Posted on 10/11/2003 8:32:00 AM PDT by Pokey78
Edited on 04/13/2004 2:44:20 AM PDT by Jim Robinson. [history]
Gov.-elect Arnold Schwarzenegger is preparing a push to deregulate the state's electricity markets -- a move embraced by business leaders and some energy analysts but criticized by many Democrats and consumer advocates as a return to the failed policies that sparked California's energy crisis.
(Excerpt) Read more at sfgate.com ...
Well the only "deregulation" the politicians ever monkey with are the financial gyrations dictated by lawyers and accountants. And the only thing they ever achieve is to make the whole system even MORE unfathomable to the average Joe.
The obvious technological solution to California's future energy requirements is to build modern, efficient NUKES with sufficient capacity to assure a safe, abundant and reliable supply.
Market forces work AGAINST this or any other rational solution. A competitive market achieves "efficiency" by SHEDDING excess capacity and increasing utilization of existing facilities. On balance, it is also short-sighted and risk averse to investing in new capacity. New capacity is only constructed in response to rising prices dictated by supply shortages. All-in-all, market competition is too volatile to assure a stable and abundant supply.
The regulated public utility model served our nation well for many, many decades. IMHO, we should dispense with this "free market" experiment, return to the public utility concept, and build more Nukes.
Here was the first stone you threw after bandying a grossly oversimplified comparison:
Think about it.
As if I hadn't.
You leaped in with your ill-considered comment based upon a pithy suggestion I made to Dog Gone which is part of a conversation I have been having with he, SeirraWasp, snopercod, Randita, Robert357, and Ernest_at_the_Beach, among others for over two years now. DG thinks that the power crisis was caused by mere stupidity. I don't.
DG knows, for example, that I effectively predicted that Arnold would resurrect deregulation because the people who wrote Arnold's environmental plan were part of the same crew who manufactured the shortage on which the power crisis was the payoff. Not only that, but he put Brulte on his transition team. So here it is, deregulation, before Arnold has even been sworn in. Gosh, just shocks the hell out of me.
Rather than club DG with an "I told you so," I suggested how a rational transition from the current debacle to a free market could be conducted without bankrupting scads of small businesses, else the power market in California might more resemble the situation in Russia and the employment market even worse. DG negotiates oil and gas deals for a living. He agreed that the suggestions made sense and were, if anything, too aggressive toward a deregulated market such as he enjoys in Texas.
Did you know all that? No, you couldn't, because you weren't in on many of these conversations. It was you who assumed superior knowledge with your reference to the breakup of AT&T as if the initial conditions were equivalent to the bogus deregulation of the California power market in its state of artificial shortage. I showed you how it wasn't a valid comparison. You don't like it.
It's your mentality that needs to be thrown out.
You put yourself above those that have been discussing these issues in detail for two years here without knowing the players. So, you expressed the desire to kill the messenger just like the vicious RINOs who have virtually destroyed the CAGOP by sabotaging conservative campaigns and then claiming they can't win.
Argue with facts and principles. If you can't win on those, change your thinking.
So what if immediate deregulation is what they say they want? It isn't good for the people and businesses of the State of California in its current condition.
But your stringing method churns out disinformation.
Then refute it point by point.
But because others may be duped by you, let's review:
You said:
Power companies will accept a predictable return as long as they know that they won't get screwed later. There isn't a lot of difference to them between a moderate profit for longer and a wild profit for a few years followed by cutthroat competition (the usual pattern in deregulation).
Do you really expect anyone to believe such a ludicrous statement?
To illustrate how power company perspectives contradict your wild assertion, look at the following excerpt (dated TODAY):
http://www.amtddj.inlumen.com/bin/djstory?StoryId=Cp4T0WaebqLqWmdu0odG
Most at risk are units that aren't under contract to sell power to the state's utilities or aren't considered critical enough for the grid operator to make capacity payments to keep them available.
Absent contracts or capacity payments from the ISO, up to 10,590 megawatts of power plants in the state could be retired after 2004 for economic reasons, generator West Coast Power estimated in a recent filing with the California Energy Commission.
There are plants now that exist that can provide power, yet California does not want to pay its bills. To replace those plants with state-of-the-art environmental friendly facilities requires cashola. You see the asses in California want it all, they want state-of-the-art yet they are unwilling to pay for it. For a power company to replace or upgrade its existing fleet, it has to seek board approval by selling one and only one parameter, ROI. That is why it is damned ridiculous that a know-it-all as you claim yourself to be states that ROI does not matter, that a predictable return is all that matters. There is no return!!! These companies are on the verge of bankruptcy because California shafted them and then played victim. These companies tried to shut their plants down on any pretext to stop the hemorrhage of cash, and California accuses them of gaming the system. What an Orwellian nightmare.
Your "customer base" did not want to pay for their Utopian wet dream. And don't kid anyone, that customer base is claimed by the State of California, not the energy companies.
Remember what you said when I asked in "Who's customer base"?
And you said:
Power companies, obviously.
Anybody with a modicum of mind left would know that if they do not negotiate price of product or service to a recipient, that recipient is not a customer.
The "Customer" to energy companies doing business in California is the State of California itself, not the residents and businesses of that state, except in instances where commercial companies gained approval to negotiate their own contracts.
Which brings us to another refutation:
I said that some businesses signed long term contracts that they are very happy with.
to which you responded:
As negotiated by their hand picked boy working for Davis. There's a reason Edison International and John Bryson donated over a quarter million for Davis' election.
Was the Kroger-Dynegy contract negotiated by a dweeb from Davis?
And if you referring to the pinhead who got a kickback from SOCAL Edison, that was for $200 thousand on two contracts, not 65. It was an isolated event like the Enron west coast sales rep who decided to get back at California's bullshit.
The bottomline is that California decided several years ago to have a little energy party and invited all those nasty energy companies to join them. After those evil Ken Lays invested millions in purchasing and developing energy assets, California decided not to pay them and went bankrupt, and cried it's all their fault.
Because California was playing parent to its population, it decided what was best. And now you're proposing the samething! You want California to be the protective parent again.
What does a person or business do if the bills are unpaid and the lights go out? They pay their bills and if it is high, they seek subsidy and a different competing source.
California needs to offer tax breaks to businesses, energy assistance payments to low income indigents, and more importantly, they need to stay out of the way of the market. They are out of their friggin minds if they think they can control prices in a capital intensive free market. Else they stagnate until they are replaced.
And then you contradict yourself:
My guess is that within two years, the State could be ready to initiate a fully free market on the model of Texas. There probably will still be a bump in prices when the system releases to open market pricing...
So you're predicting a shock yet you are setting up for regulated pricing to avoid a shock. Which is it? You need capacity yet the Energy Companies will have nothing to do with it, so you're stuck. There is no free lunch.
Since they haven't tried de-regulation yet, how would this person know?
Do you really expect anyone to believe such a ludicrous statement?
Your perspective is so distorted by your perceptions that you can't read what I wrote. Instead, you attack those with whom you think my position is associated. Profit is profit. If producers in a heavily regulated market aren't making one on the books, or aren't even getting paid, that isn't a profit, is it? So don't compare what is happening or what the leftists want to what I suggested, because neither is the same.
To replace those plants with state-of-the-art environmental friendly facilities requires cashola. You see the asses in California want it all, they want state-of-the-art yet they are unwilling to pay for it.
Well duh, as a former project engineer in a chemical plant I guess I would know that. First of all, you are assuming that state-of-the-art environmental friendly facilities are environmentally necessary or legally required on the Federal level. They often aren't, but are instead the whimsical insistence of CARB, which is often politically rather than technically motivated. I have obtained several air quality permits in the BAAQMD basin and am familiar with how that backward system works. Some of their demands even make air quality worse. Many CARB mandates aren't required by EPA (which should have given you a clue considering the pay for play game Davis plays). So I either have to conclude that you still don't understand why those restrictions are in place, or know better and are answering me selectively. Let's see which it is.
For a power company to replace or upgrade its existing fleet, it has to seek board approval by selling one and only one parameter, ROI. That is why it is damned ridiculous that a know-it-all as you claim yourself to be states that ROI does not matter, that a predictable return is all that matters. There is no return!!!
Why don't you learn to read what I wrote instead of lumping me in with the people you oppose?
I said, "Does it really matter that much if the ROI is spread out over five years instead of one as long as the area under the present value curve is the same? In many respects a power company might prefer the former." That was not the non-existent ROI they are making now, but a prospective ROI pursuant to changes in the way the market is currently structured on the way to full deregulation, and not of just pricing.
Here is a simplified translation: If, after immediate price deregulation, the ROI subsequent to the price shocks due to the current shortage in generating capacity return, say, 60% on capital in the first year, it isn't a catastrophe to the supplier if the return is 20% for five years, instead (depending upon what the expected return on capital might be for an NPV calculation, right now the rates are rather low). That curve generates more "cashola" for five years instead of a lot for one or two.
Here is why such a contract might be preferable to a supplier: What usually happens in an atmosphere of price deregulation with a history of supply shortages is that prices spike when controls are released. The classic example is when Reagan deregulated oil prices in the early 1980s. What then happens is that the massive profits enjoyed by those with access to existing sources of supply triggers ALL the producers to invest in developing new supply capacity. Once that new stream comes online, prices crash, often to below pre-deregulation levels and late entrants are often hit the worst. Sometimes they go broke get bought for a song.
That crash isn't so desirable to the producers, and I'd bet you haven't a clue as to how they could prevent such a scenario in the future in California, or is there a reason you never mention supply deregulation in your "analysis"?
It took me four years of research to understand how this game works, and no, when I started that work I would have agreed with every word of what you have written. I was a good little subscriber to The Economist, and lapped up every bit of that kind of globalist agitprop.
The supply regulation game is at least as old as the Dutch East India Company's manipulation of coffee prices by controlling access to the plants. Understanding that sorry history of economic tyranny by European corporate royalty, the founders of this nation tried to design a limited government, one that didn't have the power to control private property or have control of resources. Control of access to resources is too much temptation for the wealthy to purchase corrupt influence that depresses everybody else. They Founders failed.
The key to cracking the Constitutional system was international law, a loophole in Article VI Clause 2 of the Constitution, governing the adoption of treaties and the scope of their powers (IMO the rat Patrick Henry and others smelled only too clearly; if you want a good chuckle read Hamilton's defense of the manner of treaty ratification in Federalist #75). To implement the plan European investors needed a foothold in the US before they could get into the market. Until the Civil War, corporations were haltered in the US because they were not allowed to own land and were not protected under the Constitution in a manner co-equal to citizens. After the Civil War the US was deeply in debt to that very European investor class. The 14th Amendment changed that balance of power between the individual and corporate. Once the appropriate Supreme Court cases were in place interpreting persons "subject to the jurisdiction thereof" as including corporate persons, corporations then derived equal protection under the laws and could own property, the investment floodgates opened, and that not only created an American industrial colossus, it produced an American investor class owning enormously influential private tax-exempt foundations.
So it isn't exactly by coincidence that it is those same colossal foundations that are making all those "charitable" donations to those icky Greens. The Environmental Grantmakers Association? That's Rockefeller. The Pew Charitable Trusts? That's Sunoco. W. Alton Jones? That's Citgo. The World Wildlife Fund? BP and Shell. You do see a pattern, don't you?
These are more than investors in energy, their assets include timber, mining, banking, food production… They aren't fools. They use the same simple and ancient recipe as did their European forbears by which to manufacture a predictable return: Kill the competition with regulations, create a shortage, and cash in. It's become so common there is even an excellent book out on the topic that I suggest you read, .
It's a simple process that has accelerated over the last five decades.
It's a vertically integrated racketeering system that extends over the entire planet. American investors in multinational operations are perfectly happy taking a hit on US operations destroying domestic production because their investments abroad get the business. They either convert domestic resource land to real estate or mothball it under tax exempt conservancies, Federal monuments, and such.
It's been done in industry after industry: timber, energy, mining, beef, fish, agriculture, real estate development, soon water… ALL taking advantage of economies of scale in environmental compliance and sometimes selective enforcement. Tax-exempt foundations buy the research "data" they need, fund a few ideological groups trained by the same professorate that lives off their grant money, and not a word need be breathed to the companies in which they are invested. Their pet executives wail about the regulations and scream how stupid and counterproductive they are, just like you do. It makes great theater. There is virtually no way of getting caught.
This is exactly what SPI and Simpson did in the timber business in California (seeing as it is only their two representatives sitting on the Board of Forestry), and it's the same reason we don't log National Forests any more. Weyerhaeuser and Boise Cascade would not approve. They are logging Russia, Borneo, Chile, Sweden… and if you think this is strictly a Democrat gambit I hate to dieabuse you. Mark Rey was a lobbyist for AF&PA.
Enviro-racketeering is a way of shaking out small competition. Subsequent to the power crisis over the last two years, the State still owes big to the producers. Last I heard, the companies that were having the hardest time getting get paid were the little guys, the small private power producers of hydro, wind, etc who sell their output to the larger distributors. Now, in California's regulated market, many of these are "green power" sources, who, by law, get paid at higher than normal producers' rates. I understand how bizarre that subsidy is when all one thinks of is electricity, but there is an economic rationale for it driven by real estate interests. If a critical air basin fails to meet EPA standards, development is curtailed by the Feds. Development interests are the principal investor sponsors of the Democrats in this State. So, if those green producers go bust, we either have to import the power, do without, or build cleaner plants burning more natural gas. Now, what is it that you were talking about and how necessary was it, really?
You never did mention that we don't have the pipeline capacity to feed all those new plants or that there is an impending natural gas shortage nationally.
So, what you and the existing producers in California want is price deregulation, but you aren't exactly enthralled about that crash that happens later. So, you speak as if there's nothing to be done about those stupid air quality regulations and wail about all the money you'll have to raise to build new equipment, and we'll just have to let you have your windfall so that new plants can be purchased with cash. Fancy that, as if cash were that important in a time with effectively zero interest rates. You talk about price deregulation and never mention what to do about SUPPLY REGULATION that will hold up that price by keeping out new entrants and slowing new construction while you get that windfall.
Enter your natural allies, the environmental groups! Enter Arnold, Jim Brulte, RFK Jr. and his advisors at Earthjustus. Just shocks the hell out of me.
So in California, a nifty strategy would be to kill the competition by getting into trouble and then stall in court on paying suppliers. Bigger companies have the advantage of being supported by overseas operations. The little guys go out of business and sell off their assets for a song. The big ones can reorganize and, unless I misunderstand, who gets paid, how much, and when, that all depends upon the bankruptcy judge followed by a lengthy appellate process. Then deregulate only prices during a supply shortage and cash in. The cost of environmental regulations and local NIMBY groups such as TURN and RFKJr.'s buds at Earthjustus will attack anyone with the temerity to build a new plant as Mr. Bryson's associates in the NRDC did decades ago when they helped shut down Rancho Seco. Lock in the long-term contracts. Refinance the contracts with bonds from Wall Street banks...
That is how has been going, isn't it? There is no other explanation for NRDC founder John Bryson's tenure at Edison, other than perhaps playing the carbon credit market pursuant to that Kyoto treaty we never ratified, reiterating a question you never confronted. Are you really going to sell me on the story that people were financing payments on power costing over $1/KWh and nobody was making money?
So let's see if our little hypothetical gambit has a precedent, shall we? We'll start with that famous scam when the State required that gasoline retailers remove ALL steel underground storage tanks and replace them with new fiberglass tanks because they were supposedly a threat to leak. Of the 12,000 tanks at service stations sampled in California, 48 leaked (some threat). Assuming that the average cost of replacing an underground fuel tank is approximately $100,000 (it can be three times that) and that there are approximately 200,000 such tanks in California, the estimated capital cost was about 20 billion dollars, not to mention the amount of money made burning contaminated dirt. Over 10,000 independent sellers of gasoline went out of business because of the cost thus leaving the major oil companies with a vertically integrated oligopoly. But at least we were safe, right?
Wrong. Enter the Clean Air Act of 1990 mandating oxygenates for both the LA basin and the Central Valley. I don’t suppose you know that it was David Doniger of the NRDC (surprise, surprise) who was the ONLY representative of an environmental NGO at the EPA meetings that approved MTBE as an oxygenate for gasoline? I am told that it was NRDC lawyer Mary Nichols who presided at the CARB hearings in LA as well (I'm still getting source documents on that).
Up until that time methyl tertiary butyl ether (MTBE) had been a byproduct of gasoline production requiring expensive disposal. The oil refiners had been handling the stuff for years; thus the requirements for processing and containment of the material were well understood, as were the byproducts of combustion. (Measurement and documentation of all these things are required for construction of a processing plant, an air quality permit, or for disposal.) Subsequent to their early experiments with MTBE in Anchorage and Denver, it was well understood by BOTH the oil companies and the EPA that MTBE was likely to leak out of plastic fuel tanks and contaminate groundwater. The EPA had documentation to that effect before 1990. It was so well understood that when the EPA demanded of Congress that the oil companies that produce reformulated gasoline (particularly ARCO), demanded they be indemnified in advance for any damage to public health or private property.
I can't imagine you don't know about the contamination of drinking water wells across the State. Well it gets worse. Guess who is now making big moves in forcing State control of private and small municipal water supplies now that the groundwater has been poisoned for ten years? Yup, the NRDC.
NRDC is a LOT bigger player in this mess than I hope you realize and their historic behavior and that of the oil companies in the oxygenate fiasco are clearly parallel to the gambit in electrical power I proposed above. In addition to the prominent role played by Mr. Doniger, I am told that it was NRDC lawyer Mary Nichols who presided at the CARB hearings in LA (I'm still getting source documents on that). The addition of MTBE to gasoline cost everyone in the California an extra 30 cents per gallon for ten years. It made ARCO so happy they put Pete Wilson's wife on their board of directors. Believe me, a lot of that was profit due to the closed market in refinery capacity. Now, guess how hard it is to build more refinery SUPPLY capacity and why? Now guess who would stand squarely in the way of adding more?
Well, who are these guys at the NRDC? It’s an interesting list.
|
Natural Resources Defense Council Board of Trustees |
|
|
Chairman |
Frederick A. O. Schwartz, Jr. |
Partner, Cravath Swaine & Moore; (a British Law Firm) Former New York City Corporation Counsel (under Mayor Ed Koch) |
Executive Director |
Frances Beinecke |
Co-founder, The New York League of Conservation Voters (with RFK Jr.) |
Trustee |
Laurance Rockefeller |
Private philanthropist; Former Chairman, Rockefeller Brothers Fund; Former chairman, Citizens Advisory Committee on Environmental Quality; Trustee, the Laurance Rockefeller Charitable Trust |
Trustee |
Thomas A. Troyer |
Partner, Caplin & Drysdale; Former Chairman, the Foundation Lawyers’ Group; Former member of the IRS Commissioner’s Advisory Group on Tax-exempt Organizations; (no conflict of interest there?) Board member, the Carnegie Corporation of New York |
Pres & Co-founder |
John H. Adams |
Former Assistant US Attorney (New York) |
Vice Chair |
Adam Albright |
Board member, Redefining Progress; Board Chair, Population Communications International; Program Chair, Conservation International |
Vice Chair |
Alan Horn |
Chairman & Chief Operating Officer, Warner Brothers |
Vice Chair |
Burks Lapham |
Chairman, Concern Inc.; Director, Chesapeake Bay Foundation (a relatively benign group) |
Vice Chair |
George Woodwell |
Founding Director, Woods Hole Research Center; Co-founder, Environmental Defense Fund (they banned DDT, Alar, etc.) |
Co-founder & Treas |
Richard E. Ayres |
Partner, Howrey & Simon; Former Chairman, National Clean Air Coalition |
Trustee |
Patricia Bauman |
Member, Pew Environmental Health Commission; Former Manager, National Institute for Environmental Health Sciences; Co-Director, The Bauman Foundation |
Trustee |
William Richardson |
Former US Secretary of Energy; Former US Ambassador to the United Nations; Former US Congressman (D-NM) |
Trustee |
Michael Finnegan |
Managing Partner, J.P Morgan Securities |
Is this "Natural Resources" defense, or natural resource SUPPLIERS defense?
Now, let’s look at who gives the NRDC money, shall we?
|
Top Funders of NRDC |
||
Funder |
Total Donated |
Comments |
|
|
|
Descriptions in bold are major energy investors |
Pew Charitable Trusts |
$11,568,000.00 |
Sunoco money |
Blue Moon Fund |
$7,818,735.00 |
This is W. Alton Jones Money (Citgo) |
Energy Foundation |
$6,965,000.00 |
Launched by The John D. and Catherine T. MacArthur Foundation, The Pew Charitable Trusts, and The Rockefeller Foundation. The Joyce Mertz-Gilmore Foundation joined as a funding partner in 1996, and The McKnight Foundation joined in 1998. In 1999, The David and Lucile Packard Foundation joined to support two programs: the U.S. Clean Energy Program (now the Climate Program) and the China Sustainable Energy Program. In 2002, the William and Flora Hewlett Foundation joined to support advanced technology transportation and clean energy for the West. |
John D. & Catherine T. MacArthur Foundation |
$5,636,500.00 |
Bankers Life and Casualty money (investment portfolio unknown) |
U.S. Environmental Protection Agency |
$4,681,097.00 |
Your tax dollars at work subsidizing the interests of whom? |
Turner Foundation |
$3,795,167.00 |
CNN, and a lot more |
Public Welfare Foundation |
$3,500,000.00 |
Too confounded to determine |
Joyce Foundation |
$3,309,445.00 |
Timber Wealth |
Charles Stewart Mott Foundation |
$3,022,340.00 |
General Motors |
Ford Foundation |
$2,733,300.00 |
Ford |
Beinecke Foundation |
$2,150,000.00 |
Major player at Yale. |
J. M. Kaplan Fund |
$2,057,500.00 |
|
William Bingham Foundation |
$1,995,000.00 |
|
Homeland Foundation |
$1,733,000.00 |
|
San Francisco Foundation |
$1,654,739.00 |
|
Rockefeller Brothers Fund |
$1,377,510.00 |
Them again |
McKnight Foundation |
$1,365,500.00 |
|
Robert Sterling Clark Foundation |
$1,310,000.00 |
|
Geraldine R. Dodge Foundation |
$1,310,000.00 |
|
Bauman Family Foundation |
$1,226,000.00 |
|
Nathan Cummings Foundation |
$1,220,000.00 |
|
Educational Foundation of America |
$1,210,000.00 |
|
Richard & Rhoda Goldman Fund |
$1,205,000.00 |
|
Mertz Gilmore Foundation |
$1,201,000.00 |
|
Carnegie Corporation of New York |
$1,200,000.00 |
|
Park Foundation |
$1,198,010.00 |
|
New York Community Trust |
$1,186,821.00 |
|
Overbrook Foundation |
$1,182,585.00 |
|
Surdna Foundation |
$1,147,000.00 |
|
Bullitt Foundation |
$1,122,675.00 |
|
William & Flora Hewlett Foundation |
$1,075,000.00 |
Note also the participation with the Energy Foundation |
These people are energy investors who use federal money and their own tax-exempt "charitable" donations to fund lawsuits that manipulate access to resources, control processing of energy feedstocks, and set attainment targets in a manner preferential to their own investments. ALL of the resulting capital gains in their trusts are tax-exempt. You may be surprised to find the Hewlett and Packard fortunes listed as energy investors, but they just gave over 130 million to Stanford to research extraction of methane hydrates and are directly tied in with Exxon/Mobil in that effort. Keeping it in the family they've put Lynn Orr, who is married to Susan Packard, in charge of the global energy project. The idea is that they can use the energy revenues and the carbon credits for removing a principal source of atmospheric methane, a powerful greenhouse gas. They need Kyoto or this will be a big loser of an investment. Curiously, if they disturb those nodules foolishly, they may end up releasing a great deal of methane to the surface which would release the gases into the atmosphere. You don’t think that they might need protection from the NRDC in case they screw up, do you?
Did anybody sue the NRDC for the cleanup costs of MTBE?
They can’t be sued. Clinton EO 12986 indemnified them from such lawsuits as members in good standing at the IUCN, the United Nations' equivalent of the EPA.
Now, how much of all of this do you think most executives at Sunoco or Citgo really understand? I’d bet they haven’t a clue. Bryson on the other hand…
So, in reality, there's a damned good reason to do everything possible to reform the regulatory environment of power SUPPLY capacity. To deregulate prices without deregulating supply is a catastrophic recipe for the eventual CUSTOMERS. Remember those? They vote. We should simultaneously restructure the demand side of the market BEFORE price deregulation. The difference means more to customers and the state than just power.
Let's say I run a welding business. Electrical power is my life-blood. If the business dies, so do the jobs and so does the tax revenue to the State. I might be able to survive a 20% increase for five years, where a 60% change for one year would kill me. If I know that the prices will hold 20% higher for five years, I might be able buy new equipment that reduces that consumption. If they jump 60%, I won't be able to afford that equipment because I will be broke. No one would loan me money on that cash flow. So to transition to deregulation on a schedule is good for both suppliers and customers. It happens more often than you apparently realize, or else you would have understood what I meant when I talked about protecting customers from price shocks.
Now we'll deal with the rest of your myopic ranting.
Anybody with a modicum of mind left would know that if they do not negotiate price of product or service to a recipient, that recipient is not a customer. The "Customer" to energy companies doing business in California is the State of California itself, not the residents and businesses of that state, except in instances where commercial companies gained approval to negotiate their own contracts.
Pathetic dodge, but the State, as you admitted, is only acting as an agent for a political constituency. When I talked of customers you knew exactly who I meant and showed every bit the contempt for them that the rest or your post expresses. I was very clear that I meant commercial users of power who are very sensitive to the price, businesses too small to have negotiated those long term contracts, not a few of whom will go out of business if there are price shocks. Small businesses are the largest employers in the State. For you to take my words out of context in order to set up your answer as if I was talking about residential users is worse than unethical. It's deliberately deceptive.
Was the Kroger-Dynegy contract negotiated by a dweeb from Davis?
As I said, the system works for the big players. There is no contradiction.
And if you referring to the pinhead who got a kickback from SOCAL Edison, that was for $200 thousand on two contracts, not 65. It was an isolated event like the Enron west coast sales rep who decided to get back at California's bullshit.
No, I wasn't.
California needs to offer tax breaks to businesses, energy assistance payments to low income indigents, and more importantly, they need to stay out of the way of the market. They are out of their friggin minds if they think they can control prices in a capital intensive free market. Else they stagnate until they are replaced.
A typically self interested plan. You are still talking about eliminating price controls without even looking at how the State controls supply or how the power companies "inability" to take on the meter readers has abetted peak residential demand. You want the State to deregulate prices while still retaining the regulatory requirement for an arguably necessary large-scale replacement of the existing capital stock that doesn't necessarily address total peak capacity. Your solutions are ALL designed to use either State revenue or cuts in State revenue to help people pay more for power. What you want isn't full deregulation or a free market. You want revenge.
So you're predicting a shock yet you are setting up for regulated pricing to avoid a shock. Which is it?
Can't you see the contradiction in that question? If California deregulates prices while regulatory restrictions on supply are in place there will be a shock. Do you dispute that? So, I suggested means to reduce the impact by distributing it over a period of time. That is not inconsistent. The longer those supply restrictions remain in place the longer that shock will last because new construction will be delayed. Who wins there with deregulated pricing in an effectively closed market?
So, unlike you, I advocate easing regulatory restrictions on supply. I advocate maintaining the elimination of new source review on upgrades, something Arnold specifically opposed in his wretched environmental plan. I advocate extension of existing permits for plants that were to be built until Gray Davis' henchmen took control. I want those permits to be transferable if necessary. I advocate negotiation of intermediate term contracts for terms of two to five years, and reining in CARB as necessary to back off on stiffer air quality controls if they are not mandated by the federal EPA. I would also like to investigate the role MTBE has played in asthma rates to see if eliminating that alone might reduce the need for more stringent attainment standards. Do you have a problem with any of that?
Now, to the second glaring omission in your argument and your recommendations: You suggest NOTHING THAT WILL REDUCE DEMAND.
I suggested aggressively installing the infrastructure so that the customers of a future power market can modify their consumption patterns to advantage during peak hours: time of day metering and time of day controls on major electrical appliances. That will reduce the need for peak supply capacity that requires new plant construction.
Please tell me why that is a bad idea under the current circumstances.
You need capacity yet the Energy Companies will have nothing to do with it, so you're stuck. There is no free lunch.
I'm not asking for one. Although you may be anticipating a feeding frenzy, neither should you.
Even though I've read your book, this post clarified "the control of supply" issue for me.
I'm getting better at making it clear. I hope now you understand better my cynicism during the power crisis (and why I wanted to strangle lewislynn (of course, lewislynn deserves strangling on his own merits)). :-)
My first inkling of this camr from writing the two sections in Part II, Chapter 3, "More is Less" and "Less is More." You might end up wondering (as I do) if the seemingly deliberate accrual of fuels around Los Angeles is "The Squeeze" in action. I honestly believe that the monsters with whom we are dealing at a high level are that callous.
I guess I should have added that at the time the MTBE thing went down, the British Royal Family was the principle investor in ARCO (the ARCO Chemical Company that produced MTBE is now part of Lyondell).
I came across a what might work out to be a little gem this morning (WARNING: the next link is a long pdf document. A shorter excerpt is here. I tested the short one, the longer is beyong my bandwidth): A top ARCO executive admitted under oath, “The EPA did not initiate reformulated gasoline....” He clarified that “the oil industry... brought this [MTBE] forward as an alternative to what the EPA had initially proposed,” (which was ethanol being pushed forward by ADM (corporate welfare has become a feeding frenzy)).
Apparently the oil companies knew of the threat from leaking tanks as early as 1981, from a spill in Rockaway, NJ. A Shell hydrogeologist testified in the South Lake Tahoe case that he first dealt with an MTBE spill in 1980 in Rockaway, N.J., where seven MTBE plumes were leaking from underground storage tanks. [Excerpt] [Full document].
I've got more on this if anybody wants it.
ME TOO!!! You've caused me to "BOOKMARK" this thread. No wonder you were asking me what that San Fran Fed EPA Lady admitted to a room full of CA County Supervisors about the NRDC and MTBE!!! (those are two dirty four letter words, you know)
SNOPERCOD is exactly correct in his appraisal of your magnificently researched reply. It confirms the scope of this whole energy/oxygenate manipulation through orchestration and who's really behind it. Most people lack the concentration powers to comprehend the scope, but you have begun to help them connect the crucial "dots!"
I will never forget the hearings/meetings/conferences on MTBE in Sacramento and the Lobbyists on their cellphones with excruciatingly worried looks on their faces. Also the subtle, almost mysteriously subtle phone calls I recieved as I composed the resolution to submit for my board to approve in 1997 to make my county that includes the jewel of the Pacific Rim, (Lake Tahoe) "MTBE FREE!
Like: "We know where your grandkids go to school."
In other words... What the hell do you think you are doing? Aren't you acting just like the EnvironMentalista "activists" you normally detest? Could you be "roll playing" to achieve some undeserved notariety? Aren't you getting just a little too excited and a little too big for your britches, etc., etc., etc...
The implication of being politically "targeted" came through to me loud and clear! Thus, I can again prove that I never was a typical "politician" as they get RE-elected!!!
Peak periods are also seasonal, but can be greatly affected by local weather conditions.
Unless we move to a system where electricity is priced in real-time dollars, which would be enormously difficult to do, about the only thing the PUC could do to implement your suggestion is to arbitrarily dictate some times of the day during some times of the year as peak periods, whether they really are or not, and set a higher price for kilowatts used during those periods. Heavy users would then have to decide whether or not to shut down during those periods or incur additional costs.
However, I do agree that the overall solution is deregulate the supply of power within California. Even the industry insiders who have benefited from squeezing out competition have found the barriers to constructing new plants too high. Unless that changes, California will have chronic power shortages.
...about the only thing the PUC could do to implement your suggestion is to arbitrarily dictate some times of the day during some times of the year as peak periods, whether they really are or not, and set a higher price for kilowatts used during those periods. Heavy users would then have to decide whether or not to shut down during those periods or incur additional costs.
Weather in California is fairly predictable on a seasonal basis, at least enough so that it would be worth implementing what you suggest (which is closely akin to what I was thinking). Given that in the short term, the markup on that power would be regulated, the "hourly price" could be a simple multiple of what was paid or a differential percentage negotiated with the PUC. Either way, the user would have the incentive to install equipment that would reduce peak demand. That's the key.
I would reluctantly support such a measure, but only as a stopgap measure until a surplus of power (even during peak usage) is available. Ideally, California would remove obstacles, and even create incentives, for new power plant construction. At the point where California has at least 15% more power capacity than peak demand, then it should phase in price deregulation for all consumers, both commercial and residential. Allow everyone to contract directly with a power provider.
If the Texas model is any indication, power providers would provide a wide range of plans and prices to fit the needs of the customer base. Some would offer adjustable pricing, some would offer fixed prices for a contractually set period, and others might offer time of day plans.
The key to a healthy and reliable power system is to quit interfering and manipulating it, as is being done now, and to let market forces work their magic.
Actually, I'm a little more aggressive than that, but in general I agree.
The key to a healthy and reliable power system is to quit interfering and manipulating it, as is being done now, and to let market forces work their magic.
Well, we both agree about the magic part, but as you know, until we can get the patient off of life-support, it isn't going to walk when we pull the plug. As much as I would like to see a totally open market (with a few twists brought to you by yours truly to help keep it honest :-), deregulating pricing alone now would IMHO, be counterproductive for the people of California.
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Democrats run the URN too??
The problem with that is that there is no incentive to opt out unless they're getting a lower price than the rest of you are stuck with. And you are stuck. Gray Davis committed California to long-term contracts and that power has to be delivered to somebody. I suppose California could re-sell the power at a loss if all consumers were allowed to opt out, but that would only add to the state budget problems.
The state should never have become involved in purchasing power and entering into long-term contracts. That decision not only was financially folly, but greatly complicates any attempt to achieve deregulation. I think Arnold should focus on creating more supply, and worry about deregulating prices (and even direct access) later.
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