44 replies to this topic

[MJ]

Here is a part of my reply to you, Azat:

Azat, why do you make such unsubstantiated statements? Because you feel that way, or because you know? The summer additives are not practiced in the west, but in Illionis.
Azat - This is very much so true in California. If you do not believe me ask someone on this board to drive to their local Unocal station(i only use Unocal 76, but I am sure this is true for others as well) and read the black and white sticker on the pump itself. Unocal used MTBE(I do not know what it is) to have cleaning burning fuel. This is what is in short supply.

OK. Let’s say it is absolutely correct. As you claim, the additive is in short supply. If the regulations require this additive in California, which I didn’t know (oil is not my area of expertise), then the problem indeed is created by the shortages and the regulations, right? Why to blame the oil companies, then?
I am smarter that you make me sound to be. We had the same taxes last year the same capacity as last year, maybe a 5%(I am not sure) increase in demand, yet the price of gas is sky high. It is MOSTLY due to the shortage of the additives. I can get sources that tell you that if you want.
I have no doubts about your smartness, but rather I have questions about your information. Additionally, I remember last year the same picture was present – before the summer and in the summer the prices of gasoline went off the roof. You have probably forgotten it. It was followed by the symbolic gesture of Clinton administration to tap into the National Strategic Petroleum Reserve, and the Saudies increased production. The prices last year were as high as they are this year. BTW, I disagree with the tapping into the Strategic Reserve. That’s not what it is brought together for.


I once again never said that they cut production, they only cut the supply. It is not bogus. They have used the pipeline to send other fuels to other places thus cutting the supply of gas.
O, it is bogus, because if they cut the supply, but continue the production, the only thing that logically can be done is to put the gas in storage (this cannot be done for power, because it is a non-storable commodity – this is were the problems starts in power markets, in fact). But nobody has enough storage capacity, so that to put all the cut supply, as you claim, in that storage. Simply there are none! But there should be. This is a potentially hot market. However, having the storage just in any location is not a solution, because you need pipelines to transport the gas from the storage. Now, if the pipelines function at almost at their capacity limits, without additional pipelines you cannot transport much. If not the pipelines, then the storage needs to be built somewhere in California. It requires a lot of money. So that investors put that money in, they have to have the confidence with the government and the regulators. I hope you would agree that they don’t have a lot of reasons to have confidence in the California government.

MJ, it is super expensive to store natural gas because to store it they have to almost make it to liquid form and thus it becomes expensive to store in masses. And just like power, gas is almost used on the spot or is wasted. It is the size and the use of the pipeline that has increased the price.
Wrong. The liquid gas is one way of doing it, and it is a relatively small market. Storing of gas does not require liquefying. It just requires compressing. Gas is not used like power, i.e. only on the spot. You couldn’t be further away from the truth, here, though you were right about the power (and as I said, that’s the primary reason of a higher magnitude of problems in power markets- you don’t have much room for bad planning/scheduling). Gas is successfully stored, and this is widely practiced. Every Wednesday of the week, you can obtain the info on Gas storage availability. Check www.aquila.com, for example, for gas storage information – this is just one company. If not satisfied, I’ll give you more.
It indeed seem like you get your information from the TV comedians.

Azat - That is a stupid thing to say. Unfortunately I think you have been listening to sublibibibibal messages from Mr. Bush.
I do listen Bush, and I really respect and admire him for his understanding of the issues. He is a simple speaker – no pompous expressions, doesn’t use complicated terms, says things which are correct, and he doesn’t mislead people. Is he an outspoken President as some others? No. But is that the value of the President? The value of the President is if he has the courage to surround himself with the best experts available, and take principal stance on the problems, no matter how unpopular the solutions may be. Additionally, as I have said, he demonstrates that he is able to make his superstar team work.
However, you are mistaken that I get my info from him, or from whatever newspapers or “Gazetts.” In fact, evidently, that’s where you get your info. I get my info from professional sources.
What part of Valdez was a foreign company or foreign territory or anything that you said in the above statement. How does it make it less likely? Just for your information, Valdez is in Alaska(you know the state up north) and it was Exxon(you know the largest US company) that caused the problem.
No. Valdez was a tanker. It is irrelevant if it was foreign or domestic tanker. The accident and spillover rates with tankers are much higher than with pipelines. This is what my comment had meant.

What would your answer be? You think that prices are high because of the free wholesale market of electricity I am sure. The fact is that six investigations by state and federal agencies are underway, seeking evidence of collusion or other illegal behavior. Multimillion-dollar lobbying efforts in Sacramento are intensifying. (Nancy Vogel, LA Times 12/9/00 "How State's Consumers Lost With Electricity Deregulation.")

No. The opposite. If there were free wholesale and retail markets, this crisis would have been much mitigated. It is resulted from three sources:
1. The supply has not kept up with the growth of the demand;
2. The structure of the wholesale market in CA has been the most stupid structure in the nation – nobody has repeated this stupid experiment. It is not just the current and previous Governors to be blamed, but also the legislatures, and the previous Federal Government;
3. The wholesale market has been deregulate, but the retail has not. This has meant an industry having its one foot in the regulated world, and the other in the deregulated world, and the ground under feet slipping away. This is another major contributor of the problem.

The six investigations underway are not the first ones, nor are they the last ones. They also had several investigations last year. These investigations would not lead anywhere in terms of concluding that the energy companies have created the situation, since they have not. These types of investigations are primarily oriented at the public opinion, and saving the skins of the politicians, which are up for reelection.

You are right. The exploration is not short term. Neither power plant development or anything else is short term. In energy markets there are no short-term solutions. There is nothing that anybody can do in the short term.
Azat - I agree 100%. But there are power plants being built. My previous post shows more info about this.
Fine. But those plants would not be up and running in the summer, as you recognize in another paragraph. That’s when the demand peaks.
It is like five years ago you had sex with a prostitute
Azat - I can't believe she called and told you about this. I have to have a talk with her.
She did. And I said, having Azat’s experience in front of me, I ask you not to call me ever again.
I don’t know Carlin as a comedian, but I saw him speak in Larry King Live, recently. I think the guy is an idiot, and an ultra-socialist zealot. As to Bill Mahr’s funnyness – sorry. Have seen his comic monologs over HBO.
Azat - This is why we each have different tastes in life. I like them both. Here is a link from our humor section on some one liners from Carlin. http://armenians.com...c&f=14&t=000057
You are right.
…but the situation in California should not be used as an example of a shortage, but rater as an example of both corporations and government (including the current governor) screwing things up.
Agreed. But it was not a malicious attempt by the corporations in California. It was resulted from their incompetence – they had no understanding of the free market structures and forces, while being very experienced in the regulated world. I have spoken about this in the past, in our forum. They screwed up the market structure, but that was not the primary source of the problem, because even with this structure, if there were abundant supply, we would have not had the current experience. This market structure is inadequate only under the constrained supply, which is the primary source of the problem. The rest are just amplifying factors, or consequences. This is my primary point.
I will not be in the dark like many in California because my little city has a public run power plant that is doing a MUCH better job than the private corporations who only care about their shareholders.
Just because it is publicly owned, it doesn’t mean much. In the summer of 1998, some publicly owned utilities were behind the $7.5K per MWH price spike in the MidWest (Cinergy Hub). With the time, the demand in your city will grow, and you will need to either build new plants, or to bring power from elsewhere – that is if the transmission lines have excess capacity.

Plus all 4 cities that I mentioned are selling power back to the state on the spot market.
Wrong again. The prices go astronomically high namely in the spot market – not in the forward market. That’s why you have the problems that you do in California. The prices don’t go nearly as high in the forward markets. And the regulations prohibit the utilities to buy in the forward markets in California. That’s where also the problem of the short supply is aggravated.
It was smart thinkers that built enough power into their system to make sure their city did not go dark.
This is where we agree.
Do you need me to get you sources that say that Glendale, Pasadena, Burbank and DWP from LA are selling power back too?
Back to whom? Everybody sells back to … That is regulation. They are obligated to do so. The generating, distributing, transmission and marketing companies have to be separated. This is the law. Everybody does it.
But you are right in saying that we in Southern California cannot produce enough to supply all the energy needs of Northern California. And who is at fault here. The environmentalists who would not allow for new power plants. Yes partially, maybe major blame can go to them.
You are being very soft. The primary blame goes to them and the politicians who cater them. The environmentalists are against nuclear power, they are against the coal-generated power, and they are against the hydro-power (due to the problems with the migration of salmon). They sort of are more open to gas fired combined-cycle turbines. OK. But these are more expensive (actually most expensive), however necessary, sources of power, and additionally, you can build them only not far away from the existing gas pipelines - so that to be able to deliver fuel. And guess what – the environmentalists are also against building gas pipelines. Now, the other alternative is to build the plants outside California, for example. But then, you need adequate transmission lines to transmit the power. Guess what – the environmentalists are against the transmission lines, too. What do you think the implications of all these limitations would be?
But one cannot forget all the money that SCE and PG&E sent back to the parent companies and sat on the sideline trying to see what was going to happen with deregulation without building any new plants. That is the truth. they even blocked other companies from building plants.
Wrong again. What money was sent back to the parent companies? Do you know the source of that money? The regulations required that SCE and PG&E to sell all their power plants, since they were not allowed to have any of them by the screwed-up mentality of the regulators. They did. And this is the money that they sent back to their parent companies, which in turn paid of the shareholders (through dividends) and the debt holders because they were the ones who own the plants. If you would sell your house, who would you send the appropriate portion of the money (assuming you make profit)? Wouldn’t you be obligated to send it to your Mortgage Company, since the house belongs to them until it is paid-off?
Don’t blame the Texan Companies, but blame your zealot and incompetent friends for not allowing to built neither electricity transmission lines, neither gas pipelines, neither oil pipelines, neither gas storage facilities, nor power plants.
Azat - MJ, you are looking at this issue from only one side.
Tell me what side should I look at it from.
I don’t want to make this positing a lecture on energy markets. Besides, I am a professional consultant for energy markets, and it is unprofessional of me to give such lectures for free. However, out of our friendship, if you still are interested in it, I can give you also additional explanation on the subject through private messaging.
Azat - i don't mind getting lectured by you as long as you don't mind me taking shots at your theories.
Go right ahead.
Finally, this year, we all are very lucky because it has been abnormally cool year, so far. Wait and see what happens next year, if we assume that the weather pattern goes back into its normal trend. Wait and see what is going to happen in California and New York.
Azat - I don't know what will happen in NY, but IF all 4 new plants come online in CA we will be fine, especially since there are 2 more coming online in 2002.
Maybe you will be fine for a while. But then, you would need more plants, and more plants, and more plants. Normally, construction of a power plant takes about two years, in average. FYI, New York would have been in the same mess, if they didn’t have an unusually cool weather for this time of the year. And their structure is not as bad in terms of the spot-forward market. The problem is the supply, again.
Regarding your other comment on power plants being suspiciously offline at the same time. You probably have missed to note three things:
1. Every spring and summer, a whole host of plants are stopped for regular maintenance. It is required. And there is nothing that they can do about this. If they don’t do it, they would be forced to do it in the summer and the winter, which would have much worse consequences, or if they don’t do it at all, the plants would start experiencing frequent random outages, which would have the same results on the spot market. This is similar to your car having oil change. You may not do it, but then, you would need to live with the consequences;
2. A number of the plants that were off lines were the old plants, which don’t satisfy the environmental standards. When they are brought online, the owners of these plants pay huge fines for the pollution of the environment. Clearly, that cost is going to be past to the consumers.

I will reply to the article of the Irvine Professor a bit later.

[MJ]

Sorry for this Question&Answer format. It saves much time from me to address the material in that format.

[MJ]

Azat,

Here is my reply to the article. This was a short article. Don’t know why, initially it seemed to me a long one, and I decided to look at it later. I could’ve answered immediately.

Some of the power generators complaining loudest about California's environmental obstacle course have used the system to hold up the licensing of a competitor. According to Energy Commission documents, 22 energy companies have intervened in 12 proposals by competitors. Some become formal "interveners" simply to glean information. But others aggressively use their status to hire lawyers, file objections and cross-examine competitors in evidentiary hearings. Of the 21 power plants proposed for licensing since 1997, competing companies have intervened in 12 proposals, slowing the process in at least four situations.
There is nothing strange or illegitimate about this. Building a power plant means investing hundreds of millions of dollars, if not more. There is an element of gambling in it. It is like a poker. Imagine that the given region has need for extra 500MWH power during the peak hours, and imagine that without knowing, 5 companies come forward and start building 5 plants of the capacity 500MW. Since the market doesn’t have the capacity to absorb them, most likely all five are going to lose their investments. Therefore, the permitting process, besides being a treacherous process from the point of view of passing the hurdles put forward by the numbers of regulating agencies, are also like a game of poker - much like in the stoke market for big players.
Six years ago, the Public Utilities Commission ordered the state's investor-owned utilities to contract with private companies that were planning to build 1,400 megawatts of new plants. Southern California Edison objected, and appealed the order to the Federal Energy Regulatory Commission, arguing it would "not need this power until 2005." FERC sided with Edison, and the proposed plants never were built.
Probably. This means incompetence – as simple as that.

The following year, the state passed its deregulation legislation, and that slowed plant construction even more, said John Tiner, a professor emeritus of electrical engineering at Johns Hopkins University. "Once deregulation became a factor, the power utilities stopped building plants, with good reason. They knew they would have to divest," he said.
Exactly. Why to blame then the power companies?
Since 1996, the California Energy Commission has tried to speed up new generation with its "one-stop-shop" for plant permits. The result: The commission has licensed nine big power plants, totaling 6,278 megawatts, said Claudia Chandler, an assistant director of the commission. Six of those plants are under construction. Firms are formally seeking licenses for 12 others, she said. When their interests are threatened, energy companies also throw their muscle around. (Stuart Leavenworth and Chris Bowman, Sacramento Bee 1/8/01 "All kinds have foiled new plants")
"Assertions that environmental regulations were holding back power production were 'absolutely false.'" - spokesman for Houston- based Reliant Energy, which operates four Southern California plants. Nor, apparently, did environmental regulations play much of a role in California's failure to build new plants in the years since deregulation. In fact, environmentalists generally favored deregulation, because they thought it would lead to the construction of new plants, which would be gas-fired and hence cleaner than the coal-fired plants that still supply much of the state's power. (Paul Krugman, New York Times January 31, 2001 "Smog and Mirrors")
I have partially addressed this issue in my previous note. The problem is when all the new plants are gas-fired, that increases the demand on gas, therefore, gas delivery system should be upgraded – pipelines, storage facilities, compressors, etc. More exactly, new ones have to be built.
People think that the crisis was caused by a sudden increase in demand.
This is not what the specialists think. The increase of demand is steady. In fact, this year, due to the cool weather, the demand has increased less than what normally it would’ve done.

The facts are that the utilities took an unusually large amount of capacity off-line for what it described as ``routine maintenance.''
I have addressed this issue in the previous note.
[b]At the same time, members of the power-generator cartel also began to systematically withhold power. Ostensibly, this was done because the cartel feared that any power sold to the near-bankrupt utilities on credit would be money lost. The practical effect, however, was to drive wholesale electricity rates through the roof at the same time that the now-artificial electricity shortages triggered rolling blackouts throughout the state. (Peter Navarro, Pioneer Press 1/30/ 01 Navarro is an associate professor of economics and public policy at the University of California, Irvine. Distributed by the Los Angeles Times-Washington Post News Service.)
Partially absurd, partially true. Why wouldn’t he give some names of companies that have illegitimately held the supply, and why the regulators do not go after them? Of coarse if the utilities are near-bankrupt (and they were), everybody would fear to sell them anything. How are they going to collect their money? If you were near-bankrupt, would anybody sell you a car or a house? Or if your credit is bad, and you apply for a loan in a bank, and they agree to give it to you, wouldn’t they charge very high interest rates? This is called risk-premium in classic finance/portfolio theory. Higher the risks, higher premiums your counterparties build in. What kind of absurd is it to complain about it?


But I think that the "respectable" Professor has to be fired for incompetence from the university due to his statement “The practical effect, however, was to drive wholesale electricity rates through the roof at the same time that the now-artificial electricity shortages triggered rolling blackouts throughout the state.” It seems like he has no clue about how the markets operate even outside the energy industry, for example, in commercial loans’ industry. Would you have a comment, here, Boghos?

P.S. Azat, when you first spoke about curtailing the supply, I had an impression that it is about gaming of the market through holding of supply. There is such a topic in the academic literature related to power markets, and I am familiar with it. Theoretically speaking, the power companies can game the market, by holding the supply where needed, and artificially congesting the transmission lines so that to create islands of high demand and no-supply. While the academicians do demonstrate such possibility, there is no evidence that artificial congestion has taken place anywhere in the US. It is a very hard thing to do artificially. This is what I first you were referring to. That’s why I decided to read the article carefully, and then to reply. But what is being alleged in this article is an absurd from the point of view that it is the most natural concern in business – the creditworthiness of the counterparty. From what I understand, the respectable “Professor” is more of a lawyer rather than economist. In a mess like the energy market is, the lawyers hope for another redistribution of the national wealth from the shareholders to the attorneys (much like in tobacco and other industries).

[ May 21, 2001: Message edited by: MJ ]

[Azat]

This is very much so true in California. If you do not believe me ask someone on this board to drive to their local Unocal station(i only use Unocal 76, but I am sure this is true for others as well) and read the black and white sticker on the pump itself. Unocal used MTBE(I do not know what it is) to have cleaning burning fuel. This is what is in short supply.

I have not blamed(if I did I was wrong) the oil companies for the price of gasoline at the pump. I have said that the price is high because of the shortage of MTBE and whatever else they add in gasoline to burn it cleanly.

Additionally, I remember last year the same picture was present - before the summer and in the summer the prices of gasoline went off the roof. You have probably forgotten it. It was followed by the symbolic gesture of Clinton administration to tap into the National Strategic Petroleum Reserve, and the Saudies increased production. The prices last year were as high as they are this year. BTW, I disagree with the tapping into the Strategic Reserve. That’s not what it is brought together for.

MJ, I personally do not care much on how much gasoline price is. I drive a compact car and usually laugh at all those people that drive the huge SUVs at the gas station. I too was against Clinton tapping into the Strategic Oil reserves(which really did noting to the market price), but last year we did have a high price on the barrel of oil and in combination to the summer additives the price was at 1.70-1.80 range. We today are a little over 2 bucks and are going for more soon. Also, we do have a shortage of capacity of refineries in CA and if one of the goes down, that we will see 3 bucks a gallon also. Anyway enough about oil.

O, it is bogus, because if they cut the supply, but continue the production, the only thing that logically can be done is to put the gas in storage (this cannot be done for power, because it is a non-storable commodity - this is were the problems starts in power markets, in fact). But nobody has enough storage capacity, so that to put all the cut supply, as you claim, in that storage. Simply there are none! But there should be. This is a potentially hot market. However, having the storage just in any location is not a solution, because you need pipelines to transport the gas from the storage. Now, if the pipelines function at almost at their capacity limits, without additional pipelines you cannot transport much. If not the pipelines, then the storage needs to be built somewhere in California. It requires a lot of money. So that investors put that money in, they have to have the confidence with the government and the regulators. I hope you would agree that they don’t have a lot of reasons to have confidence in the California government.

You can call it bogus or anything you want, but this is what is getting published in papers here today. This is where my info is coming from. And no, I am not reading the comics section as you may think. The story is that natural gas companies in Texas have cut the supply of the gas to california because they were using it to transport other things. Period. Do you need a source?

Wrong. The liquid gas is one way of doing it, and it is a relatively small market. Storing of gas does not require liquefying. It just requires compressing. Gas is not used like power, i.e. only on the spot. You couldn’t be further away from the truth, here, though you were right about the power (and as I said, that’s the primary reason of a higher magnitude of problems in power markets- you don’t have much room for bad planning/scheduling). Gas is successfully stored, and this is widely practiced. Every Wednesday of the week, you can obtain the info on Gas storage availability. Check www.aquila.com, for example, for gas storage information - this is just one company. If not satisfied, I’ll give you more.

I belive you.

I do listen Bush

No wonder you do not like any comedians. He is the punch line of 90% of his jokes.

However, you are mistaken that I get my info from him, or from whatever newspapers or "Gazetts." In fact, evidently, that’s where you get your info. I get my info from professional sources.

Which part of my sources(NY Times, LA Times, Washington Post, Sacramento Bee) did you not like?

No. The opposite. If there were free wholesale and retail markets, this crisis would have been much mitigated. It is resulted from three sources:
1. The supply has not kept up with the growth of the demand;
2. The structure of the wholesale market in CA has been the most stupid structure in the nation - nobody has repeated this stupid experiment. It is not just the current and previous Governors to be blamed, but also the legislatures, and the previous Federal Government;
3. The wholesale market has been deregulate, but the retail has not. This has meant an industry having its one foot in the regulated world, and the other in the deregulated world, and the ground under feet slipping away. This is another major contributor of the problem.


1. true, but nobody can tell me why there is such a difference between one year and the other. You have not proven to me why this has happened. The 2% or 4% increase in demand does not account for the shortage.
2. I actually think that both current and previous governors have a lot to be blamed. Wilson allowed for deregulation and Davis screwed it up more.
3. Yes, but both PG&E and SCE had lobbyists in Sacramento asking for this.
~~~~~~
George Dunn, Governor Pete Wilson's Deputy Chief of Staff (now a lobbyist) brokered the deregulation agreement, largely behind closed doors, with Southern California Edison, its biggest industrial customers and an association of independent power producers. All parties pledged to support legislation that would create an independent power market. (Nancy Vogel, LA Times 12/9/00 "How State's Consumers Lost With Electricity Deregulation.")

"Utilities played a major role when the Legislature drafted and approved the restructuring that has turned sour. They received, at the time, an entitlement to compensation for anticipated losses (apart from any rise in the price of electricity) that was generous." (Editorial, Wednesday, Jan. 31, 2001, in the San Jose Mercury News)
~~~~~
The six investigations underway are not the first ones, nor are they the last ones. They also had several investigations last year. These investigations would not lead anywhere in terms of concluding that the energy companies have created the situation, since they have not. These types of investigations are primarily oriented at the public opinion, and saving the skins of the politicians, which are up for reelection.

People who reelect the current politicians are the real idiots(if they do reelect them)

Fine. But those plants would not be up and running in the summer, as you recognize in another paragraph. That’s when the demand peaks.

I know. I do not have a solution for the problem. I am not even sure if there is a solution in the short term.

Agreed. But it was not a malicious attempt by the corporations in California. It was resulted from their incompetence - they had no understanding of the free market structures and forces, while being very experienced in the regulated world. I have spoken about this in the past, in our forum. They screwed up the market structure, but that was not the primary source of the problem, because even with this structure, if there were abundant supply, we would have not had the current experience. This market structure is inadequate only under the constrained supply, which is the primary source of the problem. The rest are just amplifying factors, or consequences. This is my primary point.

I am not saying that it was malicious. All I am saying is that they had their hand in their and they did their stupid part as well. They did not allow(if I was managing them I would have done the same) for new plants to be built by themselves and by others as well.

Just because it is publicly owned, it doesn’t mean much. In the summer of 1998, some publicly owned utilities were behind the $7.5K per MWH price spike in the MidWest (Cinergy Hub). With the time, the demand in your city will grow, and you will need to either build new plants, or to bring power from elsewhere - that is if the transmission lines have excess capacity.
They already are.

Wrong again. The prices go astronomically high namely in the spot market - not in the forward market. That’s why you have the problems that you do in California. The prices don’t go nearly as high in the forward markets. And the regulations prohibit the utilities to buy in the forward markets in California. That’s where also the problem of the short supply is aggravated.
Not wrong, unless you are talking about the difference between the spot and forward market.(I have to admit I don't know one from the other) City of Glendale is producing excess power and is selling it to SCE at price of goods plus small profit. This is one of the reasons why Glendale residents are only going to have a 3% increase in power charges even though the actual cost of producing it has gone up by 15% because of high Gas prices.

Back to whom? Everybody sells back to - That is regulation. They are obligated to do so. The generating, distributing, transmission and marketing companies have to be separated. This is the law. Everybody does it.
Everybody does not have to produce 100% of capacity. Glendale and others are trying to make money in the deal by doing so and selling it to SCE. I am certain there are cities in the north that sell to PG&E

You are being very soft. The primary blame goes to them and the politicians who cater them. The environmentalists are against nuclear power, they are against the coal-generated power, and they are against the hydro-power (due to the problems with the migration of salmon). They sort of are more open to gas fired combined-cycle turbines. OK. But these are more expensive (actually most expensive), however necessary, sources of power, and additionally, you can build them only not far away from the existing gas pipelines - so that to be able to deliver fuel. And guess what - the environmentalists are also against building gas pipelines. Now, the other alternative is to build the plants outside California, for example. But then, you need adequate transmission lines to transmit the power. Guess what - the environmentalists are against the transmission lines, too. What do you think the implications of all these limitations would be?

Well, just as I am soft on the environmentalists, you are soft on the companies and the lobbyist that they have that cater to the stupid politicians that we have in office.

Wrong again. What money was sent back to the parent companies? Do you know the source of that money? The regulations required that SCE and PG&E to sell all their power plants, since they were not allowed to have any of them by the screwed-up mentality of the regulators. They did. And this is the money that they sent back to their parent companies, which in turn paid of the shareholders (through dividends) and the debt holders because they were the ones who own the plants. If you would sell your house, who would you send the appropriate portion of the money (assuming you make profit)? Wouldn’t you be obligated to send it to your Mortgage Company, since the house belongs to them until it is paid-off?

Not wrong at all. Do you remember what PG&E did a day prior to filing bankruptcy? If you don't let me remind you. they gave close to 60 million in bonuses to management and employees.

They were not forced to sell all their plants. The San Onofre Nuclear Generating Station (SONGS) is a 75% owned by SCE. Today, SONGS provides nearly 20 percent of the power to more than 15 million people in Southern California -- enough power to serve 2.75 million households. SCE´s Big Creek hydroelectric system which comprises approximately 90% of SCE´s Hydroelectric generation capacity. Big Creek Hydroelectric System has grown into an integrated hydroelectric project consisting of 23 generating units in nine powerhouses. Check their website if you do not believe me. http://www.sce.com

~~~~
Edison has overstated its electricity-buying debts by failing to subtract the amount of money it paid for power from its own power plants. That amount is at least $1.5 billion, it said. Edison has acknowledged that the debt figure it publicizes most widely, $4.5 billion through Dec. 31, does include payments to itself, but it has not specified an amount. Some speculation has placed the figure at more than $2 billion. PG&E has said its $6.6 billion in electricity buying debt includes about $3.3 billion for power from its own plants(By Dale Kasler, Carrie Peyton and Dan Smith Sacramento Bee 1/30/01 "Audit finds Edison overstated debt: Utility still near end of its cash; PG&E report expected soon.")
~~~~
A formal audit of SCE's books released by the California Public Utilities Commission Monday 1/29/01 confirmed that between January 1996 and November of 2000, they transferred about $4.8 billion of net income to Edison International, their parent company.(http://www.cpuc.ca.g...kmpg_report.pdf)
~~~~
An independent audit of PG&E on 1/30/01 accused the investor owned utility of not heeding months of warnings and for not moving quickly to save money when things turned bad. PG&E Corp. (the parent company of PG&E) spend $800 million of the money it collected from PG&E to support other subsidiaries, auditors said, while providing no cash, credit or other financial assistance to its struggling California utility.(Bian Melley, Associated Press 1/31/01 "Audio Confirms PG&E near broke.")
~~~~

Tell me what side should I look at it from.
You should see it from both sides of the issue. Just like I am. Okay I know I am not either.

Maybe you will be fine for a while. But then, you would need more plants, and more plants, and more plants. Normally, construction of a power plant takes about two years, in average. FYI, New York would have been in the same mess, if they didn’t have an unusually cool weather for this time of the year. And their structure is not as bad in terms of the spot-forward market. The problem is the supply, again.

Start building my friend. Start building. I actually heard another story on NPR(note, not a comedy hour) that there is some company that is getting approvals on 2 types of Nuclear Power Plants and are planning to build them the same way everywhere. The review process is suppose to be very much shorter than a custom one in every location. I will try to find more info on it. But you are not going to find me sitting here and saying that they should not build more or anything like that.


Regarding your other comment on power plants being suspiciously offline at the same time. You probably have missed to note three things:
1. Every spring and summer, a whole host of plants are stopped for regular maintenance. It is required. And there is nothing that they can do about this. If they don’t do it, they would be forced to do it in the summer and the winter, which would have much worse consequences, or if they don’t do it at all, the plants would start experiencing frequent random outages, which would have the same results on the spot market. This is similar to your car having oil change. You may not do it, but then, you would need to live with the consequences;
2. A number of the plants that were off lines were the old plants, which don’t satisfy the environmental standards. When they are brought online, the owners of these plants pay huge fines for the pollution of the environment. Clearly, that cost is going to be past to the consumers.


I understand all that and I take all that into consideration, but you do not want to believe that more than normal have been brought down this year.

I will reply to the article of the Irvine Professor a bit later.
cool

I feel like I am starting to repeat myself. Sorry if I am.

[Azat]

I am sorry, I am starting to fade a little and my replies may not be clear. I need some caffeine in me. I know what you are thinking. "Humm, when were his replies clear?"

Six years ago, the Public Utilities Commission ordered the state's investor-owned utilities to contract with private companies that were planning to build 1,400 megawatts of new plants. Southern California Edison objected, and appealed the order to the Federal Energy Regulatory Commission, arguing it would "not need this power until 2005." FERC sided with Edison, and the proposed plants never were built.
Probably. This means incompetence - as simple as that.

True, and i always thought that these officials were smarter that an "Average Joe". Note that in this case it was not the environmentalists that blocked the building of the plant, but the company itself.


The following year, the state passed its deregulation legislation, and that slowed plant construction even more, said John Tiner, a professor emeritus of electrical engineering at Johns Hopkins University. "Once deregulation became a factor, the power utilities stopped building plants, with good reason. They knew they would have to divest," he said.
Exactly. Why to blame then the power companies?

Because they were lobbying for deregulation.

This is not what the specialists think. The increase of demand is steady. In fact, this year, due to the cool weather, the demand has increased less than what normally it would’ve done.
Even more ammunition for me when I ask why we have such a huge shortage.

Partially absurd, partially true. Why wouldn’t he give some names of companies that have illegitimately held the supply, and why the regulators do not go after them? Of coarse if the utilities are near-bankrupt (and they were), everybody would fear to sell them anything. How are they going to collect their money? If you were near-bankrupt, would anybody sell you a car or a house? Or if your credit is bad, and you apply for a loan in a bank, and they agree to give it to you, wouldn’t they charge very high interest rates? This is called risk-premium in classic finance/portfolio theory. Higher the risks, higher premiums your counterparties build in. What kind of absurd is it to complain about it?

I have no idea why he did not give names. And they are going after them. Or are trying to go after them. Check out the LA Times article in my previous post.

The thing to note again is that because of deregulation(something that power companies lobbied for) and because of mis management, and because our governor is an idiot for trying to save the company instead of changing deregulation and allowing these companies to charge going market price for their commodity we have the situation that we are in. They asked for this and they should pay the price. But because of their short sightedness and realizing that they were getting an immediate increase in power price from the users with deregulation they went for it head first.

But I think that the "respectable" Professor has to be fired for incompetence from the university due to his statement "The practical effect, however, was to drive wholesale electricity rates through the roof at the same time that the now-artificial electricity shortages triggered rolling blackouts throughout the state." It seems like he has no clue about how the markets operate even outside the energy industry, for example, in commercial loans’ industry. Would you have a comment, here, Boghos?

This is the beauty of the internet. If you want to tell him that he is an idiot and want to tell the university to fire him, you are free to email them.

[Azat]

I am done for the day. So done that you can stick a fork in it.

Defending with MJ this energy stuff takes all the energy from me.

MJ, so what do you do for a living? And how come you know so much about this?

[MJ]

Please read my text after the P.S. in my previous posting. I have just added it.

I have not blamed(if I did I was wrong) the oil companies for the price of gasoline at the pump. I have said that the price is high because of the shortage of MTBE and whatever else they add in gasoline to burn it cleanly.
So it does mean the price hikes are partially caused by shortages, aren’t they. Are you sure it is just additives shortages, and not refined oil?
MJ, I personally do not care much on how much gasoline price is. I drive a compact car and usually laugh at all those people that drive the huge SUVs at the gas station.
Too bad, because I am one of these people. Do you have kids? I do. And I feel safe when I put my kids in my SUV and go for long and short-range trips. Besides, I love the comfort it gives me while driving.
… but last year we did have a high price on the barrel of oil and in combination to the summer additives the price was at 1.70-1.80 range. We today are a little over 2 bucks and are going for more soon. Also, we do have a shortage of capacity of refineries in CA and if one of the goes down, that we will see 3 bucks a gallon also. Anyway enough about oil.
Nothing strange about it. The demand grows on an annual basis. We have more severe shortages this year than the last year due to naturally increased demand.
You can call it bogus or anything you want, but this is what is getting published in papers here today. This is where my info is coming from. And no, I am not reading the comics section as you may think. The story is that natural gas companies in Texas have cut the supply of the gas to california because they were using it to transport other things. Period. Do you need a source?
No, I don’t need those sources. I have mine. Let’s think together. What possibly can the gas pipelines transport other than gas?
Which part of my sources (NY Times, LA Times, Washington Post, Sacramento Bee) did you not like?
Neither one. I trust only the professional sources of information as far as the energy markets are concerned. I would never take the word of a journalist in these matters. Additionally, I don’t know about the Sacramento Bee, but NY and LA Times are two of the most lef leaning newspapers in the Nation. Less so the Washington Post.
No. The opposite. If there were free wholesale and retail markets, this crisis would have been much mitigated. It is resulted from three sources:
1. The supply has not kept up with the growth of the demand;
2. The structure of the wholesale market in CA has been the most stupid structure in the nation - nobody has repeated this stupid experiment. It is not just the current and previous Governors to be blamed, but also the legislatures, and the previous Federal Government;
3. The wholesale market has been deregulate, but the retail has not. This has meant an industry having its one foot in the regulated world, and the other in the deregulated world, and the ground under feet slipping away. This is another major contributor of the problem.
Azat -
1. true, but nobody can tell me why there is such a difference between one year and the other. You have not proven to me why this has happened. The 2% or 4% increase in demand does not account for the shortage.
2. I actually think that both current and previous governors have a lot to be blamed. Wilson allowed for deregulation and Davis screwed it up more.
3. Yes, but both PG&E and SCE had lobbyists in Sacramento asking for this.
Even 0.5% shortage may have huge impact on the markets, if it cannot be conserved. This is because the prices would be set in the market by the marginal plants/refineries, etc, and they can push the market wherever they want, since over the sudden, they become the “biggest dog in the corner.” There are ways to fight against it. But that implies to have smart government.
~~~~~~

George Dunn, Governor Pete Wilson's Deputy Chief of Staff (now a lobbyist) brokered the deregulation agreement, largely behind closed doors, with Southern California Edison, its biggest industrial customers and an association of independent power producers. All parties pledged to support legislation that would create an independent power market. (Nancy Vogel, LA Times 12/9/00 "How State's Consumers Lost With Electricity Deregulation.")
True. But as I said, this was due to incompetence, not a malicious intend. As you know, one of those who have lobbied is already bankrupt, the other is on the verge of it. Very few specialists, and among them your humble servant, have declared at the time that the California deregulation cannot be digested.
"Utilities played a major role when the Legislature drafted and approved the restructuring that has turned sour. They received, at the time, an entitlement to compensation for anticipated losses (apart from any rise in the price of electricity) that was generous." (Editorial, Wednesday, Jan. 31, 2001, in the San Jose Mercury News)
Yes, it is true that they have played major role – see my remarks above. But that they have been generously compensated is a bogus. What the author is referring too, I guess, is the utilities ability to capture their so-called stranded costs. It has ended in 1995 or 96, I think.

People who reelect the current politicians are the real idiots (if they do reelect them).
Probably, so. But they would not understand it until the situation hits them at their pockets. Apparently, judging by the poles of public opinion, they have not quite understood it, yet. So they perhaps will rethink this summer.
Fine. But those plants would not be up and running in the summer, as you recognize in another paragraph. That’s when the demand peaks.
Azat - I know. I do not have a solution for the problem. I am not even sure if there is a solution in the short term.
None. Whatever may be achieved through conservation – that would be it. But it would be a very minor achievement. The other thing would be financial support one or another way – tax cut for the middle class, and financial assistance programs for the low income people.

Not wrong, unless you are talking about the difference between the spot and forward market. (I have to admit I don't know one from the other) City of Glendale is producing excess power and is selling it to SCE at price of goods plus small profit. This is one of the reasons why Glendale residents are only going to have a 3% increase in power charges even though the actual cost of producing it has gone up by 15% because of high Gas prices.
But I know the difference. Glendale can supply to SCE because they operate in the same transmission zone. Same Glendale cannot sell to Northern California, because the Path 15 of the transmission line would not sustain it.

Everybody does not have to produce 100% of capacity. Glendale and others are trying to make money in the deal by doing so and selling it to SCE. I am certain there are cities in the north that sell to PG&E.
I haven’t said that. In fact, nobody has the right to produce at 100% capacity, It is a very dangerous thing to do from the system reliability and stability, as well as reserve margin points of views.
Well, just as I am soft on the environmentalists, you are soft on the companies and the lobbyist that they have that cater to the stupid politicians that we have in office.
I am not soft on the lobbyists. As far as the companies go, I just say that they are not the source of the evil. They operate in extremely difficult and risky circumstances. Most of them lose a lot of money – not overnight as the PG&E did, but steadily.

[b]Not wrong at all. Do you remember what PG&E did a day prior to filing bankruptcy? If you don't let me remind you. they gave close to 60 million in bonuses to management and employees.
I don’t know about the bonuses. If they have done it – shame on them. However, the $60 mil. is nothing in the scale of the problems we discuss.
[b]They were not forced to sell all their plants. The San Onofre Nuclear Generating Station (SONGS) is a 75% owned by SCE. Today, SONGS provides nearly 20 percent of the power to more than 15 million people in Southern California -- enough power to serve 2.75 million households. SCE´s Big Creek hydroelectric system which comprises approximately 90% of SCE´s Hydroelectric generation capacity. Big Creek Hydroelectric System has grown into an integrated hydroelectric project consisting of 23 generating units in nine powerhouses. Check their website if you do not believe me. http://www.sce.com
You perhaps are not aware that there is a two-layer structure of power plants:
1. Those which are “regulated” plants, i.e. they have to sell at the cost+small markup. The utilities were not forced to sell these.
2. The “deregulated” plants, which can sell at the market price. They were obligated to sell them.

[b]Edison has overstated its electricity-buying debts by failing to subtract the amount of money it paid for power from its own power plants. That amount is at least $1.5 billion, it said. Edison has acknowledged that the debt figure it publicizes most widely, $4.5 billion through Dec. 31, does include payments to itself, but it has not specified an amount. Some speculation has placed the figure at more than $2 billion. PG&E has said its $6.6 billion in electricity buying debt includes about $3.3 billion for power from its own plants(By Dale Kasler, Carrie Peyton and Dan Smith Sacramento Bee 1/30/01 "Audit finds Edison overstated debt: Utility still near end of its cash; PG&E report expected soon.")
~~~~
A formal audit of SCE's books released by the California Public Utilities Commission Monday 1/29/01 confirmed that between January 1996 and November of 2000, they transferred about $4.8 billion of net income to Edison International, their parent company.(http://www.cpuc.ca.g...kmpg_report.pdf)
~~~~
An independent audit of PG&E on 1/30/01 accused the investor owned utility of not heeding months of warnings and for not moving quickly to save money when things turned bad. PG&E Corp. (the parent company of PG&E) spend $800 million of the money it collected from PG&E to support other subsidiaries, auditors said, while providing no cash, credit or other financial assistance to its struggling California utility.(Bian Melley, Associated Press 1/31/01 "Audio Confirms PG&E near broke.")
These machinations are irrelevant from the point of view of the disruption of the supply and demand equilibrium in the market. Besides, these are exactly the companies who have suffered in the game. That they have fudged their books is an entirely different story, not having anything to do with the market.


[b]Regarding your other comment on power plants being suspiciously offline at the same time. You probably have missed to note three things:
1. Every spring and summer, a whole host of plants are stopped for regular maintenance. It is required. And there is nothing that they can do about this. If they don’t do it, they would be forced to do it in the summer and the winter, which would have much worse consequences, or if they don’t do it at all, the plants would start experiencing frequent random outages, which would have the same results on the spot market. This is similar to your car having oil change. You may not do it, but then, you would need to live with the consequences;
2. A number of the plants that were off lines were the old plants, which don’t satisfy the environmental standards. When they are brought online, the owners of these plants pay huge fines for the pollution of the environment. Clearly, that cost is going to be past to the consumers.
Azat - I understand all that and I take all that into consideration, but you do not want to believe that more than normal have been brought down this year.
How do you know? Do you know their maintenance schedule? It is a very high threshold to prove such an allegation. I, for example, don’t see how can it be proved. Additionally, it might’ve resulted from incorrect forecasting. To have 5% forecasting error in the demand forecasts is a normal error. This error is tolerated on a daily basis everywhere. But because the region was operating at its limit, obviously this type of error might’ve had dramatic implications. I am not trying to justify them. I am just saying that there may be a number of innocent or justifiable reasons why these plants were off-line.

Er…my hands are tired from the typing.

[MJ]

This is part of what I do for living. I mean I am in power markets.

[ May 21, 2001: Message edited by: MJ ]

[MJ]

Six years ago, the Public Utilities Commission ordered the state's investor-owned utilities to contract with private companies that were planning to build 1,400 megawatts of new plants. Southern California Edison objected, and appealed the order to the Federal Energy Regulatory Commission, arguing it would "not need this power until 2005." FERC sided with Edison, and the proposed plants never were built.

MJ-Probably. This means incompetence - as simple as that.
Azat - True, and i always thought that these officials were smarter that an "Average Joe". Note that in this case it was not the environmentalists that blocked the building of the plant, but the company itself.
You are apparently of higher opinion of them then I am. Yes, but not the Texas companies, right? These are the very companies that have suffered in the game. However, that was 6 years ago. If the plants were built 2-3 years ago (if they had started then), California wouldn’t have had the problems today. This is where the environmentalists come in.

The following year, the state passed its deregulation legislation, and that slowed plant construction even more, said John Tiner, a professor emeritus of electrical engineering at Johns Hopkins University. "Once deregulation became a factor, the power utilities stopped building plants, with good reason. They knew they would have to divest," he said.

MJ - Exactly. Why to blame then the power companies?
Azat - Because they were lobbying for deregulation.
If the deregulation was done the right way, the problems would’ve not been nearly as bad even with the current available supply, though they would’ve been in place. At least, these companies would’ve not gone bust.
MJ - This is not what the specialists think. The increase of demand is steady. In fact, this year, due to the cool weather, the demand has increased less than what normally it would’ve done.

Azat - Even more ammunition for me when I ask why we have such a huge shortage.
Not really. As I said before, the amount of rainfall has been small this year. Therefore the hydro-plants have not operated at the capacities that they would’ve normally done. The supply was law due to this factor, by in large.

[Azat]

I had an impression that it is about gaming of the market through holding of supply.
I am not that bright. I did not even know that that means. But I have a good idea now.

So it does mean the price hikes are partially caused by shortages, aren’t they. Are you sure it is just additives shortages, and not refined oil?
Yes, but not oil, unless MTBE and the other stuff comes from oil. I will try to find out what MTBE is.

Too bad, because I am one of these people. Do you have kids? I do. And I feel safe when I put my kids in my SUV and go for long and short-range trips. Besides, I love the comfort it gives me while driving.
MJ, I am not married and do not have kids. This could be one of the reasons why I feel like so. The thing worries me about SUV is the damage that they do on the other car when they get involved in an accident. This is a different topic, but too many irresponsible kids are driving SUVs the way they were not designed to be driven. I just hope I never get hit by one.

By the way, you are one of the reasons why we have a shortage of oil.

No, I don’t need those sources. I have mine. Let’s think together. What possibly can the gas pipelines transport other than gas?

I wish I knew, but I have no idea. i will try to find an article or two. I am curious now as well.

Neither one. I trust only the professional sources of information as far as the energy markets are concerned. I would never take the word of a journalist in these matters. Additionally, I don’t know about the Sacramento Bee, but NY and LA Times are two of the most lef leaning newspapers in the Nation. Less so the Washington Post.

This is all the sources that is available to us, the public. If the truth is different, than we don't know.


Even 0.5% shortage may have huge impact on the markets, if it cannot be conserved. This is because the prices would be set in the market by the marginal plants/refineries, etc, and they can push the market wherever they want, since over the sudden, they become the "biggest dog in the corner." There are ways to fight against it. But that implies to have smart government.

And how am I suppose to find a "smart government". You forget that we in USA, especially in CA. we put more emphasis on the persons look and charisma than intelligence when we vote for them.

None. Whatever may be achieved through conservation - that would be it. But it would be a very minor achievement. The other thing would be financial support one or another way - tax cut for the middle class, and financial assistance programs for the low income people.

I also know one other thing. If anyone thinks that this situation(notice I did not say shortage ) is not going to effect their pocket books they are wrong. Maybe the utilities could not pass all their costs to the home users, but they have no problems passing it on to the companies and every company will find a way to pass it on to their customers throughout the US. And CA taxpayers have an additional burden in the tax payments that they are going to pay for all the Bonds that are being issued by our wonderful governor. Approximately $2,000 over the next 10 years. Got to love that!!!

I don’t know about the bonuses. If they have done it - shame on them. However, the $60 mil. is nothing in the scale of the problems we discuss.
True $60 million is a drop in the bucket, but it is the principle of things. http://test.arizonar.../0409pge09.html (sorry I was unable to find a better source.)

If the deregulation was done the right way, the problems would’ve not been nearly as bad even with the current available supply, though they would’ve been in place. At least, these companies would’ve not gone bust.
Remember who was going to implement deregulations. The same superior politicians that we the idiot public elects. ANd if Davis gets reelected, I am moving to Mexico.

Not really. As I said before, the amount of rainfall has been small this year. Therefore the hydro-plants have not operated at the capacities that they would’ve normally done. The supply was law due to this factor, by in large.
Darn, you have to take all my ammunition away.

I feel like I have been writing "deregulation", "lobbyist", "MJ", "conservation", "shortage" all day long. Oh shucks, I have been. I hope my customers do not get upset if I do not meet their project deadlines.

It is always a pleasure talking with you Martin. Although I am certain that you know very little about the energy industry. (just kidding)

[Azat]

And why did you not tell me this prior to me starting to argue with you.

[Azat]

MTBE is Methyl Tertiary Butyl Ether.

It adds as much as 60 cents per gallon of gas we buy, and as little as 27 cents.

And you don't want to know the problems that it has created on the California groundwater.

Also taxes on gas in CA accounts for 19 cents federal, 19 cents state plus local taxes.

[ May 21, 2001: Message edited by: Azat ]

[Azat]

Here is some more info why we use MTBE and other additives.

~~~~~~
Cleaner Gasoline Has Come To Your Part of the Country
Reformulated gasoline (RFG) is one of our nation's most important strategies to reduce pollution from motor vehicles. On January 1, 1995, you found cleaner, or "reformulated," gasoline at local service stations if you live in those parts of the country with the worst ozone air pollution problems. Also, some areas with less serious problems have elected to use it. Others may do so in the future.
Reformulated gasoline is just conventional gasoline blended to burn more cleanly and not evaporate as easily. The U.S. Environmental Protection Agency has been working cooperatively with the petroleum and auto industries to make sure this new gasoline fully meets the needs of the American motorist.

Cleaner gasoline is waiting for you at the pump.

This means there will be less smog-forming ground-level ozone to damage sensitive lung tissue and make it harder for the lungs to function. When the noxious ozone level is high, joggers, people working or exercising outdoors, or people with various chronic health conditions or lung diseases may suffer symptoms such as chest pain, coughing, and stinging eyes.

Air toxics from tailpipe emissions or gasoline vapors also can be harmful. Some of the toxic compounds in gasoline (benzene, for one) and compounds created when gasoline is burned in the engine are known or believed to cause cancer. In fact, motor vehicles are estimated to account for roughly 50% of all cancers associated with exposure to air toxics.

Using reformulated gasoline reduces the total health risk to the public by reducing exposure to ozone and air toxics.

Reformulated gasoline will have no adverse affects on vehicle performance or the durability of engine and fuel system components, not even for high performance engines. In fact, the nation's major auto manufacturers support - even recommend - the use of reformulated gasoline. If you travel to a conventional gasoline area, you can fill up without any harm to your car.

Reformulated gasoline contains oxygenate additives that have been used in a significant amount of gasoline since the 1970's. Gasolines containing oxygenates may reduce gas mileage by 1 to 2 percent. Gas mileage is affected mostly by the type of engine and vehicle, driving habits, weather conditions, and vehicle maintenance. So, changing your driving habits and vehicle maintenance pattern could balance it out.

Using reformulated gasoline will not affect either the manufacturer's general warranty or the emissions warranty. For information on warranty provisions, see your vehicle owner's manual or consult a local auto dealer.

Recently, EPA has had discussions with various manufacturers of off-road engines (motorcycles, boats, recreational equipment, and lawn equipment) who have confirmed that using oxygenated fuels is acceptable, although some manufacturers offer special instructions when operating equipment on oxygenated fuels. While manufacturers' recommendations vary for the type of oxygenate that should be used in various applications, a report published in November, 1994 by Downstream Alternatives, Inc. (DAI) of Bremen, Indiana, revealed that most off-road engine manufacturers permit the use of oxygenated fuels not to exceed 10% ethenol or 15% methyl tertiary butyl ether 9MTBE) by volume.

RFG will cost a few cents more per gallon than conventional gasoline, but its a small price to pay for cleaner air and a healthy environment. So . . . now that cleaner gas is here, use it to protect your health.

REQUIRED AREAS
Los Angeles, Anaheim, Riverside-California
San Diego County-California

Hartford, New Britain, Middleton, New Haven, Meriden, Waterbury- Connecticut

New York, Northern New Jersey, Long Island, Connecticut Area

Philadelphia, Wilmington, Trenton, Cecil County, Maryland Area

Chicago, Gary, Lake County-Illinois, Indiana, Wisconsin Area

Baltimore-Maryland

Houston, Galveston, Brazoria-Texas

Milwaukee, Racine-Wisconsin

"OPT-IN" AREAS
The entire state of Connecticut
Delaware

Kentucky

Maine

Maryland

The entire state of Massachusetts

[MJ]

Actually, I did. I have just not read my postings carefully.

[MJ]

I can assure you that you need to take it with the environmentalists, since it is apparent that th eidea of the additive would belong to them.

[MJ]

GasDaily
May 29, 2001

Bingaman previews bipartisan tone as committee chairman
Sen. Jeff Bingaman, D-N.M., who is expected to become chairman of the Senate Energy and Natural Resources Committee next week, provided a glimpse Friday of his legislative agenda after he is handed the gavel. And the outlook may not be all that different than what many had predicted with Sen. Frank Murkowski, R-Alaska, at the helm.



Aside from the issue of drilling in the Arctic National Wildlife Refuge, not much separates the two senators. The spotlight turned to Bingaman last week after Sen. James Jeffords of Vermont announced that he was departing the Republican Party to adopt the political label of independent. Upon Jeffords’ exit from the party, the Democrats will control the Senate, 50-49.



In a conference call Friday sponsored by Deutsche Banc Alex. Brown, Bingaman, who was first elected to the Senate in 1982, said he plans to press forward with energy legislation, although he said it would not make sense to rush legislation that would affect policy for the next 20 years. “If we can get agreement to do so, I hope we can move ahead on energy legislation here this summer and maybe over the period of the fall as well because there’s a lot of different issues that should be addressed,” he said.



In March, Bingaman and other Democrats authored the bill, Energy Security Tax Incentive Act of 2001, which has a number of similarities to the Bush administration’s proposal released last week (GD 5/18).



A senior economist on the Senate Energy and Natural Resources Committee, Shirley Naff, assured analysts at Deutsche Banc that Bingaman will adopt a bipartisan tone as chairman. “I think there is an impression that there’s going to be some dramatic change in approach to energy policy and I don’t think that’s correct,” Naff said. “Sen. Bingaman has always had the view that energy policy is not partisan and he will proceed in a very bipartisan fashion to address the various issues before the energy committee.”



Naff also sought to dispel news stories that electricity price caps in California would be on the top of Bingaman’s agenda. “I think there have been press reports that the senator is a proponent of price caps to address the California situation,” she said. “I think we need to clarify that.”



While the federal government should address the “out-of-control” wholesale power prices, Bingaman would only support temporary measures to help the markets function better, the staffer said. “That does not mean that there’s any suggestion of re-regulation, certainly not on Sen. Bingaman’s part,” Naff explained. “But he does feel strongly that the Federal Energy Regulatory Commission should be enforcing the current law, which requires just and reasonable prices at the wholesale level. This issue is of serious importance from an economic standpoint for that entire region. So we’re hoping that with the two new FERC commissioners … that the FERC will move to establish some rational order in the wholesale market and reduce pressure for legislation.”



Naff disputed the perception that Bingaman is not a strong advocate of market-based solutions for energy issues. “For anyone who followed the [electricity] restructuring debate in the Senate last year, it was pretty clear he was actually more pro-market than Sen. Murkowski,” she said.



In answering questions during the conference call, though, Bingaman somewhat contradicted Naff’s assertion that he was not a supporter of price caps. “The Federal Power Act … does require the [FERC] to ensure that rates for wholesale power are just and reasonable. It’s clear to me they have not been just and reasonable in California in recent weeks and months,” Bingaman said. “The [FERC] has the responsibility to step in and deal with that situation. They can do so to the extent that they impose limits on what can be charged.”



In order to encourage power plant development in the state, he said FERC can impose rates of return at a high enough level that anyone who is investing in a power plant or anyone who owns a power plant is ensured a very good rate of return. “I don’t think we’re suggesting that the caps be unreasonably low and we’re not suggesting that they be at such a level that they would discourage investment in additional capacity.”



Bingaman noted that the only legislation currently pending that would apply a legislative remedy is a bill sponsored by Sens. Dianne Feinstein, D-Calif., and Gordon Smith, R-Ore., that would order FERC to impose either a cost-based or a regionwide price limit on electricity sold in the western United States. “Clearly, this is a fast-changing situation. We should not be writing into law any kind of price cap. I do think we should be calling on FERC, though, to carry out its responsibilities under the law. FERC is much better able to step in and take action on a temporary basis and then change that action when circumstances require. We have two new FERC commissioners … I am very optimistic that they will step up to this responsibility and that we will not wind up having to pass any additional legislation.”



As for other energy issues, Naff said Bingaman remains a major supporter of oil and gas development. “There have been various reports that have suggested that when Sen. Bingaman becomes chairman of the committee that he will be opposed to any oil and gas development in Alaska. That’s very much not the case.”



She said Bingaman’s stance against drilling in ANWR is a position shared by a majority in Congress. “He does very much support moving forward to construct a natural gas pipeline to develop the Arctic gas from the North Slope and, in fact, was instrumental in getting the environmental community to come on board and be constructive in that process,” Naff said. “He stands ready to quickly address whatever needs to be done as far as changes in the law or permitting issues that we can help streamline the construction of that pipeline.”



Bingaman mentioned the explosion on El Paso Natural Gas in his home state last year that killed 12 people and applauded the gas industry’s response to the disaster and its willingness to make pipeline safety a high priority. “That’s a place where some of the industry representatives have worked with us to find a solution to that. More can be done both by the government and by industry to find a solution.”



Regarding global climate change policy, he said the United States should work hard toward reaching some conclusions. He was pleased with Energy Secretary Spencer Abraham’s testimony before the committee last Thursday in which Abraham said the White House has set up a task force to begin looking at the climate change issue. Abraham predicted the task force would formulate a position on climate change in a month or two.



The senator said he was a firm supporter of the benefits of nuclear power, which currently generates about 20% of the country’s electricity. “I think the question as to whether we build additional nuclear power plants is an economic question and companies are going to have to make that judgment based on the economic environment they find themselves in,” he said. “But I have no problem with nuclear power. … I am confident we can produce nuclear power safely and that’s an option we need to look at very seriously.”

Copyright © 2000

[raja]

Interesting thread for me even though I don't live in California,but I happen to be managing a gasstation currently here in New Jersey.Our main company,Getty,recently stopped using MTBE as an additive and instead started to use ethanol.Their claim is that in case of any leak from the underground tanks and this leak mixing with drinking water,MTBE contaminates the water whereas ethanol doesn't.Right now the usage of ethanol in whole US is 12% and rapidly growing.The reason for MTBE to be used more commonly is its being cheaper compared to ethanol.
btw right now in New Jersey we are sailing in the 1.60-1.70 range.

[Kazza]

MJ jan , YOU caused it! lol! What WERE you thinking...

[MJ]

What was it, Kazza?

Did you mean I have caused the US Energy Crisis?

[Kazza]

Yes! I think you and me both!