Senate Bill 282 (Kelley 1999) directs the California Energy Commission to send a report to the State Legislature on agricultural electricity usage in California. The report is to analyze daily and seasonal usage patterns, compare agricultural rates among utilities in the Western U.S., examine the effects of restructuring on agriculture, and analyze strategies for reducing electricity costs incurred by agricultural customers. This report addresses those issues, with an emphasis on going-forward policies and strategies that affect agriculture. Due to the turmoil in California's electricity industry, the economic analysis of rates and energy costs can not be done in a timely fashion that is useful to the Legislature. However, the analytic tools developed here can be used to assess different policy options once some semblance of stability has returned to the industry. During this crisis, the state can consider the proposals made here to mitigate the impacts on agriculture. California's agricultural sector represents a significant part of the state's economy, responsible for approximately 8 percent of gross state product (GSP). Agricultural production is dependent on access to water, either from surface supplies (e.g., the State Water Project), or pumped from underground aquifers. Moving water around-to irrigate fields, pump groundwater, water stock, or as part of food processing-requires energy. Ninety percent of electricity used by agriculture is associated with water use. As a result, energy can represent a significant portion of agricultural production costs. For agriculture, energy costs are rising rapidly now and could have an even more significant impact this coming summer. Natural gas costs that have increased tenfold from last winter and the recent rolling outages are now impacting these products: • Dairy farmers with outages that force them to dump milk; • Citrus growers fighting frost with wind machines and field heaters; and • Greenhouse operators in the state's important nursery and floral industries who must supplement heating in their facilities. This summer, state policy, as embodied in the CALFED and related processes, likely will reduce surface water supplies available to agriculture, and encouraging greater