Monday, March 05, 2007
If you haven't already, stop by and congratulate Diana Hsieh on five years of excellent blogging over at Noodle Food.
Business Columnist Lambastes Power Companies for Building Plants
Business columnist Loren Steffy of the Houston Chronicle offers the following ridiculous criticism of what he implies to be capitalism: It encourages utility companies to build -- Oh, the humanity! -- coal-powered electricity generation plants.
The way deregulation works in Texas, consumer electric prices are set by the free market. Wholesale rates, or the price at which generating companies sell their electricity, are tied to the price of natural gas.It is not clear from this column whether "the system" Steffy implies is capitalism -- but which is really a mixture of freedom and government controls -- forces electricity to be tied to the price of natural gas by legal fiat (in which case, regulation is to blame for the discounts not being seen by customers). On the other hand, it could be that Texas overwhelmingly uses gas power. (In which case, a truly free market would eventually cause a new benchmark to be selected for electricity prices. Read on.)
That's because gas-fired plants generate most of the electricity in the state.
TXU, however, shows how a savvy investor can make a killing by playing the spread between natural gas prices and generation costs. Consider this explanation in TXU's annual financial statement, filed last week with the Securities and Exchange Commission:
"One of TXU Power's key competitive strengths is its ability to produce electricity at low variable costs in a market in which power prices are set by natural gas-fueled generation."
In other words, because its nuclear and lignite coal plants have lower generating costs than natural gas plants, TXU is able to make more money from them because it still sells its electricity at the prevailing wholesale rate.
TXU is simply exploiting a flaw in the system, said Tom "Smitty" Smith, director of Public Citizen's Austin office. [Smith is an anti-nuclear environmental activist! --ed] Even though coal plants cost more to build, the long-term profitability makes them more attractive.
"It's encouraging people to build coal and nuke plants," he said.
The lower generating costs for TXU and other coal plant operators aren't passed on to residential customers because the wholesale market remains wedded to natural gas prices.
"We need to look at whether the market is reflecting the real cost of generating electricity," Smith said. "This all brings into question whether deregulation is in the best interest of consumers."
Of course, it's a problem the deregulated market is supposed to solve. If TXU won't build enough generating plants, then, in theory, someone else will step in to meet the demand.
Given the potential profits, I'm sure someone will.
But what type of plants do you think they'll want to build?
In either case, since companies are in business to make money, I applaud this kind of creative approach to operating on the Texas market. At worst (if the law forces utilities to index based on natural gas and consumer rates are heavily regulated, which I suspect is the case), we know that utility companies are going to be interested in producing power in Texas. I don't know about Steffy, but even if my bill is a few dollars higher a month, I'll take the reliability of power we enjoy here over California-style brownouts any day. If the system is broken, the last criticism it deserves is that it encourages utility companies to invest in more generation capacity!
And if electricity rates really are determined on an open market, the indexing to natural gas is something that would fix itself as more non-gas plants were built -- if coal and nuclear power were not so heavily regulated. That TXU makes money from coal plants is no secret, so perhaps "someone else will step in", as Steffy says. In a truly free market, this would eventually lead to both reliable power and a decrease in rates as more utilities built coal plants and someone decided to steal customers via lower rates. Even Steffy ought to be able to see this!
But for some reason, the lower rates have not arrived. That would have been an interesting story. Too bad Loren Steffy spent too much time gabbing with an anti-nuclear power activist and less time digging when he prepared to write this Sunday's column.
New Documentary, Evidence on Global Warming (Hysteria)
Via Matt Drudge is a link to a new documentary on the science of global warming, The Great Global Warming Swindle:
The film brings together the arguments of leading scientists who disagree with the prevailing consensus that a 'greenhouse effect' of carbon dioxide released by human activity is the cause of rising global temperatures.I'll be on the lookout for this one, but not at that Final Authority on All Matters Scientific, the Motion Picture Academy.
Instead the documentary highlights recent research that the effect of the sun's radiation on the atmosphere may be a better explanation for the regular swings of climate from ice ages to warm interglacial periods and back again.
The film argues that the earth's climate is always changing, and that rapid warmings and coolings took place long before the burning of fossil fuels. It argues that the present single-minded focus on reducing carbon emissions not only may have little impact on climate change, it may also have the unintended consequence of stifling development in the third world, prolonging endemic poverty and disease.
The film features an impressive roll-call of experts, including nine professors – experts in climatology, oceanography, meteorology, environmental science, biogeography and paleoclimatology – from such reputable institutions as MIT, NASA, the International Arctic Research Centre, the Institut Pasteur, the Danish National Space Center and the Universities of London, Ottawa, Jerusalem, Winnipeg, Alabama and Virginia.
The film hears from scientists who dispute the link between carbon dioxide levels and global temperatures.
The film examines an alternative theory that explains global temperatures, based on research by Professor Eigil Friis-Christensen of the Danish Space Center. The professor and his team found that as solar activity increases, and the sun flares, cloud formation on earth is significantly diminished and temperature rises.
Ian Clark, Professor of Isotope hydrogeology and paleoclimatology at the Dept of Earth Sciences, University of Ottawa explains: 'Solar activity over the last hundred years, over the last several hundred years, correlates very nicely, on a decadal basis, with temperature.' [bold and italics mine]
Oh. And speaking of alternate theories on climate change, it was amusing to see that National Geographic had to admit, albeit very grudgingly, that there is new evidence from Mars against the "consensus" theory of global warming that is being used to justify all manner of new ways to strangle the world economy.
Earth is currently experiencing rapid warming, which the vast majority of climate scientists says is due to humans pumping huge amounts of greenhouse gases into the atmosphere. ...Of course, this coverage tries to make the Russian scientist it cites sound like a lone raving lunatic, but it was still funny to see that shill for global warming hysteria, National Geographic, have to run the story.
Mars, too, appears to be enjoying more mild and balmy temperatures.
In 2005 data from NASA's Mars Global Surveyor and Odyssey missions revealed that the carbon dioxide "ice caps" near Mars's south pole had been diminishing for three summers in a row. [bold added]
What isn't funny are the predictable consequences (as listed earlier) of the political "solution" to global warming we hear from every direction, at full volume, and on a constant basis from such media outlets. Amid cries for Nuremberg trials , like Heidi Cullen's, for "global warming deniers", the news media are themselves denying scientific evidence on that very subject as well as the predictions of well-established economic theory concerning the misguided "solutions" they advocate for this imagined problem.
Thompson on Privatizing Education
Via Amit Ghate is a link about an appearance in Southern California by C. Bradley Thompson, who will argue for privatization of education, a matter I have found myself blogging about quite a bit lately. Ghate's comments on the special harm done by government-run education are worth repeating here:
[I]n some sectors the effects of government social engineering are much more pernicious than in others, and in that sense, if one must choose one's battles, education is a great place to start. For example, though farm subsidies are immoral and harmful to both taxpayers and to the displaced competitors, at least the end result of the subsidies (except when farmers are paid not to produce) is healthy food. In the case of education, however, not only is every taxpayer violated and every would-be private competitor hamstrung, but in the end, children are indoctrinated rather than educated -- and in many cases we are actually paying teachers to argue for our own destruction, whether morally, economically, or most egregiously via violent jihad! ... [my bold]The talk, free and open to the public, will occur in Costa Mesa, CA on the 27th of this month.