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Enron Mail |
Please see the following articles: (* due to the large influx of pressclip=
s,=20 I will be distributing two sets of articles today) Contra Costa Times, Sat, March 24, 2001- "PG&E balking at Davis' plan" Sac Bee, Sat, 3/24/2001 - "A lone voice for price caps: U.S. regulator fear= s=20 'a disaster'" NY Times, March 24, 2001- "California's Choices All Look Painful" The Bakersfield Californian, Filed: 03/24/2001- "Local generators win small= =20 victory" LA Times, Sat, March 24, 2001- "Hearings On Cost of Natural Gas=20 Skyrocketing prices affecting economy" The Riverside Enterprise, Mon, 03/26/01 - "Enron drops power project=20 The move surprises critics and supporters of a Lake Elsinore hydroelectric= =20 plant" Orange County Register, March 24, 2001 - "Jobs at utilities appear safe --= =20 for now" San Jose Mercury News, Mon, March 26, 2001- "State power regulator proposes= =20 40% rate increase" =20 Dow Jones Newswires, Monday 3/26 - "Calif State Treasurer: Electricity Rate= =20 Hike Inevitable" MICHAEL LIEDTKE, AP Business Writer, Monday, March 26, 2001- "Possible rate= =20 hikes cheer California utility investors" San Jose Mercury - "Duke says would take less for California power sales" Posted at 11:55 a.m. PST Monday, March 26, 2001=20 New York Times, Mon, March 26, 2001 - "Power Woes Raise Questions Over=20 Control of Gas Pipelines" Dow Jones Newswires, Sun, March 25, 2001 - "SoCal Edison To Pay QFs On=20 Going-Forward Basis" San Jose Mercury News - "Legislative firebrand Burton plays hardball in=20 debate over power" Posted at 9:53 p.m. PST Sunday, March 25, 2001=20 Orange County Register, March 25, 2001- "Web of power intrigue alleged" Orange County Register, March 25, 2001 - "Studies show pitfalls in power=20 market" Oakland Tribune, Sun, March 25, 2001 - "Headed toward 'disaster'=20 Analysts: California fails in bid to get handle on crisis" Contra Costa Times, Sun, March 25, 2001- "Experts predict summer outages So= me=20 say conserving not enough" DowJones Newswires, Sat, 3/24/2001- "Calif To OK 20% Rate Hike For Utils Tu= e=20 - Commissioner"=20 Sacramento Bee - "Few share Davis' view on rate hike: Even aides predict bi= g=20 power cost boost" (Published March 25, 2001) San Jose Mercury News - "Rising cost of purchasing electricity sparks alarm= " Posted at 11:00 p.m. PST Saturday, March 24, 2001=20 San Diego Union, March 25, 2001- "Bond may fall short, Davis aides fear Governor holds out hope of keeping a lid on rates" ---------------------------------------------------------------------------= --- ---------------------------------------------------------------------------= --- --------------------- Published Saturday, March 24, 2001=20 PG&E balking at Davis' plan POWER CRISIS=20 The utility threatens to take legal action if it is forced to reimburse=20 alternative energy producers and the state=20 By Andrew LaMar TIMES STAFF WRITER=20 SACRAMENTO -- Pacific Gas & Electric raised the threat of legal action Frid= ay=20 if the Davis administration follows through with a plan that would force th= e=20 ailing utility to cough up money to alternative energy producers as well=20 repay the state for its power purchases.=20 The strident stance caught some state officials off guard and led one of Go= v.=20 Gray Davis' advisers to label it "negotiating in the paper." The two sides= =20 have squared off for more than a month to try to hammer out an agreement th= at=20 would rescue PG&E from its mounting debt.=20 The company's resistance to plans that emerged this week in proposed=20 legislation and a prospective order to be considered Tuesday by the Public= =20 Utilities Commission further complicates a difficult situation that appears= =20 to be growing more tense by the day.=20 "These actions approach the problem in a piecemeal and uncoordinated fashio= n=20 and would force us to pay out far more than we collect in rates, further=20 exacerbating an already precarious financial situation," said Gordon R.=20 Smith, president and chief executive of PG&E. "The numbers just don't work.= "=20 Company spokesman John Nelson said he could not specify which options the= =20 utility might pursue.=20 And while Smith promised to continue to work with state officials on a=20 solution, he said: "We have a duty to our suppliers, lenders and shareholde= rs=20 to protect the assets of the utility, and we must challenge any action by t= he=20 state to force us to pay out more than is collected in rates."=20 Creditors could petition to take Southern California Edison or PG&E into=20 bankruptcy at any moment, and some say their patience for a state solution = is=20 wearing thin.=20 Lawmakers moved quickly this week to rescue the alternative generators, kno= wn=20 as qualifying facilities, after many shut down Monday and helped trigger tw= o=20 days of rolling blackouts. The facilities range from geothermal operations= =20 and wind turbines to natural gas-burning co-generation plants. They produce= =20 about 30 percent of the state's energy needs this time of year.=20 The qualifying facilities quit running because they no longer had cash to p= ay=20 employees and buy goods to keep their plants operating. Southern California= =20 Edison and PG&E have not paid the facilities for months, and they are owed= =20 $1.5 billion.=20 A bill by Assemblyman Fred Keeley, D-Santa Cruz, sought to give the PUC=20 authority to order utility companies to pay the qualifying facilities in=20 advance. The measure also would direct utility companies to pay back the=20 Department of Water Resources, which has bought power for them since=20 mid-January, before paying back others.=20 The legislation passed the Senate but stalled in the Assembly, where=20 Republicans objected to the haste of the action, among other concerns. On= =20 Friday, Assembly Speaker Bob Hertzberg, D-Van Nuys, said Democrats and=20 Republicans would work through the weekend to come up with a plan that coul= d=20 win passage Monday.=20 Meanwhile, Smith said the approach contained in the legislation would make= =20 PG&E's finances even worse. The company is collecting $400 million in bills= =20 each month but owes $1.4 billion a month for energy purchases.=20 On Tuesday, Davis called PG&E's and Edison's practice of collecting bills= =20 from their customers to pay the qualifying facilities and not forwarding th= e=20 money "immoral." On Friday, Davis spokesman Steve Maviglio said the governo= r=20 had nothing more to add.=20 Joseph Fichera, a member of the governor's team of advisers negotiating wit= h=20 utility companies, said PG&E's refusal to fully pay qualifying facilities= =20 leads the facilities to shut down, which in turn forces the state to find t= he=20 energy elsewhere.=20 "They are still collecting and not paying out the full amount," Fichera sai= d.=20 "The consequences of that is that it increases the amount of power the stat= e=20 has to buy on the spot market and creates a bigger problem for everybody."= =20 Fichera said negotiations with Edison and PG&E would continue through the= =20 weekend. He said there's nothing wrong with PG&E articulating its position,= =20 but company officials have misjudged the plan and should keep in mind the P= UC=20 will proceed on the qualifying facilities order in a way the company's=20 finances can work.=20 "They need to get the QFs online," Fichera said. "They need to see the bigg= er=20 picture that (having) the QFs offline is exacerbating a problem we call=20 summer."=20 Staff writer Mike Taugher contributed to this story. ---------------------------------------------------------------------------= --- ---------------------------------------------------------------------------= --- ----------------------- A lone voice for price caps: U.S. regulator fears 'a disaster' By David Whitney Bee Washington Bureau=20 (Published March 24, 2001)=20 WASHINGTON -- William Massey used to be a team player. Then the lights=20 started flickering in California.=20 Now, Massey is the dissenting voice of the Federal Energy Regulatory=20 Commission -- a preacher, an absolute convert to the idea that free markets= =20 be damned because California is getting a raw deal.=20 Wholesale electricity prices are rocketing into the stratosphere. Gov. Gray= =20 Davis, joined by the governors of Oregon and Washington, is screaming for= =20 price controls. And yet Massey said his colleagues wouldn't do their job to= =20 ensure "just and reasonable" prices and rein in price gougers.=20 "I fear a disaster is in the making," Massey told a House subcommittee this= =20 week. He said that without price controls this summer, he fears the worst.= =20 Massey isn't just pounding the table at congressional hearings. In recent= =20 orders by the commission, he has been the lone naysayer, uttering in strong= =20 terms the doom and gloom that will be thrust upon the state by an agency he= =20 says is refusing to follow the Federal Power Act's mandate that it enforce= =20 just and reasonable wholesale rates.=20 Two weeks ago, Massey condemned as insufficient the commission's order=20 finding that a dozen or so power producers may have overcharged California = by=20 as much as $69 million for January power sales.=20 Massey called the commission action "facially arbitrary, capricious and an= =20 abuse of discretion." Massey said his colleagues only focused on power sale= s=20 above $273 a megawatt-hour sold during Stage 3 alerts of imminent rolling= =20 blackouts.=20 "There is no logic to this methodology other than limiting the universe of= =20 potential refunds," Massey wrote.=20 Asked about this at the House hearing, Massey was even more pointed. When i= t=20 comes to ferreting out price gougers, Massey said the message is that "FERC= =20 is going to be looking for the wallet under the lamp post with the lights= =20 shining, and nowhere else."=20 These are welcome words to beleaguered state officials and utility executiv= es=20 who are growing increasingly frustrated that neither the commission nor the= =20 Bush administration seems to be heeding the concerns of California and the= =20 West over the worsening power situation.=20 "Commissioner Massey has a very good understanding," said an appreciative= =20 Sen. Dianne Feinstein, author of price-control legislation that Massey has= =20 endorsed.=20 Joe Nipper, senior vice president of the American Public Power Association,= =20 said the fact that Massey is alone in advocating firmer protection for=20 California and its consumers makes his role even more important.=20 "Thank God he is there to articulate that point of view because if he=20 weren't, you wouldn't hear it at all," Nipper said.=20 Massey concedes that his role as commission dissenter is new. In his eight= =20 years on the commission, the former legal services lawyer and aide to retir= ed=20 Arkansas Democratic Sen. Dale Bumpers has been known more as a team player.= =20 Nominated by President Clinton for the post in 1993, Massey was fully behin= d=20 the notion that free and open markets were the way to go in the energy=20 business.=20 When California's electric deregulation package started rolling through the= =20 agency in 1996, Massey was right there, urging it on, proclaiming the glori= es=20 of open competition.=20 "It's true that as the commission has marched toward competition in the ope= n=20 markets, I've been there in a leadership role," Massey said during an=20 interview.=20 Several Midwest shortages during a 1998 heat wave were the first indication= s=20 that something was amiss. Massey said he was skeptical about the prevailing= =20 view on the commission that the Midwest problem was the result of "the=20 confluence of a series of circumstances that were unlikely to recur, the=20 so-called perfect storm."=20 "I thought that was a naive statement," he said.=20 But Massey said this didn't shake his confidence in deregulation and=20 market-based competition so much as it caused him to doubt the commission's= =20 ability to handle shifting circumstances.=20 "The commission's attitude was that we couldn't go wrong, that competition= =20 would always be better than the old-fashioned regulatory market and=20 essentially that any old market structure would work," he said. "That is=20 simply not true."=20 Then came California.=20 "I just feel like our actions have been too little, too late all along," he= =20 said. "As billions of dollars are changing hands, we were studying it. Then= =20 we are investigating it," he said.=20 "But for me, competitive markets have to produce just and reasonable prices= .=20 A dysfunctional market that produces outrageous prices is unlawful. And I= =20 think my agency has not taken strong enough steps to save California and th= e=20 West from a wildly dysfunctional electricity market."=20 Massey was on the commission when it basically rubber-stamped the Californi= a=20 deregulation plan, the first in the nation. He said it arrived as a package= ,=20 much of it written into state law, and that the agency did not ask hard=20 questions such as how California could get the best price for consumers by= =20 relying on day-ahead power purchases on the volatile spot market.=20 "Essentially we deferred to the market design that was handed to us," Masse= y=20 said. "We did say that it was a work in progress, and that we would be payi= ng=20 attention to it.=20 But to assume the spot markets would usually produce the lowest prices now,= =20 in retrospect, seems naive. We are now very critical of that market design= =20 but we did approve it."=20 Now the commission, with only three of its five seats filled, is led by the= =20 panel's only Republican, Curt Hebert, who is adamantly opposed to price=20 controls.=20 The panel's other Democrat, Linda Breathitt, is similarly disposed.=20 "I am the lone voice crying in the wilderness," Massey said.=20 But with the power crisis pushing up wholesale rates throughout the West,= =20 Massey said this is not the time to be clinging to ideology.=20 "I do not think it is worth bringing down the economy of an entire region o= f=20 the country just for the theoretical purity," he said.=20 ---------------------------------------------------------------------------= --- ----------------------------------------- March 24, 2001 California's Choices All Look Painful By LAURA M. HOLSON OS ANGELES, March 23 =01* California's energy crisis seems to get worse wit= h=20 each passing day. This week, Californians were once again plunged into darkness as warm weath= er=20 and a large number of shuttered power plants caused blackouts from Santa=20 Monica to San Francisco. In offices in and around Sacramento, frenzied=20 negotiators continue their months-long talks to design a settlement to keep= =20 the nearly bankrupt utilities afloat and creditors at bay. And despite a dizzying 190 bills introduced in the Legislature to address t= he=20 crisis, the bickering among politicians persists. Republican leaders have= =20 called for the ouster of state utility officials, and California's controll= er=20 warned that the state's general fund was in danger of being frittered away= =20 unless decisive action was taken.=20 Two months ago, Gov. Gray Davis promised a speedy end to the crisis. But al= l=20 the solutions proposed so far seem as fragile and tenuous as the grid itsel= f. Now a growing chorus of economists, business leaders and policy experts are= =20 saying what most agree that Mr. Davis will not utter: the state cannot spen= d=20 its way out of this crisis, and politicians are delaying an inevitable,=20 albeit unpopular, end =01* raising retail electricity rates significantly. = The=20 desire to satisfy all parties is costly and has caused confusion and=20 indecision. "The solution to the policy problem is moving agonizingly slowly because=20 there are several powerful political groups that can block any piece of=20 legislation," said Laura D'Andrea Tyson, a former chief economic adviser in= =20 the Clinton White House who is now the dean of the Haas School of Business = at=20 the University of California at Berkeley. "California's politicians don't= =20 seem to have enough power or conviction =01* I think it's power =01* to get= these=20 groups to agree."=20 Further, said Steve Fleishman, a Merrill Lynch utility analyst in New York:= =20 "The government officials keep trying to plug the holes in the dam when the= y=20 spout up. But there are too many things that need to be paid within the=20 current utility rate structure."=20 In an interview today, Governor Davis reiterated what he has said for month= s:=20 California's biggest problem is short supply =01* no major power plants hav= e=20 been built in 10 years =01* and he has invoked his emergency power to put m= ore=20 generation online quickly. He warned, too, that state negotiators were=20 proceeding with caution to avoid the kind of mistakes the architects of=20 deregulation made in the first place. "One of the reasons we are in trouble= =20 today was because there was a rush to judgment," he said. "We are not going= =20 to make that mistake again." But for a brief moment recently, it looked as if the state had finally=20 marshaled its forces and was well on its way to presenting Californians wit= h=20 a cohesive plan. The state treasurer's office hired bankers to help sell a= =20 $10 billion bond issue, the largest of its kind, that would help pay for=20 power now and stabilize prices over time.=20 State negotiators hoping to avoid a taxpayer bailout announced a preliminar= y=20 agreement with Southern California Edison to buy its transmission lines for= =20 about $2.76 billion. And Governor Davis proudly told reporters that his tea= m=20 had negotiated a successful round of long-term power contracts that would= =20 help keep California's lights on.=20 But almost every promising announcement has had a less-enticing twist.=20 Intense negotiations with the privately-owned utilities drag on week after= =20 week. Southern California Edison has not finished a deal to sell its=20 transmission lines, a necessity if it is to begin paying bills owed since= =20 November. "Progress has been made," said Bob Foster, Edison's chief=20 negotiator. But he warned, "I don't want to sound overly optimistic." Pacific Gas and Electric, for its part, has not announced anything, even in= =20 principle. John Nelson, a spokesman for the utility, did not return calls= =20 seeking comment.=20 Regarding the long-term power contracts, a report released this week says= =20 that the state has received commitments for less than half the 6,000=20 megawatts it hopes to secure for this summer. The power generators, too, ca= n=20 opt out of their contracts for a variety of reasons, including a failure by= =20 the state to sell bonds by July 1. Governor Davis said today that in most= =20 cases, much of the energy the state wanted to buy for this summer was no=20 longer available. That shortfall could require the state to buy more than 1= 5=20 percent of the energy it needs in the expensive spot market, nearly triple= =20 the amount he once said he wanted.=20 Still, the issue that has caused the biggest controversy is who has first= =20 rights to the money now being collected from ratepayers. (Pacific Gas and= =20 Electric and Southern California Edison now have $4.4 billion in their=20 coffers.) State officials have said that according to the law drafted in=20 January to ensure the state could buy power on behalf of the utilities, the= =20 Department of Water Resources should be paid first. The utilities are sayin= g=20 they are first in line. Whatever the outcome, the law's ambiguity has been = a=20 problem for the state treasurer, Philip Angelides, who said it has not only= =20 cost him precious time, but could put the bond offering in jeopardy unless = it=20 is clear how the revenues will be divided.=20 "The danger of this is if you let problems like this multiply, the situatio= n=20 gets worse and worse," he said. California's Public Utilities Commission is= =20 expected to rule on this issue. (Governor Davis said he expected the=20 commission to agree that the state should be paid first.)=20 But Mr. Angelides did not want to wait that long. Instead, he said, he and= =20 his team approached legislators to write another law so he could proceed wi= th=20 the state's $10 billion bond offering in May.=20 But even then, he contends, the bond offering is only a short-term fix at= =20 best. "After the $10 billion is exhausted, we can't keep borrowing and=20 borrowing and borrowing," Mr. Angelides said. "The reality is our lack of= =20 investment in power plants and inability to conserve are going to cost us= =20 more."=20 Mr. Angelides has a point. But the governor's resistance to raising rates i= s=20 at best a negotiating tool. The governor has told some people that he is op= en=20 to raising rates, but only after the utilities make the concessions he want= s,=20 people close to the negotiations with the utilities said. It is part of his= =20 overall strategy, these people said =01* one that includes building more po= wer=20 plants and conserving energy, both crucial in helping California minimize= =20 disasters this year and next. But that does little to solve the problem of the $13 billion in debts the= =20 utilities have already incurred. And that provides little comfort to the=20 likes of Hal Dittmer, president and owner of the Wellhead Electric Company,= a=20 small power generation company in Sacramento, who decided to close down his= =20 three power plants in February because he had not been paid all the money= =20 owed by Pacific Gas and Electric. No solution now being discussed, he said,= =20 either in the legislature or with the utilities themselves, really addresse= s=20 his problem. And like many of the utilities' creditors, he is growing=20 impatient. "The word I would use for what is going on in Sacramento is dithering," sai= d=20 Jack Kyser, chief economist of the Los Angeles County Economic Development= =20 Corporation, who has seen a swarm of recruiters from other states approach= =20 Los Angeles businesses recently in an effort to woo them away. "I think wha= t=20 they have to understand is that they are putting California's economic futu= re=20 at risk."=20 Governor Davis, while sympathetic to his critics' frustrations, dismisses= =20 them. "They are viewing the process from afar," he said. "From the=20 government's perspective, we are moving at warp speed." But that may not be fast enough. Today, in Sacramento, the State Assembly= =20 rejected a plan that would have allowed smaller power generators, which hav= e=20 contracts directly with the utilities, to be paid. Unlike their larger=20 counterparts, companies like Mr. Dittmer's do not have their sales guarante= ed=20 by the state and are themselves threatened by bankruptcy. The utilities have been negotiating with the smaller generators for months,= =20 but industry analysts say the two groups are bitter rivals and no agreement= =20 is likely soon. And to make matters even more precarious, smaller generator= s=20 could be the likeliest to force the utilities into involuntary bankruptcy, = in=20 part, because they want their money and have the least to lose. "Politics is not just about keeping the lights on," Ms. Tyson said. "It's= =20 about making sure that all parties are represented." And that is contrary t= o=20 the business world, she added, "where it's about getting the job done." ---------------------------------------------------------------------------= --- ----------------------------------------- Local generators win small victory Filed: 03/24/2001=20 By VIC POLLARD, Californian Sacramento Bureau e-mail:=20 vpollard@bakersfield.com=20 SACRAMENTO -- With help from Kern County's three Assembly members, owners o= f=20 small natural gas-fired generating plants like those in Kern's oil fields w= on=20 a partial victory Friday in their campaign to get paid for the electricity= =20 they sell to nearly bankrupt utilities.=20 Kern County lawmakers helped bury a bill that would have required the big= =20 utilities to start paying the small generators -- but at a price below what= =20 it costs them plants to operate.=20 The legislation is expected to be taken up in revised form Monday, and Kern= 's=20 lawmakers said they hope it will contain a better deal for the small=20 generators.=20 The action came at the end of a week of feverish activity sparked by rollin= g=20 blackouts that hit unexpectedly Monday and Tuesday. The blackouts were caus= ed=20 partly by the shutdown of many small generating facilities because they hav= e=20 not been paid for their electricity in months.=20 The crucial vote came late Thursday, when the Assembly's Republicans=20 unanimously opposed the low-price payment bill, depriving it of the=20 two-thirds vote needed for passage, in the face of heavy pressure from=20 Democratic legislative leaders. They wanted to push the bill through=20 Thursday, partly because most lawmakers were scheduled to leave Friday on a= n=20 annual lobbying trip to Washington, D.C.=20 No one felt the pressure more than Dean Florez of Shafter, the only Democra= t=20 to vote against the measure.=20 "It was really tough," Florez said Friday.=20 Assemblymen Roy Ashburn of Bakersfield and Phil Wyman of Tehachapi were amo= ng=20 the Republicans voting against the measure.=20 Florez and Ashburn said the main reason they voted no was that the bill wou= ld=20 have locked in a price for the small generating facilities that would have= =20 made it impossible for the natural-gas fired plants, and many others, to ke= ep=20 operating.=20 "If they're losing money generating electricity, they're going to close=20 down," Ashburn said, adding to the state's shortage of electricity.=20 On Friday, after hours of closed-door meetings between Democratic and=20 Republican leaders and officials of Gov. Gray Davis' administration, Assemb= ly=20 Speaker Robert Hertzberg announced that negotiations would continue and the= =20 issue would come up again Monday.=20 The problem for local lawmakers was that the price established by the=20 governor's office, 7.9 cents per kilowatt hour for a five-year contract, is= =20 anywhere from one-half to one-third of what it costs the gas-fired generato= rs=20 to produce electricity because of the current high price of natural gas.=20 Under current law, the gas-fired generators are assured of a price for thei= r=20 electricity that takes into account fluctuations in the price of natural ga= s.=20 Florez said the price being considered by the PUC would have made it=20 economical only for wind- and solar-powered generators. ---------------------------------------------------------------------------= --- ----------------------------------------- Enron drops power project=20 The move surprises critics and supporters of a Lake Elsinore hydroelectric= =20 plant.=20 By Thomas Buckley The Press-Enterprise LAKE ELSINORE Enron North America has pulled the plug on its plans for a hydroelectric=20 power plant in Lake Elsinore.=20 Friday's surprise move does not kill the proposal but dims the hopes of=20 supporters like the Elsinore Valley Municipal Water District for the $450= =20 million project.=20 But opponents, worried about power lines and the potential adverse effect o= n=20 the environment, were overjoyed.=20 "That's fantastic," said Barbara Bowers, La Cresta resident and member of a= =20 recently-empaneled project oversight citizen's committee. "(Enron officials= )=20 have finally discovered what we knew all along: This was not a viable=20 project."=20 While speculation about why Enron backed away from the proposal centered on= =20 the instability of both the lake and state-power market, company officials= =20 said their decision was a matter of timing.=20 Enron spokeswoman Kathy Russeth said the timetable for both the hydro plant= =20 and the 23 miles of power lines that would have been strung along the=20 Elsinore Mountains ridgeline was moving much slower than expected, promptin= g=20 the company to re-allocate its resources to other projects in the state.=20 "We need to pick up the pace with our power-plant development," Russeth sai= d.=20 While the water district still holds a three-year preliminary federal permi= t=20 for a hydroelectric project and consultant Nevada Hydro has an agreement wi= th=20 the water district, observers say chances are Enron's departure makes the= =20 project impossible.=20 Nevada Hydro is expected to continue work on the project, Enron said, but n= o=20 one close to the project believes the water district and consulting firm ca= n=20 pull it off alone. Attempts to contact Nevada Hydro officials were=20 unsuccessful.=20 "If a company like Enron is not going ahead with this, it is unlikely the= =20 project will ever be built," said county Supervisor Bob Buster.=20 But not everyone is willing to throw in the towel on the idea that has been= =20 in play for a decade, has been declared dead before.=20 Dropping the project entirely is "not an option," said water district board= =20 President Kris Anderson.=20 "We've got the permit and we've got three years to get the license to build= ,"=20 Anderson said. "I would hate to see the district get out now."=20 Distict officials will met next week to decide how to proceed.=20 Wildomar Chamber of Commerce President and citizen's committee member John= =20 Purpura agreed.=20 "It's a sad case and I hope EVMWD can find another company to step into=20 Enron's shoes," Purpura said.=20 In its latest incarnation, the pumped-storage proposal was born last summer= =20 when Enron first showed an interest.=20 The water district was poised to cut its ties to Nevada Hydro, a consulting= =20 firm long associated with trying to build project, when Enron said it might= =20 be interested in pursuing the proposal.=20 In the following months, Enron, a multi-billion multi-national energy firm,= =20 spent thousands on research and securing the preliminary federal permit for= =20 the district.=20 People who lived near the lake where the power plant would go were irked by= =20 what they saw as corporate heavy-handedness, while environmentalists and=20 forest residents became alarmed by power line and reservoir construction=20 plans.=20 The federal permit to pursue a final building license was secured in Februa= ry=20 and the county-backed citizen's committee, after much controversy, had its= =20 first meeting five days ago.=20 Backers have said the project would be a godsend to the lake, providing mon= ey=20 to buy water to keep it full and to help fund the upcoming $15 million lake= =20 clean-up. Neither is likely to happen now, observers say.=20 "All the expectations they raised have been dashed," said Buster, who sits = on=20 the joint-powers agency in charge of the lake clean-up project. "They owe t= he=20 community an explanation."=20 Environmentalist activist Gene Frick, who has fought the project for five= =20 years and once promised to chain himself to an oak tree, was gleeful at=20 Enron's decision.=20 "I thank you," Frick said, "my associates thank you, and the oak trees than= k=20 you."=20 ---------------------------------------------------------------------------= --- ---------------------------------------------------------------------------= --- ----------------------- Jobs at utilities appear safe -- for now=20 PUC ruling offers some security at Edison and PG&E, but the threat of=20 bankruptcy hovers over many.=20 March 24, 2001=20 By CATRINE JOHANSSON The Orange County Register=20 Safe for now, but for how long?=20 That's the question for thousands of employees at Southern California Ediso= n=20 and Pacific Gas & Electric, which are near bankruptcy after paying billions= =20 more for power over the past 10 months than they could charge customers.=20 The utilities hoped to save about $650 million by laying off some 3,000=20 employees, but a ruling last week by the state Public Utilities Commission= =20 halted most of those plans.=20 Edison had planned to cut about 2,000 jobs during the course of a year. Abo= ut=20 400 of them were cut in December, while the remaining 1,600 were to be cut= =20 during 2001.=20 Shaun Rolow, a part-time Edison meter reader in Kern County, said he and hi= s=20 co-workers feel their jobs are fairly safe, thanks to the PUC ruling, but= =20 they worry about the future.=20 "Most guys are very relieved, but we also talk a lot about the danger of=20 Edison going bankrupt," he said. "We feel uneasy, but also try to joke abou= t=20 it. Like when we get our paychecks, we joke about whether they'll be any=20 good."=20 The 400 employees let go in December were contract workers whose contracts= =20 were up anyway, said Edison spokesman Steve Hansen. The PUC ruling does not= =20 reinstate any of those workers. It does, however, prohibit further layoffs = in=20 customer call centers, meter-reading departments, outage-response teams and= =20 new-customer connection departments.=20 Exactly how many of the 1,600 other jobs are protected by the PUC ruling -= =20 and how many are not - is unclear, as Edison officials haven't completed=20 their analysis of the ruling, Hansen said.=20 Of the 1,600, "less than 50" were laid off before last week's PUC ruling.= =20 Whether any of those jobs will be reinstated remains to be decided.=20 Steven Carlton, a 20-year Edison employee who is an electricity foreman in= =20 the Los Alamitos area, said a possible bankruptcy filing for the company is= a=20 more immediate worry than layoffs.=20 "We know that there are too few people to do what we do as it is, so we=20 wouldn't get laid off, but we do wonder what's going to happen in the futur= e=20 if the company goes bankrupt," Carlton said.=20 The PUC also rejected the utilities' plans to cut expenses by reading=20 electricity meters every other month and using estimated bills for the=20 interim months.=20 Bimonthly meter readings would, according to the PUC ruling, "create=20 inaccuracies in calculating baseline usage, and consumers will not be able = to=20 see the results of their conservation efforts."=20 Although the PUC allowed the utilities to continue reducing overtime, Ediso= n=20 has decided to pay for overtime work in some cases.=20 "We continue to restrict overtime, except in cases where the public or=20 employee safety are compromised," Hansen said. He would not elaborate on wh= at=20 kinds of situations those would be, but acknowledged that the company had= =20 changed a strict no-overtime policy that left residents of an apartment=20 complex in Fountain Valley without electricity for a weekend in January.=20 "If a community loses power, we'll send out people to fix it - even if it i= s=20 on the weekend," Hansen said.=20 The utilities can petition the PUC to change the ruling on layoffs, but=20 there's no word yet on whether they will do so.=20 "We don't know yet, but we do expect the utilities to appeal," said Pat=20 Lavin, business manager for Local 47 of the International Brotherhood of=20 Electrical Workers, which represents 4,100 Edison workers.=20 The IBEW is one of the unions in the Coalition of California Utility=20 Employees, which filed the grievance with the PUC that prompted the ruling.= =20 Lavin said the unions watch the situation closely and are prepared to=20 challenge future layoff plans by the utilities - regardless of whether the= =20 targeted employees are union members. ---------------------------------------------------------------------------= --- ----------------------------------------- State power regulator proposes 40% rate increase=20 Posted at 12:00 noon PST Monday, March 26, 2001=20 BY KAREN GAUDETTE=20 Associated Press Writer=20 SAN FRANCISCO (AP) -- California's top power regulator proposed a 40 percen= t=20 hike in electricity rates Monday, saying such an increase should encourage= =20 customers to cut back on usage and conserve enough power to get through the= =20 hot summer months.=20 Loretta Lynch, president of the Public Utilities Commission, said rates=20 should increase by an average of 3 cents per kilowatt hour. The current rat= e=20 averages 7.5 cents per kilowatt hour.=20 The higher rates could go into effect as early as Tuesday, when the PUC=20 meets. Lynch and two other members of the five-member PUC were appointed by= =20 Gov. Gray Davis, and Lynch's proposal is expected to be approved by the=20 commission.=20 Lynch, who repeatedly refused to characterize the hike as a 40 percent=20 increase, said the increase was needed to avoid significant power problems= =20 this summer.=20 ``That number should be all that is needed going forward,'' she said at a= =20 news conference, ``to keep utilities solvent and ensure that the treasurer = of=20 the state can issue bonds.''=20 Lynch's proposal is at odds with that of administrative law judge Christine= =20 Walwyn, who recently advised the PUC that rate increases were not necessary= .=20 Any increase would be on top of the 9 percent to 15 percent rate increase t= he=20 PUC approved in January, and an additional 10 percent increase already=20 scheduled for next year.=20 Lynch also supports a ``tiered'' rate system that would charge residential= =20 and businesses customers more if they're large users and fail to cut back. = So=20 it should encourage conservation.=20 The governor repeatedly has said he is confident the state's power crisis c= an=20 be resolved without further rate hikes. But Davis aides have concluded that= =20 rates must rise, given that wholesale power costs remain high. Several=20 lawmakers, including Assembly Speaker Bob Hertzberg, have said a rate=20 increase is inevitable.=20 Southern California Edison Co. and Pacific Gas & Electric Co. both have=20 pushed for further rate increases, and PG&E has said its current rates woul= d=20 be insufficient to cover its bills and the state's.=20 Administration officials have been negotiating with PG&E, Edison and San=20 Diego Gas & Electric about purchasing the utilities' transmission lines to= =20 give the companies cash to pay their bills.=20 PG&E and Edison say they've lost more than $13 billion since last summer du= e=20 to high wholesale electricity costs that California's 1996 deregulation law= =20 prevents them from collecting from their customers.=20 ---------------------------------------------------------------------------= --- ----------------------------------------- Calif State Treasurer: Electricity Rate Hike Inevitable 03/26/2001 Dow Jones Energy Service (Copyright © 2001, Dow Jones & Company, Inc.) NEW YORK -(Dow Jones)- The State of California will have to raise electrici= ty=20 rates for consumers to reflect the dramatic price rise seen in the wholesal= e=20 power market, State Treasurer Phil Angelides said Monday in an interview on= =20 CNBC.=20 Angelides declined to specify how much rates would rise from current levels= ,=20 however, and he said that the state's two main investor-owned utilities mig= ht=20 possibly have to reorganize their financial situation through a bankruptcy= =20 proceeding. "It's hard to tell," what the percentage of the increase would be, Angelide= s=20 said, "but there's no mystery that rates are going up. We have to match the= =20 price of power to what we pay for it to keep the lights on."=20 The rate increase would both curb demand and assure lenders that the state= =20 will be able to repay the $10 billion in bonds it wants to issue to cover t= he=20 costs of purchasing power.=20 As for the utilities, "It's their job to reorganize themselves inside or=20 outside of a bankruptcy proceeding," Angelides said, adding that the=20 utilities' parent companies greatly benefitted from electric deregulation f= or=20 three years before suffering huge losses in 2000.=20 Since the state began buying power on behalf of its two near-bankrupt=20 utilities - PG&E Corp.'s (PCG) Pacific Gas & Electric Co. and Edison=20 International's (EIX) Southern California Edison - in January, it has spent= =20 almost $3 billion covering the difference between the utilities' generated= =20 power and their customers' electricity usage.=20 Angelides spoke from New York, where he is trying to convince Wall Street= =20 bankers to help issue the $10 billion in bonds. The debt issue will provide= =20 "breathing room to get to a long-term plan by September to balance market= =20 prices and rates," he said. The money will also be used for "a very dramati= c=20 conservation program."=20 "If we can get demand down 5% to 10%, we can get power prices down,"=20 Angelides said.=20 But the treasurer also said that the merchant power companies in the state= =20 have acted unconscionably. Reducing demand, he said, will put the state in = a=20 better position to get the producers to negotiate reasonable long-term pric= es=20 as part of a sustainable solution to the state's power and financial crisis= .=20 "The first problem is a supply and demand imbalance. If we in California de= ny=20 that we're denying reality. But the other problem is that generators have= =20 been charging unfair and unreasonably prices," said Angelides, who said=20 generators have to "take their foot off our throat and meet us half-way."= =20 -By Mark Golden, Dow Jones Newswires; 201-938-4604; mark.golden@dowjones.co= m ---------------------------------------------------------------------------= --- ---------------------------------------------------------------------------= --- ----------------------- Possible rate hikes cheer California utility investors=20 MICHAEL LIEDTKE, AP Business Writer Monday, March 26, 2001=20 ,2001 Associated Press=20 (03-26) 11:46 PST SAN FRANCISCO (AP) -- The prospect of substantially highe= r=20 electricity rates in California drew rave reviews Monday on Wall Street as= =20 investors snapped up the long-suffering stocks of the state's two largest= =20 utilities.=20 With about two hours of trading left on the New York Stock Exchange, shares= =20 in PG&E Corp. surged $3.80, or 36 percent, to $14.45 while Edison=20 International's stock gained $3.79, or 34 percent, to $14.99.=20 San Francisco-based PG&E and Rosemead-based Edison International own=20 utilities that have been flirting with bankruptcy for months as they paid f= or=20 soaring wholesale electricity costs that couldn't be passed on to customers= =20 under the state's deregulation law.=20 After months of resistance to the idea, state political leaders and=20 regulators are poised to swallow a bitter pill and prescribe significant ne= w=20 rate increases.=20 California's top power regulator proposed a 40 percent hike in electricity= =20 rates Monday, saying such an increase should encourage customers to cut bac= k=20 on usage and conserve enough power to get through the hot summer months.=20 Loretta Lynch, president of the Public Utilities Commission, said rates=20 should increase by an average of 3 cents per kilowatt hour. The current rat= e=20 averages 7.5 cents per kilowatt hour. The higher rates could go into effect= =20 as early as Tuesday, when the PUC meets.=20 Gov. Gray Davis remains confident the state's power crisis can be resolved= =20 without further rate hikes, an aide said Monday. But his high-level financi= al=20 aides warned legislative leaders Friday that consumers could feel significa= nt=20 pain when all is said and done.=20 Although nothing has been completed, news of the likely rate increases leak= ed=20 out during the weekend and raised hopes on Wall Street that the darkest day= s=20 for the two utilities, Pacific Gas and Electric and Southern California=20 Edison, might be behind them.=20 The utilities' executives, backed by numerous industry analysts, have=20 contended for months that the state needed to approve hefty rate increases = to=20 ease a power crisis that threatens to make rolling blackouts a routine even= t=20 this summer.=20 The higher rates are seen as a way to ease the financial burden of the=20 utilities, which say they have run up debts of more than $13 billion buying= =20 wholesale electricity during the last 10 months. Analysts also reason highe= r=20 electricity bills will persuade more customers to reduce their usage and=20 reduce the frequency of blackouts this summer.=20 The likely rate increases weren't the only good news for utility shareholde= rs=20 Monday.=20 Over the weekend, Southern California Edison said it will resume payments t= o=20 alternative energy providers known as ``qualifying facilities'' -- a move= =20 expected to reduce the chances that the disgruntled generators will band=20 together and try to force the utility into bankruptcy.=20 In a Securities and Exchange Commission filing Monday, Pacific Gas and=20 Electric disclosed that it had received more breathing room from some of it= s=20 key creditors. The utility has defaulted on a $1 billion revolving credit= =20 line, but the banks that made the loans have given the company until April = 13=20 to work things out, the filing said.=20 PG&E also revealed that its electricity losses could result in a $4.1 billi= on=20 charge against its fourth-quarter earnings.=20 ---------------------------------------------------------------------------= --- --------------------------------------------------- Duke says would take less for California power sales=20 Posted at 11:55 a.m. PST Monday, March 26, 2001=20 NEW YORK, (Reuters) - Duke Energy Corp. said Monday it would take less mone= y=20 for power it sold to California customers during January and February,=20 provided it receives guarantees it will get paid.=20 Responding to accusations by the Federal Energy Regulatory Commission (FERC= )=20 that it overcharged its California customers by $17.8 million during power= =20 shortages in January and February, Duke said in a statement that the prices= =20 it charged were ''reasonable'' given the high risks that generators would n= ot=20 be paid.=20 In a filing with FERC Friday, Duke President and Chief Executive Officer Ji= m=20 Donnell said, ``We could be willing to forgo collection of the credit=20 premiums for these months, provided we receive the FERC clearing price.''= =20 California's Independent System Operator, which covers 75 percent of the=20 state's power grid, has accused generators of overcharging customers by $6.= 2=20 billion since May.=20 Houston-based Duke said that during the months of January and February its= =20 bids included a credit premium to cover the ''substantial risk'' of=20 nonpayment. Duke said the credit premium and market condition were=20 responsible for its bids exceeding the FERC determined market clearing pric= e.=20 FERC had set a $273 megawatt per hour cap on power sales to California duri= ng=20 the Stage 3 emergencies in January and February.=20 Shares of Duke were up $1.27, or more than 3 percent, to $39.15 in afternoo= n=20 trading on the New York Stock Exchange, compared to a 52-week high of=20 $45.2188 and low of $24.8750.=20 ---------------------------------------------------------------------------= --- ----------------------------------------- March 26, 2001 Power Woes Raise Questions Over Control of Gas Pipelines By RICHARD A. OPPEL Jr. and LOWELL BERGMAN arly last year, the El Paso Natural Gas Company took bids from two dozen=20 companies for the right to ship enough natural gas through its pipeline fro= m=20 Texas and New Mexico to meet one-sixth of the daily demand of energy-starve= d=20 California.=20 The winner: El Paso's sister company, the El Paso Merchant Energy Company,= =20 which buys, sells and trades natural gas. The bidding was not close. El Pas= o=20 Merchant offered twice as much for the capacity as the other companies bid,= =20 in total, for bits and pieces. Why pay so much more? California officials, who are pressing a complaint=20 against El Paso at the Federal Energy Regulatory Commission, say the answer= =20 is simple. The state contends that El Paso Merchant, with help from its=20 sister company, saw the transaction as a way to manipulate the price of=20 natural gas by using its control of pipeline capacity.=20 According to sealed documents obtained by The New York Times that are part = of=20 filings in the federal case, executives at El Paso Merchant said internally= =20 that the deal would give them "more control" of gas markets, including the= =20 "ability to influence the physical market" to benefit the company's financi= al=20 positions. El Paso executives called the accusations fanciful, and in a formal respons= e=20 to California's complaint, said the state "grossly distorted" company=20 documents by quoting words and phrases out of context. The dispute opens a window on an important debate about oversight of the=20 natural gas industry, which fuels a growing share of the nation's electric= =20 power plants. At issue is whether current safeguards do enough to prevent anticompetitive= =20 abuses in the marketing and trading of natural gas, and whether federal=20 regulators adequately enforce existing rules. In particular, many industry= =20 officials question whether regulated pipeline companies are able to favor= =20 unregulated sister companies that trade natural gas and are free to maximiz= e=20 profits. More than 200,000 miles of interstate pipelines crisscross the country,=20 moving natural gas from Canada, the Southwest and other producing regions t= o=20 fuel factories, power utilities and heat houses.=20 Not long ago, many parts of the country had excess pipeline capacity. But= =20 experts say that several regions, including California, New York and New=20 England, now face constraints as demand soars for gas to fuel power plants.= =20 In California, state officials and utility executives said the documents in= =20 the federal case, and El Paso's actions, were proof that the state's energy= =20 crisis stemmed not just from an ill-conceived deregulation plan but from=20 price manipulation and profiteering. "They are the market maker with this pipeline," said Loretta Lynch, the=20 president of the California Public Utilities Commission, which has struggle= d=20 to cope with skyrocketing power prices and supply shortages.=20 El Paso "sets the price in California," Ms. Lynch said, and what it did was= =20 intentional. "It has affected the price," she said, "for everything related= =20 to heat and electrical power prices in the state."=20 California's complaint to the federal agency contends that El Paso Merchant= =20 "has hoarded capacity and refused to attractively price unused capacity" on= =20 the pipeline. The state also charges that El Paso Natural Gas, the pipeline= 's=20 owner, has had no incentive to spur competition, by offering discounts to= =20 other users, because the two companies are corporate siblings. The state sa= id=20 that El Paso had violated federal natural gas statutes that prohibit=20 anticompetitive behavior. The sealed filings in the El Paso case indicated that the company expected = to=20 make money by widening the "basis spread" =01* the difference between what = gas=20 can be bought for in producing basins of Texas and New Mexico, at one end o= f=20 the pipeline, and its price on delivery to Southern California. As it turned out, spreads widened enormously over the last year as the pric= e=20 of gas soared in California, adding to costs for wholesale electricity that= =20 pushed the biggest utilities near bankruptcy. California utilities paid $6.= 2=20 billion above competitive prices for wholesale electricity over the last 10= =20 months, state officials estimated. The utilities are not allowed to recoup= =20 the costs from customers. While the cost of 1,000 cubic feet of gas typical= ly=20 is less than $1 higher at the California end of the pipeline, spot prices i= n=20 the state rose to almost $50 more than the Texas- New Mexico price in=20 December. To executives of the parent company, the El Paso Corporation, the accusatio= ns=20 of market manipulation are ludicrous.=20 High gas prices in California, El Paso executives said in interviews, are= =20 easily explained by soaring demand, the poor credit standing of the state's= =20 utilities and the failure of the utilities to retain pipeline capacity or= =20 store enough gas for winter. "The idea that anybody is holding back on California is really ridiculous,"= =20 said Clark C. Smith, president of El Paso Merchant's operations in North=20 America.=20 Some El Paso customers, though, agreed with California officials. The Pacif= ic=20 Gas & Electric Company, the San Francisco-based utility, condemned El Paso = in=20 a filing with the federal agency after its lawyers reviewed the sealed=20 company documents.=20 "It is now very clear from the business records of El Paso Energy=20 Corporation," the utility said in the filing, "that the business strategy E= l=20 Paso Merchant was authorized at the highest corporate levels to pursue=20 involved manipulation of price spreads."=20 The agency has not ruled on California's complaint, which asks that the dea= l=20 between El Paso Natural Gas and El Paso Merchant be invalidated. Based on t= he=20 agency's history of policing energy providers lightly, many industry=20 observers predicted that the complaint would be dismissed, perhaps as soon = as=20 the agency's public meeting on Wednesday. Nonetheless, El Paso Merchant is feeling some pressure. The subsidiary said= =20 recently that it planned to relinquish control of all but about 22 percent = of=20 the capacity on the pipeline to California, rather than exercise an option= =20 that would have allowed it to retain the entire capacity of 1.2 billion cub= ic=20 feet of gas a day.=20 Critics said they believed El Paso made the move in hopes of lessening the= =20 chance of government action. El Paso executives deny that but do say that= =20 their decision was influenced by the backlash over the arrangement. Surrendering the pipeline capacity made for a "gut-wrenching" decision, Mr.= =20 Smith said, but was "a first- class gesture" to California. El Paso Merchan= t=20 paid $38.5 million to control the pipeline capacity from March 1, 2000, unt= il=20 May 31, 2001. While Mr. Clark said he did not know the return on that=20 investment, he acknowledged that it was lucrative. "No doubt about it," Mr. Clark said, "we made good money."=20 The question of whether El Paso's conduct has driven gas prices higher is= =20 expected to be scrutinized by legislators in Sacramento this week. The=20 company also faces several lawsuits, including one by the city of Los=20 Angeles, that accuse it of conspiring with other companies to prevent=20 pipeline projects that could have eased California's energy crisis. El Paso= =20 denied the accusation. With pipeline capacity and gas supplies tighter, concerns about=20 anticompetitive behavior have increased as price volatility has created=20 soaring profits for energy marketers and traders.=20 Dynegy Inc., a Houston-based energy trader, was once the target of complain= ts=20 to federal regulators that it had artificially raised prices by abusing=20 capacity that it controlled on El Paso's pipeline to California. In a filing with regulators in January, Dynegy contended that pipeline=20 companies routinely favored affiliates. "Abuses abound because of financial= =20 windfalls, difficulty of detection, lengthy investigations and increased=20 complexity of the market," the company said. "There are some red flags right now," said William L. Massey, a member of t= he=20 Federal Energy Regulatory Commission since 1993. Mr. Massey said he was=20 troubled by the potential for abuses when pipeline companies own gas and=20 power marketing subsidiaries as well as electric plants fueled by natural= =20 gas. El Paso is in all those businesses. "What the commission ought to be serious about is: What are the forces at= =20 work? Is it simply robust markets responding to true supply-and-demand=20 signals, or is it a market defined by market power and some measure of=20 affiliate abuse?" he said.=20 Many in the industry do not believe changes are needed.=20 "There are rules in place today that protect against affiliate abuse," said= =20 Stanley Horton, chief executive for gas pipeline operations at the Enron=20 Corporation and chairman of the Interstate Natural Gas Association of=20 America, the industry's trade group, referring to the rules under which=20 California has brought its complaint about El Paso. To its critics, El Paso epitomizes competitive concerns. It operates the=20 nation's largest network of interstate pipelines and owns one of the larges= t=20 reserves of natural gas. With its recent acquisition of the Coastal=20 Corporation, another large pipeline operator, El Paso has a market=20 capitalization of $32 billion.=20 At a conference at El Paso headquarters in Houston in February, analysts=20 heard executives predict net profits of $1.7 billion this year. El Paso's= =20 much better known rival, Enron, with its headquarters a few blocks away, is= =20 expected to earn about $1.4 billion. El Paso Merchant provides the strongest growth. Two years ago, the unit's= =20 profits, before interest payments and taxes, were $99 million; this year, i= t=20 is expected to have $700 million in North America alone. In its latest=20 quarterly report, El Paso attributed those profits, in part, to "commodity= =20 market and trading margins" that were enhanced by "power price volatility,= =20 particularly in the Western United States."=20 Critics contend that El Paso set out to exploit those conditions. According= =20 to the sealed filings, on Feb. 14, 2000, the day before El Paso Merchant wa= s=20 awarded the pipeline capacity, executives made a presentation to William A.= =20 Wise, chief executive of the parent company, laying out the rationale for t= he=20 bid.=20 The presentation outlined what it termed "strategic advantages," including= =20 "more control of total physical markets" and the "ability to influence the= =20 physical market to the benefit of any financial/hedge position," according = to=20 the sealed filings. The passages suggested that El Paso expected the deal t= o=20 give it sway over the market for trading actual volumes of gas and to suppo= rt=20 financial transactions it had entered into with other parties to limit its= =20 risk. For every one-cent increase in the spread on gas prices, the presentation= =20 said, El Paso Merchant stood to make an additional $2.4 million.=20 Under the heading "Challenges," according to the sealed filings, the=20 presentation stated that storage was needed "to help manipulate physical=20 spreads, adding to the overall transport/storage cost." On April 14, according to the sealed filings, El Paso Merchant's president = at=20 the time, Greg G. Jenkins, wrote a memorandum to Mr. Wise involving an upda= te=20 for directors meeting later that month. The memorandum stated: "We will mak= e=20 money two ways: 1) increase the load factor, 2) widen the basis spread."=20 The language appears to suggest that El Paso Merchant would profit by=20 increasing the gas flow in the pipeline =01* the load factor =01* while inc= reasing=20 the difference between what gas could be bought for at one end and what it= =20 could be sold for at the other end =01* the basis spread. In an interview, Mr. Smith, the El Paso Merchant executive, said that the= =20 unit's prices, and profits, on bulk gas sales in California were locked in= =20 months in advance, so that the company could not benefit from rising prices= =20 in the spot market.=20 Otherwise, Mr. Smith declined to provide any details about money made on th= e=20 pipeline deal or about financial terms of the transactions that locked in= =20 prices ahead of time. In addition, Mr. Smith said that nearly all of El Pas= o=20 Merchant's pipeline capacity was used every day when prices spiked late las= t=20 year, with no capacity withheld to increase prices. The company did not respond last week to a request to discuss information i= n=20 the sealed documents. But El Paso Merchant, in a filing with federal=20 regulators, said California's complaint had "misconstrued and incorrectly= =20 interpreted" what it termed "snippets of data." ---------------------------------------------------------------------------= --- ----------------------------------------- SoCal Edison To Pay QFs On Going-Forward Basis 03/25/2001 Dow Jones News Service (Copyright © 2001, Dow Jones & Company, Inc.) ROSEMEAD, Calif. -(Dow Jones)- Edison International's (EIX) Southern=20 California Edison unit said that, in anticipation of pending action by the= =20 California Public Utilities Commission to restructure the way qualifying=20 facility generators, or QFs, will be paid, the utility will resume payments= =20 to QFs on a going-forward basis.=20 In a press release Sunday, Southern California Edison said it has set aside= =20 funds in a separate account and will make payments in advance of expected= =20 April deliveries. Payment processing would begin immediately after the CPUC approves on Tuesd= ay=20 a proposed decision to restructure QF prices.=20 Advance payments will be based on the generators' historical production lev= el=20 and the PUC's pricing order.=20 The company said it will be able to make payments only up to "an aggregate= =20 amount that is available to us from rates actually received for QF payments= ."=20 Southern California Edison said that "in recognition of the state's need fo= r=20 all the electricity it can get during these times, SCE is hereby institutin= g=20 a program to pay those QFs that continue to provide electricity to the=20 utility."=20 The company is "leaving it up to the discretion of the" PUC "as to how the= =20 payment structure will be revamped and how we should allocate the payments = to=20 QFs."=20 The PUC will likely approve a 20% rate increase for Southern California=20 Edison and PG&E Corp.'s (PCG) Pacific Gas & Electric on Tuesday, ending a= =20 three-year-old retail rate freeze, two PUC commissioners told Dow Jones=20 Newswires on Saturday.=20 The increase also would let utilities start paying small independent power= =20 producers on a forward basis for electricity sold directly to the utilities= ,=20 the commissioners said.=20 PG&E and SoCal Ed are now more than $13 billion in debt, have seen their=20 ratings downgraded to junk status by Wall Street credit agencies and have= =20 defaulted on billions of dollars in dividend payments, power bills and bank= =20 loans. ---------------------------------------------------------------------------= --- ---------------------------------------------------------------------------= --- ----------------------- Legislative firebrand Burton plays hardball in debate over power=20 Posted at 9:53 p.m. PST Sunday, March 25, 2001=20 BY HALLYE JORDAN=20 Mercury News Sacramento Bureau=20 SACRAMENTO -- It didn't take long for perpetually impatient John Burton to= =20 size up the conference call as a waste of time.=20 Twenty minutes and four curses into the conversation, the president pro tem= =20 of the state Senate announced to the utility company executives, outgoing= =20 Clinton Cabinet members and top state officials that he was putting down th= e=20 phone -- to shave.=20 Five minutes later, he stashed his Gillette Mach 3 and returned to the phon= e.=20 As he suspected, ``I didn't miss a thing.''=20 Welcome to the world of John Lowell Burton, perhaps the state's most=20 powerful, colorful and combative legislator. That Burton has ascended to th= e=20 top rung of political power in California surprises many, and perhaps no on= e=20 more than Burton himself.=20 The 68-year-old product of old school San Francisco politics has a penchant= =20 for profanity and a demeanor that ricochets from volatile to gruff to goofy= .=20 He fought a well-publicized battle against cocaine addiction that threatene= d=20 to end not only his political caree
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