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Strategies & Market Trends : Bob Brinker: Market Savant & Radio Host -- Ignore unavailable to you. Want to Upgrade?

To: Mr. BSL who wrote (11490)	1/6/2001 7:11:43 PM
From: MrGreenJeans	Read Replies (1) \| Respond to of 42834

MrBSL Things are changing fast as the genie is being let out of the bottle. Has your microeconomic pricing and macroeconomic forecasting predicted what is going on in California? Do you see this current chaos as a short thing until we are fully deregulated? Do you think that the current price of electricity is enough incentive for companies to begin major generation projects? What will it take for supply to catch up and keep up with demand? The energy business is very complex these days. We can tackle any one of the points you made and spend days discussing them. In a nutshell, the industry is being deregulated or as we say at work reregulated so the regulators can keep their jobs and keep out real competition so the major utilities can have control over their service areas. One major point is that the cost of service model you keep on pointing to, costs plus regulated profits, has been fading fast these past few years. A utility that prices based on cost of service CANNOT survive. The major utilities are or are moving to market based pricing if only for survival. This type of pricing passes along the costs directly or indirectly to end users...call them rate hikes or hidden surcharges the consumer cannot figure out...but they increase prices to the retail sector. The ISO in California has been a failure. There have been more minor failures in the PJM area and the NY ISO is having problems of their own. I believe if it were not for the cool summer in NY this past year the consumer would have been shocked at the rates and congestion charges they would have been billed. What is an ISO but a monopoly anyway? The ISO model is an engineer's contrived attempt at creating a "free market"...they think if they can fix prices that is competition...laughable. The major utilities are selling their generation plants to third parties. They are literally becoming transmission providers. The owners of the wires that the power gets transmitted through. Independent operators are now charging the major utilities the market prices for power and in turn the major utilities are transmitting the power and are telling their customers they have no control over the price which is being passed on but which they must recoup. Agree or disagree this is what is happening. No one predicted what would happen in California but capping prices always distorts resources and the marketplace and never works. I see the current chaos as ongoing. Many areas of the country are summer peaking and because of the cool summer plus the start of deregulation in some areas most consumers are unaware of the problems they will be facing especially in urban areas where there is little transmission and capacity shortages. In areas with little transmission there are congestion charges incurred which can be substantial. The major problem here is that there is a need for more generation but no one wants generation or new plants built in their backyard. For the record I don't want a plant by my house either. There is an energy firm in NY which wants to place more generators in the five boroughs before the summer starts so there are no capacity shortages this summer and every neighborhood where the generators are to be placed are crying foul. This is typical across the country. When was a new nuclear plant built? Increasing energy usage + resistance to new generation means greater problems going forward.