Welcome to the May 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 is sold and delivered in America, it's important for all of us to keep an eye on both Sacramento and our nation's capitol.

NEW CO-OP JOINS GOLDEN STATE POWER CO-OP ASSOCIATION

We are pleased to announce the joining of Cooperative Community Energy Co-op, one of the biggest renewable energy generating and equipment & services co-ops in America! This co-op specializes in solar energy and has some 40 major installations in Northern California, especially North of San Francisco around the San Rafael area. Learn a lot more about CC Energy Co-op and the great work they do to improve the environment and lift the human spirit at their website: www.ccenergy.com (just click on our "Links" button to go there). The President and CEO is Daniel Pellegrini. We would like to welcome Dan and all his co-op employees and partners to the Golden State family!

A PARTNERSHIP WITH NEW YORK CO-OP???

1st Rochdale is the newest and fastest growing co-op in New York State. Located in New York City, it has a world of potential and has already brought forth many new and innovative programs and services. But the best may be "yet to come" as they say. Through their non-profit "Green Apple" renewable energy division, 1st Rochdale is looking into electric cars and renewable energy projects to provide the fuel. It's a model that Golden State's new co-op venture, Clean Power Co-op, is looking into as well. Is a partnership in the making? We're talking...more next month. Now for some old news...

NEWEST ASSOCIATE BUSINESS MEMBER ... GENERAL PACIFIC!

We're always happy to announce new Business Associate Members. This month the 10th Business Associate Member is General Pacific, Inc. "GenPac" is a co-op that serves co-ops. Founded during the 1960's, GenPac is a supplier to rural electric co-ops and other electric companies, selling everything from complete substations to nuts and bolts. GenPac was the answer to a problem electric co-ops had during the early days of rural electric co-op development. Some suppliers would not sell their products to co-ops for fear of offending bigger customers, the investor-owned utilities. So co-ops in the Northwest formed General Pacific and it has served them well for all these years. Rick Hall is the general manager of GenPac and a frequent visitor to Golden State Power Co-op meetings. We appreciate his support and all that GenPac does for electric co-ops in California!

AND A NEW BUSINESS MEMBER FROM KENTUCKY!

Big Rivers Generation & Transmission Cooperative is headquartered in Kentucky, so why, you might ask, would it pay to join Golden State Power Co-op in California? "It's simple," says their CEO, Michael Core, "We support electric co-ops in California because their success is our success...if Golden State Power Co-op is successful it helps the entire program nationwide."

Mr. Core makes a good point. He knows how successful electric co-ops have been in Kentucky...with 27 co-ops serving over 20 percent of the population of the state. He knows they provide reliable, affordable power while some for-profit companies are more determined to gain excessive profits than to provide a public service. In California the work is just beginning...only three distribution co-ops, but a growing number of aggregation co-ops, as in San Diego, San Francisco, etc. As Mike knows, as the new California co-ops grow and prosper more and more people will become familiar with the non-profit, locally controlled co-op business model and the benefits of that knowledge will not only flow throughout California, but nationally. So thank you, Michael Core, for showing us that Big Rivers has a "big vision" for the cooperative movement!

SPEAKING OF BUSINESS PARTNERS, US&R KNOWS THE GAS BUSINESS

We've mentioned this before, but one of our Business Associate Members, Utility Savings & Refund, LLC (US&R), really tracks the gas business in California. That's important to know when energy markets, and especially the gas markets, are unsteady. Knowing when to lock in prices and how to do it is valuable, which makes this co-op-type entity so important to its farm and urban customers. Learn more about US&R by going to their website: www.Utility-Savings.com.

Biomass Grants Offered

On April 9 Agriculture Secretary Ann Veneman unveiled the $44 million in grants to support President Bush's energy plan to develop renewable energy and expand research and development of biomass energy projects. Both programs were authorized by the 2002 Farm Bill. USDA and the Dept. of Energy will play lead roles in operating the grant programs. Applicants for the Renewable Energy Systems and Energy Efficiency Improvements program must be agricultural producers or rural small businesses. The solicitation package (USDA-GRANTS-031803-001) is posted on the federal funding opportunities Web site.

And at the State Level...no Exit Fees!

In case you haven't heard yet, renewable energy advocates prevailed on April 3 when the California Public Utility Commission (CPUC) voted to exempt renewable onsite generation from exit fees. The decision exempts many types of small, renewable and clean self-generation of customers of PG&E, SCE and SDG&E from extra power surcharges. Customers who installed their own power generation before January 17, 2001, when the California Department of Water Resources (DWR) began contracting for electricity, are exempt from most surcharges, as are customer generation systems that meet certain environmental criteria. The exceptions to the surcharges are created to promote economic incentives to develop various forms of alternative generation, as well as to comply with Legislative and Commission policy.

The exemptions apply to: 1. Systems smaller than 1 megawatt (MW) that are net metered and/or eligible for PUC or California Energy Commission (CEC) incentives for being clean and super-clean are fully exempt from any surcharge; this includes many solar and wind systems, as well as fuel cells; 2. Ultra-clean and low-emission systems (such as solar) that are 1 MW or greater that meet Senate Bill 1038 requirements to comply with CARB 2007 air emission standards will pay 100 percent of the bond charge, but no future DWR charges or utility undercollection surcharges; 3. All other self-generation customers will pay all components of the surcharge except the DWR ongoing power charges.

EXPECT MORE ABOUT NRTC AND Ka-band IN THE MONTHS AHEAD

Golden State Power Co-op is proud to be a business partner with the National Rural Telecommunications Cooperative (NRTC). We've written about their efforts to bring affordable, reliable telecom services to rural California. We will be writing about...and working with...NRTC as it continues to provide unique, affordable, reliable telecommunication services to Rural America. We will continue to share the good news about NRTC activities on a regular basis and look forward to the day when Golden State members can actually utilize Ka-band and other new technologies through NRTC. Stay tuned!

NRECA REPORTS THAT MAJOR ENERGY LEGISLATION IS LIKELY THIS YEAR

Golden State Power Co-op members benefit from almost daily updates from our national association, the National Rural Electric Co-op Association (NRECA) and the news out of D.C. in recent weeks has not been good. It appears that national energy legislation, for better or worse, is headed our way. It has been on a fast track in the House for the past month or so, and is all set to move rapidly through the Senate after the Easter break. As one energy staffer noted last week, "While the first week of mark-up (in the Senate) was relatively uneventful, the real excitement will begin when Congress returns from the Easter break."

NRECA has stressed the need to proceed slowly and carefully as new energy legislation is written, noting that many states are still trying to rebound from failed energy deregulation attempts at the state level. NRECA's CEO, Glenn English, suggested a "time out" for electricity legislation (suggesting a less comprehensive energy bill), but House Republicans were able to muster more than enough support to move their legislation through in late March and early April. The Senate will be more careful as it writes energy legislation, but even there the expectation is that there will be new, comprehensive legislation this year. To safeguard the interests of electric co-op members from California to New York and all other corners of the nation, electric co-op leaders will join with NRECA to "rally" in D.C. soon...

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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.). It looks like a dozen or so folks from California will make the trip and walk the halls of Congress.

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.