Re: Phony deregulation - Fwd: James Bennett's UPI Column for 01-26-01

Date: Sat Jan 27 2001 - 12:19:11 MST

In a message dated 1/27/01 8:37:50 AM, writes:

>The California utilities had their power cut off because they failed
>to pay their last bill. Utilities in other states who can still pay
>for power are still getting it. When President Bush ordered the
>other states to not cut off power, the power came back on. There is
>no lack of power. There is a lack of solvent utility companies.
>There is no question about how to get the power back on. The only
>question is who is going to pay for it.

That's not entirely true. There is not enough power being produced in the
US West, and especially not in California. Typicallly it's enough,
but if something goes wrong it's not. The problem is that supply
is inelastic beyond a certain price (short-term, since it takes a
while to build plants) and demand is inelastic since the price
consumers pay is set by fiat.

The sensible solution is simply to raise consumer rates until supply
and demand are matched. A market would do this automatically;
the utility board could have done it if it were truly concerned with
stable electricity supply, economic growth, common good, etc.
Of course, it's a politically appointed board, so it has other ends.
I suspect they kept rates low to help their own reappointments and
the re-election of their friends. Kind of a 12 billion dollar campaign
contribution extorted from the utilities, albeit spent *very*
inefficiently. I'd also think it worth investigating the board members
for connections to electricity wholesalers, since they are the main
beneficiaries of this bizarre policy.

Now that the state partially owns the utilities and will have to pay
for electricity, I expect the utility board will start acting sensibly
and keep consumer rates at a level that allows the wholesale
market to clear. If not, we're in for a catastrophic summer out

This archive was generated by hypermail 2b30 : Mon May 28 2001 - 09:56:25 MDT