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Thanks - Jean Los Angeles Times, April 17, 2001, Tuesday,, Home Edition, Page 17, 837 ????words, THE CALIFORNIA ENERGY CRISIS; ??PUNISHING THE PRODUCERS COULD ADD TO ????PROBLEM; ??SHORTAGE: SOME OFFICIALS WANT 'PIRATES' TO PAY FOR STATE'S ????CRISIS. BUT THAT COULD DISSUADE THEM FROM CREATING NEEDED SUPPLY, OTHERS ????WARN., JULIE TAMAKI, TIMES STAFF WRITER, SACRAMENTO (Quotes Smutny on behalf of IEP) Sacramento Bee, April 16, 2001, Monday, Pg. A1;, 1389 words, Tough talk on ????energy Many Democratic lawmakers push to seize generators., Jim Sanders Bee ????Capitol Bureau ?(Quotes Smutny on behalf of IEP) The Bulletin's Frontrunner, April 17, 2001, 1552 words, California State ????Legislators Against Grid Buyout. Contra Costa Times, April 17, 2001, Tuesday, STATE AND REGIONAL NEWS, K7054 ????, 687 words, PG&E wrote off billions, according to earnings reports, By ????George Avalos Contra Costa Times, April 17, 2001, Tuesday, STATE AND REGIONAL NEWS, K6844 ????, 1329 words, Former governor defends his decision to deregulate utilities, ????By John Simerman Copley News Service, April 17, 2001, Tuesday, State and regional, 1118 ????words, Suggestion is floated that Edison follow PG&E into bankruptcy, Dean ????Calbreath Copley News Service, April 17, 2001, Tuesday, State and regional, 1142 ????words, Activist pans FERC refund order; figure is called too low, Craig D. ????Rose, SAN DIEGO Los Angeles Times, April 17, 2001, Tuesday,, Home Edition, Page 8, 336 ????words, POWER CRISIS: WHO WILL PAY? Los Angeles Times, April 17, 2001, Tuesday,, Home Edition, Page 17, 423 ????words, THE CALIFORNIA ENERGY CRISIS; ??JUDGE FAVORS SMALL PRODUCER IN BOUT ????WITH EDISON, TONY PERRY, TIMES STAFF WRITER, EL CENTRO Los Angeles Times, April 17, 2001, Tuesday,, Home Edition, Page 3, 1099 ????words, CALIFORNIA AND THE WEST; ??THE CALIFORNIA ENERGY CRISIS; ??DEAL TO ????BUY EDISON GRID RAISES DOUBTS IN CAPITOL, MIGUEL BUSTILLO and CARL INGRAM, ????TIMES STAFF WRITERS, SACRAMENTO Los Angeles Times, April 17, 2001, Tuesday,, Home Edition, Page 1, 1182 ????words, DWP CHIEF TO WORK FOR DAVIS; POST AS ENERGY CZAR LIKELY, TINA DAUNT ????and RONE TEMPEST, TIMES STAFF WRITERS Los Angeles Times, April 17, 2001, Tuesday,, Home Edition, Page 2, 316 ????words, CALIFORNIA; ??RELIANT SEES PROFIT DOUBLE IN 1ST QUARTER, From ????Bloomberg News The New York Times, April 17, 2001, Tuesday, Late Edition - Final, Section ????C; Page 15; Column 1; Business/Financial Desk, 659 words, PG&E Has a Loss; ????Reliant's Earnings Soar, By Bloomberg News The New York Times, April 17, 2001, Tuesday, Late Edition - Final, Section ????A; Page 18; Column 6; Editorial Desk, 150 words, California, Neglected San Jose Mercury News, April 17, 2001, Tuesday, SJ-POWER-COSTS, 1124 words, ????California Leaders Gain Support for Power Price Controls, By John Woolfolk The San Francisco Chronicle, APRIL 17, 2001, TUESDAY,, FINAL EDITION, NEWS; ????, Pg. A3, 614 words, Davis Names New Top Energy Adviser; ???Freeman to ????spearhead major conservation effort, Chuck Squatriglia The San Francisco Chronicle, APRIL 17, 2001, TUESDAY,, FINAL EDITION, ????EDITORIAL;, Pg. A18;, 1303 words, U.S. Energy Chief: No Price Caps The San Francisco Chronicle, APRIL 17, 2001, TUESDAY,, FINAL EDITION, ????BUSINESS;, Pg. B1, 606 words, Independent Electricity Producer Posts Big ????Profits; ???Independent Power Firm Doubles Profits, Christian Berthelsen The Washington Post, April 17, 2001, Tuesday, Final Edition, STYLE; Pg. ????C02; ART BUCHWALD, 433 words, The Power of One, Art Buchwald The Associated Press State & Local Wire, April 16, 2001, Monday, BC cycle, ????State and Regional, 442 words, Natural gas tax could worsen electricity ????shortage, LOS ANGELES The Associated Press State & Local Wire, April 16, 2001, Monday, BC cycle, ????State and Regional, 681 words, Davis may have trouble selling power plan, ????senators say, By DON THOMPSON, Associated Press Writer, SACRAMENTO Copyright 2001 / Los Angeles Times ??????????????????????????????Los Angeles Times ????????????????????April 17, 2001, Tuesday, Home Edition SECTION: Part A; Part 1; Page 17; Metro Desk LENGTH: 837 words HEADLINE: THE CALIFORNIA ENERGY CRISIS; PUNISHING THE PRODUCERS COULD ADD TO PROBLEM; SHORTAGE: SOME OFFICIALS WANT 'PIRATES' TO PAY FOR STATE'S CRISIS. BUT THAT COULD DISSUADE THEM FROM CREATING NEEDED SUPPLY, OTHERS WARN. BYLINE: JULIE TAMAKI, TIMES STAFF WRITER DATELINE: SACRAMENTO BODY: ??Lt. Gov. Cruz Bustamante wants to empower the state to throw power producers in jail. Atty. Gen. Bill Lockyer is offering a $ 50-million reward to anyone who helps him prosecute them for fraud. Senate leader John Burton is calling on the governor to commandeer their plants. ??As the electricity crisis has escalated, so have efforts by lawmakers to go after the big energy companies--described as "pirates" or a "cartel"--that they say have brought California to its knees. ??They want the mostly out-of-state companies, which Gov. Gray Davis recently described as "the biggest snakes on the planet Earth," punished and some of their earnings returned to the public. ??* Bustamante proposed that the Legislature enact a law to make it a felony for energy companies to charge unreasonable and unjust prices. Prosecutors could use findings of unreasonable prices by regulatory bodies, such as the Federal Energy Regulatory Commission, to file charges against a generator. Punishment would include restitution, jail time or fines. ??* Sen. Nell Soto (D-Pomona) and Sen. Jack Scott (D-Altadena) introduced legislation that would tax producers' "windfall profits" and give the money to taxpayers to offset their electricity bills. The charge would apply to a corporation's taxable net income for 2001, using 1999 as a comparison year. ??* Offering potential rewards of hundreds of millions of dollars, Lockyer appealed to whistle-blowers to report suspected fraud by energy providers who sell electricity and natural gas to California government entities. ??Lockyer said he will invoke a state law under which whistle-blowers whose information leads to the successful prosecution of a false claim may be entitled to a percentage of the financial penalties, which can be three times the actual losses. ??"Since billions of state dollars may be recovered, the award to an informant could potentially range from $ 50 million to hundreds of millions of dollars," Lockyer said. ??Whether his offer results in any fraud convictions, or whether any of the other proposals produce more than rhetoric, remains to be seen. But the possibility exists that the actions could compound the state's problems by dissuading companies from building new plants in California or refurbishing existing ones to increase their output. ??Generators say the lawmakers' proposals share a common trait: None solves California's fundamental problem, which they contend is a lack of electricity supplies. They describe their treatment by state officials, who are desperate for new power plants to be built in California, as contradictory at best. ??"We cannot simultaneously be the heroes and the villains in this opera," said Jan Smutny-Jones, executive director of the Independent Energy Producers. ??Richard Wheatley, a spokesman for Reliant Energy of Houston, said that in response to strong demand for power in California, his company has more than doubled its plants' output. ??Reliant, which bought five California power plants from Edison when the state deregulated electricity, said the windfall profits measure could cause some generators to reduce the amount of power they produce. ??"It would make the problem worse in California by removing financial incentives that have prompted generators to run their plants at historically high levels," Wheatley said. ??Duke Energy of Houston has announced plans to spend $ 1.6 billion to refurbish its California power plants to increase production. ??But company spokesman Tom Williams said a windfall tax would have an inflationary effect, because the expense ultimately would be passed on to consumers. He said such measures could cause his and other companies to rethink their plans in the state. ??Sen. Tom McClintock (R-Thousand Oaks) said he believes some of his legislative colleagues are doing "enormous damage" to the state by targeting power suppliers. California, he said, suffers from a catastrophic shortage of electricity. ??"To make electricity plentiful, we have to build more power plants, but we cannot accomplish that by threatening every generator in the world with the confiscation of its assets and the imprisonment of its executives the moment they set foot in California," McClintock said. "It is no wonder that power plant applications in California are a fraction of what they are in states like Texas that welcome new power plant construction." ??Others say the shortage is a manipulated one. Lockyer noted that his investigators have been examining whether producers have manipulated the market and withheld supplies to run up energy prices. ??Santa Monica consumer advocate Harvey Rosenfield welcomed word of the windfall tax legislation, which he said embodies an idea he has been calling for since last fall. ??"This is a crisis of greed," Rosenfield said. "There is no solution in this energy crisis that does not involve getting our money back from the thieves who have stolen it from us." ??* ??Times staff writer Carl Ingram contributed to this story. LOAD-DATE: April 17, 2001 ???????????????????????????????2 of 2 DOCUMENTS ??????????????????Copyright 2001 McClatchy Newspapers, Inc. ????????????????????????????????Sacramento Bee ??????????????????April 16, 2001, Monday METRO FINAL EDITION SECTION: MAIN NEWS; Pg. A1; POWER CRUNCH LENGTH: 1389 words HEADLINE: Tough talk on energy Many Democratic lawmakers push to seize generators. BYLINE: Jim Sanders Bee Capitol Bureau BODY: ??Here's what some California lawmakers see as a trump card in solving the state's energy crisis: Gouge the public, lose your power plant. ??Faced with growing bills and dwindling options, many Democratic lawmakers are pushing for the use of emergency powers or eminent domain to force power generators to negotiate lower wholesale electricity prices. ??"Step One is to seize a few power plants," said Senate President Pro Tem John Burton, D-San Francisco. "That would let (the generators) know we mean business." ??"There's no negotiation when generators say, 'Pay us what we want, or we'll shut off California's lights,' " said Phil Angelides, state treasurer. "We ought to levy an excess profit tax, and if they don't take their foot off our throat, seize a plant or two to sober them up." ??The increasingly tough talk about seizing assets, while motivated by an immediate desire to extract concessions, fits into a longer-term push for California to produce some of its own electricity to boost supply and protect against spiraling prices. ??Critics blast the notion of seizure, however, as a bargaining ploy or political grandstanding. ??"It's actually quite silly and a waste of time to consider these options," said Gary Ackerman, executive director of the Western Power Trading Forum, an association of wholesale generators. ??"Seizure would mean the state would pay top dollar for an Edsel - old, tired plants that are past their prime," he said. "What happens if these people are wrong and they're taking the people of California down a dead end?" ??But others say the time is ripe for radical reform, with the state paying up to $50 million a day for electricity and facing prospects of rolling power blackouts this summer. ??"The generators will only respond when we take their golden eggs: the plants they own," said Douglas Heller of the Foundation for Taxpayer and Consumer Rights. "They're the ones cheating us, and they're the ones we must target." ??Lawmakers have raised the following two seizure possibilities, each aimed at ensuring that more electricity is available at lower than spot-market prices: ??* Take over private power plants, perhaps contract with utilities to run them and let the courts decide what fair market price should be paid to the companies that now own them. ??* Leave the plants alone, but seize their contracts with marketers, thus controlling where the power is sold while reducing price markups by eliminating the middleman in spot-market transactions. ??State Sen. Debra Bowen, D-Marina Del Rey, chairwoman of the state Senate's Energy Committee, recently suggested a third way for California to acquire existing electricity assets, without seizing them: Purchase the entire Pacific Gas and Electric Co. in Bankruptcy Court. ??Such a move could benefit the state and keep PG&E property out of the hands of private companies that already have too much influence over the electricity market, Bowen said. ??All sides agree that takeovers would be an extraordinary, unprecedented intervention into California's electricity industry. ??But Burton said his support for seizures is "very serious." The state could pay acquisition costs through revenue from electricity sales, he said. ??"People make money on power plants," he said. "It ain't like they're loss leaders." ??Gov. Gray Davis hasn't ruled out the seizure of power generators' assets or the acquisition of PG&E. But such possibilities raise a million questions, ranging from taxpayer exposure to technical issues regarding use of any asset acquired, Davis spokesman Steve Maviglio said. ??Seizure, in particular, can be a "risky gamble" that should not be done in haste, Maviglio said. Private companies targeted by the state could respond by withholding power or deciding not to invest in new plants at a time when California is scrambling for more electricity. ??"Clearly, the governor doesn't want to send a message that California doesn't want increased generation," Maviglio said. "Even though generators are gouging us now, they're also the people that build plants." ??While the Democratic governor has not committed himself to seizure, he supports legislation - SB 6x - written by Burton and supported by Angelides that would create a public power authority to construct state-owned plants and help finance conservation and renewable-energy projects. ??"The notion that we should let electricity be traded by profiteers like a sheer commodity is ludicrous and dangerous," Angelides said. "Public power is the public's defense against the greed and dysfunction of a market run amok." ??Power plants aren't cheap, but with the $5.2 billion it has spent or allocated since January to buy energy on the spot market, the state could generate enough electricity to serve more than 10 million homes. A 1,000-megawatt plant burning natural gas would cost about $500 million, according to the California Energy Commission. ??"We ought never again be in the position of having no ability to control at least part of the supply and hedge the market," said Darrell Steinberg, D-Sacramento, a member of the Assembly's Energy Committee. ??S. David Freeman, general manager of the Los Angeles Department of Water and Power and an adviser to Davis, said he solidly supports building public plants. He likes the idea of a windfall profits tax but is less enthusiastic about asset seizures. ??"All those things are worth considering and they're part of a common theme: The state has to take control of its own destiny," Freeman said. "We need to conserve and build our way out of this mess. The Lord helps those who help themselves." ??But Republican legislators, who have long opposed Davis' efforts to buy statewide electricity transmission, think the state would be making a big mistake by seizing private plants or building its own. ??"There's no reason to believe the state of California can run the power business or the transmission business as good as, or better than, the private sector," said Assembly Republican leader Dave Cox of Fair Oaks. ??The concept of seizure is particularly controversial. ??"How far can you take this?" Cox asked. "If we have a natural gas shortage, do we then seize those pipelines?" ??Jan Smutny-Jones of the Independent Energy Producers Association said state officials need to stop their "constant haranguing of generators." ??"Seizing private property didn't work in Cuba, and I don't think it would work in California," he said. ??Private electricity companies are investing billions to generate more power, and are running their plants as hard as possible to meet the crisis, Smutny-Jones said. ??Soaring electricity prices have been due largely to high demand, scarce supply, extremely high costs for natural gas to run turbines, and financial risks tied to the instability of PG&E and Southern California Edison, industry officials say. ??But state officials claim that market manipulation has contributed as well. ??The California Independent System Operator, which manages the statewide transmission grid, has accused power generators of overcharging Californians by $6.2 billion since May. ??In response, the Federal Energy Regulatory Commission recently threatened to order generators to refund a portion of the contested charges, $134.8 million, mostly covering state purchases in January and February. ??Tom Williams, a spokesman for Duke Energy Corp., a North Carolina-based company that operates four California power plants, said the company is spending $1.6 billion to upgrade and expand those facilities in an attempt to ease the energy crunch. ??State seizures would discourage investment and hurt the industry, Williams said. ??"The governor has said that two things need to happen: The state needs more supply and lower prices," he said. "Seizing power plants would do nothing to help those two objectives." ??Any attempt to take Duke's property through eminent domain would spark a lawsuit, Williams said. "We would fight it vigorously, I can assure you, to ensure we got fair market value." ??But Duke would not object to the state building power plants of its own, he said. ??"We support any effort, public or private, to add generation to California," he said. "The state needs it - and needs it fast." ??l l l ??The Bee's Jim Sanders can be reached at (916) 326-5538 or jsanders@sacbee.com. Copyright 2001 Bulletin Broadfaxing Network, Inc. ??????????????????????????The Bulletin's Frontrunner ????????????????????????????????April 17, 2001 LENGTH: 1552 words HEADLINE: California State Legislators Against Grid Buyout. BODY: ??The Los Angeles Times (4/17, Bustillo, Ingram) reports, "Gov. Gray Davis may face a bigger challenge selling legislators on his deal to keep Southern California Edison out of bankruptcy than he did in forging the agreement with the utility. Legislators returning to Sacramento on Monday after their spring break openly voiced objections to and concerns about the deal to purchase Edison's power lines in exchange for $2.76 billion and a variety of state guarantees." The Times continues, "Some Republicans and Democrats called Davis' deal too generous. Others questioned whether a state- financed rescue of Edison still makes sense after the bankruptcy of Pacific Gas & Electric Co., California's largest private utility." The Times quotes several state legislators who are against the deal. Assemblyman Tony Cardenas (D- Sylmar) said, "There are lots and lots of questions. With the (PG&E) bankruptcy, the world changes. We have to reconsider how this deal fits into the new world we are living in." Assemblyman Tony Strickland (R- Moorpark) said, "It's a bailout. Why would the people of California want to own this thing? That's money that could be better used on schools, health care and tax cuts." Sen. Don Perata (D-Alameda) added, "I haven't talked to anybody who is for it." ??PG&E Reports Fourth Quarter Losses Of $4.1B. The AP (4/17), "PG&E Corp., parent of the bankrupt northern California utility, reported a $4.1 billion fourth-quarter loss Monday, acknowledging the company may be unable to recover soaring electricity costs it was unable to pass on to consumers last year. The San Francisco-based company recorded a before-tax charge of $6.9 billion, the difference between what it paid for wholesale electricity last year and what state regulators allowed the utility to charge its 4.5 million customers. The pre-tax charge produced a loss of $4.1 billion, or $11.34 per share, in the three months ended Dec. 31." The San Francisco Chronicle (4/17, Lazarus) reports, "Marking its worst performance in almost a century of operation, San Francisco's PG&E Corp. last night reported a quarterly loss of $4.1 billion. The huge loss was reported at the same time that the corporation wrote off nearly $7 billion in outstanding debt as uncollectable." The Chronicle continues, "Blame for the quarterly loss is tied to the financial woes of its utility subsidiary, Pacific Gas and Electric Co., which filed for bankruptcy protection this month after racking up $9 billion in unrecovered expenses. Those deficits mounted as the utility was forced to pay more for electricity than it was able to recover from customers under the state's deregulation plan." The Chronicle adds, "While the corporate parent is writing off the loss, the subsidiary is not abandoning its claim to the billions in past debt. The company said it will press ahead with a federal lawsuit asking for total recovery of the costs through higher electricity rates." ??Utilities Took Different Paths In Negotiations With State. The Washington Post (4/17, E1, Behr) reports, "For six months, California's two largest utilities were roped together, sliding steadily toward bankruptcy with billions of dollars in electricity costs they could not recover from consumers. Then, at a crucial crossroads, they diverged. Pacific Gas & Electric leapt -- or was pushed, it says -- into bankruptcy court on April 6. Rather than wrestle any longer with Gov. Gray Davis and his staff over a rescue plan, the utility put its operations, debts and destiny into the hands of US Bankruptcy Judge Dennis Montali. Three days later, Southern California Edison, the state's No. 2 utility, jumped the other way. It signed an agreement with Davis in which the state agreed to buy SoCal Edison's transmission lines, promising the utility $ 2.76 billion to help pay down debt. The plan would also permit SoCal to issue bonds, backed by rate payments, to cover more debt." The Post adds that "the two companies clearly followed divergent paths in their negotiations with the state. After PG&E's executives met with Davis's staff in February, the company issued a statement that spelled out a hard-nosed challenge to Davis and his negotiators. 'PG&E wants to make clear that it is not seeking a rescue or a bailout,' the company said. 'We are asking the state simply to follow the law, which allows us to recover wholesale power costs incurred for our customers.' A bankruptcy reorganization -- the route PG&E ultimately took -- offered an opportunity to isolate the utility company's debts from the parent company. . PG&E also moved to protect the rest of the company from the utility's woes through a corporate restructuring called 'ring-fencing,' which federal regulators approved in December. The strength of those protective walls will be tested in the bankruptcy process by creditors' lawyers seeking to capture some of the parent company's assets, experts predict. Meanwhile PG&E's negotiations with Davis's staff faltered from the start, said Stephen Maviglio, the governor's spokesman." The Post continues, "The negotiations between Davis's staff and SoCal Edison started out better and ultimately reached a tentative deal, announced April 9. In contrast to the tough relationship between Davis and PG&E executives, Edison's chairman and chief executive, John E. Bryson, and Davis both had served on the staff of former California governor Jerry Brown, and Bryson had been president of the CPUC. PG&E's instinct is to battle regulators; Edison's is to seek an agreement, one veteran state regulator said. In addition, because Edison is smaller than PG&E, with half its debt, its issues were easier to deal with than those of its counterparts." ??Los Angeles Power And Water Chief Expected To Head New California Energy Agency. The Los Angeles Times (4/17, Daunt, Tempest) reports, "S. David Freeman, the wily 75-year-old general manager of the Los Angeles Department of Water and Power, will resign soon to become Gov. Gray Davis' chief energy advisor and is widely believed to be a leading candidate to head a new California power authority. Freeman, who has been credited with making the Los Angeles municipal utility an island of electrical stability in a statewide sea of crisis, will become the Governor's 'chief energy czar for conservation,' Davis spokesman Steve Maviglio said Monday. Maviglio refused to confirm that Freeman would head the yet-to-be-formed power authority. He said that Davis did not rule out such a move, but that an announcement would be premature because the Legislature has yet to pass the bill that would put the authority in business. Los Angeles Mayor Richard Riordan, however, said Monday night that Davis has told him that Freeman would be appointed to the power authority job once the agency is created. Regardless of his specific job title, Freeman is expected to be in position to significantly shape the state's energy policy as Davis struggles to keep prices under control and prevent widespread blackouts this summer." The Times adds, "A power authority has been proposed as the vehicle by which the state could purchase the electrical transmission grid now owned by California's private utilities. The agency also could have broad power over conservation programs, construction of new power plants and rehabilitation of current power facilities. Freeman would bring unparalleled experience to a state energy post. In a long and storied career, the wisecracking Tennessee native has run three of the largest public power authorities in the United States -- the Tennessee Valley Authority, the New York Power Authority and the Lower Colorado River Authority in Texas. He also served as energy advisor to President Jimmy Carter. Earlier this year, Freeman worked for Davis as California's chief energy negotiator, hashing out the prices and terms of long-term electricity contracts for the state." ??Carnahan And Lieberman Ask GAO To Investigate Market Power In Wake Of California Problems. The St. Louis Post Dispatch (4/17, Branch-Brioso) reports, "Sens. Jean Carnahan, D-Mo., and Joseph Lieberman, D-Conn., called Monday for an inquiry into the federal agency that oversees wholesale sales of electricity between states. Their letter to the General Accounting Office, Congress' investigative arm, cited California's power woes -- and a fear that the same could befall other states contemplating deregulation, such as Missouri." The Post quotes the letter, "We have been watching with dismay as the state of California suffers sporadic rolling blackouts with impacts on electricity supplies and prices throughout the United States. With the possibility of electricity deregulation occurring soon in additional states such as Missouri, we are concerned whether there is adequate federal oversight to guard against potential abuse of market power by suppliers." The Post continues, "Carnahan and Lieberman asked the GAO to find out whether the Federal Energy Regulatory Commission has properly fulfilled its responsibility 'to ensure just and reasonable prices for interstate wholesale transmission.' They cited recent price-gouging allegations by the California Public Utility Commission as potential evidence that the federal commission had fallen down on the job." LOAD-DATE: April 17, 2001 ??????????????????????????????4 of 66 DOCUMENTS ??????????????Copyright 2001 Knight Ridder/Tribune News Service ???????????????????????Knight Ridder/Tribune News Service ??????????????????????????????Contra Costa Times ???????????????????????????April 17, 2001, Tuesday SECTION: STATE AND REGIONAL NEWS KR-ACC-NO: ?K7054 LENGTH: 687 words HEADLINE: PG&E wrote off billions, according to earnings reports BYLINE: By George Avalos BODY: ??WALNUT CREEK, Calif. _ PG&E Corp., the parent of California's bankrupt utility, posted a $3.4 billion loss in 2000 as it wrote off billions in power-purchase costs that it might never be able to collect, the company reported Monday evening. ??San Francisco-based PG&E disclosed a charge, before taxes, of $6.9 billion to cover its losses for wholesale power purchases last year. ??The charge effectively represents the difference between what PG&E paid for wholesale power and the amount that the Public Utilities Commission determined that PG&E could charge its residential and business customers for electricity. ??The charge helped to plunge PG&E into a $3.4 billion loss for all of 2000 and $4.1 billion during the fourth quarter of last year. ??Had it not been for the charges, PG&E and its various units, including the bankrupt utility and an unregulated power company called National Energy Group, would have recorded healthy profits. ??"While overshadowed by the extraordinary impacts of the California energy crisis, we demonstrated continued solid performance on an operating basis," said Robert Glynn, PG&E's chairman and chief executive officer. "We are proud of that accomplishment, even as we are deeply dissatisfied at reporting a substantial net loss due to the uncertainty around the recovery of our wholesale power and transition costs." ??The multibillion-dollar setback for PG&E extended what has been a bleak several months and string of financial reverses for the once-proud utility. ??"It's almost like a perfect storm," said Michael Worms, an analyst with Gerard Klauer Mattison. "Everything that could have gone wrong has gone wrong for PG&E." ??Overall, and excluding the huge charge, the entire company earned $925 million, or $2.54 a share, from its continuing operations during 2000. Those operating profits were up about 12 percent from 1999. ??The bankrupt utility unit managed a profit of $769 million, or $2.11 a share, from ongoing operations, not counting the charge, during 2000. Those profits were up by less than 1 percent from 1999. ??National Energy Group, an unregulated wholesale power company that is a unit of PG&E, harvested a profit of $162 million, or 45 cents a share, during 2000. Those earnings represented a hefty 165 percent increase, or more than double the totals in 1999. National Energy has prospered by purchasing power plants in the Northeast and natural gas pipeline facilities in Texas. ??"The fortunes of National Energy point out how well that unit is doing by expanding outside of California," said Arthur O'Donnell, editor of California Energy Markets, a newsletter in San Francisco. ??With the operating profits as a backdrop, PG&E executives insisted they will pursue every effort to recover the company's losses in the wholesale market, despite taking the one-time charges. These include legal challenges in the courts, ongoing negotiations with regulators and political leaders such as Gov. Gray Davis, and discussions with lenders and creditors as its bankruptcy case unfolds. ??"Taking this charge does not diminish our conviction that the utility is entitled under law to recover these costs, nor does it diminish our ongoing lawsuit" in the federal courts, Glynn said. ??Nettie Hoge, executive director of the Utility Reform Network, said that if PG&E is willing to take the $4.1 billion after-tax write-down, the company should halt its quest to recover its reported losses. ??"They want it both ways," Hoge said. "If they're willing to tell investors they're writing it off, they should quit trying to take it out of my pocket." ??The huge loss and charges being swallowed by PG&E are a reminder of the extent of the utility's financial wreckage in California's shattered electricity market. ??"We're already well down the road of how bad can it get for PG&E," O'Donnell said. ??(Staff writer Mike Taugher contributed to this report.) ??KRT CALIFORNIA is a premium service of Knight Ridder/Tribune ??© 2001, Contra Costa Times (Walnut Creek, Calif.). ??Visit the Contra Costa Times on the Web at http://www.cctimes.com/ JOURNAL-CODE: CC LOAD-DATE: April 17, 2001 ??????????????????????????????5 of 66 DOCUMENTS ??????????????Copyright 2001 Knight Ridder/Tribune News Service ???????????????????????Knight Ridder/Tribune News Service ??????????????????????????????Contra Costa Times ???????????????????????????April 17, 2001, Tuesday SECTION: STATE AND REGIONAL NEWS KR-ACC-NO: ?K6844 LENGTH: 1329 words HEADLINE: Former governor defends his decision to deregulate utilities BYLINE: By John Simerman BODY: ??WALNUT CREEK, Calif. _ The man who prodded California into the wobbly world of utility deregulation sat in a well-lit meeting room in Beverly Hills last week, apologizing to no one. ??"Blame, hell," said Pete Wilson. "I take credit for having been the driving force to launch deregulation." ??The former governor, 67, watches from private life as old rivals rake his political legacy across a landscape of rolling blackouts, PG&E bankruptcy and billowing power bills that threaten to capsize the state's economy. ??Now, as momentum builds in Sacramento for more government control over power, Wilson has begun to defend himself and a plan for deregulation that, even its most faithful boosters admit, never heeded the prospect of too little power supply. ??In an interview with last week, Wilson admitted to some major mistakes in the 1996 deregulation that the legislature passed in a unanimous vote, and which some have labeled the worst policy miscalculation in California history. ??Among them: ??_ Installing a cap on retail electricity rates that backfired on the private utilities, drowning them, and ultimately the state, in billions of dollars in bills as wholesale energy costs soared. ??_ Forcing the utilities to sell off their power plants while prohibiting them from locking in favorable long-term rates with the suppliers who bought the plants. ??Not among them: deregulation itself, says Wilson. ??"I will not pretend to you that (the legislation) was a perfect, free-market mechanism. It wasn't. I knew that at the time. I signed it knowing that," said Wilson. "I thought whatever flaws would emerge they would be addressed by our successors." ??These figured to be the golden days for Wilson, now a managing director at Pacific Capital Group, a commercial banking and venture capital firm in Beverly Hills. A Hoover Institution fellow, Wilson could have retired to the lecture circuit with the confident glow that comes from leading California out of a dark recession and into an era of prosperity and surpluses. ??That was before one of his most aggressive economic initiatives spun wild, threatening to drain those surpluses dry. ??Wilson now finds himself defending deregulation, saying the state's supply problem, if not PG&E's bottom line, would be worse off without it. ??It was the recession, he said, that led him to stack the Public Utilities Commission with free-market advocates. ??Back then, the regulated power industry found itself with a 30 percent power surplus, yet with prices far higher than most other states, partly due to bad investments that the utilities passed on to consumers. ??Officials from dozens of other states had launched an aggressive raid on California. Competition would bring lower prices and smooth the economic recovery. ??The concern: how to manage oversupply and help PG&E recover its government-imposed investments in a free market. If anyone suggested a future power shortage, it sounded like a bleat. ??"At one point there was a discussion of what would happen if the wholesale price went up. Someone said if rates ever got to 10 cents a kilowatt-hour, this whole thing would fall apart," said Dan Howle, chief of staff for Sen. Steve Peace, D-El Cajon, a key driver of the legislation. ??"There was a lot of laughter, and a response of, 'That'll never happen."" ??The average PG&E customer now pays 10.4 cents per kilowatt hour, not including a 3-cent hike the PUC approved March 27. Residential users pay 11.4 cents. The wholesale price now equates to 30 to 35 cents a kilowatt-hour. Just who picks up the difference remains the $9 billion question that helped propel PG&E into bankruptcy court. ??Clearly, the laughter has ended. ??In its place, Gov. Gray Davis has adopted the mantra that he inherited the energy crisis from a Wilson administration that never fostered the construction of a single major power plant. ??"When you preside over the birth of the high-tech industry as governor, and you don't have the vision to realize there's going to be more supply needed while population is soaring, that says a lot," said Davis spokesman Steve Maviglio. ??If it were up to him, Wilson said, he'd muzzle "NIMBY" voices and aggressively site power plants on the state's contaminated brownfields, ladling out fat bonuses for private power generators to build plants quickly. To him, Davis' plan to create a state power authority that would build and run its own power plants seems an idle threat, or a gross mistake. ??"If they do that, they can look forward to having to rely almost exclusively on public power because no one in the private sector is going to want to touch California," said Wilson. ??"The goal is to get more power online and doing what it takes to get more online," said Maviglio. "(Wilson) is an apologist for deregulation. He's proud of it." ??What stifled new plant construction during Wilson's tenure was not deregulation, he claims, but the 1998 campaign to repeal it, which left power companies queasy. At the same time, Wilson said no one could have anticipated the energy drain of the Internet economy. ??"The growth outstripped the expectations of the people who are paid to project supply and demand," said Wilson. "In fairness to them, it was difficult to understand that a server farm could be erected and, in four months' time, add as much demand to the grid as another San Jose." ??The theory that the Internet sucked up the power grid and launched an era of rolling blackouts is staunchly rebuked by academic experts, who say much of today's demand follows population and economic growth trends. Indeed, as early as 1988, the California Energy Commission issued forecasts for peak electricity demand in 2000 that overshot reality. ??"When people say the high electricity demand is causing the California power crisis and the Internet is causing the high electricity demand, it's a multi-part false statement," said Jonathan Koomey, a staff scientist and group leader at Lawrence Berkeley Laboratory. ??"It sounds plausible. People believe it when you tell them, but actually it's one of these cases of urban legend becoming conventional wisdom." ??As for the utilities, Wilson said he regrets the price caps that helped drive PG&E to bankruptcy but "not nearly so much as the people who were pushing for it." ??At the time, retail price caps seemed fairly innocuous and made for a shrewd political move that helped win the legislation a unanimous vote. ??But Wilson, who harbored presidential hopes at the time, says he agreed to the caps largely because the utilities begged for them as a mechanism to help them recoup their earlier investments. ??The utilities "didn't just acquiesce. They embraced it, they lobbied for it, lobbied everyone. I mean, I remember when my chief of staff ... came to me and said, 'You're not going to like this, but I think maybe (a rate cap) is a necessary part of the deal," said Wilson. "That's the irony. They wound up getting stung by the provision." ??PG&E officials paint a different picture, saying the price caps were a compromise solution. ??To be sure, credit for the energy debacle covers vast territory, from Davis to Wilson to environmentalists to the utilities to Bush and around again. ??Wilson, who said he harbors no further ambitions for elected office, chose at first not to enter the fray, saying, "When you leave office you ought to permit your successor a decent interval and not constantly be a kvetch." ??But that was before Davis and PUC president Loretta Lynch homed in on the past, he said. ??"After the PUC voted to increase the rate, Ms. Lynch came down and did the talk show circuit here and said, 'Wilson did it, Wilson did it, Wilson did it. It's all de-reg, it's all de-reg.' Just like a parrot," said the former governor. ??"I don't suffer in silence." ??KRT CALIFORNIA is a premium service of Knight Ridder/Tribune ??© 2001, Contra Costa Times (Walnut Creek, Calif.). ??Visit the Contra Costa Times on the Web at http://www.cctimes.com/ JOURNAL-CODE: CC LOAD-DATE: April 17, 2001 ??????????????????????????????6 of 66 DOCUMENTS ??????????????????????Copyright 2001 Copley News Service ?????????????????????????????Copley News Service ???????????????????????????April 17, 2001, Tuesday SECTION: State and regional LENGTH: 1118 words HEADLINE: Suggestion is floated that Edison follow PG&E into bankruptcy BYLINE: Dean Calbreath BODY: ??Ten days after Pacific Gas and Electric declared bankruptcy, some key legislators and corporate chieftains are toying with the notion that the state's next-largest utility, Southern California Edison, should follow its example. ??In Sacramento, some lawmakers have suggested that bankruptcy might be preferable to Gov. Gray Davis' plan to buy power transmission lines from the state's heavily indebted utilities. Any move toward bankruptcy would make it tougher for Davis to push his plan through the Legislature. ??Meanwhile, state officials learned yesterday of a new problem affecting another aspect of the intricate plan to resolve the energy mess. ??Late Friday, PG&E followed through on its threat to challenge a Public Utilities Commission action that gives the state money from utility customers' bills. The state needs the money to repay a proposed bond for power purchases. ??PG&E wants a larger share of the monthly ratepayer revenue. The state cannot obtain a $4.1 billion short-term bridge loan or issue the main $12.4 billion bond until the legal challenge is removed. ??As the state struggled with that new wrinkle, some of the state's biggest energy suppliers are saying bankruptcy court might be a useful vehicle for collecting their bills. ??Gary Ackerman, executive director of the Western Power Trading Forum, an industry group, said electricity suppliers increasingly see bankruptcy in a positive light. ??''It's a chaotic situation, and what bankruptcy does is bring order to the process,'' Ackerman said. ??Electricity generators once raised dire warnings against letting the utilities fall into bankruptcy. ??In a report to investors last week, Bank of America bond analyst Faith Klaus warned that Edison's creditors may force the utility into involuntary bankruptcy to collect their debts. ??Already, Edison faces at least 10 lawsuits from small energy generators who have been waiting to be paid for several months. And it faces a May 16 deadline to repay borrowings from an $818 million credit line. ??Even if the Legislature approves Davis' transmission-line buyout, it will be autumn before Edison receives any money from the deal, raising the possibility that some of its creditors may try to force it into bankruptcy in the interim. ??The governor's office is trying to ward off the bankruptcy talk. Over the next several days, Davis will meet with legislators to lobby for his package. ??''He's going to try to convince them that it's not in the state's best interests to let another utility fall into bankruptcy,'' said his spokesman, Steve Maviglio. ??But Davis might find that a hard sell, even in his own party. ??''Bankruptcy should have always been one of the options with the utilities,'' said state Sen. Dede Alpert, D-Coronado. ''The fact that the governor kept talking about the need to keep the utilities out of bankruptcy sent a message to the generators that they could keep charging as much money as they wanted. I'm not sure it was very smart on our part.'' ??PG&E and Edison began warning they might fall into bankruptcy last December, after they incurred billions of dollars in debt paying sky-high prices for electricity. Because San Diego Gas and Electric was allowed to pass more of those debts on to customers, it is not now in danger of bankruptcy. ??To keep the utilities solvent, Davis crafted a plan to buy their transmission lines for 2.3 times their book value. Nevertheless, PG&E filed for Chapter 11 bankruptcy protection last week, declaring $9 billion in debt. ??Despite PG&E's bankruptcy, Davis went ahead with an offer of $2.76 billion for Edison's transmission system. Under the terms of the deal, Davis has until Aug. 15 to push it through the Legislature. ??''The utilities are getting a sweetheart deal while the state is assuming the liabilities of a dilapidated transmission system,'' said state Sen. Bill Morrow, a Republican from Carlsbad. ??Assemblywoman Christine Kehoe, a San Diego Democrat, said that throughout the past few months, members of the Legislature have been talking about the possibility of bankruptcy at the utilities. ??Kehoe said she is willing to hear the governor's pitch about his proposal to buy the transmission lines. But she added that some elements of the plan make her ''very skeptical.'' ??Edison spokesmen did not respond to queries yesterday. ??But in a conference call with Wall Street analysts last Friday, Edison lobbyist Bob Foster conceded that it would be an uphill battle for Davis to push his deal through the Legislature. ??''The initial indications are that consumer groups are going to oppose the agreement,'' he said, adding that Edison would have to ''martial our forces and build up some coalitions'' to help push the plan through the Legislature. ??On the bond matter, State Treasurer Phil Angelides said yesterday he believes the PG&E challenge can be resolved either through a PUC process or by allocating the revenue through legislation. ??A decision by PG&E to abruptly file for bankruptcy earlier this month had already raised the question of whether a federal bankruptcy judge's control over ratepayer revenue could delay or even block the bond. ??''We are meeting with both the lenders and the credit-rating agencies this week,'' said Angelides. ??One problem is that the legislation in January that authorized the state to begin buying power for customers of the utilities requires that the bonds be investment grade. ??It's not clear whether the credit-rating agencies Standard & Poor's, Moody's and Fitch will give the proposed bond an investment-grade rating, given the unknown risks posed by bankruptcy. ??''I don't think we want to be in the junk-bond business,'' Angelides said. ??The state expects to have spent $4.7 billion buying power by the end of the week. If the general fund is not repaid by the bond, the state would have to consider borrowing by other means or cutting funds for other programs. ??Even if the bond is issued, some consumer groups are predicting that the state budget could still be seriously undermined when power demand and prices increase this summer. ??The state was forced to begin buying power in mid-January after PG&E and Edison, whose rates were frozen under deregulation as wholesale power costs soared, ran up a combined debt they said reached $13 billion. ??Davis plans to resume negotiations today for the state purchase of the San Diego Gas and Electric transmission system, said Maviglio. ??The governor hopes to reach an agreement with SDG&E within a week and then ask a federal bankruptcy judge to approve the sale of the PG&E transmission system to the state. Staff writer Craig D. Rose contributed to this report. LOAD-DATE: April 17, 2001 ??????????????????????????????7 of 66 DOCUMENTS ??????????????????????Copyright 2001 Copley News Service ?????????????????????????????Copley News Service ???????????????????????????April 17, 2001, Tuesday SECTION: State and regional LENGTH: 1142 words HEADLINE: Activist pans FERC refund order; figure is called too low BYLINE: Craig D. Rose DATELINE: SAN DIEGO BODY: ??Federal regulators say California may have been overcharged for electricity purchases in March by $587,000, a sum criticized as ''insultingly low'' by a local consumer leader. ??Mandated by law to ensure wholesale prices are ''just and reasonable,'' the Federal Energy Regulatory Commission issued its March refund order late yesterday after setting $300 per megawatt hour as a cutoff for unlawful prices. ??The threshold translates to a retail price of 30 cents per kilowatt hour, or nearly five times the current rate paid by SDG&E customers. ??Attempts to reach FERC officials for comment were unsuccessful. ??Michael Shames, executive director of the Utility Consumers' Action Network, said the March order continues a ''hard line'' by FERC toward helping California deal with sky-high electricity prices. ??''This is not a legitimate or reasonable effort toward righting a wrong,'' Shames said. ??''Why bother issuing a refund order for $587,000? They spent more than that issuing the order.'' ??FERC's March order targets Dynegy for a potential refund of $470,000; Mirant for $93,000; and Williams Energy Services Corp. for a potential refund of $26,000. ??FERC's March order follows similar reviews for January and February that resulted in potential refunds of $124 million. For all months, electricity generators have the opportunity to justify their prices and avoid the potential refund. ??FERC's overcharge estimates for earlier months fall short of estimates from other sources, including the California Independent System Operator, which manages most of the power grid. ??The ISO, which estimates California was overcharged by more than $6 billion for a recent 10-month period, said yesterday it had not calculated overcharges for March. But a spokeswoman noted the ISO believes federal regulators are using too narrow a methodology for assessing potential overcharges and setting too high a price threshold. ??An electricity suppliers' association representative, on the other hand, said federal regulators are doing a commendable job. ??''FERC is doing its level best to demonstrate its concern about possible market manipulation in the West,'' said Gary Ackerman, executive director of the Western Power Trading Forum. ??''I'm surprised the refund order is so low, but I'm pleased.'' ??In other developments yesterday: ???A state judge postponed action until June on CalEnergy Operating Corp.'s request for $120 million from Southern California Edison. Based in Brawley, CalEnergy generates power from geothermal facilities. The company has gone unpaid for the power it formerly provided Edison under contract. ???Gov. Gray Davis named S. David Freeman to lead implementation of a spate of recently passed conservation programs. Freeman, who will resign his post as general manager of Los Angeles Department of Water and Power, has led the state effort to negotiate long-term contracts with electricity suppliers. He will carry the title of chief energy adviser to governor. ??Davis says conservation will be critical to averting blackouts in California this summer. ??He released California Energy Commission figures that indicate Californians cut their electricity usage by 9.2 percent in March. Davis said that is more conservation than occurred in January or February. He has said the state needs to reduce power consumption by at least 10 percent this summer. ??WAGNER-CNS-SD-04-16-01 2233PST LOAD-DATE: April 17, 2001 ??????????????????????????????8 of 66 DOCUMENTS ??????????????????????Copyright 2001 / Los Angeles Times ??????????????????????????????Los Angeles Times ????????????????????April 17, 2001, Tuesday, Home Edition SECTION: Metro; Part B; Page 8; Letters Desk LENGTH: 336 words HEADLINE: POWER CRISIS: WHO WILL PAY? BODY: ??* Re "Experts Doubtful About Rush to Build Small Power Plants," April 15: We don't need 5,000 more megawatts this summer, we need to use 5,000 less. San Diego allowed rate increases last summer and cut usage by 16%. The rest of the state will begin to conserve when utility bills send the message to use less energy. ??Whether we like it or not, Californians unwittingly made the decision to accept higher prices rather than build power plants. We made this bargain and now we have to pay for it. ??TOM ECKER ??Los Angeles ??* ??Re "Davis Says All Power Costs to Be Recovered," April 14: ??Were your editors and reporters asleep when Gov. Gray Davis was telling them that it will be the ratepayers and not taxpayers who will shoulder the cost of the state's energy crisis? Except for customers of municipal electric companies, call them ratepayers or taxpayers, they are the same people. ??Using the governor's logic, I'm sure he will soon be telling car owners not to be concerned that gasoline now costs more than $ 1.75 a gallon. It will only be car drivers who will have to pay the higher fuel cost. ??WALTER BAILEY ??Encino ??* ??If the Federal Energy Regulatory Commission refuses to rein in the predatory suppliers and wholesalers of electricity ("Price Caps Excluded in FERC Plan," April 12), could somebody please explain to me what this commission pretends to "regulate"? Maybe, to cut the federal budget, President Bush should just abolish the commission, which clearly refuses to do its job. ??ALLAN E. IRISH ??Glendora ??* ??Re "Energy Cost Study Critical of Public Agencies Too," April 11: ??I find it most interesting that Los Angeles' own DWP has been "overcharging" the California investor-owned utilities during times of electricity shortage and that a major portion of the DWP's power comes from a nuclear power plant in Arizona. Forget about those greedy Texans. Let's talk about hypocrisy; the greed starts with public-owned utilities in this state. ??STEPHEN HASELTON ??Hesperia LOAD-DATE: April 17, 2001 ??????????????????????????????9 of 66 DOCUMENTS ??????????????????????Copyright 2001 / Los Angeles Times ??????????????????????????????Los Angeles Times ????????????????????April 17, 2001, Tuesday, Home Edition SECTION: Part A; Part 1; Page 17; Metro Desk LENGTH: 423 words HEADLINE: THE CALIFORNIA ENERGY CRISIS; JUDGE FAVORS SMALL PRODUCER IN BOUT WITH EDISON BYLINE: TONY PERRY, TIMES STAFF WRITER DATELINE: EL CENTRO BODY: ??An Imperial County judge said Monday he is leaning toward a decision ordering Southern California Edison to pay $ 33 million to a geothermal power producer, but will allow Edison lawyers a final opportunity to talk him out of it. ??CalEnergy asserts it is owed the money for electricity it sold Edison from eight geothermal plants near the Salton Sea. ??Cash-strapped Edison last year stopped payment to a variety of small producers, who now say they are owed $ 1.8 billion by Edison and Pacific Gas & Electric. ??If Superior Court Judge Donal Donnelly is unconvinced by Edison's arguments at a June hearing and follows through with an order favoring CalEnergy, it will represent the first victory for a small producer against the giant utility. ??CalEnergy alleges that it is owed more than $ 120 million for energy it provided from November, when Edison stopped making monthly payments, until late March, when Donnelly allowed CalEnergy to sever its contract with Edison and sell energy to the highest bidder. ??The $ 33 million represents payments for November and December. The remainder of the $ 120 million involves months earlier this year for which Edison plans to dispute the billing rate. ??CalEnergy and other small producers have complained that the tentative deal struck between Edison and Gov. Gray Davis does not address the back payments owed them by Edison. ??Edison on Monday failed to persuade Donnelly to order CalEnergy to resume selling power to Edison now that Edison is willing to pay for new energy received. ??CalEnergy said it does not want to resume selling to Edison until the utility pays for energy already received. CalEnergy has instead been selling to its business partner, El Paso Merchant Energy Co. ??Edison lawyers said El Paso Merchant has manipulated the market to drive up natural gas prices. For that reason, they said, Edison should be allowed to argue that CalEnergy has acted improperly and should not be able to collect the $ 33 million. ??Donnelly, who had been on the verge of a tentative ruling for CalEnergy, agreed that Edison should be able to make such an argument, setting a hearing for June. ??It remains to be seen whether the final arbiter will be Donnelly, the Public Utilities Commission or a Los Angeles judge selected to deal with a dozen similar suits against Edison. The PUC is set to discuss the issue of small producers this week. ??"Things keep happening," said James Polish, lawyer for Edison. "Things could dramatically change this week or the following week." LOAD-DATE: April 17, 2001 ??????????????????????????????12 of 66 DOCUMENTS ??????????????????????Copyright 2001 / Los Angeles Times ??????????????????????????????Los Angeles Times ????????????????????April 17, 2001, Tuesday, Home Edition SECTION: Part A; Part 1; Page 3; Metro Desk LENGTH: 1099 words HEADLINE: CALIFORNIA AND THE WEST; THE CALIFORNIA ENERGY CRISIS; DEAL TO BUY EDISON GRID RAISES DOUBTS IN CAPITOL BYLINE: MIGUEL BUSTILLO and CARL INGRAM, TIMES STAFF WRITERS DATELINE: SACRAMENTO BODY: ??Gov. Gray Davis may face a bigger challenge selling legislators on his deal to keep Southern California Edison out of bankruptcy than he did in forging the agreement with the utility. ??Legislators returning to Sacramento on Monday after their spring break openly voiced objections to and concerns about the deal to purchase Edison's power lines in exchange for $ 2.76 billion and a variety of state guarantees. ??Some Republicans and Democrats called Davis' deal too generous. Others questioned whether a state-financed rescue of Edison still makes sense after the bankruptcy of Pacific Gas & Electric Co., California's largest private utility. ??If the Edison deal came to a vote right now, several legislators said, it would almost certainly fail. ??"I think the governor understands that," said Assemblyman Tony Cardenas (D-Sylmar). "There are lots and lots of questions. With the PG&E bankruptcy, the world changes. We have to reconsider how this deal fits into the new world we are living in." ??Davis is meeting this week with Senate Republicans and Democrats in both houses. ??Republicans strongly oppose the Edison deal and say it will be dead on arrival when it finally reaches the Legislature, which could still be days away. ??"It's a bailout," said Assemblyman Tony Strickland (R-Moorpark). "Why would the people of California want to own this thing? That's money that could be better used on schools, health care and tax cuts." ??Other legislators are somewhat less pessimistic, noting that a governor can wield great negotiating clout with legislators. ??"I haven't talked to anybody who is for it," said Sen. Don Perata (D-Alameda), who has become a vocal critic of Davis' approach to the energy crisis. "I'm not saying he can't sell it; I'm saying he has to sell it." ??Yet amid increased grumbling from legislators concerned about their political futures, and threats of a ballot initiative by angry consumer groups to re-regulate electricity, even a full-court press by Davis may not be enough. ??State Senate leader John Burton (D-San Francisco) said the Edison deal will probably be a "take it or leave it" arrangement in the Legislature that leaves legislators little room to make changes without affecting the pact Davis reached with the firm. Burton said Monday that the legislation will not be introduced until it passes muster from Edison's attorneys. ??"I've got some questions--serious questions," Burton said. ??Among his concerns is a guarantee that Edison be allowed to generate an 11.6% return on equity until 2010--a concession that takes that decision out of the hands of the California Public Utilities Commission, which usually adjusts the rate. ??"What is the impact of limiting the role of the PUC?" Burton said. ??Legislators, eager to avoid controversy, promise that, after the deal becomes a bill in the Legislature, it will get a thorough vetting that could last weeks. In that airing out process, some now say it could be picked to death. ??Perhaps the biggest question they have about the Edison deal is whether it would still accomplish what it was intended to do: buy out, not bail out, the nearly bankrupt utility. ??Davis' plan originally called for California to purchase the transmission grid owned by the state's big private utilities in exchange for helping the debt-strapped companies survive. ??Legislators saw state ownership of the power grid as a way to gain at least some control over a runaway electricity market by obtaining leverage over the suppliers that sell electricity to California. Burton, an early proponent of the concept, called it getting a hot dog for your dollar, which quickly became a political sound bite. ??PG&E's bankruptcy filing has complicated that scenario, and may make it impossible for the state to acquire its part of the system. This has raised questions among legislators about whether the Edison deal alone--what Assemblyman Bill Leonard (R-San Bernardino) called "not even half a hot dog"--has any merit. ??"The real question here is whether it makes any sense for the ratepayers to buy one-third of the transmission system," said Sen. Debra Bowen (D-Marina del Rey). "Normally, if you buy one-third of a bridge, you get very wet. We feel that the ratepayers are already getting soaked." ??Another question being pondered by legislators is whether they need to keep Edison out of bankruptcy. Much of the focus in Sacramento has been on keeping the utilities from going to bankruptcy court, an outcome many legislators believed would have catastrophic consequences for California. ??But after PG&E's decision to file for bankruptcy rather than continue negotiating with Davis on a state rescue--a move that embarrassed the governor--a growing group of legislators is rethinking that position. Some now believe a federal court may be a better place for Edison to sort out its problems. ??"Regardless of who blinked first, the governor or PG&E, the fact of the matter is he let them go bankrupt," Perata said. "All these dire things that were initially predicted have not occurred." ??Power Points ??Background ??The state Legislature approved electricity deregulation with a unanimous vote in 1996. The move was expected to lower power bills in California by opening up the energy market to competition. Relatively few companies, however, entered that market to sell electricity, giving each that did considerable influence over the price. Meanwhile, demand has increased in recent years while no major power plants have been built. These factors combined last year to push up the wholesale cost of electricity. But the state's biggest utilities--Pacific Gas & Electric and Southern California Edison--are barred from increasing consumer rates. So the utilities have accumulated billions of dollars in debt and, despite help from the state, have struggled to buy enough electricity. ??* ??Daily Developments ??* The governor's new chief energy advisor and perhaps the head of the state's new power authority will be S. David Freeman, manager of the Los Angeles DWP. ??* The Federal Energy Regulatory Commission has begun deciding whether to revoke energy producers' right to sell to California at any price. ??* State legislators returning from spring break voiced objections to the governor's deal to buy Edison's power lines for $ 2.76 billion. ??* ??Verbatim ??"If we are going to be in the business of building power plants and selling energy, he's the man." ??-- State Senate President Pro Tem John Burton ??on S. David Freeman ??Complete package and updates at www.latimes.com/power LOAD-DATE: April 17, 2001 ??????????????????????????????13 of 66 DOCUMENTS ??????????????????????Copyright 2001 / Los Angeles Times ??????????????????????????????Los Angeles Times ????????????????????April 17, 2001, Tuesday, Home Edition SECTION: Part A; Part 1; Page 1; Metro Desk LENGTH: 1182 words HEADLINE: DWP CHIEF TO WORK FOR DAVIS; POST AS ENERGY CZAR LIKELY BYLINE: TINA DAUNT and RONE TEMPEST, TIMES STAFF WRITERS BODY: ??S. David Freeman, the wily 75-year-old general manager of the Los Angeles Department of Water and Power, will resign soon to become Gov. Gray Davis' chief energy advisor and is widely believed to be a leading candidate to head a new California power authority. ??Freeman, who has been credited with making the Los Angeles municipal utility a
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