Hello, might as well dip my oar back in the water! To what extent there is "coercion" is moot: are market realities "coercion"? One of the earliest lessons children learn is that the piper must be paid.
This topic started as a spinoff from the subject of deregulation, and the more conservative approach that Europeans take to it. While their views might make a free-enterpriser gag, it is unlikely that they would permit the situation that exists in California to arise. We discussed, for a while, the French implementation of nuclear power, and the relative freedom it has given them from uncertainties in fossil fuel availability.
A coherent and rational plan to ensure that light, heat and power are available to citizens at all times serves the public interest. Personally, I view the abandonment of power generation to "market forces", alone, as madness. And despite the rationalizations, you cannot "hedge" an empty pipe into emitting natural gas, when there is none.
If the market forces that the deregulation crowd so favored are "coercion", then I fear we can expect more of the same. The effects are spreading well beyond California...
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B.C. alarmed as California utility faces bankruptcy
Millions at risk for B.C. Hydro in California power crisis
Chris Nuttall-Smith Vancouver Sun with Los Angeles Times and Bloomberg
B.C.'s finance ministry was anxiously watching one of California's largest utilities Tuesday after the company, which buys millions of dollars of power from B.C. Hydro, teetered toward bankruptcy.
Southern California Edison shook the financial community by announcing it would not make $596 million US in payments due to various creditors, so it could "preserve cash."
Of that sum, $215 million is owed to the California Power Exchange, the company that brokers electricity sales from producers, including B.C. Hydro, to buyers.
Adding to the alarm down south, Pacific Gas & Electric Co., California's other major electricity utility, has a $583-million US payment due on Feb. 1 that will exhaust its cash reserves.
In Victoria, finance ministry officials -- and Finance Minister Paul Ramsey -- were watching the situation closely.
"Obviously our minister is anxious -- he's been asking the same questions too," said Susan Gee, director of communications for the finance ministry.
Those questions include just how much Southern California Edison owes B.C. Hydro, and what Tuesday's events will mean for future sales to the California Power Exchange.
Neither Gee nor Stephen Bruyneel, a spokesman for Hydro, could say how much the utility is owed.
"Those questions you're asking us we've been asking ourselves this afternoon," Gee said.
Bruyneel said Hydro had not received any indication from Southern California Edison that it would have trouble meeting its payments. He added that Hydro had no immediate reason to change the way it does business with the utility.
Paul Klein, a Southern California Edison spokesman, said late Tuesday that power from B.C, Hydro helped save the state from rolling blackouts just last Thursday.
B.C. Hydro's export arm, called Powerex, has boasted of huge profits from sales of electricity abroad in 2000. According to the company's Internet site, export sales last year totalled more than $1.1 billion Cdn, up from $740 million the year before and just $340 million in 1998.
Much of that revenue comes from California, where dry conditions have cut the ability to generate hydro-electric power and a surge in the state's economy has created unprecedented demand for electricity.
In just four days last summer, for example, B.C. Hydro reaped a $60-million Cdn profit from sales to the Western U.S., the Crown corporation reported at the time. Although up-to-date figures were not immediately available Tuesday evening, Victoria skimmed 85 per cent of Hydro's profit, totalling $5.5 billion, between 1991 and January 1999.
The province also earns directly a share of sales from power generated downstream on the Columbia River, said David Austin, a Vancouver energy lawyer and vocal B.C. Hydro critic. Austin estimated that downstream revenue at $350 million per year.
California developed a plan in 1996 to deregulate its electricity business. It was supposed to lower electricity costs by creating competition, but instead it caused electricity costs to skyrocket.
But while the result has been that the two largest utilities in California, Southern California Edison and Pacific Gas & Electric, have faced soaring costs for electricity, they haven't been allowed to pass the full cost on to consumers.
According to Southern California Edison, the average price of electricity in December last year increased 900 per cent compared to the same month the year before.
Early Tuesday, the three agencies rating company credit-worthiness downgraded Southern California Edison's debt deep into junk status. Standard & Poor's also cut ratings on Pacific Gas & Electric to junk grade.
The crisis has in recent days escalated into a wider threat, with shares of lender banks among those coming under pressure. Fears that the two giant utilities could go bankrupt also sent shudders through California's business community Tuesday.
California lawmakers rushed to try to get a bill through the state assembly Tuesday that would allow the state to buy wholesale electricity and sell it either to the utilities or directly to consumers.
Adding to the crisis, the California Independent System Operator, which runs most of the state's power grid, declared a so-called Stage Three emergency on Tuesday, its highest level alert, after reserves dropped below 1.5 per cent of demand. Such low reserves raise the threat of state-wide blackouts.
vancouversun.com |
