On Sun, 11 Feb 2001, Jordan Hayes wrote:
> As far as what's needed, I'm all for throwing money at figuring
> out better ways to transport (and ultimately store) power: Texas
> over-built production in the last few years while California
> under-built. But if you could realize the dream that "the grid"
> promisses, we'd be in a much better position to have a real market.
> Since all the players in California "are" the market, you'd need
> external players -- like those in Texas -- who would step up and
> when the local are just playing games.
But is this possible, Jordan? My understanding is that the only people who can sell you power are the people that live next door. And that's why the electricity market has had one squeeze play after another.
As for Texas, my impression is that that extra capacity is also squeeze play based. Enron has built a series of mini-plants of 600MW on the understanding that they would stay offline all but 2 weeks a year, when there were power spikes, and MW hours soared from 30 dollars to 3000. Just the fact that this is a viable business plan seems to indict power marketization. Instead of delivering power more efficiently, it seems designed to extract the highest possible price during times of need, and to encourage the production of need. Even if the boys from Texas could step in, it would only be an a hugely inflated price -- otherwise it wouldn't be worth their time. But technologically, if I understand correctly, they just can't. They can only sell to the guys next door.
It seems to mean there is an inherent logic here encouraing permanently higher costs than those we would get from the old public power model, where you just built in a certain fudge factor and averaged in the cost. But even Iff, under a market system, the average price were somehow lower, to avoid situations like California there would a finacial market that allowed distributors and then consumers to lock in that average price. But the market for electricity futures is even crazier than the market for electricity. Producers simply welsh on their contracts and dare each other to sue, figuring a hundred fold increase in profits for two weeks will pay the legal bills. And this then sets off chain reactions of screwed brokers who default on each other. It's lots of fun for lawyers. But as far as I can tell, even though they get back millions of dollars everntually in breach of contract suits, it still turns out to be cost-effective to break the contracts.
Michael
__________________________________________________________________________ Michael Pollak................New York City..............mpollak at panix.com