Huh? Troll?
Gas isn’t that ridiculously priced, despite the relative increases. And this thread’s not about gasoline per se anyway.
Jeesh, go buy a scooter.
I just had this discussion with a friend over lunch. It’s a mistake to blame the lack of new power plants on “environmentalists.” It’s NIMBYism at work: middle class property owners whining and complaining about their property values that have pressured local and state governments to deny licenses to power plant builders. And it’s still happening.
As a CA resident, I have observed that our state’s electric power crisis appears to be everyone’s fault: the legislature, for crafting such a crappy deregulation plan; the energy suppliers and distributors (and every other special interest group for that matter), for lobbying in their own self-interests; the federal regulators, for not intervening in an obviously flawed plan; and the voters, for letting their elected leaders pull this thing off.
But regardless, we’re not going to fix anything by pointing fingers and assigning blame. Especially in a problem this convoluted.
What really ticks me off, though, is when legislators from other states blame it on Californians and their hot tubs. (That really happened - last month some US Representative from Washington State directed her accusation that way.)
The other thing that ticks me off is how all these Texas energy companies are making windfall profits on prices that are 10 to 100 times above “normal” kWh rates, and then in March Bush turned around and said “I see no reason for price caps.” How much more blatantly in their hip pocket could he be?
(Not that I would have expected anything different from Gore. It would have just been a different set of hip pockets.)
Oh, I should have noted that the electric companies knew well in advance that higher gas prices were coming, but chose NOT to stockpile or, at least, lock in a cheaper price.
Sure, the problem of plant construction has a lot to do with the NIMBY syndrome, but just why do you think all those people became so negative towards power plants in the first place? Because the environmental movement ran a non-stop smear campaign against pretty much every form of power generation that wasn’t on their pie-in-the-sky approved list. Plus, those environmental groups often took an active role in helping oppose local plant construction by supplying funds, ad copy, lobbying politicians, etc. So it’s a little disingenuous to suggest that the environmental movement didn’t have a powerful role in the elimination of power plant construction in California.
I’m not that old, and I can remember a time when cities used to fight to have power plants built near them, because of the jobs they created and the belief that having a local plant would lower energy costs.
I hope I’m wrong; I try to believe in people, but it seems everyone’s putting the blame in the wrong place.
o Blame the other states for price gouging.
o Blame the middle-class for their SUV’s.
o Blame Silicon Valley for needing too much.
o Blame Hot Tubs in California (surely that had to have been facetious, right?)
o Blame Bush for not wanting caps.
o Blame others for wanting caps.
o Blame people for not wanting plants in their back yards.
It seems whether you’re talking electricity, natural gas, or gasoline, the answer should be the same: let free enterprise do what it does best – sort itself out by supply and demand. Who cares if you’re being gouged? Just boycott the product (or conserve). If enough people “boycott” then suddenly there’s a surplus and prices’ll drop. Until that happens, those that WANT more electricity and are willing to pay for it, can.
If I (hypothetically speaking) want to get 10MPG, and am willing to pay for it, it’s too bad for you. That’s the benefit of having more money–I can buy what I want with it (in this case, gasoline). Maybe you should tell me I can’t have a 6-foot TV either, 'cos it draws more electricity than your 19" model.
“Fixing” prices is just everything contrary to the American way. Yeah, I hate having paid $1.89 for gas today. I’m not going to like the natural gas hike come this winter. And if electricity shoots up, I guess I’ll stop so blatantly wasting it. But you know what, paying a little more is worth not living someplace like East Germany 
If you know well in advance that energy stocks (the real stuff, not shares in the companies) are going to rise in price, and you’re a consumer-supplier of such, perhaps it makes sense to stockpile in advance of the coming increase.
That choice might not be available to you if you had not foreseen the last upturn in energy prices and were caught with your working capital stretched to the max, or were perhaps capital-healthy but forced to bid higher than anticipated in a supply deficient market.
Mr. Blue Sky, plants cannot “stockpile” electricity. If California utilities could not produce enough and had to buy out of state, then they have to pay the going rate.
At any rate,the plants were loosing millions because of the cap on what they could charge consumers and the prices of energy the were buying was going through the roof. They were having problems getting credit for their current needs, never mind for tomorrow. Finally the suppliers refused to supply unless paid cash.
The only reason I can see that caused this situation is the stupid non-de-regulation.
You sound like the companies planned to go bankrupt to spite the consumers.
And, of course, if you have X amount of gasoline on hand that cost you Y when you become aware that the price of wholesale fuel has jumped, you can’t afford to sell it at the “normal” markup of Y + operating cost + profit because you have to replace the current inventory with a renewed supply acquired at Y + increase cost.
Sure, Sam, the NIMBYs may have used environmental impact aruguments to bolster their lawsuits, but the real reason they’re NIMBYs is because they are concerned about their property values. And regardless, these people are’nt “environmentalists.” They’re average folk.
And, sailor, you’re forgetting about the billions in profits that the public utilities turned over to their parent companies. If these had been municipal utilities, or independant private companies, those profits would have still been available to pay creditors, providing some cushion for periods when wholesale prices exceeded retail. I’m not exonerating the deregulation rules, just pointing out that the public utils are not innocent vicitms.
And finally, Balthisar, I agree with you in general. When you’re talking autos and hamburgers and levis, let the invisible hand reign. However, when it comes to essential services, and resource prices that drive every other sector of the economy, it’s irresponsible to trust people whose only concern is profit. It’s not the “Amercan Way” you say? Heck, with respect to electricity prices, interest rates, and a few other fundamental things that have resounding effects on the economy, it has always been the American Way to regulate them.
And until the Reagan administration, it was even the American Way to regulate things like airlines and phone companies. What’s changed is that in the past 20 years, corporate influence has grown to the point where there are precious few checks left on their power in the Federal and state governments.
That’s what these WTO and FTAA protesters are so POed about: they’re labelled “anarchists” but what they’re really concerned about is that these trade pacts give more power to corporate interests than they do to the governments of the countries engaging in “free trade.” In typical modern political doublespeak, the powers that be have labeled those concerned with preserving government power “anarchists” when the real anarchists are the multinational corporations who wish to operate unfettered by the nuisances of environmental, labor, and human rights laws.
Anyway, to bring this back on thread, I’m convinced that when it comes to electricity, the real solution to this problem has passed us by.
It’s unfortunate that Pete Wilson didn’t have the cojones to do what was right for his constituents, what he threatened to do but wimped out on: exercise his power of Eminent Domain and seize all generators on CA soil. Sure, it wouldn’t have met all of his state’s power needs, but it would have made a huge dent. Sure, the affected owners would cry foul and take him to court, but it would cost the state less to pay court costs and make compensation for the property than to use the state’s money to buy power. Yes, it amounts to property theft, but the owners got them at bargain basement prices thanks only to CA legislation, and have already made back their investment many, many times over. And if you aren’t sure the state should be in the generating business, Pete could have turned the generators over to an independant, state-controlled, nonprofit company.
This would have given Pete a lot more control over the situation, and it would have made him hugely popular with the voters. But he caved to corporate interests and let the PUC do exactly what he promised wouldn’t happen: raise consumer electric rates. He doesn’t have a chance in hell of winning another election.
As for Gas prices, the solution is simple: eliminate the use of additives. The problem is driven by air pollution? Then address it directly - encourage people to conserve. Pollution control is a legitimate government concern. Add a large federal gasoline tax, and allow larger state and local taxes. That’s how every other government in the world controls gasoline consumption. There’s absolutely no reason why oil companies should be profiting off of an artificial shortage based on the short supply of a mandated additive. (The reason why the MTBE is of such short supply is because the natural gas it’s made from is more profitable to sell in its natural form, or as electricty, both due to other artifical supply shortages.)
When you look at it that way, the current arrangement is ludicrous. But there are too many corporate interests tied up in the status quo, so nothing is going to change.
So your solution was to have the government buy up all the power plants at several times market price, and then set up a state-run or state-managed power system. And this would have solved the current crisis HOW? There would still be fewer plants than needed to meet the demand. California would still be paying other states in the Western Grid for its power, at the same prices. So exactly what would have been gained here? Are you claiming that the government would have held onto all those billions that the power companies supposedly siphoned out of California? Even if true, that might have kept prices down for a while, but then you’d have higher taxes to have paid for the giant acquisition in the first place.
Have a look at Pennsylvania. From what I understand, they have real deregulation, and everyone there seems pretty happy with the result.
And whose hip pocket was Clinton in for not pushing price caps when he was in office?
I hear the “property values were why power plants aren’t built” argument all the time. Typically from people who don’t understand the concept of transmission and distribution.
Large power plants are not built in subdivisions, or next to schools, or on top of orphanages. They are built in rural areas typically, especially if they are nuclear or coal plants. Property values simply have nothing to do with it. And the only people suggesting that power plants are going to truly be built “right in your backyard” are environmental groups, who in saying this are purposefully mis-stating the mechanics of power plant siting and transmission concerns to rile up Joe Homeowner. IMO, of course.
The above are some very on the mark posts as to what’s causing the problem, however, the relevant question, as far as I’m concerned is ……what’s the solution?
And who forced via legislation these sales? California did.
OK…anyone here want to go back to regulated phone service? Where you pay rent for each phone in your house, have no cell phone service, and long distance is $0.50 a minute?
“Yes, it amounts to property theft, but…” When combined with your sympathy for the people who organized the WTO riots (and let’s not mince words, it was a planned, organized, illegal riot), I think this sums up your stance very well.
You know, the whole story of exactly what really happened in CA can easily be found on the DoE’s website. But most people really don’t want to read through all the fine print.
Bughunter, your ideas have been tried out in Cuba. They started 40 years ago and look at them. Maybe you could learn something from their example.
bug, the market in the U.S. is open to any who can muster bringing themselves to bat. If you can summon and master an idea that brings gasoline to the market cheaper than it is now delivered, you can make much $$$. Why aren’t you doing that?
No. Not buy up the power plants. Seize them. The current owners will sue, the state will incur court costs, and it’ll be tied up in the courts for years. Eventually the process of appeals will meet an end, and CA will owe these companies money, but most likely the supply crisis will be over. Right now Wilson is spending billions paying these facility owners for power and getting nothing in return.
A state-run or state-managed power system is one possibility. Another option would be for the state to turn the generators back over to PG&E and SCE. The point is to gain legislative and regulatory control over the prices of a large fraction of the power sold to the state’s utilites. (I’ve been looking for a reference as to what this exact fraction is, but have failed.) Right now, Pete Wilson has no control over the wholesalers of power - he couldn’t regulate them if he wanted to.
I don’t suggest that this be permanent. But it’s one way for Pete Wilson to gain some leverage over the situation. Eventually, once the crisis is over and more power plants are built, the seized plants won’t be so strategically important.
PA doesn’t have a crisis to “fix.” But they’re as vulnerable to one as CA is if the wholesale prices should outgrow the ability of the consumer to pay at the retail level. The retail price may not be capped by legislation in PA like it was in CA, but they are capped by market forces. In a worst case scenario, PA could wind up with large segments of the population who cannot afford electric power, and so have their service turned off. Industry will leave the state for places with cheaper power. The economy will suffer enormously.
I repeat my assertion that electricity differs from other commodities in that it is a fundamental resource, like water and clean air, that is in the public’s best interest to keep under government regulation. If it were beer or bagels, I would think otherwise.
What does Clinton have to do with it? There was no one asking for price caps when he was in office. I do agree, however, that he (or more specifically, his staff) was in a position to foresee and forstall the problem but that wasn’t his (their) job. Yet.
But since you asked, if CA had asked for price caps on wholesale electricity, the pocket that would have swayed him would have been probably been Hollywood studios, and maybe Silicon Valley. Tyson Chicken wasn’t affected so we can ignore them.
Really. Well based on your inappropriate Clinton-bashing, I think I could draw an equally uninformed conclusion about your stance. But I won’t.
All protests against the status quo are “illegal.” The American Revolution was illegal. My specific stance on the WTO/FTAA riots is offtopic and would take far too long to express, but I’ll sum it up by saying that they serve a useful purpose of bringing important points of view to national attention that would otherwise receive no venue. Their methods are frequently immature, inefficient, and unaffiliated opportunists unfortunately used the protests to engage in random violence and looting. But if they felt they had another voice, they would have used it.
So please post the link. I’m open-minded enough to adjust my opinion based on new, relevant facts.
But as I understand it, it’s really not that complicated.
[li]New regulations forced the CA utilities to sell all their natural gas fired plants.[/li][li]These plants were purchased by out of state owners that did not fall under CA regulation.[/li][li]Nobody built any new plants, despite the fact that for about a decade, gov’t and industry knew deregulation was coming.[/li][li]New regulations required wholesale prices to be set by the open market.[/li][li]New regulations put a cap on retail prices.[/li][li]The wholesale cost of electricity exceeded the retail cost.[/li][li]Eventually the middlemen ran out of cash, then ran out of credit.[/li]
Nobody is without blame. Nobody. Not even the voters. But it’s certainly a valid question for ratepayers to ask “where is all the money going?” Last year, the answer was “the utilities’ parent companies.” This year it’s “Enron, Duke Power, Dynegy,” etc.
And a coule of replies to posters who made it in time for my preview of this post:
beatle do you think you can raise the capital to compete with the likes of Shell, Arco, BP, etc.? Good Luck! And then add to that lineup the fact that they have powerful lobbyists in all state governments and they’re being accused of collusion to fix market prices and limit lines of supply.
Just look at the nightmare Legend Air has endured trying to compete with just a tiny part of American Airlines’ Dallas/Fort Worth market.
Besides, that’s not the point. This gas price spike is due to a shortage of MTBE. Prices are sane in Atlanta, where the additive is not required by clean air laws. I’m saying that if you want clean air, raise prices by taxation, not by setting up byzantine rules that give windfall profits to oil companies.
And sailor I’d be more curious as to what you were specifically referring to if I didn’t think you were just trying to call me a communist. I’m not talking about widespread, across the board public ownership of all industry, just state government exercising enough power to keep the freaking lights on for pete’s sake!
My point about Clinton is only in response to your earlier point about Bush. This problem was building long before Bush came to office, and Clinton - like Bush - did nothing about it. People were calling for price caps as far as back as two Winters ago - before everything really went wrong - and he had no intention of implementing them. To his credit, IMO. I just thought that calling out Bush as being the evil one in the pockets of special interests was not entirely a complete statement.
One could point to all the “last minute” things Clinton did right before he left office, and ask why he didn’t push for price caps then. There certainly was enough outcry by then. But he didn’t, because, IMO, it simply would make the matter worse.
You implement price caps that lock the price of energy below what it costs to purchase it or generate it, nobody sells to California anymore, California goes dark, the Governor starts illegally and immorally (IMO) seizing power plants and companies, and then investment flees CA like rats leaving a sinking ship.
Why build a business in CA, when the State can just seize it and drag you through the courts for decades, spending taxpayer money freely to defend their theft - or vast underpayment - of your property’s worth? The economy of CA would look like that of North Korea soon.
You admitted yourself earlier that it was property theft, but this is “OK”, because it is a greedy corporation, right? You advocate seizing them, without proper compensation, in your last post. So CA can seize the plants, putting at risk the jobs of tens - if not hundreds - of thousands of workers in other States? Any idea what this ripple effect would have on the economy?
And there is one thing you have forgotten completely. California does not produce near enough electricity for themselves. Who has to sell it to them? That’s right, the companies that just had their power plants stolen from them. What the Hell do you propose then when the interties into CA are cut - mobilizing the National Guard in CA and invading Nevada and Arizona to seize more plants? And who in the Hell will build any new plants in CA, and try to operate them, when they know they can be seized on a whim? Or would CA be moving to a Nationalized energy policy, with government troops running gas stations, power plants, even the wind farms…my God, it sounds…well, I can’t even think of the words.
Your entire premise on seizure is truly scary. Do you have any idea about the Constitutionality of seizing businesses with the intent of using the court system as a means to circumvent fair compensation?
It’s pretty obvious that your opinion on the solution is not going to be changed signifacntly by anything I can say, so unless there are specific energy questions that come up here I’m backing out of this one. I refuse to get into a GD here over government seizures of private property.
BTW - you keep trying to speak from a stance of knowledge on the subject, yet you keep referring to Pete Wilson as being in charge in CA. Are you unaware that Gray Davis is the Governor of CA?
Oh, and regarding regulated airlines. Seen Europe or Japan, and how screwed up their fare rates, gate access, and arguing over time slots is? Seen the BA/Virgin/American dispute at Heathrow? Thank God we don’t have that here.
Bug, just a few things. You have the “problem” of that thing called the constitution.
Countries which respect rights to private property have investors willing to risk their money. Countries where the rights to private property are not respected cannot find capitalists who will invest… gee… I wonder why.
If America would allow the seizing without compensation, the flight of capital would be tremendous and the economy would go into a tailspin. Once you start down that road there is no stopping, you have to regulate more and more and seize more and more. Then people start grumbling and you have to start shooting a few to keep the rest in line… ever heard of “unintended consequences”?
Do you think Cuba started out like this? The government seized some American companies… capital started fleeing so they seized the banks… then other countries stopped selling them stuff… things got bad and some people thought they’d be better off in some other country… so now they have to stop the people from fleeing… the whole thing went into a tailspin and 40 years later they are worse off than they started. To say you can seize one industry and not have it have consequences in the rest of the economy is quite naive.
I would recommend you read “The road to serfdom” by F. Hayek in which he explains a few things quite well. Among them that people who propose a government control of the economy do not realize it can only be done with methods of which they would not approve.
Another relevant piece by Hayek The Use of Knowledge in Society explains how prices in a free market act to regulate the best use resources and fixing prices is the best way to screw up a good system.
Anyway, I’m outta here with Anthracite.
Look folks…there are many issues facing California’s power industry but price caps has to be tops among them. Price caps are thoroughly unnatural economic tools and I can’t think of a time where they ever helped or improved the situation they were meant to correct.
Consumer Interest Group Caused Problem:
The people consuming power have absolutely ZERO incentive to conserve power. Who cares if running an air conditioner costs $0.20 and hour to run when you are guaranteed a price no higher than $0.08? (BTW…those numbers are examples to illustrate the point and not meant to be taken as actual costs.)
Economic Reality/Environmentalist/NIMBY Caused Problem:
The power companies have no incentive to build more capacity. Why build in additional capacity when you cannot recoup your costs due to artificial price caps? Add to this environmentalist pressures and NIMBYism run amok and you can forget about excess capacity.
Economic Reality Caused Problem:
Competition will not materialize to force efficiencies into the system since they have no way of expecting to see their investment returned. In addition, competition will not exist between existing power companies since they are maxed out on price and can’t compete there at all. Some consumers may change on customer service issues but that is a relatively small number. Price in this case is where the competition is at.
Consumer Interest Groups Caused Problem:
In addition California compounded its problems. For some reason California didn’t trust the utilities to enter into long-term contracts for the delivery of power (i.e. you promise to sell me power for the next year at $50/MWh). Instead, they are forced, by law, to buy power on the spot market where prices are MUCH higher than the long-term wholesale market. There is some speculation that power generators were actually turned off to increase the price on the spot market. In short, the prices to buy power were sky high (from below $50/MWh to over $300/MWh in a few months).
Utility Company Caused problem:
So where’s all of the competition that is supposed to come with a free market and drive down prices? Well, Californians managed to screw this one up as well from strong pressure from the utility lobby. Regulation of the past forced utilities to build all sorts fo stuff they’d now be stuck with maintaining in a deregulated economy. These stranded assests are real and it is legitimate for the utilities to expect some compensation for them. Unfortunately California paid far too much for these stranded assests. In order to get the state’s money back some of these costs were to be passed on to new entrants into the power market. Of course, this raised the barriers to entry in the market and essentially kept everyone else out.
Californian Caused Problem:
In the end Calfornians have no one to blame but themselves. Frankly, at the root of all of the problems, is California’s unique hyper-democratic system of government. It’s the old “Too many chefs spoil the broth” deal. Californians expect everyone to be made happy regardless of the realties of a situation. So, the environmentalists get their way, the consumer lobbies get their piece of the pie, the utility lobbies get their chunk, the NIMBY’s make certain they aren’t displeased in any fashion and the politicians are spineless weaklings trying to cowtow to every wish.
In the end you are left with the mess we see today.
I’m hardly an economist but a few things seem to suggest themselves immediately.
- Remove the price caps immediately.
- Allow the utilities to negotiate long-term power contracts on the wholesale market so they can lock-in a price.
- Start building new power plants. Try and be nice about locating them but in the end use Eminent Domain to place them if the NIMBY’s don’t play nice.
- Lower the barriers to entry for competitors.
Only #1 presents a serious problem since as soon as the cap is lifted prices will absolutely soar and many people simply cannot afford that. The state may need to find a way to forgive previous debt and have the utilities price based upon the future long-term contratcs they negotiate. This would probably be quite expensive for the state but this problem has already been expensive and looks to remain so. Better to bite the bullet once and be done with it.