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Strategies & Market Trends : Rande Is . . . HOME -- Ignore unavailable to you. Want to Upgrade?

To: Joe Lyddon who wrote (52079)	6/6/2001 2:20:50 PM
From: maverick61	Respond to of 57584

Joe, do you know why power on the spot market is more expensive than typical rates - because it costs a lot more to produce. You said: Price gouging: . . . Charging $800-$900 per megawatt hour vs. the normal $35. . . That's a cost increase of only 2,300% - 2,600%. . .!! That is obscene! I won't debate the figures you use , that is not my purpose as anyone can use numbers to strecth a point- but generating more power is not as simple as simply flipping a switch. Many power plants generating capacity is already under contract across the nation, or needed for their local needs. Where its a local utility subject to regulatory requirements, they have an obligation to porduce and provide power to their local customer base. Where its a dergulated basis - most of the smart companies have locked in long term contracts with power producers (which by the way, is what some large manufacturers in California have done - so don't cry too hard for them). In either case, the power companies know what their projected demand will be, and thus they have generating capacity on line to meet it. Now when California comes shouting, hey send us power when we need it, it takes these companies lots of extra costs to bring ADDITIONAL capacity online. Sure, they may have a litttle unspent capacity that they are holding for peak demands that could possibly be sent CA's way - but thats a samll amount, and subject to prior commitments. So, they need to spend much much more to bring additional capacity on line. So of course, they need to charge more - and in many cases, MUCH more. Bringing additional capacity online is not always easy and cheap, especially for fluctuating demand not guaranteed under long term contracts. So, you want a third prong to my short term solution - get California to agree to bankruptcy proof, fully guaranteed unbreakable long term contracts with some of these companies who may have extra cpacity to bring online and that can be committed for several years. But don't ask for supply only when you need it, especially at the risk of not being paid. In that case, be aware their are large extra costs that must be covered, as well as the risk potential must be rewarded. SO to compare normal long term contract charges with peak on demand capacity is like comparing apples and oranges - or a bull and a bear. Now all that said, I don't know if anything productive will come of this discussion. You have your opinion, I have mine, and many others have theres. SO how about we get back to the market and make some money - at least that way - it will help you pay those higher bills if they don't get addressed