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Sac Bee, Mon, 7/9: Energy probe relies on history: A 1929 cement case offers a map as a Senate panel seeks contempt charges Sac Bee, Mon, 7/9: Dan Walters: Energy preoccupies politicos, but school crisis still looms large SD Union, Mon, 7/9: Estimates start at $50 billion for deregulation cost SD Union, Sat, 7/7: SDG&E ratepayers lose PUC case SD Union, Sat, 7/7: Davis totals up his efforts, notes price drop LA Times, Mon, 7/9: Concern Over Price of Long-Term Power Pactrs Grows Embedded costs may yield more rate hikes, critics say, and the $43-billion total could complicate plans to rescue Edison LA Times, Mon, 7/9: The Nation Deal with Suppliers Not Likely LA Times, Sun, 7/8: Paying the Energy Bill Crying Foul Over Energy Baselines LA Times, Sun, 7/8: Power Firms Have Motive to Deal With Davis Energy SF Chron, Sun, 7/8: Airplane leftovers converted into electricity Mercury News, Mon, 7/9: FERC judge readying his resolution OC Register, Mon, 7/9: Energy crisis begets brainstorms Individual.com (AP), Mon, 7/9: PG&E to Assume Calpine's California QF Contracts Calpine to Receive All Past Due Receivables WSJ, Mon, 7/9: California Officials Justify Their Claims Of Overcharges Before Federal Mediator WSJ, Mon, 7/9: Calpine Says PG&E Has Agreed to Pay $267 Million in Overdue Electricity Charges Mercury News, Sat, 7/7: REFUND ACCORD UNLIKELY BEFORE DEADLINE; POWER SUPPLIERS, STATE REMAIN BILLIONS APART; JUDGE ORDERS MORE TALKS Mercury News, Sat, 7/7: PG&E TO PAY $265 MILLION IN CALPINE DEAL; TALKS BETWEEN UTILITY, GENERATOR MARK TURNING POINT IN BANKRUPTCY NEGOTIATIONS ------------------------------------------------------------------------------ ------------------------------------------------------- Energy probe relies on history: A 1929 cement case offers a map as a Senate panel seeks contempt charges. By Emily Bazar Bee Capitol Bureau (Published July 9, 2001) Reports of the day called it one of the most tense and trying legislative sessions to date. On March 14, 1929, the state Senate found 10 executives from California cement companies in contempt and voted to send them to jail. The Bee's headline screamed the news the following day: "Senate Will Jail Cement Executives for Defiance." The executives had refused to answer questions and divulge documents requested by a special Senate committee trying to determine whether an illegal "cement trust" had fixed prices at an artificially high level in the years before 1929. Such allegations of price manipulation ring eerily familiar these days in the Capitol, where many lawmakers are embroiled in a frenzied effort to prove that energy companies have played the power market and gouged billions of dollars from California ratepayers. On Wednesday, a special Senate committee investigating electricity price manipulation is poised to confirm its own recent contempt findings against two energy companies, if necessary. One week later, it may add others to the list. Should the committee agree to finalize any contempt charges, it will forward a report to the full Senate, which will decide on punishments that could include jail time or steep fines. As the committee pursues this rarely used option, members are taking a careful look at the 1929 cement trust investigation, believed to be the only time during the past 100 years that the Legislature has found anyone in contempt. That case provides modern-day lawmakers with a road map of sorts, confirming their ability to levy contempt charges and punishments, and identifying potential legal pitfalls that could hamper their case. One possible problem, for instance, is the state Supreme Court decision that voided the 1929 contempt charges and kept the cement executives out of jail. "We are without reservation ensuring that we cross all of our t's and dot all of our i's as identified in the (1929) decision," said the committee's chairman, Sen. Joe Dunn, D-Santa Ana. Details of the cement case were culled from the history books last year when the Assembly Insurance Committee began probing former state Insurance Commissioner Chuck Quackenbush's questionable behavior in office. As part of the investigation, legislators issued subpoenas. They also studied precedents, including the cement case, to determine how to respond if witnesses ignored a subpoena or refused to respond to their questions. "We had to know what our powers were," said Matthew Jacobs, a former federal prosecutor who served as special counsel to the committee. The few years before 1929 were boom times in California. Houses were sprouting everywhere, businesses were raking in money and state government went on a building binge, erecting dams, prisons and hospitals. But lawmakers noticed that cement companies attempting to win state contracts for public works projects submitted nearly identical bids over a period of several years. A special Senate committee subpoenaed officials from several cement companies, peppered them with questions and asked them to release records, including income tax forms and balance sheets. But their responses, like their suspicious bids, were nearly identical. According to the committee's March 8, 1929, report, committee executives -- one after another -- refused to turn over documents and answer questions, saying they were declining upon the advice of their attorneys. Here's one example of a typical exchange repeated hundreds of times during the hearings: Sen. J.M. Inman of Sacramento at one point asked Harry T. Battelle, secretary of the Pacific Portland Cement Co., to "tell the committee what it costs to produce cement." Battelle's answer: "On the advice of counsel, I will have to refuse to answer." On March 14, 1929, the Senate voted 22-16 to find the 10 executives from eight companies in contempt and ordered them "confined in the Sacramento County Jail until they have purged themselves of contempt," according to the next day's article in The Sacramento Bee. (An article in the Sacramento Union on March 15 reported that the Senate's action marked the third time it had ever found anyone in contempt. The two previous cases involved newspaper reporters who had refused to divulge information.) Though they were ordered to jail, the executives -- eventually numbering nine because legislative leaders determined that one executive found in contempt had never even appeared before the committee -- spent little or no time behind bars. When eight surrendered themselves to the Senate's sergeant-at-arms on March 25 in San Francisco -- one was sick -- they had with them court orders and were released later that day "on $1,000 bail each," according to an article in the Union, pending a full-scale constitutional review of the case by the state Supreme Court. The court heard the case in early April. Attorneys for the cement executives argued that the Senate had exceeded its authority in making the contempt charges and had no right to their confidential records. But on May 14, the court found that the Senate had the authority to order the executives to jail for the contempt charges. However, the justices also decided that the Senate's findings lacked specificity. For instance, the court found that the Senate had failed to adequately justify why it had demanded certain documents and records. With the contempt findings voided by the court, the executives were free to go. The headline in The Bee the next day read, "Supreme Court Frees Cement Heads on Quirk." The committee dropped the investigation. Fast forward 72 years. Dunn said he is working to ensure that the committee is very clear about why its investigation is important, and why the documents and records are necessary. As for the companies that already have been found in contempt -- Enron Corp. and Mirant -- Dunn said he's "cautiously optimistic" that the committee will expunge the findings against Mirant, which he believes will comply with the committee's request before Wednesday. Although Dunn indicated Thursday that he is "cautiously pessimistic" about Enron, the company later told committee officials that they would produce some documents today. A Mirant spokesman said last week that it wanted assurances from the committee that information in the documents wouldn't end up in a public forum where it might be misused. Enron questioned whether the committee investigation encroached on the jurisdiction of the Federal Energy Regulatory Commission. The Bee's Emily Bazar can be reached at (916) 326-5540 or ebazar@sacbee.com. Dan Walters: Energy preoccupies politicos, but school crisis still looms large (Published July 9, 2001) The energy crisis has preoccupied California politicians for the past six months and is likely to remain on the front burner for many months to come, perhaps through next year's elections. Until the energy crisis came along, education was presumed to be the state's all-consuming issue. Gov. Gray Davis, who made education reform the hallmark of his first term, once declared it to be his "first, second and third priority." But a recent poll by the Los Angeles Times revealed that 57 percent of those surveyed now list the energy crisis as the state's top problem, with education a distant second at 17 percent, which explains why Davis and other politicians have shifted their focus. Polls notwithstanding, improving public education remains a more fundamentally important chore for California and its politicians, albeit one that includes dozens of important sub-issues. And one of them is the sad physical condition of the state's schools, in terms of both maintenance and capacity. The Legislature's budget office estimates that a third of California's 5.6 million public school students attend schools that are either overcrowded or in need of upgrading. The files of school organizations are filled with horrific tales about leaking roofs, overflowing toilets and other signs of decay and neglect. The budget office pegs the cost of upgrading and expanding schools to adequate levels at $30 billion -- roughly half of what the state is now paying for electricity each year. It's a problem that will only grow worse, since the buildings continue to age, school authorities continue to cave in to political pressure, mostly from unions, to spend money on salaries rather than maintenance, and enrollments continue to grow faster than the population. California sorely needs a long-range, predictable program of financing its infrastructure needs, not only K-12 schools but colleges, highways, water systems and other public facilities. But what it has is a hit-and-miss process by which the governor and the Legislature, local officials and voters occasionally offer up bond or tax money to attack a specific infrastructure need, but no one can predict when it will happen or how effective it will be. In 1998, voters approved what was then the largest state bond issue in American history, a $9.2 billion pot of money for elementary, secondary and higher education facilities. And accompanying legislation specified that the $6.7 billion in K-12 money be apportioned on a first-come, first-served basis, as had been the state's practice for years. Districts that had the foresight and energy to get their projects together, with requisite amounts of local bond or developer fee money, would receive state money first. By last September, most of the bond funds had been allocated, but then someone in Southern California realized many of the region's urban districts, including the huge Los Angeles Unified, were not taking advantage of the money, which was flowing mostly to suburban districts. Why? Simply because officials in those overly politicized districts had been laggard in siting and designing projects. The Los Angeles Times worked itself into a virtual lather about Southern California's lack of bond money, and the Mexican American Legal Defense and Educational Fund filed suit attacking the allocation system, resulting in a settlement with the State Allocation Board, which distributes school construction aid. The board changed its procedures aimed at funneling money to districts with the greatest needs, not to those most diligent in seeking funds. But relatively little of the 1998 bond money was left. Capitol politicians are now talking about putting another school bond issue on the 2002 ballot. But with the economy beginning to slow and California's credit rating slipping because of energy purchases, no one knows whether the bond issue is viable. And no one knows whether suburban voters will be willing to support a measure that, under the revised rules, will mostly benefit urban districts. It's another example of our on-again, off-again approach to infrastructure financing. The Bee's Dan Walters can be reached at (916) 321-1195 or dwalters@sacbee.com . Estimates start at $50 billion for deregulation cost By Craig D. Rose UNION-TRIBUNE STAFF WRITER July 8, 2001 Like survivors emerging from a terrible storm, Californians are beginning to assess the damage wrought by the state's foray into electrical deregulation. The first calculations are still back-of-the-envelope, rough estimates of the toll. But an early consensus has emerged: The nearly $9 billion in refunds California is seeking in ongoing settlement talks with electricity suppliers would be just a fraction of what deregulation has cost the state. A sampling of consultants, consumer advocates, state officials and an attorney pressing a class-action suit against power suppliers said the damage to the state has certainly exceeded $50 billion -- and will probably rise far higher with a fuller accounting. "I would probably say the $50 billion estimates are low because of the multiplier effects" from the loss of money in the state's budget surplus, said Michael Kahn, California's chief negotiator in the talks and head of the agency that runs the state electricity grid. Kahn, who emphasized he remains under a judge's gag order surrounding the negotiations, said the money could have contributed to improving education and meeting other social needs. "I don't see the opportunity for another huge budget surplus available to the public," Kahn said. "The damage has been horrible." That may be the case, but the power industry argues much of the money spent was the result of bungled state policy that pushed excessive dependance on expensive spot power markets. "From a legal standpoint, I don't believe there are any grounds whatsoever for refunds," said Gary Ackerman, executive director of the Western Power Trading Forum, which represents generators and electricity marketers. "(But) for the generators to continue to do business in California, there is a persuasive argument that we have to contribute to the solution, both politically and financially. And I don't believe any of my members would disagree." Gov. Gray Davis, other political leaders and private lawyers say there have been violations of law that entitle the state to recovery and perhaps damage payments. The settlement negotiations in Washington, D.C., are under the auspices of an administrative law judge from the Federal Energy Regulatory Commission. The judge initially suggested that a settlement for electricity overcharges might be about $2 billion. He said California's $9 billion demand for what it says are illegal charges is too high. Damages of $50 billion or more would translate to a cost of at least $1,500 for each state resident. The California Manufacturer and Technology Association, moreover, says blackouts this summer -- which are less likely now but remain a possibility -- could cost the state an additional $20 billion. Most analysts begin their overall deregulation damage estimates by noting that power costs for the state's deregulated electricity market increased by $20 billion last year and are expected to rise at least $20 billion more this year, for a total $40 billion increase in two years. Some of that is attributable to high fuel costs for producing electricity, a drought that limits hydroelectric production and an overall tight energy supply. Yet much of the cost cannot be explained by those factors. Several consumer advocates argue that California's damages include the more than $20 billion that electricity customers paid to state utilities for what are called stranded costs. It was thought that the competitive forces unleashed by deregulation would render uneconomical many of the generating plants and long-term power contracts owned by San Diego Gas & Electric, Pacific Gas and Electric and Southern California Edison. The stranded costs were the investments the utilities had made in the plants and agreements. Yet it turned out the soaring prices unleashed by deregulation transformed the plants and contracts into gold mines. Some continue to defend the stranded cost payments as appropriate compensation to the utility companies. Either way, the utilities used the money they collected for the stranded costs to build and buy new power plants out of state, as well as to pay dividends to shareholders. Harvey Rosenfield, president of the Foundation for Taxpayer Rights in Santa Monica, said that beyond his philosophical objection to stranded costs -- that is, paying for utility assets he argues ratepayers had already paid for -- the utility's parent companies are now demanding what he characterizes as another bailout for the weakened companies they left to provide service in California. The consumer advocate said other unnecessary costs of deregulation can be found in long-term electricity purchase contracts the state signed in the heat of the power crisis last winter and spring. State officials said the agreements were needed to stabilize power prices. They say the contracts obligate electricity customers to about $43 billion in costs but are open to renegotiation. Rosenfield said the contracts as they stand may include some $30 billion more in costs -- which will translate to higher rates -- than electricity would have cost in a regulated market. "The total damage to the state from deregulation is in excess of $80 billion," Rosenfield said. "This will affect California for decades. The only businesses that benefited from deregulation are the energy companies." Rosenfield's analysis did not include a recent calculation by state Controller Kathleen Connell that the true costs of the complicated long-term power contracts could be more than double the state's first estimate. An industry consultant agreed that the state contracts can only be assessed as vastly inflated. "The state's agreements potentially have us paying $20 billion more than we should," said Frederick Pickel, a Los Angeles-based vice president of Tabors, Caramanis & Associates, who based the overcharge estimate on current power prices. But Pickel argues that much of the cost attributed to deregulation is actually the result of a severe region-wide shortage of inexpensive hydroelectric power. San Diego lawyer Michael Aguirre places the blame for billions in excessive costs solely on energy companies, whom he accuses of engaging in violations of business practices and antitrust laws. "The starting point is $50 billion and that does not include consequential damages to the state," said Aguirre, who is pressing a class-action lawsuit against power suppliers and is representing Lt. Gov. Cruz Bustamente in a separate energy lawsuit. Michael Shames, executive director of the San Diego-based Utility Consumers Action Network, suggests measuring current electricity prices against what California might have paid for power had the state retained a regulated electricity market. Shames said if the state had begun building new plants in 1995, he thinks electricity prices in California would be akin to prices on the East Coast, about 4 to 6 cents per kilowatt-hour. That compares to the 11 cents per kilowatt-hour paid by residents last year, and costs this year are running far higher. The state's deregulation law anticipated the competitive market would bring a 20 percent decrease in rates by 2002. "The degree of overcharges is not in the $3 billion to $5 billion range," Shames said. "Nor is it close to the governor's demand for $9 billion in refunds. From my point of view, the cost is in the hundreds of billions. For FERC to talk about $2 billion to $3 billion in refunds is more an insult than redress." Kahn, the leader of the state delegation in the FERC settlement talks, said the state's call for a $9 billion refund relates only to overcharges for the past year. He is separately trying to get rid of a 10 percent surcharge federal regulators have levied on all power sales in California, another cost of the deregulation debacle. Regulators said the surcharge was appropriate because of California's precarious finances caused by the deregulation meltdown. More difficult to assess in financial terms is what Kahn called the lost opportunity of tapping what was once a hefty state surplus. Electricity costs exhausted the multibillion surplus in a matter of months. The Davis administration plans to reimburse the state through a bond issue of up to $13.4 billion that would be paid off by ratepayers over 15 years. Ralph Nader, an early and persistent critic of deregulation, said repairing the damage done by deregulation will take more than civil action. "Criminal investigations are important both to prevent future collusion and to get the bottom of what the adequate number of dollars is needed for refunds," Nader said. SDG&E ratepayers lose PUC case Quietly signed deal favors shareholders By Jeff McDonald UNION-TRIBUNE STAFF WRITER July 7, 2001 State energy regulators have reversed position and agreed that lucrative power contracts signed by San Diego Gas and Electric are not the property of ratepayers but instead belong to shareholders. In a deal quietly signed this week by Public Utilities Commission President Loretta Lynch, the state agreed to no longer dispute ownership of three pacts that netted the utility about $245 million in one year alone. The ruling, issued Monday in San Francisco, follows through on a separate agreement announced last month between Gov. Gray Davis and Sempra Energy, the SDG&E parent company. But critics argue that the PUC ruling was reached in private and that consumers have no idea what the contracts are worth. They also complained about the timing of the ruling, issued two days before the Fourth of July holiday. The settlement calls for SDG&E to write off $219 million of the proceeds -- money to help pay off the so-called balancing account, about $750 million that the utility claims to have paid for power but could not pass along to customers. It also ends several lawsuits the utility is fighting, including an appeals court case filed by SDG&E challenging the initial PUC decision that profits from the contracts should go to ratepayers. Both the city and county of San Diego joined that case to try to protect residents from losing that money. Outlined in two pages, the Lynch settlement is scheduled to go into effect July 16. Though the contracts remain shareholder property, SDG&E will negotiate with the Department of Water Resources to sell that power to the state through the remainder of the agreements. Those terms have not been agreed to. Because this was a holiday week, no one from the PUC was available to discuss the settlement Thursday or yesterday. A Davis spokesman said the commission operates independently of the governor and declined to comment. The ruling gives interested parties like the city of San Diego until Tuesday to weigh in on the ruling. City lawyers said they are not sure how they plan to respond. "The numbers don't quite jibe with what we know to be the value of those contracts, but we haven't finished our analysis," Assistant City Attorney Les Girard said. "We're trying to sort out what if anything we'll say by next Tuesday. It's unfortunate that we haven't been given more time to fully analyze this and respond." In announcing the agreement last month to buy the transmission network operated by SDG&E, Davis pledged that San Diego ratepayers would not have to repay the $750 million balancing account. The debt would go away even without the state transmission line purchase, the governor said. Davis made it clear that the payoff would not require approval from state lawmakers, who have held up plans to buy the portion of the grid owned by another financially troubled utility, Southern California Edison. In late 1996 and 1997, SDG&E signed contracts with Illinova Power Marketing Inc., Louisville Gas and Electric Energy Marketing Inc. and PacifiCorp. to buy electricity through 2001, the PUC said. The SDG&E contracts are valuable because they allowed the utility to buy power for less than what it charged customers under deregulation. Money to pay off the rest of the $750 million already has been identified. Michael Shames of the Utility Consumers' Action Network criticized both the timing and secrecy of the Lynch ruling. Without knowing how much the contracts are worth, consumer advocates cannot measure the appropriateness of the deal, he said. "What is the value of these contracts? They're clearly very lucrative," Shames said. "This 'settlement' between the PUC and San Diego Gas and Electric appears to be an abandonment of the commission's (earlier) decisions." SDG&E officials defended the ruling signed by Lynch as a good deal for consumers because it resolves a number of legal disputes and ensures that the average residential customer is not stuck with a $400 balloon payment. But company executives continue to refuse to disclose the value of the contracts, which SDG&E lawyers said in court papers was "in excess of $300 million." Last month, the company appealed a PUC decision that the pacts were ratepayer property -- one of the cases that will go away under the settlement. "We believe we have a strong legal position," SDG&E spokesman Ed Van Herik said. "We purchased those contracts with shareholder money with the clear understanding that it was shareholder risk." Davis totals up his efforts, notes price drop By Ed Mendel UNION-TRIBUNE STAFF WRITER and Toby Eckert COPLEY NEWS SERVICE July 7, 2001 Gov. Gray Davis, claiming progress in handling the electricity crisis, said yesterday that the average cost of power purchased by the state last month was half the average cost in January. A consumer group and others had feared that this summer could be "Armageddon," with soaring electricity costs draining the state treasury and frequent blackouts crippling the economy and threatening public safety. But there were no blackouts last month, even though it was the hottest June on record in some areas, and electricity costs dropped below the levels of an administration forecast that was widely derided when it was issued in April. "Obviously, we have a long summer ahead of us," Davis said. "We need to be vigilant. There will be challenges. I expect there will be some outages before the summer is over. But I do believe we are making good progress." Davis said the state spent $1 billion on power in June as the average price dropped to $167 per megawatt-hour, down from an average of $332 in January when the state began buying power for the customers of troubled utilities. The governor attributed the drop in prices to more supply, through additional power plants, and a "heroic" conservation effort by Californians, which cut use by 11 percent in May and 12 percent in June. In addition, he said, the state obtained long-term contracts that have helped lower prices by reducing the amount of power that must be purchased on the spot market where prices soared earlier this year. "If you don't lock down a big chunk of the spot market, you are at the mercy of forces who bragged that they charged you $3,800 a megawatt-hour in January," said Davis, referring to Duke Energy. The price information that the governor released reinforces criticism that the long-term contracts, costing $43 billion over the next decade, are more costly than current market rates. But he argued that the figures also show how the long-term contracts pushed down spot-market prices. Davis said the average cost of power under long-term contracts was $121 per megawatt-hour in May and $118 in June, well below the administration forecast of $130 for the period. At the same time, he said, the average price paid by the state on the day-ahead portion of the spot market was much lower, falling to $99 per megawatt-hour in June, down from $243 in May. Davis contended that the prices fell on the spot market because demand dropped as the long-term contracts kicked in, allowing the state to purchase 50 percent less power on the spot market in June than in May. "You can see the value of those long-term contracts dramatically shrinking those spot prices," Davis said. An internal e-mail mistakenly sent to reporters by the governor's press office yesterday said the state paid an average of $132 per megawatt-hour for power Thursday, costing a total of $37.4 million. Davis has resisted releasing information about what the state pays on the spot market, arguing that it would undermine the state's bargaining position. His administration released edited long-term contracts last month, after legislators and a coalition of newspapers filed suit. San Diego County Superior Court Judge Linda Quinn is hearing the case, and if she orders the release of spot market prices July 16, the Davis administration will appeal. The administration plans to release spot-market purchases for the first quarter of the year Monday. But Ray Hart, head of the power-purchasing unit, said a "full quarter lag" is needed to prevent the information from being used to drive up prices. Davis has been criticized by opponents who say he failed to secure long-term, cost-saving contracts before wholesale prices soared. A group called the American Taxpayers Alliance began an attack-ad campaign against Davis last month. The ads were produced by GOP strategists and paid for by electricity generators. Davis responded yesterday. His chief campaign consultant, Garry South, said the Davis re-election committee is launching a statewide radio advertising campaign and setting up a campaign Web site. Meanwhile, talks in Washington between California officials and power providers appeared to show more promise yesterday, and the mediator backed off his threat to outline a possible settlement of his own. "We are making progress. We're swapping offers back and forth and, hopefully, when the time is up, we'll have a settlement in the case," said Curtis L. Wagner Jr., the chief administrative law judge for the Federal Energy Regulatory Commission. The negotiations over the size of possible refunds for high-priced electricity and other issues arising from the state's power crisis have entered a make-or-break phase, with a deadline looming Monday. "We continue to be ready to discuss all offers with all comers," said Michael Kahn, who is leading the California delegation. But he stuck to the position the state took when the talks started June 25. "We want $8.9 billion and we have justified the numbers," said Kahn, chairman of the California Independent System Operator, which manages most of the state's power grid. On Thursday, Wagner warned the parties that he might issue a settlement outline of his own unless they made more progress. But as the talks got under way yesterday, he said he wanted to hear each side's "methodology" for arriving at their competing proposals before acting. "I will not make any preliminary assessment until Monday, at the earliest, and I don't know what that will be," he told reporters during a break in the closed-door discussions. The negotiators are planning to meet today and possibly tomorrow. Wagner said he would not seek an extension of the Monday deadline set by FERC. If the parties can't reach an agreement, Wagner will have seven days to recommend a settlement to the five-member FERC. The Associated Press contributed to this report. California ; Metro Desk The State NEWS ANALYSIS Concern Over Price of Long-Term Power Pacts Grows Embedded costs may yield more rate hikes, critics say, and the $43-billion total could complicate plans to rescue Edison. DAN MORAIN ? 07/09/2001 Los Angeles Times Home Edition Page B-7 Copyright 2001 / The Times Mirror Company SACRAMENTO -- Even as the summer progresses without blackouts, and Gov. Gray Davis prepares for yet another news conference today to symbolically switch on a new power plant, the work in the Capitol has shifted to the seemingly more daunting task of balancing the books. It's a task with potentially far more long-lasting implications for state coffers, for businesses' bottom lines and for consumers' wallets. In particular, long-term power contracts trumpeted by the governor's office as helping to bring stability to California 's out-of-control electricity market are having the opposite effect politically. A growing concern about the $43-billion price tag of the contracts is complicating one of Davis' most ambitious energy initiatives: a proposed financial rescue of Southern California Edison, which already faces an uncertain fate in the Legislature. Questions about the contracts come as California readies a complex $13.4-billion bond sale to reimburse the state's general fund for other power purchases. Critics worry that costs embedded in the contracts, on top of the billions needed to pay for the Edison rescue, could lead to additional electricity rate hikes for consumers. Key lawmakers, consumer advocates and business lobbyists are urging that at least some of the pacts be renegotiated. Citing a recent plunge in wholesale energy costs, these critics say the state should work to shorten the duration of the contracts and lower some of the prices. They argue that the state entered into the deals under duress after California 's utilities neared insolvency and the state Department of Water Resources took over the purchasing of electricity for more than 25 million residents. "They are vulnerable," Senate Energy Committee Chairwoman Debra Bowen (D-Marina del Rey) said of deals the state struck with independent power companies when prices were at record highs. Bowen lauds Davis administration negotiators for signing "the best deals they could." But she said that in the crisis atmosphere in which the negotiations 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 Federal Energy Regulatory Commission in Washington. There, an administrative law judge could direct that the pacts be reworked as part of a settlement of allegations by Davis that generators overcharged the state for electricity by $8.9 billion. "We ought not to say, 'Fine, the contracts were the best we could do,' " Bowen said. For his part, Davis says he is willing to accept partial payment of the $8.9 billion in the form of contracts with terms more favorable to the state. He attributes the recent sharp drop in wholesale electricity prices to conservation, the administration's effort to increase power supply and--a major factor--the long-term contracts, which slashed the state's reliance on the volatile daily, or spot, market. "You can see the value of these long-term contracts . . . dramatically shrinking our overall price, which is what matters to Californians," Davis said, pointing out that the average cost of power plunged 30% from May to June. Davis energy advisor S. David Freeman, who helped negotiate the contracts, said they may end up costing less than $43 billion, given the recent decline in prices for natural gas, the main fuel for California 's electricity -generating plants. Freeman also compared critics to someone who calls the fire department to douse a blaze. "After the fire is out," he said, "you complain about the water damage." The contracts have other defenders, among them UC Berkeley economics professor Severin Borenstein, who says the deals helped to tame the volatile spot market by reducing generators' incentive to drive up prices, while 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 to reduce risk," Borenstein said. Still, experts have been picking through the pacts ever since a Superior Court judge in San Diego, ruling in a California Public Records Act lawsuit by news organizations and Republican lawmakers, ordered last month that Davis unseal the contracts. An analysis done for the Assembly by three experts--one each representing Southern California Edison; the Utility Reform Network, a consumer group; and large electricity consumers--concluded that the about $43-billion price tag announced by the administration may not account for all the costs. When other expenses are factored in--ranging from environmental equipment upgrades to any new energy-related taxes--the contracts could cost an additional 10% to 20%. "Once the contracts were made public," Senate Republican leader Jim Brulte of Rancho Cucamonga said, "just about anyone who can read began calling for those contracts to be renegotiated." As buyers' remorse spreads through the Capitol, the contracts increasingly are seen as a hurdle--or a bargaining chip--as Davis and lawmakers confront fast-approaching deadlines in their effort to prevent the energy crisis from morphing into a broader financial crisis. A bill pushed by Davis to avert bankruptcy for the financially hobbled Southern California Edison must be approved by Aug. 15. The deadline could be tighter, because the Legislature is scheduled to adjourn for a monthlong break July 20. Davis' rescue plan, along with legislative alternatives, languishes in the Legislature. The plan, which has little apparent support, would require the state to buy Edison's system of transmission lines for $2.76 billion and permit the utility to charge ratepayers for the rest of its back debt of $3.5 billion. Some lobbyists and lawmakers believe that the electricity rate hike approved in March by the California Public Utilities Commission--at 3 cents a kilowatt-hour the largest in state history--may not be enough. The revenue generated under the new rate structure must cover the costs of the long-term power contracts and repay the planned $13.4 billion in bonds, which would be the largest municipal deal ever. Whether there would be sufficient money left to pay for the Edison rescue remains to be seen. But some experts say the utility may need to seek a separate rate hike to cover its costs. As written, the contracts have few escape clauses; Davis cannot simply walk away from them if he concludes that prices are too high. Still, criticism persists and crosses political lines. Harry Snyder, longtime Sacramento lobbyist for Consumers Union, and Jack Stewart, president of the California Manufacturers and Technology Assn., rarely find themselves on the same side of a debate. But in separate interviews, they sounded similar themes. "If there is a way to buy our way out of these contracts, even if we have to pay damages, we'd be better off in the long run," Snyder said. Stewart, like other business leaders, does not advocate abrogating the contracts. But like many familiar with the terms, he hopes that some deals can be renegotiated. "They are problematic," he said. In a move that critics fear could lock in high electricity prices for the next decade, the Davis administration is pushing the PUC to agree within a month to limit its authority to question costs incurred by the Department of Water Resources as it goes about procuring power. State Treasurer Phil Angelides said the PUC must act so he can complete the $13.4-billion bond sale. A binding agreement is necessary so that Wall Street 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," he said. "We will move toward fiscal insolvency." The so-called rate agreement, a draft of which was obtained by The Times, would bind customers of the three big regulated utilities to pay more than just the principal and interest on the $13.4 billion in bonds. Consumers would have to pay for consultants, lawyers, to pay taxes, fees and other as-yet-undefined charges that may be incurred by the Department of Water Resources. Additionally, the PUC would be obligated to approve payments for programs by which the state would pay large and small customers to cut electricity use, although the Legislature has not approved the programs and their details remain to be worked out. The Department of Water Resources estimates the cost to be $800 million, spread over this year and next. "It is loaded up," Senate President Pro Tem John Burton (D-San Francisco) said of the proposed rate deal, adding that it would require the commission to "raise rates to cover whatever the Department of Water Resources decides 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 would provide the water agency with "dictatorial power." "As skeptical as we are of the PUC process, at least there is a process," Stewart said, referring to the commission's procedures to set electricity rates. "There is no process for DWR. DWR just tells the PUC, 'This is what we need,' and the PUC must approve it." Others say the rate agreement is a standard piece of work, given the extraordinary step the Legislature took in January when it authorized the Department of Water Resources to buy power for utilities that had fallen so deeply into debt that they could no longer carry out their obligation to consumers. In essence, Davis energy advisor Freeman said, lawmakers in January created "the equivalent of a public power purchasing agency" beyond the jurisdiction of the PUC. "There is no public power agency in California that is reviewed by the PUC," 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 story. National Desk THE NATION Deal With Suppliers Not Likely ? 07/09/2001 Los Angeles Times Home Edition Page A-9 Copyright 2001 / The Times Mirror Company WASHINGTON -- Prospects for a deal on the almost $9 billion that California contends it was overcharged by power suppliers appeared dim Sunday as settlement talks neared the end with no compromise in sight. Curtis L. Wagner Jr., the federal mediator in the closed-door negotiations, told reporters he had begun to write a final report to the Federal Energy Regulatory Commission, which has said it will impose a settlement if the parties fail to reach agreement. However, Wagner, who is also FERC's chief judge, said he would continue to seek a deal through today, the deadline he had set two weeks ago. Wagner said he expected the talks, which began two weeks ago, to end by about 1:30 p.m. PDT today. "I'm still hoping for a big settlement, but we may just have partial settlements," Wagner said. "It's still hard to tell." The participants spent Sunday afternoon listening to technical presentations on how California calculated its refund estimate. Wagner said he would release a transcript of the session so that FERC's governing board could refer to it in its deliberations. "If you need something to cure insomnia, get the record and read it," he said. While California has stood firm on its demand for $8.9 billion, a source familiar with the talks said generators had offered no more than $500 million. Metro Desk PAYING THE ENERGY BILL Crying Foul Over Energy Baselines NANCY RIVERA BROOKS ? 07/08/2001 Los Angeles Times Home Edition Page A-1 Copyright 2001 / The Times Mirror Company Down by the sea in Santa Monica, a month of electricity can cost a mere $2.32 with a bit of determination, a tiny home and energy-efficient appliances. In landlocked Compton, a somewhat bigger house with a pool also generates an electricity bill with triple digits--but without the decimal point. The two homes could not be more different, except in the eyes of state utility regulators, who are applying the same power-use yardstick to determine how much their electricity bills will rise this summer because of the largest rate hike in state history. Despite their different climates, housing quality and income levels, Santa Monica and Compton share the same "baseline" allotment, the amount of electricity that supposedly meets the minimum needs of an average household in a particular region. Before California 's energy crisis, consumers had little reason to care about their baseline allowance. But now, under terms of the rate hike, the further above baseline a customer gets, the more that customer will pay. Although residential customers of Southern California Edison and Pacific Gas & Electric Co. won't get a full taste of the new rates until this month's bills, which will reflect an entire month of the increase, some are already complaining that the conservation-inducing setup of the new rate structure is unfair. The critics say the baseline regions are too large, creating such improbable electricity twins as Santa Monica and Compton, and Newport Beach and Orange. And because baselines are based on simple averages of consumption within a region, the system takes no account of a home's size or number of occupants. The baseline allowance "does not address the real needs of consumers," said Douglas Heller, consumer advocate with the Foundation for Taxpayer and Consumer Rights, a Santa Monica-based activist group. "We've said, somewhat tongue in cheek, that this baseline plan is a subsidy of single guys by families." State regulators and legislators are considering overhauling the baseline allowances, but the changes wouldn't come in time for this summer. When they rip open their latest power bills, nearly 8 million California customers will find themselves sorted into a new caste system of consumption tied to their baseline, set by the state Public Utilities Commission, that is meant to represent 50% to 60% of an average household's electricity use in a region. The PUC boosted electricity rates by a record 3 cents a kilowatt-hour on March 27, and decreed that residential customers will absorb their share of rate shock according to how much electricity they use. The aim is to raise more cash to cover stubbornly high wholesale electricity prices while encouraging customers to use less power. Residents of Los Angeles and other cities served by municipal utilities are not affected by the rate increase. Half of Customers Deemed 'Higher Use' Under the previous, two-tier system of figuring bills, customers paid less for electricity used up to baseline levels and more for electricity use above baseline. That was replaced by a five-step system in which residential customers pay the old rates in two tiers up to 130% of baseline but fork over progressively more across three tiers of usage above 130% of baseline. Those higher-use customers, pegged at 50% of households by the PUC, will see their monthly bills jump depending on how much electricity they consume over their baseline allowance. Average residential bills will go up between $4 and $85 a month. Low-income customers and those with special medical equipment will see no rate increase. Business customers, whose rates also are rising, are not billed by baseline use. The PUC established the baseline allotments in 1982, using average residential consumption as a way to encompass differences in home size and numbers of residents per household. Critics of the baseline system say the allotments are determined across regions that are too large and don't accurately account for differences in climate, household size and income. The baselines were last adjusted in the early 1990s and have not kept pace with the electricity use of modern homes, they say. Edison's 50,000-square-mile territory is divided into six baseline zones. PG&E has 10 for its 70,000 square miles. San Diego Gas & Electric, which has not increased rates, has three zones. Santa Monica and Compton share a baseline zone that skims across such coastal communities as Malibu, Long Beach and Newport Beach but also stretches inland to Norwalk, Cerritos, Santa Ana and Orange. For them, known at Edison as Baseline Zone 10, the cheapest power is meted out at a pace of 9.1 kilowatt-hours a day in summer or 276 kilowatt-hours over 30 days. Although staying close to baseline is somewhat easier near the coast, Miamon Miller and Martha Adams are an extreme example of power parsimony. The Santa Monica couple needs only a little pocket change to pay their latest monthly Edison bill of $2.32. "It sounds strange to complain that your bill is too low," Miller said, noting that the couple usually pays less than $10 a month and their electricity use is often one-third or less of their baseline allowance. Miller and Adams manage this feat seemingly without breaking a sweat--although they do have a lighthearted running dispute over whether the front porch lamp needs to be on. Their secret weapons are size and location. Miller and Adams live in a tiny home--about 800 square feet--only half a mile from the ocean, without an air conditioner, Miller said. "We live in Santa Monica; we open the doors when we want air-conditioning." The couple owns the usual assortment of appliances, but they are small and relatively energy efficient. Their water heater and dryer use gas, and their lighting is low-wattage. "A lot of it is the climate," Adams said. "It doesn't get too hot or too cold here." Over in Compton, where summer days average 10 to 15 degrees hotter than in Santa Monica, Marjorie Shipp has expended considerable energy trying to use less electricity in her 1,800-square-foot home. Lights Out, Cold Pool, and Bill Still Doubles The retired teacher has extinguished her driveway lights ("They're pretty and I miss them."), sharply reduced the number of hours the pool pump runs ("Now I'm getting algae.") and has unplugged appliances when not in use to minimize the toll from so-called standby electricity consumption. Most lights in the home are energy-sipping fluorescents. Still, electricity usage in her two-adult household was nearly double the baseline last month, although down more than 40% from recent bills. The tab was nearly $180. "I guess I'm going to have to start paying even more attention to it," Shipp said with a sigh. "I don't know what else I can do." The five members of the PUC acknowledged that inequities may exist when they agreed in late May to begin a review of the baseline system that probably will last until the fall. In fact, PG&E says only 35% of its customers have been able to keep their electricity consumption at 130% or less of baseline in the last year. At Edison, about half of customers have done it. "There are real questions over whether these baselines are fair," Commissioner Carl Wood said. "This is not going to be without controversy. This is not a giveaway program. It's not a matter of jacking up everyone's baselines to reduce rates." Chana Perelmuter, a Long Beach mother of six, said baselines are unfair to families. "I have never been close to baseline in all my years of having children," said Perelmuter, whose offspring range in age from 10 to 20. "I only run the dishwasher when it is full, but I have six children so it's full every night," she said. "I do laundry only when I have a full load, but I have six children so that's at least one load a night." Bills have been proposed in the Legislature to require adding household size to the formula that determines baselines and to increase the allowance in the steamy Coachella Valley. But fiddling with baselines is sure to make someone unhappy. That's because the utilities must collect a certain amount of revenue through rates. If one person's rate goes down, someone else's must go up. At the Utility Reform Network, a San Francisco consumer activist group that bitterly fought the rate increase, staffers have mixed feelings about adjusting baselines. "We have been hearing a lot from consumers who are concerned about the way baseline affects them," spokeswoman Mindy Spatt said. "We are very sympathetic to people who think it isn't a fair system," she said. "On the other hand, they've raised the rates by X dollars, and someone is going to have to pay that." The whole system makes no sense to Dorothy and Walter Harris, retirees who live in a sliver of the West Los Angeles-area community of Ladera Heights that is not served by the Los Angeles Department of Water and Power. For the entire month of March, the couple unplugged nearly every appliance, put their refrigerator's thermostat on the vacation setting and headed out on a trip in their recreational vehicle. When they returned, the Harrises found their electricity use had indeed dropped below baseline, but just barely. "I've been ranting for months to family and friends about the baselessness of the baseline," Dorothy Harris said. Valerie Rodriguez and family have gained entry to the 130% club in recent weeks through dogged conservation that has cut their electricity use in half. The Westlake Village family of four has been taking the usual steps around their 2,000-square-foot home as well as idling a hot tub. "I'm here to say that conservation works," Rodriguez said. But with the start of air-conditioner-hugging season, Rodriguez frets that her rates inevitably will rise with the temperature. "We're doomed," she said. "Nobody at my house is going to suffer through those intense heat days." (BEGIN TEXT OF INFOBOX / INFOGRAPHIC) Getting to Baseline Knowing how much electricity appliances use can help you budget your way closer to baseline levels. Here is the average monthly use of various appliances, measured in kilowatt-hours. * Air conditioner 3.5-ton central forced air, operating 77 to 340 hours a month: 378 to 1,670 * Air conditioner one 1,100-watt room model, operating 8 hours a day: 264 * Pool pump 2-horsepower, operating 5 hours a day: 300 * Refrigerator 20-cubic-foot 1987 model: 112 * Computer and color monitor left on around the clock: 115 * Computer and color monitor left on 10 hours a day: 48 * Television 27-inch color, 265-watt model operating 4 hours a day: 32 * Lights Five 100-watt incandescent bulbs burning 90 hours a month: 48 100-watt incandescent lightbulb burning 10 hours a day (e.g., nighttime porch light): 30 * Clothes washer 1/2-horsepower motor, operating 12 hours a month or about 24 loads: 6 * Electric clothes dryer 3,000 watts, operating 20 hours a month or about 24 loads: 66 * Standby power loss from an average home's appliances that appear to be off but actually are consuming energy: 35 to 50 * Powering Down Here are some tips on saving energy and the percentage each measure would save in a 2,000-square-foot home, with air conditioning, in Southern California . They, and other ideas, are presented on a new Web site, http://savepower.lbl.gov, by Lawrence Berkeley National Laboratory. * No-Cost Measure: Open windows and use fans instead of air conditioner Savings off Summer Bill: 15% * No-Cost Measure: Raise thermostat on air conditioner by 4 degrees Savings off Summer Bill: 10% * No-Cost Measure: Use air conditioner only when house is occupied Savings off Summer Bill: 8% * No-Cost Measure: Close window blinds and drapes to block direct sunlight Savings off Summer Bill: 6% * No-Cost Measure: Dry clothes on line instead of using electric dryer Savings off Summer Bill: 3% * * Low-Cost Measures: Replace most-used incandescent bulbs with compact fluorescent bulbs Savings off Summer Bill: 4% * Low-Cost Measures: Fill gaps in attic insulation Savings off Summer Bill: 3% * More Expensive Measures: Buy a new, energy-efficient air conditioner Savings off Summer Bill: 11% * More Expensive Measures: Have air-conditioner ducts professionally sealed to reduce air leakage Savings off Summer Bill: 7% * More Expensive Measures: Install argon-filled double-pane windows Savings off Summer Bill: 6% * More Expensive Measures: Increase ceiling insulation Savings off Summer Bill: 5% * More Expensive Measures: Add wall insulation Savings off Summer Bill: 5% * More Expensive Measures: Install a programmable thermostat More Expensive Measures: 4% * Sources: Southern California Edison, San Diego Gas & Electric, Utility Consumers Action Network, Lawrence Berkeley National Laboratory (BEGIN TEXT OF INFOBOX / INFOGRAPHIC) The Basis of Baseline The California Public Utilities Commission has established a baseline allocation of electricity deemed necessary to meet the minimum needs of a household at affordable rates. The PUC divides the service area of each utility into broad climate-based regions. Baseline represents 50% to 60% of the average electricity consumption in each region. Baseline allotment varies by season, with the summer season in Edison territory running from the first Sunday in June to the first Sunday in October. Southern California Edison's service territory is divided into six baseline regions. Below are baseline allocations for Edison, in kilowatt-hours. * Summer Season Baseline Daily Baseline 130% region baseline for 30 days of baseline 10 9.1 276 359 13* 15.8 474 617 14 14.2 426 554 15** 42.7 1,281 1,665 16 9.2 276 359 17 13.1 393 511 * Winter Season Baseline Daily Baseline 130% region baseline for 30 days of baseline 10 9.2 276 359 13* 11.0 330 429 14 10.6 318 414 15** 8.8 264 343 16 10.1 303 394 17 10.5 315 410 * * Area includes Visalia and Delano, not shown on map ** Area includes Palm Springs and Coachella Valley, not shown on map Note: Customers with all-electric homes and those who depend on life-support equipment get additional baseline allowances and low-income customers receive a discounted rate. Sources: California Public Utilities Commission and Southern California Edison Metro Desk PAYING THE ENERGY BILL Power Firms Have Motive to Deal With Davis Energy: Neither side has blinked as negotiation deadline nears. But momentum seems to be with the governor. RICARDO ALONSO-ZALDIVAR; DAN MORAIN ? 07/08/2001 Los Angeles Times Home Edition Page A-23 Copyright 2001 / The Times Mirror Company WASHINGTON -- For a year now, Gov. Gray Davis and large power generators have pounded one another, lobbing accusations of greed and incompetence over the causes and handling of California 's energy crisis. Now the governor's representatives and officials of the industry are eye to eye in a federal office building next to the railroad tracks here, trying to see if they can settle the most contentious issues between them. They have been talking for two weeks. The clock will run out at midnight Monday. At stake are billions of dollars in potential electricity refunds to California ; lawsuits and investigations over alleged price gouging that could drag on for years; political and corporate reputations; even the course of power deregulation, on which a whole industry has bet its future. So far, nobody has blinked. But with time running out, observers say it appears that the power companies have more to gain than Davis does by seeking a peace treaty. The governor appears to be more dug in. The motivation for the companies to seek a deal comes down to the long-term health of their businesses. "Frankly, the continuance of a viable competitive business model is at risk," said Jim Hoecker, immediate past chairman of the Federal Energy Regulatory Commission, which ordered the closed-door settlement talks. "This is something the companies have a tremendous stake in. I imagine they would not only want a fair settlement, but some assurance about what the future is going to look like." FERC's board set three issues for discussion in the talks: refunds of overcharges, long-term power contracts, and debts owed to generators. The companies also want to head off lawsuits and investigations by the state, and the governor wants to renegotiate pricey long-term power contracts that have opened him to political criticism. On Saturday, the talks were "moving very slowly," said FERC Chief Judge Curtis L. Wagner Jr., who is acting as mediator. An afternoon session was scheduled for today to once again go over how California has calculated its refund demand. "I'm trying to break them loose," Wagner said. "I'm trying to wheel and deal and see if I can't broker something out of this." Davis, whose hand has been strengthened in Washington even as his standing in California public opinion polls has languished, is emerging as the player to be wooed, even though he is not physically present at the talks. "If he gets a $5-billion rebate, he looks like King Kong," said a top Democratic official in California , speaking on condition that he not be identified. Others are urging the Democratic governor to stand fast for the $8.9 billion the state has claimed it is owed. "The advice is, 'Don't settle,' " said state Sen. Steve Peace (D-El Cajon). "They broke the law. We'll win the lawsuits. . . . I wouldn't settle for a penny less than $9 billion." Davis' only concession so far has been to say he is willing to take some of the $8.9 billion in other "currencies," such as discounts on long-term power contracts the state has already negotiated, future power deliveries at below-market rates or forgiveness of debts that the generators say are owed by California utilities. "If we can settle this matter to the satisfaction of all parties . . . terrific," the governor said at a news conference Friday. "If we can't, FERC still has the full burden to enforce the law and to ensure that we get the rebates we're entitled to." Yet people within the industry and in the federal government have questioned the accuracy of the $8.9-billion figure, saying it represents an inflated estimate of what FERC could legally order refunded. California representatives are just as adamant that the number is valid. Industry representatives have avoided public comment on the negotiations, citing a gag order imposed by Judge Wagner. Privately, however, they have complained bitterly about Davis and questioned whether he is bargaining in good faith. "There is no downside at this point to his hanging tough," said one industry official, who asked not to be identified. The official said politics appear to be the governor's main motivation at this point. "He has nothing to lose by continuing to do battle with the enemy," the official said. "The public perception is that he is leading the fight, and whether he gets the full amount or not won't change that." For the industry, a settlement involves balancing short-term pain with the potential for long-term relief. "My sense is that FERC intends there to be some major-league refunds if there is not a settlement," said Kit Konolige, an industry analyst at Morgan Stanley in New York. "The smaller the refund, the happier the markets will be, and the bigger, the more unhappy," added Konolige. "But it's not just the amount of money. What people like even less is the sense that the rules can change and nobody knows how they will come out. The uncertainty has been killing people." If the parties cannot come to an agreement voluntarily, the FERC board will impose its own settlement. That mandate could be challenged in court, and agency officials say they would not be surprised if the litigation dragged on for a decade. Also hanging over the industry are the investigations that California 's attorney general is pursuing. "They are looking at endless litigation," said Ed Kahn, a San Francisco economist who studied California 's power markets and concluded that abusive prices were charged. "At a certain point, there is a political element for them to consider. Reputation is also a business asset." Kahn added: "If the generators really would like it to end, it all comes down to price. How much do they want it to end?" Sources close to the California delegation at the talks say the figures proffered by generators last week come nowhere close to what the state wants. In Sacramento, Republicans share the industry's skepticism about Davis' motives. As they see it, he is winning political points by pursuing the $8.9-billion refund and continuing to berate generators, the
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