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Bay City News, Wed 3/21: "Blackouts Not Expected=20 Today" Dow Jones Newswire, Wed 3/21: "Calif State Controller:General Fund Surplus = Dn=20 To $3.2B" CBS.MarketWatch.com, Wed 3/21: "Davis says regulators will act to pay QFs Electricity providers insist they need to be paid" Long Beach Press, Wed 3/21: "Rash power bill may need fix" SF Chron, Wed 3/21: "PUC considers rewarding producers that sign long-term= =20 contracts" Sac Bee, Thurs, 3/22: "State claims $5.5 billion overcharge: Refunds by=20 wholesale generators sought" Sac Bee, Thurs, 3/22: "Power solution eludes Davis: Lawmakers grow edgy as= =20 crisis drags on" Sac Bee, Thurs., 3/22: " Legislators learn some details of power contracts= " San Diego Union, Thurs, 3/22: "Federal judge orders major power wholesaler= =20 to sell to California" San Diego Union, Thurs., 3/22: "Controller: State's power spending imperil= s=20 its financial health" San Diego Union, Wed, 3/21: "Governor says utilities must pay in advance f= or=20 some power" LA Times, Thurs, 3/22: "Energy Overcharge of $5.5 Billion Is Alleged" LA Times, Thurs, 3/22: "Power Strain Eases but Concerns Mount" LA Times, Thurs, 3/22: Graphics: Overcharges Alleged=20 San Fran Chron, Thurs, 3/22: "Net Complex A Dilemma For San Jose=20 SERVER FARM: Plant would tax grid" San Fran Chron, Thurs, 3/22: "Contracts Won't Meet Summer Demands=20 DETAILS: 2004 before full impact felt" Mercury News, Thurs, 3/22: "California overcharged $5.5 bln for wholesale= =20 power" Orange Cty Register, Thurs, 3/22: Commentary: "If the Power Goes Off" =20 Orange Cty Register, Thurs, 3/22: Commentary: "Socialized Electricity" San Fran Chron, Thurs, 3/22: "Bush's Energy Policy Will Backfire,=20 Feinstein Warns / She wants federal price controls now" Dow Jones Newswires, Thurs, 3/22: "Reliant Still In Power Pact Talks With= =20 Calif. DWR" Dow Jones Newswires, Thurs, 3/22: "CPUC Must Address Rates In QF Repayment= =20 Order - SoCal Ed" Dow Jones Newswires, Thurs, 3/22: "Calif Small Pwr Producers To Shut Plant= s=20 If Rates Capped" ---------------------------------------------------------------------------= --- ---------------------------------------------------------------------------= --- Blackouts Not Expected=20 Today Bay City News=20 Following two consecutive days of rolling blackouts, California's power=20 picture looks much brighter today, but conservation is still needed.=20 The California Independent System Operator is urging consumers to continue= =20 conservation measures during today's Stage One Electrical Emergency.=20 "The conservation efforts of Californians, particularly Tuesday evening, we= re=20 significant and helped to reduce the duration and impact of yesterday's=20 blackouts,'' according to officials. "The California ISO asks customers to= =20 continue their voluntary reductions during this time of tight supply."=20 More than 11,500 megawatts of in-state generation remain unavailable with= =20 power plants completing repairs and needed maintenance. However, several=20 generating units returned to service today and the level of imported power= =20 has increased, boosting the supply.=20 "The ISO is cautiously optimistic that customer outages will be avoided=20 today,'' according to officials.=20 Today's Stage One alert is in effect through midnight tonight.=20 Stage One Emergencies are declared when power reserves fall below 7 percent= .=20 Stage Two kicks in when reserves fall below 5 percent. Stage Three is=20 initiated when reserves drop to below 1.5 percent. ---------------------------------------------------------------------------= --- -------------------------------------------------------------------------- Calif State Controller:General Fund Surplus Dn To $3.2B 03/21/2001 Dow Jones Energy Service (Copyright © 2001, Dow Jones & Company, Inc.) LOS ANGELES -(Dow Jones)- California State Controller Kathleen Connell=20 Wednesday said the state's general fund surplus has dropped to $3.2 billion= =20 from $8.5 billion in January, mostly because of electricity purchases made = by=20 the state's Department of Water Resources, a press release said.=20 Connell also denied Gov. Gray Davis' request to transfer an additional $5.6= =20 billion from the general fund to the Special Fund for Economic Uncertaintie= s,=20 the release said. Connell noted that, given the rapid depletion of the general fund on power= =20 purchases, the state would need to borrow $2.4 billion in order to tranfer= =20 the $5.6 billion from the general fund to the special fund.=20 "We started this year with a generous budget surplus. The energy crisis has= =20 taken much of that away, and this transfer on top of the electricity=20 purchases would put the fund at risk," Connell said.=20 Connell called on Davis to ensure that the CDWR completes by the end of May= =20 2001 the revenue bond sales that will be used to buy power and repay the=20 general fund.=20 She also asked that the CDWR notify her of all power purchases made and=20 contracts negotiated thus far and requested that she be told within 7 days = of=20 any purchases and contracts negotiated in the future.=20 Connell also said she wanted to be told within 24 hours of any power buys= =20 that exceed $55 million and asked that the Department of Finance be directe= d=20 to prepare new general fund cash flow estimates for the next 30 and 60 days= ,=20 and for the end of the fiscal year.=20 The state's Department of Water Resources has been buying power since Janua= ry=20 in lieu of Edison International (EIX) utility Southern California Edison an= d=20 PG&E Corp (PCG) utility Pacific Gas and Electric Co, because suppliers=20 refused to sell to the nearly-bankrupt utilities.=20 -By Jessica Berthold; Dow Jones Newswires; 323-658-3872;=20 jessicaberthold@dowjones.com=20 Gov. Davis' office said, in response to Connell's comments, that the state= =20 budget was solid and the economy remained strong.=20 "We will be getting the money back we've paid for energy and it should have= =20 no significant effect on the state's finances from the Wall Street=20 perspective," said Davis press secretary Steve Maviglio.=20 -By Jessica Berthold; Dow Jones Newswires; 323-658-3872;=20 jessicaberthold@dowjones.com ---------------------------------------------------------------------------= --- -------- Davis says regulators will act to pay QFs Electricity providers insist they need to be paid By Russ Britt, CBS.MarketWatch.com=20 Last Update: 9:45 PM ET Mar 20, 2001 LOS ANGELES (CBS.MW) - California Gov. Gray Davis said regulators will act= =20 Tuesday on a plan to guarantee that independent power generators are paid. Independent power producers provide about 30 percent of California's=20 electricity from a variety of sources including wind, solar and other=20 sources. Because many of the companies, known as Qualifying Facilities, or= =20 QFs, haven't been paid they've begun to withhold power, contributing to=20 blackouts in the state Monday and Tuesday.=20 "We are anxious to pay the QFs because they're falling like flies," Davis= =20 said at a news conference late Tuesday. "If they don't get paid, the lights= =20 will go out." Davis said the state's PUC order will require the state's nearly bankrupt= =20 utilities to enter five-year contracts with the QFs at rates of 7.9 cents p= er=20 kilowatt hour, or 10-year contracts for lower rates. The structure is simil= ar=20 to rates Davis claims he was able to negotiate for long-term power contract= s=20 from out-of-state generators. ---------------------------------------------------------------------------= --- ------------------------------------- Rash power bill may need fix By Will Shuck From our Sacramento Bureau SACRAMENTO Even as lawmakers lament the slow pace of solving California's= =20 energy crisis, the cost of haste has cropped up in their first major act, a= =20 multibillion dollar measure that put the state in the power-buying business= .=20 AB1X, the highly touted bill that put California in the power-buying=20 business, may have been so rashly crafted that it will take another piece o= f=20 legislation to fix it, an influential senator said Tuesday.=20 At issue is vague wording that makes it unclear when and to what extent=20 Southern California Edison and other utilities have to repay the state for= =20 buying power.=20 State Sen. Debra Bowen, chairwoman of the Senate Energy, Utilities and=20 Communications Committee, said the bill apparently has left room for utilit= y=20 lawyers to argue that their companies needn't repay the state until they ha= ve=20 covered other costs.=20 But Bowen, a Redondo Beach Democrat who represents downtown and western Lon= g=20 Beach, said "the legislative intent is crystal clear" that the state wanted= =20 to be repaid directly for supplying about a third of the power utility=20 companies deliver to their customers.=20 "We need a cleanup bill" to set the matter straight, she said.=20 Although AB1X illustrates the flaws that come with speed, Bowen said, the= =20 Legislature can't afford to delay.=20 "I think we are much too slow in our response," she said. "But that has to = be=20 balanced against things we've done in a tearing hurry and then have had to= =20 fix later."=20 No matter what the Legislature does in the coming weeks, she said, Californ= ia=20 is in for a tough summer, and only determined conservation efforts will put= =20 much of a dent in a precarious supply-demand equation. ---------------------------------------------------------------------------= --- ------------------------------------------- PUC considers rewarding producers that sign long-term contracts=20 Greg Lucas, Lynda Gledhill, Chronicle Sacramento Bureau Wednesday, March 21, 2001=20 ,2001 San Francisco Chronicle=20 Sacramento -- Some cash-strapped producers of wind, solar and other=20 alternative forms of energy will get long-delayed financial relief under a= =20 proposed order by state regulators, Gov. Gray Davis said yesterday evening.= =20 A proposed order by the Public Utilities Commission is designed to reward= =20 energy producers who sign long-term contracts with utilities at lower rates= .=20 Alternative energy producers that voluntarily enter such contracts, which= =20 would start on April 1, would be paid within 15 days, said Davis, who=20 requested the order. Those that do not would have to wait until the utiliti= es=20 that buy their power return to solvency.=20 Davis blasted Pacific Gas & Electric Co. and Southern California Edison for= =20 not paying the alternative generators -- know as qualified facilities, or= =20 "QFs" -- even though the companies have been collecting money through rates= .=20 "It is wrong and irresponsible of the utilities to pocket and withhold the= =20 money designed to compensate the QFs," Davis said. "It's immoral and has to= =20 stop."=20 Alternative producers -- ranging from massive co-generation facilities at o= il=20 refineries to tiny biomass plants -- produce about a third of the state's= =20 supply of electricity. But many are shutting down because utilities have no= t=20 paid them since November.=20 The loss of some 3,000 megawatts from tapped-out alternative energy produce= rs=20 contributed to the blackouts that snarled California yesterday and Monday,= =20 according to the Independent System Operator, which manages the state's pow= er=20 grid.=20 The PUC's proposed order -- which will be considered at the board's Tuesday= =20 meeting -- offers the generators a choice of agreeing to a five-year contra= ct=20 at $79 per megawatt or a 10-year deal at $69 per megawatt, Davis said.=20 The order does not address the more than $1 billion already owed to the mor= e=20 than 600 alternative energy producers around the state. Davis said to favor= =20 one creditor over another in past debt could bring on bankruptcy proceeding= s=20 from other creditors.=20 The Legislature would also need to act to make the order work.=20 "It is critical to keep these facilities up and online," said Sen. Debra=20 Bowen, D-Marina del Ray, who estimates that Edison has $1.5 billion in cash= =20 on hand, and PG&E $2.5 billion. "The utilities owe it to the people of the= =20 state to pay them."=20 Edison said yesterday that it opposed any attempt to place alternative=20 producers ahead of their other creditors.=20 But Tom Higgins, a senior vice president for Edison International, which ow= es=20 alternative producers some $835 million, said his company was talking to th= e=20 governor's office about possible payment structures.=20 Alternative energy producers, particularly those that use high-priced natur= al=20 gas to fire their generators, say that without an immediate infusion of cas= h=20 they must close their plants.=20 "We've been obsessed with the health of the utilities and (have) forgotten= =20 the health of everyone else," said V. John White, legislative director of t= he=20 Clean Power Campaign, which lobbies for alternative energy producers.=20 CalEnergy Operating Corp., which operates eight geothermal plants in the=20 Imperial Valley producing 268 megawatt hours for Edison has sued the utilit= y=20 asking to be paid and to be temporarily released from their contract with= =20 Edison which has paid them nothing since November.=20 CalEnergy has a court hearing tomorrow on its Edison contract. Edison owes= =20 the company $75 million, and the debt increases by $1 million a day.=20 "We've lived up to our end of the bargain but Edison hasn't. We're now not = in=20 a position to make a property tax payment on April 10 and we're the largest= =20 employer in the county," said Vince Signorotti, CalEnergy's property manage= r.=20 Unlike Edison, PG&E is paying its creditors 15 cents on the dollar.=20 "We have offered over the past five days to prepay for future power not yet= =20 delivered to keep as many of them operating as possible, but the state need= s=20 to decide how its going to divvy up the limited money under the frozen=20 rates," said John Nelson, a PG&E spokesman.=20 The PUC's sudden attempt to recast the rates paid to alternative generators= =20 comes after several months of inaction, partly a result of waiting for=20 legislative negotiations on the issue to conclude. Those negotiations=20 eventually failed to move forward.=20 ---------------------------------------------------------------------------= --- ------------------------------------- State claims $5.5 billion overcharge: Refunds by wholesale generators sough= t By Dale Kasler Bee Staff Writer (Published March 22, 2001)=20 In its boldest attempt yet to extract refunds from wholesale power=20 generators, the state's grid operator accused the generators Wednesday of= =20 overcharging Californians by $5.5 billion for electricity since last May.= =20 The state's Independent System Operator, which manages the state's=20 transmission grid, plans to tell a federal regulatory agency today that pow= er=20 generators consistently took advantage of their stranglehold on the=20 California market to ratchet up prices.=20 The federal agency, the Federal Energy Regulatory Commission, recently=20 threatened to order generators to refund $134.8 million for overcharges,=20 mostly covering January and February. But those refunds amounted to just a= =20 fraction of what the grid operator was seeking. The ISO, which has been=20 complaining about market abuses for several months, says FERC must do more.= =20 "We're happy that (FERC) took this first step, but we think there's a long= =20 way to go," said Anjali Sheffrin, the ISO's director of market analysis. "A= s=20 far as I'm concerned, it's been too little, too late. ... The refunds they= =20 have acted on (so far) have been minimal."=20 She said the report covers five major power suppliers and 16 other power=20 importers.=20 FERC Commissioner William L. Massey said it would be improper for him to=20 comment on a report that has not yet been filed. But when told of the $5.5= =20 billion total, Massey told the Los Angeles Times: "That doesn't shock me in= =20 any way."=20 "Prices over the past 10 months in California have greatly exceeded the=20 federal standards of just and reasonable prices, and I think they have=20 exceeded the standards by possibly billions of dollars," he said.=20 However, most FERC critics are skeptical that the federal agency, which is = a=20 strong believer in letting free markets run their course, would order a=20 refund anywhere near as large as $5.5 billion -- even though it has found= =20 that California prices at times have been "unjust and unreasonable."=20 The big power generators, saying their charges were reasonable, are disputi= ng=20 the $134.8 million refunds proposed so far and have vowed to fight the ISO'= s=20 latest effort.=20 If the ISO were to prevail, the $5.5 billion in refunds could go a long way= =20 toward remedying California's energy mess.=20 They could help restore the financial health of Pacific Gas and Electric Co= .=20 and Southern California Edison, which have nearly been bankrupted by the=20 prices charged by the power generators. They also could ease the strain on= =20 the state treasury, which is spending billions to purchase electricity for= =20 Californians because PG&E and Edison can't.=20 Sheffrin said her department studied sales made by the power generators to= =20 ISO, which makes last-minute power purchases to balance supply with demand,= =20 and the California Power Exchange, the now-bankrupt entity where most of=20 California's wholesale electricity was bought and sold until December.=20 She said the study made "very generous" allowances for natural gas expenses= ,=20 costly air-pollution credits and other factors, including the scarcity of= =20 electricity. The result was $5.5 billion worth of charges "in excess of=20 competitive costs," she said.=20 In many cases, the companies used their market clout to submit bids that we= re=20 "way beyond their costs," she said.=20 "It was insufficient competition," Sheffrin said. "They got away with a lot= ."=20 She said the refund request isn't just a shot in the dark. FERC, she noted,= =20 "has already found that prices in the California wholesale energy market ha= ve=20 been unreasonable. We took it upon ourselves ... to show FERC how they got = to=20 be so high."=20 FERC proposed refunds totaling $124 million for January and February sales,= =20 declaring that generators' prices were too high.=20 In a separate case the federal agency, for the first time, accused two=20 generators last week of taking plants offline to force prices up.=20 ---------------------------------------------------------------------------= --- --------------------------------------- Power solution eludes Davis: Lawmakers grow edgy as crisis drags on=20 By Emily Bazar and Amy Chance Bee Capitol Bureau (Published March 22, 2001)=20 Gov. Gray Davis likes to compare the state's energy crisis to a complicated= =20 "three-cornered" billiard shot.=20 But as California plunged into another round of power blackouts this week,= =20 Davis has yet to line up the angle on an ultimate solution.=20 The state's short-term power bill is nearing $4.2 billion, and legislators= =20 are balking at the administration's requests for additional money.=20 Getting even the least controversial pieces of the puzzle through the=20 Legislature is taking weeks longer than expected.=20 While the Democratic governor has insisted secrecy about details of his pow= er=20 purchases is necessary to protect the state's bargaining position, other=20 state officials are complaining vigorously about the lack of information.= =20 And critical deals the governor hoped to reach with energy suppliers and=20 utility companies are proving difficult to close.=20 "I think we all got lulled into a little complacency a few weeks ago. All= =20 these things seemed to be going along, and the governor was making all thes= e=20 warm and fuzzy comments," said Assemblyman John Campbell, R-Irvine.=20 "But it only takes one deal to go sideways and we're all blacked out," he= =20 added. "The governor is running around basically saying, 'Trust me.' I'm no= t=20 sure he's deserving of the trust at this point."=20 Davis and his aides insist they are working around the clock on plans to=20 boost power generation, encourage conservation and reach an agreement with= =20 utilities that will keep them out of bankruptcy.=20 The utility plan, they say, is the equivalent of a large corporate merger= =20 that simply can't be accomplished overnight. Davis notes that earlier=20 deregulation efforts might have benefitted from a little more time.=20 Although the state has reached a broad "agreement in principle" with Southe= rn=20 California Edison to obtain its power transmission lines in exchange for he= lp=20 paying off its debts, a final, detailed deal has not been reached. The=20 initial agreement with Edison was announced Feb. 23.=20 And the governor has yet to achieve a tentative agreement with Pacific Gas= =20 and Electric Co., which is driving a harder bargain over price and other=20 elements of a potential rescue plan.=20 Joseph Fichera, one of several consultants receiving more than $11 million= =20 from the administration for advice on the energy crisis, said many people= =20 don't realize the complexity of the deal they're brokering.=20 In their bid to achieve a public takeover of the investor-owned utilities'= =20 transmission lines, he said, negotiators have to pore over thousands of=20 documents related to the transmission lines alone.=20 "We are doing what is normal in a transaction of this magnitude, which is= =20 investigate, document, circulate, redocument, agree, move forward," said=20 Fichera, an investment banker with Saber Partners in New York City. "The=20 governor has put a 'I want this yesterday' fire" under his negotiating team= .=20 The negotiator, however, declined to say when he expects final agreements t= o=20 be reached with the companies.=20 "It could be days, it could be weeks," he said.=20 There were signs, meanwhile, of trouble brewing on another front: the giant= =20 bond sale the state must make to repay the money it has spent so far on=20 electricity and to finance future long-term contracts for energy.=20 State Treasurer Phil Angelides said Wednesday the utilities are appealing a= =20 ruling by the state Public Utilities Commission that essentially ensures th= e=20 state will be repaid, a move that he said threatens to delay the sale=20 indefinitely.=20 "If the utilities have decided to adopt a scorched earth policy until they= =20 get what they need and want, then it will be a significant problem,"=20 Angelides said.=20 PG&E spokesman Ron Low said the governor is simply placing too many demands= =20 on a rate structure that doesn't compensate the utilities for their current= =20 costs.=20 "Political rhetoric is not going to change the math," he said.=20 In the Legislature, lawmakers are growing grumpier. Most were taken by=20 surprise Monday when blackouts were ordered across the state, weeks before= =20 summer temperatures were expected to set in and strain the power system.=20 "I'm more worried than ever," said Assemblyman Bill Leonard, R-San=20 Bernardino. "A lot of the elements we thought we had a handle on in January= =20 are unraveling."=20 A deal the governor said had been worked out weeks ago between the state an= d=20 more than 600 small alternative energy suppliers collapsed last week.=20 The alternative generators have not been paid by the utilities for months,= =20 and state leaders attempted to bargain down the price utilities pay those= =20 generators for power.=20 But administration officials complained privately that lawmakers instead=20 sweetened the pot for the suppliers to the point that the measure no longer= =20 helped solve the overall financial situation pushing the utilities toward= =20 bankruptcy. Under a proposal announced Tuesday by Davis, the Legislature=20 would authorize the PUC to require the utilities to pay the alternative=20 suppliers at prices more closely resembling the original deal.=20 But the governor ran into immediate opposition, as some suppliers said said= =20 he would not pay them enough to cover their fuel costs.=20 "We would go from not being paid, to losing money," said Hal Dittmer of=20 Wellhead Electric, a Sacramento-based supplier that has been shut down for= =20 more than a month. "Almost everybody who burns natural gas is going to shut= =20 down. (Davis) got it wrong."=20 Democrats outside the Davis administration, meanwhile, are complaining abou= t=20 the amount of money the state Department of Water Resources is spending on= =20 expensive, last-minute power purchases. Within a week, $4.2 billion will ha= ve=20 been committed.=20 State Sen. Steve Peace, D-El Cajon, chairman of the joint Legislative Budge= t=20 Committee, is warning the Davis administration that he will block additiona= l=20 funds for last-minute purchases of power until the PUC makes progress=20 recovering money that already has been spent. He intends to hold a hearing = on=20 the issue this morning.=20 On Wednesday, state Controller Kathleen Connell told Davis she will refuse = to=20 make a routine budget transfer he had requested, saying she is concerned th= at=20 there is "no outside check and balance" on the money the administration is= =20 spending to buy electricity on the spot market.=20 As the statewide elected official who pays the state's bills, Connell said= =20 she has yet to receive information from the Department of Water Resources= =20 about how much it is spending.=20 "We really need an accounting as to the total amount of liability they have= =20 accumulated," she said. "I understand they're in an emergency situation ...= =20 but it begins to imperil the state's ability to manage its cash flow."=20 Meanwhile, a bill to provide $1 billion for conservation programs, aimed at= =20 reducing power needs this summer, also has languished for several weeks in= =20 the state Senate. While Davis has focused his attention elsewhere, Republic= an=20 lawmakers have opposed the measure as too expensive. Democrats argue that= =20 each two-week delay prevents the state from saving as much energy as one=20 "peaker" plant will produce this summer. Peaker plants are designed to help= =20 meet the peaks of electricity demand.=20 "I'm the eternal optimist, but we have to keep working on all fronts," said= =20 Sen. Byron Sher, D-Palo Alto, who hopes to take his energy conservation bil= l=20 up for a vote in the Senate again today. "It's a formidable challenge."=20 Bee staff writer Dale Kasler contributed to this report.=20 ---------------------------------------------------------------------------= --- ------------------------------------------- Legislators learn some details of power contracts By John Hill Bee Capitol Bureau (Published March 22, 2001)=20 The veil of secrecy surrounding the state's electricity contracts lifted=20 Wednesday -- a little.=20 Gov. Gray Davis gave state legislators a report laying out some of the=20 details of long-term contracts designed to help the state pull out of its= =20 energy crisis. But the report left legislators and others clamoring for mor= e.=20 "The information raises more questions," said Assemblyman George Runner,=20 R-Lancaster. "I liken it to watching a parade through a knothole in a fence= .=20 You get to look at one float, but you're not sure about what's coming up an= d=20 what you've missed."=20 Davis had previously disclosed that the state had signed or was close to=20 signing 40 long-term contracts, at an average price over 10 years of $69 pe= r=20 megawatt-hour.=20 The contracts are part of the state's strategy for trying to avoid a fiscal= =20 shellacking in the energy spot market while making sure there's enough=20 electricity to avoid more blackouts.=20 Davis also previously disclosed that the contracts were for an average of= =20 about 9,000 megawatts a year, and that the total cost exceeded $40 billion.= =20 But Davis has resisted telling more, saying the state would jeopardize its= =20 ability to get the best prices if electricity generators knew what their=20 counterparts were getting.=20 On Wednesday, the governor's office released a March 15 report from S. Davi= d=20 Freeman, general manager of the Los Angeles Department of Water and Power, = to=20 the state Department of Water Resources. The state agency has been given th= e=20 responsibility of making power purchases, and Freeman was brought in to lea= d=20 the negotiations.=20 As of March 15, the state had signed 19 contracts with seven suppliers for= =20 periods ranging from 14 months to 20 years, with many for three or five=20 years, the report says. Some of the contracts are for electricity to meet t= he=20 state's everyday power demand, while others are only for times of peak use,= =20 such as hot summer days.=20 The state had "agreements in principle" for an additional 25 contracts.=20 Runner said he has been told that two of these contracts have since been=20 finalized.=20 The amount of power provided reaches a peak in 2004 of more than 10,000=20 megawatts. As the long-term contracts start to expire around then, the stat= e=20 is hoping that demand can be met with new contracts or spot purchases at=20 prices expected to be much cheaper.=20 The report says nine more long-term contracts were under discussion.=20 Some of the contracts are with power generators, while others are with=20 marketers who may get the power from a number of sources.=20 In some cases, the state may supply the natural gas used to generate the=20 electricity, or power costs may be pegged to the going rate for the fuel.= =20 Some suppliers can cancel if the state fails to sell bonds by a certain dat= e=20 to cover power costs or fails to maintain an investment grade credit rating= .=20 Some depend on the construction of power plants, but Freeman said they were= =20 firm commitments.=20 "We were pretty careful not to put a hope and a dream in the portfolio," he= =20 said.=20 More contracts will have to be signed to meet summer demand, and these=20 agreements will probably be more expensive, the report says.=20 One item not in Freeman's report was a secret deal to relieve several major= =20 generators from having to pay for polluting the air beyond allowable limits= .=20 The long-term power contracts include language that would have the state pa= y=20 the costs of "pollution credits" that allow power plants to exceed their=20 permitted levels of smog-forming pollutants, the governor's office confirme= d=20 Wednesday. Spokesman Steve Maviglio said that several generators are being= =20 relieved from having to pay those costs.=20 V. John White, a Sierra Club lobbyist close to the negotiations, said Dyneg= y=20 Inc., which has power plants in El Segundo, Encina and Long Beach, is one o= f=20 them. Dynegy officials did not return calls to The Bee on Wednesday.=20 Freeman said that generators were demanding hefty premiums for having to de= al=20 with air quality regulators in the summer and he figured it would be cheape= r=20 just to pay for the pollution credits.=20 In other energy-related developments:=20 With more power plants back online, grid operators dropped down to a Stage = 1=20 electricity alert. The state Independent System Operator was expecting=20 supplies to gradually increase over the next few days.=20 The state Public Utilities Commission issued a revised draft decision that= =20 would impose the prices outlined Tuesday by Davis for power produced by=20 alternative energy companies -- $79 a megawatt-hour for five-year contracts= =20 or $69 a megawatt-hour for 10 years. The proposal is scheduled for a PUC vo= te=20 March 27.=20 A federal judge ruled that one of the nation's major electricity generators= =20 must continue supplying California with emergency power.=20 In imposing an injunction on Reliant Energy Services Inc., U.S. District=20 Judge Frank C. Damrell Jr. noted the "rolling blackouts (that have) darkene= d=20 the California landscape" and said the loss of Reliant's production "poses = an=20 imminent threat."=20 Bee staff writers Carrie Peyton, Chris Bowman and Denny Walsh contributed t= o=20 this report.=20 ---------------------------------------------------------------------------= --- ---------------------------------------- Federal judge orders major power wholesaler to sell to California=20 By Don Thompson ASSOCIATED PRESS=20 March 21, 2001=20 SACRAMENTO =01) A federal judge issued a preliminary injunction Wednesday= =20 ordering a major electricity wholesaler to continue selling to California= =20 despite its fear that it will not get paid.=20 U.S. District Judge Frank C. Damrell Jr. said Californians were at risk of= =20 irreparable harm if Reliant Energy Services stopped selling power to the=20 Independent System Operator, which oversees the state's power grid. The ISO= =20 buys last-minute power on behalf of utilities to fill gaps in supply to try= =20 to fend off blackouts.=20 Damrell dismissed Reliant's attempt to force the state Department of Water= =20 Resources to back the ISO's purchases for the state's two biggest utilities= .=20 The state has been spending about $50 million a day on power for Pacific Ga= s=20 and Electric Co. and Southern California Edison, both denied credit by=20 suppliers after amassing billions of dollars in debts.=20 Controller: State's power spending imperils its financial health=20 Governor says utilities must pay in advance for some power=20 ?=20 The judge said he had no authority to force the DWR to pay for that power.= =20 Gov. Gray Davis has said the state isn't responsible for purchasing the=20 costly last-minute power ISO buys for Edison and PG&E, despite a law=20 authorizing state power purchases on the utilities' behalf.=20 ISO attorney Charles Robinson said the ruling gives ISO operators "a tool t= o=20 assist them in keeping the lights on in California."=20 "Had the decision gone the other way, one could expect other generators to= =20 simply ignore emergency orders," Robinson said.=20 Damrell's preliminary injunction will remain in effect until the Federal=20 Energy Regulatory Commission rules on the matter.=20 Damrell denied the ISO's request for preliminary injunctions against three= =20 other wholesalers, Dynegy, AES and Williams, who agreed to continue selling= =20 to the ISO pending the FERC ruling.=20 The ISO went to court in February after a federal emergency order requiring= =20 the power sales expired. The judge then issued a temporary restraining orde= r,=20 requiring the sales, but dropped it after the suppliers agreed to continue= =20 sales to California, pending his Wednesday ruling.=20 The ISO said it would lose about 3,600 megawatts if the suppliers pulled ou= t,=20 enough power for about 2.7 million households. One megawatt is enough for= =20 roughly 750 homes.=20 Grid officials said Reliant's share alone is about 3,000 megawatts. Reliant= =20 said the amount at issue actually is less than a fourth of that, because mo= st=20 of the power is committed under long-term contracts.=20 Reliant, which provides about 9 percent of the state's power, worries it=20 won't get paid due to the financial troubles of PG&E and Edison.=20 PG&E and Edison say that together they have lost about $13 billion since Ju= ne=20 due to soaring wholesale electricity costs that California's 1996=20 deregulation law bars them from passing onto customers.=20 At the same time, the state has faced a tight electricity supply, due in pa= rt=20 to California power plant shutdowns for maintenance and to a tight=20 hydroelectric supply in the Pacific Northwest.=20 Managers of the state power grid imposed rolling blackouts across the state= =20 Monday and Tuesday as supply fell short of demand. Wednesday, cooling=20 temperatures and the completion of repairs at several power plants allowed= =20 the state to avoid blackouts.=20 State Controller Kathleen Connell said Wednesday that the energy crunch als= o=20 imperils California's financial health.=20 Connell said the state's power-buying on behalf of Edison and PG&E is is=20 gutting its budget surplus. Since the state started making emergency power= =20 buys in January, the surplus has fallen from $8.5 billion to about $3.2=20 billion, she said.=20 Connell ordered an audit of the state's power-buying, saying Davis is=20 withholding key financial information from her office and the Legislature.= =20 She is refusing a request by Davis and the Legislature to transfer $5.6=20 billion into a "rainy day fund" she said was set up to impress Wall Street = as=20 the state prepares to issue $10 billion in revenue bonds to cover its=20 power-buying.=20 Transferring the money would leave the state general fund $2.4 billion in= =20 debt, Connell said.=20 Sandy Harrison, spokesman for the state Department of Finance, and Keely=20 Bosler of the Legislative Analyst's Office, said such transfers are routine= =20 and required by law.=20 They put the state's budget surplus at $5.6 billion.=20 "The law says she has to do it. The law does not give her the power to dema= nd=20 that kind of audit information," Harrison said.=20 He said the state's budget isn't in danger because it will be repaid with t= he=20 $10 billion in long-term debt.=20 Wells Fargo & Co. chief economist Sung Won Sohn said he sees little progres= s=20 in efforts to fix the state's power problems and end state electricity=20 purchases.=20 "If we're going to pour money into a bottomless pit, I would worry about th= e=20 state's finances," he said. "At some point we're going to run out of money.= "=20 The controller's criticism of fellow Democrat Davis won support from Assemb= ly=20 Republicans and Secretary of State Bill Jones, a Republican considering=20 challenging Davis next year.=20 Jones said he wants to announce his own plan to solve the state's energy=20 woes, but can't unless Davis releases more financial details.=20 Davis spokesman Steve Maviglio dismissed the criticism.=20 "Political grandstanding doesn't generate one more kilowatt of energy for= =20 California in this time of emergency," he said.=20 Maviglio said the administration has released the financial information it= =20 can without jeopardizing negotiations for long-term power contracts with=20 wholesalers.=20 ---------------------------------------------------------------------------= --- ---------------------------------------------- Controller: State's power spending imperils its financial health=20 By Don Thompson ASSOCIATED PRESS=20 March 21, 2001=20 SACRAMENTO =01) California's power-buying on behalf of two strapped utiliti= es is=20 gutting its budget surplus and putting the state at financial risk, the sta= te=20 controller said Wednesday.=20 The surplus dropped from $8.5 billion in January, when the state began buyi= ng=20 electricity for Pacific Gas and Electric Co. and Southern California Edison= ,=20 to $3.2 billion now, Kathleen Connell estimates.=20 Connell ordered an audit of the state's power-buying, saying Gov. Gray Davi= s=20 is withholding key financial information from her office and the Legislatur= e.=20 Wednesday marked the first time in three days the state avoided rolling=20 blackouts. Power grid officials credited cooling temperatures and the=20 completion of repairs at several power plants.=20 Connell said the energy crunch now imperils the state's budget as well as i= ts=20 electric grid.=20 California has been spending about $45 million a day =01) $4.2 billion so f= ar =01)=20 to buy power for Edison and PG&E, both denied credit by electricity=20 wholesalers.=20 The two utilities, California's largest, say they are nearly $14 billion in= =20 debt due to soaring wholesale power costs the state's deregulation law bloc= ks=20 them from recovering from customers.=20 Meanwhile, the state has faced high natural gas costs and a tight power=20 supply driven in part by power plant repairs in California and scarce=20 hydroelectric power in the Pacific Northwest.=20 Standard & Poor's has put the state on a credit watch due to its power=20 purchases and chastised Davis, the Legislature and state regulators for not= =20 taking more aggressive steps to assure the utilities can pay their bills.= =20 On Wednesday, Connell said she is refusing a request by Davis and the=20 Legislature to transfer $5.6 billion into a "rainy day fund" she said was s= et=20 up to impress Wall Street as the state prepares to issue $10 billion in=20 revenue bonds to cover its power-buying.=20 Transferring the money would leave the state general fund $2.4 billion in= =20 debt, Connell said.=20 Sandy Harrison, spokesman for the state Department of Finance, and Keely=20 Bosler of the Legislative Analyst's Office, said such transfers are routine= =20 and required by law.=20 They put the state's budget surplus at $5.6 billion.=20 "The law says she has to do it. The law does not give her the power to dema= nd=20 that kind of audit information," Harrison said.=20 He said the state's budget isn't in danger because it will be repaid with t= he=20 $10 billion in long-term debt.=20 Connell said the scope of the proposed transfer is unprecedented and amount= s=20 to a "shell game" that disguises the power purchases' impact on the state= =20 budget.=20 Wells Fargo & Co. chief economist Sung Won Sohn said he sees little progres= s=20 in efforts to fix the state's power problems and end state electricity=20 purchases.=20 "If we're going to pour money into a bottomless pit, I would worry about th= e=20 state's finances," he said. "At some point we're going to run out of money.= "=20 The controller's criticism of fellow Democrat Davis won support from Assemb= ly=20 Republicans and Secretary of State Bill Jones, a Republican considering=20 challenging Davis next year.=20 Jones said he wants to announce his own plan to solve the state's energy=20 woes, but can't unless Davis releases more financial details. He said his= =20 plan may involve giving the utilities low-interest loans with their=20 transmission lines held as collateral.=20 Davis spokesman Steve Maviglio dismissed the criticism.=20 "Political grandstanding doesn't generate one more kilowatt of energy for= =20 California in this time of emergency," he said.=20 Maviglio said the administration has released the financial information it= =20 can without jeopardizing negotiations for long-term power contracts with=20 wholesalers.=20 ---------------------------------------------------------------------------= --- --------------------------------------------- Governor says utilities must pay in advance for some power=20 By Jennifer Coleman ASSOCIATED PRESS=20 March 21, 2001=20 SACRAMENTO =01) The state's two largest utilities will be ordered to pay=20 environmentally friendly power generators in advance, a move Gov. Gray Davi= s=20 hopes will bring a quick end to the power blackouts that darkened Californi= a=20 this week.=20 The statewide blackouts that stretched from San Diego to Oregon on Monday a= nd=20 Tuesday were caused in part by the failure of Southern California Edison an= d=20 Pacific Gas and Electric Co. to pay millions of dollars they owe "qualifyin= g=20 facilities" or QFs, Davis said.=20 Such suppliers use cogeneration =01) steam from manufacturing plus natural = gas =01)=20 or solar, wind and other renewable energy to generate electricity. This wee= k=20 California lost about half the power those generators normally provide.=20 Controller: State's power spending imperils its financial health=20 ?=20 Several of them said they hadn't been paid by Edison and PG&E in weeks and= =20 can't afford to keep operating their plants.=20 Davis accused the utilities of taking in money from customers while failing= =20 to pay the QFs. The state has been spending about $45 million a day since= =20 January to buy power for customers of Edison and PG&E, which are so=20 credit-poor that suppliers refuse to sell to them.=20 "It's wrong and irresponsible of the utilities to pocket this money and not= =20 pay the generators," the governor said at a Capitol news conference Tuesday= =20 evening. "They've acted irresponsibly and immorally and it has to stop."=20 PG&E called the governor's statements "inappropriate and unjustified," addi= ng=20 that it was negotiating a payment plan with the QFs. Edison said it is inte= nt=20 on paying creditors and working with the California Public Utilities=20 Commission to pay QFs for future power sales.=20 Controller Kathleen Connell warned Wednesday that the state's $2=20 billion-a-month power purchases are jeopardizing California's budget.=20 The state's budget surplus dropped from $8.5 billion in January, when the= =20 power purchases began, to $3.2 billion now, Connell estimates. She blamed= =20 Davis for withholding key financial information, and ordered an audit of th= e=20 state's power spending starting next week.=20 She blocked a request by the Legislature and Davis administration to transf= er=20 $5.6 billion from the state's general fund into a special "rainy day" fund,= =20 saying that would have left the general fund $2.4 billion in debt.=20 The Legislative Analyst's Office said such transfers are routine; Connell= =20 agreed, but said the size of the transfer is unprecedented.=20 "We started this year with a generous budget surplus," Connell said. "The= =20 energy crisis has taken much of that away and this transfer on top of the= =20 electricity purchases would put the fund at risk."=20 Meanwhile, keepers of the state's power grid were optimistic California wou= ld=20 get through Wednesday without another day of rolling blackouts. Two plants= =20 down for repairs returned to service.=20 Several power plants that were taken down for repairs are also expected com= e=20 online by the end of the week, reducing the likelihood of blackouts, said J= im=20 Detmers, ISO vice president.=20 Power may flow to homes and businesses, but it could soon cost consumers=20 more, said Assemblyman Fred Keeley, one of the Legislature's leaders on=20 energy issues.=20 "I think it's intellectually appropriate and honest to tell people as soon = as=20 it's apparent" that a rate increase is warranted, the Boulder Creek Democra= t=20 said Tuesday, indicating that time had come.=20 He estimated that the state Public Utilities Commission may soon have to=20 raise rates by about 15 percent to cover the state's costs and its utilitie= s'=20 bills.=20 "My sense is that people will appreciate having some certainty and being ab= le=20 to plan for it," he said. "They don't have to like it but I think they'll= =20 appreciate it."=20 Davis said he is confident the utilities and the state can pay their bills= =20 without further rate increases for Edison and PG&E customers.=20 In the meantime, the Independent System Operator, keeper of the grid, is=20 counting on continued conservation by residents and businesses to avoid mor= e=20 blackouts. Conservation accounted for about 300 megawatts in savings during= =20 Tuesday's peak usage, enough to power 300,000 homes.=20 Roughly a half-million homes and businesses were affected by Tuesday's=20 blackouts, which snarled traffic and plunged schools and businesses into=20 darkness across the state.=20 The outages began at 9:30 a.m. and continued in 90-minute waves until about= 2=20 p.m., when the ISO lifted its blackout order. They were blamed for at least= =20 one serious traffic accident.=20 Two cars collided at an intersection in the Los Angeles suburb of South El= =20 Monte where the traffic lights were out. Two people were seriously hurt, sa= id=20 California Highway Patrol Officer Nick Vite.=20 In San Francisco's Chinatown, souvenir shops normally bustling with visitor= s=20 were forced to shut down. Nearby, irritated customers waited for a bank to= =20 reopen.=20 The blackouts, like Monday's, were caused by a combination of problems,=20 including unseasonably warm weather, reduced electricity imports from the= =20 Pacific Northwest and numerous power plants being shut down for repairs.=20 Adding to those troubles, the state lost about 3,100 megawatts from the QF= =20 plants.=20 Senate Energy Committee Chairwoman Debra Bowen, D-Marina del Rey, estimated= =20 Tuesday that Edison has amassed more than $1 billion and PG&E more than $2= =20 billion that they have not paid to generators.=20 Davis said the PUC planned to issue an order next week directing the=20 utilities to pre-pay their future QF bills.=20 PG&E said its prepayments hinge on an upcoming PUC decision on whether the= =20 utility's rates are sufficient to pay its bills and cover the state's power= =20 purchases on its behalf, which amount to $4.2 billion since early January.= =20 Edison and PG&E say they have lost more than $13 billion since last June to= =20 climbing wholesale electricity prices, which the state's 1996 deregulation= =20 law prevents them from passing on to ratepayers.=20 ---------------------------------------------------------------------------= --- ----------------------------------------- Energy Overcharge of $5.5 Billion Is Alleged=20 Power: Money should be refunded to taxpayers and utilities, the state grid= =20 operator says, citing evidence of market manipulation. Suppliers deny the= =20 accusation.=20 By TIM REITERMAN and NANCY RIVERA BROOKS, Times Staff Writers=20 ?????Wholesale electricity suppliers overcharged California by about $5.5= =20 billion between May and last month, and that money should be refunded to th= e=20 state's taxpayers and financially strapped utilities, the state power grid= =20 operator said Wednesday. ?????Generators engaged in market manipulation and consistent patterns of= =20 bidding far above costs in the deregulated energy market, the California=20 Independent System Operator found in a study of pricing data. The findings= =20 support the widespread belief that these suppliers reaped massive additiona= l=20 revenue by manipulating the market. ?????Spokesmen for the companies denied the accusation. ?????The study, prepared for a filing with federal regulators today, is=20 central to Cal-ISO's efforts to seek reimbursement for what it considers=20 excessive charges by electricity suppliers during the state's energy crisis= . ?????"This might be the first time we told them the total impact and=20 magnitude [of the overcharging]," said Anjali Sheffrin, Cal-ISO's director = of=20 market analysis. "We think the entire amount deserves consideration for=20 refunds." ?????Using confidential bidding data on tens of thousands of electricity=20 sales, Cal-ISO found that five companies that together supply about 30% of= =20 the power delivered to customers of the state's investor-owned utilities=20 engaged in two types of behavior that tended to push up prices: ?????* They effectively withheld supplies by bidding at excessive prices,= =20 even though they could have made some money selling more electricity. ?????* Less frequently, they had power generation available but did not bid= =20 at all. ?????The study concluded that energy suppliers commonly offered their=20 electricity at twice their cost. For example, Sheffrin said, the average=20 markup in August was 100% during peak hours. ?????A spokeswoman at the Federal Energy Regulatory Commission, which=20 oversees wholesale electricity pricing across the country, declined to=20 comment Wednesday, saying, "This is part of an ongoing proceeding." ?????FERC member William L. Massey, who has considered previous commission= =20 actions on refunds to be inadequate, said it would be improper for him to= =20 comment on a report that has not yet been filed. But when told of the=20 $5.5-billion total, Massey said: "That doesn't shock me in any way." ?????"Prices over the past 10 months in California have greatly exceeded th= e=20 federal standards of just and reasonable prices, and I think they have=20 exceeded the standards by possibly billions of dollars," he said. ?????Cal-ISO, which oversees grid operations and an emergency energy market= ,=20 previously detailed $550 million in alleged overcharges for December and=20 January and asked FERC for refunds. But the commission has proposed refunds= =20 of only a tiny fraction of that amount. ?????The study covered five major in-state power suppliers--Reliant Energy,= =20 Dynegy, Williams/AES, Duke Energy and Mirant, formerly Southern Energy--plu= s=20 16 power importers, all of which deliver power to customers of Pacific Gas = &=20 Electric Co., Southern California Edison and San Diego Gas & Electric Co. ?????"All [21] overcharged, but some excessively and some by moderate=20 amounts," Sheffrin said. ?????Cal-ISO's public filing will quantify the alleged overcharging by each= =20 company, but the companies will be identified only by a number. The code wi= ll=20 be provided to FERC, Sheffrin said, and Cal-ISO lawyers will determine how= =20 much information about the companies will be made public. ?????State, U.S. Investigations ?????California electricity markets and the companies that buy and sell pow= er=20 in the state have been the subject of several investigations by state and= =20 federal authorities since wholesale electricity prices first skyrocketed in= =20 May. ?????Electricity suppliers have repeatedly denied manipulating the Californ= ia=20 market in any way, whether through above-cost bidding in spot markets or=20 through physical withholding of electricity to drive up prices. ?????Reliant Energy is cooperating with FERC's requests for more data and i= s=20 confident the commission will conclude that prices charged by Reliant were= =20 justified, said Joe Bob Perkins, president of the Houston-based company. ?????Perkins also bitterly disputed charges that Reliant has shut down unit= s=20 so that it can earn bigger profits on the power sold by the remaining plant= s.=20 These charges have been leveled against all of the power-plant owners in th= e=20 state. ?????Reliant Vice President John Stout said Cal-ISO's calculations typicall= y=20 don't include such fixed costs as salaries, taxes and the interest on bonds= =20 they sold to finance their power plants, which they acquired under terms of= =20 the state's landmark 1996 deregulation law. ?????In addition, he said, many high-priced power days have resulted from= =20 buyers bidding against each other for scarce supplies rather than sellers= =20 charging excessive amounts--like a house price being driven far above the= =20 listing price in a hot real estate market. ?????Williams Energy Services, a trading company that markets most of the= =20 power produced by plants owned by AES, also says it will be exonerated by= =20 FERC once the commission examines documentation being submitted, said Paula= =20 Hill-Collins, spokeswoman for the Tulsa, Okla., company. ?????"FERC has the obligation to investigate when these accusations are=20 made," Hill-Collins said. "This is just a process of justification, not=20 necessarily proof of guilt." ?????Williams/AES was recently ordered by FERC to prove that it did not tak= e=20 generating units out of service last year to drive up electricity prices, o= r=20 refund $10.8 million to California utilities. ?????During the period studied, suppliers sold electricity in the Californi= a=20 Power Exchange to Southern California Edison, PG&E and San Diego Gas &=20 Electric Co. and in a backup market for last-minute electricity operated by= =20 Cal-ISO. But sky-high prices plunged Edison and PG&E deeply into debt, and= =20 most suppliers stopped selling to them in January, forcing the state=20 Department of Water Resources to step in as the primary electricity buyer f= or=20 the three big utilities' 27 million customers. ?????The Cal-ISO study, first summarized at an energy conference last week = at=20 UC Berkeley but not otherwise publicized, concluded that the companies=20 exercised so-called market power to pump up electricity prices. ?????Severin Borenstein, director of the Energy Institute at Berkeley, said= =20 Cal-ISO's study is consistent with his research examining pricing practices= =20 in 2000. ?????"We found several billion dollars . . . in departures from competitive= =20 pricing," he said. "When the market was tight this summer, they were able t= o=20 push up prices, and they did." ?????The early warning signs of electricity price spikes, the study found,= =20 appeared in May after two years of relatively stable prices of $30 to $40 p= er=20 megawatt-hour under deregulation. Prices went up during the summer, dipped = in=20 September and October with lower demand, then took off in November and=20 December as weather turned cold and the price of natural gas, which is used= =20 to generate much of the state's electricity, reached record levels. ?????"There were plant outages, and demand and supply became close," Sheffr= in=20 said. "Whatever price they bid had to be taken, and market power asserted= =20 itself." ?????Cal-ISO found that $3 billion of the alleged overcharges occurred=20 between May and November. ?????On Friday, federal regulators ordered six wholesale power suppliers to= =20 refund $55 million to California if they cannot justify prices charged in= =20 February. The refund was limited to power sold that month in excess of $430= =20 per megawatt-hour during Stage 3 power alerts, when supplies are so tight= =20 that rolling blackouts are threatened. (One megawatt-hour is enough=20 electricity to supply 750 typical homes for an hour.) ?????The previous week, FERC ordered 13 suppliers to justify or refund $69= =20 million for power sold in January at prices above $273 per megawatt-hour. ?????Massey opposed the potential refunds as too low because they were=20 limited to hours in which a Stage 3 power emergency was in place and becaus= e=20 the benchmark price set for each month was too high--combining to exempt mo= re=20 than 70,000 transactions from scrutiny. ?????"We're still looking for our lost wallet under the lamppost, which is= =20 Stage 3 alerts," said Massey, one of three commissioners on the five-member= =20 board (two seats are vacant). ?????Generators "have been given the free and clear," he said. ?????"These tinkling little refunds they have come out with recently are=20 almost a joke," said Cal-ISO board member Mike Florio, senior attorney at t= he=20 Utility Reform Network. ?????Resisting Price Caps ?????Cal-ISO contends that the last 10 months have proved that generators c= an=20 no longer be allowed to receive electricity prices that are dictated by wha= t=20 the market will bear. ?????"FERC granted market-based rate authority on each of these suppliers'= =20 own showing that they could not manipulate prices, yet their actions have= =20 shown the contrary," Sheffrin said. "We feel FERC needs to look at the=20 premise of allowing these generators to continue selling at market-based=20 rates." ?????The commission is responsible for ensuring just and reasonable=20 electricity rates. Although it has called California's power market=20 dysfunctional and vulnerable to manipulation, the agency has resisted setti= ng=20 firm price caps sought by California's congressional delegation. ?????Chairman Curt L. Hebert Jr. strongly opposes caps, while Massey wants = to=20 use caps across the West as a "temporary timeout." ?????Energy Secretary Spencer Abraham, in a New York news conference=20 Wednesday, reiterated his opposition to electricity price caps as a way to= =20 cope with California's energy crisis. ?????"If we put price caps in place, there will be more blackouts, and=20 they'll be worse," Abraham said. ?????Cal-ISO is filing its market study as part of its comments on FERC sta= ff=20 recommendations on ways to thwart market manipulation. FERC's proposal=20 includes strict coordination of power plant outages by Cal-ISO with reporti= ng=20 of suspicious closures to FERC, and generator-by-generator bid caps tied to= =20 costs. ---=20 ?????Reiterman reported from San Francisco, Rivera Brooks from Los Angeles.= =20 Times staff writer Thomas S. Mulligan in New York contributed to this story= . ---------------------------------------------------------------------------= --- ---------------------------------------------------------------------------= --- ------------------------------------- Power Strain Eases but Concerns Mount=20 Energy: Officials say summer prices will be high, and a state report shows= =20 that contracts with generators are far short of goals.=20 By DAN MORAIN and JENIFER WARREN, Times Staff Writers=20 ?????SACRAMENTO--California's fragile electricity system stabilized=20 Wednesday, but a Davis administration report suggested troubles ahead becau= se=20 the state could be forced to buy most of its power for the coming summer on= =20 the costly and volatile spot market. ?????After two days of statewide blackouts, power plants that had been shut= =20 down were cranked up. Unseasonable heat tapered off. The operators of the= =20 statewide power grid relaxed their state of emergency. ?????But plenty of ominous signs remained. Many small producers remained sh= ut=20 down, skeptical about Gov. Gray Davis' plan for utilities to pay them. ?????State Controller Kathleen Connell issued a sharp warning about the hig= h=20 cost of the state's foray into the power business and announced that she wi= ll=20 block an administration request that she transfer $5.6 billion into an=20 account that could be tapped to pay for state purchases of electricity. ?????And a report from the administration summarizing contracts between Dav= is=20 and independent power generators showed that the state has signed contracts= =20 for only 2,247 megawatts of electricity, significantly less than the 6,000 = to=20 7,000 megawatts previously claimed. ?????While there are agreements in principle for the full amount, the repor= t=20 notes that generators can back out of the contracts for a variety of reason= s,=20 including the state's failure to sell bonds to finance power purchased by= =20 July 1. The Legislature has approved plans to sell $10 billion in bonds, bu= t=20 none have yet been issued. ?????"We are exposed enormously this summer," Senate Energy Committee=20 chairwoman Debra Bowen (D-Marina del Rey) said after looking at the report.= =20 "We owe the people the truth about how difficult this summer is going to be= .=20 We don't have a power fairy." ?????Perhaps most significant, the report suggests that the contracts fall= =20 significantly short of Davis' stated goal of buying no more than 5% of the= =20 state's summer needs on the spot electricity market, where prices can be ma= ny=20 times those of long-term contracts. ?????After reading the report, Frank Wolak, a Stanford University economist= =20 who studies the California electricity market, said the numbers suggested= =20 that the state's long-term contracts will cover less than half of what the= =20 state will need this summer. ?????"We're definitely short this summer, next summer and the summer of=20 2003," he said. ?????California was forced to start buying electricity in December--at a co= st=20 of $50 million a day--because producers refused to sell to Southern=20 California Edison and Pacific Gas & Electric. The two utilities amassed=20 billions of dollars in debt when prices for wholesale power soared on the= =20 spot market. ?????Vikram Budhraja, a consultant retained by Davis to negotiate deals wit= h=20 generators, said the report represents a "work in progress." He said the=20 state may yet sign new contracts. ?????However, Wolak said the contract figures confirm what he and others ha= ve=20 been dreading: that summer is going to be rife with rolling blackouts unles= s=20 serious steps to cut demand are taken immediately. ?????Wolak and other ex
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