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Pastimes : The California Energy Crisis - Information & Forum
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To: Raymond Duray who wrote (453)6/12/2001 1:05:27 PM
From: GVTucker  Read Replies (1) of 1715
 
Raymond, RE: Is it a good thing that the Texas cabal sends thousands of otherwise viable businesses and households into bankruptcy for the sake of outsized profits? The answer is Yes or No.....Choose One.

First of all, you need to define "Texas cabal". If you're referring to companies like Enron, then I would strongly disagree that they are making outsized profits. Look at the historical quarterly profits for Enron, and you'll see what I'm talking about. I can provide specific examples if you'd like.

The reason why Enron is not making outsized profits is because they're having part of the same problems that the CA utilities are having. The base product, natural gas, is up sharply in price. Thus, you have to look at the producer of the natural gas to find the firm that is making the outsized profits, as you term it. The best example of this is Burlington Resources. They have 250 mmcf/day, or 13% of their production, exposed to the California market. And their profits are sharply higher right now than they were a year ago. Two or three years ago they were losing money.

But if Burlington Resources started to charge below market rates for their product, they would be doing their shareholders a disservice. Natural gas exploration and production has been a horrid business for public companies for a very long time. Look at a long term chart of Burlington Resources to get an indication. If there wasn't the prospect for 'outsized profits', no one would have an incentive to drill for natural gas in the first place.

The simplest solution is the best. The people of California need to market prices for their power. From there, markets will adjust.
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