HEADLINE: ?Calif. Governor To Address State

BYLINE: JENNIFER COLEMAN


DATELINE: SACRAMENTO, Calif.

BODY:

???While Gov. Gray Davis prepared to speak to the state Thursday night about
California's energy crisis, economic forecasters predicted the power crunch
would lead to higher taxes and scrapped public projects.

??Davis said Wednesday he hadn't written his five-minute address, but that he
planned to discuss ''the progress that we've made and what we have to get
through.''

??Among other things, he was expected to talk about the more than 40 percent
rate increases approved last week by the Public Utilities Commission for
customers of the state's two largest utilities, Pacific Gas and Electric Co. 
and
Southern California Edison Co. He has asked California television stations to
carry his remarks live.

??California has been hit with rolling blackouts and tight power supplies
blamed in part on soaring wholesale electricity costs.

??On Wednesday, the state got more bad economic news: The UCLA Anderson
Business Forecast said Californians would face higher taxes and a tighter 
state
budget because of the billions of state dollars being spent on emergency 
power.
The blackouts and the state's scrutiny of private power suppliers also 
threaten
to scare away new businesses, the report said.

??Facing continued refusal from federal energy regulators to cap high energy
prices, Davis said Wednesday he would be willing to support a windfall-profits
tax on electric generators that have made a fortune selling power to 
California
this year.

??A bill to that effect was introduced Wednesday in the state Assembly. It
would tax gross receipts that ''significantly exceed'' the cost of producing
power and tax profits of power marketers who have bought power and later sold 
it
at much higher rates.

??''We continue to allow some electricity generators and middlemen to reap
enormous profits on their sales of electricity into the state. This 
profiteering
must stop,'' Democratic Assemblywoman Ellen Corbett said.

??Duke Energy spokesman Tom Williams said he doubted a tax on a selected
industry would be legal. He added that such a tax would discourage generators
from building new power plants in California.

??''The governor has made very clear that he is trying to do whatever he can 
to
increase the amount of generation in California and reduce the price.
Windfall-profits taxes do neither of these,'' Williams said.

??Davis said he generally opposes treating profitable companies in that 
manner,
''but these profits are outrageous and are at our expense. The only things
companies understand is leverage.''

??For the first time, Davis also said the state should let companies buy their
power from generators instead of going through the utilities.

??The Utility Reform Network and the head of the PUC oppose the idea. They
argue residential customers and small businesses unable to contract with
generators would get stuck with the bill for the billions of dollars the state
has and will spend buying electricity for the customers of the cash-strapped
utilities.


HEADLINE: 'Chaos' in state electricity planning

BYLINE: By Rick Jurgens

BODY:

??LOS ANGELES _ Two hundred of the finest economic minds in California 
gathered
Wednesday at UCLA's Anderson School of Management to discuss the state's 
energy
crisis but, as state Public Utilities Commission President Loretta Lynch 
spoke,
the power to her microphone cut out intermittently and unexpectedly.

??"I don't have any control over this," the beleaguered technician operating
the sound system called out after repeated outages.

??"I feel your pain," Lynch replied with a smile.

??No one in the audience doubted that. After two rounds of rolling blackouts
that state officials were powerless to prevent, Lynch last week led the
commission to hike retail power rates 42 percent, sparking protests from
consumer groups.

??But at UCLA Lynch had power and natural gas producers in her sights. She
promised to lead "a war against the sellers who are taking so much value out 
of
the California economy and not adding a whit of value."

??Lynch said she favored reinstatement of wholesale price caps that were ended
by the Federal Energy Rate Commission in December but wasn't counting on that.

??Even without those caps, she said she was optimistic that the state had
enough tools to restrain price hikes by wholesalers and avoid another rate 
hike.

??Those tools include conservation, purchases of long-term power contracts by
the Department of Water Resources, utility cost cutting and making sure the
small power producers known as qualifying facilities are online, she said.

??Lynch dismissed the state's 1996 deregulation plan as a "failed experiment"
and said she did not accept a questioner's premise that "true deregulation is
our goal." The problem was that "the state stepped back too much" from
management of the power system and that there had been "too much ideology and
theory and not enough practical solutions," she added.

??A panel of experts offered some grim predictions. "We are expecting severe
difficulties for this summer and next summer," said Barry Sedlik, a Southern
California Edison manager.

??Mark Bernstein, an analyst with the Rand Corp. in Santa Monica, said the
electricity problems are spreading. "This may go on for a while and it's not
just California," he said. "In the near term we've got chaos," he added.

??But he offered one macabre ray of hope. He said that federal policymakers 
may feel more urgency to step in if, as now appears possible, rolling 
blackouts occur in 2002 in Florida where, he didn't need to add, President 
Bush's brother is governor.

??Problems with the transmission system there, as well as generation shortage,
could hurt Florida but the state has enough time to avoid a crisis, he said in
an interview.