The Cost of Natural Gas [was Re: The Cost of California Liberalism]

[James A. Donald]

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At 03:33 PM 12/29/2000 -0500, auto58194 at hushmail.com wrote:
 > If it's so hard to build power plants in California, what is the 
obsession with building them in California?

Ask the regulators in other states.  Most of the neighboring states have 
regulated monopolies, rather than a regulated market, which are effectively 
an arm of the government, in that the decision to build a plant is 
primarily made by the government.  A Californian power company simply has 
no legal right to build a power plant in Oregon, because that would violate 
the monopoly authorized by the state of Oregon.


 > Looking at the queue of plant requests within California they also seem 
to be obsessed with building them in highly populated areas.

The endangered species act makes it impractical to build power plants in 
less developed areas.  The process of getting approval would take over a 
generation.  They would first have to get someplace out in the coutryside 
rezoned for industry, which would probably require an initiative, which 
cannot be passed until the next election..  Much faster to start off with a 
proposal to build a plant in an area already zoned for industry.

The underlying cause of the power crisis is that the burdensome regulatory 
process means that power needs must be foreseen over a decade in advance, 
and California had an unexpected surge of growth.  Because of this growth 
surge we would have had a crisis anyway, but the "deregulation" made the 
crisis worse than it would otherwise have been, and one of the ways it made 
the crisis worse than it would otherwise have been is that the lead time 
required to get regulatory approval to build a power plant appears to have 
increased rather than decreased.

In fact of course, what we are seeing in California is not deregulation, 
but desocialization.  Regulation has actually increased substantially.  The 
former regulated monopoly, when it was acting as an arm of the state, had a 
fairly free hand to do whatever the state decided.   The many genuinely 
private firms do not have a free hand to do what they decide.

 > I suppose one has to consider the plight of the capitalist here.
 > Given that the ROI on a plant closer to demand is higher (less
 > additional infrastructure such as transmission lines and
 > substations) than one far away, it becomes a no-brainer which to
 > build from a profit standpoint.  Considering power plants were
 > competing with dot-coms for investment capital, it's no surprise
 > that ROI on a plant needed to be made as high as possible to have
 > any chance of being funded.
 >
 > Thinking about it that way, it shouldn't be too surprising the
 > result is high-ROI plants get built where people don't want them but
 > eventually accept them after a year or two's delay.

Of course if the evil capitalist had decided to build the plant further 
away, the eco freaks would be frothing with outrage about the plant 
destroying nature and the power lines destroying the migratory routes of 
animals.   It takes many more years, perhaps generations, to get past the 
endangered species act, no matter how frivolous and absurd the objections, 
than it takes to build in areas already approved for industry.

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          James A. Donald
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