Welcome to the second issue of Golden State Power's email newsletter, a monthly publication designed to keep members of Golden State Power Co-op and their friends and associates informed about issues affecting electric cooperatives in California.
While this newsletter will feature energy issues, people and events in California, it will also keep you up-to-date on federal power issues. Fortunately, we have the National Rural Electric Co-op Association ("NRECA") protecting our interests at the federal level. But it's a team effort. The work California co-op officials do to make California more "co-op friendly" helps our friends at NRECA who work with Members of Congress from California and all states to protect the interests of nonprofit, consumer-owned electric co-ops.
At a time when many powerful politicians in Washington, D.C. and elsewhere are still pushing for deregulation of the electricity industry, and when the Federal Energy Regulatory Commission ("FERC") is rewriting many of the laws for how electricity i s sold and delivered in America, it's important for all of us to keep an eye on both Sacramento and our nation's capitol.

THE BUZZ IN D.C. POINTS TOWARDS ENERGY BILL SOON

Rural Electric Statewide Association leaders from around the nation gathered in D.C. in mid-February to review political issues at the Federal level. NRECA officials noted that Rep. Joe Barton of Texas and Rep. Billy Tauzin of Louisiana are teaming up again to push the House version of the Energy bill, with Barton in particular promoting an electricity title that harms co-ops. Glenn English, NRECA's CEO, said the national association is poised to fight against any bill that harms co-ops and said NRECA's position is "an electricity title isn't needed this year." He said that about half of the states are still experimenting with deregulation of the electricity industry, most without success, and that new Federal legislation would only cause more confusion and expense. Several co-op officials agreed and were able to point out how many millions of dollars (and in some cases billions of dollars) have been wasted in their states in an effort to restructure the electricity industry. No one was able to point to a successful restructuring so far, but a few states, including Texas, appear to be having fewer problems than most.

With Enron and other scandals still clearly visible in the rear view mirror, and with California ratepayers and taxpayers still on the hook for billions of dollars to pay for the first disasterous attempt to restructure California's electricity industry, it's hard to imagine that any Californian would suggest we give it a second try. Fortunately, most Members of Congress from the Golden State are not supporting Federal legislation.

NRECA'S ANNUAL D.C. LEGISLATIVE CONFERENCE IS MAY 4 - 7, 2003

Rural electric co-op leaders from around the nation will have a timely opportunity in early May to make their feelings known about deregulation and other Federal issues when NRECA hosts another of its famous grassroots lobbying efforts in D.C. Thousands of co-op directors, managers and key staffers converge on our nation's Capitol at once, which makes a sizeable impression on lawmakers and their staff members. Golden State Power Co-op will lead a group from California (hopefully a dozen or more cheerful people who like to walk and talk a lot) and will make the rounds to all 50-plus California offices, plus a few other government offices (like USDA, DOE, etc.). More about this great event next month.

ELECTRICITY COOPERATIVES AGAIN RATED NUMBER ONE BY CONSUMERS...

AND ALSO BY THE FINANCIAL RATING SERVICES...

As we pointed out last month, a report by RKS Research & Consulting ranks different types of utilities and points out that co-ops continue to win "the highest levels of consumer support" while investor-owned companies "continue to lag in key customer perceptions of value, service and performance (www.rksresearch.com)."

Perhaps more meaningful is the recent report by Fitch Ratings which shows half of all the Merchant Traders of electricity in America on shaky financial ground, about 25 percent of all investor-owned utilities still working through major financial problems, but almost none of the 950 electric co-ops in serious financial trouble. Alan Spen of Fitch Ratings spoke to electric co-op leaders in D.C. and told them that co-ops and other consumer-owned utilities represent the only financially stable group of electric utilities in America. He said financial rating downgrades for investor-owned utilities have been running 15-1 versus upgrades. He noted that half of all merchant power plant operators remain on alert for further downgrades. He suggested that it could be another year or two before the fallout from the deregulation busts and financial scandals in the electricity industry work out of the system and stability returns.

Mr. Spen, who tracks the electricity industry on a daily basis, advised co-op leaders to think seriously about building more of their own powerplants so they would not have to rely as much on the market in the future. "Integrated utilities that own and control their own power supply look a lot better today so it would not be a bad idea for public power (co-ops) to finance and build their own powerplants to meet their future power needs," he said. "With the low interest rate invironment we find ourselves in today, public power has the ability to build and own assets which could significantly benefit their ratepayers in the years ahead."

He also had words of praise for the bank that is owned by electric co-ops, the Cooperative Finance Corporation ("CFC"). He noted that CFC had recently gone to the financial markets for a billion dollars but "upsized" the deal by an additional $500 million when it became clear that investor demand for CFC bonds was great. Even with the increased issue, some investors were left out of the deal.

Obviously, Wall Street investors view rural electric co-ops as stable, "low risk" utilities, despite the fact that they are tending to stay far away from the rest of the electricity industry.

EVEN IN CALIFORNIA, FUTURE POWER SUPPLY IS THE KEY

As noted in the co-op history section of this website, California is one of the few states where less than one percent of all consumers are served by electric co-ops. But in those few areas that do enjoy member-owned co-op service, consumer satisfaction is high. A recent independent survey of Plumas-Sierra's membership showed overwhelming approval of the co-op and attracted numerous unsolicited comments praising the co-op for the community and economic development work it does on a regular basis. Similar results have been realized at other co-ops, including Surprise Valley and Anza over the years. That's partly true because these co-ops plan ahead to meet the power supply needs of their members. As co-ops, their only goal is to meet the needs of their co-op members. Whether it's new generation, new transmission facilities or rebuilding distribution lines, co-ops are working every day to make sure their members are well served. And while California co-ops get their power from different sources, they all have excellent track records for having the power their customers need on time and at competitive rates. Today California co-ops are reviewing all their options, from gas-fired turbines to farm-based renewable energy sources, like wind and solar. If you are a member of an electric co-op in California, you can be sure that your co-op will have the power you need, next week and 20 years from now, at reasonable "cost-based, non-profit" rates and not a penny more!

CO-OPS HAVE PROVEN TO WALL STREET...AND TO AMERICA...THAT THE

CO-OP BUSINESS MODEL WORKS BEST FOR ENERGY CONSUMERS...

Is it a mere coincidence that the states with the fewest electric co-ops, like California and New York, also have the highest retail electricity rates?

Christopher Weare's research on the California Energy Crisis provided a clue. Historically the consumer-owned utilities (PUDs, municipals and co-ops) have charged lower retail rates for electricity than the three major investor-owned utilities -- 9.53 cents per kWh versus 8.29 cents (Public Policy Institute of California report on the electricity crisis by Christopher Weare, 2003). As a group, co-ops, despite serving low density rural areas, have maintained the lowest overall rates while maintaining high levels of reliability.

Bottom line: Having the co-op business model active in the electricity industry provides a higher degree of competition and consumer protections which results in higher reliability and lower rates, which in turns leads to a higher level of consumer satisfaction.

SPEAKING OF THE CO-OP BUSINESS MODEL, THE SAN DIEGO COUNTY FARM BUREAU

IS USING IT TO MEET THE ENERGY NEEDS OF ITS GROWER-MEMBERS...

The San Diego County Farm Bureau has flower growers and other members of the agriculture sector as members, so when deregulation of the electricity industry happened in California (and when electricity rates went through the roof in San Diego), the Farm Bureau was there to protect the interests of its members. To accomplish that difficult task the Farm Bureau helped organize the San Diego Agricultural Energy Cooperative, a new co-op with a mission to buy wholesale electricity and natural gas for its members. The electricity function ended when California put a halt to the deregulation experiement, but the natural gas part is still very much in place and helping San Diego area growers remain competitive. Led by Eric Larson and a visionary Board of Directors, the new co-op has enjoyed solid success during its initial years. It has proven once again what a dedicated group of people working together and through the co-op business model can accomplish. While the co-op is non-profit, it puts greater profits in the pockets of its members because it has purchased wholesale power in larger blocks, at lower prices, so that all co-op members share in the savings.

URBAN ENERGY CO-OPS ARE SUCCESSFUL, TOO...

Like San Diego, San Francisco has unique energy problems...like too little transmission capacity coming in and too little power supply in the community to meet peak loads. Solution: A new "San Francisco Community Power Cooperative!" It all started a couple years back, with a local attorney, Steve Moss, latching onto the co-op business model as the best way to solve community energy problems. Their slogan says it all: "Working with the community to save money, energy and the environment."

Through united conservation efforts, including improvements to their homes and businesses, co-op members have been able to cut energy usage during critical peak load times, thereby "stretching" the power supply that is available to the area. Steve believes the co-op can do even more to meet the longterm energy challenges of the Bay Area. And we're glad that his co-op, like the San Diego County Ag Energy Co-op, is a member of Golden State Power Co-op (the state association). By working together the co-op community can do even more than the co-ops could do on their own.

WIND POWER IS THE FASTEST GROWING ELECTRIC POWER SOURCE...

AND "OFF GASES" MAY SOME DAY BE ON THE GRID!

According to a January 14 report by the Associated Press ("TVA Agrees to Expand Wind Power"), wind power is the fastest growing electric power source, outpacing gas turbines, coal plants or nuclear plants. "The Energy Department lists 4,558 megawatts of U.S. wind power."

The AP report, carried on the cooperative.com website, featured the Tennessee Valley Authority and its recent agreement to finance another 28 megawatts of wind at a reclaimed strip mine site 25 miles west of Knoxville. "Although the TVA project pales compared to large wind farms in the Pacific Northwest, California and Texas, 'this is a significant commitment to wind in our region,' said Stephen Smith, executive director of the Southern Alliance for Clean Energy watchdog group." TVA also utilizes solar collectors and reclaimed landfill gas to produce electricity, as do a growing number of utilities nationwide.

California continues to be the national leader in renewable energy development, with solar, wind, biomass, geothermal and a number of other "green" energy projects coming on line every month. One environmentall friendly new source of electricity in California that won't be available in every state is "off gases" from oil wells. These are the various natural gases that are too low in heat content or too expensive to clean up and are therefore flared or reinjected into the ground. But Bob Fickes, General Manager of the California Oil Producers Co-op, is sure he has found a way to turn the problem gases into a valuable commodity. Working with Edan Prabhu and the new FlexEnergy turbine, Fickes is modifying the "Flex" turbine to burn low btu content gases and other off gases to produce electricity. The plan is to end up with a fleet of portable units that can be deployed to oil fields all across California to capture hundreds of extra megawatts of power and, in the meantime, to clean up what has been an environmental issue. Early tests of the FlexTurbine shows it can utilize a wide range of off gases and produce electricity in a competitive price range. It also works with other waste products, including animal wastes, nut shells, forest residues and the like. Test models of the "Flex" are scheduled to go into oil fields in March...so more about this unique technology in the months ahead!

IMPORTANT DATES TO REMEMBER

The Golden State Board of Directors will meet April 3 in Hollywood at the Hilton Hotel at Universal City. Detailed information will be mailed to each co-op the last week of February.

An Energy Co-op Symposium is scheduled for the first week of October, either in the Bay Area or Los Angeles (more on that later after final plans are approved).

The Golden State Power Co-op Annual Meeting will be in Reno again this year, on October 16 & 17. At last year's Annual Meeting Mr. Fielding Thompson, Chairman of the California Electricity Users Cooperative and a member of the Fruit Growers Supply management team, was re-elected Chairman of the Board, with David Coyle, manager of Anza Electric Cooperative, elected Vice-Chairman.