Re: N. Korea Says Has Nukes

[Doug]

Dan Minette wrote:

Well, lets look earlier in that report:


There were two inherent flaws noted in the system "(1) retail prices were
frozen and (2) with few exceptions, the California Public Utilities
Commission prohibited or discouraged long-term contracts between utilities
and wholesale suppliers."

The freezing of retail prices was not in order to maximize income, it was
to persuade the public that it was good for them.  IIRC, long term
contracts were discouraged because

1) they were considered suspect
2) in the short term, the spot market price was lower.

The retail prices being frozen was key because demand didn't go down as the
wholesale price went up.  There was no financial disincentive to use
energy.  I cannot imagine this feature being put in because of lobbying by
the energy industry.

They didn't lobby against it because they want the industry deregulated. Politically expedient.

The second one doesn't make sense either.  There were plenty of wholesalers
who were willing to lock in long term contracts in '97, just at above the
spot market price.  There was sure profit involved, what company is against
sure profit?

Restructuring (deregulation) was responsible for the conditions that led	
to the crisis, but from what I understand, energy companies helped the
PUC design the restructuring that Pete Wilson signed into law in 1996.

So did consumer groups.  It was the worst of both worlds, as it turned out.
It was thought to be a win-win, but it was based on the assumption that the
temporary surplus of electricity and the depressed prices for coal and
natural gas would last foverer, and that dry spells would not reduce
hydroelectric power.

It wasn't the worst of any worlds for the providers that came away with billions in profits. It was definitely the worst for California who lost a $4 billion surplus and went deeply into hock overnight.

In all probability, a shortage that may have been  little more than a bump

in the road was elevated to a full blown crisis  due to the illegal use of market power.


Why in the world could a single supplier have that kind of market power?
There are scores of suppliers of electricity in the US, why didn't they
step in?  At first, the reason was simple, the capped prices for California
was less than the going rate elsewhere. So, a company had to be foolish to
supply California with electricity for less than they'd get elsewhere.

Ok, that's at first...

Plus, the costs of generating electricity went through the roof for some
suppliers.  Those that used natural gas, 40% of California's suppliers, saw
that price go from under $2.00 to as high as $9.00 on the spot market.
People producing with natural gas would have to lose money to fit under
California's cap.> >

But of course later on, when they learned how to game the system there was lots of money for all the big boys.

Because they were in cahoots.

To what benefit to themselves?  There are scores of suppliers of
electricity.  Why would they agree to refrain from  selling it to
California?  Lets look at some numbers on this.

In 1999, the total demand in California was 275 Twh (T means 10^12), of
which 67 Twh was imported, and 85 Twh came from natural gas.  In 2000, the
total demand was 280 Twh, out of which only 46 Twh was imported, and 107
Twh came from natural gas.

Part of the reduction in the imports was due to the lack of hydro power
from the NW.  The rest is due to the fact that California ceased to be an
atttractive market.

The beginning of 2000 was the height of the crisis after which massive conservation measures were taken. Considering that, the numbers above by themselves don't mean anything.

Well, lets put it this way.  When there are many potential suppliers, and
one of them is able to manipulate the prices on their own, the market has
to be extrodinarily tight.  The reality was that California did it about as
stupidly as possible.  They froze consumer rates, so demand kept on going
up.  They wouldn't pay wholesalers the going rate until the last minute,
when they were authorized to pay any price out of desparation.  They took
the short term gain of going to the spot market, where desperate suppliers
were willing to sell cheap at the last minute, and then were shocked that
dealers would sell dearly at the last minute when supplies were tight.

If they had just raised the wholesale price they were willing to pay to the
level that other buyers were willing to pay, and then passed the costs on
to consumers, things would have worked out much better.

I won't argue that the restructuring was done very poorly. I will argue that it would have been in the best interests of the industry that _desires_ deregulation to pounce on California like a lion pouncing on a wounded animal. Dereg. was set way back, and Ca. is suing the industry to the tune of $9 billion.

I'm rather disappointed in the Sierra club using the "up to" line.  That
statement is true  if there is one small, high polluting, inefficient plant
out there.

Why do you hold the Sierra Club to a higher standard than commercial or political institutions that wouldn't bat an eyelash at using such language when they have to compete against these institutions for media attention?

If the clean plants they are talking about are natural gas, then that's
reasonable.  But, the cost of natural gas went up more than 4-fold after
deregulation.  It then settled back down to about $4.00, where it is now.
It had to go up; folks couldn't break even drilling for gas under $2.00.

So, under the best of circumstances, with everyone playing by the rules,
y'all should have seen about a doubling of your electric bill during the
summer.

Utilities and power  producers on the other hand, have resisted building

new plants over the

last ten years because, until recently, demand did not force them to do
so and because the utilities knew that deregulation would force them to
sell off plants."

So, new plants were not profitable.  Is your position that companies should
be forced to lose money by building new plants that they cannot pay for?
Or, did you want California to get in the business of state owned plants,
with tax money subsidizing the use of electricity.  Isn't that the opposite
of conservation?

After 2000? I'd vote for that in a second.

Did you oppose the 10% reduction in retail prices?  Did you honestly
favoring increasing your electric bill by, say, 50%?

The reduction was part of the PR campaign to sell the deregulation. And yes I would support higher energy bills for cleaner, more reliable energy enthusiastically. I would also support a _doubleing_ gas prices in order to support mass transportation and to improve infrastructure and research into alternatives, but I suspect that I don't have a lot of company there.

That would only be true if those devious companies simply agreed to absorb
horrid losses to protect the consumer.  Do you think it is their obligation
to go bankrupt, so that your electric bill didn't go up?  The problem
California had was, during that time, it was 40% dependant on natural gas
for electricity, and the price of natural gas was up better than 4 fold for
a bit.  If things were done right, your electricity bills would have gone
through the roof, usage would fall..or at least stop rising, and then the
rates would go back down when the natural gas shortage was eliminated.

If things had been done right, Pete Wilson and his handpicked PUC wouldn't have pushed deregulation so quickly and so foolishly, and the industry would have used some foresight in their dealings with the state. But "Republican leadership" and "Corporate responsibility" are oxymorons, and we should know that by now so shame on us.

Doug

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