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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: portage who wrote (7719)	8/26/2001 1:13:44 AM
From: Maurice Winn	Respond to of 74559

<It's really very simple Maurice. For 100 years we had an excellent, reliable and fairly reasonably priced regulated supply of energy> Portage, for the first few decades of that century, there were no problems in building more supply. Try building new nuclear reactors in California now and see what happens. The heating of water and consequent disturbance of some endangered left-footed mud-crab species would stop it. The definition of 'fairly reasonably' is also an important issue. <(until PG&E went out and built a few nuclear plants with massive cost overruns, then had to find a way to pass along the booboos. And they're not even decommissioned yet).> The way that should be handled is the same way Globalstar's mismanagement is to be handled. The investors in those nuclear plants should lose their shirts. They wouldn't get to pass on costs of the booboos in a free market. The decommissioning costs should have been deposited by the nuclear power-station operators in a state-controlled fund in case the managers bankrupted the company. <In about a year and a half, we went from spending about $7 billion on power to a projected $70 billion under dereg, though it's been scaled back since the gamed and real shortages of the winter have settled down.> Wow, I bet that attracted a huge number of alternative energy supplies, efficiency businesses, conservation and other balancing actions. That's the way to get alternative suppliers [existing suppliers getting huge profits]. <Now, the state is proposing to issue $5 billion in bonds to ensure a 15% surplus of power, which the private sector can't be counted on to build - why should they cut into their fat pig of artificial shortages and price gaming?> Because if they don't, somebody else will. That's how markets work. If there is a shortage, prices rise [that's the supply and demand process]. The higher prices and profits attract competition. It happens every time. Every business tries to prolong their highly profitable monopoly, but the world is full of opportunists wanting to make a buck and the place to do it is where somebody else making a bundle. The state going into the power business with $5bn in bonds? How silly. Typical of government to throw money and rules at a problem instead of getting off peoples' backs. Voters want them ON peoples' backs so that's why it happens. <Meanwhile, the private sector will supply and distribute the energy - but not get away with manipulating it due to artificial shortages that they induce.> There will need to be many bureaucrats, committees, central planners and government departments with noses in the trough. The electricity consumers will pay for all of that instead of just the electricity they want. If one supplier creates an artificial shortage, another supplier will fill the gap. It will also annoy the customers who will change supplier when they get a chance. <Let's see : $70 billion - $7 billion = $63 billion in additional charges over a few years -- that $5 billion will be a worthwhile investment, I'd say, even with true increases in the wholesale rates - and it may be that only a portion of it needs to be spent.> Government bureaucrats love games like that. They take their cut, stay in hotels, have nice meals, go to conferences. All good fun. The only way to get more electricity is to build more supply [or buy insulation or other electricity equivalents]. The only way to maximize the productivity of the existing supplies and minimize the need for new supplies is to price the existing supplies to what the market will bear. Voters don't like that [because they are ignorant cargo-cultists]. What happens when the $5bn runs out? Oh, they'll get more! <Your blind adherence to your theories > It's not blind adherence. I've totally changed my theories over the decades when I saw in practise how my initial 'state-run' theories did not work in practise [in any country]. People who don't change their ideas in the face of reality [preferably before they are run over by reality] will have problems. I'm still reading and thinking. My theories gain strength with every review and reality check. <...and your rampant hyperbole is puzzling in face of the realities of what private sector companies exercising market power have shown they will do, and did do here.> They will do what people selling used cars, houses, their labour and anything else do. They will sell it for what the market will bear. Is that a surprise. If they are producing a lot and people don't really need that much and the supplier can get a better return on investment for less production, they'll shut down some production and get a higher price. If competitors think they can do it better or get a chunk of the business, they'll offer supply. All very normal really. < But it doesn't matter, sputter all you want, we're not going to adhere to your stifled doctrines.> Of course not. Ignorant J6Ps will do as they will. No skin off my nose. I've got my own problems with equally ignorant cargo-cultists here arranging blackouts in the same way. It's just that it's amusing to see India, California and New Zealand all doing dumb things and ending up with blackouts. Stifled doctrine? That's an odd description. Anyway, enjoy your blackouts. <Funny how much more smoothly things have gone since the FERC price caps removed the incentives for gaming, in spite of Big Time Dick's stern warnings. There's a difference between a real price signal and a gamed price signal.> Of course governments can, just like Stalin, order people around to get what they want. To some extent. But the next round of electricity supply investment might not be forthcoming on terms the Stalinists like. A gamed price signal is still a price signal. If a supplier 'games' somebody, that somebody will soon give a 'gamed' response to that supplier who will be looking for another customer. < visit us some time if you get hungry for some Korma or Biryiani. But I wouldn't worry about it being served to you cold in a dark, dusty plaza somewhere. > Oh heck, now I have to ask IT what the heck Korma and Biryiani are. I'll bring a kerosene or LPG cooker just in case supplies are down. Those Capstone turbines might be useful too. Mqurice