California: Davis caught between energy generators, PUC chief on contracts

Sacramento Bee ^ | January 18, 2002 | Dan Walters

[TwoStep]

Keep the faith. I don't know any dems, who are willing to vote for Lights-Out Davis!

[zog]

--I guess that was my point, californias solvency long term. Like right now, if all the economic and demograpic and social trends continue, they will have to continually raise taxes, or default. Hmm, similar to argentina, good money after bad until the money just evaporates with the trust and the actual sum of "real work" done there to finance all this stuff. My guess is cutting government will never happen because of the demographics and social services being tied to voting for same. Davis might not get back in, that don't mean that the repubs and government shrinkers are gonna win by landslides in every office, either. That leaves taxes. If they keep going up, and productive businesses and people leave, well, there ya go. Any governmental bonds are hideously destructive on the economy, they are just dismal. It's a skim on a skim, actually subtracts money from the economy. And this bond issue is in effect trying to swap a double negative productive wealth skimming for a huge positive amount of tangible-if I can use that word here- electricity. IMO, it just ain't gonna work out, it just sounds cool to some people.

I am skeptical of the state being able to pay back these bonds myself, and I bet they are a flop on the market unless they promise so much that people are willing to take a chance on them, after first looking around and seeing if there are ANY other investment "opportunities". I bet they find more than one before they pick "cal state bonds", but hey, I could be wrong, people are un-predictable really. A dot bomb stock trading at one zillion times it's projected non earnings for the next centurry "hey, gimme a thousand shares of THAT stuff!" It happened, so who knows.

If it was the federal government, like with our ridiculous deficit spending and the ability to just issue any sum of money they want to print up, ya, people buy them, but cal can't print money. Maybe the state's worker's union might buy them....

I also doubt they will actually get the desired amount of juice at anywhere near what they think right now it's gonna cost in the next few years either, but that's another thread sometime.

[SierraWasp]

"I will wait and see who the next Kali Gov is before I would consider buying any Calpine stock!"

They will suck up to him, too! These people, like many in business, are not concerned with principles or politics, they are pragmatists! They only care about finding a need and filling it.

Sometimes, they even help those they see creating a need where none exists so they can capitalize on that, too. Nothing personal about it. Just business as usual.

[randita]

I also doubt they will actually get the desired amount of juice at anywhere near what they think right now it's gonna cost in the next few years either, but that's another thread sometime.

Excellent point. I think there's trouble abrewin' in the Middle East oil producing nations like Saudi Arabia and Iraq. Even an all out war between Israel and Palestine or another neighboring country would affect things. I don't know what form it may take, but there is a lot of unrest over there. it's like there's a long fuse lit that's slowly working its way to the powder keg. I hope I'm wrong, but the price of oil could go sky high if things get out of hand over there. And that would affect ALL of us mightily, esp. CA.

Last year, when CA started borrowing from it's revenues to pay for power, many on FR warned it was sheer folly to borrowing to pay for basic overhead expenses. A business, for example, that consistently takes that approach will find itself in deep trouble in no time. But, of course, a business can't just charge more for its products or services, but a state can get more money by raising taxes. But in the long term, increased taxes drive people and businesses out of the state, increase unemployment and reduce people's buying power, thus hurting the state economy.

An article posted a couple of days ago pegs the state's liability for its mishandling of its energy problems at $71 billion. CA's yearly budget is about $100 billion. The vaunted bond issue is only supposed to be around $12 billion, if it ever takes place. They're borrowing money right and left and continuing to raise taxes and fees to sky high levels. They're facing an unmitigated disaster. Davis's hope is that he can somehow bandage over the problem long enough to get re-elected which he probably will, but eventually the stuff is going to hit the fan.

If Al Gore were president, they'd be begging for a government bail-out (i.e. you and I bearing some of the brunt of CA's fiscal irresponsibility) and they'd most likely get it. GWB has and will continue to tell them to handle their own problems.

Despite all this, the people out there seem to be living in LaLa Land. From what I've observed in following this issue for over a year now is that there is very little concern by CA's populace about the future financial viability of their state. Amazing!

[zog]

--I think there is even another possible scenario, even if nothing happens to the mideast. the way they are going and building new plants now, they are gonna need a LOT more natgas. And we got fuel cells on the horizon just about to start hitting the markets in a big way, which will compete with the avaialble natgas. Just saying 'there's a lot in the ground" way over in canadastan or wherever is not having a tap handy to turn on. And the competition will indirectly but positively drive up the cost of food, which is REALLY tied to natgas and making fertilizers from same. Either way, energy will cost more in the future, it already costs more than people will admit, a huge part of the gas bill is our long standing decades long military involvement in the mideast. that's a price we pay, it's just hidden, it's not directly at the pump, so hardly no one acknowledges it. That and the fuel tax, whioch is supposed to go for road building, but I doubt if even 50% of it results in asphalt and concrete, the rest in overhead and expenses and various other government project boondoggle. roads are necessary, i don't think private roads would really "work", but I doubt the way it is now is all that cost effective either.

electricity, who knows, but a decent home insurance bet is to at least have some sort of self generated and stored backup electrical potential. buy it, pay for it, own it outright, start using it. Keep the grid as long as it works and is affordable, but don't cut yourself off from no juice at all if possible. there's something for everyone out there, any budget, any locale. Brazil just had a major whoopsie the other day, it could happen here as well, I trust no corporate or government guarante or assurance on that. Even if it's only an occassional outtage, when I have experienced them, it's when you least want to be without some power, ice storm, etc.