You have not defined “just and reasonable price,”
Just and reasonable pricing should be COST BASED in a market that has been defined as dysfunctional. I'll pick a number if you want...how 'bout 20 percent above cost.
The vast majority of utility customers now pay for electricity based on cost. It is a better model than market based pricing.
Taking your example a step further. Assume it is a hot day. I am willing to buy your water @ $2/glass. Thousands of others are also willing to buy your water. In fact, the line is so long that it stretches over the horizon. You only have 20 gallons to sell.
Why do I only have 20 glasses of water to sell? The supply of energy is short because of poor planning by the energy producers. The market influenced producers have opted to produce energy from natural gas....the easy way...the way to make a fast buck. The natural gas industry cannot supply the goods. The planning of energy production facilities requires an analysis of the fuel supply. LADWP moved away from oil and gas and towards coal after the energy crisis in the 70s. The independent profit oriented producers have moved towards natural gas. You can't argue with success...LADWP has plenty of power available at reasonable cost. They do not have to ration their power.
Who should receive the relatively scarce water and how many glasses should each receive? The old, the sick, those with “excess” incomes, green people, purple people, ecologists, or party members? If you don’t use the price system, by what criteria will you ration your scarce supply?
I didn't say price should not be used to distribute the juice. It should be cost based rather than market based. Cost based has been and is the basis for retail power distribution in most of the US. As noted in my previous post a tiered price system would be the best short term solution to the existing scarcity. A relatively low price for the first juice used rising to higher prices for amounts in excess of basic minimum requirements. I.e. everyone can have a refrigerator but the guy with the hot tub pays a bunch. In addition price incentives should be used to reward those that cut back the most.
1. The population in CA and the US has increased. The relative and absolute demand for power has increased. If per-capita consumption levels remain unchanged, more power must be produced. You find it hard to argue with success, but someone must invest to produce more power to meet the increasing demands, or there will be an insufficient supply. Without the potential of profit, who will invest in new power plants, gas pipelines, and infrastructure? Would you? Will the state government?
Where do you think the existing power plants came from? They don't grow on trees. Utilities have been guaranteed a profit. I think you will find there are sufficient investors who choose to invest when guaranteed a profit...widows and orphans come to mind....you can't argue with success.
In addition public agencies build and maintain power self sustaining facilities....all of their excess funds (profit) is reinvested. LADWP comes to mind...you can't argue with success.
If independent power producers can compete, if they think they can produce power at a cost less than the regulated utilities that are guaranteed a profit of (15 percent?) and cheaper than a publicly run (inefficient bureaucrats?) then private investors will support them.
All three have potential for abuse so it is important to maintain the diversity of supply. One of California's mistakes was to make a radical change towards independent market based power. Failure is failure...the experiment in market based power failed.
2. Alternatively, if aggregate demand for power is frozen, then per-capita consumption must fall
Live by the sword...die by the sword. If you want market based power you will have a short supply. Market based experiments have proven this to be the case. The goal should be to significantly increase supply such that American industry can compete in the world economy. There is plenty of untapped energy. The pieces are all in existence. The problem is the market doesn't plan...it just reacts. The US has plenty of coal and clean coal technology. Limited natural gas supplies should be reserved for distributed uses such as home heating. Coal is best used for centralized applications such as power plants.
3. You neglect to discuss the problem of supply and the cost to produce power. If the cost of finding, transporting, and distributing new natural gas supplies (and electricity) increases, who should bear these costs?
It is a mistake to become dependent on one source of fuel. Power plants should have multifuel capability or sufficient power plants should be built with various capability. Another one of California's mistakes was to virtually eliminate the dual fuel power plants.
If costs increase then the consumer cost should increase. That is a cost based system.
That insufficient rainfall in the PacNW has exacerbated the problem is not a conspiracy.
But it has to be planned for. What market based independent power producer will plan for a drought in the PacNW? It wouldn't make sense. If there is a shortage of juice and they sell at market price then they can sell the same amount of juice at a higher price and increase their profits. So where is the incentive to provide the 20 percent? excess capacity necessary to plan for a drought or a disruption in supply of certain fuels by foreign nations?
That the economics of power generation and distribution was working is only part of the problem. It was only working in a static world. Power production, population increases, and the costs of producing power are not constants.
The US from 1900 to 1990 was static???!!!!!!
Yes, it seems few in CA want a power plant built in their neighborhood or even in their state.
I was referring to my neighbor. It is better to centralized power production facilities than to let every tom dick and harry fire up a generator in his back yard.
California has increased power production capability. No new large production facilities have been built in the state in the last ten years or so. However 25 percent+/- of the power generated in California now comes from small independent producers. The Feds and Edison didn't want to build new power plants in California because they did not believe the power use forecasts by the California Energy Commission. Blame it on NIMBY if you want but it is not true.
so that Californian’s can enjoy a pollution-free paradise?
Not even close. California has a significant air quality problem. California is under federal mandate to clean up the air.
You say ‘build one.’ Who will build it? Who will pay for it? If you don’t offer a profit incentive, how do you propose this might be accomplished? If you are create a monopoly, fine. If you regulate the price of energy, fine. However, if the price is too low, no company will invest.
There is plenty of room for profit. Power transmission is a monopoly and it has to be controlled. The monopoly has to be guaranteed a profit and they must be required to increase capacity to meet demand.
A. People are not forced to take the toll road; there are alternatives. If the price is too high, people have choices.
B. Under what terms and set of rights was the original monopoly granted? If an error was made in the contract and the public now wants a new system, pay the owners for their investment and create as many or few toll roads as you like.
Some things are best left under government control. The government has a good track record building and maintaining roads. This is another example of don't fix it if it ain't broke....another failing of the *free market* privatization mantra of the nineties.
A. Which is it, a free market or no free market? You can’t have it both ways.
My point is there is no *free market* and thoughts of free markets in juice are an illusion.
B. ‘Solution … is really quite simple.’ Yes, but this flies in the face of your own admonition above [**] that I have noted.
Referring to the short term proposal..Where am I inconsistent? I propose a tiered cost based solution with additional incentives for reductions in retail use.
I propose the FERC use price caps set sufficiently high to guarantee profits for wholesale supplies in a market that they have characterized as dysfunctional.
There is nothing wrong with profits. However the contention that profits are the driving force to increase supply is incorrect. This has proven not to be the case in the electric power system. The so called *free market* has been in place for many years and it DID NOT result in an electric power system with adequate capacity.
Zeuspaul |
