At 09:20 AM 1/26/01 -0800, Matt wrote:
>
>After looking at the difference in wholesale market prices from a
>year ago and today, I find it extremely hard to believe that it is
>the result of fair players responding to natural market forces.
Sure it is. Let's say you produce 1,000 kwh of electicity. You have
sold 900 kwh in long-term contracts. You now have 100 kwh of electricity
left. How do you decide who gets the last 100kwh? Why not auction it?
Those that want it the post will pay the highest price for it? This is
the system we use for every sort of good or service in limited supply - be
it a date in a bachelor auction or Marilyn Monroe's letter from the White
House.
This also has the added beneficial effect of reducing power usage during
periods of highest demand. During the times of the day where power is
most hotly demanded, price will go up, reducing demand and vice versa.
>The base prices have, in the course of a year, jumped from $20-$60
>per megawatt-hour (MWh) to $180-$420 / MWh. In no way has demand
>increased by 600%, nor has supply decreased to 17% of its former
>capacity in the last year, yet the prices increased by 600%-700%
>I understand it's more complex than that, but a price increase of
>600%-700% anywhere else require
What it is, is that once power demand outstrips supply for the first time,
the auction method of selling power enters into play. If supply outstrips
demand, then prices will remain low. Once there is more demand than
supply, the price increases until demand again equals supply.
JDG
__________________________________________________________
John D. Giorgis - [EMAIL PROTECTED] - ICQ #3527685
"The point of living in a Republic after all, is that we do not live by
majority rule. We live by laws and a variety of isntitutions designed
to check each other." -Andrew Sullivan 01/29/01
