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Politics : High Tolerance Plasticity -- Ignore unavailable to you. Want to Upgrade?

To: Second_Titan who wrote (1077)	3/7/2001 6:31:34 PM
From: Raymond Duray	Read Replies (1) \| Respond to of 23153

Hi Quehubo007, Re: I work in the IPP industry and from what I have seen these companies are very conservative and would be very reluctant to do anything that would get them in hot water,especially in such a visible situation like in CA. I cant imagine NRG , DYN DUK REI etc coordinating outages to reduce demand and screw CA. Paronia may cause some to look for conspiracy, but the real culprit is CA. government incompetency. I am wondering if you would agree with me on this scenario. Last December, as natural gas spot prices peaked at $62/Mcf in the California market, many IPPs were faced with a dilemma. They could produce and sell power at about $250/Mwh, but the cost of fuel alone to run the turbines was over $300/Mcf equivalent. Thus, the IPP operator was in a heck of a bind if they sold power, they lost an immediate $50/Mwh and were also faced with selling to a Power Exchange (subsequently mothballed) and utilities that were known credit risks. A prudent man would not, under those circumstances, assume the risk of selling power into the California market. It was at this time that many "repair" tags started appearing on generation equipment, and raised the eyebrows of the CPUC, who knew very well that there was no real repair needed. It was at this same time and prior to the mid-December crisis that there also was a flurry of plants taken down for the sake of environmental upgrades, something that the State had mandated, and was in part, as you say, a contributing factor to the power supply shortfall. So, I'm in agreement that the trail of evidence supporting a conspiracy theory will be most likely impossible to follow. However, I believe that many of the IPPs, faced with the same set of facts, i.e. unprofitably and risky sales, came independently to the same conclusion to shut down capacity and thereby exacerbated the crisis as each producer attempted to protect itself from market risk. So, much as with the image provided here at HTP regarding the "herd" of investors being whipsawed by the analysts, etc., so to the IPPs necessarily had to act as a herd in order to preserve capital individually. The lesson? Spot markets markets for energy are devastating to the stability of the system unless supply exceeds power demand by at least 20%. A luxury we will not find ourselves enjoying in the foreseeable future. JMVHO, Ray