Will George W. Bush help California

Great Debates
41

Well, when you explain it like that… It’s just that I’ve seen power plants and they seem to take up a lot of land. There’s a big one located near the mouth of the San Gabriel River in Long Beach. I’ve seen San Onofre and it seemed quite large to me. But if I’m wrong, I’m wrong.

It isn’t just “Not In My Back Yard” that makes people object to having a power plant built in the neighborhood. It’s also “Don’t Make Me Give Up My Home!” (Which doesn’t make for an easy-to-remember acronym.) A person buys a house and invests time and money in it and makes friends with the neighbors and turns the house into a home can’t be blamed, really, for not wanting to sell it and give up all that so a power plant (or a freeway or anything else) can be built. I admire that woman in Atlantic City who refused to sell her house and land to a casino.

I say it’s unreasonable to force someone who has broken no laws to give up their home.

But what about the fact that PG&E and SCE spent all that windfall they got from selling their domestic power plants? I still say that if they’re broke, it’s their fault.

Besides, aren’t they getting any revenue from those out-of-state plants they bought? If not, why not?

What about the fact that Enron’s revenues went up from $11 billion in 1999 to $40 billion in 2000? (I must admit I don’t know how much of it came from California.) Couple that to the fact that Enron’s CEO is (or was) one of President Bush’s energy advisers, and you have the potential for some serious conflict-of-interest issues. I ask again, do you really expect Kenneth Lay to give advice that would hurt Enron’s profit margin?

42

then

And what law did the farmer break to deserve having a power plant (to power a city hundreds of miles away) erected in HIS back yard?

Besides, did it ever dawn on you that perhaps one of the reasons people choose to live out “in the sticks” is because they don’t want to breathe the polluted air of the cities?

If you choose to live in a populated area, you should expect to enjoy the benefit AND the detriment of such.

43

Here’s one thing to chew over if people think that Bush went way out of his way to give a sweet deal to the utilities.

The regulations proposed for NOx in Texas, under his term.

From what I know about the limits, and what I know from talking to representatives of all the major Texas utilities, they are so strict as to be nearly impossible to comply with. And yet…they are very likely to go forward. These would limit NOx emissions to 0.03 lbm/MBtu, or about 20 ppm. For comparison, most coal plants in the US that do have limits are currently at 0.5 lbm/MBtu - already considered to be a “strict” limit.

This new emissions limit would require selective catalytic reduction systems (SCR’s) to be added to all coal plants and even gas plants - something unheard of except in California. And the utilities feel “betrayed” over this, or so their representatives will tell me off-the-record, since Bush’s administration was all for this.

Now, one can always find some reason to still criticize this - one can call it “election year politics”, for example, and perhaps it was. But it is interesting to think about.

44

A lot of the space required for San Onofre (which is a nuke, in case someone reading does not know) is for security reasons. And I think the one at the mouth of the San Gabriel river is Haynes, which is a 1600 MW gas-steam plant, which is completely different than a gas turbine. Gas steam plants are about 1/2-3/4 the size of a coal plant of equivalent capacity, so they can be large. Be that as it may, when you consider that San Onofre can supply roughly 2.5 million homes with electricity, and Haynes about 1.8 million homes, I guess one has to ask whether it is a reasonable size or not for each of them.

Most all new capacity in CA is being added through gas turbines, which as I posted are very, very small.

I agree with you completely. But with the money at stake, surely someone or some group of people can be found that will willingly and with no coercion sell their home. Given $1000 MW*hr prices looming this Summer, I imagine the land is worth quite a lot…

What about the price caps put into place, so they couldn’t charge the true cost of electricity early? From the EPRI presentation I saw, one thing they do blame on the CA legislature was the price caps. There was no gradual warning possible (like we have here in Kansas) via steadily higher utility bills - this situation came all at once.

And they couldn’t just keep the money as profit in the bank - I mean really, no company in the World (except Microsoft) will do anything like that. And a lot of it was not “profit” per se. Some of the plants still had serious loans on them, for example.

It takes time to recover your buying price until you truly get profits. I would hazard there are few situations where they would recover their sale price and make a profit the first year.

Well, their revenues went up, but their profits lagged disproportionately behind, by the numbers you posted. For example, Enron’s revenue increased by about 400%, but their profits increased by about 33%. Tough for them? Not really at all, but it does show they became a less profitable business.

FTR, the representative from Duke Energy I spoke with says they may lose $800 million this year on CA alone. But I cannot back that up with any hard facts, so take it at face value.

W.R.T. Mr. Lay - I really have no idea. I suspected most Clinton advisors of dishonesty, and have no reason to feel any differently about Bush’s. But how do you avoid conflict of interest issues completely, and not get an idiot in the position? This is very hard to do for any Administration.

45

There seems to be quite a bit of undeveloped land close to LA county(which is unaffected by the power crisis, power provided by LA DWP). There’s a lot of god-forsaken scrub brush and nasty-ass desert. Ever been to Needles?

46

jab1,

I’ll havr to respectfully disagree. Several people have already commented, but here’s my take:

  1. Yes, some land in Claifornia is expensive, but that is completely beside the point - the power needed is for this area, the plants should be in this area. I’m sure the loss of power during transmission is much more cost that the difference in the price of land. Also, I just drive across the state, and went through hundreds of miles of desert. No reason I can think of that we can’t put power plants there, except state regulations.

  2. That’s my biggest problem with it - Californians have decided that pollution is bad. But Dot Coms were good. So, importing power to support the SF and Silicon Valley economies was not a problem. But it should have been, if you were truly against pollution. It turns out that polluting Oregon was perfectly acceptable, but not California. Skrew that, that’s blatant hypocricy. We need the energy, we buillld the plants.

I’m not saying to tear down cities, but certainly before any new developements are built the power needs shoul dbe concidered. There is planty of area around cities to huild them, it just takes will and a glimpse of reality.

47

“Pollution bad, but dot coms good.” I think you may find that not all people hold both ideas. I think you may find that not everyone knew that California was getting so much of its power from other states. (The only out-of-state source I knew of for sure was Hoover Dam.) This whole crisis has been a great opportunity to learn about and appreciate something one took for granted!

By the way, you don’t have to build a power plant in another state in order to subject that state to air pollution. Pollution crosses state lines because of wind and water. (Did you know that visibility at the Grand Canyon in Arizona has been compromised by smog from Los Angeles? Controlling smog benefits those who live downwind in addition to those who live near the source(s).) Build a plant in Needles and the prevailing wind will carry its exhaust across the Colorado river into Arizona.

If we can build a plant that produces an acceptable level of pollution and if people are willing to sell the necessary land, then we should do so!

48

This was in today’s L. A. Daily News. The writer got the information from the Department of Energy. As far as per capita consumption is concerned, only Rhode Islanders are more efficient than we, meaning we rank 2nd.

Los Angeles is the most efficient city in the state.

When all forms of energy are considered, California is 4th in efficiency.

Mind you, some of this is because of our moderate climate. Most of Southern California never experiences freezing temperatures and summers are mild for those living near the coast. (However, inland population is rising.) Another factor is the relative lack of heavy industry.

But if it wasn’t for the state’s conservation program, we’d be a lot worse off. Right now, total electric usage for the state averages at about 50,000 megawatts. If we used at the same rate as Texas, total demand, would average out at 100,000 megawatts.

And our pollution problems would be much worse.

49

Here’s a very interesting article on the California energy problem:

http://reason.com/ml/ml022201.html

And if that viewpoint interests you, here’s a collection of articles from the same source:

http://reason.com/hod/electricity.html

Anthracite, I’d specifically like your opinion of some of these articles, if you feel like reading them. You obviously have a lot of inside knowledge about this problem, in addition to your exceedingly fine analytical skills (-:

50

Why doesn’t Mexico sell us that power they said they would?

Also, ironically, Sacramento has it’s own power plant, it’s not effected by the power crunch.

51

Your confidence in me is flattering. :eek:

Anyhow…the first article is essentially correct, and matches very well what my friend from EPRI in Palo Alto presented to us here (he will not, in fact, let me post the presentation before it goes in front of Congress :frowning: ). The Wall Street Journal just recently had a very critical article about buying the transmission assets at 2.3 times their market value, and why on earth California would do such a thing.

I did not have time to read the other articles yet. I will also post links to two large online reports that my EPRI friend claims echo their findings close to 99%, so people here can read and make their own judgements as well.

52

BTW, here is a “Manifesto” published by many prominent economists (incl. Nobel Laureates) and public policy academics on the crisis which basically echoes what everyone knows needs to happen…a pass-through of energy costs to retail rates.

http://haas.berkeley.edu/news/california_electricity_crisis.html

53

GW has it figured out:

“The California crunch really is the result of not enough
power-generating plants and then not enough power to power
the power of generating plants.”—Interview with the New York Times, Jan. 14, 2001

54

Also, Calif went to Gore quite handily in the '00 election, and has a Dem gov, and two Dem senators. So, I don’t think helping Calif is a top priority for Bush2. He may try to blame it on the state’s Dem leaders to help Repubs get elected there.

55

Unfortunately I don’t know very much about the power crisis, despite the fact that I live in CA and follow the news pretty closely. Fundementally, it seems to boil down to a poorly designed scheme of deregulation and a lack of new power plant construction to keep pace with increasing demand. (Not to mention Pollyanna-ish thinking that passing savings from deregulation on to consumers doesn’t also mean passing additional expenses on to consumers if the prices go the other way) From what I’ve heard, the state is investigating the possibility of collusion to close plants for “maintenance” to drive up prices, but no evidence has been released yet to allow a positive conclusion of this.

I did want to add a couple comments to the thread though:

  1. Even if Bush could do something about it, would he want to? After all, much of this is going to come down on Gray Davis’ head (despite the fact that he wasn’t governor in 1996 when deregulation was passed), and Davis is a potential future Democratic candidate for president. (like curious george has mentioned)

  2. Someone mentioned regret that the legislators who were around in '96 aren’t anymore because of term limits… isn’t it a good thing they’re gone and can’t continually issue more screwed up legislation?

  3. Someone else mentioned Davis’ threat to use eminent domain to seize power plants in the state. I’m not really sure why he said this, because it’s pretty obviously not a feasible act he would take. Doesn’t it just make it worse to bluff when the companies know you’re bluffing?

To top it all off, a question: If California hadn’t deregulated in 1996 (or had deregulated in a different way), would any of this have occurred?

56

It should be noted that Davis’ proposal to buy up all the power distribution assets would have California taxpayers cough up 2.3 times the market value. About on par with many other deals Californians have agreed to in the past.

GW had it right, but mangled his syntax as usual. The net problem in California is not enough plants, and a price cap that doesn’t allow the true cost to be passed to the consumer.

If the market was fully de-regulated, then the price of electricity would rise. This would cause two things to happen: People would conserve more, helping to ease the immediate crisis, and the higher price for electricity would spur development of more plants and alternatives. But when you cap prices, then power companies have no incentive to continue investing in power generation, and the people have no incentive to conserve. Thus, the problem continues to get worse.

This the normal pattern of government ‘solutions’ to scarcity:

[ul]
*An important product becomes scarce.
*The price starts to rise
*consumers scream, and governments get involved.
*since governments can’t produce the stuff themselves, they usually go for the ‘quick fix’ of instituting price controls.
*Without rising prices, consumers continue to consume the product, which gets even scarcer.
*With price caps in place, producers have no incentive to continue producing
*The government responds to all this with the next step - rationing.
*Rationing sets off a panic mode which causes hoarding and other ways around the rations, which defeats the purpose of the rationing in the first place.
*Things go completely to hell, which then causes government to announce de-regulation or at least some kind of market forces back into the loop.
[/ul]

Look at the last two grand experiments with price controls, and see if you can spot that pattern:

In the 1970’s, government attempted to fight inflation with wage and price controls. The government attempted to fight gasoline shortages with rationing. (remember even-odd license plate laws that determined which day you could buy gas?) The result of that action was huge lineups of cars at gas stations.

New York has attempted to control apartment rent increases with price controls. The result? Abandoned buildings and no new construction, leading to even worse apartment shortages. Eventually, New York had to re-institute market forces, but political pressure wouldn’t allow previous rent-controlled apartments to be released. Thus, you had people living next to each other, one paying three times the amount of the other simply because he had the bad luck of moving in on the wrong day.

Also, the result of that was that new investment was put into new apartments where there was profit, rather than upgrading old ones, where there wasn’t. Thus, many rent controlled apartments became decrepit, and the tenants could no longer afford to move out because they’d lose their rent controlled status.

This the exact pattern you’re seeing in California. The long term solution is to completely remove price controls and allow the price of power to reflect its cost. Of course, Democrats are generally arguing for even more price controls, or outright subsidies from the federal government to artificially depress the retail price of power. This is an extraordinately bad idea.

And where are the greens in all this? Why aren’t they fighting for a free market? Why don’t they want prices to rise in order to force people to conserve? It must be hard being a green, and having your natural desire for big government to be in direct conflict with the good of the environment.

57

It should be noted that Davis’ proposal to buy up all the power distribution assets would have California taxpayers cough up 2.3 times the market value. About on par with many other deals Californians have agreed to in the past.

GW had it right, but mangled his syntax as usual. The net problem in California is not enough plants, and a price cap that doesn’t allow the true cost to be passed to the consumer.

If the market was fully de-regulated, then the price of electricity would rise. This would cause two things to happen: People would conserve more, helping to ease the immediate crisis, and the higher price for electricity would spur development of more plants and alternatives. But when you cap prices, then power companies have no incentive to continue investing in power generation, and the people have no incentive to conserve. Thus, the problem continues to get worse.

This the normal pattern of government ‘solutions’ to scarcity:

[ul]
[li]An important product becomes scarce.[/li][li]The price starts to rise[/li][li]consumers scream, and governments get involved.[/li][li]since governments can’t produce the stuff themselves, they usually go for the ‘quick fix’ of instituting price controls.[/li][li]Without rising prices, consumers continue to consume the product, which gets even scarcer.[/li][li]With price caps in place, producers have no incentive to continue producing[/li][li]The government responds to all this with the next step - rationing.[/li][li]Rationing sets off a panic mode which causes hoarding and other ways around the rations, which defeats the purpose of the rationing in the first place.[/li][li]Things go completely to hell, which then causes government to announce de-regulation or at least some kind of market forces back into the loop.[/li][/ul]

Look at the last two grand experiments with price controls, and see if you can spot that pattern:

In the 1970’s, government attempted to fight inflation with wage and price controls. The government attempted to fight gasoline shortages with rationing. (remember even-odd license plate laws that determined which day you could buy gas?) The result of that action was huge lineups of cars at gas stations.

New York has attempted to control apartment rent increases with price controls. The result? Abandoned buildings and no new construction, leading to even worse apartment shortages. Eventually, New York had to re-institute market forces, but political pressure wouldn’t allow previous rent-controlled apartments to be released. Thus, you had people living next to each other, one paying three times the amount of the other simply because he had the bad luck of moving in on the wrong day.

Also, the result of that was that new investment was put into new apartments where there was profit, rather than upgrading old ones, where there wasn’t. Thus, many rent controlled apartments became decrepit, and the tenants could no longer afford to move out because they’d lose their rent controlled status.

This the exact pattern you’re seeing in California. The long term solution is to completely remove price controls and allow the price of power to reflect its cost. Of course, Democrats are generally arguing for even more price controls, or outright subsidies from the federal government to artificially depress the retail price of power. This is an extraordinately bad idea.

And where are the greens in all this? Why aren’t they fighting for a free market? Why don’t they want prices to rise in order to force people to conserve? It must be hard being a green, and having your natural desire for big government to be in direct conflict with the good of the environment.

58

Did you read one of my earlier posts, near the bottom of page one of this thread, where I pointed out that California is ALREADY the second-most-efficient user of electricity in the country, per capita? (This is straight from the Department of Energy.) Only Rhode Island has us beat! What more can we do? How can we conserve any more than we already are? I guess we should start using candles and kerosene lamps again!

How do you hoard electricity? Batteries?

Yeah, and it’s just too damn bad for anyone who can’t afford those new rates, which WOULD be higher.

Because a free market has no compassion for those unable to compete in it. It does not care for those who go hungry because they can’t afford food or the electricity to keep it edible.

If it wasn’t for “big government” enacting pollution laws and severe penalties for anyone breaking the laws, the environment would be a hell of a lot worse off than it is.

59

Actually 2.3 times book value for the transmission assets is a good deal for the state in purely dollar terms because the market value is certainly much higher than that.

And yes Californians are fairly efficient consumers of electricity, but they are far from being “maxed out” on their conservation. I suggest checking out any of the home pages of the utilites and municipal utilites. I suspect the California Energy Commision might have some good ideas. The news websites also have been running stories on ideas for conservation. When there are proper economic incentives folks will act.

60

Just more food for thought. This is in todays LA Daily News.
" Friday, March 2, 2001
Wholesalers gouging, power officials say

Associated Press

SACRAMENTO – Electricity wholesalers have charged excessively high prices for power in recent weeks, roughly $550 million, and should have to make refunds, California power grid officials said Thursday.
Wholesale prices for power bought by grid officials to avoid blackouts in December and January were unreasonable, the California Independent System Operator’s report says – higher than could be attributed to soaring prices for natural gas used to generate electricity.

The ISO asked the Federal Energy Regulatory Commission to order wholesalers to refund payments that exceeded a reasonable price"