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Enron Mail |
Adam Smith, Save Us! How to solve California's power crisis: market pricing.
Forbes, 07/09/01 INDIA: Enron India chief "optimistic" about Dabhol project. Reuters English News Service, 07/09/01 INDIA: Enron chief to discuss Dabhol with Indian officials. Reuters English News Service, 07/09/01 Trying to Run a Country Like a Corporation The New York Times, 07/08/01 Privatise MSEB distn & generation: Godbole panel report-II Press Trust of India Limited, 07/08/01 Tough-talking energy adviser could head state power authority Associated Press Newswires, 07/08/01 NIGERIA: INTERVIEW-Nigeria power project's success fuels AES expansion. Reuters English News Service, 07/07/01 FOCUS ON ENERGY / As the clock ticks, rifts remain in Calif. electricity refund talks Houston Chronicle, 07/07/01 JUDGE URGES ON SETTLEMENTS FOR POWER OVERCHARGES Portland Oregonian, 07/07/01 Sustainability isn't simple The Seattle Times, 07/07/01 Campaign funds will pay for spots The San Francisco Chronicle, 07/07/01 OutFront Adam Smith, Save Us! How to solve California's power crisis: market pricing. BY Lynn Cook 07/09/2001 Forbes 058 Copyright 2001 Forbes Inc. Power Surge | Here's a novel scheme to balance supply and demand for electricity in California. Hint: It's called market pricing. Californians have a chance to keep the lights on this summer: Let commercial customers take the power they would ordinarily use but decide not to, and sell it back to the grid at a profit. Such "negawatt" auctions are already being tested in Atlanta. Wal-Mart, say, could cool down its California stores by an extra three degrees during the nonpeak morning hours. In the afternoon, when temperatures and wholesale power prices soar, it could shut off air-conditioning and resell the power it would have consumed. Stores would be hot, but not unbearable. All Wal-Marts would get to remain open with cash registers operating instead of having to deal with scattershot closings and lost business because of blackouts. From steel fabrication plants to aluminum smelters that have already shuttered for the summer, heavy industry is itching to sell negawatts, says Marc Yacker, spokesman for the Electricity Consumers Resource Council representing industrial users. So why hasn't the Golden State seized a golden opportunity? Governor Gray Davis likes the idea, but not the proponents--Houston energy giants Enron and Reliant Energy--and any suggestion from Texas is, of course, anathema. Another little problem is that California's attorney general is on record favoring jail sentences for energy "profiteers." Let a big business like Wal-Mart make a spread on electricity? Horrors! Another hurdle: A multistate auction system of the sort that would rescue California would require overriding the federal Public Utility Holding Company Act, which prevents commercial and residential users from reselling juice to the grid. In Atlanta, where Georgia Power offers large industrial users a program called Daily Energy Credit, the utility was subject to approval only by a state commission, not the Feds, because it runs the negawatt program within its assigned borders and not across state lines. A bill pending in the U.S. House Energy & Air Quality subcommittee would have alleviated that. But in June the bill's sponsor, Representative Joe L. Barton, a Republican from Texas, yanked the relief package off the table, claiming House Minority leader Richard Gephardt, the Missouri Democrat, was planning to wreck the deal because it did not promote price caps. Gephardt denies the charge. A shame that it's so much harder to turn down the political heat than the central a/c. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. INDIA: Enron India chief "optimistic" about Dabhol project. 07/09/2001 Reuters English News Service (C) Reuters Limited 2001. NEW DELHI, July 9 (Reuters) - The chief executive of Enron Corp's Indian arm said on Monday he was optimistic about working through the company's payment dispute with a local utility. "There are a variety of options facing us with the project. We are just trying to work through those," Wade Cline told reporters in the Indian capital after a meeting with the country's finance secretary. "We are having good meetings with the ministry, so we are optimistic," Cline said. He added he had briefed the finance secretary ahead of Enron Corp Chairman Kenneth Lay's meeting with Finance Minister Yashwant Sinha. Lay is due to meet Sinha, the Indian power minister and senior officials in connection with the payment dispute between Enron's Dabhol Power Co and the Maharashtra State Electricity Board which has defaulted on payments of $48 million to Dabhol. Enron's project is the largest direct foreign investment in India. Its first phase of 740 MW was completed in 1998, while a second phase adding another 1,444 MW was almost complete when its contractor stopped work because of the dispute. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. INDIA: Enron chief to discuss Dabhol with Indian officials. 07/09/2001 Reuters English News Service (C) Reuters Limited 2001. NEW DELHI, July 9 (Reuters) - Enron Corp Chairman Kenneth Lay is due to meet the Indian power minister and senior power ministry officials on Monday to discuss a dispute between the U.S. firm's Indian unit and a local utility, officials said. The firm's Dabhol Power Co and the Maharashtra State Electricity Board (MSEB) are locked in a payments dispute which provoked Enron to serve a preliminary termination notice to the utility, which in turn stopped buying power from Dabhol. "He is scheduled to meet Power Minister Suresh Prabhu at 5:25 p.m. (1155 GMT)," a federal power ministry official told Reuters. Lay was expected to discuss the future of the troubled Dabhol project, said the official who did not want to be identified. He said Lay would also meet senior officials in the federal power ministry before visiting Prabhu. MSEB, the sole buyer of Dabhol power, has defaulted on payments of $48 million to Dabhol. Enron's project is the largest direct foreign investment in India. Its first phase of 740 MW was completed in 1998, while a second phase adding another 1,444 MW was almost complete when its contractor stopped work because of the dispute. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Week in Review Desk; Section 4 The Nation: Look Sharp Trying to Run a Country Like a Corporation By DAVID E. SANGER 07/08/2001 The New York Times Page 1, Column 5 c. 2001 New York Times Company WASHINGTON -- WHEN President Bush was sworn in nearly six months ago, Washington was awash with loose talk of a ''C.E.O. presidency.'' The first president with an M.B.A. to his name, from Harvard Business School no less, would be the chairman of the board of the world's biggest conglomerate, his aides boasted, a leader who delegated to his cabinet of experienced C.E.O.'s. They said his administration would apply business discipline to a bloated government. And cabinet sessions do look a lot like the Business Roundtable, the organization of chief executives that, a few weeks ago, held part of its annual meeting in the East Room. Next to the president sits Dick Cheney, late of Halliburton, and Treasury Secretary Paul H. O'Neill, fresh from Alcoa. Donald H. Rumsfeld is also at the table, in his second run as defense secretary, after running G. D. Searle & Company. Lower level officials, too, look and sound like business folk. ''We effectively are the C.E.O.'s of wholly owned subsidiaries of the Department of Defense,'' said Thomas E. White, who left Enron -- the Texas energy company that wields great influence here -- to become secretary of the army last month. But cracks are already beginning to mar the smooth veneer of Bush & Co.'s boardroom table. Part of the problem is Mr. Bush himself: He cast himself first as a Reagan-style figure -- though less detached -- who would define the missions his team would carry out. But on a host of issues, from energy, to stem cell research, to ending bombing exercises on the island of Vieques in Puerto Rico, Mr. Bush has second-guessed his C.E.O.'s and swept decisions back into the White House. At Bush & Co., the strategic plans are beginning to collide, and polls suggest that shareholders are increasingly unconvinced by aspects of the business plan. One cause of the president's troubles may be that his C.E.O. approach to running the government conspicuously lacks what Washington demands: the flexibility required to appeal to a variety of constituencies and to horse trade (something Mr. Bush did quite well in Texas). While Mr. Bush scored a quick, major victory with the tax cut, for example, his energy initiatives and his ''faith-based'' plan for federal aid to religious groups that perform social services have run into the kind of political cross-currents that are rarely seen in corporate America. IN both cases, the White House has shown little willingness to compromise and little ability to persuade voters to share its views. ''They run the meetings on time but he doesn't have much emotional range in connecting these themes to the public,'' said Rahm Emanuel, a highly partisan aide to President Clinton, who never ran meetings on time but knew how to stir a crowd. Mr. Bush's style has also vexed America's allies. They made it clear during his trip to Europe that they are tired of being treated like foreign subsidiaries of America, Inc. So Mr. Bush listened, and said he was humbled. But as soon as he got home, he boasted to The Wall Street Journal that 15 leaders of the European Union ''told me how wrong I was'' on global warming, but that he stood his ground because his position was ''right for America.'' Others say the problem is not Mr. Bush, it's the slowness of his C.E.O.'s to readjust to a world where they do not have the last word. It's a huge change, notes Peter G. Peterson, who moved from a chief executive's post to become commerce secretary in the Nixon administration, and who is now chairman of the Blackstone Group, the New York investment bank. In the private sector, he notes, Mr. Bush's successful former executives had ''the undiffused power to implement their individual corporate visions.'' Not in Washington. ''When you are a C.E.O., you observe, listen, and decide,'' Mr. Peterson said. ''When you are a cabinet secretary, you observe, listen, testify, subject everyone to interagency review, get resistance from Congress, and then, more often than not, someone else decides.'' That should have come as no surprise to Mr. Cheney, Mr. Rumsfeld or Mr. O'Neill, who all had previous experience in government. ''And yet,'' said Thomas Mann of the Brookings Institution, ''they seem like somewhere along the line they forgot what they learned, and they've made some severe errors in judgment.'' TAKE Mr. Cheney -- former Congressman, former White House chief of staff, former defense secretary. To put together the administration's energy report, he drew on the best minds he knew from his life at Halliburton. Yet his reliance on one slice of his constituency -- his fellow energy executives -- only fed the perception that the Bush team is far too close to energy interests. Now, in a classic Washington battle, the General Accounting Office is demanding to know who Mr. Cheney met with as his task force developed its policy in secret sessions, and he has refused to reveal the list, fueling suspicions about who has his ear. ''It was less than politically adept,'' one of Mr. Cheney's close friends conceded last week. ''But Dick had strong views, and they were reinforced by others he knew who had similarly strong views.'' Now Mr. Bush is trying to undo the damage, showing up in places like Sequoia National Forest, restoring $300 million in Federal money for energy conservation that Mr. Cheney cut out of the budget, and calling for Americans to use energy efficient devices that Mr. Cheney ignored. Similarly, Mr. Rumsfeld is backtracking from his go-it-alone approach. For months he left the Joint Chiefs in the dark about his missile defense plans, and conducted his top-to-bottom review in secret, with a few trusted aides. ''It was very corporate,'' said one senior military official, ''but we had no idea what he was doing, and he had no idea why we do things the way we do.'' He has begun to change, but some of the Joint Chiefs remain wary of him. Then there is Mr. O'Neill, a longtime friend of Mr. Cheney and the chairman of the Federal Reserve, Alan Greenspan. But it's unclear who is setting financial strategy -- Mr. O'Neill or the White House chief economic adviser, Larry Lindsey -- and that has many of America's economic partners unsettled. ''Who makes dollar policy?'' a top aide to Japan's new prime minister asked a reporter last week. So far, it's hard to say. Mr. O'Neill has also shown a penchant for speaking more frankly than the White House would wish. For example, when asked if it was smart to keep pressing for the elimination of the corporate tax at a time the administration is under fire for being too cozy with corporate America, the former Alcoa chief dismissed the whole issue. The corporate tax, he said, ''causes people to say we're getting those rotten bastards who are corporations, and we are taking money away from them.'' But ''at the end of the day individuals pay all the taxes,'' he said, so by cutting taxes for Exxon, I.B.M. and Alcoa, he's really helping consumers. It is not an argument the White House wants to hear right now, and it seems to be looking for another way of doing business. The president is in the midst of what business schools might call a ''strategic refocusing.'' Issues that one might have expected to be decided by the C.E.O.'s have been recalled to the White House. It was Karl Rove, Mr. Bush's political guru, who told the Pentagon that its days of bombing Vieques were coming to an end -- even though the military has no alternative site to train its fliers. The issue was just too important to Latino voters, or so Mr. Rove thought. Similarly, the coming decision on federal funding for stem-cell research was sucked back into the White House as soon as it became clear that it involved not only science, but Catholics, anti-abortion groups and other key constituencies. Mr. Bush is likely to get into the middle of more decisions. With the surplus shrinking and government revenues declining, Mr. Rumsfeld is trying to figure out how to pay for missile defense and new conventional weapons, while Mr. Cheney wants funding for his energy agenda. AS Mr. Peterson says, ''when the aggregate of these individual visions don't add up, something, and in particular somebody, has to give.'' It's possible that these are the usual contortions any new team finds itself in as it struggles to its feet. But it's also possible that Mr. Bush, eager to apply the lessons of private enterprise to Washington, overestimated how transferable those lessons are. ''The problem isn't the model,'' insists Jeffrey E. Garten, the dean of the Yale School of Management and author of the recent book, ''The Mind of the C.E.O.'' (Perseus, 2001.) ''The problem is the Bush variant of the model. ''A good C.E.O. has to be able to execute the policy once it's set,'' he said. Mr. Bush, like many politicians, is already ''compromising and backpedaling. The C.E.O.'s aren't accustomed to dealing with that. And so they get antsy.'' Photo: President Bush and Vice President Cheney display their concern for punctuality in a photo released by the White House to commemorate the administration's first 100 days. (Reuters) Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Privatise MSEB distn & generation: Godbole panel report-II 07/08/2001 Press Trust of India Limited © 2001 PTI Ltd. Mumbai, Jul 8 (PTI) Even as India's western state of Maharashtra grapples over its energy crisis with US energy major Enron, Godbole Review Committee has recommended outright "privatisation" of the loss-making Maharashtra electricity board's (MSEB) distribution network and generation unit in the second part of its report to be submitted on July 11. "The report outlines path breaking reforms, which not only suggests restructuring of MSEB, but also makes its clear that its once-a-very-good board will be destroyed, if it continues as a government body", official sources told PTI here Sunday. The report would be submitted to the state Chief Minister Vilasrao Deshmukh on Tuesday morning, sources said. "The committee has recommended that MSEB's government ownership should be dissolved, however, the control of transmission network should rest with it". "MSEB's current assets are close to worth Rs 120 billion and once cabinet approves the proposal following submission of the report, process like inviting tenders from private parties may be taken up", officials said. According to the report, the interested companies would have to infuse capital investment in the distribution and generation networks with an increased rate of return at about 4.8 per cent, sources explained. The 200-plus pages report draws a detailed road map for the need to privatise MSEB, a different model from what was implemented in other states, sources added. (THROUGH ASIA PULSE) 08-07 2001 Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Tough-talking energy adviser could head state power authority By DANNY POLLOCK Associated Press Writer 07/08/2001 Associated Press Newswires Copyright 2001. The Associated Press. All Rights Reserved. LOS ANGELES (AP) - With his trademark Stetson hat, cowboy boots and raspy Tennessee drawl, S. David Freeman has seized center stage in California's power crisis. Credited rightly or wrongly for keeping the lights on in Los Angeles as head of the Department of Water and Power, the swashbuckling chief energy adviser to Gov. Gray Davis is seen by many as the state's energy savior. Others, however, call him a wily salesman and master of public relations whose dealings with energy providers are overly confrontational. "Maybe I'm a little of both," the 75-year-old Freeman said. "I know how to sell a vision." Indeed, Freeman's record is a conflicted one. He headed the nation's largest municipal utility when it was one of the few power providers in California to avoid the pain of deregulation. He kept the lights on and rates low for the city's 3.8 million residents while pulling the DWP from the brink of bankruptcy. He also was one of the first public officials to talk tough about power generators when energy prices soared, routinely accusing them of committing "highway robbery" and "ripping off" consumers. Yet Freeman himself has been accused of selling surplus power at premium rates as head of the DWP. His critics also note that Freeman was an early architect of deregulation who helped devise the key mechanisms of the state's energy market, and that he may not deserve the credit he claims for keeping the DWP in control of its own generating plants. Freeman makes no apologies for his record or his aggressive rhetoric. "It distinguishes me from all the mealy-mouthed wusses who talk in language people don't understand," he said. "It's a tough business we're in. We're not playing pattycake." Freeman made believers of many state officials while negotiating $43 billion in long-term energy contracts for the state. "We needed a pirate to negotiate with the pirates," said state Sen. Debra Bowen, D-Redondo Beach, who chairs the Senate Energy Committee. "We didn't want to send Snow White." Freeman is in line to head the newly created state power authority, a key element in his vision for ending the power crisis. The agency can issue up to $5 billion in revenue bonds to build and buy power plants. Freeman's faith in public power goes back to his days growing up in the shadow of the Tennessee Valley Authority, the grandaddy of all public power projects. "The TVA and religion were the two biggest things in life," recalled Freeman, who went to work for the TVA soon after college. In the mid-1960s, he caught the attention of the White House with a major study on energy conservation. President Lyndon Johnson made him the nation's first coordinator of energy policy, a role he maintained under presidents Nixon and Carter. Since then, Freeman has headed four public power agencies, including the TVA. "David Freeman has an almost religious belief in public power," said Jan Smutny-Jones, executive director of the Independent Energy Producers Association, which represents major providers such as Enron, Reliant and Dynegy. "He really believes that can save the day. But he's flat wrong for California ... The generation industry, with government stability, will bring new investment." In the mid-1990s, while Freeman was heading the Sacramento Municipal Utility District, state officials considering deregulation recruited him to oversee development of the Power Exchange and California Independent System Operator. The agencies were to be the cornerstones of deregulation, handling the auctioning of power and managing much of the state's transmission grid. "I thought deregulation might work," Freeman said about the project. "I wouldn't have done it if I'd have known what would happen." That turnaround is one of many Freeman has made to dodge the political fallout of deregulation, according to Brian D'Arcy, business manager of Local 18 of the International Brotherhood of Electrical Workers, which represents 6,000 municipal utility workers in Los Angeles and other cities. "He's reinventing history and people aren't calling him on it because they're trying to latch on to his star," said D'Arcy, who worked with Freeman after he took over the DWP in 1997. Freeman has been labeled a visionary for bucking deregulation and hanging on to power plants that have since provided a lucrative energy surplus for Los Angeles. D'Arcy said Freeman actually favored selling outdated DWP plants because plenty of cheap power was then available on the spot market. D'Arcy said he fought a sell-off to save jobs for union members. "He and I fought over (selling) generation, and that stalled it," D'Arcy said. Freeman, however, said he intentionally held on to those plants, a move that allowed the DWP to sell excess power and make more than $200 million. He said the agency charged reasonable rates for power under state guidelines, but critics said Freeman's opportunism undercuts his verbal assaults on private generators. "It's the pot calling the kettle black," Smutny-Jones said. "I don't think it's proper for him to be characterizing everyone else in a negative light." John Stout, a senior vice president with Reliant Energy, declined to comment specifically about Freeman. However, he said energy providers are being unfairly targeted by accusations of price gouging. "It's counterproductive,' he said. "It makes it difficult to sit down face to face to solve problems when someone has their finger in your face." AP Photo LA101 Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. NIGERIA: INTERVIEW-Nigeria power project's success fuels AES expansion. By Ebenezer Ademola 07/07/2001 Reuters English News Service (C) Reuters Limited 2001. LAGOS, July 7 (Reuters) - If successful, Nigeria's most ambitious independent power project will be a beacon for other foreign ventures in the country, the head of the project said at the weekend. Dennis Skipper, project manager for AES Barge Nigeria Ltd, the Nigerian subsidiary of the U.S. energy group AES Corp. , told Reuters in an interview that many prospective investors based in the U.S. and Europe are watching AES' attempt to generate 270 MW of electricity for Nigeria's power-starved commercial capital Lagos. "There is a great deal of interest in the United States to invest in Nigeria and the success of this project is going to lead to an economic boom," Skipper said. "Each year people invest in doing things in Nigeria, the risk factor goes down - it has a snowball effect and attracts more investors," he said. But just in case the political situation in Nigeria, which ended 15 years of military rule in 1999, does turn for the worse, Skipper said AES has taken out a $200 million political risk insurance policy from the U.S.-based Overseas Private Investment Corporation (OPIC). "If somebody seizes power and seizes my (power-generating) barges, I can be paid," he said. But after overcoming six months of repeated delays, Skipper said early indications suggest the project will be a success and the company is has large expansion plans. READY TO SEND FIRST ELECTRIC BILL Last month the generating barges - positioned next to the country's biggest power plant at Egbin near Lagos - began injecting 60 MW into the national grid. Two additional barges are scheduled to be activated July 15, bringing the project up to 120 MW. Skipper said the project should be operating at its full capacity of 270 MW in September. Nigerians have been anxiously watching the barge project in the hope that it they will no longer have to rely solely on the erratic supplies of electricity from the the State-run National Electric Power Authority (NEPA). Africas' most populous country with more than 110 million people, needs about 3,400 MW daily but NEPA's decaying facilities generate only 1,500 MW. Nigerians joke NEPA stands for "Never Expect Power Always". At the end of July, AES will send its first monthly bill to NEPA. "We've given away about $600,000 worth of electricity already," Skipper said. He said $270 million has been invested in the project so far and AES is negotiting with NEPA to expand the project by 60 MW to increase the capacity to 330 MW. TWO NEW PROJECTS IN WORKS Skipper said the company is in advanced negotiations with NEPA on two new projects The largest is a 800 MW extension to the Ughelli power plant in Nigeria's oil-rich Delta state. "We have actually built the engineering model that will be taken," he said. "We have a financial proposal that in principle have been agreed to, all we need to do is finalise the PPA (power purchase agreement)." The second project is a 548 MW land-based power plant at Agbara, Ogun State, an industrial centre near lagos. When the Nigeria government privatises NEPA next year, Skipper said AES would like to buy the Egbin power plant. "AES is coming here to stay, we are not just here to make few thousand or few million dollars and go home," Skipper said. "We came here to do business in Nigeria, to be a Nigerian company." To demonstrate AES's commitment to Nigeria, Skipper said the company is creating a $500,000 education fund, which will provide scholarships and promote education in the country. AES bought majority interest in the barge power project from he original contractor Enron Corp. in December. Nigerian energy firm YF Power Nigeria owns the remaining shares in the business. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. NEWS FOCUS ON ENERGY / As the clock ticks, rifts remain in Calif. electricity refund talks DAVID IVANOVICH, LAURA GOLDBERG Staff 07/07/2001 Houston Chronicle 3 STAR 1 (Copyright 2001) WASHINGTON - California Gov. Gray Davis vowed Friday not to back down on his demands electric power companies cough up $8.9 billion for overcharging the state for electricity in the midst of a power crisis. Negotiators from California and a group of power producers - including representatives from Houston-based Reliant Energy, Enron Corp., Duke Energy North America, Dynegy and El Paso Corp. - agreed to work through the weekend in the hopes of resolving their refund disputes. But with a Monday deadline fast approaching and the rhetoric still confrontational, the two sides still sounded far from a negotiated settlement. The Federal Energy Regulatory Commission last month ordered the parties try to reach an agreement. Otherwise, administrative law Judge Curtis L. Wagner Jr., who is overseeing the negotiations, will craft his own compromise. Wagner had threatened to issue his preliminary terms on Friday, only to back off that warning to give the parties more time to haggle. "We have several settlement offers pending," Reuters quoted Wagner as saying Friday. Wagner added: "They could meet a consensus in a day or two if they really wanted to." Tamara Young-Allen, a spokeswoman for the commission, said Wagner is "very optimistic. The talks are moving along." But Wagner's optimism is not echoed by other parties at the bargaining table. "Litigation is basically where we're headed," one industry source said early Friday. Davis claims the power companies overcharged the state to the tune of $8.9 billion between May 2000 through May 2001. "Will I take less than $8.9 billion? No," the California governor told reporters Friday. Davis, however, has instructed his negotiators to make clear he is open to several forms of repayments, including renegotiating some existing contracts or contracting for future power at below-market rates. California has been struggling to sign long-term power supply contracts, in an effort to get away from its reliance on the volatile spot market, which left the state's power companies vulnerable to the huge price spikes last winter. As of June 12, the state had signed deals totaling $42.8 billion with 18 different suppliers. As a result, California purchased only 1.9 million megawatt hours of power on the spot market, down from 4 million megawatt hours in May, Davis said. Earlier this week, Davis' chief negotiator in the talks, California Independent System Operator Chairman Michael Kahn, proposed allowing those companies that have signed long-term deals to renegotiate those contracts for lower rates. These discounts could be used to cover the refunds demanded by the state, an industry source said. But Davis said Friday he wants a substantial portion of the $8.9 billion in the form of refunds. The industry source complained that Davis has not been willing to go far enough to reach a settlement. Davis said Friday the state would not be willing to offer to drop ongoing investigations that could result in civil or even criminal penalties as part of those negotiations. Companies from Houston, Oklahoma and North Carolina took advantage of California, Davis said, "trying to suck us dry." The power companies, meanwhile, are firing their own salvos. In a report filed with the U.S. Securities and Exchange Commission Friday titled "Myths Debunked: The Real Story of Wholesale Power Costs in California," Reliant assailed the "disingenuous attempts . . . to paint the picture that independent generators have been principal beneficiaries of the increase in wholesale power costs in California." Joe Bob Perkins, president of Reliant Energy's Wholesale Group, argued in an interview that the higher wholesale prices in California were not caused by generators trying to push up their operating margins. Instead, Perkins argued, those prices were the result of a number of factors, including high natural gas prices and a greater reliance on gas-fired power generators because hydroelectric power was short. Reliant's operating margin for its California operations between October 2000 through May 2001 - the peak of the power crisis - were $41.34 a megawatt hour, the company revealed Friday. This margin - which represents the profit for their generating operations per megawatt hour - compares with $27.64 per megawatt hour in all of 2000, $11.21 in 1999 and $37.52 in 1998, the company said in its filing. Between 1998 and 2001, the company's fuel costs rose seven-fold while its sales quadrupled, said Reliant, parent company of Houston utilities Reliant HL&P and Reliant Entex. Reliant officials examined which companies collected the $27 billion paid for wholesale power in California last year. More than half the increase in cost, Reliant officials noted, went to California's investor-owned utilities, San Diego Gas and Electric, Southern California Edison and Pacific Gas & Electric, as well as the publicly-owned Los Angeles Department of Water and Power. "The real money stayed in California itself," Reliant said in its filing. Gary Ackerman, executive director of the Western Power Trading Forum, a trade association of wholesale power buyers and sellers in the Western states, argued that "if the state of California insists on its fictitious number of $8.9 billion, that won't help the negotiations any," he said. If the parties fail to reach an agreement, Wagner will have one week to devise his own settlement plan and present that recommendation to the full Energy Regulatory Commission. He said the talks would likely continue up to the midnight Monday deadline. "Three minutes before closing time is when the most serious negotiations take place," he said. Mug: California Gov. Gray Davis: "Will I take less than $8.9 billion? No'' (p. 16) Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. BUSINESS JUDGE URGES ON SETTLEMENTS FOR POWER OVERCHARGES TOM DETZEL - The Oregonian 07/07/2001 Portland Oregonian SUNRISE B01 (Copyright © The Oregonian 2001) Summary: About $15 billion in refund claims for electricity overcharges is at issue at a settlement conference ordered by FERC Optimistic that he can meet a looming deadline, a judge on Friday pushed to keep a surge of momentum going in talks to settle as much as $15 billion in refund claims for electricity overcharges across the West. "We are making progress. We're swapping offers back and forth," said administrative Judge Curtis L. Wagner, who earlier had threatened to issue his own preliminary refund plan to give the negotiations a jolt. Wagner said he dropped the threat after it served its purpose and to avoid jeopardizing a deal before Monday, when the clock runs out on the 15-day settlement conference ordered by the Federal Energy Regulatory Commission. Oregon and Washington are among the parties at the meeting, which is aimed at discharging financial and legal claims spawned by California's power deregulation fiasco and the staggering wholesale electricity prices it exported. Huge sums are at stake. California officials have demanded $8.9 billion in refunds for the year ended in May, and some have put overcharges elsewhere across the 10 other states connected to the Western power grid at as much as $6 billion. Power suppliers such as Reliant Energy, Mirant, Dynegy, Enron and Duke Energy dismiss charges of price gouging and counter that they haven't been paid for billions of dollars worth of electricity sales into California. Caught in a complicated middle ground are such Northwest utilities as Portland General Electric, PacifiCorp, Puget Sound Energy, Avista Utilities, Idaho Power, plus the Bonneville Power Administration and many consumer-owned utilities. In some cases, those utilities acted on both sides of the high- flying wholesale power markets of the past year, benefiting from the extreme prices when they sold electricity and paying a hefty premium when they were buyers. How they might fare in a settlement is far from clear, and results might vary greatly from utility to utility, said Bob Jenks, executive director of the Oregon Citizens' Utility Board, a ratepayer advocacy group. "For consumers in Oregon, it goes both directions," Jenks said. "If refunds are ordered, some customers may see benefits from that, and a credit on their bill. Other customers may see a charge on their bill." He said PGE, for instance, made enough money off power sales last year to withdraw a proposed 17 percent rate increase. Meanwhile, PacifiCorp was forced to buy heavily into the wholesale market after its Hunter power plant in Utah suffered a five-month generator failure. The utility wants a 15 percent rate hike starting Aug. 1. Participants in the talks are under order to keep details confidential, but Wagner on Friday shed light on a few areas: * He said separate settlement offers were being prepared for his review by Pacific Northwest parties and by utilities from outside California, but he declined to clarify which utilities or states were behind each offer. "There are so many parties in it, it's hard to keep them all in my head," the judge said, explaining that some parties were represented in both offers. * He described as "encouraging" statements by California Gov. Gray Davis that the state might reduce its demand for refunds if power suppliers agreed to renegotiate $43 billion in long-term power sales contracts with power providers in the state. Davis seemed to suggest for the first time Wednesday that renegotiating terms of those contracts could be a way to deal with California's refund claim. "We've offered various ways in which people could get us $8.9 billion," Davis told the San Jose Mercury News in California on Wednesday. "You can renegotiate our existing contracts and save us money. However you want to do it, it's just got to net out close to $8.9 billion." On Friday, however, Davis' chief representative at the conference stressed that the state wasn't budging from its refund demand going into the talks. "We came here saying we wanted $8.9 billion and we would justify the numbers, and we want $8.9 billion," said Michael Kahn, chairman of agency that runs California's power grid. "We have justified the numbers at every turn." Kahn seemed to echo Wagner's optimism about the discussions, saying the judge was doing "everything in his power" to reach a deal. The settlement talks began June 25 at the insistence of FERC, which days before ordered a broad expansion of market-based price controls across the 10 Western states that took collateral damage in the California-induced crisis. Wagner said he had no plans to extend Monday's deadline. If no settlement is reached, he is instructed to recommend one to FERC. That's one reason why he considered putting out his own preliminary refund plan. "It was just to put folks on notice that if they didn't settle, that this might occur," Wagner said. You can reach Tom Detzel at 503-294-7604 or by e-mail at tom.detzel@newhouse.com. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Opinion Sustainability isn't simple 07/07/2001 The Seattle Times Fourth B5 (Copyright 2001) TWENTY-SEVEN wind turbines set to produce "green" electricity for 4,300 homes have been stopped dead by a law to protect endangered species. Who said sustainability was simple? The species being so expensively saved is the Washington ground squirrel, Spermophilus washingtoni. Gray with white spots, it is 5 to 7 inches long, with a short, black-tipped tail and hints of red about the nose. It burrows among the sagebrush along the Washington-Oregon border east of the bend in the Columbia River. Hardly a Goliath, the squirrel is asleep seven months of the year. In Oregon, it lives only in three counties, and the state has listed it as endangered. The machines it stops are 21st-century versions of the old Dutch windmill. Made of steel alloys and guided by computers, they sip no oil or natural gas and emit no carbon dioxide or sulfur dioxide. Their fuel is free, though the power they generate is not because the machines themselves are so expensive. They generate power at about $50 per megawatt-hour--double the price of the late 1990s, but a nice price today. The Stateline Wind Farm was to have created electricity for 70,000 homes. The squirrel reduces that to 65,700. Presumably, the difference is to be made up from Dynegy, Enron, B.C. Hydro or one of the other scalpers who now sell power. Do not curse the squirrel. Just be thankful it is not yet listed in Washington. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. NEWS Campaign funds will pay for spots Robert Salladay Chronicle Sacramento Bureau 07/07/2001 The San Francisco Chronicle FINAL A.6 (Copyright 2001) Gov. Gray Davis will begin a series of radio ads next week defending his handling of the energy crisis -- further proof that political campaigning has become a permanent sport. Davis political adviser Garry South said the ads are designed to fill an "information void" among Californians about what the state has accomplished. But they are playing statewide just as millions of dollars of TV ads financed by Republicans and power companies are attacking Davis. "The campaign season has started early," said Rob Stutzman, a consultant with the state GOP, which has not been involved with the anti-Davis TV spots running since June 19. Davis' 60-second radio spot takes the form of an "energy update," where the governor informs listeners that "we" have licensed 16 new power plants, including three Davis opened this month, and that "conservation is the best way to fight back against high energy prices." Davis' ads convey the same information as a series of state- financed "Flex Your Power" ads run by the Department of Consumer Affairs, only those ads don't mention Davis. Davis' campaign fund, worth well above $25 million, is paying for the $150,000-per-week radio spots to avoid accusations he is using state money to finance his political ambitions. South dismissed the notion that the radio ads came in response to the TV ads that make Davis a target, saying the governor's poll numbers are actually going up. He said people laughed at the ads attacking the governor as ridiculous, particularly one showing Davis in Red Square. "One of the reasons we chose this ('energy update') tack," South said, "is that people simply are not in the mood to have some full- out firefight and some partisan battle about this problem. They are in a just-the-facts-ma'am mood." Stutzman said he didn't disagree with South about the ill-timed and partisan nature of the TV ads, which are financed out of Washington, D.C., but he said the governor is also launching a political firefight of his own. "These ads, even though the the first iteration of them sound like public service ads, very much are political ads," Stutzman said. "The reason they may be poor political ads is they use the governor's voice, and I don't think he has any credibility on this issue." Davis already has updated his 2002 campaign Web site, www.gray- davis.com, which includes an odd-looking caricature of the governor and a photo of Davis standing with actor Martin Sheen, who plays a president on the TV show "The West Wing." The Sheen photo dominates the home page. "What we're trying to do with the Web site is have a little fun with it," said South, who declined to say whether Davis would run against President Bush in 2004. Last month, a conservative group with links to Republicans and energy companies began running a series of ads blaming Davis for the energy crisis and saying the state was suffering from "Grayouts." Time magazine reported last month that hundreds of corporations had contributed to the ads attacking Davis, who has accused Texas firms such as Reliant Energy of "unconscionable price-gouging." Reliant, which donated $10,000 to Davis before the energy crisis, has contributed to the anti-Davis advertising effort, according to Time, and the American Taxpayers Alliance hopes to raise as much as $25 million to keep the ads running in California through July. Scott Reed, a former campaign manager for Bob Dole's failed 1996 presidential bid, formed the American Taxpayers Alliance in Washington to raise money for the 30-second ads. He has refused to name his donors, and did not return a call for comment yesterday. Even though the 2002 elections are more than a year away, Republicans are worried they are losing ground in Congress on Bush's energy policy, and Davis' popularity has slipped somewhat in the polls. But the ads mounted by both sides also are designed to change public policy. Davis recently hired former Clinton-Gore campaign and White House strategists Chris Lehane and Mark Fabiani, and Davis' public presence and political pull dramatically increased. Another conservative group, the 21st Century Energy Project, will begin running TV ads next week in Washington to promote expansion of the energy supply, more drilling and nuclear energy. The $500,000, two-week advertising purchase is being coordinated by Ed Gillespie, a former campaign strategist for Bush and a consultant for Houston's Enron Corp., the world's largest energy trader. Gillespie said yesterday his group wants to promote a "conservative, market-oriented message" about energy, to counteract environmental groups such as the Sierra Club. He said environmentalists aren't addressing the gap between supply and demand, except through strict conservation. "We're trying to shape the debate, because it's been pretty one- sided so far," Gillespie said. Copyright , 2000 Dow Jones & Company, Inc. 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