🚀 go-pugleaf

In article <9e1rc7$gdj$1@slb1.atl.mindspring.net>,
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.  
>
>
>Well, these are my observations, as a outsider that will
>soon return home.


I'm sure electricity isn't 24.8 cents/kilowatt-hour back home, wherever
home is. Thanks for your contribution. We all needed someone who's been
in San Diego 7 weeks to help explain the situation to us.


Dimitri

In sdnet.general D. Gerasimatos <dim@csua.berkeley.edu> wrote:
> In article <9e1rc7$gdj$1@slb1.atl.mindspring.net>,
> 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.  
>>
>>
>>Well, these are my observations, as a outsider that will
>>soon return home.


> I'm sure electricity isn't 24.8 cents/kilowatt-hour back home, wherever
> home is. Thanks for your contribution. We all needed someone who's been
> in San Diego 7 weeks to help explain the situation to us.


> Dimitri


Unfair, Dimitri. Also quite defensive. 

As a San Diegan I welcome outside analyses. No Xenophobia here, Xenman. Nex

"Alan Pollock" <nexus@king.cts.com> wrote in message
news:3b048770$0$193$e2e8da3@nntp.cts.com...
> In sdnet.general D. Gerasimatos <dim@csua.berkeley.edu> wrote:
> > In article <9e1rc7$gdj$1@slb1.atl.mindspring.net>,
> > 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.
> >>
> >>
> >>Well, these are my observations, as a outsider that will
> >>soon return home.
>
>
> > I'm sure electricity isn't 24.8 cents/kilowatt-hour back home, wherever
> > home is. Thanks for your contribution. We all needed someone who's been
> > in San Diego 7 weeks to help explain the situation to us.
>
>
> > Dimitri
>
>
> Unfair, Dimitri. Also quite defensive.
>
> As a San Diegan I welcome outside analyses. No Xenophobia here, Xenman.
Nex

Thanks for an 'outside' perspective, Alan.

No Thanks for the immature response, Dimitri.

Thank God for a thread that's less than 48 layers deep relating to the power
discussion!!

How about that Gray Davis? He is a WONDERFUL WHINER! What a pitiful
political hack. He could at the least, stop blow-drying his hair to do his
part in the conservation effort.

As far as his efforts to bankrupt the state by spending EVERYTHING on power,
STOP!!!  I certainly don't want this state bled dry to buy power at stupid
rates rather than have some outtages. What's wrong with cutting the grid
back across 4 ROB's between 1AM and 4AM? Bank the energy saved as credits to
use during the day.

..j

in article C_%M6.206$1R4.7766@typhoon.sonic.net, Joe Falejczyk  wrote:

> As far as his efforts to bankrupt the state by spending EVERYTHING on power,
> STOP!!!  I certainly don't want this state bled dry to buy power at stupid
> rates rather than have some outtages. What's wrong with cutting the grid
> back across 4 ROB's between 1AM and 4AM? Bank the energy saved as credits to
> use during the day.

Sorry, it just doesn't work that way. You cannot bank ultra-cheap power
(that available at three in the morning) to pay for expensive power at 3 PM.
And even if you could, you still need the generation capacity to provide it.
It doesn't make much sense to drop portions of the grid that are hardly
consuming any power (like at four in the morning). All you end up doing is
screw up servers and digital clocks...you don't save any significant amount
of power. 

Think "on-peak capacity".

What we should have been doing all along is to refuse to pay the exorbitant
prices...period. If that would mean dropping load (rolling blackouts), then
that is what it would mean. Once the generators learn that they are not
going to get astronomical prices for on-peak electricity, you can bet the
price will drop like a stone.

-- 
John Higdon     | Email Address Valid | http://www.anntec.com/
+1 408 264 4115 |  Silicon Valley, CA | FAX: +1 408 264 4407
  Cheap, provincial San Franciscans can call: 415 428-COWS

John Higdon wrote:
> What we should have been doing all along is to refuse to pay the exorbitant
> prices...period. If that would mean dropping load (rolling blackouts), then
> that is what it would mean. Once the generators learn that they are not
> going to get astronomical prices for on-peak electricity, you can bet the
> price will drop like a stone.

What price would you suggest?  

While I might agree that it would be better to simply allow blackouts
than to pay extreme peaks of $1900/mWh, these don't happen that often. 
The cost most of the time is in the range of $200/mWh, and that
approximates natural gas costs.  By contrast, the cost built into the
rate structure is only about $60/mWh.  

If you were to refuse to pay more than $60/mWh, you would lose nearly
all of the natural gas fired capacity, because they simply could not
afford to pay for fuel (and pollution credits) at that price.  About 35%
of the capacity goes offline.  Since nearly 50% of the customers are
exempt from rolling blackouts for political or technical reasons, the
rest of us would be subject to "rolling" blackouts 60+% of the time!

John Higdon wrote the quoted material below:

" Sorry, it just doesn't work that way. You cannot bank ultra-cheap power
" (that available at three in the morning) to pay for expensive power at 3 PM.

Well, you can sort of.  This is why hydro plants have turbines to push
water back up on the other side of the dam.  Of course, you get a good
sized amount of loss (what, 10%?) but it's some kind of banking.


-- 
(C) 2001                        Someday we'll look back on this moment and
David Kaye                           plow into a parked car. -- Evan Davis
                                                                          

xenman wrote the quoted material below:

" 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. 

Sure it was deregulated:  The power companies sat down and came up with
the way THEY wanted to deregulate the industry.  It was SoCalEd, PG&E, and
SDG&E who proposed the retail rate cap.  They offered to sell off their
generating facilities in-state in order to be freed from most PUC
regulations.  They struck the bargain and they brought it on themselves.


-- 
(C) 2001                             I never drink water. That's the stuff
David Kaye                                that rusts pipes. -- W.C. Fields
                                                                          

in article 3B04B5AD.254D060A@quiotix.com, Jeffrey Siegal  wrote:

> What price would you suggest?

I think that would be up to those in a position to realistically assess what
is affordable. I'm not personally in a position to set that price.
 
> If you were to refuse to pay more than $60/mWh, you would lose nearly
> all of the natural gas fired capacity, because they simply could not
> afford to pay for fuel (and pollution credits) at that price.

Obviously, you cannot consistently refuse to pay real-world prices. It is no
secret (at least to those in the biz, I would assume) what realistic costs
to generate power under various situations might be. Once we decide what
methods are deemed "affordable", then we can make determinations regarding
acceptable price ranges. And it goes without saying that the retail rates
would have to cover those determinations.

> About 35%
> of the capacity goes offline.  Since nearly 50% of the customers are
> exempt from rolling blackouts for political or technical reasons, the
> rest of us would be subject to "rolling" blackouts 60+% of the time!

Just like we residence customers who have been designated "heavy users" must
pick up the tab increase for fifty percent of the entire base of residence
users.

-- 
John Higdon     | Email Address Valid | http://www.anntec.com/
+1 408 264 4115 |  Silicon Valley, CA | FAX: +1 408 264 4407
  Cheap, provincial San Franciscans can call: 415 428-COWS

David Kaye wrote:
> " Sorry, it just doesn't work that way. You cannot bank ultra-cheap power
> " (that available at three in the morning) to pay for expensive power at 3 PM.
> 
> Well, you can sort of.  This is why hydro plants have turbines to push
> water back up on the other side of the dam.  Of course, you get a good
> sized amount of loss (what, 10%?) but it's some kind of banking.

That's already done.  The limit is the size of the pumps; blackout out
people at 4am wouldn't increase the amount of energy that could be
stored that way.

in article 9e2dsk$1162c$3@rn.area.com, David Kaye  wrote:

> John Higdon wrote the quoted material below:
> 
> " Sorry, it just doesn't work that way. You cannot bank ultra-cheap power
> " (that available at three in the morning) to pay for expensive power at 3 PM.
> 
> Well, you can sort of.  This is why hydro plants have turbines to push
> water back up on the other side of the dam.  Of course, you get a good
> sized amount of loss (what, 10%?) but it's some kind of banking.

Actually, the efficiency hit is more like thirty percent of the energy going
up in mechanical losses.

But what about all those electric cars that were going to be charged during
"off-peak"? Suddenly, the fabulous electric car doesn't look so wonderful
anymore, does it...particularly with the new rates. And then wait until they
add a road tax!

-- 
John Higdon     | Email Address Valid | http://www.anntec.com/
+1 408 264 4115 |  Silicon Valley, CA | FAX: +1 408 264 4407
  Cheap, provincial San Franciscans can call: 415 428-COWS

John Higdon wrote:
> Suddenly, the fabulous electric car doesn't look so wonderful
> anymore, does it.

It never did, but I think you knew that.

John Higdon wrote:
> 
<snip>
> Just like we residence customers who have been designated "heavy users" must
> pick up the tab increase for fifty percent of the entire base of residence
> users.

This is the one that truly makes no sense to me.  Residential customers
already pay the second highest rates for electricity (street lighting is
the highest) and are, individually, the lowest consumers.  Supposedly
*because* they use so much, industrial/commerical users pay a lower
rate.

So, what we have is a macro rate structure that rewards high volume use
with the lowest rates (which are merely passed on to their customers),
and we get a 'plan' that says that the already lowest volume users (who
can't pass the cost on to anyone) pay even more.  Huh?

It seems to me that the greatest opportunity for reduced usage is with
the highest volume users.  And since the costs are passed on to their
customers, then a true "free market" advocate would say "no subsidies"
and no lower rates.

-- 
~ "emails are NOT lost, just delayed." (Excite@Home, Tue, 03 Oct 2000) ~
~~~ Really?  See http://members.home.com/mblackford/eGroup-chart.htm ~~~
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Zvxr Oynpxsbeq       Fvyvpba Inyyrl, Pnyvsbeavn       zvxr@oynpxsbeq.pbz

The cost of the distribution and customer service component is a *lot*
higher for residential users than industrial users.  

BTW, under the latest rate structure, the cost of the "under 130% of
baseline" rate freeze is being charged to commercial and industrial
customers, not just high volume residential customers.  This is the
first time there has been an explicit cross subsidy in the California
rate structure, a point made in opposition to doing so by the
commissioner who filed a dissenting opinion on the rate decision.  (His
dissenting opinion was generally well-reasoned and well worth reading.)

Jeffrey Siegal wrote:
> 
> The cost of the distribution and customer service component is a *lot*
> higher for residential users than industrial users.
<snip>

I'll assume that the "customer service component" is predominantly
metering and billing. While I agree, it seems to me that this merely
argues for a rate structure that reflects a basic service charge that's
not volume-sensitive (but may be based on rated capacity) combined with
a consumption charge that's the same for all customers.

When increased demand actually results in increased investments in
supply ("free market" model), it can make some kind of sense to
structure the rates in a way that offers a somewhat lower price/kWh for
higher levels of consumption.  This assumes that profits will be
reinvested and economies of scale are passed on to consumers.  We have
not seen this.  A very, very small part of profits are being reinvested
in production (this means gneration, transmission, *and* distribution in
the energy sector).

OTOH, when increased demand merely results in increased prices and
correspondingly amplified profits that are NOT reinvested (oligopolistic
model), but instead are channeled through mergers, acqusitions, and
restructuring into the pockets of profiteers (not producers), it makes
some kind of sense to structure rates in a way that increases the
price/kWh as consumption goes up.

What we have is a model that is neither (not both, neither).  I can only
call it (searching for a meaningful term) a 'fascist model' ... where
the entire nation is called upon to subsidize the creation of productive
capacity, but the concentrated economic interests are by far the major
beneficiaries in terms of both largest share of profits and lowest share
of costs.

NB: I've heard "pseudo free marketeers" argue that the lower rate for
large, commercial/industrial energy users is merely based on some
strange desire to reduce the related cost of the goods and services
produced by these users.  This, it seems to me, is specious.  It is
merely a "redistribution of costs" in an anticompetitive fashion, where
costs are shifted to the public at large, independent of their use of
the related goods and/or services, who cannot use their 'market' choice
to select the producers best able to manage such costs.

-- 
~ "emails are NOT lost, just delayed." (Excite@Home, Tue, 03 Oct 2000) ~
~~~ Really?  See http://members.home.com/mblackford/eGroup-chart.htm ~~~
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Zvxr Oynpxsbeq       Fvyvpba Inyyrl, Pnyvsbeavn       zvxr@oynpxsbeq.pbz

On Thu, 17 May 2001 17:45:36 -0700, "xenman"
<xenman@sprynet.nospaam.com> wrote:

>1.  High prices are NOT the problem, 

They are when they drive companies out of business.

>2.  The CA electrical power industry was NEVER deregulated.

Semantics. Deregulated doesn't mean without regulations. It means with
less regulations. No one has ever suggested that it should be
permissible to build a nuclear plant in the middle of an estuary and
dump the waste on the beach. Nor that the money for the plant could be
gained through fraud. It's a question of what regulations and how
many.

SDG&E _was_ deregulated according to plan and they did pass on their
costs to their customers. 

What I find curious is a market based on the _highest_ price for a
commodity. Who are the bozos bidding these prices? And what's to
prevent them from bidding 100x what the prices are today? The
knowledge that the turnip is already bled dry and they won't get their
money? Do you really want to let an industry bankrupt an entire state?
I can deal with rolling blackouts a lot easier than the draining of
our economy.

As far as I can tell, this crisis is independant of the "deregulation"
hassle. The power shortage would have hit anyway, and the CA power
companies would have been bid into bankruptcy. The problem is a market
that allows such radical fluctuations in the price. Free market
capitalism at its best.

Tom Keener
keensurf_at_cts_dot_com

Mike Blackford wrote:
> I'll assume that the "customer service component" is predominantly
> metering and billing. While I agree, it seems to me that this merely
> argues for a rate structure that reflects a basic service charge that's
> not volume-sensitive (but may be based on rated capacity) combined with
> a consumption charge that's the same for all customers.

It certainly might, but that doesn't exist in California.  Everything is
built into the energy charge.  So the energy charge for residential
customers has to be a lot higher than industrial.  

Also, there are distribution costs (energy losses) which are a lot
higher for residences, because there are more stages of transformers and
lines; industrial users get high voltage feeds, not stepped-down drop
lines.

Tom Keener wrote:
> What I find curious is a market based on the _highest_ price for a
> commodity.

Every business works that way.  There is a market price for potatoes
which is the equilibrium reached in the marketplace between the highest
cost producer necessary to satisfy demand, and the highest price
consumers are willing to pay. 

If you are able to produce potatoes for less, you pocket the
difference.  

> Who are the bozos bidding these prices? And what's to
> prevent them from bidding 100x what the prices are today?

If a single generator bid 100x, their bid would be ignored, and they
would lose the revenue they would get if they bid at a more reasonable
price.  If multiple bidders got  together and decided to boost all of
their bids by 100x, they would be violating antitrust law by colluding.  

> The
> knowledge that the turnip is already bled dry and they won't get their
> money? Do you really want to let an industry bankrupt an entire state?

What is bankrupting the state is the absurd policy of having the state
pay the costs rather than passing them on to consumers, who would then
be a hell of a lot more likely to conserve than they are now (especially
the 60% or so who are below 130%-of-baseline and are thus protected by
law from *any* rate increase).

Tom Keener <keensurf@cts.com_but_not_this_part> wrote in message
news:3b0558ea.291284937@nntp.cts.com...
> On Thu, 17 May 2001 17:45:36 -0700, "xenman"
> <xenman@sprynet.nospaam.com> wrote:
>
> >1.  High prices are NOT the problem,
>
> They are when they drive companies out of business.
>

Then why don't high taxes drive companies out of business,
high real estate drive companies out of business, high
wages drive companaies out of business.  On a per capita
basis CA consumes very little power, ranked 49th I've
read, primarily because it's climate is so moderate.  The
actual cost of electricity as a % of all expenditures in
CA is really quite low.

> >2.  The CA electrical power industry was NEVER deregulated.
>
> Semantics. Deregulated doesn't mean without regulations. It means with
> less regulations. No one has ever suggested that it should be
> permissible to build a nuclear plant in the middle of an estuary and
> dump the waste on the beach. Nor that the money for the plant could be
> gained through fraud. It's a question of what regulations and how
> many.
>
> SDG&E _was_ deregulated according to plan and they did pass on their
> costs to their customers.
>

Not for the power bills I get.  I own property in San Diego
County and SDG&E is my power supplier.  Our power bills
show a credit for power that costs more than $.065/kwh.
We get to make up the difference next year.

Any attempt at deregulation would allow prices to go up
and down, would allow supply to increase (build new
power plants) and decrease.

> What I find curious is a market based on the _highest_ price for a
> commodity. Who are the bozos bidding these prices? And what's to
> prevent them from bidding 100x what the prices are today? The
> knowledge that the turnip is already bled dry and they won't get their
> money? Do you really want to let an industry bankrupt an entire state?
> I can deal with rolling blackouts a lot easier than the draining of
> our economy.
>
> As far as I can tell, this crisis is independant of the "deregulation"
> hassle. The power shortage would have hit anyway, and the CA power
> companies would have been bid into bankruptcy. The problem is a market
> that allows such radical fluctuations in the price. Free market
> capitalism at its best.
>
> Tom Keener
> keensurf_at_cts_dot_com

Actually its the lack of a free market that is causing
the extreme price fluctuations.  A free market means new
sellers are allowed to enter and old ones allowed to leave
a market.

Joe Falejczyk wrote:

>
>
> How about that Gray Davis? He is a WONDERFUL WHINER! What a pitiful
> political hack. He could at the least, stop blow-drying his hair to do his
> part in the conservation effort.

Or you could stop whining away at your computer to do your part.

>
> As far as his efforts to bankrupt the state by spending EVERYTHING on power,
> STOP!!!  I certainly don't want this state bled dry to buy power at stupid
> rates rather than have some outtages. What's wrong with cutting the grid
> back across 4 ROB's between 1AM and 4AM? Bank the energy saved as credits to
> use during the day.

What's wrong is that you can't bank electricity from one part of the day to
spend at another.
You can re-allocate the usage to more evenly distribute the maximum demand,
which, when exceeded, is why the blackout scenario occurs.

~~Bart~~

John Higdon wrote:

> But what about all those electric cars that were going to be charged during
> "off-peak"? Suddenly, the fabulous electric car doesn't look so wonderful
> anymore, does it...particularly with the new rates. And then wait until they
> add a road tax!

Not to mention other side effects.. like the cost to consumers to replace
appliances like refrigerators more often as the repeated power cycles and
motor wear (needed to make up for the down time) caused by regular outages.

-- 
Mike Marion-Unix SysAdmin/Senior Engineer-Qualcomm-http://www.miguelito.org
..I'm sure that if I were wandering naked across the Serengeti Plain and 
happened to come across a pride of lions who were feeling peckish, they'd
show me the same f'g courtesy.  Come on, in less time than it takes to say
"Two all-Miller patties" I'd be chili con carnage. -- Dennis Miller on
Vegetarianism.

[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/>

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

In <B729FCC4.3D626%no-spam@RadioMonopoly.com> on Thu, 17 May 2001
22:10:13 -0700, John Higdon <no-spam@RadioMonopoly.com> wrote:

>What we should have been doing all along is to refuse to pay the exorbitant
>prices...period. If that would mean dropping load (rolling blackouts), then
>that is what it would mean.

I tend to agree, but as noted below, it could backfire.

>Once the generators learn that they are not
>going to get astronomical prices for on-peak electricity, you can bet the
>price will drop like a stone.

I think it quite possible that prices will settle in at the cap, the
most we are willing to pay.  The danger is that our total cost might
well go up if the cap is set too high, and that it might not be worth
the damage to the economy if the cap is set too low, a tough balancing
act indeed.

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

In ye olden post John Navas <spamfilter@navasgrp.dublin.ca.us> spake...
>[POSTED TO ba.general - REPLY ON USENET PLEASE]
>
>In <B729FCC4.3D626%no-spam@RadioMonopoly.com> on Thu, 17 May 2001
>22:10:13 -0700, John Higdon <no-spam@RadioMonopoly.com> wrote:
>
>>What we should have been doing all along is to refuse to pay the exorbitant
>>prices...period. If that would mean dropping load (rolling blackouts), then
>>that is what it would mean.
>
>I tend to agree, but as noted below, it could backfire.
>
>>Once the generators learn that they are not
>>going to get astronomical prices for on-peak electricity, you can bet the
>>price will drop like a stone.
>
>I think it quite possible that prices will settle in at the cap, the
>most we are willing to pay.  The danger is that our total cost might
>well go up if the cap is set too high, and that it might not be worth
>the damage to the economy if the cap is set too low, a tough balancing
>act indeed.


How about allowing electric power to be bought and sold on the stock
market like gold, silver, platinum, oil, etc? Ditto selling water on
the open market.


-- 
Bruce James Robert Linley | +---+---+--_ | "Ocha tte nigai demo... hito no chi
linley at megami dot org  | |   |NV | UT |  wa atatakakute tottemo amai no"
Programmer, Fortunet Inc. | \ CA \  |___ | "Tea is always bitter... but blood 
Las Vegas, Nevada, USA ---------> \*| AZ |  is warm and sweet"     - Miyu

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

In <9eb9c8$hb7$1@megami.org> on 21 May 2001 07:40:08 -0700,
linley@megami.org (Bruce Linley) wrote:

>In ye olden post John Navas <spamfilter@navasgrp.dublin.ca.us> spake...

>>I think it quite possible that prices will settle in at the cap, the
>>most we are willing to pay.  The danger is that our total cost might
>>well go up if the cap is set too high, and that it might not be worth
>>the damage to the economy if the cap is set too low, a tough balancing
>>act indeed.
>
>How about allowing electric power to be bought and sold on the stock
>market like gold, silver, platinum, oil, etc? Ditto selling water on
>the open market.

The most obvious problem is transportation/distribution -- power
purchased in (say) Maine isn't terribly useful in California.  Hence the
push to create a regional market, which was actually the intention of
so-called deregulation.

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

in article rG8O6.150$sA6.9814@typhoon.sonic.net, John Navas  wrote:

> I think it quite possible that prices will settle in at the cap, the
> most we are willing to pay.

Only at times of peak demand. The rest of the time, even in our current
condition, there is room to pick and choose. Whoever sells the power gets
the money; the rest get nothing regardless of how much they wanted to get.

> The danger is that our total cost might
> well go up if the cap is set too high, and that it might not be worth
> the damage to the economy if the cap is set too low, a tough balancing
> act indeed.

The equilibrium of the marketplace is, by definition, a balancing act.

-- 
John Higdon     | Email Address Valid | http://www.anntec.com/
+1 408 264 4115 |  Silicon Valley, CA | FAX: +1 408 264 4407
  Cheap, provincial San Franciscans can call: 415 428-COWS

In article <9eb9c8$hb7$1@megami.org>, Bruce Linley <linley@megami.org> wrote:
>
>How about allowing electric power to be bought and sold on the stock
>market like gold, silver, platinum, oil, etc? Ditto selling water on
>the open market.


We are already heading that way. 25% of the nation's power is traded in
this way currently.


Dimitri

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

In <B72E9045.3D9C6%no-spam@RadioMonopoly.com> on Mon, 21 May 2001
09:28:38 -0700, John Higdon <no-spam@RadioMonopoly.com> wrote:

>in article rG8O6.150$sA6.9814@typhoon.sonic.net, John Navas  wrote:
>
>> I think it quite possible that prices will settle in at the cap, the
>> most we are willing to pay.
>
>Only at times of peak demand. The rest of the time, even in our current
>condition, there is room to pick and choose. Whoever sells the power gets
>the money; the rest get nothing regardless of how much they wanted to get.

The problem with that logic is that sellers know the highest price you
are willing to pay, which substantially reduces their motivation to bid
lower prices.  Because there are relatively few sellers with
considerable market power, normal supply and demand doesn't necessarily
apply.

>> The danger is that our total cost might
>> well go up if the cap is set too high, and that it might not be worth
>> the damage to the economy if the cap is set too low, a tough balancing
>> act indeed.
>
>The equilibrium of the marketplace is, by definition, a balancing act.

Different kind of equilibrium.

The smart buyer never discloses to sellers the actual highest price the
buyer is willing to pay.

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

in article 4veO6.207$sA6.10935@typhoon.sonic.net, John Navas  wrote:

> The problem with that logic is that sellers know the highest price you
> are willing to pay, which substantially reduces their motivation to bid
> lower prices.  Because there are relatively few sellers with
> considerable market power, normal supply and demand doesn't necessarily
> apply.

It certainly does during off-peak periods. There is plenty of loose power
during off-peak times and moderate-climate days. You may indeed end up
paying your top-dollar amount during the tightest supply periods...but isn't
that better than just paying "the sky's the limit"?

> Different kind of equilibrium.
> 
> The smart buyer never discloses to sellers the actual highest price the
> buyer is willing to pay.

Does the Buyer's Cartel have to reveal today's "top price"? A supplier can
quote the rate and the cartel can say "no thanks". Only if the sellers get
together and talk amongst themselves about the rates being charged
(otherwise known as "collusion") would they even be able to figure out
today's cap. Tomorrow's cap is a new ball game.

-- 
John Higdon     | Email Address Valid | http://www.anntec.com/
+1 408 264 4115 |  Silicon Valley, CA | FAX: +1 408 264 4407
  Cheap, provincial San Franciscans can call: 415 428-COWS

John Higdon wrote:
> It certainly does during off-peak periods. There is plenty of loose power
> during off-peak times and moderate-climate days. You may indeed end up
> paying your top-dollar amount during the tightest supply periods...but isn't
> that better than just paying "the sky's the limit"?

It depends.  "The sky's the limit" pricing has been going on, on
occasion during extreme peaks, for years.  These peaks generally don't
matter very much to the overall bottom line because they don't last very
long.  Governor Davis made headlines by revealing that the state paid
$1900/mWh last week.  But how much actual money was spent at that price,
compared to the billions spent at everyday (but still high) prices?  In
reality, not very much.  (The plant in question can only sell power a
*total* of 8-9 hours per year!) 

Everyday prices and the behavior of the marketplace during non-extreme
conditions are a lot more important than the shocker numbers that make
headlines.

> Does the Buyer's Cartel have to reveal today's "top price"? A supplier can
> quote the rate and the cartel can say "no thanks". Only if the sellers get
> together and talk amongst themselves about the rates being charged
> (otherwise known as "collusion") would they even be able to figure out
> today's cap. Tomorrow's cap is a new ball game.

It doesn't matter beacuse the "buyer's cartel" isn't going to happen
anyway.  In addition to violating anti-trust law, agreements between
states must be approved by Congress, which wouldn't go along with it. 
The idea was a trial balloon launched for political purposes and nothing
more.

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

In <B72EEF9D.3DA22%no-spam@RadioMonopoly.com> on Mon, 21 May 2001
16:15:25 -0700, John Higdon <no-spam@RadioMonopoly.com> wrote:

>in article 4veO6.207$sA6.10935@typhoon.sonic.net, John Navas  wrote:
>
>> The problem with that logic is that sellers know the highest price you
>> are willing to pay, which substantially reduces their motivation to bid
>> lower prices.  Because there are relatively few sellers with
>> considerable market power, normal supply and demand doesn't necessarily
>> apply.
>
>It certainly does during off-peak periods. There is plenty of loose power
>during off-peak times and moderate-climate days. ...

I don't share your confidence, but I hope you're right.

>> The smart buyer never discloses to sellers the actual highest price the
>> buyer is willing to pay.
>
>Does the Buyer's Cartel have to reveal today's "top price"? A supplier can
>quote the rate and the cartel can say "no thanks". Only if the sellers get
>together and talk amongst themselves about the rates being charged
>(otherwise known as "collusion") would they even be able to figure out
>today's cap.

I think it would be pretty easy for buyers to "game" the market and
figure out the cap.

>Tomorrow's cap is a new ball game.

I doubt that the "Buyer's Cartel" would be able to manage a changing
cap.  Political realities and all that sort of thing.

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

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

In <3B09A946.18A87652@quiotix.com> on Mon, 21 May 2001 16:48:22 -0700,
Jeffrey Siegal <jbs@quiotix.com> wrote:

>John Higdon wrote:

>> Does the Buyer's Cartel have to reveal today's "top price"? A supplier can
>> quote the rate and the cartel can say "no thanks". Only if the sellers get
>> together and talk amongst themselves about the rates being charged
>> (otherwise known as "collusion") would they even be able to figure out
>> today's cap. Tomorrow's cap is a new ball game.
>
>It doesn't matter beacuse the "buyer's cartel" isn't going to happen
>anyway.  In addition to violating anti-trust law, agreements between
>states must be approved by Congress, which wouldn't go along with it. 
>The idea was a trial balloon launched for political purposes and nothing
>more.

1.  I don't think anti-trust laws would prevent such agreements among
sovereign entities (states).

2.  I don't think Congress needs to approve anything not preempted by
Federal law.

3.  As a practical matter California could simply announce its cap, and
other states could match it.  That would seem to be no more unlawful
than airline ticket pricing.

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

John Navas wrote:
> 1.  I don't think anti-trust laws would prevent such agreements among
> sovereign entities (states).

Immunity is waived when a soveriegn entity acts in concert with
non-soverign entities.  Since states are not the only buyers (indeed,
outside California, states are not significant buyers at all), a
meaningful "buyer's cartel" could not exist without involving
non-soveriegn entities.  

The kind of restructuring necessary for soverign states to take over all
power buying would require, at the very least, FERC approval under
federal energy law.  There is no chance of this happening.

> 2.  I don't think Congress needs to approve anything not preempted by
> Federal law.

Article I Section 10 Clause 3.  "No State shall, without the Consent of
Congress ... enter into any Agreement or Compact with another State."

> 3.  As a practical matter California could simply announce its cap, and
> other states could match it.  That would seem to be no more unlawful
> than airline ticket pricing.

Such an arrangement would not be very effective cartel.  Indeed, were
California to announce its cap, not only could sellers use it against
us, but other buyers could use it against us as well (and both would
likely be required by their fiduciary and public service duties to do
so).

And it could also be subject to antitrust enforcement, just as some
airline pricing practices have been.

In article <B72EEF9D.3DA22%no-spam@RadioMonopoly.com>, John Higdon wrote:
>in article 4veO6.207$sA6.10935@typhoon.sonic.net, John Navas  wrote:
>
>> The problem with that logic is that sellers know the highest price you
>> are willing to pay, which substantially reduces their motivation to bid
>> lower prices.  Because there are relatively few sellers with
>> considerable market power, normal supply and demand doesn't necessarily
>> apply.
>
>It certainly does during off-peak periods. There is plenty of loose power
>during off-peak times and moderate-climate days. You may indeed end up
>paying your top-dollar amount during the tightest supply periods...but isn't
>that better than just paying "the sky's the limit"?
>
>> Different kind of equilibrium.
>> 
>> The smart buyer never discloses to sellers the actual highest price the
>> buyer is willing to pay.
>
>Does the Buyer's Cartel have to reveal today's "top price"? A supplier can
>quote the rate and the cartel can say "no thanks". Only if the sellers get
>together and talk amongst themselves about the rates being charged
>(otherwise known as "collusion") would they even be able to figure out
>today's cap. Tomorrow's cap is a new ball game.

	I heard a short while ago that part of the problem is that the law,
as originally formulated by our so-enlightened legislators in 1996, said, in
effect, that if the price company A charged in any given hour was xxx, then
that same price had (by law) to be paid to company B and company C, etc, for
that hour. If company C offered its power for xxx - 2 (say), too bad. xxx
was 'the' price they all would get. I guess this was intended to work the
OTHER way -- that the xxx would be very low and this same price would then
(by law) be paid to all those who supplied power. Yuh.

	The 'law of unintended consequences' seems to've teamed up with
Murphey's law with the result that xxx is very high and they all are paid
this same amount. Well, duh! You mean those super expensive people we pay to
draft (mostly absurd) legislation couldn't see that one coming?

	I think the FIRST place to be subject to a rolling blackout should
be the California state assembly/senate buildings. Let THEM suffer with 85
degree-plus temps this summer with no air conditioning. After all, they
started alla this..

-- 
jimbo@sonic.net 
Eclectic Garbanzo BBS, (707) 539-1279

Linux: gawk, date, finger, wait, unzip, touch, nice, suck, strip, mount,
fsck, umount, make clean, sleep. (Who needs porn when you have /usr/bin?)

Jeffrey Siegal wrote:
> 
> Tom Keener wrote:
> > What I find curious is a market based on the _highest_ price for a
> > commodity.
> 
> Every business works that way.  There is a market price for potatoes
> which is the equilibrium reached in the marketplace between the highest
> cost producer necessary to satisfy demand, and the highest price
> consumers are willing to pay.

That is not how the power market is structured.  Assume the state
needs 100 units of power, three companies bid:

	A:	50 units @ $0.10
	B:	45 units @ $0.12
	C:	 5 units @ $0.20

As currently structured all 100 units are purchased at $0.20
giving A an unexpected profit of $5.00 and B $3.60.

It is one thing for seller A to look at the market and see that
C was able to sell at a higher price and raise his to $0.19
in hopes of getting more profit, it is another for the government
to mandate the extra profit regardless of the offered price!

	-David

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

In <3B0A237F.FF6FBADB@quiotix.com> on Tue, 22 May 2001 01:29:51 -0700,
Jeffrey Siegal <jbs@quiotix.com> wrote:

>John Navas wrote:

>> 1.  I don't think anti-trust laws would prevent such agreements among
>> sovereign entities (states).
>
>Immunity is waived when a soveriegn entity acts in concert with
>non-soverign entities.  Since states are not the only buyers (indeed,
>outside California, states are not significant buyers at all), a
>meaningful "buyer's cartel" could not exist without involving
>non-soveriegn entities.  

I sincerely mean no offense, but I disagree with both the interpretation
and the contention.

>> 2.  I don't think Congress needs to approve anything not preempted by
>> Federal law.
>
>Article I Section 10 Clause 3.  "No State shall, without the Consent of
>Congress ... enter into any Agreement or Compact with another State."

I believe that pertains to relationships between states, not states
acting in their common interest.  Otherwise all sorts of ongoing
cooperation (e.g., law enforcement) would be unlawful. 

>> 3.  As a practical matter California could simply announce its cap, and
>> other states could match it.  That would seem to be no more unlawful
>> than airline ticket pricing.
>
>Such an arrangement would not be very effective cartel.  ...

That remains to be seen.

>And it could also be subject to antitrust enforcement, just as some
>airline pricing practices have been.

Generally speaking, price leadership and price matching have been held
to be lawful; likewise buyers cooperatives.  In this general area only
price fixing (by sellers) has been held to be unlawful.

CAVEAT:  I am not a lawyer and this is not legal advice.

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

John Navas wrote:
> 
> [mild disagreement over fine points of antitrust and constitutional law snipped]

The key issue, as I said, I whether there is actually going to be a
buyer's cartel, as opposed to the idea of one simply being sent up as
one of many trial balloons we've seen on the topic this year.  The
barriers are not only legal but also enormously high in political and
practical terms.  Until and unless it appears even remotely likely to
actually happen, which it doesn't, I don't see any point in continuing
along this line.  Even in the few days since the idea was floated, it
has essentially disappeared from public discussion.  

Of all the things that might happen, good or bad, this just isn't one of
them.

David Robinson wrote:
> > Every business works that way.  There is a market price for potatoes
> > which is the equilibrium reached in the marketplace between the highest
> > cost producer necessary to satisfy demand, and the highest price
> > consumers are willing to pay.
> 
> That is not how the power market is structured.  Assume the state
> needs 100 units of power, three companies bid:
> 
>         A:      50 units @ $0.10
>         B:      45 units @ $0.12
>         C:       5 units @ $0.20
> 
> As currently structured all 100 units are purchased at $0.20
> giving A an unexpected profit of $5.00 and B $3.60.
> 
> It is one thing for seller A to look at the market and see that
> C was able to sell at a higher price and raise his to $0.19
> in hopes of getting more profit, it is another for the government
> to mandate the extra profit regardless of the offered price!

Think of it this way: You're a farmer and you grow carrots.  Because
your land is exceptionally fertile, it only costs you $0.10/lb to grow
carrots.  You take your carrots to the market, expecting to sell them
for say $0.12 but when you get there you find that, because not
everyone's land is as fertile as yours (or maybe there was a carrot
famine this year or whatever), carrots are selling for $0.50/lb.  You
sell your carrots for $0.50, not $0.12.

There is a single price for carrots (or power) based a balance between
supply and demand.  In a free market, each seller does not sell his
product for a different price based on costs.  That only exists under a
regulated cost-based pricing model (or when buyers have and abuse market
power to force each seller down to a subsistence price).  Instead,
everyone sells at the same price, and the more efficient producers
simply make a higher profit then the less efficient ones.

in article 3B0C3D46.25DB4187@ebay.sun.com, David Robinson  wrote:

> That is not how the power market is structured.  Assume the state
> needs 100 units of power, three companies bid:
> 
> A: 50 units @ $0.10
> B: 45 units @ $0.12
> C:  5 units @ $0.20
> 
> As currently structured all 100 units are purchased at $0.20
> giving A an unexpected profit of $5.00 and B $3.60.
> 
> It is one thing for seller A to look at the market and see that
> C was able to sell at a higher price and raise his to $0.19
> in hopes of getting more profit, it is another for the government
> to mandate the extra profit regardless of the offered price!

What should possibly happen is to take A and B at $0.12 and tell C to take a
hike. That is a perfectly legitimate action. C can take the $0.12 or just go
fish. Yes, we are short five units and we might have to shed some load for a
short period, but we have greatly influenced the market price.

-- 
John Higdon     | Email Address Valid | http://www.anntec.com/
+1 408 264 4115 |  Silicon Valley, CA | FAX: +1 408 264 4407
  Cheap, provincial San Franciscans can call: 415 428-COWS

John Higdon wrote:
> > A: 50 units @ $0.10
> > B: 45 units @ $0.12
> > C:  5 units @ $0.20
> >
> > As currently structured all 100 units are purchased at $0.20
> > giving A an unexpected profit of $5.00 and B $3.60.
> >
> > It is one thing for seller A to look at the market and see that
> > C was able to sell at a higher price and raise his to $0.19
> > in hopes of getting more profit, it is another for the government
> > to mandate the extra profit regardless of the offered price!
> 
> What should possibly happen is to take A and B at $0.12 and tell C to take a
> hike. That is a perfectly legitimate action.

It certainly is, but in reality I don't think it is going to be feasible
to do that to any great extent.  Natural-gas fired capacity, for
example, is very expensive to operate given current natural gas prices
(hundreds of dollars per mWh in recent months) and represents about 30%
of California's total capacity.  If you set the price below that
threshold, natural gas plants are better off shutting down than
producing.  Given that about half of the demand is exempt from rolling
blackouts, rest of us would be subject to rolling blackouts an average
of 60% of the time (probably more during periods of high demand). 
That's really just not feasible.

On Fri, 18 May 2001 11:20:23 -0700, Jeffrey Siegal <jbs@quiotix.com>
wrote:

>Tom Keener wrote:
>> What I find curious is a market based on the _highest_ price for a
>> commodity.
>
>Every business works that way.  There is a market price for potatoes
>which is the equilibrium reached in the marketplace between the highest
>cost producer necessary to satisfy demand, and the highest price
>consumers are willing to pay. 

Syntactically, that sentence doesn't parse. 
 
>> Who are the bozos bidding these prices? And what's to
>> prevent them from bidding 100x what the prices are today?
>
>If a single generator bid 100x, their bid would be ignored, 

Hang on. The generators are bidding sale prices? I thought the power
retailers were bidding purchase prices. Anybody care to explain how
this market really works?

>> The
>> knowledge that the turnip is already bled dry and they won't get their
>> money? Do you really want to let an industry bankrupt an entire state?
>
>What is bankrupting the state is the absurd policy of having the state
>pay the costs rather than passing them on to consumers, who would then
>be a hell of a lot more likely to conserve than they are now 

My electric rate has almost tripled. Since I have been energy
conservative since the 60's, the only way I could conserve a fraction
of that would be to turn off my refrigerator and wash clothes by hand.
Sure, many families could use a lot less than they do now, but 1/3?
That's hardly realistic. 

Tom Keener
keensurf_at_cts_dot_com

On Fri, 18 May 2001 11:43:28 -0700, "xenman"
<xenman@sprynet.nospaam.com> wrote:
>Tom Keener <keensurf@cts.com_but_not_this_part> wrote in message
>news:3b0558ea.291284937@nntp.cts.com...
>> On Thu, 17 May 2001 17:45:36 -0700, "xenman"
>> <xenman@sprynet.nospaam.com> wrote:
>>
>> >1.  High prices are NOT the problem,
>>
>> They are when they drive companies out of business.
>>
>Then why don't high taxes drive companies out of business,

Some profit margins are very slim. Tax rates are a fixed item and
predictable. Wildly fluctuating power bills can wreak havoc on small
businesses who have to compete with large out-of-state conglomerates
who can spread their expenses.

>> >2.  The CA electrical power industry was NEVER deregulated.
>>
>> SDG&E _was_ deregulated according to plan and they did pass on their
>> costs to their customers.
>>
>Not for the power bills I get.  I own property in San Diego
>County and SDG&E is my power supplier.  Our power bills
>show a credit for power that costs more than $.065/kwh.
>We get to make up the difference next year.

That credit didn't happen until after the s**t hit the fan. The
initial bills after "deregulation" showed the entire increase. Only
when customers started screaming did they come up with the delayed
payment plan.

Tom Keener
keensurf_at_cts_dot_com

Tom Keener wrote:
> >> Who are the bozos bidding these prices? And what's to
> >> prevent them from bidding 100x what the prices are today?
> >
> >If a single generator bid 100x, their bid would be ignored,
> 
> Hang on. The generators are bidding sale prices? I thought the power
> retailers were bidding purchase prices. Anybody care to explain how
> this market really works?

This is really of historical interest (and of interest in other areas
where such an auction is still used) because the auctions are no longer
used to purchase power in California anyway.  After the collapse of the
power exchange due to non-payment by utilities, the DWP and ISO are now
neogotiation power purchases on a case-by-case basis.  

The way it used to work is that generators were bidding sale prices. 
(There were only a small number of power retailers of any significance
anyway.)  Over time the plan was to eventually allow retailers to
competitively negotiate their own power contracts (as the MUDs do
today).

> >What is bankrupting the state is the absurd policy of having the state
> >pay the costs rather than passing them on to consumers, who would then
> >be a hell of a lot more likely to conserve than they are now
> 
> My electric rate has almost tripled. Since I have been energy
> conservative since the 60's, the only way I could conserve a fraction
> of that would be to turn off my refrigerator and wash clothes by hand.
> Sure, many families could use a lot less than they do now, but 1/3?
> That's hardly realistic.

Who said anything about 1/3?  People would still see an overall price
increase -- that's inevitable given the tight supply and the general
increase in energy prices (oil and gas prices, even outside California,
are up 100-200% over the past few years) -- but there would be a lot
more conservation than there is now.  This would bring supply and demand
back into balance, would moderate prices in the wholesale market
(reducing the magnitude of the increase), and most importantly would
avoid senselessly bankrupting first the utilities and then the state. 
Once the limited pot of money to subsidize purchases runs out (which is
rapidly happening), consumers will be exposed to market prices anyway.

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

In <3B0D7C41.AD849188@quiotix.com> on Thu, 24 May 2001 14:25:21 -0700,
Jeffrey Siegal <jbs@quiotix.com> wrote:

>Who said anything about 1/3?  People would still see an overall price
>increase -- that's inevitable given the tight supply and the general
>increase in energy prices (oil and gas prices, even outside California,
>are up 100-200% over the past few years) -- but there would be a lot
>more conservation than there is now.  This would bring supply and demand
>back into balance, ...

In fact it probably wouldn't.  The reason is that demand is relatively
inelastic, as shown by the available evidence.  Effective conservation
comes from greater efficiency, not turning off a few lights.  That takes
both time and money.  And unfortunately, George II has already acted to
roll back and/or ignore the benefits of greater efficiency (e.g., air
conditioner standards, CAFE).

Mostly these higher prices will just enrich providers and middlemen at
the expense of consumers.  Every bit as dumb as the original
"deregulation" plan.

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

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

In <3B0567E7.76FB3EF1@quiotix.com> on Fri, 18 May 2001 11:20:23 -0700,
Jeffrey Siegal <jbs@quiotix.com> wrote:

>Tom Keener wrote:

>> What I find curious is a market based on the _highest_ price for a
>> commodity.
>
>Every business works that way.  There is a market price for potatoes
>which is the equilibrium reached in the marketplace between the highest
>cost producer necessary to satisfy demand, and the highest price
>consumers are willing to pay. 
>
>If you are able to produce potatoes for less, you pocket the
>difference.  

In a functional commodity market, price equilibrium is reached at the
_lowest_ price that producers are willing to accept (and the highest
price that consumers are willing to pay).  That's not working here
because artificial scarcity and inelastic demand permit sellers to bid
absurd prices with relative impunity.  In a functional market, that kind
of price dislocation would be inhibited by such things as competitive
alternatives, market entrants, and going without, things that are
lacking here.

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

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

In <3B0C74D1.2068A05C@quiotix.com> on Wed, 23 May 2001 19:41:21 -0700,
Jeffrey Siegal <jbs@quiotix.com> wrote:

>David Robinson wrote:

>> > Every business works that way.  There is a market price for potatoes
>> > which is the equilibrium reached in the marketplace between the highest
>> > cost producer necessary to satisfy demand, and the highest price
>> > consumers are willing to pay.
>> 
>> That is not how the power market is structured.  Assume the state
>> needs 100 units of power, three companies bid:
>> 
>>         A:      50 units @ $0.10
>>         B:      45 units @ $0.12
>>         C:       5 units @ $0.20
>> 
>> As currently structured all 100 units are purchased at $0.20
>> giving A an unexpected profit of $5.00 and B $3.60.
>> 
>> It is one thing for seller A to look at the market and see that
>> C was able to sell at a higher price and raise his to $0.19
>> in hopes of getting more profit, it is another for the government
>> to mandate the extra profit regardless of the offered price!
>
>Think of it this way: You're a farmer and you grow carrots.  Because
>your land is exceptionally fertile, it only costs you $0.10/lb to grow
>carrots.  You take your carrots to the market, expecting to sell them
>for say $0.12 but when you get there you find that, because not
>everyone's land is as fertile as yours (or maybe there was a carrot
>famine this year or whatever), carrots are selling for $0.50/lb.  You
>sell your carrots for $0.50, not $0.12.
>
>There is a single price for carrots (or power) based a balance between
>supply and demand.  In a free market, each seller does not sell his
>product for a different price based on costs.  That only exists under a
>regulated cost-based pricing model (or when buyers have and abuse market
>power to force each seller down to a subsistence price).  Instead,
>everyone sells at the same price, and the more efficient producers
>simply make a higher profit then the less efficient ones.


In a truly free market, your farmer undercuts other farmers by selling
at (say) $0.40, in order to gain market share and sell out the crop.
And the farmer plants more crops to capitalize on the lucrative
opportunity and to preempt other farmers.  Other farmers respond in like
manner, driving prices down.    Only the absence of normal market risk
would permit the farmer sell at the highest price with impunity.

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

John Navas wrote:
> >Every business works that way.  There is a market price for potatoes
> >which is the equilibrium reached in the marketplace between the highest
> >cost producer necessary to satisfy demand, and the highest price
> >consumers are willing to pay.
> >
> >If you are able to produce potatoes for less, you pocket the
> >difference.
> 
> In a functional commodity market, price equilibrium is reached at the
> _lowest_ price that producers are willing to accept (and the highest
> price that consumers are willing to pay).

You are confusing two distinct concepts of pricing.  First is the lowest
price that *each* producer is willing to accept and the highest price
that *each* consumer is willing to pay.  

Second is the price at which there is a balance between the highest of
those lowest individually-acceptable producer prices and the lowest of
those highest individually-acceptable consumer prices.

In essentially any market, there is a mix of producers and consumers
willing to sell or buy at different prices.  Once a balance is struck in
the marketplace and a single market price is reached, some producers are
selling at a higher price than they were willing to sell, and some
consumers are buying at a lower price than they were willing to buy.

John Navas wrote:
> >There is a single price for carrots (or power) based a balance between
> >supply and demand.  In a free market, each seller does not sell his
> >product for a different price based on costs.  That only exists under a
> >regulated cost-based pricing model (or when buyers have and abuse market
> >power to force each seller down to a subsistence price).  Instead,
> >everyone sells at the same price, and the more efficient producers
> >simply make a higher profit then the less efficient ones.
> 
> In a truly free market, your farmer undercuts other farmers by selling
> at (say) $0.40, in order to gain market share and sell out the crop.

Nope, in a classic "pure competition" marketplace, such a seller sees a
flat, horizontal demand curve.  He (having a capacity which is small
compared to the size of the market) can sell as much as he wants at
$0.50, so there is no valid reason for him to sell at $0.40.

> And the farmer plants more crops to capitalize on the lucrative
> opportunity and to preempt other farmers.

The premise is that there is only a finite amount of *maximally*
productive land.  All other land is less productive, or carries higher
costs in some similar way.  

But even if our hypothetical farmer does plant more crops, as long as he
doesn't have sufficient market share to posses market power, he can't
alter the market price either up *or down*.  (He can of course, sell for
less if he wants, but doing so would gain him nothing.)

In your zeal to argue that electricity is special and unique as a way of
justifying government control (since you realize that an argument that
the government should control every market would fall flat on its face),
you have very simply tied yourself up in knots.  What you are calling a
"truly free market" requires that the farmer be able move the market
with his production decisions.  Does that sound like a "truly free
market" to you, or does it sound like something else?