BUSINESS WEEK IN REVIEW San Francisco Chronicle, Sunday January 21, 1999 STATE PROBING POWER PRACTICES by Christian Bethelsen and Scott Winokur (Jan 14) State regulators are investigating whether power companies are engaged in a little-known, profit-making scheme to sell off the natural gas supplies needed to operate their plants -- and thus artificially worsening electricity shortages, the Chronicle has learned. In recent weeks, state energy and utility company officials have become suspicious that generators are shutting down power plants statewide so that they can privately sell the high-value natural gas that runs most of them. In doing so, sources said, the power companies end up profiting on both sides of the equation: They get top prices for their natural gas, and the resulting electricity shortage brings a lucrative run-up in power prices. Such a scenario would go far toward explaining current shortages and skyrocketing prices at a time of year when demand normally is low. REGULATORS OK PG&E CORP. SHIELD by Christian Bethelsen (Jan 15) PG&E Corp. has quietly won approval from federal regulators to restructure itself in a way that shields the parent company's profits, and shareholders, from the mounting debts of the utility it owns. The move appears to allow Pacific Gas and Electric Co.'s parent to record substantial profits while maintaining that its subsidiary, which supplies power to 4.5 million customers, is teetering on the edge of bankruptcy and trying to force rate- payers to pick up the tab. The corporate restructuring, apprtoved by the Federal Energy Regulatory Commission, came as a surprise to consumer advocates and state leaders dealing with the energy crisis -- including Gov. Gray Davis. A spokesman for the governor said Davis was "disappointed that FERC acted in the middle of the night without notice to all parties." PG&E spokesman Greg Pruett said the intent of the plan was merely to allow another unit of the corporate parent, National Energy Group, to receive its own credit rating that would be weighed independently of the troubled utility. HIGH-TECH JOB MARKET SLOWING New York Times Growth slowed in Silicon Valley's job masrket last year, even as housing shortages and transportation bottlenecks became worse for the region that is often held out as the world's model for economic development. At the same time, the gap widened between the region's richest and poorest households, according to an annual economic and environmental report released by Joint Venture Silicon Valley Network, a nonprofit regional planning group. Silicon Valley --Santa Clara County and the adjacent parts of Santa Cruz, San Mateo and Alameda counties-- added 39,000 jobs last year, the report said, raising the region's workforce to 1.35 million. But the estimated growth rate of 3 percent was a full percentage point below the 3.8 percent increase in 1999 and 3.9 percent in 1998. CONSPIRACY THEORIES by Katherine Seligman (Jan 17) The energy crisis is serious, but most Californians see it as a plot by power companies seeking to jack up utility bills, according to a poll by the Field Institute. The poll found that Californians are growing more dubious about the roots of the so-called crisis. More than half of those surveyed, 57 percent, said the shortage amounts to an attempt to raise rates, rather than an emergency born purely from a lack of generating sources or from increased demand. BUSH BLAMES DEREGULATION by Caroilyn Lockhead (Jan 18) President-elect Bush bluntly rejected the electricity price caps desperately sought by Gov. Gray Davis, calling them "a short-term delay of a needed solution." Bush, in his first direct comments on California's rolling blackouts, blamed the problem on California's "flawed" deregulation legislation, which he said the state has to fix. "I have read where some propose price controls," Bush said. "I'm against price controls." LEGISLATURE PONDERS BAILOUT by David Larzarus and Lynda Gledhill While Pacific Gas and Electric Co. inched toward bankruptcy, the state Legislature was poised to adopt an emergency plan to bail out the utility with taxpayer money. Lawmakers stopped far short of handing over the blank check that Gov. Gray Davis wanted, but the governor promised to sign whatever rescue measure legislators approved. Meanwhile, 675,000 Northern Californians lost power for the second time in as many days when regulators launched another round of rolling blackouts to ease pressure on the state's beleaguered electricity grid.
