Price caps increase blackout threat SAN FRANCISCO CHRONICLE

Officials in California and Nevada, after months of lobbying for federal regulators to cap Western power prices, warned Tuesday that the newly imposed limits have had the unintended consequence of increasing a threat of blackouts in the two states.

The warnings were issued as California came within minutes of rolling blackouts Tuesday afternoon, one day after the first rolling blackouts in Las Vegas forced energy-hungry casinos to shut off fountains and reduce air conditioning.

The two states are asking the Federal Energy Regulatory Commission to take a closer look at the so-called price mitigation plan and come up with revisions that would deter power companies from withholding electricity during shortages.

"We need some clarity to this order," said Oscar Hidalgo, a spokesman for the California Department of Water Resources.

The crux of the problem is that price limits kick in during shortages, yet power companies say these caps force them to sell power at below-market rates during periods of high demand.

Some companies have responded by holding back power rather than face the expense of shipping electricity from state to state. Each mile that electricity must be transmitted adds to the overall cost.

http://www.azstarnet.com/star/today/10704RENERGY-RATES-SFCHRON.html

-- Martin Thompson (mthom1927@aol.com), July 04, 2001

Answers

This is the most natural, normal human reaction in the world--the encouraged withholding of power by the generators, under these circumstances, that is.

Yes, one plus one still equals two. Maybe, someday, government bureaucrats will factor in human reeactions before issuing silly regulations.

-- Uncle Fred (dogboy45@bigfoot.com), July 04, 2001.

The best short term solution might be for FERC to clarify the meaning of "cost", to include the transmission losses; thus allowing a higher price per delivered megawatt*hour for longer distance transmissions. Otherwise, power generators will sell to a nearby customer before a distant customer, as the distant customer "sees" less power, which reduces the amount payable.

-- Robert Riggs (rxr.999@worldnet.att.net), July 04, 2001.

Good idea.

-- Uncle Fred (dogboy45@bigfoot.com), July 04, 2001.