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Sac Bee, Wed, 6/6: Businesses vie for blackout exemptions:=20 The PUC must decide who should be spared, and the applicant list is very lo= ng Sac Bee, Wed, 6/6: PG&E, ISO agree to court order on power bills Sac Bee, Wed, 6/6: Peter Schrag: Turning up the heat in Houston and=20 Washington (Editorial) SD Union, Wed, 6/6: Is trading an insider's game? SD Union, Wed, 6/6: Daily energy costs for state fall in past weeks=20 SD Union, Wed, 6/6: Five tiers sought in proposed rate boost SD Union, Wed, 6/6: Port budget large, but power bills loom SD Union, Wed, 6/6: Continuous use urged for planned power plant=20 SD Union, Wed, 6/6: Rising energy prices threaten Poway troupe=20 SD Union, Wed, 6/6: Fair to use generators for midway attractions LA Times, Wed, 6/6: 'Hi, My Name Isn't Justice, Honey,' and Shame on Lockye= r =20 (Editorial) LA Times, Wed, 6/6: U.S. Probes Alleged Pact Not to Build New Plants Power:= =20 Justice officials focus on Southland operations of two firms, which deny=20 wrongdoing LA Times, Wed, 6/6: Natural Gas, Power Prices Drop Sharply Energy:=20 More conservation, mild weather are among factors keeping costs down, exper= ts=20 say LA Times, Wed, 6/6: The State Utility Averts $1 Billion in Costs Courts:=20 PG&E and Cal-ISO agree to recognize Department of Water Resources as=20 purchaser of the power SF Chron, Wed, 6/6: Dramatic drop in cost of electricity=20 LOWER BILLS: Cheaper fuel, milder weather credited SF Chron, Wed, 6/6: San Jose council gives green light to generating plant= =20 VOTE REVERSAL: Officials pressured to OK project SF Chron, Wed, 6/6: Developments in California's energy crisis SF Chron, Wed, 6/6: California conserves SF Chron, Wed, 6/6: L.A. power customers awash in cheap energy SF Chron, Wed, 6/6: PG&E doesn't want to pay for energy to avert blackouts Mercury News, Wed, 6/6: Metcalf plant gets preliminary approval=20 OC Register, Wed, 6/6: Feds probe AES, Williams Individual.com (PRnewswire), Wed, 6/6: Calpine Begins Construction of=20 Peaking Energy Center in Gilroy, Calif.=20 Individual.com (PRnewsire), Wed, 6/6: Reliant Urges FERC to Drop or Amend= =20 California Price Caps to Avoid Additional Shortages and More Blackouts Energy Insight, Wed, 6/6: Farm-fresh biopower ---------------------------------------------------------------------------= --- --------------------------------------- Businesses vie for blackout exemptions: The PUC must decide who should be= =20 spared, and the applicant list is very long. By Carrie Peyton and Dale Kasler Bee Staff Writers (Published June 6, 2001)=20 Mixes for milkshakes and frozen coffees could spoil at ice cream parlors,= =20 sickening customers.=20 Seniors getting their hair done would have to leave their dryers and go hom= e=20 with wet heads, risking a chill.=20 Mall escalators could come to a sudden halt, endangering shoppers who lose= =20 their footing.=20 Those are among the health and safety risks cited by more than 10,000=20 businesses and government bodies asking state regulators to exempt them fro= m=20 rolling blackouts.=20 It is a list that mixes nursing homes and grocery stores, outpatient surgic= al=20 clinics and beauty salons, dialysis centers and country clubs.=20 "A lot of people are treating this like a lottery," said Subodh Medhekar of= =20 Exponent Inc., the consulting firm sorting through exemption requests for t= he=20 state Public Utilities Commission.=20 For many, Medhekar said, the rationale seems to be " 'I'm pretty sure I won= 't=20 get exempted, but what's the down side? Let's put in an application.' "=20 Amid predictions that Californians could face dozens of rolling blackouts= =20 this summer, state regulators are trying to update a decades-old list of wh= o=20 should be spared if the lights go out.=20 The Alta Sierra County Club in Grass Valley should be among those whose pow= er=20 stays on, Sean O'Brien, the club's golf course superintendent, told=20 regulators in a nine-page application.=20 The country club telephones could go out, making it harder to phone for hel= p=20 if someone has a medical problem while golfing, he said in an interview.=20 And if the golf course's irrigation pumps shut down, it would lose the=20 ability to quell small blazes -- leaving it to rely on a fire station O'Bri= en=20 said is about one-quarter mile away.=20 Placerville Dialysis wants an exemption, too. As many as a dozen people the= re=20 can be having their blood pumped through an artificial kidney that cleans i= t=20 when their own kidneys no longer function properly.=20 "When the power goes out, everything just stops," said manager Shirley=20 Carpenter. "There is a way to manually return the blood by hand before it= =20 clots in the line. ... It would just be hectic."=20 It takes about five minutes of manual pumping to fully disconnect someone= =20 from a dialysis machine, Carpenter said. And some patients can help by=20 operating their own pumps.=20 But, she said, "I'm sure it would be kind of frightening to have your blood= =20 out in the line and the power off, and they're pretty much tied to the=20 machine."=20 Pam Chin, a hairdresser at the Loomis Beauty Salon, said the owner sought a= n=20 exemption because people could get overheated if the air conditioning went= =20 out, and older customers getting their hair set could be chilled if the=20 dryers shut off.=20 With about half the state already exempt from rolling blackouts, the questi= on=20 of who else should stay connected has become a delicate one for utilities,= =20 regulators and legislators.=20 Carl Wood, the PUC commissioner who has taken the lead on blackout issues,= =20 estimates that fewer than 1,000 more utility customers can be exempted befo= re=20 they overload the rolling outage system designed to take stress off the=20 electric grid.=20 While about 6,000 customers are classified as "essential" by the state's tw= o=20 largest utilities, keeping them out of the blackout rotation also spares=20 about 5 million other customers who are served by the same circuits.=20 That multiplier effect will have to be weighed by the consulting firm, by= =20 utilities and eventually by PUC commissioners, who are scheduled to vote in= =20 early August on who should be added to existing standards.=20 The rules will apply to the state's investor-owned utilities, Pacific Gas a= nd=20 Electric Co., Southern California Edison and San Diego Gas & Electric Co.,= =20 but not to municipal utilities.=20 The Sacramento Municipal Utility District already rejected pleas for specia= l=20 exemptions from a medical lab, a veterinary hospital, nursing homes, medica= l=20 facilities, businesses and residents. SMUD believes they can weather=20 blackouts because they are not critical to public safety.=20 People have counted on having dependable electricity for so long that some= =20 have widely varying ideas of who can do without it safely, Medhekar said.= =20 Of the more than 500 Baskin Robbins ice cream parlors that dot California,= =20 only five are listed on the PUC Web site as applicants for exemptions.=20 The site cautions that its list of 9,239 electronic applicants hasn't been= =20 checked for duplicates -- or fiction. It includes hundreds of outlets of th= e=20 same drug store and supermarket chains, dozens of related nursing homes and= =20 more than 400 dentists. Another 1,200 commercial power users have applied b= y=20 fax.=20 Among those who have confirmed they want out of outages are the grocery=20 chains operated by West Sacramento-based Raley's, which said it took the=20 action as part of united effort with all California grocers, who are worrie= d=20 about food spoilage.=20 Others in the mix are Fairfield's Westfield Shoppingtown Solano, formerly t= he=20 Solano Mall, where officials sought the exemptions out of fear that shopper= s=20 would get injured if escalators came to a sudden halt.=20 The Yolo County Housing Authority asked for an exemption on behalf of its 7= 00=20 dwellings in the belief that the utilities offer exemptions for low-income= =20 Californians, Executive Director David Serena said.=20 Serena added that many of the authority's occupants are older or disabled a= nd=20 could be endangered by a blackout.=20 Chevron Corp. acknowledged it couldn't show that a blackout at its refineri= es=20 would present "imminent danger to public health or safety," but it asked Go= v.=20 Gray Davis to support legislation exempting makers and transporters for=20 "critical fuels," saying a refinery shutdown would cut into the state's=20 gasoline supply.=20 Some businesses acknowledged that their applications are a long shot.=20 "It's probably a stretch," said Amanda Leveroni, who owns Bacio Catering Co= .=20 of Chico, about her request to the PUC. "The public wouldn't be in danger.= =20 "But we're a catering company -- somebody has planned for a year-plus for a= =20 wedding or some big event," she added. "I would be in such a huge situation= .=20 I'd have to send out for pizza."=20 The Bee's Carrie Peyton can be reached at (916) 321-1086 or=20 cpeyton@sacbee.com. PG&E, ISO agree to court order on power bills By Claire Cooper Bee Staff Writers (Published June 6, 2001)=20 SAN FRANCISCO -- Pacific Gas and Electric Co. and the operator of=20 California's power grid agreed Tuesday to a preliminary court order providi= ng=20 that the utility will continue to receive -- but not pay -- generators' bil= ls=20 for the state's purchases of the most expensive wholesale electricity.=20 The tab has been running at about $300 million a month.=20 The order, which U.S. Bankruptcy Judge Dennis Montali said he'll sign, will= =20 specify that the Independent System Operator will not procure power except= =20 for a "creditworthy buyer who has agreed to pay the generator."=20 In California, the only such potential buyer is the state Department of Wat= er=20 Resources. However, the department, which has avoided PG&E Co.'s bankruptcy= =20 proceedings by claiming sovereign immunity, will not be controlled by the= =20 agreement. Montali pointed out that the department still could demand=20 reimbursement from PG&E.=20 Under the agreement, the ISO will not press any claims against PG&E on beha= lf=20 of generators if they are not paid.=20 The proposed preliminary injunction was based on an April order by the=20 Federal Energy Regulatory Commission, which forbade the ISO from purchasing= =20 power on behalf of any non-creditworthy buyer, such as PG&E.=20 The ISO is appealing the FERC order. If the appeal succeeds, the injunction= =20 will end.=20 Peter Schrag: Turning up the heat in Houston and Washington (Published June 6, 2001)=20 Behind all the palaver about the predictable standoff at last week's energy= =20 "summit" between President Bush and Gov. Gray Davis, one major political=20 development was missed.=20 Put simply, in the past month the focus of the California energy crisis, an= d=20 maybe the onus as well, has moved east: from the state's (and Davis')=20 handling of the mess to the generating companies, energy marketers and gas= =20 pipeline companies that have richly profited from it, and thus to FERC, the= =20 do-next-to-nothing Federal Energy Regulatory Commission, and the Bush=20 administration.=20 That wasn't all Davis' doing -- far from it -- though it's been at the hear= t=20 of his message about energy industry "pirates" and "profiteers." Bush's=20 misbegotten energy plan and the administration's political clumsiness also= =20 contributed mightily, not least by inadvertently giving Davis the chance to= =20 get media exposure he could only have dreamed about.=20 More important, there's the defection of Sen. James Jeffords from the=20 Republican Party and the resulting shift of control in the U.S. Senate, whe= re=20 the next chair of the Energy Committee will be Sen. Jeff Bingaman of New=20 Mexico, a co-sponsor of Sen. Dianne Feinstein's bill capping wholesale=20 electric rates for the next two years. And chairing the Committee on=20 Governmental Affairs will be Sen. Joseph Lieberman of Connecticut, who's=20 already asked for an audit of energy prices.=20 Those changes will draw a lot more attention to recent studies showing that= a=20 handful of big generators -- Duke Power, Reliant, Mirant, Dynegy and the hu= ge=20 energy-marketing firm Enron -- have gamed the market to drive wholesale=20 prices to levels that, in the year 2000, sometimes reached 40 times the=20 prices of the year before.=20 The findings come not merely from economists at the California Independent= =20 System Operator, the agency that manages the state's grid, who estimate=20 overcharges resulting from market power at $6.2 billion for last year alone= .=20 They come also from Severin Borenstein and his colleagues at the University= =20 of California Energy Institute, who "conservatively" calculate the=20 overcharges at $4.5 billion; from Paul Joskow, a widely respected energy=20 economist at MIT; and from Edward Kahn, an economic analyst in San Francisc= o.=20 In a recent paper published by the National Bureau of Economic Research,=20 Joskow and Kahn conclude that there's "considerable evidence that the high= =20 prices experienced in the summer of 2000 reflect the withholding of supplie= s=20 from the market by suppliers [generators or marketers] exercising market=20 power." That those high prices occurred not merely during peak usage but al= so=20 at off-hours, when no one had ever seen a price spike before, makes those= =20 spikes even more curious.=20 There is, in addition, the powerful suspicion that the huge increase in=20 natural gas prices that a subsidiary of El Paso Energy Co., now the largest= =20 gas company on Earth, was charging on the California side of the=20 California-Arizona border wasn't merely the result of an innocent imbalance= =20 between supply and demand.=20 None of that may be illegal. If there's no collusion, there are no violatio= ns=20 of antitrust laws. But it adds plenty of steam to the political argument. I= n=20 the 2000 election cycle alone, energy companies kicked in some $64 million = in=20 political contributions, 75 percent of it to Republicans. At a time when=20 those companies, many of them located in the same Houston neighborhood, are= =20 racking up astronomical profits and when their collective coziness with Bus= h=20 and the Republican Party is a lot more than rhetoric, their vulnerability t= o=20 a vigorous Senate investigation ought to be obvious.=20 The clincher is "Blackout," a "Frontline" program that both symbolizes the= =20 shifting emphasis and reinforces it. (The program is scheduled to be aired = at=20 8 p.m. Friday on Sacramento cable Channel 7.) It isn't another recital of= =20 Californians worrying about their electric bills, or about the stupidity of= =20 the state's deregulation scheme or how Davis dithered in addressing the=20 crisis. It is about those generators and marketers in Houston and North=20 Carolina, men (and a few women) who regard themselves as the heroes of the= =20 new energy markets.=20 The piece is reported by Lowell Bergman, who in working for both "Frontline= "=20 and the New York Times has already broken major print stories about Duke=20 Power's secret approach to Davis offering unspecified energy refunds in=20 return for an end to state investigations and lawsuits. Bergman also report= ed=20 private conversations between Enron chairman Kenneth Lay, a major Bush=20 supporter, and FERC chairman Curt Hebert regarding the influence that Lay= =20 could exercise with Bush to allow Hebert to keep his chairmanship if Hebert= 's=20 supported certain decisions Enron badly wants.=20 None of these recent events is likely to end Davis' political woes, and the= y=20 may not produce the wholesale rate caps Feinstein wants and that most=20 economists think necessary -- or maybe any significant reduction in the=20 industry's predatory pricing. But they will surely help turn up the heat,= =20 both in Houston and Washington. Six months ago FERC found wholesale prices= =20 were not "fair and reasonable" as federal law requires, but did little abou= t=20 them. It will now have a lot more questions to answer.=20 Peter Schrag can be reached at Box 15779, Sacramento, CA 95852-0779, or at= =20 pschrag@sacbee.com. Is trading an insider's game?=20 Buying, selling of electricity is a growth business, but some say deck is= =20 stacked against consumers By Craig D. Rose=20 UNION-TRIBUNE STAFF WRITER=20 June 6, 2001=20 While Californians decry deregulation's failure to deliver a competitive=20 market, electricity wholesalers have quietly developed a vast and rapidly= =20 growing business of buying and selling power among themselves.=20 The deals take place on high-tech trading floors in Houston and elsewhere= =20 around the country, as well as on Internet-based trading systems.=20 Some experts say this electricity trading is a key mechanism for raising=20 consumer power prices, yet it's largely unregulated.=20 "Electricity trading is like buying stock -- when you have ability to chang= e=20 the stock price," said Frank Wolak, a Stanford University economics profess= or=20 and member of the state grid operator's market surveillance group.=20 Energy companies say the buying and selling of contracts to deliver power= =20 provides risk management, allowing plant owners to presell their electricit= y,=20 lock in prices and avoid fluctuations. The rough and tumble of the free=20 market, they add, is the most efficient means of allocating a resource like= =20 electricity.=20 But industry critics say trading is far from a competitive market paradigm.= =20 In their view, it's a means of communication -- a way for energy insiders t= o=20 collude and raise prices under the guise of competition.=20 To be sure, the trading arms of major energy companies have emerged as star= s=20 in an industry where profit surges of 300 percent or 400 percent are not=20 uncommon.=20 The transactions, shrouded in secrecy, can leave ownership of a critical=20 commodity in unknown hands. Consider the case of power generated by AES=20 Corp.'s California plants.=20 In 1998, AES made a bold move. Immediately after purchasing power plants th= at=20 gave it control of 10 percent of the state's electric generating capacity,= =20 the company sold the output from its plants for the next 20 years to Willia= ms=20 Cos.=20 Williams did not sit on this treasure trove of electrons. The Tulsa, Okla.,= =20 company soon sold 80 percent of what it bought.=20 It is difficult to say who owns that power now. Some might be owned by Semp= ra=20 Trading, a sister company of SDG&E. Or some could be owned by Enron Corp.,= =20 the nation's biggest electricity trader.=20 A spokeswoman for Williams conceded that Williams itself may have repurchas= ed=20 some of the electricity it sold earlier. But trading companies closely guar= d=20 their positions.=20 This much can be said with certainty: Electricity that AES sold for less th= an=20 5 cents per kilowatt-hour to Williams changed hands perhaps 10 times in the= =20 wholesale market and emerged at times in recent months with a price tag for= =20 consumers that was 300 percent higher.=20 Williams' trading profits increased by 523 percent in the first quarter thi= s=20 year. Advance sales All this buying and selling creates curious confluences.=20 In their attempt to deflect criticism over high prices, generating companie= s=20 such as Duke Energy -- operator of the South Bay Power Plant in Chula and= =20 others in the state -- frequently note that they sell most of their=20 electricity far in advance. But they acknowledge less often that their=20 trading units may also be buying power, which could boost the company's=20 electricity inventory.=20 Duke was the fourth biggest electricity trader last year and cited its=20 trading activity as a prime contributor to its wholesale business profits,= =20 which soared 324 percent in the first quarter to $348 million.=20 It is a company's power traders who frequently direct plant operators to=20 increase or decrease the generation of power in response to market=20 conditions.=20 Energy companies have little option but to turn to trading for profits. One= =20 of the better kept secrets of electrical deregulation and its promise of=20 competition is that there is remarkably little competition in the productio= n=20 side of the business.=20 For one thing, electricity is a commodity; power from one company is=20 indistinguishable from that generated by others.=20 More important, nearly all modern plants generate power from turbines built= =20 by a handful of manufacturers. The result? Modern plants owned by different= =20 companies produce power at nearly identical cost.=20 "The cost of power produced by modern plants is all within a mil=20 (one-thousandth of a dollar)," said Michael Peevey, an adviser to Gov. Gray= =20 Davis and former president of Southern California Edison.=20 So the extraction of profit in the electricity business relies much more on= =20 trading. Traders' profits rise when prices are volatile -- plunging, or eve= n=20 better, rising sharply. Little regulation But despite the obvious temptation to manipulate the market, the burgeoning= =20 electricity trading business has remained largely unregulated.=20 The Federal Energy Regulatory Commission does require quarterly filings fro= m=20 energy traders, but these often provide incomplete information, or at least= =20 little that has been of concern to FERC.=20 In fact, although the trading of electricity grew more than a hundredfold= =20 from 1996 to 2000, FERC has taken no major enforcement action against a=20 trader. After the onset of the California crisis last year, FERC has acted= =20 once. That was against Williams, which agreed to pay $8 million without=20 admitting guilt to resolve an allegation that it withheld supply to pump up= =20 prices.=20 FERC's record of enforcement in the area of power trading stands in contras= t=20 to a long list of enforcement actions within other markets taken by the=20 Securities Exchange Commission and the Commodity Futures Trading Commission= .=20 FERC has recently added staff to its market oversight operations. But Willi= am=20 Massey, a FERC commissioner, says the agency's effort is still inadequate.= =20 "Electricity can be flipped, stripped and chopped up," Massey said. "It's a= n=20 extraordinarily complicated market.=20 "The sophisticated marketers and traders have simply moved past us. We're= =20 kind of horse and buggy in our approach and they're out there in rocket shi= ps=20 flying around ... The problem is that sophisticated traders don't necessari= ly=20 produce reasonable prices. They produce profits."=20 Before deregulation, electricity trading was a low-key affair. Regulated=20 utilities dealt power back and forth on a reciprocal basis to fill=20 electricity shortfalls in their control areas. There was little trading for= =20 profit until the mid-1990s, after federal legislation and FERC rulings open= ed=20 the market.=20 Major traders include large energy companies, sister companies of=20 California's major utilities and Wall Street firms. Market volatility In many ways, the trading of power is similar to that of other commodities.= =20 But there are important differences. Because it cannot be stored and its us= e=20 is so fundamental, the price of electricity is the most volatile of all.=20 When supplies are tight, a single supplier can rapidly raise prices to=20 budget-busting levels, as evidenced by Duke Energy's recent admission that = it=20 charged California nearly $4,000 for a megawatt-hour of power, a quantity= =20 that probably sold hours earlier for one-tenth of that sum or less.=20 Wolak, the Stanford economist, and state Sen. Joseph Dunn, D-Garden Grove,= =20 who is investigating the state power market, say trading allows companies t= o=20 collude under the guise of competition. Instead of wringing out lowest cost= s,=20 the wholesale trading market serves to raise prices, they say.=20 "As I trade to you and you trade to me, we communicate to each other what= =20 price we would like to get," said Wolak. "It's not collusive. It's just=20 communicating price."=20 Mark Palmer, a spokesman for Enron, the nation's biggest power trader, said= =20 California's problem is not the result of trading.=20 "It's a result of shortages," Palmer said.=20 Underscoring its emphasis on trading, Enron's new headquarters tower in=20 downtown Houston rises from a six-story block of new trading floors,=20 including expanded space for electricity trading.=20 Enron also pioneered trading in cyberspace and its Enron Online site claims= =20 to be the most active computer-based trading market.=20 The Houston company argues that consumers won't fully benefit from power=20 trading and deregulation until they have greater choice in choosing their= =20 power supplier. And the company says FERC has not done enough to open acces= s=20 to transmission lines, which would allow traders to move power around the= =20 country. To that end, Enron has lobbied hard for President Bush's plan for = a=20 national electricity grid.=20 Palmer says the notion that the price of electricity rises each time it is= =20 traded is mistaken.=20 "The market is always looking for the real price of a commodity," Palmer=20 said.=20 Dunn, the California state senator, says his investigation found a differen= t=20 function for trading. At a time when supply barely meets or falls short of= =20 demand, he noted, companies with electricity to sell have to worry only abo= ut=20 how high to set their price.=20 "The trader is a pawn in the generator's game to drive up prices," said Dun= n.=20 "Trading develops a level of trust. You, my alleged competitor, will bid in= =20 the same patterns and I will respond not in a competitive pattern but in a= =20 complimentary pattern."=20 The state senator said his investigation found evidence that on several day= s,=20 energy companies appeared to test their ability to drive prices up, without= =20 being undercut by competitors.=20 This ability to drive up prices without competitive consequence is a key te= st=20 of market power, the technical term for manipulation or price fixing.=20 But Dunn also conceded that antitrust violations can be hard to prove in=20 court. He suggested that even if the trading behavior falls short of=20 antitrust violations, it remains anti-competitive and devastating for the= =20 California economy.=20 To Harry Trebing, a utility industry expert and professor emeritus at=20 Michigan State University, wholesale electricity trading is reminiscent of= =20 what took place in the 1920s and early '30s. Back then, utility companies= =20 created complex networks of holding companies that traded stock among=20 themselves, driving up prices in the process.=20 Undoing that scheme was a focus of President Franklin Roosevelt's=20 administration. Congress ended up barring national power companies and=20 tightening regulation of utilities, in an effort to counteract their tenden= cy=20 to create markets that work only for insiders.=20 "The broad goals of trading are the same," Trebing said.=20 "The goal is to maximize profits through raising prices."=20 Daily energy costs for state fall in past weeks=20 By Ed Mendel=20 UNION-TRIBUNE STAFF WRITER=20 June 6, 2001=20 SACRAMENTO -- In some of the first good news of the electricity crisis, the= =20 Davis administration said yesterday that the daily cost of power purchased = by=20 the state for utility customers has dropped in recent weeks.=20 The price-drop news comes after an announcement that Californians conserved= =20 more energy than expected last month, 11 percent, and amid Davis=20 administration optimism that the Legislature may finally begin to move on a= =20 plan to keep Southern California Edison out of bankruptcy.=20 The developments, if they turn out to be a trend and not temporary, could b= e=20 among the first signs that Gov. Gray Davis' plan to end the electricity=20 crisis is beginning to work. But the administration isn't saying that.=20 "We have had a few good days here lately," said S. David Freeman, a Davis= =20 power adviser. "I don't think that I want to project."=20 Some power-market watchers began to speculate last month that prices may ha= ve=20 peaked earlier this year. Platts, an energy information service, said=20 yesterday that spot prices for the natural gas used by power plants are=20 falling this month.=20 The governor's press secretary, Steve Maviglio, told reporters yesterday th= at=20 the daily amount spent on power is now "well below" $50 million, which was= =20 the average cost earlier this year.=20 A 12-day gap in the most recent notice to the Legislature that another $500= =20 million increment will be spent on power suggests that the daily average=20 during the last two weeks may have dropped down around $42 million.=20 Oscar Hidalgo, a spokesman for the state power purchasing agency, said that= =20 the average cost of power was under $40 million during the first four days = of=20 this month.=20 Maviglio attributed the lower cost to conservation, the phasing in of cheap= er=20 long-term power contracts, fewer power plants off-line for maintenance, and= =20 cooler weather.=20 However, he said, "The average cost is still way over what we paid last=20 year."=20 There was widespread skepticism in late April when the governor's consultan= ts=20 predicted that the $346 per megawatt-hour average paid by the state for=20 non-contracted power from April through June would drop to an average of $1= 95=20 from July through September.=20 "We are still very comfortable with the projection that Mr. Fichera and=20 company estimated," Maviglio said, referring to Joseph Fichera of Saber=20 Partners in New York.=20 During a briefing on May 21, Fichera told reporters that the amount of powe= r=20 that the state would obtain under long-term contracts for May was expected = to=20 be about 43 percent of the total required, the so-called net short.=20 Fichera said contracts already signed were expected to cover 66 percent of= =20 the net short in June, 48 percent in July, and 42 percent in August. He sai= d=20 contracts that had been agreed on in principle could increase those amounts= =20 to 73 percent in June, 67 percent in July, and 60 percent in August.=20 "We are still on target. There are risks," Fichera said yesterday, among th= em=20 extended hot weather and power plant outages. "No one is popping the=20 champagne corks until Sept. 30."=20 The governor's consultants based their forecast of power demand this summer= =20 on an estimate that Californians will reduce their electricity use by 7=20 percent.=20 The 11 percent reduction last month, as compared to May of last year, came= =20 before the sticker shock of rate hikes that begin this month for customers = of=20 Edison and Pacific Gas and Electric. And a $35 million ad campaign urging= =20 conservation has not hit full stride.=20 Maviglio said the administration plans to release some detailed information= =20 on Monday about the roughly $8 billion the state has spent buying power. Th= e=20 general fund will be repaid by a bond of up to $13.4 billion that ratepayer= s=20 will pay off over 15 years.=20 Legislative leaders have demanded detailed information about power purchase= s=20 before proceeding with the Edison plan. Assembly Democrats are working on a= =20 plan that de-emphasizes state purchase of the Edison transmission system an= d=20 would put most of the burden for paying off Edison's debt on businesses and= =20 large users, not residences. Five tiers sought in proposed rate boost=20 Conservation would be promoted, SDG&E says By Karen Kucher=20 UNION-TRIBUNE STAFF WRITER=20 June 6, 2001=20 A proposed rate increase for SDG&E customers to cover the high cost of=20 electricity should be imposed in five tiers to encourage conservation, the= =20 company is advising state utility regulators.=20 The more electricity a customer uses, the higher the rate would be.=20 SDG&E needs to raise its rates to bring in an additional $502 million=20 annually to pay the state for power purchases.=20 The state Public Utilities Commission is expected to rule on San Diego Gas = &=20 Electric's rate-increase proposal June 28.=20 The rate changes would remove a cap that has shielded most SDG&E customers= =20 from rising electricity prices for a year. The cap, enacted by state=20 lawmakers in September 2000 and retroactive to June 2000, set rates at 6.5= =20 cents per kilowatt-hour.=20 Higher rates would mean the average SDG&E residential and small-business=20 customer's electricity bills would go up by 18 percent. Large commercial=20 users' bills would average 29 percent more.=20 Public hearings on the issue will be held next Monday and Tuesday in San=20 Diego, El Cajon, Escondido and San Clemente. These sessions will focus on= =20 small-business and residential consumers. Hearings on large commercial user= s=20 were held last month.=20 Earlier this year, the PUC decided to allow the state's two largest=20 utilities, Pacific Gas and Electric and Southern California Edison, to char= ge=20 customers an extra $5.7 billion annually for electricity.=20 The state Department of Water Resources, which has been buying power for=20 SDG&E customers since February, asked SDG&E to generate a total of $915=20 million annually to cover the cost of electricity purchases.=20 With the proposed rate increases, SDG&E could do that.=20 Large commercial customers would pay about 30 percent of the overall increa= se=20 and residential and small-business customers would pay about 70 percent, sa= id=20 Ed Van Herik, a spokesman for the utility company.=20 If the increase can be tiered, as many as 60 percent of residential custome= rs=20 will see no rate increase if their electricity usage remains the same, Van= =20 Herik said.=20 But customers who use more than 130 percent of their baseline -- considered= =20 the minimum amount of electricity needed by a household -- will be billed a= t=20 increasingly higher rates.=20 Residential and small-business customers who use a lot of electricity could= =20 pay as much as 17.89 cents per kilowatt hour for some power they consume.= =20 Consumer advocate Michael Shames said he is concerned the utility's proposa= l=20 does not spread the increases evenly among different types of users. He als= o=20 called for more scrutiny of the state's request.=20 People should tell PUC officials "that this increase should not be a carte= =20 blanche or blank check approval," said Shames, the head of Utility Consumer= s'=20 Action Network. "The PUC needs to ensure that the rate increase requested b= y=20 the (state) is reasonable."=20 The public hearings are scheduled for:=20 ?Monday, 1 p.m., San Diego Concourse, Copper Room, 200 C St., San Diego.=20 ?Monday, 7 p.m., El Cajon Community Center, 195 E. Douglas Ave., El Cajon.= =20 ?Tuesday, 1 p.m., Country Inn Hotel, 35 Via Pico Plaza, San Clemente.=20 ?Tuesday, 7 p.m., Center for the Arts, 340 N. Escondido Blvd., Escondido.= =20 Port budget large, but power bills loom=20 Slowing economy also cause for worry By Ronald W. Powell=20 UNION-TRIBUNE STAFF WRITER=20 June 6, 2001=20 The "rock" is rolling financially, but there are indications that the blues= =20 lurk on the horizon.=20 Officials of the San Diego Unified Port District -- headquartered in a=20 block-shaped building some employees call the rock -- are happy with a=20 projected 2001-2002 budget that is 5.1 percent larger than the current one.= =20 Total revenue is expected to reach $208.7 million, $10.2 million above what= =20 is expected in the fiscal year that ends June 30.=20 Port commissioners gave preliminary approval to the budget yesterday and ar= e=20 scheduled to take a final vote July 10.=20 But a slowing economy and surging electric bills are causes for concern.=20 Electricity costs are expected to rise from $5 million to $8.2 million in t= he=20 coming fiscal year.=20 "As far as trends, we see a continuation of the growth we've experienced ov= er=20 the past five years," said Bruce Hollingsworth, the port's treasurer. "But= =20 our percentage of growth will not rise as sharply."=20 Port revenues have grown steadily since the 1997-1998 fiscal year, when $16= 3=20 million was generated.=20 The proposed budget calls for adding 24 employees to the port's 730-member= =20 work force. New hires will include three Harbor Police officers, 10 employe= es=20 in the aviation division and four in maritime services.=20 The port operates Lindbergh Field and administers nonmilitary tidelands alo= ng=20 San Diego Bay. It is landlord to more than 600 waterfront businesses and=20 operates two marine cargo terminals and one cruise ship terminal.=20 The budget calls for growth in each of the port's primary revenue centers:= =20 aviation, real estate and maritime services.=20 Passenger and cargo activity at Lindbergh Field is expected to generate $90= .7=20 million, or $5 million more than expected in the current year. Most of that= =20 increase is expected to come from parking-rate increases at the airport and= =20 at the port's long-term parking lot on Pacific Highway.=20 Rent from hotels and other businesses that are port tenants are expected to= =20 total $63.1 million, up $1.8 million from the current budget.=20 Increases in cargo and cruise ship traffic are expected to boost maritime= =20 income by $2.7 million, to a total of $18.4 million.=20 The port expects to spend $157 million on construction projects. They inclu= de=20 $8.5 million to relocate the General Services Department from Eighth Avenue= =20 and Harbor Drive in San Diego to National City and more than $5 million for= =20 paving and improvements at the 10th Avenue Marine Terminal.=20 Rent revenue could grow substantially in future years. Four hotel projects = on=20 port property have won approval or are seeking it.=20 Jim Bailey, president of Manchester Resorts, told commissioners yesterday= =20 that he expects to break ground on a second Hyatt tower of 750 rooms by Jun= e=20 26. Port officials said revenue from that hotel would bring in an additiona= l=20 $3.7 million a year. It is scheduled to open in the summer of 2003.=20 Hollingsworth, the treasurer, said that if all four hotels are built the po= rt=20 could receive as much as $15 million a year in new revenue.=20 Continuous use urged for planned power plant=20 Escondido facility originally proposed for peak demand By Jonathan Heller=20 UNION-TRIBUNE STAFF WRITER=20 June 6, 2001=20 ESCONDIDO -- A proposed power plant in southwest Escondido that initially w= as=20 expected to run only during times of peak electricity demand probably will = be=20 allowed to run full time.=20 A state energy official who recommended approval of the plant yesterday has= =20 said the plant could operate as often as the state deems necessary.=20 The California Energy Commission was scheduled to vote on the project today= .=20 CalPeak Power of San Diego has asked the commission to approve a 49-megawat= t=20 plant on Enterprise Street near Vineyard Avenue. Referred to as a "peaker"= =20 plant, such facilities typically are designed to supply energy only during= =20 times of peak demand.=20 The state limits the number of hours some plants can operate to keep=20 pollution at a minimum. A 44-megawatt peaker plant being built on West=20 Mission Avenue in Escondido by Ramco Inc. will be allowed to operate no mor= e=20 than 16 hours per day.=20 That plant is permitted to emit up to 5 parts per million of nitrogen oxide= ,=20 although its actual emissions are expected to be slightly lower, said Dale= =20 Mesple, a Ramco consultant. Nitrogen oxide is a component of smog.=20 The CalPeak plant, if approved, would be restricted to 2 parts per million = of=20 nitrogen oxide.=20 It was generally assumed that the CalPeak plant would operate under similar= =20 time restrictions as the Ramco plant. The potential for air pollution was= =20 among the chief concerns of residents who spoke at the City Council hearing= s=20 on the Ramco project and at the energy commission hearings about the CalPea= k=20 plant.=20 But under the terms of approval recommended by Energy Commission Chairman= =20 William Keese, CalPeak's plant would be able to operate "up to 8,760 hours= =20 per year, typically when the demand for electricity is high." That number= =20 equals 24 hours a day.=20 The actual number of hours would depend on the requirements of the state's= =20 Independent System Operator, which manages the energy grid.=20 "We certainly want to have the flexibility to run whenever we're needed,"= =20 said Mark Lyons, CalPeak's development director. "Exactly how often we will= =20 run is anybody's guess."=20 Escondido Councilwoman June Rady said she was frustrated by the possibility= =20 of the plant running full time. In Ramco's case, the city and the county Ai= r=20 Pollution Control District made it clear how often the plant could operate.= =20 CalPeak chose to bypass the city's permitting process and went through the= =20 state Energy Commission, which offers an expedited 21-day approval put in= =20 place by Gov. Gray Davis as an emergency measure.=20 "I think Escondido has been absolutely ignored and there's a total lack of= =20 due process," Rady said. "It boils down to an issue of local control."=20 Although city officials objected to the commission pre-empting the city's= =20 land-use authority, the commission maintained that Davis' order gave it the= =20 final say on this type of project.=20 If the commission gives final approval today, the only remedy available to= =20 the city would be in court. At least three council members must vote to=20 initiate legal action.=20 Keese's recommended approval did take into account several city concerns=20 regarding landscaping. The CalPeak plant would be built near the entrance o= f=20 a planned high-tech business park, and city officials were worried the=20 plant's appearance might hinder the ability to attract high-quality tenants= =20 to the park.=20 Mayor Lori Holt Pfeiler said she was not surprised by the commission's=20 recommendation.=20 "I expected they would want to approve the project, and that's why it was= =20 important for the city to weigh in with conditions we have in this=20 community," Pfeiler said.=20 Rising energy prices threaten Poway troupe=20 By Brian E. Clark=20 UNION-TRIBUNE STAFF WRITER=20 June 6, 2001=20 POWAY -- Rising electricity rates may extinguish the stage lights this summ= er=20 for the Poway Performing Arts Company.=20 "I'm afraid that if SDG&E gets the price increase it's asking for -- from 6= .5=20 cents per kilowatt-hour to 8.9 cents -- that we'll go under," said Kathy=20 McCafferty, spokeswoman for the nonprofit theater.=20 The volunteer organization produces its plays in a building at a Poway Road= =20 shopping center. It held three fund-raising performances over the weekend,= =20 but officials were uncertain yesterday how much money was raised.=20 The group is not affiliated with the Poway Performing Arts Center and has= =20 been in business for 20 years.=20 McCafferty said the group built up a $2,000 surplus last summer before ener= gy=20 prices began to surge.=20 "That $2,000 was a big reserve for us," she said. "It seemed like a ton of= =20 money, but, boy, it went fast. And we're really energy-dependent. Our light= s=20 use a lot of power. And we're in Poway on the second floor of our building.= =20 It gets hot here, and we have to use air conditioning."=20 But McCafferty acknowledged that the cost of power isn't the group's only= =20 problem.=20 In a recent letter to backers, President Nan Katona said the organization= =20 also needs new blood to keep operating.=20 "The truth is that lack of funding is just a symptom of the deeper problem,= =20 which is lack of community support," she wrote. "Ironically, audiences and= =20 reviewers recognize the Poway Performing Arts Company as one of the premier= =20 community arts theaters in San Diego."=20 Katona said some new volunteers had stepped forward to take leadership role= s=20 in the theater company since she wrote her letter last month. But she said= =20 rising electricity prices could still bring the group down.=20 "If our energy bills double or triple, we could be in dire straits," she=20 said. "It could push us over the edge financially."=20 McCafferty said it would be difficult for the theater to cut costs.=20 "We can't run a much leaner operation," she said. "If our power prices go u= p=20 again, we may still be forced out of business."=20 The theater is at 13250 Poway Road, in the Lively Shopping Center. For more= =20 information, call (858) 679-8085.=20 Fair to use generators for midway attractions=20 By Michael Burge=20 UNION-TRIBUNE STAFF WRITER=20 June 6, 2001=20 DEL MAR -- The Del Mar Fair will generate its own electricity for thrill=20 rides on the midway this year instead of using energy from SDG&E.=20 "In case there are planned or unplanned outages, we still will be operating= ,"=20 fairgrounds General Manager Timothy J. Fennell said.=20 Fennell decided to put the midway on generators because he didn't want the= =20 fairgrounds pulling power from the grid while county residents are coping= =20 with rolling blackouts at home and at work, he said.=20 And the fair does not want to take a chance that a rolling blackout will=20 leave some people stranded in rides high above the grounds, forcing an=20 evacuation.=20 The fairgrounds has been told it is exempt from rolling blackouts, but rath= er=20 than take such a risk it will rent 13 diesel-fuel generators and produce=20 electricity on the midway. The rest of the fairgrounds will use power from= =20 San Diego Gas & Electric Co.=20 Fairgrounds operations manager Larry Baumann estimated it would cost the=20 fairgrounds $20,000 more to generate its own electricity than to buy it fro= m=20 SDG&E.=20 Midway manager Donna Ruhm said it will be worth it.=20 "Rides that require evacuation have to have backup power and they do," Ruhm= =20 said. "Now our service won't be interrupted."=20 It is not unusual for carnivals to generate their own power, and the=20 fairgrounds has done so in the past. Fair officials removed the generators = 10=20 to 15 years ago to reduce noise on the midway.=20 The fair opens June 15 and ends July 4.=20 While the rest of the fairgrounds is on the SDG&E grid, Baumann said backup= =20 generators can kick in during a typical 60-or 90-minute blackout, allowing= =20 the fair to operate without serious difficulty. Those generators are not=20 linked to the midway.=20 All the generators are licensed by the state and meet emission standards,= =20 fair officials said, so they do not expect the noise and odor to be=20 excessive.=20 The fairgrounds is taking the precaution of providing its own power despite= =20 the fact that it probably will not go dark during a rolling blackout.=20 "SDG&E has assured me that .?.?. the fairgrounds and the racetrack will not= =20 be on the curtailment (blackout) list during the fair and the races," said= =20 Del Mar Fire Chief Jack Gosney.=20 The Del Mar Thoroughbred racing season begins July 18 and ends Sept. 5.=20 Gosney said SDG&E told him earlier this year that the fairgrounds was not= =20 subject to a forced outage because it shared a circuit with the Del Mar Fir= e=20 Station, which is a 911 dispatch center and exempt from a blackout. But he= =20 said recent research showed that the fairgrounds is on a separate circuit.= =20 Nonetheless, Gosney said, SDG&E is exempting the fairgrounds and racetrack= =20 during the busy summer season.=20 The fairgrounds paid $137,152.95 for its electricity usage from March 12 to= =20 April 10. It paid $51,845.39 for electricity during the same period last ye= ar. ?=20 Wednesday, June 6, 2001=20 'Hi, My Name Isn't Justice, Honey,' and Shame on Lockyer=20 By TOM G. PALMER ?????Here's what California Atty. Gen. Bill Lockyer said at a press=20 conference about Enron Corp. Chairman Kenneth Lay: "I would love to=20 personally escort Lay to an 8-by-10 cell that he could share with a tattooe= d=20 dude who says, 'Hi, my name is Spike, honey."'=20 ?????Here's why Lockyer should be removed from his office of public trust:= =20 First, because as the chief law enforcement officer of the largest state in= =20 the nation, he not only has admitted that rape is a regular feature of the= =20 state's prison system, but also that he considers rape a part of the=20 punishment he can inflict on others.=20 ?????Second, because he has publicly stated that he would like to personall= y=20 arrange the rape of a Texas businessman who has not even been charged with= =20 any illegal behavior.=20 ?????Lockyer's remarks reveal him to be an authoritarian thug, someone whol= ly=20 unsuited to holding an office of public trust.=20 ?????But his remarks do have one positive merit: They tell us what criminal= =20 penalties really entail.=20 ?????Contrary to some depictions of prisons as country clubs, they are=20 violent and terrible places. More and more politicians propose criminal=20 sanctions for more and more alleged misdeeds, and as a result ever more kin= ds=20 of behavior are sanctioned by criminal penalties, perhaps now even selling= =20 electricity. Those found guilty of such crimes are put into cages, where th= ey=20 are deprived of their liberty and dignity and, as Lockyer so clearly=20 acknowledged, raped and brutalized. What's worse, Lockyer has indicated tha= t=20 he believes that rape is an appropriate part of the system of punishments h= e=20 administers.=20 ?????Should it matter that Lay is a businessman? Imagine the outcry if the= =20 head of Enron were female. What would Lockyer's fellow Democrats have said = to=20 that?=20 ?????Should it matter that Lay is chairman of an electricity generator? Doe= s=20 the nature of his business justify threats to escort him to his own rape?= =20 Lockyer told the Los Angeles Times that he had singled out Enron's chairman= =20 because the Houston-based company is the world's largest energy trader.=20 ?????So apparently singling out a man for a heinous threat is OK because he= 's=20 the chairman of the world's largest energy trading company. That's accordin= g=20 to the man who, as a state senator, sponsored California's 1984 hate-crimes= =20 law. Evidently the crusader against intimidation on the basis of race,=20 religion and sexual orientation feels no hesitation at all about intimidati= ng=20 someone and threatening him with the brutal use of physical force simply=20 because he heads the world's largest energy trading company.=20 ?????Lockyer and Gov. Gray Davis seem to think that the best way to keep th= e=20 lights on is to threaten electricity producers with brute force, rather tha= n=20 to offer to pay competitive rates in competitive markets. Are energy=20 producers to blame for California's energy problems? No. Bad policies,=20 including rigid controls on retail prices of electricity, are the cause of= =20 the problem, not the people who generate energy. Scapegoating producers and= =20 threatening them with violence is an old ploy of authoritarians. California= ns=20 should not stand for it.=20 ?????An Enron spokesman said that Lockyer's chilling stated desire to arran= ge=20 the rape of Lay does not merit a response. The spokesman is wrong. Lockyer'= s=20 remarks merit public disgrace and removal from office. After all, rape is n= ot=20 a form of legal justice in America--is it?=20 - - - Tom G. Palmer Is a Senior Fellow at the Cato Institute in Washington. E-mai= l:=20 Palmert@cato.org Copyright 2001 Los Angeles Times=20 California ; Metro Desk=20 U.S. Probes Alleged Pact Not to Build New Plants Power: Justice officials= =20 focus on Southland operations of two firms, which deny wrongdoing. MYRON LEVIN; NANCY RIVERA BROOKS ?=20 06/06/2001=20 Los Angeles Times=20 Home Edition=20 Page B-1=20 Copyright 2001 / The Times Mirror Company=20 The U.S. Department of Justice has launched an investigation into whether t= wo=20 companies that control a large swath of Southern California 's electricity= =20 supply agreed to limit power plant construction, potentially hindering=20 crucial energy production, according to federal records and interviews.=20 The civil antitrust probe of Williams Energy Services and AES Southland=20 represents the Justice Department's first foray into the activities of ener= gy=20 suppliers who have reaped huge profits in California 's price-shocked marke= t.=20 AES disclosed the investigation, which began last month, in a filing with t= he=20 Securities and Exchange Commission on Tuesday. In its papers, AES said the= =20 Justice Department is focusing on whether its agreement with Williams could= =20 constrain future power plant construction in Southern California .=20 The investigation comes at a time when the state is scrambling to get new= =20 generators built and running to avoid blackouts and economic problems.=20 The government alleges that AES and Williams agreed to limit the expansion = or=20 construction of new power plants near three facilities purchased by AES in= =20 1998 from Southern California Edison under the state's new deregulation pla= n.=20 The plants--in Long Beach, Huntington Beach and Redondo Beach--are owned by= =20 AES, but the electricity is sold by Williams. Under a 3-year-old deal, know= n=20 as a tolling agreement, Williams essentially rents out the capacity of the= =20 plants for annual payments to AES. Williams supplies natural gas to fire th= e=20 plants and sells the electricity under long-term contracts and in the costl= y=20 spot market.=20 Williams and AES have similar tolling agreements at plants in Pennsylvania= =20 and New Jersey. However, AES spokesman Aaron Thomas said the Justice=20 Department's investigative requests have focused only on agreements between= =20 Williams and AES in Southern California .=20 Thomas would say only that the agreement at the center of the investigation= =20 is simply a delineation of "how expansion or repowerings are done at the=20 facilities."=20 The three plants have a combined capacity of more than 3,900 megawatts,=20 enough to supply about 3 million homes. This summer, AES is bringing anothe= r=20 450 megawatts on line by reactivating two mothballed generators in Huntingt= on=20 Beach.=20 Paula Hall-Collins, a spokeswoman for Tulsa-based Williams Cos., said she= =20 believes that the investigation is unrelated to a recent inquiry by the=20 Federal Energy Regulatory Commission into whether AES and Williams=20 unnecessarily shut down plants to jack up prices. A portion of that=20 investigation was settled in April, when Williams, without admitting any=20 wrongdoing, agreed to pay about $8 million.=20 "We've always maintained that we've operated within the law, and we're=20 certain the investigation by the DOJ will find we are operating legally,"= =20 Hall-Collins said.=20 Williams and AES are among the power plant owners and marketers that have= =20 been lambasted by Gov. Gray Davis because of gold-plated electricity prices= =20 that have pushed the state's biggest utilities to the edge of ruin and are= =20 steadily draining the state's budget surplus.=20 State officials are asking FERC to revoke the rights of AES and Williams to= =20 sell electricity at whatever price the market will bear. That right was=20 granted for three years, beginning in 1998 by federal regulators when=20 California 's $28-billion electricity market was opened to competition.=20 Under that plan, the rights of AES and Williams to sell into the market are= =20 the first to come up for renewal.=20 AES Southland and Williams Energy Services are both arms of large energy=20 companies--AES Corp. of Arlington, Va., and Williams Cos. of Tulsa, Okla. California ; Metro Desk=20 Natural Gas, Power Prices Drop Sharply Energy: More conservation, mild=20 weather are among factors keeping costs down, experts say. RICARDO ALONSO-ZALDIVAR; NANCY VOGEL ?=20 06/06/2001=20 Los Angeles Times=20 Home Edition=20 Page B-1=20 Copyright 2001 / The Times Mirror Company=20 WASHINGTON -- The wholesale prices of electricity and natural gas in=20 California have fallen sharply in recent weeks, and experts said Tuesday th= at=20 the relief could be the harbinger of an energy turnaround.=20 Or it may be just a blip.=20 In the last couple of weeks, California power prices have plunged to the=20 lowest levels since April 2000, traders say, with electricity selling on so= me=20 days for less than $100 per megawatt-hour.=20 At night, when demand slackens, power sometimes sells for less than $20 per= =20 megawatt-hour. That is reminiscent of the days before prices went haywire= =20 last summer.=20 It is a drastically different scenario than the $500 to $800 the state paid= =20 during a spate of hot weather last month.=20 Meanwhile, wholesale natural gas prices at a bellwether pipeline junction o= n=20 the Southern California -Arizona border dipped last week to their lowest=20 levels since November, according to a publication that tracks the industry.= =20 Separately, Southern California Gas Co. and Pacific Gas & Electric Co.=20 reported June rate cuts for their residential gas customers of 16% and 38%,= =20 respectively.=20 Experts credited a combination of conservation, mild weather, a burst of=20 increased hydroelectric generation and lower natural gas prices for the dro= p=20 in electricity costs.=20 "Conservation is starting to worry the generators, which is nice to see,"= =20 said Severin Borenstein, director of the University of California Energy=20 Institute in Berkeley. Californians used 11% less energy last month than in= =20 May 2000, according to the state Energy Commission.=20 "I'm worried that if we don't push harder on conservation, [prices] won't= =20 stay down," Borenstein added.=20 On the natural gas side, experts said the price decline is due to replenish= ed=20 storage within California , a nationwide drop in the cost of the fuel and= =20 easing demand from power plants.=20 The number of shippers competing to get natural gas to the state has also= =20 increased, with the expiration of a controversial contract on the El Paso= =20 pipeline system last week.=20 But economists were reluctant to make sweeping predictions based on the=20 latest indicators.=20 "It's hard to draw specific conclusions," said Bruce Henning, who tracks th= e=20 natural gas markets for Energy and Environmental Analysis Inc., an Arlingto= n,=20 Va., consulting firm.=20 How the summer turns out depends on the weather in the state, Henning said,= =20 adding, "The weather represents the balance in the Southern California=20 market."=20 Natural gas fuels most California power plants. With wholesale prices=20 recently averaging three to four times the rates charged elsewhere in the= =20 country, state and federal officials have despaired of chances for=20 controlling electricity costs.=20 Last Friday, however, the daily price for immediate delivery of natural gas= =20 in Topock, Ariz., a pipeline junction near the California border, dipped to= =20 $7.85 per million British thermal units.=20 According to Natural Gas Week, it was the first time since mid-November tha= t=20 the price at that location had fallen below $8 per million BTUs. One millio= n=20 BTUs is what a typical Southern California home uses in five or six days.= =20 Considered a bellwether for other pipeline systems serving California , the= =20 Topock price reached a record $56.54 per million BTUs on Dec. 8. It stood a= t=20 $9.36 per million BTUs at the close of business Tuesday, still below recent= =20 weekly averages.=20 Other industry publications have also picked up signals of price declines.= =20 Platts, the energy information division of McGraw-Hill Cos., reported Tuesd= ay=20 that the price for monthly gas delivery contracts to California fell 22% in= =20 June, following a nationwide trend.=20 But Henning said the drop in California prices is attributable to both lowe= r=20 prices around the country and a decline in the high markups for shipping ga= s=20 to California . Those markups, which far exceed the cost of transporting ga= s,=20 have drawn the attention of state and federal investigators.=20 Henning said the markups are declining as depleted storage levels in=20 California are replenished. "Storage levels have been filling very rapidly,= =20 and that fact is reflected in prices coming down," he said.=20 The link between natural gas and electricity prices is a hotly debated=20 subject. Some experts say high-priced natural gas is driving up the cost of= =20 electricity . Others believe that record prices for power are raising the= =20 prices that generators are willing to pay for their fuel.=20 Electricity prices that range from $20 to $200 per megawatt-hour--instead o= f=20 the $150 to $500 per megawatt-hour paid in recent months--are great news fo= r=20 Gov. Gray Davis.=20 Average daily power prices in California for transactions through the=20 Automated Power Exchange have dropped from $149 per megawatt-hour last Frid= ay=20 to $110 per megawatt-hour Tuesday. The exchange is a private company that= =20 brings together electricity buyers and sellers and accounts for less than 1= 0%=20 of the state's market.=20 Davis spokesman Steve Maviglio said Tuesday that average daily power=20 purchases by the state have recently dipped below $50 million.=20 The state has sometimes had to pay more than $100 million a day since it=20 started buying power in January through the Department of Water Resources.= =20 The state stepped in because California 's two biggest utilities became too= =20 financially crippled to withstand the prices being charged by generators.= =20 Davis' plan to pay for past and future energy purchases with a $12.4-billio= n=20 bond issue hinges on an assumption that power prices will be driven down th= is=20 summer through long-term contracts, conservation and the construction of ne= w=20 power plants.=20 UC Berkeley's Borenstein said conservation efforts have not gone far enough= .=20 "You walk into most buildings and you still need a sweater," he said. "That= =20 ain't the way to hit the target."=20 If Californians conserved an additional 10% off their peak usage on hot=20 afternoons, he said, "we could really break the backs of the generators, we= =20 could really collapse the price."=20 Prices tend to skyrocket in California 's electricity market on hot=20 afternoons, when demand soars and grid operators must scramble to purchase= =20 enough electricity . Cool weather, which reduces demand for air conditionin= g,=20 and conservation help keep the state from reaching such crisis situations.= =20 Borenstein said he believes generators are also asking less money for their= =20 electricity in part because of a federal order that took effect last month.= =20 The order limits the price power plant owners can charge when California 's= =20 supplies are strained.=20 Power sellers say there are more fundamental forces at work.=20 "There's more supply relative to demand, which is softening prices," said= =20 Gary Ackerman, executive director of the Western Power Trading Forum. "The= =20 market is working, and it's providing cheaper wholesale power more quickly= =20 than any regulatory scheme could ever do."=20 *=20 Times staff writer Dan Morain in Sacramento contributed to this story.=20 RELATED STORY=20 PG&E wins: The utility averted a $1-billion bill for power buys. B6=20 (BEGIN TEXT OF INFOBOX / INFOGRAPHIC)=20 A Blip or a Trend?=20 Daily natural gas prices at the California border with Arizona--considered = a=
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