NUCLEAR POWER IS AN OPTION

Environmental activists don't like global warming and they don't

like nuclear power. But observers say they must soon make a

choice between coal-fired generating plants -- which they contend

lead to global warming -- and clean nuclear power.

There are many arguments in favor of nuclear power, and one of

them is the safety issue. Serious studies consistently show that,

to generate the same amount of electricity, more people will die

if coal is used than if nuclear power is employed.

o In America, about 36 people per year are killed in the

coal-mining industry -- and China reportedly loses about

10,000 per "normal" year in coal mining.

o If we assume the developed world has a death rate per

million tons mined equal to that of the United States, and

that the Third World has a death rate equal to that of

China, 55 people per day die in the world's coal-mining

industries.

o While few of those deaths receive any publicity, the

deaths of two workers in a nuclear power plant in Japan

made headlines around the world last year.

o Such reporting obscures the high degree of safety found in

nuclear power activities and leads people irrationally to

fear its use -- while coal is seldom faulted on safety

grounds, even though it is infinitely more dangerous.

Source: Lester C. Thurow (Massachusetts Institute of Technology),

"Time for Nuclear Power," USA Today, January 11, 2001.

For NCPA's Global Warming Hotline go to

http://www.ncpa.org/hotlines/global/gwhot.html

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TRACING CALIFORNIA'S POWER DEBACLE TO ENVIRONMENTALISTS OF THE

1970s

For decades, analysts warned that California must build more

power plants. But politicians there paid more heed to

environmental groups which first attacked the idea of building

coal-fired power plants, then graduated to an anti-nuclear

stance.

o As of March 1970, 200 environmental groups had mushroomed

in the San Francisco area alone.

o One study back then claimed that conservation in home

appliances, and in heating and cooling would cut

California's consumption of natural gas and electricity by

30 percent -- and peak demand would drop by half in 10

years.

o In 1975, Jerry Brown -- who opposed both coal and nuclear

power -- became governor, and in 1978 he backed a state

moratorium on building nuclear plants.

o As a result, it took 17 years to get the Diablo Canyon

nuclear plant up and running -- and costs jumped 12-fold

from $500 million to $6 billion.

"After the experience with Diablo Canyon," comments Miro

Todorovich, executive director of the pro-nuclear Scientists and

Engineers for Secure Energy in the 1970s and 1980s, "no utility

in its right mind would build a power plant in California."

This explains why California produces less power per resident

than any other state and imports one-quarter of its energy from

places as far away as Quebec.

Source: David Isaac, "California's Recipe for Energy Crisis: When

Demand Booms, Forget Supply," Investor's Business Daily, January

22, 2001.

For more on Energy http://www.ncpa.org/pi/enviro/envdex5.html

MPORTANCE OF INDEPENDENT POWER GENERATORS GROWING

Nearly every new power plant in the U.S. is being built by

companies that are largely unregulated. The marketplace, not old-

fashioned state regulatory commissions, dictates where plants

will be built and what type of fuel they will use.

o The new independents now account for more than 20 percent

of domestic electricity generation -- and that figure is

rising quickly.

o Since the independents are now free to build whatever

types of plants they want, more than 90 percent of those

currently planned will run on natural gas.

o Nonutility generators plan to build 250,000 megawatts of

new capacity -- a huge addition to today's total of more

than 700,000 megawatts.

Although insufficient supplies of electricity -- not deregulation

-- have been responsible for California's power fiasco,

politicians in some states are still misreading the root cause

and are becoming cool toward deregulation. Of the two dozen

states that still work on the old model of monopoly utilities

with regulated rates and guaranteed profits, at least four have

indicated they may rethink any moves toward open energy markets.

Executives of independent companies warn that efforts to cap

wholesale electricity prices or otherwise restrain them will

curtail new construction -- hurting consumers in the long run.

Source: Richard A. Oppel Jr., "Independent Plants Play Role in

Electricity Troubles," New York Times, January 23, 2001.

For text http://www.nytimes.com/2001/01/23/business/23UTIL.html

For more on Electrical Power

http://www.ncpa.org/pd/regulat/reg-4.html

CALIFORNIA'S ENERGY CRISIS

California's electric power crisis is due to a poorly constructed

electrical industry deregulation -- or restructuring -- plan, and

also to the failure of the state to build new power plants, notes

Newsweek's Robert J. Samuelson.

o From 1988 to 1998 the state's electric-generating capacity

actually declined 5 percent, says the Department of

Energy.

o Over the same period, power consumption rose 15 percent;

in the next two years it increased a further 7 percent.

o Some experts think California needs about 10,000 megawatts

more, about a 20 percent increase in generating capacity.

But that doesn't explain why the crisis has come in the middle of

winter, which is the off-peak season for power consumption and

thus the time of the year when wholesale prices usually decline.

For instance, the record high in California's summer-peak demand

(45,844 megawatts on July 12, 1999) was a third larger than that

in its winter-peak demand (34,432 megawatts on Dec. 13,1999).

Samuelson notes that in March 1999 Southern California Edison

asked the California Public Utility Commission for permission to

make long-term purchase contracts for electricity. This would

have provided a stable source of power at fairly stable prices.

It would have relaxed pressure on the spot market. The CPUC

refused.

Without long term contracts, California utilities have been

forced to buy wholesale power at the short term, spot market

price -- while the retail rates they charge consumers are frozen.

As a result, they have been forced to borrow heavily to purchase

electricity, and now face bankruptcy.

Source: Robert J. Samuelson, "The American Energy Fantasy,"

Newsweek, January 29, 2001.

For text http://www.msnbc.com/news/519122.asp#BODY

For more on Electrical Power

http://www.ncpa.org/pd/regulat/reg-4.html

N TODAY'S NEWS

PRICE CONTROLS STOPPED SAN DIEGANS FROM CONSERVING ELECTRICITY

Economists note that electricity consumers must suffer through

higher power bills before they will willingly and seriously adopt

conservation measures. That message came through loud and clear

in the case of San Diego last year.

In fact, what happened there comes as close to a controlled

laboratory test of consumer behavior as any economist could wish.

Here's what happened:

o With electricity supplies short and California's power

grid on the brink of collapse in last summer's heat, the

San Diego Gas & Electric Company experienced a near

tripling of its wholesale power costs -- and it passed

those costs on to its consumers.

o By August, electricity use in San Diego dropped 9 percent

-- and homeowners took to the streets in protest at the

higher rates.

o In September, California legislators caved in and capped

retail electricity rates at the average market price paid

in the month before the summer crisis.

o Now electricity use is back to pre-crisis levels.

"Summer should have been a wake-up call," says Peter Navarro, an

economist at the University of California at Irvine. "You can't

blame San Diego consumers for not doing anything, because

legislators stepped in and lowered prices. If the discomfort

isn't of a lengthy duration, the adjustments to behavior that

need to take place won't."

Now that electricity is cheap once again, San Diegans without an

incentive to conserve have someone else to blame. It has been

supplied to them by Gov. Gray Davis (D), who has railed against

out-of-state power suppliers that need to be reined in.

Source: Laura M. Holson, "Why San Diego, Where Rates First Rose,

No Longer Conserves Energy," New York Times, January 30, 2001.

For New York Times Text

http://www.nytimes.com/2001/01/30/national/30CONS.html

For more on Electrical Power

http://www.ncpa.org/pd/regulat/reg-4.html

ELECTRICITY DEREGULATION PROCEEDING IN 24 STATES

The Center for the Advancement of Energy Markets has just

released its second annual ranking of states based on how

aggressively they are moving toward electricity deregulation. The

report, "Regional Energy Deregulation 2001," says:

o Twenty-four states and Washington, D.C., have been

actively moving toward consumer choice in power supplies

-- the rest, mainly in South and Central regions of the

country, are doing little or nothing to achieve the goal.

o Pennsylvania, New York, Maine, Maryland, Arizona, New

Jersey and the District of Columbia have been the most

aggressive in pursuing deregulation, according to the

group's rankings.

o States which are pursuing deregulation, but doing so in

low-gear, include Vermont, New Mexico, Arkansas, West

Virginia and Oregon.

o Consumers in Hawaii, New Hampshire, New York, Vermont and

Maine are burdened with the highest average kilowatt hour

rates in the country -- in excess of 10 cents per kilowatt

hour.

Utah, with average prices in the first nine months of 2000 at 4.7

cents per kilowatt hour, had the nation's lowest electricity

prices.

Source: Del Jones, "State Take Varied Routes to Energy

Deregulation," USA Today, February 1, 2001.

For CAEM report http://www.CAEM.org

For text

http://www.usatoday.com/money/consumer/2001-02-01-states.htm

"REAL-TIME" POWER PRICING

Economists have long recognized the benefits of what is called

real-time pricing of energy supplies. Armed with data on the

price fluctuations of electricity, consumers can tailor some of

their energy purchases to coincide with cost dips. The benefits

are lower bills and greater conservation.

The practice is now beginning to catch on, thanks to California's

energy debacle.

o Atlanta-based Georgia Power lets large energy consumers

track prices and cut use based on price.

o By using the Internet to inform 1,650 of its biggest

business customers of price fluctuations, Georgia Power

can save as much as 800 megawatts at a time -- enough to

power almost 225,000 homes.

o About 5,300 industrial plants, skyscrapers and big

institutions in California -- representing 8,000 megawatts

of peak electricity use -- are already equipped with

meters that might trigger cuts in demand, but they do not

yet have the billing software or ability to get hour-by-

hour power prices via the Internet.

o In several other states, pilot studies on real-time

pricing have affirmed its benefits.

One of California's problems is that its Public Utilities

Commission -- which must approve a demonstration program

involving installation of energy-price monitoring equipment --

has been dragging its feet. The commission has been bogged down

in politics and consumer challenges. Also, its regulators don't

want to relinquish control to electricity users, critics

complain.

But if the system and equipment were installed, California

businesses could temporarily shrink demand by 20 percent -- or

3,000 megawatts. That compares to a predicted power shortfall

next summer of 1,000 to 2,000 megawatts.

Source: Byron Acohido, "When Energy Prices Go Up, Some Businesses

Turn Off," USA Today, February 8, 2001.

For text

http://interactive.wsj.com/articles/SB981596525191942357.htm

For more on Electrical Power

http://www.ncpa.org/pd/regulat/reg-4.html

ankruptcy v. Bailout

By Harvey Rosenfield

California’s largest utility company, Southern California Edison, has thrown down the gauntlet to Governor Gray Davis: force the ratepayers to bail us out or we’ll declare bankruptcy.

In an energy system that is more like organized crime than a free market, this is blackmail. What Edison really wants is a ratepayer bailout from the failures of the deregulation law, which Edison lobbied through the California Legislature in 1996. But there are disturbing indications that Gov. Davis will seize on the fear of bankruptcy as justification for rescuing the utilities, among his biggest contributors. If he does so, the Governor will pay a capital price for his disloyalty to the public. So it’s worth examining which would be worse for California’s ratepayers: a bailout or bankruptcy?

BAILOUT. If Governor Davis orders a bailout, it will be the second one in four years. In 1996, the state’s three utilities – Edison, Pacific Gas & Electric and PG&E -- wanted deregulation. But were worried that their bloated bureaucracies would not be able to compete. So they demanded that ratepayers be forced to subsidize billions of dollars in uneconomic deals on the utilities’ books. The Legislature agreed, freezing residential and small business electricity rates for four years at 50% above the national average. In exchange, the law stated that once the debts were paid off, the rate freeze would end and consumers would receive a "guaranteed" 20% rate reduction. Ratepayers have paid Edison and PG&E $17 billion so far under the "competition tax." That was Bailout I.

Now, however, the utilities' sweet deal has gone sour. Freed by deregulation from government oversight, the dozen wholesale energy companies that generate nearly half of California's electricity supply are now manipulating the supply of electricity to create shortages. The market price of electricity has soared 3900%, far exceeding the frozen price. The power suppliers’ profits have risen by as much as 500%.

Edison, too, is profiting from the crisis as much as hurting from it: 70% of its power comes from the company’s own plants, for which it receives the market price. But Edison isn’t counting its profits when pleading its financial woes, and wants the Governor to order ratepayers, the innocent victims of this public policy fiasco, to pick up the entire tab – presently $6 billion and growing. Bailout II would be illegal under the deregulation law. Worse, it guarantees that rates will continue to skyrocket, because it tells the energy producers: charge whatever you want; we’ll just pass it through to the ratepayers.

BANKRUPTCY. Compared to another bailout, bankruptcy might well be less costly for ratepayers in the long run. Contrary to the utilities’ fear-mongering, a bankrupt utility would not shut down or be sold off for scrap. Instead, the company would be placed under court supervision and ordered to restructure its debts, operations and executive staff; borrowing money will be easier for the company than it is today. With legislative action restoring regulation, the Public Utilities Commission would control rates.

Bankruptcy also allocates responsibility where it belongs. Edison pushed for deregulation, and for awhile profited handsomely from it. The first bailout enriched the company, which went on an international spending spree. Its shareholders prospered, while its CEO, John Bryson, got a 46% pay raise. But in demanding to be in the "free market," Edison took the risk that the market wouldn’t always operate to the company’s advantage. Now that their judgment has proven wrong, Edison’s executives want to crawl back into the womb of government protection. The hypocrisy of their stance is rivaled only by their audacity. The shareholders should foot the bill, not the ratepayers. Bankruptcy would send the correct message to Wall Street – and to other states that are considering deregulation. If you insist on deregulation, you must be prepared for the consequences.

Bankruptcy is highly unlikely; but it might actually be helpful to the crucial task before us: to restore reliability and affordability to California’s energy system. The legislature must reinstate the authority of state agencies to oversee rates and plan for our future energy needs, encouraging conservation and other cost-effective technologies. Moreover, California should move to a non-profit, publicly-owned system. Private energy companies operating as a cartel have no incentive to alleviate the shortages they are prospering from. Today, publicly-owned utilities like LA’s often-maligned DWP are meeting their customers’ needs at lower prices, without having to ask them to shut off their holiday lights. A bankrupt Edison would be a cheap purchase. Rather than force ratepayers to spend billions to bailout Edison’s shareholders, California’s leaders should consider purchasing the company and dedicating it to public use. A buy-out is better for ratepayers than a bail out.

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This column appeared in the Los Angeles Times, December 18, 2000.