To: Raymond Duray who wrote (462 ) 6/12/2001 2:42:05 PM From: GVTucker Read Replies (2) | Respond to Thanks for the kind words, Ray. I just hopped onto this thread today. Someone told me I might enjoy it. I'm an old FDR liberal who sees clearly that the electric utilities, left to their own devices would screw this country like an A-19 light bulb every chance they get. Re-regulate and save the economy from its own worst polemicists, the "free marketers". If ever there was a misnomer, sheesh. OK, I did not single out Enron, but I will single out El Paso Natural Gas, Duke, Dynegy, Mirant, Reliant and Williams. I think you chose the least culpable of the cabal to base your argument on, and I'm not sure if you were being disingenuous or simply haven't been keeping up on the news. All the companies I've mentioned are now involved in legal actions for fraud and market manipulation. And they have made outsized, bizarre profits by gaming the system. Not to mince words here. they are the company that is most profiting by the current situation in California. I'm guessing that the only reason that they aren't being sued is because their presence isn't quite as obvious to the California legislature, and one thing's for sure, the California legislature has no clue about how power is truly generated. Three years ago, when natural gas prices were $2/mcf, Burlington Resources lost $321mm; Enron made $703mm. In the first quarter of 2001, Burlington Resourcse made $336mm; Enron made $425mm. And, although Enron isn't too good at disclosure, a big piece of Enron's lower profit growth comes from oil and gas production that is unrelated to California. I'm guessing (and yes, this is a pure guess, because Enron won't tell us) that Enron's power trading business generates much less profits than they say. If Enron's true breakdown of profits was known, their whole story to Wall Street might fall apart, and thus they keep us in the dark. All of those other companies, like Enron, must purchase natural gas from companies like Burlington Resources, and the cost of that natural gas can explain almost the entire price increase to consumers. Yes, I have read the Cornell study that theoretically proves that markets were manipulated. But I find the evidence used to be almost comical. He cites a ten fold price increase back in January as evidence of obvious manipulation. Of course, what he didn't note is that natural gas prices in California had also increased ten fold. Instead he uses Henry Hub pricing. I think he should take some time off and drive from the Henry Hub to California so that he could discover the relevance. Natural gas isn't crude oil. You can't put it in a barrel easily and transport it. California has heavily restricted offshore drilling for many years now. It shouldn't be a surprise that natural gas prices are much higher in California than in Louisiana at the Henry Hub. If Californians are willing to have the same sticky goo on their beaches than people on the Texas and Louisiana Gulf have learned to live with, they could have low natural gas prices, too.somebody, otherwise their constituents will realize where the problem really lies--with the silly deregulation law of four (?) years ago and the fact that California residents have had their power costs heavily subsidized. Power prices should be much higher in California than in the rest of the country because the heavy regulations in that state force prices higher. Yes, these regulations might be necessary to preserve the environment that is obviously important to the California population, but the fact is that these regulations have a cost. Elsewhere in the country, Enron can have a power plant up and running in less than a year. In California, it takes more than 5 years. That is solely because of the regulatory atmosphere.
