Posted on 06/23/2002 8:16:59 AM PDT by Dog Gone
THE electric power business has come out of the closet. Enron, Reliant, Dynegy and other Houston-based energy firms have become household names in recent months, though not necessarily for the best of reasons. Terms such as transparency, round-trip trades, and "gaming the market" are now part of the journalistic lexicon. Electricity deregulation, which had been a sleeper public policy issue for years, is now the subject of heated debate in Washington and many state capitals.
Unfortunately, politicians of various stripes are using the Enron debacle and its aftermath as a stalking horse for unrelated agendas. Gov. Gray Davis of California is using the alleged misdeeds of energy traders to boost his re-election campaign, when the principal problem with California's power market was an ill-conceived deregulation program. Instead of working on a national energy plan, Congress is deposing Enron and Arthur Andersen executives and considering legislation to re-regulate the trading of all energy derivatives. And several states scheduled to implement retail competition in electric power this year have put these initiatives on hold while "problems" in the utility industry are sorted out.
It is also regrettable that virtually every power trader now is being portrayed as an Enron clone. But unlike Enron, which had few hard assets, Reliant, Dynegy and most other power traders own electric generating plants worth billions and report real earnings. In fact, Reliant is the second largest merchant power producer in the United States.
What's lost in all the noise about round-trip trading and creative accounting is the fact that the United States still faces a host of energy problems but has yet to come up with any viable solutions. For example, over the next two decades, the nation will need about 1,500 new electric plants to meet projected demand. Much of this new generation will be fueled by natural gas. But in the current environment, many of the nation's utilities and power companies are unable to raise money for new facilities, raising the risk of future power shortages. Calpine recently canceled 35 orders for natural gas turbines from General Electric and delayed the delivery of another 81. General Electric, which built 284 turbines last year for the U.S. market, will build only 150 this year.
To make matters worse, the stock prices and credit ratings of independent power producers -- the companies that have built most of the nation's new power plants -- have plunged since the collapse of Enron. Witness Dynegy, which laid off 6 percent of its work force last week. And disclosures about aggressive business and accounting practices in energy and other industries have made fund-raising even more problematic.
The upgrading of the nation's transmission grid is another challenge facing power companies and regulators. Otherwise, California-type electricity shortages may occur in other parts of the country in the near future. Absent a restoration of investor and lender confidence, the huge capital outlays required to complete the infrastructure required for a national power market will not be forthcoming and electric reliability will be impaired.
Nuclear power remains another unresolved energy policy issue. Though currently contributing about 20 percent of the nation's electricity supply, no new plants have been constructed or ordered since the late 1970s. As well, the battle over disposal of spent fuel at Yucca Mountain continues, with Nevada promising to fight the federal government all the way to the U.S. Supreme Court.
Finland and several other countries, recognizing that nuclear power is the most environmentally benign process for generating electricity while reducing dependence on costly imports, are proceeding to construct new plants. By contrast, America increases its dependence on imported energy month after month while nuclear power languishes and we lose our pre-eminence in this technology.
Perhaps the most serious consequence of the post-Enron climate is the lost momentum for deregulation and retail competition in electric power. Those politicians and consumer groups beating up on the power industry and clamoring for re-regulation fail to mention that inflation-adjusted electricity prices have decreased by 30 percent for residential customers and by 36 percent for industrial and commercial customers since deregulation began in the early 1990s. But with further deregulation on hold, consumers and businesses may pay higher prices than would otherwise be the case.
Ironically, Texas -- home to many of the "sinners" in the power industry -- is generally considered to have implemented the best deregulation plan in the nation and to be a model for other states. Texas has witnessed a smooth transition to a competitive retail market while at the same time adding to generating capacity and enhancing the overall reliability of the distribution system. Indeed, Texas has the potential to become a leading exporter of electricity to other states if, and when, the United States completes a national power grid and retail competition becomes a reality.
Deregulation can't work without power trading. As recently put by Pat Wood, current chairman of the Federal Energy Regulatory Commission and former chairman of the Texas Public Utility Commission, "Well-functioning power markets depend on three key elements: adequate infrastructure; clear and balanced rules that allow efficient trading among market participants; and effective market oversight." Congress should focus on the first element and leave the other two to FERC and the state PUCs.
If deregulation is to move forward, the power industry must rebuild trust among regulators and investors. Otherwise, capital will not flow where it is needed and consumers will remain skeptical about the benefits of competition in electricity.
Weinstein is director of the Center for Economic Development and a professor of applied economics at the University of North Texas in Denton.
Q: Isn't it because of all these millions of additional illegals one of the reasons we need the power plants?
A: Yes, and that is why we have to open the border even more so we can provide them with the power they are entitled to have.
The fact that there are still companies with the capital and expertise to build something that people need and want no longer matters in America. America is going fascist right before our eyes.
"When force is the standard, the murderer wins over the pickpocket. And then that society vanishes, in a spread of ruins and slaughter."Do you wish to know whether that day is coming? Watch money. Money is the barometer of a society's virtue. When you see that trading is done, not by consent, but by compulsion - when you see that in order to produce, you need to obtain permission from men who produce nothing - when you see that money is flowing to those who deal, not in goods, but in favors - when you see that men get richer by graft and by pull than by work, and your laws don't protect you against them, but protect them against you - when you see corruption being rewarded and honesty becoming a self-sacrifice - you may know that your society is doomed. Money is so noble a medium that it does not compete with guns and it does not make terms with brutality. It will not permit a country to survive as half-property, half-loot.
--Ayn Rand, Atlas Shrugged, 1957
Sorry to be so negative, but that's the way I see it.
LOL! Are you sure it isn't Dostoevski's The Idiot?
For reference:
The Alaska North Slope Natural Gas Pipeline needs a natual gas price of at least $2.70 to be profitable.
COAL is a natural since it does burn dirtier and is best treated at a central plant.
It seems that an analysis of overall energy effiency would prove this.
Converting fossil fuels to H2 just to get 'em to burn cleanly seems awfully inefficient.
It just intensifies my conviction that we need more nukes.
Wonder where you got that number? Exclusive of the pipeline and only to the border? Even then it still is much lower than anything I have heard. There is an article about LNG that uses a breakeven price of $4.50 floating around however that number is clearly low. As to Alaska, the pipeline cost alone has to be in that neighborhood.
As I read the whines, Feinstein, et al are actually trying to get the energy companies to pay for emissions abatement in the U.S., as an offset to their emissions in Baja California.
In other words, cut down on or pay for emissions that you're not even responsible for. Which strikes me as an attempt to simply generate more income for the quasi-governmental enviro-whacko shakedown Air Quality Boards.
I've not read that one. I'm probably living the plot, though.
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