California Capsule: Controller Says $13.4 Billion Not Enough

LCG, May 22, 2001—California state Controller Kathleen Connell told a news conference yesterday that proceeds from the $13.4 billion bond issue approved by the legislature to cover power purchases made by the state will not be enough.

"We are walking into the budget year with no reserves," Connell said, predicting the state will run out of cash in early 2002 unless an additional $3 billion to $5 billion in debt is issued.

The $13.4 billion bond issue – the biggest municipal bond issue in U.S. history – is intended to repay the state general fund for $7 billion the California Department of Water Resources has already spent paying top dollar for power purchases and to cover future purchases made under long-term contracts at presumably far lower rates.

Connell said additional money was needed for items in the upcoming 2001-02 fiscal year budget. She said the funds could be raised by issuing revenue anticipation bonds – bonds backed by future tax collections.

Some members of Gov. Gray Davis' administration have expressed doubts that the huge bond issue will get the state through the year as far as power purchases are concerned. So far, details of the long-term power purchase contracts entered into by the state have been kept secret over the objections of Republican leaders. Most of the state's large newspapers have sued the state to make the data public.

Davis Hiring of Clinton Spin Doctors Criticized California Republican legislative leaders yesterday expressed dismay over the hiring by Davis of two Clinton administration spin doctors to handle public information on the state's energy crisis. On Friday, Davis announced that he had engaged Mark Fabiani and Chris Lehane and the state will pay the pair $180,000 over the next six months.

State Senate GOP leader Jim Brulte and Assembly Republican leader Dave Cox said in a letter to Davis that putting the two on the state payroll "undermines the assertions you have made both publicly and privately throughout the crisis."

In a news conference, Brulte said "We're not going to support the hiring of political hacks on the government payroll…. The issue is which payroll is appropriate." He added, "These are political opposition research attack dogs. If the governor wants them, he ought to pay for them with his $30 million political war chest."

Fabiani and Lehane worked in the Clinton administration and in Vice President Al Gore's presidential campaign, where they gained a reputation as cut-throat partisans. Davis spent Saturday in Dallas at a political fund-raiser and Sunday in Chicago for more of the same.

State to Give Notice before Blackouts The California Independent System Operator said yesterday that it expects to have in place by the end of this month a warning system that will issue 24-hour warnings of where and when power blackouts can be expected.

The system would also give specific notice to businesses, residents and local governments at least a half-hour in advance of blackouts in their areas. The ISO is talking to private firms capable of notifying more than 10,000 customers a minute using telephones and FAX and millions using wireless communications.

The plan is in response to complaints by businesses that last-second notice of blackouts did no good and cost the companies millions of dollars when production lines shut themselves down, often incurring damage, rather than being down in an orderly fashion.

Sign Up Now to be Blackout Exempt The California Public Utilities Commission has begun taking applications from individual businesses seeking exemption from rolling blackouts this summer, but not just anyone should apply. The PUC said it would exempt a business if it could prove that a power outage would present "a significant threat to public health and safety."

"This is not a lottery," said Commissioner Carl Wood. "This is a serious exercise aimed at protecting the well-being of people in California." He added that the CPUC can only accept a limited number of requests.

The commission will accept applications from nursing homes, clinics, organ and blood donor labs, sewage treatment plants and others until June 1. The applicants will then be ranked and the CPUC will issue an expanded list of "Essential customers" by August 2.

By August 2, the 43d day of summer, there will likely have been a lot of blackouts, though the hottest days of summer are usually in August.

Mirant Corp. Says Put Up or Shut Up Mirant Corp., operator of 3,065 megawatts of generation in Northern California, is tired of the vilification it receives from California's governor and other politicians and of charges it deliberately withheld power from the state wholesale market in order to drive up prices.

"It's time to put the political rhetoric aside and speak to the facts. State officials have been to our facilities 65 times since January and have found on every instance that Mirant is in full compliance," said Randy Harrison, chief executive of Mirant's western U.S. operations. "Mirant also has responded to several requests from the CAISO to put off maintenance of our aging equipment and continue operating. Without hesitation, Mirant has honored CAISO's requests."

Harrison said the company has operational data showing the plants ran non-stop during March and April, the months Cal-ISO accuses it of gaming the system. "It takes on average 24 hours to bring online or offline any of the Mirant units, so it is unrealistic to believe that our units were taken down quickly or frequently."

He added that the CPUC and Cal-ISO "have a responsibility to set the record straight on this issue."

Some of Harrison's comments were in response to Connell's press conference yesterday, during which she held up an enlargement of a check paid to Mirant for April power. "If the intent was to somehow attack Mirant for its role in the California market in April, then I'd have to say that the state has apparently decided to bite a helping hand," said Harrison.

"Many of these transactions were at the request of the state Department of Water Resources. In some cases, we bought electricity from sellers unwilling to sell to the state and then turned around and sold that power to the state, helping to keep the lights on in California during critical times," he said.

Data indicate that Mirant generated 1.377 million megawatt hours of power in April of this year, but sold 2.077 million megawatt hours during the same time period, the difference occurring as the company's energy marketing operation bought from other generators to sell to the state.

http://www.energyonline.com/news/articles/e22-1ca.asp

-- Martin Thompson (mthom1927@aol.com), May 22, 2001

Answers

Bankruptcy here we come.

And a new poll shows that 56% of Californians think that it's BUSH who is responsible for their energy problems.

Hard to believe.

Wait till the two political attack dogs Davis just hired as "Engergy Consultants" start to work. They will soon have 80% of Californians believing this claptrap.

-- JackW (jpayne@webtv.net), May 23, 2001.