🚀 go-pugleaf

[POSTED TO ba.general - REPLY ON USENET PLEASE]

In <9e1rc7$gdj$1@slb1.atl.mindspring.net> on Thu, 17 May 2001 17:45:36
-0700, "xenman" <xenman@sprynet.nospaam.com> wrote:

>I don't live in CA, but I've been here in the San Diego
>area for about 7 weeks now.  Maybe my perspective is
>a bit tainted by having a degree in Economics, but my
>take on the problem is quite different from what is
>being reported in the news media.  I see two issues
>completely different.
>
>1.  High prices are NOT the problem, they are the
>symptom of a different problem; a disjoint between
>supply and demand.  A professional economist would
>use terms like "marginal demand", 'elasticity", and
>"marginal supply", but basically what they're saying
>is that market forces are really working given that
>supplies are artificially constrained but demand is
>not.

If "market forces" were "really working" then the response to such high
prices would be an increase in supply.  Instead, there is evidence that
suppliers were withholding supply in order to inflate and profit from
these high prices.  They were able to do that with relative impunity
because the market is dysfunctional.  For example, natural gas delivered
just across the border in California was several times more expensive
than in Arizona (and other states such as New York).  Market forces
should have responded by moving cheaper gas into California.  That
apparently didn't happen because the means to do it (pipelines) were
under the control of those profiting from the high prices in California.

>2.  The CA electrical power industry was NEVER deregulated.
>Calling a law "deregulation" and then artificially
>constraining prices, restricting supply, forcing
>divestiture of assets, and limit purchase contracts
>is laughable.  Perhaps the law was crafted by people
>whose nature is to oppose free markets, but all the while
>knowing that their law would ultimately fail and thus
>turning the populace away from real deregulation.  I'm
>not say that there was some backhanded plot to destroy
>any future real deregulation, but that has surely been
>the result.  The amazing part is that the news media
>still refers to the "power deregulation" law, as if
>there really was such a law.

The law was intended to be a transition to a fully deregulated market.
Supply was not restricted.  Divestiture was believed to be (and probably
was) necessary to create a competitive market.

Retail price controls were actually intended to benefit the utilities,
which is why utilities supported them and consumer groups opposed them
at the time -- wholesale prices were expected to fall, thus rewarding
utilities for their participation by keeping retail rates high
(effectively a bribe).  California was already paying some of the
highest rates for electricity in the 48 states, so this seemed a good
bet.

Saying now, with the benefit of hindsight, that this was intended to
fail is both unjustified and unwarranted.

-- 
Best regards,
John Navas     <http://navasgrp.home.att.net/>