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Sac Bee, Fri, 6/22: Employees: Power supply held down Sac Bee, Fri, 6/22: Consumers cut down their own power in protest Sac Bee, Fri, 6/22: Davis consultants had contract with Edison: The=20 disclosures turn up the heat on the governor for hiring=20 ex-Clinton aides SD Union, Fri, 6/22: State deal may ease blackout threat Canada to supply energy as summer demand rises=20 SD Union, Fri, 6/22: Ex-worker: Duke manipulated market LA Times, Fri, 6/22: Estimates of power profits disputed LA Times, Fri, 6/22: Edison plans bond offer at 13% rate LA Times, Fri, 6/22: Energy company abandons plans for Baldwin Hills plant= =20 SF Chron, Fri, 6/22: Western states could feel pinch from California pricin= g=20 SF Chron, Fri, 6/22: Feds spurn Duke Energy in its bid to avoid refunds SF Chron, Fri, 6/22: News Analysis: Davis winning Washington PR battle=20 Price cap victory may rob Democrats of campaign issue SF Chron, Fri, 6/22: Suit filed over report on power lines, health=20 Deal on transmission grid could raise liability SF Chron, Fri, 6/22: Texas power firm's shares failing (Enron spotlighted) Power baron Enron finds fortunes fading Mercury News, Fri, 6/22: Power firm accused of price-fixing Mercury News, Fri, 6/22: Enron chief: Gov. Davis not to blame for energy=20 crisis (Jeff Skilling comments, Ken Lay and Enron mentioned) OC Register, Fri, 6/22: Three say company purposely cut power Ex-Duke workers say repairs were curbed in order to manipulate market OC Register, Fri, 6/22: FERC judge tackles task of generating a deal=20 OC Register, Fri, 6/22: Davis seeks $9 billion refund=20 OC Register, Fri, 6/22: Energy notebook: Blackouts are still a hot prospect= ,=20 officials warn OC Register, Fri, 6/22: In rolling blackouts, 'together' is all relative Employees: Power supply held down By Kevin Yamamura and Emily Bazar Bee Capitol Bureau (Published June 22, 2001)=20 Three former San Diego Gas & Electric Co. employees who worked at a Duke=20 Energy plant said Thursday that the generator destroyed working parts,=20 withheld power supply or otherwise took actions that they believe drove up= =20 the price of electricity.=20 State officials said the whistle-blowers' comments at a state Senate hearin= g=20 today could provide the most damaging illustration yet that power generator= s=20 held down production to inflate prices on the spot market. Gov. Gray Davis= =20 has long alleged that power companies have overcharged the state and=20 utilities.=20 Jimmy Olkjer, a former assistant control room operator at Duke's South Bay= =20 plant in San Diego, said in a phone interview that during the state's power= =20 shortages, Duke cut supply. Although Duke, a Charlotte, N.C.-based company,= =20 owned the plant, and it contracted with SDG&E to operate the unit, he said.= =20 "Rather than creating more power, they were creating less," Olkjer said. "I= =20 think there was manipulation of the market."=20 The California Public Utilities Commission and several state legislative=20 committees continue to investigate price manipulation allegations, and=20 Attorney General Bill Lockyer has said he will take witnesses to a grand ju= ry=20 next month.=20 The generators have denied they manipulated the market.=20 "We stand behind our maintenance practices and have done a good job keeping= =20 the power flowing," Duke spokesman Tom Williams told the CBS television=20 network.=20 But former mechanic Glenn Johnson said he saw generation units taken "down= =20 for economics."=20 Ed Edwards, also a mechanic, said he was ordered to destroy 23 pallets of= =20 working parts.=20 "We were asked, myself and other employees, to disperse of perfectly good= =20 parts that were used to make repairs of systems and components," Edwards=20 said.=20 State Sen. Joe Dunn, D-Santa Ana, chairman of the market-manipulation=20 committee, said his staff has been looking for employees or others with=20 intimate knowledge of power plant operation to come forward, and he promise= d=20 that others will testify at future hearings.=20 "It's the first time that we've had evidence from directly within power=20 plants in California that the ramping up and ramping down of power generati= on=20 was a response to price and not to demand," Dunn said.=20 He said he would reach no conclusions until Duke and other generators testi= fy=20 next month, but he added that the former employees' testimony raises=20 suspicions "at first blush."=20 The Bee's Kevin Yamamura can be reached at (916) 326-5542 or=20 kyamamura@sacbee.com. Consumers cut their own power in protest=20 By Silvina Mart?nez Bee Staff Writer=20 (Published June 22, 2001) When the temperature hit 100 degrees at 7 p.m. Thursday, Larry Lynch turned= =20 off the air conditioner, unplugged the refrigerator, pulled out the TV cord= s=20 and shut down all other appliances in the house.=20 Lynch, a 61-year-old newsletter publisher in Sacramento, responded to the= =20 "Roll Your Own Blackout" Thursday and joined thousands throughout the state= =20 to protest energy policies and promote conservation by stopping the use of= =20 energy from 7-10 p.m.=20 But the data coming off the grid at the California Independent System=20 Operator didn't show the effort.=20 During the first hour of the voluntary shut-off, the demand for energy by= =20 PG&E customers in Northern California was almost the same as at the same ti= me=20 Wednesday, ISO officials said.=20 Protesters didn't expect significant changes on the grid.=20 "I feel it will at least send a message that we don't have to depend on it= =20 (energy)," said Jackie Bell, 37, a consultant at the Capitol joining the=20 conservation drive from her apartment on Fulton Avenue.=20 "It's just a symbolic act," said Peter Lopez of Sacramento, who decided to= =20 use the evening to meditate. "Maybe I'll just go outside, stare at the star= s=20 and try to spot a few constellations in the night."=20 It was the longest day of the year, and one of the hottest. But those=20 determined to advocate conservation didn't mind the sacrifice.=20 "People are getting focused on the fact that we have power at our end," sai= d=20 Joan Blades, a spokeswoman for MoveOn, a grass-roots organization in the Ba= y=20 Area and one of hundreds of online groups passing along the call for the=20 voluntary blackout.=20 An electrical engineer in Oakland started the "Roll Your Own Blackout" idea= =20 when he posted a note in a political chat room in April. Then an artist in= =20 Los Angeles forwarded the e-mail to a number of friends and from there it= =20 quickly spanned the globe.=20 By Thursday afternoon, more than 12,000 people had signed up at the MoveOn= =20 Web site to join the protest, Blades said.=20 Many threw blackout parties. In San Francisco, the nonprofit group Global= =20 Exchange gathered hundreds around a big bonfire at Ocean Beach.=20 At his home in east Sacramento, Lynch did fine without electricity for thre= e=20 hours. He ate tuna salad for dinner, watered the lawn and when it got dark,= =20 he opened the windows and let some air in.=20 "We should show that people are willing to shut the power off if the prices= =20 go too high," he said.=20 ISO has not declared a power emergency since May 31.=20 "We have seen a consistent conservation on a day-to-day basis, and it's=20 making the difference between blackouts and no blackouts," ISO spokeswoman= =20 Stephanie McCorkle said.=20 McCorkle encouraged initiatives like "Roll Your Own Blackout."=20 "People are conserving," she said. "And we can only support this whole=20 effort."=20 The Bee's Silvina Mart?nez can be reached at (916) 321-1159 or=20 smartinez@sacbee.com. Davis consultants had contract with Edison: The disclosures turn up the hea= t=20 on the governor for hiring the ex-Clinton aides. By Emily Bazar Bee Capitol Bureau (Published June 22, 2001)=20 Two consultants hired to advise Gov. Gray Davis on energy policy officially= =20 disclosed their contract with Southern California Edison on Thursday, but= =20 Davis aides insisted it is not a conflict because "Edison and the Governor'= s=20 Office have the same goal."=20 Communications consultants Chris Lehane and Mark Fabiani have drawn intense= =20 criticism since they were hired last month to shape the Democratic governor= 's=20 public response to the state energy crisis.=20 The former Clinton administration communication aides -- nicknamed the=20 "Masters of Disaster" for their spin on the Whitewater, travel office and= =20 1996 fund-raising controversies at the Clinton White House -- have come und= er=20 fire for receiving a six-month, $30,000-a-month contract, more than the=20 governor or anyone on his staff makes.=20 Secretary of State Bill Jones, a Republican who is running for governor nex= t=20 year, has called for an investigation into potential conflicts. State=20 Controller Kathleen Connell, a Democrat, has said she will not issue=20 paychecks to the pair pending her own investigation.=20 The criticism mounted after the duo's economic interest disclosure forms we= re=20 released late Thursday, showing that each has received at least $10,000 und= er=20 contract from Edison in the past year.=20 But Davis spokeswoman Hilary McLean defended their credibility, saying=20 there's no conflict of interest because Lehane and Fabiani both disclosed= =20 that they had worked for Edison before they signed their contracts with the= =20 state.=20 Besides, she added, Edison and the governor are working toward the same goa= l:=20 Both want the Legislature to adopt a memorandum of understanding, a propose= d=20 agreement, that would prevent Edison from going bankrupt by financing a sta= te=20 purchase of the utility's transmission lines.=20 "It's not a conflict because there's been full disclosure," McLean said.=20 "Edison and the Governor's Office have the same goal, passing the MOU. We'r= e=20 working together at this point with Edison."=20 But open-government groups and Republican lawmakers bristled at the notion= =20 that disclosure negates any potential conflict.=20 Derek Cressman of the California Public Interest Research Group pointed to = a=20 section of state law that prohibits public officials from influencing=20 decisions if it would have "a material financial effect" on a business enti= ty=20 that provided them $500 or more within the last year.=20 "You have two individuals on the government payroll who had previously been= =20 on the Edison payroll and it's not clear to whom their loyalties are," he= =20 said. "Just because they've revealed it doesn't mean there's not a conflict= =20 there, and that they're not serving two masters."=20 On Thursday, Jones said he is awaiting the results of the Fair Political=20 Practices Commission investigation and agrees with Connell's decision this= =20 week to withhold payment from the consultants.=20 "This further calls into question the ethics of how these individuals were= =20 hired and contracts were let," Jones said.=20 Senate Republican leader Jim Brulte believes there's no question that Lehan= e=20 and Fabiani are violating conflict-of-interest laws and suggested that the= =20 two should be paid out of Davis' campaign funds, which had reached $26=20 million by Jan. 1.=20 Brulte, of Rancho Cucamonga, added that he would not vote for a state budge= t=20 as long as Lehane and Fabiani remain on the state payroll.=20 "The state of California does not need to be paying political wordsmiths=20 $30,000 a month," he said. "I just wish (Davis) were as frugal with the=20 taxpayers' money as he is with his campaign money."=20 The Bee's Emily Bazar can be reached at (916) 326-5540 or ebazar@sacbee.com= . State deal may ease blackout threat=20 Canada to supply energy as summer demand rises By Ed Mendel=20 UNION-TRIBUNE STAFF WRITER=20 June 22, 2001=20 SACRAMENTO -- California may be able to avoid some of the blackouts predict= ed=20 for this summer, thanks to a little-known power-swapping agreement with a= =20 Canadian utility.=20 The arrangement is expected to give California electricity in July and Augu= st=20 from the hydroelectric generators of BC Hydro in British Columbia, despite = a=20 serious drought in the Northwest.=20 California has sold surplus power in recent months to the government-owned= =20 utility, which is expected to return power to the state as heat drives up t= he=20 demand for electricity.=20 State deal may ease blackout threat=20 Continuing coverage: California's Power Crisis=20 ?=20 Despite the energy crunch, the state often finds itself with surplus power= =20 that can be sold or swapped. For instance, advance power purchases that=20 provide energy at a better price may deliver more power than needed at any= =20 given time, particularly during off-peak hours.=20 BC Hydro's reservoirs and hydroelectric generators are a little like an=20 electricity storage battery. By importing California power, BC Hydro has be= en=20 able to conserve water that can be released this summer to produce power fo= r=20 California.=20 As a result of the agreement and other factors, state power buyers say they= =20 are in a stronger position going into the hot summer months than they had= =20 expected. So far this week, the state has managed to get through a heat wav= e=20 without so much as a Stage 1 power alert.=20 "We are in much better shape at this point than I imagined we would have be= en=20 as little as a month ago," said Ray Hart, head of the power purchasing unit= =20 in the state Department of Water Resources.=20 The North American Electric Reliability Council, which last month predicted= =20 260 hours of rolling blackouts for California this summer, has noticed a=20 change in recent weeks.=20 "We don't seem to have the crisis we were all expecting," said Ellen Vancko= ,=20 a council spokeswoman. "But whether that is a short-term or a long-term eve= nt=20 we don't think anyone knows yet."=20 Much of the credit for avoiding blackouts is given to unexpectedly high=20 conservation by Californians and an increased supply of power. Many=20 generators that had been shut down for maintenance or lack of payment are n= ow=20 back on line.=20 But the hydroelectric power agreement had gone unnoticed until now.=20 Hart mentioned it during a Senate Energy Committee hearing this week. But h= e=20 declined to reveal the amount of power banked with BC Hydro, saying it coul= d=20 hurt the state's competitive position in the market.=20 "If I start talking specifics," said Hart, "then I have to give out what I = am=20 doing every single day, and I have no market position."=20 In the past, California routinely sent power to a number of utilities in th= e=20 Pacific Northwest during the winter when residents there needed heat.=20 Northwest utilities returned power to California in the summer when air=20 conditioning drove up demand.=20 Little was expected from the reciprocal arrangement this year because=20 California was short of power last winter as electricity prices soared, and= =20 drought has sharply lowered reservoirs in the Northwest. But the agreement= =20 with BC Hydro will provide at least some power this summer.=20 The state was forced to begin buying power in January after its two largest= =20 utilities, Southern California Edison and Pacific Gas and Electric, were=20 unable to borrow because of a $13 billion debt. The rates that the utilitie= s=20 could charge their customers were frozen under a failed deregulation plan a= s=20 the cost of power on the wholesale market skyrocketed.=20 Hart said it took time to convince BC Hydro, which has demanded cash for so= me=20 electricity, that it could safely do business with California despite big= =20 debts owed to generators for power they supplied to the utilities.=20 "We have only been able to do it for the last couple of months," said Hart.= =20 "It took a long time to get them to do it because of credit issues."=20 A spokesman for BC Hydro said the utility engages in power swaps but does n= ot=20 release the name of the other parties or the terms of the agreements.=20 "Our first priority is taking care of our own," said Warren Cousins of BC= =20 Hydro. "We are still looking for opportunities to help out other entities= =20 when we can."=20 Hart said the state has another arrangement with the federal Bonneville Pow= er=20 Authority, but again refused to provide details. He said the state has sold= =20 surplus power to several buyers, including the Los Angeles Department of=20 Water and Power.=20 Information about state power purchases had been closely guarded until=20 recently. Gov. Gray Davis, pressured by lawsuits and a court ruling, releas= ed=20 edited versions last week of 38 long-term power contracts worth $43 billion= .=20 The Davis administration said it agreed to release contract information=20 because power prices have dropped, easing competitive pressures.=20 ?=20 Ex-worker: Duke manipulated market=20 By Bill Ainsworth=20 UNION-TRIBUNE STAFF WRITER=20 June 22, 2001=20 SACRAMENTO -- A former operator at Duke Energy's Chula Vista plant said he= =20 was told frequently by company officials during the past year to alter the= =20 plant's output in a way that may have boosted electricity prices.=20 The operator, Jimmy Olkjer, said he was even ordered to cut power generatio= n=20 during energy emergencies, when the state faced rolling blackouts because o= f=20 a scarce supply of electricity.=20 He said he believes reducing the electricity generation helped the company= =20 charge higher prices. "It looks like that's what they were doing," Olkjer= =20 said in an interview.=20 He and another former plant employee said that during the past year the=20 company regularly operated its least-efficient turbine, possibly to justify= =20 higher prices.=20 The allegations, which they plan to repeat today at a state Senate hearing= =20 investigating power generators, provide the first insider evidence that Duk= e=20 Energy may have manipulated output at its South Bay plant to drive up price= s.=20 Duke, based in North Carolina, leases the South Bay plant from the San Dieg= o=20 Unified Port District.=20 A March report by the Independent System Operator, which manages California= 's=20 electricity grid, alleged that by withholding power Duke and four other=20 owners of generating plants have contributed to billions of dollars in=20 overcharges to California consumers.=20 Tom Williams, spokesman for Duke Energy North America, said that varying th= e=20 output of the generating units at the Chula Vista plant had nothing to do= =20 with trying to achieve higher prices.=20 He said the changes in output helped balance the state's grid by "dancing i= n=20 the market" -- providing flexibility for grid managers by allowing the plan= t=20 to add or reduce power quickly.=20 Williams added that the aging South Bay plant produced as many megawatts la= st=20 year as it did in 1994.=20 Olkjer served as a plant operator for 18 years, mostly when the plant was= =20 owned by San Diego Gas & Electric Co. After Duke took over the plant, worke= rs=20 were guaranteed their jobs for two years. In April, when that period ended,= =20 Duke laid off Olkjer and other workers. Now he is retired.=20 During the two years Duke has managed the plant, Olkjer said, operators=20 frequently got calls from officials with Duke Energy Trading and Marketing = in=20 Salt Lake City telling them to adjust their production schedule.=20 Some employees at the plant monitored the hourly price of electricity poste= d=20 by the Independent System Operator and recognized a correlation, he said.= =20 "We noticed that a lot of times when the price was down (our) megawatts wou= ld=20 go down," he said. "If the price was up, often the megawatts would go up."= =20 Olkjer said he was never told why he was being ordered to turn the plant's= =20 output up and down. When he asked, he said, company officials told him it w= as=20 none of his business.=20 Still, he was puzzled, particularly when he was told to throttle down the= =20 plant during electricity emergency alerts -- as he says he did Jan. 16 when= =20 the state declared a Stage 3 alert, with the possibility of rolling=20 blackouts.=20 "It doesn't make sense to cycle up and down when there's a Stage 3 alert," = he=20 said.=20 Duke spokesman Williams said the company may turn down units at the orders = of=20 the ISO during a Stage 3 alert because the grid manager can find cheaper=20 power somewhere else.=20 Lisa Szot, spokeswoman at the ISO, said she couldn't determine whether the= =20 ISO had ordered Duke to power down its Chula Vista plant Jan. 16.=20 Olkjer said the frequent adjustments of power production, which sometimes= =20 occurred every half-hour, wear out the plant's equipment.=20 "It's harder on the machinery," he said. "It's like driving down the street= =20 putting your (foot) on the gas and then slamming on the brake."=20 Before deregulation, Olkjer said, the four units at Chula Vista, which have= =20 the capacity to produce 706 megawatts, had been operated steadily during mu= ch=20 of their history.=20 S. David Freeman, formerly general manager of Los Angeles' Department of=20 Water and Power and now chief energy adviser to Gov. Gray Davis, said rapid= =20 cycling had become more common under deregulation and is hard on equipment.= =20 "We had almost 15,000 megawatts of generating capacity down for repair last= =20 winter," said Freeman, referring to what industry experts agreed was an=20 extraordinary level of plant outages over several months.=20 SDG&E, which built the Chula Vista plant in the 1960s, sold it to the Port= =20 District for $110 million. In 1998 the port leased the plant to Duke Energy= =20 for 101/2 years in what critics are now calling a sweetheart deal.=20 The company pays minimal rent, but has made large profits. In the first=20 quarter of this year, Duke, which owns three other plants in California, sa= id=20 profits rose 208 percent to $428 million from energy sales and trading.=20 Duke may hold the record for charging the highest price for electricity. It= =20 asked $3,880 per megawatt-hour this year. By comparison, before the energy= =20 crisis began, electricity sold for around $35 per megawatt-hour, an amount= =20 which powers about 750 homes.=20 Federal regulators have ordered the company to refund $20 million to the=20 state for charging excessive prices unless the company can justify them.=20 In May, the company offered to pay the state to settle any price gouging=20 investigations, but Gov. Gray Davis declined.=20 Olkjer and Ed Edwards Jr., who worked at the plant for 20 years before bein= g=20 laid off in April, said they couldn't understand why Duke ran the=20 inefficient, high-cost turbine unit during the past year while other=20 generators sat idle.=20 They said they believed it may have been an attempt to fetch a higher price= =20 for electricity because the company got extra fees when it ran.=20 Williams, the Duke spokesman, said the opposite was true. He said Duke ran= =20 the small turbine more frequently because it was less expensive. It ran on= =20 jet fuel, which was cheaper than the natural gas powering the other units.= =20 Edwards said the smaller unit was run so hard that it was destroyed.=20 "It ran so frequently and so hard, it needed extensive repairs," he said.= =20 Edwards told CBS News last night that plant outages at Chula Vista were=20 prolonged because one supervisor ordered him to dump spare parts.=20 The former power plant employees said they felt compelled to come forward= =20 because they saw the impact the power crisis was having on their community.= =20 "It kind of irritated me because you know there's people on a fixed income= =20 that can't afford a big utility bill," said Olkjer.=20 Staff writer Craig D. Rose contributed to this story.=20 ?=20 Estimates of Power Profits Disputed=20 Electricity: A study of overcharges by suppliers may be flawed, state=20 officials say. Davis quoted the figures to Congress.=20 By DOUG SMITH, ROBERT J. LOPEZ and RICH CONNELL, Times Staff Writers=20 ?????Gov. Gray Davis' contention that California has been nicked for billio= ns=20 of dollars in inflated electricity costs is based on a study that state=20 officials concede may have significant flaws, according to interviews and= =20 confidential government documents. ?????Those costs--estimated by the state to be as high as $9 billion--were= =20 central to Davis' testimony this week before a U.S. Senate committee, where= =20 he again denounced power wholesalers and urged federal regulators to "give = us=20 back the money that was wrongly taken from us." ?????The governor's impassioned demand, however, was based on shaky=20 calculations. The formulas are being reworked, said Charles Robinson, vice= =20 president of California's grid operator, which prepared the study. ?????Robinson said he "had no idea" how much the amount allegedly overcharg= ed=20 by the generators might change. For now, he said, the agency stands by the= =20 numbers. ?????But internal documents from the California Independent System Operator= =20 warn that some of the financial assumptions used to quantify the alleged=20 excess profits could be well off the mark. ?????What's more, the documents caution against relying on the agency's stu= dy=20 as a basis for allegations of overcharging--as Davis did during his testimo= ny=20 Wednesday. That warning was particularly important because the documents=20 provide for the first time a detailed accounting of how much each energy=20 supplier prospered from the state's power troubles between last summer and= =20 February. ?????The largest amounts were charged by four out-of-state power companies,= =20 according to the confidential Cal-ISO report. Okalhoma-based Williams Cos.= =20 led the group with $860 million, followed by Duke Energy with $805 million,= =20 Southern Company Energy Marketing (now Mirant) with $754 million and Relian= t=20 Energy Services with $750 million. ?????When told of the alleged profiteering attributed to them, executives o= f=20 the companies insisted the numbers were grossly overstated because of=20 Cal-ISO's poor methodology. ?????Duke spokesman Tom Williams said his company's entire energy earnings= =20 for North America were less than the amount it was accused of reaping=20 unfairly in California. ?????"It doesn't add up. It doesn't come close to adding up," Williams said= .=20 "What [Cal-ISO] has done is highly irresponsible math." ?????Paula Hall-Collins, a Williams Cos. spokeswoman, said the firm would= =20 need to study the ISO report further. But generally, she said, such reports= =20 fail to fully account for electricity production costs. ?????"We maintain that we have not overcharged, and that we have operated= =20 legally." ?????Reliant spokesman Richard Wheatley also questioned the figures, saying= ,=20 "There's a lot of misinformation out of there." ?????A Mirant spokesman said: "We haven 't overcharged. We haven't=20 manipulated. We haven't withheld."=20 ?????Even some firms alleged to have overcharged to a much lesser degree we= re=20 outraged. ?????Joe Ronan, vice president for government and regulatory relations at= =20 Calpine, said the $236 million attributed to his company "doesn't bear any= =20 relation to reality." ?????"Anybody can throw out any number," he said. "It's like McCarthyism. .= .=20 . Where is the evidence?" ?????A spokeswoman for Davis conceded that his refund figure was an estimat= e=20 but defended it as reasonable. ?????"It's no surprise that the people that are gouging us want to dispute = an=20 estimate of how much they're gouging us," senior advisor Nancy McFadden sai= d. ?????Despite the cautions expressed in the Cal-ISO documents, officials=20 Thursday insisted they were not troubled that the governor referred to the= =20 agency's figures as potential overcharges.=20 ?????"The way it should be characterized is the amount paid above a=20 competitive benchmark," said Robinson, who is also Cal-ISO's general counse= l. ?????The first version of the now-disputed Cal-ISO study was made public in= =20 March. It estimated that power sellers earned $6.3 billion in excess profit= s=20 between May 2000 and last February. The report, later revised upward to $6.= 7=20 billion, became a crucial element of the Davis Administration's campaign=20 against alleged electricity price gougers. ?????This week, just before Davis' appearance in Congress, the study was=20 updated again, adding another $2.2 billions in alleged excess profits throu= gh=20 May. ?????The orginal study, which did not include actual pricing data, was most= ly=20 intended to prod federal regulators into seeking information from generator= s=20 that the state had been denied, Robinson said. ?????Thus far, the Federal Energy Regulatory Commission has ordered refunds= =20 of only $125 million. Next week FERC is convening an unusual settlement=20 conference aimed at addressing the outstanding claims by the state, as well= =20 as those of sellers who claim they are owed hundreds of millions of dollars= =20 by California utilities. ?????One encouraging signal for state officials came this week when FERC=20 reiterated an earlier order that Duke Energy pay millions in refunds. The= =20 order stemmed from the company's sale of electricity at $3,880 a megawatt= =20 hour--for thousands of hours. ?????FERC's order said Duke's pricing had resulted in $11 million in=20 billings. A fair price for that power would have been $273 per megawatt hou= r,=20 the agency said. ?????Tom Williams, a Duke spokesman, said the firm is willing to accept the= =20 lower price. He said he company has yet to collect a dime.=20 ---=20 ?????Times staff writers Elizabeth Shogren and Dan Morain contributed to th= is=20 story. Edison Plans Bond Offer at 13% Rate=20 Debt: Yield is about double what a credit-worthy company would pay, analyst= s=20 say. But will investors bite?=20 By JERRY HIRSCH, Times Staff Writer=20 ?????Edison International is offering investors what analysts are calling a= n=20 unprecedented 13% interest rate for $1.2 billion in notes to refinance debt= .=20 Even so, it's far from certain that the Rosemead-based power company will= =20 find enough buyers to complete the deal. ?????A failure by Edison to refinance $618 million in bank debt that comes= =20 due June 30 and an additional $250 million in notes due in July could put t= he=20 company precariously close to bankruptcy and cast a shadow on California's= =20 plan to sell $12.5 billion in bonds to pay for power purchases, said Dan=20 Scotto, a bond analyst at PNB Paribas in New York. ?????"Even though it would at first appear to be a company setback, it woul= d=20 really be a major setback for the state," said Scotto, who added that=20 Edison's credit troubles could translate into higher prices for California'= s=20 proposed bond offering. ?????Edison, however, said Thursday that the deal is moving forward. ?????"We believe our deal is going well, and we are comfortable with it,"= =20 said Jo Ann Goddard, vice president for investor relations. She declined to= =20 discuss other details of the offering. ?????Goldman Sachs Group, Edison's investment bank, expects to formally pri= ce=20 the offering Monday. Edison officials would not comment on the proposed pri= ce=20 of the note offering, but Wall Street sources said the power company was=20 shopping the issue at the 13% rate. ?????Edison floated the plan earlier this month as a way to tap the borrowi= ng=20 power of a profitable subsidiary to trim debt that comes due this year and = to=20 insulate itself from a possible bankruptcy of its ailing utility unit. The= =20 utility, Southern California Edison, has lost billions of dollars on=20 electricity sales over the last year. ?????The high interest rate on Edison's proposed sale of seven-year notes i= s=20 about double what a credit-worthy company would pay for a similar bond or= =20 note issue and would add a premium amounting to tens of millions of dollars= =20 in annual interest costs to the company's already strapped financial=20 condition, analysts said. It's a full two percentage points higher than the= =20 average rate for other junk, or speculative, bonds. And corporate bonds wit= h=20 similar ratings are going out at 9% to 10%. ?????Edison originally started marketing the issue at 12%, a full two=20 percentage points higher than what analysts initially expected, but then=20 raised the rate to 13% in recent days because it was finding few takers on= =20 Wall Street. ?????"The word is that they couldn't get people interested and that they=20 might not be able to get it done," said Kurt Stabel, a money manager at=20 Street Asset Management in Newport Beach. ?????The higher rate, however, might be pulling investors out of the woodwo= rk=20 and has increased the chance that Edison will pull off the deal, Scotto sai= d. ?????"This never promised to be a day at the beach," Scotto said. "I think = it=20 is really a question of find the right price, the price at which people fee= l=20 comfortable with the risk." ?????Both Stabel and Scotto said that Edison's note offering is unusually= =20 complicated and requires far more explaining or "selling" than typical=20 corporate offerings. ?????Mission Energy Holding Co., a company created by Edison for the sole= =20 purpose of issuing these bonds, will offer the notes. The assets of Edison= =20 Mission Energy, a subsidiary that owns a network of power plants across the= =20 United States and in Asia, Australia and New Zealand, will secure the debt. ?????Mission Energy Holding plans to issue the proceeds to Edison in the fo= rm=20 of dividends, giving the parent company funds to pay off a substantial=20 portion of its debt. ?????The notes will have a credit rating of BB-minus and come due in 2008,= =20 according to bond rating agency Standard & Poor's. That's slightly higher= =20 than the near-default CC rating now carried by Edison. ?????If the offering failed, Edison would face a series of difficult choice= s=20 that range from depleting its cash cushion to going back to its bankers and= =20 begging for continued forbearance.=20 ?????Its SCE subsidiary already has defaulted on $931 million in bonds and= =20 notes. That triggered a default in bank lines of credit at Edison=20 International and SCE, which has since operated under extensions from its= =20 lenders. ?????Edison has about $3 billion in cash, including $2 billion held by SCE,= =20 according to regulatory documents. ?????"This could all still unravel, but I have been impressed with [Edison'= s]=20 effort to inch along so far," said Ellen Lapson, an analyst at Fitch Inc., = a=20 corporate credit rating service. "Who would have thought that they could ha= ve=20 lasted so many months after their first default in January and still not be= =20 in bankruptcy?" ?????Positive developments for Edison, including a deal to hold small=20 generators at bay with partial payments from SCE and progress at crafting a= =20 rescue plan in both the state Legislature and the Public Utilities Commissi= on=20 have sparked a small rally in the company's stock.=20 ?????Edison shares have risen 8% this month. They gained 21 cents Thursday = to=20 close at $11.90 on the New York Stock Exchange. Energy Company Abandons Plans for Baldwin Hills Plant=20 Power: Homeowners and environmentalists rejoice at decision. The site is=20 proposed as a 1,200-acre state park.=20 By JOE MOZINGO, Times Staff Writer=20 ?????In a victory for environmentalists and nearby homeowners, an energy=20 company announced Thursday that it was abandoning its plan to build a power= =20 plant on the site of a proposed state park in the Baldwin Hills.=20 ?????La Jolla Energy Development Inc., in a letter to the state Energy=20 Commission, said it was withdrawing its application for fast-track approval= =20 of the 53-megawatt plant and "will not pursue the Baldwin facility in the= =20 future." ?????"We listened to the community," La Jolla President Steve Wilburn said = in=20 an interview Thursday. "We need to find another place for this equipment." ?????The project was to be a joint venture between La Jolla and Stocker=20 Resources, an oil company that leases the land where the trailer-sized=20 natural-gas plant would sit. ?????Stocker officials said they will decide in the next few days whether= =20 they will pursue the project. "At this point it's just La Jolla pulling out= ,"=20 Stocker spokesman Steve Rusch said. ?????But most observers said it would be difficult to move forward on the= =20 fast-track schedule the state has implemented to relieve the energy crisis. ?????The state commission was scheduled to decide whether to approve the=20 project today in Sacramento, but the hearing has been canceled. ?????The news sparked elation among environmentalists and nearby homeowners= =20 who had fought the proposal on grounds that it would pollute neighborhoods= =20 and threaten an ambitious plan to piece together 1,200 acres of public open= =20 space in the hills. ?????"We're getting ready to have the biggest party," said Tony Nicholas,= =20 president of the hills' United Homeowners Assn. "This shows how a community= =20 can come together for a common goal and mobilize the people in a matter of= =20 days." ?????About 76% of the residents in the hills are African American and many= =20 saw the issue as a matter of environmental justice.=20 ?????In addition, Stocker and La Jolla were seeking approval for the plant= =20 within 21 days of filing their application, under the governor's emergency= =20 power orders. By following this fast-tracked procedure, they would have bee= n=20 able to avoid the normal, time-consuming environmental review process. ?????That angered opponents even further, and nearly 1,000 people showed up= =20 at a public hearing Monday to fight the project. ?????But what officials said turned the tide against the project--at a time= =20 when the energy commission is approving such plants as fast as possible--wa= s=20 testimony from a South Coast Air Quality Management official who said his= =20 agency would not be able to approve the plant quickly. ?????Executive Director Barry Wallerstein said his agency would have to=20 conduct hearings that would take up to 60 days, pushing construction well= =20 beyond a Sept. 30 deadline set by the governor for fast-track projects. He= =20 also said it was unlikely Stocker could get needed exemptions from federal= =20 clean air laws. ?????In a letter to the Energy Commission this week, Wallerstein wrote: "It= =20 appears that the Baldwin Energy Facility could not begin operation until so= me=20 time in the first part of 2002 at the earliest." By Wednesday night, the=20 energy commissioner who presided over the public hearings issued a statemen= t=20 recommending that the rest of the commission deny the application for a=20 plant, citing Wallerstein's concerns. ?????Conservationists embraced the outcome as a sign that the movement to= =20 create a park was gaining steam. The Baldwin Hills Conservancy was created= =20 last year with the idea of creating green space for the densely populated= =20 neighborhoods of south Los Angeles. With support from the governor and loca= l=20 politicians, the state recently bought a 68-acre parcel in the area for an= =20 unprecedented $41 million. ?????"This is a great day for the Baldwin Hills and all the people who have= =20 worked so hard to bring this world-class vision to reality," said Esther=20 Feldman, president of Community Conservancy International and the main=20 organizer to build the park. ?????Also applauding La Jolla's decision were state Sen. Kevin Murray=20 (D-Culver City) and Assemblyman Herb Wesson (D-Culver City), who had come o= ut=20 strongly against the project. They and others questioned whether the small= =20 amount of power provided by the facility--coming online after the dog days = of=20 summer--would do much to relieve the energy crisis. ?????"I'm ecstatic" Wesson said. "At this point the environment has won." ?????The plant would have sat on what is a working oil field about 650 feet= =20 from the Kenneth Hahn State Recreation Area. And according to park=20 proponents, it would lie in the middle of the grander state conservancy, on= =20 what would be a half-mile bridge of land arching over La Cienega Boulevard. ?????Rusch, the spokesman for Stocker, said much of the information=20 circulating about the trailer-sized plant is false. ?????The plan did not call for "a stack with billowing smoke," he said. "If= =20 the issue is air quality, we've cleaned air quality up." In the last decade= ,=20 Rusch said, the company's existing 400 oil pumps on the property have reduc= ed=20 nitrogen oxide emissions from 374 tons to 3 tons a year. The power=20 plant--with two 70-foot stacks--would ultimately add about 18 tons a year. ?????He said the company was trying to cut its energy bills by providing it= s=20 own power to pump oil, while also contributing an extra 39 megawatts to the= =20 state grid during the energy crisis. ?????Residents say there are more desolate places for the state to relieve= =20 the energy problem. Said Mary Ann Green, president of the Blair Hills=20 Homeowners Assn.: "We just hope that Stocker would be responsive to the=20 outcry from the community." Western states could feel pinch from California pricing=20 KAREN GAUDETTE, Associated Press Writer Friday, June 22, 2001=20 ,2001 Associated Press=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2001/06/22/n= ation al0545EDT0489.DTL&type=3Dnews=20 (06-22) 02:45 PDT SAN FRANCISCO (AP) --=20 When power supplies stretch thin across the West this summer, who will deci= de=20 whether Silicon Valley computers, Washington apple orchards or Las Vegas=20 casinos get first dibs on what's left?=20 It's a key question raised by the decision of federal energy regulators thi= s=20 week to cap electricity prices throughout the West, using a formula based o= n=20 California's power costs.=20 Economists, energy industry executives and officials in all 11 states are= =20 beginning to analyze the fit of this new piece in the energy puzzle.=20 Though most call the order a good step that could prevent price gouging,=20 others worry the pricing system could lead to electricity shortages for=20 California's neighbors, or prompt utilities to stock up on power contracts = to=20 fend off shortages. That could diminish any leverage power buyers might hav= e=20 as they compete for the remaining megawatts available each day.=20 Tying the highest possible power price to California could cause a problem= =20 come winter, when power demand drops in the Golden State, said Gary Ackerma= n,=20 director of the Western Power Trading Forum, which represents most sellers = of=20 energy.=20 States where consumers need electricity to heat furnaces through the winter= =20 would be unable to outbid each other above the price cap, which is usually= =20 determined by a formula based on the highest bid for last-minute power duri= ng=20 the most recent energy supply emergency in California.=20 That may leave power wholesalers, and not a free market, to decide who gets= =20 the energy.=20 "Certainly, California has a tremendous pull on our prices and has for=20 probably the last year," said Claudia Rapkoch, spokeswoman for Montana Powe= r=20 Co., which supplies natural gas and electricity to two-thirds of the Big Sk= y=20 state. "What it means for this winter, we're just going to have to wait and= =20 see."=20 California utilities had much more control over power supplies before=20 deregulation in 1996 obligated them to sell off their power plants to=20 encourage competition. This brought lower prices for a time, but gave contr= ol=20 over power supplies to wholesalers that aren't obligated by state law to=20 serve the serve the best interests of local customers.=20 Rather than appointing one power grid manager to decide how to divide power= =20 in the West, Ackerman predicts utilities in non-deregulated states will=20 simply sell their power within their borders. That would hurt California,= =20 which this week imported about 10 percent of its electricity and its=20 remaining supply from local plants owned by out-of-state power companies.= =20 Price cap or not, utilities in the region will watch out for each other as= =20 best they can, because they might need the favor returned, said Charles=20 Reinhold, executive consultant for Electric Resources Strategies in Ariz.= =20 Saddled with rising bills that threatened to exhaust the state's budget,=20 California recently began to sign long-term contracts with generators. Gov.= =20 Gray Davis credits the change for helping to drastically reduce prices on t= he=20 spot market, which earlier this month fell below $50 per megawatt hour for= =20 the first time in a year.=20 The long-term contracts, though, weren't cheap. California will pay an=20 average of $70 per megawatt hour during the next decade under 38 different= =20 contracts signed so far.=20 On the Net:=20 Western Power Trading Forum: www.wptf.org=20 RTO West: www.rtowest.org=20 ,2001 Associated Press ?=20 Feds spurn Duke Energy in its bid to avoid refunds=20 Christian Berthelsen, Chronicle Staff Writer Friday, June 22, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/06= /22/M N95159.DTL&type=3Dnews=20 Federal regulators have rejected attempts by Duke Energy Inc. to avoid=20 refunding millions of dollars to California for charging exorbitant=20 electricity prices in January and February.=20 The Federal Energy Regulatory Commission first ordered the refunds on March= =20 9, and Duke responded by filing a challenge. But the commission on Monday= =20 rejected the company's appeal and reiterated its earlier order, claiming Du= ke=20 had abused its power in the California energy market when it sold power for= =20 $3, 880 per megawatt hour.=20 "We will not tolerate abuse of market power or anticompetitive bidding or= =20 behavior," the commission said.=20 Duke acknowledged this month that it had charged $3,880 per megawatt for=20 about 5,500 megawatt hours sold to the state's major utilities in January a= nd=20 February, netting it more than $19 million in receivables.=20 The commission did not specify how much money Duke should refund, but it=20 directed the company to readjust its January billings for those hours to a= =20 price of $273. From a FERC document, it appears that about 2,835 hours=20 occurred in January, which would result in a total refund for that month of= =20 $10.2 million.=20 Duke is one of the companies that have been identified by both the Californ= ia=20 Independent System Operator, the manager of the state's electricity grid, a= nd=20 the FERC as having exercised market power and overcharged Californians for= =20 electricity.=20 Meanwhile, employees at the South Bay power plant in San Diego run by Duke= =20 are expected to testify in a state Senate committee hearing today that the= =20 company ramped production up and down. That allegedly was aimed at lowering= =20 power production during shortages and attempting to drive up electricity=20 prices on the spot market.=20 The workers were employed by San Diego Gas & Electric Co. but were working= =20 under contract to Duke.=20 E-mail Christian Berthelsen at cberthelsen@sfchronicle.com.=20 ,2001 San Francisco Chronicle ? Page?A - 4 NEWS ANALYSIS=20 Davis winning Washington PR battle=20 Price cap victory may rob Democrats of campaign issue=20 Marc Sandalow, Washington Bureau Chief Friday, June 22, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/06= /22/M N167044.DTL&type=3Dnews=20 Washington -- There was a reason Gov. Gray Davis donned a dark blue jacket= =20 and endured beastly humid 90-degree heat this week in an area behind the=20 Capitol known as the "House swamp."=20 The nation was watching. And after months of political free fall, his messa= ge=20 seemed to be taking hold.=20 "California has been bilked out of $9 billion while the Federal Energy=20 Regulatory Commission was asleep at the switch," Davis declared, repeating= =20 testimony he had delivered hours earlier in the air-conditioned confines of= a=20 Senate hearing room.=20 Wiping a bead of sweat from his brow as 10 television cameras and two dozen= =20 reporters recorded the scene, the California governor apparently couldn't= =20 resist taking another shot: "For nearly a year I've been pounding on this= =20 commission to enforce the law."=20 The state's energy crisis, with its volatile spot markets, out-of-state=20 generators and dearth of alternative energy providers, is a dizzyingly=20 complex policy puzzle. The politics are much simpler.=20 Democrats present themselves as consumer crusaders, defending helpless=20 utility customers from greedy energy conglomerates and misguided regulators= .=20 Republicans portray themselves as stewards of the free market and long-term= =20 solutions, rejecting price caps and refunds as heavy-handed overreactions= =20 with Soviet-style results.=20 The Democratic populism seems to be winning the battle. Though the debate i= s=20 far from settled, the consumer-oriented approach to California's energy woe= s=20 has raised their hopes of winning back the House of Representatives in 2002= =20 and the White House in 2004.=20 "Republicans are scared out of their minds about this," said one gleeful=20 Democrat on Capitol Hill, who suggested that the White House's lackadaisica= l=20 response to California's problems would rile consumers from coast to coast.= =20 "This could rival Pete Wilson's alienation of Latinos," said the Democrat,= =20 referring to the former Republican governor's strident stand against illega= l=20 immigrants, which many blame for the party's weak standing in California.= =20 A sign of the GOP's concern surfaced this week with television ads, finance= d=20 by anonymous sources but produced by Republican Party strategists, that bla= me=20 the Democratic governor for California's energy problems.=20 Democrats, who long have worried that the crisis could cost Davis a second= =20 term, now take credit for having pressured the White House and federal=20 regulators to take a more active role.=20 The Federal Energy Regulatory Commission, which had previously resisted suc= h=20 efforts, took steps toward controlling wholesale electricity prices Monday.= =20 Later in the week, two commissioners appointed by President Bush testified= =20 that they might be open to further price restrictions and support huge=20 refunds to California. And just yesterday, Vice President Dick Cheney, who= =20 has been among California's most vocal critics, told Senate Democrats behin= d=20 closed doors that he could support refunds to California if federal=20 regulators agreed, according to those in the meeting.=20 "There is no doubt in my mind that action (taken by federal regulators) was= =20 the direct result of pressure for price relief led primarily by the=20 California delegation," Davis said.=20 The pressure did not come only from Democrats. Republican lawmakers, some o= f=20 whom fear the crisis could cost them seats in 2002, wrote FERC last week,= =20 requesting commissioners to "take further actions" to help the state.=20 The Democrats' public relations success follows an effort by the party to= =20 raise the profile of its consumer crusade. Hardly a day has passed in the= =20 past several weeks without a group of Democrats holding a news conference t= o=20 attack the White House, the Republican controlled House or FERC for inactio= n.=20 But it may have just as much to do with a White House that has been far mor= e=20 focused on long-term energy production than the immediate concerns of=20 Californians. Even as it engaged in a legitimate policy dispute over how to= =20 solve the power mess, the Bush administration appeared indifferent to the= =20 plight of residents experiencing skyrocketing energy bills and rolling=20 blackouts.=20 Bush tried to correct that impression with a trip to the state last month.= =20 But the damage appears to have extended beyond California.=20 A CBS News/New York Times poll released this week of 1,050 adults from acro= ss=20 the country showed that only one in three voters approved of the job Bush w= as=20 doing on energy. More than half the respondents said that protecting the=20 environment was a higher priority than producing energy, yet barely one in = 10=20 said that Bush shared that priority.=20 Some Republicans say that Bush was in a no-win position, contending that=20 anything he did would have been attacked by California's opportunistic=20 governor.=20 "Politics is (Davis') main objective, and I don't see the Bush administrati= on=20 being that way," said Rep. George Radanovich, R-Fresno.=20 The question for some analysts is whether Democrats might have been too=20 successful. By pressuring the federal government to take a more active role= ,=20 Democrats may lose their ability to point the finger at a convenient=20 scapegoat.=20 "Davis has always needed rate caps much less than he needed a scapegoat. No= w=20 that FERC has given him what he wants, or close enough to it, it's a lot=20 harder for him to lay blame back on Washington when the blackouts kick in,"= =20 said Dan Schnur, a GOP analyst based in San Francisco.=20 E-mail Marc Sandalow at msandalow@sfchronicle.com.=20 ,2001 San Francisco Chronicle ? Page?A - 4=20 Suit filed over report on power lines, health=20 Deal on transmission grid could raise liability=20 Matthew Yi, Chronicle Staff Writer Friday, June 22, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/06= /22/M N114037.DTL&type=3Dnews=20 As state legislators consider Gov. Gray Davis' deal to buy part of the powe= r=20 grid in California, a public records advocacy group filed a lawsuit yesterd= ay=20 demanding that the state release a report on potential health hazards of=20 living near high-voltage transmission lines.=20 The document could be vital to how legislators vote on the $2.76 billion de= al=20 to buy Southern California Edison's power lines, said Terry Francke, genera= l=20 counsel for the California First Amendment Coalition, which filed the lawsu= it=20 in Alameda County Superior Court. The power line deal was brokered by the= =20 governor to help the cash-strapped utility.=20 Legislators must approve the power grid purchase by Aug. 15 or the utility= =20 can back out. Davis also has a $1 billion agreement to purchase San Diego G= as=20 and Electric's power grid, which also would require the Legislature's=20 approval.=20 Pacific Gas and Electric has not agreed to sell its transmission lines.=20 The power lines report was completed in April by California Electric and=20 Magnetic Fields Program, an agency set up by the state Department of Health= =20 Services to study the issue, Francke said. Both state agencies and their=20 directors are named in the lawsuit.=20 Efforts to keep the report secret are suspect, Francke said.=20 "If it's known there's some danger . . . do you want the state owning that= =20 liability?" he asked.=20 The study began in 1993 after the state Public Utilities Commission committ= ed=20 $7.2 million for research and education on the subject, Francke said.=20 The state document deals with scientific findings on how magnetic and=20 electric fields from transmission lines affect humans and possible policies= =20 based on those findings, he said.=20 The report was scheduled to be released to the public on May 7, but "at the= =20 last minute, the Public Utilities Commission apparently instructed the staf= f=20 of the EMF Program to keep the reports secret," the lawsuit said.=20 State health services spokeswoman Lea Brooks said that the report was only = a=20 draft and that her department was following orders from the PUC.=20 "The PUC wanted to see the draft before (it is released)," she said. "We=20 prepared (the report) for them. We are following their request."=20 Brooks refused comment on the lawsuit, saying her office hadn't seen it. PU= C=20 officials were not available for comment.=20 Studies on the effects of magnetic fields have resulted in no clear consens= us=20 on their effects, Francke said. That's what makes the state study important= =20 for legislators to consider before voting on the governor's deal to buy=20 transmission lines, he said.=20 Opponents of the power grid deals say the report may add to objections to= =20 Davis' agreements with the utilities. Some legislators would rather the sta= te=20 help build more power generators in California.=20 "They are extra nails in the coffin," said James Fisfis, spokesman for stat= e=20 Assembly minority leader Dave Cox, R-Fair Oaks. "We have fundamental issues= =20 with the transmission lines, but when you start stacking these items up,=20 you have an undigestible deal."=20 Davis' spokesman Roger Salazar said he believed the governor hadn't seen th= e=20 health hazard report.=20 "Obviously, if something pops up and is an issue, you'll take a look at it,= =20 but I don't think we're at that point yet," he said.=20 An Alameda County Superior Court judge will hear the lawsuit on July 23,=20 Francke said.=20 E-mail Matthew Yi at myi@sfchronicle.com.=20 ,2001 San Francisco Chronicle ? Page?A - 4=20 Texas power firm's shares falling=20 Power baron Enron finds fortunes fading=20 Christian Berthelsen, Chronicle Staff Writer Friday, June 22, 2001=20 ,2001 San Francisco Chronicle=20 URL:=20 http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2001/06= /22/B U178338.DTL&type=3Dnews=20 There's trouble in Texas.=20 Enron Corp., the Houston power firm that's profited mightily during=20 California's energy crisis, is suffering a surprising lack of popularity on= =20 Wall Street.=20 While all eyes have been on Enron's enormous profits here and its enormous= =20 pull in Washington, D.C., the reputed titan of the newly incarnated, free-= =20 wheeling power industry has lost half its market capitalization -- more tha= n=20 $30 billion -- since its peak in August.=20 Forgive Californians for savoring a bit of schadenfreude over the Houston= =20 boys' reversal of fortunes. But what gives? Isn't this the company that was= =20 fattening up on the backs of the state's beleaguered utilities, residents a= nd=20 state budget? Isn't this the company with such close ties to the Bush=20 administration that Kenneth Lay, Enron's chairman, was reported to have=20 interviewed a candidate for a job on the commission that regulates his=20 company?=20 Yup. That Enron.=20 On Monday, Enron shares hit a 52-week low of $43.07, after the Federal Ener= gy=20 Regulatory Commission decided to apply the same price controls to power=20 marketers such as Enron that had applied to power-generating companies for= =20 months. That's a far cry from August, when the company's shares peaked at= =20 $90.=20 "There's a whole kaleidoscope of issues that Enron is being challenged with= =20 in the marketplace right now, none of which on the surface is a major deal,= "=20 said Donato J. Eassey, an analyst with Merrill Lynch Global Securities in= =20 Houston. "But when you combine them all . . . I think what's happening here= =20 is you have a crescendo with this FERC announcement. You have people saying= ,=20 'OK, the growth rate is now in question.' "=20 That growth rate was an eye-popping 88.82 percent in revenues for the Unite= d=20 States on a two-year average, and nearly 98 percent in the rest of the worl= d.=20 Enron officials did not respond to a request for interviews, but as the sto= ck=20 continued to drop Tuesday morning, chief executive Jeff Skilling issued a= =20 statement to the markets in which he reiterated "strong confidence" in its= =20 earnings guidance. The stock rebounded slightly throughout the week, closin= g=20 at $44.05 yesterday.=20 In a speech at the Commonwealth Club last night, Skilling blamed regulatory= =20 interference with the "free market" for investor flight from his company.= =20 "Our stock prices have gotten hammered," he said. "They're half what they= =20 were a year ago."=20 Tumbling stock prices weren't the only bad news for Skilling last night. A= =20 protester pelted the executive with a berry pie just before he began=20 speaking. As Skilling used paper towels to wipe the pie from his face, a=20 woman was arrested on battery and malicious mischief charges.=20 Enron isn't the only company with stock prices that soared in tandem with= =20 California's power crisis and are now suddenly headed south. Shares of=20 Reliant Energy Inc., AES Inc. and Williams Companies Inc., which generate a= nd=20 sell electricity in California, and El Paso Energy Corp., which sells natur= al=20 gas here, are all trading near 52-week lows.=20 The main culprit appears to be the suddenly serious talk in Washington abou= t=20 power price controls, re-regulation and now, the possibility of big refunds= =20 being ordered for California. Even Calpine Corp. of San Jose, which has=20 developed a reputation as an industry good guy because it has not played th= e=20 spot market and has not been accused of manipulative tactics, dropped nearl= y=20 7 percent yesterday, to $37.10. But none of the companies has been hit as= =20 hard as Enron.=20 Such a drastic drop in market capitalization poses serious problems for any= =20 company. It leaves it less money to invest in its own growth, and because= =20 executive compensation is so closely tied to stock price, a sharp decline= =20 makes it more difficult to retain talented leaders.=20 While Enron's power wholesaling division seems to be doing fine, the firm h= as=20 been buffeted by disappointments in other lines of business and other regio= ns=20 in recent months. In the financial press, the continuing knock on Enron is= =20 that its business lines are so new and complex, and the company is so=20 secretive about its operations, that analysts and fund managers don't feel= =20 confident in their understanding of what it does.=20 A look at the firm's recent troubles exemplifies its diversity.=20 For instance, Enron has engaged in repeated battles with the state governme= nt=20 of Maharashtra in India over a 2,184-megawatt power plant there. The Dahbol= =20 Power Co., which is 65 percent controlled by Enron, stopped construction on= a=20 second phase of the project on Sunday, claiming it is owed $48 million by t= he=20 Maharashtra State Electricity Board. The state has accused Enron of chargin= g=20 too much and not generating enough, and stopped buying power from the plant= =20 last month.=20 Closer to home, Enron has struggled with its investments in fiber-optic=20 bandwidth. The company buys and sells unused, high-speed bandwidth space,= =20 treating it like a commodity as it does electricity, coal or natural gas. B= ut=20 the fiber-optic sector has imploded in recent weeks as it has become clear= =20 that for all the long-distance cable laid in the ground, there have not bee= n=20 enough "last mile" connections set up for users to actually take advantage = of=20 it. Earlier this year, Enron scuttled plans for a joint venture with=20 Blockbuster to offer what it called "video on demand," in which customers a= t=20 home would be able to select a video of their choice for a fee and have it= =20 transmitted via fiber-optic cables.=20 Then there was the FERC ruling. For months, the agency had resisted=20 aggressive price controls in the West, preferring to let the market run its= =20 course. But
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