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To: pater tenebrarum who wrote (4033)	7/17/2000 9:46:37 AM
From: IceShark	Read Replies (1) \| Respond to of 436258

Don't mess with tipper on electrical generation. He is dumb as a rock on investing ideas but he knows his juice, as that is his job in real life. -g- PS: I don't believe it, my flea short, not poot, is actually working out. I better close that before the immutable laws of nature reassert themselves. -g-

To: pater tenebrarum who wrote (4033)	7/17/2000 9:50:50 AM
From: SeaViewer	Read Replies (1) \| Respond to of 436258

PG&E which controls California already raised NG bill by 10%+ last month.

To: pater tenebrarum who wrote (4033)	7/17/2000 11:00:09 PM
From: yard_man	Read Replies (2) \| Respond to of 436258

Coal is not on the retreat Heinz, unless you are simply counting new plants built in the states. Growth in demand is being met by natural gas. That may seem like double-speak -- let me explain and perhaps I can dig up some stats -- Electricity production is not constant -- there is annual growth as you might expect, but there is also wide seasonal variation in demand. For us and utlities of the southern states -- the times of highest demand occur during the summer -- i.e. the time of large air conditioning demand for residential customers. This variation in demand is what drives the operation of resources having different types of economics. Think of it this way -- every day has a peak demand -- if you ignore the dates and instead reorder the demands for electricity that a utility faces each day of the year in ascending order -- you have what is called a load-duration curve. For the most part (in the middle of the curve) the curve slopes upward very gently -- but at the high end, it really spikes up. Coal generating units (and nuclear units) have large fixed costs but very low operating costs. These are the kinds of units it makes sense to run virtually all the time to meet that component (level) of demand that persists throughout the year -- thus the name baseload unit. On the other side of the spectrum are units with very low fixed (capital costs), but having high operating costs -- these are the units that are used to serve the load which persists for much shorter periods of time -- the higher peak days when everyone and his brother are running their air conditioner. These are primarily combustion turbines -- many are NG fired, some are oil-fired. Technology that is similar in kind to jet engines that power aircraft ( there is a particular kind that is very similar -- called aeroderivative). In the middle are some other units -- less efficient coal units and NG fired combined cycle plants. Combined cycle plants are (usually) gas fired combustion turbines followed by a second stage steam cycle which makes use of energy that is typically lost in a conventional combustion turbine. The result is a more efficient generating station -- but at higher capital and operating cost. In recent years there has been a huge build-out of gas fired combustion turbines. There has been a huge growth in peak demand -- growth in annual energy has been less -- but there have been two factors that have really pushed the build-out. One, is the natural growth in peak demand. The second is what happened in 97 -- for years the wholsale price for exchange of power between utlities had been largely driven by costs -- but in '97 something happened (can't attribute this all to some of the dereg that happened); prices became extremely volatile when supplies got tight. Some marketers who owned no real assets were short-squeezed out of existence. Some more of this happened in 98 -- but it wasn't just the shorts who were hurt, but those that they had promised to deliver to as well. Hence, accelerated demand for gas turbines -- insurance. Much cheaper to carry one or two 40 - 50 M asset in case they are needed than to have to purchase power at 100X the price it normally goes for if one of your baseload (coal or nuclear) units is forced out at an inopportune time. Long story short -- for most utilities -- not all -- gas & oil fired generation is predominantly peaking capacity: Meant to be run at capacity factors of less than 10 - 15%. However, some markets have been distorted for the long run -- especially California and some others which jumped into PURPA with both feet -- some of these regions during the dereg of the 1980's were forced to calculate their "avoided" costs of generation at extraordinarly ( and wrong) high values -- this forced them to forestall installing their own generation and purchase from uneconomic generation projects built by others Truly this is partly to blame for the current impetus for further deregulation -- the push for the separation of the business into 3 components -- generation , transmission and distribution. These regions may be fairly dependent on gas fired generation and I have seen articles about huge increases -- one from the utility in San Diego --- For us coal will still be a predominant fuel cost. NG costs will increase considerably if we have a typical summer compare to the prior summer -- but the effect will not be huge as an overall part of operating costs. Some of our sales contracts are structured so that the costs paid by the purchaser is linked to a gas index -- this helps us and does tend to escalate costs elsewhere but it is only for the summer and only if the purchaser can't find cheaper supplies -- it isn't "must-take." Re: unless a recession hits ... I think it is irrelevant. Supplies will be tight this winter. People like to keep warm even for a while after they've lost their paycheck -- and many utilities are under rules about shutting off folks when it is really cold. BTW -- the experts say (same who said 10 years ago we;d almost be out of natural gas now) that coal reserves are many times greater at current and projected levels of useage than natural gas or oil. Gore and others can sqwak and keep folks from building coal plants for a few more years -- then pure economics will take over. Wait and see ... Natural gas problems should ease in the states in 01 some time when a new pipeline coming from Canada becomes operational ...