"[EMAIL PROTECTED]" wrote: > I just read today's Krugman editorial on the NYT regarding the deregulation > of electricity issue in California. As many sharp members of this list do > reside in CA, I wonder what their reactions are... [...] > http://www.nytimes.com/2000/12/10/opinion/10KRUG.html The author overlooks some obvious objections: * Let us assume that the power companies, in all their evil, have infallible analysts who can figure out totally accurate price-demand curves. In that case, it'd be nice if the author actually proved that power companies are on the favorable side of demand by citing some more detailed figures. I have not yet read the NBER paper because a) I'm not an economist and b) it costs money via their website ($5). Even then, in the NBER paper abstract it reads: "While these results make deregulation of generation less attractive than if there were no market power, they do not suggest that deregulation would be a mistake." * My father is the supervisor of maintenance at a local power plant, so he is an authority on generating capacity availability. He actually considers California's 75% on-line figure to be "very good," since he says that the industry standard is 60-70%. This means that CA's power companies have by far the best engineers and operating conditions (unlikely), or that they're actually stretching their hardware to the max (likely). * The author says that the companies are not building new capacity because they are gun-shy due to market fluctuations. While this may be true, it is rather hard to swallow since there is such a high demand for power -- again, this line of reasoning hinges on some quasi-malicious intent by the companies seduced by some extraordinary price-demand curves. Also, he fails to point out that after years of artificial pricing, the power companies may not have enough accumulated capital to absorb market risks. * There are anecdotal reports that at least a few power companies that very badly want to build capacity, but are being thwarted by enviromentalists and NIMBY ("Not in My Backyard") syndrome since most of California is inhabited by people or enviromental preserves. This is a double whammy since the same population growth that squeezes generating capacity tighter probably also pushes this political hurdle higher. Bear in mind that nearly all forms of viable power generation require a substantial source of cool water. (For example, visit "http://www.southsanjose.com/".) Power deregulation is working in areas where there isn't such a big power crunch, like in the Washington DC metropolitan area. The new eye on profits is pissing off the unions, but everyone else (esp. shareholders) seem to be pretty satisfied. At first blush, it seems like the the author of this NYT editorial is being one of the reactionaries that he his lambasting. Regards, Sourav Mandal PS: I reside in Northern Virginia. ------------------------------------------------------------ Sourav K. Mandal [EMAIL PROTECTED] http://www.ikaran.com/Sourav.Mandal/ "In enforcing a truth we need severity rather than efflorescence of language. We must be simple, precise, terse." -- Edgar Allan Poe, "The Poetic Principle"
