California energy crisis....

[Raspewtin]

<< Maybe I made that a little to difficult to understand so I will simplify further. You can't continue to sell power at 9.5cent/kwh when you are buying it for 25cent/kwh on borrowed money, because NOONE in their right mind would loan them money >>




Your entire argument hinges that market caps won't be lifted until Edison is dead and buried. I didn't realize you were that naive. Here's another possible scenario written in easy words, cut into small chunks so even your brain can digest it: (1) market caps lifted (2) Edison, PGE, SDGE enter Ch. 11 (3) state authorizes all three to buy long-term contracts, or (3) deregulation ended, companies allowed to own power producers (4) etc, etc. I hope you've invested in some of the power companies that sold CA electricity, or BoA!! I don't know what bugs me more, people who wish bad things for other people, or stupid people who don't know what they're talking about who wish bad things for other people.

 

[rahvin]

<<Your entire argument hinges that market caps won't be lifted until Edison is dead and buried. I didn't realize you were that naive. Here's another possible scenario written in easy words, cut into small chunks so even your brain can digest it: (1) market caps lifted (2) Edison, PGE, SDGE enter Ch. 11 (3) state authorizes all three to buy long-term contracts, or (3) deregulation ended, companies allowed to own power producers (4) etc, etc. I hope you've invested in some of the power companies that sold CA electricity, or BoA!! I don't know what bugs me more, people who wish bad things for other people, or stupid people who don't know what they're talking about who wish bad things for other people.>>

Lol, someone that has faith that they won't bankrupt. The SEC filing by SoCal Edison was the warning shot. Consider the example of 3dfx interactive, they ran out of capital after trying to find a lender for 3months and are currently in process to liquidate the company. And yes, I honestly believe that the regulators will NOT allow a rate increase up to wholesale prices. As long as power prices are below wholesale prices the utilties are doomed financially.

And explain one thing to me, with the inability to borrow money, exactly how are the utilities going to buy power generation facilities? Hell even if the could borrow working capital I sincerely doubt they can achieve enough capital to repurchase production facilties. But you are brilliant, so counter this press piece that went over the AP wire...

http://biz.yahoo.com/apf/010104/power_woes_6.html

Here are selective quotes from the article:



<< The state Public Utilities Commission voted unanimously Thursday to grant emergency rate increases to two cash-strapped utilities that serve 25 million Californians. But Wall Street thinks the increases may be too little, too late, to keep the companies afloat. And consumer advocates criticized the rate hikes, arguing customers should not be forced to pick up the tab. >>





<< The crux of the utilities' problem is this: They have been unable to recoup the money spent on wholesale electricity. They buy power for roughly 30 cents a kilowatt hour and, because of a rate freeze, they can charge customers only about a fifth of that amount. >>





<< The result is that PG&amp;E and SoCal Edison, who serve more than three-fourths of California's population, have lost more than $9 billion since June. Wall Street has threatened to downgrade the two investor-owned utilities to junk bond status unless an assured cash source is found -- and fast. >>





<< Standard and Poor's was skeptical of rate hike's value, saying it would make only a small dent in the utilities' cash-flow problem. >>



http://biz.yahoo.com/apf/010103/power_woes_5.html



<< PG&amp;E said last week a third of the 60 companies it buys power from no longer will sell to the utility unless it has cash in hand. >>



So who's your knight in shining armor, guess what it's the taxpayer...

And as for your comment about wishing bad things on people. I don't wish bad things on anyone. I want Californians to pay for their environmental activisim in the prevention of power plant production. Power rates of 30cents a kwh will change attitudes, its unfortunate that that activism will result in the loss of so many jobs.

 

[Pennstate]

But isn't it also true that many power producers own huge chunks of stocks in these eletric companies?

 

[Raspewtin]

jeez rahvin, how many times does it have to be explained to you. I won't do this again. If Here's the scenario step by step (again...sigh)

(1) market caps lifted
->thus no longer selling under cost.
(2) Edison, PGE, SDGE enter Ch. 11
->handles debt management and litigation from creditors.
(3) state authorizes all three to buy long-term contracts, or (3) deregulation ended
->unlike some weird conception in your head, companies continue to operate post-bankruptcy (depending on how bankruptcty is filed) and can make long-term contracts, and work towards acquire new assets (i.e. power plants) In addition some of these companies (such as SDGE) are owned by companies that already own power plants. If SDGE, for example was not required to buy from PUC, they could use Sempra's plants.

if you still don't see how this would solve all the problems in your article, I honestly don't think I can explain it so you would understand.

-re: &quot;<< PG&amp;E said last week a third of the 60 companies it buys power from no longer will sell to the utility unless it has cash in hand. >>&quot;
->you do know that right now that the Western states are presently required to sell to California?

-remember, that your article is written in the present tense, and with time things change. Thus, although these companies are selling electricity below cost now, it is probable things will change in the future.

-re: good intentions, here are two of your quotes:
&quot;I don't wish bad things on anyone&quot;
&quot;I think SOcalEdison should go under...t's unfortunate for the shareholders but I think the people in SoCal need to be taught a lesson&quot; And no, I'm not a shareholder (neither direct or indirect through funds) of the company, nor of Bank of America (a primary lender for these companies).

 

[Raspewtin]

<< But isn't it also true that many power producers own huge chunks of stocks in these eletric companies? >>



I don't know for sure, I know SDGE is owned by Sempra Energy, which is a major power producer from what I understand. I'm not sure about Edison or PGE.

 

[rahvin]

<<unlike some weird conception in your head, companies continue to operate post-bankruptcy (depending on how bankruptcty is filed) and can make long-term contracts, and work towards acquire new assets (i.e. power plants) In addition some of these companies (such as SDGE) are owned by companies that already own power plants. If SDGE, for example was not required to buy from PUC, they could use Sempra's plants.>>

So explain something to me about this world you live in. You honestly believe that stockholders of a company are going to dump more capital into an existing investment because it's done poorly? How little you know about the market. Chap 11 Bankruptcy would require you first condition which is rebuked the following paragraph.

And you honestly believe they are going to authorize the utils to charge wholesale rate for the power? 30cents a kwh? Yea right, you claim I'm living in a fantasy world. Look at the opposition to raising them to 10cents/kwh. Isn't gonna happen, it would be political suicide to let power costs go that high. No politician in their right mind would allow utility prices to go that high. They will bankrupt the utils, keep power rates the same and state run the utils, after the lawsuits, purchase of power generation facilties and making all the utility workers state employees expect a nice tax hike that they will camoflauge as something other than what it really is. After a few years they will slowly raise utility prices to account for inefficiencies in their system and to recoup lost finances, power prices will probably top 15cents/kwh within 5 years.

Now who's senario is more likely, yours where half the california legislature, the governer and the entire deregulation commitee commit polical suicide. Or there is a tax hike.

Reality is key.

 

[Raspewtin]

- review the scenario again, this time merging #3 and #1, followed by #2, add. notes: state has already been offered long-term contracts BELOW market rate for a locked in rate over an extended period of time (after a little thought and putting these pieces together, should see how politicians can save their butts, not require a tax hike, not pay market rate, and manage the debts of the utility companies)
- re: additional stockholder capital, see above and re-read this: &quot;In addition some of these companies (such as SDGE) are owned by companies that already own power plants. If SDGE, for example was not required to buy from PUC, they could use Sempra's plants&quot;

However, we both seem to wrong at present.