Strictly: Drilling and oil-field services Message Board

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Gold/Mining/Energy : Strictly: Drilling and oil-field services

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To: Area51 who wrote (84912)	1/22/2001 1:02:46 AM
From: Zeuspaul	Read Replies (1) of 95453

Interesting article but the author doesn't have much credibility judging from the number of mistakes. Allowing prices to rise may be unpopular in the short term, but it will ensure the long-term viability of the electricity sector in California. Unsubstantiated opinion. California had long term viability in its electrical sector before deregulation. Does he just pull this statement out of a hat? Selling the power plants is what caused the existing problem. That has nothing to do with high prices. Rate caps in California effectively mean that consumers learn about the power crisis only from the evening news. They have no sense of the severity of the problem. FALSE Californians are having blackouts. Blackouts are inconvenient for households but can be devastating to businesses. Californians continue to pay only 6.5 cents per kWh, and so far enjoy mostly uninterrupted service. FALSE I pay SCE 12 cents per Kwh. SCE provides most of the juice in the LA area. Even low cost power from LADWP is more than 6.5 cents. I don't know where this guy gets his numbers. Ideally, consumers should pay a rate reflecting the true cost of generation True but that isn't what consumers are being asked to do. Californians are being asked to pay spot market prices which have nothing to do with the true cost of generating power. If it costs 10 cents (varies substantially) and it is sold for a buck in a spot market the buck doesn't represent the cost to generate power. It is only a methodology to distribute a fraction of unspoken for power. If the author were true to his position he would support regulated power because regulated power does represent the true cost of generating power. Right idea...wrong conclusion All the new power plants currently under construction use natural gas as fuel. That will make the industry even more vulnerable to price spikes than is currently the case. He's got that one right and they all aren't in California. This is where the feds come in. You can't have an entire nation chasing after an unreliable energy supply. Energy planning has to include an analysis of the fuel supplies and the ability to switch fuels. Switching fuel capability is an area where market forces can play an important role. Most important, allow prices to provide undistorted signals and incentives for investors. I don't see how that can happen in a free energy market with some juice selling for two cents and some for a buck. If that is not distortion in a free market I don't know what is. Zeuspaul

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