Bob Brinker: Market Savant & Radio Host Message Board

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Strategies & Market Trends : Bob Brinker: Market Savant & Radio Host

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To: Mr. BSL who wrote (11484)	1/6/2001 2:43:54 PM
From: MrGreenJeans	Read Replies (2) of 42834

MrBSL Regulation works Deregulation in the energy industry has really been reregulation which is now failing in California because of regulatory pricing that is price caps. Why sell in a price capped California market when you get higher prices out of state? A utility is granted a monopoly by a state That is under the old environment. Under the new environment there is plenty of competition and independent generators forming entities. I cite NY. The utility guarantees CAPACITY At a price. If a utility does not have capacity they purchase it on the open market and pass on the costs or eat the costs themselves. The utility’s revenue is cost plus profit. Cost plus pricing has ceased in this industry for a few years. Utilities have gone to MARKET BASED PRICING. Therefore, retail customers have felt these effects more and more. The value of electricity never enters into the equation HORSESHT! The value of power always enters into the equation and is passed on directly or through surcharges to the end users. Under this arrangement, the consumer and industry will get as much CHEAP electricity as they will ever need.* In what country is this? Regulated electricity is cheap because its price never ever approaches market value. What is the market price of electricity? Simply the price that a consumer or business will pay in order to avoid doing without it. We will find out the dollar figure soon enough. Electric prices have risen substantially in recent years. There have been price spikes during the summer of up to $10,000 a mwh. The market has been and is going to continue to value electric power at market prices. We already know the dollar figure. A major problem is that outside of price caps energy demand has risen by 12% in certain areas and generation has risen by only 2%. I have to wonder how in touch you are with this industry at the moment. I could write a few pages on your comments just in disagreement but it is not worth my time. The Wall St. Journal has focused on the problems in the industry the past few months and have done a good job for those interested. For the record I work as an energy economist for a major energy firm doing microeconomic pricing and macroeconomic forecasting.

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