Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Pastimes : Clown-Free Zone... sorry, no clowns allowed -- Ignore unavailable to you. Want to Upgrade?

To: LLCF who wrote (101759)	5/12/2001 11:17:02 AM
From: Don Lloyd	Read Replies (2) \| Respond to of 436258

DAK - ...Just FYI they're talking about higher MWH prices all over the west this summer than those that originally shocked California... tell you anything?? Also, power plants on the drawing board all over AZ... You've hit on the perfect solution for CA. All the Governor and the Legislature (Assembly?, mob?) need to do is pass legislation requiring that a hundred new power plants be created on drawing boards all over the state. These drawing boards can then be required by law to be connected to the grid and to supply power. Surely the degree of engineering and magic required for getting power from a drawing of a power plant is no greater than that required for getting any program that works from the CA government. Regards, Don

To: LLCF who wrote (101759)	5/12/2001 12:52:36 PM
From: flatsville	Read Replies (1) \| Respond to of 436258

>>>but they're still doing it no? Why don't you wake up and ask your self why instead of hiding your head in a hole.<<< Resturctuing is not dereg. If it looks like they're headed into an abyss they can always choose to pull back. Better to take tentative steps than to jump off the cliff screaming "Freeeee Maaaarkeeettts!!!"...though it sounds good until you splat. (Still good money in transmission and generation even with regulation.) >>>Prices fluctuate my dear... I know this creates "agnst" in the coffee shop among the politico wannabees...<<< Me agnst? Hardly. My rates are still quite reasonable. With the exception of yourself I've detected more than a little agnst from some of the thread's western posters. You "free marketeers" out there get ready to bend over. I think you're headed for a lesson in Greek culture. I'll do my best to feel your pain...Ooops...on second thought, nah. The one guy on the board who's actually in the biz is still solidly in the regulation camp for now due to flawed modeling on the dereg side of the argument. Tell you anything? I think "freer markets" would work in time provided dereg preceeded by restructuring was accomplished on a more regional rather than state by state basis. That may prove impossible. People would actually have to think about geo-electrical-poltical issues in terms of common good...unlikely as it might cut into the huge profits they could make by screwing as many users as possible. I have to give Skeeter Bug's argument that dereg/"free markets" is just a rouse for one of the largest transfers of wealth we'll see in our lifetime some credit. It appears to be netting so many suckers.

To: LLCF who wrote (101759)	5/13/2001 9:52:45 PM
From: yard_man	Read Replies (4) \| Respond to of 436258

I think it is a reasonable question to ask: Do sufficient conditions exist for a competitive power market to develop in California? I mean -- outside of the political and regulatory will -- are there in fact physical, financial and economic structures that preclude this? I have only a very rudimentary understanding of open transmission from the standpoint of billing, reciprocity, levels of service, etc. But -- I do know that these involve the fiction of a "contract path" and there is a methodology that provides for varying levels of "firmness" for transactions. "contract path" is a fiction with/respect to how flows actually happen -- all flows are network flows -- as such one supplier does not have unlimited capacity to supply customers anywhere within even a given range ... In areas of very tightly constrained transmission -- what some have termed competition is little more than financially swapping responsibilities -- the liklihood for this to benefit customers is small. If a customer really doesn't have a competitive supply choice and rates are released from regulatory controls why should prices be driven anywhere near the marginal costs to supply? Suppose for a moment that conditions in some areas are not sufficient for competition to develop because of inadequate transmission -- how can the parties be incented to develop the infrastructure sufficint to real competition, if that part of the business is supposed to remain regulated? Even if conditions are sufficient and competition does develop -- the transactions will still always be in part a financial swap of some sort until the total network flow effect of adding the incremental generation to the grid is calculated and compensated for in that fashion -- it is really not as fungible as people think -- generation at one buss is not the same product as generation at another buss -- For this reason I understand the theoretical attraction of pools, but I think truly free markets require unfettered bilateral transactions -- with a grid however, when two parties contract they can't help but affect third parties ... (I'll be the first to admit my thinking is incomplete on the issue. I am stuck at many places that eocnomists who are movers and shakers seem to have gotten over years ago in selling the proposition to the regulators.) Getting real competition (i.e. not a situation where market participants yield market power to gouge) is not any easy task. I still think there are some valid arguments that the business remains a "natural monopoly" and that competition cannot allocate resources properly -- i.e. with the lowest overall cost / best overall benefit to society. Any solution to these problems would seem to require to make transmission competitive, while providing the incentive for sufficient investment to take place in transmission as well as generation ... difficult to achieve -- perhaps impossible?

To: LLCF who wrote (101759)	5/13/2001 10:30:26 PM
From: yard_man	Read Replies (1) \| Respond to of 436258

RE 1: CA was never a free market -- true -- but why did you draw this conclusion and what do you mean by free? Market participants -- wholesale providers were free to charge what they wanted. Those who purchased were free to contract with more than one supplier and free to buy / not buy ... Maybe this sounds silly to you, but you really have to define what you mean by free markets. Free markets sometimes result in some outfits going bankrupt, some parties not being able to afford some products at any price and so on ... I think what you mean (please correct me) is that the market arrangements didn't work from the standpoint providing an economic supply of energy or even energy at a price even close to costs. Many would count as failure simply the inability of those providing electricity to residential customers to raise prices above costs to ensure a continued profit -- sounds good on it's face, except for what I just mentioned -- competition does over time move prices towards marginal costs -- perhaps it was working in california and if those suppliers to the ultimate end-users had been able to pass along costs (again, this is not something always assured in free markets -- though this was precluded by regs) prices would move toward marginal costs of supply -- But a very important question is: How quickly would prices move towards the marginal cost of supply -- 1 year, 2 years or 5 years? In the interim a lot of people could be in deep sh&t. Right? Prices do fluctuate -- with competitive markets for truly fungible goods (assuming no interference from public enemy no 1) -- supply and demand come into equilibrium at some clearing price. But electricity is not like coffee in a number of ways -- 1) electricity is a critical economic input to the production of so many other goods 2) electricity is (my neighbors notwithstanding) a basic need having great utility 3) the production of electricity is very capital intensive owing to the great economies of scale involved 4) the facilities by which electricity is transmitted are also very costly, such that competition via duplication of such facilities is clearly uneconomic and not in the public's best interest 5) For the most part electrical energy cannot be stored, but msut be comsumed as it is produced Given 2) there is keen political interest in the stability of supply and a willingness to forgo some "economic freedoms." For instance, letting firms fail without recourse .... But re price fluctuations: There are a number of inputs to electrical energy production. These inputs have cost fluctuations which, as a matter of course (going concern assumption), must be reflected in the prices charged. There is an additional set of price fluctuations on top of these. If electricity were fungible and not "affected with the public interest" -- this additional set of fluctuations would simply be the rationing of demand according to currently available supply. But electricy is a basic need. As such, to some extreme, people will keep paying for it, and in a given amount, while they are charged higher and higher prices ... It wasn't until 3 years ago -- with open access tariffs that prices rose to multiples like x100 the cost to produce and deliver. This was clearly the result of a regulatory shift and not simply free market rationing of supply. Such an increase in volatility (alone) is not proof of anti-competive behavior ... but I know that there are system constraints on the grids that would advantage some, were they bent on this. Regardless of what happened -- we had a system where charges were by some means (all regulation is bad; hell, I know that I'm a republican <vbg>) kept within some bounds of the costs necessary to produce electricty. Did inefficiencies exist? Yes. Do we have a more stable system now? No. Are all those inefficiencies disappearing?? Is the price volatility and / or instability a transient effect of deregulation? Wish I knew the answer to that? In many areas it will depend on what you mean by "transient." Glad I don't live in California ...