Re: Re: RE: CA electricity rip-off
Joel Blau wrote: >A biographical note: William Tucker is the guy who used to argue that rent >control caused homelessness. well, he's wrong on that one, but he might be right on other things. > > The American Spectator -- April 2001 > > > > California Unplugged > > > > Environmentalists dreamed of soft power. The state woke up in the dark. > > > > by William Tucker > > > > > Looking back over the past 25 years, one thing soon becomes dramatically > > clear. The current situation was planned from the beginning. Almost a > > quarter-century ago, California officials became entranced with the idea > > that the centralized generation of electricity -- the system of building > > large generating stations and distributing power through electrical > > transmission lines -- was becoming outdated. Instead it would be > replaced by > > a "distributed" system of generation that would be anchored by much smaller > > industrial "co-generation" plants. This "small-but-beautiful" system would > > eventually atomize into a world where almost everyone would supply > their own > > electricity through backyard fuel cells, windmills, or solar panels. This > > strategy, called the "soft path," has led California to where it is today. I think that this is a total distortion. I guess Tucker hasn't studied California. On this level, the mistake was that the California folks decided to over-specialize in natural gas-fired plants. These are very clean, but it turned out to be a mistake when the price of natural gas rose steeply, partly as a result of the deregulation of the pipeline prices. > > ... With Lovins acting as > > an adviser, the state rewarded utilities for investing in energy > savings for > > their customers. The commission granted the utilities higher rates if they > > would rebate customers for buying energy-efficient appliances. In 1991, > PG&E > > hired Lovins and Berkeley physicist Arthur Rosenfeld to head a $10 million > > program applying energy-efficiency ideas to new and existing buildings, > with > > considerable success. Altogether, PG&E has spent $1.3 billion on > > conservation since 1976, displacing 2,300 megawatts of new power -- a > > relative bargain. From 1983 to 1995, Golden State energy consumption grew > > only half a percent per year, 20 percent below projections. Ratepayers > saved > > $1 billion in electrical bills. California now ranks dead last among the 50 > > states for per-capita consumption of electricity. here's the conservation that I referred to in my previous missive on this subject. However, it's a _big mistake_ to assume that Lovins has any real power. The governors of California in recent memory -- the ones who built the basis for the current energy emergency -- were Republicans Deukmeijian (sp?) and Wilson, who had no respect for what they saw as hippy-dippy small is beautiful stuff. > > At the same time, California stopped building coal, nuclear, and oil > > "base-load" plants. it's suspicious that the author simply ignores the role of natural gas (until later). He's clearly got an axe to grind. > >In 1991, residents of the Sacramento Municipal Utility > > District even voted to close down the Rancho Seco Nuclear Plant, though it > > still had years to go in its life cycle. of course, that would have prevented years of creation of nuclear waste that's unprocessable -- in addition to the creation of a very radioactive plant. But I guess this character doesn't care about externalities. >As a result, California also ranks > > 49th in its per-person capacity to generate electricity. Nice rhetorical trick. He goes from what he sees as the outrageous proposal to shut down a nuke to blaming the victim (California). Notice that the difference between being 50th in terms of use and 49th in terms of productive capacity suggests that California as surplus capacity, though perhaps not very much. > > ... The mechanism for eliminating coal plants from California was air > pollution > > regulations. As a result, the state now has no sulfur dioxide emissions > > (acid rain) and ranks 40th in emission of carbon dioxide per square mile. > > "Since the late 1960s, we've known environmental regulations made it > > impossible to burn coal in Southern California," says Steve Hansen, > > spokesman for Southern California Edison. "The only option was to build > > out-of-state." But they have been building in CA. This self-serving quotation also ignores the fact the restructuring (a.k.a., "deregulation") _actively encouraged_ SCE and other producers to become mere distributors of electricity and to sell off all their plants. (It's typically harder for new companies to get into a market than for established ones to expand capacity.) The companies were encouraged to redistribute their wealth to the out-of-state holding companies. It also encouraged them to "game" the market. They could restrict the construction of new plants without losing. I'll let someone
Re: Re: RE: CA electricity rip-off
I wrote: >One point the fellow [from the CA state legislature] made, BTW, was that the situation was made worse by the California commitment to avoid blackouts at any cost. In the face of this declaration of inelastic demand, the power companies are more than willing to charge any cost...< David Shemano wrote: > You say that demand is inelastic and the power companies can charge whatever > they want. Well, how can you say that, as an empirical matter, when retail > prices haven't risen? Because the restructuring fixed retail prices to allow PG&E, SCE, and, until recently, San Diego Electric (or whatever it's called) to "recover" the costs of their wasted investment in nukes. (It's part of the American Way that those with political power should have their losses covered by the state. Little did anyone know that the price floor would become a price ceiling, so the distribution companies would start complaining about what had been a boon to them.) The price I was referring to (and I'm sorry I wasn't clearer) was the price that the California state government pays in its effort to make sure that power is available to consumers in the face of the bankrupt or un-credit-worthy power distributors, which were having a hard time buying power from the wholesalers (the real villains in this piece). And retail prices have risen in San Diego, as they have for natural gas. >Epistemologically, how can you know? it's true that a lot of the whole restructuring -- so-called "deregulation" -- made the entire operation of the CA electrical market opaque to folks like us. That's one reason why the utilities were able to "game" the state and to rip off tremendous amounts of money from California. How do I know? I was just reporting what the economist/lawyer (and expert on bankruptcy) from the state legislature was saying. I actually wasn't reporting anything that I know, since I'm far from an expert on this subject. But I'll try to give a tentative answer. I hope that any experts -- Gene Coyle? -- will correct me. >Aren't you saying that conservation is impossible? I don't understand where this question comes from. California has been conserving. (California is very efficient in terms of energy use per capita.) It will do so. But what I was saying was it sure looks to me as if the problem isn't actual scarcity of energy or actual overuse of energy as much as the totally uncompetitive market for energy, which the energy companies created and took advantage of, with the aid of FERC (the Federales, the Federal Energy Regulatory Commission) and the CA state government. BTW, until very recently, the energy companies were part of the leadership of the organizations which were supposed to be helping the consumer. So the foxes were guarding the hen-house. As happens so often, Big Government is harnessed by Big Business to rip off the public. I guess what you are asking is: why can't people in California simply cut back on the quantity of electricity they use (to "conserve"), in response to the price signals (the substitution effect)? This seems to be the wrong question: the price to Californians (either at the retail level or to the state government) is much higher than the cost of producing the damn stuff. The energy producers should be forced to conserve on their profit winnings (through lower, fixed prices at the wholesale level) rather than forcing the consumers -- who did not create this problem and are thus not to blame -- to radically restructure their lives. I don't think price controls are a long-term solution, but in a case where the producers are earning dramatically high monopoly rents, they make sense in the short run. Of course, the FERC won't go that way, what with President Clinton in office or for that matter, with President Bush. BTW, I think that Krugman may be right that there isn't really an energy crisis (though of course it depends on how you define "crisis"). I don't think that the long-run problem is that "we're running out of energy" (since there are lots of new sources and new ways to use old sources more efficiently) as much as "we're polluting this planet to death" (the externality problem, or what libertarians call "neighborhood effects" -- big neighborhood!) In the short run, the problem is that the energy companies (or at least most of them) are taking advantage to grab as much as they can. Of course, the Cheney gang -- part of the same power bloc -- is using this "crisis" to undermine environmental restrictions (making the _real_ long-term problem worse) and to help their friends get their hearts' desires. Interestingly, all this encouragement of the supply side could eventually spur _over production_. Then the President will be going on TV to tell us to waste more energy ... or more likely will be bailing the energy corporations out with taxpayer dollars. (The big bucks being earned now will largely have been shifted elsewhe
