend who owns a bakery says his suppliers have=20 added a 20% surcharge. This all gets passed on to us, and it's just money= =20 sunk down a hole--it's not spending that advances our well-being in any way= ." ?????California business owners say they have little choice but to tack on= =20 costs to help with their own ballooning bills. And they say that along with= =20 the rising natural gas and electricity bills, they have been hit with a jum= p=20 in the minimum wage--by 50 cents in January--and high gasoline prices.=20 Workers' compensation rates are up as well. ?????Hotels, which spend about 3.6% of their revenue on energy costs, led t= he=20 charge in passing on the extra expense. In January, most began adding fees= =20 ranging from $1 to $4. Stay at the venerable Westin St. Francis on San=20 Francisco's Union Square and you're looking at $2.85 extra per night, per= =20 room. At the Quality Inn in Mammoth Lakes, it's $2.50. ?????In San Diego, the zoo added the energy charge Thursday. Though many=20 visitors might not think of the zoo as a big energy gobbler, public relatio= ns=20 director Ted Molter said many exhibits consume lots of kilowatts. ?????Reptiles, for example, require warm temperatures and lighting, while= =20 pumps and filtration systems run constantly to keep water clear in the=20 underwater viewing portion of the hippo enclosure. ?????Molter said the zoo, a nonprofit organization, experienced a 290%=20 increase in the amount it pays per kilowatt hour during the last year. "We= =20 don't take this fee lightly and look forward to the day when we can roll it= =20 back," he said. ?????At the Calistoga Village Inn & Spa near Napa, Manager Gisela Schaefer= =20 said the natural gas bill has risen 500%--to $7,000 in March--making a pric= e=20 increase at the 41-room compound inevitable. The spa includes numerous=20 energy-guzzling Jacuzzis, pools and saunas, and its natural hot springs=20 require pumps to draw water from underground. ?????But Californians need not travel to the wine country to experience=20 energy surcharges. At Foasberg Cleaners in Long Beach, owners in February= =20 posted signs announcing a fee--about 3% per item--to account for spiking=20 utility costs. ?????Vice President James Foasberg said the cleaners' natural gas bill has= =20 tripled in the last year, and he expects his June bill from Southern=20 California Edison to show a 40% increase in his electricity rate. ?????"We hate to do this, but we have no choice," said Foasberg, who has al= so=20 been pinched by high gasoline prices that cost him more for deliveries. "So= me=20 of our smaller competitors are afraid to raise prices, so they're just=20 closing down a few days a week. It's terrible." ?????Restaurant owners also are getting hit from two sides: reeling from=20 higher utility costs and getting squeezed by linen, dairy and produce=20 suppliers who are raising prices because of the energy crisis. Signs advisi= ng=20 customers of surcharges have begun popping up next to the cream pitchers at= =20 coffee shops, while managers of some restaurants are reluctantly opting to= =20 charge more for meals. ?????Jeff King is chairman of a company that owns 11 restaurants from=20 Calabasas to San Diego, including the Water Grill in Los Angeles and iCugin= i=20 and Ocean Avenue Seafood in Santa Monica. King said energy costs for the=20 eateries rose by $150,000 during the last four months, prompting him to rai= se=20 menu prices about 3% last month. ?????"The last thing you want to do is charge the guests more," King said.= =20 "But this is a major hit. And unfortunately, I think it's just the beginnin= g." ?????Economist Cochrane agrees, predicting the energy debacle will cause a = 2%=20 increase in California's inflation rate overall, showing up in price hikes= =20 for every conceivable product and service. ?????"Power is such an essential component of production, so for most=20 businesses there's no escape," said Cochrane, who studies California for hi= s=20 economic forecasting company. "These rate increases are so large, and they'= re=20 hitting so quickly, that those businesses that don't go under have no choic= e=20 but to raise prices." ---=20 ?????Times researcher Patti Williams contributed to this story. Copyright 2001 Los Angeles Times=20 ---------------------------------------------------------------------------= --- ---------------------------------------------------------------- Question Remains Who'll Take Brunt of the Rate Hikes=20 Power: Everyone has opinions on how to allocate the increases. PUC will hol= d=20 hearings before selecting a plan.=20 By TIM REITERMAN, Times Staff Writer=20 ?????SAN FRANCISCO--When the California Public Utilities Commission approve= d=20 the largest electricity rate hike in state history, it ignited debate over= =20 how the pain of almost $5 billion in increased power charges will be shared= . ?????Everyone from the governor and the PUC president to consumer groups an= d=20 industry associations has weighed in, with about 20 plans. ?????They all say their formulas translate into equitable charges that will= =20 encourage serious energy belt-tightening. ?????The PUC, as the state's chief regulator, must decide how to divvy the= =20 rate increase among millions of utility customers, ranging from single-fami= ly=20 homes to factories that employ thousands of people. ?????Beginning today in Santa Monica, the commission will hold a series of= =20 hearings to let the general public have its say before the scheduled adopti= on=20 of a rate plan on May 14. ?????PUC officials say rates will increase by an average of almost 30%. The= =20 question is: Who gets hit the hardest? ?????The rate structuring is a pivotal piece of California's strategy for= =20 surviving the summer without economic devastation and extricating the state= =20 from a crisis that already has wreaked hardship on the state budget,=20 utilities and customers alike. ?????The PUC not only must assess a welter of competing proposals that=20 sometimes clash head-on. It also must design the rate structure without=20 knowing with certainty how much money the state will need to buy power in t= he=20 future. ?????Roughly half of residential users--including low-income customers--wou= ld=20 see no rate increases, and that number could grow, experts say, if customer= s=20 conserve significantly. Under proposals from Pacific Gas & Electric Co. and= =20 Southern California Edison, rates for heavy users would increase by 50% or= =20 more. ?????One battle shaping up is over whether residential customers alone shou= ld=20 pay for the increased cost of delivering power to those conserving enough t= o=20 be exempted from the rate hikes. Or should it be shared with businesses and= =20 other nonresidential customers? ?????The answers are politically and economically tricky because someone is= =20 going to feel the pinch. ?????"It is enough money to cause a noticeable increase for customers to wh= om=20 it is allocated," Paul Clanon, head of the PUC energy division, said.=20 ?????PUC President Loretta Lynch, Gov. Gray Davis and others say rates shou= ld=20 be tiered to reward energy savers and punish heavy users. The proposals=20 involve fluctuation of a customer's baseline, an amount utilities determine= =20 as the minimum level needed for household usage, varying by climate and=20 region. ?????Some proposals call for four tiers of residential users; others for fi= ve. ?????Under Southern California Edison's proposal, residential customers wou= ld=20 receive a 5% rate hike for usage that sometimes exceeds 130% of their=20 baseline amount but falls below 200%. Customers who use 300% above the=20 baseline less than six months a year would see a 45% increase. Above that,= =20 the rate would climb to 70%. ?????Lynch's proposed rate design attempts to reduce the gap between what= =20 residential customers pay and the lower rates paid by commercial and=20 industrial customers. ?????The California Large Energy Consumers Assn., representing big steel an= d=20 cement companies, said a rate hike of 3 cents a kilowatt hour--approved in= =20 March by the PUC--amounts to a huge increase for large industrial users who= =20 currently pay substantially lower rates than residential customers. ?????"One class should not pay an increase that is twice or three times [th= e=20 percentage] . . . as others," said William H. Booth, lawyer for the=20 association. ?????Farmers and food processors express concerns that they would take a=20 heavy hit because, unlike some industries, they are less able than some=20 customers to shift power use to nonpeak times. ?????"The bulk of the crops go to processors in the summer," said Ron=20 Liebert, staff attorney for the 94,000-member California Farm Bureau=20 Federation. "We can't say we'll do a double shift at night. Some crops have= =20 to be irrigated around the clock." ?????The commission also must resolve a $1 billion disagreement over how mu= ch=20 money the rate increase will raise. ?????If the utilities have their way, the 3 cents per kilowatt hour increas= e=20 will be multiplied by the total number of kilowatt hours used by its=20 residential, commercial and industrial customers. ?????However, The Utility Reform Network (TURN) contends that total should= =20 not reflect energy usage by low-income customers and other residential=20 customers who consume less than 130% baseline--groups exempted from rate=20 increases. That means the utilities would collect a total of about $4 billi= on=20 from customers, not $5 billion.=20 ?????TURN's proposal, according to staff attorney Bob Finkelstein, also wou= ld=20 mean "less money will be flowing to [the Department of Water Resources] for= =20 power purchases." Copyright 2001 Los Angeles Times=20 ---------------------------------------------------------------------------= --- ------------------------------------------------------------ Riordan and Freeman's Feud Erupts in Public=20 Power: Each questions the other's role in keeping the city free of=20 California's energy crisis. By MICHAEL FINNEGAN and TERENCE MONMANEY, Times Staff Writers ?????With California mired in energy troubles, Mayor Richard Riordan and hi= s=20 former power chief S. David Freeman trumpet the extraordinary fortune of Lo= s=20 Angeles: no rate hikes and no blackouts. ?????Yet Riordan and Freeman have sullied their mutual success story by=20 waging bitter campaigns to discredit one another--at first behind the scene= s=20 but now in public. ?????Pettiness, ingratitude, conflicts of interest, overblown claims of=20 achievement: Such is the back and forth between two leaders who would seem = to=20 have good reason to pat one another on the back. ?????To Freeman, who has resigned as general manager of the L.A. Department= =20 of Water and Power to become chief energy advisor to Gov. Gray Davis, it=20 seems Riordan resents his high-profile role in trying to steer California o= ut=20 of the energy crisis. ?????So the mayor, Freeman charged, has elbowed his way into energy issues= =20 that he is ill-equipped to handle and taken steps along the way that could= =20 harm the environment. ?????"With all due respect, I have 25 years of experience and knowledge--an= d=20 he has 25 days," Freeman said. "But he's the mayor, and he didn't like it= =20 that I didn't just say yes to everything he came up with." ?????To Riordan, Freeman's efforts to fight air pollution have given short= =20 shrift to the threat of skyrocketing power rates in Los Angeles. The mayor= =20 said Freeman also failed to recognize potential conflicts of interest betwe= en=20 his city and state roles in the power crisis. And he scoffed at Freeman for= =20 saying he had lifted morale at DWP. ?????"Morale was terrible under him," Riordan said. "I mean, they are so=20 relieved right now." ?????The backbiting has left associates suspecting the clash is really abou= t=20 egos. City Councilwoman Ruth Galanter sees Riordan and Freeman as proud,=20 successful men unable to say, "I couldn't have done it without X, Y and Z." ?????"Each of them is used to being the boss and taking pleasure at being= =20 recognized as the boss," she said.=20 ?????Much of the conflict has taken place in private meetings. And the mayo= r,=20 a Republican multimillionaire, has taken pains to play down his dispute wit= h=20 Freeman, a liberal Democrat from Tennessee who wears a cowboy hat and speak= s=20 with a Southern drawl. ?????In an interview after his resignation, Freeman laid out the conflict= =20 point by point, often in terms bluntly critical of the mayor. One of his=20 concerns, Freeman said, was that Riordan in his final two months as mayor= =20 could reverse the agency's progress in protecting the environment. ?????Freeman cited Riordan's plans concerning coal-fired power plants in=20 Nevada and Utah that are partly controlled by the DWP, the nation's largest= =20 municipal utility. The first is the Mohave Generating Station in Laughlin,= =20 Nev., a plant that has been blamed for spreading some of the haze that=20 shrouds the Grand Canyon. The DWP had planned to sell its stake in the plan= t,=20 but Freeman said Riordan ordered him to back out of the sale. ?????He described the mayor's move as a sign that Riordan and his appointee= s=20 on the board that oversees DWP were "completely insensitive to the fact tha= t=20 that power plant is one of the most environmentally troubling plants in the= =20 West." ?????"I've worked real hard to try to build some environmental sensitivity= =20 into the DWP policy," Freeman said. "And I am concerned as to whether the= =20 current commissioners and the mayor have that sensitivity, and what they=20 might do in the interim to basically overturn the progress we've made." ?????The other plant is part of the Intermountain Power Project in central= =20 Utah. Riordan has proposed building a new coal-fired generating unit there,= =20 but Freeman said he objected because of the pollution it would cause. ?????In both cases, Riordan said he was striking the appropriate balance=20 between protecting the environment and meeting the energy needs of Los=20 Angeles at an affordable cost. By keeping its share of the Mohave plant and= =20 expanding the Utah plant, Los Angeles can avert the astronomical price hike= s=20 of natural gas--and the sharp rise in ratepayers' bills that would follow,= =20 Riordan said.=20 ?????Natural gas, which provides 26% of the fuel for DWP plants, causes les= s=20 air pollution than coal, which provides 51%. The rest is mainly nuclear and= =20 hydroelectric. Los Angeles has averted rate hikes and blackouts in part=20 because the DWP relies less on natural gas than most other California power= =20 providers. ?????"I favor clean air and more natural gas, but not to the point where=20 we're going to destroy the economy of Los Angeles," Riordan said. ?????On the Mohave plant, Riordan questioned the benefit of selling the=20 city's share to a buyer that would simply continue running it. ?????"It's still going to be coal-driven," he said. "How does selling it he= lp=20 the environment?" ?????The tension between the two has built steadily as the state power cris= is=20 has worsened. With the charismatic DWP chief drawing favorable news coverag= e=20 in stories on how L.A. has dodged the crisis, Riordan and the DWP=20 commissioners began to view him as "too big for my britches," Freeman said. ?????The conflict reached its peak on April 17, the day Freeman resigned to= =20 become the governor's advisor. The DWP board president, Kenneth T. Lombard,= =20 said the mayor told commissioners that day that "it made the most sense to= =20 release him immediately." ?????"All we were doing, frankly, was release him from his responsibilities= ,=20 and then whatever time he needed to clean out his office was fine with us,"= =20 Lombard said. ?????From Riordan's standpoint, Freeman needed to be stripped of his=20 authority right away because of a potential conflict of interest: The city= =20 utility sells surplus power to the state, so Freeman would be on both sides= =20 of the sales. ?????Freeman, who had voluntarily bowed out of a DWP meeting on the state= =20 power crisis earlier that day, was outraged at his sudden release, in part= =20 because he was denied the chance to say goodbye to agency employees. In an= =20 interview, he called the conflict of interest assertion "complete malarkey.= " ?????"The insinuation that I have done anything less than protect the=20 interests of the city of Los Angeles is bordering on slanderous, considerin= g=20 what I've accomplished here," he said. ?????Brian D'Arcy, who heads the union local that represents 6,000 DWP=20 employees, agreed that Riordan and his commissioners "kind of ran him out o= f=20 here. For David to be summarily jettisoned out of here without even a=20 howdy-do is absolutely tacky," D'Arcy said.=20 ?????Riordan said Freeman deserves "an A-plus" for his work at DWP. The may= or=20 conceded that he knew of nothing that Freeman had done "to hurt Los Angeles= ."=20 But, he added, "when you have a conflict of interest, you have to act befor= e=20 anything happens." ?????Freeman has long bridled at the oversight of DWP, not just by the mayo= r,=20 but by the agency's board and the City Council. In 1998, he called for City= =20 Charter amendments to consolidate authority in a more independent board of= =20 directors. The proposal went nowhere. ?????Freeman's concerns were echoed in a report to be released Monday. The= =20 Rand Enterprise Analysis report was commissioned by the DWP. It calls for= =20 restructuring DWP management much the way Freeman proposed. But Riordan and= =20 Galanter, who chairs the Council's Commerce, Energy and Natural Resources= =20 Committee, rejected the concept. Copyright 2001 Los Angeles Times=20 ---------------------------------------------------------------------------= --- ----------------------------------------------------------------------- Cheney Rejects Price Caps, Aid for Calif. Power Crisis By DOYLE McMANUS and RICHARD SIMON, Times Staff Writers ?????WASHINGTON--Vice President Dick Cheney said Friday that there is littl= e=20 more the Bush administration can do to alleviate California's energy crisis= =20 this year and declared his opposition to further federal intervention in th= e=20 energy market even if the problem threatens the nation's economy. ?????"It's all you can do in the short term," Cheney said of the modest=20 energy conservation measures President Bush announced earlier this week, su= ch=20 as turning down air conditioners in federal buildings. ?????In an interview with The Times, Cheney, whom Bush has put in charge of= =20 designing a new national energy policy, said he strongly believes that ener= gy=20 prices should not be capped or regulated under any circumstances. ?????He said he disagreed with the Federal Energy Regulatory Commission's= =20 decision last month to place limits on wholesale electricity prices during= =20 emergency shortages. ?????"I'm a skeptic. I've never seen price regulations that I've felt very= =20 good about," Cheney said. ?????"If I had been at FERC, I would never had voted for short-term price= =20 caps. But that's their decision. . . . I hope for their sake, and=20 California's, it works." ?????FERC, an independent regulatory commission, decided April 25 to cap=20 wholesale prices when statewide electricity reserves fall below 7%, using a= =20 formula pegged to the cost of production for the least efficient generating= =20 plant. ?????Consumer groups and Democratic members of Congress have criticized the= =20 decision as too soft, but Cheney--like other advocates of=20 deregulation--condemned it as a step too far. ?????"Price caps are not a help. They take us in exactly the wrong=20 direction," the vice president said. "The way you address these issues is y= ou=20 either have to reduce demand or increase supply. And anything that doesn't = do=20 that is counterproductive, especially if it takes us in the opposite=20 direction, which to some extent price caps may because they discourage=20 investment." ?????"Ultimately, I think we're going to be better off if we have a=20 deregulated energy market in this country," he added. ?????Asked whether he might soften his opposition to price controls if the= =20 energy crisis began to produce significant damage to the national economy,= =20 Cheney shook his head ruefully. ?????"I start with a strong view, based on prior experience, that governmen= t=20 should intervene in the marketplace with great reluctance. ?????"I admit that I was traumatized in my youth by being part of the Nixon= =20 wage and price controls," he said with a wry smile. In 1971, when President= =20 Nixon sought to tame inflation with federal controls, Cheney was an obscure= =20 White House official. ?????"I remember how we started out with 14 pages of regulations . . . whic= h=20 I typed up myself." A few years later, "we had a roomful." ?????More important, Cheney recalled, the Nixon price controls led to a=20 series of "unintended consequences," including a decline in domestic=20 production of oil, increased reliance on foreign energy sources and the=20 failure of the U.S. automobile industry to build fuel-efficient cars. ?????Cheney, speaking in his West Wing office, acknowledged that the=20 administration's tough position against price caps could offend many=20 California voters in the short run, but he said he was confident that=20 Californians would come to accept his position in the long run. ?????"There is a much greater willingness today . . . to have this debate,"= =20 he said. ?????Cheney said the administration has done "virtually everything" that Go= v.=20 Gray Davis has asked, except to impose price controls. ?????"We're doing everything we can. Remember, we've been here 100 days. Ou= r=20 predecessor left this area virtually untouched, I think primarily because i= t=20 involves very tough issues. It means you've got to go out and address some = of=20 the most sensitive political issues . . . and we're doing that. That should= =20 have been done years ago. If it had been done years ago, California wouldn'= t=20 have trouble today." ?????Cheney said the national energy policy manifesto he plans to issue lat= er=20 this month will touch on California--but largely as an example for the rest= =20 of the nation to shun, not as a focus for federal action. ?????"We talk about California; there are a lot of examples there in terms = of=20 what needs to be done and, to some extent, what to avoid. . . . [But] the= =20 things we focus on with respect to policy are long-term in nature and aren'= t=20 going to provide any relief this summer." ?????Cheney offered a glimpse of his strategy for building political suppor= t=20 for a national energy policy that is expected to promote domestic productio= n=20 of oil, gas, coal and nuclear power. ?????Contending that technological advancements have reduced the=20 environmental risks of oil and gas exploration on public lands, he said, "W= e=20 can, in fact, have both: a clean environment and adequate supplies of energ= y." ?????While Cheney has been criticized for emphasizing the supply side over= =20 energy conservation, he said, "Conservation has a role to play, but it's no= t=20 sufficient. You cannot build an energy policy just on the notion of=20 conservation. . . . People have used the conservation arguments in order to= =20 avoid some of the tough issues associated with increasing supply." ?????Acknowledging that increased reliance on nuclear power--an issue he ha= s=20 embraced--has been a tough sell, Cheney said public attitudes appear to be= =20 changing. He said he recently asked a group of moderate lawmakers whether= =20 they would be open to construction of new nuclear power plants. "Nearly eve= ry=20 hand went up," he said, touting the "environmental values" of nuclear power= . ?????Cheney also said that, although he believes that unilateral economic= =20 sanctions "rarely work," he understands there are "special problems" in=20 removing sanctions against oil exporters such as Libya and Iran. Bush has= =20 said he has no intention at the moment of removing sanctions on Libya and= =20 Iran; Cheney said he favors a review of sanctions. ?????The task force report will deal with another controversial proposal:= =20 industry efforts to allow federal authorities to exercise the power of=20 eminent domain to obtain rights-of-way for new electrical transmission line= s,=20 as they already do for gas pipelines. ?????Cheney would not say whether the task force would recommend that=20 authority. But such a proposal is likely to face opposition from state and= =20 local officials. Copyright 2001 Los Angeles Times=20 ---------------------------------------------------------------------------= --- ----------------------------------------------------------------------- Rolling Health Hazards=20 Summer Blackouts May Pose Public Health Risks=20 David Bragi, Special to SF Gate Monday, May 7, 2001=20 ,2001 SF Gate=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/gate/archive/2001/05/07/h= ealth watch.DTL=20 On May 1, just prior to putting the finishing touches on this column from m= y=20 El Cerrito home, I heard the low, mournful howl of a disaster siren in the= =20 neighboring city of Richmond. A car had slammed into a utility pole, knocki= ng=20 out electrical power to the General Chemical Corp. plant.=20 The company's backup generators had failed to kick in and the ensuing power= =20 outage tripped a safety valve which shut down the compressor. After power w= as=20 restored, the safety valve would not reopen, causing a leakage of sulfuric= =20 gas into the air. By the time workers plugged the leak, approximately 100= =20 people, all in Richmond, had arrived at area hospitals with minor ailments.= =20 Although not caused by the state's energy crisis, this electrical outage=20 highlights how the prospect of chronic blackouts could pose some very real= =20 and unexpected threats to public health. So far we have been lucky, with=20 planned rolling blackouts lasting no longer than about 90 minutes.=20 But if sudden, unexpected shortfalls in electrical supply cause outages=20 lasting longer than a few hours, Californians may face such health hazards = as=20 unclean drinking water, food spoilage, vaccine shortages, heat stroke and= =20 disabled and elderly residents living without electricity.=20 For instance, widespread outages could affect the availability and safety o= f=20 water supplies. Local water districts are concerned that the state Public= =20 Utilities Commission has not exempted their facilities, such as pumping=20 stations that transport water uphill and treatment plants that purify water= ,=20 from rolling blackouts.=20 "In addition to our own facilities, outages could affect the State Water=20 Project and the Central Valley Project's ability to get water to us," said= =20 Marty Grimes, public information representative for the Santa Clara Valley= =20 Water District, which provides wholesale water supplies to Santa Clara=20 County. On the retail level, some of the smaller suppliers lack large stora= ge=20 tanks and would themselves run out of water quickly.=20 If treatment plants go off-line, water quality might also decline in some= =20 areas, in which case consumers would have to boil their tap water for at=20 least 20 minutes before drinking it. "We are doing all we can to minimize= =20 this possibility and see it as unlikely," says Grimes. "If that were to=20 happen, we'd be ready to inform everyone in the affected area immediately."= =20 To help keep the water flowing during outages, the district has installed= =20 backup generators in treatment facilities and key pumping stations, and is= =20 keeping Anderson Reservoir as full as possible. "It is high enough in=20 altitude that electricity is not needed to get the water to our treatment= =20 plants. Gravity does all the work," says Grimes.=20 The district also recommends that consumers use less water when the weather= =20 is very hot or outages are likely to occur. "In essence," says Grimes,=20 "saving water can save energy."=20 Since refrigerators and freezers run on electricity, when the power goes ou= t,=20 so does your ability to keep perishables fresh. One health risk occurs when= =20 somebody carelessly reheats and eats yesterday's frozen casserole long afte= r=20 a blackout has already thawed it back to life.=20 "It goes way beyond spoilage," says Susan Conley, director of food safety= =20 education for the Food Safety and Inspection Service at the U.S. Department= =20 of Agriculture. "If, because of the blackouts, the temperature in the=20 refrigerator or the freezer goes above dangerous levels, then you could hav= e=20 a problem with bacterial contamination," such as botulism.=20 Contrary to popular opinion, simply sniffing around is not a good way to te= ll=20 whether food is safe to eat, since not all bacteria produce noticeable odor= s.=20 A better course is to learn how to keep your food cold for as long as=20 possible and which foods last for how long at what temperatures.=20 For instance, a blackout lasting under four hours will not spoil the food i= n=20 your refrigerator. A freezer will keep frozen food safe for at least a day.= =20 To keep the cold air inside, keep refrigerator and freezer doors closed=20 unless you absolutely need to retrieve food.=20 Some foods, muffins for instance, will last longer than others, such as egg= s.=20 For an easy-to-read spoilage chart that recommends when to use, refreeze or= =20 discard various foods, go to the USDA's Keeping Food Safe During A Power=20 Outage page. It also has a collection of practical tips, such as safe=20 temperature levels, using thermometers, and handling dry ice.=20 As for food spoilage at grocery stores, I asked a butcher at Armond's Quali= ty=20 Meats in El Cerrito how well the meats in the store's refrigerated glass=20 display counter would hold up during an extended outage. He said they would= =20 keep the counter closed; since the case is kept at just above freezing, the= =20 meat would remain safe until the next day.=20 Medical facilities also rely upon refrigerators to keep perishables cold an= d=20 safe. Unfortunately, like water facilities, smaller clinics and hospitals i= n=20 California are not exempt from planned blackouts, although major hospitals= =20 are.=20 According to Dr. Barbara Ramsey, medical director the Native American Healt= h=20 Center's community health clinic in Oakland, if power goes down for more th= an=20 two hours, their biggest problem will be vaccine spoilage. In addition,=20 replacing them may also prove difficult if power outages to other clinics= =20 across the state or nation result in widespread shortages.=20 "We have episodic vaccine shortages without blackouts," she says, largely= =20 because drug manufacturers allegedly limit the supply of medicines to impro= ve=20 profit margins. "We just had one with tetanus. For those vaccines that aren= 't=20 profitable, I would see a particular risk."=20 Ramsey recommends that parents of children between 15 months and 30 months= =20 and 4 to 6 years get them vaccinated as soon as possible, especially if the= y=20 expect to enroll them in a school or day care center that requires=20 inoculations prior to admission. Often, says Ramsey, "the parents go, 'Oh,= =20 the kid turned 4 but I've two years to do these vaccines.' Then suddenly th= e=20 parent wants boosters given today because preschool starts tomorrow. But if= I=20 don't have the vaccine, tough luck."=20 Otherwise, having experienced a rolling blackout a few weeks ago, she gives= =20 mixed reviews about the clinic's ability to operate without power. Since th= e=20 clinic is "a fairly low-tech operation," Ramsey says she is confident that = it=20 can continue to provide basic services, with the exception of the EKG machi= ne=20 and dental equipment. "Just to shine that light in your mouth requires=20 electricity," she says.=20 Other medical issues must be dealt with in the home, especially for elderly= =20 and disabled residents. Medicines kept in the refrigerator can spoil,=20 life-support equipment can shut down, and heat stroke can result in serious= =20 illness or death. Some Bay Area communities plan to open summer "cooling=20 shelters" for seniors during hot days.=20 Keeping tabs on San Francisco's homebound elderly and disabled residents=20 during a disaster is largely the responsibility of a volunteer disaster=20 preparedness program called NERT, for Neighborhood Emergency Response Team.= =20 In other cities it might go by another acronym, such as NEAT (Neighborhood= =20 Emergency Assistance Team) or CERT (Community Emergency Response Team).=20 While distributing informational flyers, Susan Yip, NERT coordinator for Sa= n=20 Francisco's Balboa Terrace neighborhood, noticed some notes pasted to a fro= nt=20 door indicating that a disabled person lived inside. So she left a note of= =20 her own asking if the occupant would like to contact her in order to be=20 placed on a list of local residents who may have special needs during a=20 neighborhood-wide emergency.=20 "His son phoned me and told me about his father, who lived alone in the=20 house," was in his late 90s, mostly bedridden, and on an oxygen machine, sa= ys=20 Yip. "He explained to me which window to climb in and that he has a chair= =20 right there to jump down on, that kind of thing."=20 Not long after, a rolling blackout hit the neighborhood. She quickly paged= =20 the son, they met at the father's house, and went inside together.=20 Fortunately, the oxygen machine did not depend upon AC power and was=20 operating normally. "Because the rolling blackout happened during the dayti= me=20 and it just lasted an hour and a half, it was just a good drill for us," sh= e=20 says.=20 Yip is more concerned about the consequences of nighttime outages. "If it= =20 were dark and he went to turn on his light and that didn't go on, there mig= ht=20 just be that fear of what's going on." So an important part of a NERT=20 volunteer's job is providing neighbors with information, reassurance and a= =20 sense of hope.=20 Even in a power outage, the greatest impediments to good health are apathy= =20 and ignorance. So if we take steps to protect health and safety during the= =20 energy crisis, then the next string of blackouts may end not with a trip to= =20 the hospital and a lot of embarrassing questions, but with an excuse to sit= =20 on the front porch and enjoy the balmy evenings of summer.=20 If you would like a NERT volunteer to visit an elderly or disabled San=20 Francisco resident during a community-wide emergency, call (415) 554-9960. = If=20 you live in another community, contact your local fire department for=20 information.=20 =09 David Bragi, a freelance journalist who lives in El Cerrito, California, is= =20 Editor of the multicultural webzine New Tribal Dawn. =09?=20 ,2001 SF Gate ?=20 ---------------------------------------------------------------------------= --- --------------------------------------------------------------- Oh, that boom in 2002=20 Jon Carroll Monday, May 7, 2001=20 ,2001 San Francisco Chronicle=20 URL: http://www.sfgate.com/cgi-bin/article.cgi?f=3D/c/a/2001/05/07/DD168333= .DTL=20 I THINK WE must now believe and accept that there is no bailout coming, no= =20 miracle cure. Human behavior will remain the same, which takes care of the= =20 demand end, and human avarice and incompetence are also reliable, which tak= es=20 care of the supply end.=20 Which means we will have blackouts this summer.=20 It seems ironic in the inner Bay Area, where our power needs drop=20 precipitously from May to October (except for a little furnace action on=20 those brisk, foggy summer days), but the rest of the state wants to stay co= ol=20 cool cool.=20 I can't blame it. If I lived in Fresno, I would succumb to temptation, I'm= =20 pretty sure. What with those rotating blocks, I'd get hit only once every= =20 fourth blackout or so. I could live with that.=20 Hell, I will live with it, even though I don't own an air conditioner, even= =20 though daylight saving will cut my illumination needs substantially, even= =20 though we have already unplugged the freezer and turned out lights like=20 little Boy Scouts. And, of course, like little Girl Scouts -- equally=20 virtuous energy savers.=20 Nevertheless, we are all in this together, just like in the old days. We ar= e=20 experiencing solidarity in our misery. Maybe we'll make up folk songs as we= =20 sit around the blocks of ice.=20 Perhaps you remember 1989, when the bridge fell down. Everything was=20 different for a while. Many of us took ferries and said, "God, this is the= =20 only way to travel. I'm never going back to my car again."=20 Yes, well. Bad habits die hard.=20 SO I AM thinking what it might be like when the great blackouts start to=20 happen. I am thinking of people learning to live without television or=20 computers. I am thinking about people at loose ends, wandering around their= =20 homes or places of businesses.=20 "What did people do for fun before there was electricity?" Various=20 suggestions will come up: quoits, bearbaiting, starting a land war in Asia.= =20 And then Person A will look at Person B and remember the oldest recreation= =20 known to humanity. It's free, it gets better the more you do it, it wastes= =20 not a gram of our precious fossil-fuel resources. Batteries are not even=20 necessary (although, of course, optional). Salmon habitats are untouched; a= ir=20 quality remains the same.=20 The heat, of course, would be a deterrent. The boredom, on the other hand,= =20 would be a goad. It would be the old heat/boredom dilemma. I'm betting on= =20 boredom here. "The hell with it, we can always take a cold shower," some=20 romantic person can say.=20 I am envisioning people putting locks on the Xerox-room door. You know what= =20 I'm saying?=20 SO LET US think big picture. Let us think downstream. Let us count to nine= =20 starting from July: August, September . . . May! I am strongly suggesting= =20 here that obstetrics wards staff up for May 2002. Extra beds, extra people.= =20 Hospitals may already be preparing the budgets for that time frame -- don't= =20 be caught off guard.=20 Oh, and think of the names. Blackie will suddenly be fashionable for boys,= =20 and maybe Blaze for the girls. Or even Heather, with a little hyphen betwee= n=20 the t and the h. Wouldn't that be cunning? I suspect we may see a few kids= =20 named Xerox too.=20 Couples will not be able to hear the phrase "rolling blackout" without=20 giggling.=20 Maybe, under the pressure of circumstance, old fires will be rekindled. Two= =20 parents might suddenly come home from their darkened workplaces in the midd= le=20 of the day to a blessedly silent house . . . violins and roses. People in= =20 cubicles facing dead computers might begin to chat . . . incense and=20 peppermints. People will say, "This is great! We should keep doing it even= =20 when the energy crisis is just a memory!"=20 Just like we're all riding the ferry now.=20 Giving a whole new meaning to the phrase "gridlock," it's fun in the dark.= =20 Skyrockets in flight, afternoon [email protected].=20 ,2001 San Francisco Chronicle ? Page?B - 10=20 ---------------------------------------------------------------------------= --- --------------------------------------------------------------- Developments in California's energy crisis=20 The Associated Press Monday, May 7, 2001=20 ,2001 Associated Press=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2001/05/07/s= tate0 940EDT0145.DTL&type=3Dnews=20 , , -- (05-07) 06:40 PDT Developments in California's energy crisis:=20 MONDAY: --Democrat state lawmakers say they will announce that they are suing feder= al=20 energy regulators for refusing to cap the spiraling cost of electricity.=20 -- A legislative committee is expected to vote on a bill to tax power=20 generators' windfall profits.=20 -- The state Assembly could consider a bill to authorize $12.5 billion in= =20 bonds for power buys. Republican members have balked at financing that much= =20 money, suggesting that the state instead use some of its surplus to buy=20 electricity for customers of three cash-strapped utilities.=20 -- The state remains free of power alerts as reserves stay above 7 percent.= =20 FRIDAY: -- Customers of Pacific Gas and Electric Co. will have their own committee = in=20 the utility's bankruptcy proceedings, a move to which PG&E officials=20 immediately objected. The nine-member committee will be the consumers' voic= e=20 at the bargaining table, says Nettie Hoge, executive director of The Utilit= y=20 Reform Network, and a member of the panel appointed by the U.S. Trustee's= =20 office. PG&E spokesman Ron Low says ratepayers could be represented by the= =20 state attorney general and didn't need a committee.=20 -- California's power buyers announce a $7 billion contract with Sempra=20 Energy Resources for electricity for the customers of three utilities. The= =20 10-year contract will provide 250 megawatts of electricity starting June 1,= =20 eventually increasing to 1,900 megawatts, the governor's office says. One= =20 megawatt is roughly enough power for 750 homes.=20 -- Southern California Edison and several organizations kick off an=20 advertising campaign Saturday to urge support for Gov. Gray Davis' plan to= =20 rescue the utility by purchasing its power lines. Among the members of the= =20 coalition running the television and radio ads are the California Small=20 Business Roundtable, California Professional Firefighters and the Californi= a=20 Taxpayers Association.=20 -- Energy Secretary Spencer Abraham visits San Francisco to trumpet a Bush= =20 administration plan directing federal facilities to conserve electricity.= =20 Abraham says the effort, which does not specify how much power must be save= d,=20 is an important step as the administration prepares to release its national= =20 energy policy later this month. But he also stresses that conservation is n= ot=20 the panacea to California's power affliction and that the state also must= =20 build new power generators.=20 -- Shares of Edison International closed at $9.25, down 3 cents. PG&E Corp.= =20 closed at $9, up 14 cents.=20 -- No power alerts are reported as reserves stay above 7 percent.=20 WHAT'S NEXT: -- The governor meets Wednesday with the CEOs of several major energy=20 suppliers to discuss the money they're owed by the state's two largest=20 utilities, the state's creditworthiness and how wholesalers can help the=20 state during the energy crisis. Davis says he won't be discussing any of th= e=20 investigations into price manipulation in the wholesale market.=20 -- Davis' representatives continue negotiating with Sempra, the parent=20 company of San Diego Gas and Electric Co., to buy the utility's transmissio= n=20 lines.=20 THE PROBLEM: High demand, high wholesale energy costs, transmission glitches and a tight= =20 supply worsened by scarce hydroelectric power in the Northwest and=20 maintenance at aging California power plants are all factors in California'= s=20 electricity crisis.=20 Edison and PG&E say they've lost nearly $14 billion since June to high=20 wholesale prices the state's electricity deregulation law bars them from=20 passing on to consumers. PG&E, saying it hasn't received the help it needs= =20 from regulators or state lawmakers, filed for federal bankruptcy protection= =20 April 6.=20 Electricity and natural gas suppliers, scared off by the two companies' poo= r=20 credit ratings, are refusing to sell to them, leading the state in January = to=20 start buying power for the utilities' nearly 9 million residential and=20 business customers. The state is also buying power for a third investor-own= ed=20 utility, San Diego Gas & Electric, which is in better financial shape than= =20 much larger Edison and PG&E but also struggling with high wholesale power= =20 costs.=20 The Public Utilities Commission has raised rates as much as 46 percent to= =20 help finance the state's multibillion-dollar power buys.=20 ,2001 Associated Press ?=20 ---------------------------------------------------------------------------= --- --------------------------------------------------------------- U.S. considers withdrawing lawsuits against coal industry=20 Pollution controls affect power plants=20 Katharine Q. Seelye, New York Times Monday, May 7, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/05= /07/M N213627.DTL&type=3Dnews=20 Washington -- The Bush administration is considering pleas from coal and=20 electric companies to drop a series of government lawsuits initiated by the= =20 Clinton administration to require the utilities to install modern pollution= =20 controls on old, coal-fired power plants.=20 The request, which the coal industry says would let it quickly increase its= =20 output of power, has touched off a debate within the administration. Christ= ie=20 Whitman, administrator of the Environmental Protection Agency, which=20 initiated the litigation, is resisting the industry's suggestion, while Vic= e=20 President Dick Cheney and Energy Secretary Spencer Abraham are sympathetic.= =20 The Bush administration is determined to increase the nation's use of fossi= l=20 fuels to produce power in response to what it deems an energy crisis.=20 The coal industry says the EPA's enforcement of the Clean Air Act is=20 preventing investments that would generate tens of thousands of megawatts o= f=20 electricity from existing coal-fired plants and that the cost of new=20 pollution controls would have to be paid by consumers.=20 "There is a recognition that plants aren't modernizing because the burden i= s=20 too onerous," a White House official said yesterday.=20 Discussions within the administration about the lawsuits have intensified i= n=20 recent days, as the White House completes a report by a energy task force= =20 headed by Cheney. The report is to be printed this evening.=20 "The coal industry is pushing very hard to lock this in and make it part of= =20 the report," said an environmentalist who has been following the case=20 closely.=20 At stake are emissions that would cost millions of dollars to control and= =20 that account for a significant share of the nation's air pollution.=20 The Clean Air Act exempted many older plants from strict emissions controls= ,=20 but required modern controls when owners modified plants in ways that=20 increased emissions.=20 For years, the agency says, plants evaded the requirements by insisting tha= t=20 certain modifications were merely "routine maintenance." But the agency fou= nd=20 that a number of major electric utilities had been modernizing their plants= =20 with projects that increased emissions.=20 Since 1988, the EPA has sued 11 companies over controls at 49 power plants.= =20 If the administration dropped these lawsuits and otherwise softened=20 regulations, the council argues, coal-fired plants could provide an increas= ed=20 capacity of 40,000 megawatts within three years, almost twice the capacity = of=20 all new power plants built last year, and 5 percent of the total generating= =20 capacity available nationwide.=20 ,2001 San Francisco Chronicle ? Page?A - 3=20 ---------------------------------------------------------------------------= --- --------------------------------------------------------------- Swimming pool owners get PG&E discounts=20 Operating pumps at night saves energy=20 Michael McCabe, Chronicle Staff Writer Monday, May 7, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/05= /07/M N121100.DTL&type=3Dnews=20 A penny here, a penny there, a megawatt here and a megawatt there, for=20 Pacific Gas and Electric Co it all adds up -- maybe.=20 In the fervent hope and fear that each tiny zap of electricity is going to= =20 count this summer, PG&E is offering owners of private swimming pools $20 if= =20 they set their pool timers to operate the pumps during off-peak hours.=20 Shifting 15 megawatts off peak demand, the daylight time of day when power= =20 shortages are most likely to occur, may sound like a drop in the bucket. Bu= t=20 PG&E says 134,000 private pools exist in Northern and Central California, a= nd=20 that's enough to save 15 megawatts, or enough to power 15,000 homes at any= =20 one moment.=20 And that could add up to a sizable savings in light of the grim predictions= =20 for this summer.=20 The Independent System Operator, which oversees the state's power market,= =20 estimates that on any given day in June, the state will fall 6,815 megawatt= s=20 short of demand. That would put nearly 7 million homes in the dark.=20 So PG&E figures every bit of conservation helps, even pumping dirt and debr= is=20 and other foreign matter out of swimming pools at night or in the early=20 morning.=20 To qualify for the $20 check -- a one-time rebate, owners of in-ground=20 swimming pools must agree to set their timers to operate the pumps between = 8=20 p. m. and 10 a.m.=20 The offer does not extend to public pools for public health reasons or to= =20 solar-heated pools, which do not use power from the grid.=20 "Obviously, this is not a silver bullet to solving the energy crisis, but i= t=20 is one BB among many," said Staci Homrig, a PG&E spokeswoman. "Every little= =20 bit helps, and this is just our latest among many programs offering=20 incentives to customers who are more energy efficient at home." Other PG&E= =20 programs include offering $3 off energy star-labeled compact fluorescent=20 lamps, which use 75 percent less energy than standard incandescent bulbs; $= 75=20 rebates for Energy Star-labeled clothes washers and $50 for dishwashers. PG= &E=20 also offers $75 rebates for refrigerators that meet the 2001 Department of= =20 Energy efficiency standard.=20 Some pool installation companies say the $20 offer sounds like a good idea,= =20 generally. But they caution that pool owners who operate their sometimes=20 noisy pumps only at night may run into problems with local noise-abatement= =20 ordinances.=20 "If you run your pumps at night, then you are going to hear it running," sa= id=20 John Maguire, owner of the Pool Man, which serves Sonoma County. "But I'm= =20 sure PG&E will get a good response -- a lot of people will be happy to take= =20 $20."=20 Other pool experts said, however, that the most modern pool equipment is ve= ry=20 quiet and pumps manufactured in recent years should not cause a noise=20 problem.=20 Generally, though, the reaction was that PG&E probably could spend whatever= =20 money it has left more wisely.=20 "The trouble is that $20 is not a whole lot of money," said Rick Wolpin,=20 director of Sales and Marketing for Lifetime Pools in Palo Alto. "If it was= =20 $20 a month off their bill, I could see people jumping at it."=20 At least one pool owner agrees.=20 "I don't think 20 bucks is much of an incentive, but I probably would have= =20 done it anyway -- and also take the $20," said Deborah Clark, who has a lap= =20 pool in her San Jose backyard.=20 Indeed, most pool owners already shut their pumps down during the day, said= =20 Randy Saunders, division manager for Adams Pool Solutions based in=20 Pleasanton. "I would bet 90 percent of the pool owners would be happy to do= =20 that because the backyard pool doesn't care what time of day it is as long = as=20 it gets four to eight hours of circulation," Saunders said. "I think it's a= =20 terrific idea, assuming PG&E can afford it."=20 PG&E officials say they will have little problem coming up with the $2=20 million or so the program may cost if 80 percent of its pool-owning custome= rs=20 enroll in the program.=20 PG&E's Homrig said all the rebates will come after the bankruptcy filing, a= nd=20 so will not be affected by its filing for Chapter 11 on April 6. She said t= he=20 money for the rebates will come from the utility's customers, who pay a sma= ll=20 portion of each month's bill for energy efficient programs.=20 To make sure that those who sign up for the $20 are actually turning off=20 their pumps during the day, PG&E plans random inspections, Homrig said. The= =20 utility is also counting on the honesty of their valued customers, she said= .=20 E-mail Michael McCabe at [email protected].=20 ,2001 San Francisco Chronicle ? Page?A - 13=20 ---------------------------------------------------------------------------= --- --------------------------------------------------------------- Legislators plan to sue U.S. panel on energy=20 Top state Democrats want cap on prices=20 Jim Herron Zamora, Chronicle Staff Writer Sunday, May 6, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/05= /06/M N233207.DTL&type=3Dnews=20 The two top leaders in the California Legislature said yesterday that they= =20 plan to sue federal energy regulators for allowing electricity rates to=20 spiral out of control.=20 "The commission is not complying with the law," Senate President Pro Tem Jo= hn=20 Burton said of the Federal Energy Regulatory Commission.=20 "The Federal Power Act requires (the commission) to make sure that energy= =20 prices are just and reasonable," he said. "Clearly, rates are anything but= =20 just and reasonable."=20 Burton, D-San Francisco, said yesterday that he and Assembly Speaker Robert= =20 Hertzberg, D-Sherman Oaks, will file the suit tomorrow in federal court. Th= e=20 suit will accuse the commission of neglecting its duty by refusing to cap t= he=20 escalating cost of electricity in the midst of the power crisis.=20 Gov. Gray Davis is not a party to the suit, but "is supportive of any effor= t=20 to make sure FERC does its job," said Davis spokesman Steve Maviglio.=20 No one answered the phones at the federal commission's media office=20 yesterday, and commission officials could not be reached for comment.=20 Late last month, the commission ordered a one-year cap on electricity sold= =20 into the state during power emergencies, when power reserves fall below 7.5= =20 percent, in order to avoid rolling blackouts.=20 But the Democratic governor and state power regulators dismissed the cap as= =20 too little, too late.=20 The pending lawsuit follows months of lobbying by Davis and legislative=20 leaders of both parties. Hertzberg also is working on a tri-state plan to= =20 lower electricity costs and cut the risk of blackouts in the drought-strick= en=20 Pacific Northwest.=20 Burton said those efforts may bear fruit, but that legal action against the= =20 commission is needed as well.=20 "California is in a crisis, and we need FERC to do its job," Burton said. "= 'I=20 don't know if they have fallen asleep or if they are trying to screw=20 California, but the net effect is the same -- we are being gouged by energy= =20 wholesalers."=20 Joseph Cotchett, a Burlingame-based attorney with strong political=20 connections to Democratic leaders, will represent the legislative leaders f= or=20 $1 a month.=20 This will be the second suit filed in less than a week alleging that=20 Californians have been gouged during the power crisis.=20 On Wednesday, Lt. Gov. Cruz Bustamante filed a suit against wholesale energ= y=20 producers on behalf of California's taxpayers.=20 Bustamante's suit accuses Duke Energy Inc., Dynegy Inc., Reliant Energy Inc= .=20 , Mirant Corp. and the Williams power company of engaging in a price-fixing= =20 conspiracy and using unlawful trading practices to manipulate the state's= =20 electricity market.=20 Chronicle news services contributed to this report. / E-mail Jim Herron=20 Zamora at [email protected].=20 ,2001 San Francisco Chronicle ? Page?A - 16=20 ---------------------------------------------------------------------------= --- --------------------------------------------------------------- Nevada's winning hand -- power=20 State sees profit in California's crisis=20 David Lazarus, Chronicle Staff Writer Sunday, May 6, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/05= /06/M N18476.DTL&type=3Dnews=20 Reno -- California's energy crisis is possibly the best thing to happen to= =20 Nevada since gangster Bugsy Siegel chanced upon a backwater town called Las= =20 Vegas in the 1940s.=20 Construction workers are scrambling not to erect new casinos but nearly a= =20 dozen new power plants -- an ambitious scheme hatched by state leaders and= =20 power companies to profit from California's chronic shortages.=20 While California may get fresh power supplies, Nevada, by hosting the plant= s,=20 will benefit from additional tax revenues and jobs, a more stable electrici= ty=20 network and a level of energy self-sufficiency the Golden State can only=20 dream of achieving.=20 And, to a great extent, Nevada's gains will be financed by California=20 ratepayers.=20 "While you guys in California have been putzing around politically, we got= =20 together and figured out what to do," said Nevada state Sen. Randolph=20 Townsend,=20 chairman of the Committee on Commerce and Labor that oversees energy matter= s.=20 "We're bringing the same mentality to power plants that we brought to=20 casinos," he said. "You build, and then you build some more."=20 In embarking on an unprecedented energy building boom, Nevada's first=20 priority is to secure enough electricity to meet all its needs for years to= =20 come.=20 No less importantly, though, the state is looking to position itself as the= =20 battery pack of the West -- a regional energy hub that will be to electrici= ty=20 what Texas is to oil.=20 California's acute need for juice, at virtually any price, is what will mak= e=20 this otherwise fanciful goal a reality.=20 "Our strategy is to overbuild," Nevada Gov. Kenny Guinn said during an=20 interview in his Carson City office. "We have short-term plans and long-ter= m=20 plans, and those plans affect California tremendously."=20 Those plans also include trade-offs that some environmentalists fear place= =20 business interests ahead of natural resources, as well as hardball tactics= =20 intended to force generators to provide at least a portion of their output = to=20 Nevada, rather than sell it all across the border.=20 "Energy developers are looking at us with big grins and drooling chops," sa= id=20 Jane Feldman, a spokeswoman for the southern Nevada branch of the Sierra=20 Club. "This really makes us nervous."=20 While California Gov. Gray Davis has been forced to take a crash course in= =20 energy issues, Nevada's Guinn boasts 20 years of experience in the utility= =20 business, including a stint as head of Southwest Gas Corp., a leading natur= al=20 gas supplier.=20 He said he has discussed California's energy troubles with Davis several=20 times, and each time urged Davis to be more aggressive in building new powe= r=20 plants.=20 "I think he's frustrated that he can't move as fast as we can," Guinn said,= =20 with a satisfied smile. The Nevada governor is a Republican. His California= =20 counterpart is a Democrat.=20 Of course, Nevada's commitment to energy independence is not solely the=20 result of political will. It also is what the gaming industry wants, and=20 Nevada lawmakers take notice when the casinos flex their considerable muscl= e.=20 Today, Las Vegas is the fastest-growing city in America, and the glitzy=20 gaming palaces that are its lifeblood soak up about 10 percent of all=20 available power.=20 Casinos and related sales and services account for no less than 60 percent = of=20 Nevada's economy, according to the state Commission on Economic Development= .=20 Six of every 10 Nevadans work for a casino or a casino-related company.=20 "The casino industry cannot tolerate blackouts like you've had in=20 California," said Harvey Whittemore, legislative counsel for the Nevada=20 Resort Association in Las Vegas. "We need predictable and reliable energy= =20 resources."=20 Not surprisingly, Nevada legislators voted last month to halt deregulation = of=20 the state's electricity market in its tracks and to shield local utilities= =20 from the sort of financial ruin that led Pacific Gas and Electric Co. to fi= le=20 for bankruptcy protection.=20 They also wasted no time in rolling out the red carpet for power companies= =20 eager to build new plants while California electricity prices remain at sky= -=20 high levels.=20 The governor stood alongside executives from four leading power companies t= o=20 announce that his state will fast-track approval of new plants so it can=20 double Nevada's electricity output within just two years.=20 A licensing process that might take as long as four years in California has= =20 been reduced to months in Nevada.=20 "We don't want to be like other states, like California, who can't control= =20 their own destiny," Guinn said.=20 This is music to the ears of power companies, which see Nevada as an=20 affordable and hospitable base from which to pump electricity into the=20 captive California market.=20 "If you could, you would build all your California plants in Nevada," said= =20 Jack Farley, president of western operations for Houston's Reliant Energy.= =20 "The political climate is more stable, there's no state income tax and the= =20 labor is cheaper."=20 Reliant will spend about $1 billion on three new plants outside Las Vegas,= =20 which together will generate enough power to light about 1.4 million homes.= =20 North Carolina's Duke Energy Corp., meanwhile, is looking to build a=20 sprawling facility near Las Vegas capable of lighting more than 1 million= =20 homes and a second plant about half that size near Reno.=20 Tom Williams, a Duke spokesman, said one reason power companies are heading= =20 into Nevada is because they hope to rapidly recover their construction cost= s=20 from California consumers.=20 "Clearly, building a plant rapidly in a market that has a shortfall is an= =20 objective," he said. "The sooner you get to a market that has a desperate= =20 need for power, the better off you will be."=20 In a desert canyon outside Reno, along the same path once followed by the= =20 ill-fated Donner Party, the West's newest power plant is due to begin=20 operating by the end of the month.=20 The $130 million facility, bankrolled by brokerage Morgan Stanley, will not= =20 only fuel Reno's lavish resorts but also pump electricity over the mountain= s=20 and into neighboring California.=20 Huge gray transformers and turbines dominate the construction site as worke= rs=20 battle dust storms and the harsh sun to meet their deadline.=20 "If we could have a year to do this, it would be simple," said Ray Kaufman,= a=20 technical consultant with Energy Services, the engineering firm hired by=20 Morgan Stanley to build the plant. "Doing it in four months is very=20 difficult."=20 State officials insist that no environmental regulations were waived to get= =20 Nevada's new power plants off the drawing board in record time. They say th= e=20 normally slow bureaucratic process was simply streamlined.=20 Consumer activists are not so sure.=20 "The state is moving too fast," said Kalynda Tilges, a spokeswoman for Las= =20 Vegas' grassroots Citizen Alert. "There needs to be more discussion."=20 At the same time, she and other activists worry that Nevada will be giving = up=20 precious natural resources for power plants that will be producing=20 electricity for consumers elsewhere.=20 The new plants require groundwater for cooling -- something Nevada does not= =20 have in abundance.=20 "I don't think most Nevadans realize what's happening," Tilges said. "They= =20 have no idea how much groundwater will be used, and how much of the power= =20 will be going to California."=20 To ensure that at least some of the output stays close to home, Nevada=20 authorities have driven a hard bargain with power companies. Access to=20 groundwater will be permitted in return for 25 percent of all electricity= =20 produced, which is to be sold to Nevada utilities at low rates.=20 Richard Wimmer, deputy general manager of the Southern Nevada Water=20 Authority, said he was surprised to find that power companies seemed=20 comfortable with, and perhaps even respected, his state's strong-arm tactic= s.=20 "This is what these people do all the time," he observed, adding that Nevad= a=20 saw how poorly California fared when it attempted to negotiate without any= =20 leverage.=20 In this sense, Nevada and the big energy companies have gotten off to a fin= e=20 start. They both speak the same language -- a readiness to seize=20 opportunities and to roll the dice on risky endeavors.=20 "Our economy may not have been built by gamblers, but it's a spirit we like= ,=20 " said Sen. Townsend. "Just turn us loose and let us get things done.=20 "It's not so much that we want to profit from California," he added. "We're= =20 just trying to survive."=20 E-mail David Lazarus at [email protected].=20 ,2001 San Francisco Chronicle ? Page?A - 1=20 ---------------------------------------------------------------------------= --- --------------------------------------------------------------- Share prices rise amid news of big energy deals=20 Posted at 7:44 a.m. PDT Monday, May 7, 2001=20 NEW YORK (AP) -- Share prices rose tentatively in early trading Monday as= =20 investors tried to absorb the impact of two big energy mergers and weakness= =20 in the hand-held computer sector.=20 In early trading, the Dow Jones industrial average was up 28.50 at 10,979.7= 4.=20 The Nasdaq composite index rose 16.54 to 2,208.07, while the Standard &=20 Poor's 500 index was up 1.56 at 1,268.17.=20 Two energy deals were announced in the hours just before the market opening= .=20 Williams Companies of Tulsa, Okla., said Monday it will buy natural gas=20 producer Barrett Resources for $2.3 billion in cash and stock, topping a $2= =20 billion hostile bid by the U.S. unit of Royal Dutch/Shell Group.=20 Denver-based Barrett put itself up for sale in a formal auction after Shell= =20 mounted its effort in March.=20 Shares in Barrett soared $2.79 to $70.09, while Williams' stock was down=20 $2.77 at $38.90.=20 Meanwhile, Valero Energy Corp. said it was buying Texas rival Ultramar=20 Diamond Shamrock Corp. for about $4 billion in cash and stock in a deal tha= t=20 will make Valero the second-largest U.S. refiner of petroleum products. The= =20 companies said the deal was approved by both boards over the weekend, but= =20 still must be sanctioned by regulators.=20 Valero's shares dropped 37 cents to $45.10, while those in Ultramar Diamond= =20 Shamrock were up $9.38 at $52.09.=20 In the high-tech sector, Handspring Inc. announced that it was lowering the= =20 price of its Visor Deluxe handheld computers to $199 from $249. The company= =20 also said it was offering two promotions: a $50 rebate on the purchase of a= ny=20 new Visor Platinum and $30 rebates on select Springboard modules with the= =20 purchase of any Visor handheld.=20 Investors feared the action would set off a price-war in the sector, which= =20 has been dominated by Palm Inc.=20 Shares in Handspring were down 45 cents at $12.58. Palm's were up 13 cents = at=20 $8.52.=20 Also Monday, 3Com Corp., which spun off Palm last year, announced a second= =20 round of layoffs Monday, cutting 3,000 jobs. The networking company aims to= =20 trim costs by $1 billion a year.=20 Its shares were up 20 cents to $7.10 on the news.=20 The market last week ended on an upbeat note after dismal unemployment=20 figures led investors to expect the Federal Reserve to aggressively cut=20 interest rates when it meets next week. Most analysts expect the Fed to cut= =20 interest rates at least a half a percentage point for the fifth time this= =20 year.=20 The Russell 2000 index, which measures the performance of smaller companies= =20 stocks, was up 1.07 at 493.96.=20 Advancing issues were slightly ahead of declining issues on the New York=20 Stock Exchange, where volume came to 114.58 million shares, compared with= =20 138.10 at the same time last Friday.=20 Overseas markets were mixed on Monday. In afternoon trading in Europe,=20 Germany's DAX index was off 0.18 percent at 6,127.15. France's CAC-40 was u= p=20 0.79 percent at 5,498.45, and Britain's FT-SE 100 was up 1.81 percent at=20 5,870.30.=20 The benchmark 225-issue Nikkei Stock Average rose 107.77 points, or 0.74=20 percent, to 14,529.41. It was the strongest close since the index registere= d=20 14,552.29 on Dec. 15.=20 ------=20 On the Net:=20 New York Stock Exchange: http://www.nyse.com=20 Nasdaq Stock Market: http://www.nasdaq.com=20 AP-WS-05-07-01 1036EDT ---------------------------------------------------------------------------= --- ---------------------------------------------------------------------------= --- ----------- Florida shrugs off Calif.-blackout scenario=20 Posted at 7:38 a.m. PDT Monday, May 7, 2001=20 BY JOAN GRALLA=20 NEW YORK (Reuters) - Florida is confident it will not face next year the=20 rolling power blackouts that have bedeviled California, but one analyst who= =20 foresaw trouble for the West Coast says the same problems may lie ahead for= =20 the Gold Coast.=20 California's self-imposed black eye with deregulation has left a number of= =20 states, from Wisconsin to Florida, disinclined to go ahead with similar=20 plans. That is especially true in the Southeast, where states have less=20 reason to deregulate because their power costs are fairly low.=20 Florida residents are not expected to experience soaring power prices this= =20 summer when the thermometer rises since power companies say they have enoug= h=20 supply to meet customer needs.=20 But whether Floridians run short of power next year might be decided by=20 factors beyond the state's control: how hot the summer is, whether utilitie= s=20 accurately predict demand growth, and whether they can add new power as fas= t=20 as they project, analyst Mark Bernstein recently told Reuters.=20 ``Two-and-a-half years ago we said California could face a problem. It wasn= 't=20 a prediction, it was one of our scenarios,'' said the policy analyst with t= he=20 Santa Monica, California-based think tank RAND.=20 But California ran into some tough luck, including a drought that dried up= =20 hydropower. ``For California to have the problem it had, everything had to = go=20 wrong,'' Bernstein said.=20 California's crisis stems from a flawed 1996 deregulation plan that allowed= =20 wholesale energy prices to soar but capped retail rates. The result has bee= n=20 rolling blackouts, soaring prices and the bankruptcy of the state's biggest= =20 utility.=20 Bernstein sees an eerie similarity between what California experts said two= =20 years ago and what Florida analysts now say. ''What they're saying in Flori= da=20 is the same thing they said in California a couple of years ago. We're not= =20 predicting problems in Florida, but if you look at the direction they're=20 going in they could have the same problems as California.''=20 Tom Ballinger, an energy supervisor with the Division of Safety and=20 Electricity Reliability for Florida's Public Service Commission, said he wa= s=20 confident the state could meet demand.=20 For 2002, for example, the peninsula area, which accounts for some 90 perce= nt=20 of Florida demand, has a 19 percent reserve margin. That will climb to 26= =20 percent by 2005 before drifting back down to 23-25 percent in the years=20 ahead.=20 ``The peninsula in times past has gotten by with a 15 percent reserve=20 margin,'' Bernstein pointed out.=20 DEREGULATION LOOKS LESS DESIRABLE=20 Back in 1995, Wisconsin was tracking California on the path to electricity= =20 deregulation, although it planned a slower approach. But the process ground= =20 to a halt after California's problems singed its reputation, economy and=20 living standards.=20 ``When California occurred, it froze everybody,'' said State Rep. Tim Hoven= ,=20 a Republican from Port Washington and chairman of the Wisconsin Legislature= =20 utilities oversight committee. He said the state now was focusing more on= =20 reliability, adding, ''We don't want to duplicate what they did in=20 California.''=20 In an interim report, a Florida study group recommended creating a=20 competitive wholesale market.=20 That would not be done by requiring utilities to divest themselves of=20 generators, as New York State has done, for example; Florida utilities woul= d=20 transfer power sources to an affiliate or third party, said Billy Stiles,= =20 executive director of the Florida Energy 2020 Study Commission.=20 Once the generators were transferred, the utilities would have long-term=20 contracts with their old units -- unlike California, whose utilities could= =20 buy only on the spot market. The amount of power Florida utilities contract= ed=20 for would decline over time, opening the market up to merchant power plants= ,=20 Stiles explained.=20 ``Once the transition is over ... they have the ability to buy (power) from= =20 anybody selling in the market, including their own affiliate or merchant,''= =20 he said.=20 Florida's deregulation proposal stalled partly because of concerns that=20 consumers might not get repaid for the hugely expensive power generators th= ey=20 helped pay for in the form of higher electricity rates.=20 The study group proposed transferring power plants at their book value: how= =20 much the plant is listed at on the utility's balance sheet. But some critic= s=20 charged the plants were worth more than their book value, and after they we= re=20 transferred they eventually might be sold to other independent power=20 producers.=20 ``There was a belief that the gain on the sale of plants will escape=20 recognition of the regulator ... that the customers will be deprived of tha= t=20 gain,'' Stiles said.=20 He did not agree that power plants necessarily would fetch more than their= =20 book values. Still, he added, ``some mechanisms may need to be devised to= =20 recognize that gain.''=20 FLORIDA SEES POWER SUPPLY AS SATISFACTORY=20 Among the concerns Bernstein raised about Florida's plans were questions=20 about whether its utilities might experience delays in building new power= =20 sources.=20 ``If those plans actually emerge on time, maybe they'll be OK, but years of= =20 experience on things like this (shows) things get delayed,'' the RAND analy= st=20 said.=20 Ballinger, the Florida Public Service Commission expert, recognized that as= a=20 risk, but only over the longer term. He said he was confident the utilities= '=20 demand projections, on which the state relies, were solid.=20 ``They're looking at it all the time,'' he said, explaining that utilities= =20 routinely analyzed population growth, customer accounts, the economy and=20 other factors.=20 Bernstein also raised the possibility Florida's weather might turn aberrant= ,=20 with a warmer winter than usual, for example, which could raise demand for= =20 cooling. Balllinger said the state's assumptions -- compiled from data=20 provided by its utilities -- were based on normal temperatures.=20 Although parts of the Northeast such as New York have gone ahead with at=20 least partial deregulation, they had a fairly strong incentive to do so.=20 New York's retail rates ran around 14.2 cents per kilowatt hour, according = to=20 the Energy Information Administration. In contrast, Floridians paid only=20 about 8 cents, and such low rates were the norm for most states in the=20 Southeast, giving them less incentive to deregulate.=20 ``I don't think you're going to see deregulation in the South anytime soon,= ''=20 said John Sell, a spokesman for Southern Company, which owns power provider= s=20 in Georgia, the Florida Panhandle, Alabama and Mississippi.=20 REUTERS Reut10:26 05-07-01=20 ---------------------------------------------------------------------------= --- ---------------------------------------------------------------------------= --- ------------------ Hot days worry energy watchers=20 Published Monday, May 7, 2001, in the San Jose Mercury News=20 BY GARY RICHARDS=20 Mercury News=20 Hot weather will cover the state today and Tuesday, and edgy energy officia= ls=20 are asking people not to turn on air conditioners or fans at home or at wor= k.=20 Temperatures are expected to remain in the high 80s in Silicon Valley today= =20 and the low 90s in Sacramento and Southern California. That could lead to a= n=20 energy drain and more threats of rolling blackouts as the workweek begins.= =20 ``When it warms up, demand does skyrocket and we're definitely on guard and= =20 asking consumers to step up their conservation,'' said Stephanie McCorkle, = a=20 spokeswoman for the California Independent System Operator.=20 However, energy watchers won't know until this morning whether California h= as=20 enough power to get through these warm days. The peak demand doesn't hit=20 until about 4 p.m. in spring and summer. Weather forecasters say temperatur= es=20 will return to the mid-70s by Wednesday, which is normal for this time of= =20 year. Sunday's high was 87 in San Jose, far short of the record 99 for May = 6.=20 Contact Gary Richards at [email protected] or (408) 920-5335.=20 ---------------------------------------------------------------------------= --- ---------------------------------------------------------------------------= --- ------------------ Unplugged=20 Mankind has lived thousands of years without electricity. The Amish still d= o.=20 Californians may have to. We called an Ohio hardware store to find out how.= =20 May 7, 2001=20 By ANDRE MOUCHARD The Orange County Register This spring, nearly 16 months after Y2K failed to unplug our=20 electricity-addicted world and just weeks before we figure to get browned o= ut=20 by our erratic power suppliers, Southern California is turning its eyes to= =20 the Amish of northern Ohio.=20 The Amish, like us, are busy. They run farms and small manufacturing=20 companies and even dabble in real estate. And while they might shun things= =20 like SportsCenter and Marilyn Manson, they're not totally without comfort.= =20 The Amish, like us, like their clothes clean, their food hot and their coff= ee=20 beans ground to a powder suitable for drip-style brewing.=20 What the Amish don't like is electricity. They live as plug-free as possibl= e.=20 Here in backward Southern California (where an almost totally non-Amish=20 population sucks down more electricity than anybody in the world) many wond= er=20 how. Hence our sudden interest in northern Ohio.=20 "Nowadays, we get calls nearly every day from people in Southern California= ,"=20 says Glenda Lehman-Ervin, marketing director of Lehman's Hardware and=20 Appliances Inc., a Kidron, Ohio-based retailer that, since 1955, has=20 specialized in selling non-electric appliances to, among others, the Amish,= =20 survivalists and Martha Stewart.=20 Lehman's, which is privately held, says only that its non-electric applianc= e=20 sales to California have "dramatically increased" in the past year,=20 particularly as power outages and rate hikes have become the norm.=20 "Apparently, there is some concern out there about electricity."=20 Apparently.=20 So even with a blackout summer only weeks away, it's not too late to go=20 plugless. The process might not be cheap. It might involve some damp=20 undergarments. And it almost certainly won't include a curling iron or a ha= ir=20 dryer. But some unplugging - without batteries even - is possible.=20 Here's a breakdown of some non-battery-powered devices that can unplug the= =20 most electric of all events - the morning ritual:=20 STEP 1: WAKING UP=20 One way to save a lot of electricity would be to sleep in so long that you= =20 get fired. You could then hang out all day by a pool or the ocean and live= =20 almost exclusively on solar power.=20 Sigh.=20 Let's assume you're not yet so dedicated to easing our strained power grid.= =20 Let's assume you've got to wake up. To do that, unplugged, you'll need a=20 mechanical alarm clock.=20 Mechanicals are no oddity. They dominated time keeping from about 1000 AD= =20 until just after World War II. Most run on power generated by gravity or=20 springs. And when they're attached to bells, they double as extremely loud= =20 alarm clocks.=20 Some companies still make mechanicals (one way to find them is to look on t= he=20 Internet under the words "mechanical alarm clocks"). Some say new mechanica= ls=20 aren't as good as old mechanicals. But one company that made the old=20 mechanicals is still around.=20 A new Westclox mechanical will cost about $20, and a near antique - from th= e=20 early 1900s - will run around $50, according to Aaron Kaplan, owner of=20 Friendly Clock and Watch Repair in Santa Ana.=20 "They're still pretty functional," Kaplan says. "If you maintain them=20 properly, they'll keep time to within a minute or two."=20 Amishness rating: 100=20 STEP 2: CLEAN DUDS=20 In the larger world of waking up and putting on clothes, one thing is alway= s=20 true: clean and dry is better than dirty and wet.=20 In Southern California, most clean, dry clothes come out of a washer and=20 dryer, two machines that also are electricity hogs.=20 But it doesn't have to work that way.=20 An Amish family, for example, might get its clean, dry clothes from a=20 washboard (technology circa 500 AD) and a clothesline. That's fine if you'v= e=20 got about eight hours to get ready for work and you don't mind a T-shirt th= at=20 crunches.=20 Other unplugged washing options are hand-cranked, mechanical washers follow= ed=20 up by hand-cranked ringers that make line-drying faster. Lehman's sells a f= ew=20 of these products. There are also dozens of alternative energy washers and= =20 dryers on the market. Like clocks, those can be found over the Internet.=20 A San Diego company, Explorer Appliances, even sells an alternative energy= =20 combo device, a washer/dryer that runs on propane, natural gas or even=20 wind-created power. The machine also drinks less water than conventional=20 washer/dryer combos, according to Explorer VP Paul Real.=20 What it doesn't provide, necessarily, is socks that come out of the dryer= =20 toasty warm.=20 "Centrifugal force," Real says, describing how the washer-dryer dries. "Tha= t=20 gets almost all the moisture out."=20 Unplugging other parts of the morning's clothing thing isn't that tricky. Y= ou=20 can find irons that reuse heat from the stove. Lehman's also sells an iron= =20 that runs on burning embers. "You need a small shovel or something to get t= he=20 embers in there. It's kind of fun," spokeswoman Lehman-Ervin says.=20 Amishness rating: 75 (subtract 25 points if your clothes are synthetic or= =20 brightly colored.)=20 STEP 3: VITTLES=20 Eating plug-free isn't as easy as it looks. You can eat raw stuff, but that= 's=20 probably going to involve a refrigerator and, in most homes, that involves = a=20 plug. You can decide to cook some stuff, look at your gas-powered range, an= d=20 think you're OK. But you're not. Check out the oven. Electric. Bummer.=20 Anyway, all of this gets particularly tricky in the morning. Breakfast is a= =20 huge electricity user. Milk (if it's cold) needs a plug. Toast has its own= =20 plug-in machine. Same for waffles. And coffee, the absolutely must-have dri= nk=20 for most morning routines, needs a plug-in machine for brewing and another= =20 plug-in machine to grind the beans.=20 Or not.=20 See, the good news is there are non-electric versions of virtually every=20 kitchen appliance. The fridge can run on propane or natural gas or wind if= =20 you're so inclined. (Check the Internet under "alternative energy=20 appliances.") And Lehmans, among others, sells wood stoves, including a mod= el=20 that has a catalytic converter that'll make your wood-stove electricity fre= e=20 and a smog-buster at the same time.=20 "Think about your car 30 years ago. You didn't have airbags or seat belts a= nd=20 things like that. And it didn't get good mileage. Well, wood stoves have=20 gotten a lot better over the years, just like cars," Lehman-Ervin says.=20 Lehman's and others also sell toasters that toast using the heat from the= =20 stove and a waffle iron that does the same thing. The company (as well as= =20 some coffee shops) also sells hand-cranked coffee bean grinders, something= =20 that's quiet and, because it doesn't generate a lot of bean-burning heat,= =20 better for the coffee. After that, you can use a water-drip device to make= =20 the coffee without a plug.=20 If you care to go further, you can grind your own grain and churn your own= =20 butter with non-electric devices.=20 "We even have a hand-crank blender," Lehman-Ervin says.=20 "The Amish like it for milkshakes, but out there, in California, maybe you= =20 could use it for margaritas."=20 Not before work.=20 Amishness rating: 10=20 STEP 4: BLOW DRYING=20 "Sacrifices must be made."=20 That's not the opening line to your pink slip. It's what Lehman-Ervin and= =20 others say when asked about how to unplug the morning routine. Essentially,= =20 there are parts of waking up and getting ready for work that must be change= d,=20 not unplugged.=20 "There is no non-electric blow dryer, except maybe when you stick your head= =20 out the window of your car or something," Lehman-Ervin says.=20 Curling irons fall into this category. Electric shavers, too, but they're= =20 easy to replace with foam and hot water and a razor.=20 Television, CD and DVD players, Nintendo - they all need a plug or a batter= y=20 which, for our purposes, rule them out. Same for microwaves and trash=20 compactors.=20 Eventually, unplugging - even in the morning - boils down to a question of= =20 "what you really need vs. what you simply want," Lehman-Ervin says.=20 "The biggest benefit is self-sufficiency. As you're finding out in=20 California, it's not always great to rely on somebody else to maintain your= =20 lifestyle.=20 "But there are many, many people in this country who don't have electricity= =20 or who have unreliable electricity, and they manage to wake up and get read= y=20 for work.=20 "If you absolutely have to have something, there is probably a non-electric= =20 version of it."=20 So how can you find out more?=20 "Uh, with a computer," Lehaman-Ervin says, laughing.=20 And that, she adds, "needs a plug."=20 Amishness: 0=20 ---------------------------------------------------------------------------= --- ---------------------------------------------------------------------------= --- ------------------------------- Mexico Continues Power Exports To California MEXICO CITY, May 4, 2001 (El Economista/Infolatina via COMTEX) via NewsEdg= e=20 Corporation - Mexican state-owned power utility the Federal Electricity Commission (CFE) will=20 continue to supply the U.S. state of California with electricity, in light of the=20 state's ongoing power shortage, CFE head Alfredo Elias Ayub said Thursday. Speaking= =20 to a gathering of California officials and business leaders, Elias said excess electricity supply from the northern Mexican state of Baja California would continue to be exported to the United States, Mexican financial daily El Economista reported. Baja California, for geographical reasons, is not=20 connected to Mexico's national power grid, and the state's excess supply, therefore, cannot be channeled to areas of the country suffering supply shortfalls or = low operating reserve margins, explained Elias. He said rapidly rising demand f= or electricity on both sides of the border made expansion of interconnection capacity a priority. Interconnection capacity currently stands at 400=20 megawatts, he said. New transmission lines, to be completed by 2002, will boost cross-border interconnection capacity to 2,000 megawatts, he said. ---------------------------------------------------------------------------= --- ---------------------------------------------------------------------------= --- ----------------------------------- Charged Up: Texas May Face a Glut Of Electricity, but That Won't Aid Rest of U.S. --- Pride and Policy Make State A Magnet for Power Plants And an Island Unto Itself --- A Wire Enshrined in Lucite=20 By Alexei Barrionuevo and Russell Gold=20 ?=20 05/07/2001=20 The Wall Street Journal=20 Page A1=20 (Copyright (c) 2001, Dow Jones & Company, Inc.)=20 While California struggles to keep its lights on and New York City braces f= or=20 possible electricity shortages this summer, Texas utilities could soon face= =20 the opposite problem: a power glut.=20 Texas' wide-open spaces and relatively weak zoning and environmental rules= =20 have helped make the Lone Star state a magnet for power-generation companie= s=20 as it prepares to deregulate its electricity market next year. The result:= =20 Texas' electricity-production capacity this summer is expected to exceed it= s=20 peak power demand by 11,000 megawatts -- nearly enough to light up New York= =20 City. By the summer of 2002, the excess may be closer to 15,000 megawatts,= =20 enough to power 15 million homes. And with 27 new generating plants under= =20 construction, more than any other state, some power producers fear that=20 overbuilding ultimately could send Texas' wholesale electricity prices into= a=20 tailspin.=20 All this sounds like good news for the electricity-starved East and West=20 Coasts -- but it isn't. That's because the U.S. is divided into three major= =20 power grids -- with the West on one, the East on another and most of Texas = on=20 a third, with very few links to the rest of the country. In the world of=20 electricity, that makes Texas "an island with a couple of little footpaths= =20 over to it," says Larry Makovich, senior director for electric power resear= ch=20 at Cambridge Energy Research Associates, a Cambridge, Mass., consulting fir= m.=20 Some Texas utility executives argue that their state's island status is=20 principally an accident of geography. But no one disputes the fact that goo= d=20 old Texas pride -- and a deep-seated skepticism toward federal regulation -= -=20 also played a role in shaping the state's grid. So, too, did a renegade=20 utility's desperate 1976 bid to save itself from a corporate breakup and th= e=20 resulting four-year legal battle, which the industry later dubbed the "Texa= s=20 Range War."=20 Texas' isolation isn't expected to end anytime soon. If Texas became fully= =20 interconnected, its big utilities say, the state could become more=20 susceptible to blackouts, if other regions drew off too much power. "From a= =20 reliability standpoint, it would be a degradation to the Texas grid," says= =20 Steve Schaeffer, a senior vice president at Reliant Energy Inc., the former= =20 Houston Lighting & Power Co.=20 Moreover, the utilities estimate that building the transmission lines neede= d=20 for a full connection to the nation's other grids would take at least three= =20 years and cost Texas ratepayers about $600 million. They don't want to inve= st=20 that much money to sell power to California or New York to ease what they= =20 view as temporary imbalances.=20 Some in the state also believe low rates and excess power could give it an= =20 advantage in persuading businesses to locate there. "America will be shy=20 enough electricity that this will be one of our greatest inducements for=20 growing Texas," says Matthew Simmons, president of Houston investment bank= =20 Simmons & Co.=20 Texas is an extreme example of the haphazard way electricity grids develope= d=20 in the U.S. Until the 1960s, most power plants were built near the customer= s=20 they served. Then, utilities began building larger, more-efficient coal and= =20 nuclear plants, connecting them with their neighbors to ensure that if one = of=20 these big plants went down, there would be a backup ready to keep the power= =20 flowing.=20 But the old-line Texas utilities, which have long benefited from the state'= s=20 plentiful supplies of fuels such as natural gas and lignite coal, were=20 reluctant to join in this wave of interconnections. Back then, in the mid- = to=20 late 1970s, electricity outside Texas was generally more costly. And=20 surrounding states weren't planning big enough plants to back up the huge n= ew=20 ones Texas was building to power its fast-growing cities and energy-thirsty= =20 petrochemical industry. "There was no big money to be made by shipping powe= r=20 one way or the other over the lines," says Reliant's Mr. Schaeffer.=20 By confining their grid to Texas, state utilities also avoided oversight by= =20 the Federal Energy Regulatory Commission. Thus, FERC couldn't force Texas t= o=20 send power out of state in case of an emergency.=20 The state's dominant utilities -- Texas Utilities Inc., the Dallas-based=20 predecessor of what is now TXU Corp., and Houston Lighting -- went to great= =20 lengths to ensure there were no interstate connections. The switches at a= =20 hydroelectric plant on the Texas-Oklahoma border were wired to prevent powe= r=20 from flowing between the states. Elsewhere along the border, a system of=20 relays was installed to prevent unauthorized interstate transmissions.=20 Only one big utility didn't like the setup: Central & South West Corp., a= =20 Dallas holding company that owned power plants in both Texas and Oklahoma. = In=20 1976, it faced a crisis. If it couldn't show that its plants in both states= =20 were interconnected, it ran the risk of being broken up under a federal law= .=20 The law, which barred holding companies from owning unconnected utilities i= n=20 separate states, was decades old. But, until then, it hadn't been strictly= =20 enforced.=20 On May 4, 1976 -- eight days before the Securities and Exchange Commission= =20 was set to consider the matter -- Central & South West took an extraordinar= y=20 step. At 5:30 a.m., it sent one of its line crews to secretly rewire a=20 substation in Vernon, Texas, near the Oklahoma border, allowing power to fl= ow=20 freely between the two states. For a few hours, the grids were connected by= a=20 minuscule thread. Later that morning, officials at Central & South West=20 phoned other Texas utilities to tell them the company was engaged in=20 interstate commerce.=20 Texas' other major utilities reacted angrily. "The sons of bitches are tryi= ng=20 to steal my lignite!" Texas Utilities Chairman Louis Austin bellowed,=20 according to former Texas Public Utility Commissioner George Cowden, who=20 recalls Mr. Austin making the remark during a private meeting between the t= wo=20 men.=20 Around noon, Houston Lighting cut its system off from the rest of the state= 's=20 utilities. Texas Utilities followed suit hours later. By day's end, the=20 state's utilities had broken the grid into a half-dozen pieces.=20 That same day, one of Texas Utilities' chief lawyers, a 6-foot-6 former=20 college-football star named J.A. "Tiny" Gooch, dispatched one of his=20 company's crews to disconnect the link Central & South West had made betwee= n=20 Vernon and Altus, Okla. "They made it so it was physically impossible to=20 [connect] it again," says Mr. Gooch's son, Gordon, then a lawyer representi= ng=20 Houston Lighting. The elder Mr. Gooch, who died in 1986, is considered the= =20 patron saint of Texas' electrical independence.=20 At an emergency meeting of the utility commission three days later, Mr.=20 Austin of Texas Utilities expressed disgust at the prospect of having to bu= rn=20 Texas lignite and natural gas to satisfy "Yankees," according to a=20 transcript. And, he added: "I don't like federal regulations." (Mr. Austin= =20 died in 1997.)=20 A wire reputed to have formed part of Central & South West's brief=20 Texas-Oklahoma interconnection later was cut into pieces, encased in Lucite= =20 and given out as paperweights by Dallas law firm Worsham, Forsythe &=20 Woolridge, which represented Texas Utilities.=20 Alan Erwin, a state utility commissioner in 1976 who still has the souvenir= =20 on his desk, used the wiring episode as fodder for a 1979 novel, "The Power= =20 Exchange," in which a winter storm cripples Northeast power production and= =20 the nation turns to Texas for electricity. Texas refuses to ship the=20 electricity, fearful that other regions would drain it of "what little chea= p=20 fuel was left." Ultimately, Texas becomes a scapegoat and ends up seceding= =20 from the union.=20 In reality, the outcome was less dramatic. The grid conflict wound its way= =20 through many courtrooms. Central & South West -- recently acquired by=20 American Electric Power Co. of Columbus, Ohio -- lost almost every round.= =20 After about four years, the utilities hashed out a compromise, at the urgin= g=20 of the federal government.=20 Rather than link the Texas grid to the East, so that electricity could flow= =20 freely across state borders through alternating-current cables, they agreed= =20 to build two direct-current lines. Operators could control the flow over=20 these bridges, which at peak capacity could carry a mere 820 megawatts. The= =20 parties to the deal, which included the federal government, agreed these=20 links wouldn't bring the Texas grid under federal jurisdiction. Today, Texa= s=20 power continues to be regulated in Austin, not Washington.=20 "It's just a Texas thing," says Pat Wood III, chairman of the state utility= =20 commission and a recent Bush administration nominee to FERC. "We want contr= ol=20 of our own destiny."=20 That independent attitude has extended in recent years to Texas'=20 business-friendly approach to deregulating its power industry. Unlike=20 California, with its stringent emissions and zoning rules, Texas has made i= t=20 quick and easy for power companies to locate their plants almost anywhere= =20 they can find a place to hook up to the grid. Last year, Texas completed a= =20 major upgrade to alleviate bottlenecks on the grid, and it has six similar= =20 projects under way. Unlike most other states, it decided to charge grid use= rs=20 a flat rate to move power anywhere in the state, so they could put plants i= n=20 low-cost rural areas, far from their customers.=20 Those policies, as well as projections that the state's electricity demand= =20 would grow by a robust 3.5% a year, set off a flurry of power-plant=20 construction, beginning in 1998. Since then, $11 billion worth of power=20 plants have been completed or started in Texas, and more are on the drawing= =20 board.=20 By contrast to California's approach to deregulation, which largely failed = to=20 bring new plants online, Texas' strategy "encouraged an overbuild," says Mr= .=20 Makovich, of Cambridge Energy Research Associates.=20 Consider tiny Seguin in south central Texas, where Constellation Energy Gro= up=20 Inc. of Baltimore is building an 800-megawatt gas-powered plant in a former= =20 cornfield. Fifteen miles to the west, Texas Independent Energy LP of Dallas= =20 recently finished a 1,000-megawatt plant. About the same distance to the=20 north, American National Power, a Houston-based unit of Britain's=20 International Power PLC, is building a 1,100-megawatt plant.=20 If generators don't get cold feet, Texas is on track to have a capacity=20 surplus of 9% this summer and 11% by summer 2002, says Cambridge Energy=20 Research Associates. That's in addition to the 15% surplus that most expert= s=20 consider an adequate cushion. Some areas of the country, including parts of= =20 the Southeast, Upper Midwest, New York City and the West, are struggling wi= th=20 razor-thin capacity margins. After factoring in a similar 15% cushion, the= =20 West has an 8% capacity deficit and the Upper Midwest has a 4% deficit.=20 As a result, while electricity futures prices for summer are running at as= =20 much as $400 per megawatt hour in the Northwest and around $100 in the=20 Northeast, Texas futures prices are averaging only $72 to $74 per megawatt= =20 hour.=20 Calpine Corp. of San Jose, Calif., is making the boldest wager that=20 overcapacity and a lack of export possibilities won't sink Texas' wholesale= =20 electricity prices. The company has six plants under construction in the=20 state, two of which are expected to come on line next month. And it plans t= o=20 add an additional five plants over the next two years. Altogether, Calpine= =20 plans to spend about $2.8 billion in the state, its largest investment=20 outside California.=20 "People from day one probably thought Calpine was crazy," says Darrell=20 Hayslip, a company vice president. "But so far, we are absolutely convinced= =20 that this is the right bet." He says Calpine's newer gas-fired plants are 4= 0%=20 more efficient than older plants in the state, a third of which are at leas= t=20 30 years old. Calpine expects that edge to force rivals to retire older=20 plants, thus keeping electricity prices from sagging.=20 Others aren't so sure. After initially planning new plants in Texas, Duke= =20 Energy Corp. began to worry that the state was getting overbuilt. Last May,= =20 Duke, of Charlotte, N.C., sold its 80% stake in a plant under construction = in=20 south Texas to Calpine. "We sized up the market early, and then realized to= o=20 many followers were doing the same thing," says Jim Donnell, president and= =20 CEO of Duke Energy North America.=20 If the electricity situation outside Texas grows too grim and too much supp= ly=20 sinks prices in the state, there could be "renewed pressure" for Texas to= =20 study interconnection options, says John Stauffacher, vice president for=20 regulatory affairs at Houston-based Dynegy Inc., which has 1,000 megawatts = of=20 capacity in Texas.=20 Calpine, for one, wouldn't mind sharing Texas power with the East and West.= =20 "I would love to be able to wheel power from Texas to California," says Mr.= =20 Hayslip. But, so far, the Texas utilities haven't budged in their oppositio= n=20 to exports.=20 A few generators are trying to find the best of both worlds. Tenaska Inc. o= f=20 Omaha, Neb., is building plants at the border between the Texas and eastern= =20 grids. Though utilities aren't allowed to be connected to both grids at onc= e,=20 the plants are designed to allow the company to switch between grids as=20 demand and prices warrant.=20 In rural Grimes County, about 90 miles outside Houston, Tenaska plant manag= er=20 Frank Carelli boasts that his 830-megawatt plant could disconnect from one= =20 grid, connect to the other and be back at full power within an hour. A=20 similar Tenaska plant is slated to begin operations this month in Rusk=20 County, near the Louisiana border.=20 ---------------------------------------------------------------------------= --- ---------------------------------------------------------------------------= --- ---------------------------------- By David Wagman [email protected] "And it never failed that during the dry years the people forgot about the= =20 rich years, and during the wet years they lost all memory of the dry years.= =20 It was always that way." -John Steinbeck East of Eden, 1952 Electricity in the West this summer will rise and fall on the whim of=20 nature's elemental forces: water for power generation, weather for its effe= ct=20 on demand, and fire=01*or the threat of it=01*for its potential damage to= =20 transmission lines and the grid. And then there's Harvey Rosenfield.=20 A force of nature in his own right, perhaps no one wields more clout over= =20 California's politicians and the rest of the West than Rosenfield. Politica= l=20 watchers say his skill as a consumer advocate and master of California's=20 potent ballot initiative process is so great that he has all but sapped Gov= .=20 Gray Davis' ability to act decisively in this crisis.=20 Given California's role as the West's largest state and biggest economy, th= is=20 leadership gridlock leaves the region facing a virtual political vacuum eve= n=20 as it gropes to find a broader solution to problems of supply and price tha= t=20 are poised to infect at least Oregon and Washington.=20 Running for cover California's political gridlock is so bad that one observer equates the=20 situation to the uncertainty and confusion of a mob during a riot. "Politicians respond when there is a quantifiable problem," said Dan Walter= s,=20 political columnist for the Sacramento Bee newspaper. But the energy crisis= =20 is a "fourth-dimensional problem that mutates every day," making it tough f= or=20 politicians to respond. Walters said a growing sense within the California= =20 state legislature is that the die is cast for this summer and it's time to= =20 run for political cover.=20 But a governor and a legislature bent on self-preservation may be unwilling= =20 or unable to act on a number of important energy issues.=20 "We hope the legislature doesn't become dysfunctional because there's some= =20 stuff that's gotta move," said Tom Williams, a California-based spokesman f= or=20 Duke Energy.=20 One of many priorities is legislative action on the proposed Southern=20 California Edison (SoCal Ed) transmission asset buyout and what observers s= ay=20 is an almost mandatory fix to the imbalance between wholesale and retail=20 markets. Approval of this item has been clouded by questions about the valu= e=20 of owning only a portion of the state's transmission system. Members of=20 Davis' own party appear unconvinced by arguments that SoCal Ed could follow= =20 PG&E into bankruptcy protection.=20 "I've never been afraid of bankruptcy from the beginning," Democratic Senat= e=20 leader John Burton told the Orange County Register in mid-April. "Bankruptc= y=20 court is a better venue for open discussion and investigation."=20 The outlook for action on the second big legislative item may be even worse= =20 as California politicians hope to shield the consuming/voting public from= =20 market forces for as long as possible.=20 "Californians are paying for a product below cost. Customers need to see th= e=20 link between wholesale and retail prices," said Alex Papalexopoulos,=20 president of ECCO International, a San Francisco-based company that designs= =20 regional market structures.=20 News reports also revealed the state spent nearly $5 billion buying power= =20 between January and mid-April. In one two-week stretch from late March to= =20 mid-April, the state's average weekday power costs rose from $45.8 million = to=20 $73 million, a 60% increase. Gov. Davis blamed generators for the higher=20 costs, saying they face greater risk of not being paid. But observers worry= =20 the state itself may be headed toward bankruptcy if it continues to spend f= or=20 electric supplies.=20 CALIFORNIA'S RISING DAILY ELECTRICITY BILL Against this fast-changing backdrop, annual assessments for summer power=20 supplies for California and the West are being released. Perhaps more than = at=20 any other time, the politics of energy are as critical for industry insider= s=20 to understand as the more traditional forecasts of hydro flow, gas=20 availability and transmission constraints.=20 Bleak assessment By those more traditional measures, the summer power assessment is bad=20 enough. Below-normal precipitation in the Northwest has led power planners = to=20 say for months the region will be short of power. The California Independen= t=20 System Operator (ISO) said if consumers use the same amount of electricity= =20 this summer as last the state could face 34 days of rotating blackouts.=20 The Western States Coordinating Council's summer assessment forecasts a pea= k=20 demand of 53,893 MW in the U.S. portion of its California-Mexico subregion.= =20 Load management and interruptible demand are expected to account for almost= =20 1,000 MW of demand, leaving a net internal demand of 52,899 MW, expected fo= r=20 August.=20 But California's tight power supply market may be squeezed further by=20 conditions in the Pacific Northwest. There, electricity prices have recentl= y=20 outpaced California's, according to daily prices reported by Megawatt Daily= .=20 Those high prices suggest the Northwest's hydro shortage is driving the=20 region's crisis, said Doug Logan, principal with RDI Consulting.=20 MONTHLY PEAK PRICE TRENDS IN THE WEST SPREADSHEET "California is screaming, but the Northwest is desperate" for power, he sai= d.=20 Market vulnerabilities Published reports also suggest that almost anything short of a cool summer= =20 will overtax supplies and lead to rolling blackouts in California. Unexpect= ed=20 power plant outages also could trigger blackouts and price spikes, a=20 possibility some say points to market manipulation by power generators.=20 Others say the outages are a natural result of running older plants harder= =20 and longer than ever before.=20 For example, Duke Energy's 165-MW Oakland plant, built in 1895 and=20 revitalized in 1978, typically ran no more than 70 hours a year, said=20 spokesman Tom Williams. During 2000, Oakland ran for 800 hours before its= =20 turbines burned up. Its loss prompted a call from the California ISO, which= =20 said the plant was still needed for baseload operation, Williams said.=20 The danger for much of California is that as the state's older generating= =20 plants are called on to run harder and longer this summer, they will break= =20 down more often and add to the supply problem. With supplies constrained, t= he=20 loss of even a single plant could throw the market into turmoil.=20 "It doesn't matter what the market demand is like if supply is tight," said= =20 Papalexopoulos. Under tight supply conditions, "every market breaks down."= =20 Another critical factor will be environmental controls mandated by the=20 federal Clean Air Act and administered by state air quality management=20 districts. Plants whose NOx emissions exceeded permitted levels last year h= ad=20 to enter the market to buy emission credits. At one point, demand for the= =20 credits was so high they were all but unavailable at any price. When credit= s=20 were available, their price left some power generators paying almost as muc= h=20 for them as for wholesale power. Thus, a crucial factor to watch will be th= e=20 willingness (or ability) of air quality management districts to ease or=20 modify environmental restrictions.=20 CALIFORNIA SUPPLY & DEMAND FROM ECONOMIC FORUM SPREADSHEET Kern River rescue One bright spot seems to be natural gas supplies, which appear adequate or= =20 even improved compared with last year. The improved outlook is due in part = to=20 the fast-track approval by the Federal Energy Regulatory Commission of a 13= 5=20 million-cubic-foot per day expansion to the Kern River pipeline into=20 California. The expanded capacity will import relatively low-cost natural g= as=20 from the Rocky Mountain region for use in California's gas-fired power=20 plants. This should help deflect some price pressure that built up last yea= r=20 at a pipeline choke point on the California-Arizona border.=20 HOW HIGH COULD CALIFORNIA'S ELECTRIC BILL GO? SPREADSHEET But even this bright spot looks a bit cloudy, said Mike Farina, a power=20 consultant with RDI Consulting in Boulder, Colo. Uncertainty remains over= =20 whether Kern River's extra gas capacity can make it through a second=20 unrelated congestion point at Wheeler Ridge, Calif. There, the pipeline=20 connects with a web of in-state distribution pipes. What's more, low hydro= =20 supplies will lead to even more reliance on gas-fired power plants for=20 electricity. And, Farina said, a cold snap could boost demand for natural g= as=20 for space heating. That could cause an unexpected twin demand peak coincide= nt=20 with electric generation demand. A similar dual peak occurred last summer,= =20 adding to upward pressures on natural gas prices.=20 READ MORE ABOUT THE GAS FACTOR Sending price signals On the demand side, a key factor will be how effective the recent rate=20 increase approved by the California Public Utilities Commission is at=20 dampening consumer demand.=20 The rate hike could send a powerful price signal for consumers to reduce=20 demand, said John Egan, director of strategic and marketing issues for=20 Boulder, Colo.-based E Source, the retail consulting division of Financial= =20 Times Energy. Reports already have made much of the fact that California's= =20 market lacks a good set of demand-side tools to send price signals to=20 consumers. One exception has been in the industrial sector where=20 interruptible contracts and real-time metering have regularly forced=20 conservation responses.=20 AVERAGE ELECTRIC WHOLESALE PRICES SPREADSHEET Indeed, large energy users have already reacted to the crisis by moving awa= y=20 from interruptible contracts and toward aggressive energy hedging strategie= s=20 just to remain in business, said Brennan Higgins, market intelligence manag= er=20 for Louisville, Ky.-based Summit Energy. His clients include large end-user= s=20 nationwide. "Manufacturers have quit looking at rates in terms of saving=20 money and now are looking at their ability to run their plants," he said.= =20 READ MORE ABOUT CALIFORNIA'S CAPACITY ISSUES Looking beyond the summer, a primary factor for California's recovery will = be=20 how much new generating capacity is added. As one gauge, insiders watch to= =20 see how lenders and developers respond to what some say are frequent and=20 numerous rule changes within the state.=20 "The rules change almost on a real-time basis," said Jerry Pfeffer, a=20 Washington, D.C.-based attorney who specializes in utility finance. As a=20 result, risk premiums have risen and may work against the state's efforts t= o=20 expand its generating capacity.=20 In the past, baseload coal or nuclear plants were all but impossible to mov= e=20 once they were approved for a specific location. Today, natural gas turbine= =20 technologies=01*and the money to build them=01*are more mobile. With other = parts of=20 the country growing anxious for new generating capacity, lenders and=20 developers can take their turbines to states offering less political=20 volatility and uncertainty.=20 The power supply assessment for California and the Pacific Northwest this= =20 summer appears bleak. Uncontrollable forces of nature=01*temperature, rainf= all=20 and fire=01*may make or break a market where political blunders have expose= d=20 gaping vulnerabilities. As a result, the "Harvey factor," as the game of=20 energy politics in California is coming to be known, emerges as a central= =20 theme for California and the West.=20 READ MORE ABOUT THE HARVEY FACTOR In California this summer, said E Source's John Egan, "there is a much=20 shorter list of things that could go right."=20 To read more analysis about the California energy situation, click on the= =20 links below. READ MORE ABOUT CONSERVE READ MORE ABOUT HYDRO READ MORE ABOUT MONEY TALKS READ MORE ABOUT SOLUTIONS

dasovich-j/all_documents/12100.

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[]

CSFB Independent Power Weekly-Issue #27

Good Morning, Attached, please find the latest issue of our Independent Power Weekly. <<IPW051401.pdf>> Summary: 1. IPPs Fall 0.5% Last week our IPP composite traded off 0.5%, outperforming both the NASDAQ (-3.8%) and the S&P 500 (-1.7%). Mirant was the strongest performer, rising 7.8%. AES was the weakest, falling 8.7%. 2. Investors Focus on Calif. Windfall Profits Tax Proposal On Monday evening (5/7), the California State Senate passed windfall profits tax bill, calling for a 100% tax on power sales over $80 per Mwh. We believe the proposal should be seen as a negotiating tactic to force generators to lower prices. Should the bill get passed in its current form, we believe CPN, MIR and NRG's exposure is limited by their power sales contracts. Regardless, the bill presents interesting federal/state jurisdictional issues, which could form the basis for a legal challenge. 3. AES: Time for Investors to Take "Another Look" On Friday, AES hosted a conference call to address investor concerns regarding Latin America. On the call, management reaffirmed its prior guidance for 2001 of $1.75 - $1.90. While we acknowledge the risks presented by the Brazilian situation and the potential for additional negative catalysts, in our view, given current price levels, now is an ideal time for investors to take "another look" at AES. The stock is trading close to its 52 week valuation trough. Indeed, we believe it is safe to assume that the market has already priced-in an earnings disappointment. AES's 52 week median 2001 P/E is 27.8x. If we regard this level as AES's normalized valuation, the market is implying that it will earn about $1.59 in 2001-16% below our base case estimate and 6% below the bottom-end of management's range of guidance. See our FC note issued today for more details. 4. Looking Ahead: Mirant Hosting Analyst Meeting on 5/14 and 5/15 MIR will host its first major analyst seminar on May 14 and 15 in Atlanta. We believe the meeting will be an important catalyst for the stock. MIR is currently trading at 22.2 times our 2001 EPS estimate, representing a 17% discount to the group average. Since the beginning of the year, earnings expectations for Mirant have increased by 73%. We believe MIR's relative valuation discount reflects investor confusion surrounding the drivers of the recent upside as well as skepticism surrounding the sustainability of earnings growth over the next few years. We believe management will address these issues at the analyst meeting, which should help close some of the valuation gap between MIR and its peers. Regards, Neil Stein 212/325-4217 Bryan Sifert 212/325-3906 This message is for the named person's use only. It may contain confidential, proprietary or legally privileged information. No confidentiality or privilege is waived or lost by any mistransmission. If you receive this message in error, please immediately delete it and all copies of it from your system, destroy any hard copies of it and notify the sender. You must not, directly or indirectly, use, disclose, distribute, print, or copy any part of this message if you are not the intended recipient. CREDIT SUISSE GROUP and each of its subsidiaries each reserve the right to monitor all e-mail communications through its networks. Any views expressed in this message are those of the individual sender, except where the message states otherwise and the sender is authorised to state them to be the views of any such entity. Unless otherwise stated, any pricing information given in this message is indicative only, is subject to change and does not constitute an offer to deal at any price quoted. Any reference to the terms of executed transactions should be treated as preliminary only and subject to our formal written confirmation. - IPW051401.pdf

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EES Position at the customer/utility level - April 2001

Colleagues: EES positions as of 1st of April 2001 are no available at the following level of details: The position (long, short, and net) in electric utility "x" The position (long, short, and net) per customer in the electric utility "x". The position (long, short, and net) per rate schedule/customer class in electric utility "x". Aggregates of the above per State, NERC Region, and Customer. If you need any position for a specific utility in your service territory, please contact Miyung Buster ((713-853-4329) by email with cc to: Amr Ibrahim and we shall attempt to provide the data in the shortest possible time (currently aiming at within the same business day). Additional names for contact will be added very soon, hopefully, to shorten the reply time and increase data reliability. Best regards AI 713-853-3037

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['[email protected]', '[email protected]', '[email protected]', '[email protected]', '[email protected]', '[email protected]']

URM Position at the customer/utility/NERC level - Aug. 2001

Colleagues: Utility Risk Management positions as of August are now available at the following level of details: The net position in electric utility "x." The net position per customer in the electric utility "x." The net position per rate schedule/customer class in electric utility "x." Aggregates of the above per State, NERC region, and Customer. If you need any position for a specific utility in your service territory, please contact Bryan Gottfredson (713-345-2430) or Miyung Buster (713-853-4329) by email with cc to: Stella Chan, Pat Keene and/or Amr Ibrahim and we shall attempt to provide the data in the shortest possible time (currently aiming at within the same business day). Best Regards, Bryan Gottfredson

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['[email protected]']

CSFB Independent Power Weekly-Issue #45

> <<IPW100101.PDF>> > Good Morning, > > Attached, please find the latest issue of our Independent Power Weekly. > > Summary: > 1. IPP's Rise 3.9% Last week our IPP composite increased 3.9%, > underperforming the NASDAQ (+5.3%) and the S&P 500 (+7.8%). Orion Power, > which was up 38.1%, was the strongest generator in the group. AES Corp > was the weakest performer, declining 47.1%. > > 2. Generation Oriented Utilities Fall 0.6% Our universe of generation > oriented utilities fell 0.6%, underperforming the NASDAQ and S&P 500, > while outperforming the UTY (-4.8%). Black Hills Corp, which was up 7.5%, > was the strongest performer in the group. PPL was the weakest performer, > declining 11.9%. > > 3. Some Good News and Some Bad News Last week saw considerable stock > price volatility as investors focused on 3 key events: 1. Reliant > Resources acquires Orion Power; 2. AES Corp. (Restricted) issues earnings > warning; and, 3. CPN reaffirms earnings guidance. > > 4. IPPs Trading 22% Below Private Market Asset Value We believe the > RRI/ORN transaction provides additional support for our private market > valuation framework. Our analysis indicates that as a group, the major > IPPs are trading at a 22% average discount to their private market asset > values. NRG Energy and Reliant Resources are trading at the most > significant discounts to their private market values--30% and 35%. We > believe the disparity between public and private market valuations is > unsustainable. > > 5. Power Market Update Last week power prices were down across the > country. Generally we continue to see a trend of power prices moving down > in "lock-step" with natural gas prices. While the Mirant National Power > Index fell 12% last week, the Natural Gas Week composite spot price fell > 13%. Also contributing to the weakness was seasonally mild weather ahead > of the normal October power plant maintenance season. > > Regards, > > Neil Stein 212/325-4217 > This message is for the named person's use only. It may contain confidential, proprietary or legally privileged information. No confidentiality or privilege is waived or lost by any mistransmission. If you receive this message in error, please immediately delete it and all copies of it from your system, destroy any hard copies of it and notify the sender. You must not, directly or indirectly, use, disclose, distribute, print, or copy any part of this message if you are not the intended recipient. CREDIT SUISSE GROUP and each of its subsidiaries each reserve the right to monitor all e-mail communications through its networks. Any views expressed in this message are those of the individual sender, except where the message states otherwise and the sender is authorised to state them to be the views of any such entity. Unless otherwise stated, any pricing information given in this message is indicative only, is subject to change and does not constitute an offer to deal at any price quoted. Any reference to the terms of executed transactions should be treated as preliminary only and subject to our formal written confirmation.

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[]

CSFB Independent Power Weekly; Commentary on Refund Issue, Windfa

<<IPW070201.doc>> Good Morning, Attached, please find the latest issue of our Independent Power Weekly. Summary: 1. IPPs Rise 3.7% Last week the Independent Power Producers posted their strongest stock price performance since mid-May. Our composite was up 3.7%, outperforming the S&P 500 (+0.0%), but underperforming the NASDAQ (6.6%). Mirant was the strongest performer in the group, rising 10.9%. Reliant Resources was the weakest, falling 2.3%. While the IPPs show some signs of renewed strength last week, we believe "technical" end-of-the-quarter selling pressure combined with lingering political concerns prevented a more significant rally from taking place. 2. Refund Issue Dominates Investor Attention The most visible political concern revolves around the issue of potential retroactive refunds for power generators. We believe closure on this matter could be forthcoming over the next month, most likely in the form of a FERC order. In our view, Strong Buy rated Calpine offers the best downside protection, given that the bulk of its sales in California have taken place outside the spot market. We would also cite Buy rated Mirant, which has taken sizable reserves against its California earnings. For the whole group, we believe any resolution will have a positive impact on market psychology and, valuations which have compressed 29%, year to date. 3. Windfall Profits Tax On July 9, the California Assembly Revenue and Taxation Committee will consider SB 1X-the power generator windfall profits tax bill. This hearing was originally scheduled to take place on July 2. Our contacts in Sacramento indicate that the bill does not have broad support and expect the bill to "die" at some point in the legislative process. 4. Q2 EPS Preview The bulk of the IPPs will report second quarter earnings during the weeks of July 23 and July 30. Below we review our estimates and expectations for the industry. Generally, we expect solid growth across the sector driven by recent acquisition and development activity. In particular, we believe Calpine and Black Hills offer the greatest potential for upside EPS surprises. 5. CSFB Power Generation Supply Chain Conference On September 10 and 11, CSFB will host a Power Generation Supply Chain Conference at the Plaza Hotel in New York City. This event is designed to provide investors with a wholistic perspective on all aspects of the sector-from coal and natural gas companies, to equipment and construction service providers, to the power producers themselves. Please contact us if you would like additional information. Regards, Neil Stein 212/325-4217 Bryan Sifert 212/325-3906 This message is for the named person's use only. It may contain confidential, proprietary or legally privileged information. No confidentiality or privilege is waived or lost by any mistransmission. If you receive this message in error, please immediately delete it and all copies of it from your system, destroy any hard copies of it and notify the sender. You must not, directly or indirectly, use, disclose, distribute, print, or copy any part of this message if you are not the intended recipient. CREDIT SUISSE GROUP and each of its subsidiaries each reserve the right to monitor all e-mail communications through its networks. Any views expressed in this message are those of the individual sender, except where the message states otherwise and the sender is authorised to state them to be the views of any such entity. Unless otherwise stated, any pricing information given in this message is indicative only, is subject to change and does not constitute an offer to deal at any price quoted. Any reference to the terms of executed transactions should be treated as preliminary only and subject to our formal written confirmation. - IPW070201.doc

dasovich-j/all_documents/28241.

dasovich-j

['[email protected]', '[email protected]', '[email protected]', '[email protected]']

Energy Issues

Please see the following articles: Sac Bee, Fri, 7/27: Hopes dim for a quick Edison deal SD Union, Fri, 7/27: Sempra's trading unit generates a windfall LA Times, Fri, 7/27: Smog Rules May Be Eased LA Times, Fri, 7/27: Federal Caps Didn't Deter Higher Prices SF Chron, Fri, 7/27: Calpine profits double on skyrocketing sales Escalating power prices inspire plant building program SF Chron, Fri, 7/27: Generators continue to set high electricity prices SF Chron, Fri, 7/27: THE ENERGY CRUNCH Environmental suit against power plant Expansion called danger to slough OC Register, Fri, 7/27: Let's make a real deal with Edison (Editorial) LA Times, Fri, 7/27: California Sempra Continues Improved Results LA Times, Fri, 7/27: California Calpine Doubles Earnings, Beats Forecasts Energy: San Jose-based company credits higher electricity prices in California and sales from new plants LA Times, Fri, 7/27: Cap No Bar to Higher Prices Power: Cal-ISO study says suppliers continued to charge as much as five times more than the U.S.-imposed limits WSJ, Fri, 7/27: Calpine Net Soars On Added Plants; Sempra Profit Rises ------------------------------------------------------------------------------ ---------------------------------------------- Hopes dim for a quick Edison deal By Kevin Yamamura Bee Capitol Bureau (Published July 27, 2001) The Assembly will not return this week to consider a plan to save California's second-largest utility from bankruptcy, all but ending hopes that legislation would reach Gov. Gray Davis by a mid-August deadline. A group of legislators and Davis staffers has worked this week on an agreement that would restore Southern California Edison's credit and relieve the state of having to purchase energy for the utility. Assembly leaders, who convened the group, set an ambitious schedule that would have led to a vote today had they reached consensus and been able to recall enough of the 80 Assembly members from summer recess destinations. But the newly formed plan, which would issue $2.9 billion in consumer-backed bonds in exchange for several Edison concessions, remains too rough for a vote, said Paul Hefner, a spokesman for Assembly Speaker Robert Hertzberg, D-Sherman Oaks. Hefner was quick to note that Hertzberg has the Assembly "on call" for the scheduled monthlong break and is prepared to ask members to return if a deal comes in the next three weeks. But staff and lawmakers said earlier that organizing a mass return after today would prove nearly impossible because Assembly members are expected to travel throughout the state and beyond. Davis set an Aug. 15 deadline in his original Edison deal and recently said he could call a special session forcing legislators to return if they do not authorize a plan by then. His spokesman, Steven Maviglio, said Thursday the governor is not ruling out that idea but is waiting to see what comes of further legislative discussions. "It's pretty clear that everyone's working pretty hard to form a consensus, but they're just not there," Maviglio said. "The governor is optimistic about the Aug. 15 date." Even so, Edison does not expect a solution by then. Company officials stated earlier this week that they would wait for a political deal at least until lawmakers return Aug. 20. The Bee's Kevin Yamamura can be reached at (916) 326-5542 or [email protected] <mailto:[email protected]>. Sempra's trading unit generates a windfall \ objattph By Craig D. Rose UNION-TRIBUNE STAFF WRITER July 27, 2001 Sempra Energy, the parent company of SDG&E, reported a 25 percent surge in profit to $137 million last quarter but said yesterday it lost money on the sale of electricity under a long-term contract to California. On the other hand, Sempra said its largest source of profits was its energy trading unit, a middleman that earned $69 million during the quarter buying and selling energy produced by others. The results underscore the transformation of relatively simple utility companies into diversified energy holding companies that have learned to profit in new ways from the deregulation of electricity and the turmoil in energy markets. The surprising announcement -- that a company lost money selling power during California's run-up in electricity prices -- was explained by Sempra as an intentional consequence of the long-term contract it signed with the state to provide power. Stephen Baum, chairman and chief executive officer of Sempra, said the company agreed to provide a steep discount to California during the summer months but would recoup the losses later in the 10-year deal. California sought long-term electricity purchase contracts so it could reduce its purchases in daily and near-term power markets, where prices reached record levels. Critics say Gov. Gray Davis rushed into long-term deals because of concerns about getting through next year's election. They also say the contracts will saddle customers with higher costs for years. The governor has acknowledged that long-term contracts might cause consumers to pay relatively high prices for electricity in later years, but he maintains it is a fair price to pay for lowering prices that were devastating the state economy. Michael Shames, executive director of the Utility Consumers' Action Network in San Diego, said the steep discount Sempra provided to the state on power this summer raised questions about the governor's proposal to help San Diego Gas & Electric Co. clear a debt of $750 million. SDG&E says it is owed that money for power purchases on behalf of its customers. In a media conference last month, Davis said the agreement would eliminate the threat of a possible balloon payment for consumers, who he said might have faced the so-called balancing account debt as early as next year. Shames says the proposal, which took the form of a memorandum of understanding, or MOU, is costly for consumers and a bonanza for Sempra. He said the relatively cheap power provided by Sempra this summer "makes the MOU sound like more of a hidden payback to Sempra than a real relief plan for local ratepayers." Shames said he will release an analysis of the state's Sempra plan next week. The state Public Utilities Commission is expected to rule on the plan in August. A Sempra spokesman said there is no connection between discount power and the tentative agreement to clear the $750 million debt. Doug Kline, the Sempra spokesman, said the power contract with the state was signed in early May and the agreement on the balancing account was reached in mid-June. Sempra Energy Trading, meanwhile, said only 10 percent of its $69 million profit was earned from sales of energy in the western region, which includes California. The trading operation earned $40 million in profit during the comparable period last year. California's Independent System Operator, which manages most of the state power grid, and other investigators have said trading and bidding strategies were tools used by energy companies to raise prices during the California power crisis. Though Sempra earned money on trading, its wholesale power generating business lost $9 million during the quarter. Baum said the discounts on electricity provided the state were the prime cause of the loss for Sempra Energy Resources but added that a plant outage also contributed. Sempra Energy Resources, which co-owns a generating plant near Las Vegas with Reliant Energy, earned $2 million during the second quarter last year. Baum added that Sempra's long-term contract with the state -- under which it will provide up to 1,900 megawatts -- has allowed its wholesale business to pre-sell about half the power it expects to generate from the Nevada plant, which will be expanded, and three generating facilities it expects to build. Profits at SDG&E slipped to $37 million during the quarter ended June 30, down from $40 million last year, according to Sempra. SDG&E, whose business is restricted to delivering gas and electricity, said it provided increased customer service during the crisis, which lowered profits. Wall Street analysts generally applauded Sempra's results, noting that the company was ahead of its plan to generate at least a third of its profits from its newer businesses by 2003. "They're really two years ahead of schedule for their non-utility businesses," said Brian Youngberg, an analyst with Edward Jones & Co. Bud Leedom, a San Diego-based analyst with Wells Fargo Van Kasper, said Sempra's move into energy trading now seems shrewd. "We never dreamed they were setting themselves for a windfall like this," Leedom said. Investors pushed Sempra shares up 17 cents yesterday, to close at $25.49 in trading on The New York Stock Exchange. Bloomberg news service contributed to this report. Smog Rules May Be Eased Power plants: EPA proposes a sweeping change in how utilities' emissions are curbed, a flexible approach favored by the industry. By GARY POLAKOVIC and ELIZABETH SHOGREN Times Staff Writers July 27 2001 WASHINGTON -- U.S. Environmental Protection Agency Administrator Christie Whitman proposed sweeping changes Thursday in the regulation of power plant pollution that would replace five of the government's toughest programs with a single, flexible approach favored by utilities. Whitman outlined a plan for cleaning up major components of power plant smog that represents a significant departure from the EPA's traditional regulatory dictums. She called for a major expansion of pollution credit trading, which, up to now, has had varying success. Under the new plan, the EPA would scrap some of the most stringent measures devised by the agency to deal with power plant emissions. One provision to be set aside aims to cut harmful mercury emissions; another is meant to reduce emissions from Midwestern power plants by 85%; another is designed to restore visibility at national parks. Especially unpopular with industry, one measure, known as new source review, requires the installation of advanced pollution controls whenever power plants are expanded or modified. It too would be phased out. "New source review is certainly one of those regulatory aspects that would no longer be necessary," Whitman told Sen. George Voinovich (R-Ohio) at the hearing by the Environment and Public Works Committee. "All of those [programs] could be aligned into one regulatory process" that she said would work better than existing rules. Whitman's comments offer the first peek into the administration's plans for cleaning some of the dirtiest polluters left in the nation. Debate over the administration's clean-air approach has shifted to Congress as it considers whether to revise the national Clean Air Act. The magnitude of the proposed revisions caught environmentalists by surprise but buoyed industry representatives who say existing controls are costly and inefficient. "She has raised an appalling prospect of junking virtually every rule and strategy to deal with emissions of electric companies in return for some vague industry-sought plan for an emissions trading scheme," said Frank O'Donnell, executive director of the Clean Air Trust, an environmental advocacy group. "If they go forward with this, it means a wholesale fight over the Clean Air Act in Congress." After the hearing, Whitman stressed that the overall goal is to clean the air more efficiently than current rules do. Although the administration has not yet released a so-called multipollutant cleanup strategy, Whitman contended that collapsing several regulations into one far-reaching approach would be easier for regulators and industry to manage. "What we're looking for is targets under this legislation that significantly clean up the air beyond what our current regulatory, statutory requirements would do," Whitman said. She added that new source review, for example, "could potentially be no longer necessary if you have the right kind of targets set in a multi-emissions bill. We have to wait and see where the targets are set." Utilities have lobbied Vice President Dick Cheney's energy task force to prevent the EPA from aggressively enforcing the new source review regulation. Industry and administration officials say the provision is onerous and prevents plant upgrades, although EPA officials say it is a key tool for forcing dirty, old plants to cut emissions by up to 95%. During the Clinton administration, federal officials charged that 32 coal-fired power plants in several Southern and Midwestern states ignored a requirement that companies install advanced emission controls when their plants were upgraded. The government reached settlement with three utilities, but a provision in the Bush administration's energy plan stalled those enforcement actions pending a review of power plant controls. C. Boyden Gray, attorney for the Electric Reliability Coordinating Council and former White House counsel for the first President Bush in the 1980s, praised the administration's proposal. He said major utility companies he represents, including Southern Co., Duke Energy Co. and the Tennessee Valley Authority, could clean up with greater flexibility and less cost under the plan outlined by Whitman. "To put everything in a market-incentives basis is a great step. It would be a real breakthrough and a plus for the business community," Gray said. For example, Gray said EPA has four separate measures to control nitrogen oxides from power plant combustion, including programs to cut acid rain, ozone and haze. Another program scheduled to take effect in May 2004 requires power plants in 19 states to cut summer emissions by 1 million tons annually. He said those programs can be confusing and costly and could easily be replaced by a credit-trading program run largely by power companies. Under the program being considered by the Bush administration, an emission limit could be established at hundreds of power plants followed by annual reductions in mercury, a toxic metal, as well as smog-forming nitrogen and sulfur oxides. However, a provision to reduce carbon dioxide, a gas implicated in global warming, was dropped under industry pressure. Power companies that reduce beyond their limits could sell emission credits, which represent a pound of pollution, to companies that exceed their limits. Although industry and free-market advocates favor such programs, they are not without controversy. The record of market-driven programs is mixed. On the one hand, the nation's acid rain program uses marketable permits and is widely credited with cutting sulfur oxides at less cost. On the other hand, the world's first market-driven program to tackle urban smog has not worked in Los Angeles, where nearly 400 power companies and manufacturers failed to achieve significant cleanup for the nearly eight years the program has been in effect. Further, many environmental groups are wary of market-driven programs because by design they preclude active government intervention. Critics say such programs could potentially limit public review of power plant operations, allow emissions to concentrate in poor communities and slow efforts to cut haze in national parks downwind from plants that elect to buy pollution credits instead of cleaning up. The Bush administration's power plant strategy was aired before the Senate Environment and Public Works Committee, which is chaired by Sen. James M. Jeffords (I-Vt.), whose dramatic departure from the GOP threw control of the Senate to the Democrats. Jeffords is proposing legislation, different from the administration's approach, that would control four power plant pollutants, including the greenhouse gas carbon dioxide, an approach rejected by the Bush administration. Prospects appear to be increasing that Congress will pass one or more measures designed to reduce carbon dioxide emissions, a belated response to this week's decision by more than 180 countries to deal with the problem without the involvement of the United States. Indeed, in recent weeks several members in the GOP-led House and Democratic Senate have voted on bills with the intention of disassociating themselves from President Bush's environmental policies before the next election. Among the votes, the House struck down a provision supported by the Bush administration that could hinder progress on global climate change policy. The Senate banned new coal mining and oil and gas drilling in national monuments. Other recent rebuffs included rejections of administration initiatives on such issues as the Endangered Species Act, hard-rock mining regulations and offshore drilling for oil and gas. Copyright 2001, Los Angeles Times <http://www.latimes.com> Federal Caps Didn't Deter Higher Prices Power: Cal-ISO study says suppliers continued to charge as much as five times more than the imposed limits. By NANCY VOGEL TIMES STAFF WRITER July 27 2001 SACRAMENTO -- After federal regulators limited wholesale electricity prices last month, big private sellers of power in California continued to ask as much as five times more for electricity than the federal cap, according to a confidential study by state grid operators. The analysis by the California Independent System Operator covers only the first week after the caps were imposed June 20. Cal-ISO has submitted the data to federal regulators for potential investigation. The report is a summary of what Cal-ISO calls possible anti-competitive behavior by Duke Energy, Williams Cos., Mirant Corp., Reliant Energy and Dynegy Corp. "In a truly competitive market we would expect these suppliers to bid very close to their actual operating cost," said Greg Cook, senior policy analyst with Cal-ISO's Department of Market Analysis. The state did not necessarily purchase any power at the high prices being demanded. Instead, the significance of the bids is that they show how California could find itself paying exorbitant prices for electricity again if hot weather returns and conservation slackens, said Frank Wolak, a Stanford University economist who studies the California electricity market. "The bottom line is that the generators are putting out these bids in expectation of high demand," he said. "If weather all of a sudden gets really hot from Southern to Northern California, the bids submitted by generators could be very costly to California." Cal-ISO calculated the cost of production for each company based on the efficiency of its power plants and estimates of what each paid for natural gas to fuel the plants. The average cost for the five was $105 per megawatt-hour, which closely matches the federal price limit in California, which now stands at $101 per megawatt-hour. According to the power bidding procedures, companies that bid at or below their cost of production often still get paid a higher price, allowing them to make a substantial profit. On average, four of the five companies submitted bids either slightly below or slightly above their cost of production. But with the exception of Atlanta-based Mirant, each company at times submitted bids that were substantially higher. Houston-based Reliant, for example, bid as much as $540 per megawatt-hour, more than five times its estimated cost. Overall, Reliant's average bid was close to costs, according to the analysis. Cal-ISO identified companies by code in its report. Sources familiar with the study identified the companies for The Times. The Cal-ISO report singled out "Supplier 5," identified by sources as Charlotte, N.C.-based Duke Energy, saying the company "continues to bid significantly in excess of its operating costs." Duke owns two large power plants on the central coast. It marked up its bids an average of 88% beyond its cost to produce electricity, according to the analysis. For example, it cost Duke $85 to $121 to generate a megawatt-hour of electricity in the time period studied, the report shows, but the company offered to sell a megawatt-hour from $149 to $195. Duke spokesman Tom Williams on Thursday said, "The use of the data in some cases doesn't appear to add up and in all cases appears to be selective and could easily be misunderstood." Duke sells nearly the entire output of its power plants under long-term contracts, and not on the spot market, which the Cal-ISO report studied, he noted. Reliant spokesman Richard Wheatley said, "We're looking at the data, and we question whether or not it is correct." A combination of cool weather, heavy conservation, the start-up of new power plants and recently signed long-term power contracts that guarantee supplies have eased the state's electricity crisis in recent weeks. Market prices that as recently as May averaged $271 per megawatt-hour have dropped to less than $100 per megawatt-hour. The more abundant power supplies have freed grid operators to ignore higher-priced bids. But they will have to consider paying such prices to avoid blackouts if supplies tighten, Wolak said. Such a scenario would test the effectiveness of the Federal Energy Regulatory Commission order issued June 19, he said. The bids of the five companies analyzed were offers of sales to Cal-ISO, a Folsom-based agency that manages the electrical transmission grid serving 75% of California. Cal-ISO buys power on short notice to smooth the flow on the state's electrical freeway and avert blackouts. As California's fledgling market began to go haywire last fall, Cal-ISO workers struggled to purchase as much as 30% of the state's power demand with just hours to spare. Since then, the market has stabilized, and Cal-ISO's purchases now amount to roughly 5% of the electricity California consumes. RELATED STORY Power profits: Power plant operator Calpine said its quarterly profit more than doubled. C2 Copyright 2001, Los Angeles Times <http://www.latimes.com> Calpine profits double on skyrocketing sales Escalating power prices inspire plant building program Carolyn Said, Chronicle Staff Writer <mailto:[email protected]> Friday, July 27, 2001 ,2001 San Francisco Chronicle </chronicle/info/copyright> URL: <http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/07/27/ BU234287.DTL> Fueled by high electricity prices, power generator Calpine Corp. reported strong second-quarter results yesterday. Calpine of San Jose said profit for the quarter ended June 30 almost doubled to $107.7 million (32 cents per share) from $59.5 million (20 cents) during the year-ago quarter. Revenue almost quadrupled to $1.61 billion from $417.2 million a year ago. Excluding charges related to the acquisition of Canada's Encal Energy, Calpine's net income was $132.2 million (39 cents), well above the 31 cents per share predicted by analysts, according to Thomson Financial/First Call. Calpine is on an ambitious path to expand its roster of generating plants. By the end of 2005, it expects to have 75,000 megawatts in operation in the United States, including 12,000 megawatts in California. A megawatt is about enough power for 1,000 homes. The company, which generates 2,428 megawatts in California, this summer opened the state's first two major power plants in a decade. The new plants in Yuba City (Sutter County) and Pittsburg generate 547 and 555 megawatts, respectively. Combined with a new plant in Arizona that sells power to California, Calpine's new facilities helped the state stave off threatened blackouts this summer, Chief Executive Officer Peter Cartwright said. Calpine is building the 847-megawatt Delta Energy Center in Pittsburg, scheduled to open in May, and a 750-megawatt plant in Kern County, due in June 2003. It is also awaiting an August decision by the California Energy Commission on its proposed 600-megawatt Metcalf Energy Center in San Jose. "California is a very good market for us," said Bill Highlander, a Calpine spokesman. "The pricing in California has benefited Calpine." However, he said, the company was not one of the traders that focused on making top dollar in California's volatile spot market, because its business model concentrated on selling electricity through long-term contracts. During the past few months, Calpine signed 10-year and 20-year contracts with the state for as much as 2,500 megawatts, at prices ranging from $58.60 to $73 per megawatt hour. With most of its plants fired by natural gas, Calpine wants to control about a quarter of the gas it uses, Highlander said. Its April purchase of Encal Energy for $1.77 billion more than doubled its gas reserves, to about 1. 7 trillion cubic feet equivalent, according to Hoover's Online. Calpine's stock closed up $1.08 at $36.89 yesterday. E-mail Carolyn Said at [email protected] <mailto:[email protected]>. ,2001 San Francisco Chronicle </chronicle/info/copyright> Page B - 1 Generators continue to set high electricity prices Friday, July 27, 2001 ,2001 Associated Press URL: <http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/07/27/state 0359EDT0121.DTL> (07-27) 00:59 PDT LOS ANGELES (AP) -- Power wholesalers continued to demand higher prices for energy despite federal regulation that capped electricity rates, according to a confidential report by the California Independent System Operator. In one case, an energy company charged as much as five times more for electricity than the federal cap, which were imposed June 20. State grid operators have given the study to federal regulators for a possible investigation, the Los Angeles Times reported Friday. Five companies were identified by code in the report and sources familiar with the study named the wholesalers for the Times. They include Duke Energy, Dynegy Corp., Mirant Corp., Reliant Corp., and Williams Cos. The average price charged by the five power companies was $105 per megawatt-hour, which closely matches the federal price limit in California set at $101 per megawatt-hour. Four of the five companies submitted bids either just below or just above their cost of production. Houston-based Reliant, however, asked as much as $540 per megawatt-hour in some cases. Overall, the company's average bid was close to costs, the report said. The state wasn't required to purchase power at the rates set by wholesalers but the bids reflect a potential repeat of charging exorbitant electricity prices if temperatures soar and conservation dwindles, said Frank Wolak, a Stanford University economist who studies the California electricity market. "The bottom line is that the generators are putting out these bids in expectation of high demand," he said. "If weather all of a sudden gets really hot from Southern to Northern California, the bids submitted by generators could be very costly to California." The Cal-ISO report singled out Duke Energy, noting it "continues to bid significantly in excess of its operating costs." The report shows the company's cost to produce electricity was between $85 and $121 but it offered to sell a megawatt-hour from $149 to $195. Cal-ISO calculated the cost of production for each company based on the efficiency of its power plants and estimates what each paid for natural gas to fuel the plants. "The use of the data in some cases doesn't appear to add up and in all cases appears to be selective and could easily be misunderstood," said Duke spokesman Tom Williams. ,2001 Associated Press THE ENERGY CRUNCH Environmental suit against power plant Expansion called danger to slough Christian Berthelsen, Scott Winokur, Chronicle Staff Writers <mailto:[email protected]> Friday, July 27, 2001 ,2001 San Francisco Chronicle </chronicle/info/copyright> URL: <http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/07/27/ MN236840.DTL> An environmental group filed suit yesterday to overturn a permit granted to Duke Energy Co. to expand a major power plant south of Santa Cruz. Saying the permit was illegally awarded, the suit warns that the resulting project will damage the ecologically important Elkorn Slough. Voices of the Wetlands accuses the board that awarded the permit of violating federal law by not requiring Duke to use the best possible technology to minimize impacts on the environment around the Moss Landing power plant. If plans to expand the plant proceed without change, the group said, it would kill off critical organisms at the bottom of the food chain. The suit, filed in Monterey County against the California State Water Resources Control Board and the regional board that serves the central coast, seeks a court order to return the case to the regional water district so that more environmentally sensitive cooling technology can be ordered for use at the plant. State officials said yesterday that the issues raised in the suit were considered and rejected during the initial permit approval process last year, and again during the appeal process this year. The case comes amid enormous pressure on state officials, in light of California's energy crisis, to rapidly accelerate power plant approvals and expand the amount of power generation available. Against this backdrop, the state water board on June 21 essentially rejected environmental groups' appeal that had sought to overturn the district board's decision approving the Moss Landing expansion permit. On another front, board members of the California Energy Commission took testimony earlier this week on a proposal to curtail public review of plant project proposals, with one board member, Robert A. Laurie, acknowledging in an interview that he believed "in some cases" it posed one of the most time- consuming aspects of project approval. A recommendation is expected within the next month. Duke, of Charlotte, N.C., bought the Moss Landing plant from Pacific Gas & Electric Co. in 1998, when the Northern California utility sold off many of its facilities to prepare for deregulation of the energy market. The plant was built in 1950 using a cooling system technology that sucks water out of the Elkorn Slough and Monterey Bay to cool generating turbines before spitting the water out into the Pacific Ocean. The group says wildlife conditions and sea otter population have improved markedly since PG&E mothballed many of the generating units at Moss Landing in 1995. But Duke now is proposing to resurrect parts of the cooling system in a major expansion that will make Moss Landing the state's largest power plant after its completion next summer. With an output of 2,538 megawatts, the plant when completed is expected to account for 30 percent of all new electricity generated in California next year, serving about 2.5 million households in the Monterey, Santa Cruz and southern Santa Clara County areas, including San Jose. Regional water quality board officials declined comment yesterday, citing the pending litigation. But in public documents filed yesterday, water officials said cooling alternatives had been considered and rejected. The documents did not elaborate on why they were not mandated. Duke had acknowledged during the process that more ecologically sensitive technologies were available, but at prohibitive costs of $20 million to $50 million more. Deborah Sivas, an attorney for the Earthjustice Environmental Law Clinic, which filed the suit on behalf of Voices of the Wetlands, considered the best technology alternatives mandatory, not optional. She said the board had not considered alternative approaches in reaching its conclusions. E-mail the writers at [email protected] <mailto:[email protected]> and [email protected] <mailto:[email protected]>. ,2001 San Francisco Chronicle </chronicle/info/copyright> Page A - 3 Let's make a real deal with Edison July 27, 2001 By JONATHAN LANSNER The Orange County Register When any government official tries to play business executive, it's time to get nervous. Take the Edison bail out as evidence. At its essence, the deal works like this: Taxpayers give the utility a big pile of cash; the state gets some old, rickety transmission lines in return. Don't be fooled: The power bounty is basically a political ploy. The state doesn't need to control electric distribution. What politicos need is a face-saving trade as evidence that this is a business deal - not a government handout. The state probably should just write the check and eat its losses. But if bureaucrats wanted real remuneration from this bail out, California would eye some juicy Edison assets. As a public service, I'll list a few. Now, for argument's sake, I won't differentiate between the utility and its parent company, Edison International. Hey, lawyers built those walls between the two. Let 'em figure out how to take 'em down. For starters, you'd figure an energy-strapped state would like some regional power plants, no? Like the San Onofre facility. However, it might be laughable to see Sacramento-types defending their future handling of the local nuclear plant. OK, if that's a tad too dicey for the state, how about a coal-fired plant in Nevada? Heck, Edison had a buyer at half a billion bucks before the state oddly quashed that deal. Maybe the state could grab it from Edison -- then flip it to pay off electricity-related debts. Of course, buying one of the out-of-town power plants that Edison's sister company in Irvine has acquired might be educational for Sacramento. Owning a plant in Illinois or Pennsylvania or possibly New Zealand might show state honchos how easy - or not - it is to rig supply and prices. Alternatively, the state could demand a small entity called Edison Capital. Basically, it's a bank. One specialty: the politically correct field of affordable-housing lending. A good fit for bureaucrats. Speaking of money, there's the Edison pension plan. Governments are really good at running retirement benefits. Heck, California already has a huge one. There's got to be some economies of scale - real cash savings - in merging the Edison plan with some state pension fund. Do note that Edison's plan might be overfunded by about $400 million. You can bet, though, that the state would never have the nerve to play 1980s corporate raider: profiting by grabbing some of a company's overfunded retirement kitty. Finally, there's Edison International Field in Anaheim. Stadium naming-rights contracts must have some value since corporations always seem to fight over these promotional gimmicks. (The utility's parent company paid $50 million in 1997 for two decades of "free" publicity.) Imagine the buzz the state could get out of the huge sign age on a nationally renowned stadium. Plus, maybe the Angels could be good corporate citizens and tie into this deal. It's possible they'd allow a slight change in the team name to better emphasize the state's role in the ballpark. So, how does "California Angels" sound to you? Business; Financial Desk California Sempra Continues Improved Results NANCY RIVERA BROOKS 07/27/2001 Los Angeles Times Home Edition Page C-2 Copyright 2001 / The Times Mirror Company Sempra Energy on Thursday reported another quarter of higher earnings and revenue, a sharp contrast to California 's bigger and beleaguered investor-owned utilities. Although California 's electricity crisis has pushed Southern California Edison and Pacific Gas & Electricity into insolvency--and PG&E into U.S. Bankruptcy Court--the parent of San Diego Gas & Electric and Southern California Gas continues to post improved results on the strength of its non-utility businesses. Net income for the period ended June 30 rose 25% to $137 million, or 66 cents a share, up $25 million, or 55 cents, earned a year ago, the San Diego-based utility holding company said. Revenue jumped 40% to $2.1 billion. Pretax operating income rose 24% to $291 million. Sempra's earnings came in just ahead of the 65-cent average estimate of analysts surveyed by First Call/Thomson Financial. "Our strong second-quarter performance is primarily the result of our efforts to accelerate growth through new businesses," Stephen L. Baum, Sempra's chairman, chief executive and president, told analysts in a conference call. Sempra is in a vastly different position than Edison International and PG&E Corp. because its electric utility arm was able to avoid the deep financial woes afflicting their respective Southern California Edison and Pacific Gas & Electric utilities. SDG&E was first to sell its power plants two years ago and thus was freed from a rate freeze. That in turn allowed the utility to pass along to customers the soaring costs of electricity beginning last summer. The state Legislature eventually rolled back and capped the rates for SDG&E customers, but promised the utility it would be allowed to recover those losses. Edison and PG&E, however, continued to accumulate staggering debts because their retail rate freezes remained in place. In contrast, Sempra is solvent, with $1.5 billion in cash and $1 billion in available credit, Baum said. The performance of its utilities was lackluster, with Southern California Gas earning $47 million, unchanged from the second quarter of 2000, and SDG&E earning $37 million, down from $40 million in the year-ago period. But Sempra's unregulated businesses--including energy trading, power plant construction and operation, international electricity operations and energy services--turned in an overall strong performance, contributing 39% of the parent company's earnings. Sempra's trading unit provided most of that profit, contributing $69 million to second-quarter net income compared with $40 million in the same quarter last year. Sempra's stock gained 17 cents to close at $25.49 on the New York Stock Exchange. Business; Financial Desk California Calpine Doubles Earnings, Beats Forecasts Energy: San Jose-based company credits higher electricity prices in California and sales from new plants. 07/27/2001 Los Angeles Times Home Edition Page C-2 Copyright 2001 / The Times Mirror Company Calpine Corp., one of the biggest U.S. power-plant builders, said Thursday that second-quarter earnings more than doubled, beating estimates, because of higher electricity prices in California and sales from new plants. Profit from operations rose to $132.2 million, or 39 cents a share, from net income of $59.5 million, or 20 cents, a year earlier. Revenue almost quadrupled to $1.61 billion. San Jose-based Calpine opened plants in the U.S. with a combined capacity of 1,545 megawatts--enough to light 1.5 million average homes--and benefited from existing plants in California . Calpine has insulated itself from rising fuel costs by buying natural-gas fields to supply its plants. "Given the strategy they have chosen, they're following through quite well," said Andre Meade, an analyst at Commerzbank Capital Markets Co. "They are growing from a small base and adding a lot of plants, so we'd expect high growth." Profit topped the 31-cent average estimate of analysts surveyed by First Call/Thomson Financial. Calpine said it expects to earn $2 a share this year. The average First Call forecast was $1.92, with a range of $1.80 to $2.04. Calpine's shares rose $1.08, or 3%, to close at $36.89 on the New York Stock Exchange. The shares had fallen 21% this year amid concern that generators might have to give back some of the profit they made selling power in California during the last year. In addition, cooler-than-normal weather and conservation efforts recently reduced power prices in the state. Calpine runs or is building natural gas plants in 29 U.S. states and Canada that produce more than 30,000 megawatts of power. The company plans to more than double capacity to 70,000 megawatts by the end of 2005. Calpine this month opened the $350-million Sutter plant, California 's first major generator in more than a decade. The company is building 11 plants to run during times of peak demand in the state and getting permits for four more, James Macias, who oversees Calpine's West Coast power plants, said in a conference call with analysts and investors. Separately, Arlington, Va.-based AES Corp., a power producer that supplies California and operates in 27 countries, said second-quarter profit fell 20% because of losses tied to currency fluctuations and the sale of a U.S. electricity retailer. Net income fell to $112 million, or 21 cents a share, from $140 million, or 28 cents, a year earlier. Sales rose 26% to $2.21 billion. California ; Metro Desk Cap No Bar to Higher Prices Power: Cal-ISO study says suppliers continued to charge as much as five times more than the U.S.-imposed limits. NANCY VOGEL 07/27/2001 Los Angeles Times Ventura County Edition Page B-1 Copyright 2001 / The Times Mirror Company SACRAMENTO -- After federal regulators limited wholesale electricity prices last month, big private sellers of power in California continued to ask as much as five times more for electricity than the federal cap, according to a confidential study by state grid operators. The analysis by the California Independent System Operator covers only the first week after the caps were imposed June 20. Cal-ISO has submitted the data to federal regulators for potential investigation. The report is a summary of what Cal-ISO calls possible anti-competitive behavior by Duke Energy, Williams Cos., Mirant Corp., Reliant Energy and Dynegy Corp. "In a truly competitive market we would expect these suppliers to bid very close to their actual operating cost," said Greg Cook, senior policy analyst with Cal-ISO's Department of Market Analysis. The state did not necessarily purchase any power at the high prices being demanded. Instead, the significance of the bids is that they show how California could find itself paying exorbitant prices for electricity again if hot weather returns and conservation slackens, said Frank Wolak, a Stanford University economist who studies the California electricity market. "The bottom line is that the generators are putting out these bids in expectation of high demand," he said. "If weather all of a sudden gets really hot from Southern to Northern California , the bids submitted by generators could be very costly to California ." Cal-ISO calculated the cost of production for each company based on the efficiency of its power plants and estimates of what each paid for natural gas to fuel the plants. The average cost for the five was $105 per megawatt-hour, which closely matches the federal price limit in California , which now stands at $101 per megawatt-hour. According to the power bidding procedures, companies that bid at or below their cost of production often still get paid a higher price, allowing them to make a substantial profit. On average, four of the five companies submitted bids either slightly below or slightly above their cost of production. But with the exception of Atlanta-based Mirant, each company at times submitted bids that were substantially higher. Houston-based Reliant, for example, bid as much as $540 per megawatt-hour, more than five times its estimated cost. Overall, Reliant's average bid was close to costs, according to the analysis. Cal-ISO identified companies by code in its report. Sources familiar with the study identified the companies for The Times. The Cal-ISO report singled out "Supplier 5," identified by sources as Charlotte, N.C.-based Duke Energy, saying the company "continues to bid significantly in excess of its operating costs." Duke owns two large power plants on the central coast. It marked up its bids an average of 88% beyond its cost to produce electricity , according to the analysis. For example, it cost Duke $85 to $121 to generate a megawatt-hour of electricity in the time period studied, the report shows, but the company's bids ranged from $149 to $195 per megawatt-hour. Duke spokesman Tom Williams on Thursday said, "The use of the data in some cases doesn't appear to add up and in all cases appears to be selective and could easily be misunderstood." Duke sells nearly the entire output of its power plants under long-term contracts, and not on the spot market, which the Cal-ISO report studied, he noted. Calpine Net Soars On Added Plants; Sempra Profit Rises By Rebecca Smith 07/27/2001 The Wall Street Journal Page B4 (Copyright (c) 2001, Dow Jones & Company, Inc.) Calpine Corp. reported net income nearly doubled in the second quarter, reflecting the independent power producer's aggressive plant-building program. Meanwhile, the parent of a San Diego utility said profit rose 25%. Calpine, of San Jose, Calif., said net was $107.7 million, or 32 cents a share, up from $59.5 million, or 20 cents a share, a year earlier. The latest results, which were in line with analysts' expectations, included a special charge of seven cents a share related to Calpine's purchase of Encal Energy Ltd., a natural-gas company. Revenue grew even more strongly, soaring to $1.61 billion from $417.2 million. Separately, Sempra Energy, parent of electric utility San Diego Gas & Electric, reported profit rose to $137 million from $110 million a year earlier. Revenue jumped 40% to $2.1 billion from $1.5 billion. Sempra Chairman Steve Baum attributed the growth, which stands in marked contrast to the financial woes of California 's other electric-utility-owning energy companies, to Sempra's unregulated operations. Calpine's profit increased despite paying substantially more for natural gas to fuel its plants. It spent an average of $4.80 per million British Thermal Units for natural gas, up from $3.31 a year before. At the same time, Calpine's revenue per megawatt hour of electricity sold also rose, to $71.03 in the latest period from $64.80 a year earlier. At Sempra, Mr. Baum said profit from Sempra's biggest utility unit, San Diego Gas & Electric, fell 7.5% to $37 million from $40 million. Results were flat at its gas-distribution company, Southern California Gas Co. Sempra Energy Trading was the big profit center, generating half its total profit, or $69 million, compared with $40 million a year earlier. Mr. Baum said Sempra's stock, which trades at a low price/earnings multiple of 10, still is being "affected negatively by the California situation." He also said the company made less money in spot-power markets than in prior quarters but nevertheless intends to invest $2 billion in new power plants. In 4 p.m. New York Stock Exchange composite trading, Calpine shares rose $1.08 to $36.89, while Sempra climbed 17 cents to $25.49.

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Energy Issues

Please see the following articles: Sac Bee, Tues, 5/29: Lodi just says no to powers that be:=20 Four times since March, the city kept the lights on as other towns went dar= k Sac Bee, Tues, 5/29: Dan Walters: Debt dilemmas plague energy executives,= =20 ordinary workers alike SD Union (AP), Tues, 5/29: Governor's rescue plan garners no support, a newspaper reports SD Union, Tues, 5/29: In power crisis, is there ray of light at end of mur= ky=20 tunnel? SD Union, Mon, 5/28: Bush, Davis on collision course SD Union, Sun, 5/27: Republicans fiddle while Californians burn SD Union (AP), Sun, 5/27: Energy executive seeks state GOP support (Enron= =20 mentioned) SD Union (AP), Sat, 5/26: State demands FERC close loopholes =20 SD Union, Sat, 5/26: Changes in Senate could offer state relief (Enr= on=20 mentioned) SD Union, Sat, 5/26: Natural gas CEO denies deal was improper LA Times, Tues, 5/29: Kern County Basks in Role as State's Blackout-Buster LA Times, Mon, 5/28: Plan to Rescue Edison Stalls LA Times, Mon, 5/28: Bush Could Boost Green Power With Buying Power LA Times, Sun, 5/27: Suddenly, Dirty Old Coal Is the Fossil Fuel of the=20 Future LA Times, Sun, 5/27: Power Firm Chief Lists Solutions for Crisis LA Times, Sat, 5/26: State Renews Demand for Power Price Relief LA Times, Sat, 5/26: El Paso CEO Admits Approving Subsidiaries' Natural Ga= s=20 Deal LA Times, Sat, 5/26: Police Support 48-Hour Alerts for Blackouts LA Times, Sat, 5/26: Outdoor Lights Still Burning LA Times, Sat, 5/26: Businesses Hopeful on Blackout Warnings LA Times, Tues, 5/29: Power Crisis Has Mileage for Bush =20 (Commentary) SF Chron (AP), Tues, 5/29: Bush announcing low-income aid, but no price ca= ps =09=09=09 SF Chron, Tues, 5/29: Bush facing Davis' heat over energy=20 In first visit to state as president, he'll hear governor's plea for help SF Chron, Tues, 5/29: Bush's first visit not so welcome=20 SF Chron (AP), Tues, 5/29: Californians revert to clotheslines, fans as th= ey=20 gear up for blackouts=20 SF Chron, Tues, 5/29: Crisis no sweat to some offices=20 Many offices keep cool in crisis=20 Air conditioners blast in state's energy centers=20 SF Chron (AP), Tues, 5/29: Stakes are high for Davis meeting with Bush SF Chron, Tues, 5/29: State gives president tepid ratings=20 Power crisis blamed for 42% approval SF Chron (AP), Mon, 5/28: Calif. pawn businesses boom as energy bills ris= e SF Chron (AP), Mon, 5/28: Californians brace for a summer of blackouts SF Chron, Mon, 5/28: New Nevada-California energy plan surfaces at last=20 minute Mercury News, Tues, 5/29: Bush feeling weight of state's energy crisis Mercury News, Tues, 5/29: New energy moves by W.House before Bush-Davis me= et OC Register, Tues, 5/29: California should try true deregulation =20 (Commentary) Energy Insight, Tues, 5/29: Look for more wellhead-power plant deals=20 ---------------------------------------------------------------------------= --- -------------------------------------------------------- Lodi just says no to powers that be: Four times since March, the city kept= =20 the lights on as other towns went dark. By Stuart Leavenworth Bee Staff Writer=20 (Published May 29, 2001) LODI -- In this old farm town, where ferment is largely confined to wine=20 bottles, leaders are staging a Boston Tea Party against California's energy= =20 crisis.=20 Lodi, population 57,000, is refusing to participate in the rolling blackout= s=20 that have swept across California. Four times since March, Lodi's electric= =20 utility has snubbed the state's power managers and kept its lights on while= =20 others went dark.=20 The rock band Creedence Clearwater Revival once derided Lodi as a=20 conservative backwater, but now, this town is leading an unlikely revolt th= at=20 is being picked up by others statewide.=20 "Lodi has something of an independent streak," said Steve Mann, a former ci= ty=20 councilman in Lodi and one of many residents who support the city's utility= .=20 "It doesn't make sense that we should participate in blackouts when we have= =20 done everything we can to make sure we can avoid that."=20 So far, Lodi has the only utility in the state to openly defy an on-the-spo= t=20 call for blackouts. They did so twice in March, then twice again this month= .=20 This week, however, Riverside's utility said it, too, would not participate= =20 in forced outages, and leaders of some other "munis" may follow suit.=20 Worried about a political snowball, Gov. Gray Davis met with leaders of the= =20 munis last week, but refused to exempt them from further blackouts. If that= =20 happened, the state's power managers would be unable to spread blackouts to= =20 25 percent of the state's households, putting the brunt on other parts of t= he=20 state.=20 "I'm sympathetic," said David Freeman, the governor's top energy adviser an= d=20 a former leader of municipal utilities in Sacramento and Los Angeles. But= =20 Freeman, speaking with uncharacteristic guardedness, said it may not be=20 practical "to separate out utilities that are an integral part of the grid.= "=20 The self-proclaimed "wine grape capital of the world," Lodi would seem an= =20 unlikely hotbed for dissent. Creedence Clearwater once bemoaned being "stuc= k=20 in Lodi." Instead of being offended by the song, many residents are glad=20 their town isn't inhabited by a bunch of long-haired rabble-rousers.=20 Even so, Lodi likes to defy convention when it comes to protecting its own.= =20 Two years ago, the city started waging battle against big insurance compani= es=20 that didn't want to pay to clean up toxic substances from local businesses= =20 that had trickled into water supplies.=20 In recent years, Lodi has spent millions sprucing up its once-dilapidated= =20 downtown, which soon will be crowned by a new 12-screen cineplex.=20 But the town's biggest source of pride is its taxpayer-owned utility, which= =20 started in the 1890s when two brothers, Ed and Fred Carey, launched a water= =20 and electric utility. In 1910, they sold it to the city of Lodi for $35,000= .=20 Now, the utility provides $4 million to the town's coffers every year, with= a=20 $30 million annual budget.=20 Like many other municipal utilities in Northern California, Lodi has more= =20 power lined up than it needs, but is dependent on Pacific Gas and Electric= =20 Co. to deliver that power to its doorstep.=20 As a result, "Lodi's relationship with PG&E has been tenuous throughout its= =20 history," said Mann. One point of contention is the interconnection agreeme= nt=20 among PG&E, Lodi and the town's fellow members in the Northern California= =20 Power Agency.=20 PG&E officials say the agreement requires Lodi to shed power during any pow= er=20 shortfall. But Lodi contends the pact obligates the utility to impose=20 blackouts only during "physical emergencies," such as a wind storm that=20 knocks out transformers.=20 "We don't see any compelling reason why Lodi should have to participate in= =20 rolling blackouts," said Alan Vallow, director of the city's utility. "You= =20 want me to turn customers off when we have the capacity to keep them on? Th= at=20 doesn't work for me."=20 During a statewide call for blackouts, PG&E conceivably could just switch o= ff=20 power for Lodi if the city's utility didn't heed the call voluntarily. But= =20 Vallow doubts PG&E would take such a step. "That would be pretty extreme," = he=20 said.=20 An engineer who used to work for Los Angeles' utility, Vallow has become=20 "something of a folk hero" because of his stance, said Mann. Vallow is=20 especially popular with Lodi's canneries, which need reliable power in the= =20 summer to pack fruit before it rots in the field. And most Lodites "are 100= =20 percent behind Mr. Vallow," said Marie Saunders, a longtime local resident.= =20 On the other hand, Lodi's City Council hasn't officially endorsed Vallow's= =20 decision, giving it an out should PG&E or state officials seek revenge.=20 "If we weren't supportive, we would let Alan know," said Alan Nakanishi, th= e=20 mayor of Lodi. "On the other hand, if we do get retribution, we may say to= =20 Al, 'Hey, what is all this about?' "=20 So far, PG&E hasn't threatened any action against Lodi, but experts say the= =20 town is venturing into murky legal territory.=20 "It is a legal question that hasn't been resolved," said John Fistolera,=20 legislative director of the Northern California Power Agency, a group of=20 municipal utilities that includes Lodi.=20 The Sacramento Municipal Utility District, which is not part of NCPA, also= =20 has taken a cautious approach. Earlier this year, at least one SMUD board= =20 member recommended the utility follow Lodi's example. But the idea was=20 dropped amid fears that SMUD, being a bigger utility, could face a legal=20 fight that PG&E wouldn't mount against little Lodi.=20 "I really admire what Lodi has done," said Linda Davis, a SMUD board member= .=20 "But I don't want to end up in court, and I fear SMUD would end up in court= ."=20 Instead of an open rebellion, SMUD has joined the Southern California town = of=20 Vernon and 13 other cities in appealing to the Federal Energy Regulatory=20 Commission. They want FERC to exempt them from blackouts ordered by the=20 state's grid manager, the Independent System Operator.=20 ISO officials argue that "load shedding" from the municipal utilities is=20 vital for maintaining balance on the grid during shortfalls. But SMUD and t= he=20 other municipalities say they shouldn't be penalized for lining up power=20 reserves that have eluded the state's big utilities, especially with the=20 state facing dozens of blackouts this summer.=20 "Like Vernon, SMUD has grave concerns over the prospect of sharply escalati= ng=20 the number and duration of blackout occurrences directed by the ISO on a=20 grid-wise basis over the upcoming summer months," SMUD wrote to FERC.=20 Last week, the Riverside City Council voted to stop participating in=20 blackouts ordered by the ISO. Like Lodi, Riverside says its conservation=20 programs should be taken into account in ISO's attempts to deal with power= =20 shortages.=20 Vallow says Lodi has done everything it can to help the state. In January,= =20 the city complied with blackout orders, then purchased long-term contracts= =20 that gave it a 40 percent surplus in power reserves.=20 To pay for those reserves, the utility increased customer rates by as much = as=20 15 percent.=20 Since then, the city has sold excess power back to the state to help with= =20 shortages. But Vallow also has told the state that Lodi will not participat= e=20 in further blackouts.=20 Vallow calls it the "SET" program, which stands for "System, Electric suppl= y=20 and Team."=20 "We've done everything the state should have done to avoid the crisis we ar= e=20 in now," said Vallow. "We are SET."=20 The Bee's Stuart Leavenworth can be reached at (916) 321-1185 or=20 [email protected]. Dan Walters: Debt dilemmas plague energy executives, ordinary workers alike (Published May 29, 2001)=20 The Bible, in one of its many warnings to the faithful about incurring debt= ,=20 makes this pithy observation: "The rich rule over the poor and the borrower= =20 is servant to the lender."=20 Credit may have become the essential underpinning of a modern industrial=20 society, from the billions of dollars in operational financing arranged by= =20 governments and corporations to the credit card transactions of everyday=20 consumers, but our uneasiness about debt continues.=20 California's two major utilities ran up more than $13 billion in debt to bu= y=20 power at prices far higher than consumers were paying, until lenders cut of= f=20 their credit. And the state government then stepped in and has incurred an= =20 additional $7.7 billion in debt -- with plans to nearly double its borrowin= g=20 to over $13 billion -- to keep the lights burning. One utility has sought= =20 bankruptcy protection and another is on the verge; the state's heavy power= =20 purchase debts have undermined its credit rating and its ability to finance= =20 other spending.=20 While the governor and state legislators ponder these multibillion-dollar= =20 questions of debt, they also must decide what to do, if anything, about the= =20 relatively tiny debts that poor Californians are incurring. The practices o= f=20 so-called "payday lenders" and those making home-secured loans to the elder= ly=20 and working poor are generating sharp conflicts in the Capitol.=20 The "payday loan" business has mushroomed since being expressly authorized = by=20 1996 state legislation. Storefront businesses offering short-term loans at= =20 high interest rates have exploded from almost none to more than 3,000 in th= e=20 state, often replacing pawnbrokers as lenders of last resort.=20 Critics see the trade as legalized usury, in which cash-poor borrowers not= =20 only are tapped for very high interest rates -- as much as 900 percent per= =20 year -- and are forced, in effect, to roll over the loans week after week.= =20 Sen. Don Perata, D-Alameda, is carrying a measure that would tighten up=20 payday loan practices, the latest in a long string of proposals that have= =20 died at the hands of fellow Democrats in legislative committees, thanks to= =20 the efforts of lenders and their lobbyists. Assemblyman Dario Frommer, D-Lo= s=20 Angeles, meanwhile, is carrying a measure that lenders back as a compromise= ,=20 although it's been denounced by consumerists as a smoke screen.=20 A similar battle is being waged over what critics describe as "predatory=20 lending" by home loan subsidiaries of major banks. Consumer activists argue= =20 that the lenders are enticing low-income and/or elderly borrowers into=20 pledging their homes for "subprime" loans -- even many who could qualify fo= r=20 more conventional, lower-cost mortgages. The borrowers, say critics, are=20 paying higher interest rates and higher fees, are being saddled with unneed= ed=20 mortgage life insurance and often are at risk of losing their homes to=20 foreclosures.=20 Sen. Joseph Dunn, D-Santa Ana, is carrying a consumer group-backed bill,=20 pending in the Senate Banking Committee, but bankers have mounted a stiff= =20 opposition campaign and the fate of the bill is in doubt. Dunn and his=20 supporters need five of the six Democrats on the committee to vote for the= =20 bill, and the heaviest lobbying attention is being focused on two uncommitt= ed=20 Democrats from conservative Central Valley districts -- Mike Machado of=20 Linden and Jim Costa of Fresno. Last week, consumer activists staged a=20 symbolic march on the Capitol to press their cause.=20 The questions that surround both issues are similar: Should the state prote= ct=20 borrowers from agreeing to loans that carry high interest rates and other= =20 charges, as long as they are aware of the risks and costs they are incurrin= g?=20 Are those rates and fees justified by the higher costs, including higher=20 default rates, that lenders experience in making loans to those of marginal= =20 creditworthiness?=20 They are not dissimilar to the questions that are being raised about the hu= ge=20 debts that the utilities and the state -- institutions presumably operated = by=20 sophisticated executives -- have assumed. The blue-collar worker who takes= =20 out a high-cost payday loan to keep his own lights burning is not that much= =20 different from the governor.=20 The Bee's Dan Walters can be reached at (916) 321-1195 or [email protected]= om . Governor's rescue plan garners no support, a newspaper reports=20 ASSOCIATED PRESS=20 May 28, 2001=20 LOS ANGELES =01) Leaders of both houses are against Gov. Gray Davis' plan t= o=20 rescue Southern California Edison from bankruptcy, the Los Angeles Times=20 reported Monday.=20 Not only has the more than $3 billion plan failed to garner support but=20 efforts by lawmakers to come up with an alternative are also falling by the= =20 wayside.=20 The stakes are high, because restoring Edison to financial health and=20 requiring Edison to temporarily sell power at lower prices are vital to=20 Davis' plan to get the state out of the business of buying electricity.=20 Nevertheless, leaders in the Legislature say the governor's approach has fe= w=20 backers.=20 "I don't think the governor's (plan) has support in either party in either= =20 house," Assembly Speaker Bob Hertzberg, D-Sherman Oaks, told the Times. "Th= e=20 issue is whether we can come up with something else, and I think we can."= =20 Senate leader John Burton, D-San Francisco, has been critical of the deal= =20 Davis and Edison put together from the outset. He said it is certainly dead= =20 in the Legislature, but that a more far-reaching proposal may still emerge.= =20 "Hopefully, we will find a long-term solution" to the state's energy crisis= ,=20 Burton said. The Edison deal alone "is not going to solve anything. It is n= ot=20 going to reduce rates, and it is not going to prevent blackouts," he said.= =20 In both the Assembly and Senate, most Democrats and Republicans are convinc= ed=20 there is no way for them to save Edison without appearing to sanction a hug= e=20 bailout. Therefore, they want to get something of value in return from Edis= on=20 =01) high-voltage transmission lines, hydroelectric power plants or guarant= ees=20 that the utility will boost energy supplies =01) but are sharply split on w= hat=20 is best.=20 Democrats, who hold majorities in both houses, cannot agree on how to save= =20 the utility =01) or whether it is even proper for the government to do so. = Some=20 believe that the state would be better off letting Edison file bankruptcy= =20 like Pacific Gas & Electric.=20 Meanwhile, their efforts to forge a bipartisan solution with Republicans ha= ve=20 are not going well.=20 Despite the setbacks, Davis and many lawmakers still say some form of the= =20 Edison rescue plan will clear the Senate and Assembly this summer. But sinc= e=20 Davis announced he had reached a deal with Edison executives to save the=20 utility in April, nothing has been accomplished in the Legislature to=20 implement it.=20 The rescue deal Davis reached with Edison calls for the state to pay the=20 utility $2.76 billion for its power transmission lines. It would allow the= =20 state to issue bonds to finance the purchase, and declares that Edison is t= o=20 use the money to reduce its estimated $3.5 billion debt.=20 The deal also would set aside a portion of ratepayers' monthly utility bill= s=20 to pay off Edison's "undercollections," huge debts the utility incurred las= t=20 year and early this year because it was not allowed by the state to pass on= =20 to consumers the full cost of wholesale power.=20 In return, Edison would agree to sell the electricity it generates from its= =20 power plants at cost for the next decade, lowering the state's overall=20 power-buying expenses.=20 Lawmakers from both parties have called the deal overly generous and=20 questioned the benefit to the public.=20 In power crisis, is there ray of light at end of murky tunnel?=20 By Ed Mendel=20 May 28, 2001=20 SACRAMENTO -- Is California, at long last, about to catch a break in the=20 electricity crisis, or will the cost of power this summer short-circuit the= =20 state budget, forcing painful cuts?=20 Among the doom and gloom of blackout preparations last week, there were a f= ew=20 faint flickers of hope.=20 Some prices for summer power have dropped. State power buyers smoothly=20 handled high loads during two hot days. A big generator, Mirant, unexpected= ly=20 agreed to provide 500 megawatts through the summer at a reasonable price.= =20 Davis administration officials are sticking with their forecast, derided by= =20 some as a "hope and expectation," that the average price the state will pay= =20 for non-contracted power will drop this summer.=20 "It's very doable," said Ray Hart, head of the power purchasing unit in the= =20 state Department of Water Resources.=20 The forecast by Davis consultants expects the average of $346 per megawatt= =20 hour paid by the state for non-contracted power in April through June to dr= op=20 to $195 in July through September.=20 But skeptics fear that as heat drives up the demand for power, the state wi= ll=20 get a double whammy -- soaring spot-market prices because of a regional pow= er=20 shortage, and a series of disruptive and dangerous blackouts.=20 The state, in what Vice President Dick Cheney calls a "harebrained scheme,"= =20 began buying power for utility customers in January after a failed=20 deregulation plan forced the utilities deep into debt.=20 The Davis administration notified the Legislature last Wednesday that in 10= =20 days the state general fund will begin spending another $500 million=20 increment for power, bringing the total since January to $7.7 billion.=20 Now it's nervous time at the Capitol until the general fund is repaid by a= =20 bond issue of up to $13.4 billion, which is expected to be issued in late= =20 August and September and paid off by ratepayers over 15 years.=20 What if there is a snag? Or spending on power soars? State Controller=20 Kathleen Connell is predicting that the state will have to borrow more mone= y=20 than planned, perhaps an additional $4 billion.=20 As for the flicker of hope, a reporter for a publication that tracks power= =20 said prices at the Palo Verde hub, which serves Southern California, have= =20 dropped significantly since April for deliveries in July through September.= =20 "My personal opinion is, they probably won't get back up to where they were= =20 during the highs," said Mike Wilczek of Platts Power Market Week.=20 Another journalist who tracks power prices, Arthur O'Donnell, editor of=20 California Energy Markets, sees no trend other than volatility.=20 "It depends largely on what the weather is," O'Donnell said. "The expectati= on=20 is that August is going to be the ugly month, and that is being reflected i= n=20 the future prices."=20 O'Donnell said he was encouraged that the state Department of Water=20 Resources, which lined up some power purchases in advance, handled=20 heat-driven high loads last Monday and Tuesday without declaring an=20 emergency.=20 "What it tells me is, DWR is learning its job," O'Donnell said.=20 The state is counting on an ad campaign and "sticker shock" from rate=20 increases to reduce power use this summer. And the amount of cheaper power= =20 obtained through contracts, now less than half the total, is expected to=20 increase to about two-thirds in June through August.=20 "I think this month is a harder month to get through than those months," sa= id=20 DWR's Hart.=20 Ed Mendel is Capitol bureau chief for the Union-Tribune.=20 Bush, Davis on collision course=20 President, Cheney firm: No price caps By Toby Eckert=20 COPLEY NEWS SERVICE=20 May 27, 2001=20 WASHINGTON -- When President Bush and Gov. Gray Davis meet this week to=20 discuss California's power crisis, it will be a close-up clash of ideologie= s=20 that until now have been playing out long distance.=20 To Californians struggling with rolling blackouts and skyrocketing power=20 bills, Bush's allegiance to free-market principles and his rejection of=20 electricity price controls can seem baffling -- if not payback for the=20 state's vote against him in the presidential election.=20 Yet a look at the record shows that Bush and his energy czar, Vice Presiden= t=20 Dick Cheney, share an unshakable faith in open power markets shaped by=20 conservative politics and their long association with an industry that has= =20 benefited greatly from deregulation. It is a view fortified by energy company executives who enjoy easy access t= o=20 top administration officials and counsel against measures like price=20 controls. One company in particular, power marketer Enron Corp., appears to= =20 wield great influence with the White House on energy policy.=20 Davis argues that because the deregulation plan adopted by the state in 199= 6=20 turned out to be deeply flawed, a truly free market doesn't exist. Power=20 marketers and generators now have enough leverage to charge, on average, mo= re=20 than $330 per megawatt-hour of electricity, 10 times what they were getting= =20 just a year ago.=20 Temporary Western price controls -- based on the cost of producing the powe= r=20 and a hefty, built-in profit margin for the power sellers -- would provide = a=20 respite until the problems are fixed, Davis contends. A recent Field Poll= =20 shows that an overwhelming majority of Californians, Republican and Democra= t,=20 share that view.=20 "It would be a grave mistake for the Bush administration to allow rigid=20 ideology to stand in the way of doing what's best for our country," a=20 frustrated Davis said recently. "Deregulation is not a religion."=20 The White House flatly denies it is looking at the issue with ideological= =20 blinders on, or through an energy industry prism. Bush and other=20 administration officials argue that price controls have a proven history of= =20 backfiring -- drying up energy supplies at the same time they encourage mor= e=20 consumption.=20 "The president and this administration do not support price caps because th= ey=20 don't work," said White House spokeswoman Claire Buchan.=20 The folly of price controls is an article of faith in the oil industry, whi= ch=20 was long subjected to them. Both Bush and Cheney prospered in that industry= .=20 Bush founded an oil company in his native West Texas in 1977, shortly after= =20 graduating from business school. Arbusto Energy didn't find much oil, but= =20 Bush profited greatly in the boom-and-bust industry through mergers with=20 bigger industry players.=20 Before Bush plucked him out of the private sector, Cheney headed Halliburto= n=20 Co., a leading oil-field services firm based in Dallas.=20 "I think there's no doubt that their views have been shaped by their=20 backgrounds in the industry and their broader ideological views about=20 markets," said political analyst Stuart Rothenberg.=20 Cheney in particular has expressed a visceral aversion to price controls. H= is=20 experience helping to craft broad wage and price limits in the Nixon=20 administration left an indelible mark.=20 "The night the control regulations went to the Federal Register to be=20 published, they were 14 pages long. I know, because I typed them," Cheney= =20 said recently. "When we got through a couple years later, we had a roomful = of=20 regulations."=20 The price controls aggravated the oil shortage that plunged the nation into= =20 an energy crisis in the 1970s, Cheney argues.=20 "You could control domestic oil prices, but you couldn't control the price = of=20 imports that were set by the international market. .?.?. A lot of companies= =20 shut down, quit producing domestically," he said.=20 The new breed of power generators and marketers spawned by the nationwide= =20 move toward electricity deregulation are also, by and large, fierce opponen= ts=20 of price controls. Houston-based Enron in particular has positioned itself = as=20 a major player in the world of freewheeling power sales, including in=20 California.=20 Enron and its executives have been among Bush's biggest supporters througho= ut=20 his political career and enjoy an unusually close relationship with the=20 president. Company Chairman Kenneth Lay was one of the "Pioneers" who raise= d=20 at least $100,000 for Bush during the presidential campaign.=20 Enron's political action committee and its executives poured $113,800 into= =20 Bush's coffers and put a corporate jet at his disposal, according to the=20 Center for Responsive Politics, which tracks political spending.=20 Two top Bush administration officials -- economic adviser Lawrence Lindsey= =20 and U.S. Trade Representative Robert Zoellick -- once served on an Enron=20 advisory board.=20 As Cheney was crafting the administration's recently unveiled energy policy= ,=20 Lay was one of the handful of people who got to meet with him. Lay presente= d=20 a three-page, eight-point list of priorities for open power markets,=20 including an admonition that the administration "should reject any attempt = to=20 re-regulate wholesale power markets" with price caps or other controls.=20 Davis, by contrast, was invited to simply submit a one-page memo to the=20 energy task force, his spokesman said.=20 Lay also reportedly advised the Bush administration on appointments to the= =20 Federal Energy Regulatory Commission. The commission has the power to impos= e=20 price controls, but has so far balked at Davis' proposal.=20 Enron's clout with the administration has stoked the suspicions of critics.= =20 "It's Lay that drives the policy," said Craig McDonald, director of Texans= =20 for Public Justice, which tracks political spending in that state.=20 Enron spokesman Mark Palmer dismissed such talk as "outrageous."=20 "The Cheney task force met with dozens of trade groups, industry=20 representatives, politicians, regulators," Palmer said.=20 But in recent weeks, even the normally cautious Davis has highlighted the= =20 Texas ties of the energy companies that have profited from California's=20 travails, saying at one point that the Bush administration was allowing the= =20 companies "to get away with murder."=20 The White House says such allegations are just overheated rhetoric.=20 "That's goofy. It doesn't even merit a response," Cheney said when asked=20 about Davis' comments. "The president and I are making decisions and policy= =20 based on what we think makes sense for the country."=20 Republicans fiddle while Californians burn=20 By Bill Ainsworth=20 UNION-TRIBUNE STAFF WRITER=20 May 27, 2001=20 CALIFORNIA'S POWER CRISIS=20 SACRAMENTO -- Once upon a time, California Republicans faced a Democratic= =20 governor with ratings in the stratosphere, a Legislature dominated by his= =20 party and no popular issues to help improve their lowly status.=20 Then the energy crisis hit. As power prices jumped, blackouts hit and the= =20 governor hesitated, the formerly unbeatable candidate and his party suddenl= y=20 seemed vulnerable.=20 Yet California Republicans are having trouble taking advantage of this=20 seemingly golden political opportunity. As Davis struggles to extricate=20 himself from the energy quagmire, GOP leaders are also flailing about, mire= d=20 in contradiction, indecision and debate.=20 Although most Californians blame the power generators for the crisis, the= =20 Republicans' reflexive support of big business makes them unwilling to=20 criticize the out-of-state "entrepreneurs." Meanwhile, the party's lack of = a=20 strong leader or well-known gubernatorial candidate means that it doesn't= =20 have a loud voice in the Capitol.=20 Republican consultant Dan Schnur, whose former boss, Gov. Pete Wilson, thru= st=20 deregulation upon the state, said Republican leaders made a mistake by not= =20 offering an alternative plan once the crisis hit.=20 "Keeping their heads down did nothing but leave the playing field open to= =20 Gray Davis," he said.=20 Republicans have recently sketched out some proposals, but these appear=20 contradictory and politically dangerous.=20 The party opposes Davis' creation of a state power authority, with some=20 blasting it as "socialism."=20 "America is built on a capitalist system -- not on socialization," said=20 Assembly Republican Leader Dave Cox, R-Fair Oaks. "Socialism has failed=20 throughout the rest of the world."=20 Yet Assembly Republicans want to make it easier for San Diego County to=20 create a publicly owned municipal utility district.=20 Cox said local power isn't socialism because its board members are elected.= =20 The board of the state authority is composed of appointed and elected=20 officials.=20 Assemblyman Mark Wyland, R-Escondido, who is pushing a San Diego utility=20 district, said he believes the difference is local control.=20 "People want to control their own energy destiny," he said. "They don't hav= e=20 any control over a statewide bureaucracy."=20 Davis chastised Republicans for putting ideology above pragmatism.=20 "They're very quick to say we need more supply, but when you have a measure= =20 that would lead to more supply, they quickly retreat to their ideological= =20 point of view and refuse to be problem solvers," he said.=20 Republicans also opposed the Democrats' plan to replenish the state treasur= y=20 for the money it has spent on buying power by floating a $13.4 billion bond= =20 that would be repaid by ratepayers. They claimed that the bond was so large= =20 it was fiscally irresponsible.=20 Yet the Assembly Republicans' alternative plan would have led to massive=20 budget cuts. They wanted the state to give away about $5 billion it had to= =20 spend to buy electricity on the spot market -- and that money would have be= en=20 a subsidy largely to business and large users of electricity.=20 Democrats passed the bond plan anyway, but the Republicans' opposition=20 delayed the sale until August. Davis charged the delay cost the state an=20 extra $50 million to $150 million in bond charges.=20 Republicans have also been hurt by their unwillingness to crack down on the= =20 mostly out-of-state generating companies and natural gas companies.=20 According to last week's nonpartisan Field Poll, the vast majority of=20 Californians believe that these companies are to blame for piling up enormo= us=20 profits at California's expense.=20 Davis and the Democratic leaders have proposed a windfall profits tax on=20 generators.=20 By contrast, Cox opposes the tax, worrying that it will hurt the business= =20 climate. Davis calls the power producers "price gougers," while Cox refers = to=20 them as "entrepreneurs trying to maximize profits."=20 A recent Assembly investigation into California's high natural gas prices= =20 highlighted the GOP's reluctance to criticize energy companies.=20 Assembly Democrats issued a report accusing a Texas natural gas company, El= =20 Paso Corp., of making a sweetheart deal with an affiliate that allowed it t= o=20 manipulate the natural gas market. That deal, the report charged, contribut= ed=20 to soaring prices for California consumers and astronomical profits for the= =20 company.=20 The key Republican committee member, Assemblyman John Campbell, R-Irvine,= =20 issued a dissenting report, attributing El Paso's profits to supply and=20 demand.=20 Assemblyman Juan Vargas, D-San Diego, said Republicans are backing the wron= g=20 side.=20 "They're siding with Texas oil interests and Texas gas interests and that's= =20 going to get them in trouble," he said.=20 Republicans may also suffer from association with President Bush, who is=20 visiting California this week. The Republican president's close ties to the= =20 oil industry and refusal to back wholesale electricity price caps have made= =20 him unpopular with California voters, said Bruce Cain, a UC Berkeley=20 political scientist whose view is backed by state polls.=20 Bill Jones, the only announced Republican candidate for governor, commended= =20 Bush's energy plan -- even without price caps.=20 Jones, secretary of state, released his plan so quietly some wondered wheth= er=20 he was trying to avoid publicity. Jones criticized Davis for "socializing t= he=20 delivery" of power and called on the state to help its utilities by loaning= =20 them money.=20 Despite their missteps, though, the Republicans still have time to develop = a=20 coherent alternative. The energy crisis isn't going away.=20 "Most voters understand that the Democratic plan hasn't worked," said Schnu= r,=20 "but at some point they'll want to see an alternative. The Republicans are= =20 starting to do that."=20 Republicans can claim credit for urging Davis to act more quickly. Last=20 summer when the price spikes hit San Diego and threatened to spread, they= =20 asked the governor to call a special session. He ignored their pleas.=20 And Republicans voted against the January measure that got the state into t= he=20 power buying business, a move that Democrats said was required to keep the= =20 lights on, but now threatens the state's fiscal health.=20 Still, if the generators remain unpopular, the GOP could suffer.=20 "The Republicans have an inability to distinguish between market manipulati= on=20 and a well-functioning market," said Cain. "The perception that the party i= s=20 tied to the big energy companies isn't helpful."=20 ANALYSIS Energy executive seeks state GOP support=20 Politicians, celebs at secret meeting ASSOCIATED PRESS=20 May 27, 2001=20 SAN FRANCISCO -- In a move to garner support from prominent California=20 Republicans, a Texas energy executive attended a secret meeting to push for= =20 the preservation of the state's deregulated power market, a newspaper=20 reported yesterday.=20 Houston-based Enron Corp. Chairman Kenneth Lay met with well-known=20 Republicans, including movie star Arnold Schwarzenegger, Los Angeles Mayor= =20 Richard Riordan and Michael Milken, who pleaded guilty to fraud charges in= =20 1990 as head of the Drexel Burnham Lambert investment banking firm, the San= =20 Francisco Chronicle reported. The 90-minute private meeting took place May = 11=20 at a Beverly Hills hotel.=20 Schwarzenegger and Riordan have both been courted as Republican candidates= =20 for California governor.=20 Enron distributed a four-page plan at the meeting calling for ratepayers to= =20 cover the billions in debt racked up by the state's public utilities and=20 contending that state and federal investigations of price gouging are=20 hindering the situation, the Chronicle reported after obtaining a copy of t= he=20 paper.=20 "Southern California Edison is very close to bankruptcy, and no one around= =20 the table wanted that to happen," Enron spokeswoman Karen Denne said=20 yesterday. "There was considerable frustration that a solution is not being= =20 advanced at the legislative level."=20 But Gov. Gray Davis' spokesman Steve Maviglio called the paper a "generator= 's=20 wish list," saying it goes against the governor's policy on the energy=20 crisis.=20 "The governor is not calling off the dogs," Maviglio said yesterday. "To=20 suggest that ratepayers should shoulder the entire burden of deregulation i= s=20 totally the opposite of what the governor is calling for."=20 Lay and Davis have disagreed about how California's power crisis should be= =20 handled, and Lay says his company is being used as a scapegoat.=20 The meeting was hosted by Kevin Sharer of biotech giant Amgen. About a doze= n=20 people attended, including chief executives Ray Irani of Occidental Petrole= um=20 and Bruce Karatz of home builder Kaufman & Broad, Denne said.=20 Lay, who is a friend of President Bush and one of his largest campaign=20 contributors, has built the world's largest energy-trading company by buyin= g=20 electricity from generators and selling it to consumers. During the first= =20 quarter of this year, Enron's revenue increased 281 percent to $50.1 billio= n.=20 State demands FERC close loopholes=20 By Jennifer Coleman=20 ASSOCIATED PRESS=20 May 26, 2001=20 SACRAMENTO -- California made new demands for tough federal electricity pri= ce=20 caps yesterday and singled out two generators that it said should roll back= =20 rates immediately.=20 The filings by several state agencies were in response to a Federal Energy= =20 Regulatory Commission order last month that offered limited price controls = in=20 exchange for concessions on control of the state's power grid.=20 "FERC's pricing plan is laced with loopholes," Gov. Gray Davis said. "It's= =20 worse than too little, too late. It's simply a fig leaf that does nothing t= o=20 address the impact of the energy crisis on California and our nation."=20 The state's multiple filings also said that two generators, Williams and AE= S,=20 have profited excessively by exercising market power.=20 The Electricity Oversight Board, the Public Utilities Commission and the=20 Independent System Operator asked FERC to require the generators to use=20 cost-based rates, which limit company profits to a percentage above the cos= ts=20 to produce power.=20 In order to escape charging cost-based rates, generators must prove to FERC= =20 that they don't have market power -- the ability to charge whatever price= =20 they want without consequence.=20 The ISO, keeper of the state's power grid, said the two companies have=20 exhibited that they have market power and the ability to charge market-base= d=20 rates should be revoked.=20 Aaron Thomas, spokesman for the Arlington, Va.-based AES, said the company= =20 has applied to have its ability to charge market-based rates renewed, and= =20 expects FERC to approve that request.=20 "The governor, for six months now, has been calling for a form of cost-base= d=20 rates from FERC, so I don't think anything has changed," said Thomas.=20 Earlier this month, Tulsa-based Williams agreed to pay $8 million to settle= =20 charges with FERC that the company was purposely withholding electricity fr= om=20 California's power market. The company admitted no wrongdoing, and official= s=20 said a full hearing would have cleared the company.=20 ISO attorney Charles Robinson said the agency is also considering similar= =20 requests for revocation of the market-power authority of three other=20 generators -- Duke Energy, Reliant and Mirant.=20 Sen. Joe Dunn, D-Garden Grove, chairman of the Senate subcommittee=20 investigating the electricity wholesale market, said FERC has never adopted= a=20 definition of market power, leaving open the question of how they can=20 determine if the generators don't have it.=20 "That calls into question whether FERC must revoke market-based rate=20 authority retroactively," Dunn said. "That may require a reimbursement of t= he=20 difference between what would have been cost-based rates and what they've= =20 been charging."=20 The FERC order in April establishes some price controls when the state's=20 power reserves drop below 7.5 percent. That is scheduled to take effect=20 Tuesday, unless the FERC orders otherwise over the holiday weekend, Robinso= n=20 said.=20 The state Assembly, in documents to be filed Tuesday, said those price=20 controls should cover all hours -- not just during power emergencies. The= =20 Assembly's filing calls that order "arbitrary and capricious," and says the= =20 order does nothing to curtail unreasonable prices unless reserves drop.=20 Earlier ISO studies have estimated that California was overcharged more tha= n=20 $6 billion in the last year. FERC has ordered refunds for a fraction of tha= t=20 -- $125 million -- saying it can only examine prices for power sold during= =20 Stage 3 emergencies, when reserves drop to below 1.5 percent.=20 The Assembly's filing also will object to FERC's requirement that the state= =20 join a regional transmission organization in order to get price controls.= =20 Robinson, the ISO attorney, said the ISO would make a decision next week=20 whether to file a plan to join an RTO.=20 The state agencies also objected to a FERC plan to put a surcharge on energ= y=20 rates to pay money owed to generators.=20 Changes in Senate could offer state relief=20 By Finlay Lewis and Toby Eckert=20 COPLEY NEWS SERVICE=20 May 26, 2001=20 WASHINGTON -- After weeks of impasse, a plan to bring emergency relief to= =20 California's suffering electricity customers suddenly seems likely in the= =20 Senate because a sympathetic friend unexpectedly finds himself in a positio= n=20 to help.=20 This dramatic reversal of fortune will occur when Sen. Jeff Bingaman, D-N.M= .,=20 becomes chairman of the Senate Energy and Natural Resources Committee becau= se=20 of Vermont Sen. James Jeffords' defection from the GOP.=20 Bingaman is expected to take control of the committee next week when Jeffor= ds=20 officially becomes a political independent and throws control of the chambe= r=20 to the Democratic Party. Bingaman will replace Sen. Frank Murkowski,=20 R-Alaska, a strong ally of the energy industry.=20 Unlike Murkowski, Bingaman supports a bill championed by Sens. Dianne=20 Feinstein, D-Calif., and Gordon Smith, R-Ore., to impose temporary restrain= ts=20 on wholesale power sales in the West. The bill is likely to command a=20 majority if it comes to a vote in the committee.=20 The price caps still face fierce resistance in the House and at the other e= nd=20 of Pennsylvania Avenue, where President Bush, armed with a veto pen, and Vi= ce=20 President Dick Cheney steadfastly resist movement toward any form of price= =20 controls.=20 But because of a committee chairman's agenda-setting power, Bingaman's=20 ascension would dramatically shift the prospects of the Feinstein bill and= =20 other energy issues in the Senate.=20 Bush's proposal to open the Arctic National Wildlife Refuge to oil=20 exploration already faced difficulty, but now opponents will have easier=20 means to block it. And other environmentally contentious energy proposals= =20 could face tough scrutiny from Jeffords, who is expected to become chairman= =20 of the Senate's Environment and Public Works Committee.=20 Still, the president will have the power to enact the bulk of his energy=20 program because fewer than two dozen of his 105 proposals need congressiona= l=20 action.=20 But the shift in the Senate allows Democrats to advance their own plan. At= =20 the top of the list are temporary price controls.=20 "It's a priority for Sen. Bingaman," said Jude McCartin, a spokeswoman for= =20 the senator. "He would like to act quickly to meet the challenges."=20 "Bingaman is from a Western state, unlike Murkowski," said Ashley Brown,=20 executive director of an electricity-policy think tank at Harvard Universit= y.=20 "His geographic outlook is going to be different. He is also going to be=20 sensitive to Democratic senators from California. It's going to mean more t= o=20 him than it meant to Murkowski."=20 McCartin and aides to Feinstein were guardedly optimistic about the measure= 's=20 prospects should the bill reach the Senate floor, where its bipartisan=20 parentage will likely guarantee bipartisan backing.=20 That does not mean Feinstein's bill is home-free.=20 Bush and Cheney's opposition to price caps is rooted firmly in their belief= =20 that they would discourage investment in the energy industry, thereby=20 resulting in even shorter power supplies and more California blackouts.=20 In the House, a companion bill to the Feinstein-Smith measure is snarled in= =20 complex and inconclusive negotiations in the House Energy and Commerce=20 Committee, and the House Republican leadership would be poised to bury any= =20 measure that might make it to the floor in defiance of Bush's wishes.=20 But other factors may be bolstering prospects for action to ease the=20 California crisis.=20 McCartin pointed to the Senate's unanimous vote yesterday afternoon=20 confirming two Bush nominees to posts on the Federal Energy Regulatory=20 Commission as signaling a possibly more activist bureaucratic policy in=20 dealing with the state's problems.=20 The two new members of the nation's major regulatory authority over the pow= er=20 industry are Pat Wood III, the head of the Texas Utility Commission, and No= ra=20 Brownell, a Pennsylvania utility regulator.=20 Bush reportedly plans to replace FERC Chairman Curtis Hebert with Wood.=20 While observers say it is unlikely that Wood and Brownell would defy the=20 White House, they note that the appointees have indicated they might take a= =20 more expansive view than most current FERC commissioners to bring relief to= =20 California.=20 Once the Democrats take formal control of the Senate, probably about June 5= ,=20 there could be other actions affecting California's power problems.=20 Feinstein yesterday urged the likely chairman of the Senate Governmental=20 Affairs Committee, Sen. Joseph Lieberman, D-Conn., to investigate whether= =20 energy companies are improperly influencing the FERC.=20 She cited a report in yesterday's New York Times that Kenneth Lay, the head= =20 of Enron Corp., a Houston-based power marketing company, had offered to bac= k=20 Hebert in his effort to remain at the commission's helm if Hebert supported= =20 Enron's positions on electricity deregulation.=20 Enron outpaced all other energy companies last year in contributing to GOP= =20 campaigns, while Lay has personally been one of Bush's most generous=20 financial backers.=20 "Since FERC has refused to fulfill its legally mandated function under the= =20 Federal Power Act to restore 'just and reasonable' electricity rates, we ne= ed=20 to ask whether undue influence by the companies that FERC regulates has=20 resulted in its failure to act," Feinstein wrote in a letter to Lieberman.= =20 Senate passage of the Feinstein-Smith bill would send the measure to the=20 House, where some Republican House members from California face close=20 re-election races next year.=20 A Field Poll recently showed that 75 percent of state residents view the=20 electricity situation as "very serious" and that 59 percent say it was caus= ed=20 by energy companies seeking to increase profits.=20 Democratic strategists, citing those findings, say some California lawmaker= s=20 visiting their districts over the Memorial Day recess may come under pressu= re=20 to take strong action to restrain energy prices.=20 Natural gas CEO denies deal was improper=20 By Joe Cantlupe=20 COPLEY NEWS SERVICE=20 May 26, 2001=20 WASHINGTON -- The head of a Texas energy company that is accused of=20 wrongfully driving up California's natural gas prices told a federal=20 administrative law judge yesterday that he approved a deal between two=20 subsidiaries, but denied that it was an improper, sweetheart arrangement.= =20 William Wise, the chief executive officer of El Paso Corp., said the=20 Houston-based company has "stringent" rules that separate the operations of= =20 its pipeline subsidiary, El Paso Natural Gas, from its gas marketing=20 division, El Paso Merchant Energy.=20 "Functionally, that is the way they perform," said Wise of the corporate=20 subsidiaries. "They can be very autonomous from each other and the parent= =20 company."=20 Wise defended the corporation's practices in testimony before Curtis L.=20 Wagner, Federal Energy Regulatory Commission administrative law judge.=20 Wagner is examining allegations by California officials that El Paso and it= s=20 divisions entered into improper business practices before the deal was=20 struck. California officials charge that El Paso bolstered profits by=20 withholding natural gas capacity, costing the state about $3.7 billion. El= =20 Paso officials deny the allegations.=20 FERC's governing body has dismissed allegations of an improper relationship= =20 between the subsidiaries, but Wagner said he is still examining the issue= =20 before making recommendations to FERC.=20 Wise was hastily summoned to testify yesterday, a day after Wagner sharply= =20 criticized the credibility of another top El Paso Corp. executive about=20 Wise's involvement in discussions about the Merchant bid.=20 In his testimony, Wise said he gave the OK, on Valentine's Day 2000, to all= ow=20 Merchant Energy officials to bid on the natural gas capacity within the El= =20 Paso Natural Gas Co. pipeline. Wise said he was unaware of details about th= e=20 bid.=20 The El Paso Merchant Energy subsidiary eventually won the $38.5 million bid= =20 on the pipeline, which supplies about one-sixth of the natural gas that=20 California imports from throughout the Southwest. The company earned more= =20 than $180 million in profits.=20 If El Paso is found to have manipulated the power market, it could face=20 hundreds of millions of dollars in penalties.=20 Kern County Basks in Role as State's Blackout-Buster=20 Electricity: Six new plants will bolster its status as energy center.=20 By MITCHELL LANDSBERG, Times Staff Writer=20 ?????McKITTRICK, Calif.--You could think of this as California's own little= =20 slice of west Texas. ?????Here in the scruffy brown hills of western Kern County, oil rigs grow= =20 more easily than trees, pickups are more common than cars, and chicken frie= d=20 steak is the most popular dish at Mike and Annie's McKittrick Hotel. Tom Romesberg, general manager of La Paloma plant being built in Kern Count= y,=20 stands next to the unit's cooling tower. AL SEIB / Los Angeles Times ?????The hotel--which no longer offers lodging, just food and drink, and=20 plenty of it--is bustling these days with the roustabout energy of a Lone= =20 Star construction camp. Just down the road, a mammoth electrical power plan= t=20 is rising out of the sagebrush, its generators housed in four boxy building= s=20 the size of airplane hangars. ?????It is one of six new major gas-fired power plants expected to be built= =20 in Kern County over the next several years, an electrical construction boom= =20 unmatched anywhere in California. Kern, which already has a large surplus o= f=20 electricity, is cementing its place as California's energy capital, assumin= g=20 far more than its share of the burden in recharging the state's drained pow= er=20 supplies. ?????Over the next several years, the county will add nearly 5,000 megawatt= s=20 of power to the statewide grid. That is more than California now imports, o= n=20 average, from out-of-state suppliers. It's enough to supply about five=20 counties the size of Kern, which fills the dusty southern rim of the San=20 Joaquin Valley and has a population of 662,000. ?????In some parts of the state, a proposal to build a new power plant is a= =20 call to throw up the barricades. In recent months, intense community=20 opposition has forced developers to pull back proposals to build major plan= ts=20 in South Gate and San Jose, although Gov. Gray Davis has tried to revive=20 plans for the San Jose plant. ?????You don't hear a lot of not-in-my-backyard talk in Kern County. ?????"There should be power plants in everybody's backyard," said Paul Gipe= ,=20 chairman of the Kern chapter of the Sierra Club, which did not oppose any o= f=20 the new plants. "If people are concerned about having too many power plants= ,=20 they should think twice when they flip on the light switch." ?????New, natural gas-fired power plants, Gipe reasoned, are relatively cle= an=20 and will not add significantly to the county's serious air pollution=20 problems. Ideally, he said, they will allow the state to close some older,= =20 dirtier plants that cause considerably more environmental damage. ?????If environmentalists don't oppose the plants, it's not too much of a= =20 leap to guess that some people might be positively thrilled about them. ?????Just try, for instance, asking somebody in Taft, an oil center south o= f=20 McKittrick. "It's more money coming into Kern County--that's the way I look= =20 at it," said Pamela Dunlap, who runs a downtown thrift shop. ?????An Economy Rooted in the Oil Industry ?????She stood in the twilight outside her shop, on a street that embodies= =20 many of the most attractive attributes of small town Americana--with one=20 small difference. Where some towns might have statues of their founders or= =20 war heroes in prominent public places, Taft has erected small oil rigs and= =20 other pieces of drilling machinery, a reminder of its economic roots. ?????That Kern County has stepped up as California's blackout-buster is,=20 perhaps, not surprising. ?????To begin with, there's geography. Kern stands astride California's maj= or=20 north-south electrical transmission lines at precisely the spot at which th= ey=20 divide between the service areas of Pacific Gas & Electric, which serves=20 Northern California, and Southern California Edison. That spot can be=20 pinpointed as the Midway substation, a vast jungle of humming wires,=20 transformers and circuit breakers that lies a short distance west of=20 Interstate 5 in the town of Buttonwillow. ?????Already, massive new circuit-breakers--they look like Frankenstein=20 helmets sprouting 5-foot-long sparkplugs--are being erected at Midway to=20 handle the power from two major plants that will be revving up in the comin= g=20 months: PG&E National Energy's La Paloma plant, the one near McKittrick; an= d=20 Edison Mission Energy's Sunrise plant, just south of Taft. ?????The county is served by two major natural gas pipelines, which will be= =20 tapped to run the plants. In fact, Kern contains the state's largest known= =20 reservoirs of natural gas. ?????Another of Kern's geographic advantages? ?????"You look around, and you'll see there aren't a lot of people living= =20 around here," observed Stephen Whaley, who is overseeing construction of th= e=20 Sunrise plant. In the surrounding hills, an orchard of oil rigs bobbed in t= he=20 morning haze. Dirt roads cut crudely across the landscape, bisecting a=20 crisscross of steam pipes, fuel lines and electrical wires. ?????"This area is all about oil," Whaley said. Casting a glance at the=20 modular 560-megawatt plant rising behind him, he added with a wry smile, "Y= ou=20 know, I guess you could look at this from the road, and you could make the= =20 argument that it improves the looks." ?????The Sunrise plant, a relatively simple single-cycle plant, is expected= =20 to fire up 320 megawatts of its total output by Aug. 1, a scant nine months= =20 after construction began. The other plants--more complex and efficient=20 dual-cycle operations--will be opening over the next several years, assumin= g=20 all receive final approval. ?????The lack of major opposition to the plants is, of course, another reas= on=20 developers see Kern County as a good place to build. The county has long ha= d=20 a more intimate relationship with energy--oil, gas, electricity--than most= =20 places. To people here, the link between a natural gas well and a lightbulb= ,=20 or an oil derrick and a gas pedal, is neither theoretical nor especially=20 threatening. They're comfortable with energy. ?????Kern produces more crude oil than any other county in the United State= s=20 outside Alaska. Property taxes from oil companies have helped build handsom= e=20 new schools in Bakersfield, the county seat and largest city. The companies= '=20 big payrolls have helped populate elegant subdivisions with names that soun= d=20 vaguely Houstonian: Seven Oaks, River Oaks, Landmark Estates. ?????Which brings us to the Texas connection. ?????It's hard to overlook it, in a county that runs on oil and cotton and= =20 boasts a country music scene to rival Austin's. Conversations in the finer= =20 Bakersfield restaurants are filled with references to trips to Texas, of=20 colleagues in Midland and Odessa. A Bakersfield radio station was running a= =20 contest recently: The winners would be flown to a bull riding championship = in=20 Houston. ?????Until December 1999, American Airlines offered direct jet service=20 between Bakersfield and Dallas. It stopped after Occidental Petroleum moved= =20 its headquarters from Bakersfield to Houston. ?????This is a county where President Bush received more support in the=20 November election than he did in Texas, his home state. But then, Bush=20 already had a Bakersfield connection: He lived there briefly as a child whe= n=20 his father, former President George Bush, worked in the Kern oil fields. ?????"You look at the topography around Bakersfield, and the county's moral= s=20 and ethics--that predominantly conservative attitude that we have around=20 here--and you look at the oil, and you could be in Midland," said John Alle= n,=20 the general manager of Occidental of Elk Hills, which is developing a power= =20 plant in tandem with Sempra Energy of San Diego. ?????A lot of people in Kern County will tell you they don't mind being an= =20 energy farm for the state. It's a living, after all. ?????"It's good to be working at home," said Joe Ryan, a Bakersfield pipe= =20 welder who has spent years on the road seeking the heavy construction work= =20 that seemed to have vanished in his hometown. Now he's working at the La=20 Paloma plant, a 1,048-megawatt behemoth that will come online in phases=20 beginning in December. ?????About 800 people are at work on the plant, and several hundred more wi= ll=20 be employed in the coming months. And after that plant is done, there will = be=20 others to build. ?????"This is a good job here, I tell you what," said Ryan, 47, who has bee= n=20 banking his overtime on six 10-hour days a week--sometimes more. ?????County Sees Itself as 'Part of the Solution' ?????But there are some signs of simmering resentment, especially among=20 county leadership. After all, if every other county produced just half the= =20 electricity that Kern generates, California wouldn't have an energy crisis.= =20 And people in Kern County are getting hit with the same spring-loaded=20 electricity bills, the same rolling blackouts as everybody else. ?????"I think the people of California are either going to be part of the= =20 solution or part of the problem," said Assemblyman Roy Ashburn=20 (R-Bakersfield). "And in Kern County, we have a long history of being part = of=20 the solution, especially when it comes to energy issues." ?????Elsewhere in the state, Ashburn sees "a lot of arrogance--people who= =20 enjoy the benefits of a very high quality of life, enjoy the benefits of=20 electric power for jobs and for their personal life, but with an exclusivit= y=20 that it's someone else's problem to create that for them. We don't have tha= t=20 attitude in Kern County." Copyright 2001 Los Angeles Times=20 Plan to Rescue Edison Stalls=20 Power: Few lawmakers back Davis in the deal he reached with the utility.=20 Alternatives are being crafted, but legislators are wary of being blamed fo= r=20 new failures. Some see benefits in bankruptcy.=20 By MIGUEL BUSTILLO and CARL INGRAM, Times Staff Writers=20 ?????SACRAMENTO--Despite months of negotiations, Gov. Gray Davis' plan to= =20 save Southern California Edison, one of California's biggest utilities, is= =20 effectively dead in the state Legislature, leaders of both houses now agree= . ?????Not only has Davis failed to garner support for his more than $3-billi= on=20 plan to keep the utility out of bankruptcy--in part by having the state=20 purchase its transmission lines--but follow-up efforts by leading lawmakers= =20 to fashion an alternative are also falling flat. As a result, any alternati= ve=20 proposal to rescue Edison will probably have to be approved on a party-line= =20 vote by Democrats. ?????The reasons are complex, according to legislators working to close the= =20 Edison deal, but ultimately come down to simple politics, and are emblemati= c=20 of what has been a plodding, partisan response in the state Capitol to the= =20 energy crisis. ?????The stakes are high, because restoring Edison to financial health and= =20 requiring the utility to temporarily sell power at lower prices are linchpi= ns=20 of Davis' plan to get the state out of the business of buying electricity. ?????Nevertheless, leaders in the Legislature say Davis' approach has few= =20 backers. ?????"I don't think the governor's [plan] has support in either party in=20 either house," said Assembly Speaker Bob Hertzberg (D-Sherman Oaks). "The= =20 issue is whether we can come up with something else, and I think we can." ?????Senate leader John Burton (D-San Francisco), who has been critical of= =20 the deal Davis and Edison put together from the outset, said it is certainl= y=20 dead in the Legislature, but that a more far-reaching proposal may still=20 emerge. ?????"Hopefully, we will find a long-term solution" to the state's energy= =20 mess, Burton said. The Edison deal alone "is not going to solve anything. I= t=20 is not going to reduce rates, and it is not going to prevent blackouts." ?????Since January, California has authorized more than $7 billion in=20 taxpayer money to buy power for private utilities in order to avoid mass=20 blackouts. It is a perilous fiscal situation that has drained the state=20 budget and led to downgrades of the state's credit rating on Wall Street. ?????Lawmakers are wary of making an even greater blunder than they did in= =20 1996, when they unanimously approved what is now widely considered to be a= =20 botched scheme to deregulate electricity in California. In both the Assembl= y=20 and Senate, most Democrats and Republicans are convinced there is no way fo= r=20 them to save Edison without appearing to sanction a huge bailout similar to= =20 the federal government's rescue of Chrysler in 1980--one with less financia= l=20 reward for the state. ?????As a result, they all want to get something of value in return from=20 Edison--high-voltage transmission lines, hydroelectric power plants or=20 guarantees that the utility will boost energy supplies--but are sharply spl= it=20 on what is best. ?????A core element of all Edison rescue programs being considered is a=20 proposal to use a chunk of customers' monthly electric bills to repay the= =20 utility's huge debt, a solution many election-conscious legislators find as= =20 appetizing as a suicide pill. ?????Consumer Activists Threaten Initiative ?????The deal only requires a majority vote, but without two-thirds approva= l=20 it would be wide open to an initiative challenge--a prospect that frightens= =20 politicians. Consumer activists have already threatened to strike back with= a=20 referendum next year, when Davis and lawmakers will be seeking reelection. ?????Democrats, who hold majorities in both houses, cannot agree on how to= =20 save Edison--or whether it is even proper for government to do so. Some hav= e=20 grown convinced that California would be better off letting Edison follow= =20 Pacific Gas & Electric Co. into U.S. Bankruptcy Court. Indeed, after PG&E= =20 filed for protection from creditors in Bankruptcy Court last month, and=20 massive blackouts failed to materialize, legislative momentum to save Ediso= n=20 from a similar fate all but vanished. ?????"The urgency of doing anything on behalf of Edison is gone," said Sen.= =20 Don Perata (D-Alameda). ?????Meanwhile, Democratic efforts to forge a bipartisan solution with=20 Republicans have unraveled, and GOP lawmakers are now advancing their own= =20 plan. Legislative leaders realized early on that liberals and conservatives= =20 were unlikely to ever agree on details of a deal, so some Democrats and=20 Republicans attempted to form a centrist coalition. But the parties have=20 become increasingly distrustful of each other as the climate in Sacramento= =20 over who is to blame for California's power problems grows ever more partis= an. ?????Sensing they were being frozen out of negotiations, Assembly Republica= ns=20 rolled out a rival proposal last week that was focused on increasing power= =20 supplies in exchange for the rescue. Assembly Republican leader Dave Cox=20 (R-Fair Oaks) said he had hoped to pursue a bipartisan solution, but,=20 "Regrettably, it appears that [the Legislature] is not moving in that=20 direction now." ?????The Republicans' decision surprised and angered members of the "Plan B= =20 Group," a loose-knit cadre of Democratic lawmakers that has been working wi= th=20 Republicans to hash out an alternative to Davis' proposal. Members of the= =20 group say they are close to unveiling a complex counterproposal that could= =20 garner greater support, but now fear that they may have to seek approval on= a=20 party-line basis. ?????Despite the setbacks, Davis and many lawmakers still say some form of= =20 the Edison rescue plan will clear the Senate and Assembly this summer. But= =20 since Davis announced he had reached a deal with Edison executives to save= =20 the utility in April, nothing has been accomplished in the Legislature to= =20 implement it. ?????The long delay is adding to the problem. Every day that passes increas= es=20 the likelihood that one of Edison's numerous creditors will drag the=20 debt-strapped utility into an involuntary bankruptcy. ?????The lack of progress also increases the chances that Edison, like PG&E= ,=20 will lose patience with politicians in Sacramento and take itself into=20 bankruptcy court. ?????Edison has ramped up its public relations efforts in recent weeks and= =20 has launched an aggressive multimedia campaign to pressure legislators into= =20 approving the deal, replete with firefighter testimonials on television and= =20 direct mail pitches to stockholders asking them to write their state=20 representatives. ?????The rescue deal Davis reached with Edison calls for the state to pay t= he=20 utility $2.76 billion for its network of high-voltage transmission lines. I= t=20 would allow the state to issue bonds to finance the purchase, and declares= =20 that Edison is to use the money to pare down its debt, estimated at $3.5=20 billion. ?????Most important, the deal would set aside a portion of ratepayers'=20 monthly utility bills to pay off Edison's "undercollections," huge debts th= e=20 utility incurred last year and early this year because it was not allowed b= y=20 the state to pass on to consumers the full cost of wholesale power. ?????In return, Edison would agree to sell the electricity it generates fro= m=20 its power plants at cost for the next decade, lowering the state's overall= =20 power-buying expenses. ?????From the minute it was announced, however, lawmakers from both parties= =20 have called Davis' deal overly generous and questioned the benefit to the= =20 public. ?????Republicans, who have opposed the takeover from the outset, are=20 supporting an alternative they call "Plan R." Like Davis' proposal, the=20 Assembly GOP plan allows Edison to recover debts by siphoning a portion of= =20 electric rates, but requires in to bolster power supplies in return. ?????"This whole electricity crisis is a supply-demand imbalance," said=20 Assemblyman Keith Richman (R-Northridge), one of the architects of the=20 Republican plan. "We need to get to a point where there is a supply surplus= ." ?????In addition, the GOP plan calls for the electricity generators owed=20 billions by Edison to "take a haircut," Capitol parlance for forgiving some= =20 of what they are owed. Davis and Burton have also called for the generators= =20 to accept a 30% reduction in outstanding payments, and the idea is part of= =20 the alternative Edison deal being pieced together by the Democrats' Plan B= =20 Group. ?????Assemblyman John Dutra (D-Fremont), one of the group's leaders, said i= ts=20 members have been meeting with consumer groups, Edison representatives and= =20 others, and believe they are close to satisfying the groups at odds over th= e=20 rescue plan. But because of lingering differences with Republicans, Dutra= =20 said they may have to try passing partisan legislation. ?????"This is not a situation where we should be playing a political game,"= =20 he said. "We have to find a solution, because the alternative for the state= =20 is social and economic chaos." ?????Assemblyman Bill Leonard (R-San Bernardino) said he was disappointed= =20 that what started out in January as a bipartisan effort to resolve energy= =20 issues had collapsed into a nasty partisan standoff. Leonard said he feared= =20 that the bipartisan spirit would not return. ?????"The reservoirs of goodwill are not full right now," Leonard said.=20 "We're in a goodwill drought." Copyright 2001 Los Angeles Times=20 WASHINGTON OUTLOOK Bush Could Boost Green Power With Buying Power=20 By RONALD BROWNSTEIN, Times Staff Writer=20 ?????Today, the south wall of the Energy Department's fortress-like=20 Washington headquarters is a fitting symbol for an agency that itself has= =20 never quite established an identity: a 32,100-square-foot blank slab of=20 concrete. ?????Shortly before leaving office, however, the Clinton administration=20 awarded a Chicago architectural firm a contract to explore converting the= =20 wall into something quite different: a vast solar array that would provide= =20 much of the building's heat and power. ?????The firm--Solomon Cordwell Buenz & Associates--has produced a=20 spectacular design of a graceful, canopy-like Sun Wall that utilizes both= =20 photovoltaic panels and hydronic systems, a liquid-filled vacuum tube that= =20 warms with the sun's rays and can heat the building in winter. Now the firm= =20 is working to estimate the cost of constructing its creation. "We think it= =20 would certainly draw attention to this whole new type of energy," says Mart= in=20 Wolf, one of the designers. "Which would be quite timely given where we are= =20 as a nation." ?????The Sun Wall stands as a riveting symbol of Washington's potential to= =20 advance the development of renewable energy through a tool that's received= =20 almost no attention in the energy debate: the purchasing power of the feder= al=20 government itself. Through all its departments and agencies, the federal=20 government spends about $8 billion a year on energy--probably more than any= =20 other single consumer in the world. That buying power gives the government= =20 enormous leverage to speed the growth of renewable energy sources such as= =20 solar, wind, geothermal and biomass. ?????Today, all of these renewable sources (leaving aside hydropower) provi= de=20 only 2% to 3% of the nation's electricity, mostly because they are too=20 expensive to compete with conventional sources. Renewables are in the same= =20 Catch-22 as many new technologies: Because they are too expensive, they=20 cannot attract the sales that their makers need to both generate economies = of=20 scale and invest in more advanced manufacturing techniques. ?????Government can break the logjam by providing a market that allows=20 renewable manufacturers to advance up the learning curve and lower the pric= e=20 of their technologies to a level that makes them commercially competitive. ?????Washington has done precisely this before, most important with a produ= ct=20 that has literally transformed modern life: the microchip at the heart of t= he=20 computer revolution. The first microchips were much too expensive to attrac= t=20 commercial customers, but in the early 1960s, both NASA (using the chips fo= r=20 the Apollo space program) and the Defense Department (embedding the chips i= n=20 nuclear weapons) provided a guaranteed market--buying the chips without=20 regard to cost. ?????As author T.R. Reid recounted in "The Chip," his history of the=20 microchip: "The government's willingness to buy chips in quantity at premiu= m=20 prices provided the money the semiconductor firms needed to hone their skil= ls=20 in designing and producing [the] circuits. . . . As experience taught ways = to=20 solve the most common production problems, the cost of making a chip began = to=20 fall." ?????Three years after the government first started buying, the cost fell f= ar=20 enough that the microchip attracted its first commercial customers. Its bee= n=20 a breakneck race to the future ever since. ?????An alliance of centrist House Democrats has sensibly proposed that=20 Washington do the same for renewables. Earlier this month, the House New=20 Democrat Coalition introduced legislation that would commit the federal=20 government to purchasing a fixed percentage of its power from renewable=20 sources; the bill also would provide grants and loans to encourage state=20 governments and nonprofit organizations to also buy green. "Today, you can'= t=20 generate the revenue to make these technologies more commercially viable,"= =20 says Rep. Adam Smith (D-Wash.), one of the bill's principal authors. "The w= ay=20 to get around that is to use the market power of the federal government to= =20 help create a market." ?????With little attention, former President Clinton already committed the= =20 federal government to that course. In 1999, he signed an executive order=20 mandating that Washington expand its use of renewable energy; later, his=20 administration set a goal of obtaining 2.5% of its electricity from renewab= le=20 sources by 2005, almost eight times more than today. Smith believes that go= al=20 is already too low, largely because renewables are becoming more competitiv= e=20 as conventional sources grow more expensive. ?????Even so, this initiative is already spurring new thinking. As part of= =20 the overall plan, the Clinton administration committed to installing 20,000= =20 solar systems on government facilities by 2010; by the time he left office,= =20 2,000 were already in place. ?????"It's out in the national parks, where instead of having to string pow= er=20 lines to remote buildings, they are putting up solar systems," says Dan=20 Reicher, the assistant secretary for energy efficiency and renewable energy= =20 under Clinton. "There are several thousand units of naval housing in Hawaii= =20 that are now using solar. They are being used at the Coast Guard Station in= =20 Boston, a post office in Nantucket." ?????Another dramatic project is underway in Nevada. Shortly before Clinton= =20 left office, his administration signed an agreement with a private consorti= um=20 to lease part of an old nuclear test site in the desert northwest of Las=20 Vegas as a giant wind power facility that would be the nation's second=20 largest. Eventually the site is expected to provide power for California an= d=20 Nevada and the Energy Department itself from 500 wind turbines. ?????President Bush hasn't tipped his hand entirely on leveraging governmen= t=20 buying power to boost renewables. Disturbingly, the national energy plan th= at=20 Bush released earlier this month says not a word about the use of governmen= t=20 procurement. But Jill Schroeder, an Energy Department spokeswoman, says the= =20 administration has indicated no intention to revoke the Clinton executive= =20 order--and the green power purchasing goal it includes. ?????As for the Sun Wall, Energy Department officials sound dubious--but th= ey=20 are reserving judgment until Wolf's firm completes its cost estimates. The= =20 cost could indeed be intimidating; even the Clinton team hadn't committed= =20 itself to construction. But such a strategic purchase can pay dividends for= =20 decades--a fact evident in the debt that everyone who uses a computer still= =20 owes to the critical investments NASA and the Defense Department made in=20 another technology 40 years ago. ---=20 ?????Ronald Brownstein's column appears every Monday.=20 Copyright 2001 Los Angeles Times=20 Suddenly, Dirty Old Coal Is the Fossil Fuel of the Future=20 Energy: The power crisis--and Bush's plan to deal with it--has lifted the= =20 mining lobby and the industry it promotes.=20 By GERALDINE BAUM, Times Staff Writer ?????WASHINGTON--The National Mining Assn. represents a fuel that many=20 Americans think went out with Charles Dickens. ?????Just last week, a California congressman's aide asked an association= =20 lobbyist wide-eyed: "Do we still use coal in this country?" ?????The answer is yes--and lots of it. More than half of America's=20 electricity is coal-fired, but polls show that most Americans don't know it= . ?????Considered the voice of coal in Washington, the mining association has= =20 been denigrated by critics as a venal hired gun for an industry that doesn'= t=20 give a whit about acid rain, global warming, black lung disease or slag hea= ps=20 that scar the land. The industry was under siege in the final years of the= =20 Clinton administration, when Washington launched an aggressive effort to ma= ke=20 owners of coal-fired power plants undertake expensive pollution control=20 improvements. ?????"It was like waking up every morning with a six-chamber gun pointed at= =20 your head, and each chamber contained a lethal bullet," said Thomas Altmeye= r,=20 the association's top lobbyist. ?????Suddenly, it's a new day for coal in America. That much became clear t= o=20 Altmeyer the other day as he found himself at the White House, where Vice= =20 President Dick Cheney personally briefed about 40 industry types on the Bus= h=20 administration's new energy plan. ?????"It was really nice to hear it from him," says Altmeyer.=20 ?????A lot has changed in the short time since George W. Bush beat Al Gore = in=20 West Virginia (and lots of other places), and California's power crisis=20 transformed dirty old coal into a fossil fuel of the future. ?????Now, when the mining association faxes position papers to the U.S.=20 Environmental Protection Agency, they are read. Now, when its lobbyists cal= l=20 over to the U.S. Interior Department with suggestions for job candidates,= =20 they talk with old friends occupying key positions. Now, those at the top= =20 don't need to be told that coal supplies more than half of America's=20 electricity: Bush comes from Texas, which uses more coal-fired power than a= ny=20 other state in the union; Cheney hails from Wyoming, the largest=20 coal-producing state. ?????When the Bush-Cheney team took over, mining association employees were= =20 invited to serve on transition teams. The White House had not had a new=20 occupant but two months before Bush reversed himself on carbon dioxide=20 emissions, deciding to forgo new rules on a gas that scientists say=20 contributes to global warming. Coal-fired power plants are a key source of= =20 the gas.=20 ?????Yet, like poor relatives who have finally been invited over for=20 Christmas dinner, the coal people are not quite comfortable with their=20 newfound popularity in Washington. When asked how it feels to go from class= =20 pariah to homecoming king, the best that Altmeyer and his boss, mining=20 association President Jack Gerard, can come up with is that they're, well .= .=20 . pleased. ?????But their friends know better: The chief of staff to a Southern=20 Republican senator said he saw the usually low-key, all-business Altmeyer a= t=20 an inaugural party in January. "He was downright elated," said the aide,=20 chuckling. ?????A coal-friendly Democratic senator slapped Altmeyer on the back at a= =20 fund-raiser recently and said, "Tom, I can't believe it, but we really have= =20 an opportunity to do something. All the liberal senators are running scared= =20 about this California energy crisis. Now they'll listen to us." The next da= y,=20 Altmeyer shipped him a list of suggestions to share with his liberal=20 colleagues. ?????"We're not going to waste this opportunity to educate people, no way,"= =20 says Altmeyer.=20 ?????The association's president, Gerard, 42, a native of Idaho and a forme= r=20 consultant to the mining industry, is not ready to celebrate. He is new at= =20 his job: He took over the NMA shortly before Bush took over the White House= ,=20 but he has been around mining long enough to remember other times when the= =20 industry was left for dead but rebounded with an energy crisis. ?????And so, he says, he is merely "cautiously optimistic." ?????"You might sense some excitement in the industry," he allows, "that we= =20 have a White House that recognizes the facts." He then rattles off a bunch:= =20 The U.S. has enough reserves in the ground to burn coal at its current rate= =20 for 250 years; since implementation of the 1970 Clean Air Act, coal use for= =20 electricity has tripled while emissions have dropped 30%. ?????"We play an important role in society and the White House knows it,"= =20 Gerard says. "Does that make us gleeful? Not necessarily." ?????Perhaps it's because coal is still a hard sell to many people.=20 ?????Gerard is the speaker at a conference of 400 scientists interested in= =20 "carbon sequestration," a theoretical solution to coal's contribution to=20 global warming. But he spends about half of his time attacking=20 environmentalists and saying things like, "California represents a failed= =20 experiment in energy policy." ?????When a professor takes issue with his combative "tone," Gerard smiles= =20 pleasantly. He is not fazed. On the cab ride back to his office, he explain= s,=20 "Look, the professor is looking for a technical paper. That's not what we d= o.=20 I'm trying to talk about what is at stake and the future." ?????In recent years, the NMA has tried to refashion its industry's dark=20 legacy and image. It spent less time calling scientific evidence against co= al=20 "bunk" and more time on the bandwagon to clean up three of the four main=20 pollutants caused by its use. And now coal-related businesses are trying to= =20 act like winners. Besides backing Bush's $2-billion plan for more "clean=20 coal" technology, they're spending $10 million of their own money on a=20 campaign to buff up their image.=20 ?????More than image-building, however, the real work of the mining=20 association these days is in the massive Capitol building and House and=20 Senate offices. There is where the administration's energy plan will be=20 fashioned into action; there is where the president's budget will buy the= =20 coal industry time to develop new anti-pollution technology; there is where= =20 they can get government to ease up. ?????Altmeyer is a tall, strapping fellow. But, although he was born in Wes= t=20 Virginia, he wasn't born to its coal. His father was an undertaker. ?????After earning degrees in law and business, Altmeyer went to work for t= he=20 late Democratic Sen. Jennings Randolph of West Virginia, and he got to know= =20 "lots of coal miners who were proud of what they're doing," he says.=20 ?????In the mid-1980s, he went with a trade association that evolved into t= he=20 NMA. He has spent most of his career shepherding companies through=20 anti-pollution legislation. ?????He can't quite abide the way coal is treated like a "black hat" in the= =20 media--even now. "You don't see banner headlines, 'U.S. has record coal=20 production in the year 2000, and we did it in a way much more environmental= ly=20 responsible.' " ?????Instead, he says, media reports emphasize renegade coal companies that= =20 break laws and exaggerated claims about climate change. ?????But coal has never been appealing to California, which uses very littl= e=20 coal-fired power because it's so dirty. California Resources Secretary Mary= =20 Nichols does not buy the coal lobby's Rodney Dangerfield act. ?????"They don't get no respect?" mocks Nichols, who ran the EPA's air and= =20 radiation department for President Clinton. "But they have over the years.= =20 We've spent billions trying to clean up coal. Nobody is suggesting we stop.= =20 But how much attention should it get as a fuel of the future? Not much,=20 because under any scenario, the cost of cleaning up carbon emissions and th= e=20 way it's mined is too high."=20 ?????Altmeyer is no fan of Nichols, either. It may be a new day, but the ol= d=20 battles remain fresh. ?????"It was like living in a banana republic with a dictator who made=20 arbitrary decisions," he says of the Clinton years. He won't even speculate= =20 what the industry would be facing if Gore had been elected president. "I=20 would have rather had Woody Allen in the White House." Copyright 2001 Los Angeles Times=20 Power Firm Chief Lists Solutions for Crisis=20 By KURT STREETER, Times Staff Writer ????? A Texas business executive whose company has profited enormously from= =20 California's energy crisis says California needs more deregulation, not les= s. ?????Kenneth Lay, the head of Houston-based Enron Corp., handed out a=20 four-page plan detailing his solution to California's energy crisis at a=20 meeting with Los Angeles Mayor Richard Riordan and other state business and= =20 political leaders at a Beverly Hills hotel May 17. ?????The report details several ways to solve California's energy crisis. ?????"Get deregulation right in California," it reads. "California never=20 deregulated. . . . There is more regulation than ever."=20 ?????Among the document's other points are calls for consumers to pay the= =20 billions of dollars in debt the state's public utilities have incurred, and= =20 an assertion that federal investigations into price gouging by private firm= s=20 such as Enron are contributing to the problems.=20 ?????Lay also suggests increasing conservation efforts, partly through=20 pricing that would cost consumers more for using electricity during peak=20 times. ?????Reached for comment, Steve Maviglio, a spokesman for Gov. Gray Davis,= =20 called the paper a "generator's wish list," saying it goes against the=20 governor's policy on the energy crisis. ?????"The governor is not calling off the dogs," Maviglio said Saturday. "T= o=20 suggest that ratepayers should shoulder the entire burden of deregulation i= s=20 totally the opposite of what the governor is calling for." ?????Lay, one of President Bush's biggest campaign contributors and a key= =20 advisor on the Bush energy plan, has built a powerful energy company by=20 buying electricity from generators and then selling it. Enron reported=20 first-quarter revenue of $50.1 billion, nearly a 281% increase over the sam= e=20 quarter last year.=20 ?????Lay met with Riordan and luminaries including actor Arnold=20 Schwarzenegger and financier Michael Milken--plus about a dozen others--at= =20 the Peninsula Hotel. ?????Enron spokesman Mark Palmer said: "Our position is simple." California= =20 needs to "increase the supply of energy and decrease the demand." --- ?????Associated Press contributed to this story.=20 Copyright 2001 Los Angeles Times=20 State Renews Demand for Power Price Relief=20 Energy: Officials ask FERC to reconsider ruling. Cheney reiterates oppositi= on=20 to caps.=20 By NANCY VOGEL and DAN MORAIN, Times Staff Writers ?????SACRAMENTO--California officials launched a full-scale formal effort= =20 Friday to persuade the federal government to act more forcefully to push do= wn=20 wholesale electricity prices, saying that existing plans have "utterly=20 failed." ?????At the same time, Vice President Dick Cheney strongly reiterated the= =20 Bush administration's opposition to any price caps. Price controls are "a= =20 mistake," he told a Washington audience. "It's not a solution; it's adding = to=20 the problem," he said. "There isn't anything that can be done short term to= =20 produce more kilowatts this summer." ?????State officials have repeatedly demanded price controls, only to be=20 rebuffed, and Cheney's remarks illustrate the depth of the administration's= =20 opposition to the idea. ?????But the politics of the energy crisis have changed since the last time= =20 the Federal Energy Regulatory Commission rejected broad price caps. The=20 Senate is about to move from Republican to Democratic control, giving=20 opponents of the administration's energy policies a much more potent=20 platform; the Senate has confirmed two new members to the five-member FERC;= =20 and the existing members of the commission have shown doubts about whether= =20 deregulation of energy prices is working. ?????Gov. Gray Davis described the state's actions--detailed in a set of=20 filings delivered Friday to FERC--as a "full frontal attack" on what he ter= ms=20 the commission's industry-friendly policies. ?????"This agency has failed its duties miserably," he said. "It's time for= =20 FERC to wake [up] and take action on a crisis that threatens our nation's= =20 economy." ?????With the governor's backing, the California Public Utilities Commissio= n,=20 California Independent System Operator and Electricity Oversight Board said= =20 FERC's actions to date have failed "to extinguish the fire that is rapidly= =20 consuming California's economy." They petitioned the commission to reconsid= er=20 its April 25 order to limit prices during power shortages in California. ?????A second petition asks the federal government to revoke the rights of= =20 Oklahoma-based Williams Cos. and Virginia-based AES Corp. to sell electrici= ty=20 at whatever price the market will bear. ?????The companies' right to do so was granted by FERC three years ago, whe= n=20 California opened its $28-billion electricity industry to competition, but= =20 that right has come up for renewal. State officials said they will similarl= y=20 challenge other power sellers, arguing that it is illegal for FERC to allow= =20 the companies to sell at whatever price the market will bear when the marke= t=20 is obviously broken. ?????The state's filings and the evidence about wholesale prices they conta= in=20 are sure to be fodder for Davis' scheduled meeting Tuesday with President= =20 Bush in Los Angeles. ?????California's petitions also come the day that Bush won Senate=20 confirmation of his two appointees to FERC. With the current members split = 2=20 to 1 on last month's FERC order, the new commissioners--Pat Wood III of Tex= as=20 and Nora Mead Brownell of Pennsylvania--would cast the deciding votes on=20 California's request for a rehearing. In their confirmation hearings, both= =20 Wood and Brownell expressed support for more aggressive federal efforts to= =20 protect California consumers. ?????Since last June, after prices began to soar in California's partly=20 deregulated electricity market, Davis has beseeched the federal agency to= =20 take swift action, including imposing price caps. The agency is charged by= =20 federal law with ensuring that prices for wholesale electricity are just an= d=20 reasonable. ?????But its commissioners have declined to cap prices across the West's=20 interconnected electrical transmission system. Instead, they have attempted= =20 to stabilize wholesale power costs through its April 25 order that would=20 limit how much power sellers can earn whenever California's reserves have= =20 slipped to 7% or less, which triggers what is known as a Stage 1 emergency. ?????But some economists have concluded that California's market is so flaw= ed=20 that sellers are able to boost prices even when electricity demand is not= =20 particularly high, such as at night or on weekends. ?????State officials have also faulted the federal plan for exempting=20 marketers--companies that trade electricity but do not generate it--from th= e=20 limited price caps. Such a loophole, they say, would allow power producers = to=20 escape the caps by making arrangements with marketers--a process called=20 "megawatt laundering." ?????"FERC's pricing plan is laced with loopholes," Davis said in a written= =20 statement. "It's simply a fig leaf that does nothing to address the impact = of=20 the energy crisis on California and our nation." ?????The state's filings homed in on wholesale electricity prices charged i= n=20 April, when electricity usage was down compared with that of a year earlier= .=20 Prices averaged $370 per megawatt-hour last month, significantly higher tha= n=20 those of January and February. (That's enough to supply 750 typical homes f= or=20 an hour.) ?????Officials with the California Independent System Operator, which manag= es=20 three-quarters of the state's electricity transmission grid, said they=20 measured greater manipulation of prices by power sellers in April than in a= ny=20 month since June 2000. ?????In 1999, the first full year of deregulation in California, wholesale= =20 electricity prices averaged $31 per megawatt-hour. By February of this year= ,=20 the average price had risen more than 700%, to $258 per megawatt-hour,=20 according to the state's filings. ?????Such prices have contributed to extraordinary profits for some=20 companies, including Williams, the state noted in its filings. ?????Williams reported first-quarter profit of $484 million in 2001, compar= ed=20 with $77.8 million for the same period last year. ?????"Frankly," the state charges, "it does not and should not require=20 detailed analysis by economists to recognize that the phenomenal transfer o= f=20 wealth is the product of supplier exploitation of the current market=20 situation." ?????Williams, which markets electricity produced by AES, was ordered April= =20 30 by FERC to refund $8 million in connection with allegations that power= =20 plants in Huntington Beach and Long Beach were improperly shut down to crea= te=20 scarcity that would boost prices. ?????The state filing asks FERC to set the prices Williams and AES can char= ge=20 based on what it costs to produce the power. ?????Representatives of Williams could not be reached for comment late=20 Friday, but AES spokesman Aaron Thomas said that stripping companies of the= =20 right to sell at whatever price the market bears would result in tremendous= =20 upheaval in California's power market. ?????In Washington, at a U.S. Chamber of Commerce energy conference, Cheney= =20 suggested that California officials were largely to blame for the state's= =20 energy problems.=20 ?????"They didn't address it soon enough," he said, referring to the power= =20 shortages. "They knew a year ago they had problems; they postponed taking= =20 action because all of the action was potentially unpleasant--[it] would hav= e=20 involved price increases, and so forth. ?????"The net result is, though, having postponed action and delayed, we're= =20 now in a situation where the prices [consumers pay] have to go up anyway;= =20 where, in effect, you're going to have blackouts this summer because even a= s=20 we had this flawed regulatory scheme, we've had demand grow in California= =20 with the economy, but no increase in power because nobody built a new plant= =20 out there for 10 years.=20 ?????"Long term, the answer is build more power plants, and that's exactly= =20 what they're doing," Cheney added. "But they're not going to have enough ne= w=20 capacity online this summer to be able to avoid blackouts." ?????Soaring market prices since May 2000 have financially crippled Pacific= =20 Gas & Electric and Southern California Edison, the state's two biggest=20 electricity utilities, which were forbidden by the state's deregulation pla= n=20 to pass on their higher costs to customers. ?????By mid-January, the utilities were so close to bankruptcy that power= =20 sellers refused to deal with them for fear of not getting paid. The state= =20 stepped in to buy electricity on their behalf and has so far committed $7= =20 billion from the general fund for such spending. ?????Even if it can't persuade FERC to reconsider its plan, the state could= ,=20 in effect, kill it outright. ?????Implementation of the plan is contingent upon the state submitting by= =20 June 1 a plan for joining a so-called regional transmission organization.= =20 FERC has made it a top priority to make the country's electricity system wo= rk=20 more efficiently and smoothly by linking operations through such regional= =20 organizations. ?????State officials said Friday they will decide next week whether to subm= it=20 such a plan to FERC.=20 Copyright 2001 Los Angeles Times=20 El Paso CEO Admits Approving Subsidiaries' Natural Gas Deal=20 By RICARDO ALONSO-ZALDIVAR, Times Staff Writer ?????WASHINGTON--The chief executive of a Texas energy company testified=20 Friday that he approved a controversial deal between two subsidiaries that= =20 critics allege contributed to Southern California's soaring natural gas=20 prices. ?????However, El Paso Corp. Chief Executive William A. Wise said he did not= =20 decree that El Paso Merchant Energy Group, which sells natural gas, enter= =20 into the $38.5-million deal with El Paso Natural Gas Co., which owns a majo= r=20 pipeline system. He also said he was unfamiliar with the details of=20 Merchant's bid for about one-third of the pipeline system's capacity. ?????"What I don't do is micromanage," Wise said under questioning by Judge= =20 Curtis L. Wagner Jr. in a trial-like hearing before the Federal Energy=20 Regulatory Commission. "I agreed we should go forward and bid on this=20 capacity . . . but I didn't direct them to bid or not to bid for it." ?????Describing his role in a meeting at which the plan was presented to hi= m,=20 Wise said, "I had no part in preparing for the meeting--I just showed up." ?????Wagner will now have to determine if Wise's role violated FERC rules o= n=20 arm's-length relationships within the same corporate family, essentially=20 circumventing federal policies to prevent pipeline companies from exercisin= g=20 monopolistic power. ?????The California Public Utilities Commission has alleged that El Paso=20 Merchant took advantage of the contract to withhold space on the pipeline,= =20 creating an artificial shortage that led to a price spike that raised=20 California's total energy costs by an estimated $3.7 billion. ?????El Paso counters that high prices are due to increased demand from pow= er=20 plants that burn natural gas, unusual weather and other factors--not market= =20 manipulation. They dismiss the $3.7-billion estimate. ?????Separately Friday, the Senate unanimously confirmed President Bush's= =20 nominations of Patrick Wood III and Nora Brownell to fill two empty seats o= n=20 FERC's five-member governing board. Wood, who heads the Texas Public Utilit= y=20 Commission, is widely expected to be named the next FERC chairman. The new= =20 board members are expected to bring a more activist style to the agency,=20 which functions like a national utility commission. ?????Also Friday, FERC issued a late-afternoon order clarifying technical= =20 details of its plan to keep California electricity prices in check during= =20 power emergencies this summer. The order addresses such issues as how to=20 compute a price for natural gas. ?????The El Paso case represents the closest yet to a trial of allegations= =20 that energy companies are manipulating the California market. Wagner, who i= s=20 FERC's chief judge, will render an initial decision to the agency's governi= ng=20 board, which has the power to order the return of ill-gotten profits. ?????Attorneys for the plaintiffs said Wise's testimony was important becau= se=20 it suggests an effort by a single corporate entity to use its subsidiaries = in=20 an end-run around FERC's system of checks and balances against monopoly pow= er. ?????"It shows it was a coordinated strategy at the highest levels of El Pa= so=20 Corp.," said Frank Lindh, a lawyer representing Pacific Gas & Electric, whi= ch=20 is one of the plaintiffs. ?????During his cross-examination, Lindh sought to emphasize that, as a=20 former executive of the pipeline company, Wise was intimately familiar with= =20 the workings of the industry and with federal curbs on monopoly power. Copyright 2001 Los Angeles Times=20 Police Support 48-Hour Alerts for Blackouts=20 Crisis: Law enforcement officials downplay crime fears, saying notice of=20 power outages will make their jobs easier.=20 By MITCHELL LANDSBERG, Times Staff Writer ?????Earlier this year, when widespread blackouts first began to roll their= =20 way across California, electric utility officials explained why they couldn= 't=20 give the public more than a few minutes' warning before pulling the plug. ?????Advance notice, they explained, would give the upper hand to criminals= ,=20 who could plan their day around out-of-service burglar alarms. ?????That was then. ?????This is now: On Friday, law enforcement officials throughout Southern= =20 California hailed a decision by Gov. Gray Davis to create an early-warning= =20 system that would give the public increasingly specific alerts during the 4= 8=20 hours leading up to a blackout. ?????"It's a huge improvement," Los Angeles County Sheriff Lee Baca said at= a=20 news conference, where he was joined by senior officials of the California= =20 Highway Patrol and the Los Angeles Police Department, among other agencies.= =20 The governor announced his plan Thursday. ?????The governor's plan was also endorsed by 35 police chiefs from=20 throughout Los Angeles County. The chiefs held their annual meeting Friday = in=20 Palm Springs. ?????Since the blackouts began, "one of the No. 1 issues has been the lack = of=20 notification," said Pasadena Police Chief Bernard Melekian, who is presiden= t=20 of the county police chiefs association. ?????What gives? What has changed since January, when officials from Southe= rn=20 California Edison insisted that they couldn't give more than five or 10=20 minutes' warning? ?????Richard Rosenblum, a senior vice president for Edison, said the utilit= y=20 had canvassed law enforcement officials earlier this year. "The general vie= w=20 at that time--and it certainly was not unanimous--was that for public safet= y=20 reasons, it would be better not to release that information." ?????Since then, he said, "there's been a good deal more thinking . . . and= =20 that view has changed." ?????Melekian (whose city is served by its own utility, not Edison) said he= 'd=20 heard that explanation before. ?????"I remember, when they were saying that, I had trouble finding anybody= =20 who had been canvassed," he said. "I certainly wasn't. Somebody may have=20 been." ?????Were police worried about looting and burglaries in a blackout? ?????"We never were worried about that," Melekian said. With blackouts=20 lasting only about an hour in any one place and always occurring during=20 daylight, "we haven't seen any crime issues emerge and we don't anticipate= =20 any." ?????Baca said he did have concerns, but they were erased Monday, when Davi= s=20 led a delegation of California officials to Chicago, where they met with=20 Mayor Richard Daley and top public safety officials to compare notes on the= =20 threat of crime during blackouts. Chicago has a plan in place for dealing= =20 with electricity outages by determining in advance which intersections and= =20 other public places should receive the most attention. ?????The Chicago officials told the Californians that public safety isn't= =20 jeopardized as long as law enforcement officials send forces to critically= =20 affected areas, Baca said. ?????"All of us were extremely relieved that . . . our fears about crime=20 increasing by advance notice are just totally unfounded," the sheriff said. ?????Baca said his department would be developing a plan for deploying=20 deputies when blackouts strike. Other agencies said they were doing the sam= e. ?????"We may contact businesses such as banks and jewelry stores, or any ty= pe=20 of businesses that the criminal type may target," said Lt. Clyde Stuart of= =20 the Huntington Beach Police Department. ?????Ventura County Sheriff Bob Brooks said he had been dreading this=20 summer's looming blackouts, but the 48-hour warning will make his job easie= r.=20 During the past few rounds of rolling outages, Brooks said he was notified= =20 just a few minutes before the power was yanked. ?????"There really wasn't time to do anything except shut our computers=20 down," he said. ?????Earlier this month, he met with several other sheriffs throughout the= =20 state to talk about how to cope with the power outages. "That was our No. 1= =20 priority--being able to have adequate time to mobilize," he said. "It was a= =20 good move on the part of the governor." --- ?????Times staff writers Anna Gorman in Ventura and Thuy-Doan Le in Orange= =20 County contributed to this story. Copyright 2001 Los Angeles Times=20 Outdoor Lights Still Burning=20 Energy: Despite threat of fines, few retailers are following order to cut= =20 usage in off hours.=20 By SARAH HALE, Times Staff Writer ?????It was almost midnight on auto row in Glendale recently, and although= =20 the car lots had been closed for nearly three hours, the lights still burne= d=20 brightly at Glendale Dodge, Guy Schmidt Cadillac and other dealerships alon= g=20 Brand Boulevard. ?????California regulators ordered retailers March 15 to cut their outdoor= =20 lighting in half during off hours, but so far it appears there is widesprea= d=20 disregard or ignorance of the plan, retailers acknowledge. Many auto dealer= s,=20 grocery stores and restaurants still keep the lights burning after hours. ?????Although the state order threatens retailers with fines of as much as= =20 $1,000 for disregarding the measure, no citations have been issued, accordi= ng=20 to state officials tracking the program. Police say they are paying little= =20 attention to the issue. ?????Despite that, Sheryl Tankersley of the Governor's Office of Emergency= =20 Services said she believes the program is working--even though she concedes= =20 there are no energy-use figures or other statistics to prove it. She also= =20 acknowledged that the state is at the mercy of local police to enforce the= =20 measure, who say they are more interested in fighting violent crime than=20 conservation scofflaws. ?????"It is our belief that the program is working," Tankersley said. "We= =20 assume businesses are complying. However, without law enforcement assistanc= e,=20 the order is difficult to moderate." ?????The energy conservation order by Gov. Gray Davis applies to all=20 California businesses, regardless of location or whether they are served by= =20 municipal utilities with power to spare. ?????In interviews, many business owners, including one of the Glendale car= =20 dealers whose lights were on after closing time, said they are complying wi= th=20 the law. ?????"Someone must have forgot [to turn off the lights]," said Myron=20 Grombacher, general manager of Glendale Dodge. "Or maybe the cleaning crew= =20 turned on the lights." ?????Some retailers say they've killed lights to save on energy bills, not= =20 for fear of being fined. Others say they were unaware of the rule or haven'= t=20 complied due to security concerns. The order applies only to "unnecessary"= =20 lighting, exempting lighting needed to protect workers, the public or=20 property. ?????"We understand the importance of turning off the lights, but we can't= =20 afford to black out the lot," said Bill Jaros, with Guy Schmidt Cadillac.= =20 "Theft is a problem and that's just as costly." ?????Glendale isn't alone--bright lights can be seen after midnight at car= =20 dealerships throughout the area, including lots in Van Nuys and Thousand=20 Oaks. After-hours lights also were spotted this week at a Smart & Final in= =20 Venice, a lamp store in Studio City and a Goodyear Tires store in Westwood,= =20 where the manager said the lights stay on till 3 a.m. ?????"We are obligated to the corporate office to keep our lights on," said= =20 the tire store manager, who would not give his name. "We do what they tell= =20 us. I didn't even know a fine could be issued." ?????In San Francisco's Union Square, retailers and restaurants also keep= =20 their windows lit long after closing time, according to area merchants. ?????"If stores are cutting back, I haven't noticed. The heart of Union=20 Square looks the same. Everything is bright, everything is on," said Brando= n=20 Koehl, manager of the Williams-Sonoma housewares store near Union Square. ?????The light-reduction order, signed by Davis on Feb. 1, called on "all= =20 California retail establishments" to "substantially reduce maximum outdoor= =20 lighting capability during nonbusiness hours." In a directive one week late= r,=20 the governor's office defined substantial as a 50% reduction in electrical= =20 power consumed--allowing retailers to meet the rule by either turning off= =20 lights or cutting the wattage. ?????Law enforcement honchos, including Los Angeles County Sheriff Lee Baca= ,=20 promised to enforce the measure at a Feb. 1 news conference with Davis. Sin= ce=20 then, police have expressed confusion about the 50% rule and whether cities= =20 such as Glendale and Los Angeles that have been spared from blackouts must= =20 comply. ?????Los Angeles County Sheriff's Deputy David Cervantes said his agency is= =20 focused on street crime, not store lights. ?????"We aren't issuing citations," Cervantes said, although he said that= =20 deputies have issued a few warnings to businesses that appeared to be in=20 violation. ?????Glendale Police spokesman Sgt. Rick Young said the late-night bright= =20 lights at the Brand Boulevard car dealerships aren't his problem. "We don't= =20 believe this is a police matter," Young said. "What do police officers know= =20 about monitoring energy use?" ?????(This week, after calls to Glendale city officials and car dealers, mo= re=20 lights appeared to be off along Brand Boulevard after hours.) ?????Norman Williams of the state Technology, Trade and Commerce Agency,=20 which was asked by Davis to help implement the order, said he was=20 disappointed to learn that police departments have been reluctant to devote= =20 resources to the issue. ?????"We need them to help us," Williams said. ?????Richard Giss, a retail analyst with Deloitte & Touche in Los Angeles,= =20 said many store managers may be unaware of the rules or are unable to easil= y=20 curtail power usage. ?????"Most retailers aren't scofflaws," Giss said. "Some may face issues th= at=20 aren't apparent on the surface. . . . There isn't always a switch that turn= s=20 off all the lights. It's not that easy." ?????Bob Israel, co-owner of Hungry Al's Bar-B-Que in West Covina, said the= =20 $1,000 fine didn't scare him into trimming his energy use. His monthly $500= =20 to $600 utility bills were a bigger threat. Israel raised his food prices a= nd=20 began to limit employee hours, but the high energy costs still were too muc= h. ?????He said he can't afford to turn on the restaurant's air conditioning= =20 this summer, when he expects his bill to approach $1,000. And the illuminat= ed=20 sign in front of Hungry Al's now goes off at 11 p.m. instead of staying on= =20 all night. "We've always left our outdoor lights on. We want people to see= =20 us. It just wasn't feasible anymore. The governor has nothing to do with it= ." ?????The bottom line also influenced Edwards Cinemas' energy conservation= =20 efforts, which have been implemented at the company's 55 California locatio= ns=20 since last summer. Illuminated theater displays and marquees go off when th= e=20 last show begins, rather than when it ends, saving the company about two=20 hours of energy use. Kevin Frabotta, vice president of theater operations,= =20 said the company has focused on long-term methods as well, including=20 electrical rewiring and using of more cost-efficient bulbs. ?????"It's an expensive transition," he said. "But we'll save money in the= =20 long haul." ?????Other local businesses have used the governor's order as a marketing= =20 tool, pushing the sale of energy-efficient products such as motion detector= s,=20 ceiling fans, weather stripping and improved windows. Home Depot, which=20 unveiled a hefty conservation plan in January, said it is important for=20 customers to see conservation products in action. ?????After rolling blackouts started sweeping the state, sales and interest= =20 in these items increased, said Chuck Sifuentes, company spokesman. Home Dep= ot=20 added a special section to its catalog devoted to energy-related tips and= =20 merchandise. ?????"It's important to lead by example," Sifuentes said. "If we cut back,= =20 the customers will cut back. They'll want to buy our products." Copyright 2001 Los Angeles Times=20 Businesses Hopeful on Blackout Warnings=20 Power: But some leaders worry that early outage notification won't be=20 accurate.=20 By MARLA DICKERSON, Times Staff Writer ?????Frustrated at being left in the dark about rolling blackouts, Californ= ia=20 business leaders expressed optimism Friday that a proposed early warning=20 system will help minimize the economic damage of power outages on the state= 's=20 industries. ?????Gov. Gray Davis ordered state officials Thursday to begin warning=20 residents and businesses of likely power outages up to two days in advance= =20 when power supplies appear scarce. Given the fluid nature of the state's=20 electricity grid, which can see its supplies swing from abundant to=20 inadequate in a matter of minutes, some of those predictions could prove=20 about as useful as a weather report six months in advance. ?????But business advocates say any information is better than no informati= on=20 when it comes to avoiding outages. ?????"Businesspeople are accustomed to assessing risk," said Jack Stewart,= =20 president of the California Manufacturers and Technology Assn. "We need to= =20 give them the best available information, as far ahead as possible, and let= =20 them make their own decisions." ?????Under Davis' order, blackouts will be issued under a three-tiered syst= em=20 beginning with a forecast 48 hours in advance of a projected electricity=20 shortfall. ?????General geographic areas to be blacked out will be identified in=20 warnings issued 24 hours before likely outages. Precise locations will be= =20 announced an hour before the power is cut. ?????Details are still being worked out, but the idea is to use data such a= s=20 weather patterns and scheduled power plant shutdowns to make the longer-ran= ge=20 projections. Information about communities and specific block numbers to be= =20 interrupted will be provided closer to the projected outages, as real-time= =20 usage and supply information becomes available to the grid operator. ?????Plans call for notifying electricity customers through a variety of=20 means, including the news media, the California Independent System Operator= =20 (Cal-ISO), utility Web sites and a proactive system being developed by=20 Cal-ISO to phone, page, fax or e-mail individual power users. Agency=20 officials say they plan to implement the governor's order by June 15. ?????Business interests have been beating the drum for early warning since= =20 the first rolling blackouts walloped companies last summer. Though resident= s=20 might find it inconvenient to have their dishwashers turned off, a sudden= =20 outage can wreak havoc on a company if an assembly line freezes or a comput= er=20 system crashes. ?????The stakes are enormous. A Silicon Valley business group estimated tha= t=20 a single blackout last June resulted in losses of $100 million for that=20 region's companies because of forfeited sales, squandered productivity,=20 wasted wages and ruined products. ?????A study released this month by a California business consortium=20 estimated that a projected 30-plus days of summer blackouts could cost stat= e=20 businesses $21.8 billion, reduce household income by $4.5 billion and resul= t=20 in 135,000 lost jobs. ?????Julie Puentes, a spokeswoman for the Orange County Business Council,= =20 said the governor's plan is consistent with what businesses have been=20 demanding. "If they can do this, companies will be able to use the backup= =20 generation that they've paid hundreds of thousands of dollars for," she sai= d.=20 "They will be able to prevent chaos for their workers, and they'll be able = to=20 maintain their business operations, which benefits the California economy." ?????The president of Aluminum Precision Products in Santa Ana, which has= =20 four manufacturing plants in Orange County, was equally enthusiastic. ?????"You have no idea what help [the warnings] would be," Philip S. Keeler= =20 said. "In our particular case, because of the heavy equipment, this could b= e=20 the difference between life and death, and I'm very serious. It will help= =20 tremendously." ?????Others are skeptical. ?????James Swartwout, chief executive of Torrance-based Summa Industries,= =20 said he's not counting on the system to protect his molded plastics=20 manufacturing company. ?????"How can they say with certainty that a blackout will occur?" Swartwou= t=20 asked. "It's my understanding that they have no real way of knowing until t= he=20 very last minute. Eventually, we'll get two or three warnings a week. I can= 't=20 promise we won't start to ignore them." ?????Indeed, while early warning sounds good in theory, implementing it is= =20 another story. The utilities long resisted such a system because they often= =20 get only a few minutes' notice from Cal-ISO, which in turn often isn't able= =20 to project a shortfall with absolute certainty until it is almost upon them= . ?????One of the big concerns with early warning is that it simply won't be= =20 accurate. Cal-ISO board member Mike Florio, a consumer advocate, said he=20 worries about crying wolf. ?????"After the third or fourth or 10th time," Florio said, "people start t= o=20 say, 'They're always calling these things, and nothing ever happens.' " ?????But board member Carl Guardino, who also is head of the Silicon Valley= =20 Manufacturing Group, sees that as a strength rather than a weakness of the= =20 program. ?????He said early warning will prompt businesses to redouble their=20 conservation efforts, which could help stave off many of the projected=20 blackouts. ?????"That's not crying wolf; that's popping the champagne," Guardino said.= =20 "Preventing blackouts from happening in the first place is precisely what w= e=20 want." --- ?????Times staff writers Sarah Hale, Leslie Earnest and Nancy Vogel=20 contributed to this report. Copyright 2001 Los Angeles Times=20 Power Crisis Has Mileage for Bush=20 By ROBERT SCHEER ?????The Bush administration is pulling a fast one on energy, and we will a= ll=20 pay dearly for decades to come. By panicking the public with oil industry= =20 propaganda of an energy shortage, the Bushies are building support for the= =20 most reckless energy policy since the days before the environmentalist=20 movement, when blackened skies and lungs represented the vision of progress= .=20 ?????To make things worse, to head off objections to their plans to plunder= =20 virgin lands and obliterate conservation measures, they have thrown in as a= =20 palliative the old oxymoron of "clean" nuclear power.=20 ?????Of course there is nothing clean about nuclear waste, which can never = be=20 rendered safe.=20 ?????The public may temporarily accept new nuclear power plants, as long as= =20 one is not built anywhere near their neighborhood and the radioactive=20 byproduct is shipped to another part of the country.=20 ?????But trust me, while these things may be better designed today, the=20 insurance companies are no dummies for still refusing to insure nuclear pow= er=20 plants. It is wildly irresponsible for the Bush administration to now insis= t=20 that U.S. taxpayers underwrite these inherently dangerous ventures.=20 ?????Does anyone even remember Three Mile Island? Or, more disastrously,=20 Chernobyl? I was the first foreign print journalist admitted to the Chernob= yl=20 plant after the explosion. Even a year after the fact, and with the benefit= =20 of the best of Western scientific advice, it was still a scene of chaos.=20 Nuclear power is like that--unpredictable, unstable and ultimately as=20 dangerous as it gets.=20 ?????The entire Chernobyl operation is now buried in a concrete-covered=20 grave, but the huge area under the radioactive plume emitted from the plant= =20 is a permanent cancer breeding ground, as is the sediment in the area's mai= n=20 rivers and throughout much of its farm land. I traveled from Moscow to=20 Chernobyl by train in the company of top U.S. and Soviet experts, but even= =20 they seemed to feel lost and frightened as they donned white coats and Geig= er=20 counters to tour Chernobyl. Nuclear power is just too risky a gamble to pus= h=20 because of a phony energy crisis.=20 ?????The desperation in the White House is palpable, but it is not over an= =20 "energy crisis," which Bush's buddies and campaign contributors manipulated= =20 in the Western electricity market.=20 ?????No, the fear of the Bush people, even before Jim Jeffords' defection,= =20 was that their political power would be short-lived and that they had best= =20 move as fast as possible on their pet projects, beginning with increasing t= he=20 profits of GOP energy company contributors.=20 ?????Why else the panic? There is no sudden energy crisis. Known world=20 reserves of fossil fuel are greater than ever, alternative energy sources a= re=20 booming, and conservation measures work. If the Federal Energy Regulatory= =20 Commission would do its legally required duty of capping wholesale prices t= o=20 prevent gouging, there would not be an electricity crisis in California or= =20 elsewhere.=20 ?????The FERC has not done its job. Clearly, as the New York Times reported= =20 last week, energy wholesalers are in cahoots with the Bush administration t= o=20 use the FERC as their personal marketing tool to drive up their already=20 obscene profits.=20 ?????Finally, there is simply no reason to rape America in pursuit of=20 something called "energy self-sufficiency." If the vast reservoirs of natur= al=20 energy resources--resources that are sitting under land controlled by regim= es=20 around the world that we've propped up at enormous military cost for half a= =20 century--are not available to be sold to us at a fair price, why continue t= o=20 prop up these regimes? What did President Bush's Dad, with his buddies Dick= =20 Cheney and Colin Powell, achieve in preserving Saudi Arabia and Kuwait if= =20 those degenerate monarchs they saved in the Gulf War will not now trade=20 fairly in the one commodity of value that they hold?=20 ?????We must make our quid pro quo clear: We will pay for a huge military t= o=20 keep these sheikdoms and other energy-rich regimes in power only if they=20 guarantee fair oil and natural gas prices for our retail consumers.=20 ?????Make that deal and the energy "crisis" is history.=20 - - - Robert Scheer Writes a Syndicated Column Bush announcing low-income aid, but no price caps=20 SCOTT LINDLAW, Associated Press Writer Tuesday, May 29, 2001=20 ,2001 Associated Press=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2001/05/29/n= ation al0755EDT0488.DTL=20 (05-29) 04:55 PDT LOS ANGELES (AP) --=20 President Bush traveled across the country to deliver news Gov. Gray Davis= =20 doesn't want to hear: He won't force down soaring electricity prices that= =20 have cost California nearly $8 billion since January.=20 The Republican president and the embattled Democratic governor arranged a= =20 20-meeting Tuesday to talk about California's energy crisis, but there was = no=20 indication they would break their stalemate.=20 Bush opposes price limits on wholesale electricity that utilities buy,=20 arguing they do nothing to address supply-and-demand issues at the heart of= =20 the crisis.=20 Davis contends federal energy regulators are ignoring their mandate to ensu= re=20 "just and fair" electricity prices.=20 With no sign of a break in the deadlock, each side maneuvered for maximum= =20 advantage from Bush's first full day in California as president.=20 Davis, in an interview Tuesday on ABC's "Good Morning America," defended hi= s=20 record on licensing more power plants.=20 "We've licensed 15 plants. Ten are under construction, four will be online= =20 this summer, four next summer, and by the end of 2003 we will have built ou= r=20 way out of this problem. But between now and then, we are getting gouged=20 unbelievably," Davis said.=20 The Bush administration timed positive energy announcements to coincide wit= h=20 the president's visit.=20 At the Marine Corps base at Camp Pendleton, Bush was announcing the expansi= on=20 of a program that provides federal money to help low-income residents pay f= or=20 power.=20 Bush was proposing $150 million, in addition to $300 million already budget= ed=20 for a component of the Low Income Home Energy Assistance Program, to provid= e=20 special help to cash-strapped residents of California and certain Midwest= =20 areas such as Chicago, a senior administration aide said.=20 Bush was also reminding state residents of his order that military faciliti= es=20 in the state cut peak-hour usage by 10 percent.=20 To alleviate an electricity bottleneck on a crucial south-north transmissio= n=20 path, the Department of Energy announced that the Western Area Power=20 Authority will try to raise money from a variety of private and public=20 entities to finance a crucial additional lines.=20 "The Bush administration is taking a leadership role in addressing a=20 long-neglected problem in California's electricity transmission system," sa= id=20 Energy Secretary Spencer Abraham. "California's electricity problems=20 developed over a period of years and cannot be solved overnight. However, w= e=20 can move now on actions that will help avert the same types of problems fro= m=20 recurring year after year."=20 Davis had a letter for Bush from top economists who maintain price caps are= =20 justified and necessary.=20 Aides to the governor expressed amazement that Bush would travel all the wa= y=20 to California with no major announcement in hand, and predicted Davis would= =20 respond with "polite rage."=20 Mindful of the national stage he commanded, Davis planned a news conference= =20 to air his grievances. And he convened a panel of families he said have bee= n=20 victimized by the energy crisis in the same hotel where Bush was staying.= =20 Davis wants Bush to pressure the Federal Energy Regulatory Commission to=20 impose stiff price caps.=20 Tuesday, limited caps ordered last month by FERC go into effect in=20 California, but only when electricity reserves fall below 7.5 percent in th= e=20 state -- a step Davis called inadequate.=20 Protesters planned demonstrations in Los Angeles and at Camp Pendleton, in= =20 San Diego County.=20 Bush also arranged a speech on energy and trade to the Los Angeles World=20 Affairs Council and planned to president over a closed-door energy=20 round-table discussion.=20 ,2001 Associated Press ?=20 Bush facing Davis' heat over energy=20 In first visit to state as president, he'll hear governor's plea for help= =20 Carla Marinucci, Lynda Gledhill, Chronicle Political Writers Tuesday, May 29, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/05= /29/M N205743.DTL=20 President Bush wasn't on California soil for more than five minutes yesterd= ay=20 when he was drawn into his first debate on the state's power crunch.=20 Rep. Brad Sherman, a Democrat from Thousand Oaks who met Air Force One on t= he=20 tarmac at Los Angeles International Airport along with a group of high scho= ol=20 students, wasted no time button-holing the president for what appeared to b= e=20 an animated conversation.=20 "I brought up . . . the idea that after his meeting with our governor, I=20 hoped he would be in favor of wholesale regulation (of energy prices),"=20 Sherman said later. "He disagreed with me."=20 Sherman -- who two weeks ago suggested that the headline to the president's= =20 national energy policy should be "Bush to California: Drop Dead" -- didn't= =20 seem optimistic yesterday about Bush's 48-hour visit to the state. "I think= =20 that the president's policies show either a lack of understanding of what's= =20 really going on in California, or a lack of concern," he said.=20 That vignette underscored some of the challenges facing Bush, who arrived i= n=20 California as protesters geared up and Democratic Gov. Gray Davis prepared = to=20 press him for federal action on the state's power troubles.=20 Besides Sherman, Bush was greeted by a crowd of cheering Republicans,=20 including Secretary of State Bill Jones and Los Angeles Mayor Richard=20 Riordan, the former a declared GOP candidate for governor in 2002, the latt= er=20 a rumored one.=20 But today, Bush will sit down with the present governor, who lately has bee= n=20 blistering in his criticism of the president.=20 "The last time I looked, California was still part of the United States of= =20 America," Davis told reporters this weekend. "We have contributed=20 disproportionately to the economic growth of this country. There's no reaso= n=20 why a president should not respond to a legitimate request from the chief= =20 executive of the largest state in the union."=20 In his first visit to California since just before the election, Bush plans= =20 to emphasize the energy crisis -- but will focus on it through the lens of= =20 his own energy plan.=20 ENERGY SECRETARY ACTS Just hours before the president landed, Energy Secretary Spencer Abraham=20 ordered a speedup in planning to relieve a notoriously overloaded electrici= ty=20 transmission line in California.=20 Abraham's holiday action was timed to provide a bit of positive news for Bu= sh=20 to announce in California. He ordered the Western Area Power Administration= ,=20 a 15-state marketing arm of the Energy Department, to complete planning and= =20 seek outside financing to reduce the transmission bottleneck on California'= s=20 Path 15, which connects the northern and southern parts of the state.=20 This morning, Bush will visit the Marine Corps base at Camp Pendleton, near= =20 San Diego, to underscore his conservation order for a 10 percent cut in=20 energy usage in federal buildings and military facilities.=20 In Los Angeles, he will deliver a wide-ranging talk before the World Affair= s=20 Council and lead a discussion among business leaders about technological=20 advances in energy conservation.=20 Then, he will head to Fresno and Sequoia National Park to press his=20 initiative to improve national parks. Along the way, protesters have vowed = to=20 provide a vocal commentary on Bush's energy and environmental policies.=20 But the real drama of the trip will no doubt be the sit-down between Bush a= nd=20 Davis today. The governor pushed for a lengthy, open meeting with Bush that= =20 would include testimony from officials and consumers affected by the energy= =20 crisis. Bush's camp announced Friday the meeting would be 20 to 30 minutes = --=20 in private.=20 Davis plans to outline steps the state has taken to alleviate the energy=20 crisis, and what it wants the federal government to do -- including=20 implementing price caps on the wholesale cost of energy, cost-based pricing= ,=20 and the possibility of ordering refunds.=20 DAVIS THREATENING SUIT The governor has said he will consider suing the Federal Energy Regulatory= =20 Commission -- the agency charged with overseeing energy prices -- if it doe= s=20 not impose temporary price caps.=20 And the state Legislature has already filed a suit, saying the commission h= as=20 failed to stop what it has determined are "unjust and unreasonable prices."= =20 With California's energy woes worsening and a summer of rolling blackouts= =20 predicted, the Bush-Davis session holds potentially deep political pitfalls= =20 for both leaders, both of whom are suffering in state polls as a result of= =20 their handling of the energy crisis.=20 Bush needs to demonstrate his concern for California, a state that gave a= =20 12-point margin of victory to Al Gore in the presidential election.=20 But even as Bush adviser Karen Hughes told state reporters this week that t= he=20 president had arrived to show he cares, Vice President Dick Cheney again=20 chastised state officials for delaying their response to the energy crisis= =20 "because all of the action was potentially unpleasant."=20 And Cheney signaled that the administration would resist long-term price=20 caps, saying, "We think that's a mistake."=20 Such talk drew fire from Davis' senior political adviser, Garry South, who= =20 charged that Cheney's words demonstrated insensitivity to California's=20 troubles and only underscored the perception of an "all-oil, all-the-time= =20 ticket."=20 Davis, whose campaign for re-election next year will depend on his handling= =20 of the crisis, has stepped up his criticism of Bush and profit-hungry energ= y=20 firms, particularly those from Texas, in recent weeks.=20 And yesterday, signaling no letup, Davis' supporters made an unusual holida= y=20 conference call to again press his case for federal action. They argued tha= t=20 without immediate intervention from the Bush administration, the economy of= =20 California -- and potentially the entire nation -- was at risk.=20 'THIS ENORMOUS SHOCK'=20 "We have this enormous shock in prices that needs to be addressed and not= =20 ignored," said Joseph Fichero, head of Sabre Partners and a consultant to= =20 Davis.=20 Alan Blinder, a Princeton economist and former vice chairman of the Federal= =20 Reserve, warned that energy woes in California alone would "take almost a= =20 half a percent of the gross domestic product off of the national economy."= =20 Blinder and others argue that short-term relief -- for about 6 to 12 months= =20 -- is necessary while new power plants are being built.=20 "Most times and most places, I agree price caps are not the long-run=20 solution, but they can be part of a short-term solution," Blinder said.=20 "There really is a case for temporary price caps to shield consumers and th= e=20 California and national economy from the full force of the energy shock."= =20 Limited new price caps approved by the Federal Energy Regulatory Commission= =20 on the sale of wholesale electricity begin today in California. But the=20 temporary caps, which go into effect when the electricity reserves dip belo= w=20 7. 5 percent, have been lambasted by Davis as ineffective and inadequate.= =20 Political analysts say Bush's resistence on the issue could cost him in=20 California -- and elsewhere.=20 "(California) is probably an area where he is criticized more than any othe= r=20 region in the country," said Mark DiCamillo, director of the statewide Fiel= d=20 Poll. "Californians are looking to Bush for some relief -- and to the exten= t=20 they don't get it, Bush may be in some jeopardy here."=20 Chronicle news services contributed to this report. / E-mail the writers at= =20 [email protected] and [email protected].=20 ,2001 San Francisco Chronicle ? Page?A - 1=20 Bush's first visit not so welcome=20 Medea Benjamin Tuesday, May 29, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/05= /29/E D10936.DTL=20 THIS WEEK, President Bush is making his first visit to California at a time= =20 when consumers have been socked with hefty electric rate increases, and $70= =20 million is being drained from our state budget each day as we buy wholesale= =20 energy at outrageous prices.=20 If Bush were serious about helping Californians, he would immediately tell= =20 the Federal Energy Regulatory Commission, FERC, to do its job. FERC's legal= =20 mandate is to ensure that wholesale electricity prices are "just and=20 reasonable." But current wholesale prices are not just and reasonable, and= =20 they are completely divorced from costs.=20 FERC has been ideologically fixated on the free market while ignoring the= =20 reality that companies controlling California's energy supply are=20 manipulating the market to make obscenely high profits at our expense.=20 During the past several months, the news media have unveiled how generators= =20 are turning power plants on and off as often as several times an hour; taki= ng=20 plants off line for "unscheduled maintenance," and simply refusing to sell= =20 California power. Investigators have determined that these energy companies= =20 have deliberately gouged consumers to the tune of billions of dollars.=20 State Senate figures show that profits of these energy companies rose more= =20 500 percent between 1999 and 2000.=20 If President Bush wanted FERC to control wholesale prices through a system = of=20 cost-plus pricing, it would happen overnight.=20 When it comes to long-term solutions, Bush's energy policy dangerously=20 promotes a continued reliance on polluting fossil fuels and a resurgence of= =20 unsafe nuclear energy. Bush pays lip service to smart, sustainable solution= s=20 such as solar, wind and other sources of renewable energy, and to energy=20 savings derived from conservation and improved efficiency.=20 Technologies proven to be dirty, dangerous and expensive will get the lion'= s=20 share of taxpayer subsidies, while the 2002 federal budget slashes funding= =20 for solar research by more than 50 percent, with major cuts in funding for= =20 geothermal, hydrogen and biomass technology, and fuel cell research.=20 If the Bush administration were to make sustainable energy sources a=20 priority, technologies such as wind, solar and some types of biomass could= =20 solve our long-term energy needs. While such a policy is anathema to oil,= =20 coal and utility industry leaders, it is central to any forward-looking=20 energy strategy.=20 The sensible responses to the energy crisis are clear: Control prices now a= nd=20 rely on renewable energy and conservation in the future.=20 It is up to us to let the president know he can't kowtow to the energy=20 industry interests. Hopefully, he'll respond to the angry Californians he= =20 will hear this week.=20 Medea Benjamin is founding director of Global Exchange, a San Francisco=20 corporate accountability organization.=20 ,2001 San Francisco Chronicle ? Page?A - 19=20 Californians revert to clotheslines, fans as they gear up for blackouts=20 MARGIE MASON, Associated Press Writer Tuesday, May 29, 2001=20 ,2001 Associated Press=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2001/05/29/n= ation al0338EDT0451.DTL=20 (05-29) 00:38 PDT OAKLAND, Calif. (AP) --=20 Paul Goettlich's condo in the Oakland hills features vaulted ceilings and= =20 skylights, a sweeping view of San Francisco's bay and state-of-the-art=20 appliances.=20 But with the power crisis in full tilt, his dryer sits unused while he hang= s=20 clothes, sheets and towels on a wooden rack in the garage.=20 "Maybe somebody doesn't want to see somebody else's underwear or bras hangi= ng=20 out," Goettlich says. "But, hey, that's life."=20 As the state gears up for rolling blackouts and hefty energy bills this=20 summer, many Californians are changing their habits. The result: surging=20 sales of everything from low-energy light bulbs to fans to evaporative=20 coolers that blow misty air.=20 The Orchard Supply Hardware store a few miles down the road from Goettlich'= s=20 condo is having a hard time keeping clotheslines and retractable drying rac= ks=20 in stock.=20 At The Home Depot store in Colma, about 10 miles south of San Francisco,=20 energy-efficient compact fluorescent light bulbs are hot sellers, along wit= h=20 a $40 device called a Power Planner that's said to cut energy use by=20 appliances like refrigerators.=20 At the Wal-Mart in the Southern California suburb of Brea, customers are=20 buying blackout supplies along with fans and low-energy light bulbs.=20 Flashlights, camping lanterns and oil lamps are popular, according to manag= er=20 Rebecca Smith.=20 "We've quadrupled our fan sales this year, and it's not even summer," Smith= =20 said. "It doesn't seem to matter what kind. People are buying all of them."= =20 The rolling blackouts are proving a retail bonanza for some out-of-state=20 companies, like St. Louis-based Emerson, which is selling twice as many=20 ceiling fans in California than in any other state.=20 "They're energy efficient and use less electricity than a 100-watt bulb,"= =20 explains Emerson spokesman Walt Sharp. "They can make a room feel about sev= en=20 degrees cooler without air conditioning by circulating the air. They can sa= ve=20 up to 40 percent when used with air conditioning."=20 Industrial-sized floor fans -- used in manufacturing areas and large=20 warehouses -- also are a hot commodity in California, he said.=20 At Walnut-based Lights of America, sales of energy-efficient compact=20 fluorescent bulbs have increased 700 percent since last year. And with stat= e=20 rebates and incentives for consumers to switch to the new bulbs, sales are= =20 expected to continue soaring, said Brian Halliwell, vice president of=20 marketing sales.=20 Most bulbs average from $6 to $10, with 50-watt compact fluorescent bulbs= =20 providing the same amount of light as 300-watt halogens, Halliwell said.=20 Shopping the light bulb display at The Home Depot in Colma, Linda Shintaku= =20 said she's exploring all her options for conserving energy this summer.=20 "We lowered the thermostat, and we're trying not to turn lights on in rooms= =20 we're not in," Shintaku said. "I try to wash clothes at night during low-pe= ak=20 hours."=20 Energy experts note that homeowners can make the biggest dent in their powe= r=20 bills by switching to more efficient models of major appliances.=20 But despite the advice and an array of rebate programs, Home Depot manager= =20 Benefield says consumers aren't yet flocking to replace energy-sucking=20 appliances like refrigerators and dishwashers. People who are in the market= =20 for big appliances ask about the government's Energy Star ratings, which=20 bring rebates of up to $75, he noted.=20 The new vogue for conservation has some ecology-conscious Californians=20 shaking their heads. Berkeley resident Leona Benten has been hanging her=20 clothes outside to dry long before the power crisis came along and she's=20 hoping the energy crisis will push others to change their habits and their= =20 attitudes.=20 "It takes like two minutes," Benten said. "I think that people have succumb= ed=20 to incredible amounts of advertisements, and if it's mechanized, it's=20 better."=20 Crisis no sweat to some offices=20 Many offices keep cool in crisis=20 Air conditioners blast in state's energy centers=20 Steve Rubenstein, Chronicle Staff Writer Tuesday, May 29, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/05= /29/M N208422.DTL=20 Some very cool places to be during the dog days of spring and summer turn o= ut=20 to be the places with their fingers on California's air conditioning switch= .=20 If only the entire state could cram itself into the cavernous control room = in=20 Folsom of the Independent Systems Operator, where the air is a comfortable = 69=20 degrees and receptionists wear sweaters at high noon -- when it's upwards o= f=20 90 degrees outside.=20 Or the Pacific Gas and Electric Co. lobby in downtown San Francisco, where= =20 the air is an even chillier 65 degrees, which admittedly isn't much of a=20 bounty, considering it's usually that cool outside anyway.=20 Other cool places to be are the state Capitol, where legislators who=20 promulgate energy edicts hang out, and the headquarters of the state Public= =20 Utilities Commission, where bureaucrats who promulgate energy edicts hang= =20 out.=20 Armed with a high-tech digital thermometer, The Chronicle made the rounds o= f=20 the energy crisis poohbahs, to make sure they are practicing what they are= =20 preaching.=20 Some were, some weren't. Those that weren't blamed it all on that most=20 familiar of modern scapegoats, the computer.=20 Computers must be kept cool -- in the 60s for big mainframes and a bit more= =20 for the smaller units most folks use, though some can go into the 80s witho= ut=20 hiccuping. So generally, people who work alongside the computers get to kee= p=20 cool, by association, although it's the computer that counts.=20 The ISO headquarters, located in an industrial park 20 miles east of=20 Sacramento, is a delightfully cool and comfortable place when the outside= =20 temperature soars into the 90s and 100s.=20 The reception area, the only room accessible to the outraged public, is a= =20 fairly stiff 76 degrees -- only two degrees cooler than the 78 degrees=20 recommended by President Bush and the federal energy crisis czars and=20 czarinas.=20 But take a step past the lobby security doors and the temperature plummets.= =20 In the main hallway, the temperature is 73 degrees. And in the control room= ,=20 where two dozen engineers and technicians sit at consoles and monitor the= =20 flow of California electricity on a giant diagram of state power lines so= =20 they can order blackouts for everyone else -- the temperature is 69 degrees= .=20 NO SWEATING AT ISO Some managers do not take off their sports coats and jackets.=20 "We want these people to be comfortable," explained Tony Capasso, facilitie= s=20 manager for the ISO complex. "We don't want these people sweating bullets i= n=20 the middle of a crisis."=20 Inside the state Capitol, where legislators and the governor preach=20 compliance with federal guidelines calling for 78-degree thermostats, the= =20 temperature dips into the high 60s. The coolest spots are the press briefin= g=20 room and the treasurer's old office.=20 GOVERNOR'S OFFICE The governor's suite is in the mid-70s, apparently because folks are often= =20 coming by with thermometers and it wouldn't do not to set an example. Press= =20 secretary Steve Maviglio said Governor Gray Davis is a practice-what-he-=20 preaches kind of guy who keeps corridors dark, shades drawn, air conditione= rs=20 idle. His personal secretary works in short sleeves, with a cheap plastic f= an=20 humming nearby.=20 "It's so dark in the hall that we're always bumping into things," said one= =20 aide.=20 Even so, the temperature in the governor's suite of offices is three degree= s=20 cooler than the 78 degrees recommended by President Bush -- not the first= =20 time the two men have failed to agree.=20 THE LEGISLATURE The Assembly chamber is 71 degrees while the Senate chamber -- with 40 fewe= r=20 legislators spewing forth -- is 73 degrees. But the Senate chamber has a=20 southern exposure, one Capitol guide explained.=20 "Hot air from the people sitting inside has nothing to do with it," he said= .=20 In San Francisco, the temperature inside cavernous City Hall dips in spots = to=20 the mid-60s. College student Jasmine Westbrook, who dropped by with her art= =20 class on a project to sketch the interior of the building, was doing her=20 sketching while wearing a windbreaker to keep warm.=20 "I want to stay comfortable," she said. "It think it's supposed to be hotte= r=20 in here, isn't it?"=20 The mayor's office, at 73 degrees, was eight degrees warmer than another=20 office down the hall, even without the mayor sitting in it.=20 63 AT THE PUC=20 At the headquarters of the state Public Utilities Commission, which is=20 supposed to be keeping an eye on the self-declared bankruptcy of the utilit= y=20 that mails out the bills, the lobby temperature is 63 degrees.=20 Chief engineer David Omosheyin, eyeing The Chronicle's thermometer nervousl= y,=20 insisted the 63-degree reading was caused by the lobby's proximity to the= =20 front door, where the outside temperature at the moment was in the low 60s.= =20 He invited the thermometer to visit the upper floors, where the temperature= =20 was 70.=20 As for San Francisco's federal buildings: Bush would probably not frown.=20 His orders appeared to be followed during The Chronicle's visits, so much s= o=20 that it was actually hotter inside than out. Though that wouldn't be hard,= =20 considering it was in the low 60s outside. And the places measured happened= =20 to be courtrooms and tax offices, where the body heat from anxiety alone=20 could probably melt the paint some days.=20 San Franciscans, Omosheyin said, are losing their perspective when it comes= =20 to things like electricity, energy alerts and rolling blackouts. In his=20 native country of Nigeria, he said, the electricity runs sporadically, if a= t=20 all.=20 "There the power can go off for a week," he said. "The world goes on. Here,= =20 people take a lot of things for granted, and electricity is one of them."= =20 As for the offices of the places that report on such matters, they fared=20 about the same.=20 The Walnut Creek bureau of The Chronicle, where the sun sizzles into the 90= s=20 with regularity in the summer, is kept at 67 degrees because of all the=20 computers. The main newsroom of The Chronicle is kept at 71 degrees, becaus= e=20 of all the computers. But the reception room was 71 degrees, too, and there= =20 aren't any computers there, not a one.=20 E-mail Steve Rubenstein at [email protected].=20 Some offices keeping their cool Place Inside Outside temperature temperature Control Room, California Independent =20 Systems Operator (Folsom) 69 90 Governor's office, Capitol (Sacramento) 75 94 Press briefing room, Capitol (Sacramento) 68 94 Caltrans headquarters (Sacramento) 70 94 Chronicle bureau newsroom (Walnut Creek) 67 90 Mayor's Office, San Francisco City Hall 73 63 Calif. Public Utilities Commission lobby =20 (San Francisco) 63 63 State Building (San Francisco) 69 63 Courtroom, 19th floor, Federal Building =20 (San Francisco) 70 63=20 Lobby, Pacific Gas and Electric =20 headquarters (San Francisco) 65 65 IRS office, Federal Building=20 (San Francisco) 69 63 Main newsroom, =20 San Francisco Chronicle (San Francisco) 71 64 ,2001 San Francisco Chronicle ? Page?A - 1=20 Stakes are high for Davis meeting with Bush=20 GARY GENTILE, AP Business Writer Tuesday, May 29, 2001=20 ,2001 Associated Press=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2001/05/29/s= tate0 731EDT0136.DTL=20 (05-29) 04:31 PDT LOS ANGELES (AP) --=20 With California facing a summer of outages, Gov. Gray Davis was to meet=20 President Bush to press for a federal cap on energy prices.=20 But Davis wasn't expected to win any concessions during the 20-minute Tuesd= ay=20 meeting where he's expected to point to Texas energy makers.=20 Davis has appeared on national news programs attacking Bush for opposing=20 price controls on wholesale electricity, and suggesting the president has= =20 ignored price-gouging by Texas-based electricity generators.=20 "The president did not create this problem, but he is uniquely situated to= =20 solve it," Davis said Monday. "What I'm going to ask him to do, with all=20 respect, is to enforce federal law. The money that leaves this state goes= =20 directly to energy companies in Texas and the Southwest."=20 If Bush refuses to administer price controls as expected, Davis can use tha= t=20 as ammunition in his sparring with the administration.=20 Bush has blamed California officials for the state's power woes and said=20 price controls won't solve shortages. Instead, they said, Bush plans to=20 stress his efforts to conserve energy in federal buildings and will bring o= ne=20 or two new initiatives to the table.=20 One of them commits the federal government to helping organize a consortium= =20 to build more power lines for the state.=20 Energy Secretary Spencer Abraham directed the Western Area Power=20 Administration, a federal agency, to take the first steps to clear the way= =20 for building more transmission capacity between southern and northern=20 California. That would help relieve a transmission bottleneck in the centra= l=20 part of the state.=20 While this will not help this summer, Abraham said in a statement the line= =20 improvements, when completed, "will help avert the same types of problems= =20 from recurring year after year."=20 The stakes of the meeting are high for both politicians.=20 Davis, who has been mentioned as a Democratic challenger to Bush in 2004,= =20 wants federal help to solve an energy crunch that threatens rolling outages= =20 this summer and has cost state taxpayers nearly $8 million since January --= =20 the price of buying power for two cash-starved private utilities. And his= =20 plan to rescue one of those companies reportedly is faltering.=20 Leaders of both the state Senate and Assembly oppose a $3 billion-plus plan= =20 to bail out Southern California Edison by buying its power lines, the Los= =20 Angeles Times reported Monday.=20 Bush, meanwhile, needs to mend fences in vote-heavy California. The=20 Republican president lost badly here in November, and polls show most=20 Californians dislike his handling of their energy crisis.=20 Bush's Tuesday agenda was heavy on energy issues. At the Marine Corps base = at=20 Camp Pendleton, near San Diego, Bush was to highlight his order that federa= l=20 agencies and installations cut back energy use. Then it was on to Los Angel= es=20 to discuss his energy plan in a speech to the Los Angeles World Affairs=20 Council.=20 Bush was confronted by the issue virtually as he stepped off the plane Mond= ay=20 in Los Angeles. Rep. Brad Sherman, D-Los Angeles, escorted the Academic=20 Decathlon national championship team from El Camino Real High School in=20 Woodland Hills to meet Bush. He told the president California needs=20 regulation of electric generators.=20 "The president seems to believe just by instinct that rate regulation reduc= es=20 supply and also by instinct that all those in the energy industry are fair= =20 people who are not trying to game the system," Sherman said. "Anyone who=20 studies the facts in California knows that power is being withheld in order= =20 to drive up the price."=20 ,2001 Associated Press ?=20 State gives president tepid ratings=20 Power crisis blamed for 42% approval=20 Carla Marinucci, Chronicle Political Writer Tuesday, May 29, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/05= /29/M N56632.DTL=20 As President Bush arrives in California for his first trip in seven months,= =20 many state residents give the former Texas governor lackluster approval=20 ratings - underscoring how even the nation's leader may be feeling the=20 effects of the worsening energy crunch, a new Field Poll shows.=20 The poll of 1,015 Californians, taken from May 11 to May 20, shows that 42= =20 percent approve of Bush's job performance to date, with 40 percent=20 disapproving, a nearly even split. Eighteen percent of those surveyed offer= =20 no views of Bush's performance, the poll showed.=20 A Field Poll last week showed that on energy issues specifically, more than= =20 half of Californians viewed the president's job performance as "poor" or=20 "very poor," compared with 38 percent who gave Democratic Gov. Gray Davis t= he=20 same rating.=20 "This should be a time when Bush is enjoying his honeymoon period," said Ma= rk=20 DiCamillo, director of the Field Poll, who pronounced the president's ratin= gs=20 "very mixed."=20 "If you compare Bush's 42 percent approval ratings in California, it's abou= t=20 12 points behind the national (ratings)," said DiCamillo. "He's not doing a= s=20 well as he should here, and one of the reasons is the energy crisis."=20 In the Field Poll's first measure for Bush since his election, "what stands= =20 out is the absence of any real honeymoon."=20 ". . . It's highly partisan," DiCamillo said.=20 CHENEY LOOKS RATHER POSITIVE Vice President Dick Cheney fares better, with 47 percent of Californians=20 viewing him in a positive light and 25 percent disapproving.=20 Much of the difference in the ratings comes because voters are not as likel= y=20 to hold the second-in-command responsible for their energy woes, DiCamillo= =20 said.=20 "Whenever there's a problem with the federal government, you're going to=20 focus your anger and attention at the guy at the top of the heap," he said.= =20 "Bush will be held responsible for his administration."=20 DAVIS' SHARP DECLINE The Field Poll reported last week that as the energy crisis has ramped up,= =20 the governor's overall approval ratings have fallen statewide. Today, 49=20 percent disapprove of his job performance and 42 percent approve -- a sharp= =20 decline from the favorable approval ratings he held in January.=20 But the new poll shows that the public's views of the Legislature has dropp= ed=20 dramatically in recent months as concerns about the energy crisis have=20 multiplied. Just 39 percent of Californians have a positive view of the=20 Legislature's job performance today, while 42 percent have a negative view.= =20 That's a stark contrast to January, when residents approved of the job the= =20 Legislature was doing by more than a 2-to-1 ratio, 52 percent to 25 percent= .=20 While state and local political leaders appear to bear the brunt of the=20 public's negative feelings regarding the recent energy crisis, Californians= =20 continue to give strong approval ratings to their two U.S. senators and to= =20 members of Congress, the poll showed.=20 Californians hold favorable views of Sen. Dianne Feinstein, who was re-=20 elected in November. By 54 percent to 27 percent, they like the job she is= =20 doing, the latest poll showed.=20 "She has always had good job ratings" among voters, said DiCamillo, "and th= is=20 is just an affirmation of that."=20 Sen. Barbara Boxer also continues to get high ratings, with 49 percent=20 approving of her performance and 28 percent disapproving. And Californians= =20 gave a generally favorable rating to their congressional representatives,= =20 with 53 percent approving and 35 percent disapproving.=20 PARTY LINE SPLITS Among the other findings of the new Field Poll:=20 -- Views about Bush's job performance are split along party lines, with=20 Democrats, by a more than 3-to-1 ratio, holding a negative view of him, and= =20 Republicans, by a 6-to-1 ratio, seeing him in a positive light. Independent= =20 voters gave him positive ratings, 39 percent approving of his job=20 performance, 31 percent disapproving and 30 percent holding no view.=20 -- Cheney had equally partisan approval ratings, although he received much= =20 stronger ratings from his own party and independents. Forty percent of=20 Democrats disapproved of him, compared with 30 percent who approved. But=20 Republicans approved of him by a 10-to-1 ratio. Independents, by a 2-to-1= =20 ratio, liked what he has done in office.=20 -- Congressional Democrats get particularly strong ratings from state voter= s.=20 Fifty-three percent of Californians approve of their job performance, while= =20 just 33 percent disapprove. Republicans in Congress get a less favorable 41= =20 percent approval, 46 percent disapproval rating, the poll showed.=20 The Field Poll carries a margin of error of plus or minus 3.2 percentage=20 points.=20 E-mail Carla Marinucci at [email protected].=20 Field Poll / Job approval ratings -- Job approval of George W. Bush as president Approve Disapprove No opinion Statewide 42% 40% 18%=20 Democrats 18% 63% 19%=20 Republicans 76% 12% 12% Others/non-partisans 39% 31% 30% . -- Trend of job approval of Dianne Feinstein as senator Approve Disapprove No opinion Men 49% 35% 16% Women 60% 19% 21% Democrats 73% 12% 15% Republicans 33% 50% 17% Others/Non-partisans 44% 21% 35% . -- Trend of job approval of Barbara Boxer as senator Approve Disapprove No opinion Men 45% 36% 19% Women 53% 20% 27% Democrats 67% 12% 21% Republicans 29% 53% 18% Others/Non-partisans 37% 19% 44% The poll was conducted May 11-20, 2001. Results are from a telephone=20 survey=20 of 1,015 California adults, including 504 self-described Democrats, 390 sel= f- described Republicans and 121 others. The margin of error is 3.2 percentage= =20 points. Source: Field Institute Chronicle Graphic ,2001 San Francisco Chronicle ? Page?A - 1=20 Calif. pawn businesses boom as energy bills rise=20 Monday, May 28, 2001=20 ,2001 Associated Press=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2001/05/28/n= ation al1807EDT0593.DTL=20 (05-28) 15:07 PDT SAN FRANCISCO (AP) --=20 Rising energy bills have some Californians pawning their valuables to pay f= or=20 power.=20 When an employee at an Oakland pawnshop asked N'Kechia Jackson last week ho= w=20 much she wanted for a gold necklace, Jackson had a specific amount in mind.= =20 "I need $113.86," she said. "That's how much my PG&E bill is."=20 Jackson, who got $125 for the chain, said her monthly energy bill from=20 Pacific Gas and Electric Co. is like a credit card balance that never=20 shrinks.=20 Bay Area pawnshop owners say similar scenes are becoming common as laid off= =20 dot-com workers and single mothers hock items like jewelry and laptop=20 computers to pay rising power bills.=20 "That's the number one reason people have been coming in to pawn right now,= "=20 said Bill Rager, assistant manager of Best Collateral Pawnbrokers in Oaklan= d.=20 "Basically, it's high-dollar items -- chains, watches, bracelets, engagemen= t=20 rings, wedding rings."=20 Pawnshops do not require credit checks, and they offer fast cash. They also= =20 allow people up to four months to repay a loan before their items are sold.= =20 Interest rates range from 5 percent to 20 percent.=20 "The sad thing about it is that I'd say 60 percent will lose their property= =20 because they can't afford to get it out," Rager said.=20 Another woman entered Rager's shop minutes after Jackson pawned her jewelry= .=20 The woman, who gave her name only as Sophia, used her children's Nintendo= =20 game set as collateral for a $65 loan.=20 The woman said she had scrambled since February to pay a $700 PG&E bill, an= d=20 now had no money to cover her $100 phone bill.=20 "When they come home and see their Nintendo gone, they'll be upset," she=20 said. "But my kids are understanding."=20 ,2001 Associated Press ?=20 Californians brace for a summer of blackouts=20 GARY GENTILE, Associated Press Writer Monday, May 28, 2001=20 ,2001 Associated Press=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2001/05/28/n= ation al0501EDT0456.DTL=20 (05-28) 02:01 PDT LOS ANGELES (AP) --=20 While most people celebrate Memorial Day, Jan and Ralph Vazquez will=20 celebrate their own independence day -- energy independence.=20 Worried about a summer of rolling blackouts and fed up with rising utility= =20 bills, the couple installed a $33,000 solar system in their four-bedroom ho= me=20 in San Rafael a few weeks ago. It can store enough energy in batteries to= =20 power their refrigerator and other appliances for up to six hours if there = is=20 a blackout.=20 "I think there is a little bit of fear and concern about to what extent wou= ld=20 we be subject to blackouts and how much energy is going to cost us," Jan=20 Vazquez said. "The simple solution is to be independent, or as much so as= =20 possible."=20 The Vazquezes are among millions of Californians facing an uncertain summer= ,=20 wondering how they will cope with what is expected to be several months of= =20 rolling blackouts.=20 The prospect of daily power outages as the temperature rises and air=20 conditioning use peaks has left many people apprehensive, from parents of= =20 newborns who need warm bottles to people who require electric-powered medic= al=20 devices in their homes to office workers worried about getting stuck in an= =20 elevator.=20 California already has endured six days of rolling blackouts this year, eac= h=20 lasting about an hour and hitting different parts of the state. Estimates= =20 vary about what lies ahead.=20 One industry-sponsored watchdog group, the North American Electric=20 Reliability Council, predicted California would face an average of 20 hours= a=20 week of rolling blackouts.=20 Responding to complaints following the earlier outages, state power officia= ls=20 this month plan to begin issuing weather advisory-style warnings 24 hours= =20 before an expected blackout.=20 Chicago, faced with a deteriorated electrical system after years of neglect= =20 and severe weather, adopted a blackout plan in 1999 that is being studied a= s=20 a model by California officials.=20 Today, for example, Chicago police officers carry portable stop signs to=20 darkened intersections moments after a blackout hits.=20 "There's no just excuse for trapping people in elevators," said Bill Abolt,= =20 Chicago's commissioner of environment. "There's no excuse for shutting off= =20 power to an intersection with no notification to police and fire in advance= ."=20 Across the country, reduced hydroelectric production due to the Pacific=20 Northwest drought, an aging transmission system, rising costs for the natur= al=20 gas that fires many power plants and increasing demand for electricity is= =20 expected to produce shortages and higher prices in the Northwest, New Engla= nd=20 and other regions.=20 The stakes are high in California. It has the world's sixth largest economy= =20 and is home to bellwether high tech companies such as Intel and Cisco=20 Systems.=20 For some retailers, the impact is minimal. Clerks can switch from an=20 electric-powered cash register to battery-powered calculators. Some compani= es=20 can fire portable generators to power their phone system with minimal=20 disruption.=20 The California Manufacturing and Technology Association recently estimated = a=20 summer of blackouts could cost the state $21 billion and 136,000 jobs as=20 manufacturers curtail production and retail stores suffer a slowdown.=20 The Bay Area Economic Forum has estimated that rolling blackouts could cost= =20 as much as $15 billion and 15,000 jobs.=20 A summer of rolling blackouts also will test the emotional mettle of=20 Californians, who normally rally when faced with such natural disasters as= =20 earthquakes and wildfires.=20 "It's going to be an interesting natural experiment," said Mihaly=20 Csikszentmihalyi, Davidson professor of management at Claremont Graduate=20 University.=20 "When there is a natural calamity, people often respond really positively.= =20 This is different in the sense it is not a natural calamity and you can bla= me=20 politicians and gougers for it. It could turn into resentment against those= =20 in power and those who should be supplying the power."=20 California's plight already has become comic fodder.=20 From David Letterman to radio talk shows, the state has been the butt of=20 power-related jokes. On a recent episode of the game show "The Weakest Link= ,"=20 which is taped in Los Angeles, the acerbic host asked which player was havi= ng=20 a "rolling mental blackout."=20 Jan Vazquez, however, suggests that California has the chance to go from=20 punch line to role model.=20 "California has the opportunity to be a leader again," Vazquez said, urging= =20 more state investment in alternative energy rather than sinking billions mo= re=20 into buying power at inflated prices.=20 "If there were more homeowners like us and more businesses that were=20 generating their own electrical power, I think we would avoid blackouts=20 completely -- maybe not by this summer, but by next summer," she said.=20 ,2001 Associated Press ?=20 New Nevada-California energy plan surfaces at last minute=20 BRENDAN RILEY, Associated Press Writer Monday, May 28, 2001=20 ,2001 Associated Press=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2001/05/28/s= tate2 242EDT0228.DTL=20 (05-28) 19:42 PDT CARSON CITY, Nev. (AP) --=20 An 11th-hour proposal to help ease Nevada's budget problems and provide mor= e=20 electrical power to neighboring California was outlined Monday by a key sta= te=20 lawmaker.=20 Assembly Ways and Means Chairman Morse Arberry, D-Las Vegas, said his plan,= =20 to be introduced Tuesday, would allow power plants to be built along the=20 Nevada-California border, on land that would be owned by this state.=20 "It could produce millions of dollars for the state," said Arberry, adding= =20 that he has asked researchers to determine the exact dollar benefit to Neva= da=20 to help get the proposal passed in the final week of the 2001 session.=20 Under the proposal, the state would negotiate with the federal Bureau of La= nd=20 Management to acquire BLM land on the border of the two states, especially = in=20 the southern Nevada desert region.=20 The state then could accept bids from companies that wanted to build=20 power-generating plants, and take the bid that would be the best deal for t= he=20 state, he said.=20 The benefit to the power plant builders would be a site as close to a prime= =20 market -- energy-starved California -- but located in industry-friendly=20 Nevada, which already has moved to speed up paperwork involved in power pla= nt=20 approvals.=20 Arberry said he wasn't approached by energy company lobbyists to introduce= =20 the idea. Instead, he said, "I was just talking to an old guy at the=20 barbershop, and he suggested it. I don't know if he even realized what he w= as=20 saying."=20 As part of a broad effort to ensure Nevada has enough energy, Gov. Kenny=20 Guinn already has worked with local government officials, especially in=20 southern Nevada, to speed up power plant permit processes.=20 Legislative efforts include SB362, which lets various local and state=20 agencies act simultaneously on permits for power plants, transmission lines= =20 and other related facilities.=20 Various power companies have come up with plans for Nevada plants that woul= d=20 supply more than 10,000 megawatts of energy by 2004.=20 Those proposals are among plans that would add more than 76,000 megawatts o= f=20 power in the Northwest, Southwest, Rocky Mountain and California-Mexico=20 regions, according to the California Energy Commission.=20 ,2001 Associated Press ?=20 New energy moves by W.House before Bush-Davis meet=20 Posted at 6:39 a.m. PDT Tuesday, May 29, 2001=20 BY RANDALL MIKKELSEN=20 WASHINGTON (Reuters) - On the eve of a showdown meeting on California's pow= er=20 crisis between California Gov. Gray Davis and President Bush, the Bush=20 administration Monday moved to help ease the crisis.=20 Energy Secretary Spencer Abraham unveiled plans to boost extra transmission= =20 capacity in California, which he said would be a ``big step'' in easing=20 rolling power blackouts.=20 Abraham ordered the Western Area Power Administration -- an Energy Departme= nt=20 arm responsible for marketing electricity from federal water projects in 15= =20 Western states -- to wrap up planning for building extra transmission=20 capacity.=20 The move came as Bush headed to California for his first presidential visit= ,=20 and a critical meeting on Tuesday in Los Angeles with the Democratic=20 governor.=20 Davis will ask Bush to impose wholesale electricity price controls and orde= r=20 refunds for overcharged consumers, aides said, but the White House on Monda= y=20 reiterated Bush's position that such steps would be counterproductive.=20 Davis spokesman Steven Maviglio said the steps announced by Abraham were no= t=20 new and were not the kind of help California needed to meet its immediate= =20 crisis. ``That's been kicked around for a while,'' he said.=20 Davis said last week he was prepared to ``go to court'' if Bush failed to= =20 act. ``The law says we're entitled to relief and it hasn't been coming,''= =20 Davis said.=20 White House spokeswoman Claire Buchan said that while Bush had ``worked ver= y=20 hard'' to help California, through measures such as ordering the Defense=20 Department to reduce its energy use by 10 percent in California and easing= =20 rules for using backup power generators, price controls ``make the problem= =20 worse.''=20 TRANSMISSION BOTTLENECK=20 At issue in Abraham's order is so-called Path 15, an 84-mile stretch of pow= er=20 lines with insufficient capacity to carry the necessary load between southe= rn=20 California and the northern part of the state, especially during peak hours= .=20 Abraham told WAPA to determine whether outsiders were interested in financi= ng=20 and co-owning a new transmission line. ''The level of interest will be a=20 factor in the decision to build the line later this year,'' the Energy=20 Department said in a statement.=20 The statement did not make clear whether the federal government would go=20 ahead with the project in the absence of outside financing, nor did it give= =20 cost details.=20 It said WAPA, which manages nearly 17,000 miles of transmission lines, woul= d=20 prepare the necessary environmental and feasibility studies and review=20 easement and land acquisition issues.=20 LEADERSHIP ROLE=20 ``The Bush administration is taking a leadership role in addressing a=20 long-neglected problem in California's electricity transmission system,''= =20 Abraham said. ``California's electricity problems developed over a period o= f=20 years and cannot be solved overnight. However, we can move now on actions= =20 that will help avert the same types of problems from recurring year after= =20 year.=20 ``Removing the so-called Path 15 bottleneck is a big step in the right=20 direction,'' he said.=20 The Energy Department said a new line could transmit across the state an=20 additional 1,500 megawatts of electricity, enough to power 1.5 million home= s.=20 Planning for additional transmission in the Path 15 area was started in the= =20 mid-1980s.=20 California's energy crisis is rooted in a flawed 1996 deregulation plan tha= t=20 allowed wholesale power prices to soar while capping retail rates.=20 The result has brought rolling blackouts, spotty power supplies and put=20 intense pressure on Davis to come up with ways to solve a worsening energy= =20 crunch that has also drained billions of dollars from state coffers.=20 It has also energized potential opposition to Davis's expected 2002=20 reelection bid. Bush has encouraged Los Angeles Mayor Richard Riordan to=20 challenge Davis. Tuesday, May 29, 2001=20 California should try true deregulation=20 Moving toward a government monopoly is the wrong prescription EDWARD R. MULLER=20 Mr. Muller is the former president and CEO of Edison Mission Energy, a=20 power-producing firm owned by Edison International and headquartered in=20 Irvine. This was co-authored by S. Linn Williams, former senior vice=20 president of Edison Mission Energy.=20 Capitalism won the Cold War because of better economics: Consumers make=20 better decisions than politicians, central planners or monopolists. That=20 lesson seems to have been learned better by those who lost the war than by= =20 those who won it. The failure to absorb the lesson is nowhere clearer than in the efforts to= =20 deregulate utilities. Deregulation, we are being told, has failed. The ligh= ts=20 are going out in California, and now politicians, governments, consumer=20 groups and the utilities themselves are rushing to hang out signs that read= =20 "Capitalism doesn't work here."=20 Principles matter, so let's start with some: The objective of government is= =20 to provide a framework for a better life for its people, and monopolies are= a=20 bad framework. They are inefficient, and when they include the government,= =20 whether as owner or comprehensive regulator, they are both inefficient and= =20 dogmatic because politics enters the equation. We pay for that inefficiency= =20 through higher taxes or higher prices. We must, of course, keep the lights on to maintain our standard of living.= =20 Does that mean that we just have to put up with the inefficiencies of=20 government-supported monopolies as a necessary evil to assure that importan= t=20 services are available? We do not. The problem has not been too little=20 regulation, but too much. California is an excellent example.=20 What has gone wrong? The finger pointing has been great sport, but the core= =20 of the problem is just the law of supply and demand. California flat ran=20 short of power. Many have wanted to build new power plants in California, b= ut=20 the regulatory hurdles have been insurmountable. In recent times, the=20 utilities themselves said that California didn't need more power plants and= =20 fought to stop the construction of new plants by others. The marketplace=20 didn't fail; regulation failed.=20 And California's vaunted "deregulation" was in reality just a botched=20 substitution of one form of regulation for another. When you deregulate a= =20 monopoly marketplace, you want all buyers and sellers to be subject to mark= et=20 forces. What California called "deregulation" didn't come close. First, the= =20 state and the utilities agreed on fixed retail prices for five years. As a result, consumers used electricity without knowing what it really cost= =20 to produce. Second, the state and the utilities agreed that the utilities= =20 would buy wholesale power through a system subject to market forces. As a= =20 result, the cost of power bought by the utilities fluctuated even though th= e=20 price they could charge was fixed. The utilities thought the retail prices were fixed high enough to more than= =20 cover what they expected power to cost them. For two years they were correc= t=20 and bought power for much less than the fixed prices they charged their=20 customers, but last year the cost of power soared way above the fixed price= s.=20 This wasn't deregulation, just another form of regulation. There were no=20 principles, just political expediency.=20 It didn't take long for economic reality to assert itself and the jury-rigg= ed=20 structure came tumbling down. Blackouts, high prices and insolvent utilitie= s=20 are not a failure of the marketplace; the marketplace never got a chance. N= ow=20 we are at a fork in the road. Should we go back to the regulation of the pa= st=20 or forward to full deregulation?=20 It's not fair to say that deregulation has failed. After all, we haven't=20 tried it yet. We should return to first principles: Deregulate properly by= =20 making all aspects of the system subject to market forces. True deregulatio= n=20 would include:=20 * Reducing the regulatory burdens on building new power plants. * Eliminating fixed prices.=20 * Making sure that there are enough players in the market to make it=20 competitive.=20 * Having shareholders, not customers, be responsible for the financial=20 effects of business decisions.=20 Prices will vary with supply and demand and may rise at the outset until=20 supply is added, but over time a deregulated market will give customers the= =20 lowest prices. The talk of a retreat to the regulation of the past is in pa= rt=20 a result of our failure to articulate why capitalism won the Cold War and= =20 competition makes the world a better place.=20 The tendencies of politicians to intervene, and of businessmen to ask=20 government to exempt their particular business from the marketplace, or som= e=20 of its effects, remain strong. Ironically, prosperous times reinforce those= =20 tendencies by masking their effects on the rest of us. Whether in good time= s=20 or in bad, the public interest is a David to the Goliath of politicians,=20 bureaucrats and businessmen who see governmental protection as safer for=20 themselves than the hurly burly of competition. Capitalism, like democracy, is imperfect, but both are far preferable to th= e=20 alternatives. Our laws and regulations should provide the structure for a= =20 marketplace where consumers vote many times a day, not a discredited and=20 dictatorial system in which only politicians and monopolists get to vote.= =20 By Rick Stouffer [email protected] Power generators and traders are finally realizing that the phrase "build i= t=20 and they will come" wasn't written with power plants and natural gas fuel i= n=20 mind. You can build all the new capacity you want=01*but if you don't have the na= tural=20 gas to fuel the turbines, all you have is a brand-new, very expensive white= =20 elephant.=20 With roughly 90% of the 155,000 MW to 200,000 MW of announced capacity to= =20 come on-line within the next few years firing with natural gas, executives= =20 are beginning to add two and two together and really getting four.=20 Back to the future with a twist Translation: The really smart power producers/traders are now locking in=20 proven natural gas reserves=01*insuring that when supply gets tight, they c= an=20 reach into the ground and pull out more fuel=01*their fuel.=20 For some players, it's back to the future, a return to the days when the sa= me=20 company owned the fuel, the generation, and the transmission=01*but with a = 21st=20 century twist. Today, the various factions are unregulated.=20 "What goes around comes around in this business," said Edward Tirello Jr.,= =20 managing director and senior power strategist-investment banking at Deutsch= e=20 Banc Alex. Brown. "The utilities used to own the various fuel sources, coal= ,=20 natural gas, and now they are getting back into it."=20 "Oil and natural gas firms are rebundling, reintegrating, but in an=20 unregulated sense," said John Olson, an energy analyst in Houston with=20 Sanders Morris Harris.=20 Can't burn paper in a turbine With volatility as much a part of deregulation as mergers and acquisitions,= =20 no power producer wants to be caught with its assets unproductive, i.e. wit= h=20 a shiny, new combined-cycle plant and no gas to fuel it.=20 "You can't put paper in a pipeline; you can't burn paper in a turbine," sai= d=20 Donato Eassey, head of natural gas analysis for Merrill Lynch in Houston,= =20 Texas.=20 "There are developing some real physical concerns for getting natural gas,= =20 and we will see some reneging on deals=01*even with contracts."=20 Olson has done the mathematics concerning the spike in demand related to ne= w=20 plants=01*and the numbers don't work.=20 "To feed all the plants expected to come on-line in the next few years woul= d=20 take an additional 13 billion cubic feet per day (Bcfd), and we are produci= ng=20 52 Bcfd," according to Olson. "Gas production has only been growing at a ra= te=20 of 0.4 Bcfd over the last 10 years=01*and well productivity has been down t= he=20 last two years. We've simply been replacing our natural declines."=20 Control what's there To put it in the vernacular: If enough gas isn't going to be there, you=20 better control what you can. Thus, Calpine Corp. in February announced a de= al=20 to acquire for $1.2 billion in stock and assumed debt the Calgary, Alberta,= =20 Canada-based exploration and production (E&P) firm Encal Energy Ltd.=20 No power producer wants to be caught with a shiny, new combined-cycle plant= =20 and no gas to fuel it.=20 The deal gave Calpine a solid foothold in satisfying part of its seemingly= =20 insatiable need for natural gas fuel, as it marches toward 70,000 MW of=20 capacity within the next three years. With Encal, San Jose, Calif.-based=20 Calpine's proven and probable reserves jumped to 1.7 trillion cubic feet=20 (Tcf), with a daily production capacity of 390 million cubic feet equivalen= t=20 (MMcfe).=20 Earlier this month, Williams Cos. pushed oil behemoth Royal Dutch/Shell Gro= up=20 out of the way and snared independent E&P player Barrett Resources Corp. fo= r=20 $1.5 billion in cash, stock and assumed debt.=20 Williams' offer was music to Barrett shareholders' ears: At $73 per share,= =20 the price was some 60% above Barrett's stock price the day before Shell's= =20 unsolicited bid became a hostile offer in March.=20 Two weeks ago, another independent E&P player took the money and ran. San= =20 Francisco-based HS Resources agreed to $66 a share=01*a 24% premium=01*$1.7= billion=20 in cash, stock and assumed debt from Kerr-McGee Corp. Not bad for a stock= =20 trading around $20 a year ago=01*and around $5 a share in early 1999.=20 As was the case with Calpine's swallowing of Encal, Williams and Kerr-McGee= =20 were thinking one thing when they bid the roof off: natural gas reserves.= =20 Williams' proven reserves, including Barrett, more than doubled to 3.3=20 trillion cubic feet equivalent (Tcfe), while average daily production jumpe= d=20 to 555 MMcfe.=20 Kerr-McGee gains via the HS Resources deal 1.3 Tcfe, about a 77% increase,= =20 while daily production will climb 45%. "Williams looked at Barrett using wellhead-to-power plant economics,"=20 according to Stuart Wagner, a principal in the Denver office of investment= =20 banking firm Petrie Parkman. "It was looking at long-lived, low-risk=20 reserves."=20 More deals a no-brainer Generators today cannot take the chance natural gas will not be available= =20 when that 500-MW or 1,000-MW plant is set to be primed.=20 "If you are building the plants and you don't have the gas, you are down th= e=20 tubes," Merrill Lynch's Eassey said. "If you are down a day in this market,= =20 you're sunk. And buying gas in the ground is cheaper than buying it on the= =20 market." "The firms already have a market for their power, now they are locking in= =20 margins," said Phillip Pace, an energy analyst in Houston with Credit Suiss= e=20 First Boston. "It depends on how short you want to be. One hundred percent= =20 short=01*you don't want to be."=20 Thus, there will be more plays made for sister firms to Barrett and HS=20 Resources, industry watchers believe. The acquisition of independent E&P=20 players is heating up.=20 "Will we see more deals? That's a no-brainer," said Merrill's Eassey. "You= =20 think Equitable (Pittsburgh, Pa.-based Equitable Resources Inc., the larges= t=20 holder of gas in the Appalachian region) is trading around $80 a share on i= ts=20 fundamental valuation? That's not fundamentals=01*that's takeout."=20 National Fuel is another takeout target, said Eassey. Another analyst, who= =20 requested anonymity, believes Mitchell Energy & Development Corp., Louis=20 Dreyfus Natural Gas and Burlington Resources are choice targets. Petrie=20 Parkman's Wagner sees Mitchell and Western Gas Resources Inc. as takeout=20 material. Olson calls Mitchell his "dream" acquisition. The 55-year-old firm, founded= =20 by 81-year-old wildcatter George Mitchell, may be the choicest plum still t= o=20 be picked. Mitchell put his firm on the block last year but has yet to hear= =20 numbers he likes.=20 "Gas production at Mitchell is up 25% this year, and is projected at 20%=20 through 2003," Olson said. "It's finding very rich gas in the Barnett=20 Formation in North Texas, but even if you're finding it at 70 cents per Mcf= =20 (thousand cubic feet), if you can sell it for $4 to $5 per Mcf, that works.= "=20 Proven gas reserves are in the 1.5 Tcf range, with daily production of=20 roughly 340 MMcfd. Mitchell's stock price has more than doubled in the last= =20 year, closing May 23 at $56.55.=20 A crowded field of acquirers With potential acquisitions awaiting, which companies are the promising=20 acquirers? Merrill's Eassey likes Reliant Energy, Aquila, possibly Mirant,= =20 even Calpine and Williams, which he believes remain natural gas-short if th= ey=20 stay on their capacity growth plans. Sanders Morris' Olson believes Duke=20 Energy clearly is looking for more natural gas, even with its access to=20 product via Duke Energy Field Services.=20 Credit Suisse's Pace said the field of potential acquirers could be crowded= =01* including every firm yet to be successful in acquiring reserves. That=20 includes Royal Dutch/Shell.=20 "Phillips already has stated it wants to be the largest coal-bed methane=20 player in the U.S.," Petrie Parkman's Wagner said. "Duke, Dynegy, Entergy a= nd=20 AES will also have to step up."=20 "The pressure is there definitely to act," Pace said. "I would be very=20 surprised if nothing else happened this summer."=20

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